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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 11, 1999
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SHANECY, INC.
(Exact name of registrant as specified in its charter)
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Delaware 0-25521 88-0407731
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<S> <C> <C>
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
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1530-625 Howe Street, Vancouver, British Columbia V6C2T6
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(Address of principal executive offices/Zip Code)
Registrant's telephone number, including area code: (604) 682-3284
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Former name, former address, and former fiscal year,
if changed since last report:
13640 White Rock Station Road, Poway, CA 92064
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Forward-Looking Statements
There are forward-looking statements in this document, and in Shanecy,
Inc.'s public documents to which they may refer, that are subject to risks and
uncertainties in addition to those set forth above. These forward-looking
statements include information about possible or assumed future results of
Shanecy, Inc.'s operations. Also, when any of the words "may," "will,"
"believe," "expect," "anticipate," "estimate," "continue" or similar expressions
are used, Shanecy, Inc. is making forward-looking statements. Many possible
events or factors, including but not limited to those set forth herein, could
affect future financial results and performance. This could cause Shanecy,
Inc.'s results or performance to differ materially from those expressed in any
forward-looking statements. These and other risks are described in Shanecy,
Inc.'s other publicly filed documents and reports that are available from
Shanecy, Inc. and from the SEC.
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Item 5. Other Events
Shanecy, Inc. is filing this Current Report on Form 8-K/A to supplement
the Current Report on Form 8-K filed on November 29, 1999 and December 8, 1999
and to further define its change in strategic direction to concentrate on
businesses that utilize the Internet to provide products and services to middle
income consumers. Consistent with its new strategic plan, Shanecy, Inc. intends
to seek shareholder approval to change its name to Inc.ubator Capital, Inc.
The following is a description of Shanecy's new strategic plan and its
new management team.
Shanecy, Inc., to be known as Inc.ubator Capital, Inc. ("Inc.ubator"),
is an Internet holding company that invests in businesses that utilize the
Internet to provide products, services and personal empowerment information to
moderate-income consumers, principally households with annual incomes of $25,000
to $50,000. Bureau of Labor Statistics and Census Bureau statistics and studies
indicate that there are approximately 30 million moderate-income households in
the U.S. Inc.ubator believes that its business model provides it with the
ability to be one of the first movers in the moderate-income consumer Internet
market. Unlike other e-commerce and Internet companies that concentrate on the
affluent consumer, or on business to business commerce, Inc.ubator believes that
focusing on the moderate income consumer will allow its Portfolio Companies to
take advantage of the opportunity presented by 30 million households that to
date have had limited access to the benefits of the Internet. Inc.ubator is
traded in the over-the-counter market under the symbol "SECY".
Inc.ubator seeks to invest in entrepreneurial companies that
demonstrate the capability of innovating and deploying Internet-based
information technology for business-to-consumer e-commerce applications directed
toward the moderate-income consumer market. Further, Inc.ubator seeks to invest
in companies that should have the potential to be first movers in utilizing the
Internet to provide inexpensive goods, enhanced services and user friendly
access to information that can improve their economic well being and the overall
quality of their lives ("personal empowerment information") to moderate income
consumers. A unique aspect of Inc.ubator's investment approach is that the
individual companies ("Portfolio Companies") are provided with an incubation
period during which the application of their technologies, systems and business
processes can be developed into a sustainable enterprise. In order to accelerate
the incubation period, Inc.ubator's management works closely with these
companies in providing operational, managerial, financial, marketing, human
resources and technological support.
Inc.ubator was founded to invest in businesses which will serve the
moderate income consumer market which it believes is underserved by most
e-commerce businesses, which have chosen to target more affluent Internet users.
Inc.ubator believes that many of these enterprises have, in large part,
established business models around advertising revenue and as a result have
sought an affluent socio-demographic audience. Based on the assumption that
those with higher incomes have more discretionary/disposable spending power,
these existing Internet business models attempt to attract an affluent customer
and therefor command a premium for advertising. However, Inc.ubator believes
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that the moderate income consumer market represents enormous aggregate consumer
purchasing power, principally oriented at non-discretionary items such as food,
housing, transportation, clothing and personal entertainment, which has been
largely untapped by existing Internet businesses. Consequently, Inc.ubator
believes a significant opportunity awaits those businesses that are able to
utilize the Internet to cost effectively provide products, services and access
to personal empowerment information to this moderate income consumer market.
The Digital Divide
In July, 1999 the U.S. Department of Commerce published a report
entitled Falling Through the Net: Defining the Digital Divide (the "DOC
Report"), which examines the availability of telephones, computers and the
Internet to American households. This DOC Report was prepared to better define
the "divide" between those who have and those who do not have access to these
new technologies so that concrete steps can be taken to redress this gap. The
DOC Report indicates that less than 30% of moderate-income households have
access to the Internet.
In response to the DOC report, numerous articles have appeared in the
press and on the Internet, which have raised public awareness of moderate-income
consumer's lack of Internet access. Further, various corporations and non-profit
groups have announced a variety of initiatives to improve Internet access to all
economic groups. In addition, on December 8, 1999, President Clinton hosted a
meeting of leading technology executives and representatives of minority and
civil rights groups during which he announced a series of partnerships and
initiatives to help "slam shut the digital divide between technology haves and
have-nots, so that access to computers and the Internet is as common as the
telephone." On December 9, 1999, Secretary of Commerce, Richard Daley, convened
the "Digital Divide Summit" which focused on expanding access to information
technologies for underserved portions of the population. Summit participants
from the Federal Government, technology industry, civil rights and non-profit
community groups, grassroots community organizations and the general public
examined public and private initiatives to close the technology gap and
discussed how to expand and coordinate these efforts. As a result of the Summit,
the "digitaldivide.gov" web site was created as a central resource for Federal
Government information on closing the digital divide. It was also announced at
this Summit that closing the digital divide has been made an essential part of
President Clinton's New Markets Initiative which seeks to bring America's
prosperity to economically underserved areas.
Moderate Income Consumers
The DOC Report and numerous related media articles indicate that
moderate-income consumers have a significant need for the benefits provided by
the Internet. As a result, Inc.ubator believes that the market they represent
will be one of the next areas of accelerated growth on the Internet. Further,
Inc.ubator's analysis of the Bureau of Labor Statistics and U.S. Census data and
studies indicate that this demographic group collectively has substantial annual
purchasing power of over $1.5 trillion. The majority of the expenditures made by
moderate-income consumers are non-discretionary and include primarily food,
housing, transportation, clothing and personal entertainment. Inc.ubator,
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therefore, believes that moderate income consumers can be advantageously
impacted by the competitive pricing made available by the Internet for
mortgages, insurance and other products and services, as well as the
availability of personal empowerment information.
Inc.ubator also believes that the spending patterns of less affluent
consumers justify the expansion of e-commerce to this market. Moderate income
consumers spend a significantly greater proportion of their income on
necessities than do more affluent consumers and would benefit substantially from
the ability to take advantage of discounts and other electronic commerce offers
available on the Internet. As a group, moderate-income consumers often pay
significantly more than affluent consumers for items such as home mortgages,
insurance, and auto loans, and other goods and services. Consequently,
moderate-income consumers could gain a significant economic benefit if they
expand their buying power through discount purchases offered over the Internet,
together with access to personal empowerment information.
Inc.ubator Capital, Inc. Portfolio Company Investments
[email protected], Inc.
On November 11, 1999, Inc.ubator acquired 100% of the outstanding
common stock of CASA Internet Services, Inc., the predecessor to [email protected],
Inc. ("CASA"). CASA is a recently formed Internet-based vertical portal focused
on providing moderate-income consumers access to the financial and non-financial
benefits of the Internet. CASA is considered Inc.ubator's anchor company due to
its ability to acquire moderate-income subscribers and users to its vertical
portal. CASA is also representative of the types of companies that will become
part of Inc.ubator's network of businesses that use the Internet to provide
products and services to the moderate-income consumer market.
CASA offers a bundle of four primary services in order to introduce
moderate-income consumers to the benefits of the Internet. The bundle consists
of: (1) a new VISA(R) 'E-Commerce' credit card, (2) a low cost non-PC Internet
access device, (3) low cost ISP service, (4) highly customized subscriber
content that can improve their economic well being and the overall quality of
their lives.
Because moderate-income consumers direct the great proportion of their
income towards non-discretionary spending, such as food, housing,
transportation, clothing, and personal entertainment, as a group, they will
benefit even more than affluent consumers from the competitive pricing provided
by the Internet. Because the Internet makes possible lower selling, distribution
and transaction costs, CASA believes its systems will offer subscribers the
ability to reduce their expenditures, thereby increasing the income available
for discretionary spending. Toward that end, CASA is positioning itself as a
facilitating portal. Further, since these consumers are relatively
unsophisticated in the use of what is still a somewhat complex technology, the
belief is that they will be less migratory than more affluent consumers and,
therefore, CASA's subscriber base will not experience the attrition rates of
more typical Internet product and service providers. CASA believes that it can
acquire and maintain a proprietary subscriber base of several hundred thousand
users in the intermediate term. To summarize, CASA's basic program delivers a no
cash upfront means for new Internet users to obtain an Internet access device, a
no-security deposit credit card required for e-commerce, low cost monthly
Internet access and personal empowerment informational services only available
through the Net.
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CASA has entered into an agreement with Brunswick Capital Partners an
affiliated third party company to issue a VISA(R) credit card to its
subscribers, which can be used anywhere, including on the Internet; more
particularly through CASA's web portal, which is installed as the home page on
Internet access device provided to the subscriber. CASA's proprietary database
management systems then monitor the activity of the card, the credit file and
the web portal, simultaneously providing statistically based information to
better assess individual customer requirements. CASA's ability to issue a
VISA(R) credit card provides its customers with a payment mechanism for
e-commerce transactions that CASA plans to facilitate, while simultaneously
providing CASA (and Inc.ubator) with statistically based information to better
assess individual customer requirements, which will be integrated into its
network.
CASA distinguishes itself by managing complex database systems, in
order to provide targeted services relevant to moderate-income consumers. In
addition, the credit card provides CASA an efficient subscriber acquisition
tool. CASA believes that there are several important revenue channels available:
(1) Recurring monthly subscriber fee;
(2) Non-recurring initial subscriber fee;
(3) Monthly per account fee from the credit card issuer;
(4) Value-added/cross sell opportunities; and
(5) Advertising revenue.
Brunswick Capital Partners, Inc.
On January 18, 2000, Inc.ubator acquired, through a wholly-owned
subsidiary, preferred stock in Brunswick Capital Partners, Inc. ("BCP"),
convertible into 40% of the common stock of BCP. BCP is a national, specialty
financial services company that uses proprietary data \base mining, marketing
techniques, automated systems and information technology to issue credit cards
to moderate income consumers. BCP manages the resulting portfolio of accounts in
an attempt to ensure that they remain in a performing status. General purpose
credit cards have become the primary payment mechanism for e-commerce
transactions over the Internet. BCP is headquartered in Sioux Falls, South
Dakota and its management has over a decade's experience in the origination and
servicing of credit cards.
The income level of moderate income consumers ($25,000 to $50,000 per
year) presents a profile that is unattractive to the majority of credit card
issuers who are focused on the upper income consumer who can qualify for gold
and platinum cards. Given their economic circumstances, BCP believes moderate
income consumers that have had access to credit often experience problems due
largely to circumstances beyond their control (i.e. employment interruption,
marriage break-up, extended uninsured illness, etc.). Once a credit problem has
tarnished an individual's credit report, it becomes extremely difficult to
obtain new credit, regardless of the change in the individual's economic
circumstances. Compounding the credit access problems of many moderate income
consumer is the fact that they generally have not been schooled in the basics of
personal financial management.
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To address the opportunity represented by this underserved, 30 million
to 40 million household market, BCP utilizes its proprietary data mining, neural
network analysis and database management software, to identify those moderate
income consumers who it believes have a high probability of handling a credit
card responsibly. Identified individuals are then sent skillfully prepared
direct mail pieces, which are then followed up by telephone contact. The
telephone contact focuses the consumer on the offer, gathers comprehensive
current information so that underwriting the credit application can properly
evaluate the consumer's present financial status and educate the consumer on the
importance of the timely payments. The telephone contact also represents the
first important step in building a personalized relationship between BCP and the
customer. The initial credit limit established is generally $300 to $2,500 which
permits the borrower to demonstrate that the credit now available can be
successfully handled. The consumer then earns additional credit in two ways.
First, as the balance owed is paid down, automatic access is provided to
additional credit up to the approved limit. Second, as successful payment
performance is demonstrated, the credit limit will be increased. Thus, consumers
are given every incentive to properly handle the credit made available as a
means of improving their overall credit profile, as well as gaining expanded
credit availability from BCP.
BCP has established relationships with a number of leading vendors
regarding credit card origination, issuing, processing and servicing. Through
these relationships, BCP is able to cost-effectively optimize the operational
aspects of its business, as well as scale up or down as conditions and
circumstances warrant. In turn, these arrangements permit BCP's management to
concentrate their efforts and energies on marketing and account management
functions.
BCP uses several companies to market its programs and acquire
customers. One of the companies used is InfoBase Direct Marketing Services,
Inc., an affiliated company. Unsecured VISA(R) credit cards are issued to BCP's
customers through an Issuing and Participation Agreement with CorTrust Bank, NA,
Sioux Falls, South Dakota ("CTB"). CTB is responsible for compliance and
regulatory issues, account set up, daily settlement, customer service,
complaints, and customer correspondence, as well as all aspects of account
servicing and delinquency management under BCP's oversight and in accordance
with BCP's policies. BCP has also entered into an agreement with Universal
Transactions, Inc. ("UTI") to provide fully automated, on line, credit scoring
and application processing and underwriting. UTI's system accesses the
consumer's credit report and automatically evaluates it relative to underwriting
guidelines that have been established by BCP and CTB. First Data Resources, Inc.
is responsible for all credit card payment processing, collections, and billing.
BCP also intends to market credit cards to moderate income consumers
via the Internet. Developmental efforts are currently underway with respect to
an Internet based, online account processing and underwriting system. Upon
completion, the consumer would be able to apply for BCP products online and be
given a credit approval decision in seconds, all in accordance with BCP's
pre-established underwriting criteria. BCP further intends to provide
interactive customer service support, permitting the customer to make online
inquiries regarding their applications and obtain other account information,
make inquiries, resolve account issues, etc.
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InfoBase Direct Marketing Services, Inc.
On January 18, 2000, Inc.ubator acquired, through a wholly-owned
subsidiary, preferred stock in InfoBase Direct Marketing Services, Inc.
("InfoBase"), convertible into 49% of the outstanding common stock of InfoBase.
InfoBase is an information based, technology driven direct marketing company
that designs, develops and implements sophisticated inbound and outbound
marketing programs using the Internet and computerized call management systems
for companies targeting the moderate income consumer. InfoBase has developed
proprietary software to facilitate sales tracking, data mining, neural
networking and data base management designed to individually target consumers.
The management of InfoBase has over 60 years experience designing and
implementing inbound and outbound programs to moderate income consumers and is
headquartered in Carlsbad, California.
InfoBase provides its clients inbound/outbound telemarketing and
Internet based services consisting of direct sales activities, integrated direct
mail programs, call list analysis profiling, sales tracking, data analysis and
reporting. Dialing strategies are created and distributed as calling campaigns
to the sales agents. InfoBase's computerized call management system utilizes
predictive dialers that automatically dial telephone numbers, determine if a
live connect is made and present connected calls to a sales agent.
InfoBase provides inbound teleservices support for activities such as
customer service, response to customer inquiries, and order processing. InfoBase
uses automated call distributors (Voice Response Units) to direct callers to the
appropriate agent, who has access to on-line support databases to address
customers' needs. Scripts are drafted and approved by the client for sales
agents to utilize. To enable quality assurance, call monitoring and sales
verification are employed. All sales confirmations are recorded and management
personnel verify accuracy and authenticity of transactions.
InfoBase utilizes the latest technologies to extract data from the
client's database for sales/performance analysis and reporting. Data-Mining,
neural networking and fuzzy logic software helps InfoBase's staff design,
develop and analyze key information for clients relative to the performance of
their programs. Reports are produced on request, daily, weekly and monthly. Pre
and post sales analysis of call lists are provided for the client so he may
evaluate the effectiveness of Shanecy, Inc.'s sales techniques and strategies.
InfoBase provides integrated direct mail programs that are developed
and tailored to each client's customer base. The Company achieves a higher
response rate to the mailing as calling campaigns are implemented to coincide
with the mail.
Given the growing potential of primary channel alternatives, the
Company is constantly expanding its capabilities in database marketing. InfoBase
has brought its customer list in house for this first phase as its database
sophistication is expanded. Registration cards and periodic customer surveys
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assists the Company in understanding its customer and measure the success of the
marketing, sales and product activities. Profile overlays of other lists fill in
the awareness gaps. This in-house presence provides the sales and technical
support teams with tools that streamline operations while updating customer
knowledge. InfoBase's customer information system helps in making sound
decisions by providing historical answers to the marketing questions posed.
Eikos Acquisition Limited
Concurrent with the acquisition of CASA, Inc.ubator also acquired 100%
of Eikos Acquisition Limited ("EAL"). EAL, through Eikos Management LLC
("Eikos"), holds the technology licensing rights to a database management system
developed at the founder's prior business, described below. The licensing
agreement also calls for royalty payments to be made to Eikos.
Inc.ubator management believes that the technology is useful to CASA
and has granted CASA an unrestricted licensing right. Further, Management
determined that the gross royalty agreement paid by The Credit Store, (OTCBB:
PLCR), a nationwide financial services company, with offices in Sioux Falls,
South Dakota, provides Inc.ubator with what it believes is a more consistent
cash flow.
