UNITED STATES
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
GREENLEAF TECHNOLOGIES CORPORATION
- --------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Delaware 13-34291593
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8834 Capital Of Texas Highway North, Suite 150, Austin, Texas 78759
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(Address of principal executive offices) (Zip Code)
(512) 343-1300
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(Issuer's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered each class is to be registered
N/A
------------------------------ ------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
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(Title of class)
<PAGE>
PART I
------
Greenleaf Technologies Corporation (the "Company") is including the
following cautionary statement to make applicable, to the extent possible, the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
(the "Reform Act"), which do not apply to statements made in connection with an
initial public offering (and do not apply to statements made in this Form 10-SB
to the extent that this Form 10-SB constitutes an initial public offering of the
Company's $.001 par value common stock (the "Common Stock")), for any
forward-looking statements made by, or on behalf of, the Company. The provisions
of the Reform Act also do not apply to an entity that issues penny stock. The
following cautionary statement also is made for the purpose of taking advantage
of any defenses that may exist under other laws, including common law.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, expectations, future events or performance and underlying
assumptions and other statements which are other than statements of historical
facts. Certain statements contained herein are forward-looking statements and,
accordingly, involve risks and uncertainties which could cause actual results or
outcomes to differ materially from those expressed in the forward-looking
statements. The Company's expectations, beliefs and projections are expressed in
good faith and are believed by the Company to have a reasonable basis, including
without limitation, management's examination of historical operating trends,
data contained in the Company's records and other data available from third
parties, but there can be no assurance that management's expectations, beliefs
or projections will occur or be achieved or accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements: the ability
of the Company to maintain its rights in its intellectual property; the ability
of the Company to obtain acceptable forms and amounts of financing to fund
operations, technology development, and marketing as well as acquisitions and
other expansion efforts; and the global market for technology. The Company has
no obligation to update or revise these forward-looking statements to reflect
the occurrence of future events or circumstances.
Item 1. Description of Business.
The Company was incorporated under the laws of the State of Delaware on
October 9, 1986 and has been in the development stage since its inception. The
Company was originally incorporated under the name Greenleaf Capital
Corporation. In December 1997 the name of the Company was changed to Greenleaf
Technologies Corporation in order to reflect the change in the focus of the
Company's efforts to development and marketing of high technology products.
In August 1988, the Company consummated an initial public offering (the
"IPO") of 206,500 units at $1.00 per unit, with each unit consisting of one
share of Common Stock and a redeemable warrant to purchase two shares of Common
Stock. The Company subsequently expended the proceeds of the IPO in unsuccessful
attempts to acquire a number of operating companies.
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<PAGE>
On December 15, 1997, Company entered into a five-year marketing agreement
with Daiichi Kosho U.S.A., Inc ("DKI"). Pursuant to that agreement, the Company
granted to DKI the rights to use the Company's proprietary DigiGuard(TM)
encryption technology in connection with the electronic delivery of music for
use in karaoke sing-along products.
On January 12, 1998, the Company entered into an agreement with MultiCom
Services LLC ("MultiCom"), which operates a service bureau and call receipt
center for processing product orders. The agreement calls for MultiCom to
provide the Company with a basic system for credit card billing, capturing
customer order information and verifying credit card purchases on-line. In
addition, MultiCom's Customer Service division will interact with software
supplied by the Company to generate unlock codes upon approval of credit card
purchases.
On April 16, 1998, the Company paid $300,000 cash to purchase a 33.33%
ownership interest in NetHome Media, Inc. ("NetHome"). At that time, NetHome was
a wholly owned subsidiary of MultiCom Services LLC, a Texas corporation. NetHome
created and developed the "Browser Butler(TM)" and "CyberScreen(TM)" software
products. The "Browser Butler(TM)" is a proprietary navigation aid for use in
browsing material on the Internet. "CyberScreen(TM)" is designed to filter text
and restrict searches to provide a uniquely monitored, family safe environment
on the Internet.
On September 29, 1998, the Company consummated an agreement to acquire
Gameverse, Inc. ("Gameverse"), a wholly owned subsidiary of Riverside Group,
Inc. The agreement provided for the Company to pay 14,687,585 of its common
shares as well as options to purchase an additional 5,733,333 of its shares at
$0.25 per share until September 30, 2003 and options to purchase 1,581,249
shares at $0.15 per share until September 30, 2003. The agreement also provided
Riverside with the right to appoint four directors to the Board of Directors of
Company (the "Board"). At the time of consummation of the agreement, the Company
believed that Gameverse was an online game development and web design company
which markets services to the entertainment industry, and which also builds web
sites, including database development and maintenance services for business
seeking to take advantage of the web's advertising and e-commerce potential.
However, after consummation of the agreement, the Company determined that
Gameverse had not developed its products or business. The Company currently is
considering alternative courses of action that may be available to it regarding
this transaction.
On February 23, 1999, the Company announced that it had reached an
agreement with Accolade Inc., now known as Infogrames North America
("Infogrames") and Warner Advanced Media Operations ("Warner"), a business unit
of Time Warner Inc. (NYSE: TWX), to form a joint venture referred to as "WAG".
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Under the WAG banner, the three companies will join to market multiple computer
game titles on a single DVD disc for distribution to the personal computer
Original Equipment Manufacturers ("OEM") market. The DVD software will be
encrypted by the Company utilizing its proprietary "DigiGuard(TM)" security
technology. On May 6, 1999, the Company announced that it would debut the
Accolade Family Spectacular, the initial game bundle to be released by WAG, at
the E3 Expo industry trade show.
On August 30, 1999, the Company and BroadcastDVD, Inc. ("BroadcastDVD")
announced a three-year, exclusive partnership to include BroadcastDVD's
FILM-FEST, a video magazine that exposes viewers to prestigious film festivals
of the world, in the DVD disc packages to be marketed by the WAG joint venture.
Contents of the video magazine are currently anticipated to include interviews
with THE BLAIR WITCH PROJECT directors Daniel Myrick and Eduardo Sanchez, and
filmmakers and celebrities including Tim Roth, Eric Stoltz, Sheryl Crow, Guy
Pearce and Robert Carlyle. Also expected to be included is an hour of
award-winning short films from the latest film festivals.
In September 1999, the Company entered into an agreement to acquire all the
outstanding shares of Future Com South Florida, Inc. ("Future Com") in exchange
for 4,000,000 shares of the Company's restricted common stock. Of these shares,
2,000,000 shares were to be issued to William Gale, the president and Chief
Executive Officer of Future Com, and 2,000,000 shares were to be issued to
Warren Blanck, the Secretary and Treasurer of Future Com. Future Com was formed
by Mr. Gale and Mr. Blanck for the purpose of acquiring and managing mobile
communications radio licenses and/or systems. As a wholly-owned subsidiary of
the Company, Future Com intends to continue to pursue this line of business. The
Company completed the acquisition in November 1999.
At the time that the Company acquired Future Com, Future Com entered into
agreements to acquire four SMR licenses in the 220-222 MHz range for a purchase
price of $175,000 per license. The purchase price for each license is to be paid
in the form of 350,000 shares of the Company's restricted common stock. In
addition, the Company is to issue warrants to purchase the same number of shares
of common stock exercisable at $0.50 per share during the one-year period
commencing on the date of purchase of the licenses. These shares and warrants
will be delivered to the respective sellers of the licenses when the FCC
approves the transfer of the respective licenses to Future Com. Also, at the
time of closing of the Company's purchase of Future Com, Future Com entered into
an agreement to acquire a dedicated communication satellite license at a total
purchase price of $687,500, including amounts paid to eliminate an encumbrance
on the license. The purchase price is to be paid in the form of 1,375,000 shares
of the Company's restricted common stock. In addition, the Company also agreed
to issue to the seller of the satellite license warrants to purchase 75,000
shares of the Company's common stock at an exercise price of $0.50 per share
during the three-year period beginning on the date of the purchase of the
satellite license. The Company also agreed to issue to the holder of the
encumbrance options to purchase 1,300,000 shares of common stock at $.50 per
share during the one-year period beginning on the date of the purchase of the
satellite license. The shares, options and warrants will be delivered when the
FCC approves the transfer of the satellite license to Future Com.
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In connection with the acquisition, Future Com entered into employment
agreements with each of Mr. Gale and Mr. Blanck which provide for each of them
to receive a salary of $96,000 per year. In addition, Future Com agreed to pay
each of Mr. Gale and Mr. Blanck an automobile allowance of $850 per month for
use of their automobiles for business purposes. Future Com also agreed to repay
$150,000 advanced by each of Communications Concepts, Inc. ("CCI") and Uni-Call
Communications, Inc. ("Uni-Call"), for a total of $300,000, pursuant to
promissory notes issued by Future Com. These promissory notes provide for
payments of principal plus interest at the rate of eight percent per year at
such time that the Board Of Directors of Future Com determines that there are
sufficient funds available for payment, with the unpaid amount due upon demand
at any time after five years from the date of the closing of the acquisition.
Uni-Call and CCI are owned by Mr. Gale and Mr. Blanck, who serve as officers and
directors of those companies.
At the time of acquiring Future Com, the Company issued options to existing
employees of Future Com to purchase as aggregate of 600,000 shares of the
Company's common stock. These options are exercisable at a price of $0.50 per
share until November 4, 2000.
In connection with the acquisition of Future Com, the Company entered into
a registration rights agreement with Mr. Gale, Mr. Blanck, Mr. Leonard Berg, the
President and Chief Executive Officer of the Company, Mr. Richard Wachs, then
the President of the Company's wholly-owned Greenleaf Research and Development,
Inc. ("GRD") subsidiary and a Director of the Company, and Mr. Christopher
Webster, a Director of the Company. Mr. Wachs subsequently resigned from all
positions with the Company and GRD. Pursuant to the registration rights
agreement, the Company agreed to register the shares held by those individuals
in a registration statement.
Computer Software And Hardware Products
Beginning in late 1998 the efforts of the Company and GRD have been
concentrated on developing and marketing a line of proprietary computer software
and hardware to customers in the entertainment industry. As described below, the
Company's customers then utilize the Company's products to facilitate sales via
electronic media, including the Internet. The Company's line of computer data
security and communications solutions assists customers in protecting their
intellectual property and information assets from access by unauthorized
parties. In addition, the Company's products provide an alternative to
traditional methods of bundling and distributing software-based entertainment
content through electronic media.
To date, the Company has developed the following two proprietary software
products:
DigiGuard(TM). The Company's DigiGuard(TM) product consists of a suite of
software packages to support the locking, unlocking, and playing of
entertainment media. DigiGuard(TM) protects data contained on CD-ROMs and DVDs,
allowing customers to securely bundle various entertainment content, such as
games, music and movies, on a single disc or for transmission via the Internet.
DigiGuard(TM) creates access 'keys' to unlock protected content. Each 'key' is
unique for each user to protect the integrity of the content. After meeting
certain criteria, such as a credit card number exchange for payment, customers
may unlock a product via the Internet or by phone.
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<PAGE>
MusicLock(TM). The Company's MusicLock(TM) product allows distributors to
deliver digitally-recorded songs to radio stations over the Internet.
MusicLock(TM) prevents premature access to the recording by allowing playback of
the songs only after a pre-determined time, which allows music distributors to
control the distribution of new releases while reducing distribution costs for
the record labels. MusicLock(TM) allows record promoters to distribute new
releases in advance of the release date with the security of knowing that
material cannot be played until the designated time and date.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation
The Company is a "High Tech Business Solutions Provider" which is
developing new marketing paradigms and enabling technologies in order to create
new revenue possibilities for its customers. Examples include the Company's
DigiGuard(TM)and MusicLock(TM)encryption products described above under "Item 1.
Description of Business".
The Company's corporate strategy is to build strategic alliances for the
purpose of leveraging its core competency and resources into significant revenue
statements. To this end, the Company has built interlocking strategic
relationships with product providers, distributors, and support providers. The
Company believes that the largest opportunity for its products and services is
the entertainment industry and its strategic alliances are aimed at capturing
that potential revenue stream.
The principal accountant's report on the financial statements for the past
year contains a statement to the effect that the Company has an accumulated
deficit at September 30, 1998, which raised substantial doubt about the
Company's ability to continue as a going concern. The continuation of Company as
a going concern is dependent on its ability to generate sufficient operating
cash flows and/or equity or debt financing to meet its obligations and sustain
its operations.
Management of the Company has identified and intends to pursue new business
opportunities, which is believes will be profitable and plans to obtain
infusions of new equity capital into the Company. There are no assurances,
however, that management of the Company will be successful with either the new
business opportunities or raising new equity capital.
Revenues
The Company did not have an operating business during the fiscal 1998 so
that there are no revenues to be accounted for.
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Selling Expenses
Selling expenditures for the fiscal year ended September 30, 1998 amounted
to $305,549 or 8.4% of the total expenses incurred for the year.
Operating and Administrative Expenses
Operating and Administrative expenses totaled $3,345,839 for the fiscal
year ended September 30, 1998. Product and development costs amounted to
$2,025,779 or 55.5% of total 1998 expenditures. Compensation and administrative
expenses, together, totaled $1,317,118, or 39.4% of the spending for the year.
Other Income & Expense
Other income and expense amounted to a net expense for fiscal 1998 of
$290,255 primarily due to losses on investments.
Liquidity and Capital Resources
The Company's cash position was $68,423 as of September 30, 1998. Cash
flows from activities during the year used cash of $3,635,713 for operating
activities due to the net loss of $3,941,643 offset by net increase in assets of
$7,675 and an increase in current liabilities of $298,255. In addition, cash was
used to purchase fixed assets in the amount of $158,842.
The net cash provided by financing activities of $3,863,010 for the year
ended September 30, 1998 consisted of sales of stock totaling $3,918,775 offset
by the reduction of loans payable of $50,765. These proceeds funded operating
activities during the year.
During the next twelve months, the Company plans to satisfy its cash
requirements through additional debt and/or equity financing. There can be no
assurance that the Company will be successful in raising the additional
financing.
As of the date of the filing of this report, there were no commitments for
material capital expenditures.
Year 2000 Readiness Disclosure
The Company's operations are highly dependent on various computer hardware,
software and electronic components. Traditionally, computer systems and other
electronic devices have used two digits rather than four digits to define an
applicable year. As a consequence, at 12:00 a.m. on January 1, 2000 date
sensitive systems may recognize the year 2000 as 1900 or not at all. The
inability to recognize or properly treat the year 2000 may cause erroneous
processing of information critical to the Company's operations. This potential
situation is referred to as the Year 2000 Issue.
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The Company has assessed the impact of the Year 2000 Issue on its computer
systems, software and other equipment (collectively, the "Systems"). Based on
its evaluations, the Company believes that its Systems are Year 2000 compliant.
That is, the Company believes that its Systems will correctly recognize and
process data concerning dates subsequent to December 31, 1999. In addition, the
Company's products currently are created internally and are continually
evaluated to ensure Year 2000 compliance. Although the Company does incorporate
into some of its products certain programs supplied by Infogrames, the Company
has verified that those programs do not contain or rely on date-sensitive
material and therefore are considered to be compliant.
Because the Company does not rely on outside suppliers or vendors whose
products contain date-sensitive material, and because the Company has not yet
recognized any sales of its products, the Company believes that non-compliance
of outside parties would not have a material adverse impact on the Company's
business as currently operated.
As a contingency, the Company intends to create, on Thursday, December 30,
1999, copies of data contained in its Systems. In addition, all Systems will be
shut down and unplugged on Friday, December 31, 1999 so that the Systems will
not be affected by potential electrical power supply problems in the event that
local utilities are not Year 2000 compliant. The Systems will be re-powered only
after the Company has received adequate confirmation that normal electric
service is available after 12:01 a.m. on January 1, 2000.
Because the Company's analyses of the Year 2000 Issue have been performed
by regular employees of the Company, no material costs have been incurred
regarding the Year 2000 Issue in excess of those associated with the day-to-day
operation of the Company's business. The Company also believes that, because it
is compliant, no material additional costs are expected to be incurred in
connection with the Year 2000 Issue. However, there can be no guarantee that the
estimate of future costs will be achieved and actual results could differ
materially from the estimate due to as yet unforeseen changes in circumstances.
There is no assurance that the Company's analyses of the Year 2000 Issue
are accurate. If the Company's analyses of the impact of the Year 2000 Issue are
erroneous, the Company's operations could be materially adversely affected.
Item 3. Description of Property.
The Company leases its corporate offices located at 8834 Capital of Texas
Highway, Suite 150, Austin, Texas 78759 pursuant to a written lease agreement.
The lease agreement, which expires on June 30, 2003, currently provides for
minimum monthly payments of $12,982.50 per month. The agreement also provides
that the minimum monthly payments under the agreement will be escalated to
$13,559.50 after July 1, 2000, and to $13,848 after July 1, 2002.
The Company also is party to a written lease agreement for office space
located at 75 Route 27, Iselin, New Jersey. Pursuant to the provisions of that
agreement, which expires on March 15, 2001, the Company is responsible for
minimum monthly payments of $5,587.58. The Company has sublet the New Jersey
office space to a third party who has agreed to pay, and to date has paid, the
minimum monthly payments.
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Trademarks
On October 26, 1998, the Company filed, with the U.S. Patent and Trademark
Office ("USPTO"), applications to register "DigiGuard", "MusicLock" and "GLFC"
as registered trademarks. Also on that date, the Company filed with the USPTO an
application to register "Greenleaf Technologies Corporation", in conjunction
with a unique design, as a registered trademark. Action on all the applications
is pending.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
As of October 27, 1999, there were 74,930,101 shares of the Company's
Common Stock outstanding. The following table sets forth certain information as
of that date with respect to the beneficial ownership of the Company's Common
Stock by each director and nominee for director, by all executive officers and
directors as a group, and by each other person known by the Company to be the
beneficial owner of more than five percent of the Company's Common Stock:
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned (1) Shares Outstanding
- ---------------- ---------------------- ------------------
<S> <C> <C>
Leonard Berg 10,375,472 (2) 13.2%
8834 Capital Of Texas Highway, Suite 150
Austin, Texas 78759
Christopher J. Webster 3,043,072 (3) 4.1%
8834 Capital Of Texas Highway, Suite 150
Austin, Texas 78759
Lon T. Berg 671,345 (4) *
8834 Capital Of Texas Highway, Suite 150
Austin, Texas 78759
William J. Hubert 411,100 (5) *
8834 Capital Of Texas Highway, Suite 150
Austin, Texas 78759
All Executive Officers and Directors as a 14,500,989 (2)(3)(4)(5) 18.3%
Group (four persons)
Cybermax Tech, Inc. 22,002,167 (6) 26.8%
7800 Belfort Parkway, Suite 100
Jacksonville, Florida 32256
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Richard E. Wachs 5,786,548 (7) 7.7%
11320 Pachea Trail
Austin, Texas 78726
Jaime Camil Garza 4,398,167 5.9%
Paseo del Compestre
134 Colinis Compeste la Rosita
Torreon, Coahulla, Mexico 27250
Richard Margulies 4,050,000 5.4%
75 Route 27
Iselin, New Jersey 08830
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</TABLE>
* Less than one percent.
(1) "Beneficial ownership" is defined in the regulations promulgated by the
U.S. Securities and Exchange Commission as having or sharing, directly or
indirectly (i) voting power, which includes the power to vote or to direct
the voting, or (ii) investment power, which includes the power to dispose
or to direct the disposition, of shares of the common stock of an issuer.
The definition of beneficial ownership includes shares underlying options
or warrants to purchase common stock, or other securities convertible into
common stock, that currently are exercisable or convertible or that will
become exercisable or convertible within 60 days. Unless otherwise
indicated, the beneficial owner has sole voting and investment power.
(2) Includes 1,500,289 shares owned by Thelma Berg, the wife of Leonard Berg;
Mr. Berg disclaims beneficial ownership of these shares. Also includes
currently exercisable options to purchase 2,187,072 shares for $.15 per
share until September 30, 2003 and currently exercisable options to
purchase 1,500,000 shares for $.25 per share until September 30, 2003.
(3) Includes currently exercisable options to purchase 258,603 shares for $.15
per share until September 30, 2003.
(4) Includes currently exercisable options to purchase 300,000 shares for $.25
per share until September 30, 2003.
(5) Includes currently exercisable options to purchase 10,000 shares for $.75
per share until March 1, 2001; currently exercisable options to purchase
88,536 shares for $.15 per share until December 15, 2002; currently
exercisable options to purchase 50,000 shares for $.15 per share until
September 30, 2003, and; currently exercisable options to purchase 110,000
shares for $.50 per share until October 25, 2003.
(6) Includes currently exercisable options to purchase 5,733,333 shares for
$.25 per share until September 30, 2003 and currently exercisable options
to purchase 1,581,249 shares for $.15 per share until September 30, 2003.
(7) Includes currently exercisable options to purchase 224,048 shares for $.15
per share until September 30, 2003.
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Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company, their respective
positions and ages, and the year in which each director was first elected, are
set forth in the following table. Each director has been elected to hold office
until the next annual meeting of stockholders and thereafter until his successor
is elected and has qualified. Additional information concerning each of these
individuals follows the table.
Name Age Position with the Company Director Since
---- --- ------------------------- --------------
Leonard Berg 75 Chairman Of The Board; December 1995
Chief Executive Officer;
President; and Director
Christopher J. Webster 27 Executive Vice President; October 1998
and Director
Lon T. Berg 39 Vice President of Marketing - -
William J. Hubert 46 Secretary; and Treasurer - -
Leonard Berg has served as the Chairman Of The Board, Chief Executive
Officer and President of the Company since April 1999 and also previously served
as President of the Company from November 1995 to December 1997. From December
1997 to March 1999 he was a consultant to the Company on general business
matters. Beginning in August 1994 until March 1995 Mr. Berg was a Survey Manager
for The Gallup Organization.
Mr. Berg has over forty years of experience in the finance industry. His
corporate experience includes owning, managing and financing real estate
properties, as well as financial and operating experience in the commercial real
estate business. In 1949, Mr. Berg founded Berg Enterprises. He served as
co-chairman of the board, officer, director and shareholder of Berg Enterprises
for 33 years. During its operation, Berg Enterprises was listed on the American
Stock Exchange and was primarily involved in the real estate and mortgage
banking business. Mr. Berg helped to successfully operate the company until it
became a subsidiary of the Primerica Corporation in 1982. Since 1982, Mr. Berg
has owned and consulted numerous companies in the entertainment, finance, and
real estate industries. Mr. Berg also founded and served as a Lifetime Director
and General Campaign Chairman for the John F. Kennedy Medical Center in Edison,
New Jersey, and was responsible for that center's merger with the Robert Wood
Johnson (J. & J.) Rehabilitation Center. In addition, Mr. Berg has previously
served as Chairman Of The Board of each of United Plastics and Metalique
Industries.
Christopher J. Webster has served as Executive Vice President of the
Company since August 1997. In that capacity Mr. Webster has been an integral
participant in development of the Company's long-term strategies and
development. From February 1995 to August 1997 he was the Vice President and a
director of Clearview Technologies, Inc. Previously, from October 1996 to August
1997, Mr. Webster was the Senior Vice President for Marketing/Acquisitions of
Flatline Studios, LLC ("Flatline"). While at Flatline, he was responsible for
acquiring venture capital for the development of the game "Alien Intelligence"
and later negotiated a multi-million dollar royalty contract with Interplay
Products to bring "Alien Intelligence" to market.
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In May 1993, Mr. Webster co-founded WebEver Productions, Inc. ("WebEver"),
one of the first advertising agencies devoted to the Internet. From that time
until October 1996, he served as the Chief Executive Officer of WebEver, where
he developed Internet and Intranet sites for companies such as Microsoft, Texas
Instruments and IBM.
Lon T. Berg has served as the Company's Vice President of Marketing since
February 1999. Mr. Berg spearheads the development of new marketing alternatives
and distribution outlets for the Company's proprietary products and clients.
From November 1997 to March 1999, he was an Advertising Account Executive for
Westland Associates, where he was responsible for securing new accounts from
automotive dealerships, advising them on marketing their service department's
advertising initiatives and expanding their customer base. Beginning in October
1995 until August 1997, Mr. Berg was the West Coast Area Manager of AucNet USA,
Inc., where he obtained new accounts for training and consulting on marketing
issues with automotive dealers and manufacturers in the western half of the
United States. In this position, Mr. Berg was involved a new product launch of
satellite-based automotive auctions for manufacturers such as Mitsubishi, Toyota
and Lexus throughout the western United States. From June 1993 to August 1995,
Mr. Berg was a Sales Representative for Panorama Sales, Inc., a retailer of new
and used automobiles.
William J. Hubert has been the Secretary and Treasurer of the Company since
July 1999. Previously, from February 1996 until August 1997, Mr. Hubert was an
Executive Assistant and Office Manager for Clearview Technologies, Inc., where
he was responsible for day-to-day operations in the Austin, Texas office. From
January 1995 to February 1996, Mr. Hubert was an executive assistant at Flatline
Studios, LLC where he assisted in obtaining financing for several films to be
produced by Texas-based production companies, as well as financing for the
studio itself.
None of the Company's directors or officers is a director of any other
entity that has securities registered under the Securities Exchange Act of 1934,
as amended. Mr. Leonard Berg is the father of Mr. Lon T. Berg. There is no other
family relationship between or among the above directors and officers of the
Company.
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Item 6. Executive Compensation.
Summary Compensation Table
The following table sets forth in summary form the compensation received
during each of the Company's last three successive completed fiscal years by
Leonard Berg, the Chief Executive Officer, President and Chairman Of The Board
of the Company, and by Richard Margulies, the former President and a former
director of the Company (together, the "Named Executive Officers"). No executive
officer of the Company, including its Chief Executive Officer, or of any of the
Company's subsidiaries received total salary and bonus exceeding $100,000 during
any of the last three fiscal years. The figures in the following table are for
the fiscal years ended September 30, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------------
Awards Payouts
------------------------------- -------
Securities
Other Annual Underlying LTIP All Other
Name and Fiscal Salary Bonus Compensation Restricted Stock Options/SARs Payouts Compensation
Principal Position Year ($)(1) ($)(2) ($)(3) Award(s)($)(4) (#)(5) ($)(6) ($)(7)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard Berg, Chairman 1999 $96,000 -0- $5,820 $296,833 2,187,072 -0- -0-
of the Board, President, 1998 $96,000 -0- $3,880 $62,500 1,500,000 -0- -0-
Chief Executive Officer, 1997 -0- -0- -0- $384,430 -0- -0- -0-
and a director
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Margulies, 1999 $48,000 -0- -0- $125,000(8) -0- -0- -0-
former President and 1998 $48,000(9) -0- -0- $62,500 -0- -0- -0-
former director (8) 1997 -0- -0- -0- $88,129(9) -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The dollar value of base salary (cash and non-cash) earned during the year
indicated.
(2) The dollar value of bonus (cash and non-cash) earned during the year
indicated.
(3) The dollar value of compensation not properly categorized as salary or
bonus, including perquisites and other personal benefits, securities or
property, earned during the year indicated. The amounts shown represent
allowances granted to the named person in order to cover automobile-related
expenses.
(4) The dollar value (net of any consideration paid by the person named in the
Summary Compensation Table) of awards of restricted Common Stock.
(5) The sum of the number of shares of Common Stock to be received upon the
exercise of all stock options granted.
(6) The Company does not have in effect any plan that is intended to serve as
incentive for performance to occur over a period longer than one fiscal
year.
(7) All other compensation received that the Company could not properly report
in any other column of the Summary Compensation Table including annual
Company contributions or other allocations to vested and unvested defined
contribution plans, and the dollar value of any insurance premiums paid by,
or on behalf of, the Company with respect to term life insurance for the
benefit of the Named Executive Officer, and, the full dollar value of the
remainder of the premiums paid by, or on behalf of, the Company.
13
<PAGE>
(8) Mr. Margulies resigned as President and director of the Company effective
as of April 1, 1999. On June 2, 1999, Mr. Margulies was issued 500,000
shares of Common Stock, valued by the Company at $125,000, in connection
with an agreement pursuant to which Mr. Margulies' services on behalf of
the Company were terminated.
(9) During fiscal 1998, Mr. Margulies also received $45,428 in payment of fees
for consulting services provided to the Company prior to Mr. Margulies'
being included on the payroll of the Company.
Option Grants Table
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended September 30, 1999 to each Named
Executive Officer.
% of Total Options
Options Granted to Employees Exercise or Base Expiration
Name Granted(#) in Fiscal Year Price ($/Share) Date
- --------------------------------------------------------------------------------
Leonard Berg 2,187,072 60.3% $.15/Share 9/30/03
- --------------------------------------------------------------------------------
Richard Margulies -0- - - - - - -
- --------------------------------------------------------------------------------
Aggregated Option Exercises And Fiscal Year-End Option Value Table
The following table indicates exercises of stock options during the fiscal
year ended September 30, 1999 by the Named Executive Officers, and also sets
forth information concerning the fiscal year-end value of unexercised options
held by each Named Executive Officer.
Aggregated Option Exercises
For Fiscal Year Ended September 30, 1999
And Year-End Option Values
Number of Value of
Unexercised Unexercised
Shares Options In-The-Money
Acquired on Value at Fiscal Options at Fiscal
Name Exercise(#)(1) Realized($)(2) Year-End(#) Year-End ($) (3)
- --------------------------------------------------------------------------------
Leonard Berg 3,000,000(4) $2,634,375 3,687,072(5) $596,632
- --------------------------------------------------------------------------------
Richard Margulies 3,000,000(4) $2,634,375 -0- - -
- --------------------------------------------------------------------------------
- ----------
(1) The number of shares received upon exercise of options during the fiscal
year ended September 30, 1999.
(2) With respect to options exercised during the Company's fiscal year ended
September 30, 1999, the dollar value of the difference between (A) the
exercise price of the option, and (B) the market value of the option shares
purchased on the date of the exercise of the options as determined by
averaging the high and low prices for the Common Stock on that date as
reported on the OTC Bulletin Board.
14
<PAGE>
(3) For all unexercised options held as of September 30, 1999, the aggregate
dollar value of the excess is the market value of the stock underlying
those options over the exercise price of those unexercised options. For
purposes of this table, the market value used for the Common Stock is the
average of the high and low prices for the Common Stock on that date as
reported on the OTC Bulletin Board.
(4) Consists of shares underlying options exercised on October 2, 1998 to
purchase 900,000 shares at $.25 per share and options exercised on February
12, 1999 to purchase 2,100,000 shares at $.25 per share.
(5) Consists of options to purchase 1,500,000 shares for $.25 per share and
options to purchase 2,187,072 shares for $.15 per share, all of which were
exercisable at September 30, 1999.
Compensation Of Outside Directors
All the members of the Board also are employees of the Company. The members
of the Board do not receive additional compensation for their service on the
Board.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Effective as of December 15, 1997, the Company entered into a written
agreement with Leonard Berg (the "Berg Agreement") pursuant to which Mr. Berg
was to provide services to the Company. Pursuant to the Berg Agreement, which is
for a term of five years, Mr. Berg is entitled to compensation of $8,000 per
month. In addition, the Company agreed to reimburse Mr. Berg for
business-related expenses and to provide him with all benefits that are
generally available to executive officers of the Company, including life and
health insurance as well as access to any stock option plans that the Company
may determine to institute. If Mr. Berg is unable to perform his duties under
the Berg Agreement due to physical or mental disability or death, he or his
estate is entitled to 12-months' compensation. If the Company is in default of
the Berg Agreement, Mr. Berg is entitled to immediate payment of full
compensation for each month remaining in the term of the Berg Agreement.
Item 7. Certain Relationships and Related Transactions.
Leonard Berg has loaned money to the Company for use by the Company as
working capital. As of September 30, 1999, the balance owed to Mr. Berg was
$191,794.91. The balance accrues interest at the rate of nine percent per year.
Mr. Berg may demand immediate payment of all accrued and unpaid principal and
interest at any time.
15
<PAGE>
On February 12, 1999 and October 2, 1998, certain of the Company's
directors and officers, as well as a beneficial owner of more than five percent
of the Company's Common Stock, exercised options to purchase shares of Common
Stock. In all cases, the exercise price for the options was paid in the form of
a promissory note payable to the Company. Each of the notes bears interest at
the rate of six percent per year. Following is a schedule of each exercise.
