<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SACIO, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
SACIO, INC.
c/o Nancy Davis
8320 O'Connell Road
El Cajon, CA 92021
February 18, 2000
To: Stockholders of Sacio, Inc.
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
of Sacio, Inc., a Delaware corporation ("Sacio"), to be held at the offices
of Sacio, at 8320 O'Connell Road, El Cajon, CA 92021 on Thursday, March 22,
at 1:30 p.m., Pacific Time.
At this Special Meeting, you will be asked to consider and vote upon
the approval of (1) the Merger Agreement and Plan of Reorganization dated
January 28, 2000 by and among Sacio, on the one hand, and
Freesoftwareclub.com, Inc., a Nevada corporation ("FSC"), and the
shareholders of FSC, on the other hand (the "Merger Agreement") and each of
the transactions contemplated thereby, whereby FSC will be merged with and
into Sacio (the "Merger") with Sacio as the surviving corporation (the
"Surviving Entity"); (2) the change in the name ("Name Change") of Sacio,
Inc. to Freesoftwareclub.com, Inc. ("Freesoftwarecub.com"); (3) the election
of Richard Miles, John Collins, and Rene Pardo as directors of the surviving
entity; and (4) an increase in the authorized capital stock of the surviving
entity to 100,000,000 shares of common stock, par value $0.001. The Merger
Agreement calls for the issuance of 13,158,000 shares of Sacio common stock,
par value $0.001 per share, in exchange for all the issued and outstanding
common stock, $0.001 par value, of FSC. The proposed Name Change for Sacio
will provide association of the post-merger company with the name of FSC's
business name and website address. The Merger Agreement and the transactions
contemplated thereby and the Name Change are planned to be concluded as soon
as possible after approval by the shareholders of Sacio.
FSC is a development-stage company that has developed an internet
business strategy to offer "name-brand" software for free and/or at large
discounts to its club members. The Merger Agreement, the Merger, the Name
Change, and the increase in the authorized capital of the corporation have
been previously approved by the Board of Directors of Sacio. A copy of the
Merger Agreement is attached hereto as Exhibit A.
Sacio is a publicly traded company, listed on the NASDAQ Over-the-
Counter Bulletin Board (the "OTC Bulletin Board"). It is subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, is
required to file periodic reports with the Securities and Exchange
Commission. As of the close of the market on January 31, 2000, Sacio's
common stock traded on the OTC Bulletin Board at a high and low price of
$3.02 and $2.00, respectively.
<PAGE>
The Board of Directors of Sacio has carefully reviewed and considered
the terms and conditions of the proposed Merger, Merger Agreement, the Name
Change, and the increase in the authorized capital of the corporation. The
Board of Directors of Sacio has unanimously approved the Merger, the Merger
Agreement, the proposed Name Change, and the increase in the authorized
capital, and recommends that the stockholders of Sacio vote FOR approval of
the Merger, the Merger Agreement, the Name Change, the proposed directors,
and the increase in the authorized capital.
While the Board of Directors of Sacio is confident that new management
can incorporate the business assets and operating plans of FSC into Sacio,
there can be no assurance that Sacio will in fact be able to do so.
Therefore, Sacio shareholders are urged to read the enclosed Proxy Statement
and the Merger Agreement, attached as Exhibit A, and to carefully consider
the description of the prospective business, including the information under
"Risks of Sacio's Prospective Business" in the Proxy Statement.
Enclosed are a Notice of Special Meeting, Consent and Waiver of Notice,
a Proxy Statement, and a proxy card for the Special Meeting. Please give
this information your careful attention. It provides a detailed description
of the proposed transactions. The affirmative vote of the holders of a
majority of the shares of Sacio Common Stock entitled to vote at the Special
Meeting is required for approval of the Merger, the Merger Agreement, the
Name Change, the election of the proposed directors, and the increase in the
authorized capital. A majority vote of the shareholders is required for
approval by the Consent and Waiver of Notice. Accordingly, your vote is
important, no matter how large or how small your holdings.
In view of the importance of the action to be taken, we urge you to
complete, sign, and date the enclosed proxy card and to return it promptly in
the enclosed envelope, whether or not you plan to attend the Special Meeting.
To expedite the transaction, we request that you sign and return the
enclosed "Consent and Waiver of Notice" at your earliest convenience. Sending
in your proxy now will not interfere with your right to attend the Special
Meeting or to vote your shares personally at the Special Meeting if you wish
to do so. However, the merger will be approved upon receipt by the Company of
the Consent and Waiver of Notice signed by shareholders representing a
majority of the issued and outstanding shares and, accordingly, no
shareholders meeting would be held.
Sincerely,
/s/Nancy Davis
--------------
Nancy Davis, President
<PAGE>
SACIO, INC.
c/o Nancy Davis
8320 O'Connell Road
El Cajon, CA 92021
----------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF
SACIO, INC.
TO BE HELD ON MARCH 22, 2000
----------------------------------
February 18, 1999
To the Stockholders of Sacio, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Sacio,
Inc., a Delaware corporation ("Sacio") will be held at the offices of Sacio,
at 8320 O'Connell Road, El Cajon, CA 92021, on Thursday, March 22, 2000, at
1:30 p.m. Pacific Time, for the following purposes:
1. For stockholders of Sacio to consider and vote upon a proposal to
approve the Merger and Merger Agreement and Plan of Reorganization, dated
January 28, 2000 (the "Merger Agreement") by and among Sacio, on the one
hand, and Freesoftwareclub.com, Inc., a Nevada corporation ("FSC"), and the
shareholders of FSC, on the other hand (the "Merger Agreement"), whereby FSC
will be merged with and into Sacio (the "Merger") with Sacio as the surviving
corporation (the "Surviving Entity") on the terms and conditions set forth in
the Merger Agreement, a copy of which is attached to the Proxy Statement as
Exhibit A. The Merger Agreement calls for the issuance of 13,158,000 shares
of Sacio common stock, par value $0.001 per share, in exchange for all the
issued and outstanding common stock, $0.001 par value, of FSC;
2. For stockholders of Sacio to consider and vote upon a proposal to
approve the change in the name ("Name Change") of Sacio to
"Freesoftwareclub.com, Inc." The proposed name change for Sacio will provide
association of the post-merger company with FSC's business name and website
address;
3. For stockholders to consider and vote upon a proposal to elect
Richard Miles, John Collins, and Rene Pardo as the directors of the surviving
entity;
4. For stockholders to consider and vote to upon a proposal to
approve of the increase in the authorized capital stock of the corporation to
100,000,000 common shares, par value $0.001; and,
5. To transact such other business as may properly come before the
Special Meeting of Stockholders of Sacio, or any adjournment thereof.
<PAGE>
Only stockholders of record at the close of business on January 28,
2000, are entitled to receive notice of and to vote at the Special Meeting or
any adjournments thereof. Approval of the Merger, the Merger Agreement and
the transactions contemplated thereby, the Name Change, the election of the
proposed directors, and the increase in the authorized capital stock requires
the affirmative vote of the holders of a majority of the shares of Sacio
Common Stock entitled to vote at the Special Meeting of Stockholders of
Sacio.
Approval of the transaction by way of the Consent and Waiver of Notice
requires approval by a majority of the shareholders.
Appraisal Rights for Plan of Exchange. Stockholders may be entitled to
assert Appraisal rights under Delaware Corporate Code section 262. Please
see Exhibit B, which sets forth the Delaware Corporate Code (section 262)
applicable to Appraisal Rights.
THE BOARD OF DIRECTORS OF SACIO RECOMMENDS THAT YOU VOTE FOR APPROVAL
OF THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, THE NAME CHANGE, THE PROPOSED DIRECTORS, AND THE INCREASE IN THE
AUTHORIZED CAPITAL STOCK.
By Order of the Board of Directors of Sacio, Inc.,
/s/ Nancy Davis
---------------
Nancy Davis
President of Sacio
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. IF
YOU DO ATTEND THE SPECIAL MEETING, YOU MAY THEN WITHDRAW YOUR PROXY IF YOU
WISH. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
TO EXPEDITE THIS TRANSACTION, WE REQUEST THAT YOU SIGN AND RETURN THE
ENCLOSED "CONSENT AND WAIVER OF NOTICE" AT YOUR EARLIEST CONVENIENCE. THE
CONSENT AND WAIVER MAY NOT BE REVOKED. IF THE MERGE IS APPROVED BY WAY OF THE
"CONSENT AND WAIVER OF NOTICE" NO SHAREHOLDER MEETING WILL BE HELD.
<PAGE>
PROXY
SACIO, INC.
THIS IS YOUR PROXY CARD
SACIO, INC.
c/o Nancy Davis
8320 O'Connell Road
El Cajon, CA 92021
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Nancy Davis and Stephen Huntley, or
either of them, as proxy, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on this proxy,
all the shares of common stock of Sacio, Inc. held by the undersigned at the
Special Meeting of Stockholders to be held on March 22, 2000 or any
adjournment thereof.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made,
this proxy will be voted for approval of Proposals 1 through 5.
1. For stockholders of Sacio to consider and vote upon a proposal to
approve the Merger and Merger Agreement and Plan of Reorganization, dated
January 28, 2000 (the "Merger Agreement") by and among Sacio, on the one
hand, and Freesoftwareclub.com, Inc., a Nevada corporation ("FSC"), and the
shareholders of FSC, on the other hand (the "Merger Agreement") and each of
the transactions contemplated thereby, whereby FSC will be merged with and
into Sacio (the "Merger") with Sacio as the surviving corporation (the
"Surviving Entity") on the terms and conditions set forth in the Merger
Agreement, a copy of which is attached to the Proxy Statement as Exhibit A.
The Merger Agreement calls for the issuance of 13,158,000 shares of Sacio
common stock, par value $0.001 per share, in exchange for all the issued and
outstanding common stock, $0.001 par value, of FSC.
FOR WITHHOLD AUTHORITY
------- -------
2. For stockholders of Sacio to consider and vote upon a proposal to
approve the change in the name ("Name Change") of Sacio to
"Freesoftwareclub.com, Inc." The proposed name change for Sacio will provide
association of the post-merger company with FSC's business name and website
address.
FOR WITHHOLD AUTHORITY
------- -------
3. For stockholders to consider and vote upon a proposal to elect
Richard Miles, John Collins, and Rene Pardo as the directors of the surviving
entity.
FOR WITHHOLD AUTHORITY
------- -------
<PAGE>
4. For Stockholders to consider and vote upon a proposal to increase
the authorized capital stock of the corporation to 100,000,000 common shares,
par value $0.001.
