U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
CELEXX CORPORATION
(Name of Small Business Issuer in its charter)
NEVADA 65-0728991
(State of incorporation) (I.R.S. Employer Identification No.)
7251 WEST PALMETTO PARK ROAD, SUITE 208
BOCA RATON, FLORIDA 33433
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER (561) 395-1920
Securities to be registered pursuant to 12(b) of the Act: None
Securities to be registered pursuant to 12(g) of the Act:
COMMON STOCK $.001 PAR VALUE
(Title of Class)
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Celexx Corporation ("Celexx" or the "Company") was organized under the
laws of the State of Nevada on February 19, 1997, under the name, "Spectrum
Ventures, Inc." In February 1999, the Company merged with Cobra Technologies
International, Inc., a Delaware corporation with the Company surviving. The name
of the surviving corporation was changed to Cobra Technologies, Inc. and in
August 1999 and November 1999 was further changed to CobraTec, Inc. and Celexx
Corporation, respectively.
On February 18, 1999, the shareholders of Spectrum Ventures, Inc. voted
to acquire all of the outstanding common stock of Cobra Technologies
International, Inc., a newly-formed Delaware corporation ("Cobra
International"), pursuant to an Agreement and Plan of Reorganization in exchange
for 4,500,000 of the Company's stock.
Effective May 25, 1999, the Company acquired all of the outstanding
common stock of Pinneast.com, Inc., a South Carolina corporation ("Pinneast"),
pursuant to an Agreement and Plan of Reorganization in exchange for 500,000
shares of common stock of the Company and $100,000 in cash. Payment of the cash
portion was deferred for one year. Steven Lounsberry and Mitchell N. Smith,
President and Vice President of Pinneast, respectively, also owning 100% of the
outstanding capital stock, received 275,000 and 225,000 common shares,
respectively.
Celexx Corporation has a short operating history, and for the past nine
months has generated operating losses. At present, the only material business
that has been successfully combined with the Company is Pinneast.com, Inc.
Pinneast has had net losses of $91,000 and $131,000 for 1997 and 1998,
respectively. At present, Celexx lacks revenues and the Company has not achieved
its business plan. While the Company intends to acquire existing businesses in
accordance with its business plan, there can be no assurances that the Company
will be successful in its acquisition plans or in securing financing to acquire
such operating companies. To date, the Company has not earned a profit and can
give no assurances if and when it will turn a profit.
Our Common Stock trades on the Over-The-Counter Bulletin Board under
the symbol "CLXX". The Securities and Exchange Commission has adopted
regulations which generally define a "penny stock" to be any security that has a
market price (as defined) of less than $5.00 per share, subject to certain
exceptions including listing on the NASDAQ SmallCap Market. The shares of our
common stock may be deemed to be penny stocks and thus will become subject to
rules that impose additional sales practice requirements on brokers/dealers who
sell such securities to persons other than established customers and accredited
investors. Consequently, the "penny stock" rules may restrict the ability of
broker/dealers to sell the common stock and may affect the ability of purchasers
to sell the common stock in a secondary market.
GENERAL
Celexx Corporation has established a position in the industry as an
acquirer and consolidator of niche companies in the Information Technology (IT)
market. Celexx completed its first acquisition in May of 1999 of Pinneast.com, a
six year old Columbia, South Carolina based company. A second company, Computer
Marketplace, Inc. is expected to close before the end of the first quarter 2000,
and Celexx continues to evaluate other potential acquisition candidates.
Celexx operates within the broad market of Information Technology (IT)
which has grown in tandem with the worldwide proliferation of computerization
over the last several decades and has expanded the rate of growth with the
commercialization of the Internet and corporate Intranets over the last five
years. Several sources, including IDC, concur that the number of online users
will grow from about 150 million worldwide now to about 500 million by 2003.
Within the IT industry, several of the areas that Celexx's companies
are doing business in are growing particularly rapidly. Computer based training
(CBT) and web-based training (WBT) is another area sector of the IT market that
Celexx is becoming closely involved with, particularly through Pinneast. In the
US alone, organizations with more than 100 employees budgeted nearly $59 billion
for training in 1997. Of this amount, nearly 70% went for salaries for trainers
and training support personnel. However, computer based training still remains a
relatively new concept as 94% of firms continue to utilize Instructor-led for at
least part of their curricula. CBT, nevertheless, is making inroads into this
market and the use of a wide variety of methodologies ranging from CD-ROMs to
the Internet are bring implemented.
If we are successful in acquiring CMI, and there can be no assurance
that we will, Celexx will become involved in the delivery of systems that use
voice over IP technology. According to IDC, the worldwide Internet Protocol (IP)
telephony market is expected to explode from 310 million minutes of use in 1998
to 2.7 billion minutes by year-end 1999. By 2004, IP telephony minutes will
reach 135 billion. Revenues for this service will skyrocket from $480 million in
1999 to $19 billion by 2004. Again, we have not yet consummated the acquisition
of CMI, and while we believe that we will be successful in acquiring CMI in the
first quarter of 2000, we can give no assurances that we will be successful. If,
for any reason, we are unsuccessful in acquiring CMI, we will make every
reasonable effort to find a suitable replacement in the same area of business.
Finally, Celexx is operating within the general market of business-to-
business e-commerce. According to IDC, business-to-business e-commerce is
believed to be one of fastest growing sectors of e-commerce and is expected to
exceed $179 billion by 2001. To capitalize on this growth, many businesses are
expanding and upgrading their Internet and networking infrastructures. Through
acquisitions of companies such as CMI and Pinneast, Celexx can become an
important provider within this market.
MANAGEMENT AND STRATEGY
The core management of Celexx is composed of individuals experienced in
finance, accounting, and Information Systems, with a particular focus on the
operation of small companies and related mergers and acquisitions. The core
strategy of the Celexx management team is to acquire complimentary businesses in
the Information Technology industry that will help the company achieve annual
revenue growth of 50% or more on an annual basis over the next several years.
To date, Celexx has focused on service companies that provide customers
with systems and network integration and computer and web based training.
Companies in systems engineering, systems design, e-commerce platform
development, and network consulting are the most desired potential acquisition
candidates for Celexx. Through the planned acquisition of CMI (currently
scheduled to occur in the first quarter of 2000), Celexx is also becoming
involved in developing and delivering state-of-the-art telecommunications
systems. Telecommunications is an area that the company expects to become even
more involved with over the next several years.
One important criterion for acquisition is the potential synergy of the
company to be acquired with those that already exist within the Celexx
structure. CMI (which acquisition is planned for the first quarter, 2000) and
Pinneast, for example, share a number of their larger clients. CMI provides
hardware, systems, and service to several of these clients while Pinneast
provides training to assure that users understand and take full advantage of the
systems that CMI has provided. Celexx generally looks for companies that will
add $5 million to $15 million, or more to revenue that that have been profitable
on a pretax, pre-interest basis. Acquisition valuations are often based on an
EBIT multiple. The companies should have at least a three-year history with
recently audited financial information and a strong management team. Celexx
requires top management to stay with the company after the acquisition and ties
a portion of the final purchase price to future performance.
PINNEAST.COM, INC.
Pinneast.com, Inc. was formed in January 1994 in order to capitalize on
the growing demand for computer-based alternatives to instructor led
organizational training. The company provides its customers, mainly Fortune 1000
companies, with customized interactive multimedia training design and
development services. Today, its clients included a broad base of industrial
companies, banks, financial institutions, government agencies and educational
institutions. Pinneast.com produces and markets a wide array of customized,
interactive multimedia computer and Web based training programs that are used to
train employees in important skills pertinent to their jobs. Since the
inception, Pinneast has been a leader in developing programs combining graphics,
video and text in order to produce interactive solutions for business, industry
and government organizations. Pinneast clients include leading manufacturing and
service companies across the country such as Northern Telecom, Delta Airlines,
Nations Bank, and the US Army.
A typical Pinneast contract is negotiated on the basis of producing a
one or two hour interactive training program for a client. Costs are determined
based on the amount of new content and the complexity of the program that needs
to be created. In some cases Pinneast needs to only take an existing course
outline and script and basically convert it to computer format. In other
instances, Pinneast may need to shoot video, hire actors, and create a
comprehensive animation and live motion program to be delivered either through
the Internet or through a corporate Intranet. Delivery costs can, therefore, run
from $5,000 to $30,000 an hour, predominantly for programming. The typical
Pinneast contact would call for two hours of training, and cost from $15,000 to
$50,000.
Pinneast generated about $200,000 in revenue during its first year,
primarily from its first customer, Fleet Mortgage, and from a local grocery
chain, Harris Teeter Grocers. During the company=s second year, it established a
two-year, $800,000 contract with Hoechst Chemical to provide OSHA mandated
training to its employees. Pinneast also continued to expand within the
financial community by generating contracts with several banks and insurance
companies.
In 1996, Pinneast became a pioneer in web-based training as it
delivered an Internet accessed medical support program called Learners Toolkit
for Open Time, for the Thomas Jefferson University Hospital. By 1998, the
company had expanded its revenue base to more than $800,000 and established
contracts with companies throughout a variety of industries and government
organizations. In 1999, Pinneast is on track to report revenues of about $1.2
million. After two consecutive years of losses, the company expects to report a
profit of more than $300,00 this year.
While Pinneast has been particularly successful with companies in a few
key industries such as finance, insurance, transportation and manufacturing, the
scope of its services can be applied to most businesses and government
organizations. Generally, however, its customers need to be large enough to have
ongoing training and training support programs for their employees. Pinneast
maintains a customer retention rate in excess of 80% and, as the Internet grows
in importance as a delivery vehicle, the role of this company is expected to
grow.
Company products fall into two categories: training and marketing.
Training products include custom computer-based training (CBT) programs, custom
web-based training (WBT) programs, electronic performance support systems
(EPSS), instructional design, instructor-led training (ILT) and consultation.
The Company's marketing products include: interactive marketing CD-ROMs,
corporate web page development, e-commerce solutions, site development, and
consultation.
In developing and producing training programs for its clients, the
Company combines business performance consulting, instructional design, graphic
design and animation, computer methodologies and media technologies to meet the
specific performance improvement (productivity) needs of its clients. The
solutions and training programs are delivered via CD-ROM or the Web.
Furthermore, the Company distributes its products and services through trade
sources, customer referrals and direct marketing.
The Company's instructional design philosophy and approach focuses on
helping clients improve employee performance through training. The interactive
nature of the program design permits the user (learner) to stop, start, or
repeat any portion of the program he or she may desire, at any time. The
Company=s approach to interactive multimedia design addresses multiple learning
styles in an attempt to more effectively reach the diverse audiences for which
these programs are intended. Secondly, the Company=s interactive multimedia
programs engage the learner with simulated performance-based routines, enhanced
by corrective feedback that is directly applicable to the learner=s real world
performance responsibilities.
The instructional material is designed to engage or link the learner to
interactive multimedia so that real world knowledge, skills and methodologies
are practiced, developed and experienced and, thus, become directly
transferable to on-the-job performance. In addition to designing from the
learner's performance perspective and needs, Pinneast.com designs within the
context of the client's business objectives and priorities so that individual
performance improvements are relevant: they impact overall business performance.
PROJECT DEVELOPMENT PROCESS. To help ensure that the specific
performance and productivity needs of a client are met, Pinneast employs a
comprehensive, systematic approach to the development and delivery of
instructional materials. The main purpose of the Project Development Process (or
Instructional System Design) is to optimize communications between the Company
and its clients at each stage throughout the project; and to define specific
project milestones for the client=s review and approval. This methodological
process helps to ensure that the final instructional computer-based training
(CBT) product meets or exceeds all established quality and performance
requirements.
Through weekly or more frequent communications between the Project Team
and the client, phases and modules are reviewed to help ensure that the client=s
requirements are being adhered to and that issues or problems are anticipated
and addressed at minimum cost and delay. The Company=s interim deliverables
(drafts, scripts, schedules, etc.) minimize project risks and maximize the
performance improvement opportunities for its clients throughout the
Instructional System Design (ISD) process.
DESIGN. The purpose of the design review phase is to evaluate program
content, anticipate the learner=s needs, and accommodate them during the
development process. The Content Outline will list instructional objectives and
sequence content organized by module and topic. The Design Document will outline
the instructional, interface, interactive and evaluation strategies. The
Interface Prototype will demonstrate the graphical interface and navigation
buttons. Pinneast.com will emphasize relevant performance-based objectives
underlying the need for the training intervention.
CBT STORYBOARD/SCRIPT DEVELOPMENT AND CBT PROTOTYPE.Content is critical
to the final outcome of instructional undertaking. The purpose is to provide a
review of critical CBT program detailed design (known in the industry as
storyboards) by the Subject Matter experts, and to provide a computer-based
prototype of what may ultimately be presented in the final CBT. After
storyboards are finalized, clients are asked to review and provide feedback to
our design and development teams.
APPROACH. A detailed Storyboard/Script document is produced and
presented to the client prior to the CBT prototype. Each storyboard/script page
includes a description of the following: text, audio script, feedback, graphics,
animation, branching and student performance data record keeping.
The Company then develops a PC-based prototype that provides a clear
understanding of the overall functionality of the CBT course from a learner's
perspective. Specifically, we will focus on providing examples of the user
interface/interactions and major courseware instructional objects including
audio, video, text, graphics and branching.
Storyboard reviews are used to finalize content and instructional
design strategies, and this phase is often critical to the success of the
project. The storyboards constitute the detailed architectural blueprint for the
product. Because of this, the Company strongly recommends that adequate time be
set aside to thoroughly and critically review storyboards to ensure (1)
instructional objectives are achieved and (2) eliminate revisions later in the
project. The storyboard reviews should be consolidated in writing by the
designated client Project Team Leader before resubmission to the Company to
ensure resolution of any conflicting feedback and clarity of communication.
CBT COURSEWARE DEVELOPMENT. This phase of the project is used to trans-
form the detailed design into a CBT complete course.
APPROACH: Our instructional designers and programmers develop
courseware modules in accordance with the storyboards. The client produces a
completed working copy of the courseware containing all components in the
storyboards for review, and the Company then conducts internal acceptance
testing (debugging) prior to client receipt of the completed courseware.
In most cases, the development of the final courseware will be based on
finalized storyboards. Subsequent changes to a storyboard design can materially
impact both the delivery time and final cost.
TESTING. As with all custom products, the test phase is designed to
identify software bugs, content/design issues, and user interface issues prior
to releasing the courseware to the general audience.
Prior to pilot testing, the Company conducts internal testing in accordance with
a pre-established Testing Procedures plan. The courseware is then evaluated
using a structured methodology. The Company plans the logistics, creates a pilot
plan, creates pilot materials as necessary, conducts the pilot, reviews bug and
evaluation forms, and writes a pilot report.
Except under the most unusual circumstance, it is assumed that the
pilot will not yield any new design changes. Design decisions are normally
established during prior phases of the project. We also anticipate that the
content/presentation will have been previously reviewed and approved by client
SME's at the storyboarding stage of the project.
COMPUTER MARKETPLACE, INC.
In June 1999, the Company reached a definitive agreement to acquire
Computer Marketplace, Inc. (CMI) for $1.25 million in cash payable at closing, a
promissory note for $1.25 million at 6%, payable in equal installments at the
first and second anniversaries, and 1,000,000 Common Shares of Celexx stock. The
Company is currently negotiating the financing for the cash portion of the
acquisition. There can be no assurance, however, that the Company will be
successful in securing such financing. If such financing cannot be procured, the
Company will not be able to close the CMI purchase transaction as it is
currently structured.
CMI, located in Tewksbury, Massachusetts, is a sixteen year old network
solutions and systems design company, founded in 1983. CMI focuses on providing
Fortune 1000 companies, government agencies and educational institutions with
networking solutions, systems integration, and computer telephony integration.
CMI has a broad and diversified client list ranging from major
telecommunications companies to public school systems throughout North America.
Representative customers include: America On-Line, Lucent Technologies, AT&T,
J.C. Penny, Bell Canada, The Prudential Insurance Companies, the Boston Public
Schools, Sprint Corp., IBM Global Services, USA Group, USA Bank, and Hewlett
Packard Co., among many others. In 1998, revenue was $16.7 million with pretax
earnings of approximately $922,000.
CMI started in 1983 as a retail operation and rapidly grew to five
store locations. In 1990, however, management undertook a major restructuring in
order to capitalize on the growing demand for software, systems and solutions
rather than just hardware. The company also recognized the opportunity to
utilize this new focus to expand its market nationwide and establish an
international presence. Consequently, the company also shifter its focus from
individuals and small operations to a purely corporate focus.
Within the last several years, CMI expanded both its network solutions
business and entered into the growing area of telecommunications routing
systems. The company is divided into two basic divisions: Networking and
Telephony.
CMI provides its customers with complete, ready-to-run networks using
Novell and Windows NT platforms. CMI assesses a customer=s needs, determines the
appropriate configurat6ion, purchases the necessary software and hardware and
then assembles and tests the components at the customer=s site. While certain
large installations can run as high as $1 million or more, the average order for
a network solution is about $200,000. CMI takes care of all aspects of the
installation, from delivery and setup to completing the necessary licensing and
warranty procedures. The company also provides its customers with systems
operation training, vendor updates and upgrades, as well as a 24-hour Help
Service.
Over the last few years, CMI has also expanded its services to include
a trademarked "Share-A-CNE" program, which provides customers with the benefits
of an on-call Certified Network Engineer who can work closely with the
customers' IS department but does not need to be employed on a fulltime basis.
The Share-A-CNE program is a cost effective way for the small customer to
receive the technical benefits that their larger counterparts receive.
CMI has also recently become more involved in helping its customers
capitalize on the capabilities of the Internet. More specifically, the company
is helping customers implement voice over IP (Internet Protocol) technology,
which is a low cost alternative to standard telephone service. Network contracts
represent approximately 50% of the company's revenues.
CMI also provides its customers with systems and solutions for their
telecommunications needs. The telephony division was formed about three years
also to help some of its major telecommunications systems providers in assisting
their clients to more effectively manage their call routing systems.
The telephony division provides call routing and monitoring systems for
AT&T, Cisco, Lucent, Qwest and Sprint to resell to their customers. End
customers include airlines, banks, insurance companies, investment firms and
customer oriented organizations across the US and Canada. Orders average about
$400,000 and are usually fulfilled within 4 weeks. Many orders are received from
Europe and the typical user is a Fortune 500 company. For calendar 1999, CMI
expects revenues of $21 million and a pretax profit of more than $1.5 million.
IF WE ARE UNSUCCESSFUL IN ACQUIRING CMI, WE WILL MAKE EVERY REASONABLE
EFFORT TO REPLACE THE LOSS WITH A SUITABLE ACQUISITION CANDIDATE IN THE SAME
FIELD; HOWEVER, THERE CAN BE NO ASSURANCES THAT WE WILL BE SUCCESSFUL IN FINDING
SUCH AN ACQUISITION OR THAT WE WILL BE ABLE TO NEGOTIATE SUITABLE TERMS AND
OBTAIN THE FINANCING NECESSARY TO CLOSE SUCH A CANDIDATE. IN ADDITION, THE LOSS
OF CMI WILL HAVE A MATERIAL IMPACT UPON OUR REVENUE AND PROFIT PROJECTIONS FOR
THE YEAR 2000, AS CMI CURRENTLY HAS SUBSTANTIALLY GREATER REVENUES AND PROFITS
THAN THE COMPANY AS A WHOLE.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently leases approximately 3,000 square feet of office
space located at 7251 West Palmetto Park Road, Boca Raton, Florida as its
corporate headquarters. Early in the year 2000, the Company plans to relocate
from its current Boca Raton location to its new corporate headquarters,
consisting of approximately 5,000 square feet, in Coral Springs, Florida. The
terms and conditions of our lease include our move to the new location.
Presently, the monthly rent is $5,300 and the lease terminates in 2004.
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND SIGNIFICANT EMPLOYEES
The following table sets forth the names, ages and positions with Celexx
and ages of our executive officers and directors. Directors will be elected at
our annual meeting of shareholders and serve for one year or until their
successors are elected and qualify. Officers are elected by the board of
directors and their terms of office are, except to the extent governed by
employment contract, at the discretion of the board of directors.
NAME AGE POSITIONS HELD
Douglas H. Forde 57 Chairman, President and CEO
Lionel Forde 55 Director, Vice President,
and CFO
Vincent Caminiti 47 Director
Moty Hermon 56 Director
William Lerner 62 Director
Vito Gambelunghe 47 Director
John Straatsma 45 Secretary
DOUGLAS H. FORDE. Mr. Forde has been Chairman of the Board of Directors,
President and Chief Executive Officer since August 1999. From June 1998 until
August 1999, he was Director of Mergers and Acquisitions for the Company. From
November 1996 until June 1998, Mr. Forde was Vice President, Strategic Planning
for Computer Access International, Inc. Prior to November 1996, Mr. Forde had
been a business consultant to numerous companies, ranging from the Fortune 500
to smaller entrepreneurial businesses. He is a graduate of the University of the
Virgin Islands, the University of Illinois, and the Bernard M. Baruch College of
the City University of New York and holds degrees in accounting, finance, and
taxation.
LIONEL FORDE. Mr. Forde has been Vice President & Chief Financial Officer and a
Member of the Board of Directors of the Company since February 1999. From
November 1997 until February 1999 he was President of the international group at
Computer Access International, Inc., responsible for developing markets in the
Caribbean and Latin America. Prior to that, Mr. Forde was a senior manager in
the Color Paper Products Division at Eastman Kodak Company. He holds an MBA
(Honors) degree from Long Island University and a BS degree in Business
Administration from Eastern Illinois University.
VINCENT A. CAMINITI. Mr. Caminiti has been a member of the Board of Directors of
the Company since January of 1999. Prior to January of 1999, he has been a
Consultant active in international trade and finance consulting, including
long-term project developments with major foreign companies and US.
MOTY HERMON. Mr. Hermon has been a Member of Board of Directors since February
1999. Mr. Hermon is an international investment banker and business consultant.
He served as General Manager of Elron, Inc., a New York Stock Exchange listed
company, for seven years. Elron is the largest group of high tech companies in
Israel with revenues of approximately $1.5 billion. Mr. Hermon was the exclusive
representative and partner of Prudential Securities in Israel, and also the
exclusive representative and partner of TA Associates. TA Associates is a Boston
based venture capital firm with over $1.5 billion under management. Mr. Hermon
holds a BA in Economics and Political Science from Tel-Aviv University.
WILLIAM LERNER. Mr. Lerner has been a member of the Board of Directors since
February 1999. Since 1994, Mr. Lerner has been in the private practice of
corporate and securities law with offices in Pennsylvania and Florida. Mr.
Lerner is also Counsel to the law firms of Sweeney & Associates (Pittsburgh) and
Snow Becker Krauss, PC (New York). He is a director of Seitel, Inc. (a NYSE
listed oil and gas producing company), Helm Resources, Inc. (an Amex listed
company that provides mezzanine financing to middle market companies), and
Micros-to-Mainframes, Inc. (a NASDAQ listed company and producer of
high-technology communications and computer services to Fortune 500 companies).
Mr. Lerner is a graduate of Cornell University (1955) and of the New York
University School of Law (1960). He is a member of the bars of New York and
Pennsylvania. He has served with the U.S. Securities and Exchange Commission,
the American Stock Exchange and as General Counsel to Hornblower, Weeks,
Hemphill & Noyes, a New York Stock Exchange brokerage/investment firm.
VITO A. GAMBELUNGHE. Mr. Gambelunghe has been a member of the Board of Directors
since January 1999. From January 1999 until August 1999, Mr. Gambelunghe was
President and Chief Executive Officer of the Company. Prior to January 1999, Mr.
Gambelunghe had been President of Worldwide Trading Enterprises, Inc., a private
enterprise engaged in the procurement, sale and global distribution of computer
equipment, software, and solutions. Mr. Gambelunghe is a graduate of Brooklyn
College.
JOHN W. STRAATSMA. Mr. Straatsma has served as secretary since October of 1999.
Since August of 1998, he has acted as a consultant to Celexx for business
development and operations. In September 1995, Mr. Straatsma founded, and since
has acted as president of Consultants Ltd., a company that performs consulting
work for companies active in the IT industry. For January 1983 until August
1995, Mr. Straatsma was president of Trinidad Computers Ltd., a company he
helped to found. His educational background includes a Bachelor of Commerce
degree from the University of Guelph, in Guelph, Ontario, Canada, and a Master
of Science degree in Management from Florida International University, Miami,
Florida.
ITEM 4. EXECUTIVE COMPENSATION
The following table sets forth information relating to the compensation
paid by Celexx during the past fiscal year (Celexx had no operations prior to
January 1, 1999) to its Chief Executive Officer and President. No options were
granted to, and no options were exercised by any of our executive officers or
directors during 1998.
<TABLE>
SUMMARY COMPENSATION TABLE
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Annual Compensation Long-Term Compensation
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Awards
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Securities
Other Under-
Annual Restricted Lying All Other
Name and Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
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CEO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Doug Forde, Chairman, Presiden1998d CEO $ 60,000 -0- -0- -0- -0- -0- -0-
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STOCK OPTIONS
OPTION/SAR GRANTS IN LAST FISCAL YEAR
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Individual Grants Potential Realizable ValueAlternative To
Assumed Annual Rates Of St(f) and (g):
Price Appreciation For OptiGrant Date
Term Value
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Percent of
Number Of Total
Securities Options/
Underlying SARs Granted Exercise Of
Options/SARs To Employees Base Price Expiration
Name Granted (#) In Fiscal Year (S/Sh) Date
(a) (b) (c) (d) (e)
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Grant Date
5% ($) 10% ($) Present Value $
(f) (g) (h)
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Doug Forde -0- -0- N/A N/A N/A N/A N/A
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OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the exercise
of options to purchase shares of common stock during the fiscal year ended
December 31, 1998, of each person named in the summary compensation table and
the unexercised options held as of the end of the 1998 fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
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Number of Value Of
Securities Unexercised
Underlying In-The-Money
Unexercised Options/SARs
Options/SARs At Fiscal Year-
Shares At Fiscal Year-End End
Acquired On Value Exercisable/ Exercisable/
Exercise Realized Unexercisable Unexercisable
Name
- ---------------------------------------------------------------------------------------------------------------------------
Doug Forde N/A N/A N/A N/A
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</TABLE>
EMPLOYMENT AGREEMENTS
DOUGLAS H. FORDE, CHAIRMAN OF THE BOARD AND PRESIDENT
Under the terms of an employment agreement between the Company and Mr.
Forde, in consideration for his services to the Company, Mr. Forde will receive
an annual base salary of $150,000 as of January 1, 2000. Mr. Forde is also
eligible to participate in the Company=s Incentive Stock Option Plan.
LIONEL FORDE, VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR
Under the terms of an employment agreement between the Company and Mr.
Forde, in consideration for his services to the Company, Mr. Forde will receive
an annual base salary of $120,000 as of January 1, 2000. Mr. Forde is also
eligible to participate in the Company=s Incentive Stock Option Plan.
All Executive Officers of the Company are extended Employment Contracts
with a term of three (3) years, renewable annually thereafter.
1999 STOCK OPTION PLAN
On March 1, 1999 we adopted and implemented a Stock Option Plan (the
"Plan"). The Plan increases the employees', advisors', consultants' and
non-employee directors' proprietary interest in us and aligns more closely their
interests with the interests of our shareholders. The Plan also maintains our
ability to attract and retain the services of experienced and highly qualified
employees and non-employee directors.
Under the Plan, we reserved an aggregate of 1,000,000 shares of common
stock for issuance pursuant to options granted under the Plan ("Plan Options").
Our Board of Directors or a Committee of the Board of Directors (the
"Committee") will administer the Plan including, without limitation, the
selection of the persons who will be granted Plan Options under the Plan, the
type of Plan Options to be granted, the number of shares subject to each Plan
Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Nonqualified Options"). In addition, the Plan also allows for the inclusion of
a reload option provision ("Reload Option"), which permits an eligible person to
pay the exercise price of the Plan Option with shares of common stock owned by
the eligible person and receive a new Plan Option to purchase shares of common
stock equal in number to the tendered shares. Any Incentive Option granted under
the Plan must provide for an exercise price of not less than 100% of the fair
market value of the underlying shares on the date of such grant, but the
exercise price of any Incentive Option granted to an eligible employee owning
more than 10% of our common stock must be at least 110% of such fair market
value as determined on the date of the grant. The term of each Plan Option and
the manner in which it may be exercised is determined by the Board of the
Directors or the Committee, provided that no Plan Option may be exercisable more
than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of our common stock,
no more than five years after the date of the grant.
The exercise price of Nonqualified Options shall be determined by the
Board of Directors or the Committee.
The per share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in our
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Our officers, directors, key employees and consultants and our
subsidiaries (if applicable in the future) will be eligible to receive
Nonqualified Options under the Plan. Only our officers, directors and employees
who are employed by us or by any subsidiary thereof are eligible to receive
Incentive Options.
All Plan Options are nonassignable and nontransferable, except by will
or by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee's employment is
terminated for any reason, other than his death or disability or termination for
cause, or if an optionee is not an employee of but is a member of our Board of
Directors and his service as a Director is terminated for any reason, other than
death or disability, the Plan Option granted to him shall lapse to the extent
unexercised on the earlier of the expiration date or 30 days following the date
of termination. If the optionee dies during the term of his employment, the Plan
Option granted to him shall lapse to the extent unexercised on the earlier of
the expiration date of the Plan Option or the date one year following the date
of the optionee's death. If the optionee is permanently and totally disabled
within the meaning of Section 22(c)(3) of the Internal Revenue Code of 1986, the
Plan Option granted to him lapses to the extent unexercised on the earlier of
the expiration date of the option or one year following the date of such
disability.
The Board of Directors or the Committee may amend, suspend or terminate
the Plan at any time, except that no amendment shall be made which (i) increases
the total number of shares subject to the Plan or changes the minimum purchase
price therefore (except in either case in the event of adjustments due to
changes in our capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan has
been suspended or terminated by the Board of Directors, the Plan shall terminate
in approximately 10 years from the date of the Plan's adoption. Any such
termination of the Plan shall not affect the validity of any Plan Options
previously granted thereunder.
ITEM 5. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
Company=s shares (AShares@) of Common Stock, par value $.001, beneficially owned
as of November 30, 1999, for:
- each shareholder known by the Company to be the beneficial
owner of five (5%) percent or more of the Company=s outstanding
Common Stock,
- each of the Company=s executive officers and directors, and
- all executive officers and directors as a group.
In general, a person is deemed to be a Abeneficial owner@ of a
security if that person has or shares the power to vote or direct
the voting of such security, or the power to dispose of or to
direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities to which the person
has the right to acquire beneficial ownership within sixty (60)
days. As of November 30, 1999, there were 10,557,058 shares of
Common Stock outstanding. Approximate
Percentage of
No. of Outstanding Shares
NAME(1) SHARES BENEFICIALLY OWNED
Douglas H. Forde 775,000 7.3%
Lionel Forde(2) 650,000 6.2
Vincent Caminiti 250,000 2.4
Moty Hermon 500,000 4.7
Vito Gambelunghe 500,000 5.4
William Lerner - -
Michelle J. Michalow(3) 2,483,333 23.5
John W. Straatsma 250,000 2.4
All Executive Officers and
Directors as a group (6 persons) 2,925,000 27.7
- ----------
(1) Unless otherwise indicated, the address of each of the persons set forth
above is 7251 West Palmetto Park Road, Boca Raton, FL 33433.
(2) Lionel Forde is the brother of Douglas H. Forde.
(3) Ms. Michalow is a former officer of Celexx. Includes 1,733,333 shares owned
by Edinburgh Consulting which is wholly-owned by Ms. Michalow.
ITEM 6. INTEREST OF MANAGEMENT AND CERTAIN TRANSACTIONS
In November 1998, we entered into an agreement with Girmon Investment
Co., Limited, a company which is 33% owned by Moty Hermon, a member of our board
of directors. The agreement is for corporate finance advisory services for an
initial period of 36 months. As consideration for business, advisory and other
consulting services performed on our behalf, Girmon Investment received 500,000
shares of our Common Stock. Each share was valued at $.25for an aggregate value
of $125,000.
Since February 1998, Edinburgh Consulting, an entity which is wholly-
owned by Michelle J. Michalow, a former officer of Celexx, has loaned us
$664,761. In December 1998, Edinburgh contributed to capital $216,121. In
February 1999, pursuant to the terms of a consulting agreement between Edinburgh
and Celexx, Edinburgh converted $133,333 of the outstanding debt into 1,333,333
shares of our common stock at $.10 per share. Additionally, in March 1999
Edinburgh converted the remaining $315,307 into 400,000 shares of our common
stock at $.78 per share.
ITEM 7. DESCRIPTION OF SECURITIES
We are authorized to issue 20,000,000 shares of common stock, par value
$.001 per share, and 1,000,000 shares of preferred stock, par value $.001. As of
November 30, 1999, there were 10,557,058 shares of common stock issued and
outstanding, and no shares of preferred stock outstanding.
COMMON STOCK
Each share of common stock entitles the holders thereof, to one vote.
Holders of common stock do not have cumulative voting rights. This means that
the holders of more than 50% of shares voting for the election of Directors can
elect all of the Directors if they choose to do so, and in such event, the
holders of the remaining shares will not be able to elect any Directors. Our
bylaws require that only a majority of the issued and outstanding shares of our
common stock need be represented to constitute a quorum and to transact business
at a shareholders= meeting. The common stock has no preemptive, subscription or
conversion rights, and is not redeemable by us. Dividends are not anticipated to
be declared by the Board of Directors. Upon our liquidation, dissolution or
winding up, after payment to creditors and holders of any outstanding shares of
preferred stock, our assets will be divided pro rata on a per share basis among
the holders of the common stock.
PREFERRED STOCK
We are authorized to issue 1,000,000 shares of preferred stock, $.001
par value per share, of which no shares are outstanding as of the date hereof.
The preferred stock may be issued in one or more series, the terms of which may
be determined at the time of issuance by the Board of Directors, without further
action by shareholders, and may include voting rights (including the right to
vote as a series on particular matters), preferences as to dividends and
liquidation, conversion rights, redemption rights and sinking fund provisions.
The issuance of any preferred stock could adversely affect the rights of the
holders of common stock and, therefore, reduce the value of the common stock.
The ability of the Board of Directors to issue preferred stock could discourage,
delay or prevent the takeover of Celexx.
SHARES ELIGIBLE FOR FUTURE SALES
As of November 30, 1999, we had outstanding, an aggregate of 10,557,058
shares of common stock. Of the total outstanding shares of common stock,
1,632,203 shares of common stock are freely tradable without restriction or
further registration under the Act. The remaining 8,924,855 shares of common
stock will be eligible for resale after March 1, 2000 under Rule 144.
Under Rule 144, a person (or persons whose shares of common stock are
aggregated) who has beneficially owned restricted securities for at least one
year, including the holding period of any prior owner except an affiliate, would
be generally entitled to sell, within any three month period, a number of shares
that does not exceed the greater of:
(i) 1% of the number of the then outstanding shares of the
common stock, or
(ii) the average weekly trading volume of the common stock
in
the public market during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain manner of sale
provisions notice requirements and the availability of current public
information about Celexx. Any person (or persons), whose shares are aggregated
and who is not deemed to have been an affiliate of Celexx at any time during the
three months preceding a sale and who has beneficially owned shares for at least
two years (including any period of ownership of preceding nonaffiliated
holders), would be entitled to sell such shares under Rule 144 (k) without
regard to the volume limitations, manner-of-sale provisions, public information
requirements or notice requirements.
CERTAIN NEVADA LEGISLATION
Nevada law and our Articles and Bylaws authorize us to indemnify our
directors, officers, employees and agents. We have insurance in place to satisfy
said requirements. In addition, our Articles and Nevada law presently limit the
personal liability of corporate directors for monetary damages, except where the
directors
(i) breach their fiduciary duties; and
(ii) such breach constitutes or includes certain violations
of criminal law, a transaction from which the directors
derived an improper personal benefit, certain unlawful
distribution or certain other reckless, wanton or
willful acts or misconduct.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON CELEXX CORPORATION=S COMMON
EQUITY AND OTHER STOCKHOLDER MATTERS
As of November 30, 1999, there were approximately 184 shareholders of record of
our Common Stock. Since November 4, 1999 our Common Stock has traded on the
Over-The-Counter Bulletin Board under the symbol "CLXX", and commenced its
trading on October 16, 1998. Prior to November 4, 1999 our common stock traded
under the symbol "CBRA". The following table sets forth, for the period since
October 1998, the high and low bid quotations for our Common Stock for the
periods indicated as reported by the OTC Bulletin Board. The quotations
represent prices between dealers and do not include retail mark-up, mark-down or
commissions or necessarily represent actual transactions.
PERIOD HIGH LOW
October 16, 1998 - December 31, 1998 $ .625 $.06
January 1, 1999 - March 31, 1999 $6.00 $.875
April 1, 1999 - June 30, 1999 $1.53 $.875
July 1, 1999 - September 30, 1999 $1.15 $.63
The transfer agent for the Company=s Common Stock is American Registrar
& Transfer Company, 342 East 900 South Street, Salt Lake City, Utah 84111.
We have never paid cash dividends on our Common Stock. We presently
intend to retain future earnings, if any, to finance the expansion of our
business and do not anticipate that any cash dividends will be paid in the
foreseeable future. The future dividend policy will depend on our earnings,
capital requirements, expansion plans, financial condition and other relevant
factors.
ITEM 2. LEGAL PROCEEDINGS
There are no legal proceedings filed, or to our knowledge, threatened
against Celexx that we believe would have, individually or in the aggregate, a
material adverse effect upon our financial condition or results of operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
All Shares below reflect the number of shares issued after giving
effect to a 1 for 24 reverse split in Spectrum Ventures, Inc. shares, which was
approved by shareholders of Spectrum Ventures, Inc. on February 18, 1999.
Prior to the Merger of CobraTec, Inc. and Spectrum Ventures, Inc.
(ASpectrum@), on February 18, 1999, Spectrum raised $11,000 from sales made
pursuant to a Regulation D - Rule 504 Offering Memorandum dated February 27,
1997. There were 101 purchasers, including friends, relatives or acquaintances
of Spectrum=s Officers, Directors and Affiliates. The aggregate number of shares
of common stock issued was 45,833. Spectrum Ventures, Inc. ("Spectrum"), a
Nevada corporation, was listed on the OTC Bulletin Board (symbol SCMV).
While pursuing its business plan, Spectrum conducted a Regulation D -
Rule 504 Offering pursuant to an Offering Memorandum dated February 27, 1998,
whereby it raised an additional $84,900 from 24 shareholders for an aggregate
number of 3,538 shares of Spectrum common stock.
In September 1998, three key employees were issued an aggregate of
1,397 shares of our common stock in reliance upon an exemption provided by
Section 4(2) of the Securities Act of 1933 and are restricted securities.
In December 1998, 10,458 shares, in aggregate, of Spectrum's common
stock were issued to D. F. Mintmire - (Spectrum's Attorney), Neil Rand -
(Spectrum"s Consultant), and William Custer - (Vendor for Application Software
Development, Inc.) in exchange for services and release of personal debt of
certain officers and directors of Spectrum.
In June 1997, 28,333 shares of Spectrum's common stock were issued to
Larry K. Danley and Jacqueline C. Danley, E.H. Frankland Trust, Arthur Hansuld,
Peter S. Harlee, Jr., John Roy Gough and Virginia L. Gough, Bill Sheffield and
Angela D. Sheffield, Howard Crosby and Marc Donovan, all shareholders of
Commercial Computer Systems, Inc. in connection with Spectrum's acquiring
exclusive marketing rights to 5 proprietary software products from Commercial
Computer Systems, Inc. ("CCS"), a Florida corporation, an asset purchase for
which Spectrum relied upon Regulation D - Rule 504 as an exemption from
Registration.
On February 18, 1999, we merged with Spectrum Ventures, Inc.
(ASpectrum), a Nevada corporation. Pursuant to the Merger, Spectrum shareholders
received 713,475 shares of Celexx, Inc.=s common stock. As a consideration to
cancel a letter of intent for Spectrum to acquire Commercial Computer Systems,
Inc., we issued an additional 200,000 shares of our common stock to Commercial
Computer Systems, Inc. Accordingly, the issuance of these securities was exempt
from the registration requirements of the act pursuant to Section 4(2) of the
Act. Also on February 18, 1999 the founders of Celexx, pursuant to a share
exchange agreement with Spectrum, received 4,500,000 common shares as a
condition of the merger.
As a condition of the retirement of related party debt in the amount of
$448,640 with Edinburgh Consulting, Inc., a consulting firm owned by Michelle
Michalow, a former officer of Celexx, 1,733,333 shares were issued. Pursuant to
a Consulting Agreement between Celexx and Edinburgh, $133,333 was converted at
$.10 per share. The remaining $315,307 was converted at $.78 per share. The
issuance of the securities was exempt from registration requirements of the Act
pursuant to Section 4(2) of the Act.
In November 1998, we entered into an agreement with Girmon Investment
Co., Limited (AGirmon@), a company which is 33% owned by Moty Herman, a member
of our board of directors for corporate finance advisory services for an initial
period of 36 months. As consideration for business, advisory and other
consulting services performed on behalf of the Company, Girmon received 500,000
shares of our common stock valued at $125,000 or $.25 per share.
In February 1999, we issued 300,000 shares of common stock to Crabbe
Capital for $30,000, for financial advice, consulting services and market
strategies provided by Crabbe. The issuance of the securities was exempt from
registration requirements of the Act pursuant to Section 4(2) of the Act.
In March 1999, Celexx conducted an offering of common stock at $1.00
per share pursuant to Rule 504 of Regulation D under the Act. Management sold an
aggregate of 860,250 shares of common stock for an aggregate of $860,250.
Accordingly, the issuance of these securities was exempt from registration
requirements of the Act pursuant to Section 4(2) of the Act.
In May 1999, we signed a merger agreement and took effective control of
West Columbia, SC-based Pinneast.com for a combination of cash and stock. In
exchange for all of the outstanding stock of Pinneast, an aggregate of 500,000
shares of our common stock were issued to the Pinneast.com shareholders and a
cash payment of $100,000 (deferred for one year). The shares of common stock
were valued at $1.50 per share. Accordingly, the issuance of these securities
was exempt from registration requirements of the Act pursuant to Section 4(2) of
the Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada Business Corporation Act (the ACorporation Act@) permits the
indemnification of directors, employees, officers and agents of a Nevada
corporation. Our Certificate of Incorporation and the Bylaws provide that the
corporation shall indemnify its directors and officers to the fullest extent
permitted by the Corporation Act. Insofar as indemnification for liabilities
arising under the Act may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, we have been informed that,
in the opinion of the Commission, such indemnification is against public policy
as expressed in the Act and is therefore unenforceable.
PART F/S
The financial statements and supplementary data are included herein.
FINANCIAL STATEMENTS AND EXHIBITS
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CELEXX CORPORATION
Independent Auditors' Report.................................................F-2
Consolidated Balance Sheet...................................................F-3
Consolidated Statement of Operations.........................................F-4
Consolidated Statement of Stockholders' Equity (Deficit).....................F-5
Consolidated Statement of Cash Flows.........................................F-6
Notes to Consolidated Financial Statements............................F-7 - F-12
PINNACLE EAST, INC.
Independent Auditors' Report................................................F-13
Balance Sheets..............................................................F-14
Statements of Operations....................................................F-15
Statements of Cash Flows....................................................F-16
Notes to Financial Statements.........................................F-17 -F-18
COMPUTER MARKETPLACE, INC.
Independent Auditors' Report................................................F-19
Balance Sheets..............................................................F-20
Statements of Operations....................................................F-21
Statements of Cash Flows....................................................F-22
Notes to Financial Statements.........................................F-23 -F-26
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Description of Proforma Financial Statements................................F-27
Unaudited Proforma Consolidated Balance Sheet...............................F-28
Unaudited Proforma Condensed Consolidated Statement of Operations
(Nine months ended September 30, 1999)......................................F-29
Unaudited Proforma Condensed Consolidated Statement of Operations
(Year ended December 31, 1998)..............................................F-30
Notes to Unaudited Pro-Forma Condensed Consolidated Financial Statements... F-31
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
CeleXx, Corporation
Boca Raton, Florida
We have audited the accompanying balance sheet of CeleXx Corporation,
as of December 31, 1998, and the related statements of operations, stockholders'
equity (deficit) and cash flows for the period July 10, 1998 (inception) through
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amount and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CeleXx Corporation,
as of December 31, 1998, and the results of its operations and its cash flows
for the period July 10, 1998 (inception) through December 31, 1998, in
conformity with generally accepted accounting principles.
/s/Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
July 21, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
CELEXX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
(unaudited)
ASSETS ------------ ----------
CURRENT ASSETS:
<S> <C> <C>
Cash .......................................................$ 20,221 $ --
Accounts receivable ........................................ 257,675 --
Loan receivable - related party ............................ 112,122 --
------------ -----------
TOTAL CURRENT ASSETS ........................................... 390,018 --
FURNITURE AND EQUIPMENT, net ................................... 58,579 --
GOODWILL ....................................................... 100,000 --
OTHER INTANGIBLES, net ......................................... 808,321 --
DEPOSITS AND OTHER ASSETS ...................................... 131,753 --
------------ -----------
$ 1,488,671 $ --
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses ......................$ 219,364 $ 159,629
Note payable shareholders .................................. 100,000 --
Line of credit ............................................. 264,707 --
------------ ----------
TOTAL CURRENT LIABILITIES .................................. 584,071 159,629
------------ -----------
DUE TO RELATED PARTY ........................................... 56,000 100,000
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $001 par value, 1,000,000 share authorized;
none issued
Common stock, $.001 par value, 20,000,000 shares authorized;
9,307,058 and 5,413,475 shares issued and outstanding .... 9,306 5,413
Additional paid-in capital ................................. 2,260,826 51,079
Accumulated Deficit ........................................ (1,421,532) (316,121)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) .................. 848,600 (259,629)
------------ -----------
$ 1,488,671 $ --
============ ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
CELEXX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months July 10, 1998
Ended (Inception) to
September 30, 1999 December 31, 1998
(Unaudited)
<S> <C> <C>
REVENUE ...............................................$ 605,516 $ --
COST OF SALES ......................................... 251,271 --
------------- ------------
GROSS PROFIT .......................................... 354,245 --
OPERATING EXPENSES .................................... 1,445,086 316,121
------------- ------------
LOSS FROM OPERATIONS .................................. (1,090,841) (316,121)
INTEREST EXPENSE ...................................... 14,570 --
------------- ------------
NET LOSS .............................................. $(1,105,411) $ (316,121)
============= ============
NET LOSS PER COMMON SHARE - basic and assuming dilution $ (0.14) $ (0.06)
============= ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ............ 7,841,817 5,413,475
============= ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
CELEXX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock
--------------------- Additional Total
Number of Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity (Deficit)
---------- ---------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, July 10, 1998 (Inception) - $ - $ - $ - $ -
Issuance and sale of stock 4,500,000 4,500 (4,500) - -
Shares issued in conjucntion with merger 200,000 200 (200) -
Issuance of common stock for exchange 713,475 713 (160,342) - (159,629)
Capital contribution - - 216,121 - 216,121
Net loss - - - (316,121) (316,121)
---------- ---------- ------------ -------------- ---------------
Balance, December 31, 1998 5,413,475 5,413 51,079 (316,121) (259,629)
Period ended September 30, 1999
(unaudited)
Acquisition of subsidiary 500,000 500 749,250 - 749,750
Retirement of related party debt 1,733,333 1,733 446,907 - 448,640
Shares issued for consulting services 500,000 500 124,500 - 125,000
Sale of common stock 1,160,250 1,160 889,090 - 890,250
Net loss - - - (1,105,411) (1,105,411)
---------- ---------- ------------ -------------- ---------------
Balance, September 30, 1999 (unaudited) 9,307,058 $ 9,306 $ 2,260,826 $ (1,421,532) $ 848,600
========== ========== ============ ============== ===============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CELEXX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months July 10, 1998
Ended (Inception) to
September 30 1999 December 31, 1998
(Unaudited)
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (1,105,411)$ (316,121)
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation 3,384
Amortization 38,811 -
Common stock issued for services 125,000 -
Changes in assets and liabilities net of assets acquired:
Increase in accounts receivable (62,220) -
Increase in deposits and other assets (208,122) -
Increase in accounts payable and accrued expenses 19,958 -
(83,189) -
----------------- -----------------
NET CASH USED IN OPERATING ACTIVITIES (1,188,600) (316,121)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired in acquisition 8,251 -
Capital expenditures (40,986) -
NET CASH FLOWS USED IN INVESTING ACTIVIES (32,735) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 890,250 -
Capital contributions - 216,121
Increase in line of credit 21,067 -
Borrowings from related parties 348,640
(Increase) decrease in due to related parties (18,401) 100,000
----------------- -----------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 1,241,556 316,121
----------------- -----------------
NET INCREASE IN CASH 20,221 -
CASH - beginning of period - -
----------------- -----------------
CASH - end of period $ 20,221 $ -
================= =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
================= =================
Cash paid during the year for interest $ 14,570 $ -
================= =================
Noncash investing and financing activities:
Purchase of subsidiary for a note $ 100,000 $ -
================= =================
Common stock issued for acquisitions $ 500,000 $ -
================= =================
Conversion of related party debt to common stock$ 448,640 $ -
================= =================
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CELEXX, CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 10, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998
(UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30,1999)
1. ORGANIZATION:
Cobra Technologies International, Inc. ("International"), a Delaware
corporation, was formed on July 10, 1998 to "roll-up" select
businesses that produce, service, maintain or support the information
technologies industry.