<TABLE>
<CAPTION>
Face value of promissory
Number of shares note in favor of the Payment of
Exercise price received upon Company in payment of note due on
Name Date of exercise per share exercise exercise price or before
---- ---------------- --------- -------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Leonard Berg 02/12/99 $.25 2,100,000 $525,000 08/01/01
10/02/98 $.25 900,000 $225,000 04/02/01
Christopher J. Webster 02/12/99 $.25 1,467,908 $366,977 08/01/01
10/02/98 $.25 225,000 $56,250 04/02/01
Richard E. Wachs 02/12/99 $.15 1,700,000 $255,000 08/01/01
Richard Margulies 02/12/99 $.25 2,100,000 $525,000 08/01/01
10/02/98 $.25 900,000 $225,000 04/02/01
</TABLE>
The following schedule details issuances of Common Stock valued at greater
than $60,000 for services performed on the Company's behalf by the Company's
directors, executive officers and each other person known by the Company to be
the beneficial owner of more than five percent of the Company's Common Stock:
October 1, 1999 to October 27, 1999:
Name # of shares issued Value ($) (1)
---- ------------------ -------------
Christopher J. Webster (2) 500,000 $112,500
Fiscal year ended September 30, 1999:
Name # of shares issued Value ($) (1)
---- ------------------ -------------
Leonard Berg (3) 544,965 $296,833
Thelma Berg (4) 459,708 $387,994
Christopher J. Webster (2) 1,000,000 $625,000
Lon T. Berg (5) 300,000 $253,200
Richard Margulies (6) 500,000 $125,000
16
<PAGE>
Fiscal year ended September 30, 1998:
Name # of shares issued Value ($) (1)
---- ------------------ -------------
Leonard Berg (3) 500,000 $62,500
Thelma Berg (4) 350,000 $43,750
Richard Margulies 500,000 $62,500
- ----------
(1) The value of the issuances was determined by the Company.
(2) Mr. Webster is the Executive Vice President and a director of the
Company.
(3) Mr. Leonard Berg is the Chairman Of The Board, Chief Executive
Officer, President and a director of the Company. Leonard Berg is the
father of Lon T. Berg, the Company's Vice President of Marketing.
(4) Thelma Berg is the wife of Leonard Berg.
(5) Lon T. Berg is the Company's Vice President Of Marketing and is the
son of Leonard Berg the Chairman Of The Board, Chief Executive
Officer, President and a director of the Company.
(6) Mr. Margulies currently is a beneficial owner of more than five
percent of the Company's Common Stock.
Except as described above, during the past two years there were no
transactions between the Company and its directors, executive officers or known
holders of more than five percent of the Company's Common Stock in which the
amount involved exceeded $60,000 and in which any of the foregoing persons had
or will have a material interest.
Item 8. Description of Securities.
The Company's authorized capital consists solely of 100,000,000 shares of
$.001 par value Common Stock. The Company had 74,930,101 shares of Common Stock
issued and outstanding as of October 27, 1999, and these outstanding shares were
held by approximately 284 stockholders.
Each share of the Common Stock is entitled to share equally with each other
share of Common Stock in dividends from sources legally available therefore,
when, as, and if declared by the Board and, upon liquidation or dissolution of
the Company, whether voluntary or involuntary, to share equally in the assets of
the Company that are available for distribution to the holders of the Common
Stock. Each holder of Common Stock of the Company is entitled to one vote per
share for all purposes, except that in the election of directors, each holder
shall have the right to vote such number of shares for as many persons as there
are directors to be elected. Cumulative voting shall not be allowed in the
election of directors or for any other purpose, and the holders of Common Stock
have no preemptive rights, redemption rights or rights of conversion with
respect to the Common Stock. All outstanding shares of Common Stock are fully
paid and nonassessable by the Company. The Board is authorized to issue
additional shares of Common Stock within the limits authorized by the Company's
Certificate Of Incorporation and without stockholder action.
17
<PAGE>
All shares of Common Stock have equal voting rights and voting rights are
not cumulative. The holders of more than 50 percent of the shares of Common
Stock of the Company could, therefore, if they chose to do so and unless subject
to a voting agreement to the contrary, elect all the directors of the Company.
PART II
-------
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Stockholder Matters.
Prices for the Company's common stock currently are quoted in the OTC
Bulletin Board (the "Bulletin Board"). Because of certain rule changes for the
Bulletin Board, in order to maintain its Bulletin Board listing after December
1, 1999, the Company initially must file with the Securities And Exchange
Commission (the "SEC") a Registration Statement on Form 10-SB, including audited
financial statements, and then continue to file annual and quarterly reports
with the SEC. Greenleaf intends to file its initial Registration Statement on
Form 10-SB during November 1999, and the SEC comment process is expected to take
45 to 90 days thereafter. Therefore, it currently is anticipated that the
Company's stock will not be quoted on the Bulletin Board from December 2, 1999
for a period of 30 to 75 days. Although the Company intends to be in compliance
with the new reporting requirements by the end of the 75 days, there is no
assurance that this will occur. It is anticipated that the Company's stock will
be quoted on the "pink sheets" during the time period that its stock is not
quoted on the Bulletin Board.
Market Price Of The Common Stock
The following table sets forth the range of high and low prices per share
of the Common Stock on the OTC Bulletin Board as reported by Blomberg quotation
services for the periods indicated. The quotations set forth in the table
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
Year Ended September 30, 1998 High Low
----------------------------- ---- ---
First Quarter $.75 $.10
Second Quarter $3.375 $.10
Third Quarter $2.063 $.50
Fourth Quarter $1.438 $.313
Year Ended September 30, 1999 High Low
----------------------------- ---- ---
First Quarter $2.563 $.313
Second Quarter $2.563 $.625
Third Quarter $1.625 $.375
Fourth Quarter $.563 $.29
Year Ending September 30, 2000 High Low
------------------------------ ---- ---
First Quarter (through
November 9, 1999) $.56 $.32
18
<PAGE>
Dividends
The Company has not declared or paid any cash dividends on its Common Stock
since its formation and does not presently anticipate paying any cash dividends
on its Common Stock in the foreseeable future.
Item 2. Legal Proceedings.
The Company is currently involved in certain legal proceedings. On January
14, 1999 a former officer of the Company and a former consultant to the Company
filed a complaint against the Company in the 261st Judicial District Court,
Travis County, Texas. Plaintiffs allege that the Company breached employment
and/or service agreements and seek unspecified monetary damages as well as
injunctive relief to force the issuance of approximately 1,500,000 restricted
shares of Common Stock and options to purchase 2,000,000 shares. The defendants
intend to vigorously defend against the plaintiffs' claims.
On August 5, 1999, three individuals associated with a non-active
corporation filed a complaint in the 53rd Judicial District Court, Travis
County, Texas. The defendants in that suit are the Company, one of its officers,
two other employees, and corporate counsel. Plaintiffs allege that defendants
misappropriated assets and trade secrets allegedly belonging to the non-active
corporation. Plaintiffs seek unspecified monetary damages and also request an
injunction seeking to prevent further use of the allegedly converted corporate
assets and trade secrets. The Company and the individual defendants have
answered the complaint and intend to vigorously defend against the plaintiffs'
claims. No discovery proceedings have been completed at this time.
On April 11, 1997, a complaint was filed against National Capital
Corporation ("NCC"), a former subsidiary of the Company, and against the former
President of NCC, by an individual who previously lent money to the former
President of NCC. The complaint was filed in the 200th Judicial District Court,
Travis County, Texas. Plaintiff contends that approximately $86,000 was
illegally converted by NCC and/or the former President of NCC, who has since
declared bankruptcy. This claim has been partially settled through the
application of proceeds from a sale of the former President's property by the
bankruptcy trustee. The Company believes that its potential liability in this
matter could be approximately $50,000.
A former part-time employee of the Company has informed the Company of his
position that he believes an employment agreement was entered into with the
Company. The Company denies the existence of any such agreement. The former
employee alleges that he is owed money and an aggregate of 500,000 shares of
Common Stock pursuant to the supposed agreement. The Company intends to
vigorously defend against claims that may potentially be pursued by the former
employee.
The Company currently does not believe that adverse rulings in any of these
proceedings would have a material adverse effect on the Company's operations.
19
<PAGE>
As described above in "Item 1. Description of Business", the Company's
acquisition of Gameverse was based upon certain information obtained by the
Company during negotiations for that acquisition. The Company is considering
alternative courses of action that may be available to it regarding this
transaction, including potential legal remedies. At this time, the Company has
not determined what course of action, if any, may be pursued.
Item 3. Changes in and Disagreements with Accountants.
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
During the past three years, the Company has issued shares of its common
stock in the transactions described below which were not registered under the
1933 Act. These securities were issued in reliance on the exemption from
registration provided by Section 4(2) of the 1933 Act and by the provisions of
Regulation D promulgated under the 1933 Act. In relying on these exemptions, the
Company believed that the individuals and/or entities to whom the shares were
issued are either (1) sophisticated investors who were knowledgeable about the
Company's operations and financial condition at the time of receipt of the
shares and were able to evaluate the risks and merits of receipt of the shares,
or (2) accredited investors, as that phrase is defined in Rule 501 of Regulation
D. In some instances, stock was issued to certain persons in exchange for
services performed for the benefit of the Company and each of those persons
agreed to accept the shares as compensation for the designated portions of the
services they had performed. For additional information regarding shares issued
to employees and/or directors of the Company, see "Item 7. Certain Relationships
and Related Transactions". The transactions included the following:
o During the period from October 1, 1999 to October 27, 1999, an
aggregate of 924,500 shares were issued in private placement
transactions to 20 persons in exchange for aggregate cash
consideration of $188,000. In addition, an aggregate of 500,000
shares, valued by the Company at $112,500, were issued to an officer
of the Company who also is a director in exchange for
employment-related services on behalf of the Company. An additional
500,000 shares, valued by the Company at $112,500, were issued to an
officer of the Company's GRD subsidiary in exchange for the officer's
entering an employment agreement with the Company.
o During the Company's fiscal year ended September 30, 1999, an
aggregate of 9,005,000 shares were issued in private placement
transactions to 28 persons in exchange for aggregate cash
consideration of $1,513,200. Also during this period, 4,000,000
shares, valued by the Company at $750,000, were issued in connection
with the Company's acquisition of Future Com. An additional 14,687,785
shares, valued by the Company at $5,875,034, were issued in connection
with the Company's acquisition of Gameverse. For further description
of these acquisitions, see "Item 1. Description of Business". In
addition, separate issuances were made to 19 persons, none of whom was
a director or executive officer of the Company, of an aggregate of
20
<PAGE>
3,689,188 shares as compensation for services performed on behalf of
the Company. The total amount owed by the Company for these services
was $1,864,765. An additional 2,000,000 shares, valued by the Company
at $938,000, were issued to a consultant in exchange for the
consultant's commitment to enter into an agreement to provide
professional services to the Company. Finally, an aggregate of
2,449,356 shares, valued by the Company at $1,611,980, were issued to
seven employees and/or directors of the Company for employment-related
services on behalf of the Company.
o During the Company's fiscal year ended September 30, 1998, an
aggregate of 5,244,999 shares were issued in private placement
transactions to 13 persons in exchange for aggregate cash
consideration of $1,548,999. Also during this period, an aggregate of
8,765,069 shares were issued to 21 holders pursuant to an employment
agreement between the Company and Richard Wachs, a former officer and
director of the Company. In addition, separate issuances were made to
25 persons, none of whom was a director or executive officer of the
Company, of an aggregate of 3,450,200 shares as compensation for
services performed on behalf of the Company. The total amount owed by
the Company for these services was $991,737. In addition, an aggregate
of 1,215,000 shares, valued by the Company at $167,500, were issued to
13 employees and/or directors of the Company for employment-related
services on behalf of the Company.
o During the Company's fiscal year ended September 30, 1997, an
aggregate of 302,113 shares were issued in connection with the
acquisition of BCI. Also during this period, separate issuances were
made to 18 persons, none of whom was a director or executive officer
of the Company, of an aggregate of 4,139,082 shares as compensation
for services performed on behalf of the Company. The total amount owed
by the Company for these services was $1,335,335. In addition, an
aggregate of 100,000 shares, valued by the Company at $50,000, were
issued to two employees of the Company for employment-related services
on behalf of the Company.
Item 5. Indemnification of Directors and Officers.
The Delaware General Corporation Law provides for indemnification by a
corporation of costs incurred by directors, employees, and agents in connection
with an action, suit, or proceeding brought by reason of their position as a
director, employee, or agent. The person being indemnified must have acted in
good faith and in a manner that the person reasonably believed to be in or not
opposed to the best interests of the corporation.
In addition to the general indemnification section, Delaware law provides
further protection for directors under Section 102(b)(7) of the General
Corporation Law of Delaware. This section was enacted in June 1986 and allows a
Delaware corporation to include in its Certificate Of Incorporation a provision
that eliminates and limits certain personal liability of a director for monetary
damages for certain breaches of the director's fiduciary duty of care, provided
that any such provision does not (in the words of the statute) do any of the
following:
"eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
21
<PAGE>
or a knowing violation of law, (iii) under section 174 of this Title
[dealing with willful or negligent violation of the statutory provision
concerning dividends, stock purchases and redemptions], or (iv) for any
transaction from which the director derived an improper personal benefit.
No such provision shall eliminate or limit the liability of a director for
any act or omission occurring prior to the date when such provision becomes
effective. . ."
The Board is empowered to make other indemnification as authorized by the
Certificate Of Incorporation, Bylaws or corporate resolution so long as the
indemnification is consistent with the Delaware General Corporation Law. Under
the Company's Bylaws, the Company is required to indemnify its directors,
officers, and other representatives of the Company for costs incurred by each of
them in connection with any action, suit, or proceeding brought by reason of
their position as a director, officer, or representative.
22
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
FINANCIAL STATEMENT
SEPTEMBER 30, 1998
<PAGE>
ACCOUNTANTS' REPORT
Stockholders and Board of Directors
Greenleaf Technologies Corporation
8834 Capital of Texas Highway N.
Suite 150
Austin, Texas 78759
Gentlemen and Madames:
We have audited the accompanying balance sheet of Greenleaf Technologies
Corporation as of September 30, 1998 and the related statement of operations and
accumulated deficit, and cash flows for the year 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 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 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 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 as of September 30, 1998 and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and, as of September 30, 1998, has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
GERALD BRIGNOLA, CPA, PA
Hackensack, NJ 07601
October 22, 1999
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
BALANCE SHEET
September 30, 1998
ASSETS
CURRENT ASSETS
Cash in bank $ 68,423
-----------
Total Current Assets 68,423
PROPERTY & EQUIPMENT - net 145,494
OTHER ASSETS
Organization expense - net 1,833
Security deposit 6,131
-----------
7,964
-----------
TOTAL ASSETS $ 221,881
===========
LIABILITIES AND
STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 254,243
Payroll & sales tax payable 44,012
Due to related parties 9,235
-----------
Total Current Liabilities $ 307,490
CONTINGENT LIABILITIES
STOCKHOLDER'S EQUITY
Common stock, $.001 par
value 100,000,000 shares
authorized & 25,938,933
shares issued & outstanding 25,939
Additional Paid in Capital 4,070,170
Accumulated (deficit) (4,181,718)
-----------
TOTAL STOCKHOLDER'S
(DEFICIENCY) (85,609)
-----------
TOTAL LIABILITIES &
STOCKHOLDER'S DEFICIENCY $ 221,881
===========
See accountants' report and notes to financial statements
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
STATEMENT OF OEPRATIONS & ACCUMULATED DEFICIT
Year ended September 30, 1998
SELLING EXPENSES $ 305,549
OPERATING & ADMINISTRATIVE EXPENSES
Compensation 654,175
Administrative 662,943
Product & development costs 2,025,779
Interest 2,942
-----------
3,651,388
-----------
OTHER INCOME & (EXPENSE)
Interest income 9,745
Loss in investments (300,000)
-----------
(290,255)
-----------
NET LOSS (3,941,643)
Accumulated (deficit)-beginning of year (240,075)
-----------
Accumulated (deficit)-end of year ($4,181,718)
===========
Earnings per share (.152)
===========
Earnings per share - fully diluted (.152)
===========
See accountants' report and notes to financial statement
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
STATEMENT OF CASH FLOWS
Year ended September 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($3,941,643)
Adjustments to reconcile net income to
net cash provided by operating activities
Increase/(decrease) in cash:
Depreciation 13,348
Amortization 458
Security deposits (6,131)
Accounts payable 254,243
Payroll & sales tax payable 44,012
-----------
Net cash provided by operating activities (3,635,713)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (158,842)
-----------
Net cash used by investing activities (158,842)
CASH FLOWS FROM FINANCING ACTIVITIES
Officers loans payable (50,765)
Sale of stock 3,913,775
-----------
Net cash used by financing activities 3,863,010
-----------
Net increase in cash and cash equivalents 68,455
Cash - beginning of year (32)
-----------
Cash - end of year $ 68,423
===========
See accountants' report and notes to financial statement
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 1. The Company and Nature of Operations
Greenleaf Capital Corporation was incorporated in the State of
Delaware on October 9, 1986. On December 3, 1997, a certificate of
amendment was filed with the State of Delaware changing the name of
the corporation to Greenleaf Technologies Corporation.
Greenleaf Technologies Corporation (GTC) is a "High Tech Business
Solutions Provider." GTC provides new marketing paradigms and enabling
technologies to create new revenue possibilities for its customers.
Examples include GTC's "Digiguard" applied to the OEM distribution of
encrypted games, interactive games linked to commercial TV shows, and
GTC's Musiclock product applied to the Internet distribution of new
song releases.
Note 2. Summary of Significant Accounting Policies
(A) This summary of significant accounting policies of Greenleaf
Technologies Corporation is presented to assist in understanding
the Company's financial statements. The financial statements and
notes are representations of GTC's management, who is responsible
for the integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
(B) Furniture and Depreciation: Furniture and equipment are carried
at cost. Depreciation is computed on the straight-line basis over
periods of five to seven years, which corresponds to the useful
lives of the assets.
(C) Earnings Par Share: Computed by dividing the net loss by the
weighted average number of shares outstanding during the year.
Common stock equivalents have not been included in the
earnings-per-share computation because of the anti-dilutive
effect.
(D) Research and Development costs: The Company charges research and
development costs, which are not incurred in conjunction with
contractual obligations to expense as incurred. During the year
ended September 30, 1998, $2,025,779 was charged to
Administrative Expense, Product and Development Costs.
(E) Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that effect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates during the reporting periods.
Actual results could differ from these estimates.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 2. Summary of Significant Accounting Policies (continued)
(F) Amortization:
The organization expenses of GTC are being amortized over a five
year term using the straight-line method.
(G) Unconsolidated Subsidiaries:
The Company accounts for its investments in consolidated
subsidiaries on the equity method. All intercompany transactions
are eliminated. Losses beyond the initial investment are not
recognized as it is not the Company's obligation to fund such
losses.
(H) Advertising and Promotion:
GTC expenses advertising and promotion costs as they are
incurred. Advertising and promotion expenses for the year ended
September 30, 1998 were $31,487.
Note 3. Basis of Presentation: The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. As shown in the financial statements, the Company has
experienced substantial operating losses. The continuation of the
Company as a going concern is dependent on its ability to generate
sufficient cash flows to meet its obligations and sustain its
operations.
Management of the Company has identified and intends to pursue new
business opportunities, which it believes will be profitable and plans
to infuse new equity capital into the Company. There are no
assurances, however, that management of the Company will be successful
with either the new business opportunities or raising new equity
capital.
Note 4. Deferred Income Taxes: Based on management's present assessment, the
Company has not yet determined it to be more likely than not that a
deferred long term tax asset of $1,425,013 attributable to the future
utilization of $4,181,718 of net operating loss carryforwards as of
September 30, 1998, will be realized. Accordingly, the Company has
provided a 100% allowance against the deferred tax asset in the
financial statements as of September 30, 1998. The Company will
continue to review this valuation allowance and make adjustments as
appropriate. The net operating loss carryforwards will expire as
follows:
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 4. Deferred Income Taxes - (continued)
Year Amount
---- ------
2012 $ 84,854
2013 1,340,159
----------
Total $1,425,013
==========
Note 5. Equipment and Leasehold Improvements:
Equipment and leasehold improvements are carried at historical cost.
Expenditures for maintenance and repairs are charged against
operations. Renewals and betterments that materially extend the life
of assets are capitalized. Depreciation of equipment and amortization
of leasehold improvements is calculated by the straight-line method
for financial reporting purposes at rates based on the following
estimated useful lives.
Years
-----
Office Equipment 5
Furniture and Fixtures 7
Leasehold Improvements 7
The modified acceleration cost recovery system is used for federal
income tax purposes.
Equipment and leasehold improvements are summarized by major
classifications as follows:
September 30, 1998
------------------
Office Equipment $ 108,207
Office Furniture 46,177
Leasehold Improvements 4,459
---------
158,843
Less Accumulated Depreciation (13,349)
---------
$ 145,494
=========
Note 6. Leasing Arrangements:
The Company conducts its Austin operations from facilities that are
leased under a five year noncancelable operating lease from Colina
West Limited with 56 months remaining before expiring on June 10,
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 6. Leasing Arrangements - (continued)
2003. The monthly minimum rental amount to be paid to Colina West
Limited is $12,405.50. The monthly minimum rental obligation escalates
after each anniversary date, beginning with July 1, 1999. After July
1, 1999, the rental obligation amount will be $12,982.50 per month.
After July 1, 2000, the rental obligation amount will be $13,559.50
per month. After July 1, 2002, the rental obligation amount will be
$13,848.00 per month.
The following is a schedule of future minimum rental payments required
under the above operating lease as of September 30, 1998.
Year Ended
September 30 Amount
------------ ------
1999 $ 150,597
2000 157,521
2001 162,714
2002 163,580
2003 124,632
-----------
$ 759,044
===========
The Company conducts its New Jersey operations from facilities that
are leased under the three year noncancelable operating lease from MRC
Holdings, Inc. with 30 months remaining before expiring on March 15,
2001. The monthly minimum rental obligation amount to be paid to MRC
Holdings, Inc. is $5,587.58
The following is a schedule of future minimum rental payments required
under the above operating lease as of September 30, 1998.
Year Ended
September 30 Amount
------------ ------
1999 $ 67,051
2000 67,051
2001 33,525
-----------
$ 167,627
===========
GTC executed an operating lease with Great America Leasing Corporation
for a Toshiba 1710 copier at the Austin office. The terms of the lease
call for 36 monthly rental payments of $95.37 including tax. The lease
was executed March 3, 1998. The following is a schedule of future
minimum rental payments required under the above operating lease as of
September 30, 1998.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 6. Leasing Agreements - (continued)
Year Ended
September 30 Amount
------------ ------
1999 $ 1,144.44
2000 1,144.44
2001 572.22
------------
$ 2,861.10
============
GTC executed an operating lease with SecurityLink Corporation for a
five zone security system and monitoring services at the Austin
office. The terms of the lease call for 60 monthly rental payments of
$25.70 including tax. The lease was executed May 1, 1998. The
following is a schedule of future minimum rental payments required
under the above operating lease of September 30, 1998.
Year Ended
September 30 Amount
------------ ------
1999 308.40
2000 308.40
2001 308.40
2002 308.40
2003 205.60
------------
$ 1,439.20
============
Note 7. Commitments and Contingent Liabilities:
(A) The Company has employment contracts with the following directors
and stockholders:
Annual Date of Length of
Position Name Compensation Agreement Time
- -------- ---- ------------ --------- ----
Off./Dir. R.E.Wachs * $96,000 12/15/97 5 Yrs. to 12/15/2002
Off./Dir. C.J.Webster * $96,000 12/15/97 5 Yrs. to 12/15/2002
Director L. Berg * $96,000 12/15/97 5 Yrs. to 12/15/2002
Employee L T.Berg * $65,000 02-01-99 4 Yrs. to 01/31/2003
*Stockholders
Each of the Directors is also entitled to be reimbursed for proper
business expenses, and any other benefits offered by the Company,
either currently existing or adopted at a later date.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 7. Commitments and Contingent Liabilities - (continued)
These benefits will include, but not limited to, health and accident
insurance, life insurance and stock option plans.
(B) Under the terms of the five year noncancelable operating
lease with Colina West Limited, GTC has provided a Letter of
Credit in the amount of $84,130 drawn on Nations Bank of
Texas, NA. Conditioned upon GTC's performance of the lease
without default. Such letter of credit shall be reduced by
$16,826 per year at the anniversary of the lease term. The
amount of $13,271 of the Letter of Credit shall serve as
security deposit.
Nations Bank of Texas, NA has guaranteed the Letter of
Credit pursuant to GTC maintaining a certificate of deposit
in equal amount of the Letter of Credit. The $84,130
certificate of deposit is reported in cash and equivalents.
Note 8. Legal Matters:
(A) Corporate Express, Inc. v/s Greenleaf Technologies, Inc. Case No
716.570 - Civil Court Harris County, Texas
Legal matter involves the collection of $14,400 for office
furnishings provided to GTC offices located in Austin, Texas.
Matter was settled on August 17, 1999 in which the Company agreed
to pay Corporate Express $14,400 over a six month period at
$2,400 per month, beginning September 15, 1999. The amount of
$14,400 was recorded in accounts payable as of September 30,
1998.
(B) Elizabeth Xan Wilson vs. Greenleaf Capital Corporation and
Related Corporations and Corporate Officers Leonard Berg and
Nicholas Soriano. Case No. 97-04423 - Judicial District Court
Travis County, Texas
Legal matter involves the Plaintiff, Elizabeth Xan Wilson,
claiming that National Capital Corporation (NCC) (previously a
wholly owned subsidiary of Greenleaf Technologies, Inc.) and
Nicholas Soriano (President of the former NCC) fraudulently
converted over $80,000 from her in a fraudulent lending scheme.
According to counsel, exposure for Nicholas Soriano is great, but
counsel is unable to assess Greenleaf's liability. Since the
claim was partially settled by the sale of Mr. Soriano's stock by
the Bankruptcy Trustee in a separate matter, counsel anticipates
that Greenleaf's liability could be approximately $30,000.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 8. Legal Matters - (continued)
(C) Darrel and Gabriel McEver vs. Greenleaf.
Case No. 99-00490 District Court of Travis County, Texas
Legal matter involving Greenleaf Technologies Corporations
refusal to issue stock and severance benefits pursuant to
employment agreement with Darrel and Gabriel McEver. Counsel is
unable to express an opinion on the outcome of the law suit as of
the date of the financial statements. The case is set for trial
on March 27, 2000. No provision for this matter has been provided
in the financial statements for the year ended September 30,
1998.
Note 9. Acquisitions:
(A) On July 17, 1998, Greenleaf Technologies Corporation formed a
wholly owned subsidiary, Greenleaf Research and Development,
Inc., which was incorporated in the State of Delaware. The
Company was inactive and had no assets as of September 30, 1998.
(B) On April 13, 1998, 500 shares of common stock of Net Home Media,
Inc. was acquired by Greenleaf Technologies Corporation. This
represented a 33-1/3 percent ownership interest at a cost of
$300,000. Net Home Media, Inc. ceased doing business and, as of
September 30, 1998, the stock had no market value. The entire
investment of $300,000 was deemed worthless and charged to
expense.
Note 10. Due to Related Parties:
Notes payable have been generated by transactions with related parties
which are detailed as follows:
Stockholders, Directors and Officers $9,235
======
Promissory Notes are dated September 30, 1998, payable on demand at an
interest rate of 6% per annum.
Note 11. Issuance of Common Stock:
On November 23, 1988, the principal shareholders of Greenleaf Capital
Corporation (now defunct) who owned directly and beneficially a total
of 1,177,250 shares of common stock at $.001 par value, sold 971,250
shares to three purchasers. The three purchasers, all of whom became
directors, and two of whom continued to be directors at September 30,
1998, subsequently paid Greenleaf Technologies Corp. $14,065 or $.0145
per share for 971,250 shares of common stock.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 11. Issuance of Common Stock - (continued)
The balance of 206,500 shares were sold as part of a unit at $1.00 per
unit pursuant to provisions of Regulation D, Rule 504 as promulgated
under the Securities Act of 1933, as amended. Each unit consisted of
one share of common stock and two redeemable common stock purchase
warrants: the A & B Warrants. The "A" Warrant entitling the holder to
purchase one share of Common Stock at a price of $1.25 per share; the
"B" Warrant entitling the holder to purchase one share of Common Stock
at a price of $1.50 per share.
Note 12. Other Matters
Management has informed us that they anticipate no problems with their
computer system and the year 2000. They informed us that their current
computer software will recognize a date using (00) as the year 2000
and not 1900. Therefore, Management does not anticipate any
expenditures related to this situation.
Note 13. Subsequent Events
Acquisition/Merger/Joint Ventures
---------------------------------
(A) October 7, 1998 Greenleaf Technologies Corporation announced that
the Company finalized an agreement with Riverside Group, Inc.
based in Jacksonville Florida, whereby Greenleaf has acquired
100% of the common stock of Riverside's wholly owned subsidiary
GameVerse, Inc. in exchange for 14,687,585 common shares of
Greenleaf Technologies Corporation as well as options to purchase
5,733,333 shares of Greenleaf common stock at $.25 per share and
options to purchase 1,581,249 shares of Greenleaf common stock at
$.15 per share. The options expire on September 30, 1999.
GameVerse is involved in online game development and web design.
Greenleaf subsequently has determined that the transaction is not
valid and is attempting to rescind or renegotiate it.
(B) February 23, 1999 - Greenleaf Technologies announced that the
Company signed an agreement with Accolade, Inc. and Warner
Advanced Media Operations, a business unit of Time-Warner, Inc.
The joint venture will be called Warner/Accolade/Greenleaf. The
three companies will market a multiple of computer games on a
single DVD disk. The new joint venture will be able to distribute
the Discs to the personal computer Original Equipment
Manufacturers Market.
(C) August 30, 1999 - Greenleaf Technologies Corporation and
Broadcast DVD announced a three year exclusive partnership to
include Film-Fest, a video magazine, that takes viewers to the
best film festivals in the world.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 13. Subsequent Events - (continued)
(D) September 1999 - Greenleaf Technologies Corporation entered into
an agreement to acquire all the outstanding shares of Future Com
South Florida, Inc. in exchange for 4,000,000 shares of
Greenleaf's restricted common stock. Future Com intends to pursue
acquisition of radio licenses and systems and has already entered
into agreements to acquire four SMR licenses in the 220-222 MHz
range at the purchase price of $175,000 per license. The purchase
price for each license is to be paid in the form of 350,000
shares of restricted common stock. In addition, Greenleaf has
agreed to issue warrants to purchase the same number of shares at
$.50 per share until November 4, 2000. Future Com also has
entered into an agreement to acquire a dedicated communication
satellite license at a purchase price of $687,500, which price
includes amounts to be paid in order to eliminate an encumbrance
on the license. The purchase price is to be paid in the form of
1,375,000 shares of Greenleaf restricted common stock, plus
warrants to purchase 75,000 shares of commons tock at an exercise
price of $.50 per share. Greenleaf also agreed to issue, to the
holder of the encumbrance, options to purchase 1,300,000 shares
of common stock at a price of $.50 per share until November 4,
2000. The Greenleaf shares, options and warrants to be issued in
connection with the SMR licenses and satellite license will be
delivered to the sellers and the holder of the encumbrance when
the Federal Communications Commission approves the transfer of
the respective licenses to Future Com.
Both officers of Future Com, who also were the only shareholders
of Future Com, entered into employment agreements and will
receive annual compensation of $96,000 plus automobile expenses
of $850 per month.
In addition to the purchase price, Greenleaf has agreed to repay
$300,000 owed by Future Com pursuant to two promissory notes.
These notes accrue interest at the rate of eight percent per year
and payment of all accrued and unpaid principal and interest is
due and payable on demand at any time after November 4, 2004. In
addition, the notes provide that any payments on the notes prior
to November 4, 2004 will be made only at such time that the Board
Of Directors of Future Com determines that sufficient funds are
available for payment. Also, the existing employees of Future Com
were issued options to purchase 600,000 shares of Greenleaf's
common stock at $.50 per share until November 4, 2000.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes to Financial Statements
September 30, 1998
Note 13. Subsequent Events - (continued)
(E) Legal Matters:
Case No. 99-09044, Judicial Court Travis County, Texas
Kennith McGowan vs. Richard Wachs.
On August 5, 1999, three individual shareholders of a non-active
corporation filed suit against an officer, Richard Wachs, two
other employees and corporate counsel. The cause of action
alleges that the above individual misappropriated assets and
trade secrets belonging to the non-active corporation.