FOR WITHHOLD AUTHORITY
------- -------
5. Transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
FOR WITHHOLD AUTHORITY
------- -------
Dated:
----------- -------------------------
Signature
------------------------
Print Name(s)
-------------------------
Signature if held jointly
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD TO THE COMPANY:
SACIO, INC.
c/o Nancy Davis
8320 O'Connell Road
El Cajon, CA 92021
AS SOON AS POSSIBLE. THANK YOU.
<PAGE>
CONSENT AND WAIVER OF NOTICE
SACIO, INC.
THIS IS A CONSENT AND WAIVER OF YOUR NOTICE OF MEETING
SACIO, INC.
c/o Nancy Davis
8320 O'Connell Road
El Cajon, CA 92021
THIS CONSENT AND WAIVER OF NOTICE IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby Consents to the recommendation of the Board of
Sacio as outlined in Proxy dated February 18, 2000 and waives notice to the
Special Meeting of Stockholders to be held on March 22, 2000.
This Consent and Waiver of Notice, when properly executed, will approve
the four proposals recommended by the Sacio Board in the Proxy Statement
dated February 18 and provide shareholder approval of the merger and other
proxy items prior to the scheduled date of the Special Meeting of
Stockholders. If stockholders representing a majority of the common shares
sign and return a Consent and Waiver of Notice, the merger will be approved
at the date upon which a majority is received. If a majority of the
stockholders do not sign and return their Consent and Waiver of Notice to the
Company, the vote will be taken at the scheduled Special Meeting of the
Stockholders.
I hereby Consent and Waive my right to Notice of the Special Meeting of
Stockholders scheduled for March 22, 2000.
Dated:
----------- -------------------------
Signature
------------------------
Print Name(s)
-------------------------
Signature if held jointly
PLEASE SIGN, DATE AND RETURN YOUR CONSENT AND WAIVER OF NOTICE TO THE
COMPANY:
SACIO, INC.
c/o Nancy Davis
8320 O'Connell Road
El Cajon, CA 92021
AS SOON AS POSSIBLE. THANK YOU.
<PAGE>
SACIO, INC.
c/o Nancy Davis
8320 O'Connell Road
El Cajon, CA 92021
PROXY STATEMENT
For Special Meeting of Stockholders of Sacio, Inc.
to be Held on March 22, 2000
This Proxy Statement is being furnished to the stockholders of Sacio,
Inc., a Delaware corporation ("Sacio"), in connection with the solicitation
of proxies by the Board of Directors of Sacio from holders of outstanding
shares of common stock of Sacio ("Sacio Common Stock") for use at the Special
Meeting of Sacio Stockholders.
The purpose of the Sacio Special Meeting is to consider and vote upon
the following:
1. For stockholders of Sacio to consider and vote upon a proposal to
approve the Merger and Merger Agreement and Plan of Reorganization, dated
January 28, 2000 (the "Merger Agreement") by and among Sacio, on the one
hand, and Freesoftwareclub.com, Inc., a Nevada corporation ("FSC"), and the
shareholders of FSC, on the other hand (the "Merger Agreement"), whereby FSC
will be merged with and into Sacio (the "Merger") with Sacio as the surviving
corporation (the "Surviving Entity") on the terms and conditions set forth in
the Merger Agreement, a copy of which is attached to the Proxy Statement as
Exhibit A. The Merger Agreement calls for the issuance of 13,158,000 shares
of Sacio common stock, par value $0.001 per share, in exchange for all the
issued and outstanding common stock, $0.001 par value, of FSC;
2. For stockholders of Sacio to consider and vote upon a proposal to
approve the change in the name ("Name Change") of Sacio to
"Freesoftwareclub.com, Inc." The proposed name change for Sacio will provide
association of the post-merger company with FSC's business name and website
address;
3. For stockholders to consider and vote upon a proposal to elect
Richard Miles, John Collins, and Rene Pardo as the directors of the surviving
entity;
4. For stockholders to consider and vote to upon a proposal to
approve of the increase in the authorized capital stock of the corporation to
100,000,000 common shares, par value $0.001; and,
5. To transact such other business as may properly come before the
Special Meeting of Stockholders of Sacio, or any adjournment thereof.
-1-
<PAGE>
All information contained in this Proxy Statement pertaining to Sacio
has been supplied by Sacio. All information contained in this Proxy
Statement pertaining to Freesoftwareclub.com, Inc. ("FSC") has been supplied
by FSC. No person is authorized to give any information or to make any
representations other than those contained herein and, if given or made, such
information or representations must not be relied upon as having been
authorized. The delivery of this document shall under no circumstances
create an implication that there has been no change in the affairs of Sacio
or FSC since the date hereof or that the information herein is correct as of
any time subsequent to its date.
This Proxy Statement, the accompanying Notice of Meeting and the other
documents enclosed herewith are dated January 31, 2000 and are being first
mailed to the stockholders of Sacio on or about March 1, 2000.
THE ACQUISITION AGREEMENTS, THE PLAN OF EXCHANGE, AND THE SPECIAL MEETING
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement, and additional information concerning the
Special Meeting. It is not a complete description of all material
information regarding Sacio or FSC and the matters to be considered at the
Special Meeting and is qualified in all respects by the information appearing
elsewhere in this Proxy Statement and the Exhibits hereto. A copy of the
Merger Agreement is set forth as Exhibit A to this Proxy Statement and
reference is made thereto for a complete description of the terms of such
document.
The Special Meeting
The Special Meeting will be held at 1:30 p.m., local time, on
Thursday, March 22, 2000, at the office of Sacio, at 8320 O'Connell Road,
El Cajon, CA 92021. The purpose of the Special Meeting of Stockholders of
Sacio is to consider and vote upon approval of the Merger, the Merger
Agreement and the transactions contemplated thereby, the Name Change, the
proposed directors, and the increase in the authorized capital stock of the
corporation. The Board of Directors of Sacio has fixed the close of business
on January 28, 2000, as the record date for determining stockholders entitled
to vote at the Special Meeting (the "Record Date"). As of such date, there
were 3,289,500 shares of common stock, par value $0.001, of Sacio issued and
outstanding and therefore entitled to be voted at the Special Meeting, and
there were approximately 41 stockholders, of record or through registered
clearing agents.
To expedite the transaction, we request that you sign and return the
enclosed "Consent and Waiver of Notice" at your earliest convenience. Sending
in your proxy now will not interfere with your right to attend the Special
Meeting or to vote your shares personally at the Special Meeting if you wish
to do so. However, the merger will be approved upon receipt by the Company of
the Consent and Waiver of Notice signed by shareholders representing a
majority of the issued and outstanding shares and, accordingly, no
shareholders meeting would be held.
-2-
<PAGE>
The presence, in person or by proxy, of holders of a majority of the
issued and outstanding shares of Sacio Common Stock entitled to vote at the
Special Meeting is necessary to constitute a quorum at such Special Meeting.
The enclosed proxy is solicited on behalf of the Board of Directors of
Sacio for use in connection with the Special Meeting and any adjournment or
adjournments thereof. Holders of Sacio Common Stock are requested to
complete, date, and sign the accompanying proxy and return it promptly to
Sacio in the enclosed envelope. Failure to return a properly executed proxy
or to vote at the Special Meeting will have the same effect as a vote against
approval of the Merger, the Merger Agreement and the transactions
contemplated thereby, the Name Change, the nominees for directors, the
increase in the authorized capital stock, and any other proposal to be
considered at the Special Meeting.
A stockholder who has executed and delivered a proxy may revoke it at
any time before it is voted by giving a later written proxy or by giving
written revocation to Nancy Davis or Stephen Huntley, directors of Sacio,
provided such later proxy or revocation is actually received by the company
before the vote of the stockholders, or by voting in person at the Special
Meeting. Any stockholder attending the Special Meeting may vote in person
whether or not a proxy has been previously filed. The shares represented by
all properly executed proxies received in time for the Special Meeting,
unless revoked, will be voted in accordance with the instructions therein.
If instructions are not given, properly executed proxies received will be
voted FOR approval of the applicable agreements and any other proposal to be
considered at the applicable Special Meeting.
Sacio's management is not aware of any business to be acted upon at the
Special Meeting other than approval of the proposal to approve the Merger,
the Merger Agreement and the transactions contemplated thereby, the Name
Change, the election of the directors, and the increase in the authorized
capital stock. If other matters are properly brought before the Special
Meeting, or any adjournment thereof, the enclosed proxy, if properly signed,
dated and returned, will be voted in accordance with the recommendation of
the Board of Sacio, or, if there is no such recommendation, in the discretion
of the individuals named as proxies therein.
Background of and Reasons for the Merger and Name Change; Recommendation of
Board of Directors.
Sacio, Inc. was incorporated in Delaware on May 31, 1994. The Company
was formed in order to develop a chain of English Pub theme-based restaurants
and bars tentatively called "The Old Coach Inn", starting with an initial Pub
in the downtown redevelopment area of San Diego, California. Management used
the intervening years to study existing British restaurant and bar operations
in Southern California as the downtown redevelopment of the "Gas Lamp" area
of San Diego grew to the point where sufficient restaurant traffic existed to
support a proposed English Pub restaurant. During 1996 the Company raised
funds necessary to pay the Company's state fees and taxes by the sale of
stock to investors.
-3-
<PAGE>
Beginning in 1998, Management determined the Company should complete
the development of its neighborhood English Pub restaurant and bar.
Management's decision was based primarily on the following factors; 1) the
success of downtown redevelopment including a new ballpark district, 2) the
popularity of theme-based restaurants and patron-involved music (such as
Karaoke), and 3) the resurgence of the San Diego economy. In January of 1999
the board of directors voted to seek capital and began development of the
Company's business plan.
While the Company had initiated preliminary discussions with restaurant
design and construction companies and restaurant suppliers, it had no firm
commitments or contracts for services and supplies and could not initiate
firm negotiations until such a time as the Company had sufficient funding.
Management's estimate for total construction build-out for a 5,000 square
feet of Pub space was approximately $500,000, food and beverage inventory was
estimated at approximately $25,000, and a full liquor license was estimated
to cost approximately $50,000 in the San Diego area. Management anticipated
initial implementation of its business plan to begin in the 4th quarter of
1999.
To date, management has been unsuccessful in raising the capital to
fund its first operating Pub. The restaurant and bar industry is highly
competitive with respect to price, service, quality and location, and as a
result, has a high failure rate. In addition, there are numerous well-
established competitors, including national, regional and local chains,
possessing substantially greater financial, marketing, personnel and other
resources than the Company. This risky and competitive environment, along
with the fact the Company does not have an operating history seem to be the
most dominant reasons the Company has been unable to raise the capital it
requires.
