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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
MARCH 27, 2000 (MARCH 10, 2000)
SOUND DESIGNS, INC.
(Name of Registrant)
NEVADA 000-28331 88-0412455
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
14677 MIDWAY ROAD, SUITE 206, ADDISON, TEXAS, U.S.A.
(Address of principal executive officers)
75001
(Zip Code)
972-687-0090
(Registrant's telephone number,
including area code)
6436 LABURNUM STREET, VANCOUVER, BRITISH COLUMBIA, CANADA V6M 3S9
(Former address of principal executive offices)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 10, 2000, Sound Designs, Inc., a Nevada corporation, closed
the Agreement and Plan of Merger we entered into with SD Acquisition, Inc., our
wholly-owned subsidiary, and Plus Solutions, Inc., a Texas corporation. Pursuant
to the merger agreement, Plus Solutions merged with SD Acquisition and became
our wholly-owned subsidiary. As consideration for the merger, the stockholders
of Plus Solutions received approximately 1.69 shares of our common stock for
each share of Plus Solutions common stock they owned. As a result, the former
stockholders of Plus Solutions currently own 60 percent of the outstanding
shares of our common stock. In addition, the merger agreement required us to
cause all of our existing directors and officers to resign and name Max Golden,
Mack Lawrence and John Reynolds as the directors of Sound Designs.
In the merger agreement, Sound Designs and Plus Solutions made
representations and warranties to each other typical in similar agreements,
which representations and warranties survive indefinitely after the closing of
the merger agreement. In addition, Barry Wosk and Marvin Wosk, the previous
directors and officers of Sound Designs, executed Standstill Agreements which
required Barry Wosk and Marvin Wosk to refrain from selling any shares of our
common stock until April 9, 2000.
After the closing of the merger agreement, Sound Designs adopted the
business plan and business strategy of Plus Solutions and the new board of
directors named all of the previous officers of Plus Solutions to similar
offices with Sound Designs. We intend to call a stockholders meeting in the near
future for the purpose of changing the our name to "Plus Solutions, Inc.". In
addition we will soon apply to the OTC Bulletin Board trading system operated by
the Nasdaq Stock Market, Inc. to change our trading symbol to a symbol that
reflects the new corporate name we intend to adopt.
Because of the change in the composition of our board of directors and
the ownership of more than a majority of the outstanding shares of our common
stock, we believe that the acquisition of Plus Solutions caused a change of
control of Sound Designs upon the closing of the merger agreement.
ITEM 5. OTHER EVENTS.
As a result of the changes in our business plan and strategy, the
ownership of our common stock, and our management, we believe certain
disclosures made in our registration statement on Form 10SB filed December 1,
1999 are no longer accurate. We have provided information in this report that
updates such prior disclosures to reflect the business plan and strategy,
ownership of our common stock, and management after completion of the
acquisition of Plus Solutions. To avoid confusion, we will refer to Sound
Designs after giving effect to the acquisition of Plus Solutions as the
"Company".
BUSINESS AND PLAN OF DEVELOPMENT
Following its acquisition of Plus Solutions, the Company adopted the
business plan and strategy of Plus Solutions. The business description that
follows describes the business and plan of development of the Company after
giving effect to the acquisition.
The Company is a development-stage company that provides Internet-based
business-to-business e-commerce solutions. We have developed ExpressOrder(TM), a
global business-to-business e-commerce service that enables buyers and suppliers
to automate business transactions on the Internet. Our ExpressBuyer(TM) service
enables businesses to automate their purchasing methods. Our ExpressSeller(TM)
service enables businesses to offer a catalog of their products over the
Internet.
Sound Designs was incorporated in Nevada in September 1998. The
Company's principal executive offices are located at 14677 Midway Road, Suite
206, Addison, Texas 75001.
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THE INTERNET AND E-COMMERCE
The Internet has emerged as one of the fastest growing communication
mediums in history. As a result, the Internet is dramatically changing how
businesses and individuals communicate and share information. The Internet has
created new opportunities for conducting commerce, commonly referred to as
e-commerce or "e-commerce", on a business-to-consumer and person-to-person
basis. In addition, the widespread acceptance of the Internet as a business
communications platform and the adoption of internal communications networks
similar to the Internet by many businesses has created a foundation for
business-to-business e-commerce that will enable organizations to streamline
complex processes, lower costs and improve productivity. We believe
Internet-based business-to-business e-commerce will experience rapid growth and
represent a significantly larger opportunity than business-to-consumer or
person-to-person e-commerce. We expect this market to create a substantial
demand for Internet-based e-commerce solutions and services.
TRADITIONAL OPERATING RESOURCES PURCHASING METHODS
Virtually all businesses and other organizations are required to
procure various goods and services to operate. Such goods and services range
from significant items, such as information technology, telecommunications
equipment and professional services, to recurring items, such as maintenance,
repair and operations supplies, travel and entertainment services, and office
equipment and supplies.
Most businesses and other organizations meet their procurement needs
through traditional paper-based or semi-automated processes. These processes are
costly, time consuming, complex and often include lengthy approval cycles and
significant involvement of financial and administrative personnel. In addition,
these time consuming processes often result in delivery delays to the customer,
leading to productivity losses and customer dissatisfaction.
Beyond the time and expense associated with manual processing costs,
organizations suffer even greater costs when they cannot fully exploit
procurement economies of scale. Most organizations lack the systems that enable
them to monitor purchases and compile data necessary to negotiate better volume
discounts with preferred suppliers. In addition, many organizations suffer from
a problem known as "maverick buying", which occurs when personnel do not follow
internal guidelines regarding which suppliers to use for operating resource
purchases. When such preferred suppliers are not used, organizations pay
increased costs.
Traditional procurement processes also result in missed revenue
opportunities and additional costs to suppliers. When buyers are unable to
channel purchases to preferred suppliers, these suppliers lose revenue.
Suppliers also suffer from inefficient, error prone and manually-intensive order
fulfillment processes. Many suppliers dedicate significant resources to the
manual entry of information from faxed or phoned purchase orders and the manual
processing of paper checks, invoices and shipping notices. Suppliers also spend
significant resources on customer acquisition and sales costs, including the
production and distribution of paper catalogs. Without fully automated and
integrated e-commerce technologies, both buyers and suppliers incur substantial
extraneous costs in conducting commerce.
OPPORTUNITY FOR BUSINESS-TO-BUSINESS E-COMMERCE SERVICES
Over the past 30 years, information technologies have brought
automation to departmental operations such as manufacturing resource planning,
financial management, sales force automation and human resource management.
However, the information technology platforms that made departmental automation
possible did not provide complete connectivity within organizations or
connectivity between organizations. Thus, the processes linking customers to
suppliers are today largely paper-based or only semi-automated. With the
widespread adoption of the Internet as a business communication platform and the
implementation of internal Internet-based networks, organizations can now fully
automate procurement and selling activities. The availability of this technology
creates a significant market opportunity for Internet-based business-to-business
e-commerce solutions.
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For buyers, an optimal e-commerce solution will include a
user-friendly, customized, Internet-based catalog that connects suppliers and
administrative personnel within an integrated network. This system must be
flexible enough to meet the unique requirements of diverse businesses and must
be highly scalable, reliable and rapidly deployable. The system must provide
data reporting and analytical tools that enable analysis of end-user spending
patterns and provide insight into savings opportunities. For suppliers, the
solution must be easy to implement, offer the ability to catalog a complete
product line and be compatible with current standards.
PLAN OF DEVELOPMENT AND BUSINESS STRATEGY
The Company is a development-stage company and has not had significant
operations or revenues to date. We intend to seek financing to expand our
operations and commence full-scale marketing and customer implementation of our
services. If such financing is not made available to us, however, we may not be
able to implement our plan of development and business strategy or implement any
ExpressOrder(TM) solutions. Even if such financing is made available, we must
successfully implement our plans to develop our business and implement our
business strategy.
DEVELOP A STRONG INTERNAL MARKETING TEAM. We intend to develop a strong
internal marketing team to market our services to targeted businesses and
organizations in the North America and Europe. In addition, we will employ
marketing support personnel to assist the marketing team in the preparation of
presentations, proposals, research and other related administrative tasks. As
industry relationships are built, individuals with specific industry knowledge
will be employed to leverage such relationships.
USE SELECTED ADVERTISING. We will use carefully targeted advertising,
such as print advertising in industry publications, to market our services to
targeted businesses and organizations. It is anticipated that such advertising
will highlight the competitive advantages of ExpressOrder(TM) relative to the
products and services of our competitors. We have also established an Internet
site to assist our marketing efforts. As part of our continuing public relations
efforts, we will attempt to arrange media coverage of our services by
television, radio and print media, and participation in industry conferences.
CONTINUE THE DEVELOPMENT OF EXPRESSORDER(TM). We will continue to
develop and improve our ExpressOrder(TM) solution system. We anticipate that
such continued development and improvement will be critical to maintaining a
competitive advantage over other e-commerce solution providers and providing
maximum value to our customers.