Plaintiff's seek unspecified damages and request an injunction
seeking to prevent any further use of the converted assets and
trade secrets. Counsel does not expect that any significant
liability will be imposed on Greenleaf Technologies Corporation
or its officers and employees.
(F) During the next fiscal year ending September 30, 1999, the
Company issued an additional 8,526,152 options for services
rendered.
<PAGE>
Daniel J. Bates
Certified Public Accountant
4131 Spicewood Springs Rd., Suite D-8
Austin, Texas 78759
(512) 346-8833 (512) 346-3377 Fax
[email protected]
Member: American Institute of Certified Public Accountants and
Texas Society of Certified Public Accountants
To the Board of Directors
Greenleaf Technologies Corporation
Austin, Texas
I have compiled the accompanying balance sheet of Greenleaf Technologies
Corporation (a corporation) as of June 30, 1999 and the related statements of
income and remained earnings and cash flows for the nine months then ended in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. I have not audited or
reviewed the accompanying financial statements and accordingly, do not express
an opinion or any other form of assurance on them.
/s/ Daniel J. Bates
September 2, 1999
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
BALANCE SHEET
June 30, 1999
ASSETS
CURRENT ASSETS
Cash and Equivalents $ 87,269
Prepaid Expense 19,490
Deferred Tax Asset 3,724,478
------------
TOTAL CURRENT ASSETS 3,831,237
EQUIPMENT AND LEASEHOLD IMPROVEMENTS 126,547
OTHER ASSETS
Organization Expense 1,719
Notes Receivable 2,734,055
Product Development 42,718
Security Deposits 3,501
Investment in Greenleaf R&D, Inc. 15,000
------------
TOTAL OTHER ASSETS 2,796,993
------------
TOTAL ASSETS $ 6,754,777
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 360,694
Payroll Taxes Payable 131,077
Loans From Shareholders 173,945
------------
TOTAL CURRENT LIABILITIES 665,716
DEFERRED INCOME TAXES 1,841
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value. 100,000,000 shares
authorized and 63,261,530 shares issued
and outstanding 63,262
Additional Paid In Capital 16,530,032
Retained Earnings (10,506,074)
------------
6,087,220
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,754,777
============
See accompanying notes accountant's report
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
INCOME STATEMENT
Nine Months Ended June 30, 1999
SELLING EXPENSES $ 73,489
OPERATING AND ADMINISTRATIVE EXPENSES
Compensation 657,810
Administrative 3,449,738
Interest 135
-----------
4,107,683
-----------
OTHER INCOME AND EXPENSE
Interest Income 4,337
-----------
NET INCOME BEFORE TAXES (4,176,835)
INCOME TAXES
Current (1,337,133)
DISCONTINUED OPERATIONS
Loss on Abandonment of Game Verse, Inc., less
Applicable income tax of $1,997,512 (3,877,522)
-----------
NET LOSS $(6,717,224)
===========
See accompanying notes accountant's report
<PAGE>
<TABLE>
<CAPTION>
GREENLEAF TECHNOLOGIES CORPORATION
STATEMENT OF CHANGES IN RETAINED EARNINGS
June 30, 1999
<S> <C>
BALANCE, September 30, 1998 $ (3,788,850)
------------
COMPREHENSIVE INCOME
Net Income (2,839,702)
Other comprehensive income, net of tax:
Loss on abandonment of Game Verse, Inc., Less
applicable $1,997,512 income tax benefit (3,877,522)
------------
TOTAL COMPREHENSIVE INCOME (6,717,224)
BALANCE, June 30, 1999 $(10,506,074)
============
See accompanying notes accountant's report
</TABLE>
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
STATEMENT OF CASH FLOWS
Nine Months Ended June 30, 1999
Cash flows from operating activities
Net Income $ (2,839,702)
------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 20,377
(Increase) decrease in prepaid expenses 15,000
(Increase) decrease in other assets (42,317)
Increase (decrease) in accounts payable 187,162
Deferred income taxes (3,334,645)
(Gain) loss on disposal of property 3,877,522
------------
Total adjustments (7,031,945)
------------
Net cash provided (used) by operating activities (9,871,647)
------------
Cash flow from investing activities:
Cash payments for the purchase of property (21,430)
Cash payments for investments (15,000)
------------
Net cash provided (used) by investing activities (36,430)
Cash flow from financing activities:
Proceeds from issuance of common stock 12,497,185
Net borrowings from stockholders (2,569,345)
------------
Net cash provided (used) by financing activities 9,927,840
------------
Net increase (decrease) in cash and equivalents 19,763
Cash and equivalents, begining of year 67,506
------------
Cash and equivalents, end of year $ 87,269
============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 135
Income Tax $ (1,337,133)
See accompanying notes accountant's report
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes To Financial Statements
Nine Months Ended June 30, 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Greenleaf Technologies
Corporation (GLFC) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations of
the GLFC's management, who is responsible for the integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
Nature of Operations
- --------------------
Greenleaf Technologies Corporation (GLFC) is a "High Tech Business Solutions
Provider." GLFC provides new marketing paradigms and enabling technologies to
create new revenue possibilities for its customers. Examples include GLFC's
Digiguard(TM)applied to the OEM distribution of encrypted games, interactive
games linked to commercial TV shows, and GLFC's MusicLock(TM)product applied to
the Internet distribution of new song releases.
Use of 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 financial statements and
reported revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Depreciation
- ------------
GLFC's equipment and leasehold improvements are depreciated using primarily the
straight-line method.
Amortization
- ------------
The organization expenses of GLFC will be amortized over a five-year term using
the straight-line method.
Advertising and Promotion
- -------------------------
GLFC expenses advertising and promotion costs as they are incurred. Advertising
and promotion expenses for the nine months ended June 30, 1999 were $13,924.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes To Financial Statements
Nine Months Ended June 30, 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Deferred Income Taxes
- ---------------------
Income taxes are provided for the tax effects on transactions reported in
financial statements and consist of taxes currently due plus deferred taxes
related primarily to the difference between bases of certain assets and
liabilities, depreciation of property and equipment, and charitable
contributions, for financial reporting and income tax reporting. The deferred
taxes represent the future tax return consequences of those differences, which
will either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes also are recognized for operating losses
that are available to offset future federal income taxes.
For income tax reporting, GLFC uses accounting methods that recognize
depreciation sooner than for financial statement reporting. As a result, the
basis of property and equipment for financial reporting exceeds its tax basis by
the cumulative amount that accelerated depreciation exceeds straight-line
depreciation. Deferred income taxes have been recorded for the excess which will
be taxable in future periods through reduced depreciation deductions for tax
purposes.
NOTE B - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are carried at historical cost.
Expenditures for maintenance and repairs are charged against operations.
Renewals and betterments that materially extend the life of assets are
capitalized. Depreciation of equipment and amortization of leasehold
improvements is calculated by the straight-line method for financial reporting
purposes at rates based on the following estimated useful lives:
Years
-----
Office Equipment 5
Furniture and Fixtures 7
Leasehold improvements 7
The modified accelerated cost recovery system is used for federal income tax
purposes.
Equipment and leasehold improvements are summarized by major classifications as
follows:
June 30, 1999
-------------
Office Equipment $ 102,421
Office Furniture 50,521
Leasehold Improvements 4,532
---------
157,474
Less Accumulated Depreciation (30,927)
---------
$ 126,547
=========
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes To Financial Statements
Nine Months Ended June 30, 1999
NOTE C - INCOME TAXES
Operating Loss
- --------------
The Company, for the nine months ended June 30, 1999 has loss carryforwards
totaling $10,506,074 that may be offset against future taxable income.
Components - Current and Deferred
- ---------------------------------
The provision for income taxes consist of the following components:
1998
----
Current taxes $ 0
Deferred (1,337,133)
-----------
$(1,337,133)
===========
Deferred tax assets and liabilities consist of the following:
1998
----
Deferred tax liability $ 1,841
Deferred tax asset 3,724,478
-----------
$ 3,722,637
===========
NOTE D - LEASING ARRANGMENTS
The Company conducts its Austin operations from facilities that are leased under
a five-year noncancelable operating lease from Colina West Limited with 47
months remaining before expiring on June 30, 2003. The monthly minimum rental
obligation amount to be paid to Colina West Limited is $12,405.50. The monthly
minimum rental obligation escalates after each anniversary date, July 1, 1999.
After July 1, 1999, the rental obligation amount will be $12,982.50. After July
1, 2000, the rental obligation amount will be $13,559.50. After July 1, 2002,
the rental obligation amount will be $13,848.00.
The following is a schedule of future minimum rental payments required under the
above operating lease as of June 30, 1999:
Year Ended
September 30 Amount
------------ ------
1999 $ 38,948
2000 157,521
2001 162,714
2002 163,580
2003 $ 124,532
---------
$ 647,395
=========
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes To Financial Statements
Nine Months Ended June 30, 1999
NOTE D - LEASING ARRANGEMENTS - continued
The Company formerly conducted its New Jersey operations from facilities that
are leased under a three year noncancelable operating lease from MRC Holdings,
Inc. with 21 months remaining before expiring on March 15, 2001. The monthly
minimum rental obligation amount to be paid to MRC Holdings, Inc. is $5,587.58.
The facilities are currently subleased with no monthly payment shortage
obligation by the Company. The current tenants pay the monthly minimum rental
obligation directly to MRC Holdings, Inc.
The following is a schedule of contingent future minimum rental payments
required under the above operating lease as of June 30, 1999
Year Ended
September 30 Amount
------------ ------
1999 $ 16,763
2000 67,061
2001 $ 33,525
---------
$ 117,339
=========
NOTE D - LEASING ARRANGEMENTS - continued
GLFC executed an operating lease with GreatAmerica Leasing Corporation for a
Toshiba 1710 copier at the Austin office. The terms of the lease call for 35
monthly rental payments of $95.37 including tax The lease was executed March 3,
1998. The following is a schedule of future minimum rental payments required
under the above operating lease as of June 30, 1999.
Year Ended
September 30 Amount
------------ ------
1999 $ 286.11
2000 1,144.44
2001 572.22
---------
$2,002.77
=========
GLFC executed an operating lease with SecurityLink Corporation for a five zone
security system and monitoring services at the Austin office. The terms of the
lease call for 60 monthly rental payments of $25.70 including tax. The lease was
executed May 1, 1998. The following is a schedule of future minimum rental
payments required under the above operating lease as of June 30, 1999.
Year Ended
September 30 Amount
------------ ------
1999 $ 77.10
2000 308.40
2001 308.40
2002 308.40
2003 $ 205.60
---------
$1,207.90
=========
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes To Financial Statements
Nine Months Ended June 30, 1999
NOTE E - COMMITMENTS AND CONTINGENT LIABILITIES
As June 30, 1999, there were three lawsuits or claims pending against the
Company In the opinion of management, the ultimate liabilities, if any,
resulting from such lawsuits or claims, will not materially affect the financial
position of the Company.
NOTE F - OTHER OBLIGATIONS
Under the terms of the five year noncancelable operating lease with Colina West
Limited, GLFC has provided a Letter of Credit in the amount of $84,130 drawn on
NationsBank of Texas, NA. Conditioned upon GLFC's performance of the lease
without default, such letter of credit shall be reduced by $16,826 per year at
the anniversary of the lease term. The amount $13,271 of the letter of credit
shall serve as security deposit. NationsBank of Texas, NA has guaranteed the
letter of credit pursuant to GLFC maintaining a certificate of deposit in equal
amount of the letter of credit. The $84,130 certificate of deposit is reported
in cash and equivalents.
NOTE G - SUBSEQUENT EVENTS
(1) On October 7, 1998, GLFC finalized an agreement with Riverside Group, Inc.,
based in Jacksonville, Florida, whereby GLFC agreed to acquire one hundred
(100) percent of the common stock of Riverside Group, Inc.'s wholly owned
subsidiary GameVerse, Inc. in exchange for 14,587,585 shares of GLFC's
common stock, options to acquire 5,733,333 shares at $.25 per share, and
options to acquire 1,581,249 shares at $.15 per share. Management of GLFC
contends the transaction was improperly entered into and intends to seek
legal remedies in order to have the transaction rescinded.
(2) September 1999 - Greenleaf Technologies Corporation entered into an
agreement to acquire all the outstanding shares of Future Com South
Florida, Inc. in exchange for 4,000,000 shares of Greenleaf's restricted
common stock. Future Com intends to pursue acquisition of radio licenses
and systems and has already entered into agreements to acquire four SMR
licenses in the 220-222 MHz range at the purchase price of $175,000 per
license. The purchase price for each license is to be paid in the form of
350,000 shares of restricted common stock. In addition, Greenleaf has
agreed to issue warrants to purchase the same number of shares at $.50 per
share until November 4, 2000. Future Com also has entered into an agreement
to acquire a dedicated communication satellite license at a purchase price
of $687,500, which price includes amounts to be paid in order to eliminate
an encumbrance on the license. The purchase price is to be paid in the form
of 1,375,000 shares of Greenleaf restricted common stock, plus warrants to
purchase 75,000 shares of commons tock at an exercise price of $.50 per
share. Greenleaf also agreed to issue, to the holder of the encumbrance,
options to purchase 1,300,000 shares of common stock at a price of $.50 per
share until November 4, 2000. The Greenleaf shares, options and warrants to
be issued in connection with the SMR licenses and satellite license will be
delivered to the sellers and the holder of the encumbrance when the Federal
Communications Commission approves the transfer of the respective licenses
to Future Com.
Both officers of Future Com, who also were the only shareholders of Future
Com, entered into employment agreements and will receive annual
compensation of $96,000 plus automobile expenses of $850 per month.
<PAGE>
GREENLEAF TECHNOLOGIES CORPORATION
Notes To Financial Statements
Nine Months Ended June 30, 1999
NOTE G - SUBSEQUENT EVENTS - continued
In addition to the purchase price, Greenleaf has agreed to repay $300,000
owed by Future Com pursuant to two promissory notes. These notes accrue
interest at the rate of eight percent per year and payment of all accrued
and unpaid principal and interest is due and payable on demand at any time
after November 4, 2004. In addition, the notes provide that any payments on
the notes prior to November 4, 2004 will be made only at such time that the
Board Of Directors of Future Com determines that sufficient funds are
available for payment. Also, the existing employees of Future Com were
issued options to purchase 600,000 shares of Greenleaf's common stock at
$.50 per share until November 4, 2000.
<PAGE>
PART III
--------
Items 1 and 2. Index to and Description of Exhibits.
The following is a complete list of Exhibits filed as part of this
Registration Statement, which Exhibits are incorporated herein.
Number Description
- ------ -----------
2.1 Agreement with Cybermax Tech, Inc. regarding acquisition of
Gameverse, Inc.
2.2 Stock Exchange Agreement regarding acquisition of Future Com
South Florida, Inc.
3.1 Certificate Of Incorporation filed with the Delaware Secretary Of
State on October 9, 1986.
3.2 Certificate Of Amendment to the Certificate of Incorporation
filed with the Delaware Secretary Of State on December 3, 1997.
3.3 Amended And Restated Bylaws
4.1 Specimen Common Stock Certificate
10.1 License And Revenue Sharing Agreement regarding BroadcastDVD,
Inc.
10.2 License Agreement regarding Accolade, Inc. and Warner Advanced
Media Operations
11.1 Statement re: computation of per share earnings- Incorporated by
reference to the financial statements included in Part F/S of
this General Form For Registration Of Securities Of Small
Business on Form 10-SB
21.1 Subsidiaries of the Registrant (all are 100% owned):
Greenleaf Research And Development, Inc., a Delaware
corporation
Future Com South Florida, Inc., a Florida corporation
Gameverse, Inc., a Florida corporation.
24.1 Power of Attorney (included on signature page of this
Registration Statement)
27 Financial Data Schedule
23
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
GREENLEAF TECHNOLOGIES CORPORATION
Date: November 12, 1999 By: /s/ Leonard Berg
----------------- ---------------------------------------
Leonard Berg, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and directors
of the Registrant, by virtue of their signatures appearing below to this
Registration Statement hereby constitute and appoint Leonard Berg and
Christopher J. Webster, and each or either of them, with full power of
substitution, as attorney-in-fact in their names, place and stead to execute any
and all amendments to this Registration Statement in the capacities set forth
opposite their name and hereby ratify all that said attorney-in-fact and each of
them or his substitutes may do by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, the
Registration Statement was signed by the following persons in the capacities and
on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Leonard Berg
- -------------------------- Chairman Of The Board; Chief November 12, 1999
Leonard Berg Executive Officer; President;
and Director
/s/ Christopher J. Webster
- -------------------------- Executive Vice President; November 12, 1999
Christopher J. Webster and Director
/s/ William J. Hubert
- -------------------------- Secretary; and Treasurer November 12, 1999
William J. Hubert
24
EXHIBIT 2.1
Agreement
dated as of
September 30, 1998
between
Cybermax Tech, Inc.
and
Greenleaf Technologies Corporation
with respect to the shares of common stock of
Gameverse, Inc.
<PAGE>
TABLE OF CONTENTS
Page
----
Cover 1
Table of Contents 2
Section 1 Exchange of Stock...............................................3
Section 2 Closing.........................................................3
Section 3 Representations, Warranties and Covenants of Shareholder........3
Section 4 Representations and Warranties of GLFC.........................10
Section 5 Conditions Precedent to Obligations of GLFC....................14
Section 6 Conditions Precedent to Obligations of Shareholder.............15
Section 7 Additional Covenants by Shareholder............................16
Section 8 Additional Covenants by GLFC...................................17
Section 9 Indemnity Obligation...........................................18
Section 10 Miscellaneous Provisions.......................................19
Exhibit A Shares Owned by Cybermax Tech, Inc.
Exhibit B Gameverse liabilities
Exhibit C Gameverse litigation
Exhibit D Gameverse liens
Exhibit E Gameverse Real Property
Exhibit F Gameverse Contracts
Exhibit G Gameverse Bank Account
Exhibit H Gameverse Insurance
Exhibit I Gameverse Labor Matters
Exhibit J Gameverse Intellectual Property
Exhibit K Gameverse Benefit Plans
Exhibit L GLFC Securities Outstanding
Exhibit M GLFC Liabilities
Exhibit N GLFC Litigation
Exhibit O GLFC Tax Matters
Exhibit P GLFC Liens
Exhibit Q GLFC Real Property
Exhibit R GLFC Related Party Matters
Exhibit S Transition Services Agreement
Exhibit T Registration Rights Agreement
Exhibit U Option Agreement A
Exhibit V Option Agreement B
2
<PAGE>
AGREEMENT
AGREEMENT ("Agreement"), effective as of September 30, 1998, between
Greenleaf Technologies Corporation, a Delaware corporation ("GLFC"), and
Cybermax Tech., Inc., a Florida corporation and wholly owned subsidiary of
Riverside Group, Inc., also a Florida corporation ("Shareholder"), being the
owner of all of the issued and outstanding voting stock of Gameverse, Inc., a
Florida corporation ("Gameverse").
WHEREAS, GLFC wishes to acquire and the Shareholder wishes to transfer all
of the issued and outstanding voting stock of Gameverse.
NOW, THEREFORE, GLFC and the Shareholder adopt this plan of reorganization
and agree as follows:
Section 1. Exchange of Stock.
1.1 Number of Shares. The Shareholder agrees to transfer to GLFC at the Closing
1,000 shares of voting common stock of Gameverse, $.01 par value, hereinafter
referred to as ('Shares"). In exchange, GLFC agrees to issue to Shareholder at
the Closing 14,687,585 shares of voting common stock of GLFC hereinafter to be
referred to as ("GLFC Shares") and an Option in the form of Exhibit U, ("Option
A") hereto and an Option in the form of Exhibit V hereto ("Option B") at the
Closing.
1.2 Deliver of Certificates by Shareholder. The transfer of Gameverse Shares by
the Shareholder shall be effected by the delivery to GLFC at the Closing of
certificates representing the transferred Shares endorsed in blank or
accompanied by stock powers executed in blank, with all signatures guaranteed by
a national bank and with all necessary transfer tax and other revenue stamps.
Affixed at the Shareholder's expense. This issuance of GLFC shares, Option A and
Option B by GLFC shall be effected by the delivery to Shareholder at the Closing
of certificates issued in the Shareholder's name.
1.3 Further Assurances. At the Closing and from time to time thereafter, the
Shareholder and GLFC shall execute such additional instruments and take such
other action as either of them may reasonably request of the other in order to
more effectively transfer, assign or issue, as the case may be, the transferred
stock to Shareholder or GLFC and to confirm the relevant party's title thereto.
Section 2. Closing. The closing for the exchange of the Shares for the GLFC
Shares (the "Closing") shall take place at the offices of GLFC located at 75
Lincoln Highway, Iselin, New Jersey 08830 and is to be effective as of September
30, 1998. The date and time of the closing determined in accordance with the
preceding provisions of this Section 3 are herein referred to as the "Closing
Date".
Section 3. Representations, Warranties and Covenants of Shareholder.
Shareholder represents and warrants to, and covenants with, GLFC as follows:
3
<PAGE>
A. Title to the Shares. Shareholder is the lawful record and beneficial
owner of the Shares, as indicated on Exhibit A hereto; the Shares so owned by
the Shareholder are free and clear of all security interests, liens,
encumbrances, claims and equities of every kind, except as created by this
Agreement, and are duly authorized, validly issued and outstanding, fully paid
and nonassessable.
B. No Other Equity Securities Issued. On the closing date hereof, the
issued and outstanding equity securities of GAMEVERSE of all classes and kinds
consist exclusively of the Shares.
C. Capacity of and Execution by Shareholder. The President and Secretary of
the Shareholder have full legal power and capacity to execute, deliver and
perform this Agreement, and to deliver certificates representing the Shares
owned by Shareholder as indicated on Exhibit A hereto, and have full legal power
to exchange the Shares with GLFC in accordance with this Agreement. Without
limiting the generality of the foregoing, no authorization, consent or approval
or other order or action of or filing with any court, administrative agency, or
other governmental or regulatory body or authority is required for the execution
and delivery by the Shareholder of this Agreement or Shareholders' consummation
of the transactions contemplated hereby; this Agreement has been duly and
validly executed and delivered by Shareholder and constitutes the valid and
binding obligation of Shareholder enforceable in accordance with its terms,
except as its enforceability is limited by bankruptcy, reorganization,
insolvency, moratorium and similar laws presently or hereafter in effect
affecting the enforcement of creditors' rights and generally and subject to
general principles of equity; and transfer and delivery of the Shares to be
exchanged by Shareholder with GLFC hereunder in accordance with this Agreement
will vest good title to the Shares in GLFC free and clear of all security
interests, liens, encumbrances, claims and equities of every kind other than
restrictions on disposition contained in applicable federal and state securities
laws.
D. Other Right to Acquire Shares. Except as set forth on Exhibit A hereto,
neither the Shareholder nor GAMEVERSE is a party to any contract or agreement,
oral or written, other than this Agreement whereby, it has granted to anyone any
right, whether absolute, contingent or otherwise, to purchase, obtain or acquire
any rights in any securities of Gameverse of any class or kind now outstanding
or to be issued, including the Shares.
E. Corporate Existence, Power and Authority. GAMEVERSE is a corporation
duly organized, validly existing and in good standing under the laws of Florida
and has all requisite corporate power and authority to carry on its business as
now being conducted, and to own, lease or otherwise hold its properties.
Qualification as a Foreign Corporation. GAMEVERSE is qualified as a foreign
corporation in each jurisdiction where such qualification is required, except in
those jurisdictions where the failure to be so qualified would not have a
material adverse effect on the business, operations or financial conditions of
GAMEVERSE or its business.
4
<PAGE>
G. Conflict With Other Instruments. Neither the execution and delivery of
this Agreement by Shareholder nor the consummation by Shareholder of the
transactions contemplated in this Agreement will (a) conflict with, or result in
a breach of, the terms, conditions or provisions of, or constitute a default (or
an event which would by notice or lapse of time or both become a default) or
permit acceleration or termination of obligations under, or result in the
creation of a lien or encumbrance on any of the properties of GAMEVERSE pursuant
to (i) the certification of incorporation or by-laws of GAMEVERSE (true copies
of which Shareholder has furnished to GLFC) or (ii) any indenture, mortgage,
lease, agreement, or other instrument which is material in nature to which
GAMEVERSE or Shareholder is a party or by which it or they, or any of its or
their properties, may be bound or affected, or (b) violate any law, rule, order,
or regulation, material in nature, to which GAMEVERSE or either Shareholder is
subject or by which it or they or its or their properties are bound.
H. Brokers or Finders. There is no broker or finder involved on behalf of
the Shareholder in connection with the transactions contemplated by this
Agreement.
I. Liabilities and Obligations. GAMEVERSE, except as described or set forth
in Exhibit B hereto, has no material debts, liabilities or obligations of any
nature whether accrued, absolute, contingent or other, and whether due or to
become due, including, but not limited to, liabilities or obligations on account
of taxes, other governmental charges, duties, penalties, interest or fines, and
there is no basis for the assertion against GAMEVERSE of any such debt,
liability or obligation except
To the extent set forth or reserved against or reflected in the August 31, 1998
Balance Sheet; Liabilities and obligations incurred, and obligations arising
under agreements listed on Exhibit F or entered into, in the ordinary course of
business since August 31, 1998 Liabilities or obligations incurred in connection
with the execution of this Agreement; and notwithstanding anything to the
contrary set forth above, all intercompany debt of Gameverse to Shareholder or
any affiliate or subsidiary thereof shall be forgiven immediately prior to the
Closing Date.
J. Litigation, Etc. Except for third party collection actions brought in
the ordinary course of the Gameverse business, there are no actions, suits,
investigations or proceedings pending in any court or before any governmental
agency, other than those set forth on Exhibit C hereto, to which GAMEVERSE is a
party which if determined adversely to GAMEVERSE might materially affect the
properties, business, future prospects of financial condition of GAMEVERSE and
to the knowledge of the Shareholder there is no litigation, proceeding, claim,
grievance, or controversy threatened against Gameverse with regard to or
affecting its properties or its business as now or heretofore conducted by it
which if determined adversely to might materially and adversely affect the
properties, business, future prospects or financial condition of GAMEVERSE.
There is no action, suit, proceeding or investigation which is pending or to the
knowledge of Shareholder, threatened which questions the validity or propriety
of this Agreement, or any action taken or to be taken by Shareholder or in
5
<PAGE>
connection herewith. GAMEVERSE is not subject to any judicial injunction or
mandate or any quasi-judicial order or quasi-judicial restriction directed to or
against it as a result of its ownership of its properties or its conduct of its
business as now or heretofore conducted by it and no governmental agency has at
any time challenged or questioned in writing the legal right of GAMEVERSE to
conduct its business or any part thereof as now heretofore conducted which
challenge if determined adversely to Gameverse might materially and adversely
affect the properties, business, future prospects or financial condition of
Gameverse.
K. Compliance With Laws, Etc. GAMEVERSE has complied with all laws and
regulations of any applicable jurisdiction with which it is or was required to
comply in connection with its ownership of its properties and operation of its
business (including without limitation the Occupational Safety and Health Act of
1970, as amended, the Employee Retirement Income Security Act of 1974, as
amended, and the Reorganization Plan No. 3 of 1970, establishing the
Environmental Protection Agency, as amended), the enforcement of which would
have a material and adverse effect on the ownership of its properties or the
conduct of the Business. GAMEVERSE has all governmental permits and permissions
material to the ownership of its properties or the conduct of its Business as
now conducted. It has not received any notice or communication from any
authority with respect to non-compliance with any of the foregoing, which
non-compliance has not been cured.
L. Compliance With Securities Act; Restriction on Transfer. Neither the
Shareholder nor any agent acting on its behalf, has taken, or will take, any
action which would require the Shares to be subject to the registration
provisions of Section 5 of the Securities Act of 1933, as amended, or any
applicable state securities laws. Shareholder represents that it is purchasing
the Common Stock for its own account and without any intent to distribute it.
Shareholder will not sell or otherwise dispose of any such shares without
furnishing an opinion of counsel satisfactory to GLFC that the proposed
disposition will comply with applicable securities law and it acknowledges that
the shares may be appropriately legended.
M. Third Party Consents. In respect of the transfer of the Shares to GLFC
and the consummation of transactions contemplated hereunder, no consent of any
third party is necessary or required by any certificate of incorporation,
by-laws, indentures, mortgages, leases, agreements or other instruments to which
either Shareholder or GAMEVERSE or any of their or its properties may be bound
or affected, or under any applicable law or regulation to which either
Shareholder or GAMEVERSE is subject or by which it or they or its or their
properties are bound.
N. Material Information, Etc. Neither the Exhibits attached hereto, nor any
written material provided by Shareholder to GLFC or its counsel (or to be
provided prior to Closing, in connection with the negotiations of the sale of
the Shares contained) (nor shall contain), as of their respective dates, nor
does this Agreement contain, any untrue statement of a material fact or omit a
material fact necessary to make information contained therein or herein not
misleading. There is no fact or condition which Shareholder has not disclosed to
GLFC in writing what materially adversely affects the properties, business,
prospects or condition (financial or otherwise) of GAMEVERSE or the ability of
Shareholder to perform this Agreement.
6
<PAGE>
O. Financial Statements. Shareholder has heretofore delivered to GLFC the
following financial statements: the balance sheet of Gameverse as of August 31,
1998 (the "August 31, 1998 Balance Sheet"), its statements of income and
retained earnings for the 8-month period ending August 31, 1998. Each such
financial statement, including the notes contained therein, fairly presents the
financial position of Gameverse at the date thereof and the results of its
operations for the period purported to be covered thereby.
P. Absence of Certain Events. Since August 31, 1998, there has not been:
Any change in the financial position, or the properties, assets, liabilities,
business or prospects of GAMEVERSE except changes in the ordinary course of
business which have not been "materially adverse".
Any damage, destruction or loss (whether or not covered by insurance) which
might materially and adversely affect the properties, assets, business or
prospects of GAMEVERSE.
Any sale, lease, abandonment, encumbrance or other disposition by GAMEVERSE of
any material real property, or, other than in the ordinary course of business,
of any material machinery, equipment or other operating property, or any sale,
assignment, transfer license or other disposition by GAMEVERSE of any material
patent, trademark, trade name, or other intangible asset.
Q. Tax Returns and Payments. All federal, state and local tax returns
pertaining to Gameverse for periods prior to and ending on the date of closing
have been filed or will be the responsibility of SHAREHOLDER and all taxes due
and payable on such returns attributable to GAMEVERSE will be the responsibility
of the SHAREHOLDER. The elimination of intercompany debt between Gameverse and
any affiliate of Riverside whether by forgiveness or capital contribution will
occur immediately prior to Closing and be reflected on the Gameverse tax return
which is filed consolidated with the SHAREHOLDER.
GAMEVERSE will timely prepare all Federal, State and local tax Returns with
respect to periods beginning after the Closing Date and be responsible for the
payment of any taxes due with respect to such returns.
R. Title to Assets. GAMEVERSE has good, indefeasible and marketable title
to all of the assets and properties it purports to own (including the assets and
properties set forth in the August 31, 1998 Balance Sheet, other than those held
under lease but capitalized for balance sheet purposes, or those disposed of in
the ordinary course of business after the date thereof), free and clear of any
mortgage, pledge, lien, lease, encumbrance, security interest or other charge
other than those listed and described in Exhibit D hereto, and in the case of
each parcel of real estate owned, or occupied under lease, subject to no
restrictions, easements or title objections that would impair the usefulness
thereof for the purposes for which it is used. The parcels of real estate owned
by Gameverse, or occupied by it under lease, are briefly described in Exhibit E.
7
<PAGE>
S. Condition of Facilities. All buildings, offices, shops and other
structures and all machinery, equipment, computers, electronics, tools,
fixtures, motor vehicles, spare parts, and other properties owned or used by
GAMEVERSE (whether under its control or the control of others) are in good
operating condition and repair, reasonable wear and tear excepted, are to such
Shareholder's knowledge in compliance with applicable laws and regulations, and
are adequate and sufficient for all operations conducted by GAMEVERSE.
T. Contracts. Exhibit F hereto contains, except as noted, a true and
complete schedule of all material contracts, agreements, commitments and other
documents to which GAMEVERSE is a party or by which GAMEVERSE or any of the
properties of GAMEVERSE is bound, including the following:
Each contract, agreement or commitment in respect of the sale of products or the
performance of services, or for the purchase of raw materials, supplies,
services or utilities, other than purchase orders for materials made in the
ordinary course of GAMEVERSE's business, or any contract, agreement or
commitment which involves payments or receipts by GAMEVERSE of less than
$10,000.