During January, Sacio was contacted by management of
Freesoftwareclub.com regarding a proposed merger. FSC had developed an
internet business strategy to offer "name-brand" software for free and/or at
large discounts to its club members and had obtained financing commitments
contingent of FSC merging with a publicly traded entity to provide a public
valuation for the company and increased exposure.
In the Sacio Board's view, the proposed merger with FSC would allow
Sacio to divest itself of the development of a national chain English style
pubs, which it has been unable to fund, and to acquire another operating
business that has acquired funding commitments for developing its business.
This planned Merger, if successful, is meant to provide Sacio's stockholders
with the potential for, although not the assurance of, an increase in the
value of their shares at some time in the future without additional
investment on their part.
-4-
<PAGE>
The Merger. Sacio proposes to enter into a Merger Agreement with FSC.
The Merger Agreement provides that FSC will be merged with and into Sacio,
and as consideration therefore, all of the issued and outstanding shares of
the FSC capital stock will be converted into an aggregate of 13,158,000
shares of the capital stock, $0.001 par value, of Sacio. Sacio will be the
surviving corporation of the merger and will subsequently change its name to
Freesoftwareclub.com, Inc. Immediately prior to the Closing of the Merger,
Sacio will have 3,289,500 common shares issued and outstanding. Upon the
Closing of the Merger Agreement and concurrent with the authorization of the
13,158,000 shares of the common stock, $0.001 par value, of Sacio to be
issued to the shareholders of FSC, there shall be a total of 16,447,5000
shares of common issued and outstanding in the post-merger entity.
The following table shows the number of issued and outstanding shares
of common stock, $0.001 par value, of Sacio Pre- Proposed Merger and Post-
Proposed Merger.
Shareholder # Shares Held # Shares Held
Pre-Merger Post-Merger
- ----------- ---------- -----------
Current Sacio Shareholders(1) 3,289,500 3,289,500
Richard Miles(2) -0- 4,144,770
John Collins(2) -0- 2,763,180
Rene Pardo(2) -0- 4,934,250
EMJ DataSystems(3) -0- 1,315,800
TOTAL 3,289,500 16,447,500
(1) Current Shareholders of Sacio. The officers and directors of Sacio
cancelled all beneficially owned shares in December, 1999.
(2) Current Officers and/or Directors of FSC, Proposed Officers and/or
Directors of Sacio, Post-Merger.
(3) Current Shareholder of FSC.
Additional terms and conditions of the Merger are set forth below and
in the Merger Agreement, which is attached as Exhibit A. Shareholders of
Sacio are urged to review these items carefully.
There are certain conditions to the closing of the Merger before the
Merger will be consummated, including the completion of due diligence to each
party's satisfaction and the affirmative vote of the shareholders of both
companies, and the transaction is not free from risk. There can be no
assurances that the Merger will be approved, or, if it is approved, that the
Merger will be closed.
If the Merger and Name Change are approved, Sacio will amend its
articles of incorporation to change its name to Freesoftwareclub.com, Inc.,
and remain a Delaware corporation. If the Merger is not approved, or if the
Merger is not closed for whatever reason, Sacio may continue to look for
other operating businesses to acquire.
-5-
<PAGE>
Vote Required. Approval of the Merger, the Merger Agreement and the
transactions contemplated thereby, the Name Change, the election of the
directors, and the increase in the capital stock will require the affirmative
vote of the holders of a majority of the outstanding shares of Sacio Common
Stock. The directors and officers of Sacio beneficially owned as of the
Record Date and are entitled to vote -0- of the total 3,289,500 issued and
outstanding shares of Sacio Common Stock at the Special Meeting. Thus
directors and officers shares represent 0% of the outstanding shares entitled
to be voted. A failure to return the enclosed proxy or a vote to abstain
will have the same effect as a vote against approval of the Plan of Exchange.
The consummation of the Merger also requires the approval of the Board
of Directors and a majority of the issued and outstanding shares of FSC. As
of the date of this Proxy Statement, the FSC Board and Shareholders have
approved the Merger, the Merger Agreement, and the transactions contemplated
thereby.
Appraisal Rights for Plan of Exchange. Under Delaware law (Corporate
Code, section 262), Sacio stockholders may have the right to dissent from the
Plan of Merger and receive cash in respect of the "fair value" of their
shares of Sacio Common Stock. Please see Exhibit B, which sets forth the
Delaware Corporate Code (section 262) applicable to Appraisal Rights.
Expenses and Fees. The Merger Agreement provides that the surviving
entity will bear and pay all costs and expenses incurred by the parties in
connection with the transactions contemplated by the Merger and the Merger
Agreement, including fees and expenses of their respective accountants and
counsel, mailing fees, and transfer agent and related fees. It is expected
that the total of such expenses and fees will be approximately $25,000.
The Proposed Directors. The backgrounds of the proposed directors are
as follows:
Richard Miles
Richard is President of Re:Launch, a computer channel integrated
marketing and advertising firm located in Berkeley, California. Under
Richard's direction and leadership, Re:Launch has become one of the
industry's top marketing and sales service agencies.
1990 - present: Founder and President of Re:Launch. Created sales and
marketing consulting firm specializing in technology products. Self-funded
company enjoys revenues of approx. $3,000,000 per year. Marketing and sales
manager behind more than 20 best-selling products. Creative genius behind
the industry's longest running profitable direct mail program. Consultant to
over 50 firms including IBM, Computer Associates, Hitachi, Memorex, Connectix
and many others. Well-respected within the industry as a speaker, columnist
and analyst. Primary author of "The Software Channel Sales Guidebook" used by
over 200 firms including Microsoft, Intuit, IBM, Memorex, and many others.
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1986 - 1990 Vice President, Sales & Marketing, Polaroid Magnetics.
Responsible for Polaroid's floppy disk and computer retail channel business.
Responsible for helping to manage a commodity business from loss to profit.
while undergoing intense competition from low cost Far Eastern competitors.
1984 - 1986 Vice President, Sales & Strategic Planning, Schlage
Electronics. Responsible for helping keep this $50MM company in #1 industry
position, introducing new technologies into a VAR / installing dealer network
worldwide. Reported to Division Vice-President for Business Development,
assisting in evaluating new technologies and new acquisitions for this
division of worldwide Ingersoll-Rand.
1980 -1984 President, Adaptive Controls, Inc. Chosen by the Board of
Directors to take over operations for this developer of integrated
electronics controls systems for high-rise office building. Responsible for
increasing sales to premier accounts and nationwide developers, as well as
continuing operations with very tight cash flow. Turned around unprofitable
operations and delivered profits. Negotiated sale of the business to
Ingersoll-Rand, managed the merger of the business into Schlage Electronics
division.
John Collins
John Collins joined Re:Launch as a Senior partner in 1991. He was
General Manager for the Re:Launch Channel Sales division and was responsible
for business development, contract negotiation, and customer service with
software publishers and other vendors. He brings 15 years of sales and
marketing leadership to Re:Launch and spearheaded Re:Launch's successful
drive to establish itself as the premiere sales organization for consumer
products in the Computer Retail segment.
As a 10-year computer industry veteran specializing in selling and marketing
computer software, John directed the retail development efforts for over 30
different software developers and publishers as clients, including Computer
Associates, Memorex, Bungie, Micrologic, Software Publishing Corp, and many
others. His expertise, relationships, and knowledge of the computer software
industry has resulted in significant sales growth and success for many
Re:Launch clients.
Prior to joining Re:Launch, John was Regional Sales Manager for Polaroid's
Computer Products division and Product Marketing Manager for Schlage
Electronics. At each position he quickly established profitability by
designing and executing effective marketing plans and by leveraging
distribution channels and solid relationships. John also contributed to the
Software Channel Sales Guidebook as the author of the Selling Skills section.
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John has developed great relationships with software distributors including
Ingram Micro, Tech Data, Merisel, and Navarre, GT Interactive. He also has
many contacts with prominent software vendors throughout North America.
Rene Pardo
Rene is currently the Vice President for Business Development for
Online Direct, and is the CEO of NetProfitEtc., Inc. He was the founder
of Lanpar Technologies, and took it to $25 million revenue, going public on
Toronto Stock Exchange raising $13 million.
In 1994 Rene joined Aztech New Media, a software anthology publisher
which was just starting to sell shareware. He brought in financing and
shareholders, in different stages, and established international sales.
Revenues have grown to approx. $10 million Canadian, funded with little
capital.
In Sept. 1997, Rene established and raised financing for ComCentral
Inc. to continue the development of proprietary "Script Agent" software for
enabling the rapid customization and browsing of CD-ROMs (clients include
Compaq, Ziff Davis); and to build internet community tools (chat, homepages,
instant messaging, polling, forums, e-cards etc) to enhance electronic direct
marketing.
Management After the Plan of Merger. Immediately before and
immediately after the closing of the Merger Agreement, assuming the nominated
directors are approved and the Merger is closed, the management of Sacio will
be as follows:
Sacio Pre-Merger:
Name Age Position
---- --- --------
Nancy Davis 38 Director, President, Secretary
Stephen Huntley 45 Director, Treasurer
Sacio Post-Merger:
Name Age Position
---- --- --------
Richard Miles 45 Director, Secretary and
Treasurer
John Collins 38 Director, President
Rene Pardo 52 Director
It is anticipated that additional directors will be appointed by the
Board as the appropriate candidates are identified.
Sacio's Employees and Facilities. Sacio currently has 0 (zero)
employees. Immediately after the closing of the proposed transactions, the
surviving corporation will have 2 (two) employees.
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Sacio currently leases no office space. Immediately after the closing
of the proposed transaction, the surviving entity expects to sublease
approximately 1,000 square feet of office space from Re:Launch, located at
600 Bancroft Way, Berkeley, CA 94710.
Management Compensation. Sacio currently has no management compensation
agreements in place. The Merger Agreement calls for compensation agreements
to be signed between the post-acquisition company on the one hand, and
John Collins and Marilson Campos, on the other hand. There will be no
compensation agreement in place with Richard Miles. The required terms of
such agreements as follows:
John Collins shall be offered an employment agreement with a minimum
monthly salary of $9,500 for a duration of 3 years that shall possess
mutually suitable non-competition and non-disclosure provisions.
Marilson Campos shall be offered an employment agreement with a minimum
monthly salary of $7,500 per month for a duration of 3 years that shall
possess mutually suitable non-competition and non-disclosure provisions. Mr.