On February 18, 1999, the Company was acquired by Spectrum Ventures,
Inc. ("Spectrum"), a Nevada corporation, for 4,500,000 shares of
Spectrum stock (the "Exchange"). The Exchange was completed pursuant to
the Agreement of Merger between International and Spectrum. The
Exchange has been accounted for as a reverse acquisition under the
purchase method for business combinations. Accordingly, the combination
of the two companies is recorded as a recapitalization of
International, pursuant to which International is treated as the
continuing entity. Subsequent to the Exchange, with the approval of the
Board of Directors, Spectrum changed its name to Cobra Technologies,
Inc. On August 3, 1999 Cobra Technologies, Inc. changed its name to
CobraTec, Inc. On November 4, 1999 CobraTec, Inc. changed its name to
CeleXx Corporation ("CeleXx" or the "Company").
On February 18, 1999, prior to the merger with Spectrum, the Board of
Directors of Spectrum declared a 1:24 reverse stock split which
resulted in 713,475 shares outstanding. All periods presented have been
retroactively restated to give effect to this reverse stock split.
Additionally, on February 18, 1999 the Company issued 200,000 shares of
its common stock as part of the merger agreement with Spectrum in order
to receive a release from an acquisition agreement between Spectrum and
Commercial Computer Systems, Inc. These shares have been treated as a
cost of the merger with Spectrum.
The Company completed an offering of its common stock in April 1999
pursuant to the Securities Act of 1933 and Rule 504 of Regulation D.
The Company offered shares of common stock at $1.00 per share and
received gross proceeds from this offering of $860,250.
On May 25, 1999 CeleXx acquired through its wholly owned subsidiary,
Pineast.com, Inc, all the outstanding shares of Pinnacle East, Inc., a
South Carolina Corporation, for 500,000 shares of CeleXx and a $100,000
note payable due in May 2000. Subsequent to the acquisition Pinnacle
East, Inc. was dissolved.
In June 1999 CeleXx entered into an agreement to acquire Computer
Marketplace, Inc., a Massachusetts company engaged in systems
engineering, design and maintenance of computer network systems. The
consideration to be paid is 1,000,000 shares of the Company's common
stock and $1,250,000 at closing and a note payable for $1,250,000
bearing interest at 6% due in two equal annual installments on the
anniversary of the closing date. CeleXx intends to close this sale
before the end of the first quarter 2000.
F-7
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of the Company and its
subsidiaries. The accounts of Pinneast.com, Inc. have been
included from the date of acquisition May 25, 1999 through
September 30, 1999. All material intercompany transactions
have been eliminated.
B. ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could
differ from those estimates.
C. CASH AND CASH EQUIVALENTS - The Company considers all highly
liquid temporary cash investments with an original maturity of
three months or less when purchased, to be cash equivalents.
D. REVENUE RECOGNITION - Revenues are recognized as services
are provided.
E. CONCENTRATION OF RISK - Credit losses, if any, have been
provided for in the financial statements and are based on
management's expectations. The Company's accounts receivable
are subject to potential concentrations of credit risk. The
Company does not believe that it is subject to any unusual or
significant risks, in the normal course of business.
F. INCOME TAXES - Income taxes are accounted for under Statement
of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which is an asset and liability approach that
requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial
statements or tax returns.
G. NET LOSS PER SHARE - The Company has adopted Statement of
Financial Accounting Standard No. 128, "Earnings Per Share;"
specifying the computation, presentation, and disclosure
requirements of earnings per share information. Basic earnings
per share has been calculated based upon the weighted average
number of common shares outstanding. Stock options have been
excluded as common stock equivalents in the diluted earnings
per share because they are either antidilutive, or their
effect is not material.
H. FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts
reported in the balance sheet for cash, receivables, accounts
payable and accrued expenses approximate fair value based on
the short-term maturity of these instruments.
I. GOODWILL(UNAUDITED) - Goodwill resulting from the acquisition
of Pinneast.com, Inc. represents the remaining unamortized
value of the excess of the purchase price over the fair value
of the net assets of Pinneast.com, Inc. Goodwill is amortized
on a straight line basis over a 10 year period.
J. OTHER INTANGIBLES (UNAUDITED) - Other intangibles resulting
from the acquisition of Pinnacle East, Inc. represents
customer lists and Pinnacle's trade name. These assets are
amortized on a straight line basis over 7 and 10 years,
respectively.
F-8
<PAGE>
K. IMPAIRMENT OF LONG-LIVED ASSETS - The Company reviews
long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the
carrying amounts may not be recovered. At December 31, 1998,
the Company believes that there has been no impairment of its
long-lived assets.
L. INTERIM FINANCIAL STATEMENTS - The consolidated financial
statements as of September 30, 1999 and for the nine months
then ended are presented as unaudited. In the opinion of
management, these financial statements include all adjustments
necessary to present fairly the information set forth therein.
These adjustments consist solely of normal recurring accruals.
The interim results of operations for the nine months ended
September 30, 1999 are not necessarily indicative of the
results to be expected for the full year or for any other
interim period.
M. NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement of Financial
Accounting Standard ("SFAS") No. 130 and 131. SFAS No.130
establishes standards for reporting and display of
comprehensive income and its components. SFAS No. 131
establishes standards for reporting about operating segments,
products, services, geographic areas, and major customers. The
Company has adopted these standards for all periods presented.
In June 1999 the FASB issued Statement of Financial Accounting
Standard No. 133 which establishes standards for accounting
and reporting derivative instruments, including certain
derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging
activities. Management has adopted these standards for the
year ending after December 31, 1999, additionally the Company
believes the adoption of this standard will not have a
material effect on its financial statements.
3. RELATED PARTY TRANSACTIONS
As of December 31, 1998 the Company has a payable of $100,000 due to
Edinburgh Consulting, an entity which is wholly owned by a shareholder
of the Company. Such payable arose subject to the terms of a consulting
agreement between Edinburgh and the Company. Pursuant to such
agreement, Edinburgh may convert the payable into shares of the
Company's stock upon such shares becoming publically traded. As of
September 30, 1999 the shareholders' of Edinburgh had converted all of
its outstanding debt into shares of the Company's common stock.
As of September 30, 1999 CeleXx owes $56,000 in short term borrowings
to shareholders of the Company.
At September 30, 1999 shareholders have short term loans due to the
Company of $112,122.
F-9
<PAGE>
4. INTANGIBLE ASSETS
Intangible assets as of September 30, 1999 are as follows:
September 30,
Useful Life 1999
---------------------- ------------------------
Goodwill 10 years $ 100,000
Customer lists 7 years 477,506
Trade name 10 years 330,815
------------------------
$ 908,321
========================
5. LINE OF CREDIT
As of September 30, 1999 the Company's Pinneast.com, Inc., subsidiary,
has $264,707 outstanding on its $300,000 line of credit. Such line
expires on November 1, 1999 and bears interest at 8.75% per annum.
6. STOCKHOLDERS' EQUITY
During the nine months ended September 30, 1999 a related party,
Edinburgh Consulting, converted the $448,640 owed to it for 1,733,333
shares of the Company's common stock. Pursuant to a consulting
agreement between CeleXx and Edinburgh Consulting, 1,333,333 of these
shares were issued at $0.10 per share or $133,333. The additional
400,000 shares were issued at $0.78 per share or $315,307.
In November 1998, CeleXx entered into an agreement with an entity
partially owned by a Director of the Company for financial consulting
services. The Company paid such entity 500,000 shares of its common
stock and valued these shares at $0.25 per share and accordingly, has
recorded compensation expense of $125,000. In February 1999, the
Company entered into an agreement with a financial consultant and
issued 300,000 shares of its common stock at $0.10 per share
aggregating $30,000.
In 1999 the Company issued 860,250 shares in a private placement at
$1.00 per share for total proceeds of $860,250.
7. EMPLOYMENT AGREEMENTS
On March 1, 1999 CeleXx entered into three year employment agreements
with two of the Company's officers. Such employment agreements
aggregate $145,000 annually through December 31, 1999 and $270,000
annually through February 28, 2002.
8. PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of preferred stock
at .001 par value, the terms of which may be determined at the time of
issuance by the Board of Directors without further action by the
shareholders.
F-10
<PAGE>
9. STOCK OPTION PLAN
On March 1, 1999 the Board of Directors (the"Board") adopted the CeleXx
Corporation 1999 stock option plan. The Board or CeleXx's compensation
committee is authorized to issue to eligible persons as defined a
maximum amount of 1,000,000 options under such plan. No options have
yet to be issued pursuant to the above plan.
10. INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 requires the recognition of deferred tax assets and
liabilities for both the expected impact of differences between the
financial statements and tax basis of assets and liabilities, and for
the expected future tax benefit to be derived from tax loss and tax
credit carryforwards. SFAS 109 additionally requires the establishment
of a valuation allowance to reflect the likelihood of realization of
deferred tax assets. The provision (benefit) for income taxes differs
from the amounts computed by applying the statutory federal income tax
rate to income (loss) before provision for income taxes is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------- -----------------------
<S> <C> <C>
Taxes benefit computed at statutory rate $ (362,000) $ (107,000)
Income tax benefit not utilized 362,000 107,000
Net income tax benefit $ - $ -
=================== =======================
</TABLE>
The Company has a net operating loss carryforward for tax purposes
totaling approximately $316,000 at December 31, 1998 expiring in the
year 2018.
Listed below are the tax effects of the items related to the Company's
net tax liability:
December 31,
1998
--------------------
Tax benefit of net operating loss carryforward $ 107,000
Valuation Allowance (107,000)
Net deferred tax asset recorded $ -
====================
11. COMMITMENTS AND CONTINGENCIES
COMMITMENTS:
In May 1999 CeleXx entered into a five year lease for office space at
an annual base rental of $92,500 for the initial year. Such base rental
shall increase by 4% each year. The lease is to commence when such
premises are available for occupancy. CeleXx is currently leasing
temporary office space from the same landlord at $5,300 per month.
F-11
<PAGE>
CONTINGENCIES:
Subsequent to September 30, 1999 the Company settled a litigation in
which Spectrum was held in judgement for services rendered on its
behalf in 1998. The Company paid $6,500 and issued 150,000 shares of
common stock. As of September 30, the Company accrued $86,000 for this
matter.
The Company has been made aware of a $50,000 judgement in 1998 against
Spectrum. The Company is contesting such judgment.
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Pinnacle East, Inc.
We have audited the accompanying balance sheets of Pinnacle East, Inc.
as of December 31, 1998 and 1997 and the related statements of operations, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Pinnacle East, Inc.
as of December 31, 1998 and 1997 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
July 2, 1999
F-13
<PAGE>
<TABLE>
<CAPTION>
PINNACLE EAST , INC.
BALANCE SHEETS
ASSETS
December 31,
---------------------------------------
1998 1997
------------------ ------------------
CURRENT ASSETS:
<S> <C> <C>
Cash $ - $ 4,148
Accounts receivable, net 88,612 31,275
------------------ ------------------
TOTAL CURRENT ASSETS 88,612 35,423
FIXED ASSETS, net 25,686 36,215
CUSTOMER LIST 24,231 26,467
OTHER 18,145 12,195
------------------ ------------------
$ 156,674 $ 110,300
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses 25,031 10,592
Line of credit 244,521 81,231
Note payable - 6,608
Deferred revenue 6,000 -
------------------ ------------------
TOTAL CURRENT LIABILITIES 275,552 98,431
------------------ ------------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value; 100,000 shares issued and outstanding 1,000 1,000
Retained earnings (deficit) (119,878) 10,869
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (118,878) 11,869
------------------ ------------------
$ 156,674 $ 110,300
================== ==================
</TABLE>
See notes to financial statements.
F-14
<PAGE>
PINNACLE EAST, INC.
STATEMENTS OF OPERATIONS
Years Ended
December 31,
------------------------------------------
1998 1997
------------------- -------------------
REVENUE $ 840,423 $ 651,091
------------------- -------------------
OPERATING EXPENSES:
Salaries and payroll taxes 540,022 389,959
Professional fees 117,523 42,929
Interest expense 23,052 1,732
Depreciation and amortization 17,475 19,266
Other 273,098 284,771
------------------- -------------------
971,170 738,657
------------------- -------------------
LOSS BEFORE INCOME TAXES (130,747) (87,566)
PROVISION FOR INCOME TAXES - 3,759
------------------- -------------------
NET LOSS (130,747) (91,325)
RETAINED EARNINGS- beginning of year 10,869 102,194
------------------- -------------------
RETAINED EARNINGS (DEFICIT) -
end of year $ (119,878) $ 10,869
=================== ===================
See notes to financial statements.
F-15
<PAGE>
<TABLE>
<CAPTION>
PINNACLE EAST, INC.
STATEMENTS OF CASH FLOWS
Years Ended
December 31,
-------------------------------------
1998 1997
-------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (130,747) $ (91,325)
------------------ ----------------
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization 17,475 19,266
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (57,337) 71,965
Increase in other assets (5,950) (11,495)
Increase (decrease) in accounts payable and accrued expenses 14,439 (5,583)
Increase (decrease) in deferred revenue 6,000 (11,200)
------------------ ----------------
Total Adjustments (25,373) 62,953
------------------ ----------------
NET CASH USED IN OPERATIONS (156,120) (28,372)
------------------ ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,710) (20,268)
------------------ ----------------
CASH USED IN INVESTING ACTIVITIES (4,710) (20,268)
------------------ ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing (repayment) of loans (6,608) 6,608
Increase in line of credit 163,290 43,188
------------------ ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 156,682 49,796
------------------ ----------------
NET (DECREASE) INCREASE IN CASH (4,148) 1,156
CASH - beginning of year 4,148 2,992
------------------ ----------------
CASH - end of year $ - $ 4,148
================== ================
SUPPLEMENTAL DISCLOSURES
Cash paid for interest $ 23,052 $ 1,732
================== ================
Cash paid for taxes $ - $ 3,759
================== ================
</TABLE>
See notes to financial statements.
F-16
<PAGE>
PINNACLE EAST, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1. ORGANIZATION
Pinnacle East, Inc.(the "Company") is located in Columbia,
South Carolina. The Company was organized in 1994 and is engaged in the
development of multimedia programs for industry and government.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
B. DEFERRED REVENUE - Deferred revenue arises from the proration of
service contracts sold by the Company, which is usually less than one
year.
C. PROPERTY AND EQUIPMENT - Property and equipment is stated at cost.
Depreciation is computed using straight line methods over the estimated
useful lives of the assets.
D. INCOME TAXES - The Company recognizes deferred tax assets and
liabilities based on the difference between the financial statements
carrying amount and the tax basis of assets and liabilities, using the
effective tax rates in the years in which the differences are expected
to reverse. A valuation allowance related to deferred tax assets is
also recorded when it is probable that some or all of the deferred tax
asset will not be realized.
E. FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value Financial
Instruments", requires disclosure of fair value information about
financial instruments whether or not recognized in the balance sheet.
The carrying amounts reported in the balance sheet for cash, trade
receivables, accounts payable and accrued expenses approximate fair
value on the short-term maturity of these instruments.
F. CARRYING VALUE OF LONG LIVED ASSETS - The Company reviews the
carrying value of the long-lived assets to determine if facts and
circumstances exist which would suggest that the assets may be impaired
or that the amortization period needs to be modified. If impairment is
indicated, then an adjustment will be made to reduce the carrying
amount of the tangible assets to their fair value. Based on the
Company's review as of December 31, 1998 and 1997, no impairment of
long-lived assets was evident.
F-17
<PAGE>
3. FIXED ASSETS
The Company's fixed assets are as follows:
December 31,
----------------------------------------
1998 1997
--------------- -----------------
Office equipment $ 86,677 $ 81,967
Automobiles 10,329 10,329
--------------- -----------------
97,006 92,296
Less accumulated depreciation 71,320 56,081
$ 25,686 $ 36,215
=============== =================
4. CUSTOMER LISTS
The Company bought the assets of an existing company at
inception in 1994. An intangible asset was recognized at the time, due
to a customer list which would provide a future customer base for the
company. The asset is being amortized over a 15 year life.
5. LINE OF CREDIT
The Company has a line of credit expiring November 1, 1999 in
the amount of $300,000, which is used for operating capital. Such line
bears interest 8.75% per annum.
The amounts outstanding under the line of credit are secured
by personal assets of the stockholders.
6. LEASE COMMITMENTS - The Company leases building space in Columbia,
South Carolina under a three year lease. The leases require minimum
annual payments of $24,672. Total rent expenses for the years ended
December 31, 1998 and 1997 were $34,623 and $31,951, respectively.
The minimum rental commitments as of December 31, 1998 for all
noncancellable operating leases with initial or remaining terms in
excess of one year are as follows:
Year Ending December 31, Amount
-------------------------------------------- ----- ------------------
1999 $ 24,672
2000 24,672
7. MAJOR CUSTOMERS
Sales to one of the Company's customers approximated 49% of
sales for the year ended December 31, 1998. Accounts receivable from
such customer was $47,960 at December 31, 1998. For the year ended
December 31, 1997 sales to another customer was approximately 54% of
sales. Accounts receivables from such customer was $15,000 at December
31, 1997.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Computer Marketplace, Inc.
Tewksbury, Massachusetts
We have audited the accompanying balance sheets of Computer
Marketplace, Inc. as of February 28, 1999 and 1998 and the related statements of
income, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Computer
Marketplace, Inc. as of February 28, 1999 and 1998 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
May 4, 1999
F-19
<PAGE>
<TABLE>
<CAPTION>
COMPUTER MARKETPLACE , INC.
BALANCE SHEETS
ASSETS
February 28,
September 30, ---------------------------------------
1999 1999 1998
------------------- ------------------ ------------------
CURRENT ASSETS: (unaudited)
<S> <C> <C> <C>
Cash $ 106,891 $ 400,974 $ 258,816
Accounts receivable, net of allowance for doubtful accounts
of $5,000 for all periods presented 2,742,945 2,293,585 1,287,805
Inventory 947,920 524,476 632,139
Other current assets 34,107 - -
------------------- ------------------ ------------------
TOTAL CURRENT ASSETS 3,831,863 3,219,035 2,178,760
FIXED ASSETS, net 46,398 32,348 18,455
DEPOSITS 9,663 14,326 500
------------------- ------------------ ------------------
$ 3,887,924 $ 3,265,709 $ 2,197,715
=================== ================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,182,419 $ 353,548 $ 190,907
Accrued expenses 169,199 110,625 53,969
Line of credit - 1,177,443 969,884
Officer loans - - 24,227
Income taxes payable - 230,500 128,347
Deferred revenue - 108,619 88,645
------------------- ------------------ ------------------
TOTAL CURRENT LIABILITIES 2,351,618 1,980,735 1,455,979
------------------- ------------------ ------------------
STOCKHOLDERS' EQUITY:
Common stock; no par, 15,000 shares authorized
9,250 shares issued and outstanding 56,000 56,000 56,000
Additional paid-in capital 62,505 62,505 62,505
Retained earnings 1,457,801 1,206,469 663,231
Less treasury stock at cost: 5,000 shares (40,000) (40,000) (40,000)
------------------- ------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 1,536,306 1,284,974 741,736
------------------- ------------------ ------------------
$ 3,887,924 $ 3,265,709 $ 2,197,715
=================== ================== ==================
</TABLE>
See notes to financial statements.
F-20
<PAGE>
<TABLE>
<CAPTION>
COMPUTER MARKETPLACE, INC.
STATEMENTS OF OPERATIONS
Seven Months
Ended Years Ended
September 30, February 28,
---------------------------------------
1999 1999 1998
-------------------- ------------------ ------------------
(unaudited)
<S> <C> <C> <C>
NET SALES $ 8,950,218 $ 16,733,839 $ 10,179,987
COST OF SALES 7,199,561 13,384,687 8,238,728
-------------------- ------------------ ------------------
GROSS PROFIT 1,750,657 3,349,152 1,941,259
OPERATING EXPENSES 1,316,888 2,403,542 1,543,909
-------------------- ------------------ ------------------
INCOME FROM OPERATIONS 433,769 945,610 397,350
OTHER (INCOME) EXPENSES:
Interest expense 16,678 29,236 27,235
Interest income (1,796) (4,666) (440)
(Gain) Loss on sale of moto- vehicle (700) 721
-------------------- ------------------ ------------------
14,882 23,870 27,516
-------------------- ------------------ ------------------
INCOME BEFORE INCOME TAXES 418,887 921,740 369,834
PROVISION FOR INCOME TAXES 167,555 378,502 145,131
-------------------- ------------------ ------------------
NET INCOME 251,332 543,238 224,703
RETAINED EARNINGS- beginning of year 1,206,469 663,231 438,528
-------------------- ------------------ ------------------
RETAINED EARNINGS- end of period $ 1,457,801 $ 1,206,469 $ 663,231
==================== ================== ==================
</TABLE>
See notes to financial statements.
F-21
<PAGE>
<TABLE>
<CAPTION>
COMPUTER MARKETPLACE, INC.
STATEMENTS OF CASH FLOWS
Seven Months
Ended Years Ended
September 30, Febraury 28,
-------------------------------------
1999 1999 1998
------------------ -------------------------------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 251,332 $ 543,238 $ 224,703
------------------ ------------------ ----------------
Adjustments to reconcile net income to net cash
used in operations:
(Gain) Loss on sale of motor vehicle - (700) 721
Depreciation 2,950 5,056 18,731
Changes in assets and liabilities:
Increase in accounts receivable (449,360) (1,005,780) (256,511)
Decrease (increase) in inventories (423,444) 107,663 (365,588)
Increase in other current assets (34,107) - -
Decrease in prepaid income taxes - - 17,358
Decrease in prepaid payroll taxes - - 185
(Increase) decrease in deposits 4,663 (13,826) 1,307
Increase (decrease) in accounts payable 1,828,871 162,641 (111,457)
Increase in accrued expenses 58,574 56,656 29,713
(Decrease) increase in income taxes payable (230,500) 102,153 128,347
(Decrease) increase in deferred revenue (108,619) 19,974 65,732
------------------ ------------------ ----------------
Total Adjustments 649,028 (566,163) (471,462)
------------------ ------------------ ----------------
NET CASH USED IN OPERATIONS 900,360 (22,925) (246,759)
------------------ ------------------ ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (17,000) (19,900) (14,214)
Proceeds from sale of motor vehicle - 1,651 200
------------------ ------------------ ----------------
NET CASH USED IN INVESTING ACTIVITIES (17,000) (18,249) (14,014)
------------------ ------------------ ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Officer loans (repaid) borrowed - (24,227) 17,287
(Decrease) increase in line of credit (1,177,443) 207,559 394,547
------------------ ------------------ ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (1,177,443) 183,332 411,834
------------------ ------------------ ----------------
NET (DECREASE) INCREASE IN CASH (294,083) 142,158 151,061
CASH - beginning of year 400,974 258,816 107,755
------------------ ------------------ ----------------
CASH - end of period $ 106,891 $ 400,974 $ 258,816
================== ================== ================
SUPPLEMENTAL DISCLOSURES
Cash paid for interest $ 16,978 $ 29,236 $ 27,235
================== ================== ================
Cash paid for taxes $ - $ 276,349 $ 16,784
================== ================== ================
</TABLE>
See notes to financial statements.
F-22
<PAGE>
COMPUTER MARKETPLACE, INC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 28, 1999 AND 1998
1. ORGANIZATION
Computer Marketplace, Inc. (the "Company") is located in
Tewksbury, Massachusetts. The Company was organized in 1984 and is
engaged in the sale and service of computer equipment and peripherals
through wholesale and retail channels.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
B. DEFERRED REVENUE - Deferred revenue arises from the proration of
service contracts sold by the Company which may vary in length from six
to twelve months.
C. INVENTORIES - Inventories are stated at the lower of cost or market
calculated on the first-in, first-out method, or market.
D. PROPERTY AND EQUIPMENT - Property and equipment is stated at cost.
Depreciation is computed using accelerated methods over the estimated
useful lives of the assets.
E. INCOME TAXES - The Company recognizes deferred tax assets and
liabilities based on the difference between the financial statements
carrying amount and the tax basis of assets and liabilities, using the
effective tax rates in the years in which the differences are expected
to reverse. A valuation allowance related to deferred tax assets is
also recorded when it is probable that some or all of the deferred tax
asset will not be realized.
F. FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value Financial
Instruments", requires disclosure of fair value information about
financial instruments whether or not recognized in the balance sheet.
The carrying amounts reported in the balance sheet for cash, trade
receivables, accounts payable and accrued expenses approximate fair
value on the short-term maturity of these instruments.
F-23
<PAGE>
G. CARRYING VALUE OF LONG LIVED ASSETS - The Company reviews
the carrying value of the long-lived assets to determine if
facts and circumstances exist which would suggest that the
assets may be impaired or that the amortization period needs
to be modified. If impairment is indicated, then an
adjustment will be made to reduce the carrying amount of the
tangible assets to their fair value. Based on the Company's
review as of February 28, 1999, no impairment of long-lived
assets was evident.
H. INTERIM FINANCIAL STATEMENTS - The financial statements as of
September 30, 1999 and for the nine months then ended are
presented as unaudited. In the opinion of management, these
financial statements include all adjustments necessary to
present fairly the information set forth therein. These
adjustments consist solely of normal recurring accruals. The
interim results of operations for the nine months ended
September 30, 1999 are not necessarily indicative of the
results to be expected for the full year or for any other
interim period.
3. FIXED ASSETS
The Company's fixed assets are as follows:
February 28,
----------------------------------------
1999 1998
--------------- -----------------
Furniture and fixtures $ 9,215 $ 7,615
Equipment 138,756 138,756
Leasehold improvements 28,263 17,363
Motor Vehicles 29,695 30,595
--------------- -----------------
205,929 194,329
Less accumulated depreciation 173,581 175,874
$ 32,348 $ 18,455
=============== =================
4. LINE OF CREDIT
The Company has a line of credit in the amount of $3,000,000,
which is used to purchase merchandise for resale. Interest accrues at
1% above the prime interest rate from days 41-60.
The amounts outstanding under the line of credit are secured
by accounts receivable and inventory equal to 125 percent of the
outstanding balance.
F-24
<PAGE>
5. RELATED PARTY TRANSACTIONS
A. OFFICER LOANS - The Company had an outstanding unsecured loan in
1998 due to an officer with interest charged at an annual rate of
10.5%. The outstanding balance as of February 28, 1998 was $24,227. The
Company repaid the remaining balance in June 1998. Interest expense
totaled $2,151 for the year ended February 28, 1998.
B. LEASE COMMITMENT - The Company leases building space in Tewksbury,
Massachusetts from a related party, under a five year lease. The
leases require minimum annual payments of $72,000 plus maintenance and
operating costs over the lease term. Total rent expenses
(including common area maintenance) for the years ended February 28,
1999 and 1998 were $85,628 and $79,412, respectively.
The minimum rental commitments as of February 28, 1999 for all
noncancelable operating leases with initial or remaining terms in
excess of one year are as follows:
Year Ending February 28, Amount
-------------------------------------------- ----- ------------------
2000 $ 72,000
2001 72,000
2002 72,000
2003 24,000
6. PROFIT SHARING PLAN
The Company maintains a IRC Section 401(k) plan covering
employees who meet minimum eligibility requirements. The Company made a
voluntary contribution to the Plan of $66,652 and 16,494 for the years
ended February 28, 1999 and 1998, respectively.
7. CONCENTRATION OF CREDIT RISK
A. The Company maintains cash balances at several financial
institutions located in Massachusetts. Accounts at each institution are
insured by Federal Deposit Insurance Corporation up to $100,000. At
February 28, 1999 and 1998, the Company's unsecured cash balances were
$63,416 and $119,588, respectively.
B. Concentration of credit risk with respect to trade receivables are
limited due to the large number of customers compromising the Company's
customer base and their dispersion across different industries and
geographic locations. As of February 28, 1999 and 1998, the Company had
no significant concentration of credit risk.
F-25
<PAGE>
8. INCOME TAXES
The provision for income taxes is as follows:
February 28,
----------------------------------
1999 1998
-------------- --------------
Federal income taxes $ 288,000 $ 113,000
State income taxes 90,502 32,131
-------------- --------------
Total income taxes $ 378,502 $ 145,131
============== ==============
9. MAJOR CUSTOMERS
Sales to two of the Company's customers approximated 27% of
sales for the year ended February 28, 1999. For the year ended February
28, 1998 sales to one such customer was approximately 12% of sales.
Accounts receivables from these two customers was approximately
$560,000 at February 28, 1999.
F-26
<PAGE>
CELEXX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO-FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
On May 25, 1999 CeleXx Corporation. (formerly "Cobra Technologies,
Inc."), ( "CeleXx") signed a merger agreement and took effective control of
Pinnacle East, Inc. ("Pinneast"). Cobra has also signed an agreement for the
acquisition of Computer MarketPlace ("CMI").
The following unaudited pro-forma condensed consolidated balance sheet
presents the pro-forma financial position of Cobra at September 30, 1999, as if
the acquisition of Computer MarketPlace, Inc.(" CMI ") had been made as of
September 30, 1999.
The unaudited pro-forma condensed consolidated statements of operations
for the nine months ended September 30, 1999 and the year ended December 31,
1998 reflect the combined results of CeleXx, Pinneast and CMI as if the
acquisitions had occurred on January 1, 1998.
The unaudited pro-forma condensed consolidated statements of operations
do not necessarily represent actual results that would have been achieved had
the companies been together from January 1, 1998, nor may they be indicative of
future operations. These unaudited pro-forma condensed consolidated financial
statements should be read in conjunction with the historical financial
statements and notes thereto of the respective companies.
F-27
<PAGE>
<TABLE>
<CAPTION>
CELEXX, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONSOLIDATED BALANCE SHEET
September 30, Proforma
1999 CMI Adjustments As Adjusted
------------- ------------ ------------ -------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash $ 20,221 $ 106,891 $ 1,250,000 $ 1,377,112
Accounts receivable 257,675 2,742,945 - 3,000,620
Income tax refunds receivable - 201,662 - 201,662
Inventory - 947,920 - 947,920
Loans receivable - related party 112,122 - - 112,122
------------- ------------ ------------ -------------
TOTAL CURRENT ASSETS 390,018 3,999,418 1,250,000 5,639,436
------------- ------------ ------------ -------------
FURNITURE AND EQUIPMENT, net 58,579 46,398 - 104,977
GOODWILL 100,000 - - 100,000
OTHER INTANGIBLES, net 808,321 - 1,796,140 2,604,461
DEPOSITS AND OTHER ASSETS 131,753 9,663 - 141,416
------------- ------------ ------------ -------------
$ 1,488,671 $ 4,055,479 $ 3,046,140 $ 8,590,290
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 219,364 $ 2,519,173 $ - $ 2,738,537
Note payable 100,000 - - 100,000
Line of credit 264,707 - - 264,707
------------- ------------ ------------ -------------
TOTAL CURRENT LIABILITIES 584,071 2,519,173 - 3,103,244
------------- ------------ ------------ -------------
NOTES PAYABLE 56,000 - 1,250,000 1,306,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIT) EQUITY:
Preferred stock, - - 2,500,000 2,500,000
Treasury stock at cost; 5,000 shares - (40,000) - (40,000)
Common stock, $.001 par value, 20,000,000 shares
authorized; 9,307,058 shares issued and outstanding 9,306 56,000 (55,000) 10,306
Additional paid-in capital 2,260,826 62,505 936,495 3,259,826
Deficit (1,421,532) 1,457,801 (1,585,355) (1,549,086)
------------- ------------ ------------ -------------
TOTAL STOCKHOLDERS' EQUITY 848,600 1,536,306 1,796,140 4,181,046
------------- ------------ ------------ -------------
$ 1,488,671 $ 4,055,479 $ 3,046,140 $ 8,590,290
============= ============ ============ =============
</TABLE>
See notes to proforma financial statements.
F-28
<PAGE>
<TABLE>
<CAPTION>
CELEXX, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
Cobra Pinneast CMI
Nine Months January 1, Nine Months
Ended September 30, to May 24, Ended September 30, Proforma Adjustments
1999 1999 1999 Debit Credit As Adjusted
---------------- ------------ ----------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE $ 605,516 $ 452,063 $ 11,741,765 $ - $ - $ 12,799,344
COST OF SALES 251,271 188,393 9,430,342 - - 9,870,006
---------------- ------------ ----------------- ----------- ------------ -----------
GROSS PROFIT 354,245 263,670 2,311,423 - - 2,929,338
OPERATING EXPENSES 1,445,086 218,446 1,717,478 (1) 220,471 - 3,601,481
---------------- ------------ ----------------- ----------- ------------ -----------
OPERATING INCOME (LOSS) (1,090,841) 45,224 593,945 (220,471) - (672,143)
INTEREST EXPENSE - - 21,551 (2) 56,250 - 77,801
---------------- ------------ ----------------- ----------- ------------ -----------
NET INCOME (LOSS) BEFORE TAXES (1,090,841) 45,224 572,394 (276,721) - (749,944)
BENEFIT (PROVISION) FOR TAXES - (18,090) (230,638)(3) 248,728 -
---------------- ------------ ----------------- ----------- ------------ -----------
NET INCOME (LOSS) (1,090,841) 27,134 341,756 (525,449) - (749,944)
CUMULATIVE PREFERRED
STOCK DIVIDEND - - - (4) 67,500 67,500
---------------- ------------ ----------------- ----------- ------------ -----------
NET INCOME (LOSS) TO COMMON
SHAREHOLDERS $ (1,090,841)$ 27,134 $ 341,756 $ (592,949)$ - $ (1,314,900)
================ ============ ================= =========== ============ ===========
LOSS PER COMMON SHARE $ (0.14) $ (0.10)
================ ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,841,817 7,841,817
================ ===========
</TABLE>
See notes to proforma financial statements.
F-29
<PAGE>
<TABLE>
<CAPTION>
CELEXX, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Cobra Pinneast CMI
Year Ended Year Ended Year Ended
December 31, December 31, February 28, Proforma Adjustments
1998 1998 1999 Debit Credit As Adjusted
------------ ----------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE $ - $ 840,423 $ 16,733,839 $ - $ - $ 17,574,262
COST OF SALES - - 13,384,687 - - 13,384,687
------------ ----------- ------------ ------------- ---------- ------------
GROSS PROFIT - 840,423 3,349,152 - - 4,189,575
OPERATING EXPENSES 316,121 971,170 2,427,412 (1) 293,961 - 4,008,664
------------ ----------- ------------ ------------- ---------- ------------
OPERATING INCOME (LOSS) (316,121) (130,747) 921,740 (293,961) - 180,911
INTEREST EXPENSE - - - (2) 75,000 - 75,000
------------ ----------- ------------ ------------- ---------- ------------
NET INCOME (LOSS) BEFORE TAXES (316,121) (130,747) 921,740 (368,961) - 105,911
BENEFIT (PROVISION) FOR TAXES - - (378,502)(3) 378,502 -
------------ ----------- ------------ ------------- ---------- ------------
NET INCOME (LOSS) (316,121) (130,747) 543,238 (747,463) - 105,911
CUMULATIVE PREFERRED
STOCK DIVIDEND - - - (4) 90,000 90,000
------------ ----------- ------------ ------------- ---------- ------------
NET INCOME (LOSS) TO COMMON
SHAREHOLDERS $ (316,121)$ (130,747)$ 543,238 $ (837,463)$ - $ (741,093)
============ =========== ============ ============= ========== ============
NET INCOME (LOSS) PER SHARE TO
COMMON SHAREHOLDERS $ (0.06) $ (0.14)
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,413,475 5,413,475
============ ============
</TABLE>
See notes to proforma financial statements.
F-30
<PAGE>
CELEXX, INC. AND SUBSIDIARIES
COMPUTER MARKETPLACE, INC.
NOTES TO UNAUDITED PRO-FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
CeleXx signed a merger agreement with Pinneast on May 25, 1999
and closed on such transaction on September 7, 1999. For accounting
purposes, the acquisition was effected on May 25, 1999, the date CeleXx
assumed effective control of Pinneast. The accompanying statements of
operations for the nine months ended September 30, 1999 and the year
ended December 31, 1998 include the results of operations of Pinneast
as if Pinneast was acquired on January 1, 1998. CeleXx also has entered
into an agreement, that management is of the opinion is probable of
closing, for the acquisition of the stock of CMI. The accompanying
pro-forma balance sheet reflects the combined balance sheet of CeleXx,
Pinneast and CMI as if the acquisition of CMI had occurred on September
30, 1999. The accompanying statements of operations for the nine months
ended September 30, 1999 and the year ended December 31, 1998 include
the results of operations of CMI as if such acquisition had occurred on
January 1, 1998. The financial statements for Computer MarketPlace,
Inc. have been audited for the years ended February 28, 1999 and 1998.
For purposes of the accompanying pro-forma unaudited condensed
consolidated statements of operations for the year ended December 31,
1998, the results of operations for the year ended February 28, 1999
are assumed to approximate the twelve months ended December 31, 1998.
A. The following unaudited pro-forma acquisition adjustment is included in
the accompanying unaudited pro-forma condensed consolidated balance
sheet at September 30, 1999:
B.
(1) To record the acquisition of the stock of CMI by CeleXx for
$1,250,000 in cash and a $1,250,000 note payable issued to the
seller bearing interest at 6 % per annum, and 1,000,0000
shares of CeleXx stock which has been valued at $1 per share
at September 30, 1999. To record $3,000,000 in preferred stock
issued to an unrelated third party, which pays cumulative at
3% per annum, net of $500,000 in offering costs.
C. The following pro-forma adjustments is included in the accompanying
unaudited pro-forma condensed consolidated statements of operations for
the year ended December 31, 1998 and the nine months ended September
30, 1999:
(1) To record amortization expense of goodwill and other
intangibles, which include customer lists, trade name and
covenant not to compete over their expected useful lives as
follows which range from 7 to 10 years.
(2) To record interest expense on the debt incurred to finance
the acquisition of Pinneast.
(3) To record consolidated provision (benefit) for income taxes.
(4) To record cumulative preferred dividends.
F-31
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBITS DESCRIPTION OF DOCUMENT
2.1 Plan of Reorganization and Agreement of Merger, dated July __,
1999, by and between Computer Marketplace, Inc., David Burke,
Sr., Betty Des Meules, Cobra Technologies, Inc. and CMI
Acquisition Corp.
3.1 By-Laws
3.2 Articles of Incorporation
3.3 Articles of Amendment of Articles of Incorporation
4.1 Stock Option Plan
10.1 Lease Agreement dated May 11, 1999, between Sawgrass Realty
Holdings, Inc. and Celexx Corporation (f/k/a Cobra
Technologies, Inc.)
10.2 Employment Agreement Lionel Forde
10.3 Employment Agreement Doug Forde
10.4 Merger Agreement by and between Pinneast.com, Inc. and Celexx
Corporation, dated May 25, 1999 (filed herewith)
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
27.5 Financial Data Schedule
- -------------------
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
Celexx Corporation caused this amendment to its registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
CELEXX, INC.
DATE: DECEMBER 28, 1999 BY: /S/DOUG FORDE
------------------------------------
Doug Forde, President and
Chief Executive Officer
DATE: DECEMBER 28, 1999 BY: /S/ LIONEL FORDE
------------------------------------
Lionel Forde, Vice President
TABLE OF CONTENTS
ARTICLE I INCORPORATION OF RECITALS.........................................1
ARTICLE II DEFINITIONS......................................................2
ARTICLE III THE MERGER......................................................4
3.1 The Merger................................................4
3.2 Articles of Merger........................................4
3.3 Articles of Incorporation and Bylaws......................4
3.4 Officers and Directors....................................4
3.5 Class of Stock............................................5
3.6 Conversion of Shares......................................5
3.7 Stock Restricted..........................................6
3.8 No Representation of Value................................6
3.9 Piggyback Registration Rights.............................6
3.10 Employment Contracts......................................7
3.11 Closing...................................................7
3.12 Actions Taken Prior to Closing............................7
3.13 Deliveries at Closing by the Company......................7
3.14 Deliveries at Closing by Cobra............................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................10
4.1 Organization, Qualification...............................10
4.2 Capitalization of the Company.............................11
4.3 Consents and Approvals....................................11
4.4 Non-Contravention.........................................11
4.5 Environmental Matters.....................................11
4.6 Inventory.................................................12
4.7 Accounts Receivable.......................................12
4.8 Licenses and Permits......................................12
4.9 Compliance with Laws......................................13
4.10 Financial Statements......................................13
4.11 Litigation................................................13
4.12 Absence of Changes........................................13
4.13 No Undisclosed Liabilities................................14
4.14 Title to Properties.......................................14
4.15 Leases....................................................15
4.16 Intellectual Property.....................................15
4.17 Material Contracts........................................15
4.18 Maintenance of Tangible Assets............................16
4.19 Insurance.................................................16
4.20 Labor Matters.............................................16
4.21 Employee Benefit Plans....................................16
4.22 Tax Matters...............................................17
4.23 Finders...................................................17
4.24 Insider Interests.........................................18
4.25 No Interest in Competitors, Etc...........................18
4.26 Purchase and Sale Obligations.............................18
4.27 Books and Records.........................................18
4.28 Bank and Safe Deposit Arrangements........................18
4.29 Insider Transactions......................................18
ARTICLE V REPRESENTATIONS AND WARRANTIES OF COBRA AND MERGER SUB............18
5.1 Organization, Qualification...............................18
5.2 Capitalization of the Cobra...............................19
5.3 Consents and Approvals....................................19
5.4 Non-Contravention.........................................19
5.5 Corporate Authority and Resolutions.......................19
5.6 Validity of Shares of Cobra to be issued..................20
5.7 Financial Statements......................................20
5.8 Authorization of Transactions; Securities Compliance......20
5.9 No Registration Rights....................................20
5.10 Brokers/Commissions.......................................20
5.11 Binding Agreement.........................................20
5.12 No Violation..............................................21
5.13 Litigation................................................21
5.14 No Undisclosed Liabilities................................21
5.15 Intellectual Property.....................................21
5.16 Compliance with Applicable Laws...........................21
5.17 Absence of Certain Changes................................22
5.18 Continuity of Business Enterprise.........................22
ARTICLE VI INVESTMENT REPRESENTATIONS.......................................22
6.1 Opportunity to Examine....................................22
6.2 No Representations as to Profit or Loss...................22
6.3 Cobra Shares not Registered...............................22
6.4 Investment Intent.........................................22
6.5 Reliance on Representations...............................23
ARTICLE VII ADDITIONAL AGREEMENTS...........................................23
7.1 Conduct of Business by Company and Cobra..................23
7.2 Negotiations with Others..................................23
7.3 Investigation of Business and Properties by Cobra.........23
7.4 Confidentiality...........................................24
7.5 Efforts to Consummate.....................................24
7.6 Further Assurances........................................24
7.7 Expenses..................................................25
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF COBRA AND MERGER SUB....25
8.1 Accuracy of Representations and Warranties................25
8.2 Absence of Default........................................25
8.3 Absence of Material Damage to or Expropriation of
Property..................................................25
8.4 Absence of Liens..........................................25
8.5 Actions, Proceedings, Etc.................................25
8.6 Legal Opinion.............................................25
8.7 Satisfaction with Respect to Financial Condition and
Performance...............................................25
8.8 Continuity of Business Relationships......................26
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY SHAREHOLDERS......26
9.1 Accuracy of Representations and Warranties................26
9.2 Absence of Default........................................26
9.3 Absence of Material Damage to or Expropriation of
Property..................................................26
9.4 Absence of Liens..........................................26
9.5 Actions, Proceedings, Etc.................................26
9.6 Legal Opinion.............................................27
9.7 Satisfaction with Respect to Financial Condition and
Performance...............................................27
9.8 Continuity of Business Relationships......................27
ARTICLE X INDEMNIFICATION...................................................27
10.1 Cobra's Right to Indemnification..........................27
10.2 Company Shareholders'Right to Indemnification.............27
10.3 Limitation on Indemnification.............................27
10.4 Procedure.................................................27
10.5 Limitations on Indemnification Rights.....................28
ARTICLE XI GENERAL PROVISIONS...............................................29
11.1 Expenses..................................................29
11.2 Notices...................................................29
11.3 Certain Breaches..........................................30
11.4 Prior Negotiations........................................30
11.5 Entire Agreement; Amendment...............................30
11.6 Exhibits/Schedules........................................30
11.7 Severability..............................................30
11.8 Survival of Representations and Warranties................30
11.9 Waiver....................................................30
11.10 Number and Gender.........................................30
11.11 Headings and Cross-References.............................31
11.12 Choice of Laws............................................31
11.13 Arbitration...............................................31
11.14 Successors................................................31
11.15 Third Parties.............................................31
11.16 No Inferences.............................................31
11.17 Counterparts..............................................31
<PAGE>
PLAN OF REORGANIZATION
AND AGREEMENT OF MERGER
RECITALS
PLAN OF REORGANIZATION AND AGREEMENT OF MERGER ("Agreement"), dated as
of July __, 1999, by and between Computer Marketplace, Inc. a corporation of the
State of Massachusetts, with offices at 885 Main Street, Tewksbury, MA 01876
(hereinafter the Company), David Burke, Sr. ("David"), Betty Des Meules, Lenice
Thomas and Emmanuel Spampinato (hereinafter sometimes referred to collectively
as the "Company Shareholders"), Cobra Technologies, Inc., a corporation of the
State of Nevada, with offices located at 7251 West Palmetto Park Road, Suite
208, Boca Raton, FL 33433 (hereinafter "Cobra"), and CMI Acquisition Corp.
(hereinafter the "Merger Sub").
WHEREAS, the Company Shareholders are the owners of nine thousand two
hundred fifty (9,250) shares of common stock, comprising 4,500 shares of Class A
Voting Common Stock and 4,750 Shares of Class B Non-Voting Common stock, and
representing one hundred percent(100%) of the issued and outstanding capital
stock of the Company (hereinafter the "Shares"); and
WHEREAS, the Boards of Directors of Cobra, the Merger Sub and the
Company have approved the merger of the Company with Merger Sub, pursuant to
which all of the Shares will be converted into common stock of Cobra and the
Company will merge with and into the Merger Sub, with the Merger Sub being the
surviving corporation; and
WHEREAS, the Boards of Directors of Cobra, the Merger Sub and the
Company have also approved the mergers, in accordance with the applicable
provisions of the statutes of the State of Nevada and the Commonwealth of
Massachusetts, which permit such mergers; and
WHEREAS, it is the intention of the parties that the merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (hereinafter the Code)and as a forward
triangular merger under Code Sections 368(a)(1)(A) and 368(a)(2)(D) and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code; and
WHEREAS, each of the parties to the Agreement desires to make certain
representations, warranties, and agreements in connection with the transaction
between the parties and to prescribe various conditions thereto.