Each sales agency, distributorship, franchise, multimedia, development,
internet, license agreement or marketing agreement.
Each collective bargaining, union, employment, consulting or secrecy agreement.
Each contract, agreement, commitment or license relating to any patent,
trademark, trade name, brand name, copyright, invention, process, know-how,
formula, pattern, design or trade secret.
Each loan or credit agreement, guaranty, mortgage, security agreement, lease or
lease purchase agreement or instrument evidencing indebtedness.
Each partnership, joint venture, joint operating or similar agreement.
Each contract, agreement or commitment other than those of the types covered
above which (i) involves payments or receipts by GAMEVERSE of $10,000 or more,
or (ii) is not terminable by GAMEVERSE without penalty or not to be fully
performed within six months from the date hereof (except in the case of any
immaterial agreement covering routine services or supplies provided to
GAMEVERSE), or (iii) otherwise materially affects the condition (financial or
other), properties, assets, businesses or prospects of GAMEVERSE.
All such contracts, agreements and commitments are legally valid and
binding and in full force and effect, and there are no defaults thereunder or
any event or condition which upon notice and/or lapse of time would constitute a
8
<PAGE>
default. Copies of all the documents described in such Exhibit (other than
automobile leases) have heretofore been delivered to GLFC and are true and
complete and include all amendments and supplements thereto and modifications
thereof.
U. Bank Accounts. Exhibit G hereto sets forth the name and location of each
bank in which GAMEVERSE has an account or safe deposit box and the names of all
person's authorized t o draw thereon or have access thereto.
V. Insurance. Exhibit H. Hereto sets forth an accurate list of all
Insurance coverage maintained by or for the benefit of GAMEVERSE or any officer
or employee of GAMEVERSE, showing in each case the amount of coverage, the
insurance carrier, the type of coverage provided, and the period of time (during
the last two years) during which such coverage has been in effect.
W. Labor Disputes; Unfair Labor Practices. There is not pending or
threatened any labor dispute, strike or work stoppage of employees of GAMEVERSE,
nor any organizational activity relating to such employees, except as described
in Exhibit I hereto. There is not now pending or threatened any charge or
complaint against GAMEVERSE by the National Labor Relations Board or any
representative thereof.
X. Patents - Trademarks - Copyrights. Exhibit J. sets forth all of the
patents, trademarks, licenses and copyrights owned or held by GAMEVERSE and
their registration No. and copies of the registration certificates are attached
thereto.
Exhibit J lists all trademark names, patents, licenses and copyrights owned
or held by Shareholder or affiliates or subsidiaries which are or were employed
in the business of Gameverse which are being conveyed to GLFC hereby. Exhibit J
lists all trademarks, patents, names, licenses and copyrights employed by the
Shareholder, affiliates or subsidiaries in the business of Gameverse but which
are not being conveyed to Gameverse or GLFC in this transaction.
Y. Employee Benefit Plans. Exhibit K. Hereto sets forth an accurate list of
all employee benefit plans and trusts incident thereto ("Plans") which GAMEVERSE
has established and the documents relating thereto. Shareholder warrant and
represent that the copies of said documents which have been furnished to Buyer
by Shareholder are true, correct and complete copies of the originals. The
Internal Revenue Service has issued favorable Determination Letters with respect
to the qualified status of all the Plans (and the Trusts incident thereto), all
as amended to the respective dates of such letters, under Sections 401 and 501
of the Internal Revenue Code ("Code"); all of the Plans (and Trusts incident
thereto) are being operated in compliance with all applicable requirements of
qualified plans under the Code and the employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and to the applicable laws, regulations and
rulings. There is no pending or threatened action or proceeding against
GAMEVERSE with request to any Plan, against any Plan or any Trust or trustee
thereof of any kind, whether or not such action or proceeding might result in
the loss by any Plan of its qualified status. All reporting and disclosure
requirements of the Code and ERISA applicable to the Plans have been met; no
penalties are pending or threatened and there are no pending requests for
documents which must be honored under the Code or ERISA. All Plans have met the
minimum funding standards of the Code and ERISA. No Plan has an accumulated
9
<PAGE>
funding deficiency (whether or not waived) within the meaning of Section 302 or
Section 412 of the Code or any accrued unfunded vested benefits and the assets
in each Plan are sufficient to eliminate employer's termination liability under
ERISA. No Plan has been terminated since June 30, 1974. No Trustee of any of the
Trusts has breached Trustee's fiduciary duties under ERISA and none of the
Trusts incident to any of the Plans has engaged in a prohibited transaction
under ERISA or any transaction for which the tax on prohibited transactions
(Code Section 4975) would be imposed. All fiduciary insurance and bonding
requirements have been met, all premiums have been paid, and there are no claims
pending or threatened against the same. No reportable event with respect to any
of the Plans has occurred within the meaning of ERISA Section 4043, whether or
not said statute requires the actual reporting of such an event. No claims for
payment of benefits which have been denied are threatened or pending, and there
are no threatened or pending disputes or suits against any Trustee or Plan
Administrator of any of the Plans.
Section 4. Representations and Warranties of GLFC. GLFC represents and
warrants to Shareholder as follows:
A. Corporate Existence, Power and Authority. GLFC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated in this Agreement and
to carry on its business as now being conducted by it and to own, lease or
otherwise hold its properties.
B. Corporate Action. The execution and delivery of this Agreement by GLFC
and the consummation by GLFC of the transactions contemplated in this Agreement
have been authorized by all requisite corporate action on the part of GLFC.
C. Capacity of and Execution by GLFC. The President and Secretary of GLFC
have full legal power and capacity to execute, deliver and perform this
Agreement, and to deliver certificates representing the GLFC Shares and have
full legal power to exchange the Shares with Shareholder in accordance with this
Agreement. Without limiting the generality of the foregoing, no authorization,
consent or approval or other order or action of or filing with any court,
administrative agency, or other governmental or regulatory body or authority is
required for the execution and delivery by GLFC of this Agreement or GLFC'
consummation of the transactions contemplated hereby; this Agreement has been
and Option A and Option B will have been duly and validly executed and delivered
by GLFC and constitutes the valid and binding obligation of GLFC enforceable in
accordance with its terms, except as its enforceability is limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws presently or
hereafter in effect affecting the enforcement of creditors' rights and generally
10
<PAGE>
and subject to general principles of equity; and transfer and delivery of the
GLFC Shares to be exchanged by GLFC with Shareholder hereunder in accordance
with this Agreement and the issuance of the shares underlying Options A and B
upon exercise thereof will vest good title to the GLFC Shares or such underlying
shares free and clear of all security interests, liens, encumbrances, claims and
equities of every kind other than restrictions on disposition contained in
applicable federal and state securities laws.
D. Capital Structure. The authorized capital stock of GLFC consists solely
of 100,000,000 shares of voting common stock, $.001 par value per share, of
which, except as set forth on Schedule L hereto, 22,031,378 are issued and
outstanding. Except as set forth on Exhibit L hereto, there are no existing or
outstanding securities convertible into capital stock of GLFC or options,
warrants, calls, commitments or agreements of any character to which the Seller
or GLFC is a party or by which either of them may be bound that relate to the
authorization, issuance, delivery, sale, purchase or redemption of shares of
GLFC's capital stock, securities convertible into shares of its capital stock,
or of any option, warrant, call, commitment or agreement with respect thereto.
GLFC has delivered to Shareholder true and correct copies of all forms of
options outstanding, a purchase shares of GLFC's common stock.
E. Qualification as a Foreign Corporation. GLFC is qualified as a foreign
corporation in each jurisdiction where such qualification is required, except in
those jurisdictions where the failure to be so qualified would not have a
material adverse effect on the business, operations or financial conditions of
GLFC or its Business.
F. Conflict With Other Instruments. Neither the execution and delivery of
this Agreement by GLFC nor the consummation by GLFC of the transactions
contemplated in this Agreement will (a) conflict with, or result in a breach of,
the terms, conditions or provisions of, or constitute a default (or an event
which would by notice or lapse of time or both become a default) or permit
acceleration or termination of obligations under, or result in the creation of a
lien or encumbrance on any of the properties of GLFC pursuant to (i) the
certification of incorporation or by-laws of GLFC (true copies of which GLFC has
furnished to GLFC), or (ii) any indenture, mortgage, lease, agreement, or other
instrument which is material in nature to which GLFC or GLFC is a party or by
which it or they, or any of its or their properties, may be bound or affected,
or (b) violate any law, rule, order, or regulation, material in nature, to which
GLFC or either GLFC is subject or by which it or they or its or their properties
are bound.
G. Brokers or Finders. There is no broker or finder involved on behalf of
either GLFC in connection with the transactions contemplated by this Agreement.
H. Liabilities and Obligations. GLFC to the best of its knowledge and
belief, except as described or set forth on or reserved against or reflected in
the June 30, 1998 Balance Sheet or in Exhibit M hereto, has no material debts,
liabilities or obligations of any nature whether accrued, absolute, contingent
or other, and whether due or to become due, including, but not limited to,
liabilities or obligations on account of taxes, other governmental charges,
duties, penalties, interest or fines, and there is no basis for the assertion
against GLFC of any such debt, liability or obligation, except:
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<PAGE>
(a) Liabilities and obligations incurred, and obligations arising in the
ordinary course of business since June 30, 1998; and
(b) Liabilities or obligations incurred in connection with the execution of this
Agreement
I. Litigation, Etc. Except for third party collection actions brought in
the ordinary course of GLFC business, there are no actions, suits,
investigations or proceedings pending in any court or before any governmental
agency, other than those set forth on Exhibit N hereto, to which GLFC is a party
which if determined adversely to GLFC might materially affect the properties,
business, future prospects of financial condition of GLFC and to the knowledge
of GLFC there is no litigation, proceeding, claim, grievance, or controversy
threatened against it with regard to or affecting its properties or its business
as now or heretofore conducted by it which if determined adversely to might
materially and adversely affect the properties, business, future prospects or
financial condition of GLFC. There is no action, suit, proceeding or
investigation which is pending or to GLFC's knowledge, threatened which
questions the validity or propriety of this Agreement, or any action taken or to
be taken by GLFC or in connection herewith. GLFC is not subject to any judicial
injunction or mandate or any quasi-judicial order or quasi-judicial restriction
directed to or against it as a result of its ownership of its properties or its
conduct of its business as now or heretofore conducted by it and no governmental
agency has at any time challenged or questioned in writing the legal right of
GLFC to conduct its business or any part thereof as now heretofore conducted
which challenge if determined adversely to GLFC might materially and adversely
affect the properties, business, future prospects or financial condition of
GLFC.
J. Compliance With Laws, Etc. GLFC has complied with all laws and
regulations of any applicable jurisdiction with which it is or was required to
comply in connection with its ownership of its properties and operation of its
business (including without limitation the Occupational Safety and Health Act of
1970, as amended, the Employee Retirement Income Security Act of 1974, as
amended, and the Reorganization Plan No. 3 of 1970, establishing the
Environmental Protection Agency, as amended), the enforcement of which would
have a material and adverse effect on the ownership of its properties or the
conduct of the Business. GLFC has all governmental permits and permissions
material to the ownership of its properties or the conduct of its business as
now conducted. It has not received any notice or communication from any
authority with respect to non-compliance with any of the foregoing, which
non-compliance has not been cured.
K. Third Party Consents. In respect of the transfer of the Shares to GLFC,
the issuance of the GLFC shares to the Shareholder and the consummation of
transactions contemplated hereunder, no consent of any third party is necessary
or required by any certificate of incorporation, by-laws, indentures, mortgages,
leases, agreements or other instruments to which either GLFC or GLFC or any of
their or its properties may be bound or affected, or under any applicable law or
regulation to which either GLFC or GLFC is subject or by which it or they or its
or their properties are bound.
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L. Material Information, Etc. Neither the Exhibits attached hereto, nor any
written material provided by GLFC to Shareholder or its counsel (or to be
provided prior to Closing, in connection with the negotiation of the issuance of
the GLFC Shares contained) (nor shall contain), as of their respective dates,
nor does this Agreement contain, any untrue statement of a material fact or omit
a material fact necessary to make information contained therein or herein not
misleading. There is no fact or condition which GLFC has not disclosed to GLFC
in writing what materially adversely affects the properties, business, prospects
or condition (financial or otherwise) of GLFC or the ability of GLFC to perform
this Agreement.
M. Financial Statements. GLFC has heretofore delivered to Buyer the
following financial statements: the balance sheet of GLFC as of June 30, 1998
(the "June 30, 1998 Balance Sheet"), its statements of income and retained
earnings for the 9-month period ending June 30, 1998. Each such financial
statement, including the notes contained therein, fairly presents the financial
position of GLFC at the date thereof and the results of its operations for the
period purported to be covered thereby.
The aforesaid June 30, 1998 unaudited balance sheet, prepared by the Company,
presents fairly, as of its date, the financial condition of the Company and its
Subsidiaries, in accordance with generally accepted accounting principals
applied on a basis consistent with that of the previous year except that it is
not accompanied by the footnote disclosures normally required for fair
presentation which disclosures would not materially affect the Company's
financial condition.
N. Absence of Certain Events. Since June 30, 1998, there has not been:
(1) Any change in the financial position, or the properties, assets,
liabilities, business or prospects of GLFC except changes in the ordinary course
of business which have not been "materially adverse".
(2) Any damage, destruction or loss (whether or not covered by insurance) which
might materially and adversely affect the properties, assets, business or
properties of GLFC except for the matters described in Exhibit N1 hereto.
(3) Any sale, lease, abandonment, encumbrance or other disposition of GLFC of
any real property, or, other than in the ordinary course of business, of any
machinery, equipment or other operating property, or any sale, assignment,
transfer license or other disposition by GLFC of any patent, trademark, trade
name, or other intangible asset.
O. Tax Returns and Payments. Except as set forth in Exhibit O hereto, all
federal, state and local tax returns required to be filed have been filed or
will be the responsibility of GLFC and all taxes due and payable on such terms
attributable to GLFC and all assessments due and payable prior to the Closing
Date have been paid or will be paid by GLFC.
P. Title to Assets. GLFC has good, indefeasible and marketable title to all
of assets and properties it purports to own (including the assets and properties
set forth in the June 30, 1998, Balance Sheet, other than those held under lease
but capitalized for balance sheet purposes, or those disposed of in the ordinary
13
<PAGE>
course of business after the date thereof), free and clear of any mortgage,
pledge, lien, lease, encumbrance, security interest or other charge other than
those listed and described in Exhibit P hereto, and in the case of each parcel
of real estate owned, or occupied under lease, subject to no restrictions,
easements or title objections that would impair the usefulness thereof for the
purposes for which it is used. The parcels of real estate owned by GLFC, or
occupied by it under lease, are briefly described in Exhibit Q.
Q. GLFC Operations. GLFC's business includes development of encryption and
compression technology and the marketing of technology.
R. Purchase for Investment. GLFC is purchasing the Shares to be acquired by
it pursuant to this Agreement for investment and not with a view toward, or sale
in connection with, any distribution thereof nor with any present intention of
selling or distributing the Shares; provided that the disposition of its
property shall at all time be within GLFC's control.
S. Common Stock. The GLFC Shares and the shares underlying Option A and
Option B, when issued to Shareholder shall be duly authorized, validly issued,
fully paid and nonassessable common stock.
T. Related Transactions. Except as set forth in Exhibit R hereto, there is
no indebtedness due from (or to) GLFC to (or from) GLFC or any subsidiary or
affiliate (a person or entity that directly or indirectly controls or is
controlled by or under common control with GLFC) thereof, or any partnerships,
corporations or proprietorships in which GLFC or an affiliate of any of them has
an equity interest. Exhibit R hereto sets forth a complete and accurate list of
all contracts or other arrangements between GLFC on one hand, and GLFC and/or
any affiliate of GLFC (other than GLFC) on the other hand, which have been in
effect at any time since June 30, 1998.
U. Inclusion of Disputed GLFC Shares. The Total GLFC Shares Outstanding set
forth on Exhibit L, i.e., 22,031,378, include the 740,857 restricted shares
issued in the name of G.W. McEver, and the 34,782 restricted shares issued in
the name of Russell Barnard all being the same shares referred to on Exhibit N.
Section 5. Conditions Precedent to Obligations of GLFC. All obligations of
GLFC under this Agreement to be performed on or after the Closing Date are, at
the option of GLFC, subject to the satisfaction of the following conditions
precedent on or before the Closing Date, as indicated below:
A. Proceedings Satisfactory. All actions, proceedings, instruments,
opinions and documents required to carry out this Agreement or incidental
hereto, and all other related legal matters, shall be satisfactory to GLFC in
its sole discretion. Shareholder shall have delivered to GLFC on the Closing
14
<PAGE>
Date such documents and other evidence as GLFC may reasonably expect in order to
establish the consummation of transactions relating to the execution, delivery
and performance by Shareholder of this Agreement, the purchase, transfer and
delivery of the Shares to be purchased hereunder, the taking of all corporate
and other proceedings in connection therewith and the compliance with the
conditions set forth in this Section 5, in form and substance satisfactory to
GLFC in its sole discretion.
B. Representations, Warranties and Covenants of Shareholder Correct. The
representations, warranties and covenants made by Shareholder in Section 3
hereof shall be true and correct on and as of the Closing Date with the same
force and effect as though all such representations, warranties and covenants
had been made on and as of the Closing Date after giving effect to any
transactions or other actions contemplated hereby.
C. Compliance with Terms and Conditions. All the terms, covenants,
agreements and conditions of this Agreement to be complied with and performed by
Shareholder on or before the Closing Date shall have been complied with and
performed in all material respects.
D. No Proceedings Pending. No action, suit, proceeding or investigation by
or before any court, administrative agency or other governmental authority shall
have been instituted or threatened which may restrain, prohibit or invalidate
any of the transactions contemplated by this Agreement or which may affect the
right of GLFC to operate or control after the Closing Date the properties of
GAMEVERSE or the business, or any part thereof.
E. Legal Opinion of Counsel for Shareholder. GLFC shall have received the
favorable opinion of addressed to GLFC and dated the Closing Date, in form and
substance reasonably satisfactory to GLFC.
F. Third Party Consents. Shareholder shall have delivered to GLFC all such
written consents or waivers requested by GLFC in writing necessary or advisable
in the judgment of GLFC to permit the sale of the Shares to GLFC and
consummation of the other transactions contemplated herein, on the terms
provided herein, under the certificate of incorporation, by-laws, indentures,
mortgages, leases, agreements or other instruments to which GAMEVERSE is a party
or by which it or any of its properties may be bound or affected, or under any
applicable law or regulation to which GAMEVERSE is subject or by which it or its
properties are bound.
Section 6. Conditions Precedent to Obligation of Shareholder. All
obligations of Shareholder hereunder to be performed on or after the Closing
Date are, at the option of Shareholder, subject to the satisfaction of the
following conditions precedent on or before the Closing Date, as indicated
below:
A. Proceedings Satisfactory. All actions, proceedings, instruments,
opinions, and documents required to carry out this Agreement or incidental
hereto, and all other related legal matters, shall be satisfactory to
Shareholder on the Closing Date such documents and other evidence as Shareholder
15
<PAGE>
may reasonably request in order to establish the consummation of transactions
relating to the execution, delivery and performance by GLFC of this Agreement,
the purchase, transfer and delivery of the GLFC Shares to be purchased
hereunder, the taking of all corporate and other proceedings in connection
therewith and the compliance with the conditions set forth in this Section 6, in
form and substance satisfactory to Shareholder in its sole discretion.
B. Representations and Warranties Correct. The representations and
warranties made by GLFC in Section 4 of this Agreement shall be true and correct
on and as of the Closing Date with the same force and effect as though all such
representations and warranties had been made on and as of the Closing Date after
giving effect to any transactions or other actions contemplated hereby.
C. Compliance with Terms and Conditions. All the terms, covenants and
conditions of this Agreement to be complied with and performed by GLFC on or
before the Closing Date shall have been complied with and performed in all
material respects.
D. Legal Opinion of GLFC's Counsel. Shareholder shall have received the
favorable opinion of addressed to Shareholder and dated the Closing Date, in
form and substance reasonably satisfactory to Shareholder.
E. Delivery of certificates for the Common Stock. GLFC shall have delivered
to Shareholder on the closing date certificates evidencing the GLFC Shares to be
acquired by it hereunder. GLFC shall have clearly executed and delivered Option
A and Option B and delivered to Shareholder certificates representing such
options.
F. No Proceedings Pending. No action, suit, proceeding or investigation by
or before any court, administrative agency or other governmental authority shall
have been instituted or threatened which may restrain, prohibit or invalidate
any of the transactions contemplated by this Agreement or which may affect the
rights of Gameverse under this Agreement.
G. Third Party Consents. GLFC shall have delivered to Shareholder all such
written consents or waivers requested by Shareholder in writing necessary or
advisable in the judgment of Shareholder to permit the sale of the GLFC Shares
to Shareholder and consummation of the other transactions contemplated herein,
on the terms provided herein, under the certificate of incorporation, by-laws,
indentures, mortgages, leases, agreements or other instruments to which GLFC is
a party or by which it or any of its properties may be bound or affected, or
under any applicable law or regulation to which GLFC is subject or by which it
or its properties are bound.
Section 7. Additional Covenants By Shareholder. Shareholder hereby
covenants to GLFC that:
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<PAGE>
(1) Access to Information. Cooperate and cause others under the control of
Shareholder and GAMEVERSE to cooperate to the end of providing GLFC and its
counsel, accountants and other designated representatives full access to the
records of GAMEVERSE relating to its properties or the Business.
(2) Keep GLFC Informed. Promptly notify GLFC of any material matter or
thing occurring which affects the properties of GAMEVERSE or the Business.
Section 8. Additional Covenants By GLFC. GLFC hereby covenants to
Shareholder that:
(1) Access to Information. Cooperate and cause others under the control of
GLFC to cooperate to the end of providing Shareholder and its counsel,
accountants and other designated representatives full access to the records of
GLFC relating to its properties or the Business.
(2) Keep Shareholder Informed. Promptly notify GLFC of any material matter
or thing occurring which affects the properties of GLFC or its Business.
(3). In the event that any of D.W. McEver, John R. Barnard, G.W. McEver
receive from GLFC either or both options or GLFC Shares (other than the shares
referred to on Exhibit N) in settlement of the dispute described on Exhibit N,
hereinafter referred to as "additional shares" or "additional options", as the
case may be, GLFC shall issue to Shareholder, within five (5) business days
after the issuance of the additional shares or additional options, an amount of
GLFC Shares and Options calculated as set forth below and hereinafter referred
to as "adjustment shares" or "adjustment options".
(4). In the event that either or both options or GLFC Shares are issued in
the settlement of the dispute known as Elizabeth Wilson v. National Capital
Corporation, et al. described on Exhibit N, hereinafter referred to as
"additional shares" or "additional options", as the case may be, GLFC shall
issue to Shareholder within five (5) business days after the issuance of the
additional shares or additional options, an amount of GLFC Shares and Options
calculated as set forth below and hereinafter referred to as "adjustment shares"
or "adjustment options". For the purpose of this paragraph, a cash payment by
GLFC made in settlement of this matter shall be converted to and deemed an
amount of additional shares received in settlement at a value of $.40 per share.
(5). In the event that within three (3) months after the effective date of
Closing of this Agreement ("Transaction Period"), Richard Wachs does not
transfer to GLFC 2,931,593 GLFC Shares and his option to acquire an additional
5,910,663 GLFC Chares as part of the consideration for his purchase of fifty
percent (50%) of the common shares of Greenleaf Research 7 Development, Inc.,
then an amount of either or both GLFC Shares and Options, as the case may be,
calculated as set forth below and hereinafter referred to as "adjustment shares"
or "adjustment options", shall be issued and transferred by GLFC to Shareholder,
within fifteen (15) business days after the last day of the Transaction Period.
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For the purpose of this paragraph and the calculation, the deficiency in the
amount of either or both GLFC Shares or options so transferred by Richard Wachs
to GLFC from the amounts set forth above shall hereinafter be referred to as
"additional shares" or "additional options", as the case may be.
(6) Calculation of Adjustment Shares or Options:
a. The number of additional shares (options) is to be divided by .60
b. Subtract the number of additional shares (options)
c. The result of (b) is the adjustment shares (options)
Section 9. Indemnity Obligation.
A. General Indemnity Agreement. Subject to the provisions and limitations
hereof, the Shareholder and GLFC mutually, for themselves, for their successors
and assigns, agree to indemnify and save harmless each other from and against:
(1) Failure to Perform Obligations. Any Event of Loss or Loss arising as a
result of the failure of the indemnifying party hereunder to properly perform
any obligations to be performed by it, hereunder, whether prior to, on or after
the Closing Date; and
(2) Breach of Representation, Warranty or Covenant. Any Event of Loss or
Loss arising from any breach of a representation, warranty or covenant of the
indemnifying party set forth in this Agreement.
B. Definition of "Event of Loss" and "Loss". The occurrence of an event
which may result in a loss, cost, expense or liability to or of GLFC or
Shareholder as the case may be hereunder shall be herein called an "Event of
Loss", and the amount of any resulting loss, cost, expense or liability
(including counsel fees) shall be herein called a "Loss". Any payment to be made
under this Section 9 shall be in an amount which, after taking into account any
federal, state, local or other tax payable by GLFC or GAMEVERSE or the
Shareholder in respect thereof (as increased hereby), will yield an amount to
the GLFC or Shareholder as the case may be equal to the amount of Loss to which
such payment relates.
C. Payment of Loss. The aggregate amount of any Losses payable hereunder
shall be paid upon demand of GLFC by Shareholder or upon demand by Shareholder
upon GLFC as the case may be; provided, however, that Shareholder shall be
liable for Events of Loss or Loss enumerated in Section 9.A(2) and 9.D hereof
that affect Gameverse directly (and GLFC only indirectly by virtue of its
ownership of the Shares) only to the extent of the GLFC shares issued to
Shareholder hereunder, and any payments in respect thereof and provided further
that GLFC shall be liable for Events of Loss or Loss enumerated in Section 9.A
(2) hereof that affect the Shareholder directly (or indirectly by virtue of its
ownership of the GLFC Shares only to the extent of the Shares. As used in this
Section 9.C, "to the extent of the GLFC shares" and "to the extent of the
Shares" shall mean that the indemnities to which this Section 9.C applies shall
be limited to a maximum in the aggregate for each of the Shareholder and GLFC
18
<PAGE>
equal to the agreed upon valuation for this purpose of the GLFC Shares and the
Shares, which agreed upon valuation is $5,875,034. Either party may satisfy an
indemnity obligation to which this Section 9.C applies by a payment in cash or
by transfer to the indemnitee of a proportion of the Shares or the GLFC Shares,
as appropriate, in the same proportion as the Loss bears to the maximum
aggregate indemnity obligation set forth above.
D. Nielsen Claim. In addition to, and not as a limitation of, the other
provisions of this Section 9, the Shareholder agrees to indemnify and hold
harmless GLFC and its affiliates, at any time without limitation, against, and
in respect of, liabilities, contingent or otherwise, losses, claims, costs, or
damages, or any amounts which may become payable, resulting from or arising out
of, or in connection with any claims by Jared Nielsen for any ownership interest
in Gameverse or in any of the patents, trademarks, licenses and copyrights
listed on Exhibit J hereto (the "Nielsen Claim"). GLFC shall give the
Shareholder a reasonable opportunity, at the Shareholder's expense, of defending
or settling the Nielsen Claim, subject to the right of GLFC to participate fully
in such defense at its own cost. To the extent that the Shareholder does not
agree to defend or settle such claim, GLFC shall have the right to defend or
settle the same.
Section 10. Miscellaneous Provisions.
A. Board of Directors of GLFC. At or after the Closing at the request of
the Shareholder, the Board of Directors shall increase the number of directors
to nine (9) and elect four (4) directors nominated by Shareholder's (Cybermax
Tech, Inc.) representative. Mr. J. Steven Wilson shall be one of the four (4)
directors so nominated and he shall be elected as Chairman of the Board of
Directors of GLFC. Mr. Leonard Berg shall remain as Vice Chairman. Mr. Richard
J. Margulies shall continue to serve as President and Mr. Peter Jegou shall
continue to serve as Chief Operating Officer of GLFC. The executive office shall
be in New Jersey. GLFC shall use its best efforts to obtain directors and
officers liability insurance in type and amount reasonably satisfactory to
Cybermax.
B. Expenses. Except as otherwise provided in this Agreement, each party
hereto shall pay its own expenses incident to the origin, negotiation and
execution of this Agreement and the consummation of the transactions
contemplated hereby, including without limitation all legal and accounting fees
and disbursements.
C. Exhibits. The Exhibits attached hereto are incorporated herein and made
a part hereof for all purposes. As used herein, the expression "this Agreement"
means the body of this Agreement and such Exhibits; and the expressions
"herein", "hereof", and "hereunder" and other words of similar import refer to
this Agreement and such Exhibits as a whole and not to any particular part of
subdivision thereof.
D. Survival of Obligations. The respective representations, warranties,
covenants and agreements of the parties to this Agreement shall survive any
investigation by the parties hereto, and consummation of the transactions
contemplated by this Agreement and shall continue in full force and effect after
the date hereof. The obligations of Shareholder under Section 9 hereof shall
survive for a period of two (2) years after the termination of this Agreement.
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E. Amendments and Waivers. Except as otherwise specifically stated herein,
any provision of this Agreement may be amended by, and only by, a written
instrument executed by GLFC and Shareholder. Any party may extend the time for
or waive the performance of any obligation of the other parties, waive any
inaccuracies in the representations or warranties by the other parties, or waive
compliance by the other parties with any of the terms and conditions contained
in this Agreement. Any such extension or waiver shall be in writing and executed
by the extending or waiving party.
F. Other Instruments to be Executed, Etc. From and after the date hereof,
Shareholder shall, from time to time, at the request of GLFC and without further
consideration do, execute, acknowledge and deliver, all such further acts,
deeds, assignments, transfer, conveyances, powers of attorney and assurances as
may be reasonably required more effectively to convey, assign, transfer or
confirm the sale of the Shares.
G. Public Statements. None of the Shareholder, GLFC nor GAMEVERSE shall
issue any press release or other public statement concerning the transactions
contemplated by this Agreement without first providing the others with a written
copy of the text of such release or statement and obtaining the consent of the
others respecting such release or statement, except as required by law or
trading market requirements. GLFC and Shareholder shall keep this Agreement, the
terms hereof, and all documents and information relating to this Agreement
confidential, except as may be required by law or, in the case of GLFC, as may
be necessary in the ordinary conduct of the business after the date hereof.
H. Materiality. For purposes of determining whether a breach of a
representation of warranty contained in Section 3 or 4 hereof has occurred, an
event or events or condition or conditions having a cost greater than $5,000
individually or $20,000 in the aggregate for all such events and conditions
shall be deemed to be "material".
I. Parties Bound. This Agreement shall apply to, inure to the benefit of
and be binding upon and enforceable against the parties hereto and their
respective successors and permitted assigns. The respective rights and
obligations of any party hereto shall not be assignable without the consent of
the other parties.
J. Governing Law. This Agreement, and the rights and obligations of the
parties hereto, shall be governed by and construed in accordance with the laws
of the State of New Jersey and the venue for any disputes shall be the Federal
Court located in Newark, New Jersey.
K. Notices. Any notice, demand, approval, consent, request, waiver or other
communication which may or is required to be given pursuant to this Agreement
shall be in writing and shall be deemed given on the earlier of the day actually
received or on the close of business on the business day next following the day
when telexed, telecopied or otherwise sent by telecommunications means, receipt
confirmed, or on the close of business on the business day next following the
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day when deposited with an overnight courier service, addressed to the party at
the address set forth after its respective name below, or at such different
address as such party shall have theretofore advised the other party in writing,
with copies sent to the persons indicated:
If to Shareholder: Cybermax Tech, Inc.
7800 Belfort Parkway, Suite 100
Jacksonville, Florida 32256
Fax: (904) 296-0584
With a copy to: T. Malcolm Graham, Esq.
Holland & Knight LLP
One Independent Drive, Suite 2000
P.O. Box 1559
Jacksonville, Florida 32202
Fax: (904) 358-2199
If to GLFC: Greenleaf Technologies Corporation
75 Lincoln Highway, 2nd Floor
Iselin, New Jersey 08830
Fax: (732) 906-5676
With a copy to: Sol Freedman, Esq.