EAL is a corporation formed in October 1999, under the laws of the Isle
of Man. Through its ownership of Eikos, EAL is entitled to receive a license fee
equal to 49.5% of an amount up to $24 million (the "Fee"). This amount is based
upon the only material asset of EAL, which is its 49.5% equity interest in
Eikos, a limited liability company formed in 1997 under the laws the Isle of
Man. The principal asset of Eikos is a Mutual Business Development Agreement
(the "MBDA") with The Credit Store, Inc. Pursuant to the MBDA, Eikos is entitled
to the Fee, based on a percentage of gross credit card receivable originations
(as defined in the MBDA) produced during a period ending May 31, 2005.
Approximately $1.7 million of the $24 million had been paid prior to
Inc.ubator's acquisition of EAL. As amended, the MBDA obligates The Credit Store
to pay Eikos $75,000 per month in cash through May 2005 and accrue any fee
overage. At that time the parties will determine the aggregate amount of the Fee
then earned by Eikos and any difference between the amount earned up to an
aggregate of $24 million and the amount previously paid will be remitted to
Eikos by The Credit Store. In consideration for the accrual, The Credit Store is
also obligated to pay Eikos a monthly deferral fee of $22,500 in cash or, at its
option, $25,000 in performing credit cards, during the same period.
The MBDA also permits Eikos to use, outside of the United States and
Canada, proprietary technology developed at The Credit Store and other
intellectual property relating to the administration and information processing
of databases connected with consumer credit cards and the electronic consumer
credit business generally. In addition to its interest in EAL, Inc.ubator has a
portfolio of non-performing credit cards. Management believes that this
portfolio has limited value.
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Summary of Acquisitions
The acquisitions of CASA@Home, Inc., Brunswick and InfoBase permit
Inc.ubator to initiate its business model. The business of CASA is consistent
with the investment strategy of Inc.ubator, as it provides products, services
and personal empowerment information to the moderate income consumer market
through the Internet, and CASA is characteristic of the Internet companies that
will become part of the synergistic network of Inc.ubator. Additionally, CASA's
proprietary database mining technology and its ability to issue VISA(R) credit
cards will provide Inc.ubator with statistically based information and data that
will add to the collective knowledge and resources of Inc.ubator and its
network, which is consistent with its operating strategy. The acquisition of
Brunswick and InfoBase will also directly complement CASA's business and
Inc.ubator's fundamental investment strategy.
The acquisition of EAL provides Inc.ubator with a potential source of
cash flow to be used for its operations. Although Inc.ubator's business model
seeks to create long-term shareholder value by investments in Internet
companies, Inc.ubator will incur expenses for its day-to-day operations. The
acquisition of EAL provides Inc.ubator with potential cash flow to be used
towards its operating expenses while management is identifying new investments
in Internet companies, and advising and providing oversight to those companies
already in its organization.
Inc.ubator Capital Management
Inc.ubator's management team has experience in numerous areas
including venture capital investments, capital markets, accounting, technology
design and implementation and international finance. Incubator's management also
has significant experience in founding, identifying, investing in, founding and
realizing business opportunities present in this market segment.
The following is a description of the current Inc.ubator management
team.
Harry J. Weitzel, 61. Chairman and Chief Executive Officer
Mr. Weitzel has a 30 plus year career in commercial and corporate
finance, including managing numerous enterprises focused on the moderate-income
consumer. Mr. Weitzel currently is, and has been since June 1998, the Managing
Principal of Cedar Cove Advisors, LLC, a private investment management and
financial advisory firm located in Lexington Park, Maryland. From August 1996 to
May 1998, he was the CEO of Pacific Consumer Funding, LLC, ("PCF") a national
originator, servicer and seller of sub-prime consumer loans located in Dallas,
Texas. Mr. Weitzel continues to serve as a consultant to Pacific USA Holdings
Corp., PCF's parent. From January 1992 to July 1996, Mr. Weitzel was President
of the Consumer Asset Management Division ("CAMD"), formerly CLS, of Electronic
Data Systems Corporation, a major technology outsourcing firm. Under Mr.
Weitzel's direction, CAMD became the largest provider of consumer loan
out-sourcing services in the United States and actively participated with
institutional clients in the creation of national financial conduits for various
types of consumer loans. Prior to joining CAMD, Mr. Weitzel was with MNC
Financial Corporation (a major commercial bank holding company) for 30 years,
retiring as President of MNC Retail Services Corporation, its consumer finance
subsidiary focused on the moderate-income consumer. While at MNC, Mr. Weitzel
also oversaw its international merchant banking operation, which was
headquartered in London and served as Chairman of its Luxembourg bank
subsidiary. He also served as a director of MBNA which, since 1982, has
developed into the world's third largest credit card lender with over $50
billion in consumer receivables.
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Jason W. Galanis, 29. Co-Founder, President and Director
Mr. Galanis is a principal of Vianden Capital Management, L.L.C., the
investment advisor to Thesseus International Asset Fund, an investment company
for non-traditional investments, which he founded in December 1997. He is a
managing director of KnightVianden, a financial services company which he
co-founded with Dr. Knight and Mr. Washington in October 1998. In June 1992, he
co-founded a credit card receivables management firm which became The Credit
Store (OTCBB: PLCR). The Credit Store uses database management technology to
rehabilitate the credit impaired through new credit card-based credit.
Leighton A. Bloom, 64. Chief Technology Officer
Mr. Bloom is currently and has been since 1998 a technology consultant
to Key Bank on Internet and intranet information retrieval and publishing. He
was a senior technology consultant to Chemical Bank and its successor Chase
Manhattan Bank from 1993 until August 1999, developing techniques for management
of, and information mining and distribution from, very large investment
databases in support of private, corporate and mutual fund asset managers, most
recently for intranet publication. Previously, from 1991 to 1993, Mr. Bloom was
a senior consultant to Donaldson, Lufkin & Jenrette on the collection,
management and internal publication of investment banking information; to Avon
Corporation on data mining and analysis of marketing program effectiveness; and
to Aetna, Inc. on the optimization of computer-based corporate health care
customer service interactions. During 38 years in the computing industry, Mr.
Bloom has developed systems for several other firms in the financial services
industry as well as firms in other industries that include publishing,
litigation, real estate, natural resources, manufacturing, transportation,
communications, and advertising.
Mr. Bloom has extensive experience in the conception, architecture and
design of multi-tier systems that rely on, in addition to mainframe, mid-range
and personal computers, massive data storage and a wide variety of data and
voice communication technologies, including recently developed techniques for
heterogeneous-content interchange via the Internet.
Kevin Washington, 27. Co-Founder, Secretary and Director
Mr. Washington is and has been since 1997 a principal in Olympic
Holdings, a privately held equity securities investment and trading firm with
offices in Los Angeles and London. He is a founding partner of KnightVianden
Capital. Mr. Washington is also a principal in a family partnership which has
interests in real estate, avionics and other venture capital investments. Mr.
Washington has business relationships with several leading European investment
banks.
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Michael Bodnar, 51. Treasurer, Chief Financial Officer and Director
Mr. Bodnar has been Chief Financial Officer of Thesseus since December
1997. From June 1997 until he joined Thesseus, Mr. Bodnar was Chief Financial
Officer of a group of financial services sector companies with offices in
Vancouver that concentrated in the distressed debt field. In this capacity, his
responsibilities included overseeing the accounting and record keeping functions
for a portfolio of both performing and non-performing Visa(R) and MasterCard(R)
receivables. From March 1983 to April 1997, Mr. Bodnar was Vice President,
Finance for Wosk's Ltd., a major Western Canadian retailer of furniture,
appliances and electronics products, where his responsibilities included
overseeing all areas of consumer finance, including credit card programs. From
1973 to 1983 he was a Senior Manager with KPMG in its Vancouver and New
Westminster offices, where he performed audit and general business advisory
services. Mr. Bodnar has been a member of the British Columbia and Canadian
Institutes of Chartered Accountants since 1978.
Rory Knight, 46. Director
Dr. Knight is Dean of Templeton College, the graduate business school
at Oxford University, a position he has held since 1994. He is also a Fellow in
Finance at the College. Dr. Knight has extensive experience in working and
consulting in the financial sector in the UK, Europe and Asia. Prior to coming
to Oxford he was the Deputy Director of a foundation within the Swiss National
Bank (the central bank of Switzerland) from 1986 to 1994. In this capacity he
worked directly with the Directorate and with the International Banking sector.
Dr. Knight's work on shareholder value has been published internationally with
particular acclaim given to the Value Creation Quotient (VCQ(TM)), his public
company quantitative analysis.
Dr. Knight acts as a consultant to a number of banks and large
corporations on financial management issues. He has also held chairs in Finance
in the University of Cape Town and IMD, Lausanne, and is the Chairman of the
Finance group within the Ecole Nationale des Ponts et Chaussees in Paris. In
early 1997 the University of Oxford appointed Dr. Knight to the newly created
post of Deputy Director in the University's School of Management Studies with
special responsibility for Executive Education.
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George C. Pilallis, 51. Director
From June 1997 to December 1999, Mr. Pilallis was President and Chief
Executive Officer of Advantage Funding Group, Inc. a subsidiary of Pacific
Consumer Funding ("PCF") an originator, servicer and seller of non-prime
consumer loans located in Boston, Massachusetts. Mr. Pilallis previously held
the position of Managing Director for PCF, a unit of Pacific USA Holdings Corp.,
from March 1997 to January 1998. From June 1991 to February 1997, Mr. Pilallis
was Managing Director of Capital Markets of the Consumer Asset Management
Division ("CAMD"), formerly CLS, of EDS Corporation. Mr. Pilallis was
responsible for all aspects of consumer loan outsourcing services for capital
market transactions, particularly those involving non-prime and sub-prime
asset-backed classes in automobile, home equity and credit cards. Prior to
joining CAMD, Mr. Pilallis held a variety of executive positions with SMS
Corporation, GE Capital Mortgage Insurance and the John H. Harland Company.
Nicholas P. Wise, 41. Director
Mr. Wise has a long career managing public policy issues in Washington,
D.C., which assists the Company in advancing business, policy and social issues
for its target market, a generally socially disadvantaged demographic group. He
is President and founder of the government affairs firm of Wise & Associates
(Washington, D.C.) specializing in legislative and regulatory matters before the
Congress and executive branch agencies.
Mr. Wise has been active in Washington, D.C. legislative activities
since 1983 where he principally served as Chief Strategist and Chief Counsel for
Senator Mike DeWine (Rep:Ohio) until 1997. Mr. Wise's activities had an emphasis
on issues relating to the House Judiciary Committee and the Foreign Affairs
Committee, on both of which Senator DeWine serves (Monopolies Committee
Chairman). He focused on intellectual proprietary issues, anti trust, civil
rights and international trade issues. In 1987 he acted as Associate Counsel to
the House Committee to Investigate Covert Arms Transactions with Iran
(Iran-Contra). His service with Senator DeWine was interrupted from 1990 to 1992
when he served as Deputy Assistant Attorney General at the Department of
Justice, where he was Attorney General Thornburgh's liaison with Congress and to
the Counsel to the President. In 1997 he retired as Chief Counsel and
Legislative Director to Senator DeWine.
Mr. Wise earned his J.D. at Case Western Reserve University in 1983 and
his B.A. (cum laude) at the University of Cincinnati in 1980. Mr. Wise is a
member of the Ohio and Virginia Bar.
13
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements
The most recent audited balance sheets of the Predecessor Business as
of December 31, 1998 and 1997 and the related statements of cash flows
for the year ended December 31, 1998 and for the month ended December
31, 1997 are included in Exhibit 99.1.
The most recent unaudited interim financial statements for EAL as of
November 11, 1999 are included in Exhibit 99.1.
(b) Pro-forma Financial Information
Pro-forma Financial Information with respect to CASA and EAL is not
provided as the CASA and EAL transactions were classified as a
recapitalization of Shancey, Inc. for accounting purposes.
(c) Exhibits
The following exhibits are filed herewith:
2.1 Stock Purchase Agreement for CASA
2.2 Acquisition Agreement for EAL
23.1 Consent of Accountants
99.1 Audited balance sheets of the Predecessor Business as of
December 31, 1998 and 1997 and the related statements of cash
flows for the year ended December 31, 1998 and the month ended
December 31, 1997.
Unaudited interim financial statements for EAL as of
November 11, 1999.
99.2 Press Release dated November 17, 1999.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SHANECY, INC.
Date: January 25, 1999 By: /s/ Jason W. Galanis
---------------------
Jason W. Galanis
President
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Stock Purchase Agreement for CASA
2.2 Acquisition Agreement for EAL
23.1 Consent of Accountants
99.1 Audited balance sheets of the Predecessor Business as of December
31, 1998 and 1997 and the related statements of cash flows for the
year ended December 31, 1998 and the month ended December 31,
1997.
Unaudited interim financial statements for EAL as of November 11,
1999.
99.2 Press Release dated November 17, 1999.
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into this
11th day of November, 1999 by and among Shanecy, Inc., a Delaware corporation
with a place of business at 625 Howe Street, Suite 1530, Vancouver, British
Columbia V6C 2T6 (the "Company"), and K. Washington-Galanis Investments, LLC, a
Nevada limited liability company ("KWGI") acting as nominee on behalf of those
investors whose names and addresses are set forth on Schedule 1 attached hereto
(each, an "Investor" and, collectively, the "Investors").
RECITALS
WHEREAS, Shanecy is a public company that concentrates its business in
investing in companies that utilize the Internet to provide products and
services to middle income consumers; and
WHEREAS, on November 10, 1999, the Investors acquired the rights to own
100% of the issued and outstanding shares (the "CASA Shares") of common stock of
CASA@Home, Inc., a Nevada corporation to be formed, ("CASA") from CASA Internet
Services, Inc., a wholly-owned subsidiary of KWGI; and
WHEREAS, CASA is a company engaged in the business of providing an
Internet-based vertical portal to moderate income consumers, in order to provide
access to the financial and non-financial benefits of the Internet; and
WHEREAS, the Company desires to acquire the business of CASA in order
to facilitate its strategic focus and business plan; and
WHEREAS, the Company desires to acquire the CASA Shares from the
Investors in exchange for the issuance of restricted shares of its common stock
(the "Common Shares") to the Investors, and the Investors desire to transfer the
CASA Shares to the Company in exchange for the Common Shares, on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth below, it is therefore agreed as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1. Currency; Certain Definitions. Unless otherwise indicated, all
currency figures in this Agreement are denominated in U.S. dollars. Capitalized
terms used, but not defined elsewhere, in this Agreement are defined as follows:
1.1 "Affiliate" of a Person means another Person (a) directly or
indirectly controlling, controlled by, or under common control with, such Person
(for this purpose, "control" of a Person means the power (whether or not
exercised) to direct the policies, operations or activities of such Person by or
through the ownership of, or right to vote, or direct the manner of voting of,
securities of such Person, or pursuant to agreement or Law or otherwise) or (b)
who is a director or officer of a corporation, general partner of a partnership,
manager of a limited liability company, trustee of a trust or other Person who
exercises managerial authority with respect to the subject Person; or (c) who
owns (or has the discretionary right to acquire) 10% or more of the equity
interests (including without limitation capital stock or partnership, membership
or beneficial interests) of the subject Person.
1.2 "CASA" means CASA@Home, Inc., a Nevada corporation to be formed,
and any permitted successor thereto.
1.3 "CASA Shares" means the 1,000,000 shares of common stock of
CASA, par value $0.001, held in the aggregate by the Investors and individually
in the amount set forth next to his or her name on Schedule 1 attached hereto.
1.4 "Common Shares" means the 2,000,000 restricted Common Shares of
the Company, par value $0.001, to be acquired in the aggregate by the Investors
and individually in the amount set forth next to his or her name on Schedule "1'
attached hereto.
1.5 "Company" means Shanecy, Inc., a Delaware corporation, and any
permitted successor thereto.
1.6 "Consent" means any approval, authorization, consent or
ratification by or on behalf of any Person that is not a party to this
Agreement, or any waiver of, or exemption or variance from, any License or
Order.
1.7 "Contract" means any written or oral contract, agreement,
arrangement or understanding, including without limitation any loan agreement or
indenture, purchase, sales, supply or service order or agreement, real property,
equipment or other lease, or license of trade rights, to which the Investors or
the Company is a party or by which the Investors, the Company or any of their
respective assets are bound.
<PAGE>
1.8 "Governing Document" means (a) the articles of association or
certificate of incorporation (including any restatement, amendment or correction
thereof or any certificate of designation thereunder) and the by-laws of a
corporation, and any agreement between any shareholders thereof with respect to
the voting or disposition of, or right to receive dividends or other
distributions with respect to, the capital stock of such corporation; (b) the
articles or certificate and the partnership agreement of a partnership; (c) the
articles of organization and operating agreement of a limited liability company;
(d) the trust agreement of a trust; and (e) any similar agreement, certificate
or other document, whether or not filed or required to be filed with a
Governmental Authority, governing or relating to the organization, management or
ownership of any Person.
1.9 "Governmental Authority" means any federal, state, local or
foreign government or governmental authority, agency or instrumentality, or any
court of competent jurisdiction.
1.10 "Investor" or "Investors" means, as the context may require,
the individual(s) who are acquiring the Common Shares and whose name(s) are set
forth on Schedule "1' attached hereto.
1.11 "KWGI" means K. Washington-Galanis Investments, Inc., a Nevada
limited liability company.
1.12 "Law" means any statute, rule, regulation or ordinance of any
Governmental Authority.
1.13 "Lease" means a lease of real property.
1.14 "License" means any license, permit, certification,
qualification or franchise issued or granted by any Governmental Authority.
1.15 "Lien" means any security interest, conditional sale or other
title retention agreement, mortgage, pledge, lien, charge, encumbrance or other
adverse claim or interest.
1.16 "Order" means any judgment, order, writ, decree, award,
directive, ruling or decision of any Governmental Authority.