Campos will be the Chief Technical Officer.
Selected Financial Data:
The following tables present for selected historical financial data of
Sacio. This information is based on the financial statements of Sacio. The
financial statements of Sacio, included as Exhibit C hereto, should be read
in conjunction herewith.
Sacio Selected Historical Financial Data
Year ended December 31,
1999 1998
------ ------
Statement of Operations Data -
Net Revenues $ 0 $ 0
Total Costs and Expenses 424 0
Net Loss from Operations 0 0
Net Loss $ (424) $ 0
Balance Sheet Data -
Total Assets $ 15 $ 4,300
Total Liabilities 0 0
Total Stockholders' Equity (deficit) 15 4,300
Total Liabilities and Stockholders' Equity $ 15 $ 4,300
The following tables present for selected historical financial data of FSC.
This information is based on the financial statements of FSC. The financial
statements of FSC, included as Exhibit D hereto, should be read in
conjunction herewith.
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FSC Selected Historical Financial Data
Year ended December 31,
1999
Statement of Operations Data - -------
Net Revenues $ 0
Total Costs and Expenses 200,373
Net Loss from Operations 0
Net Loss $ (200,373)
Balance Sheet Data -
Total Assets $ 24,358
Total Liabilities 99,973
Total Stockholders' Equity (deficit) (75,615)
Total Liabilities and Stockholders' Equity $ 24,358
STOCK OWNERSHIP OF SACIO AND FSC
Sacio's Current Ownership:
The following table sets forth information regarding the beneficial
ownership of Sacio at the date hereof.
Name Shares Percentage
- ----------- ------ ----------
Nancy Davis* -0- 0%
Stephen Huntley* -0- 0%
Other 3,289,500 100.0%
Total 3,289,500 100.0%
* Officers and Directors of Sacio.
FSC's Current Ownership:
FSC currently has 10,000,000 shares of common stock issued and
outstanding. Each share of FSC common stock will be exchanged for 1.3158
shares of Sacio common stock. The following table sets forth information on
the stock ownership of the Officers, Directors and Affiliates of FSC at the
date hereof and the corresponding number of shares of Sacio stock that will
be held at the Close of the Merger.
FSC SHAREHOLDER # FSC SHARES OWNED # OF SACIO SHARES
TO BE EXCHANGED
- --------------- ------------------ -----------------
Richard Miles(1) 3,150,000 4,144,770
John Collins(2) 2,100,000 2,763,180
Net Profits, Etc.(3) 3,750,000 4,934,250
EMJ DataSystems 1,000,000 1,315,800
TOTAL 10,000,000 13,158,000
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(1) Mr. Miles is the President and a Director of FSC.
(2) Mr. Collins is the Vice President and a Director of FSC.
(3) Net Profits, Etc. is owned by Rene Pardo, who is a Director of FSC.
- -------------------
OTHER INFORMATION RELATING TO PRINCIPAL STOCKHOLDERS AND MANAGEMENT OF SACIO
Compensation of Sacio Management
The following table sets forth the compensation of Sacio management
from Sacio's inception to date: No Compensation has been paid to Sacio
Officers or Directors.
OTHER INFORMATION RELATING TO PRINCIPAL STOCKHOLDERS AND MANAGEMENT OF FSC
Management
The following are the current Directors and Executive Officers of FSC.
Richard Miles will become the Secretary and Treasurer and John Collins will
become the President of the surviving entity upon the closing of the Merger.
Name Age Position
- ------------- --- --------
Richard Miles 45 Director, President, Secretary, and
Treasurer
John Collins 38 Director, Vice President
Rene Pardo 52 Director
Compensation of FSC Management
Richard Miles and John Collins have received the following compensation
during 1999: $ 0.
DESCRIPTION OF FSC
The following information concerning FSC and its business has been
provided by FSC for inclusion in this Proxy Statement. This information is
confidential. The information contained herein does not purport to be all-
inclusive or to contain all the information that a prospective investor may
desire. This information contains statements that constitute "forward-
looking statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. Any statements that express or involve
discussions with respect to predictions, business strategy, budgets,
developments opportunities or projects, the expected timing of transactions
or other expectations, beliefs, plans, objectives, assumptions or future
events or performance are not statements of historical fact and may be
"forward-looking statements". Forward-looking statements are based on
expectations, estimates and projections at the time the statements are made
that involve a number of known and unknown risks and uncertainties which
could cause actual results or events to differ materially from those
anticipated by FSC.
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Introduction
The Free Software Club is a membership club that offers current, best selling
fully licensed software titles to members. Members pay a fee of $9.95/ month
and are eligible for one free "A" level title per month, in addition to an
extensive catalog of high quality pre-licensed "shareware" that can be
selected at no cost. The software will either be shipped to the customer on
CD-ROM discs, or if available, via digital download. Customers pay only a
small shipping and handling charge per title if the product is physically
shipped.
The Free Software Club exploits a unique opportunity that exists on Internet
that is borne out of the following three conditions:
1) Shopping online is simply a better way to acquire software. Consumers can
more thoroughly evaluate software, attain them faster, easier and often at
less cost than they in a typical brick and mortar store. As such, industry
data shows increasing sales and traffic to software-oriented websites and a
clear deceleration of buying activity at traditional retail stores.
2) Anything featured "FREE" on the internet is experiencing explosive growth
in web site traffic.
3) Lifecycles for software at retail stores are now extremely short.
Publishers and retailers alike often remove perfectly salable products from
the shelf because of high marketing costs and declining sell-through rates
that in turn, mean low or negative ROI. As a result, a plethora of high
quality content can be acquired at relatively low cost.
The Free Software Club is leveraging all of the above, in conjunction with an
aggressive marketing program to quickly capture a large membership base.
The company is now well positioned to capitalize on the opportunity as it has
accomplished the following in a few short months:
- - Built a dynamic, database driven, e-commerce enabled website, that is
prepared to handle the accelerated growth in site traffic and a deep catalog
of titles.
- - Developed back end infrastructure in conjunction with the following
service providers:
Software Development Warehouse Fulfillment Creative Services
- - Secured over 70 titles for the website catalog from Aztech New Media.
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The Market
Millions of people visit download sites looking for free software, but are
often met with a confusing mix of free, trial, demo, and shareware products.
Last week alone over 1,000,000 people downloaded a single free product from
one site. Most software available on the Internet for free is either
shareware (which requires payment later in a "try-before-you-buy" scenario),
or limited versions of commercial products ("lite" versions with less
capability). The Free Software Club will have an inventory of over 1,000
completely free titles that are available as free downloads to anyone. The
Free Software Club will offer only truly free titles to attract the user who
wants free software but wants to avoid the hassle of sifting through a
confusing array of products. These visitors will also be able to see all of
the commercial titles we offer "free" to members, and will be solicited to
join.
Key Segments
Recent industry analysis of web purchasing trends show an increasingly high
percentage of shoppers online are women. Educational studies show that
children aged 4 - 10 years jump a learning level every 4 to 5 months, while
parents typically purchase software twice a year - at Christmas and
birthdays. One of the The Free Software Club "sweet spots" are parents with
children in the home, where membership allows them to provide software for
their children on a timely basis so that the software they own does not hold
their children back. With The Free Software Club membership, the software in
the home can keep up with the advances their children make in learning.
Game software continues to be the top draw in the consumer software and will
also be prominently featured in The Free Software Club. Industry data has
shown the gamer demographic (Male, Age 18 - 34) overlaps a high percentage of
the on-line audience. And, as this segment is also made up of large body of
students, disposable income is a concern and the "FREE" will have high appeal
to this audience.
Revenue Model
The company earns revenues from the following:
1. Monthly Membership Fees
2. Shipping Charges
3. Special Member Offers
4. Affiliate Programs
5. Advertising on the website
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Membership
Projected customer acquisition is forecasted at approximately 140,000 new
customers in the first 12 months from marketing programs at an acquisition
cost of approx. $17 per customer. Additional customers are forecasted from
affiliate / OEM arrangements with other vendors. These customers are acquired
at no cost to the company, but with a discount given and a recurring rebate
back for continuing members.
Members can sign-up for one of 3 fee plan options:
a) $9.95/ month
b) $49.95/ 6 months
c) $89.95/ year.
Customers pay a $6.95 shipping and handling charge per title for tangible
product. (No fees are associated with electronic download.
Special Member offers are exclusive deals for highly popular software titles
solicited directly to the membership throughout the year via email. Titles
offered will be current "A" quality releases offered to members at discount
"exclusive" prices (e.g. Product normally sold for $50 via traditional
resellers, will be available for $29.95 to club members).
Affiliate programs, fees obtained from referral to Affiliate partners, and Ad
Banner fees will contribute a small portion of revenue beginning later in the
year.
Revenue Projections
The following results (in 000's) are forecast based on the company's fiscal
year ending December:
Fiscal Year 2000 2001
------ ------
Revenues $12,049 $56,133
Gross Margin $3,517 $25,491
Expenses $4,222 $12,597
Operating Profit -$705 $12,894
- - Valuation at the end of the first full year of operations should be in
excess of $100 million.
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<PAGE>
Conclusion
The Free Software Club has positioned itself with a marketing model that
leverages market conditions in the consumer software at retail and on-line
that will drive its membership quickly and build a recurring revenue vehicle
for growth and profit. The company has significant strategic partners and a
dedicated executive staff of industry experts in technology marketing, e-
commerce, and business.
Business Plan
The Opportunity
FreeSoftwareClub.com (FSC) offers a unique opportunity to quickly build a
profitable Internet-based business by exploiting the most pervasive
perception of the Internet - the number one source of "free stuff" and by
providing one of the most heavily pursued products on the internet -
software.
The FreeSoftwareClub is determined to be the "HBO" of Software
The FreeSoftwareClub.com essentially creates a powerful new distribution
mechanism for software. The FSC is designed to become the "HBO" of software.
We will be creating for software distribution the same model that
entertainment companies use when producing films. Film distribution starts
with theatrical release, then video release, then cable television, then
broadcast, then syndication.
Currently, software is only produced for retail (theatrical) release. A hot
title will enjoy success for a limited period of time, and as sales decline,
the publisher will either offer rebates, other incentives, or simply reduce
the price. If sales velocity cannot be maintained, the retailer will return
whatever inventory they have at no risk. As sales continue to decline, the
publisher will either continue to drop the price to keep sales velocity, or
simply allow it drop off the retail shelf. At that point, it may become
available for bundling with other titles or as a premium (bonus) offered with
other products.