EXPLORE STRATEGIC ALLIANCE OPPORTUNITIES. We will look for value-added
strategic alliances with partners that enable us to enter targeted industries,
gain access to technology or potential customers, or establish revenue sharing
opportunities. Potential alliance partners include advertising agencies,
accounting firms, software or technology-based businesses, and other e-commerce
vendors. During the development of ExpressOrder(TM), we initiated efforts to
contact potential alliance partners and explore mutually beneficial
arrangements. As a result of these efforts, we became a member of International
Business Machines Corp.'s PartnerWorld program in March 2000.
LEVERAGE EXISTING CONTACTS IN TARGETED INDUSTRIES. During the
development of ExpressOrder(TM), we contacted potential customers to establish
relationships and industry knowledge and to solicit input regarding our
services. As a result, ExpressOrder(TM) has been reviewed and evaluated by
senior managers of several large businesses. We believe that these relationships
may be leveraged to identify potential customers and improve the quality of our
services.
TARGET CUSTOMERS IN A BROAD RANGE OF INDUSTRIES THAT CAN MOST BENEFIT
FROM EXPRESSORDER(TM). We intend to target corporations and other organizations
in a broad range of industries that we believe will most benefit from our
outsourced, turnkey solutions offered by ExpressOrder(TM). We believe these
organizations will be the most likely beneficiaries of an automated, reliable,
robust and scalable e-commerce solution and can provide strong customer
references. In addition, the large number and variety of implementation
circumstances involved in serving these organizations will rigorously test our
products and assist us in designing a robust, reliable and scalable solution.
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PROVIDE SUPERIOR CUSTOMER SATISFACTION. We believe a loyal base of
reference customers affords us a significant competitive advantage. Therefore,
we intend to devote significant resources towards customer satisfaction. We will
employ a variety of customer satisfaction programs to promote superior customer
satisfaction.
EXPRESSORDER(TM)
ExpressOrder(TM) consists of two components. Our ExpressBuyer(TM)
service enables businesses to automate their purchasing methods.
ExpressBuyer(TM) is a robust, scalable and reliable service that enables an
organization to reduce processing costs and improve productivity by automating
the procurement cycle and linking end-users throughout an organization with
internal administration and financial systems. ExpressBuyer(TM) also enables
organizations to reduce the cost of operating resources by channeling purchases
to preferred suppliers. Our ExpressSeller(TM) service enables businesses to
offer a catalog of products over the Internet through a fully automated
transaction. As a complete solution package, ExpressOrder(TM) provides a
business-to-business e-commerce platform.
We believe ExpressOrder(TM) provides the following benefits to our
customers:
STAND-ALONE, EASILY IMPLEMENTED SOLUTION. ExpressOrder(TM) is a
stand-alone service that can easily be initiated with any size company. It does
not require integration into a company's operational systems package or changes
in the existing business processes. It can also serve as an extension and
enhancement of, rather than a replacement for, a supply chain management system,
increasing the efficiencies of these systems.
SPEED OF IMPLEMENTATION. ExpressOrder(TM) is an outsourced, turnkey
solution that can be quickly installed and implemented. We estimate that
ExpressOrder(TM) can be fully implemented for a customer in as little as three
to five months. Because it does not rely on the scarce internal technology
resources of our customers, the total cost of ExpressOrder(TM) will be
significantly less than that of competing solution systems.
FULLY CUSTOMIZABLE AND SCALABLE. ExpressOrder(TM) can be fully
customized as either a buying or selling solution, or both, depending on the
individual needs of our customers. In addition, ExpressOrder(TM) is fully
scalable and may be reconfigured to suit a customers ongoing needs.
EXPRESSBUYER(TM)
ExpressBuyer(TM) is our purchasing component that enables an
organization to reduce processing costs and improve productivity by automating
purchasing methods. We believe ExpressBuyer(TM) offers the following benefits to
our customers:
Automation of procurement procedures and resulting costs reduction and
productivity increases. ExpressBuyer(TM) automates the procurement of goods and
services and significantly reduces processing costs and increases productivity.
ExpressBuyer(TM) enables an organization to streamline and automate complex
business processes. By operating without a complete re-engineering of the
customers existing systems ExpressBuyer(TM) takes advantage of investments in
financial, human resource and enterprise resource planning systems. As a result,
our services allow organizations to focus on value-added activities such as
negotiating better discounts with preferred suppliers. In addition, our
customers can order and receive requested items more quickly and with less
effort, improving overall productivity.
Compilation and analysis of buying data. ExpressBuyer(TM) enables
organizations to maximize procurement economies of scale, lowering the overall
costs of goods and services. ExpressBuyer(TM) provides reporting tools on buying
patterns, enabling organizations to negotiate more favorable contracts with
suppliers. ExpressBuyer(TM) also routes transactions to preferred suppliers
automatically. Moreover, ExpressBuyer(TM) is accessible on every desktop, is
easy-to-use and streamlines the procurement process.
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These benefits minimize the frustration to end-users that often results in
maverick buying, further enabling organizations to take advantage of negotiated
discounts with preferred suppliers.
EXPRESSSELLER(TM)
ExpressSeller(TM) is our supplier service component that enables
suppliers to offer their complete line of proprietary or vended products over
the Internet and process fully automated sales transactions. We believe
ExpressSeller(TM) offers the following benefits:
Ability to offer complete line of products and services on the
Internet. ExpressSeller(TM) enables suppliers to offer their complete catalog of
goods and services over the Internet, which provides suppliers with greater
access to new and existing customers through a global presence and 24-hour
availability. In addition, by making available Internet-based catalog
capabilities, ExpressSeller(TM) enables suppliers to differentiate and market
their goods and services in their preferred format.
Integration of sales data with suppliers. ExpressSeller(TM) allows a
business to integrate their sales with multiple customers to more effectively
control inventory and take advantage of "just in time" supply systems.
Sales costs reduction. ExpressSeller(TM) enables businesses to reduce
sales costs. By automating catalog sales transactions, a business can reduce the
costs associated with, and reduce the potential for error inherent in,
paper-based ordering and payment processes. Product information can be
distributed electronically, reducing the distribution costs of printed catalogs.
In addition, suppliers can utilize their existing investments in inventory
control and delivery systems, including catalogs and product web pages.
CHARACTERISTICS OF OUR EXPRESSORDER(TM) SERVICES.
Our ExpressOrder(TM) service consists of two main components.
ExpressBuyer(TM) is our completely scalable service that enables businesses to
automate their purchasing methods and thereby reduce costs and improve
productivity. ExpressBuyer(TM) links product end-users administration and
financial personnel. ExpressBuyer(TM) also reduces the costs by directing
purchases to preferred suppliers. ExpressSeller(TM) is our service that allows
the offering of an entire catalog of products through fully automated
transactions.
The main characteristics of our ExpressOrder(TM) services are:
User friendly, Internet-based interfaces. The Internet browser-based
user interface of our EXPRESSORDER(TM) services enables users throughout an
organization to take full advantage of ExpressOrder(TM) from their desktop and
with minimal training. Online help information provides automated assistance for
less experienced users through the acquisition process, while an advanced user
interface makes the system more productive for experienced users.
Automation of e-commerce transactions. ExpressOrder(TM) provides
flexible workflow capable of streamlining and automating even the most complex
e-commerce transactions. This flexible workflow can be customized for the unique
processes of an organization and can be tailored to respond to user input,
specific events or any extrinsic or intrinsic data relevant to the transaction.
Information access and compilation. ExpressOrder(TM) provides powerful
analytical and reporting tools that enable businesses to evaluate data collected
throughout the process of acquiring, receiving and paying for goods and
services. By employing these analytical tools, an organization can analyze
purchasing patterns to streamline the procurement process, negotiate more
favorable terms with preferred suppliers and gain insight into additional
savings opportunities.
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Multi-platform compatibility. ExpressOrder(TM) functions on common
Internet browser software. As a result, is completely compatible with virtually
all computer operating systems, including Microsoft Windows and Windows NT,
Apple Macintosh and standard Linux/Unix systems.
CUSTOMER SERVICE, TRAINING AND SUPPORT
We believe that customer satisfaction will be essential to our
long-term success and we intend to offer comprehensive customer assistance
programs. Our technical support will provide dependable and timely resolution of
customer technical inquiries and will be available to customers by telephone,
over the Internet or by electronic mail. We will offer complete education and
training to our customers and partners to develop the knowledge and skills to
successfully use our services.
RESEARCH AND DEVELOPMENT
Substantially all of the research and development regarding
ExpressOrder(TM) has been outsourced to various consultants. We estimate that
Plus Solutions incurred development expenses related to ExpressOrder(TM) of
approximately $197,000 during 1998 and 1999, in addition to the devotion of
substantial internal resources. We believe the development of ExpressOrder(TM)
is substantially complete and any further resources devoted to research and
development will be used to make ongoing improvements to ExpressOrder(TM) in
response to market demands We intend to continue to outsource such development
to consultants.
We cannot be sure that continuing development of ExpressOrder(TM) will
be completed or that, if completed, they will have the features or quality
necessary to make them successful in the marketplace. Further, despite input by
potential customers and our internal quality control, errors could be found in
ExpressOrder(TM) that we have not anticipated. We may not be able to
successfully correct these errors in a timely and cost effective manner. If we
are not able to further develop or enhance our services in a timely and
cost-effective basis, or if these new developments or enhancements do not have
the features or quality necessary to make them successful in the marketplace,
our business will be seriously harmed.