100 Merrick Road (East Building)
Rockville Center, New York 11570
Fax: (516) 763-3243
L. Number and Gender of Words. Whenever herein the singular number is used,
the same shall include the plural where appropriate, and the words of any gender
shall include each gender where appropriate.
M. Captions. The captions, headings and arrangements used in this Agreement
are for convenience only and do not affect, limit or amplify the terms and
provisions hereof.
N. Invalid Provisions. If any provision hereof is held to be illegal,
invalid or unenforceable under present or future laws effective during the terms
hereof, such provision shall be fully severable; this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. In lieu of such
illegal, invalid or unenforceable provision, there shall be added automatically
as a part hereof a provision as similar in terms of such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
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O. Entirety of Agreement. This Agreement contains the entire agreement
among the parties. No representation, inducements, promises or agreements, oral
or otherwise, which are not embodied herein shall be of any force or effect.
P. Counterparts; Effectiveness. This Agreement may be executed in
counterparts, each of which shall be deemed an original for all purposes and all
of which shall be deemed, collectively, one agreement. This Agreement shall
become effective when executed and delivered by the parties hereto.
Q. Facsimile Signatures. All signatures transmitted by facsimile machines
are hereby deemed legal and binding.
R. Transition Services Agreement. At the Closing, Shareholder and GLFC
shall cause Gameverse to enter into a Transition Services Agreement in the form
of Exhibit S hereto.
S. Registration Rights Agreement. At the Closing, Greenleaf and Shareholder
shall enter into a Registration Rights Agreement in the form of Exhibit T
hereto.
T. Option Agreements. At the Closing, Greenleaf and Shareholder shall enter
into Option Agreement A and B in the form of Exhibit U and V hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Cybermax Tech, Inc.
By: __________________________________
President
GLFC: Greenleaf Technologies Corporation
By: __________________________________
Name: Richard J. Margulies
Title: President
22
EXHIBIT 2.2
STOCK EXCHANGE AGREEMENT
BETWEEN AND AMONG
GREENLEAF TECHNOLOGIES CORPORATION,
FUTURE COM SOUTH FLORIDA, INC.
AND
THE SHAREHOLDERS OF FUTURE COM SOUTH FLORIDA, INC.
November 4, 1999
<PAGE>
STOCK EXCHANGE AGREEMENT
TABLE OF CONTENTS
1. Definitions............................................................1
1.1 Closing.........................................................1
1.2 Code............................................................1
1.3 Constituent Corporations........................................1
1.4 Delaware Law....................................................1
1.5 Effective Date..................................................2
1.6 Exchange........................................................2
1.7 Execution Date..................................................2
1.8 Florida Law.....................................................2
1.9 Future Com......................................................2
1.10 Future Com Common Stock.........................................2
1.11 Future Com Shareholders.........................................2
1.12 Future Com's Business...........................................2
1.13 Greenleaf.......................................................2
1.14 Greenleaf Common Stock..........................................2
1.15 Greenleaf's Business............................................2
1.16 Material Adverse Change.........................................2
1.17 1933 Act........................................................2
1.18 1934 Act........................................................2
1.19 SEC.............................................................2
1.20 Subsidiary......................................................3
1.21 Transfer Agent..................................................3
2. The Exchange...........................................................3
2.1 Exchange........................................................3
2.2 Effective Date..................................................3
2.3 Concurrent Agreements...........................................3
2.3.1 Greenleaf Employment Agreements...........................3
2.3.2 Future Com Employee.......................................3
2.3.3 Insurance Agreements......................................3
2.3.4 Expenses; Indebtedness....................................4
2.3.5 Purchase Of SMR Licenses..................................4
2.3.6 Purchase Of Satellite License.............................5
2.3.7 Purchase Of Additional SMR Licenses.......................5
2.3.8 Registration Rights Agreement.............................5
2.3.9 Option Agreements.........................................5
2.4 Covenant Not To Compete.........................................6
3. Directors..............................................................6
4. Exchange of Shares.....................................................6
4.1 Exchange Of Shares..............................................6
4.2 Mechanics Of Exchange...........................................7
5. Representations And Warranties Of Greenleaf............................7
5.1 Organization And Standing.......................................7
5.2 Capitalization..................................................8
5.3 Authority; Non-Contravention....................................8
5.4 Governmental Consents...........................................8
5.5 Disclosure......................................................8
5.6 Reorganization..................................................9
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6. Representations And Warranties Of Future Com...........................9
6.1 Organization And Standing.......................................9
6.2 No Subsidiaries.................................................9
6.3 Capitalization..................................................9
6.4 Authority; Non-Contravention...................................10
6.5 Contracts And Commitments......................................10
6.6 Compliance With Other Instruments..............................10
6.7 Litigation And Claims..........................................11
6.8 Insurance......................................................11
6.9 Governmental Consents..........................................11
6.10 Disclosure.....................................................11
6.11 Actions........................................................11
6.12 Taxes..........................................................12
6.13 No Employees; No Retirement Obligations........................12
6.14 Books And Records..............................................12
6.15 Copies Of Documents............................................12
6.16 Employees, Officers, Directors, And Consultants................13
6.17 Documents Delivered............................................13
6.18 No Material Changes............................................13
6.19 Financial Statements; Undisclosed Liabilities..................14
6.20 Encumbrances...................................................15
6.21 No Encumbrances On Future Com Common Stock.....................15
6.22 Reorganization.................................................15
6.23 Restricted Stock...............................................15
7. Certain Agreements....................................................15
7.1 Access And Information.........................................15
7.2 Shareholder Authorization......................................16
7.3 Operation Of Business..........................................16
7.4 Preservation Of Business.......................................16
7.5 Tax Cooperation................................................16
7.6 Interim Operations.............................................18
7.7 Reorganization.................................................19
7.8 Accuracy of Representations....................................19
7.9 Consents, Waivers And Approvals................................19
7.10 Notice Of Breach Of Warranty...................................19
7.11 Additional Documents; Further Assurances.......................19
7.12 Notice Of Inaccurate Information...............................19
7.13 Publicity......................................................19
8. Conditions To Performance By All Parties..............................20
9. Conditions Precedent To Performance By Future Com.....................20
10. Conditions Precedent To Performance By Greenleaf......................21
11. Indemnification By Greenleaf..........................................22
12. Indemnification By The Future Com Shareholders........................23
13. Notice of Claim.......................................................24
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14. Closing...............................................................24
15. Termination And Abandonment Of The Exchange...........................25
15.1. Termination....................................................25
15.2. Effect Of Termination..........................................25
16. Amendment Or Waiver...................................................26
17. Entire Agreement......................................................26
18. Notice................................................................26
19. Severability..........................................................27
20. Headings..............................................................27
21. Counterparts..........................................................27
22. Expenses..............................................................27
23. Nature And Survival Of Representations................................27
24. Benefits And Assignment...............................................27
25. Specific Performance..................................................27
26. Brokers...............................................................28
27. Costs.................................................................28
28. Termination On Default................................................28
29. Choice Of Law.........................................................28
30. Arbitration...........................................................28
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SCHEDULES AND EXHIBITS
----------------------
Schedule No. And Description
- ----------------------------
2.3.3.2 Medical Insurance Policies
2.3.5. SMR Licenses
2.3.6. Satellite License
6.5. Material Contracts, Indebtedness, Liabilities And Obligations
6.6. Violations Of Articles Of Incorporation, Bylaws, Contracts, Etc.
6.7. Litigation And Claims
6.8. Insurance
6.16. Employee, Officer, Director And Consultant Annual Compensation
6.18. Material Changes
6.19. Future Com Assets And Liabilities
6.20 Encumbrances
Exhibits
- --------
Exhibit A Form Of Employment And Nonsolicitation Agreement
Exhibit B Employment Agreements Regarding Richard Wachs And Christopher
Webster
Exhibit C Form Of Stock Option Agreement
Exhibit D Agreement Regarding Repayment Of Debt Owed By Future Com
Exhibit E Form SMR License Purchase Agreement
Exhibit F Form Of Satellite License Purchase Agreement
Exhibit G Registration Rights Agreement
Exhibit H Form of Noncompetition Agreement
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STOCK EXCHANGE AGREEMENT
BETWEEN
GREENLEAF TECHNOLOGIES CORPORATION,
FUTURE COM SOUTH FLORIDA, INC.
AND
THE SHAREHOLDERS OF FUTURE COM SOUTH FLORIDA, INC.
THIS STOCK EXCHANGE AGREEMENT (the "Agreement") is made and entered into to
be effective as of November 4, 1999 (the "Effective Date"), between and among
Greenleaf Technologies Corporation, a Delaware corporation ("Greenleaf"), Future
Com South Florida, Inc., a Florida corporation ("Future Com"), and William Gale
and Warren Blanck (the "Future Com Shareholders"). Each of Greenleaf, Future Com
and the Future Com Shareholders may be referred to individually as a "Party",
and all of Greenleaf, Future Com and the Future Com Shareholders may be referred
to collectively as the "Parties".
RECITALS
A. The Parties to this Agreement desire to effect an exchange (the
"Exchange") pursuant to which Greenleaf will deliver to the Future Com
Shareholders 4,000,000 shares of restricted common stock of Greenleaf in
exchange for all the issued and outstanding shares of common stock of Future
Com. As a result of the Exchange, Greenleaf will own all the issued and
outstanding securities of Future Com, and Future Com will become a wholly-owned
subsidiary of Greenleaf. Future Com has no outstanding securities except for the
shares of its common stock to be delivered to Greenleaf pursuant to the terms of
this Agreement.
B. The Board Of Directors of Greenleaf and the Future Com Shareholders have
reviewed and approved this Agreement and have determined that the Exchange
should be consummated pursuant to the terms and conditions hereinafter set forth
in this Agreement.
C. The Parties desire to effectuate the Exchange as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
AGREEMENT
In consideration of the premises and the mutual representations,
warranties, covenants and agreements herein contained, the Parties agree as
follows:
1. Definitions. As used in this Agreement the following terms have the
meanings indicated:
1.1. "Closing" refers to the consummation of the transactions
contemplated by this Agreement.
1.2. "Code" refers to the Internal Revenue Code of 1986, as amended.
1.3. "Constituent Corporations" refers to Greenleaf and Future Com,
collectively.
1.4. "Delaware Law" refers to the Delaware General Corporation Law.
1
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1.5. "Effective Date" refers to 12:01 a.m. on November 4, 1999, at
which time all rights and obligations of the parties shall accrue pursuant to
the terms of this Agreement.
1.6. "Exchange" refers to the exchange of 4,000,000 shares of
Greenleaf Common Stock for all the issued and outstanding Future Com Common
Stock pursuant to the terms and conditions of this Agreement.
1.7. "Execution Date" refers to the date on which this Agreement is
signed by the last to sign of all the signatories to this Agreement.
1.8. "Florida Law" refers to the Florida General Corporation Act.
1.9. "Future Com " refers to Future Com South Florida, Inc., a Florida
corporation.
1.10. "Future Com Common Stock" refers to the $1.00 par value common
stock of Future Com.
1.11. "Future Com Shareholders" means William Gale and Warren Blanck,
who at the Effective Date and the Closing will together own all the outstanding
Future Com Common Stock.
1.12. "Future Com's Business" refers to the operation of Specialized
Mobil Radio systems as carried on throughout the United States by Future Com
prior to the Closing and any other business in which Future Com is engaged or in
which Future Com plans to engage following the Closing.
1.13. "Greenleaf" refers to Greenleaf Technologies Corporation, a
Delaware corporation.
1.14. "Greenleaf Common Stock" refers to the $.001 par value common
stock of Greenleaf.
1.15. "Greenleaf's Business" refers to the development and marketing
of computer data security devices as carried on throughout the United States by
Greenleaf prior to the Closing and any other business in which Greenleaf is
engaged or in which Greenleaf plans to engage following the Closing.
1.16. "Material Adverse Change" or "Material Adverse Effect" means,
when used with respect to Greenleaf or Future Com, as the case may be, any
change or effect that is or, so far as can reasonably be determined, is likely
to be materially adverse to the assets, properties, condition (financial or
otherwise), business or results of operations of Greenleaf or Future Com, as the
case may be.
1.17. "1933 Act" refers to the Securities Act of 1933, as amended.
1.18. "1934 Act" refers to the Securities Exchange Act of 1934, as
amended.
1.19. "SEC" refers to the United States Securities And Exchange
Commission.
2
<PAGE>
1.20. "Subsidiary" means any corporation, partnership, joint venture
or other legal entity of which Greenleaf or Future Com, as the case may be
(either alone or through or together with any other Subsidiary), owns, directly
or indirectly, 50 percent or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
1.21. "Transfer Agent" refers to the American Stock Transfer And Trust
Co., located at 40 Wall Street, 46th Floor, New York, New York 10004.
2. The Exchange; Additional Agreements.
2.1. Exchange. Subject to the terms and conditions hereof, at the
Closing, Greenleaf shall deliver to the Future Com Shareholders 4,000,000 shares
of Greenleaf Common Stock in exchange for all the issued and outstanding Future
Com Common Stock, with Greenleaf then being the sole shareholder of Future Com.
2.2. Effective Date. Subject to compliance by the Parties with the
covenants and agreements of, and satisfaction of the conditions contained in,
this Agreement, the Parties shall take all actions as are required by law to
make the Exchange effective. Upon the Closing of this Agreement, the Exchange
shall become effective as of the Effective Date.
2.3 Concurrent Agreements.
2.3.1. Greenleaf Employment Agreements. At the Closing, Greenleaf
and each of William Gale ("Gale") and Warren Blanck ("Blanck") shall enter into
an Employment And Nonsolicitation Agreement substantially in the form attached
to and made a part of this Agreement as Exhibit A (the "Employment And
Nonsolicitation Agreement"). All material provisions of the Employment And
Nonsolicitation Agreements executed by Greenleaf, Gale and Blanck, except for
provisions related to specific business activities of Mr. Gale and/or Mr.
Blanck, shall be substantially similar to the employment agreements previously
executed by Greenleaf and each of Messrs. Richard Wachs and Christopher Webster,
which agreements are attached to this Agreement as Exhibit B and which provide,
among other things, that (i) payment to Messrs. Gale and Blanck by Greenleaf
shall be deferred until such time as funds become available to Greenleaf which,
in Greenleaf's sole discretion, are sufficient to provide for payment to
Greenleaf's employees without jeopardizing Greenleaf's ongoing operations, and
(ii) Messrs. Gale and Blanck shall agree not to compete in the Specialized
Mobile Radio ("SMR") industry in the United States without Greenleaf's prior
approval.
2.3.2. [Intentionally left blank.]
2.3.3. Insurance Agreements.
2.3.3.1.D & O And Key Man Insurance. Promptly after the
Closing, Greenleaf shall use its reasonable best efforts to obtain and
thereafter maintain a directors' and officers' insurance policy covering errors
or omissions of Greenleaf's directors and officers acting in such capacities, in
the highest coverage amount available for a premium not to exceed $30,000 per
year.
2.3.3.2.Medical Policies. Future Com shall maintain in
effect the medical insurance policies set forth on Schedule 2.3.3.2 for the
employees identified on that Schedule; provided however, that Greenleaf or
Future Com may substitute other medical policies with substantially the same
coverages and benefits as the policies set forth on Schedule 2.3.3.2.
3
<PAGE>
2.3.4. Expenses; Indebtedness. Each of Gale, Blanck, Greenleaf
and Future Com agree as follows:
2.3.4.1.Gale and Blanck will jointly and severally pay, or
reimburse Greenleaf and Future Com for, all costs incurred by Greenleaf and
Future Com for maintenance of all SMR systems owned or operated by Future Com
for the one-year period beginning on the Closing date;
2.3.4.2.Future Com shall be responsible for all lease
payments in connection with Future Com's offices, office furniture, equipment
and telephones, up to a maximum of $10,000 per month, for the one-year period
beginning on the Closing date;
2.3.4.3.Future Com shall be responsible for all expenses
paid towards insurance premiums paid in connection with the liability insurance
maintained on Future Com's properties for the one-year period beginning on the
Closing date;
2.3.4.4.Future Com shall be responsible for all expenses
associated with telephone communications, including cellular telephones and long
distance costs, incurred by Greenleaf and/or Future Com in connection with
Future Com's properties for the one-year period beginning on the Closing date;
2.3.4.5.Future Com agrees to reimburse Gale and Blanck, up
to a maximum of $850 per month for each of Gale and Blanck, for expenses
incurred by Gale and Blanck in connection with the lease by Gale and Blanck of
one automobile each for use by them in furtherance of Greenleaf's Business and
Future Com's Business; and
2.3.4.6.Future Com and each of Uni-Call Communications, Inc.
and Communications Concepts, Inc. (the "Debt Holders") shall enter into an
agreement substantially in the form attached to this Agreement as Exhibit D and
pursuant to which Future Com shall agree to repay $150,000 owed by Future Com to
each of the Debt Holders.
2.3.5. Purchase Of SMR Licenses. At the Closing, Gale and Blanck
will enable Greenleaf and Future Com to enter into one or more agreements (the
"SMR License Purchase Agreements") for the purchase of the four SMR frequency
licenses described on Schedule 2.3.5. attached to and made a part of this
Agreement (the "SMR Licenses") at a purchase price of $175,000 per SMR License
payable in the form of restricted Greenleaf Common Stock at a rate equal to the
last closing bid price of the Greenleaf Common Stock quoted on the OTC Bulletin
Board on the Closing date, but in no event less than $.50 per share, as well as
warrants to purchase an equal number of shares of restricted Greenleaf Common
Stock at an exercise price equal to the rate per share described in the
preceding clause, with all the warrants to expire at 5:00 p.m. Austin, Texas
time on the first anniversary of the Closing date. The shares and options shall
be delivered to the respective sellers of the SMR Licenses upon the receipt by
Future Com of the approval of the FCC to the transfer of the respective SMR
Licenses to Future Com. The SMR License Purchase Agreement shall be in the form
of Exhibit E attached to and made a part of this Agreement.
2.3.6. Purchase Of Satellite License. Also at the Closing, Gale
and Blanck will enable Greenleaf and Future Com to enter into an additional
agreement (the "Satellite License Purchase Agreement") pursuant to which
Greenleaf shall purchase the dedicated satellite license described on Schedule
2.3.6. attached to and made a part of this Agreement (the "Satellite License")
at a purchase price of 75,000 restricted shares of Greenleaf Common Stock and
options to purchase 75,000 restricted shares of Greenleaf Common Stock at an
exercise price of $.50 per share, all of which options shall expire at 5:00
4
<PAGE>
p.m., Austin, Texas time on the third anniversary of the Closing date. The
shares and options shall be delivered to the seller of the Satellite License
upon the receipt by Future Com of the approval of the FCC to the transfer of the
Satellite License to Future Com. In addition, in order to obtain the release of
all security interests and other interests in the Satellite License, Future Com
shall pay 1,300,000 restricted shares of Greenleaf Common Stock and warrants to
purchase an equal number of shares of restricted Greenleaf Common Stock at an
exercise price of $.50 per share, with all the warrants to expire at 5:00 p.m.
Austin, Texas time on the first anniversary of the Closing date. The shares and
options shall be delivered upon the receipt by Future Com of the approval of the
FCC to the transfer of the Satellite License to Future Com The Satellite License
Purchase Agreement and release agreement shall be in the forms attached to and
made a part of this Agreement as Exhibit F.
2.3.7. Purchase Of Additional SMR Licenses. Effective as of the
date of the Closing, Gale and Blanck shall grant to Future Com the right to
purchase additional SMR frequency licenses (the "Additional Licenses") that are
owned by or presented to Gale or Blanck or owned by or presented to an entity in
which Gale or Blanck has a direct or indirect five percent or greater interest
or for which Gale or Blanck serves as an officer, director, manager or partner
(the "Additional License Owner"). With the approval of Greenleaf, Future Com
shall have the right to purchase the Additional Licenses at a price equal to the
cost of the Additional License to the Additional License Owner payable in the
form of restricted Greenleaf Common Stock at a rate equal to the last closing
bid price of the Greenleaf Common Stock quoted on the OTC Bulletin Board on the
date of acquisition of the Additional License by Future Com but in no event less
than $.50 per share, as well as warrants to purchase an equal number of shares
of restricted Greenleaf Common Stock at an exercise price equal to the rate per
share described in the preceding clause, with all the warrants to expire at 5:00
p.m. Austin, Texas on the first anniversary of the date of the acquisition of
the Additional License by Future Com.
2.3.8. Registration Rights Agreement. At the Closing, each of
Gale, Blanck, Leonard Berg, Richard Wachs and Christopher J. Webster shall enter
into an agreement with Greenleaf in the form of Exhibit G attached to and made a
part of this Agreement concerning the registration and disposition of their
respective shares of Greenleaf Common Stock.
2.3.9. Option Agreements. At the Closing, Greenleaf shall grant
to the individuals set forth below options to purchase the number of shares of
restricted Greenleaf Common Stock set forth opposite their respective names,
which options shall provide for an exercise priced $.80 per share and all of
which options shall expire at 5:00 p.m., Austin, Texas time on the first
anniversary of Closing date, and which options shall be evidenced by a stock
option agreement in the form of Exhibit C attached to and made a part of this
Agreement:
Option Recipient Option Shares
---------------- -------------
Janette Schafer 100,000
Wayne Keil 100,000
Erica Davis 50,000
Ed Buehler 50,000
Joe Robilio 50,000
Phyllis Schwartz 50,000
Total: 600,000
=======
2.4. Covenant Not To Compete.
5
<PAGE>
2.4.1. Each of Gale and Blanck agrees that, until the later to
occur of two (2) years after the Effective Date and one (1) year following the
termination of his respective employment with or engagement as a consultant to
Greenleaf or Future Com, that, without the prior written consent of Greenleaf,
he will not directly or indirectly engage in (whether as a principal,
consultant, proprietor, sales representative, shareholder, partner, director or
otherwise), or have any ownership interest in, or participate in the financing,
operation, management or control of, any person, firm, corporation or business
that engages in a "Restricted Business" in a "Restricted Territory" (as defined
below). It is agreed that ownership of no more than one percent (1%) of the
outstanding voting stock of a publicly traded corporation shall not constitute a
violation of this provision.
2.4.2. As used herein, the terms:
2.4.2.1."Restricted Business" shall mean any business
selling any products or services in competition with the business of Greenleaf
or Future Com or with the Greenleaf Business or the Future Com Business or with
the business of any entity controlled by or under common control with Greenleaf
or Future Com, as of the Effective Date and/or as of any date during the period
set forth in Section 2.4.1.
2.4.2.2."Restricted Territory" shall mean the United States
or anywhere in the world outside the United States where Greenleaf or Future Com
or any entity controlled by or under common control with Greenleaf or Future Com
conducts business.
2.4.3. If any restriction set forth in this Section 2.4 is found
by any court of competent jurisdiction to be unenforceable because it extends
for too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend only over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
2.4.4. At the Closing, Greenleaf shall cause each of Leonard
Berg, Richard Wachs and Christopher J. Webster to enter into agreements
providing for the same restrictions imposed on Gale and Blanck pursuant to this
Section 2.4., which agreements shall be in the form of Exhibit H attached to and
made a part of this Agreement.
3. Directors. At the Effective Date, the officers and directors of Future
Com shall resign and Greenleaf, as the then-owner of all the outstanding Future
Com Common Stock, shall cause the following to be elected as the directors of
Future Com beginning as of the Effective Date: William Gale, Warren Blanck,
Leonard Berg, Richard Wachs and Christopher J. Webster (the "New Board"). The
New Board shall elect the following to serve in the offices indicated beginning
as of the Effective Date: William Gale - President and Chief Executive Officer;
Warren Blanck - Secretary and Treasurer; and Wayne Keil - Chief Financial
Officer.
4. Exchange Of Shares.
4.1. Exchange Of Shares. At the Closing the following shall occur:
4.1.1. Greenleaf shall deliver to each Future Com Shareholder
2,000,000 shares of restricted Greenleaf Common Stock in exchange for each
outstanding share of Future Com Common Stock owned by that Future Com
Shareholder, and each Future Com Shareholder shall deliver to Greenleaf a Future
Com stock certificate representing all shares of Future Com Common Stock owned
by that shareholder together with a duly executed stock power and assignment
transferring those shares to Greenleaf.
6
<PAGE>
4.1.2. No fractional shares of Greenleaf Common Stock will be
issued. Each shareholder of Future Com shall receive the number of shares of
Greenleaf Common Stock set forth below:
Shares of Future Com Shares of Greenleaf
Future Com Shareholder Common Stock Held Common Stock to be Issued
- ---------------------- ----------------- -------------------------
William Gale 2,500 2,000,000
Warren Blanck 2,500 2,000,000
----- ---------
Totals: 5,000 4,000,000
===== =========
4.2. Mechanics Of Exchange. At the Closing, each Future Com
Shareholder who is the holder of a certificate that immediately prior to the
Effective Date represented outstanding shares of Future Com Common Stock shall
surrender that certificate, together with any other reasonably required
documents, to Greenleaf, and that Future Com Shareholder shall be entitled, upon
surrender, to receive in exchange therefor certificates representing shares of
Greenleaf Common Stock in accordance with the terms of this Agreement. If any
certificate for Greenleaf Common Stock is to be issued in a name other than that
in which the certificate for shares of Future Com Common Stock surrendered in
exchange therefor is registered, it shall be a condition of that exchange that
the person requesting the exchange shall pay any transfer or other taxes or fees
required by reason of the issuance of certificates for Greenleaf Common Stock in
a name other than that of the registered holder of the Future Com certificate
surrendered. If any Future Com certificates representing shares of Future Com
Common Stock shall have been lost or destroyed, the Future Com Shareholder who
is the registered owner of those shares may obtain the certificate representing
the Greenleaf Common Stock to which that Future Com Shareholder is entitled by
reason of the consummation of the Exchange, provided that such Future Com
Shareholder delivers to Greenleaf and the Transfer Agent a statement certifying
to the loss or destruction and providing for indemnity or in certain cases a
bond satisfactory to Greenleaf and the Transfer Agent indemnifying Greenleaf and
the Transfer Agent against any loss or expense either of them may incur if the
lost or destroyed certificates are thereafter presented to Greenleaf or the
Transfer Agent for exchange.
5. Representations And Warranties Of Greenleaf. Greenleaf represents and
warrants to Future Com and the Future Com Shareholders as follows:
5.1. Organization And Standing. Greenleaf is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Greenleaf has the requisite corporate power to own and operate its
properties and assets, and to carry on its business as currently conducted and
as proposed to be conducted. Greenleaf is licensed or qualified as a foreign
corporation and is in good standing in every state, or other jurisdiction,
wherein the character of its property or the nature of its activities makes such
licensing or qualification necessary and wherein the failure to be so licensed
or qualified would have a Material Adverse Effect on the business and operations
of Greenleaf taken as a whole. Greenleaf has furnished Future Com or Future
Com's counsel with copies of its Certificate Of Incorporation and Bylaws. These
copies are true, correct and complete in the form in which they now exist and
contain all amendments through the date of this Agreement.
7
<PAGE>
5.2. Capitalization. Greenleaf's entire authorized capital stock
consists of 100,000,000 shares of Greenleaf Common Stock, par value $.001 per
share. At August 1, 1999 there were 68,248,601 shares of Greenleaf Common Stock
issued and outstanding. There are no shares of Greenleaf's preferred stock
outstanding.
5.3. Authority; Non-Contravention. Greenleaf has the requisite power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance by Greenleaf of its obligations hereunder, and the consummation of
the transactions contemplated hereby have been duly authorized by its Board Of
Directors, and, except for the corporate filings required by state law, no other
corporate proceedings on the part of Greenleaf are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Greenleaf and (assuming the due
authorization, execution and delivery hereof by Future Com) constitutes a valid
and binding obligation of Greenleaf enforceable against Greenleaf in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws of general applicability relating to or affecting the enforcement
of creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law). The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Greenleaf under any provision of (i) the Certificate Of Incorporation or Bylaws
(true and complete copies of which as of the date hereof have been delivered to
Future Com) of Greenleaf, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, other agreement, instrument, permit, concession,
franchise or license applicable to Greenleaf, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Greenleaf or
to any of its properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults, right, liens, security
interests, charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on Greenleaf, materially impair the ability
of Greenleaf to perform its obligations hereunder, or prevent the consummation
of any of the transactions contemplated hereby.
5.4. Governmental Consents. Except for actions that have been or will
be taken prior to the Closing, no consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental or regulatory authority on the part of Greenleaf is required in
connection with the consummation of the transactions contemplated by this
Agreement. As of the Closing, there will be no consent of any third party that
has not been obtained and that is required in order to consummate the
transactions being consummated at the Closing.
5.5. Disclosure. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Greenleaf, or by
any of the directors or officers of Greenleaf, in connection with the
transactions contemplated hereby, contains any untrue statement (attributable to
Greenleaf) of a material fact. There is no fact known to Greenleaf which would
cause a Material Adverse Effect on the business, prospects or financial
condition of Greenleaf or any of Greenleaf's properties or assets taken as a
whole, which has not been set forth in this Agreement or in the Schedules or
Exhibits or certificates, SEC filings by Greenleaf, if any, or statements in
writing furnished in connection with the transactions contemplated by this
Agreement. Greenleaf has fully provided Future Com with all the written
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information that Future Com has requested for the purpose of deciding whether to
consummate the Exchange. Greenleaf agrees that, during the period between
execution of this Agreement and the date of the Closing, Greenleaf will provide
all additional information that Future Com reasonably requests.
5.6. Reorganization. To Greenleaf's knowledge, it has not taken any
action or failed to take any action which action or failure to take action would
jeopardize the qualification of the Exchange as a reorganization within the
meaning of Section 368(a) of the Code. Without limiting the foregoing (i)
Greenleaf has no plan or intention: to cause Future Com to issue any shares of
stock following the Exchange; to reacquire any of the Greenleaf Common Stock
issued in the Exchange; to liquidate Future Com; to merge Future Com with or
into another corporation; to sell or otherwise dispose of any stock of Future
Com; or to cause Future Com to sell or otherwise dispose of (except in the
ordinary course of business) any of its assets, (ii) following the Exchange,
Future Com will continue at least one significant historic business line of
Future Com, or use at least a significant portion of Future Com's historic
business assets in a business, in each case within the meaning of Treas. Reg.
ss. 1.368-1(d), and (iii) Greenleaf does not own, nor has Greenleaf owned during
the past five years, any capital stock of Future Com.
6. Representations And Warranties Of Future Com. Future Com agrees,
represents and warrants to Greenleaf as follows:
6.1. Organization And Standing. Future Com is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. Future Com has the requisite corporate power to own and operate its
properties and assets, and to carry on its business as currently conducted and
as proposed to be conducted. Future Com is licensed or qualified as a foreign
corporation and is in good standing in every state, or other jurisdiction,
wherein the character of its property or the nature of its activities makes such
licensing or qualification necessary and wherein the failure to be so licensed
or qualified would have a Material Adverse Effect on the business and operations
of Future Com taken as a whole.
6.2. No Subsidiaries. Future Com has no partially or wholly owned,
direct or indirect, Subsidiaries.
6.3. Capitalization. Future Com's entire authorized capital stock
consists solely of 5,000 shares of Future Com Common Stock. As of the date of
this Agreement and the date of Closing, there are and will be 5,000 shares of
Future Com Common Stock issued and outstanding, all of which are and will be
held by the Future Com Shareholders in the amounts set forth in Section 1.12 of
this Agreement. There are no shareholders of Future Com or owners of any equity
interests in Future Com other than the Future Com Shareholders.
Future Com has granted no warrant, call, option, convertible security or
other agreement or right (contingent or otherwise) to purchase or acquire any
Future Com Common Stock or any other capital stock of Future Com, and Future Com
has no other commitments to issue such warrant, call, option, convertible
security or other right. Future Com has no obligation, contingent or otherwise,
to purchase, redeem, or otherwise acquire any shares of Future Com's capital
stock or any interest therein or to pay any dividend or to make any other
distribution in respect thereof, except as permitted by this Agreement.