What the FSC provides is a secondary source of sales (cable). By licensing
current bestsellers on an advance royalty basis, we offer publishers an
immediate guaranteed income, with no risk of return. This helps them offset
their marketing and promotion costs while the title enjoys its "theatrical"
(retail) life.
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This anticipated distribution model is similar to the book and music
business, and is the reason for the Book-of-the-Month club, Columbia Record
Club, etc. Today's John Grisham Bestseller is available in bookstores
everywhere in the "What's New" and "Bestsellers" sections at the front of the
store. It will be available as a monthly selection to Book Club members in 2
or 3 months. The publisher has a guaranteed income from the Book Club to
offset his cost of marketing and promotion, and a secondary life for the
product.
FSC club members will be always be able to see today's bestselling software,
first available via the club at distribution cost (the lowest price currently
available via online resellers like buysoft.com), but also will be able to
see the title as a "Member's Only Special Selection - Coming Soon" available
in 30 or 60 days, at approximately half that price, and then it will go into
the "Monthly Free Picks" section. After the velocity declines from members
Monthly Free Picks, it can then go into our unlimited free pick area.
FSC will also be a destination for great completely FREE Software.
The FreeSoftwareClub.com will have a non-member public access area that will
have a terrific selection of Free software available for download. Only the
best "5 Star" quality products will be listed and the only the completely
"Free"titles with no licenses or fees to pay.
Currently, other prominent sites also have free software available, but it's
often lost among a raft of shareware titles at various license fees with
disabled features or time limitations. Viewers must hunt for titles that are
both highly rated and completely free.
Viewers who browse the FSC's public access catalog will quickly discover a
highly organized catalog of high quality content that is fully enabled, and
completely Free.
The effect of this "public" area will be to allow any viewer without any
obligation to immediately become a satisfied customer. It will also give
reason for non-members and members alike to continue to return to the site to
check out what's new.
10's of millions of users download software each week. For example,
Download.com in the week ending 1/11/00 had over 3,000,000 downloads for just
it's top 50 titles. Tucows.com, another popular site had comparable numbers.
PC-Data online shows among their top 1000 sites approximately 25% have FREE
in the title name. For the week ending 1/14/00 approximately 37 million
users collectively visited these sites with 486 Million page views.
In short, the word FREE in site name builds site traffic and free
downloadable software is tremendously popular. FSC is going to leverage both
of these conditions by developing and promoting its "COMPLETELY FREE
SOFTWARE" section as the premier destination for this class of content.
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In turn, this will drive traffic for FSC's membership and other revenue
centers on the site.
Risk Factors
FSC is a newly formed venture that will be dependent on new business
strategy. The company's success will depend in part on its ability to deal
with the problems, expenses, and delays frequently associated with
establishing a new business venture and developing new technology and
strategy. FSC has made no sales to date. Losses are likely before the FSC's
operations will become profitable. There can be no assurance that the FSC's
operations will ever prove profitable.
FSC is dependent on the overall acceptance of a software club membership
program and the continued acceptance of the internet as a distribution
channel for software.
There is no assurance that the current funding commitments will be fulfilled
and additional sources of funding may be required in the future. There can be
no assurance that such financing will be available to FSC on attractive terms
or at all.
Additional Risks of Investing in FSC's Business
Risks of Acquisition. A Merger Agreement has been signed between Sacio
and FSC. There are, however, conditions precedent to the Closing of the
Merger, including, but limited to, the completion of due diligence to each
party's satisfaction and approval by the shareholders of FSC, which may or
may not be fulfilled or completed. Accordingly, there can be no assurances
that the Merger will in fact be consummated.
Early Stage Business. If the FSC Merger Agreement is consummated,
Sacio will own the FSC business and assets. The FSC business is an early
stage business. FSC has only one product to date, known as
Freesoftwareclub.com. It is not yet ready for commercial utilization and
there are no orders to purchase any products.
Need for Capital. Sacio will need to raise capital to finance the FSC
operating business. There can be no assurances that Sacio will be able to
obtain the necessary financing in the amounts and on the timetable needed for
development of the FSC business, or if financing is available, that it will
be available on terms and conditions that are satisfactory.
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Competition. FSC's business faces strong competition in the sale of
software over the internet. Competitors include companies that are
significantly larger than the surviving corporation, companies that have been
in business for a longer period of time and have established relationships,
companies that have competitive or possibly better technology, companies with
strong management teams and access to research and development facilities,
and companies that are better funded. Accordingly, there can be no assurance
that the surviving corporation will be able to achieve and maintain a
competitive position in its new industry.
Dependence on Key Personnel. The surviving corporation will, after
closing the FSC acquisition and thereafter for the foreseeable future, be
dependent on the skills of Richard Miles, John Collins, and Rene Pardo, its
management team. The loss of key personnel or an inability to attract,
retain and motivate key personnel could adversely affect the surviving
corporation's business. The surviving corporation, at present, has no plans
to maintain key-person life insurance on any employees.
Lack of Active Public Market. Sacio Common Stock is currently listed
for trading on the OTC Bulletin Board, but there has been little trading
during the past two years. There is currently limited public trading market
for Sacio Common Stock, and there can be no assurance that the public market
will continue or develop. Holders of Sacio Common Stock may therefore have
difficulty selling their stock. The OTC Bulletin Board is generally
considered to be less efficient than securities markets such as NASDAQ or
other national exchanges. Any market price for Sacio Common Stock may not
necessarily bear any relationship to Sacio's book value, assets, past
operating results, financial condition or any other established criterion of
value, and may not be indicative of the market price in the future. The
market price may be volatile depending on business performance, industry
dynamics, news announcements, changes in general economic conditions and
other factors.
Control By Principal Stockholders. Assuming the transactions
contemplated by this Proxy Statement are completed, the surviving
corporation's new directors, officers, and affiliates will own in the
aggregate approximately 80.0% of the Company Common Stock outstanding
immediately after the transactions. As a result of such ownership, the post-
transaction the surviving corporation directors, officers, and affiliates
will be able to, and intend to, exercise substantially complete control of
the surviving corporation's affairs, including electing additional directors
of the surviving corporation. As a result of such control, a potential buyer
may be deterred from trying to acquire the Company without consent of the
surviving corporation officers and directors.
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Merger; Potential Dilution. The purchase price of the Sacio stock in
the Merger was reached by negotiation between the parties. These prices or
values are not necessarily based on any market price, appraised value, book
value, or other objective measure of value. The current shareholders of
Sacio may suffer dilution of voting power and of economic percentage
ownership upon closing of the Merger and any other share issuance, including,
but not limited to management option plans, that may be instituted by
management.
Issuance of Additional Shares; Shares Eligible for Future Sale. It is
likely that future financing of the FSC business will be require, which will
in turn require additional share issuance. Future issuance of the surviving
corporation stock for financing or other purpose, could adversely affect any
prevailing market price of the surviving corporation stock. The issuance of
such securities will result in the dilution of the voting power and other
rights of existing stockholders. After the closing of the Merger,
approximately 3,289,500 shares of Sacio common stock will be unrestricted;
and the 13,158,000 shares to be issued in exchange for the FSC shares will be
restricted securities that will be available for resale later, subject to
Rule 144. As restricted securities become available for resale into the
public market, it may be anticipated that the surviving corporation common
stock will experience selling pressure, which may have the effect of
depressing or reducing, perhaps significantly, the Sacio common stock price
in the market.
Lack of Dividends. Sacio has not paid any dividends on its Common
Stock to date and there are no plans for paying dividends on the common stock
of the surviving corporation in the foreseeable future.
FINANCIAL STATEMENTS
The financial statements included in this Proxy Statement relating to
Sacio and relating to FSC have been prepared by Sacio and FSC. The financial
statements for Sacio, attached as Exhibit C, are un-audited, and have not
been reviewed or compiled by any outside accounting firm. They represent
Sacio's best understanding of the financial position of the company as at and
for the periods indicated.
The financial statements included in this Proxy Statement relating to
FSC, attached as Exhibit D, have been prepared by FSC. They are unaudited,
and have not been reviewed or compiled by any outside accounting firm. They
represent FSC's best understanding of the financial position of FSC as at and
for the periods indicated.
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OTHER MATTERS
As of the date of this Proxy Statement, Sacio's Board of Directors
Board of Directors knows of any other matters that will be presented for
consideration at the Special Meeting other than as described in this Proxy
Statement. If any other matter shall come before the Special Meeting or any
adjournment or postponement thereof and shall be voted upon, it is intended
that the shares represented by proxy will be voted with respect thereto in
accordance with the judgment of the persons voting them.
By Order of the Board of Directors of Sacio,
/s/Nancy Davis
--------------
Nancy Davis
February 18, 2000
Please find the following Exhibits attached hereto:
Exhibit 2 - Acquisition Agreement dated January 31, 2000
Exhibit 4 - Appraisal Rights per Delaware State Code
Exhibit 99.1 - SACIO, Inc. Financial Statements
Exhibit 99.2 - Freesoftwareclub.com, Inc. Financial Statements
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EXHIBIT A
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------------------
This Acquisition Agreement ("Agreement"), effective as of January 28, 2000,
is made by and between Sacio, Inc. ("SI" or "BUYER"), the acquiring entity,
on the one hand, and freesoftwareclub.com, Inc. ("FSC"), the entity being
acquired, and all the shareholders of FSC (the "SELLERS" or "FSC
Shareholder(s)"), as listed on attached Exhibit A, on the other hand.
Recitals
WHEREAS, FSC has developed certain business plans, strategies, and strategic
business relationships (the "FSC Business Plan"); and
WHEREAS, FSC and the SELLERS are desirous to merge FSC (the "Merger") with
and into a company that is listed on the NASDAQ OTC Bulletin Board ("OTC-BB")
and is established as a public reporting company with the United States
Securities and Exchange Commission ("SEC") in a transaction meant to qualify
as a "tax-free" reorganization under section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended; and,
WHEREAS, SI is a publicly traded company listed on the OTC-BB that has
established itself as a reporting company with the SEC; and,
WHEREAS, SI is desirous of entering into a reverse merger with FSC in order
to pursue the FSC Business Plan thus far established; and,
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants, and agreements in connection with the Merger and also
to prescribed conditions to the Merger.
Agreement
NOW, WHEREFORE, in consideration of the representations, warranties,
agreements, and mutual covenants set forth below, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows.
1. EXCHANGE OF STOCK.
1.1 Number of Shares. Each FSC Shareholder agrees to transfer to SI at the
Closing (defined below) the number of shares of common stock of FSC,
$0.001 par value per share, shown opposite his name in Exhibit A in
exchange for an aggregate of 13,158,000 shares of SI Common Stock (SI
Shares), $0.001 par value, as provided in paragraph 1.5 below.