1.17 "Person" includes without limitation a natural person,
corporation, joint stock company, limited liability company, partnership, joint
venture, association, trust, Governmental Authority, or any group of the
foregoing acting in concert.
1.18 "Proceeding" means any action, suit, investigation, audit or
other proceeding, at law or in equity, before or by any Taxing Authority or
Governmental Authority.
<PAGE>
1.19 "Tax" means any tax, fee, levy, assessment or other
governmental charge imposed by any Taxing Authority (including without
limitation any income, franchise, gross receipts, property, sales, use, excise,
services, value added, ad valorem, withholding, social security, estimated,
accumulated earnings, transfer, gains, license, privilege, payroll, profits,
capital stock, employment, unemployment, severance, stamp, occupancy, customs or
occupation tax), and any interest, additions to tax and penalties in connection
therewith.
1.20 "Taxing Authority" means the U.S. Internal Revenue Service and
any other domestic or foreign Governmental Authority responsible for the
administration of any Tax.
1.21 "Tax Return" means any return, amended return, declaration,
report, estimate, information return or statement regarding Taxes which is filed
or required to be filed under applicable Law, whether on a consolidated,
combined, unitary or separate basis or otherwise.
1.22 "Transaction Document" means this Agreement and each other
agreement, instrument or other document being entered into by the Company or the
Investors or any related party at or in connection with the Closing.
ARTICLE II
ACQUISITION OF CASA SHARES AND COMMON SHARES
2.1 Acquisition of CASA Shares. Upon the execution of this Agreement,
subject to the terms and conditions set forth herein, the Investors shall sell,
assign, transfer and deliver the CASA Shares to the Company, and the Company
shall acquire the CASA Shares from the Investors.
2.2 Acquisition of Common Shares. Upon the execution of this Agreement,
in consideration for the transfer of the CASA Shares to the Company, the Company
shall sell, assign, transfer and otherwise convey to the Investors, and the
Investors shall subscribe for, in the aggregate, two million (2,000,000) Common
Shares of the Company.
2.3. Acquisition Price. The Acquisition Price for the CASA Shares, and
for the Common Shares, shall be equal to the book value of the CASA Shares as of
the date of the execution of this Agreement, and shall in each case be satisfied
by delivery of the respective Shares to its transferee in accordance with the
terms of this Agreement.
2.4 Transactions. All of the transactions contemplated by this
Agreement are to take place upon the execution of this Agreement, with the
exception of those set forth in Article VI hereof, and are intended by the
parties to be consummated concurrently; and if any such transaction is not
consummated as provided herein, the parties shall take all actions necessary to
dissolve and invalidate all other such transactions as if none of such
transactions had been consummated.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors as follows:
3.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
full power and authority to own its assets and carry on its business in the
manner and places where such assets are now owned and such business is now being
conducted.
3.2 Power and Authority. The Company has full legal capacity, power and
authority to execute and deliver this Agreement and each other Transaction
Document to which it is a party and to assume and perform its obligations
hereunder and thereunder. This Agreement and each other Transaction Document to
which the Company is a party has been duly executed and delivered, and this
Agreement and each other Transaction Document to which the Company is a party
is, a legally valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) equitable principles limiting
the availability of certain remedies.
3.3 Absence of Conflict. The execution and delivery of this Agreement
and each other Transaction Document to which it is a party do not, and the
performance by the Company of its obligations hereunder and thereunder will not,
violate any provision of the Governing Documents of the Company and do not and
will not conflict with or result in any breach of any condition or provision of,
or constitute a default under, or create or give rise to any adverse right of
termination or cancellation by, or excuse the performance of, any other Person,
or result in the creation or imposition of any Lien upon the Company or any of
its assets or the acceleration of the maturity or date of payment or other
performance of any obligation of the Company by reason of the terms of, any
agreement, indenture, instrument, license, lease, Lien or Order to which the
Company is a party or is subject or which is or purports to be binding upon it.
3.4 Consents. No Consent of, or notice to, any Person is required as to
the Company in connection with the execution and delivery by the Company of this
Agreement or any other Transaction Document or the performance of the
obligations of the Company hereunder or thereunder, where the failure to obtain
such Consent or give such notice would have an adverse effect upon the Company,
or its assets or business or prohibit, invalidate, or make unlawful, in whole or
in part, this Agreement or any other Transaction Document, or the carrying out
of the provisions hereof or thereof or the transactions contemplated hereby or
thereby.
<PAGE>
3.5 Litigation. No Proceeding is pending or, to the best of the
Company's knowledge, threatened against or affecting the assets, operations or
financial or other condition of the Company in which an unfavorable Order would
prohibit, invalidate, or make unlawful, in whole or in part, this Agreement or
any other Transaction Document, or the carrying out of the provisions hereof or
thereof or the transactions contemplated hereby or thereby. The Company is not
in default in respect of any Order, nor is there any such Order enjoining the
Company in respect of, or the effect of which is to prohibit or curtail the
Company's performance of its obligations hereunder or under any other
Transaction Document.
3.6 Authorized Capital. The entire authorized capital of the Company
currently consists of the following: 20,000,000 shares of common stock, par
value $0.001, of which 17,990,000 Common Shares are issued and outstanding; and
no shares of preferred stock, provided, however, that Thesseus International
Asset Fund N.V. ("TIAF") is the holder of rights to acquired shares of preferred
stock that, upon due amendment of the articles of incorporation of the Company
and authorization of such shares, will entitle TIAF to receive 8,500,000 shares
of such preferred stock convertible into 8,500,000 shares of common stock. The
Common Shares are duly authorized, validly issued, fully paid and nonassessable.
Other than as will be reserved against the convertible preferred stock to be
issued to Thesseus, no shares of common stock of the Company are reserved for
issuance, and there are no agreements, commitments or arrangements providing for
the issuance or sale of any capital stock or other interest of the Company, or
any issued or outstanding options, warrants or rights to purchase, or any
security or instrument convertible into or exchangeable for, any capital stock
or other interest of the Company.
3.7 Financial Statements; No Undisclosed Liabilities; Books.
(a) The Company has delivered to the Investors a complete and
correct copy of its balance sheet and related statements of operations,
stockholders' deficit and cash flows for the year ending March 31, 1999, with
the accompanying auditor's report thereon (the "Company Financial Statements").
A true and correct copy of the Company Financial Statements is attached hereto
as Schedule 3.7(a). The Company Financial Statements present fairly in all
material respects the financial position of the Company as at the date thereof
without qualification.
(b) Except as set forth on the Company Financial Statements or on
Schedule 3.7(b) attached hereto, the Company does not have any material
liabilities or obligations of any kind, whether known or unknown, or whether
absolute, accrued, contingent, matured or otherwise, whether due or to become
due except liabilities or obligations that arose in the ordinary course of
business.
<PAGE>
(c) The books and financial records of the Company made available
to the Investors constitute a complete record of its financial affairs and
accurately set forth all revenues, expenses, assets and liabilities.
3.8 No Adverse Change. Other than as set forth on Schedule 3.8 attached
hereto, since the date of the Company Financial Statements there has been no
material adverse change in the business, the assets or the financial or other
condition of the Company, and the Company has not: (a) incurred any damage,
destruction or similar loss, whether or not covered by insurance, materially
adversely affecting its business or its assets; (b) other than in the ordinary
course of business, sold, assigned or transferred any of its assets or any
interest therein; (c) incurred any material obligation or liability (including
any guaranty, indemnity, make-whole agreement for or with respect to any
obligation or liability of another Person), or paid, satisfied or discharged any
material obligation or liability prior to the due date or maturity thereof,
except current obligations and liabilities in the ordinary course of business;
(d) other than in the ordinary course of business, created, incurred, assumed,
granted or suffered to exist any Lien on any of its assets; (e) other than in
the ordinary course of business, waived any right of value or canceled, forgiven
or discharged any debt owed to it or any claim in its favor; (f) declared, set
aside or paid any dividend or made or committed to make any other distribution
in respect of any shares of common stock; or (g) effected any material change in
its business policies or practices, accounting methods, conventions, principles
or assumptions or any material change in the nature of the business
relationships with its clients; or effected any material transaction not in the
ordinary course of business.
3.9 Material Contracts. Set forth on Schedule 3.9 hereto is a list of
all contracts (including, without limitation, employment or other labor
agreements, benefits arrangements and policies of insurance) to which the
Company is a party or its business or affairs are subject, or the termination or
cancellation of which would have a material adverse effect upon its business or
prospects.
3.10 Compliance with Law. The Company has all Licenses and all Consents
of Governmental Authorities required by applicable Law for it to conduct its
business. All such Licenses and Consents are in full force and effect and the
Company has not received notice of any pending cancellation or suspension
thereof nor, to the best of the Company's knowledge, is any pending cancellation
or suspension thereof threatened. The Company is in compliance in all material
respects with each Law applicable to it. The Company has not received any notice
of violation of any Law or Order.
3.11 Tax. No Tax Returns of or relating to the Company have been filed.
No Taxing Authority has asserted any claim that could result in the imposition
of any Tax for which the Company is or may be liable or that could adversely
affect the Tax liability of the Company. There is no pending Proceeding relating
to any Tax for which the Company is or may be liable or that could adversely
affect any Tax liability of the Company and, to the best of the Company's
knowledge, no Taxing Authority is contemplating such a Proceeding or adjustment.
The Company is not a party to any Tax sharing or Tax allocation agreement,
arrangement or understanding.
<PAGE>
3.12 Brokers or Finders. Neither the Company nor any Affiliate thereof
has employed or engaged any Person to act as a broker, finder or other
intermediary in connection with the transactions contemplated hereby, and no
Person is entitled to any fee, commission or other compensation from the
Investors relating to any such employment or engagement by the Company or any
Affiliate thereof.
3.13 Investment Intent. The Company is acquiring the CASA Shares for
investment, for its own account, and not with a view to, or for resale in
connection with, any distribution thereof, nor with any current intention of
distributing the Note, or any portion thereof, in violation of the securities
laws of the United States or any foreign jurisdiction.
3.14 No Misrepresentation by the Company. No representation, warranty
or statement by the Company in this Agreement or in any certificate, exhibit or
schedule furnished pursuant hereto or in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor, individually and not jointly, hereby represents and warrants to
the Company as follows:
4.1 Power and Authority. The Investor has full legal capacity, power
and authority to execute and deliver this Agreement and each other Transaction
Document to which it is a party and to assume and perform its obligations
hereunder and thereunder. KWGI has been duly authorized by the Investor to enter
into this Agreement on its behalf, and to bind it thereby. This Agreement and
each other Transaction Document to which the Investor is a party has been duly
executed and delivered by it, and this Agreement and each other Transaction
Document to which it is a party is, its legally valid and binding obligation,
enforceable against it in accordance with its respective terms, subject to (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) equitable
principles limiting the availability of certain remedies.
4.2 Absence of Conflict. The execution and delivery of this Agreement
do not, and the execution and delivery of each other Transaction Document to
which the Investor is a party and the performance by it of its obligations
hereunder or thereunder, will not, conflict with (a) to the best of its
<PAGE>
knowledge, any of the Governing Documents of CASA, or (b) result in any breach
of any condition or provision of, or constitute a default under, or create or
give rise to any adverse right of termination or cancellation by, or excuse the
performance of, any other Person under, or result in the creation or imposition
of any Lien upon the Investor or, to the best of its knowledge, the business or
assets of CASA.
4.3 Consents. No Consent of, or notice to, any Person is required as to
the Investor in connection with the execution and delivery of this Agreement or
any other Transaction Document by it or the performance of its obligations
hereunder or thereunder, where the failure to obtain such Consent or give such
notice would have an adverse effect upon it or, to the best of its knowledge,
the business or prospects of CASA, or prohibit, invalidate, or make unlawful, in
whole or in part, this Agreement or any other Transaction Document, or the
carrying out of the provisions hereof or thereof or the transactions
contemplated hereby or thereby.
4.4 Litigation. No Proceeding is pending or threatened against or
affecting the Investor or, to the best of its knowledge, against or affecting
CASA, in which an unfavorable outcome would have a material adverse effect upon
it or CASA, as the case may be, or prohibit, invalidate, or make unlawful, in
whole or in part, this Agreement or any other Transaction Document, or the
carrying out of the provisions hereof or thereof or the transactions
contemplated hereby or thereby. The Investor has not received any notice of or,
to its knowledge, is in default in respect of any Order, nor is there any such
Order enjoining it in respect of, or the effect of which is to prohibit or
curtail the performance of, its obligations hereunder or under any other
Transaction Document.
4.5 Title to CASA Shares; Rights and Preferences. The Investor is the
owner of the number of CASA Shares set forth next to its name on Schedule 1
attached hereto, and such Shares are duly authorized, validly issued, fully paid
and nonassessable and free and clear of any and all Liens whatsoever. Upon the
consummation of the transactions contemplated by this Agreement, the Company
will hold title to such Shares, free and clear of any and all Liens whatsoever.
4.6 Investment Intent. It is the intention of the Investor that its
acquisition of its portion of the Common Shares be a transaction exempt from the
securities laws of the United States, the State of Nevada and any other
applicable jurisdiction and, as such, the Investor specifically represents as
follows:
(a) The Investor (i) has its place of business at the address set
forth on Schedule 1 attached hereto and has no current intention of becoming
domiciled in any other state or jurisdiction prior to the Closing Date; (ii) has
adequate means of providing for its current needs and possible contingencies,
and has no need for liquidity of its investment; (iii) can bear the economic
risk of its investment herein, including the possibility of losing its entire
investment; (iv) has such knowledge and experience in business and financial
matters, alone or with its representatives, that it is capable of evaluating the
relative risks and merits of this investment; and (v) understands the
speculative nature and uncertainty of the investment contemplated hereby.
<PAGE>
(b) That portion of the Common Shares being acquired by the
Investor (i) is being acquired for the Investor's own account, for investment
purposes only and not with a view to resale or other distribution thereof; and
(ii) may be sold in the United States only if it is subsequently registered
under the Act or an exemption from such registration is available.
(c) The Investor (i) has reviewed this Agreement and has been
afforded the opportunity to ask questions of and receive answers from the
Company concerning the terms and conditions of this Agreement and the businesses
of the Company and to obtain any additional information which the Company
possesses or could acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information contained herein; (ii) desires
no additional information from the Company; and (iii) has had the opportunity to
consult with such legal, accounting and other professional advisors as it has
deemed appropriate, and all such advisors have been given access to information
to the satisfaction of the Investor.
(d) The Investor (i) through its representatives and advisers, is
familiar with the definition of "Accredited Investor" as that term is defined in
Rule 501(a) of the Commission and, in light of such definition, it is an
"Accredited Investor" and (ii) it has such knowledge and experience in financial
and business matters that it is capable of evaluating the risks and merits of
the purchase of EAL Stock.
(e) The Investor fully understands and agrees that (i) it must bear
the economic risk of its purchase for an indefinite period of time because,
among all other reasons, the Common Shares have not been registered under the
U.S. Securities Act of 1933 (the "Act"), or the securities laws of any state,
and therefore, cannot be sold, pledged, assigned or otherwise disposed of unless
subsequently registered under the Act and/or qualified under applicable state
securities laws or an exemption from such registration and/or qualification is
available, (ii) the information or conditions necessary to permit routine sales
of the Common Shares under Rule 144 promulgated under the Act may not now be
available and no assurance has been given that it or they will become available,
and (iii) each of the certificates representing the Common Shares to be acquired
by the Investor pursuant hereto will bear in substance the following legend:
"These securities have not been registered under the Securities Act
of 1933 or any other applicable law. They may not be sold or
transferred in the absence of an effective Registration Statement
under that Act without an opinion of counsel reasonably
satisfactory to the Company that such Registration is not
required."
<PAGE>
4.7 Brokers or Finders. Neither the Investor nor any Affiliate has
employed or engaged any Person to act as a broker, finder or other intermediary
in connection with the transactions contemplated hereby, and no Person is
entitled to any fee, commission or other compensation from the Company relating
to any such employment or engagement by the Investor or any Affiliate of the
Investor.
4.8 No Misrepresentation by the Investor. No representation, warranty
or statement by the Investor in this Agreement or in any certificate, exhibit or
schedule furnished pursuant hereto or in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading.
ARTICLE V
DELIVERY OF DOCUMENTS
5.1 Deliveries by the Company. Upon execution of the Agreement, the
Company shall deliver to the Investors a certificate in the name of the Investor
representing the number of Common Shares set forth next to its name on Schedule
1 attached hereto.
5.2 Deliveries by the Investors. Upon execution of this Agreement, each
Investor shall deliver to the Company the certificates representing the number
of CASA Shares held by it as set forth on Schedule 1 attached hereto, duly
endorsed in favor of the Company or with a duly executed blank stock power in
its favor.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 Confidentiality. From and after the execution of this Agreement,
the parties hereto shall keep absolutely confidential all information relating
to or concerned with the Company or the investment of the Investors therein. The
parties shall not, at any time after the date hereof, use or disclose to any
Person any such information without the written consent of all other parties,
except as may be required by Law (in which case the party shall promptly give
notice to the other parties of any demand, subpoena, order or other legal
process requiring disclosure, in order to permit such parties to seek an
appropriate protective order or other confidential treatment of such
information).
6.2 Cooperation in Regulatory Filings. The Investors shall provide all
reasonable cooperation to the Company and its authorized representatives in the
preparation and making of any necessary regulatory filings with any Governmental
Authority.