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6.4. Authority; Non-Contravention. Future Com has the requisite power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance by Future Com of its obligations hereunder and the consummation of
the transactions contemplated hereby have been duly authorized by its Board Of
Directors and by the Future Com Shareholders, and except for the corporate
filings required by state law, no other corporate proceedings on the part of
Future Com are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Future Com and (assuming the due authorization, execution and
delivery hereof by Greenleaf) constitutes a valid and binding obligation of
Future Com enforceable against Future Com in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws of general
applicability relating to or affecting the enforcement of creditors' rights and
by the effect of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law). The execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Future Com under, any provision of (i)
the Articles Of Incorporation or Bylaws (true and complete copies of which as of
the date hereof have been delivered to Greenleaf) of Future Com, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement
instrument, permit, concession, franchise or license applicable to Future Com,
or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Future Com or any of its properties or assets, other
than, in the case of clauses (ii) or (iii), any such conflicts, violations,
defaults, right, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Future Com, materially impair the ability of Future Com to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
6.5. Contracts And Commitments. Other than this Agreement and the
agreements and documents contemplated herein, attached hereto as Schedule 6.5 is
a list of all agreements, contracts, indebtedness, liabilities and other
obligations known to Future Com to which Future Com is a party or by which
Future Com is bound or subject, which are material to the conduct and operations
of its business. True and complete copies of such agreements and obligations, if
extant, have been made available for inspection by Greenleaf at the offices of
Future Com. Except as set forth on Schedule 6.5, all of the contracts and other
agreements listed on Schedule 6.5 are valid and binding upon Future Com in
accordance with their terms, and neither Future Com nor, to the knowledge of
Future Com, any other party is in default, nor has Future Com received or sent
notice of default or of any unresolved claim, under any such contracts or other
agreements. Except as separately identified on Schedule 6.5, no approval or
consent of any person is needed in order that the contracts and other agreements
set forth on Schedule 6.5 or on any other Schedule continue in full force and
effect following the consummation of the transactions contemplated by this
Agreement.
6.6. Compliance With Other Instruments. Future Com is not in violation
of any term of its Articles Of Incorporation or Bylaws, or in any respect
material to the business and operations of Future Com taken as a whole of any
contract, agreement, instrument, judgment, decree, or order, except as set forth
on Schedule 6.6 hereto. Except as set forth on Schedule 6.6, to the best of
Future Com's knowledge Future Com is not in violation of any material federal,
state, or local law, ordinance, statute, rule or regulation or any other
material requirement of any governmental or regulatory body, court or arbitrator
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applicable to the business of that entity. Future Com holds, or believes that in
the ordinary course of business it will be able to obtain, all licenses,
permits, orders and approvals of any foreign, federal, state or local
governmental or regulatory bodies that are material to or necessary for the
conduct of the business of Future Com (collectively, "Permits"). All Permits are
in full force and effect; and no proceeding is pending or, to the knowledge of
Future Com, threatened to revoke or limit any Permit.
6.7. Litigation And Claims. Except as shown on Schedule 6.7 hereto,
there is no action, suit, claim or legal, administrative or arbitral proceeding
or investigation (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending and known to Future Com or known and
currently threatened against Future Com or any properties or assets of any of
them, nor to the knowledge of Future Com is there a basis therefor which
questions the validity of this Agreement or the right of Future Com to enter
into it, or to consummate the transactions contemplated hereby, or which might
result, either individually or in the aggregate, in any Material Adverse Change
in the assets, condition, affairs or prospects of Future Com, financially or
otherwise, nor does Future Com know of any meritorious basis for the foregoing.
Neither Future Com nor any properties or assets of Future Com is a party or
subject to the provisions of any order, writ, injunction, judgment, award or
decree of any court or government or regulatory agency or instrumentality or
arbitration tribunal of a material nature that has not been disclosed in
Schedule 6.7. All notices required to have been given to any insurance company
listed as insuring against any action, suit or claim set forth on Schedule 6.7
have been timely and duly given and no insurance company has asserted, orally or
in writing, that such claim is not covered by the applicable policy relating to
such claim.
6.8. Insurance. Future Com maintains the insurance coverage or
policies described on Schedule 6.8.
6.9. Governmental Consents. Except for actions that have been or will
be taken prior to the Closing, no consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental or regulatory authority on the part of Future Com is required in
connection with the consummation of the transactions contemplated by this
Agreement. As of the Closing, there will be no consent of any third party that
has not been obtained and that is required in order to consummate the
transactions being consummated at the Closing.
6.10. Disclosure. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Future Com, or
by any of the directors or officers of Future Com in connection with the
transactions contemplated hereby, contains any untrue statement (attributable to
Future Com) of a material fact. There is no fact known to Future Com which would
cause a Material Adverse Effect on the business, prospects or financial
condition of Future Com or any of its respective properties or assets taken as a
whole, which has not been set forth in this Agreement or in the Schedules or
Exhibits or certificates or statements in writing furnished in connection with
the transactions contemplated by this Agreement. Future Com has fully provided
Greenleaf with all the written information that Greenleaf has requested for the
purpose of deciding whether to consummate the Exchange. Future Com agrees that,
during the period between execution of this Agreement and the date of the
Closing, Future Com will provide all additional information that Greenleaf
reasonably requests.
6.11. Actions. Except as otherwise set forth in this Agreement or the
Schedules hereto, during the period from the Execution Date to and including the
date of Closing, Future Com will not have (a) declared or paid any dividends, or
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authorized or made any distribution upon or with respect to any class or series
of its capital stock or redeemed, purchased or otherwise acquired any shares of
its capital stock or any option, warrant or other right to purchase or acquire
any such shares, (b) incurred or increased the amount of any indebtedness for
money borrowed or incurred any other liabilities or obligations, (c) made any
loans or advances to any officer, director or shareholder, (d) sold,
transferred, exchanged or otherwise disposed of any of its assets or rights, (e)
permitted any of its assets to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, (f) made any
capital expenditure or commitment therefor, (g) made any bonus or profit sharing
distribution or payment of any kind, (h) written-off as uncollectable any notes
or accounts receivable, (i) granted any increase in the rate of wages, salaries,
bonuses or other remuneration of any officer, director, employee or consultant,
(j) cancelled or waived any claims or rights, (k) made any change in any method
of accounting or auditing practice, (l) otherwise conducted its business or
entered into any transaction, other than in the usual and ordinary manner and in
the ordinary course of its business, or (m) agreed, whether or not in writing,
to do any of the foregoing.
6.12. Taxes. All income, excise, occupation, franchise, and other
taxes, duties or charges levied, assessed or imposed upon Future Com by the
United States or by any government, state, municipality or governmental
subdivision have been duly paid or adequately provided for or are being timely
and properly contested, and all income, excise, franchise and other tax reports
or other reports required by law or regulation have been duly filed or
extensions have been duly obtained. All federal, state or other tax returns of
Future Com have been filed by Future Com as required with the appropriate
governmental agency and all assessments with respect to such periods have been
paid or adequately provided for or are being timely and properly contested.
Since its inception on August 9, 1999, (a) no audit of any federal, state, local
or other tax returns of Future Com has been conducted, is in progress or, to
Future Com's knowledge, has been threatened, (b) Future Com has not waived any
statute of limitations with respect to any of its tax liabilities, including,
without limitation, liability for federal income or any other taxes for any
period prior to the date hereof, and (c) no consents have been filed pursuant to
Section 341(f) of the Code by Future Com or any transferor corporation to Future
Com.
6.13. Employees; No Retirement Obligations. The names of all the
employees of Future Com are set forth in Schedule 6.16. Future Com has no
obligation under any pension, retirement or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings. Future
Com has no employment contracts, collective bargaining agreements, health,
medical, long-term disability, dental, overriding royalty plans, or pension,
bonus, profit-sharing, stock option, or 401(k) plans, or other agreements
providing for employee remuneration or benefits, or any consulting, commission
or fee agreements with independent contractors, except for relationships with
accounting and law firms that may be terminated by Future Com at any time
without payment of any penalty or other amounts other than fees and expenses
previously incurred.
6.14. Books And Records. With respect to matters occurring since the
inception of Future Com, the minute books of Future Com contain complete and
accurate records of all meetings and other corporate actions of Future Com's
shareholders, Board Of Directors and all committees, if any, appointed by the
Board Of Directors.
6.15. Copies Of Documents. Future Com has caused to be made available,
to the extent reasonably requested by Greenleaf, for inspection and copying by
Greenleaf and its advisors, true, complete and correct copies of all documents
referred to in any Schedule furnished by Future Com to Greenleaf.
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6.16. Employees, Officers, Directors, And Consultants. Schedule 6.16
sets forth the name and total annual compensation, from Future Com, of employee,
each officer and director and of each other consultant, agent or other
representative of Future Com other than day laborers and contract employees.
Future Com has no commitment or agreement to continue to employ or retain, or to
compensate in any manner, any such person after the Effective Date and, as of
the Effective Date, Future Com is not indebted to any such person and, also as
of the Effective Date, Future Com has no other liability to any such person.
None of such persons has made a written threat to Future Com or to any of Future
Com's officers or directors concerning such person's relationship with Future
Com.
6.17. Documents Delivered. Future Com has furnished to Greenleaf for
its examination true and complete copies of the following: (a) the Articles Of
Incorporation, as amended, and the Bylaws, as amended, of Future Com; (b) the
minute book of Future Com, containing all records required to be set forth
concerning all proceedings, consents, actions and meetings of the shareholders
and the Board of Directors of Future Com; and (c) all material permits, orders,
and consents (issued by a governmental or quasi-governmental authority) received
by Future Com, or with respect to any security of Future Com, and all
applications for such permits, orders and consents, except for permits, orders
and consents, or applications therefor, issued to or received by Future Com in
the ordinary course of Future Com's business. No amendments will be made to the
Articles Of Incorporation or Bylaws of Future Com prior to the Closing without
Greenleaf's consent.
6.18. No Material Changes. Except as set forth in Schedule 6.18, from
the Execution Date through the date of the Closing, none of the following has
occurred:
6.18.1. Any material transaction by Future Com;
6.18.2. Any capital expenditure in excess of $5,000 by Future
Com;
6.18.3. Any changes in the condition (financial or otherwise),
liabilities, assets, or business of Future Com that, when considered
individually or in the aggregate, have a Material Adverse Effect except for
general political, economic or industry changes that Future Com reasonably
believes Greenleaf already has knowledge of from sources other than Future Com;
6.18.4. The destruction of, damage to, or loss of any asset of
Future Com (regardless of whether covered by insurance) as a direct or indirect
result of the action or inaction of Future Com that, when considered
individually or in the aggregate, has a Material Adverse Effect upon the
condition (financial or otherwise) or business of Future Com;
6.18.5. Any labor matters or other events or conditions of any
character that, when considered individually or in the aggregate, have a
Material Adverse Effect upon the condition (financial or otherwise) of Future
Com except for general political, economic or industry changes that Future Com
reasonably believes Greenleaf already has knowledge of from sources other than
Future Com;
6.18.6. Any change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) by Future Com;
6.18.7. Any issuance or sale or authorization for issuance or
sale of additional shares of any class of capital stock, or subscriptions,
options (including employee stock options), warrants, rights or convertible
securities or other agreements obligating Future Com to issue shares of its
capital stock;
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6.18.8. The declaration, setting aside, or payment of a dividend
or other distribution with respect to the capital stock of Future Com, or any
direct or indirect redemption, purchase or other acquisition by Future Com of
any of its shares of capital stock, except as otherwise permitted in this
Agreement;
6.18.9. Any increase in the salary or other compensation payable
or to become payable by Future Com to any of its officers or directors, or the
declaration, payment, or commitment or obligation of any kind for the payment by
Future Com of a bonus or other additional salary or compensation to any such
person;
6.18.10. The amendment or termination of any contract, agreement,
or license to which Future Com is directly a party, except for amendment or
termination of customer contracts in the ordinary course of Future Com's
business.
6.18.11. Any loan by Future Com to any person or entity, or the
guaranteeing by Future Com of any loan;
6.18.12. Any mortgage, pledge or other encumbrance of any asset
of Future Com by Future Com or as a direct or indirect result of the action or
inaction of Future Com;
6.18.13. The waiver or release of any right or claim of Future
Com by Future Com;
6.18.14. Any other events or conditions of any character within
the knowledge of Future Com that, when considered individually or in the
aggregate, have or might reasonably be expected to have a Material Adverse
Effect on the condition (financial or otherwise), business or assets of Future
Com except for general political, economic or industry events or conditions that
Future Com reasonably believes Greenleaf already has knowledge of from sources
other than Future Com;
6.18.15. The issuance or sale by Future Com of any shares of its
capital stock of any class, or of any other of its securities;
6.18.16. The granting, by Future Com, exercise or expiration of
options or other rights to purchase securities of Future Com; or
6.18.17. Any agreement by Future Com to do any of the things
described in this Section 6.18.
6.19. Assets; Undisclosed Liabilities. Schedule 6.19 to this Agreement
sets forth all the assets and liabilities of Future Com. Notwithstanding any
other provision of this Agreement, at the Effective Date, except as provided for
in Schedule 6.19, Future Com does not have any debt, liability or obligation of
any nature, whether accrued, absolute, contingent, or otherwise, and whether due
or to become due, including any debt, liability or obligation relating to or
arising out of any act, transaction, circumstance or state of facts that
occurred or existed on or before the Execution Date or the date of Closing.
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6.20 No Encumbrances. All of Future Com's interests in tangible and
intangible property are free and clear of restrictions on or conditions to
transfer or assignment, and free and clear of liens, pledges, charges,
encumbrances, equities, claims, conditions, or restrictions, except for (a)
those restrictions, conditions or liens disclosed in Schedule 6.20 to this
Agreement; (b) the lien of current taxes not yet due and payable; and (c)
matters that, in the aggregate, are not substantial and do not materially
detract from or interfere with the present or intended use of these assets, or
do not materially impair the business operations of Future Com. Future Com does
not own any real property. Future Com does not occupy any real property in
violation of any law, regulation or decree.
6.21. No Encumbrances On Future Com Common Stock. The Future Com
Common Stock being exchanged by the Future Com Shareholders is owned by the
Future Com Shareholders free and clear of any liens, claims, encumbrances or
restrictions of any kind, and none of those shares is subject to options,
rights, warrants, or other agreements or commitments by which the Future Com
Shareholders are or may become obligated to transfer those shares of Future Com
Common Stock other than pursuant to this Agreement.
6.22. Reorganization. To the knowledge of Future Com, Future Com has
not taken any action or failed to take any action, which action or failure to
take action would jeopardize the qualification of the Exchange as a
reorganization within the meaning of Section 368(a) of the Code. Without
limiting the foregoing: (i) to the knowledge of the executive officers of Future
Com, there is no plan or intention on the part of the holders of Future Com
Common Stock to sell, exchange, or otherwise dispose of a number of shares of
Greenleaf Common Stock that would cause paragraph 2 of Section 7.03 of Rev.
Proc. 77-37 (as amplified) not to be true as applied to the Exchange, and of the
outstanding Future Com Common Stock, (ii) as of the Effective Date, Greenleaf
will hold "substantially all" of Future Com's properties within the meaning of
Section 368(a)(2)(D) of the Code and Rev. Proc. 77-37 (as amplified), and (iii)
there is no intercorporate indebtedness between Future Com and Greenleaf.
6.23. Restricted Stock. Each of the Future Com Shareholders
understands and agrees that the issuance of the shares of Greenleaf Common Stock
has not been registered under federal or state securities laws and the shares of
Greenleaf Common Stock are "restricted" securities as defined in Rule 144 under
the 1933 Act. Each of the Future Com Shareholders understands and agrees that no
holder of Future Com Common Stock may sell, offer for sale, transfer, pledge or
hypothecate the shares of Greenleaf Common Stock received pursuant to this
Agreement in the absence of an effective registration statement covering that
transaction, under all applicable federal and state securities laws, unless that
transaction is exempt from registration under all applicable federal and state
securities laws, including an exemption under Rule 144 promulgated under the
1933 Act.
7. Certain Agreements.
7.1. Access And Information. Future Com shall give to Greenleaf and
its representatives, and Greenleaf shall give to Future Com and its
representatives, during normal business hours from the Execution Date until the
Effective Date, full access to all properties, books, contracts and records
(including tax returns and insurance policies) of or relating to Future Com or
Greenleaf, respectively, with all information reasonably requested by the other
Party. Except as agreed to by Future Com and Greenleaf, all information obtained
hereunder which is not otherwise public shall be held confidential and, in the
event of termination of this Agreement, all documents (including copies thereof)
obtained hereunder containing such information shall be destroyed or returned to
the Party from which they were obtained. At the Closing, Future Com shall
deliver to Greenleaf all books, contracts, and records (including tax returns
and insurance policies) of or relating to Future Com.
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7.2. Shareholder Authorization. Future Com shall provide Greenleaf
with evidence of the approval of this Agreement and the transactions
contemplated by this Agreement by Future Com's shareholders in accordance with
all applicable laws and the governing documents of Future Com.
7.3. Operation Of Business. Each of Future Com and Greenleaf agrees
with the other that from the Execution Date to the Effective Date, except as
otherwise consented to or approved by the other in writing, each will operate
its business as presently operated in the ordinary course, and, consistent with
those operations, each of Future Com and Greenleaf will substantially comply
with all applicable legal and contractual obligations, except where
noncompliance will not cause a Material Adverse Effect on their respective
operations, and will use its best efforts consistent with past practices to
preserve the goodwill of its suppliers, customers and others with whom it has
business relationships; and neither Future Com nor Greenleaf, without the
written consent of the other Party, (a) shall institute nor use any methods of
purchase, sale, lease, management, accounting or operation that are inconsistent
with practices normally followed or that vary substantially from those methods
used by that Party as of the date of this Agreement, (b) will take any action
(or omit to take any action) which action or omission would cause any
representation to be untrue at any time prior to the Effective Date as if that
representation or warranty were made at and as of the Effective Date, or make
any change in any method of reporting income or expenses for federal income tax
purposes.
7.4. Preservation Of Business. Unless it has the written consent of
the other Party to this Agreement, Future Com and Greenleaf will each use its
best efforts to preserve its business organization intact and to preserve its
present relationships with suppliers, customers and others having business
relationships with it.
7.5. Tax Cooperation.
7.5.1. After the Effective Date, each of Greenleaf, Future Com
and the Future Com Shareholders shall cooperate, and cause their respective
directors, employees, officers and representatives to cooperate, with each other
and with each other's respective agents, including accounting firms and legal
counsel, in connection with the preparation or audit of any tax return or
report, amended return or report, claim for refund in any tax claim or
litigation in respect of Greenleaf or Future Com, or Future Com's or Greenleaf's
activities, which cooperation shall include, but not be limited to, making
available to the other all information, records, and documents in their
possession relating to the liabilities for taxes associated with Greenleaf or
Future Com, except as may be limited by this Agreement. Greenleaf and Future Com
also shall make available to the other, as reasonably requested and available,
the personnel responsible for preparing, maintaining and interpreting
information, records and documents in connection with taxes as well as related
litigation. Any information provided or obtained pursuant to this Section 7.5.1
shall be kept confidential, except as may be otherwise necessary in connection
with the filing of returns or reports, refund claims, audits, tax claims and
litigation. The Future Com Shareholders, with the assistance of Future Com and
Greenleaf as requested and furnished pursuant to this Section 7.5.1, shall
prepare and file a federal and state tax return on behalf of Future Com for the
year ended December 31, 1998, which tax return shall be filed by the applicable
due date including applicable extensions. Copies of the tax return filed
pursuant to this Section 7.5.1 shall be promptly provided to each Party. The
Future Com Shareholders shall cause the tax return to be prepared in sufficient
detail to determine the tax basis of the investments as of the Effective Date.
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7.5.2. Future Com and Greenleaf shall provide written notice to
the other on or before 15 days after learning of any pending or threatened tax
audit, tax assessment or tax proceeding related to Future Com or Greenleaf for
whole or partial periods for which a claim for payment or reimbursement may be
made by the Future Com Shareholders or Greenleaf against the other. The notice
required by the previous sentence shall contain factual information (to the
extent known) describing the asserted tax liability in reasonable detail and
shall include copies of any notice or other document received from any tax
authority in respect of any such matters. If a Party (the "Claiming Party") has
knowledge of an asserted tax liability with respect to a matter for which that
Claiming Party may make a claim against the other Party (the "Defending Party")
and the Claiming Party fails to give the Defending Party prompt notice of that
asserted tax liability as required by this Section 7.5.2 and (i) if the
Defending Party is precluded by the failure to receive prompt notice from
contesting the asserted tax liability in both the administrative and judicial
forums, then the Defending Party shall have no responsibility for any taxes or
penalties arising out of that asserted tax liability, and (ii) if the Defending
Party is not so precluded from contesting, but such failure to receive prompt
notice results in a detriment to the Defending Party, then any amount that the
Defending Party is otherwise required to pay to the Claiming Party pursuant to
this Agreement shall be reduced by the amount of such detriment, provided that
the Claiming Party shall nevertheless be entitled to full payment as provided
pursuant to this Agreement to the extent, and only to the extent, that the
Claiming Party can establish that the Defending Party was not prejudiced by such
failure.
7.5.3. In the event of an audit or dispute with a taxing
authority over taxes for which a Party is primarily liable pursuant to this
Agreement, that Party will be entitled to control the proceedings related to
those taxes (including action taken to pay, compromise, or settle those taxes),
provided that Greenleaf, Future Com and the Future Com Shareholders shall
jointly control, in good faith with each other, any proceeding related to a
taxable period that begins before and ends after the Effective Date and which
Greenleaf, Future Com, and/or the Future Com Shareholders have liability for
pursuant to this Agreement, provided further, however, that Greenleaf will in
any event be entitled to solely control any proceeding that relates to or
impacts a consolidated, combined or unitary return filed in any jurisdiction by
Future Com and Greenleaf. Reasonable out-of-pocket expenses with respect to such
contest shall be borne by the Parties in proportion to their responsibility for
those taxes as set forth in this Agreement. The Party that is not entitled to
control any such proceedings shall be afforded a reasonable opportunity to
participate in such proceedings at its own expense.
7.5.4. Greenleaf, Future Com and the Future Com Shareholders
shall have possession of their own and their subsidiaries', if applicable, tax
records after the Closing. Greenleaf, Future Com and the Future Com Shareholders
shall make available to each other for inspection and copying during normal
business hours, in connection with the preparation of tax returns, audits and
litigation, all tax records in their possession relating to Greenleaf, Future
Com or the Future Com Shareholders or their respective activities for a period
prior to the Effective Date, taxable periods for which Greenleaf, Future Com and
the Future Com Shareholders may share tax liabilities, and tax records that are
relevant to periods following the Effective Date. Greenleaf, Future Com and the
Future Com Shareholders shall preserve and keep all such tax records in their
possession until the expiration of any applicable statutes of limitation or
extensions thereof and as otherwise required by law, but in any event for a
period not less than seven years after the Tax Closing Date. Notwithstanding the
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foregoing, any of the Parties may dispose of those records provided 90 days
advance written notice of the intent to dispose is given to other Party. Such
notice shall be delivered in accordance with the provisions of Section 19 of
this Agreement and shall include a list of the records to be disposed of which
shall describe in reasonable detail each file, book or other record accumulation
to be disposed. The notified Party shall have the opportunity, at its cost and
expense, to copy or remove, within that 90 day period, all or any part of those
tax records. For purposes of this Section 7.5.4 tax records include, without
limitation, journal vouchers, cash vouchers, general ledgers, material
contracts, and other related records.
7.6. Interim Operations. From the Execution Date to the Effective
Date, Future Com will not, unless Greenleaf gives its prior written approval:
(a) amend or otherwise change its Articles Of Incorporation or Bylaws; (b) issue
or sell or authorize for issuance or sale additional shares of any class of
capital stock, or subscriptions, options (including employee stock options),
warrants, rights or convertible securities or other agreements obligating Future
Com to issue shares of its capital stock; (c) declare, set aside, make or pay
any dividend or other distribution with respect to its capital stock; (d)
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock; (e) issue any instrument that permits participation in the
revenues or profits of Future Com; (f) incur any indebtedness except for
accounts payable in the ordinary course of its business; (g) permit the sale or
encumbrance of any of the assets of Future Com; (h) enter into any employment or
severance agreements or similar agreements with any person; or (i) agree to,
make, engage in or allow to occur or continue any of the following:
7.6.1. Any material transaction;
7.6.2. Any capital expenditure in excess of $5,000;
7.6.3. Any changes in its condition (financial or otherwise),
liabilities, assets, or business that, when considered individually or in the
aggregate, have a Material Adverse Effect;
7.6.4. The destruction of, damage to, or loss of any asset of
Future Com (regardless of whether covered by insurance) as a direct or indirect
result of the action or inaction of Future Com, that, when considered
individually or in the aggregate, has a Material Adverse Effect upon the
condition (financial or otherwise) or business of Future Com;
7.6.5. Any labor troubles or other events or conditions of any
character that, when considered individually or in the aggregate, have a
Material Adverse Effect upon the condition (financial or otherwise) or business
of Future Com;
7.6.6. Any change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates);
7.6.7. Any increase in the salary or other compensation payable
or to become payable to any of its officers or directors, or the declaration,
payment, or commitment or obligation of any kind for the payment of a bonus or
other additional salary or compensation to any such person;
7.6.8. The material amendment or termination of any material
contract, agreement, or license to which it is a party, except with respect to
the amendment or termination of Future Com's customer contracts in the ordinary
course of Future Com's business;
7.6.9. Any loan to any person or entity, or the guaranteeing of
any loan;
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7.6.10. Any mortgage, pledge or other encumbrance of any asset of
Future Com by Future Com or as a direct or indirect result of the action or
inaction of Future Com; or
7.6.11. The waiver or release of any right or claim of Future Com
by Future Com.
7.7. Reorganization. During the period from the Execution Date through
the Effective Date, unless the other Parties shall otherwise agree in writing,
neither of Future Com or Greenleaf shall knowingly take or fail to take any
action which action or failure to act would jeopardize qualification of the
Exchange as a reorganization within the meaning of Section 368(a) of the Code.
7.8. Accuracy Of Representations. Each Party will take all reasonable
action necessary to render accurate, as of the Closing, its representations and
warranties contained in this Agreement, and it will refrain from taking any
action that would render any such representation or warranty inaccurate as of
that time. Each Party will use its best efforts to perform or cause to be
satisfied each covenant or condition to be performed or satisfied by it pursuant
to the terms of this Agreement.
7.9. Consents, Waivers And Approvals. Each of Future Com and Greenleaf
hereby undertake to use its best efforts to obtain in writing, as soon as
practicable after the Execution Date, all such consents, waivers, approvals and
authorizations required prior to the consummation of the Exchange.
7.10. Notice Of Breach Of Warranty. Future Com will immediately give
notice to Greenleaf of the occurrence of any event or the failure of any event
to occur that has resulted in a breach of Future Com's representations or
warranties or a failure by Future Com to comply with any covenant, condition or
agreement contained in this Agreement. Greenleaf will immediately give notice to
Future Com of the occurrence of any event or the failure of any event to occur
that has resulted in a breach of Greenleaf's representations or warranties or a
failure by Greenleaf to comply with any covenant, condition or agreement
contained in this Agreement.
7.11. Additional Documents; Further Assurances. In addition to the
schedules and other items specifically required to be furnished hereunder,
Future Com and Greenleaf hereby agree that each will promptly furnish to the
other such further schedules, certificates and other instruments and take such
other action as may reasonably be requested in order to effectuate the purposes
of this Agreement.
7.12. Notice Of Inaccurate Information. Future Com and Greenleaf each
will notify the other in writing as soon as possible of any events or
occurrences that have happened or that may happen and that have caused or that
may cause any of the information contained in this Agreement or in the Schedules
to this Agreement to become inaccurate or incomplete.
7.13. Publicity. All notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement shall be directed by
Greenleaf. Notwithstanding anything to the contrary in this Section, any Party
to this Agreement shall be permitted unilaterally to make such notices and to
engage in such publicity as it reasonably deems necessary to comply with
applicable laws and regulations, including their respective reporting
obligations, if any, under the 1934 Act. The provisions of this Section shall
remain in effect only until the earlier to occur of the Closing or the
termination of this Agreement.
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8. Conditions To Performance By All Parties. The obligations of all Parties
to effect the Exchange shall be subject to the fulfillment at or prior to the
Effective Date of the following conditions:
8.1. The Exchange shall have been approved by the Board Of Directors
and shareholders of Future Com in accordance with Florida Law and any other laws
applicable to this transaction and Agreement to which Future Com is subject.
8.2. The Exchange shall have been approved by the board of directors
of Greenleaf in accordance with Delaware Law.
8.3. At the Effective Date, there shall not be in effect any court
order restraining or prohibiting consummation of the Exchange, or any pending
proceeding brought by, or before, any governmental commission, board, agency,
court or body with a view to seeking, or in which it is sought, to restrain or
prohibit consummation of the Exchange or in which it is sought to obtain
divestiture of a material amount of assets of either Future Com or Greenleaf and
their respective Subsidiaries taken as a whole.
9. Conditions Precedent To Performance By Future Com. The obligations of
Future Com to effect the Exchange shall be, at Future Com's option, subject to
the fulfillment at or prior to the Effective Date of the following conditions
(unless any or all of them is waived by Future Com):
9.1. The representations and warranties of Greenleaf set forth in this
Agreement, including the attached Schedules, shall be true and correct in all
material respects at and as of the date hereof and shall be true and correct in
all material respects at and as of the Effective Date as though made at and as
of the Effective Date, except for changes which do not have a Material Adverse
Effect on Greenleaf and except to the extent such representations and warranties
are not true and correct by reason of actions permitted or authorized by this
Agreement or consented to in writing by Future Com. Future Com shall have
received a certificate of Greenleaf, dated the Effective Date and duly executed
by its President and Secretary, as to the accuracy of their respective
representations and warranties as of the Effective Date.
9.2. Future Com shall have received an opinion of counsel from legal
counsel to Greenleaf, dated the Effective Date, substantially to the effect
that:
9.2.1. The incorporation, existence, good standing and
capitalization of Greenleaf are as stated in this Agreement and the shares of
Greenleaf Common Stock to be issued to and received by the Future Com
Shareholders pursuant to this Agreement will be duly and validly authorized and
issued, fully paid and non-assessable.
9.2.2. Greenleaf has full corporate power and authority to
execute, deliver and perform this Agreement and this Agreement has been duly
authorized, executed and delivered by Greenleaf, and (assuming the due and valid
authorization, execution and delivery by Future Com) constitutes the legal,
valid and binding agreement of Greenleaf.
9.2.3. To the knowledge of such counsel, there are no actions,
suits or proceedings, pending or threatened against Greenleaf or its
Subsidiaries by any Governmental Entity which seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
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9.2.4. The execution and performance by Greenleaf of this
Agreement will not violate the Certificate Of Incorporation or Bylaws of
Greenleaf.
9.2.5. To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental agency or body which has not
been obtained is required on behalf of Greenleaf or any of its Subsidiaries for
consummation of the transactions contemplated by this Agreement.
In rendering its opinion, counsel may rely as to factual matters on
certificates of public officials and officers or employees of Greenleaf,
provided that copies of such opinions and certificates shall be delivered with
such opinion, and provided further that in the case of any such reliance,
counsel shall state that it believes that it is justified in relying on such
opinions and certificates for such matters.
9.3. Greenleaf shall have performed all obligations required to be
performed by them and shall have furnished all documents, schedules and
instruments required to be furnished by them under this Agreement at or prior to
the Effective Date. Future Com shall have received a certificate of Greenleaf,
dated the Effective Date and duly executed by its President to this effect.
10. Conditions Precedent To Performance By Greenleaf. The obligations of
Greenleaf to effect the Exchange shall be, at Greenleaf's option, subject to the
fulfillment at or prior to the Effective Date of the following conditions:
10.1. The representations and warranties of Future Com set forth in
this Agreement, including the attached Schedules, shall be true and correct in
all material respects at and as of the date hereof and shall be true and correct
in all material respects at and as of the Effective Date as though made at and
as of the Effective Date, except to the extent such representations and
warranties are not true and correct by reason of actions permitted or authorized
by this Agreement or consented to in writing by Greenleaf. Greenleaf shall have
received a certificate of Future Com, dated the Effective Date and duly executed
by its President and Secretary, as to the accuracy of its representations and
warranties.
10.2. Greenleaf shall have received an opinion of counsel from legal
counsel to Future Com, dated the Effective Date, substantially to the effect
that:
10.2.1. The incorporation, existence, good standing and
capitalization of Future Com are as stated in this Agreement; all outstanding
shares of Future Com Common Stock are duly and validly authorized and issued,
fully paid and non-assessable and have not been issued in violation of any
preemptive right of shareholders; and, to the knowledge of such counsel, there
is no existing option, warrant, right, call, subscription or other agreement or
commitment obligating Future Com to issue or sell, or to purchase or redeem any
shares of its capital stock other than as stated in this Agreement.