COMPETITION
The market for e-commerce solutions is intensely competitive, evolving
and subject to rapid technological change. The intensity of competition has
increased and is expected to further increase in the future. This increased
competition is likely to result in price reductions and reduced gross margins,
any one of which could seriously harm our business. Competitors vary in size and
in the scope and breadth of the products and services offered. We believe the
primary competitors in the e-commerce solutions market are Ariba, Captura
Software, Clarus, Commerce One, Concur Technologies, Extensity, GE Information
Services, Intelysis, and Netscape Communications. We also expect to encounter
competition from major enterprise software developers, such as Oracle,
PeopleSoft and SAP. In addition, because there are relatively low barriers to
entry in the e-commerce solutions market, we expect additional competition from
other established and emerging companies.
We believe that the principal competitive factors affecting our market
include:
o existing customer base
o capabilities, quality and performance of products and services
o ability to configure and improve products and services based on
market demands and customer requirements
o individual requirements of buyers and suppliers in particular
industries
o customer service and satisfaction
o capabilities of core technology
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Although we believe that our services will compete favorably with
respect to these factors, the market for e-commerce solutions is relatively new
and is evolving rapidly. Even if we are currently competitive, we may not be
able to maintain our competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
service, support, technical and other resources.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources than us,
significantly greater name recognition and a larger existing base of customers.
In addition, many of our competitors have well-established relationships with
potential customers and have extensive knowledge of certain industries. Current
and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address customer needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. We also expect that competition will increase as a
result of consolidation of the e-commerce solutions industry.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
We will depend on our ability to develop and maintain the proprietary
aspects of our technology. To protect our proprietary technology, we will rely
primarily on a combination of contractual provisions, confidentiality
procedures, trade secrets, and patent, copyright and trademark laws.
We intend to license rather than sell the software technology in
ExpressOrder(TM) and we will require our customers to enter into license
agreements, which impose restrictions on their ability to utilize the software.
In addition, we will avoid disclosure of our trade secrets through a number of
means, including but not limited to, requiring those persons with access to our
proprietary information to execute confidentiality agreements with us and
restricting access to our software source code. We will attempt to protect our
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. We cannot be sure that any
of our proprietary rights will be successfully protected since the validity,
enforceability and protection of proprietary rights in Internet-related
industries are still evolving.
We rely on technology that we license from third parties to perform key
functions with respect to ExpressOrder(TM). If we are unable to continue to
license any of this software on commercially reasonable terms, our business may
be harmed unless equivalent technology can be readily licensed or developed, and
integrated into our services.
We intend to file applications to trademark the terms "ExpressOrder",
"ExpressBuyer" and "ExpressSeller" in the United States and certain other
countries. These trademark applications are subject to review by applicable
government authorities, may be opposed by private parties, and may not be
approved by such authorities.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult, and while we are unable to determine the extent to which
piracy of our software products exists, software piracy can be expected to be a
persistent problem. In addition, the laws of some foreign countries do not
protect our proprietary rights to as great an extent as do the laws of the
United States. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our products or design around patents issued to us or our other
intellectual property.
There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
products infringe their intellectual property. We expect that software product
developers and providers of e-commerce solutions will increasingly be subject to
infringement claims as the number of products and competitors in our industry
segment grows and the functionality of products in different industry segments
overlaps. Any such claims, whether or not they have merit, could result in
costly
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litigation, cause development delays or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on commercially reasonable terms, which could seriously harm our
business.
EMPLOYEES
As of March 15, 2000, we had a total of 4 employees, all of whom were
management personnel. All of these employees are located in the our principal
executive offices in Addison, Texas. None of our employees is represented by a
collective bargaining agreement and we have never experienced any work stoppage.
We consider our relations with our employees to be good.
Our future operating results depend in significant part on the
continued service of our senior management personnel. Our future success will
also depend on our ability to attract and retain highly qualified technical,
marketing and management personnel. Competition for these personnel is intense,
and we may not be able to retain our key personnel or attract these personnel in
the future.
BUSINESS LOCATIONS
The Company's only business location is its principal executive offices
located at 14677 Midway Road, Suite 206, Addison, Texas 75001. We lease
approximately 1,300 square feet of office space at this location.
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PRINCIPAL STOCKHOLDERS
As of the close of business on March 15, 2000, we have issued and
outstanding 39,000,000 shares of our common stock. The following table shows
information concerning the ownership of our common stock as of March 15, 2000
by: (a) each current director, (b) each new director named in the merger
agreement, (c) each current officer, (d) each person we know to own more than 5%
of the shares of our common stock; and (d) all of the current directors and
officers and as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF SHARES
COMMON STOCK OF COMMON STOCK
NAME(1) BENEFICIALLY OWNED OUTSTANDING(2)
- ------- ------------------- -----------------
<S> <C> <C>
Max Golden, Chairman of the Board of Directors,
President and Chief Executive Officer(3) ..... 7,776,732 19.4%
Mack Lawrence, Director(4) ............................ 184,317 *
John Reynolds, Director ............................... 0 --
Rita Hunter, Vice President(5) ........................ 1,666,873 4.2%
Martha Scroggins, Secretary(6) ........................ 2,218,313 5.6%
Ernest Kluft, Vice President and Chief Technology
Officer(7) ................................... 33,333 *
David Ballard(8) ...................................... 3,153,459 8.1%
7228 Spring Valley Road
Dallas, Texas 75240
U.S.A
Mario Pinto ........................................... 2,655,988 6.8%
531 Landsdale, Suite 205
North Vancouver, British Columbia V7L 2G6
Canada
All current directors and officers as a group(9) ...... 11,879,568 29.0%
</TABLE>
- ----------------------------
* Less than one percent.
(1) Unless otherwise set forth, the address of each named person is 14677
Midway Road, Suite 206, Addison, Texas, U.S.A. 75001.
(2) Based upon 15,600,000 shares of our common stock issued and
outstanding as of February 28, 2000.
(3) Includes 1,200,000 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(4) Includes 100,000 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(5) Includes 300,000 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(6) Includes 300,000 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(7) Includes 33,333 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(8) Shares recorded in the name of Ballard Property Company #1, Ltd. which
is controlled by Mr. Ballard.
(9) 6 persons.
Included in the shares owned by some of our directors and officers set
forth above are options to purchase shares of common stock of Plus Solutions.
These options were issued pursuant to the Plus Solutions stock option plan prior
to the acquisition of Plus Solutions by Sound Designs. The Company currently
does not have a stock option plan that has been approved by its stockholders. We
intend to call a stockholders meeting in the near future at which we will
propose that our stockholders approve and adopt a stock option plan similar to
the Plus Solutions stock option plan. If such a stock option plan is approved by
our stockholders, we intend to cancel all the options outstanding under the Plus
Solutions stock option plan and issue an identical number of options with
similar terms under the Company's stock option plan to the current holders of
options issued by Plus Solutions. If the Company's proposed stock
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option plan is not approved by our stockholders, we intend to purchase all the
options outstanding under the Plus Solutions stock option plan for fair market
value and, after such purchase, cancel all such options.
MANAGEMENT
The following table sets forth certain information with respect to our
current directors and officers and the new directors set forth in the merger
agreement:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Max Golden 51 Chairman of the Board of Directors, President and Chief
Executive Officer
Mack Lawrence 53 Director
John Reynolds 57 Director
Rita Hunter 41 Vice President
Martha Scroggins 52 Secretary and Treasurer
Ernest Kluft 56 Vice President and Chief Technology Officer
</TABLE>
Certain background information about each of our current directors and
officers and each new director is set forth below:
Max Golden has been our Chairman of the Board of Directors, President
and Chief Executive Officer since March 10, 2000. Prior to joining the Company,
Mr. Golden was Chairman of the Board of Directors and President of Plus
Solutions since October 1998. From 1995 to 1998, he served as President and
Manager of Alliance Associates, LLC.
Mack Lawrence is a principal and president of Regency Gas Company, a
position he has occupied since 1992. From 1985 to 1992, Mr. Lawrence served as a
principal and officer in a number of private companies, including American
Central Gas Company. From 1969 to 1985, Mr. Lawrence served in several
capacities at The Texas Utilities Commission, including Manager of Gas Supply.
John Reynolds is currently a Member of the Canadian House of Commons, a
position he has occupied since 1997. He also serves as President of both
Reynolds Enterprises Ltd. and Griney Consultants Inc., positions he has held
since 1994 and 1997, respectively. Mr. Reynolds also serves as a director of
Vitality Products, Inc.
Rita Hunter currently serves as our Vice President, a position she has
held since March 10, 2000. Prior to joining the Company, she served Plus
Solutions in a similar capacity. Before joining Plus Solutions, Ms. Hunter
served as Manager of Client and Field Services for AmGas Inc. and Marketing
Coordinator and Trainer for Artesia Data Systems.
Martha Scroggins is our Secretary and Treasurer, a position she was
elected to on March 10, 2000. Prior to joining the Company, she served Plus
Solutions in a similar capacity. Before serving Plus Solutions, Ms. Scroggins
served as a Manager of Contract Administration with AmGas Inc.