ARTICLE I
INCORPORATION OF RECITALS
All of the recitals set forth above are incorporated herein by
reference.
ARTICLE II
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Affiliate" of a Person means a Person, who directly or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, such people.
"Agreement" has the meaning set forth in the introductory paragraph.
"Audited Financial Statements" has the meaning set forth in Section
4.10.
"Closing" has the meaning set forth in Section 3.10.
"Closing Date" has the meaning set forth in Section 3.10.
"Cobra Stock" means the voting common stock of Cobra.
"Effective Time" means the time indicated herein when the merger
pursuant to hereto shall be effective for corporate law purposes.
"Environmental Permits" means federal, state and local governmental
liens, permits and other authorizations and approvals, whether foreign or
domestic, which relate to the business of a Person as it may be affected by the
environment or to public health and safety or worker health and safety as they
may be affected by the environment.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Evaluation Material" has the meaning set forth in Section 7.4.
"First Anniversary Date" shall have the meanings set forth in Section
3.6(a)(2).
"Handling Hazardous Substances" has the meaning set forth in Section
4.5.
"Hazardous Emissions" has the meaning set forth in Section 4.5.
"Internal Revenue Code" or Code means the Internal Revenue Code of
1986, as amended.
"Intellectual Property" has the meaning set forth in Section 4.16.
"Inventory" has the meaning set forth in Section 4.6.
"Leases" and "Lease" have the meanings set forth in Section 4.15.
"Licenses and Permits" has the meaning set forth in Section 4.8.
"Material Contract" means each contract, agreement or commitment of a
Person other than Leases:
(a) upon which any substantial part of such Person's business
is dependent or which, if breached, could reasonably be expected to affect,
materially and adversely, the earnings, assets, financial condition or
operations of the business of such Person; or
(b) which provides for aggregate future payments of more than
$10,000, except for purchase orders or sale orders arising in the ordinary and
usual course of business, in which case they are listed only if any party
thereto is obligated to make payments pursuant thereto aggregating more than
$20,000; or
(c) which extends for more than one year from the date hereof
and is not cancelable by either party on 30 days' notice; or
(d) which provides for the sale, after the date hereof and
other than in the ordinary course of business, of any of its assets and except
for the sale or disposal of assets which have been replaced or become obsolete;
or
(e) which relates to the employment, retirement or termination
of the services of any officer or former officer; or
(f) which contains covenants pursuant to which any other
Person has agreed not to compete with any business conducted by such Person or
not to disclose to others information concerning such Person.
Collectively, each material Contract of such Person is referred to as
"Material Contracts."
"Merger" has the meaning set forth in Section 3.1.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plans" means all employee benefit plans and programs
including, without limitation, all retirement, savings and other pension plans.
"Permitted Exceptions" has the meaning set forth in Section 4.14.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
governmental or political subdivision or an agency or instrumentality thereof.
"Real Property" means all of the real property, together with the
fixtures and other improvements located thereon and the appurtenances thereto,
owned by a Person.
"Second Anniversary Date" has the meaning set forth in
Section 3.6(a)(2).
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the issued and outstanding capital stock of the Company,
comprised of 4,500 Class A voting stock and 4,750 Class B Non-Voting stock.
"Surviving Corporation" shall have the meaning set forth in Section 3.1
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Internal Revenue Code section 59A), customs duties, capital stock, franchise
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Welfare Plans" means all health, severance, insurance, disability and
other employee welfare plans.
ARTICLE III
THE MERGER
3.1 THE MERGER. Subject to the terms and conditions of this Agreement, at the
Closing provided for in this Agreement, on the Closing Date and at the Effective
Time, the Company shall be merged into the Merger Sub and the separate existence
of the Company shall thereupon cease, in accordance with the applicable
provisions of the General Corporation Law of the State of Nevada and the General
Corporation Law of the Commonwealth of Massachusetts. Said merger is referred to
herein as the "Merger." The Merger Sub will be the surviving corporation in the
Merger and will be governed by the laws of the Commonwealth of Massachusetts.
The separate corporate existence of the Merger Sub with all its rights,
privileges, powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified by the corporate laws of the
Commonwealth OF MASSACHUSETTS and the Commonwealth of Massachusetts. From and
after the Effective Time, the Merger Sub is sometimes referred to herein as the
"Surviving Corporation".
3.2 ARTICLES OF MERGER. On or before the Closing Date, the parties hereto shall
cause Articles of Merger (the "Articles of Merger"), meeting the requirements of
the corporate laws of the State of Nevada and the Commonwealth of Massachusetts
to be properly executed and filed. The Merger shall be effective, for corporate
law purposes, at the Effective Time.
3.3 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation of the
Merger Sub shall continue to be in effect after the merger and shall be the
Articles of Incorporation of the Surviving Corporation. The Bylaws of the Merger
Sub in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation.
3.4 OFFICERS AND DIRECTORS. The officers and directors of the Merger Sub
immediately prior to the Effective Time shall be the officers and directors of
the Surviving Corporation and will hold office until their successors are duly
elected and qualify in the manner provided in the Articles of Incorporation or
as otherwise provided by law, or until their earlier death, resignation or
removal.
3.5 CLASS OF STOCK. Cobra and the Merger Sub each represent that they presently
each have only one class of common stock outstanding. The Company represents
that it presently has only two classes of common stock outstanding, Class A
voting common stock and Class B non-voting common stock.
3.6 CONVERSION OF SHARES. The manner of converting the shares of the capital
stock of the Company shall by virtue of the Merger and without any action on the
part of the holders thereof, be as follows:
a. Subject to the terms hereof, the Shares outstanding immediately prior to the
Effective Time (the "Converted Shares"), shall be converted into one million
(1,000,000) shares of Cobra common stock and two million five hundred thousand
($2,500,000) dollars in cash. For purposes of this Agreement, the quantity of
Cobra common stock to be given to the Company Shareholders has been determined
based on an average bid price of Cobra common stock of $2.50 per share, for a
total estimated minimum value of $2,500,000.
1. As set forth in Schedule 3.6a, the 1,000,000 shares shall all be
transferred to David Burke, Sr. at the Closing; the $2,500,000 of cash
shall be paid in three installments as follows: (i) one million five
hundred thousand dollars ($1,500,000) shall be paid at the Closing in the
manner set forth in Schedule 3.6a., (ii) five hundred thousand dollars
($500,000) shall be due and payable on the first anniversary of the Closing
(the "First Anniversary Date") and (iii) five hundred thousand dollars
($500,000) shall be due and payable on the second anniversary of the
Closing (the "Second Anniversary Date"). The obligation to pay these two
installments shall be evidenced by a promissory note (the "Note") in favor
of David Burke, Sr., in form and substance attached hereto in Schedule
3.6b, in the original face amount of one million dollars ($1,000,000). The
dates of payment are subject to acceleration upon default by Cobra as set
forth in the Note. The Note shall bear simple interest at the rate of six
percent (6%) per annum, payable quarterly in arrears on the first day of
each calendar quarter.
2. If at either the First Anniversary Date or the Second Anniversary Date, or
both, the Cobra stock is being publicly traded and either: (i) the average
bid price for the Cobra stock on the open market for the past ninety (90)
days shall have been less THAN $2.50 PER SHARE, OR (II) the bid price is
less than $2.50 per share on such anniversary date, then on demand Cobra
will deliver to David a number of shares of Cobra common stock having a
fair market value (based on the bid price on the applicable anniversary
date) equal to the difference between the lower of such 90 day average bid
price or the bid price on the anniversary date and $2.50 per share. If the
Cobra stock is not being publicly traded on the applicable anniversary date
and the average price of the last three (3) bona fide sales of Cobra Stock
has been at less than $2.50 per share, Cobra will deliver to David shares
of Cobra common stock with a fair market value equal to the difference
between such average sale price and $2.50 per share. This additional
consideration will be made solely in additional shares of Cobra common
stock. Even if the average bid price or average sale price described above
is equal to or greater than $2.50 per share, no cash or other property will
be due from David or from any of the other Company Shareholders to Cobra.
b. All of the Converted Shares, by virtue of the Merger and upon surrender at
the Closing, shall no longer be outstanding and shall be canceled and retired
and shall cease to exist, and the holders thereof shall cease to have any rights
with respect to the Converted Shares.
c. Each share of the Company's common stock, if any, held in the treasury of the
Company on the Closing Date shall be canceled and retired and shall cease to
exist, and no consideration shall be paid with respect thereto.
3.7 STOCK RESTRICTED. All Cobra stock issued to David in conjunction with the
Merger shall be "restricted" shares within the meaning of Securities and
Exchange Commission Rule 144 promulgated under the Securities Act and
accordingly the certificate or certificates representing the Cobra shares shall
bear a restrictive legend in accordance with the requirements of Rule 144.
3.8 NO REPRESENTATION OF VALUE. Except for the provisions regarding the future
value of Cobra shares on the First Anniversary Date and Second Anniversary Date,
as set forth in Section 3.6(a)(2), David confirms that neither Cobra, nor any
officer, director, or shareholder of Cobra, nor any agent of, or professional
employed by Cobra, has made any representation as to the present or future value
or price of the Cobra shares, or any other securities of Cobra. Nor has Cobra or
any other such person made any representation with respect to the ability of
David to sell all or any part of the Cobra shares at their current market price
or at any other price. Further, the parties hereby confirm their understanding
that the future bid or asking price of Cobra's common stock, may not bear any
relationship to the net tangible book value of Cobra's common stock and,
further, may be unrelated to any other generally accepted method of valuation of
the Cobra stock.
3.9 PIGGYBACK REGISTRATION RIGHTS. Cobra shall advise David by written notice at
least twenty (20) days prior to the filing of any registration statement under
the Securities Act, or any successor thereto, with respect to the Cobra common
stock. Cobra will, upon written request of David within such twenty day notice
period, include among the securities covered by such registration, a percentage
of the Cobra shares owned by David equal to the percentage obtained by dividing
the number of shares of common stock that are offered by the Principal
Shareholders of Cobra by the total number of shares of common stock of Cobra
owned by such Principal Shareholders at the time of registration. Cobra will
include in any such registration statement such information as may be required
to permit a public offering of the Cobra shares owned by David on the same terms
of such registration statement as are applicable to the Principal Shareholders
of Cobra. Cobra shall supply prospectuses and use its best efforts to qualify
the Cobra shares registered pursuant to any such registration statement for sale
in those states where Cobra is qualifying the securities covered in such
registration. David shall furnish information reasonably required by Cobra to
register the Cobra shares pursuant to this Section 3.8. The cost of such
registration shall be borne by Cobra. "Principal Shareholders" shall mean the
five (5) shareholders of Cobra holding the highest number of shares of capital
stock of Cobra, as determined on a fully diluted basis.
3.10 EMPLOYMENT CONTRACTS. As of the Closing Date, Cobra shall enter into
employment contracts (the "Employment Contracts" with the following six (6)
employees (the "Key Employees") of the Company: 1) David Burke, Sr.; 2) David
Burke, Jr.; 3) Joseph Spampinato; 4) Emmanuel Spampinato; 5) Edward Trainor and
6) William Lavoie. The Employment Contracts shall be for an initial term of
three (3) years each with an initial base salary as agreed between Cobra and
each of the Key Employees and shall automatically renew for one additional year
at the expiration of the three year term and shall contain other terms
acceptable to the Key Employees. Each Employment Contract shall also provide
that each Employee shall receive all of the employee benefits available to other
employees of Cobra (including, but not limited to, medical insurance, dental
insurance and life insurance).
3.11 CLOSING. The closing of the Merger contemplated herein (the "Closing")
shall take place at the offices of Sherburne, Powers, Holland & Knight, on or
about July __, 1999 (the "Closing Date") or at another time or location mutually
agreeable to the parties.
3.12 ACTIONS TAKEN PRIOR TO CLOSING. Prior to closing, both parties shall take
all necessary actions to approve this transaction, including any required
meeting of the directors of Cobra, the Company and the Merger Sub.
3.13 DELIVERIES AT CLOSING BY THE COMPANY.
a. At Closing, the Company and the Company Shareholders shall deliver to the
representatives of Cobra (i) certificates representing the Shares, with stock
powers endorsed in favor of Cobra, and with all necessary transfer stamps
attached, if any; (ii) the stock books, stock ledgers, minute books and seals of
the Company; (iii) unanimous consents to action or a current corporate
certificate of good standing for the Company issued by the Massachusetts
Secretary of State; (iii) minutes of the meeting of shareholders or directors
approving of this transaction or proof that such consent or meeting was not
required and (iv) all other items required to be delivered by the Company to
Cobra at or prior to Closing under this Agreement, including, without
limitation, a legal opinion reasonably satisfactory to Cobra to the effect that:
1. The Company is duly incorporated and a validly existing corporation in good
standing under the laws of the Commonwealth of Massachusetts, and is duly
qualified to carry on its business and is in good standing in any state in
which it does business, except in those jurisdictions where the failure to
be duly qualified and in good standing would not have a material adverse
effect on the Company or the business conducted by it;
2. The Company has the requisite power and authority to execute and deliver,
and has taken all necessary corporate action to authorize the execution and
delivery of, this Agreement and the other documents and the transactions
contemplated herein. The Company Shareholders who execute this Agreement
have all requisite power and authority to enter into this Agreement
3. The execution and delivery by the Company and the Company Shareholders of
this Agreement, the performance by the Company of its obligations
hereunder, and the consummation of the transactions contemplated herein
will not result in the breach of or violate any term or provision of: the
Articles of Incorporation or Bylaws of the Company; to counsel's knowledge
based solely upon certificates of Company officers, any contract,
agreement, law, rule, regulation, judgment, order, decree or award to which
the Company is subject, other than such breaches or violations that would
not have a material adverse effect on the Company or its business.
4. According to the corporate record books of the Company when in counsel's
possession and affidavits of the Company Shareholders, the Shares of the
Company have been duly issued to the Company Shareholders and are fully
paid and non-assessable.
5. The Agreement has been duly executed and delivered by the Company and the
Company Shareholders; and the Agreement and all documents delivered
pursuant to the terms hereof are valid and binding on the Company and the
Company Shareholders and are enforceable in accordance with their
respective terms, subject to any applicable bankruptcy, fraudulent
conveyance, insolvency, reorganization or other laws of general application
affecting the enforcement of creditors' rights generally and general
principles of equity.
6. No consent of any party other than the parties hereto, and no consent,
license, approval or authorization of, or registration or declaration with,
any governmental bureau or agency is required in connection with the
execution, delivery, performance, validity and enforceability of this
Agreement.
7. According to the corporate record books of the Company when in counsel's
possession and affidavits of the Company Shareholders, the Company
Shareholders' transfer of the Shares to Cobra shall vest in Cobra good and
valid title to the Shares, free and clear of any lien, encumbrance, or
adverse claim of which counsel has knowledge.
8. Such other matters as are reasonable and customary in connection with
transactions of this kind.
3.14 DELIVERIES AT CLOSING BY COBRA.
a. At closing, Cobra shall deliver to the Company Shareholders, (i) certificates
representing Cobra stock issued to the Company Shareholders in the quantities
set forth in Schedule 3.13(a), (ii) cash in the amounts set forth in schedule
3.13(a) and (iii) the Notes in the amounts set forth in Schedule 3.13 (a).
b. At Closing, Cobra shall deliver to the Company; (i) a current certificate of
good standing for each of Cobra and Merger Sub issued by the Nevada Secretary of
State and the Massachusetts Secretary of State, respectively; (ii) unanimous
consent to action or minutes of the meeting of each of the Boards of Cobra
Directors and Merger Sub Directors approving of this transaction or proof that
such consent or meeting was not required and (iii) all other items required to
be delivered by Cobra and Merger Sub to the Company at or prior to Closing under
this Agreement, including, without limitation, a legal opinion reasonably
satisfactory to the Company to the effect that:
1. Cobra and Merger Sub are duly incorporated and are validly existing
corporations in good standing under the laws of the State of Nevada and
Massachusetts, respectively, and are duly qualified to carry on its
business and are in good standing in any states in which they do business;
2. Cobra and Merger Sub have the requisite power and authority to execute and
deliver, and have taken all necessary corporate action to authorize the
execution and delivery of, this Agreement and the other documents and the
transactions contemplated herein. The representatives of Cobra and Merger
Sub who execute this Agreement have all requisite power, authority and
capacity to enter into this Agreement on behalf of Cobra and Merger Sub and
the ability to cause Cobra and Merger Sub to fulfill their obligations
hereunder.
3. The execution and delivery by Cobra and Merger Sub of this Agreement, the
performance by Cobra and Merger Sub of their obligations hereunder, and the
consummation of the transactions contemplated herein will not result in the
breach of or violate any term or provision of the Articles of Incorporation
or Bylaws of Cobra or Merger Sub, or any contract, agreement, law, rule,
regulation, judgment, order, decree or award to which Cobra or Merger Sub
is subject.
4. When issued to the Company Shareholders, the outstanding shares of Cobra
and Merger Sub shall be duly issued to the Company Shareholders and will be
fully paid and non-assessable, and free of any lien, encumbrance or adverse
claim.
5. The Agreement has been duly executed and delivered by Cobra and Merger Sub;
and the Agreement and all documents delivered pursuant to the terms hereof
are valid and binding on Cobra and Merger Sub and are enforceable in
accordance with their respective terms, subject to any applicable
bankruptcy, insolvency, reorganization or other laws of general application
affecting the enforcement of creditors' rights generally and general
principles of equity.
6. No consent of any party other than the representatives of Cobra and Merger
Sub, and no consent, license, approval or authorization of, or registration
or declaration with, any governmental bureau or agency is required in
connection with the execution, delivery, performance, validity and
enforceability of this Agreement.
7. Such other matters as are reasonable and customary in connection with
transactions of this kind.
c. The Employment Contracts for each of the Key Employees as described set forth
in Section 3.9.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and David jointly and severally represent and warrant the
following (all references herein with respect to "the knowledge of the Company"
or the like, shall mean to the knowledge of the Company or David):
4.1 ORGANIZATION, QUALIFICATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of Massachusetts and has
corporate power and authority to own all of its properties and assets and to
carry on its business as it is presently being conducted. The Company is duly
qualified and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary, except in those jurisdictions where
the failure to be duly qualified and in good standing would not have a material
adverse effect on the Company or the business conducted by it. The Company has
heretofore delivered to Cobra complete and correct copies of the Articles of
Incorporation and Bylaws of the Company, as currently in effect.
4.2 CAPITALIZATION OF THE COMPANY. The authorized capital stock of the Company
consists only of 7,500 shares of Class A voting Common Stock and 7,500 shares of
Class B non-voting common stock, par value, of which, as of the date hereof,
four thousand five hundred (4,500) shares of Class A voting common stock and
4,750 Class B non-voting common stock are validly issued and outstanding, fully
paid and non-assessable, and were not issued in violation of any preemptive
rights. The Company has no commitment to issue or sell any shares of its capital
stock or any securities or obligations convertible into or exchangeable for, or
giving any person the right to acquire from it, any shares of its capital stock
and no such securities or obligations are issued or outstanding.
4.3 CONSENTS AND APPROVALS. Except as set forth in Schedule 4.3 there is no
requirement applicable for the Company to make any filing with, or to obtain any
permit, authorization, consent or approval of, any public body as a condition to
the consummation of this transaction. Except as set forth in Schedule 4.3, there
is no requirement that any party to any Material Contract of the Company, or of
any license or permit for the use of Intellectual Property of the Company or of
any loan agreement to which the Company is a party or by which it or they are or
were bound, must consent to the execution of this Agreement by the Company or to
the consummation of this transaction.
4.4 NON-CONTRAVENTION. Except as set forth in Schedule 4.4, the execution and
delivery by the Company of this Agreement does not, and the consummation of the
sale of the Shares will not, (i) violate or result in a breach of any provision
of the Articles of Incorporation or Bylaws of the Company, (ii) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or obligation to which
the Company is a party or by which the Company or the business conducted by it,
may be bound, or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or to the business conducted by the
Company, excluding from the foregoing clauses (ii) and (iii) such defaults and
violations as would not have a material adverse effect on the Company.
4.5 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 4.5, the Company has
obtained all Environmental Permits required, by any governmental or
non-governmental agency with jurisdiction, to conduct its business as it is
presently being conducted including, without limitation, those relating to (i)
emissions, discharges or threatened discharges of pollutants, contaminants,
hazardous or toxic substances or petroleum into the air, surface water, ground
water or the ocean, or on or into the land, and (ii) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous or toxic substances or
petroleum. The Company has not received notice of, or is otherwise aware of, any
facts, events or conditions which (a) interfere with, prevent, or, with the
passage of time, could interfere with continued substantial compliance with any
of the aforementioned environmental laws, regulations, policies, guidelines,
orders, judgments or decrees, (b) may give rise to any liability (whether based
in contract, tort, implied or express warranty, criminal or civil stature or
otherwise) under any law, regulation, policy or guideline relating to hazardous
emissions or handling hazardous substances, or (c) obligate the Company or, with
the passage of time, could cause the Company to be obligated to clean up, remedy
or otherwise restore to a former condition, by itself or jointly with others,
any contaminated surface water, ground water, soil or any natural resource
associated therewith.
4.6 INVENTORY. The raw materials, work-in-process, and finished goods, and goods
on hand for sale or refurbishing, store supplies and spare parts, which are
owned by the Company, wherever they are located, are hereinafter referred to as
the "Inventory." Except as set forth in Schedule 4.6, the Inventory (i) is
usable or, if refurbished or assembled in final form for sale, is saleable in
the ordinary course of business, and (ii) is carried on the books of the Company
at an amount which reflects valuations not in excess of the lower of cost or
market determined in accordance with generally accepted accounting principles
applied on a consistent basis. Schedule 4.6 also sets forth a list of locations
of the Inventory not located on the Real Property of the Company or on real
estate subject to a Company Lease.
4.7 ACCOUNTS RECEIVABLE. The accounts receivable for the Company as of February
28, 1999, based on the audited financial statements through such date, and the
unaudited accounts receivable through May 31, 1999, are disclosed in Schedule
4.7. Such accounts receivable and those arising or acquired by the Company
subsequent to this date, but prior to the Closing (and not collected prior to
Closing) have or will have arisen in the ordinary course of business and will
have been collected or be collectible in amounts not less than the aggregate
amount thereof (net of reserves established in accordance with the prior
practice) carried on the books of the Company. Except as reflected in Schedule
4.7, each of such accounts receivable, and those arising or acquired after this
date, but prior to the Closing, are not and will not be the subject of a pledge
or assignment, is and will be free of any and all liens, hypothecation,
encumbrances and charges whatsoever, and has not been and will not be PLACED FOR
COLLECTION WITH ANY ATTORNEY, COLLECTION AGENCY OR SIMILAR INDIVIDUAL FIRM. If
accounts receivable in the aggregate of at least 85% or more of the amount shown
in Schedule 4.7 are collected after all diligent efforts to collect them are
exhausted, no adjustment of the purchase price shall be made or claimed. If,
however, for any reason accounts receivable in the aggregate of at least 85% of
the amount shown in Schedule 47 are not collected, after all diligent efforts to
collect them have been exhausted, then the purchase price shall be reduced by
One Dollar ($1.00) for each One Dollar ($1.00) not collected and the final
payments of principal and interest under the Note shall be reduced accordingly.
4.8 LICENSES AND PERMITS. The term "Licenses and Permits" as used herein means
federal, state and local governmental licenses, permits, approvals and
authorizations, whether foreign or domestic, other than Environmental Permits.
The Company has all of the Licenses and Permits required to conduct its business
as it is presently being conducted, all of which are in full force and effect.
No written notice of a violation of any such License or Permit has been received
by the Company or, to the knowledge of the Company, threatened, and no
proceeding is pending or, to the knowledge of the Company, threatened, to revoke
or limit any of them. The Company has no reason to believe that any of its
Licenses and Permits in effect on the date hereof will not be renewed.
4.9 COMPLIANCE WITH LAWS. In addition to the representations and warranties
contained in Section 4.5 relating to environmental matters and in Section 4.8
relating to Licenses and Permits, the Company has operated its business in
compliance in all material respects with all laws, regulations, orders,
policies, guidelines, judgments or decrees of any federal, state, local or
foreign court or governmental authority applicable to it or its business
including, without limitation, those related to antitrust and trade matters,
civil rights, zoning and building codes, public health and safety, worker health
and safety and labor and nondiscrimination, the failure to comply with which
could reasonably be expected to affect, materially and adversely, the earnings,
assets, financial condition or operations of the Company. Except as is disclosed
in Schedule 4.9, the Company has not received any notice alleging non-compliance
with any of the aforementioned laws, regulations, policies, guidelines, orders,
judgments or decrees.
4.10 FINANCIAL STATEMENTS. The Company has previously furnished to Cobra true
and complete copies of audited financial statements of the Company for the
fiscal years ended February 28, 1998 and February 29, 1998, including the notes
thereto (the "Audited Financial Statements"), together with the report on such
financial statements of the Company's auditors. The Audited Financial Statements
fairly represent the financial position of the Company as of such dates and the
results of its operations and changes in financial position for such periods and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis. The Company has also furnished to Cobra true and
complete copies of unaudited financial statements of the Company for the period
ended May 31, 1999.
4.11 LITIGATION. Except as set forth in Schedule 4.11, there are no actions,
suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending, asserted or, to the knowledge of the Company, threatened,
against the Company, whether at law or in equity and whether civil or criminal
in nature, before any federal, state, municipal or other court, arbitrator,
governmental department, commission, agency or instrumentality, domestic or
foreign, nor are there any judgments, decrees or orders of any such court,
arbitrator, governmental department, commission, agency or instrumentality
outstanding against the Company which have, or if adversely determined could
reasonably be expected to have, a material adverse effect on the earnings,
assets, financial condition or operations of the business conducted by the
Company, or which seek specifically to prevent, restrict or delay consummation
of the sale of the Shares or fulfillment of any of the conditions of this
Agreement.
4.12 ABSENCE OF CHANGES. Except as set forth in Schedule 4.12, since May
31, 1999, there has not been:
a. any change, or development involving a prospective change, including, without
limitation, any damage, destruction or loss (whether or not covered by
insurance), which to the knowledge of the Company can reasonably be expected to
affect, materially and adversely, the earnings, assets, financial condition or
operations of the business of the Company;
b. any obligation or liability involving more than $5,000 (whether matured,
absolute, accrued, contingent, or otherwise) incurred by the Company, other than
those liabilities incurred by the Company in the ordinary course of business;
c. any general uniform increase in the compensation of the employees of the
Company (including, without limitation, any increase pursuant to any bonus,
pension, profit sharing or other plan);
d. any increase (other than normal increases consistent with past practices and
those required by law or collective bargaining agreements) in the compensation
payable to any employee (including officers) of the Company;
e.any amendment to any employment agreement to which any employee of the Company
is a party;
f. any sale of assets by the Company other than in the ordinary course of
business or to dispose of replaced or obsolete assets;
g. any deterioration of relations between the Company and its suppliers,
financial institutions or customers;
h. any direct or indirect redemption, purchase or other acquisition of any
shares of the capital stock of the Company;
i. any declaration, setting aside or payment of any dividend (whether in cash,
capital stock or property) with respect to the Company's common stock; or
j. any issuance by the Company of any shares of its capital stock, or any
securities or obligations convertible into or exchangeable for, or giving any
person the right to acquire from it, any shares of its capital stock.
Since May 31, 1999, except as set forth in Schedule 4.12, the Company
has not operated its business other than in the ordinary and usual course and in
a manner consistent with past practices.
4.13 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 4.13, the
Company does not have any material liabilities or obligations, whether absolute,
accrued, contingent or otherwise, including, without limitation, any uninsured
liabilities which were not accrued or reserved against in the Audited Financial
Statements other than those incurred after February 28, 1999, in the ordinary
course of business of which in the aggregate do not or cannot reasonably be
expected to have a material adverse effect upon the earnings, assets, financial
condition or operations of the Company. The unaudited accounts payable through
May 31, 1999 is attached as part of Schedule 4.13.
4.14 TITLE TO PROPERTIES.
a. Schedule 4.14 contains a complete and correct list of the Real Property of
the Company. Except as set forth in Schedule 4.14 and except for Permitted
Exceptions, the Company has good and marketable title to all of its Real
Property free and clear of any liens, charges, pledges, security interests or
other encumbrances. The term "Permitted Exceptions" as used in this Agreement
means (i) statutory liens for current taxes or assessments not yet due or
delinquent; (ii) mechanics', carriers', workers', repairers' and other similar
liens arising or incurred in the ordinary course of business relating to
obligations as to which there is no default, provided that the same shall be
fully discharged of record before the Effective Date; (iii) and such other
liens, imperfections in title, charges, easements, restrictions and encumbrances
which have been agreed to by Cobra.
b. The Company has good title to all of the personal property, tangible and
intangible, owned by it, free and clear of any liens, charges, pledges, security
interest or other encumbrances other than those reflected in the Audited
Financial Statements heretofore delivered to Cobra.
4.15 LEASES. Schedule 4.15 sets forth a complete and correct list of each
agreement to lease into which the Company has entered, whether as a lessor or
lessee, which relates to either real or personal property, other than monthly
leases of personal property which may be canceled upon not more than 60 days
notice or require the payment of not more than $100 per month. The agreements
listed in Schedule 4.15 are referred to herein as the "Leases" (each a "Lease").
Except as set forth in Schedule 4.15, neither the Company nor any other party
hereto has breached any such Lease and, to the knowledge of the Company, no
event has occurred which, with the giving of notice or the passage of time or
both, would cause a default under, or permit the termination, modification or
acceleration of any such Lease by any party thereto. Complete copies of all of
the Leases have been delivered to Cobra.
4.16 INTELLECTUAL PROPERTY. The term "Intellectual Property" as used in this
Agreement means the rights of the owner thereof in all trade names, trademarks
and service marks, patents, patent rights, copyrights, whether domestic or
foreign, (as well as applications, registrations or certificates for any of the
foregoing), inventions, trade secrets, proprietary processes, software and other
industrial and intellectual property rights. The Company owns or is licensed or
otherwise has the right to use all of the Intellectual Property which is being
used in its business as it is presently being conducted. There is no claim,
suit, action or proceeding, pending or, to the knowledge of the Company,
threatened, against the Company asserting that its use of any Intellectual
Property infringes the rights of any third party or otherwise contesting the
Company's rights with respect to any Intellectual Property, and no third party
is known to the Company to be infringing upon the rights of the Company in the
Intellectual Property of the Company. Furthermore, to the knowledge of the
Company, no party is infringing upon the rights of the Company in the Company's
Intellectual Property. All letters, patents, registrations and certificates
issued by any governmental agency relating to the Intellectual Property of the
Company are valid and subsisting and have been properly maintained.
4.17 MATERIAL CONTRACTS. Schedule 4.17 sets forth a complete and correct list of
each Material Contract of the Company. Except as set forth in Schedule 4.17, all
of the Material Contracts of the Company are in full force and effect and to the
knowledge of the Company there has not occurred, with respect to any such
Material Contract, any default or event of default, which, with or without due
notice or with the lapse of time, or both, would constitute a default or event
of default on the part of the Company or, to the knowledge of the Company, any
other party thereto. Complete copies of all the Material Contracts of the
Company have been delivered to Cobra. As more fully set forth in Schedule 4.17,
some of the Material Contracts require the consent of the vendor prior to any
change in control of the Company or prior to the assignment of any contracts by
the Company. Cobra acknowledges that the Company has not obtained the required
consents from its vendors and agrees that, notwithstanding anything to the
contrary contained in this Agreement, if the Company fails to obtain any such
consents after Closing, this Agreement will remain in full force and effect,
Cobra shall not have the right to terminate this Agreement, and that the
purchase price set forth in Section 3.6 hereto shall not be in any way reduced,
altered or modified.
4.18 MAINTENANCE OF TANGIBLE ASSETS. The tangible personal property which
belongs to the Company has been maintained in accordance with the usual
practices in the United States of businesses which are similar to the business
conducted by the Company, is in good condition, ordinary wear and tear excepted,
and is usable by the Company in the ordinary course of its business as it is
presently being conducted.
4.19 INSURANCE. Schedule 4.19 sets forth the insurance policies held by the
Company and the amount of such policies.
4.20 LABOR MATTERS. Schedule 4.20 sets forth a complete and correct list of each
collective bargaining agreement covering employees of the Company. The Company
is in compliance in all material respects with all federal and state laws
regarding employment, wages, and hours. The Company has not engaged in any
unfair labor practices nor have any employment discrimination or unfair labor
practice complaints been filed against, or to the best knowledge of the Company,
been threatened to be filed against the Company with any federal or state agency
having jurisdiction over labor matters. There are no controversies pending or,
to the knowledge of the Company, threatened between the Company and any of its
employees which effect, or can reasonably be expected to affect, materially and
adversely, its earnings, assets, financial condition or operations of the
business conducted by the Company, or relate to any specific effort to prevent,
restrict or delay consummation of the sale of the Shares.
4.21 EMPLOYEE BENEFIT PLANS.
a. Schedule 4.21 lists all Pension Plans, all Welfare Plans of the Company, and
all incentive, vacation and other similar plans that are maintained by the
Company with respect to its employees or to which the Company has contributed or
is now contributing on behalf of its employees.
b. As to each of the Pension Plans, the Company has complied, in all material
respects, with all applicable laws and regulations in administering such plans,
including specifically the provisions of ERISA and the qualification provisions
of Section 401 of the Internal Revenue Code. No prohibited transaction, as
defined in Section 4975 of the Internal Revenue Code, has occurred with respect
to any of such Pension Plans and none of the Pension Plans has incurred any
accumulated funding deficiency, as defined in Section 412 of the Internal
Revenue Code, whether or not waived.
c. As to each of the Welfare Plans and other Company employee benefit plans and
programs (including, without limitation, the plans listed on Schedule 4.21), the
Company has complied, in all material respects, with all applicable laws and
regulations in the administration thereof including, without limitation, the
provisions of ERISA when applicable.
d. The Company has not terminated any of its Pension Plans or incurred any
material liability to the PBGC under Section 4001, et seq. of ERISA and, to the
knowledge of the Company, no condition exists that could reasonably be expected
to cause the Company to incur any such liability. All premiums payable to the
PBGC have been paid when due.
4.22 TAX MATTERS.
a. The provisions made for taxes in the Audited Financial Statements are
sufficient for the payment of all Taxes of the Company, whether or not disputed,
which are properly accruable. There are no agreements by the Company for the
extension of time, or waiver of any statute of limitations, for the assessment
of any taxes, and all taxes due and payable by the Company on or before the date
of this Agreement have been paid or provided for, and are not delinquent, except
as otherwise provided in Schedule 4.22.
b. The Company has filed all Tax Returns that it was required to file. All such
Tax Returns were correct and complete in all material respects. No claim has
ever been made by an authority in a jurisdiction where the Company does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction. There
are no liens on any of the assets of the Company that arose in connection with
any failure (or alleged failure) to pay any Tax.
C. THE COMPANY HAS WITHHELD AND PAID ALL TAXES REQUIRED TO HAVE BEEN WITHHELD
AND PAID THROUGH [JUNE __, 1999], in connection with the amounts paid or owing
to any employee, independent contractor, creditor, stockholder or other third
party.
d. The Company does not expect any authority to assess any additional Taxes for
any period for which Tax Returns have been filed. Except as set forth in
Schedule 4.22, there is no dispute or claim concerning any Tax liability of the
Company either (i) claimed or raised by any authority in writing or (ii) as to
which the Company has knowledge based upon personal contact with any agent of
such authority. The Company has delivered to Cobra correct and complete copies
of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company for the 1997 and 1998
fiscal years.
4.23 FINDERS. No broker, finder or investment banker is entitled to any fee or
commission from the Company for services rendered on behalf of the Company in
connection with the transactions contemplated by this Agreement, except as
otherwise provided in Schedule 4.23.
4.24 INSIDER INTERESTS. To the knowledge of the Company, except as listed in
Schedule 4.24, no Affiliate of the Company (i) competes with or is involved in
or has a direct or indirect interest in any business entity which competes with
the business conducted by the Company, (ii) has any agreement with the Company,
or (iii) has any interest, direct or indirect, in any property, real or
personal, tangible or intangible, including, without limitation, Intellectual
Property, used in or pertaining to the business of the Company, except as a
stockholder or employee of the Company.
4.25 NO INTEREST IN COMPETITORS, ETC. To the knowledge of the Company, except as
set forth in Schedule 4.25, no officer or director of the Company, nor any
Affiliate of any of the foregoing, directly or indirectly owns any interest in
or controls or is an employee, agent, member, principal, officer, director, or
partner of, or participant in, or consultant to any corporation, partnership,
limited liability company, sole proprietorship, limited partnership, joint
venture, association, or other entity which is a competitor, supplier, customer,
or tenant of the Company.
4.26 PURCHASE AND SALE OBLIGATIONS. All unfilled purchase and sale orders and
other commitments for purchases and sales made by the Company were made in the
usual and ordinary course of its business at the then current market prices.
None of such orders or commitments calls for deliveries thereunder beyond a
period of 90 days from the Closing Date with the exception of normal outstanding
maintenance and service contracts.
4.27 BOOKS AND RECORDS. The books of account and other financial and corporate
records of the Company are in all material respects complete and correct, are
maintained in accordance with good business practices, and are accurately
reflected in the Financial Statements.
4.28 BANK AND SAFE DEPOSIT ARRANGEMENTS. Schedule 4.28 sets forth a correct and
complete list of each bank account and safe deposit box maintained by the
Company, and the names of all persons authorized to deal with such accounts and
safe deposit boxes.
4.29 INSIDER TRANSACTIONS. Schedule 4.29 sets forth a correct and complete
statement of the amounts and other essential terms of indebtedness or other
obligations, liabilities or commitments (contingent or otherwise) of the Company
to or from any past or present officer, director, employee, partner or
stockholder thereof or any person related to, controlled by or under common
control of any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF COBRA AND MERGER SUB
Cobra represents and warrants as of the date of execution of this
Agreement and as of Closing as follows:
5.1 ORGANIZATION, QUALIFICATION. Cobra is a corporation duly organized, validly
existing and in good standing under the laws of Nevada and has corporate power
and authority to own all of its properties and assets and to carry on its
business as it is presently being conducted. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of
Massachusetts. All of the issued and outstanding stock of Merger Sub is owned by
Cobra. Cobra and Merger Sub are duly qualified and in good standing to do
business in each jurisdiction in which the property owned, leased or operated by
them or the nature of the business conducted by them makes such qualification
necessary, except in those jurisdictions where the failure to be duly qualified
and in good standing would not have a material adverse effect on Cobra, the
Merger Sub or the businesses conducted by them. Cobra has heretofore delivered
to the Company complete and correct copies of the Articles of Incorporation and
Bylaws of Cobra and Merger Sub, as currently in effect.
5.2 CAPITALIZATION OF THE COBRA. The authorized capital stock of Cobra consists
only of 20,000,000 shares of Common Stock, $.001 par value and 1,000,000 shares
of Preferred Stock, $.001 par value, of which, as of the date hereof, 8,091,903
common shares are validly issued and outstanding, fully paid and non-assessable,
and were not issued in violation of any preemptive rights. No shares of
Preferred stock have been issued or are outstanding. Cobra has no commitment to
issue or sell any shares of its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any person the right to acquire
from it, any shares of its capital stock and no such securities or obligations
are issued or outstanding, except as set forth on Schedule 5.2.
5.3 CONSENTS AND APPROVALS. Except as set forth in Schedule 5.3 there is no
requirement applicable for Cobra or Merger Sub to make any filing with, or to
obtain any permit, authorization, consent or approval of, any public body as a
condition to the consummation of this transaction. Except as set forth in
Schedule 5.3, there is no requirement that any party to any Material Contract of
Cobra or Merger Sub, or of any license or permit for the use of Intellectual
Property of Cobra or Merger Sub or of any loan agreement to which Cobra or
Merger Sub is a party or by which it or they are or were bound, must consent to
the execution of this Agreement by Cobra or Merger Sub or to the consummation of
this transaction.
5.4 NON-CONTRAVENTION. Except as set forth in Schedule 5.4, the execution and
delivery by Cobra and the Merger Sub of this Agreement does not, and the
consummation of the Merger will not, (i) violate or result in a breach of any
provision of the Articles of Incorporation or Bylaws of Cobra or the Merger Sub,
(ii) result in a default (or give rise to any right of termination, cancellation
or acceleration) under the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement, lease or other instrument or obligation
to which Cobra is a party or by which Cobra or the business conducted by it, may
be bound, or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Cobra or to the business conducted by Cobra, excluding
from the foregoing clauses (ii) and (iii) such defaults and violations as would
not have a material adverse effect on Cobra.
5.5 CORPORATE AUTHORITY AND RESOLUTIONS. The Boards of Directors Cobra and the
Merger Sub have adopted resolutions authorizing execution of this Agreement as
of the date hereof and shall adopt such additional resolutions as may be
necessary authorizing the execution of documents and closing by Cobra and the
Merger Sub as contemplated by this Agreement.
5.6 VALIDITY OF SHARES OF COBRA TO BE ISSUED. The Cobra shares to be issued to
David as a result of the Merger have been duly authorized as required under all
applicable laws and, upon delivery thereof pursuant to the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and not
subject to, or in violation of, any preemptive rights.
5.7 FINANCIAL STATEMENTS. Cobra has previously delivered to the Company a true
and complete copy of Cobra's audited financial statements for the year ended
December 31, 1998 and the period ended _________, 199__, including the notes
thereto ("Cobra's Audited Financial Statements"), together with the report on
such financial statements of Cobra's auditors. Cobra's Audited Financial
Statements fairly represent the financial position of Cobra as of such dates and
the results of its operations and changes in financial position for such periods
and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis. At the time of mailing or delivery
thereof to the Company, none of such documents or information contained or will
contain an untrue statement of a material fact or omitted or will omit to state
material facts necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading; provided,
however, that no representation is made with respect to any projections relating
to Cobra which have been or will be furnished to the Company by Cobra and,
provided further, that no representation is made with respect to tentative or
pro forma information which may be furnished to the Company by Cobra which is
superseded by later or more definitive information.
5.8 AUTHORIZATION OF TRANSACTIONS; SECURITIES COMPLIANCE. By the Closing Date,
the Cobra shares to be issued to David on the consummation of the transactions
contemplated hereunder will be exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and shall have been exempt or registered or
qualified under the securities or blue sky laws of the Commonwealth of
Massachusetts for issuance upon the Closing Date. The Cobra shares, when issued
in accordance with the terms of this Agreement, will be fully paid and
non-assessable and not subject to, or issued in violation of, any preemptive
rights.
5.9 NO REGISTRATION RIGHTS. Except as provided in Section 3.9 of this Agreement,
David has not entered into any agreement with Cobra granting or providing for
registration rights with respect to the Cobra shares to be delivered to David
pursuant to this Agreement.
5.10 BROKERS/COMMISSIONS. Cobra has engaged a broker in connection with this
transaction, will pay all fees, commissions and expenses associated with such
broker and agrees to indemnify and hold harmless the Company and the
shareholders of from and against any loss, cost damage or expense incurred by
them or claim made against them by any broker, finder or similar individual in
connection with this transaction.
5.11 BINDING AGREEMENT. The execution, delivery and performance of this
Agreement and the other instruments contemplated by this Agreement by Cobra and
the Merger Sub, have been duly authorized by all necessary corporate action of
Cobra and the Merger Sub. This Agreement has been duly executed and delivered to
the Company Shareholders by Cobra and the Merger Sub and constitutes the legal,
valid and binding agreement of Cobra and the Merger Sub, enforceable in
accordance with its terms.
5.12 NO VIOLATION. The execution, delivery and performance of this Agreement by
Cobra and the Merger Sub and the consummation of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time or
both, violate, contravene or conflict with or result in a breach of or
constitute a default under (i) any writ, order, judgment or decree of any court
arbitrator or governmental agency applicable to Cobra or the Merger Sub; (ii)
the Articles of Incorporation or Bylaws of Cobra or the Merger Sub; (iii) any
contract, lease or other agreement to which Cobra or the Merger Sub is a party
or by which Cobra is bound; or (iv) to the best knowledge of Cobra or Merger
Sub, any law, rule or regulation applicable to Cobra or the Merger Sub.
5.13 LITIGATION. Except as set forth in Schedule 5.13, there are no actions,
suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending, asserted or, to the knowledge of Cobra or the Merger Sub,
threatened, against Cobra or the Merger Sub, whether at law or in equity and
whether civil or criminal in nature, before any federal, state, municipal or
other court, arbitrator, governmental department, commission, agency or
instrumentality, domestic or foreign, nor are there any judgments, decrees or
orders of any such court, arbitrator, governmental department, commission,
agency or instrumentality outstanding against Cobra or the Merger Sub which
have, or if adversely determined could reasonably be expected to have, a
material adverse effect on the earnings, assets, financial condition or
operations of the business conducted by Cobra, or which seek specifically to
prevent, restrict or delay consummation of the transfer of the shares of Cobra
or fulfillment of any of the conditions of this Agreement.
5.14 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 5.14, Cobra
does not have any material liabilities or obligations, whether absolute,
accrued, contingent or otherwise, including, without limitation, any uninsured
liabilities which were not accrued or reserved against in Cobra's Audited
Financial Statements OTHER THAN THOSE INCURRED AFTER , in the ordinary course of
business of which in the aggregate do not or cannot reasonably be expected to
have a material adverse effect upon the earnings, assets, financial condition or
operations of Cobra.
5.15 INTELLECTUAL PROPERTY. Cobra owns or is licensed or otherwise has the right
to use all of the Intellectual Property which is being used in its business as
it is presently being conducted. There is no claim, suit, action or proceeding,
pending or, to the knowledge of Cobra, threatened, against Cobra asserting that
its use of any Intellectual Property infringes the rights of any third party or
otherwise contesting Cobra's rights with respect to any Intellectual Property,
and no third party is known to Cobra to be infringing upon the rights of Cobra
in the Intellectual Property of Cobra. Furthermore, to the knowledge of Cobra,
no party is infringing upon the rights of Cobra in Cobra's Intellectual
Property. All letters, patents, registrations and certificates issued by any
governmental agency relating to the Intellectual Property of Cobra are valid and
subsisting and have been properly maintained.
5.16 COMPLIANCE WITH APPLICABLE LAWS. Cobra and Merger Sub are not in default in
any material respect under any executive, legislative, judicial, administrative
or private (such as arbitration) ruling, order, writ, injunction or decree; and
(ii) no material permits, licenses or approvals of any governmental or
administrative authorities are required for Cobra or Merger Sub to own, lease
and operate their properties and to carry on their businesses as presently
conducted. the earnings, assets, financial condition or operations of the
Company. Except as is disclosed in Schedule 5.16, neither Cobra nor Merger Sub
has received any notice alleging non-compliance with any of the aforementioned
laws, regulations, policies, guidelines, orders, judgments or decrees.
5.17 ABSENCE OF CERTAIN CHANGES. SINCE , there have not been any material
adverse changes in the financial condition, results of operations or business of
Cobra. Since ______, except as set forth in Schedule 5.17, Cobra has not
operated its business other than in the ordinary and usual course and in a
manner consistent with past practices.
5.18 CONTINUITY OF BUSINESS ENTERPRISE. After the Merger, MergerSub or Cobra
shall continue the historic business of the Company or shall use a significant
portion of the Company's historic business assets in its business, and shall
take all other steps necessary to assure that the Merger satisfies the
"Continuity of Business Enterprise" requirement under Code ss.368 and Regulation
ss.1.368-1(d).
ARTICLE VI
INVESTMENT REPRESENTATIONS
The Company and David hereby jointly and severally represent, warrant,
acknowledge and covenant to Cobra and its officers, directors, agents and
professional advisors, as follows:
6.1 OPPORTUNITY TO EXAMINE. David has examined or has had an opportunity to
examine, and to ask questions of the management of Cobra about, all applicable
documents and such applicable information as are relevant to the transactions
described herein. Some of the documents examined are listed on Schedule 6.1.