1.2 Exchange of Certificates. Each and every holder of an outstanding
certificate or certificates theretofore representing shares of FSC common
stock shall surrender such certificate(s) for cancellation to SI, and
shall receive in exchange a certificate or certificates representing the
number of full shares of SI Shares into which the shares of FSC common
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stock represented by the certificate or certificates so surrendered shall
have been converted. The transfer of FSC shares by the FSC Shareholder
shall be effected by the delivery to SI at the Closing of certificates
representing the transferred shares endorsed in blank or accompanied by
stock powers executed in blank. The FSC Shares transferred herein shall
represent all the issued and outstanding shares of FSC, including all
warrants, options, stock rights and all other securities of FSC owned by
the Shareholder, if any.
1.3 Fractional Shares. Fractional shares of SI Shares shall not be issued,
but in lieu thereof SI shall round up fractional shares to the next
highest whole number.
1.4 Further Assurances. At the Closing and from time to time thereafter,
the Shareholder shall execute such additional instruments and take such
other action as may be required to sell, transfer, and assign the
transferred stock to SI and to confirm SI's title thereto.
1.5 Securities Exchanged. The securities of FSC owned by each FSC
Shareholder, and the relative securities of SI for which they will be
exchanged, are set out in Exhibit A.
1.6 Securities Outstanding After Closing. Immediately following the
Closing, there will be issued and outstanding in SI, 16,447,500 common
shares, par value $0.001. Officer, Director, and Affiliate (greater than
10% common shareholders) shareholdings of SI at Closing will be as
follows: Richard Miles 3,150,000 shares; John Collins 2,763,180 shares;
Rene Pardo 4,934,250 shares; EMJ Data Systems 1,315,800 shares.
2. EXCHANGE OF OTHER SECURITIES.
2.1 There are no outstanding warrants, options, stock rights, or other
securities of FSC that are subject to exchange.
3. CLOSING.
3.1 The Closing contemplated herein shall be held on or before February 23,
2000 at the offices of FSC at 600 Bancroft Way, Berkeley, CA 94710, unless
another place or time is agreed upon in writing by the parties without
requiring the meeting of the parties hereof. All proceedings to be taken
and all documents to be executed at the Closing shall be deemed to have
been taken, delivered and executed simultaneously, and no proceeding shall
be deemed taken nor documents deemed executed or delivered until all have
been taken, delivered and executed. The date of Closing may be accelerated
or extended by agreement of the parties.
3.2 Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission required by this Agreement or any signature
required thereon may be used in lieu of an original writing or
transmission or signature for any and all purposes for which the original
could be used, provided that such copy, facsimile telecommunication or
other reproduction shall be a complete reproduction of the entire original
writing or transmission or original signature.
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3.3 The Merger. Subject to the terms and conditions of this Agreement,
upon the Close FSC shall be merged with and into SI in accordance with the
General Corporate Law of the State of Delaware, whereupon the separate
existence of FSC shall cease and SI shall continue as the surviving
corporation.
3.4 Filings. Upon the Close, SI will file, or caused to be filed, articles
of merger and make and cause to be made all other filings or recordings
required by Delaware Law in connection with the Merger with the Secretary
of State of Delaware, which articles of merger and other filings and
recordings shall be in the form required by and executed in accordance
with the applicable provisions of Delaware Law. The Merger shall become
effective at the time the articles of merger for such Merger are duly
filed with the Secretary of State of Delaware or at such later time as may
be designated in the articles of merger.
3.5 Directors and Officers. From and after the Closing, until successors
are duly elected or appointed and qualified in accordance with applicable
law, Richard Miles, John Collins, and Rene Pardo will shall be the
directors of the Surviving Corporation and John Collins shall be the
President and Richard Miles shall be Secretary and Treasurer of the
Surviving Corporation.
4. UNEXCHANGED CERTIFICATES.
Until surrendered, each outstanding certificate that prior to the Closing
represented FSC common stock shall be deemed for all purposes, other than
the payment of dividends or other distributions, to evidence ownership of
the number of shares of SI common stock into which it was converted. No
dividend or other distribution shall be paid to the holders of
certificates of FSC common stock until presented for exchange at which
time any outstanding dividends or other distributions shall be paid.
5. REPRESENTATIONS AND WARRANTIES OF FSC.
FSC represents and warrants the following:
5.1 Corporate Status. FSC is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada and
is licensed or qualified as a foreign corporation in all states in which
the nature of its business or the character or ownership of its properties
makes such licensing or qualification necessary.
5.2 Capitalization. The authorized capital stock of FSC consists of
25,000,000 shares of common stock, $0.001 par value, of which 10,000,000
shares are issued and outstanding, all duly authorized, validly issued,
fully paid and non-assessable. FSC has not issued or granted, or agreed to
issue or grant, any warrants, options, stock rights or other securities.
5.3 Subsidiaries. FSC has no subsidiaries.
5.4 Financial Statements. All financial statements of FSC from its
inception to and including the close as of December 31,1999, and including
audited financial statements if available, were furnished to SI and such
statements accurately and fairly present the financial position of FSC as
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of the respective dates of such financial statements, and the results of
its operations for the respective periods indicated computed on the basis
used for filing FSC's federal tax returns, consistently applied. FSC will
deliver to SI, within 30 days following the Closing, unaudited financial
statements for the period from inception through December 31, 1999.
5.5 Undisclosed Liabilities. FSC has no liabilities of any nature, except
to the extent indicated on Exhibit C, whether accrued, absolute,
contingent, or otherwise, including, without limitation, tax liabilities
and interest due or to become due.
5.6 Litigation. There is no litigation or proceeding pending, or to FSC's
knowledge threatened, against or relating to FSC, its properties or
business.
5.7 Contracts. FSC is not a party to any material contracts other than
those listed on Exhibit B.
5.8 No Violation. Execution of this Agreement and performance by FSC
hereunder will have been duly authorized by all requisite corporate action
on the part of FSC, and this Agreement constitutes a valid and binding
obligation of FSC, performance hereunder will not violate any provision of
any charter, bylaw, indenture, mortgage, lease, or agreement, or any
order, judgment, decree, law, or regulation to which any property of FSC
is subject or by which FSC is bound.
5.9 Taxes. FSC has filed in correct form all federal, state, and other tax
returns of every nature required to be filed by it and has paid all taxes
as shown on such returns and all assessments, fees and charges received by
it to the extent that such taxes, assessments, fees and charges have
become due. FSC has also paid all taxes which do not require the filing of
returns and which are required to be paid by it. To the extent that tax
liabilities have accrued, but have not become payable, they have been
adequately reflected as liabilities on the books of FSC and are reflected
in the financial statements furnished hereto.
5.10 Corporate Authority. FSC has full corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder, and
will deliver at the Closing a certified copy of resolutions of its board
of directors authorizing execution of this Agreement by its officers and
performance thereunder.
5.11 Access to Records. From the date of this Agreement to the Closing, FSC
will (1) give to SI and its representatives full access during normal
business hours to all of its offices, books, records, contracts, and other
corporate documents and properties so that SI may inspect and audit them
and (2) furnish such information concerning FSC's properties and affairs
as SI may reasonably request.
5.12 Confidentiality. Until the Closing (and permanently if there is no
Closing), FSC and the Shareholder will keep confidential any information
which they obtain from SI concerning its properties, assets, and business.
If the transactions contemplated by this Agreement are not consummated,
FSC and the Shareholder will return to SI all written matter with respect
to SI obtained by them in connection with the negotiation or consummation
of this Agreement.
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6. REPRESENTATIONS AND WARRANTIES OF THE FSC SHAREHOLDERS.
The FSC Shareholders, represent and warrant as follows:
6.1 Title to Shares. Each Shareholder is the owner, free and clear of any
liens and encumbrances, of the number of FSC shares which are listed in
Exhibit A and which he has contracted to exchange and which together
represent all the issued and outstanding shares of FSC.
6.2 Litigation. There is no litigation or proceeding pending, or to the
Shareholder's knowledge threatened, against or relating to shares of FSC
held by the Shareholder.
6.3 No Approval. The FSC Shareholders understand that the shares to be
received from SI have not been approved or disapproved by the SEC or any
state securities agencies.
6.4 Investment Intent. FSC Shareholders are acquiring the SI common shares
solely for investment for his or her own account and not with a view to,
or for, resale in connection with any distribution within the meaning of
the Securities Act, the Exchange Act, or any other applicable state
securities acts.
6.5 Speculative Nature. FSC Shareholders understand the speculative nature
and risks associated with SI and confirm that SI Common Shares are
suitable and consistent with his or her investment program and that his or
her financial position enables him or her to bear the risks of this
investment and that there may not be any public market for SI's Common
Stock.
6.6 Information. FSC Shareholders have been provided with all the
information requested of SI and with all information needed by them to
make an informed decision with respect to the SI Common Shares.
7. REPRESENTATIONS AND WARRANTIES OF SI.
SI represents and warrants as follows:
7.1 Corporate Status. SI is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware and is
licensed or qualified as a foreign corporation in all states in which the
nature of its business or the character or ownership of its properties
makes such licensing or qualification necessary.
7.2 Capitalization. The authorized capital stock of SI consists of
20,000,000 shares of common stock, $0.001 par value per share, of which
3,289,500 shares are issued and outstanding, all fully paid and non-
assessable.
7.3 Subsidiaries. SI has no subsidiaries.
7.4 Public Company. SI filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, a registration statement
on Form 10-SB on March 31, 1999 and received clearance from the SEC on its
FORM 10SB on or about August 23, 1999, voluntarily registering its common
stock for public reporting.
7.5 Public Filings. SI has timely filed all reports required to be filed by
it under Section 13 of the Securities Exchange Act of 1934, and current
management will timely file the Form 10QSB for December 31, 1999 on behalf
of SI.
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7.6 Financial Statements. The unaudited financial statements of SI as of
September 30, 1999, or such other period as are acceptable to FSC ("SI's
Financial Statements") and furnished to FSC are correct and fairly present
the financial condition of SI as of the dates and for the periods
involved, and such statements were prepared in accordance with generally
accepted accounting principles consistently applied. SI will deliver to
FSC within 30 days following the Closing unaudited financial statements
for the period through December 31, 1999.
7.7 Undisclosed Liabilities. SI had no liabilities of any nature except to
the extent reflected or reserved against in SI's Financial Statements,
whether accrued, absolute, contingent, or otherwise, including, without
limitation, tax liabilities and interest due or to become due, and SI's
accounts receivable, if any, are collectible in accordance with the terms
of such accounts, except to the extent of the reserve therefor in SI's
Financial Statements.