Ernest Kluft is our Chief Technology Officer, a position he was elected
to on March 10, 2000. Prior to joining the Company, he served Plus Solutions in
a similar capacity. Before joining Plus Solutions, Mr. Kluft directed the
planning and systems efforts of Enserch Exploration for some twenty years and
subsequently directed the information technology department of its parent,
Enserch Corporation. Recently, he also coordinated all financial, planning, and
information technology efforts for Lone Star Gas in its successful bid for the
Mexico City natural gas distribution franchise
11
<PAGE> 12
BOARD OF DIRECTORS COMMITTEES
Our board of directors does not currently have any committees.
EXECUTIVE COMPENSATION
None of our current executive officers provided any services to or
received any compensation from Sound Designs during 1998 and 1999. We intend to
enter into employment agreements with each of our executive officers in the near
future. Such employment agreements have not yet been negotiated, but we
anticipate that each will have terms of 1-3 years and will contain customary
severance provisions that provide a minimum of 30-180 days notice to terminate
the contract, except for any termination for appropriate cause. We also
anticipate that each employment agreement will contain special severance
provisions if the employee is terminated within one year after a change of
control of the Company. The salaries of our executive officers, which will be
reflected in the employment agreements, are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER SALARY
----------------- ------
<S> <C>
Max Golden ................................. $240,000
Rita Hunter ................................ $ 85,000
Martha Scroggins ........................... $ 85,000
Ernest Kluft ............................... $135,000
</TABLE>
Each of our executive officers currently hold options to purchase
shares of common stock of Plus Solutions. These options were issued pursuant to
the Plus Solutions stock option plan prior to the acquisition of Plus Solutions
by Sound Designs. The Company currently does not have a stock option plan that
has been approved by its stockholders. We intend to call a stockholders meeting
in the near future at which we will propose that our stockholders approve and
adopt a stock option plan similar to the Plus Solutions stock option plan. If
such a stock option plan is approved by our stockholders, we intend to cancel
all the options outstanding under the Plus Solutions stock option plan and issue
an identical number of options with similar terms under the Company's stock
option plan to each of our executive officers. If the Company's proposed stock
option plan is not approved by our stockholders, we intend to purchase all the
Plus Solutions options held by our executive officers for fair market value.
FORWARD-LOOKING STATEMENTS
The information in this report contains forward-looking statements
within the meaning of Section 27A of the United States Securities Act of 1933
and Section 21E of the United States Securities Exchange Act of 1934. Such
statements are based upon current expectations that involve risks and
uncertainties that may be outside of our control. Any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. For example, words such as "may," "will," "should,"
"estimates," "predicts," "potential," "continue," "strategy," "believes,"
"anticipates," "plans," "expects," "intends," and similar expressions are
intended to identify forward-looking statements. Our actual results and the
timing of certain events may differ significantly from the results discussed in
the forward-looking statement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
The Registrant will provide the financial statements required by of
Item 7(a) in an amendment to this report within 60 days of the date
that this report is required to be filed.
(b) Pro Forma Financial Information
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<PAGE> 13
The Registrant will provide the financial statements required by of
Item 7(b) in an amendment to this report within 60 days of the date
that this report is required to be filed.
(c) Exhibits
2.1 Plan and Agreement of Merger dated February 21, 2000 among
Sound Designs, Inc., SD Acquisition, Inc. and Plus Solutions,
Inc.
13
<PAGE> 14
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.
Date: March 27, 2000 SOUND DESIGNS, INC.
By: /s/ MAX GOLDEN
-------------------------------------
President and Chief Executive Officer
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<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Plan and Agreement of Merger dated February 21, 2000 among
Sound Designs, Inc., SD Acquisition, Inc. and Plus
Solutions, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of February
21, 2000 (the "Execution Date"), by and among SOUND DESIGNS, INC., a Nevada
corporation ("Sound Designs"), SD ACQUISITION, INC.., a Nevada corporation and
wholly-owned subsidiary of Sound Designs ("SD Acquisition"), and PLUS SOLUTIONS,
INC., a Texas corporation ("Plus").
WHEREAS, the respective Boards of Directors of Sound Designs, SD
Acquisition and Plus have approved the merger of SD Acquisition into Plus
pursuant to the terms and conditions hereinafter set forth (the "Merger"); and
WHEREAS, the parties desire to make certain representation, warranties
and agreements in connection with the Merger and also to prescribe various
conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing recitals, which shall
be considered an integral part of this Agreement, and the covenants, conditions,
representations and warranties hereinafter set forth, the parties hereby agree
as follows:
ARTICLE I
THE MERGER
1.1 THE TRANSACTION. At the Effective Time (as hereinafter defined), SD
Acquisition shall be merged with and into Plus (SD Acquisition and Plus are
referred to as the "Constituent Corporations"), the separate existence of SD
Acquisition shall cease and Plus shall continue as the surviving corporation
under the corporate name "Plus Solutions, Inc." (the "Surviving Corporation"),
all upon the terms and subject to the conditions provided for in this Agreement
and pursuant to the Nevada Business Corporation Act (the "Nevada Act") and the
Texas Business Corporation Act (the "Texas Act"). For Federal income tax
purposes, it is intended that the Merger shall constitute a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended.
1.2 CLOSING AND EFFECTIVE TIME. Subject to the provisions of this
Agreement, the parties shall hold a closing (the "Closing") on (a) the first
business day on which the last of the conditions set forth in Article V to be
fulfilled prior to the Closing is fulfilled or waived or (b) such other date as
the parties hereto may agree (the "Closing Date"), at such time and place as the
parties hereto may agree. The Merger shall become effective upon the filing of
Articles of Merger with the Secretary of State of Texas and the Secretary of
State of Nevada or at such later time as is provided in the Articles of Merger
(the "Effective Time"). As a result of the Merger, Plus shall become a wholly
owned subsidiary of Sound Designs.
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects specified
in the Nevada Act and the Texas Act and, at and after the Effective Time, the
Surviving Corporation shall possess all of the rights, privileges, powers and
franchises, and be subject to all of the restrictions, disabilities and duties
of each of the Constituent Corporations; and all singular rights, privileges,
1
<PAGE> 2
powers and franchises of each of the Constituent Corporations, and all property,
real, personal and mixed, and all debts due to either of the Constituent
Corporations on whatever account, and all other things in action or belonging to
each of the Constituent Corporations, shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest shall thereafter become the property of the
Surviving Corporation as they were of the Constituent Corporations; but all
rights of creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities and
duties of the Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts
and liabilities had been incurred by it.
1.4 CERTIFICATE OF INCORPORATION, BYLAWS, DIRECTORS AND OFFICERS. The
Certificate of Incorporation of the Surviving Corporation in effect immediately
prior to the Effective Time, shall be and remain the Certificate of
Incorporation of the Surviving Corporation, until thereafter amended in
accordance with the provisions therein and as provided by the Texas Act.
Similarly, the Bylaws of the Surviving Corporation in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
thereafter amended in accordance with its terms. Finally, the directors and
officers of the Surviving Corporation shall be the directors and officers of the
Surviving Corporation at the Effective Time, until their successors are duly
elected and qualified.
1.5 CONVERSION AND CANCELLATION OF SHARES IN THE MERGER. As of the
Effective Time, by virtue of the Merger and without any action on the part of
Sound Designs, SD Acquisition, Plus or the holder of any shares of SD
Acquisition or Plus:
(a) CAPITAL STOCK OF SD ACQUISITION. Each issued and
outstanding share of the capital stock of SD Acquisition shall be
converted into and become one fully paid and nonassessable share of
Common Stock, no par value per share, of the Surviving Corporation.
(b) CAPITAL STOCK OF PLUS. Each issued and outstanding share
of the capital stock of Plus shall be converted into the right to
receive 1.6863414915 shares (the "Merger Shares") of common stock, par
value $.001 per share, of Sound Designs (the "Common Stock") with the
result that after the Effective Time, Plus will become a wholly owned
subsidiary of Sound Designs. All such converted shares of Plus will no
longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of a certificate representing
any such shares shall cease to have any rights with respect thereto,
except the right to receive the Merger Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF SOUND DESIGNS AND SD ACQUISITION.
Sound Designs and SD Acquisition jointly and severally represent and warrant to
Plus as follows:
2
<PAGE> 3
(a) ORGANIZATION, STANDING AND POWER.
(i) Sound Designs is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Nevada, has all requisite power and authority to own,
lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its
properties makes such qualification necessary other than in
such jurisdictions where the failure so to qualify would not
have a material adverse affect on Sound Designs and SD
Acquisition (together, the "Sound Designs Entities") taken as
a whole.
(ii) The only subsidiary of Sound Designs is SD
Acquisition. Sound Designs does not own or hold securities or
debt obligations of any entity other than SD Acquisition. All
shares of capital stock or ownership interests of SD
Acquisition have been duly authorized, are fully paid and
nonassessable, and are lawfully owned of record and
beneficially by the owner thereof free and clear of all
pledges, liens, claims, security interests and other charges
or defects in title of any nature whatsoever.
(iii) SD Acquisition is duly organized, validly
existing, in good standing and qualified to do business in
each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where
the failure so to qualify would not have a material adverse
effect on the Sound Designs Entities taken as a whole.
(b) CAPITAL STRUCTURE. The authorized capital stock of Sound
Designs consists of 100,000,000 shares of Common Stock. On the
Execution Date, 15,600,000 shares of Common Stock were outstanding; no
shares of Common Stock were held by Sound Designs in its treasury, and
no shares of Sound Designs Preferred Stock were issued or outstanding.