6.2 NO REPRESENTATIONS AS TO PROFIT OR LOSS. No representation or warranty of
any kind has been made to the Company or to David with respect to the percentage
of profit and/or amount or type of consideration, profit or loss that are to be
realized, if any, as a result of entering into this transaction. David is not
relying upon any information other than that derived from the results of his own
independent investigation, or the investigation of his counsel and other
professional advisors, or from information furnished in writing by Cobra to him.
6.3 COBRA SHARES NOT REGISTERED. David understands that the Cobra shares to be
issued to him have not been registered under the Securities Act nor under the
securities laws of any state in reliance on exemptions therefrom for non-public
offerings, and further understand that the Cobra shares have not been approved
or disapproved by the Securities and Exchange Commission nor has any state
securities administrator or agency passed on the accuracy or adequacy of any
written information provided by Cobra to David.
6.4 INVESTMENT INTENT. David is acquiring the Cobra shares for his own account
for investment purposes only and not with a view to the sale or other
distribution thereof, in whole or in part.
6.5 RELIANCE ON REPRESENTATIONS. The Company and Company Shareholders
acknowledge that they understand the meaning and legal consequences of the
representations, warranties, acknowledgments and covenants in this Article VI
and that Cobra has relied and will rely thereon. Cobra and Merger Sub
acknowledge that they understand the meaning and legal consequences of the
representations, warranties, acknowledgments and covenants in this Article VI
and that the Company and Company Shareholders have relied and will rely thereon.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 CONDUCT OF BUSINESS BY COMPANY AND COBRA.
a. The Company warrants and represents that from the date hereof until the
Closing, the Company will (a) conduct its business only in the ordinary and
usual course and in a manner consistent with past practices, (b) maintain in
good repair, at its expense, all of its properties, and (c) use its best efforts
to preserve its relationship with suppliers, customers, dealers and others
having business relationships with the Company. The Company and Company
Shareholders will notify Cobra of any emergency or material change in the normal
conduct of the business or operations of the Company, the threat of or
initiation of any material litigation against the Company, and the initiation of
any investigation of the Company by any party, whether private or governmental,
of which it has knowledge.
b. Cobra warrants and represent that from the date hereof until the Closing,
Cobra will (a) conduct its business only in the ordinary and usual course and in
a manner consistent with past practices, (b) maintain in good repair, at its
expense, all of its properties, and (c) use its best efforts to preserve its
relationship with suppliers, customers, dealers and others having business
relationships with the Company. Cobra will notify the Company of any emergency
or material change in the normal conduct of the business or operations of Cobra,
the threat of or initiation of any material litigation against Cobra, and the
initiation of any investigation of Cobra by any party, whether private or
governmental.
7.2 NEGOTIATIONS WITH OTHERS. From the date hereof until the closing, the
Company will not, directly or indirectly, without the written consent of Cobra,
initiate discussions or engage and negotiate with any corporation, partnership,
person or entity, other than Cobra, concerning any sale of Shares or of any
merger, sale of assets or similar transactions involving the Company.
7.3 INVESTIGATION OF BUSINESS AND PROPERTIES BY COBRA. From the date hereof
until the Closing, the Company shall afford Cobra and its attorneys,
accountants, financial advisors and other representatives complete access at all
reasonable times to its offices, and to the officers, employees, properties,
contracts, and books and records of the Company. From the date hereof until the
Closing, Cobra shall afford the Company and its attorneys, accountants,
financial advisors and other representatives complete access at all reasonable
times to its offices, and to the officers, employees, properties, contracts, and
books and records of the Cobra. In addition, the Company and Cobra will furnish
each other with such financial, operating and additional data as may reasonably
be requested concerning the business, operations, properties and personnel of
the Company or of Cobra.
7.4 CONFIDENTIALITY. Pursuant to the provisions of this Agreement, Cobra and the
Company have supplied and will supply to each other certain documents and
information for use in investigating the business of Cobra and the Company. Such
material is hereinafter referred to as "Evaluation Material." Cobra and the
Company agree to hold in confidence any Evaluation Material they have received
or will receive and not to disclose all or any part of such material to anyone
except their officers, directors, employees, professional advisors, or other
representatives who need such information to perform their respective duties and
who have been informed of the confidential nature of such material and directed
to treat it confidentially. If this Agreement is terminated, Cobra and the
Company will return or cause to be destroyed and will not retain, or permit any
person to whom it has given copies thereof to retain, the originals or any
copies of any documents constituting a part of the Evaluation Material and after
termination Cobra and the Company will continue to honor the confidentiality
agreement contained herein and will not disclose, directly or indirectly, any
information obtained from the Evaluation Material. The confidentiality agreement
contained in this Section 7.4 will terminate upon the earlier of three years
after the date hereof of or upon consummation of the transactions contemplated
hereby. Notwithstanding the foregoing, the parties may use and disclose any such
information to the extent that (a) it had acquired such information on a
non-confidential basis prior to receipt thereof from the other party, (b) such
information has become generally available to the public, (c) such information
is provided to a party by a third party who has obtained such information other
than as a result of a breach of this Agreement. Furthermore, either party may
disclose such information to the extent that it is required to do so in order to
comply with a governmental or judicial order or decree, but upon receiving
notice that any such order or decree is being sought, it will promptly notify
the other party.
7.5 EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate, as promptly as practicable, the
transactions contemplated hereby, including, but not limited to, the obtaining
of all necessary consents, waivers, authorizations, orders and approvals of
third parties, whether private or governmental, required of it to enable it to
comply with the conditions precedent to consummating the transactions
contemplated by this Agreement. Each party agrees to cooperate fully with the
other party in assisting it to comply with this Section. Notwithstanding the
foregoing, neither party shall be required to initiate any litigation, make any
substantial payment or incur any material economic burden, except for a payment
otherwise required of it, to obtain any consent, waiver, authorization, order or
approval, and if, despite such efforts, either party is unable to obtain any
consent, waiver, authorization, order or approval the other party may terminate
this Agreement and shall have no liability therefor.
7.6 FURTHER ASSURANCES. The parties will use reasonable efforts to implement the
provisions of this Agreement, and for such purpose, the parties will, at the
request of any other party, at or after the closing, without further
consideration, promptly execute and deliver, or cause to be executed and
delivered, such additional documents as any other party may reasonably deem
necessary or desirable to implement any provision of this Agreement.
7.7 EXPENSES. Whether or not the Merger is consummated all expenses incurred in
connection with this Agreement and the transactions contemplated hereby will be
paid by the party incurring such expenses.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF COBRA AND MERGER SUB
The following are certain conditions precedent to the obligation of
Cobra and Merger Sub to complete this transaction.
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company herein contained shall be true in all material
respects on and as of Closing Date with the same force and effect as though made
on and as of Closing Date, except as affected by transactions contemplated
hereby and except to the extent that such representations and warranties were
made as of a specified date and as to such representations and warranties the
same shall have been true as of the specified date.
8.2 ABSENCE OF DEFAULT. No condition or event which constitutes an event of
default hereunder by the Company or Company Shareholders which, after notice and
lapse of time, or both, would constitute an event of default hereunder by the
Company shall have occurred and be continuing.
8.3 ABSENCE OF MATERIAL DAMAGE TO OR EXPROPRIATION OF PROPERTY. Between the date
of this Agreement and the Closing, there shall not have occurred (1) any
material casualty to any facility, property, equipment or inventory owned by the
Company, or (2) any material condemnation, seizure, expropriation or liquidation
by any governmental authority or any officer or instrumentality thereof of
facilities, property, equipment or inventory owned by the Company.
8.4 ABSENCE OF LIENS. There will have been no liens recorded after the execution
of this Agreement but prior to Closing with respect to any personal, real or
mixed property owned by the Company.
8.5 ACTIONS, PROCEEDINGS, ETC. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto and all other related legal matters shall have been
satisfactory to and approved by counsel for Cobra, and such counsel shall have
been furnished with such certified copies of actions and proceedings and such
other instruments and documents as they shall have reasonably requested.
8.6 LEGAL OPINION. Cobra shall have received the legal opinion of the Company's
counsel in accordance with Section 3.11 hereto.
8.7 SATISFACTION WITH RESPECT TO FINANCIAL CONDITION AND PERFORMANCE. Cobra must
be satisfied that each and every representation made by the Company regarding
the Financial Statements and the financial condition of the Company shall be
true, complete and accurate in all material respects as of Closing. Without
limiting the foregoing, Cobra must be satisfied that: (i) the Financial
Statements shall have been prepared on an accrual basis of accounting,
consistent with prior years, and in accordance with generally accepted
accounting principles; and (ii) except as specifically disclosed in the
Financial Statements, there has been no distribution to shareholders or others
or bonuses made to employees.
8.8 CONTINUITY OF BUSINESS RELATIONSHIPS. Cobra shall be satisfied that the
Company's customer, vendor, financial institution(s), insurance carrier and
employee relations are satisfactory as of the Closing Date.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY SHAREHOLDERS
The following are certain conditions precedent to the obligation of the
Company Shareholders to complete this transaction.
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Cobra and Merger Sub herein contained shall be true in all
material respects on and as of Closing Date with the same force and effect as
though made on and as of Closing, except as affected by transactions
contemplated hereby and except to the extent that such representations and
warranties were made as of a specified date and as to such representations and
warranties the same shall have been true as of the specified date.
9.2 ABSENCE OF DEFAULT. No condition or event which constitutes an event of
default hereunder by Cobra or Merger Sub which, after notice and lapse of time,
or both, would constitute an event of default hereunder by Cobra or Merger Sub
shall have occurred and be continuing.
9.3 ABSENCE OF MATERIAL DAMAGE TO OR EXPROPRIATION OF PROPERTY. Between the date
of this Agreement and the Closing, there shall not have occurred (1) any
material casualty to any facility, property, equipment or inventory owned by
Cobra, or (2) any material condemnation, seizure, expropriation or liquidation
by any governmental authority or any officer or instrumentality thereof of
facilities, property, equipment or inventory owned by Cobra or Merger Sub.
9.4 ABSENCE OF LIENS. There will have been no liens recorded after the execution
of this Agreement but prior to Closing with respect to any personal, real or
mixed property owned by Cobra or Merger Sub.
9.5 ACTIONS, PROCEEDINGS, ETC. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto and all other related legal matters shall have been
satisfactory to and approved by counsel for Company Shareholders, and such
counsel shall have been furnished with such certified copies of actions and
proceedings and such other instruments and documents as they shall have
reasonably requested.
9.6 LEGAL OPINION. Company Shareholders shall have received the legal opinion of
the Cobra's counsel in accordance with Section 3.13 hereto.
9.7 SATISFACTION WITH RESPECT TO FINANCIAL CONDITION AND PERFORMANCE. The
Company Shareholders must be satisfied that each and every representation made
by Cobra regarding the Financial Statements and the financial condition of Cobra
shall be true, complete and accurate in all respects as of Closing. Without
limiting the foregoing, the Company Shareholders must be satisfied that: (i) the
Financial Statements shall have been prepared on an accrual basis of accounting,
consistent with prior years, and in accordance with generally accepted
accounting principles; and (ii) except as specifically disclosed in the
Financial Statements, there has been no distribution to shareholders or others
or bonuses made to employees.
9.8 CONTINUITY OF BUSINESS RELATIONSHIPS. The Company Shareholders shall be
satisfied that Cobra's customer, vendor, financial institution(s), insurance
carrier and employee relations are satisfactory as at the Closing Date.
ARTICLE X
INDEMNIFICATION
10.1 COBRA'S RIGHT TO INDEMNIFICATION. The Company and David jointly and
severally undertake and agree to indemnify and hold Cobra harmless against any
and all losses, costs, liabilities, claims, damages, obligations and expenses,
including reasonable attorneys' fees, incurred or suffered by Cobra arising from
(i) the breach, misrepresentation or other violation of any covenants, warranty
or representation of or by the Company contained in this Agreement, and (ii) all
liabilities of the Company, not disclosed in writing to Cobra, including
inclusion in financial statements of the Company, prior to the execution of this
Agreement. This indemnity provision shall survive Closing for a period of one
(1) year.
10.2 COMPANY SHAREHOLDERS' RIGHT TO INDEMNIFICATION. Cobra and the Merger Sub
jointly and severally undertake and agree to indemnify and hold the Company
and/or David harmless against any and all losses, costs, liabilities, claims,
damages, obligations and expenses, including reasonable attorneys' fees,
incurred or suffered by the Company or Company Shareholders arising from the
breach, misrepresentation or other violation of any covenants, warranty or
representation of or by Cobra or the Merger Sub contained in this Agreement.
This indemnity provision shall survive Closing for a period of one (1) year.
10.3 LIMITATION ON INDEMNIFICATION. The indemnification obligations set forth in
Sections 10.1 and 10.2 hereto, shall be capped by a maximum amount equal to the
fair market value of all cash and property received by David for his shares of
the Company in connection with the Merger.
10.4 PROCEDURE. If any claim or proceeding covered by the foregoing agreements
to indemnify and hold harmless shall arise, the party who seeks indemnification,
(the "Indemnified Party") shall give written notice thereof to the other party
(the "Indemnitor") promptly (but in no event more than ten (10) days) after it
learns of the existence of such claim or proceeding. Any claim for
indemnification hereunder shall be accompanied by evidence demonstrating the
Indemnified Party's right or possible right to indemnification, including a copy
of all supporting documents relevant thereto and in the Indemnified Party's
possession or under its control. The Indemnitor shall have the right, by notice
to the Indemnified Party, to defend and to employ counsel reasonably acceptable
to the Indemnified Party to defend against any such claim or proceeding, or to
compromise, settle or otherwise dispose of the same; provided, however, that no
settlement or compromise shall be effected without the consent of the
Indemnified Party, which consent shall not be unreasonably withheld, and
provided further that in THE EVENT THE INDEMNIFIED PARTY DOES NOT CONSENT TO A
BONA FIDE offer of settlement made by a third party and the settlement involves
only the payment of money, then the Indemnitor may, in lieu of payment of such
settlement to such third party, pay such amount to the Indemnified Party. After
the payment to the Indemnified Party, the Indemnitor shall have no further
liability with respect to such claim or proceeding and the Indemnified Party
shall assume full responsibility to defend the same. After notice from the
Indemnitor to the Indemnified Party of its election to assume the defense of
such claim or proceeding, the Indemnitor shall not be liable to the Indemnified
Party under this paragraph for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the defense thereof; provided,
however, that the Indemnified Party shall have the right to employ counsel to
represent it and have the right to participate in such claim or proceeding if,
in the Indemnified Party's sole judgment, it is advisable for the Indemnified
Party to be represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Indemnified Party. The
parties will fully cooperate in any such action, making available to each other
books or records and other evidence for the defense of any such claim or
proceeding. If the Indemnitor fails to acknowledge in writing its obligation to
defend against or settle such claim or proceeding within ten (10) days after
receiving notice of the claim or proceeding from the Indemnified Party (or such
shorter time specified in the notice as the circumstances of the matter may
dictate), the Indemnified Party shall be free to dispose of the matter, at the
expense of the Indemnitor (but subject to the Indemnitor's right subsequently to
contest through appropriate proceedings its obligation to provide
indemnification), in any way which the Indemnified Party deems in its best
interest.
10.5 LIMITATIONS ON INDEMNIFICATION RIGHTS. Indemnification shall be due only to
the extent of the loss or damage actually suffered (i.e., reduced by any
offsetting or related asset or service received and by any recovery from any
third party, such as an insurer who has no rights against the Indemnified
Party), net after the amount equal to any reduction in federal, state or local
income, franchise or other taxes occasioned by such loss or damage (even though
the tax return by which such reduction would have been realized is not yet due),
but including an amount equal to any increase in federal, state and local
income, franchise or other taxes occasioned by the indemnification payment and
then only to the extent of the excess over the Agreed De Minimis Amount
(hereinafter defined). The Indemnitor shall be subrogated to all rights of the
Indemnified Party against any third party with respect to any claim for which
indemnification is paid. Notwithstanding the foregoing, the Indemnitor shall not
be liable to the Indemnified Party for any individual misrepresentation, breach
of warranty or violation of a covenant where the otherwise indemnifiable amount
does not exceed $10,000.00 and, as regards all such indemnifiable
misrepresentations or breaches of warranty or violation of a covenant that do
not exceed $10,000, the Indemnitor shall not be liable except to the extent that
the aggregate amount thereof exceeds $25,000 (such sum being herein referred to
as the "Agreed De Minimis Amount"); provided, however, that the Agreed De
Minimis Amount shall not apply with respect to the indemnification otherwise due
for any third-party claims.
ARTICLE XI
GENERAL PROVISIONS
11.1 EXPENSES. Each party shall pay its own expenses incident to the negotiation
and preparation of this Agreement and the transactions contemplated hereby. All
other recording costs for bills of sale and other instruments of transfer, and
all stamp, sales, use and transfer taxes in connection with the purchase and
sale of shares shall be paid by the transferring party.
11.2 NOTICES. All notices, requests, demands and other communications pertaining
to this Agreement shall be in writing and shall be deemed duly given when
delivered personally with a receipt, when delivered by an overnight courier
service or mailed by certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) To: Cobra: _________________________
-------------------------
-------------------------
With a copy to: _________________________
-------------------------
-------------------------
(B) TO THE COMPANY:
AND DAVID
With a copy to: Joseph B. Darby, III, Esq.
Sherburne, Powers, Holland & Knight
One Beacon Street
Boston, MA 02108
Either party may change its address for notices by written notice to
the other given pursuant to this paragraph.
11.3 CERTAIN BREACHES. Neither party shall have any liability to the other party
with respect to a breach by a party of which the other party has received
written notice at or prior to Closing.
11.4 PRIOR NEGOTIATIONS. This Agreement supersedes in all respects all prior and
contemporaneous oral and written negotiations, understandings and agreements
between the parties with respect to the subject matter hereof. All of said prior
and contemporaneous negotiations, understandings and agreements are merged
herein and superseded hereby.
11.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Exhibits and Schedules
to this Agreement supercede the non-binding Letter of Intent, dated March 2,
1999, which shall no longer (if it ever did) have any force or effect, and set
forth the entire understanding between the parties in connection with the
transaction contemplated herein, there being no terms, conditions, warranties or
representations other than those contained herein, referenced herein or provided
for herein. Neither this Agreement nor any term or provision hereof may be
altered or amended in any manner except as an instrument in writing signed by
the party against whom the enforcement of any such change is sought.
11.6 EXHIBITS/SCHEDULES. The Exhibits and Schedules attached hereto or referred
to herein are a material part of this Agreement, as if set forth in full herein.
11.7 SEVERABILITY. If any term of this Agreement is illegal or unenforceable at
law or in equity, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. Any illegal or unenforceable term shall be deemed to be void and of no
force and effect only to the minimum extent necessary to bring such term within
the provisions of any applicable law or laws and such term, as so modified, and
the balance of this Agreement shall then be fully enforceable.
11.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Unless otherwise specifically
noted herein, the several representations, warranties and covenants of the
parties contained herein shall survive the closing for a period of one (1) year
from the Closing date. Thereafter neither party shall have any liability to the
other based upon any of the representations, warranties and covenants set forth
herein.
11.9 WAIVER. Unless otherwise specifically agreed in writing to the contrary:
(i) the failure of either party at any time to require performance by the other
of any provision of this Agreement shall not affect such party's right
thereafter to enforce the same, (ii) no waiver by either party of any default by
the other shall be taken or held to be a waiver by such party of any other
preceding or subsequent default, and (iii) no extension of time granted by
either party for the performance of any obligation or act by the other party
shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11.10 NUMBER AND GENDER. Whenever the context so requires, words used in the
singular shall be construed to mean or include the plural and vice versa, and
pronouns of any gender shall be construed to mean or include any other gender or
genders.
11.11 HEADINGS AND CROSS-REFERENCES. The headings of this Agreement are included
for convenience of reference only, and shall in no way limit or affect the
meaning or interpretation of the specific provisions hereof. All
cross-references to paragraphs herein shall mean the paragraphs of this
Agreement unless otherwise stated or clearly required by the context. All
references to Exhibits or Schedules herein shall mean the Exhibits or Schedules
to this Agreement. Words such as "herein" and "hereof" shall be deemed to refer
to this Agreement as a whole and not to any particular provision of this
Agreement unless otherwise stated or clearly required by the context.
11.12 CHOICE OF LAWS. This Agreement is to be construed and governed by the laws
of the State of Florida, except for the choice of law rules utilized in that
jurisdiction.
11.13 ARBITRATION. Any dispute arising under or related to this Agreement that
the parties are unable to resolve by themselves shall be settled by arbitration
in Broward County, Florida, by a panel of three arbitrators. Cobra together with
the Company shall each designate one disinterested arbitrator and the two
arbitrators so designated shall select the third arbitrator. The persons
selected as arbitrators need not be professional arbitrators, and persons such
as accountants, appraisers and bankers shall be acceptable. Before undertaking
to resolve the dispute, each arbitrator shall be duly sworn faithfully and
fairly to hear and examine the matters in controversy and to make a just award
according to the best of his or her understanding. The arbitration hearing shall
be conducted in accordance with the rules of the American Arbitration
Association. The written decision of a majority of the arbitrators shall be
final and binding on the parties. Costs and expenses of the arbitration
proceeding shall be assessed between the parties in a manner to be decided by a
majority of the arbitrators, and the assessment shall be set forth in the
decision and award of the arbitrators. No action at law or suit in equity based
upon any claim arising out of or relating to this Agreement shall be instituted
in any court by a party against another except an action to compel arbitration
pursuant to this paragraph, an action to enforce the award of the arbitration
panel rendered in accordance with this paragraph, or a suit for specific
performance as may be specifically provided herein.
11.14 SUCCESSORS. This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
assigns.
11.15 THIRD PARTIES. Nothing in this Agreement, whether expressed or implied, is
intended to (i) confer any rights or remedies on any person other than the
parties and their respective successors and assigns, (ii) relieve or discharge
the obligation or liability of any third party, or (iii) give any third party
any right of subrogation or action against any party hereto.
11.16 NO INFERENCES. This agreement is the result of negotiations between the
parties, and no inferences shall be drawn by reason of its having been prepared
by any one of the parties.
11.17 COUNTERPARTS. This Agreement may be signed by facsimile and in
counterparts with the same effect as if the signature on each counterpart were
on the same instrument. Each of the counterparts, when signed, shall be deemed
to be an original, and all of the signed counterparts together shall be deemed
to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
WITNESS/ATTEST: COBRA TECHNOLOGIES, INC.
Secretary By: Vito Gambelunghe, President
COMPUTER MARKETPLACE, INC.
Secretary By: David Burke, President
David Burke, Sr., Individually Betty Des Meules, Individually
Lenice Thomas, Individually Emmanuel Spampinato
MERGER SUB
Secretary By:
<PAGE>
STATE OF FLORIDA :
: ss.
COUNTY OF :
I CERTIFY that on , 1999,
personally appeared before me, and this person acknowledged, to my satisfaction,
that:
(a) this person is the secretary of COBRA TECHNOLOGIES, INC., the
corporation named in this document;
(b) this person is the attesting witness to the signing of this
document by the proper corporate officer, VITO GAMBELUNGHE, who is the President
of the corporation;
(c) this document was signed and delivered by the corporation as its
voluntary act duly authorized by a proper resolution of its Board of Directors;
(d) this person knows the proper seal of the corporation which was
affixed to this document; and
(e) this person signed this proof to attest to the truth of these
facts.
----------------------------
Signed and sworn to before me
on , 1999
STATE OF :
: ss.
COUNTY OF :
BE IT remembered that on this day of , 1999, before me, the undersigned
authority, personally appeared who, I am satisfied, is the person mentioned in
the within instrument, to whom I first made known the contents thereof, and
thereupon he signed, sealed, and delivered the same as his voluntary act and
deed, for the uses and purposes therein expressed.
----------------------------
<PAGE>
SCHEDULE 3.6(A)
ALLOCATION OF CONSIDERATION
1. ALLOCATION OF CASH PAID AT CLOSING
The One Million Five Hundred Thousand Dollars ($1,500,000) to be paid
at Closing shall be paid to the Company Shareholders in the following amounts:
David Burke, Sr.:
Amount Received for Class A Shares $ 180,556
Amount Received for 3000 Class B Shares $ 833,333
Lenice Thomas - Amount Received for 450 Class B Shares $ 125,000
Betty Des Meules - Amount Received for 1,000 Class B Shares $ 277,778
EMMANUEL SPAMPINATO- AMOUNT RECEIVED FOR 300 CLASS B SHARES $ 83,333
------------
$ 1,500,000
2. TOTAL CONSIDERATION RECEIVED BY EACH COMPANY SHAREHOLDER
DAVID BURKE, SR.
Amount Received for Class B Shares $833,333
Amount Received for Class A Shares:
Cash at Closing $180,556
Cobra Stock 1 million shares
Promissory Note $1,000,000 (subject
to adjustment as set
forth in Section 3.6
(a)(2) of the Agreement.
LENICE THOMAS
Cash at Closing $125,000
BETTY DES MEULES
Cash at Closing $277,778
EMMANUEL SPAMPINATO
Cash at Closing $ 83,333
<PAGE>
SCHEDULE 3.6(B)
FORM OF PROMISSORY NOTE
(To be provided and attached hereto)
<PAGE>
DISCLOSURE SCHEDULES FOR THE COMPANY
DISCLOSURES MADE FOR THE PURPOSES OF THIS SECTION OF THE DISCLOSURE SCHEDULES
SHALL BE DEEMED TO BE DISCLOSURES FOR THE PURPOSES OF ANY OTHER RELEVANT SECTION
OF THE DISCLOSURE SCHEDULES.
Merger agreement Version 6
Merger agreement Version 6
SCHEDULE 4.3 CONSENTS AND APPROVALS
3. Finova Capital Corporation
4. Hewlett Packard Company
5. Compaq Computer Corporation
6. Microsoft Corporation
7. Inacom Corp.
8. Citrix Systems, Inc.
9. 3Com Corporation
10. Shoreline Teleworks, Inc.
11. IBM
12. Ingram Micro, Inc.
13. Computer Associates International, Inc.
14. Tech Data Corporation
15. Symantec Corporation
16. Ingram Alliance Reseller Company
17. United Parcel Services
<PAGE>
SCHEDULE 4.4 NON-CONTRAVENTION.
See Schedule 4.3.
SCHEDULE 4.5 ENVIRONMENTAL MATTERS
None.
SCHEDULE 4.6 INVENTORY
Approximately 5% of the Inventory may be obsolete as of the date of
Closing. All of the Inventory is located on the premises leased by the
Company at 885 Main Street, Tewksbury, MA 01876.
SCHEDULE 4.7 ACCOUNTS RECEIVABLE
See Attached Schedules for Accounts Receivable as of February 28, 1999
(based on the audited financial statements as of February 28, 1999) and
unaudited Accounts Receivable as of May 31, 1999.
SCHEDULE 4.9 COMPLIANCE WITH LAWS
None.
SCHEDULE 4.11 LITIGATION
None.
SCHEDULE 4.12 ABSENCE OF CHANGES
None.
SCHEDULE 4.13 UNDISCLOSED LIABILITIES
None. See attached schedule of unaudited Accounts Payable as of May
31, 1999.
SCHEDULE 4.14 TITLE TO PROPERTIES
None.
SCHEDULE 4.15 LEASES
1. Lease between Daval Realty Trust as lessor and the Company as lessee for
rental of Unit A-4, 885 Main Street, Tewksbury, MA.
2. Lease between Daval Realty Trust as lessor and the Company as lessee for
rental of Unit A-5, 885 Main Street, Tewksbury, MA.
3. Tenant at Will Agreement between Daval Realty Trust as lessor and the
Company as lessee for rental of a storage facility located at 488 Sutton
Street, Building 2, North Andover, MA.
4. Lease between Compass Financial and the Company for a 35RCT lift truck.
SCHEDULE 4.17 MATERIAL CONTRACTS
See Schedule 4.3 for a listing of all Material Contracts. The following
contracts provide that the CHANGE OF CONTROL OF THE COMPANY MAY CONSTITUTE A
DEFAULT (ABSENT CONSENT), AND/OR THAT THE VENDOR MAY terminate the contract upon
a change of control: 1) Finova Capital Corporation; 2) Hewlett Packard; 3)
Compaq Computer Corporation; and 4) IBM. Furthermore, all of the contracts
listed in Schedule 4.3 provide that the Company must obtain consent from the
vendor prior to assigning its rights and obligations under the contract. The
Company has not obtained any consents with respect to change of control or
assignment, except to the extent that any written consents are provided to Cobra
at Closing and attached to this Schedule 4.17.
<PAGE>
SCHEDULE 4.19 INSURANCE
1. Valley Forge Life Insurance
Policy #VITU23698
$150,000 ViaTerm XV
Policy Date - 3/5/98
Insured: David Burke, Sr.
Beneficiary: Alice Burke (Contingent Beneficiary
- Computer Marketplace, Inc.).
2. Security Connecticut
Policy #1101699H
$100,000 Lifeline I
Policy Date - 7/18/94
Insured: David Burke, Sr.
Beneficiary: Alice Burke (Contingent Beneficiary
- Computer Marketplace, Inc.).
3. Travelers Indemnity Co.
Workers Compensation and Employers Liability Policy
Policy Date: 6/28/98-6/28/99
4. Travelers Indemnity Co.
Business Property Insurance Policy
Policy Date: 6/28/98-6/28/99
5. Travelers Indemnity Co.
Commercial Excess Liability (Umbrella) Insurance Policy
Policy Date: 6/28/98-6/28/99
6. Commercial Union Insurance Policy
Commercial Automobile Insurance Policy
Policy Date: 1/17/99-1/17/00
<PAGE>
SCHEDULE 4.20 LABOR MATTERS
None.
SCHEDULE 4.21 EMPLOYEE BENEFIT PLANS
1. Life Insurance Plan.
2. Health Insurance Plan.
3. Accidental Death and Dismemberment Insurance Plan.
4. 401(k) Plan.
5. Dental Insurance Plan (Section 125 Plan).
SCHEDULE 4.22 TAX MATTERS
None.
SCHEDULE 4.23 FINDERS/BROKERS
None.
SCHEDULE 4.24 INSIDER INTERESTS
As set forth in Disclosure Schedule 4.15, the Company has
entered into two leases with Daval Realty Trust. David Burke, Sr. is the Trustee
of the Daval Realty Trust.
SCHEDULE 4.25 INTEREST IN COMPETITORS
None.
<PAGE>
SCHEDULE 4.28 BANK AND SAFE DEPOSIT ARRANGEMENTS
1. ANDOVER BANK
61 Main Street
Andover, MA 01810
Checking Account #220529604
Signatories: David Burke, Sr.
Emmanuel Spampinato
Mary Ann Murphy
Alice Burke
Savings Account #0040628840
Signatories: David Burke, Sr.
Emmanuel Spampinato
Mary Ann Murphy
Joseph Spampinato
Kathleen Mondi
2. BANKBOSTON P.O. Box 2016 Boston, MA 02106
Checking Account #26315565
Signatories: David Burke, Sr.
Emmanuel Spampinato
Mary Ann Murphy
Lenice Thomas (to be removed)
Savings Account #126315565
Signatories: David Burke, Sr.
Emmanuel Spampinato
Mary Ann Murphy
Lenice Thomas (to be removed)
3. FAMILY BANK
1 Pond View Place
Tyngsboro, MA 01879
Signatories: David Burke, Sr.
Emmanuel Spampinato
Mary Ann Murphy
Lenice Thomas (to be removed)
SCHEDULE 4.29 INSIDER TRANSACTIONS
With the exception of the lease arrangements set forth in
Disclosure Schedule 4.24, none.
<PAGE>
DISCLOSURE SCHEDULES FOR COBRA
SCHEDULE 5.2 CAPITALIZATION OF COBRA
SCHEDULE 5.3 CONSENTS AND APPROVALS
SCHEDULE 5.4 NON-CONTRAVENTION
SCHEDULE 5.13 LITIGATION
SCHEDULE 5.14 UNDISCLOSED LIABILITIES
SCHEDULE 5.16 COMPLIANCE WITH APPLICABLE LAWS
SCHEDULE 5.17 ABSENCE OF CERTAIN CHANGES
Bylaws
of
SPECTRUM VENTURES, INC.
ARTICLE I. DIRECTORS
SECTION 1. FUNCTION. All corporate powers shall be exercised by or under the
authority of the Board of Directors. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors. Directors must
be natural persons who are at least 18 years of age but need not be shareholders
of the Corporation. Residents of any state may be directors.
SECTION 2. COMPENSATION. The shareholders shall have authority to fix the
compensation of directors. Unless specifically authorized by a resolution of the
shareholders, the directors shall serve in such capacity without compensation.
SECTION 3. PRESUMPTION OF ASSENT. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless he objects at the beginning of the meeting (or promptly upon
arriving) to t e holding of the meeting or transacting the specified business at
the meeting, or if the director votes against the action taken or abstains from
voting because of an asserted conflict of interest.
SECTION 4. NUMBER. The Corporation shall have at least the minimum number of
directors required by 1 aw. The number of directors may be increased or
decreased from time to time by the Board of Directors.
SECTION 5. ELECTION AND TERM. -At each annual meeting of shareholders, the
shareholders shall elect directors to hold office until the next annual meeting
or until their earlier resignation, removal from office or death. Directors
shall be elected by a plurality of the votes cast by the shares entitled to vote
in the election at a meeting at which a quorum is present.
SECTION 6. VACANCIES. Any vacancy occurring in the Board of Directors, including
a vacancy created by an INCREASE IN THE NUMBER OF DIRECTORS, MAY BE FILLED BY
the shareholders or by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders. If there are no remaining directors, the vacancy
shall be filled by the shareholders.
SECTION 7. REMOVAL OF DIRECTORS. At a meeting of shareholders, any director or
the entire Board of Directors may be removed, with or without cause, provided
the notice of the meeting states that one of the purposes of the meeting is the
removal of the director. A director may be removed only if the number of votes
cast to remove him exceeds the number of votes cast against removal.
SECTION 8. QUORUM AND VOTING. A majority of the number of directors fixed by
these Bylaws shall constitute a quorum for the transaction of business. The act
of a majority of directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 9. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members one or more committees each of which must have at least two members.
Each committee shall have the authority set forth in the resolution designating
the committee.
SECTION 10. PLACE OF MEETING. Regular and special meetings of the Board of
Directors shall be held at the principal place of business of the Corporation or
at another place designated by the person or persons giving notice or otherwise
calling the meeting. SECTION 11. TIME, NOTICE AND CALL OF MEETINGS. Regular
meetings of the Board of Directors shall be held without notice at the time and
on the date designated by resolution 'of the Board of Directors. Written notice
of the time, date and place of special meetings of the Board of Directors shall
be given to each director by mail delivery at least two days before the meeting.
Notice of a meeting of the Board of Directors need not be given to a
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting constitutes a waiver of notice of that
meeting and waiver of all objections to the place of the meeting, the time of
the meeting, and the manner in which it has been called or convened, unless a
director objects to the transaction of business (promptly upon arrival at the
meeting) because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors must be specified in the notice or waiver of notice of
the meeting.
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of an adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place
of the adjourned meeting are announced at the time of the adjournment, to the
other directors. Meetings of the Board of Directors may be called by the
President or the Chairman of the Board of Directors. Members of the Board of
Directors and any committee of the Board may participate in a meeting by
telephone conference or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
by these means constitutes presence in person at a meeting.
SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted to be
taken at a meeting of directors may be taken without a meeting if a consent in
writing setting forth the action to be taken and signed by all of the directors
is filed in the minutes of the proceedings of the Board. The action taken shall
be deemed effective when the last director signs the consent, unless the consent
specifies otherwise.
ARTICLE II. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of the
corporation for the election of officers and for such other business as may
properly come before the meeting shall be held at such time and place as
designated by the Board of Directors.
SECTION 2. SPECIAL MEETING. Special meetings of the shareholders shall be held
when directed by the President or when requested in writing by shareholders
holding at least 10% of the Corporation's stock having the right and entitled to
vote at such meeting. A meeting requested by shareholders shall be called by the
President for a date not less than 10 nor more than 60 days after the request is
made. Only business within the purposes described in the meeting notice may be
conducted at a special shareholders, meeting.
SECTION 3. PLACE. Meetings of the shareholders will be held at the principal
place of business of the Corporation or at such other place as is designated by
the Board of Directors. SECTION 4. NOTICE. A written notice of each meeting of
shareholders shall be mailed to each shareholder having the right and entitled
to vote at the meeting at the address as it appears on the records of the
Corporation. The meeting notice shall be mailed not less than 10 nor more than
60 days before the date set for the meeting. The record date for determining
shareholders entitled to vote at the meeting will be the close of business on
the day before the notice is sent. The notice shall state the time and place the
meeting is to be held. A notice of a special meeting shall also state the
purposes of the meeting. A notice of meeting shall be sufficient for that
meeting and any adjournment of it. If a shareholder transfers any shares after
the notice is sent, it shall not be necessary to notify the transferee. All
shareholders may waive notice of a meeting at any time.
SECTION 5. SHAREHOLDER QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. Any number of shareholders, even if less than a quorum, may
adjourn the meeting without further notice until a quorum is obtained.
SECTION 6. SHAREHOLDER VOTING. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders. Each outstanding share
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. An alphabetical list of all shareholders who are entitled to
notice of a shareholders, .meeting along with their addresses and the number of
shares held by each shall be produced at a shareholders, meeting upon the
request of any shareholder.
SECTION 7. PROXIES. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy executed
in writing and signed by the shareholder or his attorney-in-fact. The
appointment of proxy will be effective when received by the Corporation's
officer or agent authorized to tabulate votes. No proxy shall be valid more than
11 months after the date of its execution unless a longer term is expressly
stated in the proxy.
SECTION 8. VALIDATION. If shareholders who hold a majority of the voting stock
entitled to vote at a meeting are present at the meeting, and sign a written
consent to the meeting on the record, the acts of the meeting shall be valid,
even if the meeting was not legally called and noticed.
SECTION 9. CONDUCT OF BUSINESS BY WRITTEN CONSENT. Any action of the
shareholders may be taken without a meeting if written consents, setting forth
the action taken, are signed by at least a majority of shares entitled to vote
and are delivered to the officer or agent of the Corporation having custody of
the Corporation's records within 60 days after the date that the earliest
written consent was delivered. Within 10 days after obtaining an authorization
of an action by written consent, notice shall be given to those shareholders who
have not consented in writing or who are not entitled to vote on the action. The
notice shall fairly summarize the material features of the authorized action. If
the action creates dissenters' rights, the notice shall contain a clear
statement of the right of dissenting shareholders to be paid the fair value of
their shares upon compliance with and as provided for by the state law governing
corporations.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS: ELECTION: RESIGNATION; VACANCIES. The
Corporation shall have the officers and assistant officers that the Board of
Directors appoint from time to TIME. EXCEPT AS OTHERWISE PROVIDED IN AN
EMPLOYMENT AGREEMENT WHICH THE CORPORATION HAS WITH AN officer, each officer
shall serve until a successor is chosen by the directors at a regular or special
meeting of the directors or until removed. officers and agents shall be chosen,
serve for the terms, and have the duties determined by the directors. A person
may hold two or more offices.
Any officer may resign at any time upon written notice to the Corporation. The
resignation shall be effective upon receipt, unless the notice specifies a later
date. If the resignation is effective at a later date and the Corporation
accepts the future effective date, the Board of Directors may fill the pending
vacancy before the effective date provided the successor officer does not take
office until the future effective date. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
SECTION 2. POWERS AND DUTIES OF OFFICERS. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as may be
prescribed by the Board of Directors and, to the extent not so provided, as
generally pertain to their respective offices, subject to the control of the
Board of Directors.
SECTION 3. REMOVAL OF OFFICERS. An officer or agent or member of a committee
elected or appointed by the Board of Directors may be removed by the Board with
or without cause whenever in its judgment the best interests of the Corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of an
officer, agent or member of a committee shall not of itself create contract
rights. Any officer, if appointed by another officer, may be removed by that
officer.
SECTION 4. SALARIES. The Board of Directors may cause the Corporation to enter
into employment agreements with any officer of the Corporation. Unless provided
for in an employment agreement between the Corporation and an officer, all
officers of the Corporation serve in their capacities without compensation.
SECTION 5. BANK ACCOUNTS. The Corporation shall have accounts with financial
institutions as determined by the Board of Directors.
ARTICLE IV, DISTRIBUTIONS
The Board of Directors may, from time to time, declare
distributions to its shareholders in cash, property, or its own shares, unless
the distribution would cause (i) the Corporation to be unable to pay its debts
as they become due in the usual course of business, or (ii) the Corporations
assets to be less than its liabilities plus the amount necessary, if the
Corporation were dissolved at the time of the distribution, to satisfy the
preferential rights of shareholders whose rights are superior to those receiving
the distribution. The shareholders and the Corporation may enter into an
agreement requiring the distribution of corporate profits, subject to the
provisions of law.
ARTICLE V. CORPORATE RECORDS
SECTION 1. CORPORATE RECORDS. The corporation shall maintain its records in
written form or in another form capable of conversion into written form within a
reasonable time. The Corporation shall keep as permanent records minutes of all
meetings of its shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a meeting, and a record
of all actions taken by a committee of the Board of Directors on behalf of the
Corporation. The Corporation shall maintain accurate accounting records and a
record of its shareholders in a form that permits preparation of a list of the
names and addresses of all shareholders in alphabetical order by class of shares
showing the number and series of shares held by each.
The Corporation shall keep a copy of its articles or restated articles
of incorporation and all amendments to them currently in effect; these Bylaws or
restated Bylaws and all amendments currently in effect; resolutions adopted by
the Board of Directors creating one or more classes or series of shares and
fixing their relative rights, preferences, and limitations, if shares issued
pursuant to those resolutions are outstanding; the minutes of all shareholders,
meetings and records of all actions taken by shareholders without a meeting for
the past three years; written communications to all shareholders generally or
all shareholders of a class of series within the past three years, including the
financial statements furnished for the last three years; a list of names and
business street addresses of its current directors and officers; and its most
recent annual report delivered to the Department of State.
SECTION 2. SHAREHOLDERS, INSPECTION RIGHTS. A shareholder is entitled to inspect
and copy, during regular business hours at a reasonable location specified by
the Corporation, any books and records of the Corporation. The shareholder must
give the Corporation written notice of this demand at least five business days
before the date on which he wishes to inspect and copy the record(s). The demand
must be made in good faith and for a proper purpose. The shareholder must
describe with reasonable particularity the purpose and the records he
desires to inspect, and the records must be directly connected with this
purpose. This Section does not affect the right of a shareholder to inspect and
copy the shareholders I list described in this Article if the shareholder is in
litigation with the Corporation. In such a case, the shareholder shall have the
same rights as any other litigant to compel the production of corporate records
for examination.
The Corporation may deny any demand for inspection if the demand was
made for an improper purpose, or if the demanding shareholder has within the two
years preceding his demand, sold or offered for sale any list of shareholders of
the Corporation or of any other corporation, has aided or abetted any person in
procuring any list of shareholders for that purpose, or has improperly used any
information secured through any prior examination of the records of this
Corporation or any other corporation.
SECTION 3. FINANCIAL STATEMENTS FOR SHAREHOLDERS. Unless modified by resolution
of the shareholders within 120 days after the close of each fiscal year, the
Corporation shall furnish its shareholders with annual financial statements
which may be consolidated or combined statements of the Corporation and one or
more of its subsidiaries, as appropriate, that include a balance sheet as of the
end of the fiscal year, an income statement for that year, and a statement of
cash flows for that year. If financial statements are prepared for the
Corporation on the basis of generally accepted accounting principles, the annual
financial statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the President or the person responsible for the
Corporation's accounting records stating his reasonable belief whether the
statements were prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation and describing any
respects in which the statements were not prepared on a basis of accounting
consistent with the statements prepared for the preceding year. The Corporation
shall mail the annual financial statements to each shareholder within 120 days
after the close of each fiscal year or within such additional time thereafter as
is reasonably necessary to enable the Corporation to prepare its financial
statements. Thereafter, on written request from a shareholder who was not mailed
the statements, the Corporation shall mail him the latest annual financial
statements.
SECTION 4. OTHER REPORTS TO SHAREHOLDERS. If the Corporation indemnities or
advances expenses to any director, officer, employee or agent otherwise than by
court order or action by
the shareholders or by an insurance carrier pursuant to insurance maintained by
the Corporation, the Corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next annual
shareholders' meeting, or prior to the meeting if the indemnification or advance
occurs after the giving of the notice but prior to the time the annual meeting
is held. This report shall include a statement specifying the persons paid, the
amounts paid, and the nature and status at the time of such payment of the
litigation or threatened litigation.
If the Corporation issues or authorizes the issuance of shares for
promises to render services in the future, the Corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting.
ARTICLE VI. STOCK CERTIFICATES
SECTION 1. ISSUANCE. The Board of Directors may authorize the issuance of some
or all of the shares of any or all of its classes or series without
certificates. Each certificate issued shall be signed by the President and the
Secretary (or the Treasurer). The rights and obligations of shareholders are
identical whether or not their shares are represented by certificates.
SECTION 2. REGISTERED SHAREHOLDERS. No certificate shall be issued for any share
until the share is fully paid. The Corporation shall be entitled to treat the
holder of record of shares as the holder-in fact and, except as otherwise
provided by law, shall not be bound to recognize any equitable or other claim to
or interest in the shares.
SECTION 3. TRANSFER OF SHARES. Shares of the Corporation shall be transferred on
its books only after the surrender to the Corporation of the share certificates
duly endorsed by the holder of record or attorney-in-fact. If the surrendered
certificates are canceled, new certificates shall be issued to the person
entitled to them, and the transaction recorded on the books of the Corporation.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. If a shareholder claims to
have lost or destroyed a certificate of shares issued by the Corporation, a new
certificate shall be issued upon the delivery to the Corporation of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the deposit
of a bond or other indemnity as the Board reasonably requires.
ARTICLE VII. INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. The Corporation hereby indemnities each
person (including the heirs, executors, administrators, or estate of such
person) who is or was a director or officer of the Corporation to the fullest
extent permitted or authorized by current or future legislation or judicial or
administrative decision against all fines, liabilities, costs and expenses,
including attorneys, fees, arising out of his or her status as a director,
officer, agent, employee or representative. The foregoing right of
indemnification shall not be exclusive of other rights to which those seeking an
indemnification may be entitled. The Corporation may maintain insurance, at its
expense, to protect itself and all officers and directors against fines,
liabilities, costs and expenses, whether or not the Corporation would have the
legal power to indemnify them directly against such liability.
SECTION 2. ADVANCES. Costs, charges and expenses (including attorneys' fees)
incurred by a person referred to in Section 1 of this Article in defending a
civil or criminal proceeding shall be paid by the Corporation in advance of the
final disposition thereof upon receipt of an undertaking to repay all amounts
advanced if it is ultimately determined that the person is not entitled to be
indemnified by the Corporation as authorized by this Article, and upon
satisfaction of other conditions required by current or future legislation.
SECTION 3. SAVINGS CLAUSE. If this Article or any portion of it is invalidated
on any ground by a court of competent jurisdiction, the Corporation nevertheless
indemnities each person described in Section 1 of this Article to the fullest
extent permitted by all portions of this Article that have not been invalidated
and to the fullest extent permitted by law.
ARTICLE VIII. AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws
adopted, by a majority vote of the directors or by a vote of the shareholders
holding a majority of the shares.
I certify that these are the Bylaws by the Board of Directors of the
Corporation.
Secretary
Date:
BYLAWS
OF
Spectrum Ventures, Inc.
A Nevada Corporation
ARTICLE I
OFFICES
SECTION 1. OFFICES.
The registered office shall be in the City of Clearwater, County of Pinellas,
State of Florida (her@er, the "State"). The corporation may also have offices at
such other places both within and without the State, as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE 11
MEETINGS OF STOCKHOLDERS
Section 1. General.
All meetings of the stockholders shall be held at such place within or without
the State as may be designated from time to time by the Board of Directors.