7.8 Absence of Material Changes. Between the date of SI's Financial
Statements and the date of this Agreement, there have not been, except as
set forth in a list certified by the president of SI and delivered to FSC,
(1) any changes in SI's financial condition, assets, liabilities, or
business which, in the aggregate, have been materially adverse; (2) any
damage, destruction, or loss of or to SI's property, whether or not
covered by insurance; (3) any declaration or payment of any dividend or
other distribution in respect of SI's capital stock, or any direct or
indirect redemption, purchase, or other acquisition of any such stock; or
(4) any increase paid or agreed to in the compensation, retirement
benefits, or other commitments to employees.
7.9 Litigation. There is no litigation or proceeding pending, or to SI's
knowledge threatened, against or relating to SI, its properties or
business, except as set forth in a list certified by the president of SI
and delivered to FSC.
7.10 Contracts. SI is not a party to any material contract other than those
listed on Exhibit D attached hereto.
7.11 No Violation. Execution of this Agreement and performance by SI
hereunder has been, or will be by Closing, duly authorized by all
requisite corporate action on the part of SI, and this Agreement
constitutes a valid and binding obligation of SI, performance hereunder
will not violate any provision of any charter, bylaw, indenture, mortgage,
lease, or agreement, or any order, judgment, decree, law, or regulation to
which any property of SI is subject or by which SI is bound.
7.12 Taxes. SI has filed in correct form all federal, state, and other tax
returns of every nature required to be filed by it and has paid all taxes
as shown on such returns and all assessments, fees and charges received by
it to the extent that such taxes, assessments, fees and charges have
become due. SI has also paid all taxes which do not require the filing of
returns and which are required to be paid by it. To the extent that tax
liabilities have accrued, but have not become payable, they have been
adequately reflected as liabilities on the books of SI and are reflected
in the financial statements furnished hereto.
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7.13 Title to Property. SI has good and marketable title to all properties
and assets, real and personal, reflected in SI's Financial Statements,
except as since sold or otherwise disposed of in the ordinary course of
business, and SI's properties and assets are Subject to no mortgage,
pledge, lien, or encumbrance, except for liens shown therein, with respect
to which no default exists.
7.14 Corporate Authority. SI has full corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder, and will
deliver at the Closing a certified copy of resolutions of its board of
directors authorizing execution of this Agreement by its officers and
performance thereunder.
7.15 Confidentiality. Until the Closing (and permanently if there is no
Closing), SI and its representatives will keep confidential any
information which they obtain from FSC concerning its properties, assets,
and business. If the transactions contemplated by this Agreement are not
consummated, SI will return to FSC all written matter with respect to FSC
obtained by it in connection with the negotiation or consummation of this
Agreement.
7.16 Investment Intent. SI is acquiring the FSC shares to be transferred to
it under this Agreement for investment and not with a view to the sale or
distribution thereof, and SI has no commitment or present intention to
liquidate FSC or to sell or otherwise dispose of its stock.
7.17 No Approval and Access to Information. SI understands that the shares
to be received from FSC Shareholders have not been registered with or
reviewed and approved or disapproved by the SEC or any state securities
agencies, and no federal or state securities law administrator has
reviewed or approved any disclosure or other material concerning FSC or
FSC Common Shares. Buyer has been provided with and reviewed all
information concerning FSC and the FSC Common Shares as it has deemed
necessary or appropriate as a prudent and knowledgeable investor to enable
it to make an informed investment decision concerning the FSC Common
Shares.
8. CONDUCT PENDING THE CLOSING.
SI, FSC and the Shareholders covenant that between the date of this
Agreement and the Closing as to each of them:
8.1 No change will be made in the charter documents, by-laws, or other
corporate documents of SI or FSC unless the party making any such change
notifies the other in writing.
8.2 No FSC Shareholder will transfer, assign, hypothecate, lien, or
otherwise dispose or encumber the FSC shares of common stock owned by him.
9. CONDITIONS PRECEDENT TO OBLIGATION OF FSC AND THE SHAREHOLDERS.
FSC's and the FSC Shareholders' obligation to consummate this exchange
shall be Subject to fulfillment on or before the Closing of each of the
following conditions, unless waived in writing by FSC or the Shareholders
as appropriate:
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9.1 SI's Representations and Warranties. The representations and warranties
of SI set forth herein shall be true and correct at the Closing as though
made at and as of that date, except as affected by transactions
contemplated hereby.
9.2 SI's Covenants. SI shall have performed all covenants required to be
performed by it on or before the Closing by this Agreement.
9.3 Board of Director Approval. This Agreement shall have been approved by
the board of directors of SI.
9.4.Regulatory Approvals. SI shall have received all Federal and state
regulatory approvals required of them to complete the transactions
contemplated by this Agreement.
9.5 Supporting Documents of SI. SI shall have delivered to FSC and the
Shareholder supporting documents in form and substance reasonably
satisfactory to FSC and the Shareholders, to the effect that: (a) SI is a
corporation duly organized, validly existing, and in good standing; (b)
SI's authorized capital stock is as set forth herein; (c) Certified copies
of the resolutions of the board of directors of SI authorizing the
execution of this Agreement and the consummation hereof; (d) Secretary's
certificate of incumbency of the officers and directors of SI; (e) SI's
Financial Statement and unaudited financial statement to close of most
recent fiscal quarter; and (f) Any document as may be specified herein or
required to satisfy the conditions, representations and warranties
enumerated elsewhere herein.
9.6 Shareholder Approval of Merger and Directors. This Acquisition
Agreement and Plan of Reorganization, including the election of the new
Directors designated in paragraph 3.5, shall have been approved and
adopted by the affirmative vote of a majority of the outstanding shares of
SI Common Shares entitled to vote thereon based on a properly prepared
proxy statement.
9.7 Resignation Officers and Directors/Cancel Shares. The officers and
directors of SI shall have resigned any and all their positions as
officers, directors, and employees of SI and cancelled all SI shares held
by such officers and directors.
9.8 Shareholder Approval of Name Change and Increase in Authorized Shares.
A majority of the Shareholders of SI will have elected to (1) change the
name of SI to freesoftwareclub.com, Inc. and (2) increase the number
authorized shares of SI, par value $0.001, to 100,000,000 shares.
10 CONDITIONS PRECEDENT TO OBLIGATION OF SI.
SI's obligation to consummate this merger shall be Subject to fulfillment
on or before the Closing of each of the following conditions, unless
waived in writing by SI:
10.1 FSC's and the Shareholder's Representations and Warranties. The
representations and warranties of FSC and the Shareholder set forth herein
shall be true and correct at the Closing as though made at and as of that
date, except as affected by transactions contemplated hereby.
10.2 FSC's and the Shareholder's Covenants. FSC and the Shareholder shall
have performed all covenants required by this Agreement to be performed by
them on or before the Closing.
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10.3 Board of Director Approval. This Agreement shall have been approved by
the board of directors of FSC
10.4 Shareholder Execution. This Agreement shall have been executed by all
of the shareholders of FSC.
10.5 Supporting Documents of FSC. FSC shall have delivered to SI supporting
documents in form and Substance reasonably satisfactory to SI to the
effect that: (a) FSC is a corporation duly organized, validly existing,
and in good standing; (b) FSC's capital stock is as set forth herein; (c)
Certified copies of the resolutions of the board of directors of FSC
authorizing the execution of this Agreement and the consummation hereof;
(d) Secretary's certificate of incumbency of the officers and directors of
FSC; (e) All financial statements of FSC from its inception to and
including the close of the most recent fiscal quarter, including audited
financial statements if available; and (f) Any document as may be
specified herein or required to satisfy the conditions, representations
and warranties enumerated elsewhere herein.
10.6. Regulatory Approvals. FSC shall have received all Federal and state
regulatory approvals required of them to complete the transactions
contemplated by this Agreement.
11 INDEMNIFICATION.
11.1 Indemnification of SI. FSC agrees to indemnify SI against any loss,
damage, or expense (including reasonable attorney fees) suffered by SI
from (1) any breach by FSC or the Shareholder of this Agreement or (2) any
inaccuracy in or breach of any of the representations, warranties, or
covenants by FSC or the Shareholders herein; provided, however, that (a)
SI shall be entitled to assert rights of indemnification hereunder only if
and to the extent that it suffers losses, damages, and expenses (including
reasonable attorney fees) exceeding $50,000 in the aggregate and (b) SI
shall give notice of any claims hereunder within twelve months beginning
on the date of the Closing. No loss, damage, or expense shall be deemed to
have been sustained by SI to the extent of insurance proceeds paid to, or
tax benefits realizable by, SI as a result of the event giving rise to
such right to indemnification.
11.2 Indemnification of FSC and the Shareholders. SI agrees to indemnify FSC
and the Shareholders against any loss, damage, or expense (including
reasonable attorney fees) suffered by FSC or by the Shareholder from (1)
any breach by SI of this Agreement or (2) any inaccuracy in or breach of
any of SI's representations, warranties, or covenants herein.
11.3 Defense of Claims. Upon obtaining knowledge thereof, the indemnified
party shall promptly notify the indemnifying party of any claim that has
given or could give rise to a right of indemnification under this
Agreement. If the right of indemnification relates to a claim asserted by
a third party against the indemnified party, the indemnifying party shall
have the right to employ counsel acceptable to the indemnified party to
cooperate in the defense of any such claim. As long as the indemnifying
party is defending any such claim in good faith, the indemnified party
will not settle such claim. If the indemnifying party does not elect to
defend any such claim, the indemnified party shall have no obligation to
do so.
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12 TERMINATION.
This Agreement may be terminated: (1) by mutual consent in writing; or (2)
by FSC, the Shareholder or SI if there has been a material
misrepresentation or material breach of any warranty or covenant by any
other party.
13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Subject to Paragraph 11 hereof, the representations and warranties of FSC,
the Shareholders and SI set out herein shall survive the Closing.