All outstanding shares of Common Stock are, and the Merger Shares to be
issued will be validly issued, fully paid and nonassessable and not
subject to preemptive rights. All of the issued and outstanding shares
of Common Stock were issued in compliance with all Federal and state
securities laws. There are no options, warrants, calls, agreements or
other rights to purchase or otherwise acquire from any Sound Designs
Entity at any time, or upon the happening of any stated event, any
shares of the capital stock of any Sound Designs Entity, whether or not
presently issued or outstanding.
(c) CERTIFICATE OF INCORPORATION, BYLAWS, AND MINUTE BOOKS.
The copies of the Certificate of Incorporation, bylaws and other
organizational documents of Sound Designs and each Sound Designs Entity
which have been delivered to Plus are true, correct and complete copies
thereof. The minute books of Sound Designs which have been made
available for inspection contain accurate minutes of all meetings and
accurate consents in lieu of meetings of the Board of Directors (and
any committee thereof) and of the shareholders of Sound Designs since
the respective dates of incorporation
3
<PAGE> 4
and accurately reflect all transactions referred to in such minutes
and consents in lieu of meetings.
(d) AUTHORITY.
(i) Sound Designs has all requisite power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of
Director of Sound Designs. No other corporate or shareholder
proceedings on the part of Sound Designs are necessary to
authorize the Merger, or the other transactions contemplated
hereby.
(ii) This Agreement has been duly executed and
delivered by Sound Designs and constitutes a valid and binding
obligation enforceable in accordance with its terms.
(e) CONFLICT WITH OTHER AGREEMENTS; APPROVALS. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not result in any violation of,
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation
of a lien, pledge, security interest or other encumbrance on assets
(any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation") pursuant
to any provision of the Certificate of Incorporation, bylaws or any
organizational document of Sound Designs or any Sound Designs Entity
or, result in any Violation of any loan or credit agreement, note,
mortgage, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Sound Designs or any Sound Designs Entity or their
respective properties or assets which Violation would have a material
adverse effect on Sound Designs and the Sound Designs Entities taken as
a whole. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") is
required by or with respect to Sound Designs or any Sound Designs
Entity in connection with the execution and delivery of this Agreement
by Sound Designs or the consummation by Sound Designs of the
transactions contemplated hereby, the failure to obtain which would
have a material adverse effect on Sound Designs and the Sound Designs
Entities, taken as a whole, except for (i) the filing of such documents
with, and the obtaining of such orders from, the Securities and
Exchange Commission (the "SEC"), the various state authorities,
including state securities authorities, that are required in connection
with the transactions contemplated by this Agreement; and (ii) the
filing of Articles of Merger with the Secretary of State of Nevada and
the Secretary of State of Texas.
4
<PAGE> 5
(f) SEC DOCUMENTS. Sound Designs has furnished Plus with a
true and complete copy of each report, schedule, registration statement
and definitive proxy statement filed by Sound Designs with the SEC (as
such documents have since the time of their filing been amended, the
"Sound Designs SEC Documents") and Sound Designs has filed with the SEC
all documents required to be filed pursuant to the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Each of the Sound Designs
SEC Documents complies in all material respects with the Securities
Act, the Exchange Act and the rules of the SEC promulgated thereunder.
None of the Sound Designs SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make a statement set forth therein, in
light of the circumstances under which they were made, not misleading.
(g) FINANCIAL STATEMENTS. Sound Designs has furnished Plus
with audited balance sheets balance sheets of Sound Designs and the
related statements of income, cash flows and changes in shareholders'
equity as of and for the period ended December 31, 1999 (the "Sound
Designs 1999 Financial Statements"). The Sound Designs 1999 Financial
Statements including the footnotes thereto, except as indicated
therein, have been prepared in accordance with generally accepted
accounting principles in the United States. The Sound Designs 1999
Financial Statements are complete and correct in all material respects
and fairly present in all material respects the financial condition and
results of the operations of Sound Designs and show all material
liabilities absolute or contingent of Sound Designs. SD Acquisition has
had no operations since inception and currently has no assets or
liabilities.
(h) BOOKS AND RECORDS. Sound Designs has made and will make
available for inspection by Plus upon reasonable request all the books
of Sound Designs and the Sound Designs Entities, relating to the
business of Sound Designs and the Sound Designs Entities. Such books of
Sound Designs and the Sound Designs Entities have been maintained in
the ordinary course of business. All documents furnished or caused to
be furnished to Plus by Sound Designs are true and correct copies, and
there are no amendments or modifications thereto except as set forth in
such documents.
(i) COMPLIANCE WITH LAWS. Sound Designs and the Sound Designs
Entities are and have been in compliance in all material respects with
all laws, regulations, rules, orders, judgments, decrees and other
requirements and policies imposed by any Governmental Entity applicable
to them, their properties or the operation of their businesses.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the Sound Designs 1999 Financial Statements, Sound Designs and the
Sound Designs Entities have conducted their respective businesses only
in the Ordinary Course of Business, and, as of the date of this
Agreement, there has not been (i) any Material Adverse Effect, alone or
in the aggregate, in the business, assets, liabilities, condition
(financial or otherwise), results of operations or prospects of Sound
Designs or any Sound Designs Entity; or (ii) any
5
<PAGE> 6
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any
of Sound Design's capital stock. As used herein, the term "Material
Adverse Effect" means, with respect to an entity, any loss, damage or
other change in the business or assets of such entity, taken as a
whole, that would or is likely to constitute, cause or result in: (i)
a decrease of five percent or more of (1) the total revenues or total
operating income calculated by reference to the amounts of such items
set forth in the most recent annual consolidated income statement, or
(2) the total assets, total current assets, or total properties and
equipment calculated by reference to the amounts of such items set
forth in the most recent consolidated balance sheet, or (ii) an
increase of (1) five percent or more of the total cost of operations,
total interest expense or total income tax expense calculated by
reference to the amounts of such items set forth in the most recent
annual consolidated income statement, or (2) total liabilities, total
current liabilities or total debt calculated by reference to the
amounts of such items set forth in the most recent consolidated
balance sheet, each calculated in accordance with generally accepted
accounting principles in the United States. As used herein, the term
"Ordinary Course of Business" means, with respect to an entity, the
ordinary and usual actions of such entity reasonably necessary to
conduct its principal business.
(k) LIABILITIES AND OBLIGATIONS. None of Sound Designs or the
Sound Designs Entities have any material liabilities or obligations
(direct or indirect, contingent or otherwise) except (i) liabilities
that are reflected and reserved against in the Sound Designs 1999
Financial Statements that have not been paid or discharged since the
date thereof and (ii) liabilities incurred since December 31, 1999 in
the Ordinary Course of Business consistent with past practice and in
accordance with this Agreement. On the Closing Date, none of Sound
Designs and the Sound Designs Entities shall have any current
liabilities that became due and payable on or before the Closing Date.
(l) LITIGATION. There is no suit, action or proceeding
pending, or, to the Knowledge of Sound Designs, threatened against or
affecting Sound Designs or any Sound Designs Entity which is reasonably
likely to have a material adverse effect on Sound Designs or any Sound
Designs Entity, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against
Sound Designs or any Sound Designs Entity having, or which, insofar as
reasonably can be foreseen, in the future could have, any such effect.
As used herein, the term "Knowledge" means, with respect to and entity,
the actual knowledge of any director, executive officer or persons
exercising similar authority of such entity.
(m) TAXES. Each of Sound Designs and the Sound Designs
Entities has filed or will file within the time prescribed by law and
(including extension of time approved by the appropriate taxing
authority) all tax returns and reports required to be filed with the
United States Internal Revenue Service and with all other jurisdictions
where such filing is required by law or where the failure to file would
have a material adverse effect on Sound Design; and Sound Designs and
the Sound Designs Entities have paid, have or will have made adequate
provision in the Sound Designs 1999 Financial Statements for the
payment of all taxes, interest, penalties, assessments or deficiencies
shown due and payable on, and
6
<PAGE> 7
with respect to all periods ending prior to the Closing Date. Sound
Designs has knowledge of (i) other tax returns or reports which are
required to be filed which have not been so filed or where the failure
to file would have a material adverse effect on Sound Designs and (ii)
unpaid assessment for additional taxes for any fiscal period or any
basis therefor.
(n) ASSETS. Sound Designs and the Sound Designs Entities have
good and marketable title to all their real and personal properties and
assets reflected in the Sound Designs 1999 Financial Statements free
and clear of all mortgages, liens, pledges, charges or encumbrances or
other third party interests of any nature whatsoever, except (i) as
otherwise disclosed in the Sound Designs 1999 Financial Statements,
(ii) the lien of current taxes not yet due and payable, (iii)
properties, interests, and assets disposed of by Sound Designs or any
Sound Designs Entity since December 31, 1999 solely in the Ordinary
Course of Business consistent with past practice and (iv) such
imperfections of title, easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially
detract from the value, or interfere with the present or proposed use,
of the properties subject thereto.