SECTION 2. ANNUAL ME
The annual meeting of the stockholders, commencing with the year 1998 shall be
held on January 2, if not a legal holiday, and if a legal holiday, then on the
next business day following, at " I 1: 00 AM", or at such other date and time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting, at which they shall elect by a plurality vote the
Board of Directors, and transact such other business as may properly be brought
before the meeting. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least twenty (20) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such fist shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
twenty (20) days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 3. SPECIAL MEETINGS
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute or by the Articles of Incorporation
(hereinafter, the "Certificate"), may be called by the President and shall be
called by the President or Secretary at the request in writing of a majority of
the Board of Directors, or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting. Written notice of a special meeting stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called, shall be given not less than ten (IO) or more than sixty
(60) days before the date of the meeting, to each stockholder entitled to vote
at such meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 4. QUORUM.
The holders of a majority of the stock issued and outstanding and entitled to
vote, present in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business, except as
otherwise provided by statute or by the Certificate. @ however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote, present in person or represented by proxy, shall
have power to adjourn the meeting to a future date at which a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified. Notice need not be given of
the adjourned meeting if the time and place are announced at the meeting in
which the adjournment occurs. If the adjournment is for more than thirty (' )O)
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting. No elections of officers or revisions of
bylaws are official unless approved by majority of Directors and approval of 75%
or more of votes from stockholders.
SECTION 5. VOTING.
When a quorum is present at any meeting, the vote of the holders of a majority
of the stock having voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one upon
which by express provision of the statutes or of the Certificate, a different
vote is required in which case such express provision shall govern and control
the decision of such question. Unless otherwise provided in the Certificate or
by statute, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Every proxy shall be revocable by the stockholder executing it, except where an
irrevocable proxy is permitted by statute.
SECTION 6. WRITTEN CONSENT.
Unless otherwise provided in the Certificate, any action required to be taken at
any annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote
thereon were present and voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing and to the Secretary of
the corporation. Any such consent shall be filed
with the minutes of the corporation.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. MANAGEMENT AND NUMBER.
The property, business and affairs of the corporation shall be controlled and
managed by a Board of Directors. The number of directors to constitute the first
Board of Directors is 7 and such number may be increased or decreased by future
action of the Board of Directors and a vote of approval by 75% or more votes
from shareholders . The business of the corporation shall be managed by its
Board of Directors, which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the Certificate or
by these bylaws directed or required to be exercised or done by the
stockholders.
Section 2. Vacancies.
Vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority vote of the directors
then in office, though less than a quorum, or by a sole remaining director, and
the directors so chosen shall hold office until the next annual election and
until their successors are duly elected and shall qualify, unless sooner
displaced. If there are no directors in office, then an election of directors
may be held in the manner provided by statute. If, at the time of filling any
vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole Board of Directors (as constituted
immediately prior to any such increase), then the appropriate court of the State
may, upon application of any stockholder or stockholders having at least ten
(1011/o) percent of the total number of shares then outstanding having the right
to vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships or to replace directors chosen by
the directors then in office.
SECTION 3. LOCATIONS.
The Board of Directors of the corporation may hold meetings, both regular and
special, either within or without the State.
SECTION 4. FIRST MEETING.
The first meeting of each newly elected Board of Directors shall be held at such
time and place as shall be fixed by the vote of the stockholders at the annual
meeting and no notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall be
present. In the event of the failure of the stockholders to fix the time or
place of such first meeting of the newly elected Board of Directors, or in the
event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
SECTION 5. REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by the Board of
Directors.
SECTION 6- SPECIAL ME@N s.
Special meetings of the Board of Directors may be called by the President on two
days notice to each director, either personally or by mail or by telegram,
setting forth the time, place and purpose of the meeting. Special meetings shall
be called by the President or Secretary in like manner and on like notice on the
written request of two directors. Chairman may call a Special Meeting with two
days' notice.
SECTION 7. QUORUM.
At all meetings of the Board of Directors, a majority of directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may otherwise be specifically provided by
statute or by the Certificate. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
SECTION 8. ACTION BY CONSENT.
Unless otherwise restricted by the Certificate, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
Committee.
SECTION 9. MEETINGS BY e hone.
Unless otherwise restricted by the Certificate, members of the Board of
Directors or of any committee thereof, may participate in a meeting of the Board
of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting by use of such equipment shall constitute presence in person at such
meeting.
SECTION 10. COMMITTEES, MEMBERSHIP, POWERS.
The Board of Directors may, by resolution passed by a majority of the whole
Board of Directors, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he, she or they constitute a quorum may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate; adopting an agreement of
merger or consolidation recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporations property and assets;
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution; amending the bylaws of the corporation or
increasing or decreasing the membership of the Board of Directors; and, unless
the resolution or the Certificate expressly so provide, no such committee shall
have the power or authority to declare a dividend or to authorize the issuance
of stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
SECTION I 1. COMMITTEES, MINUTES.
Each committee shall appoint a secretary of each meeting and keep regular
minutes of its meetings and report the same to the Board of Directors.
SECTION 12. COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the Certificate, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum or number of shares of company stock for
attendance at each meeting of the Board of Directors and a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
SECTION 1. NOTICES.
Whenever, under the provisions of the statutes or of the Certificate or of these
bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder at their address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
SECTION 2. WAIVERS.
Whenever any notice is required to be given under the provisions of the statutes
or of the Certificate or of these bylaws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. DESIGNATIONS.
The officers of the corporation shall be chosen by the Board of Directors and
shall be a Chairman of the Board of Directors (if one shall be elected by the
Board of Directors), a President, a Vice President, a Secretary and a Treasurer.
The Board of Directors may also choose additional Vice Presidents, and one or
more Assistant Secretaries and Assistant Treasurers. Any number of offices may
be held by the same person, unless applicable law, the Certificate or these
bylaws otherwise provide. The Chief Financial Officer ( CFO) shall report
directly to the Board of Directors and shall be employed at the pleasure of the
Board of Directors. Only the Board of Directors shall have authority over the
CFO.
SECTION 2. TERM REMOVAL.
The Board of Directors at its first meeting and after each annual meeting of
stockholders shall choose a Chairman of the Board of Directors (if they so
desire), a President, one or more Vice Presidents, a Secretary and a Treasurer.
The Board of Directors may appoint such other officers and agents as it shall
deem necessary who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors. The officers of the corporation shall hold office until
their successors are chosen and qu@. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority if the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
SECTION 3. SALARIES.
The salaries of all officers and agents of the corporation shall be fixed by the
Board of Directors. Any payments made to an officer of the corporation as
compensation, salary, commission, bonus, interest, or rent, or in reimbursement
of entertainment or travel expense incurred by said officer, shall be, to the
greatest extent practical a deductible expense of the corporation for Federal
income tax purposes.
SECTION 4. THE CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors (if one shall be elected by the Board of
Directors) shall preside at all meetings of the shareholders and at all meetings
of the Board of Directors. The Chairman shall perform all the duties incident to
the office of Chairman of the Board of Directors and such other duties as the
Board of Directors may from time to time determine or as may be prescribed by
these bylaws. In the absence of the President, the Chairman shall be the chief
executive and administrative officer and acting President of the corporation.
SECTION 5. THE PRESIDENT.
The President shall be the chief executive and administrative officer of the
corporation, shall have general supervision of the business and finances of the
corporation, shall see that all orders and resolutions of the Board of
Di-rectors are carried into effect and shall, in the absence of the Chairman of
the Board of Directors, preside at all meetings of the shareholders and
directors. The President may execute all bonds, deeds, mortgages, conveyances,
contracts and other instruments, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law otherwise to be signed or executed. The President shall have the power to
appoint, determine the duties and fix the compensation of such agents and
employees as in his judgment may be necessary or proper for the transaction of
the business of the corporation. In general, the President shall perform all
duties incident to the office of President and such other
duties as may from time to time be assigned to him by the Board of Directors.
The Board of Directors may confer like power on any other person or persons,
except those that by statute are conferred exclusively on the President.
SECTION 6. THE VICE PRESIDENTS.
The Vice Presidents shall perform such duties as shall be assigned to them and
shall exercise such powers as may be granted to them by the Board of Directors
or by the President of the corporation. In the absence of the President and the
Chairman of the Board of Directors, the Vice Presidents, in order of their
seniority, may perform the duties and exercise the powers of the President with
the same force and effect as if performed by the President and shall generally
assist the President and shall perform the duties and have the powers prescribed
by the Board of Directors from time to time.
SECTION 7. THE SECRET@A.
The Secretary shall attend all meetings of the Board of Directors and all
meetings of the stockholders and record all the proceedings of the meetings of
the corporation and of the Board of Directors in a book to be kept for that
purpose and shall perform Re duties for the standing committees when required.
The Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or President,
under whose supervision he or she shall be. The Secretary shall have custody of
the corporate seal of the corporation and he or she, or an Assistant Secretary,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by his or her signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature. SECTION 8. ASSISTANT SECRETARY. The Assistant
Secretary, or if there be more than one, the Assistant Secretaries in the order
determined by the Board of Directors (or if there be no such determination, then
in the order of their election), shall, in the absence of the Secretary or in
the event of his or her inability or refusal to act, perform the duties and
exercise the powers of the Secretary and shall preform such other duties and
have such other powers as the Board of Directors may from time to time to
prescribe.
SECTION 9. THE TREASURER.
The Treasurer shall have the custody of the corporate funds and securities and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such depositories as
may be designated by the Board of Directors. The Treasurer shall disburse the
finds of the corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all his or her transactions as Treasurer and of the
financial condition of the corporation.
SECTION IO. ASSISTANT TREASURER.
The Assistant Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board of Directors (or if there be no
such determination, then in the order of their election), shall, in the absence
of the Treasurer or in the event of his or her inability or reft" to act,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. CERTIFICATES OF STOCK.
Every holder of stock in the corporation shall be entitled to have a
certificate, signed by, or in the name of the corporation by the Chairman of the
Board of Directors, or the President or a Vice President and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him or her in the
corporation. Any or all of the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
SECTION 2. LOST CERTIFICATE.
The Board of Directors may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
SECTION 3. TRANSFERS OF STOCK.
Upon surrender to the corporation or the transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment, or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
SECTION 4. FIXING RECORD DATE.
In order that the corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. A determination of stockholder of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
SECTION 5. REI6STERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends, and to vote
as such owner, and to hold liable for calls and assessments a person registered
on its books as the owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS.
Dividends upon the capital stock of the corporation, subject to the provisions
of the Certificate, if any, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in. shares of the capital stock, subject to the provisions of the
Certificate.A "Special Dividend" in the form of cash shall be paid once a year
on or before February 1st for the preceding year and calculated by dividing the
amount collected the preceding year of "Transaction fees" from the customers
using the "Medical Wizard". The total amount received divided by 500/o will
equal the amount of the "Special Dividend" equally divided and issued to
shareholders of record as of December 31st of the preceding year.
SECTION 2. RESERVES.
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves for
working capital, or for such other purpose as the directors shall think
conducive to the interest of the corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
SECTION 3. ANNUAL STATEMENT.
The Board of Directors shall present at each annual meeting, and at any special
meeting of the stockholders when called for by vote of the stockholders, a full
and clear statement of the business and condition of the corporation.
SECTION 4. CHECKS AND DEPOSITS.
AU checks or demands for money and notes of the corporation shall be signed by
such officer or officers or such other person or persons as the Board of
Directors may from time to time designate. AU funds of the corporation not
otherwise employed may be deposited to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may from
time to time select.
Section 5. is Year.
The fiscal year of the corporation shall be fixed by resolution of the Board of
Directors.
SECTION 6. SEAL.
The corporate seal shall have inscribed thereon the name of the corporation, the
year of incorporation and the words "Corporate Seal, Nevada.' The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VII
AMENDMENTS
SECTION 1. AMENDMENTS.
These bylaws may be altered, amended or repealed or new bylaws may be adopted by
the stockholders or by the Board of Directors, when such power is conferred upon
the Board of Directors by the Certificate, at any regular meeting of the
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new bylaws be contained in the notice of such
special meeting. NO changes of any kind to the Document or bylaws can be
approved with out vote of approval by a majority of Directors and approval of
75% or more of votes from stockholders of record at the time of meeting.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION.
A. The corporation shall indemnify to the full extent authorized or permitted by
the general corporation law of the State, as now in effect or as hereafter
amended, any person made, or threatened to be made, a party to any threatened,
pending or completed action, suit or proceeding (whether civil, criminal,
administrative or investigate, including an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or serves or served any other enterprise as
such at the request of the corporation.
B. The foregoing right of indemnification shall not be deemed exclusive of any
other rights to which such persons may be entitled apart from this Article IX.
The foregoing right of indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 2. Insurance.
The corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the I . provisions of the general corporation law
of the State.
February 2, 1998 Kim E. Apicelli, Secretary
SPECTRUM ARTICLES OF INCORPORATION.WPDARTICLES OF INCORPORATION
(PURSUANT TO NR5 78)
STATE OF NEVADA
Filed in the office of
the Secretary of State of the
State of Nevada
February 19, 1997
No. G-3331597
STATE OF NEVADA
Secretary of State
------------------------------------------------------------------------------
SPECTRUM ARTICLES OF INCORPORATION.WPD1.ABNAME OF CORPORATION: SPECTRUM
VENTURES, INC.
2.RESIDENT AGENT: (designated resident agent and his STREET ADDRESS in Nevada
where process may be served)
NAME OF RESIDENT AGENT: CORPORATE
CREATIONS
STREET ADDRESS: 1504 #8-RS265 MAIN STREET (PHYSICAL LOCATION ONLY NO
MAIL ALLOWED) GARDNERVILLE,
89410-5274
MAILING ADDRESS (IF DIFFERENT):
4521 PGA BOULEVARD SUITE 211, PALM BEACH GARDENS, FL 33410
-----------------------------------------------------------
3.SHARES: (number of shares the corporation is authorized to issue)
NUMBER OF SHARES WITH PAR VALUE 20,000,000 PAR VALUE: $.001
Number of shares without par value:
------------- --------
-----------
4.ABGOVERNING BOARD: SHALL BE STYLED AS (CHECK ONE): X DIRECTORS Trustees
THE FIRST BOARD OF DIRECTORS SHALL CONSIST OF ONE members and names and
address are as follows:
DALE B. PINFROCK, JR. P.O. BOX 669 PALM BEACH, FL 33480
---------------------- ---------------------------------------------
5. PURPOSE (optional - see reverse side): The purpose of the corporation shall
be:
-----------------------------------------------------------------------
<PAGE>
SPECTRUM ARTICLES OF INCORPORATION.WPD6.abNRS 78.037: States that the
articles of incorporation may also contain a provision eliminating or
limiting the personal liability of a director or officer of the corporation
or its stockholders for damages for breach of fiduciary duty a sa director
or officer except acts or omissions which include misconduct or fraud. Do
you want this provision to be part of YOUR ARTICLES? PLEASE CHECK ONE OF
THE FOLLOWING: YES X NO
7. OTHERMATTERS: This form includes the minimal statutory requirements to
incorporate under NRS 78. You may attach additional information noted
on separate pages. But, if any of the additional information is
CONTRADICTORY TO THIS FORM IT CANNOT BE FILED AND WILL BE RETURNED TO
YOU FOR CORRECTION. NUMBER OF PAGES ATTACHED 1 .
8. SIGNATURES OF INCORPORATORS: The names and addresses of each of the
incorporators signing the articles:
(signature must be authorized).
BRIAN R. FONS Subscribed and sworn to before
ME THIS 19TH DAY OF FEBRUARY, 1997.
401 OCEAN DRIVE #312 (DOOR CODE 125)
MIAMI BEACH, FL 3319-6629 Notary Public
9. CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
I, CORPORATE CREATIONS hereby accept appointment as Resident Agent for
the above named corporation
ASST. SECRETARY
2-19-97
Signature of Resident Agent Date
<PAGE>
SPECTRUM ARTICLES OF INCORPORATION.WPDARTICLES OF INCORPORATION
(PURSUANT TO NR5 78)
STATE OF NEVADA
STATE OF NEVADA
Secretary of State
- ------------------------------------------------------------------------------
<PAGE>
SPECTRUM ARTICLES OF INCORPORATION.WPD3.abSHARES: Continued
The Corporation shall also have the authority to issue
1,000,00 shares of preferred stock, par value $.001 per share, which
may be divided into series and with the preferences, limitations and
relative rights determined by the Board of Directors.
The Corporation elects not to be governed by the provisions of
NRS 78.378 to 78.3793 governing the acquisition of a controlling
interest in the Corporation.
The Corporation also adopts the following additional
provisions:
DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other
securities of the Corporation except to the extent such right may be
granted by an amendment to these Articles of Incorporation or by a
resolution of the Board of Directors.
LIABILITY AN INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the
corporation shall be personally liable to the Corporation or its
shareholders for damages for breach of any duty owed to the Corporation
or its shareholders. In addition, the Corporation shall have the power,
in its Bylaws or in any resolution of its stockholders or directors, to
undertake to indemnify the officers and directors of this Corporation
against any contingency or peril as may be determined to be in the best
interest of this Corporation, and to procure policies of insurance at
this Corporation's expense.
AMENDMENT OF BYLAWS
Notwithstanding anything in these Articles of Incorporation, the
Bylaws, or applicable state corporation law, the shareholders shall not
adopt, modify, amend or repeal bylaws of the Corporation except upon
the affirmative vote of a simple majority vote of the holders of all
the issued and outstanding shares of the Corporation entitled to vote
thereon.
SHAREHOLDERS
Inspection of Books. The Board of Directors shall make reasonable rules
to determine at what times and places and under what conditions the
books of the Corporation shall be open to inspection by shareholders or
a duly appointed representative of a shareholder.
Quorum. The holders of shares entitle to one-third of the votes at a
meeting of shareholders shall constitute a quorum.
Required Vote. Acts of shareholders shall require the approval of
holders of 50.01% of the outstanding votes of shareholders.
CONTRACTS
No contract or other transaction between this Corporation or any
person, firm or other company shall be affected by the fact that any
other officer or director of this Corporation is, or at some time in
the future becomes, an officer, director or partner of such other
contracting party, or has now or in the future obtains a direct or
indirect interest in such contract.
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
Filed by: Vito A. Gambelunghe
President
SPECTRUM VENTURES, INC.
We, the undersigned, Vito A. Gambelunghe, President and Michelle Michalow,
Assistant Secretary, of Spectrum Ventures, Inc. do hereby certify:
THAT THE BOARD OF DIRECTORS OF SAID CORPORATION AT A MEETING DULY
CONVENED, HELD ON THE 18TH day of February, 1999 adopted a resolution to amend
the original Articles of Incorporation to read as follows:
Article 1. is amended to change the name of the corporation from
SPECTRUM VENTURES, INC. to COBRA TECHNOLOGIES, INC.
Article 2. is partially amended to change the Mailing Address of the
corporation from
4521 PGA Boulevard Suite 211,
Palm Beach Gardens, FL 3341
to
1440 Coral Ridge Drive,
#313, Coral Springs, FL 33071.
No other Articles or portion of Articles of the Articles of
Incorporation are amended and all of the same are hereby reaffirmed.
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 5,100,000; that the
said changes and amendments have been consented to and approved by a majority
vote of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
VITO A. GAMBELUNGHE, President
MICHELLE MICHALOW, Asst. Secretary
State of Florida :
County of : ss.
On February , 1999, personally appeared before me, Vito A. Gambelunghe,
President of Spectrum Ventures, Inc., who acknowledged that he executed the
above instrument.
Notary Public
COBRA TECHNOLOGIES, INC
1999 STOCK OPTION PLAN
1. Grant of Options; Generally. In accordance with the
provisions hereinafter set forth in this stock option plan
the name of which is the COBRA TECHNOLOGIES, INC. 1999 STOCK
OPTION PLAN (the "Plan"), the Board of Directors (the
"Board") or, the Compensation Committee (the "Stock Option
Committed") of Cobra Technologies, Inc. (the "Corporation")
is hereby authorized to issue from time to time on the
Corporation's behalf to any one or more Eligible Persons, as
hereinafter defined, options to acquire shares of the
Corporation's $.001 par value common stock (the "Stock").
2. Type of Options. The Board or the Stock Option Committee is
authorized to issue Incentive Stock Options ("ISOs") which
meet the requirements of Sectionss.422 of the Internal
Revenue Code of 1986, as amended (the "Code"), which options
are hereinafter referred to collectively as ISOs, or
singular as an ISO. The Board or the Stock Option Committee
is also, in its discretion, authorized to issue options
which are not ISOs, which options are hereinafter referred
to collectively as Non-Statutory Options ("NSOs"), or
singularly as an NSO. The Board or the Stock Option
Committee is also authorized to issue "Reload Options" in
accordance with Paragraph 8 herein, which options are
hereinafter referred to collectively as Reload Options, or
singularly as a Reload Option. Except where the context
indicates to the contrary, the term "Option" or "Options"
means ISOs, NSOs, and Reload Options.
3. Amount of Stock. The aggregate number of shares of Stock,
which may be purchased pursuant to the exercise of Options,
shall be 1,000,000 shares. Of this amount, the Board or the
Stock Option Committee shall have the power and authority to
designate whether any Options so issued shall be ISOs or
NSOs, subject to the restrictions on ISOs contained
elsewhere herein. If an Option ceases to be exercisable, in
whole or in part, the shares of Stock underlying such Option
shall continue to be available under this Plan. If there any
change in the number of shares of Stock due to the
declaration of dividends, recapitalization resulting in
stock split-ups, or combinations or exchanges of shares of
Stock, or otherwise, the number of shares of Stock available
for purchase upon the exercise of Options, the shares of
Stock subject to any Option and the exercise price of any
outstanding Option under this Plan, and such adjustments
shall be effective and binding of all Eligible Persons. If
because of one and more recapitalizations, reorganizations
or other corporate events, the holders of outstanding Stock
receive something other than shares of Stock then, upon
exercise of an Option, the Eligible Person will receive what
the holder would have owned if the holder had exercised the
Option immediately before the first such corporate event and
not disposed of anything the holder received as a result of
the corporate event.
4. Eligible Persons.
(a) With respect to ISOs, an Eligible Person means any
individual who has been employed by the Corporation or
by any subsidiary of the Corporation, for a continuous
period of at least sixty (60) days.
(b) With respect to NSOs, an Eligible Person means (i) any
individual who has been employed by the Corporation or
by any subsidiary of the Corporation, for a continuous
period of at least sixty (60) days, (ii) any director
of the Corporation or any subsidiary of the Corporation
or (iii) any consultant of the Corporation or any
subsidiary of the Corporation.
5. Grant of Options. The Board or the Stock Option Committee
has the right to issue the Options established by this Plan
to Eligible Persons. The Board or the Stock Potion Committee
shall follow the procedures prescribed for it elsewhere in
this Plan. A grant of Options shall be set forth in a
writing ("Option Grant") signed on behalf of the Corporation
or by a majority of the members of the Stock Option
Committee. The Board or the Stock Option Committee and may
include, among other terms, the number shares of Stock that
may be acquired pursuant to the exercise of the Options,
when the Options may be exercised, the period for which the
Option is granted and including the expiration date, the
effect on the Options if the Eligible Person terminates
employment and whether the Eligible Person may deliver
shares of Stock to pay for the shares of Stock to be
purchased by the exercise of the Option, however, no term
shall be set forth in the Option Grant which is inconsistent
with any of the terms of this Plan. The terms of an Option
granted to an Eligible Person may differ from the terms of
an Option granted to another Eligible Person, and may differ
from the terms of an earlier Option granted to the same
Eligible Person.
6. Option Price. The option price per share shall be determined
by the Board or the Stock Option Committee at the time any
Option is granted, and shall be determined by the Board or
the Stock Option Committee at the time any Option is
granted, and shall be not less than (I) in the case of an
ISO, the fair market value, (ii) in the case of an ISO
granted to a ten percent or greater shareholder, 110 percent
(110%) of the fair market value, or (iii) in the case of an
NSO, not less than 55% of the fair market value (but in no
event less than the par value) of one share of Stock on the
date the option is granted, as determined by the Board or
the Stock Option Committee. Fair Market value as used herein
shall be:
(a) If shares of Stock shall be traded on an exchange or
over-the-counter market, the mean between the high and
low sales prices of Stock on such exchange or
over-the-counter on which such shares shall be traded
on that date, or if such exchange or over-the-counter-
market is closed or if no shares shall have traded on
such date, on the last preceding date on which such
shares shall have traded.
(b) If shares of Stock shall not be traded on an exchange
or over-the-counter market, the value as determined
by a recognized appraiser as selected by the Board or
the Stock Option Committee.
7. Purchase of Shares. An Option shall be exercised by the
tender to the Corporation of the final purchase price of the
Stock with respect to which the Option is exercised and
written notice of the exercise. The purchase price of the
Stock shall be in United States dollars, payable in cash,
check, Promissory Note secured by the Shares issued through
excise of the related Options, or in property or Corporation
stock, so permitted by the Board or the Stock Option
Committee in accordance with the discretion granted in
Paragraph 5 hereof, having a value equal to such purchase
price. The Corporation shall not be required to issue or
deliver any certificates for shares of Stock purchased upon
the exercise of an Option prior to (i) in requested by the
Corporation, the filing with the Corporation by the Eligible
Person of a representation in writing that it is the
Eligible Person's then present intention to acquire the
Stock being purchased for investment and not for resale, and
/or (ii) the completion of any registration or other
qualification of such shares under any government regulatory
body, which the Corporation shall determine to be necessary
or advisable.
8. Grant of Reload Options. In granting an Option under this
Plan, the Board or the Stock Option Committee may include a
Reload Option provision therein, subject to the provisions
set forth in Paragraphs 20 and 21 herein. A Reload Option
provision provides that if the Eligible Person pays the
exercise price of shares of Stock to be purchased by the
exercise of an ISO, NSO or another Reload Option (the
"Original Option") by delivering to the Corporation shares
of Stock already owned by the Eligible Person (the "Tendered
Shares"), the Eligible Person shall receive a Reload Option
which shall be a new Option to purchase shares of Stock,
equal in number to the tendered shares. The terms of any
Reload Option shall be determined by the Board or the Stock
Option Committee consistent with the provisions of this
Plan.
9. Stock Option Committee. The Stock Option Committee may be
appointed from time to time by the Corporations' Board of
Directors. The Board may from time to time remove members
from or add members to the Stock Option Committee. The Stock
Option Committee shall be constituted so as to permit the
Plan to comply in all respects with provisions set forth in
Paragraph 21 herein. The members of the Stock Option
Committee may elect one of its members as its chairman. The
Stock Option Committee shall hold its meetings at such times
and places, as its chairman shall determine. A majority of
the Stock Option Committee's members present in person shall
constitute a quorum for the transaction of business. All
determinations of the Stock Option Committee will be made by
the majority vote of the members constituting the quorum.
The members may participate in a meeting of the Stock Option
Committee by conference telephone or similar communications
equipment by means of which all members participating in the
meeting can hear each other. Participation in a meeting in
that manner will constitute presence in person at the
meeting. Any decision or determination reduced to writing
and signed by all members of the Stock Option Committee will
be effective as if it had been made by a majority vote of
all members of the Stock Option Committee at a meeting which
is duly called and held.
10. Administration of Plan. In addition to granting Options and
to exercising the authority granted to it elsewhere in this
Plan, the Board or the Stock Option Committee is granted the
full right and authority to interpret and construe the
provisions of this Plan, promulgate, amend and rescind rules
and procedures relating to the implementation of the Plan
and to make all other determinations necessary or advisable
for the administration of the Plan, consistent, however,
with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of
Paragraph 20 and 21 herein. All determinations made by the
Board or the Stock Option Committee shall be final, binding
and conclusive on all persons including the Eligible Person,
the Corporation and its shareholders, employees, officers,
directors and consultants. No member of the Board or the
Stock Option Committee will be liable for any or omission in
connection with the administration of this Plan unless it is
attributable to that member's willful misconduct. 11.
Provisions Applicable to ISOs. The following provisions
shall apply to all ISOs granted by the Board or the Stock
Option Committee and are incorporated by reference into any
writing granting an ISO:
(a) An ISO may only be granted within ten (10) years from
March 1, 1999, the date this Plan was originally
adopted by the Corporation's Board of Directors.
(b) An ISO may not be exercised after the expiration of ten
(10) years from the date the ISO is granted. (c) The
Option price may not be less than the fair market value
of the Stock at the time the ISO is granted. (d) An ISO
is not transferable by the Eligible Person to whom it
is granted except by will, or the laws of descent and
distribution, and is exercisable during his or her
lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the
time of the grant stock possess more than ten (10%)
percent of the total combined voting power of all
classes of stock of the employer corporation or of its
parent or subsidiary corporation (as those terms are
defined in the Code), then the option price shall be at
least 110% of the fair market value of the Stock, and
the ISO shall not be exercised after the expiration of
five (5) years from the date the ISO is granted.
(f) The aggregate fair market value (determined at the time
the ISO is granted) of the Stock with respect to which
the ISO is first exercisable by the Eligible Person
during any calendar year (under this Plan and any other
incentive stock option plan of the Corporation) shall
not exceed $100,000.
(g) Even if the shares of Stock which are issued upon
exercise of an ISO are sold with one year following the
exercise of such ISO so that the sale constitutes a
disqualifying disposition for ISO treatment under the
Code, no provision of this Plan shall be construed as
prohibiting such as sale.
(h) This Plan was adopted by the Corporation on March 1,
1999, by virtue of its approval by the Corporation's
Board of Directors. Approval by the shareholders of the
Corporation is to occur prior to February 28, 2000.
12. Determination of Fair Market Value. In granting ISOs under this
Plan, the Board or the Stock Option Committee shall make a good
faith determination as to the fair market value of the Stock at
the time of granting the ISO.
13. Restrictions on Issuance of Stock. The Corporation shall not be
obligated to sell or issue a share of Stock pursuant to the
exercise of an Option unless the Stock with respect to which the
Option is being exercised is at that time effectively registered
or exempt from registration under the Securities Act 1933, as
amended, and any other applicable laws, rules and regulations.
The Corporation may condition the exercise of an Option granted
in accordance herewith upon receipt from the Eligible Person, or
any other purchaser thereof, of a written representation that at
the time of such exercise it is his or her then present intention
to acquire the shares of Stock for investment and not with a view
to, or for sale in connection with any distribution thereof:
except that, in the case of a legal representative of an Eligible
Person, "distribution" shall be defined to exclude distribution
by will or under the laws of descent and distribution. Prior to
issue any shares of Stock pursuant to the exercise of an Option,
the Corporation shall take such steps, as it deems necessary to
satisfy any withholding tax obligations imposed upon it by any
level of government.
14. Exercise in the Event of Death or Termination of Employment.
(a) If an optionee shall die (i) while an employee of the
Corporation or a Subsidiary or (ii) within three months
after termination of his employment with the
Corporation or a Subsidiary because of his disability,
or retirement or otherwise, his Options may be
exercised, to the extent that the optionee shall have
been entitled to do so on the date of his death or such
termination of employment, by the person or persons to
whom the optionee's right under the Option pass by will
or applicable law, or if no such person has such right,
by his executors or administrators, at any time, or
from time to time. In the event of termination of
employment because of his death while an employee or
because of disability, his Options may be exercised no
later than the expiration date specified in the Option
Grant or one year after the optionee's death, whichever
date is earlier, or in the event of termination of
employment because of retirement or otherwise, not
later than the expiration date specified in the Option
Grant or one year after optionee's death, whichever
date is earlier.
(b) If an optionee's employment by the Corporation or a
Subsidiary shall terminate because of his disability
and such optionee has not died within the following
three months, he may exercise his Options, to the
extent that he shall have been entitled to do so at the
date of the termination of his employment, at any time,
or from time to time, but not later than the expiration
date specified in the Option Grant or one year after
termination of employment, whichever date is earlier.
(c) If an optionee's employment shall be terminated by
reason of his retirement in accordance with the terms
of the Corporation's tax-qualified retirement plans if
any, or with the consent of the Board or the Stock
Option Committee or involuntarily other than by
termination for cause, and such optionee has not died
within the following three months, he may exercise his
Option to the extent he shall have been entitled to do
so at the date of the termination of his employment, at
any time and from time to time, but not later than the
expiration date specified in the Option Grant or thirty
(30) days after termination of employment, whichever
date is earlier. For purpose of this Paragraph 14,
termination for cause shall mean: (i) termination of
employment for cause as defined in the optionee's
Employment Agreement or (ii) in the absence of an
Employment Agreement for the optionee, termination or
employment by reason of the optionee's commission of a
felony, fraud or willful misconduct which has resulted,
or is likely to result, in substantial and material
damage to the Corporation or a Subsidiary, all as the
Board or the Stock Option Committee in its sole
discretion may determine.
(d) If an optionee's employment shall terminate for any
reason other than death, disability, retirement or
otherwise, all right to exercise his Option shall
terminate at the date of such termination of employment
absent specific provisions in the optionee's Option
Agreement.
15. Corporate Events. In the event of the proposed dissolution
or liquidation of the Corporation, a proposed sale or all or
substantially all of the assets of the Corporation, a merger
or tender for the Corporation's shares of Common Stock, the
Board of Directors may declare that each Option granted
under this Plan shall terminate as of a date to be fixed
shall be given to each Eligible Person holding an Option,
and each such Eligible Person shall have the right, during
the period of thirty (30) days preceding such termination,
to exercise his Option as to all or any part of the shares
of Stock covered thereby, including shares of Stock as to
which such Option as to all or any part of the shares of
Stock covered thereby, including shares of Stock as to which
such Option would not otherwise be exercisable. Nothing set
forth herein shall extend the term set for purchasing the
shares of Stock set forth in the Option.
16. No guarantee of Employment. Nothing in this Plan or in any
writing, granting an Option will confer upon any Eligible
Person the right to continue in the employ of the Eligible
Person's employer, or will interfere with or restrict in any
way the right of the Eligible Person's employer to discharge
such Eligible Person at any time for any reason whatsoever,
with or without cause.
17. Non-transferability. No Option granted under the Plan shall
be transferable other than by _____or by the laws of descent
and distribution. During the lifetime of the optionee, an
Option shall be excisable only by him.
18. No Rights as Shareholders. No optionee shall have any rights
as a shareholder with respect to any shares subject to his
Option prior to the date of issuance to him of a certificate
or certificates for such shares.
19. Amendment and Discontinuance of Plan. The Corporation's
Board of Directors may amend, suspend or discontinue this
Plan at any time. However, no such action may prejudice the
right of any Eligible Person who has prior thereto been
granted Options under this Plan. Further, no amendment to
this Plan which has the effect of (a) increasing the
aggregate number of shares of Stock subject to this Plan
(except for adjustments pursuant to Paragraph 3 herein), or
(b) changing the definition of Eligible Person under this
Plan, may be effective unless and until approval of the
shareholders of the Corporation is obtained in the same
manner as approval of this Plan is required. The
Corporation's board of Directors is authorized to seek the
approval of the Corporation's shareholders for any other
changes it proposes to make to this Plan which require such
approval, however, the Board of Directors may modify the
Plan, as necessary, to effectuate the intent of the Plan as
a result of any changes in the tax, accounting or securities
laws treatment of Eligible Persons and the Plan, subject to
the provisions set forth in this Paragraph 19, and Paragraph
20 and 21.
20. Compliance with Rule 16b-3. This Plan is intended to comply
in all respects with Rule 16 ("16b-3") promulgated by the
Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to participants who are
subject to Section 16 of the Exchange Act, and any
provision(s) herein that is/are contrary to Rule 16b-3 shall
be deemed null and void to the extent appropriate be either
the Stock Option Committee or the Corporation's Board of
Directors.
21. Compliance with Code. The aspects of this Plan on ISOs is
intended to comply in every respect with Sectionss.422 of
the Code and the regulations promulgated thereunder. In the
event any future statute or regulation shall modify the
existing statute, the aspects of this Plan on ISOs shall be
deemed to incorporate by reference such modification. Any
stock option agreement relating to any Option granted
pursuant to this Plan outstanding and unexercised at the
time any modifying statute or regulation become effective
shall also be deemed to incorporate be reference such
modification and no notice of such modification need be
given to optionee. If any provision of the aspects of this
Plan on ISOs is determined to disqualify the shares
purchasable pursuant to the Options granted under this Plan
from the special tax treatment provided by Sectionss.422,
such provision shall be deemed null and void and to
incorporate by reference the modification required to
qualify the shares for said tax treatment.
22. Compliance with Other Laws and Regulations. The Plan, the
grant and exercise of Option thereunder, and the obligation
of the Corporation to sell and deliver Stock under such
options, shall be subject to all applicable federal and
state laws, rules, and regulations and to such approvals by
any government or regulatory agency as may be required. The
Corporation shall not be required to issue or deliver any
certificates for shares of Stock prior to (a) the listing of
such shares on any stock exchange or over-the-counter market
on which the Stock may then be listed and (b) the completion
of any registration qualification of such shares under any
federal or state law, or any ruling or regulation of any
government body which the corporation shall, in its sole
discretion, exercise or the receipt of Stock pursuant
thereto would be contrary to applicable laws.
23. Disposition of Shares. In the event any share of Stock
acquired by an exercise of an Option granted under the Plan
shall be transferable other than by will or by the laws of
descent and distribution within two years of the date such
Option was granted or within one year after the transfer of
such Stock pursuant to such exercise, the optionee shall
give prompt written notice thereof to the Corporation or the
Stock Option Committee.
24. Name. The Plan shall be known as the "Cobra Technologies,
Inc. 1999 Stock Option Plan".
25. Notices. Any notice hereunder shall be in writing and sent
by certified mail, return receipt requested or by facsimile
transmission (with electronic or written confirmation of
receipt) and when addressed to the Corporation shall be sent
to it at its office, 7251 W. Palmetto Park Road, Suite 205,
Boca Raton, Florida 33433 and when addressed to the
Committee shall be sent to it at 7251 W. Palmetto Park Road,
Suite 205, Boca Raton, Florida 33433, subject to the right
of either party to designate at any time hereafter in
writing some other address, facsimile number or person to
whose attention such notice shall be sent.
26. Headings. The headings preceding the text of Sections and
subparagraphs hereof are inserted solely for convenience of
reference, and shall not constitute a part of this Plan nor
shall they affect its meaning, construction or effect.
27. Effective Date. This Plan, the Cobra Technologies, Inc. 1999
Stock Option Plan, was adopted by the Board of Directors of
the Corporation on March 1, 1999. The effective date of the
Plan shall be the same date.
Dated as of March 1, 1999
COBRA TECHNOLOGIES, INC.
By: ________________________
Its: President
LEASE
This lease is made this 711 day of May, 1999 between Sawgrass Realty Holdings,
Inc. hereinafter referred to as LANDLORD, and Cobra Technologies, Inc.,
hereinafter referred to as TENANT.
1. TERMS AND DEFINITIONS
(A) "Additional Rent" means Tenant's Proportionate Share of operating
expenses and taxes as more particularly described in paragraph 3(C) of
this Lease. The initial Additional Rent shall be payable in monthly
installments of $2604.17, subject to annual adjustment as set forth in
paragraph 3(C),
(B) "Base Rent" means $92,500 for the first Lease Year, as adjusted for
subsequent Lease Years in accordance with this Lease, which is based
on $18.50 per rentable square foot for an agreed rentable area of 5000
square feet. Tenant acknowledges that the usable area of the Leased
Premises estimated to be 4,250 square feet.
(C) "Broker(s) of Record" - Not applicable.
(D) "Building" shall mean the office building(s) located at I 1
575 Heron Bay Blvd., Coral Springs, Florida.
(E) "Common Areas" means lobbies, stairs, elevators, hallways and
restrooms, exterior glass and walls, roof and foundation of the
Building and all mechanical, plumbing and electrical equipment
servicing the Building (except any of the foregoing within the
boundaries of the Leased Premises or of premises leased by another
tenant) together with walkways, drives, fences, gates, landscaped
areas and parking areas on the property owned by Landlord around the
Building.
(F) "Deposit" means an amount equivalent to four months, Rent,($41,250)
which is held by Landlord pursuant to paragraph 4 of this Lease.
(G) "Lease Commencement Date" means the first day of the Lease Term, which
is the earlier to occur of. (1) the date on which Tenant shall take
possession of the Leased Premises; or (2) the date which is fifteen
(15) days after the date of Substantial Completion as defined below.
The Lease Commencement Date shall be confirmed in writing, as
described in paragraph 16(C), after Substantial Completion.
(H) "Lease Term" means five (5) years, commencing on the Lease
Commencement Date . Provided Tenant has not been in Default under this
Lease Tenant shall have the option to renew this Lease for a period of
five (5) years at the same terms and conditions including but not
limited to annual increases in the Base Rent of four (4) percent per
year. Tenant shall notify Landlord in writing six (6) months prior to
the expiration of the initial Lease Tenn of its intention to exercise
this option. Should Tenant fail to notify Landlord six (6) months
prior to the expiration of the initial Lease Tenn then this option
shall be considered null and void and no longer in effect.
(I) "Lease Year" means each successive twelve month period commencing on
the Lease Commencement Date.
(i) "Leased Premises" means Suite 300, as described in Exhibit "A"
attached hereto and made a part hereof.
(K) "Permitted Purpose" means use of the Leased Premises for offices.
(L) "Prepaid Rents" means the Total Monthly Payment for the first full
calendar month of the Lease Term ($10,312.50).
(M) "Rent" means all moneys payable by Tenant to Landlord under this Lease
including, without limitation, Base Rent, Additional Rent and
applicable sales taxes, but excluding the Deposit.
(N) "Substantial Completion" shall mean completion of the Leasehold
Improvements as defined in paragraph 16, minor punch list items
excepted, and excepting any improvements or work to be performed by
Tenant.
(0) "Tenant's Proportionate Share" means the rentable area of the Leased
Premises (5000 sq. ft.) divided by the rentable area of the Building
(45,000 sq. ft.), or I 1. 1 %.
(P) "Total Monthly Payment" means the monthly installment of Base Rent
plus the monthly installment of Additional Rent plus applicable sales
tax. The initial Total Monthly Payment under this Lease is $10,931.25
($7708.33 plus $2.604.17 plus $618.75).
2. USES
A. Tenant shall lease the Leased Premises for the Lease Term and use the Leased
Premises for Permitted Purpose only, and for no other purpose. Tenant shall
comply with the provisions of all recorded covenants, conditions and
restrictions and all building, zoning, fire and other governmental laws,
ordinances, regulations or rules applicable to the Leased Premises, and all
requirements of the carriers of insurance covering the Building. Tenant shall
not do or permit anything to be done in or about the Leased Premises, or bring
or keep anything in the Leased Premises that may increase Landlord's fire and
extended coverage insurance premium; damage the Building; constitute waste, or
be a nuisance public or private, or menace or other disturbance to tenants of
adjoining premises or anyone else.
B. Tenant has determined to its satisfaction that the Leased Premises
can be used for the Permitted Purpose, and Tenant, waives any right to terminate
this Lease in the event the Leased Premises cannot be used for such purposes for
any reason at any time during the Lease Term.
C. By taking possession hereunder, Tenant shall have acknowledged that
it has examined the Leased Premises and accepts the same as being in the
condition called for in this Lease.
3. RENT
A. Tenant shall pay each monthly installment of Base Rent in advance on
or before the first (I st) calendar day of each month, together with each
monthly installment of Additional Rent determined pursuant to paragraph 3(C)
below. Unless otherwise specifically provided in this Lease to the contrary,
Tenant's obligation to pay Rent shall begin on the Lease Commencement Date.
Monthly installments for any fractional calendar month, at the beginning or end
of the Lease Term, shall be prorated based on the number of days in such month
which fall during the Lease Tenn. Tenant shall pay all Rent, without deduction
or set off, to Landlord (or the Broker of Record) at the place specified for
notice in Paragraph 27 below. Rent not paid within five (5) days of when due
shall, at Landlord's option, be subject to a late fee of 1.5% per month of the
total unpaid balance or $50.00 per month, whichever is greater. Said late fee
shall be deemed Rent.
B. Base Rent shall increase annually, effective the first day of each
Lease Year, by 4% of the immediately preceding Lease Year's Base Rent.
C. In addition to Base Rent, Tenant shall pay to Landlord the
Additional Rent based on Tenant's Proportionate Share of operating expenses and
taxes.
(1) Operating expenses shall mean all expenses, costs and
disbursements, that Landlord pays or becomes obligated to pay because of or in
connection with the ownership, maintenance and operation of the Building and
Common Areas, but shall not include the replacement of capital investment items
and new capital improvements unless such items and improvements result in a
reduction of normal operating expenses. Operating expenses will include, but not
be limited to, the following:
a) Wages and salaries of all employees engaged in operation and
maintenance of the Building and Common Areas, employer's social
security taxes, unemployment taxes or insurance, and any other taxes
which may be levied on such wages and salaries, the cost of disability
and hospitalization insurance, pension or retirement benefits, or any
other fringe benefits for such employees.
b) All supplies and materials used in operation and maintenance of the
Building and Common Areas.
C) Cost of all utilities including water, sewer, electricity, gas and
fuel oil used by the Building and Common Areas and not payable
directly by tenants.
d) Cost of customary management, janitorial services for Common Areas,
trash and garbage removal, servicing and maintenance of all systems
and equipment comprising or serving Common Areas, including, but not
limited to any of the following that might now or in the future serve
the Building: elevators, plumbing, heating, air conditioning,
ventilating, lighting, electrical, security and fire alarms, fire
pumps, fire extinguishers and hose cabinets, guard and security
service, painting, window cleaning and window wall cleaning, lawn
maintenance, gardening, sprinkler systems, parking lot, fountains,
canopies and signage.
e) Cost of liability and casualty insurance applicable to the Building,
Common Areas and Landlord's personal property used in connection with
the Building.
f) Cost of service contract to maintain and service all air-conditioning,
heating and ventilation systems in the leased premises.
Landlord agrees to maintain accounting books and records reflecting operating
expenses of the Building in accordance with generally accepted accounting
principles.
(2) "Taxes" shall mean all impositions, taxes, assessments (special or
otherwise), water and sewer charges and rents, and other governmental liens and
charges of any and every kind, including all taxes (except only those taxes of
the following categories: any inheritance, estate, succession, transfer or gift
taxes imposed upon Landlord or any income taxes specifically payable by Landlord
as a separate tax paying entity without regard to Landlord's income source as
arising from the Building and/or the land on which it is located) attributable
to the Building, the land on which the Building is located or the rents (however
the term may be defined) receivable therefrom, or any facility or equipment
located therein or thereon or used in conjunction therewith or any charge or any
payment required to be paid to any governmental authority, whether or not any of
the forgoing shall be designated "real estate tax", "rental tax", "excise tax",
"business tax", or designated in any other manner.
(3) During the first approximately ninety (90) days of each new
calendar year, Landlord shall notify Tenant of the amount which Landlord
estimates (as evidenced by budgets prepared by or on behalf of the Landlord)
will be the amount of Additional Rent for the then current calendar year. Tenant
shall pay such sum in advance to Landlord in equal monthly installments on the
first day of each succeeding month in the calendar year until such Additional
Rent amount has been recalculated by Landlord in accordance with this Lease.
Also during the first approximately ninety (90) days of each new calendar year,
Landlord shall submit to Tenant a statement showing the actual amount payable by
Tenant as Additional Rent for the past calendar year, the amount thereof
actually paid during that year by Tenant and the amount of the resulting balance
due thereon, or overpayment thereof, as the case may be. Within thirty (30) days
of receipt by Tenant of the statement, Tenant shall have the right in person to
inspect Landlord's books and records showing the operating expenses and taxes
for the Building for the calendar year covered by the statement. The Statement
shall become final and conclusive between the parties unless Landlord receives
written objections within the thirty (30) day period. Any balance shown to be
due pursuant to said statement shall be paid by Tenant to Landlord within thirty
(30) days following Tenant's receipt thereof and any overpayment shall be
immediately credited against Tenants obligation to pay future Additional Rent
or, if by reason of any termination of the Lease no such future obligation
exists, refunded to Tenant. Anything herein to the contrary notwithstanding,
Tenant shall not delay or withhold any payment or balance shown to be due
pursuant to a statement rendered by Landlord to Tenant because of any objection
Tenant may raise with respect to the statement. Landlord shall immediately
credit any overpayment found to be owing to Tenant against Tenant's
Proportionate Share of increases in operating expenses and taxes for the then
current calendar year (and future calendar years, if necessary) upon the
resolution of said objection or, if at the time of the resolution of said
objection the Lease Tenn has expired, Landlord shall immediately refund to
Tenant any overpayment found to be owing Tenant.