10.2.2. Future Com has full corporate power and authority to
execute, deliver and perform this Agreement and this Agreement has been duly
authorized, executed and delivered by Future Com, and (assuming the due and
valid authorization, execution and delivery by Greenleaf) constitutes the legal,
valid and binding agreement of Future Com.
10.2.3. To the knowledge of such counsel, there are no actions,
suits or proceedings, pending or threatened against Future Com or its
Subsidiaries by any Governmental Entity which seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement.
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10.2.4. The execution and performance by Future Com of this
Agreement will not violate the Articles Of Incorporation or Bylaws of Future
Com.
10.2.5. To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental agency or body which has not
been obtained is required on behalf of Future Com or any of its Subsidiaries for
consummation of the transactions contemplated by this Agreement.
In rendering its opinion, counsel may rely as to factual matters on
certificates of public officials and officers or employees of Future Com,
provided that copies of such opinions and certificates shall be delivered with
such opinion, and provided further that in the case of any such reliance,
counsel shall state that it believes that it is justified in relying on such
opinions and certificates for such matters.
10.3. Future Com shall have performed all obligations required to be
performed by it and shall have furnished all documents, schedules and
instruments required to be furnished by it under this Agreement at or prior to
the Effective Date. Greenleaf shall have received a certificate of Future Com,
dated the Effective Date and duly executed by its President to this effect.
10.4. No holders of the shares of Future Com Common Stock outstanding
prior to the Exchange shall have exercised their appraisal rights in connection
with the Exchange.
10.5. On or before the date of Closing, all necessary approvals and
consents of any Parties as set forth in Schedule 6.5 shall have been obtained by
Future Com and delivered to Greenleaf.
10.6. At or before the Closing, Greenleaf shall have been furnished
with all documents that they reasonably may require for the purpose of enabling
them to pass upon the valid exchange of the Greenleaf Common Stock for Future
Com Common Stock and in order to evidence the accuracy of any of the
representations or warranties and the fulfillment of any of the conditions
contained in this Agreement. All proceedings taken by Future Com in connection
with the consummation of transactions contemplated by this Agreement shall be
satisfactory in form and substance to Greenleaf.
11. Indemnification By Greenleaf. Greenleaf hereby agrees to indemnify and
hold harmless Future Com, Future Com's officers, directors, shareholders,
employees and agents against any and all losses, claims, damages, liabilities,
costs and expenses (including but not limited to attorneys' fees and other
expenses of investigation and defense of any claims or actions) to which they or
any of them may become subject due to, or which results from, any of the
following:
11.1. Any breach of Greenleaf's covenants, agreements, warranties or
representations contained in this Agreement.
11.2. Any misstatement of a material fact contained in this Agreement
or in any of the documents executed in connection with transactions contemplated
by this Agreement, but only if the misstatement relates to information
concerning Greenleaf or its operations.
11.3. The omission to state any fact necessary to make the statements
contained in this Agreement or in any of the documents executed in connection
with the transactions contemplated by this Agreement not misleading, but only if
the omission relates to information concerning Greenleaf or their operations.
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11.4. The operations of Greenleaf, or the acts of their employees,
acting in their capacities as such, prior to the Closing, except that Greenleaf
shall not indemnify Future Com or its officers, directors, employees and agents
for liabilities incurred by Future Com in the ordinary course of business prior
to the Closing.
11.5. Actions or inactions of Greenleaf, or the agents of Greenleaf
acting in their capacity as agents, prior to the Closing, except any such costs
or losses incurred through reasonable and good faith acts in the ordinary course
of the business of Greenleaf.
12. Indemnification By Future Com And The Future Com Shareholders
12.1. Future Com and each of the Future Com Shareholders hereby agrees
to jointly and severally indemnify and hold harmless Greenleaf and Greenleaf's
officers, directors, employees and agents against any and all losses, damages,
liabilities, costs and expenses (including but not limited to attorneys' fees
and other expenses of investigation and defense of any claims or actions) to
which they or any of them may become subject due to, or which result from, any
of the following:
12.1.1. Any breach of Future Com's covenants, agreements,
warranties or representations contained in this Agreement.
12.1.2. Any misstatement of a material fact contained in this
Agreement or in any of the documents executed in connection with transactions
contemplated by this Agreement, but only if the misstatement related to
information concerning Future Com and its operations.
12.1.3. The omission to state any fact necessary to make the
statements contained in this Agreement or in any of the documents executed in
connection with the transactions contemplated by this Agreement not misleading,
including Future Com's representations contained in Section 6.19 regarding
undisclosed liabilities, but only if the omission relates to information
concerning Future Com and its operations.
12.1.4. The operations of Future Com or the acts of their
employees, acting in their capacities as such, prior to the Closing, except that
the Future Com Shareholders shall not indemnify Greenleaf or Greenleaf's
officers, directors, employees and agents for liabilities incurred by Greenleaf
through reasonable and good faith acts in the ordinary course of business of
Future Com prior to the Closing.
12.1.5. Actions or inactions of Future Com, or the agents of
Future Com (excluding sales agents) acting in their capacity as agents, prior to
the Closing, except any such costs or losses incurred through reasonable and
good faith acts in the ordinary course of the business of Future Com.
12.2. Each of the Future Com Shareholders represents and warrants to
Greenleaf as follows:
12.2.1. Benefits Of Agreement. All the outstanding capital stock
of Future Com is owned by the Future Com Shareholders in the amounts described
in Section 1.12. Each of the Future Com Shareholders acknowledges and agrees
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that Future Com Shareholder will be receiving benefit from the transactions
entered into pursuant to this Agreement and other transactions entered into
between and among the Future Com Shareholders, Future Com and/or Greenleaf in
connection with the transactions contemplated by this Agreement.
12.2.2. Reliance On Representations And Warranties. Each of the
Future Com Shareholders understands that Greenleaf, in entering into this
Agreement, is relying upon the agreements, representations, and warranties made
by Future Com and upon the agreement of the Future Com Shareholders herein made
in this Section 12.
13. Notice Of Claim. Should any Party (the "Indemnified Party") suffer any
loss, damage or expense for which the other Party (the "Indemnifying Party") is
obligated to indemnify and hold such Indemnified Party harmless pursuant to
Section 11 or 12 of this Agreement, the following shall apply: Promptly upon
receipt by the Indemnified Party of notice of any demand, assertion, claim,
action or proceeding, judicial or otherwise, with respect to any matter as to
which the Indemnifying Party is obligated to indemnify the Indemnified Party
under the provisions of this Agreement, the Indemnified Party shall give prompt
notice thereof to the Indemnifying Party, together with a statement of such
information respecting such matter as the Indemnified Party shall then have and
a statement advising that the Indemnifying Party must notify it within 10 days
whether the Indemnifying Party will undertake the defense of such matter. The
Indemnifying Party shall not be obligated to indemnify the Indemnified Party
with respect to any matter hereunder if the Indemnified Party has failed to use
its best efforts to notify the Indemnifying Party thereof in accordance with the
provisions of the Agreement in sufficient time to permit the Indemnifying Party
and its counsel to defend against such matter and to make a timely response
thereto, including without limitation, the preparation and assertion of an
answer or other responsive motion to a complaint, petition, notice or other
legal, equitable or administrative process relating to any such claim. Notice of
the intention of the Indemnifying Party to contest any such claim, and the
identity of counsel that the Indemnifying Party intends to employ to contest any
such claim, shall be given by the Indemnifying Party to the Indemnified Party
within 10 days from the date of receipt by the Indemnifying Party of notice by
the Indemnified Party of the assertion of any such claim. The Indemnified Party
shall have the right to approve the counsel named in the Notice provided
pursuant to the preceding sentence, provided that such approval shall not be
unreasonably withheld. The Indemnified Party shall have the right to participate
in such proceedings and to be represented by attorneys of its own choosing;
however, such representation shall be at the Indemnified Party's own expense if
the Indemnifying Party selects different counsel of its own choosing. If the
Indemnifying Party does not elect to contest any such claim, the Indemnifying
Party shall be bound by the results obtained with respect thereto by the
Indemnified Party, including any settlement of such claim. If the Indemnifying
Party elects to contest any claim, the Indemnified Party shall be bound by the
results obtained with respect thereto by the Indemnifying Party, including any
settlement of such claim.
14. Closing. Subject to the terms and conditions contained in this
Agreement, the Closing shall take place on or before November 4, 1999, or on
such other date or at such other time as shall be agreed to by the Parties, by
exchange of documents by overnight courier or facsimile. At the Closing, the
following shall occur:
14.1. Future Com shall deliver to Greenleaf (a) a certificate executed
by the President and Secretary of Future Com dated as of the Closing certifying
that the representations and warranties of Future Com in this Agreement are true
and correct in all material respects at and as of the Effective Date as though
each representation and warranty had been made on that date; (b) the stock book,
stock ledger, minute book and corporate seal of Future Com, and (c) such other
documents as are required to be delivered to Greenleaf under the terms of this
Agreement, including the opinion of counsel described in Section 10.2.
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14.2. The Future Com Shareholders shall deliver to Greenleaf stock
certificates representing the shares of Future Com Common Stock that are being
exchanged for Greenleaf Common Stock pursuant to Section 4 of this Agreement
together with duly executed stock powers and assignments transferring those
shares to Greenleaf.
14.3. Greenleaf shall deliver to each of the Future Com Shareholders,
upon receipt from the Future Com Shareholders by Greenleaf of the stock
certificates described in Section 14.2, stock certificates representing the
shares of Greenleaf Common Stock to be issued pursuant to this Agreement in
exchange for Future Com Common Stock and the opinion of counsel described in
Section 9.2.
14.4. Greenleaf shall deliver to Future Com (a) a certificate executed
by the President and Secretary of Greenleaf dated as of the Closing, certifying
that the representations and warranties of Greenleaf in this Agreement are true
and correct in all material respects at and as of the Effective Date, as though
each representation and warranty had been made on that date; and (b) such other
documents are required to be delivered to Future Com under the terms of this
Agreement.
14.5. Greenleaf and each of Gale and Blanck shall execute the
Employment And Nonsolicitation Agreements pursuant to Section 2.3.1 of this
Agreement.
14.6. Each of the persons named in Section 2.4.4 shall execute and
deliver to Greenleaf a noncompetition agreement in the form of Exhibit H
attached to and made a part of this Agreement.
14.7. Greenleaf and the Debt Holders named in Section 2.3.4.6 shall
sign, and Greenleaf shall deliver to the Debt Holders, the promissory notes
required to be delivered pursuant to Section 2.3.4.6.
14.8. Greenleaf and the recipients of options named in Section 2.3.9
shall sign, and Greenleaf shall deliver to the recipients of options, the option
agreements required to be delivered pursuant to Section 2.3.9.
14.9. Each of Parties agrees that it will at any time and from time to
time after the Closing, upon the request of any other Party, perform, execute,
acknowledge and deliver all such further acts, deeds, assignments, transfers,
powers of attorney and assurances as may be required for the purpose of
effectuating the consummation of the transactions contemplated by this
Agreement.
15. Termination And Abandonment Of The Exchange.
15.1. Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and abandoned at any time
before the consummation of the Exchange by the mutual consent of the Boards of
Directors of Greenleaf and Future Com.
15.2. Effect Of Termination. In the event of termination and
abandonment under Section15.1, this Agreement shall forthwith become void and
there shall be no liability on the part of any Party or their respective
officers and directors, except that the provisions of the second sentence of
Section 7.1 hereof and the provisions of Section 22 hereof shall continue in
effect.
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16. Amendment Or Waiver. This Agreement may be amended, modified or
superseded, and any of the terms, covenants, representations, warranties or
condition hereof may be waived, but only by a written instrument executed by
Future Com and Greenleaf; provided, however, the terms of the Exchange
concerning the ratio of the conversion of shares of Future Com Common Stock may
be amended, modified or superseded only with the approval of Greenleaf and
Future Com and the Future Com Shareholders. Except as expressly otherwise
required by the previous sentence or applicable law, no shareholders approval
shall be required for any amendment, modification or waiver. No waiver of any
nature, in any one or more instances, shall be deemed to be or construed as a
further or continued waiver of any condition or any breach of any other term,
representation or warranty in this Agreement.
17. Entire Agreement. This Agreement, together with the Schedules hereto,
and the documents referred to herein, constitutes the entire agreement among the
Parties with respect to the Exchange, and supersedes all prior arrangements or
understandings with respect thereto.
18. Notice. All notices, requests, demands, directions and other
communications ("Notices") provided for in this Agreement shall be in writing
and shall be mailed or delivered personally or sent by telecopier or facsimile
to the applicable Party at the address of such Party set forth below in this
Section 18. When mailed, each such Notice shall be sent by first class,
certified mail, return receipt requested, enclosed in a postage prepaid wrapper,
and shall be effective on the third business day after it has been deposited in
the mail. When delivered personally, each such Notice shall be effective when
delivered to the address for the respective Party set forth in this Section 18.
When sent by telecopier or facsimile, each such Notice shall be effective on the
first business day on which or after which it is sent. Each such Notice shall be
addressed to the Party to be notified as shown below:
GREENLEAF:
Greenleaf Technologies Corporation
ATTN: Leonard Berg
8834 Capital of Texas Highway North, Suite 150
Austin, Texas 78759
Facsimile: (521) 349-9780
FUTURE COM:
Future Com South Florida, Inc.
ATTN: William Gale
5440 N.W. 33rd Avenue, Suite 104Fort Lauderdale, Florida 33309
Facsimile: (954) 497-1129
FUTURE COM SHAREHOLDERS:
William Gale
5440 N.W. 33rd Avenue, Suite 104Fort Lauderdale, Florida 33309
Facsimile: (954) 497-1129
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Warren Blanck
5440 N.W. 33rd Avenue, Suite 104Fort Lauderdale, Florida 33309
Facsimile: (954) 497-1129
Any Party may change his or its respective address for purposes of this
Section 18 by giving the other Party Notice of the new address in the manner set
forth above.
19. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
law, and if any provision of this Agreement shall be or become prohibited or
invalid in whole or in part for any reason whatsoever, that provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remaining portion of that provision or the remaining provisions
of this Agreement.
20. Headings. The headings to this Agreement are for convenience only; they
form no part of this Agreement and shall not affect its interpretation.
21. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
22. Expenses. Regardless of whether the transactions provided for herein
are consummated, each Party to this Agreement will pay its respective costs and
expenses.
23. Nature And Survival Of Representations. All statements contained in
this Agreement and in the Schedules to this Agreement shall be deemed
representations and warranties by the applicable Party under this Agreement. All
representations and warranties made by the Parties in this Agreement or pursuant
to this Agreement shall be true and accurate as of the Closing in all material
respects. The obligation that the representations and warranties be accurate as
of the Closing in all material respects shall survive the Closing and continue
in full force and effect. In addition, all obligations relating to
indemnification under this Agreement shall survive the Closing and continue in
full force and effect.
24. Benefits And Assignment. The provisions of 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. The Parties agree that this
Agreement is made solely for the benefit of the Parties and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The terms "successor" or the term
"successors and assigns" as used in this Agreement shall not include any holders
of the Future Com Common Stock, or recipients of the Greenleaf Common Stock
pursuant to this Agreement.
25. Specific Performance. Each Party's obligation under this Agreement is
unique. If any Party should default in its obligations under this Agreement, the
Parties each acknowledge that it would be extremely impracticable to measure the
resulting damages; accordingly, the nondefaulting Party, in addition to any
other available rights or remedies, may sue in equity for specific performance,
and the Parties each expressly waive the defense that a remedy in damages will
be adequate. Notwithstanding any breach or default by any of the Parties of any
of their respective representations, warranties, covenants or agreements under
this Agreement, if Closing occurs as contemplated, each of the Parties waives
any rights that it or they may have to rescind this Agreement or the
transactions consummated pursuant to it; provided, however, this wavier shall
not affect any other rights or remedies available to the Parties under this
Agreement or under the law.
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26. Brokers. Each of Greenleaf and Future Com represents and warrants to
the other that all of its negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on directly, without the
intervention of any other person, so as not to give rise to any valid claim
against any Party hereto for a finder's fee, brokerage commission or other like
payment.
27. Costs. If any legal action or other proceeding is brought by one of the
Parties to this Agreement against another Party to this Agreement for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing Party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it or they may be entitled.
28. Termination On Default. If Greenleaf or Future Com materially defaults
in the due and timely performance of any of its or their warranties, covenants
or agreements under this Agreement, then the nondefaulting Party may at the time
set for the Closing give notice of termination of this Agreement, in the manner
provided in Section 18. A notice shall specify with particularity the default or
defaults on which the notice is based. The defaulting Party, however, shall have
the right to cure such default or defaults within 30 days after the date set for
Closing. The termination shall be effective 30 days after the date set for
Closing, unless the specific default or defaults have been cured on or before
this effective date for termination.
29. Choice Of Law. This Agreement shall be governed by, construed,
interpreted and the rights of the Parties determined in accordance with the laws
of the State of Delaware without regard to principles of conflicts of laws.
30. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled in the United States by
arbitration (except as provided below), in accordance with the rules then
obtaining, of the American Arbitration Association (the "Association") and shall
proceed pursuant to the Association's Commercial Dispute Resolution Procedure
Rules (the "Rules"). If the subject of the arbitration involves an intellectual
property, corporate, or bankruptcy matter, as determined by the Association,
then the arbitrator(s) shall have had experience in that subject. The
Association is authorized to make arrangement for this arbitration, to be held
in Austin, Texas under the Rules. Three arbitrators shall decide all issues;
Greenleaf is entitled to appoint one arbitrator of its choice and all other
parties to the dispute are entitled to appoint one arbitrator of their own
choice and those two arbitrators shall mutually choose the third arbitrator who
shall be the chairperson of the arbitration panel. If no agreement concerning
the choice of the third arbitrator can be reached by those two appointed
arbitrators within 15 calendar days from the date of the appointment of the last
party-appointed arbitrator, the third arbitrator shall be chosen pursuant to the
Rules. In addition, in the event of a dispute for which the aggrieved party
seeks immediate equitable relief, including without limitation an injunction,
the appropriate action may be brought only in the federal district, state
district or county courts located in or that have jurisdiction in the County of
Travis, Texas, provided that any such equitable relief shall be subject to
modification by the court after completion of arbitration of the dispute. This
Agreement shall be enforceable and judgment upon any award rendered by all or a
majority of the arbitrators may be entered in any court of any county having
jurisdiction.
28
<PAGE>
IN WITNESS WHEREOF, the Parties to this Agreement have caused this
Agreement to be executed by their duly authorized representatives on the date
first above written.
GREENLEAF:
GREENLEAF TECHNOLOGIES CORPORATION
Date: ______________________ By: ______________________
______________________
Printed Name and Title
ATTEST:
______________________
______________________ , Secretary
FUTURE COM:
FUTURE COM SOUTH FLORIDA, INC.
Date: ______________________ By: ______________________
______________________
Printed Name and Title
ATTEST:
______________________
______________________ , Secretary
FUTURE COM SHAREHOLDERS:
Date: ______________________ By: ______________________
Warren Blanck, Individually
Date: ______________________ By: ______________________
William Gale, Individually
29
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
GREENLEAF CAPITAL CORPORATION
---------------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and know, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is
GREENLEAF CAPITAL CORPORATION
SECOND: The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware is 299 South
State Street, City of Dover, County of Kent; and the name of the registered
agent of the corporation in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and of the purposes to be conducted
and promoted by the corporation are as follows:
To acquire businesses and subsidiaries.
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the state of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is 10,000,000. The par value of each of such
shares is $.001. All such shares are of one class and are shares of Common
Stock.
No holder of any of the shares of the stock of the corporation,
whether now or hereafter authorized and issued, shall be entitled as of right to
purchase or subscribe for (1) any unissued stock of any class, or (2) any
additional shares of any class to be issued by reason of any increase of the
authorized capital stock of the corporation of any class, or (3) bonds,
certificates of indebtedness, debentures or other securities convertible into
stock of the corporation, or carrying any right to purchase stock of any class,
but any such unissued stock or such additional authorized issue of any stock or
of other securities convertible into stock, or carrying any right to purchase
stock, may be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations and upon such
terms as may be deemed advisable by the Board of Directors in the exercise of
its discretion.
<PAGE>
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
J. A. Kent 229 South State Street, Dover, Delaware
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
corporation as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct
of the affairs of the corporation shall be vested in its
Board of Directors. The number of directors which shall
constitute the whole Board of Directors shall be fixed by,
or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall be
deemed to have the same meaning, to wit, the total number of
directors which the corporation would have if there were no
vacancies. No election of directors need be by written
ballot.
2. After the original or other By-Laws of the
corporation have been adopted, amended, or repealed, as the
case may be, in accordance with the provisions of Section
109 of the General Corporation Law of the State of Delaware,
and, after the corporation has received any payment for any
of its stock, the power to adopt, amend, or repeal the
By-Laws of the corporation may be exercised by the Board of
Directors of the corporation; provided, however, that any
provisions for the classification of directors of the
corporation for staggered terms pursuant to the provisions
of subsection (d) of Section 141 of the General Corporation
Law of the State of Delaware shall be set forth in an
initial By-Law or in a By-Law adopted by the stockholders
entitled to vote of the corporation unless provisions for
such classification shall be set forth in this certificate
of incorporation.
-2-
<PAGE>
3. Whenever the corporation shall be authorized to
issue only one class of stock, each outstanding share shall
entitle the holder thereof to notice of, and the right to
vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class
of stock, no outstanding share of any class of stock which
is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders
except as the provisions of paragraph (2) of subsection (b)
of section 242 of the General Corporation Law of the State
of Delaware shall otherwise require; provided, that no share
of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase
or decrease in the number of authorized shares of said
class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and 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.
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on October 9, 1986.
/s/ J. A. Kent
--------------
J. A. Kent
Incorporator
-3-
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION OF
GREENLEAF CAPITAL CORPORATION
Pursuant to Section 242 of the Delaware Code, as amended
I, THE UNDERSIGNED, Richard Margulies, being the Secretary, of
Greenleaf Capital Corporation, a corporation organized and existing by virtue of
the General Corporation Law of the State of Delaware, do hereby certify and set
forth:
FIRST: That at a meeting of the Board of Directors of Greenleaf Capital
Corporation, duly held and convened on the 11th day of September, 1997,
resolutions were adopted setting forth a proposed amendment to the Certificate
of Incorporation of said Corporation and declaring said amendment advisable. The
resolution setting for the proposed amendment is as follows:
RESOLVED that the Certificate of Incorporation of this Corporation be, and
it hereby is, amended by changing Articles thereof numbered First and Fourth to
read as follows:
FIRST: The name of the corporation (hereinafter called the "corporation")
is:
GREENLEAF TECHNOLOGIES CORPOPRATION
FOURTH: The aggregate number of shares of stock which the Corporation shall
have the authority to issue is one hundred million (100,000,000) common shares,
each being at $.001 par value.
IN WITNESS WHEREOF, Greenleaf Capital Corporation, has caused this
Certificate to be signed by its President and attested by its Secretary, on this
28th day of October, 1997.
GREENLEAF CAPITAL CORPORATION
By: /s/ Richard Margulies
---------------------
Richard Margulies
President & Secretary
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS
OF
GREENLEAF TECHNOLOGIES CORPORATION
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
GREENLEAF TECHNOLOGIES CORPORATION
ARTICLE I.
Offices
-------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware or such other city and
county as the board of directors shall determine.
The corporation may also have offices at such other places both within
and without the State of Delaware as the board of directors may from time to
time determine or the business of the corporation may require.
ARTICLE II.
Stockholders
------------
Section 1. Annual Meeting. The annual meeting of the stockholders
shall be held at a time and date fixed by the board of directors for the purpose
of electing directors and for the transaction of such other business as may come
before the meeting. If the election of directors shall not be held at the annual
meeting of the stockholders, or at any adjournment thereof, the board of
directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as conveniently may be.
Section 2. Special Meetings. Special meetings of the stockholders, for
any purpose, unless otherwise prescribed by statute, may be called by the
president or by the board of directors.
Section 3. Place Of Meeting. The person or persons authorized to call
any annual or special meeting may designate any place, either within or outside
Delaware, as the place for the meeting. If no designation is made, the place of
meeting shall be the principal corporate offices of the corporation.
Section 4. Fixing Date For Determination Of Stockholders Of Record.
For the purpose of determining stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or entitled 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 any other lawful action, the board of directors may fix, in
advance, a date as the record date for any such determination of stockholders,
which date shall not be more than 60 nor less than ten days before the date of
such meeting, nor more than 60 days prior to any other action. If no record date
is fixed then the record date shall be as follows: (a) for determining
stockholders entitled to notice of or to vote at the meeting of stockholders,
the close of business on the day next preceding the day on which the meeting is
held; (b) for determining stockholders entitled to express consent to corporate
1
<PAGE>
action in writing without a meeting, when no prior action by the board of
directors is necessary, the day on which the first written consent is expressed,
and (c) for determining stockholders for any other purpose, the close of
business on the day on which the board of directors adopts the resolution
relating thereto. A determination of stockholders 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. Notice Of Meeting. Written notice stating the place, day
and hour of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than 60 days before the date of the meeting, unless otherwise required
by statute, either personally or by mail, to each stockholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the stockholder at his
address as it appears on the stock books of the corporation, with postage
thereon prepaid. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting.
Section 6. Organization. The president or any vice president shall
call meetings of stockholders to order and act as chairman of such meetings. In
the absence of said officers, any stockholder entitled to vote at that meeting,
or any proxy of any such stockholder, may call the meeting to order and a
chairman shall be elected by a majority of the stockholders entitled to vote at
that meeting. In the absence of the secretary or any assistant secretary of the
corporation, any person appointed by the chairman shall act as secretary of such
meetings.
Section 7. Agenda And Procedure. The board of directors shall have the
responsibility of establishing an agenda for each meeting of stockholders,
subject to the rights of stockholders to raise matters for consideration which
may otherwise properly be brought before the meeting although not included
within the agenda. The chairman shall be charged with the orderly conduct of all
meetings; provided however, that in the event of any difference in opinion with
respect to the proper cause of action which cannot be resolved by reference to
statute, or to the articles of incorporation or these bylaws, Robert's Rules Of
Order (as last revised) shall govern the disposition of the matter.
Section 8. Voting Lists. The officer who has charge of the stock books
of the corporation shall prepare and make, at least ten 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 list shall be open to the examination of each stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten 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 9. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If fewer than a majority of the outstanding shares are represented at a meeting,
a majority of the shares so represented may adjourn the meeting from time to
time in accordance with Section 5 of this Article, until a quorum shall be
present or represented.
2
<PAGE>
Section 10. Manner Of Acting. When a quorum is present at any meeting,
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 stockholders,
unless a different vote is required by law or the certificate of incorporation,
in which case such express provision shall govern.
Section 11. Informal Action By Stockholders. Unless otherwise provided
in the certificate of incorporation, any action required or permitted to be
taken at any meeting of the stockholders may be taken without a meeting, without
prior notice and without a vote, provided that 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. In the event that the
action which is consented to is such as would require the filing of a
certificate with the Secretary of State of Delaware under the General
Corporation Law of the State of Delaware if such action had been voted on by
stockholders at a meeting thereof, the certificate filed shall state, in lieu of
any statement required under law concerning any vote of stockholders, that
written consent has been given in accordance with the provision of law and that
written notice has been given as provided by law.
Section 12. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize any other person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date unless the proxy provides for a longer period.
Section 13. Voting Of Shares. Unless otherwise provided in the
certificate of incorporation and subject to the provisions of Section 4 of this
Article, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder. In the election of directors, each
record holder of stock entitled to vote at such election shall have the right to
vote the number of shares owned by him for as many persons as there are
directors to be elected, and for whose election he has the right to vote.
Cumulative voting shall not be allowed.
Section 14. Voting Of Shares By Certain Holders. Persons holding stock
in a fiduciary capacity shall be entitled to vote the shares so held. Persons
whose stock is pledged shall be entitled to vote, unless in the transfer by the
pledgor on the books of the corporation the pledgor has expressly empowered the
pledgee to vote thereon, in which case only the pledgee or his proxy may
represent such shares and vote thereon. If shares stand of record in the names
of two or more persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, tenants by the entirety or otherwise, or if two or
more persons have the same fiduciary relationship respecting the same shares,
unless the secretary of the corporation is given written notice to the contrary
and if furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with respect to
voting shall be as set forth in the General Corporation Law of the State of
Delaware.
Section 15. Inspectors. The chairman of the meeting may at any time
appoint one or more inspectors to serve at a meeting of the stockholders. Such
inspector(s) shall decide upon the qualifications of voters, including the
validity of proxies, accept and count the votes for and against the questions
presented, report the results of such votes, and subscribe and deliver to the
secretary of the meeting a certificate stating the number of shares of stock
3
<PAGE>
issued and outstanding and entitled to vote thereon and the number of shares
voted for and against the questions presented. The inspector(s) does not need to
be a stockholder of the corporation, and any director or officer of the
corporation may be an inspector on any question other than a vote for or against
his election to any position with the corporation or on any other question in
which he may be directly interested.
ARTICLE III.
Board Of Directors
------------------
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of its board of directors, except as
otherwise provided in the General Corporation Law of the State of Delaware or
the certificate of incorporation.
Section 2. Number, Tenure And Qualification. The number of directors
of the corporation shall be as determined by the board of directors and shall be
not less than one nor more than eight. Directors shall be elected at each annual
meeting of stockholders except as otherwise provided in Section 3 of this
Article. Each director shall hold office until his successor shall have been
elected and qualified or until the earliest of his death, resignation or
removal. Directors need not be residents of Delaware or stockholders of the
corporation.
Section 3. Vacancies. Any director may resign at any time by giving
written notice to the corporation. Such resignation shall take effect at the
time specified therein; and unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective. Any vacancy or
newly created directorship resulting from an increase in the authorized number
of directors may be filled by the affirmative vote of the majority of directors
then in office, although less than a quorum, or by a sole remaining director,
and a director so chosen shall hold office until the next annual election and
until his successor is duly elected and qualified, unless sooner displaced. If
at any time, by reason of death, resignation or other cause, the corporation
should have no directors in office, then an election of directors may be held in
the manner provided by law. When one or more directors shall resign from the
board, effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have the power to fill any vacancy
or vacancies, with the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office until the next annual election and until his successor is duly elected
and has qualified.
Section 4. Regular Meetings. Unless otherwise approved by the board of
directors, a regular meeting of the board of directors shall be held without
other notice than this bylaw immediately after and at the same place as the
annual meeting of stockholders. The board of directors may provide by resolution
the time and place, either within or outside Delaware, for the holding of
additional regular meetings without other notice than such resolution.
Section 5. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the president or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or outside Delaware, as the
place for holding any special meeting of the board of directors called by them.
Section 6. Notice. Notice of any special meeting shall be given at
least 24 hours previous thereto by written notice delivered personally, or at
least one business day (and not less than 24 hours) previous thereto if sent by
facsimile or electronic mail to the business address of the director, or at
4
<PAGE>
least five days previous thereto if mailed to a director at his business
address, or by notice given at least two days previous thereto by telegraph. If
sent by facsimile or electronic mail, such notice shall be deemed delivered when
the electronic transmission has been completed and the person giving the notice
should use all reasonable efforts to notify the recipient by telephone,
voicemail message or other telephonic message of the delivery of the notice. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the board of directors
need be specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors then in
office shall constitute a quorum for the transaction of business at any meeting
of the board of directors, but if less than such majority is present at a
meeting, a majority of 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.
If a meeting of the board of directors at which a quorum is present is
adjourned for more than 24 hours, notice of the time and place of reconvention
of the adjourned meeting shall be given, to those directors who were not present
at the adjournment of the meeting, in accordance with the provisions of Section
6 of this Article.
Section 8. Manner Of Acting. The vote of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, except as may be otherwise specifically provided by law or the
certificate of incorporation.
Section 9. Removal. Unless otherwise restricted by law, any director
or the entire board of directors may be removed, with or without cause, by the
holders of a majority of shares then entitled to vote at a meeting of
stockholders.
Section 10. Committees. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board 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 they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of such
absent or disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors and except as prohibited below in this
paragraph, 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 amend the certificate of incorporation, to adopt an agreement of
merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
to recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or to amend the bylaws of the corporation; and,
unless the resolution expressly so provides, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors when required.