(o) CONTRACTS. There are no written or oral contracts,
agreements, loan agreements, leases, mortgages or commitments
("Contracts"), excluding Contracts involving payments of less than
$10,000 over the term thereof, to which Sound Designs or any Sound
Designs Entity is a party or may be bound and which cannot be
terminated by Sound Designs or any Sound Designs Entity without penalty
within 30 days after written notice. SD Acquisition is not subject to
any Contract other than the Agreement.
(p) BENEFIT PLANS. Sound Designs has no employee benefit
plans, contracts, agreements or arrangements sponsored, maintained or
contributed to by Sound Designs or any Sound Designs Entity
(collectively, the "Sound Designs Employee Benefit Plans").
(q) LICENSES, PERMITS; INTELLECTUAL PROPERTY.
(i) Sound Designs and each Sound Designs Entity own
or possess in the operation of their business all material
franchises, licenses, permits, consents, approvals, rights,
waivers and other authorizations, governmental or otherwise
("Authorization"), which are necessary for them to conduct
their business as now conducted. Neither Sound Designs nor any
Sound Designs Entity is in material default, or has received
any notice of any claim of default, with respect to any such
Authorization or any notice of any other claim or proceeding
or threatened proceeding relating to any such Authorization or
claimed lack of any necessary Authorization. Neither the
execution or delivery of this Agreement nor the consummation
of the transactions contemplated hereby will require any
notice or consent under or have any material adverse effect
upon any such Authorization.
(ii) Sound Designs does not hold or use any patents
or use any trade names, trademarks, or service marks.
7
<PAGE> 8
(r) TRANSACTIONS AND AFFILIATES. Other than employment
agreements with certain current officers of Sound Designs which will be
terminated and require no ongoing obligations of any Sound Designs
Entity, no director, officer or affiliate of Sound Designs or any
member of his or her immediate family, is a party to any Contract or
other business arrangement or relationship of any kind with Sound
Designs or any Sound Designs Entity or has an ownership interest in any
business, corporate or otherwise, which is a party to, or in any
property which is the subject of, business arrangements or
relationships of any kind with Sound Designs or any Sound Designs
Entity.
(s) BROKERAGE. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf
of Sound Designs.
2.2 REPRESENTATIONS AND WARRANTIES OF PLUS. Plus represents and
warrants to Sound Designs and SD Acquisition as follows:
(a) ORGANIZATION, STANDING AND POWER.
(i) Plus is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Texas, has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now
being conducted, and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes
such qualification necessary other than in such jurisdictions
where the failure so to qualify would not have a material
adverse effect on Plus taken as a whole.
(ii) Plus has no subsidiaries. Plus does not own or
hold securities or debt obligations of any entity.
(b) CAPITAL STRUCTURE. The authorized capital stock of Plus
consists of 25,000,000 shares of common stock, no par value (the "Plus
Common Stock") and 8,000,000 shares of preferred stock, no par value
(the "Plus Preferred Stock"). As of the Execution Date, 13,876,193
shares of Plus Common Stock were outstanding and no shares of Plus
Common Stock were held by Plus in treasury and no shares of Plus
Preferred Stock were outstanding. All outstanding shares of Plus Common
Stock are validly issued, fully paid and nonassessable and not subject
to preemptive rights or other restrictions on transfer. All of the
issued and outstanding shares of Plus Common Stock were issued in
compliance with all Federal and state securities Laws. Other than as
set forth on Schedule 2.2(b), there are no options, warrants, calls,
agreements or other rights to purchase or otherwise acquire from Plus
at any time, or upon the happening of any stated event, any shares of
the capital stock of Plus, whether or not presently issued or
outstanding.
8
<PAGE> 9
(c) CERTIFICATE OF INCORPORATION, BYLAWS AND MINUTE BOOKS. The
copies of the Articles of Incorporation, bylaws and other
organizational documents of Plus which have been delivered to Sound
Designs are true, correct and complete copies thereof. The minute books
of Plus which have been made available for inspection contain accurate
minutes of all meetings and accurate consents in lieu of meetings of
the Board of Directors (and any committee thereof) and of the
shareholders of Plus since the date of incorporation and accurately
reflect all transactions referred to in such minutes and consents in
lieu of meetings.
(d) AUTHORITY. Plus has all requisite power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Plus and Shareholders of Plus,
and no other corporate or shareholder proceedings on the part of Plus
are necessary to authorize the Merger and the other transactions
contemplated hereby. This Agreement has been duly executed and
delivered by Plus and constitutes a valid and binding obligation of
Plus enforceable in accordance with its terms.
(e) CONFLICT WITH AGREEMENTS; APPROVALS. The execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in
any Violation pursuant to any provision of the Articles of
Incorporation, bylaws or any organizational document of Plus or result
in any Violation of any loan or credit agreement, note, mortgage,
indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Plus
or its properties or assets, which Violation would have a material
adverse effect on Plus taken as a whole. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Plus in
connection with the execution and delivery of this Agreement by Plus or
the consummation by Plus of the transactions contemplated hereby, the
failure to obtain which would have a material adverse effect on Plus
taken as a whole except for the filing of Articles of Merger with the
Secretary of State of Texas and the Secretary of State of Nevada.
(f) FINANCIAL STATEMENTS. Plus has furnished Sound Designs
with unaudited balance sheets as of December 31, 1999 (the "Plus
Financial Statements"). The Plus Financial Statements including the
footnotes thereto, except as indicated therein, have been prepared in
accordance with generally accepted accounting principles. The Plus
Financials Statements are complete and correct in all material respects
and fairly present in all material respects the financial condition and
results of the operations of Plus and show all material liabilities
absolute or contingent of Plus. Plus has had no operations since
inception.
(g) BOOKS AND RECORDS. Plus has made and will make available
for inspection by Sound Designs upon reasonable request all the books
of account, relating to the business of Plus. Such books of account of
Plus have been maintained in the ordinary
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course of business. All documents furnished or caused to be furnished
to Sound Designs by Plus are true and correct copies, and there are no
amendments or modifications thereto except as set forth in such
documents.
(h) COMPLIANCE WITH LAWS. Plus is and has been in compliance
in all material respects with all laws, regulations, rules, orders,
judgments, decrees and other requirements and policies imposed by any
Governmental Entity applicable to it, its properties or the operation
of its businesses.
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1999, Plus has conducted its business only in the ordinary course, and,
as of the date of this Agreement, there has not been (i) any Material
Adverse Effect, alone or in the aggregate, in the business, assets,
liabilities, condition (financial or otherwise), results of operations
or prospects; or (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property)
with respect to any of Plus's capital stock.
(j) LIABILITIES AND OBLIGATIONS. Plus has no material
liabilities or obligations (absolute, accrued, contingent or otherwise)
except (i) liabilities that are reflected and reserved against on the
Plus Financial Statements that have not been paid or discharged since
the date thereof and (ii) liabilities incurred since December 31, 1999
in the Ordinary Course of Business consistent with past practice and in
accordance with this Agreement.
(k) LITIGATION. Except as set forth in Schedule 2.2(k), there
is no suit, action or proceeding pending, or, to the Knowledge of Plus,
threatened against or affecting Plus which is reasonably likely to have
a Material Adverse Effect on Plus, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Plus having, or which, insofar as reasonably can be
foreseen, in the future could have, any such effect.
(l) TAXES. Plus has filed or will file within the time
prescribed by law (including extension of time approved by the
appropriate taxing authority) all tax returns and reports required to
be filed with the United States Internal Revenue Service and with all
other jurisdictions where such filing is required by law; and Plus has
paid, or has made adequate provision in the Plus Financial Statements
for the payment of all taxes, interest, penalties, assessments or
deficiencies due and payable on, and with respect to all periods ending
prior to the Closing Date. Plus knows of (i) no other tax returns or
reports which are required to be filed which have not been so filed and
(ii) no unpaid assessment for additional taxes for any fiscal period or
any basis therefore.
(m) WITHHOLDING PAYMENTS. All deductions required by law to be
made by Plus from wages and salaries paid or payable by Plus have been
duly made and remitted to the proper governmental authorities, and all
returns for such withholding have been properly filed within the time
required by law.
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(n) ASSETS. Plus has good and marketable title to all its real
and personal properties and assets reflected in the Plus Financial
Statements free and clear of all mortgages, liens, pledges, charges or
encumbrances or other third party interests of any nature whatsoever,
except (i) the lien of current taxes not yet due and payable, (ii)
properties, interests, and assets disposed of by Plus since December
31, 1999 solely in the ordinary course of business consistent with past
practice and (iii) such imperfections of title, easements and
encumbrances, if any, as are not substantial in character, amount or
extent and do not materially detract from the value, or interfere with
the present or proposed use, of the properties subject thereto.
(o) CONTRACTS. All Contracts, excluding purchase or sales
orders placed in the ordinary course of business and other Contracts
involving payments of less than $10,000 over the term thereof, to which
Plus is a party or may be bound and which cannot be terminated by Plus
without penalty within 30 days after written notice are listed on
Schedule 2.2(o). All Contracts are valid and in full force and effect
on the date hereof, and Plus has not violated any provision of, or
committed or failed to perform any act which with notice, lapse of time
or both would constitute a default under the provisions of, any
Contract, the termination or violation of which might have a materially
adverse effect upon the business, assets, liabilities, condition
(financial or otherwise), results of operations or prospects of Plus.