D. Additional Rent due by reason of provisions of Subparagraph 3(C) and
this Subparagraph 3(D) for the final months of this Lease is due and payable
even though it may not be adjusted to reflect actual operating costs and taxes
until after the termination date of the Lease. Tenant expressly agrees that
Landlord, at Landlord's sole discretion, may apply the Deposit toward full or
partial satisfaction of any Additional Rent due for the final months of this
Lease by reason of the provisions of Subparagraph 3(C) and this Paragraph (3)D.
If the Deposit is greater than the amount of any such additional rent and there
are no other sums or amounts owed Landlord by Tenant by reason of any other
terms of this Lease, then Landlord shall refund the balance of said Deposit to
Tenant as required in Paragraph 4 hereof.
4. DEPOSIT
Tenant has paid to Landlord the Deposit as security for performance of Tenant's
obligations. In the event Tenant fully complies with all the terms and
conditions of this Lease, but not otherwise, the Deposit shall be refunded to
Tenant, without interest, upon expiration and this Lease or the determination
and payment of any amounts due under Paragraph 3 of this Lease. Landlord may,
but is not obligated to, apply a portion of the Deposit to cure any default
hereunder and pay any sums due Landlord (plus 12% per annum from the due date of
such amounts), and Tenant shall pay on demand the amount necessary to restore
the Deposit in full. The Deposit shall not be segregated from, but may be freely
commingled with other funds of Landlord.
5. UTILITIES AND BUILDING SERVICES
A. Landlord will @sh the following services to Tenant: elevator service,
public stairs, electrical current for Common Areas and the Leased Premises at
those points of supply provided for general use of its Tenants at all times and
at all days throughout the year; and Common Area cleaning services, deemed by
Landlord to be normal and usual in a first-class office building, Monday through
Friday, except that shampooing and replacement of carpet as required by Tenant
will be at Tenants expense. Such services shall be provided as long as the
Tenant is' not in default under any of the terms of this Lease, subject to
interruption caused by repairs, renewals, improvements, changes of service,
alterations, strikes, lockouts, labor controversies, inability to obtain fuel or
power, accidents, breakdowns, catastrophes, national or local emergencies, acts
of God and conditions and causes beyond the control of Landlord, and upon such
happening, no claim for damages or abatement of rent for failure to finish any
such services shall be made by the Tenant or allowed by the Landlord.
B. All electricity consumed within the Leased Premises shall be provided
through a separate electric meter and shall be billed directly to Tenant by the
utility company. Tenant shall be responsible for any deposits required by the
utility. If the Leased Premises are served with running water, Landlord may
require such water supply to be separately metered at Tenant's cost or,
alternatively, may charge Tenant as additional Rent a monthly sum for water
consumed in the Leased Premises.
6. INSURANCE; INDEMNITY
A. Landlord shall secure and maintain throughout the term of this Lease
insurance (the cost of which shall be a Building operating cost) in amounts and
form within Landlord's sole discretion:
I . FIRE INSURANCE WITH EXTENDED COVERAGE ENDORSEMENTS ATTACHED IN THE
AMOUNT OF THE FULL insurable value of the Building;
2. Comprehensive Public Liability Insurance (including bodily injury and
property damage insurance) for the Building (not including the Leased Premises
or other tenant-occupied space);
3. Rental Abatement Insurance against abatement or loss of rent in case of
fire or other casualty.
Landlord may, but is not obligated to, purchase such other insurance customarily
purchased, from time to time, by first class office building owners and managers
and treat the cost thereof as a Building operating cost. Landlord may charge
Tenant with any excess cost of the insurance described in this subparagraph due
to the particular use of the Leased Premises by Tenant.
B. Tenant shall at its own expense, procure and maintain throughout the
term of this lease:
I . Comprehensive Public Liability Insurance insuring Tenant's
activities with respect to the Leased Premises against loss, damage or liability
for bodily injury or death, damage to property or commercial loss occurring on
or about the Leased Premises, the Building and all Common Areas in amounts no
less than:
a) $ 1,000,000 with respect to bodily injury or death to
any one person;
b) $500,000 with respect to bodily injury or death arising
out of any one occurrence;
C) $500,000 WITH RESPECT TO PROPERTY DAMAGE ARISING out of
any one occurrence.
2. Workers' Compensation Insurance in at least the statutory amounts with
respect to any work or other operation in or about the Leased Premises.
3. Contents insurance at a dollar value to be determined by Tenant; Tenant
will hold harmless the Landlord for any deficiency in the dollar amount of such
coverage.
Landlord, Landlord's mortgagee and Landlord's manager shall be named as
additional insured tinder Tenant's insurance and such insurance shall be primary
and non-contributing with respect to any such insurance carried by the Landlord.
The liability insurance policy shall contain endorsements requiring 30 days'
notice to Landlord prior to any cancellation or any reduction in amount of
coverage. Tenant shall deliver to Landlord as a condition precedent to its
taking occupancy of the Leased Premises (but not to its obligation to pay Rent)
a certificate or certificates evidencing such insurance. Tenant, as a material
part of the consideration to be rendered to Landlord, hereby waives all claims
against Landlord for injury to Tenant, its agents, employees, invites, or third
persons in or about the Leased Premises from any cause arising at any time other
than the gross negligence of Landlord or Landlord's agents.
C. Tenant shall indemnify and hold Landlord harmless from and against all
demands, suits, fines, liabilities, losses, damages, costs and expenses
(including legal expenses) which Landlord may incur or become liable for as a
result of any breach by Tenant, its agents, employees, officers, contractors,
invites or licensees of the terms or covenants of this Lease or any other of the
acts or omissions of Tenant, its agents, employees, officers, contractors,
invites or licensees.
7. MAINTENANCE AND REPAIRS
A. LANDLORD'S MAINTENANCE AND REL2AIRS. Landlord shall maintain the Common
Areas in good, clean order and condition as reasonably determined by Landlord.
All expenses incurred by Landlord under this paragraph SHALL BE TREATED AS
OPERATING EXPENSES UNDER PARAGRAPH 3 OF THIS LEASE, EXCEPT FOR REPAIRS DUE TO
FIRE and other casualties to the extent the cost of such repairs are covered by
Landlord's insurance proceeds and for the repair of damages occasioned by the
acts or omissions of Tenant, which Tenant shall pay to Landlord in full.
Landlord shall not be in default hereunder or be liable for any damages directly
or indirectly resulting from, nor shall the Rent herein reserved be abated by
reason of. (a) the installation, use or interruption of use of any equipment in
connection with the furnishing of any of the foregoing services, (b) failure to
finish or delay in furnishing any such services when such failure or delay is
caused by accident or any condition beyond the reasonable control of Landlord or
by the making of necessary repairs or improvements to the Leased Premises or to
the Building or (c) any limitation, curtailment, rationing or restriction on use
of water, electricity, or any other form of energy serving the Premises or the
Building. Landlord shall use reasonable and diligent efforts to remedy any
interruption in the furnishing of such services.
B. TENANT'S MAINTENANCE AND REPAIRS. Tenant shall maintain all other parts
of the Leased Premises, including, but not limited to, maintenance of the
interior of the Leased Premises, including all ceilings and walls, all doors
(including, but not limited to electric doors, garage overhead doors and the
motors by which they operate), windows and floor coverings, and all plumbing and
electrical systems within the Leased Premises. Any repairs necessitated from the
failure to perform the required maintenance shall be the sole responsibility of
Tenant. Tenant shall repair and replace all glass and other glass in the Leased
Premises promptly after the same is cracked, damaged or broken. All contractors
and workmen who perform work in the Building or within the Premises shall either
be engaged by or approved in advance by Landlord.
8. TENANT'S PROPERTY
Furnishings, trade fixtures and equipment installed by Tenant shall be the
property of Tenant subject to Paragraph 22. On termination of the Lease, if
Tenant is not in default, Tenant may remove any such property and shall remove
any such property if directed by Landlord. Tenant shall repair the Leased
Premises to the same condition as when term commenced, ordinary wear and tear
excepted, or reimburse Landlord for the cost of so repairing the Leased
Premises. If Tenant fails to remove such property as required under this Lease,
Landlord may do so and Landlord shall not be liable for any loss or damage to
the property of Tenant which may occur during Landlord's removal thereof
9. IMPROVEMENTS AND ALTERATIONS BY TENANT
Tenant shall not make any improvements or alterations to the Leased Premises
without Landlord's prior written approval. Any such improvements or alterations
approved by Landlord shall be done at Tenant's expense, in compliance with all
applicable building requirements and regulations (including permitting and
inspection) and by a licensed contractor approved by Landlord. If requested by
Landlord, Tenant will post a bond or other security reasonably satisfactory to
Landlord to protect Landlord against liens arising from work performed for
Tenant. All work performed shall be done in a good and workmanlike manner and
with materials of a quality and appearance comparable to those in the Building.
All such alterations and improvements shall be the property of the Landlord.
Should Tenant desire to alter the Leased Premises and Landlord gives written
consent to such alterations, at Landlord's option, Tenant shall contract with
Landlord for the construction of such alterations.
<PAGE>
10. CASUALTY
If the Leased Premises or the Building are destroyed or damaged by fire,
hurricane or other casualty to the extent that they are untenantable in whole or
in part, then Landlord may, at Landlord's option, proceed with reasonable
diligence to rebuild and restore the Leased Premises or such part thereof as has
been destroyed or damaged, provided that within sixty (60) days after such
damage or destruction, Landlord shall notify Tenant in writing of Landlord's
intention to repair or not repair such damage. If Landlord shall determine that
such destruction or damage cannot be repaired within one hundred eighty (I 80)
days, it shall so notify Tenant in said notice. In such event, either Landlord
or Tenant may within 20 days after such notice, terminate this Lease. If neither
party terminates the Lease during that 20 day period, this Lease shall remain in
effect and Landlord shall diligently proceed to repair or reconstruct the Leased
Premises. During the period of any rebuilding and restoration, the Rent shall be
abated to the same extent that the Leased Premises are rendered untenantable.
11. ASSIGNMENT, LETTING AND SUBLETTING
A. Tenant, its legal representatives and successors in interest shall not,
directly or indirectly, assign, let or sublet or permit the assigning, letting
or subletting of this Lease, or any part thereof, or permit any part of or all
of the Leased Premises to be used or occupied by another, without first
obtaining the written consent of Landlord, which consent shall not be
unreasonably withheld. If Tenant is a corporation, any transfer of this Lease
from Tenant by merger, consolidation, reorganization or liquidation or any
change in the ownership, or power to vote the majority of the outstanding voting
stock of Tenant or any mortgage, pledge or assignment of the Lease, shall
constitute an assignment for the purposes of this paragraph. Any such assignment
made without Landlord's approval shall be voidable by Landlord. Any approval by
Landlord, unless specifically stated therein, shall not relieve Tenant from its
obligations under this Lease, and Tenant will remain liable for the entire term
of this Lease.
B. In addition to any other reasonable basis, Landlord shall be deemed to
be reasonably withholding its consent to any such assignments, letting or
subletting, if such assignment, letting or subletting would result in the
assignment, leasing or subleasing of,
I . the Leased Premises to any party, business or tenant who proposes to
conduct a business therein which is not in conformance with the provisions of
paragraph 2 hereof; or
2. less than the whole of the Leased Premises, or for a term less than
the whole of the term which remains hereunder; or
3. the Leased Premises to any party, business or tenant who is then a
tenant of the Building if the Landlord has or will have during the
ensuing six months suitable space for rent in the Building; or
4. N/A
5. the Leased Premises to a party whose financial condition and credit
rating in Landlord's sole judgment is not equal to or better than that
of Tenant's; or
6. the Leased Premises to a party whose business is of a character
which does not in Landlord's sole opinion conform with the character
of the Building.
12. CONSTRUCTION LIENS
Tenant agrees that it will fully comply with Florida's Construction Lien Law and
make full and prompt payment of all sums necessary to pay for the cost of
repairs, alterations, improvements, changes or other work done by Tenant to the
Leased Premises and further agrees to indemnify and hold harmless Landlord from
and against any and all such costs and liabilities incurred by Tenant, and
against any and all construction liens arising out of or from such work. It is
expressly
<PAGE>
understood and agreed that the interest of the Landlord shall not be subject to
liens for improvements made by Tenant in and to the Leased Premises. Tenant
shall notify each and every contractor making any such improvements of the
provision set forth in the preceding sentence of this paragraph. At Landlord's
request, the parties agree to execute, acknowledge and deliver to Landlord
without charge a Construction Lien Notice, in recordable form, containing a
confirmation that the interest of the Landlord shall not be subject to liens for
improvements made by Tenant to the Leased Premises. In the event any notice or
claim of lien shall be asserted of record against the interest of Landlord in
the Leased Premises or Building on account of any improvement or work done by or
for Tenant, or any person claiming by, through or under Tenant, or for
improvements or work the cost of which is the responsibility of Tenant, Tenant
agrees to have such lien canceled and discharged of record (either by payment or
bond as permitted by law) within ten (IO) days after notice to Tenant by
Landlord, and in the event Tenant shall fail to do so, Tenant shall be
considered in default under the terms of this Lease.
13. RELOCATION
Landlord shall have the right at any time, notwithstanding anything contained
herein, to relocate at Landlord's expense the Leased Premises on any floor of
the Building provided that the new location of the Leased Premises shall be
similar in dimension and that the rent for the Leased Premises shall remain
unchanged. The relocation of the Leased Premises shall not affect any of the
other clauses or conditions of the Lease. Landlord shall pay all reasonable
expenses incurred by Tenant related to any relocation.
14. CONDEMNATION
If the whole or any part of the Leased Premises shall be taken under power of
eminent domain or like power, or sold under imminent threat thereof to any
public authority or private entity having such power, this agreement shall
terminate as to the part of Leased Premises so taken or sold, effective as of
the date possession is required to be delivered to such authority or entity.
Rent for the remaining term shall be reduced in the proportion that the total
square footage of the Leased Premises is reduced by the taking. If a partial
taking or sale (i) substantially reduces the area of the Leased Premises
resulting in a substantial inability of Tenant to use the Leased Premises for
Tenant's business purposes, or (ii) renders the Building commercially unusable
to Landlord (in Landlord's sole judgment). Tenant in the case of (i) and
Landlord in the case of (ii) may terminate this agreement by notice to the other
party within 30 days after the terminating party receives a written notice of
the portion to be taken or sold, to be effective 180 days thereafter or when the
portion is taken or sold, whichever is sooner. All condemnation awards and
similar payments shall be paid and belong to Landlord, except any amounts
awarded or paid specifically for Tenant's trade fixtures, business damage and
relocation costs, provided such awards do not reduce Landlord's award.
15. OCCUPANCY; LEASE COMMENCEMENT DATE
There shall be no delay in the commencement of the Term of this Lease and/or
payment of Rent if Tenant fails to occupy the Leased Premises when same are
ready for occupancy, or where Tenant causes a delay in preparing the Leased
Premises for occupancy by failing to promptly approve plans, make material or
color selections, or make other decisions necessary for the preparation of the
Leased Premises for occupancy. For the purposes of this paragraph, the Leased
Premises shall be deemed ready for occupancy upon Substantial Completion of the
Leasehold Improvements.
16. CONSTRUCTION OF LEASEHOLD IMPROVEMENTS
A. Landlord shall construct the improvements required to ready the Leased
Premises for occupancy by Tenant (the "Leasehold Improvements") in accordance
with plans and specifications to be provided by Tenant (the "Plans and
Specifications") at Tenant's expense. The Plans and Specifications shall be in
form and content as required by the applicable building authorities for the
issuance of a building permit and shall otherwise be reasonably acceptable to
Landlord. After review and approval of the Plans and Specifications, Landlord
shall submit to Tenant a binding cost bid with a line item breakdown of values
for construction of the Leasehold Improvements (which shall/-\
include design costs and a charge of twelve percent (120/o) for Landlord's
Contractor's overhead, profit, and supervision, and all other line items
contained in the Leasehold Improvements). If the binding cost bid is equal to
or less than a sum equivalent to $25.00 per usable square foot ("Landlord's
Contribution") Landlord shall obtain necessary permits and commence the
Leasehold Improvements in accordance with the Plans and Specifications. If the
binding cost bid exceeds a sum equivalent to Landlord's Contribution, Tenant
shall within the ensuing ten (1 0) days either: (a) pay to Landlord a sum
("Tenants Contribution") that, with the Landlord's Contribution, will equal
the binding cost bid; or (b) submit revised Plans and Specifications
reflecting changes that will reduce specific line item values so that the
total binding cost bid is reduced to a sum equal to or less than the
Landlord's Contribution. If neither option (a) nor (b) is exercised by Tenant
within the time period provided, Tenant will be deemed to have exercised
option (a). Any delay in Tenant's payment of the Tenant's Contribution when
due shall entitle Landlord to (a) postpone further work on the Leasehold
Improvements and charge a ten percent (IO%) increase on Tenant's Contribution
(with a corresponding reduction in Landlord's Contribution), or (b) terminate
this Lease. Tenant's Contribution shall be re-calculated and appropriate
payments to or from Tenant shall be made upon completion of the Leasehold
Improvements based on Landlord's binding cost bid, Landlord's Contribution
(based on actual usable square footage) and any change orders requested by
Tenant.
B . Upon Landlord and Tenant's approving the Plans and Specifications
and issuance of all required permits, Landlord shall cause its designated
contractor ("Landlord's Contractor") to construct the Leasehold Improvements
in accordance with the Plans and Specifications, which shall be completed in a
good and workmanlike manner in accordance with all applicable governmental
codes and regulations. Additionally, Landlord shall cause Landlord's
Contractor to repair or replace, at Landlord's Contractor's option and
expense, all other defects in workmanship and materials for all work performed
by Landlord's Contractor, its agents or subcontractors, on the Building and
the Leasehold Improvements for which Landlord receives notice from Tenant
within one (1) year of Substantial Completion of the Leased Premises. In the
event that Tenant discovers any defect which Landlord is responsible to
correct hereunder, it being understood that Tenant shall have no obligation
under its maintenance or other responsibilities hereunder to correct any such
item, Tenant shall give notice to Landlord of the defect and Landlord shall
repair or replace same within a reasonable amount of time, but in no event
shall Landlord commence the repairs or replacements later than (i) within the
most expedient time period for HVAC and electrical system defects and (ii)
thirty (3 0) days after notice from Tenant for all other defects. Following
commencement of such repairs or replacements, Landlord shall diligently pursue
same to completion. Tenant shall not interfere with the construction of the
Leasehold Improvements; however, Tenant or Tenant's consultant shall have the
right, but not the obligation, to inspect the Building and Leasehold
Improvements from time to time and to advise Landlord of any deficiencies or
other matters rendering any work unacceptable. If Tenant requests any
modification, deletion or addition to the Plans and Specifications prior to
the completion of the Leasehold Improvements, said change shall be in writing
and agreed to by Landlord, Tenant and Landlord's Contractor and the work shall
be performed by Landlord's Contractor at Tenant's expense promptly paid as
additional Tenant's Contribution in accordance with subparagraph A above.
C. When the construction of the Leasehold Improvements is completed and
the Rental Commencement Date has been established, Landlord and Tenant shall
promptly execute a writing in substantially the form attached hereto as
Exhibit "C" to evidence the completed Leasehold Improvements. The actual
Rental Commencement Date, the actual Expiration Date, the actual Tenant's
Proportionate Share, the actual rentable square footage (which Landlord. and
Tenant acknowledge and agree shall include a "stretch factor" pursuant to
which a proportionate share of the common areas are attributed to the Leased
Premises for the purpose of calculating the Rent to be paid hereunder and the
actual Tenant's Proportionate Share), the actual Rent to be paid hereunder and
any other information which was not available at the time of execution of this
Lease. Tenant's failure or delay to join in such writing shall not affect
Tenant's obligations to promptly pay all Rent due, commencing on the Rental
Commencement Date, on the basis of the actual rentable square footage of the
Leased Premises.
17. RULES AND REGULATIONS
Tenant covenants that Tenant and its agents, employees, invites, or those
claiming under Tenant will at all times observe, perform and abide by all the
general rules and regulations promulgated by Landlord from time to time. The
current Rules and Regulations are attached hereto as Exhibit "B".
18. PARKING
TENANT AND ITS EMPLOYEES AND INVITES SHALL HAVE THE NON-EXCLUSIVE RIGHT TO USE
PARKING SPACES IN common with other tenants of Landlord only in general areas
reasonably designated by Landlord pursuant to the rules and regulations relating
to parking adopted by Landlord from time to time. Tenant agrees not to
overburden the parking facilities and agrees to co-operate with Landlord and
other tenants in the use of parking facilities. Landlord reserves the right in
its absolute discretion to determine whether parking facilities are becoming
crowded and, in such event, to allocate specific parking spaces among Tenant and
other tenants or to take such other steps necessary to correct such condition,
including but not limited to policing and towing and if Tenant, its employees,
contractors or invites are deemed by Landlord to be contributing to such
condition, to charge that portion of the cost thereof to Tenant which Landlord
reasonably determines to be caused by the failure of Tenant, its employees,
contractors, agents and invites to use the parking in compliance with this Lease
and the rules and regulations relating to parking. Landlord may, at its own
discretion, change the location and nature of the parking spaces available to
Tenant, its employees and invites, provided that after such change, there shall
be available to Tenant and its employees and invites approximately the same
number of spaces as available before the change.
19. ACCESS
Tenant shall permit Landlord to enter the Leased Premises at reasonable times
for the purpose of inspecting, altering and repairing the Leased Premises and
ascertaining compliance by Tenant with the provisions of this Lease. Landlord
may also show the Leased Premises to prospective purchasers or renters at
reasonable times and upon reasonable notice, provided that Landlord shall not
unreasonably interfere with Tenant's business operation.
20. SIGNS
All signs and symbols placed on the doors or elsewhere about the Leased
Premises, or upon any other part of the Building, including building
directories, shall be subject to the approval of the Landlord. Any signs or
symbols which have been placed without approval may be removed by Landlord at
Tenant's expense. Upon termination of tenancy, all signs installed shall be
removed and any damage resulting therefrom shall be promptly repaired at
tenant's expense. Tenant shall bear all cost of adding Tenant's name to the
building directory and the cost of individual Leased Premises identification.
21. TENANT'S DEFAULT
It shall be an "Event of Default" if (i) Tenant fails to pay any monthly
installment of Rent or any other charge or payment required of Tenant hereunder
(even though no legal or formal demand has been made therefor); (ii) Tenant
violates or fails to perform any of the other conditions, covenants or
agreements herein made by TENANT, AND SUCH VIOLATION OR FAILURE CONTINUES FOR A
PERIOD OF FIFTEEN (I 5) days after written notice thereof to Tenant by Landlord;
(iii) Tenant makes a general assignment for the benefit of its creditors or
files a petition for bankruptcy or other reorganization, liquidation,
dissolution or similar relief; (iv) a proceeding is filed against Tenant seeking
any relief mentioned in the preceding clause; (v) a trustee, receiver or
liquidator is appointed for Tenant or a substantial part of its property; (vi)
Tenant vacates or abandons the Leased Premises (an absence of substantial
activity by Tenant in the Leased Premises for more than 30 days to constitute
such abandonment); or (vii) Tenant mortgages, assigns or otherwise encumbers its
leasehold interest.
If an Event of Default occurs, this Lease shall@ at the option of Landlord,
cease and terminate and shall operate as a notice to quit (any written notice to
quit, or of Landlord's intention to re-enter, being hereby expressly waived) and
Landlord may proceed to recover the possession under and by virtue of the
provisions of the laws of the State of Florida, or by such other proceedings,
including re-entry and possession, as may be applicable. If Landlord elects to
terminate this Lease, the obligations herein contained on the part of Landlord
to be performed shall cease without prejudice, subject however, to the right of
Landlord to recover from Tenant all Rent and other charges accrued up to the
time of termination or recovery of possession by Landlord, whichever is later.
Should this Lease be terminated before the expiration of the Term of this Lease
by reason of an Event of Default, the Leased Premises may be relet by Landlord,
for such rent and upon such terms as Landlord is able to obtain, and, if the
full rent shall not be realized by Landlord, Tenant shall be liable for all
damages sustained by Landlord, including, without limitation, the deficiency in
Rent, reasonable attorneys' fees, other collection costs and all expenses
(including leasing fees) of placing the Leased Premises in first class rentable
condition. Any damage or loss sustained by Landlord may be recovered by
Landlord, at Landlord's option, (i) at the time of the reletting, (ii) in
separate action@,from time to time, as said damage shall have been made more
easily ascertainable by successive relettings, (iii) be deferred until the
expiration of the term of this Lease, in which event the cause of action shall
not be deemed to have accrued until the date of expiration of said term, or (iv)
if Landlord is unable to find a new tenant for the Leased Premises within sixty
days from termination of the Lease, Tenant shall immediately pay Landlord the
present value (discounted at 10%) of all the Rent due for the remainder of the
Ten-n (as if there had been no termination for cause) as liquidated damages. The
provisions contained in the paragraph shall be in addition to and shall not
prevent the enforcement of any claim Landlord may have against Tenant for
anticipatory breach of the unexpired term of this Lease. All rights and remedies
of Landlord under this Lease shall be cumulative and shall not be exclusive of
any other rights and remedies provided to Tenant.
22. REMOVAL OF PROPERTY
Upon abandonment of the Leased Premises by Tenant or termination of this Lease,
Landlord shall have the right, but not the obligation, to remove from the Leased
Premises all personal property, fixtures, furnishings and other property located
therein, and to store such property in any place selected by Landlord, including
but not limited to a public warehouse, at the expense and risk of the owners
thereof, with the right to sell such stored property, without notice to Tenant,
after it has been stored for a period of thirty (30) days or more. The proceeds
of such sale shall be applied first to the cost of such sale, second to the
payment of the charges for storage, if any, and third to the payment of any
other sums of money which may then be due from Tenant to Landlord under any of
the terms hereof, the balance, if any to be paid to Tenant.
23. QUIET ENJOYMENT, INABILITY TO PERFORM
As long as Tenant pays the Rent and keeps and performs each and every term,
covenant and condition herein contained on the part and on behalf of Tenant to
be kept and performed, Tenant shall quietly enjoy the Leased Premises without
hindrance or molestation by Landlord, subject to the terms, covenants and
conditions of this Lease and any Mortgage as referenced in paragraph 36 herein.
This Lease and the obligations of Tenant to pay Rent and perform all of the
terms, covenants and conditions on the part of Tenant to be performed shall in
no way be affected, impaired or excused because Landlord, due to circumstances
or conditions beyond Landlord's control, is (a) unable to fulfill any of its
obligations under this Lease, or (b) unable to supply or delayed in supplying
any service expressly or implied to be supplied, or (c) unable to make or
delayed in making any repairs, replacements, additions, alterations or
decorations, or (d) unable to supply or delayed in supplying any equipment or
fixtures. Landlord shall in each instance exercise reasonable diligence to
effect performance when and as soon a possible. However, Landlord shall be under
no obligation to pay overtime labor rates in the exercise of reasonable
diligence.
Circumstances or conditions beyond Landlord's control include, without
limitation, situations caused by Tenant, governmental restriction, governmental
regulations, controls, undue delays, order of civil,
military or naval authority, governmental preemption, strikes, labor disputes,
lock-outs, shortage of labor or materials, inability to obtain materials or
contractors or subcontractors, Acts of God, fire, earthquake, floods,
explosions, actions of the elements, extreme weather conditions, enemy action,
civil commotion, riot or insurrection, fire or other casualty and delays in
obtaining governmental permits or approvals.
24. HOLD OVER TENANCY
If (without execution of a new lease or written extension) Tenant holds over
after the expiration of the term of this Lease, Tenant may. at Landlord's
option, be deemed to be occupying the Leased Premises as a tenant from month to
month, which tenancy may be terminated as provided by law. During such tenancy,
Tenant agrees to pay to Landlord monthly Rent equivalent to two (2) times the
Total Monthly Payment for the last month of the Lease Tenn, unless a different
rate is agreed upon and shall be bound by all of the terms, covenants and
conditions as herein specified, so far as applicable.
If Landlord relets the Leased Premises to a new tenant and the term of such new
lease commences during the period for which Tenant holds over, Landlord shall be
entitled to recover from Tenant any and all costs incurred by Landlord as a
result of Tenant's failure to deliver possession of the Leased Premises to
Landlord when required under this Lease.
25. ATTORNEY'S FEES
In the event either party requires the services of an attorney in connection
with enforcing the terms of this lease or in the event suit is brought for the
recovery of any Rent due under this Lease or for the breach of any covenant or
condition of this Lease or for the restitution of the Leased Premises to
landlord and/or eviction of Tenant during said Term or after the expiration
thereof, the party prevailing in any such legal action shall be entitled to an
award for all legal costs and expenses, including but not limited to, a
reasonable sum for attorney's's fees.
26. AMENDMENT
This Lease is the entire agreement between the parties. This Lease shall not be
amended or modified except in writing signed by both parties. Failure to
exercise any right in one or more instances shall not be construed as a waiver
of the right to strict performance or as an amendment to this agreement.
27. NOTICES
All notices required by this Lease shall be in writing and shall be effective
when mailed by certified mail either to Tenant or Landlord at addresses shown
for each on first page of this Lease or as specified below:
Landlord: Sawgrass Realty Holdings, Inc.
Tenant: 555 S. Federal Highway #350 Boca Raton, FL 33432
<PAGE>
With a
Copy to: Akertnan, Senterfitt 777 S. Flagler Dr. 900 West Palm Beach, FL 33401
With a
Copy to:
<PAGE>
28. BINDING EFFECT
Subject to the provisions of paragraph I 1, this Lease shall be binding upon and
inure to the benefit of the parties and their successors and assigns. It is
understood and agreed that terms "Landlord"
and "Tenant" and verbs and pronouns in the singular number are uniformly used
throughout this Lease regardless of gender, number or legal status of the
parties hereto.
29. RIDERS AND ATTACHMENTS
The typewritten riders or supplemental provisions, if any, attached or added
hereto are made a part of this Lease by reference and the terms thereof shall
control any inconsistent provisions in, the paragraphs of this instrument.
30. LIMITATION OF LANDLORD'S LIABILITY
The obligations of Landlord under this Lease do not constitute personal
obligations of the individual partners, directors, officers, or shareholders of
Landlord, and Tenant shall look solely to the real estate that is the subject of
this Lease and to no other assets of Landlord for satigaction of any liability
under of this Lease and will not seek recourse against the individual partners,
directors, officers or shareholders of Landlord or any of their personal assets
for such satisfaction.
31. LANDLORD'S RESERVED RIGHTS
Without notice and without liability to Tenant, Landlord shall have the right
to:
A. Change the name or street address of the Building.
B. Install and maintain signs on the exterior of the Building.
C. Make reasonable rules and regulations as, in the judgment of
Landlord, may from time to time be needed for the safety of the tenants, the
care and cleanliness of the Building and the preservation of good order therein.
Tenant shall be notified in writing when each such rule and regulation is
promulgated.
D. Grant utility easements or other easements to such parties, or
replat, subdivide or make
such other changes in the legal status of the land underlying the Building, as
Landlord shall deem necessary, provided such grant or changes do not
substantially interfere with Tenant's use of the Leased Premises as intended
under this Lease.
E. Sell the Building and assign this Lease and the Deposit to the
purchaser (and upon such assignment to be released from all of its obligations
under this Lease). Tenant agrees to attom to such purchaser, or any other
successor or assign of Landlord through foreclosure or deed in lieu of
foreclosure or otherwise and to recognize such person as the Landlord under this
Lease.
32. ESTOPPEL CERTIFICATE
Within five (5) business days after request therefor by Landlord, its agents,
successors, or assigns, Tenant shall deliver, in recordable form, a certificate
to any proposed mortgagee or purchaser, or to Landlord, together with a true and
correct copy of this Lease and any amendments hereto, certifying (i) (if such be
the case) that this Lease is in full force and effect without modification, (ii)
the amount, if any, of Prepaid Rent and Deposit paid by Tenant to Landlord,
(iii) that Landlord has performed all of its obligations due to be performed
under this Lease and that there are no defenses, counterclaims, deductions,
offsets outstanding or other excuses for Tenants performance under this Lease,
and (iv) any other fact reasonably requested by Landlord or such proposed
mortgagee or purchaser. Tenant's failure to deliver the above described
certificate in time shall be conclusive upon Tenant: (i) that this Lease is in
full force and effect, without modification except as may be represented by
Landlord, (ii) that there are no uncured defaults in Landlord's performance and
Tenant has no right of offset, counterclaim, defenses or deduction against Rent
or the Landlord hereunder, (iii) that Prepaid Rent does not exceed the amount
stated in this Lease, and (iv) that the amount of the Deposit held by Landlord
is as represented by Landlord.
33. ACCORD AND SATISFACTION
No receipt and retention by Landlord of any payment tendered by Tenant in
connection with this Lease will give rise to or support or constitute an accord
and satisfaction, notwithstanding any accompanying statement, INSTRUCTION OR
other assertion to the contrary (whether by notation on a check of in a
transmittal letter or otherwise), unless Landlord expressly agrees to an accord
and satisfaction in a separate writing duly executed by the appropriate persons.
Landlord may receive and retain, absolutely and for itself, and all payments so
tendered, notwithstanding any accompanying instructions by Tenant to the
contrary. Landlord will be entitled to treat any such payments as being received
on account of any item or items of Rent, interest, expense or damage due in
connection herewith, in such amounts and in such order as Landlord may
deter-mine at its sole option.
34. SEVERABILITY
The parties intend this Lease to be legally valid and enforceable in accordance
with all of its terms to the fullest extent permitted by law. If any term hereof
shall be finally held to be invalid or unenforceable, the parties agree that
such term shall be stricken from this Lease, the same as if it never had been
contained herein. Such invalidity or unenforceability shall not extend to or
otherwise affect any other term of this Lease, and the unaffected terms hereof
shall remain in full force and effect to the fullest extent permitted by law,
the same as if such stricken term never had been contained herein. The above
notwithstanding, if any provision of this Lease shall be finally held to be
invalid or unenforceable, and such term substantially and adversely affects the
amount of Rent to be received by Landlord or the nature of its obligations to
Tenant or otherwise affects the economic bargain agreed to by Landlord in this
Lease, Landlord shall have the additional option of terminating this Lease. Such
right shall be exercised, if at all, by delivering notice to tenant within 30
days after any final judgment declaring a provision of this Lease invalid or
unenforceable, stating a date of termination no sooner than 90 days from such
notice.
35. WAIVER
No assent or consent to change in or waiver of any part of this Agreement shall
be deemed or taken as made, unless the same be done in writing and attached
hereon and endorsed by the Landlord. No covenant or term of this Lease
stipulated in favor of the Landlord shall be waived, except by express written
consent of the Landlord, whose forbearance or indulgence in any regard
whatsoever shall not constitute a waiver of the covenant, term or condition to
be performed by the Tenant; and until complete performance by the Tenant of the
said covenant, term or condition, the landlord shall be entitled to invoke any
remedies available under this lease or by law despite such forbearance or
indulgence.
36. SUBORDINATION AND ATTORNMENT
A. This Lease, and the rights of Tenant hereunder, shall be subject or
subordinate to any mortgage (a "Mortgage") which now are or may hereafter be
placed upon the Building and surrounding lands or any portion thereof or any
interest therein, which now exist or may hereafter be made (any holder of any
Mortgage being hereinafter called a "Mortgage"). The terms of this subordination
shall be self-operative; provided, however, that Tenant shall execute such
documents as may be requested by Landlord in order to confirm this subordination
from time to time. Any failure by Tenant to execute any such document within ten
(IO) days of Landlord's request shall be a default hereunder.
B. Upon the request of Tenant, any Mortgage shall provide to Tenant its
written agreement providing substantially as follows: so long as Tenant has not
defaulted under this Lease, (I) Tenant's rights shall not be terminated or
disturbed by reason of any foreclosure of such Mortgage; (II) in the event that
the property containing the Leased Premises is sold or otherwise disposed of
pursuant to any right or power contained in or existing by reason of any such
Mortgage or the bond, note or debt secured thereby, the purchaser thereof or
other person acquiring title thereto through or by virtue of such sale or other
disposition shall take title thereto subject to this Lease and all rights of
Tenant hereunder.
C. Upon any foreclosure sale on any Mortgage, if the Mortgage or other
purchaser at foreclosure sale shall so request, Tenant shall attom to such
holder or purchaser as Tenant's landlord under this Lease and shall promptly
execute and deliver any instrument that such holder or purchaser may reasonably
request to evidence such attomment. Upon such attornment, this Lease shall
continue in full force and effect as a direct lease between such holder or
purchaser and Tenant upon all of the terms, conditions and covenants as are set
forth in this Lease.
37. TIME
Time is of the essence hereof.
38. APPLICABLE LAW
This Lease shall be construed according to the Laws of the State of Florida.
39. BROKER'S INDEMNIFICATION
As part of the consideration for the granting of this Lease, Tenant represents
and warrants to Landlord that no broker or agent negotiated or was instrumental
in negotiation or consummation of this Lease except the Broker(s) of Record,
(See page 1), and Tenant agrees to indemnify Landlord against any other loss,
expense, cost or liability incurred by Landlord as a result of a claim by any
broker or finder claiming through Tenant.
40. ENTIRE AGREEMENT
This Lease sets forth all the covenants, promises, agreements, conditions, and
understandings, between Landlord and Tenant concerning the Leased Premises and
the Building and expressly supersedes any proposal to lease or correspondence
prior to execution of this Lease. There are no covenants, promises, agreements,
conditions, or understandings, either oral or written, between them other than
as are herein set forth. Except as herein otherwise provided, no subsequent
alteration, amendment, change or addition to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed by them.
41. RADON GAS
Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit. (Disclosure pursuant to Florida Statutes, ss.404.056(7))
42. AGENCY DISCLOSURES
hereby discloses that it is an agent and representative of Landlord and
that
any compensation due it will be paid by Landlord only. Tenant, by signing this
Lease, confirms and acknowledges receipt of the agency, compensation and radon
gas disclosures set forth above.
43. EXHIBITS
The following Exhibits are attached hereto and made a part hereof-
"A" Leased Premises
"B" Rules and Regulations
"C" Confirmation after Substantial Completion
Executed as of the date first above written.
LANDLORD Sawgrass Realty Holdings, Inc
By:________________________
Fredric Newman, Vice President
Tenant:Cobra Technologies, Inc.
By:_________________________
EXHIBIT "A"
LEASED PREMISES
EXHIBIT "B"
RULES AND REGULATIONS
I The sidewalks, entrances, halls, corridors, elevators and stairways of the
Building shall not be obstructed or used as a waiting or lounging place by
Tenants, and their agents, servants, employees, invites, licensees and visitors.
All entrance doors leading from any Leased Premises to the hallways are to be
kept closed at all times.
2. Landlord reserves the right to close Building at 6:00 p.m. subject, however,
to admittance under regulations prescribed by Landlord, and to require that
persons entering the Building identify themselves and establish their right to
enter or to leave the Building. In case of invasion, riot, public excitement or
other commotion, Landlord also reserves the right to prevent access to the
Building during the continuance of same. Landlord shall in no case be liable for
damages for the admission or exclusion of any person to or from the Building.
3. Landlord will furnish each Tenant with two keys to each door lock on the
Leased Premises, and Landlord may make a reasonable charge for any additional
keys requested by a Tenant. No Tenant shall have any keys made for the Leased
Premises; nor shall any Tenant alter any lock, or install new or additional
locks or bolts, on any door without the prior written approval of Landlord. In
the event of such alteration for installation approved by Landlord with a key
for any such lock or bolt. Each Tenant, upon the expiration or termination of
its tenancy, shall deliver to Landlord all keys in such Tenant's possession for
all locks and bolts in the Building.
4. In order that the Building may be kept in a state of cleanliness, each Tenant
shall during the term of each respective lease, permit Landlord's employees (or
Landlord's agent's employees) to take care of and clean the Common Areas after
5:30 p.m. without hindrance and Tenants shall not employ any person(s) other
than Landlord's employees (or Landlord's agent's employees) for such purpose. No
Tenant shall cause any unnecessary labor by reason of such Tenant's carelessness
or indifference in the preservation of good order and cleanliness of the Leased
Premises. Tenants will see that (i) the doors are securely closed and (ii) all
water faucets and other utilities are shut off (so as to prevent waste or
damage), each day before leaving the Leased Premises. IN THE EVENT TENANT MUST
DISPOSE OF CRATES, BOXES, ETC. WHICH WILL NOT FIT into office waste paper
baskets, it will be the responsibility of Tenant to dispose of same. In no event
shall Tenant set such items in the public hallways or other areas of the
Building or garage facility, excepting Tenant's own Leased Premises, for
disposal.
5. Landlord reserves the right to prescribe the date, time, method and
conditions that any personal property, equipment, trade fixtures, merchandise
and other similar items shall be delivered to or removed from the Building. No
iron safe or other heavy or bulky object shall be delivered to or removed from
the Building, except by experienced safe men, movers or riggers approved in
writing by Landlord. All damage done to the Building by the delivery or removal
of such items, or by reason of their presence in the Building, shall be paid to
Landlord, immediately upon demand, by the Tenant by, through or under whom such
damage was done. There shall not be used in any space, or in the public halls of
the Building, either by Tenant or by jobbers, or others, in the delivery or
receipt of merchandise, any hand-trucks, except those equipped with rubber
tires.
6. The walls, partitions, skylights, windows, doors and transoms that reflect or
admit light into passageways or into any other part of the Building shall not be
covered or obstructed by any of the Tenants.
7. No sign, name, placard, advertisement or notice visible from the exterior of
any Leased Premises, shall be inscribed, painted or affixed by any Tenant on any
part of the
Building or Common Areas without the prior written approval of Landlord. All
signs or letterings on doors, or otherwise, approved by Landlord shall be
inscribed, painted or affixed at the sole cost and expense of the Tenant, by a
person approved by Landlord.
A directory containing one name of each Tenant of the Building shall be
provided by Landlord at an appropriate place on the first floor of the
Building.
8. No signaling, telegraphic or telephonic instruments or devices, or other
wires, instruments or devices-except for basic utilities, shall be installed
in connection with any Leased Premises without the prior written approval of
Landlord. Such installations, and the boring or cutting for wires, shall be
made at the sole cost and expense of the Tenant and under the control and
direction of Landlord. Landlord retains in all cases the right to require (i)
the installation and use of such electrical protecting devices that prevent
the transmission or excessive currents of electricity into or through the
Building, (ii) the changing of wires and of their installation and arrangement
underground or otherwise as Landlord may direct, and (iii) compliance on the
part of all using or seeking access to such wires with such rules as Landlord
may establish relating thereto. All such wires used by Tenants must be clearly
tagged at the distribution boards and junction-boxes and elsewhere in the
Building, with (i) the number of the Leased Premises to which said wires lead,
(ii) the purpose for which said wires are used, and (iii) the name of the
company operating same.
9. Tenant, their agents, servants or employees, shall not (a) go upon the roof
of the Building, (b) use any additional method of heating or air conditioning
the Leased Premises, (c) sweep or throw any dirt or other substance from the
Leased Premises into any of the halls, corridors, elevators, or stairways of
the Building or the Common Areas, (d) bring in or keep in or about the Leased
Premises any vehicles or animals of any kind, (e) install any radio or
television antennae or any other device or item on the roof, exterior walls,
windows or window sills of the Building, (f) place objects against glass
partitions, doors or windows which would be unsightly from the interior or
exterior of the Building and (g) use any Leased Premises (i) for the storage
of merchandise for sale to the general public, (ii) for lodging or sleeping,
(iii) or cooking (except that the use by any Tenant of Underwriter's
Laboratory equipment for brewing coffee, tea and similar beverages shall be
permitted, provided that such use is in compliance with law,) (iv) for the
selling or display of any goods, items or merchandise, either at wholesale or
retail. Tenant, its agents, servants and employees, invites, licensees, or
visitors shall not permit the operation of any musical or sound producing
instruments or device which may be heard outside the Leased Premises, or which
may emit electrical waves which will impair radio or television broadcast or
reception from or into the Building.
10. Tenant shall not, without the prior written consent of the Landlord, store
or use in any Leased Premises any (a) ether, naphtha, phosphorous, benzol,
gasoline, benzine, petroleum, crude or refined earth or coal oils, flashlight
powder, kerosene or camphene, (b) any other flammable, combustible, explosive
or illuminating fluid, gas or material of any kind, and (c) any other fluid,
gas or material of any kind having an offensive odor.
11. No canvassing, soliciting, distribution of hand bills or other written
material, or peddling shall be permitted in the Building, and Tenants shall
co-operate with Landlord in prevention and elimination of same.
12. Tenant shall give Landlord prompt notice of all accidents to or defects in
air conditioning equipment, plumbing, electrical facilities or any part of or
appurtenances of the Leased Premises.
13. If the Leased Premises becomes infested with vermin, Tenant, at its sole
cost and expense, shall cause its Leased Premises to be exterminated from
time-to-time to the satisfaction of the Landlord and shall employ such
exterminators, which shall be approved by Landlord.
14. Landlord will not be responsible for lost or stolen personal property,
equipment, money or any article taken from the Leased Premises, Building or
Common Areas regardless of how or when loss occurs.
15. All contractors and or technicians performing work for Tenant within the
Leased Premises shall be referred to Landlord for approval before performing
such work. This shall apply to all work including, but not limited to,
installation of telephones, computer equipment, electrical devices and
attachments, and all installations affecting floors, walls, windows, doors,
ceilings, equipment or any other physical feature of the Building, Leased
Premises or Common Areas. None of this work shall be done by Tenant without
Landlord's prior written approval. Window treatments of any kind require
Landlord's prior written approval. 16. No showcases or other articles shall be
put in front of or affixed to any part of the exterior of the Building, nor
placed in the halls, corridors, vestibules or other part of Common Areas without
the prior consent of Landlord.
17. Landlord reserves the right to make reasonable amendments, modifications and
additions to the rules and regulations and to make additional reasonable rules
and regulations, as in Landlord's sole judgment may from time to time be needed
for the care, cleanliness and preservation of good order of the Building.
<PAGE>
EXHIBIT "C"
Confirmation after Substantial Completion
Landlord:
Tenant:
Substantial Completion of Leasehold Premises was achieved on 200- and
the Rental Commencement Date is 200_ (IO days after Substantial
Completion).
The initial term of the Lease expires,_________ 20__.
The Demised Premises consist of _______ rentable square feet, and are
also known as Suite________
The Minimum Annual Rent, subject to adjustment as provided in the
Lease, is $______ (based on $ per rentable square foot) payable in
monthly installments of $______ plus Sales Tax.
Tenant's Proportionate Share is______%
Initial Monthly Rent Payment:
Minimum Annual Rent: _____________
Additional Rent: _____________
Tenant's Contribution: _____________
Subtotal _____________
Sales Tax (6%) _____________
Total $ _____________
LANDLORD: TENANT:
By: By:
Date: Date:
<PAGE>
Addendum to Lease
between Sawgrass Realty Holdings, Inc. (the "Landlord")
and Cobra Technologies, Inc. (the "Tenant")
This Addendum is made to supplement or modify the terms of that certain
Lease between Landlord and Tenant of even date herewith, and shall be construed
as a part of that Lease and the term "Lease" wherever used, shall be deemed to
include the following terms and conditions. In the event of any conflict between
the terms of this Addendum and the other terms of the Lease, it is agreed the
terms of this Addendum shall control. Landlord and Tenant hereby agree as
follows:
I TE=OR= S12ACE. Pending completion of the Leasehold Improvements,
Landlord shall lease to Tenant and Tenant shall lease from Landlord
approximately 2,908 square feet of office space at 7251 West Palmetto Park
Road, Boca Raton, Florida, as more particularly depicted in Exhibit "A"
attached hereto and made a part hereof (the "Temporary Premises"). Until the
Lease Commencement Date, the following terms and conditions shall supplement
the Lease and apply to Tenants Tenancy at the Temporary Premises:
(a) The Lease Term for the Temporary Premises shall
commence May 15, 1999 and terminate on the Lease
Commencement Date.