<PAGE>
6.3 Public Announcements. Neither the Investors nor the Company shall
make or permit any Affiliate thereof to make, any press release or other public
announcement with respect to this Agreement or the transactions contemplated
hereby, without the prior written consent of the other party (which consent
shall not be unreasonably withheld), unless such announcement is required by
Law, in which case the other parties shall be given notice of such requirement
prior to such announcement and the parties shall consult with each other as to
the scope and substance of such disclosure.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by the Company. From and after the execution of
this Agreement, the Company shall indemnify and defend the Investors against,
and hold the Investors harmless from, and will pay to the Investors the amount
of, any loss, claim, liability, obligation, damage or expense (including without
limitation attorneys' and consultants' fees and disbursements and expenses of
investigating, defending and prosecuting) which the Investors or any
shareholder, director, officer, member, manager, employee or agent of the
Investors may suffer or incur (including without limitation incidental to any
claim or any Proceeding against the Investors or any shareholder, director,
officer, member, manager, employee or agent of the Investors) based upon or
resulting from:
(a) the breach or inaccuracy of any representation or warranty made
by the Company herein or pursuant hereto; or
(b) the failure of the Company to perform or to comply with any
covenant or condition required of the Company to be performed or complied with
hereunder.
7.2 Indemnification by the Investors. From and after the execution of
this Agreement, each Investor shall indemnify and defend the Company against,
and hold the Company harmless from, and will pay to the Company the amount of,
any loss, claim, liability, obligation, damage or expense (including without
limitation attorneys' and consultants' fees and disbursements and expenses of
investigating, defending and prosecuting) which the Company may suffer or incur
(including without limitation incidental to any claim or any Proceeding against
the Company) based upon or resulting from:
(a) the breach or inaccuracy of any representation or warranty made
by such Investor herein or pursuant hereto; or
<PAGE>
(b) such Investor's failure to perform or to comply with any
covenant or condition required of the Investor to be performed or complied with
hereunder.
7.3 Indemnification Procedures.
(a) Promptly after notice to an indemnified party of any claim or
the commencement of any Proceeding by a third party subject to Sections 7.1 or
7.2 above, such indemnified party shall, if a claim for indemnification in
respect thereof is to be made against an indemnifying party pursuant to this
Article VII, give written notice to the latter of the commencement of such claim
or Proceeding, setting forth in reasonable detail the nature thereof and the
basis upon which such party seeks indemnification hereunder, provided, however,
that the failure of any indemnified party to give such notice shall not relieve
the indemnifying party of its obligations hereunder, except to the extent that
the indemnifying party is actually prejudiced by the failure to give such
notice.
(b) In case any Proceeding is brought against an indemnified party,
and provided that proper notice is duly given, the indemnifying party shall
assume the defense thereof insofar as such Proceeding involves any loss,
liability, claim, obligation, damage or expense in respect of which
indemnification may be sought hereunder, with counsel reasonably satisfactory to
such indemnified party and, after notice from the indemnifying party to the
indemnified party of its assumption of the defense thereof, the indemnifying
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof (but the indemnified party shall have the right, but not the obligation,
to participate at its own expense in such defense by counsel of its own choice)
or for any amounts paid or foregone by the latter as a result of the settlement
or compromise thereof (without the written consent of the indemnifying party).
If the indemnifying party shall assume the defense of a Proceeding, the
indemnified party shall cooperate fully with the indemnifying party and shall
appear and give testimony, produce documents and other tangible evidence, allow
the indemnifying party access to the books and records of the indemnified party
and otherwise assist the indemnifying party in conducting such defense.
(c) If both the indemnifying party and the indemnified party are
named as parties in or are subject to a Proceeding and either such party
determines with advice of counsel that there may be one or more legal defenses
available to it that are different from or additional to those available to the
other party or that a material conflict of interest between such parties may
exist in respect of such Proceeding, the indemnifying party may decline to
assume the defense on behalf of the indemnified party or the indemnified party
may retain the defense on its own behalf and, in either such case, after notice
to such effect is duly given hereunder to the other party, the indemnifying
party shall be relieved of its obligation to assume the defense on behalf of the
indemnified party, but shall be required to pay any legal or other expenses,
including, without limitation, reasonable attorneys' fees and disbursements
incurred by the indemnified party in such defense; provided, however, that the
indemnifying party shall not be liable for such expense on account of more than
one separate firm of attorneys (and, if necessary, local counsel) at any time
representing such indemnified party in connection with any Proceeding or
separate Proceedings in the same jurisdiction arising out of or based upon
substantially the same allegations or circumstances.
<PAGE>
(d) No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
or compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such Proceeding (but the indemnifying party shall have
the right to participate at its own cost and expense in such defense by counsel
of its own choice) and may make in good faith any compromise or settlement with
respect thereto, and recover the entire cost and expense thereof, including
without limitation reasonable attorneys' fees and disbursements and all amounts
paid and foregone as a result of such Proceeding, or the settlement or
compromise thereof, from the indemnifying party. The indemnification required
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills or invoices are received or
loss, liability, obligation, damage or expense is actually suffered or incurred.
7.4 Survival of Representations and Warranties. The representations and
warranties of each party herein shall, notwithstanding any investigation or
inquiry made by the other party, continue until the later of three years after
the execution of this Agreement or until the expiration of the applicable
statute of limitations. Any claim for indemnification under Section 7.1 (a) or
Section 7.2 (a) shall be made within the applicable survival period set forth in
this Section 7.4.
ARTICLE VIII
MISCELLANEOUS
8.1 Limitation of Authority. No provision hereof shall be deemed to
create any partnership, joint venture or joint enterprise or association between
the parties hereto, or to authorize or to empower either party hereto to act on
behalf of, obligate or bind the other party hereto.
8.2 Fees and Expenses. Each party hereto shall bear such costs, fees
and expenses as may be incurred by it in connection with this Agreement and the
transactions contemplated hereby.
8.3 Notices. Any notice or demand required or permitted to be given or
made hereunder to or upon either party hereto shall be deemed to have been duly
given or made for all purposes if (a) in writing and sent by (i) messenger or an
overnight courier service against receipt, or (ii) certified or registered mail,
postage paid, return receipt requested, or (b) sent by telegram, facsimile
transmission, telex or similar electronic means, provided that a written copy
thereof is sent on the same day by postage paid first-class mail, to such party
<PAGE>
at the its address first set forth above, or such other address as either party
hereto may at any time, or from time to time, direct by notice given to the
other party in accordance with this Section. The date of giving or making of any
such notice or demand shall be, in the case of clause (a)(i), the date of the
receipt; in the case of clause (a)(ii), five business days after such notice or
demand is sent; and, in the case of clause (b), the business day next following
the date such notice or demand is sent.
8.4 Amendment. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective, unless in writing and signing by or
on behalf of the parties hereto.
8.5 Waiver. No course of dealing or omission or delay on the part of
either party hereto in asserting or exercising any right hereunder shall
constitute or operate as a waiver of any such right. No waiver of any provision
hereof shall be effective, unless in writing and signed by or on behalf of the
party to be charged therewith. No waiver shall be deemed a continuing waiver or
waiver in respect of any other or subsequent breach or default, unless expressly
so stated in writing.
8.6 Governing Law. This Agreement shall be governed by, and interpreted
and enforced in accordance with, the laws of the State of Delaware, without
regard to principles of choice of law or conflict of laws.
8.7 Remedies. In the event of any actual or prospective breach or
default by either party hereto, the other party shall be entitled to equitable
relief, including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive, and
nothing herein shall be deemed to prohibit or limit either party from pursuing
any other remedy or relief available at law or in equity for such actual or
prospective breach or default, including the recovery of damages; provided,
however, that the indemnification provisions of Article 10 shall be the sole and
exclusive remedy with respect to claims for monetary damages.
8.8 Severability. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
8.9 Further Assurances. Each party hereto covenants and agrees promptly
to execute, deliver, file or record such agreements, instruments, certificates
and other documents and to perform such other and further acts as the other
party hereto may reasonably request or as may otherwise be necessary or proper
to consummate and perfect the transactions contemplated hereby.
<PAGE>
8.10 Assignment. This Agreement, and each right, interest and
obligation hereunder, may not be assigned, whether by operation of law, merger,
consolidation or otherwise, by any party hereto without the prior written
consent of the other parties hereto, and any purported assignment without such
consent shall be void and without effect.
8.11 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement is not intended, and shall not be deemed, to create or
confer any right or interest for the benefit of any Person not a party hereto.
8.12 Incorporation by Reference. The Exhibits and Schedules hereto are
an integral part of this Agreement and are incorporated in their entirety herein
by this reference.
8.13 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of the date first above written.
SHANECY, INC. K. WASHINGTON-GALANIS
INVESTMENTS, LLC
For the Investors
By:__________________ By:__________________
Jason Galanis Kevin Washington
Its President Its President
<PAGE>
SCHEDULE 1
List of Investors and Holdings
Number of CASA Number of Company
Name Address Shares Held Shares to Receive
- ---- ------- ----------- -----------------
<PAGE>
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is entered into this as of
this 11th day of November, 1999 by and among Thesseus International Asset Fund
N.V., a corporation formed under the laws of the Netherlands Antilles with a
place of business at Zeelandia Office Park, 16 Kaya W.F.G. (Jombi) Mensing,
Curacao, Netherlands Antilles (the "Fund"), Eikos Management LLC, a limited
liability company formed under the laws of the Isle of Man with a place of
business at P.O. Box 107, Douglas, IM 99 1JF, Isle of Man, British Isles
("Eikos"), Eikos Acquisition Limited, a corporation formed under the laws of the
Isle of Man with a place of business at P.O. Box 107, Douglas, IM 99 1JF, Isle
of Man, British Isles ("EAL"), and Shanecy, Inc. a corporation formed under the
laws of the State of Delaware with a place of business at 625 Howe Street, Suite
1530, Vancouver, British Columbia V6C 2T6 (the "Acquiror").
RECITALS
WHEREAS, the Fund is a closed-end venture capital fund that engages
world-wide in the identification, analysis and acquisition of financial services
and related businesses emphasizing the application of information technology;
and
WHEREAS, the Fund is the sole owner of EAL, which in turn owns and
holds 49.5% of the outstanding equity of Eikos (the "Eikos Equity"), and Eikos
as its principal asset owns and holds all right and title in and to that certain
Mutual Business Development Agreement dated October 8, 1996 (the "MBDA") between
Eikos (as successor in interest to the O. Pappalimberis Trust) and The Credit
Store, Inc., a Delaware corporation ("The Credit Store") (as successor in
interest to Service One International Corporation ("Service One")), as amended
December 16, 1997 and September 1, 1998; and
WHEREAS, pursuant to the MBDA, Eikos was granted certain rights to use
proprietary technology developed at The Credit Store and other intellectual
property relating to the administration and information processing of databases
connected with consumer credit cards and electronic consumer credit business
generally; and
WHEREAS, under the MBDA Eikos is entitled to receive certain income
determined as a percentage of gross credit card receivable originations (as
defined in the MBDA) produced by The Credit Store, both in the form of cash and
performing credit card receivables; and
WHEREAS, Eikos is administered by Ionian Trust Company Limited, a
corporation formed under the laws of the Republic of Ireland with a place of
business at 65 Cliff Road, Tramore, County Waterford, Republic of Ireland
("Ionian"), pursuant to that certain Administration Agreement dated August 31,
1998 among Eikos, the Fund and Ionian; and
Page 1 of 30
<PAGE>
WHEREAS, the Acquiror has initiated a business plan to act as a
publicly traded venture capital company concentrating in the consumer financial
services business, with a particular focus on Internet-related businesses; and
WHEREAS, the Acquiror desires to expand the depth of management
required to execute its ongoing business plan as well as to provide its
stockholders enhanced access to the investment community through pre-existing
relationships of the principals of the Fund; and
WHEREAS, in addition to providing the Acquiror access to its
pre-existing professional relationships, the Fund is agreeable to utilizing its
expertise in making available to the Acquiror individuals and firms to assist it
in instituting and implementing financial and accounting controls required by
institutional investors, with a view to enhancing its overall value, stability
and liquidity; and
WHEREAS, in furtherance of the foregoing, the Fund has determined to
transfer all of its stock in EAL (the "EAL Stock") for common stock and
preferred stock of the Acquiror (the "Acquired Stock") in order to benefit the
net asset value of the Fund; and
WHEREAS, the Acquiror desires to acquire the EAL Stock from the Fund in
exchange for the Acquired Stock, and the Fund desires to acquire the Acquired
Stock from the Acquiror in consideration for the transfer of the EAL Stock, all
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth below, it is therefore agreed as follows:
ARTICLE I
DEFINITIONS
1. Currency; Certain Definitions. All currency figures in this
Agreement are denominated in U.S. dollars. Capitalized terms used, but not
defined elsewhere, in this Agreement are defined as follows:
1.1 "Acquired Stock" means the (a) 1,500,000 shares of restricted
voting Common Stock, and (b) 8,500,000 shares of Preferred Stock that the
Acquiror shall authorize after shareholder approval and thereafter issue to the
Fund, all of which the Fund is purchasing in consideration for the sale of the
EAL Stock to the Acquiror pursuant to this Agreement.
Page 2 of 30
<PAGE>
1.2 "Acquiror" means Shanecy, Inc., a Delaware corporation, and any
permitted successor thereto or Affiliate thereof.
1.3 "Articles of Association" means the articles of association, as
amended, of the Fund as filed with the Ministry of Justice of the Netherlands
Antilles.
1.4 "Administration Agreement" means that certain Administration
Agreement dated August 31, 1998 among the Fund, Eikos and Ionian (a true and
correct copy of which is attached hereto as Exhibit "A"), providing, among other
things, for the administration of Eikos, and to which the Acquiror will consent
at the Closing.
1.5 "Administrative Member" means Ionian, or any successor thereto,
as designated pursuant to Section 2.1 of the Operating Agreement.
1.6 "Affiliate" of a Person means another Person (a) directly or
indirectly controlling, controlled by, or under common control with, such Person
(for this purpose, "control" of a Person means the power (whether or not
exercised) to direct the policies, operations or activities of such Person by or
through the ownership of, or right to vote, or direct the manner of voting of,
securities of such Person, or pursuant to agreement or Law or otherwise) or (b)
who is a director or officer of a corporation, general partner of a partnership,
manager of a limited liability company, trustee of a trust or other Person who
exercises managerial authority with respect to the subject Person; or (c) who
owns (or has the discretionary right to acquire) 10% or more of the equity
interests (including without limitation capital stock or partnership, membership
or beneficial interests) of the subject Person.
1.7 "Closing" has the meaning set forth in Section 7.1 hereof.
1.8 "Closing Date" means the date of the Closing.
1.9 "Common Stock" means the shares of common stock of the
Acquiror, par value $0.001, of which, as of the date of this Agreement,
20,000,000 shares are authorized and 8,495,000 shares are issued and
outstanding.
1.10 "Consent" means any approval, authorization, consent or
ratification by, or on behalf of, any Person that is not a party to this
Agreement, or any waiver of, or exemption or variance from, any License or
Order.
1.11 "Contract" means any written or oral contract, agreement,
arrangement or understanding, including without limitation any loan agreement or
indenture, purchase, sales, supply or service order or agreement, real property,
equipment or other lease, or license of trade rights, to which Eikos, EAL or the
Acquiror is a party, by which Eikos, EAL or the Acquiror is bound or to which
the Eikos Equity or the Acquired Stock are or may be subject.
Page 3 of 30
<PAGE>
1.12 "Credit Store, The" means The Credit Store, Inc., a Delaware
corporation with its principal place of business at 3401 N. Louise Avenue, Sioux
Falls, South Dakota, and any successor thereto.
1.13 "EAL" means Eikos Acquisition Limited, an Isle of Man
corporation, and any permitted successor thereto.
1.14 "EAL Stock" means the one hundred (100) shares of common stock
in EAL, par value (pound)1-00, comprising all of the issued and outstanding
common stock thereof, all of which is currently owned and held by the Fund.
1.15 "Eikos" means Eikos Management LLC, an Isle of Man limited
liability company, and any permitted successor thereto.
1.16 "Eikos Equity" means the 49 1/2 membership units representing
forty-nine and one-half percent (49.5%) of the equity of Eikos, all of which is
held by EAL pursuant to the Agreement dated September 22, 1999 between the Fund
and EAL (the "Fund - EAL Agreement"), a true and correct copy of which is
attached hereto as Exhibit "B".
1.17 "Exchange Act" means the Securities and Exchange Act of 1934.
1.18 "Fund" means Thesseus International Asset Fund N.V., a
Netherlands Antilles corporation, and any permitted successor thereto.
1.19 "Governing Document" means (a) the articles of association or
certificate of incorporation (including any restatement, amendment or correction
thereof or any certificate of designation thereunder) and the by-laws of a
corporation, and any agreement between any shareholders thereof with respect to
the voting or disposition of, or right to receive dividends or other
distributions with respect to, the capital stock of such corporation; (b) the
articles or certificate and the partnership agreement of a partnership; (c) the
articles of organization and operating agreement of a limited liability company;
(d) the trust agreement of a trust; and (e) any similar agreement, certificate
or other document, whether or not filed or required to be filed with a
Governmental Authority, governing or relating to the organization, management or
ownership of any Person.
1.20 "Governmental Authority" means any federal, state, local or
foreign government or governmental authority, agency or instrumentality, or any
court of competent jurisdiction.
Page 4 of 30
<PAGE>
1.21 "Ionian" means Ionian Trust Company Limited, a Republic of
Ireland corporation, and any successor thereto, which owns one percent (1%) of
the membership equity of Eikos, and which serves as the Administrative Member
pursuant to the Administration Agreement.
1.22 "Law" means any statute, rule, regulation or ordinance of any
Governmental Authority.
1.23 "Lease" means a lease of or pertaining to real and/or personal
property.
1.24 "License" means any license, permit, certification,
qualification or franchise issued or granted by any Governmental Authority.
1.25 "Lien" means any security interest, conditional sale or other
title retention agreement, mortgage, pledge, lien, charge, encumbrance or other
adverse claim or interest.