14 ARBITRATION SCOPE.
The parties hereby agree that any and all claims (except only for requests
for injunctive or other equitable relief) whether existing now, in the
past or in the future as to which the parties or any affiliates may be
adverse parties, and whether arising out of this agreement or from any
other cause, will be resolved by arbitration before the American
Arbitration Association. SITUS. The situs of arbitration shall be chosen
by the party against whom arbitration is sought, provided only that
arbitration shall be held at a place in the reasonable vicinity of such
party's place of business or primary residence and shall be within the
United States. The situs of counterclaims will be the same as the situs of
the original arbitration. Any disputes concerning situs will be decided by
the American Arbitration Association. APPLICABLE LAW. The law applicable
to the arbitration and this agreement shall be that of the State of
California, determined without regard to its provisions which would
otherwise apply to a question of conflict of laws. Any dispute as to the
applicable law shall be decided by the arbitrator. DISCLOSURE AND
DISCOVERY. The arbitrator may, in its discretion, allow the parties to
make reasonable disclosure and discovery in regard to any matters that are
the Subject of the arbitration and to compel compliance with such
disclosure and discovery order. The arbitrator may order the parties to
comply with all or any of the disclosure and discovery provisions of the
Federal Rules of Civil Procedure, as they then exist, as may be modified
by the arbitrator consistent with the desire to simplify the conduct and
minimize the expense of the arbitration. Any award or decision by the
American Arbitration Association shall be final, binding and non-
appealable except as to errors of law. The prevailing party in any such
arbitration shall be entitled to the payment by the losing party of its
reasonable costs and attorneys' fees. MEASURE OF DAMAGES. In any adverse
action, the parties shall restrict themselves to claims for compensatory
damages and no claims shall be made by any party or affiliate for lost
profits, punitive or multiple damages. COVENANT NOT TO SUE. The parties
covenant that under no conditions will any party or any affiliate file any
action against the other (except only requests for injunctive or other
equitable relief) in any forum other than before the American Arbitration
Association, and the parties agree that any such action, if filed, shall
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be dismissed upon application and shall be referred for arbitration
hereunder with costs and attorney's fees to the prevailing party.
INTENTION. It is the intention of the parties and their affiliates that
all disputes of any nature between them, whenever arising, from whatever
cause, based on whatever law, rule or regulation, whether statutory or
common law, and however characterized, be decided by arbitration as
provided herein and that no party or affiliate be required to litigate in
any other forum any disputes or other matters except for requests for
injunctive or equitable relief. This agreement shall be interpreted in
conformance with this stated intent of the parties and their affiliates.
15 SECTION 1377(A) ELECTION.
SI and FSC agree to cause FSC to close its books and to file such
elections and consents where and if necessary as of the Closing to close
the books of FSC on the date of Closing pursuant to an election under
Section 1377(a) of the Internal Revenue Code of 1986, as amended, and to
execute and deliver any and all forms necessary in connection with such
election and consent.
16 GENERAL PROVISIONS.
16.1 Further Assurances. From time to time, each party will execute such
additional instruments and take such actions as may be reasonably required
to carry out the intent and purposes of this Agreement.
16.2 Waiver. Any failure on the part of either party hereto to comply with
any of its obligations, agreements, or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
16.3 Brokers. Each party agrees to indemnify and hold harmless the other
party against any fee, loss, or expense arising out of claims by brokers
or finders employed or alleged to have been employed by the indemnifying
party.
16.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or
sent by prepaid first-class certified mail, return receipt requested, or
recognized commercial courier service, as follows: If to SI, to: Nancy
Davis, Sacio, Inc., 8320 O'Connell Road, El Cajon, CA 92021. If to FSC, to
Richard Miles, freesoftwareclub.com 600 Bancroft Way, Berkeley, CA 94710.
16.5 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California.
16.6 Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns;
provided, however, that any assignment by either party of its rights under
this Agreement without the written consent of the other party shall be
void.
16.7 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Signatures
sent by facsimile transmission shall be deemed to be evidence of the
original execution thereof.
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16.8 Effective Date. The effective date of this Agreement shall be January
28, 2000.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
effective date stated above.
SI FSC
By:/s/ Nancy Davis By:/s/ Richard Miles
-------------------------- -------------------------
Nancy Davis, President Richard Miles, President
FSC Shareholders
/s/ Richard Miles
-----------------
Richard Miles
/s/ John Collins
----------------
John Collins
/s/ Rene Pardo
--------------
Rene Pardo
/s/ Jim Astill
--------------
EMJ Data Systems (By: Jim Astill)
List of Exhibits:
A. List of FSC Shareholders, FSC Common Shares owned, and SI Common Shares
to be Exchanged
B. List of all Material Contracts of FSC
C. List of all Material Liabilities of FSC
D. List of Material Contracts of SI
Exhibit B
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Delaware State Code - Appraisal Rights
Section 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such
shares through the effective date of the merger or consolidation, who has
otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to Section 28 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's
shares of stock under the circumstances described in subsections (b) and (c)
of this section As used in this section, the word "stockholder" means a
holder of record of stock in a stock corporation and also a member of record
of a nonstock corporation; the words "stock" and "share" mean and include
what is ordinarily meant by those words and also membership or membership
interest of a member of a nonstock corporation; and the words "depository
receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof;
solely of stock of a corporation, which stock is deposited with the
depository (b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to Sections 2.51 (other than a merger
effected pursuant to Section25(g) of this title), Sections 252, 254, 257,
258, 263, or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof; at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of 251 of this title.
(2) Notwithstanding paragraph (I) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof; which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
-1-
<PAGE>
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
253 of this title, each consitutent corporation, either before the effective
date of the merger or consolidation or within ten days thereafter, shall
notify each of the holders of any class or series of stock of such
constitutent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
-2-
<PAGE>
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of
the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constitutent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constitutent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constitutent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the notice
is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice
is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw such stockholder's demand for appraisal
and to accept the terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and
(d) hereof; upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor
of the merger or consolidation and with respect to which demands for
-3-
<PAGE>
appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof; whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by 1 or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of
the proceeding. Upon application by the surviving or resulting corporation
or by any stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder
whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has
submitted such stockholder's certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that such stockholder is not entitled to
appraisal rights under this section.
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<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation
to the stockholders entitled thereto. Interest may be simple or compound,
as the Court may direct. Payment shall be so made to each such stockholder,
in the case of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this
State or of any state.
j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholder's demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the
Court deems just.
(1) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
-5-
SACIO, INC.
(a Development Stage Company)
BALANCE SHEETS
UNAUDITED
ASSETS Dec 31 Dec 31
1999 1998
Current Assets
Cash 15 4,300
------ ------
Total Current Assets 15 4,300
Fixed Assets
------ ------
Net Fixed Assets 0 0
Other Assets
Organization Costs 0 0
Less Amortization 0 0
------ ------
Total Other Assets 0 0
------ ------
Total Assets 15 4,300
====== ======
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
------ ------
Total Current Liabilities 0 0
Long Term Liabilities
------ ------
Total Long Term Liabilities 0 0
----- ------
Total Liabilities 0 0
Stockholders Equity
Common Stock - $.001 par value 3,289 2
20,000,000 shares authorized, 3,289,500 issued
and outstanding at 12/31/99, 10,935,000 issued
and outstanding at 12/31/98
Additional Paid In Capital 1,013 4,299
Beginning Retained Earnings -3,863 -1
Net Loss -424 0
------- ------
Ending Retained Deficit -4,287 -1
------- ------
Total Stockholders Equity 15 4,300
------- ------
Total Liabilities and Stock Holders Equity 15 4,300
======= ======
<PAGE>
SACIO, INC.
STATEMENTS OF OPERATIONS
(a Development Stage Company)
For The Nine Month Ended
UNAUDITED
Dec 31 Dec 31
1999 1998
------ ------
Revenues
------ ------
Total Revenue 0 0
Direct Cost
------ ------
Total Cost Of Goods Sold 0 0
------ ------
Gross Profit 0 0
Operating Expenses
General, Selling, & Administrative 424 0
Licenses & Fees 0 0
Accounting & Audit Fees 0 0
------ ------
Total Operating Expenses 424 0
------ ------
Loss From Operations -424 0
Other Income & Expense
------ ------
Total Other Income & Expense 0 0
------ ------
Loss Before Taxes -424 0
------ ------
Net Loss -424 0
====== ======
Net Loss Per Share NIL 0
Weighted Average Number of Common
Shares Outstanding 3,289,500 10,935,000
<PAGE>
SACIO, INC.
(a Development Stage Company)
STATEMENT OF CASH FLOWS
For The Nine Months Ended
UNAUDITED
Dec 31 Dec 31
1999 1998
------ ------
Cash Flow From Operating Activities
Net Income (Loss) -424 0
Adjustment To Reconcile Net Income (Loss) To
Net Cash In Operating Activities:
Amortization 0 0
Change In Assets And Liabilities 0 0
Net Cash Flows From Operating Activities -424 0
Cash Flows From Investing Activities:
Organization Costs 0 0
Net Cash Flows From Investing Activities 0 0
Cash Flows From Financing Activities:
Issuance Of Common
Stock For Cash 0 0
Net Cash Flows From Financing Activities 0 0
Net Increase (Decrease) In Cash -424 0
Cash At Beginning of Period 439 4,300
Cash At End Of Period 15 4,300
freesoftwareclub.com, Inc.
600 Bancroft Way
Berkeley, CA 94710
Balance Sheet
December 1999
Assets
Current Assets
Cash on Hand
Checking Account $ 24,357.85
---------
Total Cash on Hand 24,357.85
---------
Total Current Assets 24,357.85
---------
Total Assets $ 24,357.85
=========
Liabilities
Long Term Liabilities
Other Long Term Liabilities $ 99,972.50
---------
Total Long Term Liabilities 99,972.50
---------
Total Liabilities $ 99,972.50
Equity
Owners' Equity
Investors Account $124,758.00
----------
Total Owners' Equity 124,758.00
Current Year Earnings (200,372.65)
----------
Total Equity (75,614.65)
Total Liability and Equity $ 24,357.85
=========
<PAGE>
freesoftwareclub.com, Inc.
600 Bancroft Way
Berkeley, CA 94710
Profit & Loss Statement
December 1999
Income $ 1,077.00
Cost of Goods 680.63
-----------
Gross Profit $ 396.37
-----------
Expenses
Web Building 90,000.00
Design Services 75,000.00
Equipment Expense 3,456.82
Dues and Subscriptions 6,000.00
Legal and Accounting 900.00
Business Start Up Fees 329.00
Bank Fees 20.00
Merchant Account Fees 245.00
Service Provider Fees 40.00
Collateral Expense 11,954.82
Payroll
Wages 3,600.00
Independent Expenses 519.03
Postage and Shipping 343.10
Telephone 489.01
Travel and Entertainment 7,872.24
----------
Total Expenses 200,769.02
----------
Operating Profit (200,372.65)
Other Income
Other Expenses
Net Profit/(Loss) $(200,372.65)
==========