(b) Rent shall be $5,000.00 per month plus 6% sales tax.
Rent will include water and electricity service to
the Temporary Premises and there shall be no
Additional Rent payable by Tenant for the Temporary
Premises.
(c) The Deposit payable under the Lease shall be held as
security for Tenant's tenancy in the Temporary
Premises.
(d) Promptly upon Tenant's execution of the Lease and
this Addendum, Landlord shall proceed to paint and
re-carpet the Temporary Premises as well as provide
interior access between the two suites comprising the
Temporary Premises.
Except to the extent that the foregoing terms are expressly inconsistent
therewith, the Lease terms shall apply to Tenant's tenancy of the Temporary
Premises including, but not limited to, the Lease provisions regarding the
parties' respective maintenance obligations, insurance requirements, and rules
and regulations.
2. MOVING EXPENSES. Provided that Tenant has not been in default
under any obligations of the Lease, Landlord hereby agrees to reimburse
Tenant for its reasonable costs of moving Tenant's furniture, equipment and
office contents from the Temporary Premises to the Leased Premises between
the date of Substantial Completion and the Lease Commencement Date.
3. STOCK ESCROW. In lieu of the personal guaranty of the principals
of Tenant, Landlord agrees to accept as an additional Deposit 50,000 shares
of unrestricted common stock in Tenant, which shall be held by Landlord in
escrow, together with appropriate stock power(s) to apply as Deposit funds
are permitted to be applied by Landlord under the Lease, provided, however,
that Landlord agrees not to liquidate said stock unless and until the cash
Deposit provided by Tenant has been exhausted. Notwithstanding anything in
the Lease to the contrary, after Tenant has consistently performed all of
its monetary obligations under the Lease for a period of two (2) consecutive
years beginning May 15, 1999, Landlord agrees to reduce the Deposit by
returning to Tenant the 50,000 shares of stock and one-half of the initial
Deposit, or $20,625.00.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Addendum
to be executed as of the effective date of the Lease.
LANDLORD Sawgrass Realty Holdings, Inc
By:________________________
Fredric Newman, Vice President
Tenant:Cobra Technologies, Inc.
By:_________________________
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT DATED MARCH 1, 1999 AND AMENDED AS OF AUGUST 24,
1999 BY AND BETWEEN COBRA TECHNOLOGIES, INC., A NEVADA CORPORATION ("EMPLOYER"
OR THE "COMPANY"), AND LIONEL FORDE ("Employee").
WHEREAS, Employee wishes to be employed by Employer with the duties and
responsibilities as hereinafter described, and Employer desires to assure itself
of the availability of Employee's services in such capacity.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee, and Employee
hereby agrees to serve Employer, upon the terms and conditions hereinafter set
forth.
2. TERM. The employment of Employee by Employer pursuant to this Agreement shall
be for a three (3) year term commencing March 1, 1999 and ending on February 28,
2002, unless sooner terminated pursuant to Section 8 below (hereinafter referred
to as the "Service Period").
3. DUTIES. Employee shall, subject to overall direction consistent with the
legal authority of the Board of Directors of Employer (the "Board"), serve as,
and have all power and authority inherent in the office of, Chief Financial
Officer of Employer, and shall be responsible for those areas in the conduct of
the business assigned to him by the Board, including, without limitation, (i)
participating in the Company's capital raising efforts; (ii) managing the
Company's cash and investment assets; (iii) involvement in the Company's fund
raising efforts; and (iv) management authority over the internal and external
financial reports of the Company and all of its divisions and subsidiaries
wherever situated. Employee shall devote substantially all his business time and
efforts to the business of Employer.
4. COMPENSATION AND OTHER PROVISIONS. Employee shall be entitled to the
compensation and benefits hereinafter described in subsections (a) through (d)
(such compensation and benefits being hereinafter referred to as "Compensation
Benefits").
(A) BASE SALARY. Employer shall pay to Employee a base salary
of $70,000 per annum for the period commencing March 1, 1999 through December
31, 1999, and $120,000 per annum commencing on January 1, 2000 through the
remainder of the Service Period (such amount, as it may be increased from time
to time, may sometimes hereinafter be referred to as "Base Salary"). The Base
Salary and Employee's other compensation may be reviewed by the Board from time
to time during the Service Period and may be increased (but not decreased) as
the Board may determine.
(B) PARTICIPATION IN BENEFIT PLANS. During the Service Period,
Employee shall be eligible to participate in all employee benefit plans and
arrangements now in effect or which may hereafter be established, including,
without limitation, all life, group insurance and medical care plans and all
disability, retirement and other employee benefit plans of Employer consistent
with such benefits provided to executive management of Employer. Employee shall
in all events provide and pay the full costs of all medical and health insurance
for Employee throughout the Service Period.
(C) AUTOMOBILE ALLOWANCE. During the Service Period, Employee
shall be paid an automobile allowance of approximately $700.00 per month
throughout the Service Period, which shall be utilized for an automobile lease,
insurance, gasoline, maintenance and related expenses.
(D) EXPENSE REIMBURSEMENT. Employer will promptly reimburse
Employee for all reasonable out-of-pocket business expenses incurred in
connection with the performance of Employee's services hereunder, including,
without limitation, all travel, telephone, entertainment and similar business
expenses.
5. STOCK OPTIONS. Concurrent herewith, Employer and Employee shall enter into a
certain Stock Option Agreement ("Stock Option Agreement") providing for full
anti-dilution rights to Employee, participation in the Employer's qualified
incentive stock option plan, and cashless exercise. The terms of the
anti-dilution rights shall provide that:
if the Company issues additional shares, beyond 10 million
shares outstanding on a fully diluted basis, whether in the course of
further acquisition, capital raising activity or any other activity,
the Employee shall receive options for the purchase of shares of the
Employer such that the Employee shall maintain approximately 8% (eight
percent) ownership of Employer. This right shall be valid as long as
the total outstanding shares on a fully diluted basis is less than
25,000,000 shares. When the total shares on a fully diluted basis is
greater than 25,000,000 shares, then the Employee shall have no further
anti dilution rights. In the case of a stock split, recapitalization or
other similar share reissuance program, this anti-dilution right will
be proportionately adjusted. The stock options granted shall have an
exercise price that is equal to the average market price during the 60
days prior to the distribution to Employee and shall be exercisable for
a period of five years from the date of grant.
6. STOCK GRANT. Employee is entitled to receive shares as additional
compensation as the Board of Directors may from time to time grant. Any and all
non-vested shares to which Employee which may be granted under any Employer plan
shall become vested immediately prior to a Change of Control. For purposes of
this Agreement, "Change of Control" shall mean any of the following: (i) a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becoming the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of voting securities of the Company entitled to exercise more
than 30% of the total voting power of all outstanding voting securities of the
Company (calculated in accordance with Rule 13d-3 under the Exchange Act); (ii)
the consummation of any merger, consolidation, business combination or similar
transaction involving the Company that results in the beneficial owner's voting
securities of the Company immediately prior to such consummation owning in the
aggregate, directly or indirectly, voting securities representing less than 50%
of the voting securities of the surviving entity outstanding immediately
following such consummation; or (iii) the sale of all or substantially all of
the assets of the Company, or any liquidation, dissolution or bankruptcy of the
Company..
7. REGISTRATION RIGHTS AGREEMENT. Concurrent herewith, Employer and Employee
have entered into a certain Registration Rights Agreement pursuant to which
Employer has granted to Employee certain "piggy-back" rights to register
securities of Employer, including, without limitation, common stock granted
hereunder and underlying stock options granted or to be granted in connection
with the Stock Option Agreement and Incentive Stock Option plan.
8. TERMINATION. Employee's employment hereunder shall terminate as a result of
any of the following events:
(a) Employee's death;
(b) Employee shall be unable to perform his duties hereunder
by reason of illness, accident or other physical or mental disability, as
verified by a licensed physician mutually selected by the Employer and Employee,
for a continuous period of at least six months or an aggregate of nine months
during any continuous twelve month period ("Disability");
(c) termination by Employee; or
(d) for Cause, where "Cause" shall mean: (i) the final
non-appealable conviction of Employee of a felony; (ii) the reasonable
determination of seventy-five percent (75%) of the Board that Employee has
engaged in intentional misconduct, or the gross neglect of his duties, which has
a material and continuing adverse effect on the business of Employer; or (iii) a
final non-appealable determination by a court of competent jurisdiction that
Employee shall have failed to cure the breach of any material term of this
Agreement within thirty days following receipt of detailed written notice from
Employer of such breach.
Any termination pursuant to subparagraph (b), (c) or (d) of
this Section shall be communicated by a written notice ("Notice of
Termination"), such notice to set forth with specificity the grounds for
termination if the result of "Cause". Employee's employment under this Agreement
shall be deemed to have terminated as follows: (i) if Employee's employment is
terminated pursuant to subparagraph (a) above, on the date of his death; (ii) if
Employee's employment is terminated pursuant to subparagraph (b) or (d) above,
on the date on which Notice of Termination is given; and (iii) if Employee's
employment is terminated pursuant to subparagraph (c) above, fifteen (15) days
after the date on which a Notice of Termination is given, or Employee's last day
of employment, whichever is earlier. The date on which termination is deemed to
have occurred pursuant to this paragraph is hereinafter referred to as the "Date
of Termination".
9. PAYMENTS ON TERMINATION. In the event that Employee's employment is
terminated pursuant to Section 8 above, Employer shall pay to Employee his full
salary through the Date of Termination together with all benefits and other
compensation, if any, due and owing as of that date.
10. REPRESENTATIONS AND WARRANTIES. Employee hereby represents and warrants to
the Employer that (i) the execution, delivery and performance of this Agreement
by Employee do not and shall not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Employee is a party or by which Employee is bound, and (ii) Employee is
not a party to or bound by any employment agreement, noncompetition agreement or
confidentiality agreement with any other person or entity which in any way may
restrict, impair or limit the performance of his duties hereunder.
11. DISCLOSURE AND PROTECTION OF CONFIDENTIAL INFORMATION.
(a) For purposes of this Agreement, "Confidential Information"
means knowledge, information and material which is proprietary to Employer, of
which Employee may obtain knowledge or access through or as a result of his
employment by Employer (including information conceived, originated, discovered
or developed in whole or in part by Employee). Confidential Information
includes, but is not limited to, (i) technical knowledge, information and
material such as trade secrets, processes, formulas, data, know-how,
improvements, inventions, computer programs, drawings, patents and experimental
and development work techniques, and (ii) marketing and other information, such
as supplier lists, customer lists, marketing and business plans, business or
technical needs of customers, consultants, licensees or suppliers and their
methods of doing business, arrangements with customers, consultants, licensees
or suppliers, manuals and personnel records or data. Confidential Information
also includes any information described above which Employer obtains from
another party and which Employer treats as proprietary or designates as
confidential, whether or not owned or developed by Employer. Notwithstanding the
foregoing, any information which is or becomes generally available to the
general public otherwise than by breach of this Section 11 shall not constitute
Confidential Information for purposes of this Agreement.
(b) During the term of this Agreement and thereafter, Employee
agrees, to hold in confidence all Confidential Information and not to use such
information for Employee's own benefit or to reveal, report, publish, disclose
or transfer, directly or indirectly, any Confidential Information to any person
or entity, or to utilize any Confidential Information for any purpose, except in
the course of Employee's work for Employer.
(c) Employee will abide by any and all security rules and
regulations, whether formal or informal, that may from time to time be imposed
by Employer for the protection of Confidential Information, and will inform
Employer of any defects in, or improvements that could be made to, such rules
and regulations.
(d) Employee agrees that all inventions, innovations,
improvements, developments, methods, designs, analysis, drawings, reports, and
all similar or related information which relates to Employer's actual or
anticipated business, research and development or existing or future products or
services and which are conceived, developed or made by Employee at any time
while employed by Employer, or made thereafter as a result of any invention
conceived or work done at any time during employment with Employer (hereinafter
referred to as "Work Product"), and all Employee's right, title and interest in
and to Work Product, shall be regarded as made and held by Employee in a
fiduciary capacity solely for the benefit of Employer and shall exclusively
belong to Employer. Employee will promptly disclose such Work Product to the
Board of Directors of Employer and perform all actions reasonably requested by
the Board of Directors of Employer (whether during or after the term of
Employee's employment with Employer) to establish and confirm such ownership
(including, without limitation, execution of any and all assignments,
conveyances, consents, powers of attorney and other instruments).
(e) Employee will notify Employer in writing immediately upon
receipt of any subpoena, notice to produce, or other compulsory order or process
of any court of law or government agency if such document requires or may
require disclosure or other transfer of Confidential Information.
(f) Upon termination of employment, Employee will deliver to
Employer any and all records and tangible property that contain Confidential
Information that are in his possession or under his control. The provisions of
this Section 11 shall survive the termination of Employee's employment with
Employer.
12. BOARD OF DIRECTORS. The Company agrees to nominate Employee for election to
its Board of Directors at its next meeting of shareholders and to otherwise
exercise its best efforts to cause Employee to be elected or appointed to the
Board of Directors in accordance with its Bylaws.
13. AVAILABILITY OF INJUNCTIVE RELIEF. Employee acknowledges and agrees that any
breach by him of the provisions of Section 9 hereof will cause Employer
irreparable injury and damage for which it cannot be adequately compensated in
damages. Employee therefore expressly agrees that Employer shall be entitled to
seek injunctive and/or other equitable relief, on a temporary or permanent basis
to prevent any anticipatory or continuing breach of this Agreement or any part
hereof, and is secured as an enforcement. Nothing herein shall be construed as a
waiver by Employer of any right it may have or hereafter acquired to monetary
damages by reason of any injury to its property, business or reputation or
otherwise arising out of any wrongful act or omission of it.
14. INDEMNIFICATION. Employer hereby releases and agrees to unconditionally
indemnify and hold Employee harmless from and against all losses, liabilities,
claims, actions, judgments, demands, costs, expenses, fines, penalties, fees,
and damages, of any kind or nature, including, without limitation, attorney's
fees and costs and whether or not suit is instituted, that are suffered or
incurred by Employee, directly or indirectly, relating to, arising out of or in
connection with any events, occurrences or circumstances of or involving
Employer prior to the effective date of this Agreement, irrespective of whether
or not Employee is now aware or shall hereafter become aware of such events,
occurrences or circumstances or additional facts relating thereto.
15. SURVIVAL. The covenants, agreements, representations and warranties
contained in or made pursuant to this Agreement shall survive Employee's
termination of employment, irrespective of any investigation made by or on
behalf of any party.
16. ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
17. NOTICES. Any notice required or permitted hereunder shall be deemed validly
given if delivered by hand, verified overnight delivery, or by first class,
certified mail to the following address of Employee (or to such other address as
Employee may notify in writing to Employer):
Cobra Technologies, Inc.
7251 West Palmetto Park Road
Boca Raton, Florida 33433
Lionel Forde
1440 Coral Ridge Drive, Suite 313
Coral Springs, FL 33071
18. WAIVER. Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. All waivers must be in writing.
19. BINDING EFFECT. The provisions of this Agreement shall be binding upon the
Employee and his heirs and personal representatives, and shall be binding upon
and inure to the benefit of Employer, its successors and assigns.
20. HEADINGS. The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
21. GOVERNING LAW; VENUE. This Agreement will be governed and construed under
the laws of the State of Florida, without giving effect to rules governing
conflicts of law, with proper venue with respect to all disputes related to this
Agreement being Dade County, Florida.
22. INVALIDITY. The invalidity or unenforceability of any term of this Agreement
shall not invalidate, make unenforceable or otherwise affect any other term of
this Agreement, which shall remain in full force and effect.
23. ATTORNEYS' FEES. In the event any dispute or litigation arises hereunder
between any of the parties hereto, the prevailing party shall be entitled to all
reasonable costs and expenses incurred by it in connection therewith (including,
without limitation, all reasonable attorneys' fees and costs incurred before and
at any trial or other proceeding and at all tribunal levels), as well as all
other relief granted in any suit or other proceeding.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first hereinabove written.
EMPLOYER:
COBRA TECHNOLOGIES, INC., a Nevada corporation
BY:
TITLE:
EMPLOYEE:_____________________________________
Lionel Forde
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT DATED MARCH 1, 1999 AND AMENDED AS OF AUGUST 24,
1999 BY AND BETWEEN COBRA TECHNOLOGIES, INC., a Nevada CORPORATION ("EMPLOYER"
OR THE "COMPANY"), AND DOUGLAS H. FORDE ("Employee").
WHEREAS, Employee wishes to be employed by Employer with the duties and
responsibilities as hereinafter described, and Employer desires to assure itself
of the availability of Employee's services in such capacity.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee, and Employee
hereby agrees to serve Employer, upon the terms and conditions hereinafter set
forth.
2. TERM. The employment of Employee by Employer pursuant to this Agreement shall
be for a three (3) year term commencing March 1, 1999 and ending on February 28,
2002, unless sooner terminated pursuant to Section 8 below (hereinafter referred
to as the "Service Period").
3. DUTIES. Employee shall, subject to overall direction consistent with the
legal authority of the Board of Directors of Employer (the "Board"), serve as,
and have all power and authority inherent in the office of, Chairman of the
Board of Directors of Employer, and shall be responsible for those areas in the
conduct of the business assigned to him by the Board, including, without
limitation, (i) participating in the Company's capital raising efforts; (ii)
managing the identification of and negotiation with acquisition candidates;
(iii) involvement in the Company's public relations and investor relations
efforts; and (iv) management authority over executives and key employees of the
Company and all of its divisions and subsidiaries wherever situated. Employee
shall devote substantially all his business time and efforts to the business of
Employer.
4. COMPENSATION AND OTHER PROVISIONS. Employee shall be entitled to the
compensation and benefits hereinafter described in subsections (a) through (d)
(such compensation and benefits being hereinafter referred to as "Compensation
Benefits").
(A) BASE SALARY. Employer shall pay to Employee a base salary
of $75,000 per annum for the period commencing March 1, 1999 through December
31, 1999, and $150,000 per annum commencing on January 1, 2000 through the
remainder of the Service Period (such amount, as it may be increased from time
to time, may sometimes hereinafter be referred to as "Base Salary"). The Base
Salary and Employee's other compensation may be reviewed by the Board from time
to time during the Service Period and may be increased (but not decreased) as
the Board may determine.
<PAGE>
(B) PARTICIPATION IN BENEFIT PLANS. During the Service Period,
Employee shall be eligible to participate in all employee benefit plans and
arrangements now in effect or which may hereafter be established, including,
without limitation, all life, group insurance and medical care plans and all
disability, retirement and other employee benefit plans of Employer consistent
with such benefits provided to executive management of Employer. Employee shall
in all events provide and pay the full costs of all medical and health insurance
for Employee throughout the Service Period.
(C) AUTOMOBILE ALLOWANCE. During the Service Period, Employee
shall be paid an automobile allowance of approximately $750.00 per month
throughout the Service Period, which shall be utilized for an automobile lease,
insurance, gasoline, maintenance and related expenses.
(D) EXPENSE REIMBURSEMENT. Employer will promptly reimburse
Employee for all reasonable out-of-pocket business expenses incurred in
connection with the performance of Employee's services hereunder, including,
without limitation, all travel, telephone, entertainment and similar business
expenses.
5. STOCK OPTIONS. Concurrent herewith, Employer and Employee shall enter into a
certain Stock Option Agreement ("Stock Option Agreement") providing for full
anti-dilution rights to Employee, participation in the Employer's qualified
incentive stock option plan, and cashless exercise. The terms of the
anti-dilution rights shall provide that:
if the Company issues additional shares, beyond 10 million
shares outstanding on a fully diluted basis, whether in the course of
further acquisition, capital raising activity or any other activity,
the Employee shall receive options for the purchase of shares of the
Employer such that the Employee shall maintain approximately 10% (ten
percent) ownership of Employer. This right shall be valid as long as
the total outstanding shares on a fully diluted basis is less than
25,000,000 shares. When the total shares on a fully diluted basis is
greater than 25,000,000 shares, then the Employee shall have no further
anti dilution rights. In the case of a stock split, recapitalization or
other similar share reissuance program, this anti-dilution right will
be proportionately adjusted. The stock options granted shall have an
exercise price that is equal to the average market price during the 60
days prior to the distribution to Employee and shall be exercisable for
a period of five years from the date of grant.
6. STOCK GRANT. Employee is entitled to receive shares as additional
compensation as the Board of Directors may from time to time grant. Any and all
non-vested shares to which Employee which may be granted under any Employer plan
shall become vested immediately prior to a Change of Control. For purposes of
this Agreement, "Change of Control" shall mean any of the following: (i) a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becoming the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of voting securities of the Company entitled to exercise more
than 30% of the total voting power of all outstanding voting securities of the
Company (calculated in accordance with Rule 13d-3 under the Exchange Act); (ii)
the consummation of any merger, consolidation, business combination or similar
transaction involving the Company that results in the beneficial owner's voting
securities of the Company immediately prior to such consummation owning in the
aggregate, directly or indirectly, voting securities representing less than 50%
of the voting securities of the surviving entity outstanding immediately
following such consummation; or (iii) the sale of all or substantially all of
the assets of the Company, or any liquidation, dissolution or bankruptcy of the
Company..
7. REGISTRATION RIGHTS AGREEMENT. Concurrent herewith, Employer and Employee
have entered into a certain Registration Rights Agreement pursuant to which
Employer has granted to Employee certain "piggy-back" rights to register
securities of Employer, including, without limitation, common stock granted
hereunder and underlying stock options granted or to be granted in connection
with the Stock Option Agreement and Incentive Stock Option plan.
8. TERMINATION. Employee's employment hereunder shall terminate as a result of
any of the following events:
(a) Employee's death;
(b) Employee shall be unable to perform his duties hereunder
by reason of illness, accident or other physical or mental disability, as
verified by a licensed physician mutually selected by the Employer and Employee,
for a continuous period of at least six months or an aggregate of nine months
during any continuous twelve month period ("Disability");
(c) termination by Employee; or
(d) for Cause, where "Cause" shall mean: (i) the final
non-appealable conviction of Employee of a felony; (ii) the reasonable
determination of seventy-five percent (75%) of the Board that Employee has
engaged in intentional misconduct, or the gross neglect of his duties, which has
a material and continuing adverse effect on the business of Employer; or (iii) a
final non-appealable determination by a court of competent jurisdiction that
Employee shall have failed to cure the breach of any material term of this
Agreement within thirty days following receipt of detailed written notice from
Employer of such breach.
Any termination pursuant to subparagraph (b), (c) or (d) of
this Section shall be communicated by a written notice ("Notice of
Termination"), such notice to set forth with specificity the grounds for
termination if the result of "Cause". Employee's employment under this Agreement
shall be deemed to have terminated as follows: (i) if Employee's employment is
terminated pursuant to subparagraph (a) above, on the date of his death; (ii) if
Employee's employment is terminated pursuant to subparagraph (b) or (d) above,
on the date on which Notice of Termination is given; and (iii) if Employee's
employment is terminated pursuant to subparagraph (c) above, fifteen (15) days
after the date on which a Notice of Termination is given, or Employee's last day
of employment, whichever is earlier. The date on which termination is deemed to
have occurred pursuant to this paragraph is hereinafter referred to as the "Date
of Termination".
9. PAYMENTS ON TERMINATION. In the event that Employee's employment is
terminated pursuant to Section 8 above, Employer shall pay to Employee his full
salary through the Date of Termination together with all benefits and other
compensation, if any, due and owing as of that date.
10. REPRESENTATIONS AND WARRANTIES. Employee hereby represents and warrants to
the Employer that (i) the execution, delivery and performance of this Agreement
by Employee do not and shall not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Employee is a party or by which Employee is bound, and (ii) Employee is
not a party to or bound by any employment agreement, noncompetition agreement or
confidentiality agreement with any other person or entity which in any way may
restrict, impair or limit the performance of his duties hereunder.
11. DISCLOSURE AND PROTECTION OF CONFIDENTIAL INFORMATION.
(a) For purposes of this Agreement, "Confidential Information"
means knowledge, information and material which is proprietary to Employer, of
which Employee may obtain knowledge or access through or as a result of his
employment by Employer (including information conceived, originated, discovered
or developed in whole or in part by Employee). Confidential Information
includes, but is not limited to, (i) technical knowledge, information and
material such as trade secrets, processes, formulas, data, know-how,
improvements, inventions, computer programs, drawings, patents and experimental
and development work techniques, and (ii) marketing and other information, such
as supplier lists, customer lists, marketing and business plans, business or
technical needs of customers, consultants, licensees or suppliers and their
methods of doing business, arrangements with customers, consultants, licensees
or suppliers, manuals and personnel records or data. Confidential Information
also includes any information described above which Employer obtains from
another party and which Employer treats as proprietary or designates as
confidential, whether or not owned or developed by Employer. Notwithstanding the
foregoing, any information which is or becomes generally available to the
general public otherwise than by breach of this Section 11 shall not constitute
Confidential Information for purposes of this Agreement.
(b) During the term of this Agreement and thereafter, Employee
agrees, to hold in confidence all Confidential Information and not to use such
information for Employee's own benefit or to reveal, report, publish, disclose
or transfer, directly or indirectly, any Confidential Information to any person
or entity, or to utilize any Confidential Information for any purpose, except in
the course of Employee's work for Employer.
(c) Employee will abide by any and all security rules and
regulations, whether formal or informal, that may from time to time be imposed
by Employer for the protection of Confidential Information, and will inform
Employer of any defects in, or improvements that could be made to, such rules
and regulations.
(d) Employee agrees that all inventions, innovations,
improvements, developments, methods, designs, analysis, drawings, reports, and
all similar or related information which relates to Employer's actual or
anticipated business, research and development or existing or future products or
services and which are conceived, developed or made by Employee at any time
while employed by Employer, or made thereafter as a result of any invention
conceived or work done at any time during employment with Employer (hereinafter
referred to as "Work Product"), and all Employee's right, title and interest in
and to Work Product, shall be regarded as made and held by Employee in a
fiduciary capacity solely for the benefit of Employer and shall exclusively
belong to Employer. Employee will promptly disclose such Work Product to the
Board of Directors of Employer and perform all actions reasonably requested by
the Board of Directors of Employer (whether during or after the term of
Employee's employment with Employer) to establish and confirm such ownership
(including, without limitation, execution of any and all assignments,
conveyances, consents, powers of attorney and other instruments).
(e) Employee will notify Employer in writing immediately upon
receipt of any subpoena, notice to produce, or other compulsory order or process
of any court of law or government agency if such document requires or may
require disclosure or other transfer of Confidential Information.
(f) Upon termination of employment, Employee will deliver to
Employer any and all records and tangible property that contain Confidential
Information that are in his possession or under his control. The provisions of
this Section 11 shall survive the termination of Employee's employment with
Employer.
12. BOARD OF DIRECTORS. The Company agrees to nominate Employee for election to
its Board of Directors at its next meeting of shareholders and to otherwise
exercise its best efforts to cause Employee to be elected or appointed to the
Board of Directors in accordance with its Bylaws.
13. AVAILABILITY OF INJUNCTIVE RELIEF. Employee acknowledges and agrees that any
breach by him of the provisions of Section 9 hereof will cause Employer
irreparable injury and damage for which it cannot be adequately compensated in
damages. Employee therefore expressly agrees that Employer shall be entitled to
seek injunctive and/or other equitable relief, on a temporary or permanent basis
to prevent any anticipatory or continuing breach of this Agreement or any part
hereof, and is secured as an enforcement. Nothing herein shall be construed as a
waiver by Employer of any right it may have or hereafter acquired to monetary
damages by reason of any injury to its property, business or reputation or
otherwise arising out of any wrongful act or omission of it.
14. INDEMNIFICATION. Employer hereby releases and agrees to unconditionally
indemnify and hold Employee harmless from and against all losses, liabilities,
claims, actions, judgments, demands, costs, expenses, fines, penalties, fees,
and damages, of any kind or nature, including, without limitation, attorney's
fees and costs and whether or not suit is instituted, that are suffered or
incurred by Employee, directly or indirectly, relating to, arising out of or in
connection with any events, occurrences or circumstances of or involving
Employer prior to the effective date of this Agreement, irrespective of whether
or not Employee is now aware or shall hereafter become aware of such events,
occurrences or circumstances or additional facts relating thereto.
15. SURVIVAL. The covenants, agreements, representations and warranties
contained in or made pursuant to this Agreement shall survive Employee's
termination of employment, irrespective of any investigation made by or on
behalf of any party.
16. ENTIRE AGREEMENT; MODIFICATION. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
17. NOTICES. Any notice required or permitted hereunder shall be deemed validly
given if delivered by hand, verified overnight delivery, or by first class,
certified mail to the following address of Employee (or to such other address as
Employee may notify in writing to Employer):
Cobra Technologies, Inc.
7251 West Palmetto Park Road
Boca Raton, Florida 33433
Douglas H. Forde
1440 Coral Ridge Drive, Suite 313
Coral Springs, FL 33071
18. WAIVER. Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. All waivers must be in writing.
19. BINDING EFFECT. The provisions of this Agreement shall be binding upon the
Employee and his heirs and personal representatives, and shall be binding upon
and inure to the benefit of Employer, its successors and assigns.
20. HEADINGS. The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
21. GOVERNING LAW; VENUE. This Agreement will be governed and construed under
the laws of the State of Florida, without giving effect to rules governing
conflicts of law, with proper venue with respect to all disputes related to this
Agreement being Dade County, Florida.
22. INVALIDITY. The invalidity or unenforceability of any term of this Agreement
shall not invalidate, make unenforceable or otherwise affect any other term of
this Agreement, which shall remain in full force and effect.
23. ATTORNEYS' FEES. In the event any dispute or litigation arises hereunder
between any of the parties hereto, the prevailing party shall be entitled to all
reasonable costs and expenses incurred by it in connection therewith (including,
without limitation, all reasonable attorneys' fees and costs incurred before and
at any trial or other proceeding and at all tribunal levels), as well as all
other relief granted in any suit or other proceeding.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first hereinabove written.
EMPLOYER:
COBRA TECHNOLOGIES, INC., a Nevada corporation
BY:
TITLE:
EMPLOYEE:_____________________________
Douglas H. Forde
AGREEMENT OF MERGER
RECITALS
AGREEMENT OF MERGER, dated as of May 25, 1999 by and between Pinnacle
East, Inc., a corporation of the State of South Carolina, with offices at 1221
Sunset Boulevard, Suite 100, West Columbia, South Carolina 29169 (hereinafter
the Company), Mitchell D. Smith and Steven R. Lounsberry (hereinafter the
Company Shareholders), Cobra Technologies, Inc., a corporation of the State of
Nevada, with offices located at Cobra Technologies, Inc.
7251 W. Palmetto Park Road, Suite 200, Boca Raton, FL 33433
(hereinafter Cobra), and Pinneast.com, Inc., a corporation of the State of South
Carolina (hereinafter the Merger Sub).
WHEREAS, the Company Shareholders are the owners of one hundred thousand
(100,000) shares of common stock, representing one hundred (100%) of the issued
and outstanding stock of the Company (hereinafter the Shares); and
WHEREAS, the Boards of Directors of Cobra, the Merger Sub and the
Company have approved the merger of the Company with Merger Sub, pursuant to
which all of the outstanding capital stock of the Company will be converted into
common stock of Cobra and the Company will merge with and into the Merger Sub,
with the Merger Sub being the surviving corporation; and
WHEREAS, the Boards of Directors of Cobra, the Merger Sub and the
Company have also approved the mergers, in accordance with the applicable
provisions of the statutes of the States of Nevada and South Carolina which
permit such mergers; and
WHEREAS, it is the intention of the parties that the merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (hereinafter the Code); and
WHEREAS, each of the parties to the Agreement desires to make certain
representations, warranties, and agreements in connection with the transaction
between the parties and to prescribe various conditions thereto.
ARTICLE I
INCORPORATION OF RECITALS
All of the recitals set forth above are incorporated herein by
reference.
ARTICLE II
DEFINITIONS
The following terms, as used herein, have the following meanings:
<PAGE>
-36-
"Affiliate" of a Person means a Person, who directly or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, such people.
"Agreement" has the meaning set forth in the introductory paragraph.
"Audited Financial Statements" has the meaning set forth in Section 4.10
"Closing" has the meaning set forth in Section 3.9.
"Closing Date" has the meaning set forth in Section 3.9.
"Cobra Stock" means the voting common stock of Cobra.
AEffective Time@ means the time indicated herein when the merger pursuant
to hereto shall be effective for corporate law purposes.
"Environmental Permits" means federal, state and local governmental
liens, permits and other authorizations and approvals, whether foreign or
domestic, which relate to the business of a Person as it may be affected by the
environment or to public health and safety or worker health and safety as they
may be affected by the environment.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Evaluation Material" has the meaning set forth in Section 7.4.
"Handling Hazardous Substances" has the meaning set forth in
Section 4.5.
"Hazardous Emissions" has the meaning set forth in Section 4.5.
"Internal Revenue Code" or Code means the Internal Revenue Code of
1986, as amended.
"Intellectual Property" has the meaning set forth in Section 4.16.
"Inventory" has the meaning set forth in Section 4.6.
"Leases" and "Lease" have the meanings set forth in Section 4.15.
"Licenses and Permits" has the meaning set forth in Section 4.8.
"Material Contract" means each contract, agreement or commitment of a
Person other than Leases:
<PAGE>
(a)upon which any substantial part of such Person's business
is dependent or which, if breached, could reasonably be expected to affect,
materially and adversely, the earnings, assets, financial condition or
operations of the business of such Person; or
(b)which provides for aggregate future payments of more than
$10,000, except for purchase orders or sale orders arising in the ordinary and
usual course of business, in which case they are listed only if any party
thereto is obligated to make payments pursuant thereto aggregating more than
$20,000; or
(c)which extends for more than one year from the date hereof
and is not cancelable by either party on 30 days' notice; or
(d)which provides for the sale, after the date hereof and
other than in the ordinary course of business, of any of its assets; or
(e)which relates to the employment, retirement or termination
of the services of any officer or former officer; or
(f)which contains covenants pursuant to which any other Person
has agreed not to compete with any business conducted by such Person or not to
disclose to others information concerning such Person.
Collectively, each material Contract of such Person is referred to as
"Material Contracts."
AMerger@ has the meaning set forth in Section 3.1.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plans" means all employee benefit plans and programs
including, without limitation, all retirement, savings and other pension plans.
"Permitted Exceptions" has the meaning set forth in Section 4.14.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
governmental or political subdivision or an agency of instrumentality thereof.
"Real Property" means all of the real property, together with the
fixtures and other improvements located thereon and the appurtenances thereto,
owned by a Person.
"Securities Act" means the Securities Act of 1933, as amended.
AShares@ means the outstanding capital stock of the Company.
<PAGE>
ASurviving Corporation@ shall have the meaning set forth in Section 3.1.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Internal Revenue Code section 59A), customs duties, capital stock, franchise
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Welfare Plans" means all health, severance, insurance, disability and
other employee welfare plans.
ARTICLE III
THE MERGER
3.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Closing provided for in this Agreement, on the Closing Date and at the
Effective Time, the Company shall be merged into the Merger Sub and the separate
existence of the Company shall thereupon cease, in accordance with the
applicable provisions of the General Corporation Law of the State of Nevada and
the General Corporation Law of the State of South Carolina. Said merger is
referred to herein as the Merger. The Merger Sub will the surviving corporation
in the Merger and will be governed by the laws of the State of South Carolina.
The separate corporate existence of the Merger Sub with all its rights,
privileges, powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified by the corporate laws of the States of
Nevada and South Carolina. From and after the Effective Time, the Merger Sub is
sometimes referred to herein as the ASurviving Corporation@.
3.2 ARTICLES OF MERGER. On or before the Closing Date, the parties
hereto shall cause Articles of Merger (the AArticles of Merger@), meeting the
requirements of the corporate laws of the States of Nevada and South Carolina to
be properly executed and filed. The Merger shall be effective, for corporate law
purposes, at the Effective Time.
<PAGE>
3.3 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation
of the Merger Sub shall continue to be in effect after the merger and shall be
the Articles of Incorporation of the Surviving Corporation. The Bylaws of the
Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation.
3.4 OFFICERS AND DIRECTORS. The officers and directors of the Merger
Sub immediately prior to the Effective Time shall be the officers and directors
of the Surviving Corporation and will hold office until their successors are
duly elected and qualify in the manner provided in the Articles of Incorporation
or as otherwise provided by law, or until their earlier death, resignation or
removal.
3.5 CLASS OF STOCK. Cobra, the Merger Sub and the Company each
represent that they presently each have one class of common stock outstanding
and no other classes of stock outstanding.
3.6 CONVERSION OF SHARES. The manner of converting the shares of the
capital stock of Merger Sub and the Company shall by virtue of the Merger and
without any action on the part of the holders thereof, be as follows:
a. Subject to the terms hereof, the Shares outstanding
immediately prior to the Effective Time (the AConverted Shares@), shall be
converted into 500,000 shares of Cobra common stock and one hundred thousand
($100,000) dollars in cash, which will be paid as set forth in schedule 3.12(a).
b. All of the Converted Shares, by virtue of the Merger and
upon surrender at the Closing, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and the holders thereof shall
cease to have any rights with respect to the Converted Shares.
c. Each share of the Company=s common stock, if any, held in
the treasury of the Company on the Closing Date shall be canceled and retired
and shall cease to exist, no consideration shall be paid with respect thereto.
3.7 STOCK RESTRICTED. All Cobra stock issued to the Company
Shareholders shall be "restricted" shares within the meaning of Securities and
Exchange Commission Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Act"), and accordingly the certificate or certificates
representing the Cobra shares shall bear a restrictive legend in accordance with
the requirements of Rule 144.
3.8 NO REPRESENTATION OF VALUE. The Company Shareholders hereby confirm
that neither Cobra, nor any officer, director or shareholder of Cobra, nor any
agent of, or professional employed by Cobra, has made any representation as to
the present or future value or price of the Cobra shares, or any other
securities of Cobra. Nor has Cobra or any other such person made any
representation with respect to the ability of the Company Shareholders to sell
all or any part of the Cobra shares at their current market price or at any
other price.
<PAGE>
Further, the parties hereby confirm their understanding that the future
bid or asking price of Cobra=s common stock, may not bear any relationship to
the net tangible book value of Cobra's common stock and, further, may be
unrelated to any other generally accepted method of valuation of the Cobra
stock.
3.9 CLOSING. The closing of the Merger contemplated herein (the
"Closing") shall take place through the execution of this Agreement at the
respective offices of the parties, on or before June 1, 1999 (the "Closing
Date") or at another time or location mutually agreeable to the parties.
3.10 ACTIONS TAKEN PRIOR TO CLOSING. Prior to closing, both parties
shall take all necessary actions to approve of this transaction, including any
required meeting of the directors of Cobra, the Company and the Merger Sub.
3.11 DELIVERIES AT CLOSING BY THE COMPANY.
a. At Closing, the Company and the Company Shareholders shall
deliver to the representatives of Cobra (i) certificates representing the
Shares, with stock powers endorsed in blank with Medallion signature guarantees,
and with all necessary transfer stamps attached; (ii) the stock books, stock
ledgers, minute books and seals of the Company; (iii) a current certificate of
good standing for the Company issued by the South Carolina Secretary of State;
(iii) minutes of the meeting of shareholders or directors approving of this
transaction or proof that such meeting was not required and (iv) all other items
required to be delivered by the Company to Cobra at or prior to Closing under
this Agreement, including, without limitation, a legal opinion reasonably
satisfactory to Cobra to the effect that:
(1) The Company is duly incorporated and a validly
existing corporation in good standing under the laws of the State of South
Carolina, and is duly qualified to carry on its business and is in good standing
in any state in which it does business;
(2) The Company has the requisite power and authority
to execute and deliver, and has taken all necessary corporate action to
authorize the execution and delivery of, this Agreement and the other documents
and the transactions contemplated herein. The Company Shareholders who execute
this Agreement have all requisite power, authority and capacity to enter into
this Agreement on behalf of the Company and the ability to cause the Company to
fulfill its obligations hereunder.
<PAGE>
(3) The execution and delivery by the Company and the
Company Shareholders of this Agreement, the performance by the Company of its
obligations hereunder, and the consummation of the transactions contemplated
herein will not result in the breach of or violate any term or provision of the
Articles of Incorporation or Bylaws of the Company, or any contract, agreement,
law, rule, regulation, judgment, order, decree or award to which the Company is
subject.
(4) The Shares of the Company have been duly issued
to the Company Shareholders and are fully paid and non-assessable.
(5) The Agreement has been duly executed and
delivered by the Company and the Company Shareholders; and the Agreement and all
documents delivered pursuant to the terms hereof are valid and binding on the
Company and the Company Shareholders and are enforceable in accordance with
their respective terms, subject to any applicable bankruptcy, insolvency,
reorganization or other laws of general application affecting the enforcement of
creditors' rights generally and general principles of equity.
(6) No consent of any party other than the parties
hereto, and no consent, license, approval or authorization of, or registration
or declaration with, any governmental bureau or agency is required in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement.
(7) The Company Shareholders transfer of the Shares
to Cobra shall vest in Cobra good and valid title to the Shares, free and clear
of any lien, encumbrance, or adverse claim.
(8) Such other matters as are customary in connection
with transactions of this kind.
b. The Company Shareholders shall also deliver to Cobra at
Closing the Company Shareholders= executed non-competition, non-solicitation and
confidentiality agreements in the form of Exhibit 3.11(b) attached hereto.
3.12 DELIVERIES AT CLOSING BY COBRA.
a. At closing, Cobra shall deliver to the Company
Shareholders, certificates representing Cobra stock issued to the PC
Shareholders in the quantities set forth in Exhibit 3.12(a) and cash and notes
in the form and quantity set forth in Exhibit 3.12 (a).
b. At Closing, Cobra shall deliver to the Company; (i) a
current certificate of good standing for Cobra issued by the Nevada Secretary of
State; (ii) minutes of the meeting of Cobra Directors approving of this
transaction or proof that such meeting was not required and (iii) all other
items required to be delivered by Cobra to the Company at or prior to Closing
under this Agreement, including, without limitation, a legal opinion reasonably
satisfactory to the Company to the effect that:
<PAGE>
(1) Cobra and Merger Sub are duly incorporated and
are validly existing corporations in good standing under the laws of the State
of Nevada and South Carolina, and are duly qualified to carry on its business
and is in good standing in any states in which they do business;
(2) Cobra and Merger Sub have the requisite power and
authority to execute and deliver, and have taken all necessary corporate action
to authorize the execution and delivery of, this Agreement and the other
documents and the transactions contemplated herein. The representatives of Cobra
and Merger Sub who execute this Agreement have all requisite power, authority
and capacity to enter into this Agreement on behalf of Cobra and Merger Sub and
the ability to cause Cobra and Merger Sub to fulfill their obligations
hereunder.
(3) The execution and delivery by Cobra and Merger
Sub of this Agreement, the performance by Cobra and Merger Sub of their
obligations hereunder, and the consummation of the transactions contemplated
herein will not result in the breach of or violate any term or provision of the
articles or Bylaws of Cobra or Merger Sub, or any contract, agreement, law,
rule, regulation, judgment, order, decree or award to which Cobra or Merger Sub
is subject.
(4) When issued to the Company Shareholders, the
outstanding shares of Cobra and Merger Sub shall be duly issued to the Company
Shareholders and will be fully paid and non-assessable, and free of any lien,
encumbrance or adverse claim.
(5) The Agreement has been duly executed and
delivered by Cobra and Merger Sub; and the Agreement and all documents delivered
pursuant to the terms hereof are valid and binding on Cobra and Merger Sub and
are enforceable in accordance with their respective terms, subject to any
applicable bankruptcy, insolvency, reorganization or other laws of general
application affecting the enforcement of creditors' rights generally and general
principles of equity.
(6) No consent of any party other than the
representatives of Cobra and Merger Sub, and no consent, license, approval or
authorization of, or registration or declaration with, any governmental bureau
or agency is required in connection with the execution, delivery, performance,
validity and enforceability of this Agreement.
(7) Such other matters as are customary in connection
with transactions of this kind.
c. Employment agreements for the individuals set for on
Exhibit 3.12(c).
<PAGE>
3.13 FURTHER AGREEMENTS PRIOR TO CLOSING. Prior to closing, the Company
Shareholders will execute a Continuity Agreement stating that they have no
present intention to sell in excess of fifty (50) percent of the Cobra stock
which they will receive and that for a period of one year from closing and that
they will not sell in excess of fifty percent of the Cobra stock which they
receive.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Company Shareholders jointly and severally
represent and warrant the following:
4.1 ORGANIZATION, QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of South
Carolina and has corporate power and authority to own all of its properties and
assets and to carry on its business as it is presently being conducted. The
Company is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
those jurisdictions where the failure to be duly qualified and in good standing
would not have a material adverse effect on the Company or the business
conducted by it. The Company has heretofore delivered to Cobra complete and
correct copies of the Articles of Incorporation and Bylaws of the Company, as
currently in effect.
4.2 CAPITALIZATION OF THE COMPANY. The authorized capital stock of the
Company consists only of 100,000 shares of Common Stock, $.01 par value, of
which, as of the date hereof, 100,000 common shares are validly issued and
outstanding, fully paid and non-assessable, and were not issued in violation of
any preemptive rights. The Company has no commitment to issue or sell any shares
of its capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person the right to acquire from it, any shares
of its capital stock and no such securities or obligations are issued or
outstanding.
4.3 CONSENTS AND APPROVALS. There is no requirement applicable for the
Company to make any filing with, or to obtain any permit, authorization, consent
or approval of, any public body as a condition to the consummation of this
transaction. Except as set forth in Schedule 4.3, there is no requirement that
any party to any Material Contract of the Company, or of any license or permit
for the use of Intellectual Property of the Company or of any loan agreement to
which the Company is a party or by which it or they are or were bound, must
consent to the execution of this Agreement by the Company or to the consummation
of this transaction.
<PAGE>
4.4 NON-CONTRAVENTION. The execution and delivery by the Company of
this Agreement does not, and the consummation of the sale of the Shares will
not, (i) violate or result in a breach of any provision of the Articles of
Incorporation or Bylaws of the Company, (ii) result in a default (or give rise
to any right of termination, cancellation or acceleration) under the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which the Company is a
party or by which the Company or the business conducted by it, may be bound, or
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or to the business conducted by the Company, excluding
from the foregoing clauses (ii) and (iii) such defaults and violations as would
not have a material adverse effect on the Company.
4.5 ENVIRONMENTAL MATTERS. The Company has obtained all Environmental
Permits required, by any governmental or non-governmental agency with
jurisdiction, to conduct its business as it is presently being conducted
including, without limitation, those relating to (i) emissions, discharges or
threatened discharges of pollutants, contaminants, hazardous or toxic substances
or petroleum into the air, surface water, ground water or the ocean, or on or
into the land, and (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
hazardous or toxic substances or petroleum. The Company has not received notice
of, or is otherwise aware of, any facts, events or conditions which (a)
interfere with, prevent, or, with the passage of time, could interfere with
continued substantial compliance with any of the aforementioned environmental
laws, regulations, policies, guidelines, orders, judgments or decrees, (b) may
give rise to any liability (whether based in contract, tort, implied or express
warranty, criminal or civil stature or otherwise) under any law, regulation,
policy or guideline relating to hazardous emissions or handling hazardous
substances, or (c) obligate the Company or, with the passage of time, could
cause the Company to be obligated to clean up, remedy or otherwise restore to a
former condition, by itself or jointly with others, any contaminated surface
water, ground water, soil or any natural resource associated therewith.