1.26 "Material," "materially" or "materiality" means, when
referring to the significance of any fact, condition, event or occurrence in
this Agreement or any Transaction Document delivered pursuant hereto, such level
of disclosure as required by the Laws of the United States, specifically the
Securities Act and/or the Exchange Act, as applied by the United States
Securities and Exchange Commission (the "Commission") and the Federal Courts of
the United States.
1.27 "MBDA" means that certain Mutual Business Development
Agreement dated October 6, 1996 between O. Pappalimberis Trust (as predecessor
in interest to Eikos) and Service One (as predecessor in interest to Credit
Store) (a true and correct copy of which is attached hereto as Exhibit "C"), as
amended December 16, 1997 (a true and correct copy of which is attached hereto
as Exhibit "D"), and as further amended September 1, 1998 (a true and correct
copy of which is attached hereto as Exhibit "E").
1.28 "NASDAQ" means the National Association of Securities Dealers,
Inc. Automated Quotation system, and any successor thereto.
1.29 "Operating Agreement" means that certain Operating Agreement
of Eikos dated December 7, 1997, by and among Eikos, the Fund and Ionian (a true
and correct copy of which is attached hereto as Exhibit "F"), as amended by the
Fund and Ionian on August 31, 1998 (a true and correct copy of which is attached
hereto as Exhibit "G"), and acknowledged and agreed to by EAL (as successor to
the Fund) at the Closing.
1.30 "OTCBB" means the Over-the-Counter Bulletin Board stock
quotation system, on which the Common Stock of the Acquiror is currently listed,
and any successor thereto
Page 5 of 30
<PAGE>
1.31 "Order" means any judgment, order, writ, decree, award,
directive, ruling or decision of any Governmental Authority.
1.32 "Person" includes without limitation a natural person,
corporation, joint stock company, limited liability company, partnership, joint
venture, association, trust, Governmental Authority, or any group of the
foregoing acting in concert.
1.33 "Preferred Stock" means the preferred stock of the Acquiror,
par value $0.001 per share, which the Acquiror shall authorize upon shareholder
approval, and which shall have the rights and preferences substantially as set
forth in Exhibit "H" attached hereto.
1.34 "Proceeding" means any action, suit, investigation, audit or
other proceeding, at law or in equity, before or by any Taxing Authority or
Governmental Authority.
1.35 "Purchase Price" has the meaning set forth in Section 2.3
hereof.
1.36 "Regulations" means the regulations of the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc. and/or
any other regulatory body with jurisdiction over the securities or business of
the Acquiror.
1.37 "Securities" means, collectively, the Acquired Stock, the
Common Stock, the Preferred Stock and any other authorized and outstanding
shares of stock in the Acquiror.
1.38 "Securities Act" means the Securities Act of 1933.
1.39 "Tax" means any tax, fee, levy, assessment or other
governmental charge imposed by any Taxing Authority (including without
limitation any income, franchise, gross receipts, property, sales, use, excise,
services, value added, ad valorem, withholding, social security, estimated,
accumulated earnings, transfer, gains, license, privilege, payroll, profits,
capital stock, employment, unemployment, severance, stamp, occupancy, customs or
occupation tax), and any interest, additions to tax and penalties in connection
therewith.
1.40 "Taxing Authority" means the U.S. Internal Revenue Service and
any other domestic or foreign Governmental Authority responsible for the
administration of any Tax.
1.41 "Tax Return" means any return, amended return, declaration,
report, estimate, information return or statement regarding Taxes which is filed
or required to be filed under applicable Law, whether on a consolidated,
combined, unitary or separate basis or otherwise.
Page 6 of 30
<PAGE>
1.42 "Transaction Document" means this Agreement and each other
agreement, instrument or other document being entered into by the Acquiror or
the Fund or any related party at or in connection with the Closing.
ARTICLE II
ACQUISITION OF EAL STOCK AND ACQUIRED STOCK
2.1 Acquisition of EAL Stock. At the Closing, in consideration for the
transfer of the Acquired Stock by the Acquiror to the Fund and subject to the
terms and conditions set forth herein, the Fund shall sell, assign, transfer and
otherwise convey to the Acquiror, and the Acquiror shall acquire from the Fund,
all of the right, title and interest to the EAL Stock, which shall be duly
issued, fully paid, non-assessable, and free and clear of all liens, claims and
encumbrances.
2.2 Acquisition of Acquired Stock. At the Closing, in consideration for
the transfer of the EAL Stock by the Fund to the Acquiror and subject to the
terms and conditions set forth herein, the Acquiror shall sell, assign, transfer
and otherwise convey to the Fund, and the Fund shall acquire from the Acquiror,
the Acquired Stock, which shall be duly issued, fully paid and non-assessable,
free and clear of all liens, claims and encumbrances and not subject to any
pre-emptive rights.
2.3. Acquisition Price. The Acquisition Price (a) for the EAL Stock
shall be $6,690,000, and shall be satisfied by delivery of a duly executed stock
power for the EAL Stock to the Acquiror at the Closing, and (b) for the Acquired
Stock shall be $6,690,000, shall be satisfied by delivery of a duly executed
certificate for the Acquired Stock to the Fund at the Closing.
2.4 Transactions. All of the transactions contemplated by this
Agreement are to take place on the Closing Date, with the exception of those set
forth in Article IX hereof, and are intended by the parties to be consummated
concurrently; and if any such transaction is not consummated as provided herein,
the parties shall take all actions necessary to dissolve and invalidate all
other such transactions as if none of such transactions had been consummated.
Page 7 of 30
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE FUND, EIKOS AND EAL
The Fund, Eikos and EAL hereby individually and severally represent and
warrant to the Acquiror as follows:
3.1 Organization. The Fund is a corporation duly organized, validly
existing and in good standing under the laws of the Netherlands Antilles and has
full power and authority to own its assets and carry on its business in the
manner and places where such assets are now owned and such business is now being
conducted. Eikos is a limited liability company duly organized, validly existing
and in good standing under the laws of the Isle of Man, and has full power and
authority to own its assets and conduct its business in the manner and places
where such assets are now owned and such business is now being conducted. EAL is
a corporation duly organized, validly existing and in good standing under the
laws of the Isle of Man, and has full power and authority to own its assets and
conduct its business in the manner and places where such assets are now owned
and such business is now being conducted.
3.2 Power and Authority. The Fund, Eikos and EAL, as the case may be,
each have full legal capacity, power and authority to execute and deliver this
Agreement and each other Transaction Document to which it is a party and to
assume and perform its obligations hereunder and thereunder. This Agreement has
been, and on the Closing Date each other Transaction Document to which the Fund,
Eikos or EAL is a party will be, duly executed and delivered by each such party.
This Agreement is, and each other Transaction Document to which the Fund, Eikos
or EAL is a party when so executed and delivered on the Closing Date will be, a
legally valid and binding obligation of each such party, enforceable in
accordance with its respective terms, subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) equitable principles limiting
the availability of certain remedies.
3.3 The MBDA and EAL.
(a) The MBDA is the sole material asset of Eikos. The MBDA is in
full force and effect and there is no breach or default thereunder by Eikos or,
to the best knowledge of the Fund, any other party thereto. The copies of the
MBDA and the Amendments attached to this Agreement as Exhibits "C", "D" and "E"
respectively are true and correct copies thereof. Other than by the indicated
Amendments, the MBDA has not been modified or amended in any respect.
(b) EAL is newly formed, and has not engaged in business other than
its initial formation. The sole material asset of EAL consists of the Eikos
Page 8 of 30
<PAGE>
Equity. EAL does not have any liabilities or obligations of any kind, whether
known or unknown, or whether absolute, accrued, contingent, matured or
otherwise, whether due or to become due except liabilities or obligations that
arose in the ordinary course of business in effecting its initial formation.
3.4 Absence of Conflict. The execution and delivery of this
Agreement do not, and the execution and delivery of each other Transaction
Document to which it is a party and the performance by the Fund, Eikos or EAL of
their respective obligations hereunder or thereunder, will not, (i) violate any
provision of the Governing Documents of the Fund, Eikos or EAL, or (ii) conflict
with or result in any breach of any condition or provision of, or constitute a
default under, or create or give rise to any adverse right of termination or
cancellation by, or excuse the performance of, any other Person under, or result
in the creation or imposition of any Lien upon the Fund, Eikos, EAL or the Eikos
Equity.
3.5 Consents. Other than the consent of the members of Eikos to the
admission of the Acquiror as a new member (which consent shall be given
substantially in the form attached hereto as Exhibit "I"), no Consent of, or
notice to, any Person is required as to the Fund, Eikos or EAL in connection
with the execution and delivery of this Agreement or any other Transaction
Document by the Fund, Eikos or EAL or the performance of its obligations
hereunder or thereunder, where the failure to obtain such Consent or give such
notice would have an adverse effect upon the Fund, Eikos, EAL or the Eikos
Equity or prohibit, invalidate, or make unlawful, in whole or in part, this
Agreement or any other Transaction Document, or the carrying out of the
provisions hereof or thereof or the transactions contemplated hereby or thereby.
3.6 Litigation. No Proceeding is pending or, to the best knowledge
of the Fund, Eikos or EAL, threatened against or affecting the Fund, Eikos or
EAL in which an unfavorable outcome would have a material adverse effect upon
the Fund, Eikos, EAL or the Eikos Equity or prohibit, invalidate, or make
unlawful, in whole or in part, this Agreement or any other Transaction Document,
or the carrying out of the provisions hereof or thereof or the transactions
contemplated hereby or thereby. Neither the Fund, Eikos nor EAL has received any
notice of or, to its respective knowledge, is in default in respect of any
Order, nor is there any such Order enjoining the Fund, Eikos or EAL in respect
of, or the effect of which is to prohibit or curtail the performance of, the
obligations of the Fund, Eikos or EAL hereunder or under any other Transaction
Document.
3.7 Title to Eikos Equity, EAL Stock. EAL is the legal and
beneficial owner of, and has good and marketable title to, all of the Eikos
Equity, and the Fund is transferring to the Acquiror the legal and beneficial
ownership of, and good and marketable title to, all of the EAL Stock, free and
clear of all liens, claims, security interests and other charges and
encumbrances and other types of preferential arrangements.
Page 9 of 30
<PAGE>
3.8 Authorized Capital.
(a) The entire authorized capital of EAL consists of one
hundred (100) shares of common stock, par value $0.01, of which the Fund is the
sole owner. Such shares are duly authorized, validly issued, fully paid,
nonassessable and free and clear of all Liens whatsoever. No shares of EAL are
reserved for issuance, and there are no agreements, commitments or arrangements
providing for the issuance or sale of any shares or other interests in EAL
(other than this Agreement), or any issued or outstanding options, warrants or
rights to purchase, or any security or instrument convertible into or
exchangeable for, any capital stock or other interest of EAL.
(b) The entire authorized capital of Eikos consists of one
hundred (100) membership units, of which forty-nine and one-half (49.5) units
are owned by EAL, forty-nine and one half-unit (49.5) units are owned by
Consumer Union Finance Limited, a United Kingdom corporation ("Consumer Union")
and one (1) unit is owned by Ionian.
3.9 Financial Statements; No Undisclosed Liabilities; Books.
(a) Eikos has delivered to the Acquiror a copy of the
unaudited balance sheet of Eikos as of August 31, 1999 (the "Eikos Balance
Sheet"), a true and correct copy of which is attached hereto as Schedule 3.9(a).
The Eikos Balance Sheet presents fairly in all material respects the financial
position of Eikos at such date.
(b) The Fund has delivered to the Acquiror a copy of its
Consolidated Financial Statements for the year ending December 31, 1998 with
accompanying auditors' report of KPMG LLP, Chartered Accountants (the "Fund
Financial Statements"), a true and correct copy of which is attached hereto as
Schedule 3.9(b). The Fund Financial Statements presents fairly in all material
respects the financial position of the Fund at such date including, without
limitation, the book value of the investment of the Fund in Eikos.
(c) Except as set forth in the Eikos Balance Sheet, Eikos does
not have any material liabilities or obligations of any kind, whether known or
unknown, or whether absolute, accrued, contingent, matured or otherwise, whether
due or to become due except liabilities or obligations that arose in the
ordinary course of business.
(d) The books and financial records of Eikos made available to
the Acquiror constitute a complete record of its financial affairs and
accurately set forth all revenues, expenses, assets and liabilities.
3.10 No Adverse Change. Since the date of the Eikos Balance Sheet
there has been no material adverse change in the business, the assets or the
financial or other condition of Eikos, and Eikos has not:
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<PAGE>
(a) incurred any damage, destruction or similar loss, whether
or not covered by insurance, materially adversely affecting its business or its
assets;
(b) other than in the ordinary course of business, sold,
assigned or transferred any of its assets or any interest therein;
(c) incurred any material obligation or liability (including
any guaranty, indemnity, make-whole agreement for or with respect to any
obligation or liability of another Person), or paid, satisfied or discharged any
material obligation or liability prior to the due date or maturity thereof,
except current obligations and liabilities in the ordinary course of business;
(d) other than in the ordinary course of business, created,
incurred, assumed, granted or suffered to exist any Lien on any of its assets;
(e) other than in the ordinary course of business, waived any
right of value or canceled, forgiven or discharged any debt owed to it or any
claim in its favor;
(f) declared, set aside or paid any dividend or made or
committed to make any other distribution in respect of any units of its
membership equity; or
(g) effected any material change in its business policies or
practices, accounting methods, conventions, principles or assumptions or any
material change in the nature of the business relationships with its clients; or
effected any material transaction not in the ordinary course of business.
3.11 Assets and Material Contracts. Other than the MBDA, Eikos
currently has no material contracts (including, without limitation, employment
or other labor agreements, benefits arrangements and policies of insurance)
except for the Administration Agreement, the Operating Agreement and the
amendment thereto, true and correct copies of which are attached hereto as
Exhibits "A", "F" and "G", respectively. Other than the assets acquired and to
be acquired under the MBDA (comprised of cash and credit card receivables, as
set forth on the Eikos Balance Sheet), Eikos has no other material assets.
3.12 Compliance with Law. Each of Eikos and EAL has all Licenses
and all Consents of Governmental Authorities required by applicable Law for it
to conduct its respective business. All such Licenses and Consents are in full
force and effect and neither Eikos, EAL nor the Fund has received notice of any
pending cancellation or suspension thereof nor, to the best of the each such
party's knowledge, is any pending cancellation or suspension thereof threatened.
To the best knowledge of the Fund, Eikos and EAL, each such party is in
compliance in all material respects with each Law applicable to it, or the
ownership and administration of the MBDA, and neither the Fund, Eikos nor EAL
has received any notice of any violation of any Law or Order relating to the
business or affairs of Eikos or EAL.
Page 11 of 30
<PAGE>
3.13 Taxes. No Taxing Authority has asserted any claim that could
result in the imposition of any Tax for which Eikos or EAL is or may be liable
or that could materially adversely affect the Tax liability of Eikos or EAL.
There is no pending Proceeding relating to any Tax for which Eikos or EAL is or
may be liable or that could materially adversely affect any Tax liability of
Eikos or EAL and, to the best knowledge of the Fund, Eikos and EAL, no Taxing
Authority is contemplating such a Proceeding or adjustment. Neither Eikos nor
EAL is a party to any Tax sharing or Tax allocation agreement, arrangement or
understanding.
3.14 Investment Intent. It is the intention of the Fund that its
acquisition of the Acquired Stock from the Acquiror be a transaction exempt from
the securities laws of the United States, the State of Delaware and any other
applicable jurisdiction and, as such, the Fund specifically represents as
follows:
(a) The Fund (i) has its place of business at the address set
forth above and has no current intention of becoming domiciled in any other
state or jurisdiction prior to the Closing Date; (ii) has adequate means of
providing for its current needs and possible contingencies, and has no need for
liquidity of its investment; (iii) can bear the economic risk of its investment
herein, including the possibility of losing its entire investment; (iv) has such
knowledge and experience in business and financial matters, alone or with its
representatives, that it is capable of evaluating the relative risks and merits
of this investment; and (v) understands the speculative nature and uncertainty
of the investment contemplated hereby.
(b) The Acquired Stock (i) is being acquired for the Fund's
own account, for investment purposes only and not with a view to resale or other
distribution thereof; and (ii) may be sold in the United States only if such
Shares are subsequently registered under the Act or an exemption from such
registration is available.
(c) The Fund (i) has reviewed this Agreement and has been
afforded the opportunity to ask questions of and receive answers from the
Acquiror concerning the terms and conditions of this Agreement and the business
of the Acquiror and to obtain any additional information which the Acquiror
possesses or could acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information contained herein; (ii) desires
no additional information from the Acquiror; and (iii) has had the opportunity
to consult with such legal, accounting and other professional advisors as it has
deemed appropriate, and all such advisors have been given access to information
to the satisfaction of the Fund.
(d) The Fund (i) through its representatives and advisers, is
familiar with the definition of "Accredited Investor" as that term is defined in
Rule 501(a) of the Commission and, in light of such definition, is an
Page 12 of 30
<PAGE>
"Accredited Investor" and (ii) has such knowledge and experience in financial
and business matters that it is capable of evaluating the risks and merits of
the purchase of the Acquired Stock.
(e) The Fund fully understands and agrees that (i) it must
bear the economic risk of its purchase of the Acquired Stock for an indefinite
period of time because, among all other reasons, the Acquired Stock has not been
registered under the Act, or the securities laws of any state, and therefore,
cannot be sold, pledged, assigned or otherwise disposed of unless subsequently
registered under the Act and/or qualified under applicable state securities laws
or an exemption from such registration and/or qualification is available, (ii)
the Acquiror will not honor any attempt by the Fund to sell, pledge, transfer or
otherwise dispose of the Acquired Stock, in the absence of an effective
registration statement for the Acquired Stock under the Act and/or qualification
under applicable state securities laws or an opinion of counsel to the effect
that there is an exemption available for sale of the Acquired Stock without such
registration and/or qualification, (iii) the information or conditions necessary
to permit routine sales of securities of the Acquiror under Rule 144 promulgated
under the Act may not now be available and no assurance has been given that it
or they will become available, and (iv) each of the certificates representing
the Acquired Stock pursuant hereto will bear in substance the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT WITH RESPECT TO SUCH
SHARES, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT."