True and complete copies of all Contracts, together with all amendments
thereto, disclosed in Schedule 2.2(o) have been delivered to Sound
Designs or made available for inspection. No contracts require the
consent or approval of third parties to the execution and delivery of
this Agreement or to the consummation and performance of the
transactions contemplated hereby.
(p) BENEFIT PLANS. Schedule 2.2(p) hereto lists all employee
benefit plans, contracts, agreements or arrangements sponsored,
maintained or contributed to by Plus (collectively, the "Plus Employee
Benefit Plans"). Plus has not incurred any obligation to contribute any
material amount to any multi-employer plan, as defined in Section 3(37)
of ERISA; Plus has not incurred any material liability under Title IV
of ERISA arising in connection with the termination of, or complete or
partial withdrawal from, any plan covered or previously covered by
Title IV of ERISA, and each Plus Employee Benefit Plan is in compliance
with all applicable laws and regulations in all material respects.
(q) LICENSES, PERMITS; INTELLECTUAL PROPERTY.
(i) Plus owns or possesses in the operation of its
business all material Authorizations which are necessary for
them to conduct their business as now conducted. Plus is not
in material default, and has not received any notice of any
claim of default, with respect to any such Authorization or
any notice of any other claim or proceeding or threatened
proceeding relating to any such Authorization or claimed lack
of any necessary Authorization. Neither the execution or
delivery of this Agreement nor the consummation of the
transactions contemplated hereby will require any notice or
consent under or have any material adverse effect upon any
such Authorization.
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(ii) Set forth in Schedule 2.2(q) is a list of the
material domestic and foreign patents, patent applications,
patent licenses, software, corporate or other names, trade
names, trademarks, service marks, trademark registrations and
applications, service mark registrations and applications,
copyright registrations and applications licensed or owned by
Plus (collectively the "Intellectual Property"). Plus does not
license any Intellectual Property to third parties. Plus owns
the entire right, title and interest in and to the
Intellectual Property and each item constituting part of the
Intellectual Property has been, to the extent indicated in
Schedule 2.2(q), duly registered with, filed in or issued by,
as the case may be, the United States Patent and Trademark
Office or such other government entity, domestic or foreign,
as is indicated in Schedule 2.2(q) and, to the knowledge of
Plus, such registrations, filings and issuances remain in full
force and effect and there are no pending proceedings or
litigation or other adverse claims made in writing affecting
or with respect to the Intellectual Property.
(r) TRANSACTIONS AND AFFILIATES. Except as described in
Schedule 2.2(r), no director or officer of Plus or any member of his or
her immediate family, is a party to any Contract or other business
arrangement or relationship of any kind with Plus or, except for the
ownership of not more than 1% of the stock of a company having a class
of securities registered pursuant to the Exchange Act, has an ownership
interest in any business, corporate or otherwise, which is a party to,
or in any property which is the subject of, business arrangements or
relationships of any kind with Plus.
(s) BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf
of Plus.
(t) REAL ESTATE Plus owns no real property as of the date of
this Agreement, and any interest in real property as a lessee is in
good standing. Plus is in compliance with all Environmental laws as of
the date of this Agreement.
ARTICLE III
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1 COVENANTS OF PLUS AND SOUND DESIGNS. During the period from the
date of this Agreement and continuing until the Effective Time, Plus and Sound
Designs each agree as to itself and its related entities and subsidiaries that
(except as expressly contemplated or permitted by this Agreement, or to the
extent that the other party shall otherwise consent in writing):
(a) ORDINARY COURSE. Each party and their respective
subsidiaries shall carry on their respective businesses in the Ordinary
Course of Business in substantially the same manner as heretofore
conducted.
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(b) DIVIDENDS; CHANGES IN STOCK. No party shall, nor shall any
party permit any of its subsidiaries to, nor shall any party propose
to, (i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) repurchase or otherwise
acquire, or permit any subsidiary to purchase or otherwise acquire, any
shares of its capital stock.
(c) ISSUANCE OF SECURITIES. No party shall, nor shall any
party permit any of its subsidiaries to, issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of
its capital stock of any class, any voting debt or any securities
convertible into, or any rights, warrants or options to acquire, any
such shares, voting debt or convertible securities.
(d) GOVERNING DOCUMENTS. No party shall amend or propose to
amend its Certificate of Incorporation or bylaws.
(e) NO SOLICITATIONS. No party shall, nor shall any party
permit any of its related entities or subsidiaries to, nor shall it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its related entities or
subsidiaries to, solicit or encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or
the making of any proposal which constitutes, or may reasonably be
expected to lead to, any takeover proposal, or agree to or endorse any
takeover proposal. Each party shall promptly advise the other orally
and in writing of any such inquiries or proposals. As used in this
Agreement, "takeover proposal" shall mean any tender or exchange offer,
proposal for a Merger, consolidation or other business combination
involving a party hereto or any related entity or subsidiary of such
party or any proposal or offer to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets of, such
party or related entity or any of its subsidiaries other than the
transactions contemplated by this Agreement.
(f) NO ACQUISITIONS. No party shall, nor shall any party
permit any of its related entities or subsidiaries to, acquire or agree
to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets
of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets in each
case which are material, individually or in the aggregate, to such
party and related entities and its subsidiaries taken as a whole.
(g) NO DISPOSITIONS. Except for the transfer of assets in the
ordinary course of business consistent with prior practice, no party
shall, nor shall any party permit any of its related entities or
subsidiaries to, sell, lease, encumber or otherwise dispose of, or
agree to sell, lease, encumber or otherwise dispose of, any of its
assets, which are material,
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individually or in the aggregate, to such party, its related entities
and its subsidiaries taken as a whole.
(h) INDEBTEDNESS. No party shall, nor shall any party permit
any of its related entities or subsidiaries to, incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire any debt
securities of such party or related entities or any of its subsidiaries
or guarantee any debt securities of others other than in each case in
the ordinary course of business consistent with prior practice.
(i) COMPENSATION. No party shall grant any increase in the
salary or other compensation of its officers or other employees or
grant any bonus to any officer or other employee or enter into any
employment agreement or make any loan to or enter into any material
transaction of any other nature with any officer or other employee of
such party.
(j) NO NEW SEVERANCE. No party shall take any action to
institute any new severance or termination pay practices with respect
to any directors or officers or other employees of such party or to
increase the benefits payable under its severance or termination pay
practices.
(k) BENEFIT PLANS. No party shall adopt or amend, in any
respect, except as may be required by applicable law or regulation, any
bonus, profit sharing, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund, plan or arrangement for
the benefit or welfare of any directors or officers or other employees
except as otherwise contemplated by this Agreement.
3.2 OTHER ACTIONS. No party shall, nor shall any party permit any of
its related entities subsidiaries to, take any action that would or is
reasonably likely to result in any of its representations and warranties set
forth in this Agreement being untrue as of the date made (to the extent so
limited), or in any of the conditions to the Merger set forth in Article V not
being satisfied.
3.3 ADVICE OF CHANGES. Each party shall confer on a regular and
frequent basis with the other, report on operational matters and promptly advise
the other orally and in writing of any change or event having, or which, insofar
as can reasonably be foreseen, could have, a Material Adverse Effect on such
party and its related entities and subsidiaries taken as a whole.
3.4 FILINGS. Each party hereto shall provide to each other party copies
of all filings intended to be made by such party with any Governmental Entity
not less than 24 hours before the date such filing is required to be made and
such filings shall be reasonably acceptable to such other party.
3.5 PRESS RELEASES. Neither Sound Designs nor Plus will make any press
release or other report to third parties regarding this Agreement or the matters
and transactions
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contemplated thereby, except (a) as required by applicable law and, then,
containing only such information as is required by such applicable law; or (b)
as is approved by both Sound Designs and Plus prior to dissemination.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 NAME CHANGE. It is contemplated by the parties that the corporate
name of Sound Designs shall be changed contingent upon and subsequent to the
Effective Time.
4.2 RESTRICTED SOUND DESIGNS SHARES. The Merger Shares will not be
registered under the Securities Act, but will be issued pursuant to an exemption
from such registration requirements based upon representations and warranties
made by the shareholders of Plus. Accordingly, the Merger Shares will constitute
"restricted securities" as defined in Rule 144 under the Securities Act and the
Shareholders will not be able to transfer such Merger Shares except upon
compliance with the registration requirements of the Securities Act and
applicable state securities laws or an exemption therefrom. The certificates
evidencing the Merger Shares shall contain a legend to the foregoing effect.
4.3 ACCESS TO INFORMATION. Upon reasonable notice, Sound Designs and
Plus shall each afford to the officers, employees, accountants, counsel and
other representatives of the other, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each of Sound Designs and Plus
shall furnish promptly to the other (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of Federal or state securities laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. Unless otherwise required by law, the
parties will hold any such information which is nonpublic in confidence until
such time as such information otherwise becomes publicly available through no
wrongful act of either party, and in the event of termination of this Agreement
for any reason, each party shall promptly return all nonpublic documents
obtained from any other party, and any copies made of such documents, to such
other party.
4.4 LEGAL CONDITIONS TO MERGER. Each of Sound Designs and Plus will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Merger and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or any of their related entities
or subsidiaries in connection with the Merger. Each party will, and will cause
its related entities or subsidiaries to, take all reasonable actions necessary
to obtain (and will cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other public or private third party, required to be obtained or made
by Sound Designs or Plus or any of their related entities or subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement.