4.6 INVENTORY. The raw materials, work-in-process, and finished goods,
and goods on hand for sale or refurbishing, store supplies and spare parts,
which are owned by the Company, wherever they are located, are hereinafter
referred to as the "Inventory." The Inventory (i) is usable or, if refurbished
or assembled in final form for sale, is saleable in the ordinary course of
business, (ii) is sufficient but not excessive in kind or amount for the conduct
of the business of the Company as it is presently being operated, and (iii) is
carried on the books of the Company at an amount which reflects valuations not
in excess of the lower of cost or market determined in accordance with generally
accepted accounting principles applied on a consistent basis. Schedule 4.6 sets
forth a list of locations of the Inventory not located on the Real Property of
the Company or on real estate subject to a Company Lease.
<PAGE>
4.7 ACCOUNTS RECEIVABLE. The accounts receivable for the Company as of
May 11, 1999, are reflected in Schedule 4.7. Such accounts receivable and those
acquired by the Company subsequent to May 11, 1999, but prior to the Closing
(and not collected prior to Closing) have or will have arisen in the ordinary
course of business and will have been collected or be collectible in amounts not
less than the aggregate amount thereof (net of reserves established in
accordance with the prior practice) carried on the books of the Company. Except
as reflected in Schedule 4.7, each of such accounts receivable, and those
acquired after May 11, 1999, but prior to the Closing, is not and will not be
the subject of a pledge or assignment, is and will be free of any and all liens,
hypothecation, encumbrances and charges whatsoever, and has not been and will
not be placed for collection with any attorney, collection agency or similar
individual firm.
4.8 LICENSES AND PERMITS. The term "Licenses and Permits" as used
herein means federal, state and local governmental licenses, permits, approvals
and authorizations, whether foreign or domestic, other than Environmental
Permits. The Company has all of the Licenses and Permits required to conduct its
business as it is presently being conducted, all of which are in full force and
effect. No written notice of a violation of any such License or Permit has been
received by the Company or, to the knowledge of the Company, threatened, and no
proceeding is pending or, to the knowledge of the Company, threatened, to revoke
or limit any of them. The Company has no reason to believe that any of its
Licenses and Permits in effect on the date hereof will not be renewed.
4.9 COMPLIANCE WITH LAWS. In addition to the representations and
warranties contained in Section 4.5 relating to environmental matters and in
Section 4.8 relating to Licenses and Permits, the Company has operated its
business in compliance with all laws, regulations, orders, policies, guidelines,
judgments or decrees of any federal, state, local or foreign court or
governmental authority applicable to it or its business including, without
limitation, those related to antitrust and trade matters, civil rights, zoning
and building codes, public health and safety, worker health and safety and labor
and nondiscrimination, the failure to comply with which could reasonably be
expected to affect, materially and adversely, the earnings, assets, financial
condition or operations of the Company. The Company has not received any notice
alleging non-compliance with any of the aforementioned laws, regulations,
policies, guidelines, orders, judgments or decrees.
<PAGE>
4.10 FINANCIAL STATEMENTS. The Company has previously furnished to
Cobra true and complete copies of audited financial statements of the Company
for the fiscal year ended December 31, 1998 and the period ended March 31, 1999,
including the notes thereto (the "Audited Financial Statements"), together with
the report on such financial statements of the Company's auditors. The Audited
Financial Statements fairly represent the financial position of the Company as
of such dates and the results of its operations and changes in financial
position for such periods and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis.
4.11 LITIGATION. There are no actions, suits, claims, investigations or
proceedings (legal, administrative or arbitrative) pending, asserted or, to the
knowledge of the Company, threatened, against the Company, whether at law or in
equity and whether civil or criminal in nature, before any federal, state,
municipal or other court, arbitrator, governmental department, commission,
agency or instrumentality, domestic or foreign, nor are there any judgments,
decrees or orders of any such court, arbitrator, governmental department,
commission, agency or instrumentality outstanding against the Company which
have, or if adversely determined could reasonably be expected to have, a
material adverse effect on the earnings, assets, financial condition or
operations of the business conducted by the Company, or which seek specifically
to prevent, restrict or delay consummation of the sale of the Shares or
fulfillment of any of the conditions of this Agreement.
4.12 ABSENCE OF CHANGES. Except as set forth in Schedule 4.12,
since May 11, 1999, there has not been:
a. any change, or development involving a prospective change,
including, without limitation, any damage, destruction or loss (whether or not
covered by insurance), which to the knowledge of the Company can reasonably be
expected to affect, materially and adversely, the earnings, assets, financial
condition or operations of the business of the Company;
b. any obligation or liability involving more than $5,000
(whether matured, absolute, accrued, contingent, or otherwise) incurred by the
Company;
c. any general uniform increase in the compensation of the
employees of the Company (including, without limitation, any increase pursuant
to any bonus, pension, profit sharing or other plan);
d. any increase (other than normal increases consistent with
past practices and those required by law or collective bargaining agreements) in
the compensation payable to any employee (including officers) of the Company;
e. any amendment to any employment agreement to which
any employee of the Company is a party;
f. any sale of assets by the Company other than in the
ordinary course of business;
g. any deterioration of relations between the Company
and its suppliers, financial institutions or customers;
<PAGE>
h. any direct or indirect redemption, purchase or other
acquisition of any shares of the capital stock of the Company;
i. any declaration, setting aside or payment of any dividend
(whether in cash, capital stock or property) with respect to the Company's
common stock; or
j. any issuance by the Company of any shares of its capital
stock, or any securities or obligations convertible into or exchangeable for, or
giving any person the right to acquire from it, any shares of its capital stock.
Since May 11, 1999, except as set forth in Schedule 4.12, the
Company has not operated its business other than in the ordinary and usual
course and in a manner consistent with past practices.
4.13 NO UNDISCLOSED LIABILITIES. The Company does not have any material
liabilities or obligations, whether absolute, accrued, contingent or otherwise,
including, without limitation, any uninsured liabilities which were not accrued
or reserved against in the Audited Financial Statements other than those
incurred after May 11, 1999, in the ordinary course of business of which in the
aggregate do not or cannot reasonably be expected to have a material adverse
effect upon the earnings, assets, financial condition or operations of the
Company.
4.14 TITLE TO PROPERTIES.
a. The Company has no Real Property.
b. The Company has good title to all of the personal property,
tangible and intangible, owned by it, free and clear of any liens, charges,
pledges, security interest of other encumbrances other than those reflected in
the Audited Financial Statements heretofore delivered to Cobra.
4.15 LEASES. Schedule 4.15 sets forth a complete and correct list of
each agreement to lease into which the Company has entered, whether as a lessor
or lessee, which relates to either real or personal property, other than monthly
leases of personal property which may be canceled upon not more than 60 days
notice or require the payment of not more than $100 per month. The agreements
listed in Schedule 4.15 are referred to herein as the "Leases" (each a "Lease").
Except as set forth in Schedule 4.15, neither the Company nor any other party
hereto has breached any such Lease and, to the knowledge of the Company, no
event has occurred which, with the giving of notice or the passage of time or
both, would cause a default under, or permit the termination, modification or
acceleration of any such Lease by any party thereto. Complete copies of all of
the Leases have been delivered to Cobra.
<PAGE>
4.16 INTELLECTUAL PROPERTY. The term "Intellectual Property" as used
herein means the rights of the owner thereof in all trade names, trademarks and
service marks, patents, patent rights, copyrights, whether domestic or foreign,
(as well as applications, registrations or certificates for any of the
foregoing), inventions, trade secrets, proprietary processes, software and other
industrial and intellectual property rights. The Company owns or is licensed or
otherwise has the right to use all of the Intellectual Property which is being
used in its business as it is presently being conducted. There is no claim,
suit, action or proceeding, pending or, to the knowledge of the Company,
threatened, against the Company asserting that its use of any Intellectual
Property infringes the rights of any third party or otherwise contesting the
Company's rights with respect to any Intellectual Property, and no third party
is known to the Company to be infringing upon the rights of the Company in the
Intellectual Property of the Company. Furthermore, to the knowledge the Company,
no party is infringing upon the rights of the Company in the Company's
Intellectual Property. All letters, patents, registrations and certificates
issued by any governmental agency relating to the Intellectual Property of the
Company are valid and subsisting and have been properly maintained.
4.17 MATERIAL CONTRACTS. Schedule 4.17 sets forth a complete and
correct list of each Material Contract of the Company. Except as set forth in
Schedule 4.17, all of the Material Contracts of the Company are in full force
and effect and to the knowledge of the Company there has not occurred, with
respect to any such Material Contract, any default or event of default, which,
with or without due notice of with the lapse of time, or both, would constitute
a default or event of default on the part of the Company or, to the knowledge of
the Company, any other party thereto. Complete copies of all the Material
Contracts of the Company have been delivered to Cobra.
4.18 MAINTENANCE OF TANGIBLE ASSETS. The tangible personal property
which belongs to the Company has been maintained in accordance with the usual
practices in the United States of business which are similar to the business
conducted by the Company, is in good condition, ordinary wear and tear excepted,
and is usable by the Company in the ordinary course of its business as it is
presently being conducted.
4.19 INSURANCE. Except as set forth in Schedule 4.19, the Company has
insurance contracts in force for such coverages and amounts as are usual and
customary for similar businesses in the United States.
<PAGE>
4.20 LABOR MATTERS. The Company has no collective bargaining agreements
covering employees of the Company. The Company is in compliance with all federal
and state laws regarding employment, wages, and hours. The Company has not
engaged in any unfair labor practices nor have any employment discrimination or
unfair labor practice complaints been filed against, or to the best knowledge of
the Company, been threatened to be filed against the Company with any federal or
state agency having jurisdiction over labor matters. There are no controversies
pending or, to the knowledge of the Company, threatened between the Company and
any of its employees which effect, or can reasonably be expected to affect,
materially and adversely, its earnings, assets, financial condition or
operations of the business conducted by the Company, or relate to any specific
effort to prevent, restrict or delay consummation of the sale of the Shares.
4.21 EMPLOYEE BENEFIT PLANS.
The company has no Pension or Welfare Plans, except the insurance plan
set forth in Schedule 4.21.
4.22 TAX MATTERS.
a. The provisions made for taxes in the Audited Financial
Statements are sufficient for the payment of all Taxes of the Company, whether
or not disputed, which are properly accruable. There are no agreements by the
Company for the extension of time, or waiver of any statute of limitations, for
the assessment of any taxes, and all taxes due and payable by the Company on or
before the date of this Agreement have been paid or provided for, and are not
delinquent.
b. The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects. No
claim has ever been made by an authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no liens on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Tax.
c. The Company has withheld and paid all Taxes required to
have been withheld and paid through May 11, 1999, in connection with the amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party.
d. The Company does not expect any authority to assess any
additional Taxes for any period for which Tax Returns have been filed. There is
no dispute or claim concerning any Tax liability of the Company either (i)
claimed or raised by any authority in writing or (ii) as to which the Company
has knowledge based upon personal contact with any agent of such authority. The
Company has delivered to Cobra correct and complete copies of all federal income
Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company.
<PAGE>
4.23 FINDERS. No broker, finder or investment banker is entitled to any
fee or commission from the Company for services rendered on behalf of the
Company in connection with the transactions contemplated by this Agreement.
4.24 FULL DISCLOSURE. None of the representations and warranties of the
Company which are made in Article IV of this Agreement contains an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
4.25 INSIDER INTERESTS. No Affiliate of the Company (i) competes with
or is involved in or has a direct or indirect interest in any business entity
which competes with the business conducted by the Company, (ii) has any
agreement with the Company, or (iii) has any interest, direct or indirect, in
any property, real or personal, tangible or intangible, including, without
limitation, Intellectual Property, used in or pertaining to the business of the
Company, except as a stockholder or employee of the Company.
4.26 NO INTEREST IN COMPETITORS, ETC. No officer or director of the
Company, nor any Affiliate of any of the foregoing, directly or indirectly owns
any interest in or controls or is an employee, agent, member, principal,
officer, director, or partner of, or participant in, or consultant to any
corporation, partnership, limited liability company, sole proprietorship,
limited partnership, joint venture, association, or other entity which is a
competitor, supplier, customer, or tenant of the Company.
4.27 PURCHASE AND SALE OBLIGATIONS. All unfilled purchase and sale
orders and other commitments for purchases and sales made by the Company were
made in the usual and ordinary course of its business at the then current market
prices. None of such orders or commitments calls for deliveries thereunder
beyond a period of 90 days from the Closing Date with the exception of normal
outstanding maintenance and service contracts.
4.28 BOOKS AND RECORDS. The books of account and other financial and
corporate records of the Company are in all material respects complete and
correct, are maintained in accordance with good business practices, and are
accurately reflected in the Financial Statements. The minute books of the
Company as previously made or to be made available Cobra contained accurate
records of all meetings and accurately reflect all other corporate actions of
the stockholders and directors of the Company.
4.29 BANK AND SAFE DEPOSIT ARRANGEMENTS. Schedule 4.29 sets forth a
correct and complete list of each bank account and safe deposit box maintained
by the Company, and the names of all persons authorized to deal with such
accounts and safe deposit boxes.
<PAGE>
4.30 INSIDER TRANSACTIONS. Schedule 4.30 sets forth a correct and
complete statement of (a) the amounts and other essential terms of indebtedness
or other obligations, liabilities or commitments (contingent or otherwise) of
the Company to or from any past or present officer, director, employee, partner
or stockholder thereof or any person related to, controlled by or under common
control of any of the foregoing and (b) all transactions, together with their
essential terms, between such persons and the Company during the past two years.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF COBRA AND MERGER SUB
Cobra represents and warrants as of the date of execution of this
Agreement and as of Closing as follows:
5.1 ORGANIZATION, QUALIFICATION. Cobra is a corporation duly organized,
validly existing and in good standing under the laws of Nevada and has corporate
power and authority to own all of its properties and assets and to carry on its
business as it is presently being conducted. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of South
Carolina. Cobra is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
those jurisdictions where the failure to be duly qualified and in good standing
would not have a material adverse effect on the Cobra or the business conducted
by it. Cobra has heretofore delivered to the Company complete and correct copies
of the Articles of Incorporation and Bylaws of Cobra and Merger Sub, as
currently in effect.
5.2 CAPITALIZATION OF THE COBRA. The authorized capital stock of Cobra
consists only of 20,000,000 shares of Common Stock, $.001 par value and
1,000,000 shares of Preferred Stock, $.001 par value, of which, as of the date
hereof, 8,091,903 common shares are validly issued and outstanding, fully paid
and non-assessable, and were not issued in violation of any preemptive rights.
No shares of Preferred stock have been issued or are outstanding. Cobra has no
commitment to issue or sell any shares of its capital stock or any securities or
obligations convertible into or exchangeable for, or giving any person the right
to acquire from it, any shares of its capital stock and no such securities or
obligations are issued or outstanding.
<PAGE>
5.3 CONSENTS AND APPROVALS. There is no requirement applicable for
Cobra to make any filing with, or to obtain any permit, authorization, consent
or approval of, any public body as a condition to the consummation of this
transaction. There is no requirement that any party to any Material Contract of
Cobra, or of any license or permit for the use of Intellectual Property of Cobra
or of any loan agreement to which Cobra is a party or by which it or they are or
were bound, must consent to the execution of this Agreement by Cobra or to the
consummation of this transaction.
5.4 NON-CONTRAVENTION. The execution and delivery by Cobra and the
Merger Sub of this Agreement does not, and the consummation of the Merger will
not, (i) violate or result in a breach of any provision of the Articles of
Incorporation or Bylaws of Cobra or the Merger Sub, (ii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Cobra is a party or
by which Cobra or the business conducted by it, may be bound, or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Cobra or to the business conducted by Cobra, excluding from the foregoing
clauses (ii) and (iii) such defaults and violations as would not have a material
adverse effect on Cobra.
5.5 CORPORATE AUTHORITY AND RESOLUTIONS. The Boards of Directors Cobra
and the Merger Sub have adopted resolutions authorizing execution of this
Agreement as of the date hereof and shall adopt such additional resolutions as
may be necessary authorizing the execution of documents and closing by Cobra and
the Merger Sub as contemplated by this Agreement.
5.6 VALIDITY OF SHARES OF COBRA TO BE ISSUED. The Cobra shares to be
issued to the Company Shareholders as a result of the Merger have been duly
authorized as required under all applicable laws and, upon delivery thereof
pursuant to the terms of this Agreement, will be validly issued, fully paid and
non-assessable, and not subject to, or in violation of, any preemptive rights.
5.7 CURRENT INFORMATION. Cobra has previously delivered to the Company
a copy of Cobra=s business plan and information related to its current financial
status. At the time of mailing or delivery thereof to the Company, none of such
documents or information contained or will contain an untrue statement of a
material fact or omitted or will omit to state material facts necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading; provided, however, that no representation is
made with respect to any projections relating to Cobra which have been or will
be furnished to the Company by Cobra and, provided further, that no
representation is made with respect to tentative or pro forma information which
may be furnished to the Company by Cobra which is superseded by later or more
definitive information.
<PAGE>
5.8 AUTHORIZATION OF TRANSACTIONS; SECURITIES COMPLIANCE. By the
Closing Date, the Cobra shares to be issued to the Company Shareholders on the
consummation of the transactions contemplated hereunder will be exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and
shall have been exempt or registered or qualified under the securities or blue
sky laws of the State of South Carolina for issuance upon the Closing Date. The
Cobra shares, when issued in accordance with the terms of this Agreement, will
be fully paid and non-assessable and not subject to, or issued in violation of,
any preemptive rights.
5.9 NO REGISTRATION RIGHTS. Except as provided in Section 7.7 of this
Agreement, none of the Company Shareholders has entered into any agreement with
Cobra granting or providing for registration rights with respect to the Cobra
shares to be delivered to the Company Shareholders pursuant to this Agreement.
5.10 NO BROKERS OR COMMISSIONS. Cobra has not engaged any broker,
finder or similar individual in connection with this transaction for which the
Company shall have any liability.
5.11 BINDING AGREEMENT. The execution, delivery and performance of this
Agreement and the other instruments contemplated by this Agreement by Cobra and
the Merger Sub, have been duly authorized by all necessary corporate action of
Cobra and the Merger Sub. This Agreement has been duly executed and delivered to
the Company Shareholders by Cobra and the Merger Sub and constitutes the legal,
valid and binding agreement of Cobra and the Merger Sub, enforceable in
accordance with its terms.
5.12 NO VIOLATION. The execution, delivery and performance of this
Agreement by Cobra and the Merger Sub and the consummation of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time or both, violate, contravene or conflict with or result in a breach of
or constitute a default under (i) any writ, order, judgment or decree of any
court arbitrator or governmental agency applicable to Cobra or the Merger Sub;
(ii) the Articles of Incorporation or Bylaws of Cobra or the Merger Sub; (iii)
any contract, lease or other agreement to which Cobra or the Merger Sub is a
party or by which Cobra is bound; or (iv) to the best knowledge of Cobra or
Merger Sub, any law, rule or regulation applicable to Cobra or the Merger Sub.
<PAGE>
5.13 LITIGATION. There are no actions, suits, claims, investigations or
proceedings (legal, administrative or arbitrative) pending, asserted or, to the
knowledge of Cobra or the Merger Sub, threatened, against Cobra or the Merger
Sub, whether at law or in equity and whether civil or criminal in nature, before
any federal, state, municipal or other court, arbitrator, governmental
department, commission, agency or instrumentality, domestic or foreign, nor are
there any judgments, decrees or orders of any such court, arbitrator,
governmental department, commission, agency or instrumentality outstanding
against Cobra or the Merger Sub which have, or if adversely determined could
reasonably be expected to have, a material adverse effect on the earnings,
assets, financial condition or operations of the business conducted by Cobra, or
which seek specifically to prevent, restrict or delay consummation of the
transfer of the shares of Cobra or fulfillment of any of the conditions of this
Agreement.
5.14 NO UNDISCLOSED LIABILITIES. Cobra does not have any material
liabilities or obligations, whether absolute, accrued, contingent or otherwise,
including, without limitation, any uninsured liabilities which were not accrued
or reserved against other than those incurred in the ordinary course of business
of which in the aggregate do not or cannot reasonably be expected to have a
material adverse effect upon the earnings, assets, financial condition or
operations of Cobra.
5.15 INTELLECTUAL PROPERTY. Cobra owns or is licensed or otherwise has
the right to use all of the Intellectual Property which is being used in its
business as it is presently being conducted. There is no claim, suit, action or
proceeding, pending or, to the knowledge of Cobra, threatened, against Cobra
asserting that its use of any Intellectual Property infringes the rights of any
third party or otherwise contesting Cobra's rights with respect to any
Intellectual Property, and no third party is known to Cobra to be infringing
upon the rights of Cobra in the Intellectual Property of Cobra. Furthermore, to
the knowledge of Cobra, no party is infringing upon the rights of Cobra in
Cobra's Intellectual Property. All letters, patents, registrations and
certificates issued by any governmental agency relating to the Intellectual
Property of Cobra are valid and subsisting and have been properly maintained.
5.16 COMPLIANCE WITH APPLICABLE LAWS. To the best knowledge of Cobra,
(i) Cobra and Merger Sub are not in default in any material respect under any
executive, legislative, judicial, administrative or private (such as
arbitration) ruling, order, writ, injunction or decree; and (ii) no material
permits, licenses or approvals of any governmental or administrative authorities
are required for Cobra to own, lease and operate their properties and to carry
on its business as presently conducted.
5.17 ABSENCE OF CERTAIN CHANGES. Since May 11, 1999, there have not
been any material adverse changes in the financial condition, results of
operations or business of Cobra.
ARTICLE VI
INVESTMENT REPRESENTATIONS
The Company and Company Shareholders hereby jointly and severally
represent, warrant, acknowledge and covenant to Cobra and its officers,
directors, agents and professional advisors, as follows:
<PAGE>
6.1 OPPORTUNITY TO EXAMINE. The Company Shareholders have examined or
have had an opportunity to examine, and to ask questions of the management of
Cobra about, all applicable documents and such applicable information as are
relevant to the transactions described herein. The Company Shareholders have
examined the Business Plan of Cobra.
6.2 NO REPRESENTATIONS AS TO PROFIT OR LOSS. No representation or
warranty of any kind has been made to the Company or Company Shareholders with
respect to the percentage of profit and/or amount or type of consideration,
profit or loss that are to be realized, if any, as a result of entering into
this transaction. The Company Shareholders are not relying upon any information
other than that derived from the results of their own independent investigation,
or the investigation of their counsel and other professional advisors, or from
information furnished in writing by Cobra to them.
6.3 COBRA SHARES NOT REGISTERED. The Company Shareholders understand
that the Cobra shares to be issued to the Company Shareholders have not been
registered under the Act nor under the securities laws of any state in reliance
on exemptions therefrom for non-public offerings, and further understand that
the Cobra shares have not been approved or disapproved by the Securities and
Exchange Commission nor has any state securities administrator or agency passed
on the accuracy or adequacy of any written information provided by Cobra to the
Company Shareholders.
6.4 INVESTMENT INTENT. The Company Shareholders are acquiring the Cobra
shares for their own account for investment purposes only and not with a view to
the sale or other distribution thereof, in whole or in part.
6.5 RELIANCE ON REPRESENTATIONS. The Company and Company Shareholders
acknowledge that they understand the meaning and legal consequences of the
representations, warranties, acknowledgments and covenants in this Article VI
and that Cobra has relied and will rely thereon.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 CONDUCT OF BUSINESS BY COMPANY AND COBRA.
a. The Company warrants and represent that from the date
hereof until the Closing, the Company will (a) conduct its business only in the
ordinary and usual course and in a manner consistent with past practices, (b)
maintain in good repair, at its expense, all of its properties, and (c) use its
best efforts to preserve its relationship with suppliers, customers, dealers and
others having business relationships with the Company. The Company and Company
Shareholders will notify Cobra of any emergency or material change in the normal
conduct of the business or operations of the Company, the threat of or
initiation of any material litigation against the Company, and the initiation of
any investigation of the Company by any party, whether private or governmental.
<PAGE>
b. Cobra warrants and represent that from the date hereof
until the Closing, Cobra will (a) conduct its business only in the ordinary and
usual course and in a manner consistent with past practices, (b) maintain in
good repair, at its expense, all of its properties, and (c) use its best efforts
to preserve its relationship with suppliers, customers, dealers and others
having business relationships with the Company. The Cobra will notify the
Company of any emergency or material change in the normal conduct of the
business or operations of Cobra, the threat of or initiation of any material
litigation against Cobra, and the initiation of any investigation of the Cobra
by any party, whether private or governmental.
7.2 NEGOTIATIONS WITH OTHERS. From the date hereof until the closing,
the Company will not, directly or indirectly, without the written consent of
Cobra, initiate discussions or engage and negotiate with any corporation,
partnership, person or entity, other than Cobra, concerning any sale of Shares
or of any merger, sale or assets or similar transactions involving the Company.
7.3 INVESTIGATION OF BUSINESS AND PROPERTIES BY COBRA. From the date
hereof until the Closing, the Company shall afford Cobra and its attorneys,
accountants, financial advisors and other representatives complete access at all
reasonable times to its offices, and to the officers, employees, properties,
contracts, and books and records of the Company. In addition, the Company and
Cobra will to furnish each other such financial, operating and additional data
as may reasonably be requested concerning the business, operations, properties
and personnel of the Company or of Cobra.
<PAGE>
7.4 CONFIDENTIALITY. Pursuant to the provisions of this Agreement,
Cobra and the Company have supplied and will supply to each other certain
documents and information for use in investigating the business of Cobra and the
Company. Such material is hereinafter referred to as "Evaluation Material."
Cobra and the Company agree to hold in confidence any Evaluation Material they
have received or will receive and not to disclose all or any part of such
material to anyone except their officers, directors, employees, professional
advisors, or other representatives who need such information to perform their
respective duties and who have been informed of the confidential nature of such
material and directed to treat it confidentially. If this Agreement is
terminated, Cobra and the Company will return or cause to be destroyed and will
not retain, or permit any person to whom it has given copies thereof to retain,
the originals or any copies of any documents constituting a part of the
Evaluation Material and after termination Cobra and the Company will continue to
honor the confidentiality agreement contained herein and will not disclose,
directly or indirectly, any information obtained from the Evaluation Material.
The confidentiality agreement contained in this Section 7.4 will terminate upon
the earlier of three years after the date hereof of or upon consummation of the
transactions contemplated hereby. Notwithstanding the foregoing, the parties may
use and disclose any such information to the extent that (a) it had acquired
such information on a non-confidential basis prior to receipt thereof from the
other party, (b) such information has become generally available to the public,
(c) such information is provided to a party by a third party who has obtained
such information other than as a result of a breach of this Agreement.
Furthermore, either party may disclose such information to the extent that it is
required to do so in order to comply with a governmental or judicial order or
decree, but upon receiving notice that any such order or decree is being sought,
it will promptly notify the other party.
7.5 EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate, as promptly as practicable,
the transactions contemplated hereby, including, but not limited to, the
obtaining of all necessary consents, waivers, authorizations, orders and
approvals of third parties, whether private or governmental, required of it to
enable it to comply with the conditions precedent to consummating the
transactions contemplated by this Agreement. Each party agrees to cooperate
fully with the other party in assisting it to comply with this Section.
Notwithstanding the foregoing, neither party shall be required to initiate any
litigation, make any substantial payment or incur any material economic burden,
except for a payment otherwise required of it, to obtain any consent, waiver,
authorization, order or approval, and if, despite such efforts, either party is
unable to obtain any consent, wavier, authorization, order of approval the other
party may terminate this Agreement and shall have no liability therefor.
7.6 FURTHER ASSURANCES. The parties will use reasonable efforts to
implement the provisions of this Agreement, and for such purpose, the parties
will, at the request of any other party, at or after the closing, without
further consideration, promptly execute and deliver, or cause to be executed and
delivered, such additional documents as any other party may reasonably deem
necessary or desirable to implement any provision of this Agreement.
7.7 EXPENSES. Whether or not the Merger is consummated all expenses
incurred in connection with this Agreement and the transactions contemplated
hereby will be paid by the party incurring such expenses.
<PAGE>
7.8 PIGGYBACK REGISTRATION RIGHTS. Cobra shall advise the Company
Shareholders by written notice at least twenty (20) days prior to the filing of
any registration under the Securities Act, or any successor thereto, with
respect to the Cobra common stock. Cobra will, upon written request of the
Company Shareholders within such twenty day notice period, include among the
securities covered by such registration, a percentage of the Cobra shares owned
by Company Shareholders equal to the percentage obtained by dividing the number
of shares of common stock that are offered by the Principal Shareholders of
Cobra by the total number of shares of common stock of Cobra owned by such
Principal Shareholders at the time of registration. Cobra will include in any
such registration statement such information as may be required to permit a
public offering of the Cobra shares owned by the Company Shareholders on the
same terms applicable to the Principal Shareholders of Cobra of such
registration statement. Cora shall supply prospectuses and use its best efforts
to qualify the Cobra shares registered pursuant to any such registration
statement for sale in those states where Cobra is qualifying the securities
covered in such registration. The Company Shareholders shall furnish information
reasonably required by Cobra to register the Cobra shares pursuant to this
Section 7.8. The cost of such registration shall be borne by Cobra. APrincipal
Shareholders@ shall mean the five (5) shareholders of Cobra holding the highest
number of shares of capital stock of Cobra, as determined on a fully diluted
basis.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF COBRA AND MERGER SUB
The following are certain conditions precedent to the obligation of
Cobra and Merger Sub to complete this transaction.
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company herein contained shall be true on and as of Closing
with the same force and effect as though made on and as of Closing, except as
affected by transactions contemplated hereby and except to the extent that such
representations and warranties were made as of a specified date and as to such
representations and warranties the same shall have been true as of the specified
date.
8.2 ABSENCE OF DEFAULT. No condition or event which constitutes an
event of default hereunder by the Company or Company Shareholders which, after
notice and lapse of time, or both, would constitute an event of default
hereunder by the Company shall have occurred and be continuing.
8.3 ABSENCE OF MATERIAL DAMAGE TO OR EXPROPRIATION OF PROPERTY. Between
the date of this Agreement and the Closing, there shall not have occurred (1)
any material casualty to any facility, property, equipment or inventory owned by
the Company, or (2) any material condemnation, seizure, expropriation or
liquidation by any governmental authority or any officer or instrumentality
thereof of facilities, property, equipment or inventory owned by the Company.
<PAGE>
8.4 ABSENCE OF LIENS. There will have been no liens recorded after the
execution of this Agreement but prior to Closing with respect to any personal,
real or mixed property owned by the Company.
8.5 ACTIONS, PROCEEDINGS, ETC. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall have
been satisfactory to and approved by counsel for Cobra, and such counsel shall
have been furnished with such certified copies of actions and proceedings and
such other instruments and documents as they shall have reasonably requested.
8.6 ACCOUNTANTS' LETTER. Cobra shall have received a letter dated as of
Closing, in form and substance satisfactory to Cobra, to the effect that on the
basis of a review of the accounting records of the Company, consultations with
officers of the Company, and other procedures and inquiries deemed appropriate
by such accountants, nothing has come to their attention which indicates that
during the period since May 11, 1999, to a specified date not more than five
days prior to the Closing there has been any material adverse change in the
financial condition or results of operations of the Company.
8.7 LEGAL OPINION. Cobra shall have received the legal opinion of the
Company's counsel in accordance with Section 3.11 hereto.
8.8 SATISFACTION WITH RESPECT TO FINANCIAL CONDITION AND PERFORMANCE.
Cobra must be satisfied that each and every representation made by the Company
regarding the Financial Statements and the financial condition of the Company
shall be true, complete and accurate in all respects as of Closing. Without
limiting the foregoing, Cobra must be satisfied that: (i) the Financial
Statements shall have been prepared on an accrual basis of accounting,
consistent with prior years, and in accordance with generally accepted
accounting principles; and (ii) except as specifically disclosed in the
Financial Statements, there has been no distribution to shareholders or others
or bonuses made to employees.
8.9 CONTINUITY OF BUSINESS RELATIONSHIPS. Cobra shall be satisfied that
the Company=s customer, vendor, financial institution(s), insurance carrier and
employee relations are satisfactory as at the Closing Date.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY SHAREHOLDERS
The following are certain conditions precedent to the obligation of the
Company Shareholders to complete this transaction.
<PAGE>
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Cobra and Merger Sub herein contained shall be true on and as of
Closing with the same force and effect as though made on and as of Closing,
except as affected by transactions contemplated hereby and except to the extent
that such representations and warranties were made as of a specified date and as
to such representations and warranties the same shall have been true as of the
specified date.
9.2 ABSENCE OF DEFAULT. No condition or event which constitutes an
event of default hereunder by Cobra or Merger Sub which, after notice and lapse
of time, or both, would constitute an event of default hereunder by Cobra or
Merger shall have occurred and be continuing.
9.3 ABSENCE OF MATERIAL DAMAGE TO OR EXPROPRIATION OF PROPERTY. Between
the date of this Agreement and the Closing, there shall not have occurred (1)
any material casualty to any facility, property, equipment or inventory owned by
Cobra, or (2) any material condemnation, seizure, expropriation or liquidation
by any governmental authority or any officer or instrumentality thereof of
facilities, property, equipment or inventory owned by Cobra.
9.4 ABSENCE OF LIENS. There will have been no liens recorded after the
execution of this Agreement but prior to Closing with respect to any personal,
real or mixed property owned by Cobra.
9.5 ACTIONS, PROCEEDINGS, ETC. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated by this
Agreement or incidental thereto and all other related legal matters shall have
been satisfactory to and approved by counsel for Company Shareholders, and such
counsel shall have been furnished with such certified copies of actions and
proceedings and such other instruments and documents as they shall have
reasonably requested.
9.6 LEGAL OPINION. Company Shareholders shall have received the legal
opinion of the Cobra's counsel in accordance with Section 3.12 hereto.
9.7 SATISFACTION WITH RESPECT TO FINANCIAL CONDITION AND PERFORMANCE.
The Company Shareholders must be satisfied that each and every representation
made by Cobra regarding the Financial Statements and the financial condition of
Cobra shall be true, complete and accurate in all respects as of Closing.
Without limiting the foregoing, the Company Shareholders must be satisfied that:
(i) the Financial Statements shall have been prepared on an accrual basis of
accounting, consistent with prior years, and in accordance with generally
accepted accounting principles; and (ii) except as specifically disclosed in the
Financial Statements, there has been no distribution to shareholders or others
or bonuses made to employees.
<PAGE>
9.8 CONTINUITY OF BUSINESS RELATIONSHIPS. The Company Shareholders
shall be satisfied that the Cobra=s customer, vendor, financial institution(s),
insurance carrier and employee relations are satisfactory as at the Closing
Date.
ARTICLE X
INDEMNIFICATION
10.1 COBRA'S RIGHT TO INDEMNIFICATION. The Company and Company
Shareholders jointly and severally undertake and agree to hold Cobra and/or the
shareholders of Cobra harmless against any and all losses, costs, liabilities,
claims, obligations and expenses, including reasonable attorneys' fees, incurred
or suffered by Cobra arising from (i) the breach, misrepresentation or other
violation of any covenants, warranty or representation of or by the Company
contained in this Agreement, and (ii) all liabilities of the Company, not
disclosed in writing to Cobra prior to the execution of this Agreement. This
indemnity provision shall survive Closing for a period of one (1) year.
10.2 COMPANY SHAREHOLDERS RIGHT TO INDEMNIFICATION. Cobra and the
Merger Sub jointly and severally undertake and agree to hold the Company and/or
the Company Shareholders harmless against any and all losses, costs,
liabilities, claims, obligations and expenses, including reasonable attorneys'
fees, incurred or suffered by the Company or Company Shareholders arising from
the breach, misrepresentation or other violation of any covenants, warranty or
representation of or by Cobra or the Merger Sub contained in this Agreement.
This indemnity provision shall survive Closing for a period of one (1) year.
<PAGE>
10.3 PROCEDURE. If any claim or proceeding covered by the foregoing
agreements to indemnify and hold harmless shall arise, the party who seeks
indemnification, (the "Indemnified Party") shall be given written notice thereof
to the other party (the "Indemnitor") promptly (but in no event more than ten
(10) days) after it learns of the existence of such claim or proceeding. Any
claim for indemnification hereunder shall be accompanied by evidence
demonstrating the Indemnified Party's right or possible right to
indemnification, including a copy of all supporting documents relevant thereto.
The Indemnitor shall have the right to employ counsel reasonably acceptable to
the Indemnified Party to defend against any such claim or proceeding, or to
compromise, settle or otherwise dispose of the same; provided, however, that no
settlement or compromise shall be effected without the consent of the
Indemnified Party, which consent shall not be unreasonably withheld, and
PROVIDED FURTHER THAT IN THE EVENT THE INDEMNIFIED PARTY DOES NOT CONSENT TO A
BONA FIDE offer of settlement made by a third party and the settlement involves
only the payment of money, then the Indemnitor may, in lieu of payment of such
settlement to such third party, pay such amount to the Indemnified Party. After
the payment to the Indemnified Party, the Indemnitor shall have no further
liability with respect to such claim or proceeding and the Indemnified Party
shall assume full responsibility to defend the same. After notice from the
Indemnitor to the Indemnified Party of its election to assume the defense of
such claim or proceeding, the Indemnitor shall not be liable to the Indemnified
Party under this paragraph for any legal or other expenses subsequently incurred
by the Indemnified Party in connection with the defense thereof; provided,
however, that the Indemnified Party shall have the right to employ counsel to
represent it if, in the Indemnified Party's sole judgment, it is advisable for
the Indemnified Party to be represented by separate counsel, and in that event
the fees and expenses of such separate counsel shall be paid by the Indemnified
Party. The parties will fully cooperate in any such action, making available to
each other books or records for the defense of any such claim or proceeding. If
the Indemnitor fails to acknowledge in writing its obligation to defend against
or settle such claim or proceeding within ten (10) days after receiving notice
of the claim or proceeding from the Indemnified Party (or such shorter time
specified in the notice as the circumstances of the matter may dictate), the
Indemnified Party shall be free to dispose of the matter, at the expense of the
Indemnitor (but subject to the Indemnitor's right subsequently to contest
through appropriate proceedings its obligation to provide indemnification), in
any way which the Indemnified Party deems in its best interest.
10.4 LIMITATIONS ON INDEMNIFICATION RIGHTS. Indemnification shall be
due only to the extent of the loss or damage actually suffered (i.e., reduced by
any offsetting or related asset or service received and by any recovery from any
third party, such as an insurer), net after the amount equal to any reduction in
federal, state or local income, franchise or other taxes occasioned by such loss
or damage (even though the tax return by which such reduction would have been
realized is not yet due), but including an amount equal to any increase in
federal, state and local income, franchise or other taxes occasioned by the
indemnification payment and then only to the extent of the excess over the
Agreed De Minimis Amount (hereinafter defined). The Indemnitor shall be
subrogated to all rights of the Indemnified Party against any third party with
respect to any claim for which indemnification is paid. Notwithstanding the
foregoing, the Indemnitor shall not be liable to the Indemnified Party for any
individual misrepresentation, breach of warranty or violation of a covenant
where the otherwise indemnifiable amount does not exceed $500.00 and, as regards
all such indemnifiable misrepresentations or breaches of warranty that do not
exceed $500, the Indemnitor shall not be liable except to the extent that the
aggregate amount thereof exceeds $1,000 (such sum being herein referred to as
the "Agreed De Minimis Amount"); provided, however, that the Agreed De Minimis
Amount shall not apply with respect to the indemnification otherwise due for any
third-party claims.
ARTICLE XI
GENERAL PROVISIONS
<PAGE>
11.1 EXPENSES. Each party shall pay its own expenses incident to the
negotiation and preparation of this Agreement and the transactions contemplated
hereby. All other recording costs for bills of sale and other instruments of
transfer, and all stamp, sales, use and transfer taxes in connection with the
purchase and sale of shares shall be paid by the transferring party.
11.2 NOTICES. All notices, requests, demands and other communications
pertaining to this Agreement shall be in writing and shall be deemed duly given
when delivered personally with a receipt, when delivered by an overnight courier
service or mailed by certified mail, return receipt requested, postage prepaid,
addressed as follows:
a. To: Cobra & Merger Sub: Cobra Technologies, Inc.
7251 W. Palmetto Park Road
Suite 200
Boca Raton, FL 33433
With a copy to: Bernard Wishnia, Esq.
204 Eagle Rock Avenue
Roseland, NJ 07068
b. To: The Company : Pinnacle East, Inc.
And Company c/o Mitchell Smith
Shareholders 1221 Sunset Boulevard
Suite 100
West Columbia, SC 29169
WITH A COPY TO:
Either party may change its address for notices by written notice to the other
given pursuant to this paragraph.
11.3 CERTAIN BREACHES. Neither party shall have any liability to the
other party with respect to a breach by a party of which the other party has
received written notice at or prior to Closing.
11.4 PRIOR NEGOTIATIONS. This Agreement supersedes in all respects all
prior and contemporaneous oral and written negotiations, understandings and
agreements between the parties with respect to the subject matter hereof. All of
said prior and contemporaneous negotiations, understandings and agreements are
merged herein and superseded hereby.
<PAGE>
11.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Exhibits to
this Agreement set forth the entire understanding between the parties in
connection with the transaction contemplated herein, there being no terms,
conditions, warranties or representations other than those contained herein,
referenced herein or provided for herein. Neither this Agreement nor any term or
provision hereof may be altered or amended in any manner except as an instrument
in writing signed by the party against whom the enforcement of any such change
is sought.
11.6 EXHIBITS. The Exhibits attached hereto or referred to herein are a
material part of this Agreement, as if set forth in full herein.
11.7 SEVERABILITY. If any term of this Agreement is illegal or
enforceable at law or in equity, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected or
impaired thereby. Any illegal or unenforceable term shall be deemed to be void
and of no force and effect only to the minimum extent necessary to bring such
term within the provisions of any applicable law or laws and such term, as so
modified, and the balance of this Agreement shall then be fully enforceable.
11.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Unless otherwise
specifically noted herein, the several representations, warranties and covenants
of the parties contained herein shall survive the closing for a period of one
(1) year from the Closing date. Thereafter neither party shall have any
liability to the other based upon any of the representations, warranties and
covenants set forth herein.
11.9 WAIVER. Unless otherwise specifically agreed in writing to the
contrary: (i) the failure of either party at any time to require performance by
the other of any provision of this Agreement shall not affect such party's right
thereafter to enforce the same, (ii) no waiver by either party of any default by
the other shall be taken or held to be a waiver by such party of any other
preceding or subsequent default, and (iii) no extension of time granted by
either party for the performance of any obligation or act by the other party
shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11.10 NUMBER AND GENDER. Whenever the context so requires, words used
in the singular shall be construed to mean or include the plural and vice versa,
and pronouns of any gender shall be construed to mean or include any other
gender or genders.
<PAGE>
11.11 HEADINGS AND CROSS-REFERENCES. The headings of this Agreement are
included for convenience of reference only, and shall in no way limit or affect
the meaning or interpretation of the specific provisions hereof. All
cross-references to paragraphs herein shall mean the paragraphs of this
Agreement unless otherwise stated or clearly required by the context. All
references to Exhibits herein shall mean the Exhibits to this Agreement. Words
such as "herein" and "hereof" shall be deemed to refer to this Agreement as a
whole and not to any particular provision of this Agreement unless otherwise
stated or clearly required by the context.
11.12 CHOICE OF LAWS. This Agreement is to be construed and governed by
the laws of the State of Florida, except for the choice of law rules utilized in
that jurisdiction.
11.13 ARBITRATION. Any dispute arising under or related to this
Agreement that the parties are unable to resolve by themselves shall be settled
by arbitration in Broward County, Florida, by a panel of three arbitrators.
Cobra together with the Company shall each designate one disinterested
arbitrator and the two arbitrators so designated shall select the third
arbitrator. The persons selected as arbitrators need not be professional
arbitrators, and persons such as accountants, appraisers and bankers shall be
acceptable. Before undertaking to resolve the dispute, each arbitrator shall be
duly sworn faithfully and fairly to hear and examine the matters in controversy
and to make a just award according to the best of his or her understanding. The
arbitration hearing shall be conducted in accordance with the rules of the
American Arbitration Association. The written decision of a majority of the
arbitrators shall be final and binding on the parties. Costs and expenses of the
arbitration proceeding shall be assessed between the parties in a manner to be
decided by a majority of the arbitrators, and the assessment shall be set forth
in the decision and award of the arbitrators. No action at law or suit in equity
based upon any claim arising out of or relating to this Agreement shall be
instituted in any court by a party against another except an action to compel
arbitration pursuant to this paragraph, an action to enforce the award of the
arbitration panel rendered in accordance with this paragraph, or a suit for
specific performance as may be specifically provided herein.
11.14 SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
11.15 THIRD PARTIES. Nothing in this Agreement, whether expressed or
implied, is intended to (i) confer any rights or remedies on any person other
than the parties and their respective successors and assigns, (ii) relieve or
discharge the obligation or liability of any third party, or (iii) give any
third party any right of subrogation or action against any party hereto.
11.16 NO INFERENCES. This agreement is the result of negotiations
between the parties, and no inferences shall be drawn by reason of its having
been prepared by any one of the parties.
<PAGE>
11.17 COUNTERPARTS. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were on the same
instrument. Each of the counterparts, when signed, shall be deemed to be an
original, and all of the signed counterparts together shall be deemed to be one
and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
WITNESS/ATTEST: COBRA TECHNOLOGIES, INC.
__________________________ Secretary
By: Vito Gambelunghe, President
PINNACLE EAST, INC.
Mitchell D. Smith, Secretary By: Steven R. Lounsberry,President
Witness Mitchell D.
Smith, Individually
Witness Steven R. Lounsberry, Individually
STATE OF FLORIDA :
: ss.
COUNTY OF :
I CERTIFY that on , 1999,
personally appeared before me, and this person acknowledged, to my satisfaction,
that:
(a) this person is the secretary of COBRA TECHNOLOGIES, INC., the
corporation named in this document;
(b) this person is the attesting witness to the signing of this
document by the proper corporate officer, VITO GAMBELUNGHE, who is the President
of the corporation;
(c) this document was signed and delivered by the corporation as its
voluntary act duly authorized by a proper resolution of its Board of Directors;
(d) this person knows the proper seal of the corporation which was
affixed to this document; and
<PAGE>
(e) this person signed this proof to attest to the truth of these
facts.
----------------------------
Signed and sworn to before me
on , 1999
STATE OF SOUTH CAROLINA:
: ss.
COUNTY OF :
I CERTIFY that on , 1999,
MITCHELL D. SMITH
personally appeared before me, and this person acknowledged, to my satisfaction,
that:
(a) this person is the secretary of PINNACLE EAST, INC., the
corporation named in this document;
(b) this person is the attesting witness to the signing of this
document by the proper corporate officer, STEVEN R. LOUNSBERRY, who is the
President of the corporation;
(c) this document was signed and delivered by the corporation as its
voluntary act duly authorized by a proper resolution of its Board of Directors;
(d) this person knows the proper seal of the corporation which was
affixed to this document; and
(e) this person signed this proof to attest to the truth of these
facts.
----------------------------
Mitchell D. Smith
Signed and sworn to before me
on , 1999
STATE OF S0UTH CAROLINA:
: ss.
COUNTY OF :
<PAGE>
BE IT remembered that on this day of , 1999, before me, the undersigned
authority, personally appeared STEVEN R. LOUNSBERRY, who, I am satisfied, is the
person mentioned in the within instrument, to whom I first made known the
contents thereof, and thereupon he signed, sealed, and delivered the same as his
voluntary act and deed, for the uses and purposes therein expressed.
----------------------------
STATE OF SOUTH CAROLINA:
: ss.
COUNTY OF :
BE IT remembered that on this day of , 1999, before me, the undersigned
authority, personally appeared MITCHELL D. SMITH, who, I am satisfied, is the
person mentioned in the within instrument, to whom I first made known the
contents thereof, and thereupon he signed, sealed, and delivered the same as his
voluntary act and deed, for the uses and purposes therein expressed.
----------------------------
COBRATEC, INC.
SUBSIDIARY COMPANY
Name of Subsidiary: PINNEAST.COM
Address: 1121 Sunset Boulevard
West Columbia, SC 29169
Doing business as: Pinneast.com
CobraTec ownership: 100%
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