3.15 Brokers or Finders. Neither the Fund, Eikos, EAL nor any
Affiliate thereof has employed or engaged any Person to act as a broker, finder
or other intermediary in connection with the transactions contemplated hereby,
and no Person is entitled to any fee, commission or other compensation from the
Acquiror relating to any such employment or engagement by the Fund or any
Affiliate of the Fund.
3.16 No Misrepresentation by the Fund, Eikos or EAL. No
representation, warranty or statement by the Fund, Eikos or EAL in this
Agreement or in any certificate, exhibit, schedule or other Transaction Document
furnished pursuant hereto or in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading.
Page 13 of 30
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror hereby represents and warrants to the Fund, Eikos and EAL
as follows:
4.1 Organization. The Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
full power and authority to own its assets and carry on its business in the
manner and places where such assets are now owned and such business is now being
conducted.
4.2 Power and Authority. The Acquiror has full legal capacity, power
and authority to execute and deliver this Agreement and each other Transaction
Document to which it is a party and to assume and perform its obligations
hereunder and thereunder. This Agreement has been, and on the Closing Date each
other Transaction Document to which the Acquiror is a party will be, duly
executed and delivered, and this Agreement is, and each other Transaction
Document to which the Acquiror is a party when so executed and delivered on the
Closing Date will be, a legally valid and binding obligation of the Acquiror,
enforceable against the Acquiror in accordance with its terms, subject to (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) equitable
principles limiting the availability of certain remedies.
4.3 Absence of Conflict. The execution and delivery of this Agreement
do not, and the execution and delivery of each other Transaction Document to
which it is a party and the performance by the Acquiror of its obligations
hereunder and thereunder will not, violate any provision of the Governing
Documents of the Acquiror and do not and will not conflict with or result in any
breach of any condition or provision of, or constitute a default under, or
create or give rise to any adverse right of termination or cancellation by, or
excuse the performance of, any other Person, or result in the creation or
imposition of any Lien upon the Acquiror or any of its assets or the
acceleration of the maturity or date of payment or other performance of any
obligation of the Acquiror by reason of the terms of, any agreement, indenture,
instrument, license, lease, Lien or Order to which the Acquiror is a party or is
subject or which is or purports to be binding upon either of them.
4.4 Consents. No Consent of, or notice to, any Person is required as to
the Acquiror in connection with the execution and delivery by the Acquiror of
this Agreement or any other Transaction Document or the performance of the
obligations of the Acquiror hereunder or thereunder, where the failure to obtain
Page 14 of 30
<PAGE>
such Consent or give such notice would have an adverse effect upon the Acquiror,
or its assets or business or prohibit, invalidate, or make unlawful, in whole or
in part, this Agreement or any other Transaction Document, or the carrying out
of the provisions hereof or thereof or the transactions contemplated hereby or
thereby.
4.5 Litigation. No Proceeding is pending or, to the best of the
Acquiror's knowledge, threatened against or affecting the assets, operations or
financial or other condition of the Acquiror in which an unfavorable outcome
would have a material adverse effect upon the Acquiror or would prohibit,
invalidate, or make unlawful, in whole or in part, this Agreement or any other
Transaction Document, or the carrying out of the provisions hereof or thereof or
the transactions contemplated hereby or thereby. The Acquiror is not in default
in respect of any Order, nor is there any such Order enjoining the Acquiror in
respect of, or the effect of which is to prohibit or curtail the Acquiror's
performance of its obligations hereunder or under any other Transaction
Document.
4.6 Authorized Capital. The entire authorized capital of the Acquiror
currently consists of 20,000,000 shares of Common Stock, par value $0.001. All
such Securities are duly authorized, of which 8,495,000 shares of Common Stock
are currently outstanding, all of which are validly issued, fully paid and
nonassessable. No shares of preferred stock have been authorized and issued but
the Acquiror has agreed to seek shareholder approval of the amendment of its
articles of incorporation to permit the issuance of Preferred Stock with rights
and preferences substantially as set forth in Exhibit "H" attached hereto. The
Acquired Stock is and/or will be, at the time of issuance, duly authorized,
validly issued, fully paid and non-assessable, and free and clear of all Liens
whatsoever. None of the Securities are reserved for issuance, and there are no
agreements, commitments or arrangements providing for the issuance or sale of
any capital stock or other interest of the Acquiror, or any issued or
outstanding options, warrants or rights to purchase, or any security or
instrument convertible into or exchangeable for, any capital stock or other
interest of the Acquiror, except as set forth on Schedule 4.6 attached hereto.
4.7 Financial Statements; No Undisclosed Liabilities; Books.
(a) The Acquiror has delivered to the Fund a complete and correct
copy of its balance sheet and related statements of operations, stockholders'
deficit and cash flows for the year ending December 31, 1998, with the
accompanying report thereon of its certified public, together with its unaudited
comparative financial information for the six months ending June 30, 1999
(collectively, the "Acquiror Financial Statements"). A true and correct copy of
the Acquiror Financial Statements is attached hereto as Schedule 4.8(a). The
Acquiror Financial Statements present fairly in all material respects the
financial position of the Acquiror as at December 31, 1998 and June 30, 1999
without qualification except as set forth in the accompanying report and notes
of the Acquiror's Independent Auditors.
Page 15 of 30
<PAGE>
(b) Except as set forth on the Acquiror Financial Statements or on
Schedule 4.8(b) attached hereto, the Acquiror does not have any material
liabilities or obligations of any kind, whether known or unknown, or whether
absolute, accrued, contingent, matured or otherwise, whether due or to become
due except liabilities or obligations that arose in the ordinary course of
business.
(c) The books and financial records of the Acquiror made available
to the Fund constitute a complete record of its financial affairs and accurately
set forth all revenues, expenses, assets and liabilities.
4.8 No Adverse Change. Since the date of the Acquiror Financial
Statements there has been no material adverse change in the business, the assets
or the financial or other condition of the Acquiror, and the Acquiror has not:
(a) incurred any damage, destruction or similar loss, whether or
not covered by insurance, materially adversely affecting its business or its
assets;
(b) other than in the ordinary course of business, sold, assigned
or transferred any of its assets or any interest therein;
(c) incurred any material obligation or liability (including any
guaranty, indemnity, make-whole agreement for or with respect to any obligation
or liability of another Person), or paid, satisfied or discharged any material
obligation or liability prior to the due date or maturity thereof;
(d) other than in the ordinary course of business, created,
incurred, assumed, granted or suffered to exist any Lien on any of its assets;
(e) other than in the ordinary course of business, waived any right
of value or canceled, forgiven or discharged any debt owed to it or any claim in
its favor;
(f) declared, set aside or paid any dividend or made or committed
to make any other distribution in respect of any shares of Common Stock; or
(g) effected any material change in its business policies or
practices, accounting methods, conventions, principles or assumptions or any
material change in the nature of the business relationships with its clients; or
effected any material transaction not in the ordinary course of business other
than as anticipated in the Mega-Micro Acquisition.
Page 16 of 30
<PAGE>
4.9 Material Contracts. Set forth on Schedule 4.9 attached hereto is a
list of all contracts (including, without limitation, consulting, employment or
other labor agreements, benefits arrangements and policies of insurance) to
which the Acquiror is a party or its business or affairs are subject, or the
termination or cancellation of which would have a material adverse effect upon
its business or prospects.
4.10 Compliance with Law. The Acquiror has all Licenses and all
Consents of Governmental Authorities required by applicable Law for it to
conduct its business. All such Licenses and Consents are in full force and
effect and the Acquiror has not received notice of any pending cancellation or
suspension thereof nor, to the best of the its knowledge, is any pending
cancellation or suspension thereof threatened. To the best knowledge of the
Acquiror, it is in compliance in all material respects with each Law applicable
to it, and has not received any notice of any violation of any Law or Order
relating to its business or affairs.
4.11 Taxes. No Taxing Authority has asserted any claim that could
result in the imposition of any Tax for which the Acquiror is or may be liable
that could have a material adverse effect upon the business or prospects of the
Acquiror. There is no pending Proceeding relating to any Tax for which the
Acquiror is or may be liable or that could materially adversely affect any Tax
liability of the Acquiror and, to the best knowledge of the Acquiror, no Taxing
Authority is contemplating such a Proceeding or adjustment. The Acquiror is not
a party to any Tax sharing or Tax allocation agreement, arrangement or
understanding.
4.12 Investment Intent. It is the intention of the Acquiror that its
acquisition of the EAL Stock be a transaction exempt from the securities laws of
the United States, the State of Delaware and any other applicable jurisdiction
and, as such, the Acquiror specifically represents as follows:
(a) The Acquiror (i) has its place of business at the address set
forth above and has no current intention of becoming domiciled in any other
state or jurisdiction prior to the Closing Date; (ii) has adequate means of
providing for its current needs and possible contingencies, and has no need for
liquidity of its investment; (iii) can bear the economic risk of its investment
herein, including the possibility of losing its entire investment; (iv) has such
knowledge and experience in business and financial matters, alone or with its
representatives, that it is capable of evaluating the relative risks and merits
of this investment; and (v) understands the speculative nature and uncertainty
of the investment contemplated hereby.
(b) The EAL Stock (i) is being acquired for the Acquiror's own
account, for investment purposes only and not with a view to resale or other
distribution thereof; and (ii) may be sold in the United States only if it is
subsequently registered under the Act or an exemption from such registration is
available.
Page 17 of 30
<PAGE>
(c) The Acquiror (i) has reviewed this Agreement and has been
afforded the opportunity to ask questions of and receive answers from the Fund
concerning the terms and conditions of this Agreement and the businesses of
Eikos and EAL and to obtain any additional information which the Fund, Eikos or
EAL possesses or could acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information contained herein; (ii) desires
no additional information from the Fund, Eikos or EAL; and (iii) has had the
opportunity to consult with such legal, accounting and other professional
advisors as it has deemed appropriate, and all such advisors have been given
access to information to the satisfaction of the Acquiror.
(d) The Acquiror (i) through its representatives and advisers, is
familiar with the definition of "Accredited Investor" as that term is defined in
Rule 501(a) of the Commission and, in light of such definition, it is an
"Accredited Investor" and (ii) it has such knowledge and experience in financial
and business matters that it is capable of evaluating the risks and merits of
the purchase of EAL Stock.
(e) The Acquiror fully understands and agrees that (i) it must
bear the economic risk of its purchase for an indefinite period of time because,
among all other reasons, the EAL Stock has not been registered under the Act, or
the securities laws of any state, and therefore, cannot be sold, pledged,
assigned or otherwise disposed of unless subsequently registered under the Act
and/or qualified under applicable state securities laws or an exemption from
such registration and/or qualification is available, (ii) the information or
conditions necessary to permit routine sales of the EAL Stock under Rule 144
promulgated under the Act may not now be available and no assurance has been
given that it or they will become available, and (iii) each of the certificates
representing the EAL Stock to be acquired by the Acquiror pursuant hereto will
bear in substance the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT WITH RESPECT TO SUCH SHARES, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT."
4.13 Brokers or Finders. Neither the Acquiror nor any Affiliate thereof
has employed or engaged any Person to act as a broker, finder or other
intermediary in connection with the transactions contemplated hereby, and no
Person is entitled to any fee, commission or other compensation from the Fund,
Eikos or EAL relating to any such employment or engagement by the Acquiror or
any Affiliate thereof.
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4.14 No Misrepresentation by the Acquiror. No representation, warranty
or statement by the Acquiror in this Agreement or in any certificate, exhibit,
schedule or other Transaction Document furnished pursuant hereto or in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements or facts contained herein or therein not misleading.
ARTICLE V
COVENANTS
5.1 Best Efforts. From and after the date hereof and until the Closing,
the Fund, Eikos, EAL and the Acquiror shall use their respective best efforts,
and shall cooperate with each other, to cause the consummation of the
transactions contemplated hereby in accordance with the terms and conditions
hereof.
5.2 Eikos, EAL and the Acquiror to Conduct Business in the Ordinary
Course. From and after the date hereof and until the Closing, except as
otherwise provided elsewhere herein or as the relevant party may otherwise
consent (which consent shall not be unreasonably withheld), neither Eikos, EAL
nor the Acquiror shall:
(a) amend any of its Governing Documents;
(b) merge or consolidate with any other Person or effect any
capital reorganization (except, as to the Acquiror, the consummation of the
Mega-Micro Agreement);
(c) declare, set aside or pay any dividend or make or commit to
make any other distribution in respect of any shares of capital stock or other
equity interests;
(d) acquire the business or assets, substantially as a whole, of
any other Person or make any capital expenditure in excess of $25,000; or
(e) solicit or respond to any inquiry or proposal relating to any
sale of its business or assets from any Person.
5.3 Further Information. From and after the date hereof and until the
Closing, each party shall furnish to the other parties such information as may
from time to time be reasonably requested and shall permit the requesting party
and its authorized representatives access during regular business hours and upon
reasonable notice, at such party's sole expense, to examine the books and
Page 19 of 30
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records of Eikos, EAL and/or the Acquiror, as the case may be (which the
relevant party shall assemble and maintain at its principal executive offices)
and to make inquiries of responsible Persons designated by such party with
respect thereto; provided, that any information so disclosed by such party shall
not constitute an additional representation or warranty beyond those expressly
set forth in Articles 3 and 4 hereof; and provided further that all such
information shall be subject to Section 5.5.
5.4 Public Announcements. From and after the date hereof and until the
Closing; neither the Fund, Eikos, EAL nor the Acquiror shall make or permit any
Affiliate thereof to make, any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby, without the
prior written consent of the other party (which consent shall not be
unreasonably withheld), unless such announcement is required by Law, in which
case the other parties shall be given notice of such requirement prior to such
announcement and the parties shall consult with each other as to the scope and
substance of such disclosure.
5.5 Confidentiality. Each party acknowledges that all information
relating to or concerned with the business and affairs of each other party,
including without limitation all product information, customer and supplier
lists, marketing and sales data, personnel and financing and Tax matters, is
proprietary and that its confidentiality is absolutely essential to the
operation of the business of the other party. Accordingly, from and after the
date hereof and until the Closing, no party shall use or disclose to any Person
any such information, without the relevant party's prior written consent, except
to counsel for, or other representatives or agents of, such party or prospective
lenders or other financing sources to such party as may be necessary or
appropriate in order to effect the transactions contemplated hereby (in which
case, any Person to whom any such information is disclosed shall be bound by the
provisions of this Section 5.5) or as may be required by Law (in which case,
such party shall promptly give notice to the other party of any demand,
subpoena, order or legal process requiring disclosure so that such other party
may seek a protective order or other confidential treatment of such
information), unless, with respect to disclosure of such information to a third
party, such party can demonstrate that such information was already known to
such Person without any breach or violation of any confidentiality agreement for
the benefit of the other party.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions of the Obligation of the Fund to Close. The obligation
of the Fund to purchase the Acquired Stock in accordance herewith shall be
subject to the satisfaction (or waiver) prior to or at the Closing of each of
the following conditions:
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(a) the representations and warranties made by the Acquiror herein
shall be true in all material respects on and as of the Closing Date, except
those made as of a certain date which shall be true in all material respects as
of such date (provided that participation in the Closing by the Fund shall not
in any way be deemed to waive any claim it may have for breach of any
representation or warranty whether or not such breach was material);
(b) the Acquiror shall have performed and complied with all
obligations and conditions to be performed or complied with by it hereunder;
(c) no Order or Law shall be in effect which prohibits the Fund
from consummating the transactions contemplated hereby;
(d) each Consent of, or notice to, any Governmental Authority or
other Person required for the consummation of the purchase of the Acquired Stock
shall have been obtained or given;
(e) there shall not have been any adverse change in the business of
the Acquiror since the date hereof; and
(f) the Acquiror shall execute and/or deliver at the Closing all
the documents so to be executed and/or delivered by the Acquiror pursuant to
Section 7.2.
6.2 Conditions of the Obligation of the Acquiror to Close. The
obligation of the Acquiror to consummate the purchase of the EAL Stock in
accordance herewith shall be subject to the satisfaction (or waiver by the
Acquiror) prior to or at the Closing of each of the following conditions:
(a) the representations and warranties made by the Fund, Eikos and
EAL herein shall be true in all material respects on and as of the Closing Date,
except those made as of a certain date which shall be true in all material
respects as of such date (provided that the Acquiror's participation in the
Closing shall not in any way be deemed to waive any claim it may have for breach
of any representation or warranty whether or not such breach was material);
(b) each of the Fund, Eikos and EAL shall have performed and
complied with all obligations and conditions to be performed or complied with by
it hereunder;
(c) no Order or Law shall be in effect which prohibits the Fund,
Eikos or EAL from consummating the transactions contemplated hereby;
(d) each Consent of, or notice to, any Governmental Authority or
other Person required for the purchase of the EAL Stock; and
Page 21 of 30
<PAGE>
(e) the Fund, Eikos and EAL shall execute and/or deliver at the
Closing all the documents so to be executed and/or delivered by the Fund
pursuant to Section 7.3.