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4.5 SOUND DESIGNS BOARD OF DIRECTORS AND OFFICERS. All of the officers
and directors of Sound Designs shall resign as of the Closing Date and the
following persons shall be appointed as officers and directors of Sound Designs
as of such date:
Directors: Max L. Golden
Mack Lawrence
John Reynolds
Officers: Max L. Golden, President and Chief Executive Officer
Rita Hunter - Vice President
Martha Scroggins - Secretary
4.6 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense. The Management Shareholders specifically agree to pay
all liabilities of Sound Designs which arose prior to the Closing Date.
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
receipt or filing, prior to the Closing Date, of all authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity, the failure to obtain which
would have a Material Adverse Effect on Plus or any Sound Designs Entity, taken
as a whole, shall have been filed, occurred or been obtained.
5.2 CONDITIONS OF OBLIGATIONS OF SOUND DESIGNS. The obligations of
Sound Designs and SD Acquisition to effect the Merger are subject to the
satisfaction of the following conditions on or before the Closing Date unless
waived by Sound Design:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Plus set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of
an earlier date) as of the Closing Date as though made on and as of the
Closing Date, except as otherwise contemplated by this Agreement, and
Sound Designs shall have received a certificate signed on behalf of
Plus by the President of Plus to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PLUS. Plus shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior the Closing Date, and
Sound Designs shall have received a certificate signed on behalf of
Plus by the President to such effect.
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(c) OPINION OF COUNSEL FOR PLUS. Sound Designs shall have
received an opinion dated the Closing Date of Patton Boggs, counsel for
Plus, in substantially the form attached hereto as Exhibit 5.2(c).
(d) CLOSING DOCUMENTS. Sound Designs shall have received such
certificates and other closing documents as counsel for Sound Designs
shall reasonably request.
(e) CONSENTS. Plus shall have obtained the consent or approval
of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or
credit agreement, note, mortgage, indenture, lease or other agreement
or instrument, except those for which failure to obtain such consents
and approvals would not, in the reasonable opinion of Sound Designs,
individually or in the aggregate, have a material adverse effect on
Plus and its subsidiaries and related entities taken as a whole upon
the consummation of the transactions contemplated hereby.
(f) BUSINESS REVIEW. Sound Designs shall have completed to its
reasonable satisfaction a review of the business, operations, finances,
assets and liabilities of Plus.
(g) PENDING LITIGATION. There shall not be any litigation or
other proceeding pending or threatened to restrain or invalidate the
transactions contemplated by this Agreement, which, in the sole
reasonable judgment of Sound Designs, made in good faith, would make
the consummation of the Merger imprudent. In addition, there shall not
be any other litigation or other proceeding pending or threatened
against Plus, the consequences of which, in the judgment of Sound
Designs, could be materially adverse to Plus.
(h) SHAREHOLDER APPROVAL. Plus shall have received the
approval of its shareholders regarding the Merger, and Sound Designs
shall have received satisfactory evidence of such fact.
5.3 CONDITIONS OF OBLIGATIONS OF PLUS. The obligation of Plus to effect
the Merger is subject to the satisfaction of the following conditions on or
before the Closing Date unless waived by Plus:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sound Designs set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement
and (except to the extent such representations speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing
Date, except as otherwise contemplated by this Agreement, Plus shall
have received a certificate signed on behalf of Sound Designs by the
Chief Executive Officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF SOUND DESIGNS AND SD
ACQUISITION. Sound Designs shall have performed in all material
respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Plus shall have
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received a certificate signed on behalf of Sound Designs by the Chief
Executive Officer to such effect.
(c) OPINION OF COUNSEL FOR SOUND DESIGNS. Plus shall have
received an opinion dated the Closing Date of Kevin S. Woltjen, P.C.,
counsel for Sound Designs, in substantially the form attached hereto as
Exhibit 5.3(c).
(d) CLOSING DOCUMENTS. Plus shall have received such
certificates and other closing documents as counsel for Plus shall
reasonably request.
(e) CONSENTS. Sound Designs shall have obtained the consent or
approval of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby under any loan or
credit agreement, note, mortgage, indenture, lease or other agreement
or instrument, except those for which failure to obtain such consents
and approvals would not, in the reasonable opinion of Plus,
individually or in the aggregate, have a material adverse effect on
Sound Designs and its subsidiaries and related entities, taken as a
whole upon the consummation of the transactions contemplated hereby.
(f) BUSINESS REVIEW. Plus shall have completed to its
reasonable satisfaction a review of the business, operations, finances,
assets and liabilities of Sound Designs and the Sound Designs Entities.
(g) PENDING LITIGATION. There shall not be any litigation or
other proceeding pending or threatened to restrain or invalidate the
transactions contemplated by this Agreement, which, in the sole
reasonable judgment of Plus, made in good faith, would make the
consummation of the Merger imprudent. In addition, there shall not be
any other litigation or other proceeding pending or threatened against
Sound Designs or any Sound Designs Entity, the consequences of which,
in the judgment of Plus, could be materially adverse to Sound Designs
or any Sound Designs Entity.
(h) RESIGNATION OF DIRECTORS. Each director of Sound Designs
shall have delivered his written resignation as a director of Sound
Designs effective as of the Closing Date of the Merger.
(i) STANDSTILL AGREEMENTS. Plus shall have received Standstill
Agreements, in the form of Exhibit 5.3(i) attached hereto, from each of
Barry Wosk and Marvin Wosk.
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ARTICLE VI
TERMINATION AND AMENDMENT
6.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of Sound Designs and Plus;
(b) by either Sound Designs or Plus if there has been a
material breach of any representation, warranty, covenant or agreement
on the part of the other set forth in this Agreement which breach has
not been cured within 5 business days following receipt by the
breaching party of notice of such breach, or if any permanent
injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
non-appealable; or
(c) by either Sound Designs or Plus if the Merger does not
become effective before March 15, 2000.
6.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Plus or Sound Designs as provided in Section 6.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party hereto. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
6.3 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, provided no
amendment shall be made which by law requires approval by the shareholders of
any party without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
6.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VII
GENERAL PROVISIONS
7.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations and warranties in this Agreement shall survive the Effective
Time.
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7.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) If to Sound Designs, to
Marvin Wosk
6436 Laburnum Street
Vancouver, British Columbia V6M 3S9
Canada
Facsimile No.: 604-681-8445
with a copy to
Kevin S. Woltjen, P.C.
900 Jackson Street, Suite 600
Dallas, Texas 75202
United States of America
Attn: Kevin S. Woltjen
Facsimile No.: 214-712-5674
(b) if to Plus, to
Plus Solutions, Inc.
14677 Midway Road, Suite 206
Addison, Texas 75001
United States of America
Attn: Max Golden, President and Chief Executive Officer
Facsimile No.: 972-687-0051
with a copy to
Patton Boggs
2001 Ross Avenue, Suite 3000
Dallas, Texas 75201
United States of America
Attn: Fred Stovall, Esq.
Facsimile No.: 214-758-1550
7.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words
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"without limitation". The phrase "made available" in this Agreement shall mean
that the information referred to has been made available if requested by the
party to whom such information is to be made available.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. This Agreement may be executed by
facsimile signature and the facsimile signature by any party shall constitute an
original in all respects.
7.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
7.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas without regard to principles of
conflicts of law. Each party hereby irrevocably submits to the jurisdiction of
any Texas state court located in Dallas County or the United States District
Courts in the Northern District of Texas in respect of any suit, action or
proceeding arising out of or relating to this Agreement.
7.7 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof or thereof to be null, void or unenforceable, or order any party to
take any action inconsistent herewith or not to take any action required herein,
the other party shall not be entitled to specific performance of such provision
or part hereof or thereof or to any other remedy, including but not limited to
money damages, for breach hereof or thereof or of any other provision of this
Agreement or part hereof or thereof as a result of such holding or order. The
finding of such court shall not affect the remedies portions hereof.
7.8 PUBLICITY. Except as otherwise required by law, so long as this
Agreement is in effect, no party shall issue or cause the publication of any
press release or other public announcement with respect to the transactions
contemplated by this Agreement without the written consent of the other party,
which consent shall not be unreasonably withheld.
7.9 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Sound Designs or Plus may assign, in its sole discretion,
any or all of its rights, interests and obligations hereunder to any direct or
indirect wholly owned subsidiary of such company. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
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7.10 COSTS. In the event a proceeding is brought to interpret or
enforce the provisions of this Agreement, whether in court, mediation,
arbitration or otherwise, the prevailing party in such action shall be entitled
to recover its costs, including reasonable attorney's fees.
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<PAGE> 23
IN WITNESS WHEREOF, this Agreement has been signed by the parties set
forth below as of the date set forth above.
SOUND DESIGNS, INC.
By: /s/ MARVIN WOSK
-------------------------------------
Marvin Wosk
Secretary
SD ACQUISITION, INC.
By: /s/ MARVIN WOSK
-------------------------------------
Marvin Wosk
Secretary
PLUS SOLUTIONS, INC.
By: /s/ MAX GOLDEN
-------------------------------------
Max Golden
President and Chief Executive Officer
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