ARTICLE VII
CLOSING MATTERS
7.1 The Closing. The closing of the transaction contemplated hereby
(the "Closing") shall be held at the offices of the Acquiror on November 11,
1999, or at such other place or on such other date, and at such time, as the
parties hereto may agree. The execution and/or delivery of each document to be
executed and/or delivered at the Closing and each other action to be taken at
the Closing shall be subject to the condition that every other document to be
executed and/or delivered at the Closing is so executed and/or delivered and
every other action to be taken at the Closing is so taken, and all such
documents and actions shall be deemed to be executed and/or delivered or taken,
as the case may be, simultaneously. When all such documents are so executed
and/or delivered and all such actions are so taken, the closing of the
transactions provided for herein shall be effective as of the opening of
business on the Closing Date.
7.2 Deliveries by the Acquiror. At the Closing, the Acquiror shall
deliver to the Fund:
(a) a certificate in the name of the Fund representing the Common
Stock;
(b) a certificate of the secretary of the Acquiror, substantially
in the form attached hereto as Exhibit "J", certified as of the date of the
Closing and attesting to the authenticity and correctness of (i) attached copies
of its articles of incorporation, by-laws and any other Governing Document
relevant to the rights of any of the Securities; (ii) an attached copy of the
resolutions adopted by its directors or similarly constituted authority
authorizing the execution, delivery and performance of this Agreement, the
transactions contemplated in connection herewith, and the execution, delivery
and performance of the other Transaction Documents; and (iii) the names and true
signatures of the each of its officers or directors authorized to execute this
Agreement and the other Transaction Documents to be delivered in connection
herewith, together with evidence of the incumbency of each such officer or
director; and
(c) a certificate, substantially in the form attached hereto as
Exhibit "K", of an authorized officer of the Acquiror to the effect that all the
conditions to closing set forth in Section 6.1 have been satisfied.
Page 22 of 30
<PAGE>
7.3 Deliveries by the Fund. At the Closing, the Fund shall deliver, or
cause to be delivered, to the Acquiror:
(a) the certificate representing the EAL Stock, together with a
duly endorsed stock power in favor of the Acquiror;
(b) a certificate of the secretary of the Fund, substantially in
the form attached hereto as Exhibit "L", certified as of the date of the Closing
and attesting to the authenticity and correctness of (i) attached copies of its
articles of association, and any other relevant Governing Document relevant;
(ii) an attached copy of the resolutions adopted by its directors or similarly
constituted authority authorizing the execution, delivery and performance by it
of this Agreement, the transactions contemplated in connection herewith, and the
execution, delivery and performance of the other Transaction Documents; and
(iii) the names and true signatures of each of its officers or directors
authorized to execute this Agreement and the other Transaction Documents to be
delivered in connection herewith, together with evidence of the incumbency of
each such officer or director; and
(c) a certificate, substantially in the form attached hereto as
Exhibit "M", of an authorized officer of the Fund to the effect that all the
conditions to closing set forth in Section 6.2 have been satisfied.
ARTICLE VIII
TERMINATION
8.1 Termination in General. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written agreement of the Fund, Eikos, EAL and the
Acquiror;
(b) by either the Fund or the Acquiror (if such party is not in
breach of or default under this Agreement) giving written notice to such effect
to the other party if the Closing shall not have occurred on or before December
31, 1999, or such later date as the parties shall have agreed upon prior to the
giving of such notice; or
(c) by either the Fund, Eikos and EAL in the event of a material
breach by or default of the Acquiror, or by the Acquiror in the event of a
material breach by or default of the Fund, Eikos or EAL.
8.2 Effect of Termination. Upon termination of this Agreement, all
obligations of the parties shall terminate except those under Section 5.5 and
Article X; provided, however, that no such termination shall relieve the
Page 23 of 30
<PAGE>
Acquiror of any liability to the Fund, or the Fund of any liability to the
Acquiror, by reason of any breach of or default under this Agreement.
ARTICLE IX
POST-CLOSING COVENANTS
9.1 Confidentiality. From and after the date of the Closing, the
parties hereto shall keep absolutely confidential all information relating to or
concerned with Eikos, EAL, the investment of the Acquiror in EAL, or the
investment of the Fund in the Acquiror. The parties shall not, at any time after
the date hereof, use or disclose to any Person any such information without the
written consent of all other parties, except as may be required by Law (in which
case the party shall promptly give notice to the other parties of any demand,
subpoena, order or other legal process requiring disclosure, in order to permit
such parties to seek an appropriate protective order or other confidential
treatment of such information).
9.2 Keeping of Books and Records; Inspection thereof. Each of Eikos and
the Acquiror shall keep adequate records and books of account, with complete
entries made in accordance with generally accepted accounting principles
consistently applied, reflecting all of its financial transactions. Eikos shall
permit and direct the Acquiror and the Acquiror shall permit and direct the
Fund, as the case may be, or any agents or representatives thereof, at any
reasonable time and from time to time upon reasonable prior notice, to examine
and make copies of and abstracts from their respective records and books of
account, to visit and inspect their respective properties and to discuss the
their respective affairs, finances and accounts with any of the directors,
officers, employees or other representatives of the Acquiror or the Fund, as the
case may be.
9.3 Allocation of Portfolio Expenses. Consistent with past practice,
the Fund shall continue to allocate to Eikos, and shall commence to allocate to
the Acquiror, its respective proportionate share of legal, accounting,
administrative and other overhead expenses incurred in the general operation of
its business, and the Acquiror consents to such periodic allocations, subject to
its rights of review and inspection as set forth in Section 9.2 above.
9.4 Issuance of Preferred Stock. At the next annual meeting of its
shareholders, the Acquiror shall propose shareholder approval of the
authorization of not less than 8,500,000 shares of Preferred Stock, with the
rights and preferences thereof to be determined by the Board of Directors of the
Acquiror in accordance with the Statement of Rights and Preferences attached
hereto as Exhibit "H". Immediately following such shareholder approval, and the
effectiveness of any appropriate filings with the Secretary of State of Delaware
or otherwise, the Acquiror shall issue 8,500,000 shares of Preferred Stock to
the Fund.
Page 24 of 30
<PAGE>
9.5 Auditors. The Acquiror shall continue engage such nationally
recognized certified public accountants and independent auditors having
comparable public company clients in order to facilitate (a) the maintenance of
its listing on the OTCBB, and (b) such other and further business and investment
activity as contemplated by its business plan.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by the Acquiror. From and after the Closing, the
Acquiror shall indemnify and defend the Fund, Eikos and/or EAL against, and hold
the Fund, Eikos and/or EAL harmless from, and will pay to the Fund, Eikos and/or
EAL the amount of, any loss, claim, liability, obligation, damage or expense
(including without limitation attorneys' and consultants' fees and disbursements
and expenses of investigating, defending and prosecuting) which the Fund, Eikos,
EAL or any shareholder, director, officer, member, manager, employee or agent
thereof may suffer or incur (including without limitation incidental to any
claim or any Proceeding against the Fund, Eikos, EAL or any shareholder,
director, officer, member, manager, employee or agent thereof) based upon or
resulting from:
(a) the breach or inaccuracy of any representation or warranty
made by the Acquiror herein or pursuant hereto; or
(b) the Acquiror's failure to perform or to comply with any
covenant or condition required of the Acquiror to be performed or complied with
hereunder.
10.2 Indemnification by the Fund, Eikos and EAL. From and after the
Closing, the Fund, Eikos and EAL shall each (as their respective liability shall
be apportioned) indemnify and defend the Acquiror against, and hold the Acquiror
harmless from, and will pay to the Acquiror the amount of, any loss, claim,
liability, obligation, damage or expense (including without limitation
attorneys' and consultants' fees and disbursements and expenses of
investigating, defending and prosecuting) which the Acquiror or any shareholder,
director, officer, member, manager, employee or agent thereof may suffer or
incur (including without limitation incidental to any claim or any Proceeding
against the Acquiror or any shareholder, director, officer, member, manager,
employee or agent thereof) based upon or resulting from:
(a) the breach or inaccuracy of any representation or warranty
made by the Fund or Eikos herein or pursuant hereto; or
Page 25 of 30
<PAGE>
(b) the failure of the Fund or Eikos to perform or to comply with
any covenant or condition required of the Fund or Eikos to be performed or
complied with hereunder.
10.3 Indemnification Procedures.
(a) Promptly after notice to an indemnified party of any claim or
the commencement of any Proceeding by a third party subject to Sections 10.1,
10.2 or 10.3 above, such indemnified party shall, if a claim for indemnification
in respect thereof is to be made against an indemnifying party pursuant to this
Article X, give written notice to the latter of the commencement of such claim
or Proceeding, setting forth in reasonable detail the nature thereof and the
basis upon which such party seeks indemnification hereunder, provided, however,
that the failure of any indemnified party to give such notice shall not relieve
the indemnifying party of its obligations hereunder, except to the extent that
the indemnifying party is actually prejudiced by the failure to give such
notice.
(b) In case any Proceeding is brought against an indemnified
party, and provided that proper notice is duly given, the indemnifying party
shall assume the defense thereof insofar as such Proceeding involves any loss,
liability, claim, obligation, damage or expense in respect of which
indemnification may be sought hereunder, with counsel reasonably satisfactory to
such indemnified party and, after notice from the indemnifying party to the
indemnified party of its assumption of the defense thereof, the indemnifying
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof (but the indemnified party shall have the right, but not the obligation,
to participate at its own expense in such defense by counsel of its own choice)
or for any amounts paid or foregone by the latter as a result of the settlement
or compromise thereof (without the written consent of the indemnifying party).
If the indemnifying party shall assume the defense of a Proceeding, the
indemnified party shall cooperate fully with the indemnifying party and shall
appear and give testimony, produce documents and other tangible evidence, allow
the indemnifying party access to the books and records of the indemnified party
and otherwise assist the indemnifying party in conducting such defense.
(c) If both the indemnifying party and the indemnified party are
named as parties in or are subject to a Proceeding and either such party
determines with advice of counsel that there may be one or more legal defenses
available to it that are different from or additional to those available to the
other party or that a material conflict of interest between such parties may
exist in respect of such Proceeding, the indemnifying party may decline to
assume the defense on behalf of the indemnified party or the indemnified party
may retain the defense on its own behalf and, in either such case, after notice
to such effect is duly given hereunder to the other party, the indemnifying
party shall be relieved of its obligation to assume the defense on behalf of the
Page 26 of 30
<PAGE>
indemnified party, but shall be required to pay any legal or other expenses,
including, without limitation, reasonable attorneys' fees and disbursements
incurred by the indemnified party in such defense; provided, however, that the
indemnifying party shall not be liable for such expense on account of more than
one separate firm of attorneys (and, if necessary, local counsel) at any time
representing such indemnified party in connection with any Proceeding or
separate Proceedings in the same jurisdiction arising out of or based upon
substantially the same allegations or circumstances.
(d) No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
or compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such Proceeding (but the indemnifying party shall have
the right to participate at its own cost and expense in such defense by counsel
of its own choice) and may make in good faith any compromise or settlement with
respect thereto, and recover the entire cost and expense thereof, including
without limitation reasonable attorneys' fees and disbursements and all amounts
paid and foregone as a result of such Proceeding, or the settlement or
compromise thereof, from the indemnifying party. The indemnification required
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills or invoices are received or
loss, liability, obligation, damage or expense is actually suffered or incurred.
10.4 Survival of Representations and Warranties. The representations
and warranties of each party herein shall survive the Closing, notwithstanding
any investigation or inquiry made by the other party, and continue until the
later of three years after the Closing or until the expiration of the applicable
statute of limitations. Any claim for indemnification under Section 10.1(a) or
Section 10.2(a) shall be made within the applicable survival period set forth in
this Section 10.4.
ARTICLE XI
MISCELLANEOUS
11.1 Limitation of Authority. No provision hereof shall be deemed to
create any partnership, joint venture or joint enterprise or association between
the parties hereto, or to authorize or to empower either party hereto to act on
behalf of, obligate or bind the other party hereto.
11.2 Fees and Expenses. Each party hereto shall bear such costs, fees
and expenses as may be incurred by it in connection with this Agreement and the
transactions contemplated hereby (including but not limited to its fees and
expenses for legal, tax and accounting counsel and advisors).
Page 27 of 30
<PAGE>
11.3 Notices. Any notice or demand required or permitted to be given or
made hereunder to or upon either party hereto shall be deemed to have been duly
given or made for all purposes if (a) in writing and sent by (i) messenger or an
overnight courier service against receipt, or (ii) certified or registered mail,
postage paid, return receipt requested, or (b) sent by telegram, facsimile
transmission, telex or similar electronic means, provided that a written copy
thereof is sent on the same day by postage paid first-class mail, to such party
at its address first set forth above, or such other address as either party
hereto may at any time, or from time to time, direct by notice given to the
other party in accordance with this Section. The date of giving or making of any
such notice or demand shall be, in the case of clause (a)(i), the date of the
receipt; in the case of clause (a)(ii), five business days after such notice or
demand is sent; and, in the case of clause (b), the business day next following
the date such notice or demand is sent.
11.4 Amendment. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective, unless in writing and signing by or
on behalf of the parties hereto.
11.5 Waiver. No course of dealing or omission or delay on the part of
either party hereto in asserting or exercising any right hereunder shall
constitute or operate as a waiver of any such right. No waiver of any provision
hereof shall be effective, unless in writing and signed by or on behalf of the
party to be charged therewith. No waiver shall be deemed a continuing waiver or
waiver in respect of any other or subsequent breach or default, unless expressly
so stated in writing.
11.6 Governing Law. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of Delaware,
without regard to principles of choice of law or conflict of laws.
11.7 Remedies. In the event of any actual or prospective breach or
default by either party hereto, the other party shall be entitled to equitable
relief, including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive, and
nothing herein shall be deemed to prohibit or limit either party from pursuing
any other remedy or relief available at law or in equity for such actual or
prospective breach or default, including the recovery of damages; provided,
however, that the indemnification provisions of Article X shall be the sole and
exclusive remedy with respect to claims for monetary damages.
11.8 Severability. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
Page 28 of 30
<PAGE>
11.9 Further Assurances. Each party hereto covenants and agrees
promptly to execute, deliver, file or record such agreements, instruments,
certificates and other documents and to perform such other and further acts as
the other party hereto may reasonably request or as may otherwise be necessary
or proper to consummate and perfect the transactions contemplated hereby.
11.10 Assignment. This Agreement, and each right, interest and
obligation hereunder, may not be assigned, whether by operation of law, merger,
consolidation or otherwise, by any party hereto without the prior written
consent of the other parties hereto, and any purported assignment without such
consent shall be void and without effect.
11.11 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement is not intended, and shall not be deemed, to create or
confer any right or interest for the benefit of any Person not a party hereto.
11.12 Incorporation by Reference. The Exhibits and Schedules hereto are
an integral part of this Agreement and are incorporated in their entirety herein
by this reference.
11.13 Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which shall be deemed to be an original, but all
of which taken together shall constitute one and the same agreement. This
Agreement, and any Transaction Document, may be executed and delivered to the
Closing by facsimile, and shall constitute an original of any such document if
so executed and delivered to the Closing by the party responsible therefor.
Page 29 of 30
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of the date first above written.
THESSEUS INTERNATIONAL EIKOS MANAGEMENT LLC
ASSET FUND N.V. by Ionian Trust Company Limited
its Administrative Member
By:______________________________ By:______________________________
Barry Feiner Derek Galanis
Its President Its President
EIKOS ACQUISITION LIMITED SHANECY, INC.
By:______________________________ By:______________________________
Barry Feiner Jason Galanis
Its President Its President
ATTACHMENTS:
Schedule 3.9(a) Eikos Balance Sheet
Schedule 3.9(b) Fund Financial Statements
Schedule 4.7(a) Acquiror Financial Statements
Schedule 4.7(b) Acquiror Material Liabilities
Schedule 4.9 Acquiror Contracts
Exhibit "A" Administration Agreement
Exhibit "B" Fund - EAL Agreement
Exhibit "C" Mutual Business Development Agreement
Exhibit "D" Amendment to MBDA (December 16, 1997)
Exhibit "E" Amendment to MBDA (September 1, 1998)
Exhibit "F" Eikos Operating Agreement
Exhibit "G" Amendment to Eikos Operating Agreement
Exhibit "H" Statement of Rights and Preferences of Preferred Shares
Exhibit "I" Consent of Members of Eikos
Exhibit "J" Acquiror Secretary's Certificate
Exhibit "K" Acquiror Closing Certificate
Exhibit "L" Fund Secretary's Certificate
Exhibit "M" Fund Closing Certificate
Page 30 of 30
<PAGE>
The Board of Directors
Shanecy, Inc.:
We consent to the inclusion of our report dated January 24, 2000, with respect
to the balance sheets representing the Eikos Management LLC investment owned by
Thesseus International Asset Fund N.V. as at December 31, 1998 and 1997, and the
related statements of cash flows for the year ended December 31, 1998 and for
the month ended December 31, 1997, in the Form 8-K of Shanecy, Inc. dated
January 25, 2000.
Yours very truly
/s/ KPMG LLP
- ------------------
Vancouver, Canada
January 25, 2000
<PAGE>
Financial Statements of
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
(expressed in U.S. dollars)
Forty-five weeks ended November 11, 1999
Year ended December 31, 1998
Month ended December 31, 1997
<PAGE>
AUDITORS' REPORT
To the Directors of
Eikos Acquisition Limited
We have audited the balance sheets representing the Eikos Management LLC
investment (the "Predecessor Business") owned by Thesseus International Asset
Fund N.V. (the "Fund") as at December 31, 1998 and 1997 and the statements of
cash flows for the year ended December 31, 1998 and for the month ended December
31, 1997. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with Canadian 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 Predecessor Business as at December 31,
1998 and 1997 and the results of its operations and its cash flows for the
periods then ended in accordance with Canadian generally accepted accounting
principles.
/s/ KPMG LLP
- ----------------------
Chartered Accountants
Vancouver, Canada
January 24, 2000
<PAGE>
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
Balance Sheets
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Acquisition Predecessor Business
--------------- ---------------------------------------
November 11, December 31, December 31,
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Assets
Investments (note 3):
Venture investment, Eikos Management LLC $ 6,631,119 $ 6,807,309 $ -
Mutual business development agreement - - 14,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 6,631,119 $ 6,807,309 $ 14,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholder's Equity
Shareholder's equity:
Authorized:
2,000 shares with a par value of(pound)1 each
Issued:
100 shares $ 164 $ - $ -
Additional paid-in capital 6,630,955 - -
Thesseus International Asset Fund N.V. equity
in the Predecessor Business - 6,807,309 14,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
$ 6,631,119 $ 6,807,309 $ 14,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
Statements of Cash Flows
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Predecessor Business
-----------------------------------------------------------------------
Forty-five
weeks ended Year ended Month ended
November 11, December 31, December 31,
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Cash provided by operating activities $ - $ - $ -
Cash provided by investing activities
Distributions received on MBDA 176,190 - -
Cash used in financing activities - - -
Distribution to the Fund (176,190)
- ------------------------------------------------------------------------------------------------------------------------------------
Change in cash - - -
Cash, beginning of period - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ - $ - $ -
- ------------------------------------------------------------------------------------------------------------------------------------
Supplementary cash flow information:
Issuance of common and preferred shares of Thesseus International
Asset Fund N.V. on acquisition of Eikos Management
LLC shares $ - $ - $ 12,800,000
Distributions received on MBDA in the form of
performing credit card receivables - 370,191 -
Investment in MBDA:
Exchanged for other venture investments not part of
Predecessor Business (notes 3(a) and (c)) - 7,322,500 -
Now presented as venture investment in EML - 7,177,500 -
- ------------------------------------------------------------------------------------------------------------------------------------
Acquisition
-----------------
November 11, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited)
Issuance of shares of the Company for Thesseus
International Asset Fund N.V. equity in Predecessor
Business 6,631,119 - -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
Notes to Financial Statements
(expressed in U.S. dollars)
Forty-five weeks ended November 11, 1999
Year ended December 31, 1998 and Month ended December 31, 1997
- --------------------------------------------------------------------------------
1. General:
Eikos Acquisition Limited (the "Company" or "Acquisition") is a private
company, the liability of the members of which is limited, incorporated under
the laws of the Isle of Man on September 17, 1999. The Company is a
wholly-owned subsidiary of Thesseus International Asset Fund N.V. (the
"Fund").
2. Significant accounting policies:
(a) Basis of presentation:
The Company's accounting policies are in accordance with Canadian
generally accepted accounting principles.
On November 11, 1999, the Company acquired its 49.5% owned venture
investment in Eikos Management LLC ("EML"), whose primary asset is the
Mutual Business Development Agreement ("MBDA") (note 3(b)). During the
period from September 1, 1998 to November 11, 1999 the Fund owned 49.5%
of EML, and during the period from December 2, 1997 to August 31, 1998
the Fund owned 100% of EML. In accordance with the policies of the
Securities and Exchange Commission, the interest of the Fund in the MBDA,
indirectly through EML, is presented as a predecessor business (the
"Predecessor Business") to that of the Company, and the financial
statements reflect the Fund's indirect interest in the MBDA from the date
of its acquisition of EML on December 2, 1997. EML is accounted for in
accordance with the accounting policy disclosed below.
(b) Venture investments:
Venture investments are recorded at estimated market value, which for the
first year from the date the investment is made is estimated to not be
materially different from cost unless either there is a transaction
within that year which establishes a different value for the investment
or there is a significant change within the year in the Company's
expectations.
<PAGE>
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
Notes to Financial Statements, page 2
(expressed in U.S. dollars)
Forty-five weeks ended November 11, 1999
Year ended December 31, 1998 and Month ended December 31, 1997
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
The determination of market value of venture investments, such as EML,
that are not publicly traded and cannot be readily converted into
publicly traded securities is based on the following general principles:
o investments are stated at amounts considered by the Board of Directors
to be a fair assessment of their market value, subject to the
overriding requirement of prudence, which value is based on one of the
following principles:
Cost (less any provision required);
Open market valuation;
Earnings multiple; or
Net assets.
o wherever practical, investments are valued by reference to an open
market transaction or quoted price.
o where investments are valued on a multiple of earnings basis, earnings
of the current year will normally be used provided these can be
predicted with reasonable certainty. Such earnings will be adjusted to
a maintainable basis, taxed at the full tax rate and multiplied by a
discounted price earnings multiple.
o in arriving at the value of an investment, the percentage ownership is
calculated after taking into account any dilution through outstanding
warrants, options and performance related instruments.
o the net assets basis is used where there is no open market valuation
available and an earnings basis is inappropriate, as in the case of
certain asset based investments.
The process of valuing venture investments for which no published market
exists is inevitably based on inherent uncertainties, and the resulting
values may differ from values that would have been used had a ready
market existed for the venture investments. These differences could be
material to the fair value of venture investments as a portfolio.
Realized gains and losses on the disposal of venture investments, as well
as dividends received from post-acquisition retained earnings of the
investee, are included in the results of operations. Unrealized gains and
losses on the revaluation of venture investments are recorded as a
separate component of shareholders' equity.
<PAGE>
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
Notes to Financial Statements, page 3
(expressed in U.S. dollars)
Forty-five weeks ended November 11, 1999
Year ended December 31, 1998 and Month ended December 31, 1997
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(c) Currency:
The Company was capitalized in U.S. currency and conducts virtually all
of its business in U.S. currency. These financial statements are
therefore presented in U.S. dollars.
(d) Income taxes:
The Company is subject to taxation in the country of its domicile, the
Isle of Man. The Company did not have any material tax liability as at
November 11, 1999.
A foreign corporation engaged in a trade or business within the United
States in a taxation year is taxable on its income that is effectively
connected with the conduct of each trade or business within the United
States. U.S. tax law rules provide that a company will not be considered
to be engaged in a U.S. trade or business merely because it trades in
stock or securities for its own account, directly or indirectly through a
U.S. resident broker or other independent agent, as long as it is not
deemed to be a dealer in stocks or securities. In management's opinion,
it is likely that the purchases and sales of securities and other debt
obligation portfolios by the Company are not effectively connected with
the conduct of a U.S. trade or business. Therefore, the income derived
from those activities should not be subject to taxation in the U.S.
Under a second regime, a flat tax of 30 percent is imposed on a foreign
corporation's gross income from "interest (other than original issue
discount as defined in Section 1273 of U.S. tax law), dividends, rents,
salaries, wages, premiums, annuities, compensation, remunerations,
emoluments, and other fixed or determinable annual or periodical gains,
profits, and income," but only to the extent the amount is received from
sources within the United States or is effectively connected with the
conduct of a trade or business by such corporation within the United
States and which is received from sources outside the United States.
Until August 31, 1998, the Fund effectively owned 100% of the equity of
EML, an Isle of Man limited liability company. After September 1, 1998,
the Fund owned 49.5% of the equity in EML (note 3). EML is a party to the
MBDA with The Credit Store, Inc. ("TCS"), the successor to Service One
International Corporation under the MBDA, which operates within the
United States. The MBDA provides that EML is to provide certain consumer
debt portfolio acquisition and financing services to TCS, outside the
United States, and that EML is to treat income received under the MBDA as
a distribution from an entity taxed as a partnership. It is possible that
the U.S. Internal Revenue Service could assert that such income is income
effectively connected to the U.S. In the opinion of management of the
Company, the outcome of such an assertion is not determinable at this
time. However, the Company intends to treat any income from EML as exempt
from U.S. taxation because it is earned in connection with the operations
of EML outside the U.S.
<PAGE>
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
Notes to Financial Statements, page 4
(expressed in U.S. dollars)
Forty-five weeks ended November 11, 1999
Year ended December 31, 1998 and Month ended December 31, 1997
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(e) Revenue recognition:
Payments received from EML under the MBDA are accounted for on the cost
recovery basis whereby the full amount of the payment reduces the
carrying value of the venture investment. Payments received after the
carrying value has been reduced to nil will be recognized as revenue when
earned.
(f) Unaudited interim financial information:
The financial information as at November 11, 1999 and for the period then
ended is unaudited; however, such information includes all adjustments,
consisting solely of normal recurring adjustments, that in the opinion of
management are necessary for a fair presentation of financial position,
results of operations and cash flows for the period presented.
3. Investments:
All outstanding funding commitments disclosed below are subject to the
Fund obtaining certain debenture financing, are non-interest bearing and
are payable over approximately one year thereafter.
(a) Consumer Union Finance Limited:
On September 1, 1998, in return for 1,000 6% cumulative preferred shares
convertible into 40% of the ordinary shares, on a fully diluted basis, of
Consumer Union Finance Limited ("CUF"), a United Kingdom corporation, the
Fund contributed 49.5% of its equity interest in EML to CUF and issued a
funding commitment for $500,000. The existing ordinary shares of CUF are
held by unrelated parties and are subject to escrow restrictions
requiring certain operational and share value achievements, and
distributions from EML are subject to a trust indenture, of which Ionian
Trust Company Limited (note 3(c)) is the trustee.
<PAGE>
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
Notes to Financial Statements, page 5
(expressed in U.S. dollars)
Forty-five weeks ended November 11, 1999
Year ended December 31, 1998 and Month ended December 31, 1997
- --------------------------------------------------------------------------------
3. Investments (continued):
(b) Eikos Management LLC and the MBDA:
On October 22, 1997, the MBDA was assigned to EML by the O. Pappalimberis
Trust (the "Trust") for an effective 100% interest in that company. The
Trust was not related to EML at the date of acquisition. The MBDA is a
business development and revenue sharing arrangement originally having a
six year term, which arose from the sale by the Trust of an unrelated
business interest on October 8, 1996. The original parties to the
agreement were the Trust and Service One International Corporation
("Service One"), a credit card originator and servicer, which has now
been merged into a U.S. publicly-held company, The Credit Store, Inc. The
MBDA entitles EML to receive payments generally equal to five percent of
certain monthly "performing" credit card production of TCS. The aggregate
payments to EML under the terms of the MBDA, as amended, are limited to a
maximum of $24,000,000.
An independent valuation of the MBDA was performed in March, 1998. This
produced a range of value between $13,000,000 and $16,000,000 before
considering the impact of a $1,000,000 reduction relating to the waiving
of a non-compete clause as agreed in a December 16, 1997 amendment to the
MBDA. The valuation used a discounted cash flow approach, with discount
rates ranging from 25% to 45%, a tax rate of 5% and estimated annual
after tax cash flow of approximately $4.2 million. The valuation of the
MBDA is based on inherent uncertainties, which could materially affect
its fair value. An amount of $14,500,000 was agreed by management of EML,
the Trust and the Fund as being a representative independently determined
value of the MBDA.
Effective September 1, 1998, EML and TCS again amended the MBDA. The key
amendments included extending the term by two and a half years and
providing for a minimum monthly cash payment of $75,000 plus an
additional $22,500 cash or $25,000 in performing credit card receivables,
at the option of TCS, from June 1, 1999 through May 31, 2005, with
provision for a final balloon payment within 90 days of that date. In
addition, an option was granted to TCS, exercisable through to December
31, 1999, to acquire EML's rights under the MBDA for $12,000,000, payable
by delivery of a note bearing interest at 5% per annum, with $7,000,000
due within 90 days of delivery of the note and $5,000,000 payable within
one year of delivery of the note.
Based on the carrying value of the Fund's investment in the MBDA, either
directly through its investment in EML or indirectly through its
investment in CUF and ITC, should the option be exercised, the maximum
potential adjustment in book value of the related venture investments
that may be required is approximately $1.8 million.
<PAGE>
EIKOS ACQUISITION LIMITED
AND PREDECESSOR BUSINESS
Notes to Financial Statements, page 6
(expressed in U.S. dollars)
Forty-five weeks ended November 11, 1999
Year ended December 31, 1998 and Month ended December 31, 1997
- --------------------------------------------------------------------------------
3. Investments (continued):
(c) Ionian Trust Company Limited:
On August 31, 1998, in exchange for 50.1% of the membership units of
Ionian Trust Company Limited ("ITC"), a Republic of Ireland corporation,
the Fund contributed a 1% interest in EML to ITC and issued a funding
commitment for $250,000. The Fund and ITC also entered into an
Administration Agreement designating ITC as the administrative member of
EML, responsible for all aspects of its business and affairs. The other
49.9% of the membership units of ITC are held by a beneficiary of the
Trust and are subject to escrow restrictions requiring certain
operational and share value achievements or funding contributions.
4. Uncertainty due to the Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent something other
than a date. The effects of the Year 2000 issue may be experienced before,
on, or after January 1, 2000, and, if not addressed, the impact on operations
and financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
its venture investee, suppliers and other third parties, will be fully
resolved.
<PAGE>
SHANECY ANNOUNCES CHANGES IN DIRECTORS AND BUSINESS DIRECTION,
ACQUISITION OF TWO BUSINESSES AND PLANNED
ADDITIONS TO EXECUTIVE MANAGEMENT
VANCOUVER, British Columbia, Nov 17, 1999 /PRNewswire via COMTEX/ -- Shanecy,
Inc. (OTC Bulletin Board: SECY), announced today that on November 11, 1999, the
Company's two directors, Ann Myers and Jill Wright, resigned and appointed Jason
W. Galanis and Kevin L. Washington to replace them.
Under the direction of the new board, Shanecy plans to implement its business
plan to act as a publicly traded venture capital company that will concentrate
on Internet-related companies. The Company plans to invest with entrepreneurs
demonstrating superior strategies in ventures with consumer oriented Internet
applications. It is anticipated that an active investment role will be assumed
by the new management of Shanecy (described below) implementing what it believes
will be appropriate fiscal discipline and a maximizing of shareholder value.
Management intends to augment its venture investments with support services
including financing, personnel recruitment, technology and marketing.
In order to initiate its strategy, Shanecy has entered into two transactions
whereby its capital base will be increased and certain proprietary technology
will be acquired. The Company has reached an agreement with Thesseus
International Asset Fund to acquire 100% of Eikos Acquisition, Ltd. in
consideration for 10 million shares of Shanecy restricted common stock.
The acquisition of Eikos provides Shanecy with a 49.5% beneficial interest in a
six-year gross royalty agreement with payment rights of up to $24 million. The
royalty agreement also provides for certain licensing arrangements of software
systems sold to the royalty payor, The Credit Store (OTC Bulletin Board: PLCR).
Management believes that the royalty payments should assist the Company in its
growth by providing a consistent source of earnings and cash flow as it matures
its other investments.
Simultaneously, the Company has agreed to acquire CASA@Home, Inc. for 2 million
restricted shares of common stock. CASA is a recently formed Internet Service
Distributor that plans to focus on providing Internet access and enhanced
Internet financial services to moderate-income consumers. CASA intends to use
proprietary systems to analyze consumer buying patterns with the objective of
delivering highly targeted and value-added services to its subscribers. CASA
will issue a new VISA(R) credit card to its subscribers in conjunction with
becoming a subscriber. The card will provide the consumer with a payment
mechanism for e-commerce facilitated by the Company while providing the Company
with statistically based information to better assess individual customer
requirements.
CASA is being acquired from Thesseus and K. Washington-Galanis Investments LLC,
an investment partnership controlled by Messrs. Washington and Galanis.
Thesseus is a closed-end venture capital fund with an investment mandate focused
primarily on financial services companies.
Immediately subsequent to these acquisitions Shanecy will also add several new
officers and directors, each of which are affiliated with Thesseus. Harry J.
<PAGE>
Weitzel is expected to serve as Chairman and CEO, Michael Bodnar is anticipated
to serve as a director and as Chief Financial Officer, and Dr. Rory F. Knight
will also act as a director. These additions will increase the board to a total
of five members. In addition to the directorship, Mr. Galanis has become
President of the Company. Messrs. Galanis, Weitzel and Dr. Knight are directors
of Thesseus, Mr. Bodnar is CFO of Thesseus and Mr. Washington is a major
stockholder of Thesseus. Each are considered to be affiliates of Thesseus.
Mr. Weitzel was previously President of Electronic Data Systems (EDS) CAMD and
was 30 years with the bank holding company Maryland National Corporation,
retiring as President of consumer lending.
Mr. Bodnar has been a Chartered Accountant since 1978, having spent 10 years at
KPMG Peat Marwick as a Senior Manager. He has been Chief Financial Officer for a
major Canadian retailer with a focus on consumer credit accounts and was CFO for
two Canadian investment partnerships.
Dr. Knight is the Dean of Templeton College, Oxford University, the business
school of Oxford endowed by Sir John Templeton. He was at the Swiss Central Bank
in Geneva for eight years prior thereto.
Mr. Galanis is a venture capital investor with varied investment interests. He
co-founded several companies investing in distressed debt beginning in 1987,
including co-founding The Credit Store, which he later sold.
Mr. Washington is an investor with interests in several specialized investment
funds internationally in both public and private equity.
"We are pleased to add the breadth of senior management to our executive team as
the Company develops its Internet investment strategy," said Mr. Galanis,
President and Director. "The concurrent initial acquisition of these two
companies adds resources which should be helpful in assisting innovative
entrepreneurs in growing their companies and ultimately assisting them in
independently accessing the capital markets."
There are forward-looking statements in this document, and in the Company's
public documents to which they may refer, that are subject to risks and
uncertainties in addition to those set forth above. These forward-looking
statements include information about possible or assumed future results of the
Company's operations. Also, when any of the words "believes," "expects,"
"anticipates" or similar expressions are used, the Company is making
forward-looking statements. Many possible events or factors could affect future
financial results and performance. This could cause Company results or
performance to differ materially from those expressed in their forward-looking
statements. These and other risks are described in the Company's publicly filed
documents and reports that are available from the Company and from the SEC.