5
<PAGE>
Section 11. Compensation. Unless otherwise restricted by the
certificate of incorporation or these bylaws, 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 such meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or 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 any committee of the board may be allowed like
compensation for attending committee meetings.
Section 12. Action By Written Consent Of Directors. Unless otherwise
restricted by the certificate of incorporation or these bylaws, any action
required or permitted to be taken at any meeting of the board of directors or
any committee thereof may be taken without a meeting if all members of the board
or committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of the proceedings of the board or
committee.
Section 13. Meetings By Telephone. Unless otherwise restricted by the
certificate of incorporation or these bylaws, members of the board of directors,
or any committee designated by the board of directors, may participate in a
meeting of the board of directors, or any committee thereof, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting in such manner shall constitute presence in person at the meeting.
ARTICLE IV.
Officers And Agents
-------------------
Section 1. General. The officers of the corporation shall be a
president, a secretary and a Treasurer and/or Chief Financial Officer. The board
of directors may appoint such other officers, assistant officers, and agents, a
chairman or vice-chairmen of the board, assistant secretaries and assistant
Treasurers, as they may consider necessary, who shall be chosen in such manner
and hold their offices for such terms and have such authority and duties as from
time to time may be determined by the board of directors. The salaries of all
the officers of the corporation shall be fixed by the board of directors. Any
number of offices may be held by the same person with the exception of the
office of president and secretary being held simultaneously by the same person,
or as otherwise provided in the certificate of incorporation or these bylaws.
Section 2. Election And Term Of Office. The officers of the
corporation shall be elected by the board of directors annually at the first
meeting of the board held after each annual meeting of the stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Each officer shall hold office
until his successor shall have been duly elected and qualified or until the
earliest to occur of his death, resignation or removal.
Section 3. Removal. Any officer or agent elected or appointed by the
board of directors may be removed at any time by the board whenever in its
judgment the best interests of the corporation will be served thereby.
Section 4. Vacancies. Any officer may resign at any time upon written
notice to the corporation. Such resignation shall take effect at the time stated
therein; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Any vacancy occurring
6
<PAGE>
in any office by death, resignation, removal or otherwise shall be filled by the
board of directors for the unexpired portion of the term. If any officer shall
be absent or unable for any reason to perform his duties, the board of
directors, to the extent not otherwise inconsistent with these bylaws or law,
may direct that the duties of such officer during such absence or inability
shall be performed by such other officer or assistant officer as seems advisable
to the board.
Section 5. Authority And Duties Of Officers. The officers of the
corporation shall have the authority and shall exercise the powers and perform
the duties specified below, and as may be otherwise specified by the board of
directors or by these bylaws, except that in any event each officer shall
exercise such powers and perform such duties as may be required by law, and in
cases where the duties of any officer or agent are not prescribed by these
bylaws or by the board of directors, such officer or agent shall follow the
orders and instructions of each of the following in the following order of
priority: (a) the chief executive officer, (b) the president and (c) if a
chairman of the board is elected, then the chairman of the board.
(a) Chief Executive Officer. The chief executive officer, subject
to the direction and supervision of the board of directors, shall have the
following responsibilities: (i) have general and active control of the
corporation's affairs, business and property and general supervision of its
officers, agents and employees; (ii) preside at all meetings of the
stockholders; (iii) see that all orders and resolutions of the board of
directors are carried into effect; and (iv) sign or countersign all
certificates, contracts and other instruments of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation. In
addition, the chief executive officer shall, unless otherwise directed by the
board of directors, attend in person or by substitute appointed by them, or by
written instruments appointing proxy or proxies to represent the corporation,
all meetings of the stockholders of any corporation in which the corporation
shall hold any stock and may, on behalf of the corporation, in person or by
substitute or proxy, execute written waivers of notice and consents with respect
to such meetings. At all such meetings, and otherwise, the chief executive
officer, in person or by substitute or proxy as aforesaid, may vote the stock so
held by the corporation and may execute written consent and other instruments
with respect to such stock and may exercise any and all rights and powers
incident to the ownership of said stock, subject however to the instructions, if
any, of the board of directors. Subject to the directions of the board of
directors, the chief executive officer shall exercise all other powers and
perform all other duties normally incident to the office of chief executive
officer of a corporation and shall exercise such other powers and perform such
other duties as from time to time may be assigned to him by the board.
(b) President. The president shall be the chief operating officer
of the corporation and shall report to and be subject to the direction and
supervision of the chief executive officer. At any time that there is no one who
has been elected and is then serving as chief executive officer, the president
shall have the powers and perform the duties of the chief executive officer.
(c) Chairman Of The Board. If a chairman of the board has been
elected, the chairman of the board shall preside at all meetings of the board of
directors. The chairman of the board shall not have the authority to act on
behalf of the corporation, or otherwise commit or bind the corporation, unless
specifically authorized by the board of directors in specific instances.
(d) Vice Presidents. The vice presidents, if so directed, shall
assist the chief executive officer and shall perform such duties as may be
assigned to them by the chief executive officer or by the board of directors. In
the absence of the president, the vice president designated by the board of
7
<PAGE>
directors or (if there be no such designation) the vice president senior in rank
as fixed by the board of directors or (if there be no designation or ranking by
the board of directors) the vice president designated in writing by the
president shall have the powers and perform the duties of the president. If no
such designation or ranking shall be made all vice presidents may exercise such
powers and perform such duties.
(e) Secretary. The secretary shall perform the following
functions: (i) record or cause to be recorded the proceedings of the meetings of
the stockholders, the board of directors and any committees of the board of
directors in a book to be kept for that purpose; (ii) see that all notices are
duly given in accordance with the provisions of these bylaws or as required by
law; (iii) be custodian of the corporate records and of the seal of the
corporation; (iv) keep at the corporation's registered office or principal place
of business within or outside Delaware a record containing the names and
addresses of all stockholders and the number and class of shares held by each,
unless such a record shall be kept at the office of the corporation's transfer
agent or registrar; (v) have general charge of the stock books of the
corporation, unless the corporation has a transfer agent; and (vi) in general,
perform all other duties as from time to time may be assigned to him by the
chief executive officer, or by the board of directors. Assistant secretaries, if
any, shall have the same duties and powers, subject to supervision by the
secretary.
(f) Treasurer and/or Chief Financial Officer. The Treasurer
and/or Chief Financial Officer, if one shall be elected, shall perform the
following functions: (i) be the principal financial officer of the corporation
and have the care and custody of all funds, securities, evidences of
indebtedness and other personal property of the corporation and deposit the same
in accounts insured by the United States government and in instruments backed by
the full faith and credit of the United States government and otherwise in
accordance with the instructions of the board of directors; (ii) receive and
give receipts and acquittances for monies paid in on account of the corporation,
and pay out of the funds on hand all bills, payrolls and other just debts of the
corporation of whatever nature upon maturity; (iii) be the principal accounting
officer of the corporation and as such prescribe and maintain the methods and
systems of accounting to be followed, keep complete books and records of
account, prepare and file all local, state and federal tax returns, prescribe
and maintain an adequate system of internal audit, and prepare and furnish to
the chief executive officer and the board of directors statements of account
showing the financial position of the corporation and the results of its
operations; and (iv) perform all other duties incident to the office of
Treasurer and/or Chief Financial Officer and such other duties as from time to
time may be assigned to the Treasurer and/or Chief Financial Officer by the
chief executive officer or the board of directors. Assistant Treasurers, if any,
shall have the same powers and duties, subject to the supervision of the
Treasurer and/or Chief Financial Officer. The Treasurer and/or Chief Financial
Officer may also be designated as and/or have the title of the Chief Financial
Officer.
Section 6. Surety Bonds. The board of directors may require any
officer or agent of the corporation to execute to the corporation a bond in such
sums and with such sureties as shall be satisfactory to the board, conditioned
upon the faithful performance of his duties and for the restoration to the
corporation of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 7. Salaries. Officers of the corporation shall be entitled to
such salaries, emoluments, compensation or reimbursement as shall be fixed or
allowed from time to time by the board of directors.
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<PAGE>
ARTICLE V.
Stock
-----
Section 1. Certificates. Each holder of stock in the corporation shall
be entitled to have a certificate signed in the name of the corporation by the
chief executive officer, president or a vice-president, and by the Treasurer
and/or Chief Financial Officer or an assistant Treasurer, or the secretary or an
assistant secretary of the corporation. Any of or all the signatures on the
certificate may be 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 were such officer, transfer agent or registrar at the date of issue.
Certificates of stock shall be consecutively numbered and shall be in such form
consistent with law as shall be prescribed by the board of directors.
Section 2. Record. A record shall be kept of the name of each person
or other entity holding the stock represented by each certificate for shares of
the corporation issued, the number of shares represented by each such
certificate, the date thereof and, in the case of cancellation, the date of
cancellation. The person or other entity in whose name shares of stock stand on
the books of the corporation shall be deemed the owner thereof, and thus a
holder of record of such shares of stock, for all purposes as regards the
corporation.
Section 3. Consideration For Shares. Shares shall be issued for such
consideration (but not less than the par value thereof) as shall be determined
from time to time by the board of directors. Treasury shares shall be disposed
of for such consideration as may be determined from time to time by the board.
Such consideration may consist, in whole or in part, of cash, personal property,
real property, leases of real property, services rendered, or promissory notes,
and shall be paid in such form, in such manner and at such times as the
directors may require.
Section 4. Issuance Of Stock. The capital stock issued by the
corporation shall be deemed to be fully paid and nonassessable stock, if: (a)
the entire amount of the consideration has been received by the corporation in
the form or forms set forth in Section 3 of this Article V and if any part of
the consideration is in the form of a promissory note or other obligation, such
note or obligation has been satisfied in full; or (b) not less than the amount
of the consideration determined to be capital pursuant to statute has been
received by the corporation in the form or forms set forth in Section 3 of this
Article V and the corporation has received a binding obligation of the
subscriber or purchaser to pay the balance of the subscription or purchase
price; provided, however, nothing contained herein shall prevent the board of
directors from issuing partly paid shares as described herein.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares the total amount of the consideration to
be paid therefor and the amount paid thereon shall be stated. Upon the
declaration of any dividend upon partly paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
The directors may from time to time demand payment, in respect of each
share of stock not fully paid, of such sum of money as the necessities of the
business may, in the judgment of the board of directors, require, not exceeding
in the whole, the balance remaining unpaid on said stock, and such sum so
9
<PAGE>
demanded shall be paid to the corporation at such times and by such installments
as the directors shall direct. The directors shall give written notice of the
time and place of such payments, which notice shall be mailed to each holder or
subscriber to his last known post office address at least thirty days before the
time for such payment for stock which is not fully paid.
The corporation may, but shall not be required to, issue fractions of
a share. If it does not issue fractions of a share, it shall: (a) arrange for
the disposition of fractional interests by those entitled thereto; (b) pay in
cash the fair value of fractions of a share as of the time when those entitled
to receive such fractions are determined; or (c) issue scrip or warrants in
registered or bearer form which shall entitle the holder to receive a
certificate for a full share upon the surrender of such scrip or warrants
aggregating a full share. A certificate for a fractional share shall, but scrip
or warrants shall not unless provided therein, entitle the holder to exercise
voting rights, to receive dividends thereon, and to participate in any of the
assets of the corporation in the event of liquidation. The board of directors
may cause scrip or warrants to be issued subject to the conditions that they
shall become void if not exchanged for certificates representing full shares
before a specified date, or subject to the conditions that the shares for which
scrip or warrants are exchangeable may be sold by the corporation and the
proceeds thereof distributed to the holders of scrip or warrants, or subject to
any other conditions which the board of directors may impose.
The board of directors may, at any time and from time to time, if all
of the shares of capital stock which the corporation is authorized by its
certificate of incorporation to issue have not been issued, subscribed for, or
otherwise committed to be issued, issue or take subscriptions for additional
shares of its capital stock up to the amount authorized in its certificate of
incorporation.
Section 5. Lost Certificates. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as it may prescribe. The board of directors may in its
discretion require a bond in such form and amount and with such surety as it may
determine, before issuing a new certificate. The Chief Executive Officer,
President, Treasurer and/or Chief Financial Officer may, in lieu of requiring a
bond before issuing a new certificate, agree that the corporation shall
indemnify the corporation's stock transfer agent from losses resulting from lost
certificates representing less than 100 shares of common stock.
Section 6. Transfer Of Shares. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock 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 in the stock books; provided however, that the corporation shall not
be required to effect the requested transfer if the corporation believes the
requested transfer would be in violation of any applicable law, regulation,
court order or other restriction of any nature.
Section 7. Registered 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 the
corporation shall be entitled to hold liable for calls and assessments a person
registered on its books as the owner of shares, and the corporation 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 Delaware.
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Section 8. Transfer Agents, Registrars And Paying Agents. The board
may at its discretion appoint one or more transfer agents, registrars and agents
for making payment upon any class of stock, bond, debenture or other security of
the corporation. Such agents and registrars may be located either within or
outside Delaware. They shall have such rights and duties and shall be entitled
to such compensation as may be agreed.
ARTICLE VI.
Indemnification Of Officers And Directors
-----------------------------------------
Section 1. Indemnification Of Directors, Officers, And Others. Any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was at any time since the inception of the corporation a director, officer or
employee of the corporation, or is or was at any time since the inception of the
corporation serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including serving as trustee, plan administrator or other
fiduciary of any employee benefit plan, shall be indemnified by the corporation
to the full extent permitted by the General Corporation Law of the State of
Delaware (or any similar provision or provisions of applicable law at the time
in effect).
Section 2. Indemnification Of Officers, Directors And Employees
Pursuant To The Common Law Or Statutory Provisions Other Than The General
Corporation Law Of The State Of Delaware. Any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was at any time since the inception of the
corporation a director, officer or employee of the corporation, or is or was at
any time since the inception of the corporation serving at the request of the
corporation as a director, officer, or employee of another corporation,
partnership, joint venture, trust or other enterprise, including serving as
trustee, plan administrator or other fiduciary of any employee benefit plan,
shall be indemnified by the corporation to the full extent permitted by the
common law and by any statutory provision other than the General Corporation Law
of the State of Delaware.
Section 3. Mandatory Advance Of Expenses. Reasonable expenses incurred
in defending any action, suit or proceeding described in Section 1 or 2 of this
Article VI shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director, officer or employee to repay such amount to the
corporation if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Article.
Section 4. Payment Of Indemnified Claims. Reasonable amounts required
to be paid in settlement or as a judgment in any action, suit or proceeding
described in Section 1 or 2 of this Article VI shall be paid by the corporation
within 90 days of the receipt of an undertaking by or on behalf of such
director, officer or employee to repay such amount to the corporation if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article; provided however, that the
corporation shall not be required to pay such amounts if a majority of the
members of the board of directors vote to deny the request for indemnification
within the 90 day period set forth in this Section 4 if such amounts previously
have not been paid by the corporation in accordance with this Section 4.
Section 5. Rights Of Appeal. In the event that the corporation
advances funds for indemnification pursuant to this Article, and, subsequently,
indemnification pursuant to this Article is declared unenforceable by a court,
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or the corporation determines that the director, officer or employee on whose
behalf the funds were advanced is not entitled to indemnification pursuant to
this Article, then such director, officer or employee shall have the right to
retain the indemnification payments until all appeals of the court's or the
corporation's decision have been exhausted.
Section 6. Additional Indemnification. Without limiting the
indemnification otherwise provided by this Article VI, any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time since the
inception of the corporation a director, officer or employee of the corporation
or a wholly owned subsidiary of the corporation, or is or was at any time since
the inception of the corporation a trustee, plan administrator or other
fiduciary of any employee benefit plan of the corporation or a wholly owned
subsidiary of the corporation, shall be indemnified by the corporation against
all expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him in connection with such
action, suit or proceeding, including an action or suit by or in the right of
the corporation to procure a judgment in its favor, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 7. Indemnification Not Exclusive. The indemnification provided
in this Article shall not be deemed exclusive of any other rights to which any
person seeking indemnification may be entitled under any agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 8. Insurance. By action of the board of directors,
notwithstanding any interest of the directors in such action, the corporation
may purchase and maintain insurance, in such amounts as the board may deem
appropriate, on behalf of any person who is or was a director, officer or
employee 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 and incurred by him in any such capacity, or arising out of
his status as such, regardless of whether the corporation would have the power
to indemnify him against such liability under applicable provisions of laws.
Section 9. Applicability; Effect. Any indemnification and advancement
of expenses provided by or granted pursuant to this Article VI shall be
applicable to acts or omissions that occurred prior to the adoption of this
Article VI, shall continue as to any persons who ceased to be a director,
officer, or employee of the corporation or a wholly owned subsidiary of the
corporation, or was serving as or has since ceased to be a trustee, plan
administrator or other fiduciary of any employee benefit plan of the corporation
or a wholly owned subsidiary of the corporation, and shall inure to the benefit
of the heirs, executors, and administrators of such person. The repeal or
amendment of this Article VI or any Section or provision hereof which would have
the effect of limiting, qualifying or restricting any of the powers or rights of
indemnification provided or permitted in this Article VI shall not, solely by
reason of such repeal or amendment, eliminate, restrict or otherwise affect the
right or power of the corporation to indemnify any person, or affect any right
of indemnification of such person, with respect to any acts or omissions which
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<PAGE>
occurred prior to such repeal or amendment. All rights under this Article VI
shall be deemed to be provided by a contract between the corporation and each
person covered hereby.
Section 10. Savings Clause. If this Article VI or any Section or
provision hereof shall be invalidated by any court on any ground, then the
corporation shall nevertheless indemnify each party otherwise entitled to
indemnification hereunder to the fullest extent permitted by law or any
applicable provision of this Article VI that shall not have been invalidated.
ARTICLE VII.
Execution Of Instruments; Loans; Checks
---------------------------------------
And Endorsements; Deposits; Proxies
-----------------------------------
Section 1. Execution Of Instruments. The president or any vice
president shall have the power to execute and deliver on behalf of and in the
name of the corporation any instrument requiring the signature of an officer of
the corporation, except as otherwise provided in these bylaws or where the
execution and delivery thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation. Unless authorized
to do so by these bylaws or by the board of directors, no officer, agent or
employee shall have any power or authority to bind the corporation in any way,
to pledge its credit or to render it liable pecuniarily for any purpose or in
any amount.
Section 2. Loans To Directors, Officers And Employees. The corporation
may lend money to, guarantee the obligations of and otherwise assist directors,
officers and employees of the corporation, or directors of another corporation
of which the corporation owns a majority of the voting stock, only upon
compliance with the requirements of the General Corporation Law of the State of
Delaware.
Section 3. Checks And Endorsements. All checks, drafts or other orders
for the payment of money, obligations, notes or other evidences of indebtedness,
bills of lading, warehouse receipts, trade acceptances and other such
instruments shall be signed or endorsed by such officers or agents of the
corporation as shall from time to time be determined by resolution of the board
of directors, which resolution may provide for the use of facsimile signatures.
Section 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the corporation's credit in
such banks or other depositories as shall from time to time be determined by
resolution of the board of directors, which resolution may specify the officers
or agents of the corporation who shall have the power, and the manner in which
such powers shall be exercised, to make such deposits and to endorse, assign and
deliver for collection and deposit checks, drafts and other orders for the
payment of money payable to the corporation or its order.
Section 5. Proxies. Unless otherwise provided by resolution adopted by
the board of directors, the president or any vice president may from time to
time appoint one or more agents or attorneys-in-fact of the corporation, in the
name and on behalf of the corporation, to cast the votes which the corporation
may be entitled to cast as the holder of stock or other securities in any other
corporation, association or other entity any of whose stock or other securities
may be held by the corp ration, at meetings of the holders of the stock or other
securities of such other corporation, association or other entity or to consent
in writing, in the name of the corporation as such other entity, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed in the
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<PAGE>
name and on behalf of the corporation and under its corporate seal, or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
ARTICLE VIII.
Miscellaneous
-------------
Section 1. Waivers Of Notice. Whenever notice is required to be given
by law, by the certificate of incorporation or by these bylaws, a written waiver
thereof, signed by the person entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting or (in the case of a stockholder) by proxy shall constitute
a waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need to be specified in any written waiver or notice
unless so required by the certificate of incorporation or these bylaws.
Section 2. Presumption Of Assent. A director or stockholder of the
corporation who is present at a meeting of the board of directors or
stockholders at which action on any corporate matter is taken shall be presumed
to have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director or stockholder who voted in
favor of such action.
Section 3. Seal. The corporate seal of the corporation shall be
circular in form and shall contain the name of the corporation and the words
"Seal, Delaware." The custodian of the seal shall be the secretary, who along
with the president or other officer authorized by the board of directors, may
affix the seal to documents of the corporation.
Section 4. Amendments. These bylaws may be altered, amended or
repealed or new bylaws may be adopted by the board of directors at any meeting
of the directors or by the stockholders at any meeting of the stockholders if in
the case of a stockholders' meeting notice of such alteration, amendment, repeal
or adoption is contained in the notice of such stockholders' meeting.
Section 5. Emergency Bylaws. Subject to repeal or change by action of
the stockholders, the board of directors may adopt emergency bylaws in
accordance with and pursuant to the provisions of the General Corporation Law of
the State of Delaware.
* * * * *
14
EXHIBIT 4.1
GREENLEAF CAPITAL CORPORATION
PAR VALUE $.001 CUSIP 395356 10 8
SEE REVERSE FOR CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE LEGEND ENDORSED ON REVERSE SIDE
This is to certify that:
is the owner of:
fully paid and non-assessable shares of the above corporation
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this certificate properly endorsed. This
certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
WITNESS the seal of the Corporation and the signatures of its duly
authorized officers.
Dated:
Secretary President
COUNTERSIGNED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE>
The corporation will furnish without charge to each stockholder who so requests
a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions on such preferences
and/or rights. Such request may be addressed to the Secretary of the Corporation
or to the Transfer Agent and Registrar named on this Certificate.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian ______
(Cust) (Minor)
TEN ENT - as tenants by the
entireties under Uniform Gifts to Minors Act _________
(State)
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above list.
For Value Received, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________
_____________________________________________________________________
(PLEASE PRINT OR TYPE FIRM NAME AND ADDRESS,
INCLUDING ZIP CODE OF ASSIGNEE)
_____________________________________________________________________
_____________________________________________________________________
______________________________________________________________ Shares
of the capital stock represented by this Certificate, and do hereby
irrevocably constitute and appoint _______________________________ Attorney
to transfer the said Shares on the books of the within named Corporation,
with full power of substitution in the premises.
Dated: ______________________
NOTICE: SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed:
______________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17 Ad-15.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF THE
COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
EXHIBIT 10.1
LICENSE AND REVENUE SHARING AGREEMENT
This Agreement ("Agreement") is entered into between BROADCASTDVD, INC., a
California corporation, with offices at 1543 Seventh Street, Santa Monica, CA
90401, ("BDVD") and GREENLEAF TECHNOLOGIES CORPORATION, a Delaware corporation,
with offices at 8834 Capital of Texas Highway North, Suite 150, Austin, Texas
78759 ("GREENLEAF").
1. Business Intent
BDVD is a producer and distributor of DVD magazines and DVD motion
pictures. GREENLEAF has entered into a License Agreement (the "WAG agreement")
with INFOGRAMES NORTH AMERICA, formerly known as ACCOLADE, INC. ("INFROGAMES"),
an interactive entertainment software developer and publisher, and WARNER
ADVANCED MEDIA OPERATIONS ("WAMO"), a DVD replicator, by which said parties will
develop and distribute Encrypted Game Packs ("EGPs") to Original Equipment
Manufactures ("OEMs"). GREENLEAF, INFOGRAMES and WAMO are collectively referred
to herein as "WAG". GREENLEAF, through the WAG agreement or otherwise, may also
distribute EGPs through retail channels. By this Agreement, BDVD intends to
furnish mutually agreed upon DVD magazines (such as FILM-FEST) and/or movies and
GREENLEAF intends to provide for the placement of such DVD magazines and/or
movies on the EGPs, initially in an unencrypted format, for distribution to OEMs
and/or through retail channels. Revenues for BDVD and GREENLEAF will initially
be generated from third party sponsorships or advertising contained in the DVD
magazines or movies. This Agreement further provides exclusivity provisions for
the benefit of BDVD and GREENLEAF, distribution milestones, compensation, and
reservation of rights, among other things.
2. Scope
a. General. This Agreement, including attachments, if any, shall constitute
a master agreement under which BDVD shall furnish mutually agreed upon DVD
magazines and/or movies for placement on the EGPs, in coordination with the
release of such EGPs. GREENLEAF shall provide notice and details to BDVD of
upcoming EGP production and distribution to the fullest extent allowed by the
WAG agreement or other third party agreements for EGP distribution. BDVD and
GREENLEAF shall then agree on the DVD magazines and/or movies to be included on
the EGP and submit the magazine or movie for inclusion on the EGP as provided
herein. The parties shall agree to a "Specification" (as defined herein) at such
time as the parties agree on the DVD magazine and/or movie to be included on the
EGP incorporating any additional terms or conditions and the applicable terms
and conditions hereof in the event of any inconsistency between this Agreement
and the applicable Specification, this Agreement shall control unless expressly
superseded.
b. Specifications. Each Specification shall contain, at a minimum, (i) a
description of the EGP, including a list of all content; (ii) the DVD magazine
or move to be included on the EGP, along with a listing of the sponsors and/or
advertisers for that particular DVD magazine or movie, (iii) the delivery date
for the digital linear tape ("DL7") to be used for replication of the DVD
magazine or movie, and (iv) any other material details needed for the proper
carrying out of the intent of the parties hereto.
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3. Licenses
a. Grant of Distribution License.
(i) BDVD grants GREENLEAF, pursuant to the terms and conditions of
this Agreement, a worldwide, nontransferable (subject to Paragraph 3.a.(iv) and
Paragraph 14. of this Agreement) license to use, copy and distribute the DVD
magazines and movies included on the EGPs during the term of this Agreement.
This distribution license shall be sublicensable to the extent necessary to
allow GREENLEAF's OEM and retail channels to distribute copies of the DVD
magazines and movies on the EGPs to end- users. This license may be sublicensed
by GREENLEAF to WAMO and to entities participating in the WAMO Worldwide
Affiliate Program to the extent necessary to allow such entities to manufacture
the EGPs; provided, however, such entities shall comply with the obligations and
restrictions imposed by this Agreement to the extent applicable.
(ii) This license shall be exclusive in that BDVD agrees that it shall
not grant any other licenses to use, copy or distribute its DVD magazines or
movies on encrypted or partially encrypted game discs to be given away in OEM
and retail channels. This license shall remain exclusive for a term of three (3)
years from the Effective Date or for as long as WAG or GREENLEAF is producing or
distributing EGPs, whichever is shorter. Nothing in this Agreement shall
preclude BDVD from licensing, distributing or otherwise exploiting its DVD
Magazines or movies, which are not a part of encrypted game discs, by any means
whatsoever including, but not limited to, OEM distribution, rentals and retain,
mail-order and/or online sell-through markets. Greenleaf will have the right of
first refusal on placement of BDVD's magazines or movies onto it's EGP's. If the
magazines or moves that BDVD presents to Greenleaf are not accepted and placed
on EGP's within a commercially reasonable time, nothing shall preclude BDVD from
licensing, distributing or otherwise exploiting those DVD Magazines or movies,
by any means whatsoever.
(iii) During the term of this Agreement, GREENLEAF agrees that it will
not put any other third party DVD magazines on its EGPs, and that on each of its
EGPs GREENLEAF will include a mutually agreed upon unencrypted BDVD DVD magazine
or movie, as long as BDVD furnishes agreed upon DVD magazines or movies for
inclusion on each EGP project of GREENLEAF's. In the event that GREENLEAF and
BDVD fail to agree, after meaningful and good faith discussions between the
parties, upon a DVD magazine or movie for inclusion on any particular EGP
distributed by GREENLEAF, or in the event BDVD fails to furnish a particular
agreed to DVD magazine or movie for inclusion on any particular EGP as required
by the applicable Specification, then GREENLEAF shall be entitled to terminate
the exclusivity requirement contained in this paragraph (iii) and shall be free
to use any alternate third party DVD magazine and/or movies on the particular
EGP for which the parties failed to agree on a DVD magazine or movie. Nothing
contained in this paragraph (iii) shall terminate the exclusivity requirement
contained herein with respect to any subsequent EGPs unless similar failure by
the parties occurs on such subsequent EGPs.
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(iv) In the event that GREENLEAF or BDVD assigns this Agreement
incident to the sale of substantially all of its assets, or pursuant to any
manner, consolidation or reorganization, the exclusivity provisions contained in
Subsections (ii) and (iii) of this Section shall not apply to the business
activities of the acquiring, parent, or affiliated company and shall only apply
to the specific products referenced in this Agreement.
b. Restrictions on Use. GREENLEAF shall not permit any parent,
subsidiaries, affiliated entities of third parties to use or copy the DVD
magazines or movies provided by BDVD, other than as contemplated in this
Agreement.
c. Proprietary Notices. GREENLEAF shall ensure that all copies of any EGPs
which include a BDVD magazine or movie shall include BDVD's proprietary notices,
if any, substantially in the form of the text attached hereto as Schedule A.
d. Modifications. GREENLEAF shall not modify or edit any agreed upon BDVD
magazine or movie which is to be included on an EGP. Notwithstanding any other
provision or terms of this Agreement, GREENLEAF shall not repurpose or
redistribute any DVD magazine or movie provided by BDVD to GREENLEAF for
inclusion on any EGP issued subsequent to that EGP for which BDVD had
specifically provided such DVD magazine or movie, without the express written
consent of BDVD.
e. Reserved Rights. All rights in the BDVD magazines and movies furnished
by BDVD, not expressly granted to GREENLEAF or its sublicenses as set forth in
this Agreement are reserved by BDVD. All rights not expressly granted to BDVD by
GREENLEAF in this Agreement are reserved by GREENLEAF.
4. Notice, Delivery and Installation
a. Notice by GREENLEAF. GREENLEAF shall be responsible for notifying BDVD
of the project schedule for each EGP project as soon as said project schedule
becomes available to GREENLEAF.
b. Agreement on DVD magazine and/or movie and Specification. Within a
commercially reasonable time after notification of each EGP project schedule,
BDVD and GREENLEAF shall agree on the DVD magazine and/or movie to be a part of
the EGP project and the details of the Specification referenced in paragraph 2.b
above.
c. Delivery by BDVD. BDVD shall provide GREENLEAF with a DLT for
replication in accordance with the Specification.
d. Installation by GREENLEAF. GREENLEAF shall cause the DVD magazine and/or
movie to be included on the EGPs as agreed in the Specification. Any and all
costs incurred by GREENLEAF in the process of including/installing the agreed
DVD magazines and/or movies on the EGPs shall be the sole responsibility of
GREENLEAF.
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5. Ownership
a. Title to DVD magazines and movies. BDVD and GREENLEAF agree that as
between BDVD and GREENLEAF, BDVD (i) owns all proprietary rights, including
patent, copyright, trade secret, trademark and other proprietary rights, in and
to the content of the DVD magazines it furnishes to GREENLEAF, and (ii)
possesses the lawful right to distribute the content of the DVD magazines or
movies it furnishes to GREENLEAF.
b. Title to EGPs and Their Individual Components. The parties agree that,
as between BDVD and GREENLEAF, GREENLEAF owns all propriety rights, including
patent, copyright, trade secret, trademark and other proprietary rights, in and
to the EGPs, and each of the components which comprise the EGPs, both before and
after inclusion of BDVD's magazines or movies, other than the content of the DVD
magazines and movies furnished by BDVD.
c. Transfers. Under no circumstances shall GREENLEAF sell, license,
publish, display, distribute, or otherwise transfer to a third party the content
or any copy thereof, in whole or in part, of the DVD magazines or movies
furnished by BDVD without BDVD's prior written consent, unless in accordance
with this Agreement.
6. Production, Distribution and Promotion
a. Production and Distribution. After delivery of the DLT as called for in
paragraph 4.c above, GREENLEAF shall be responsible at the sole cost and expense
of GREENLEAF for reproduction of the DVD magazines and/or movies for inclusion
on the EGPs, for delivery to OEMs and/or through retail channels as contemplated
by this Agreement.
b. Promotion. BDVD understands that as a part of the WAG agreement,
INFOGRAM is solely responsible for marketing and selling EGPs to CEMs, but that
GREENLEAF and WAMO agree to provide reasonable cooperation and assistance to
INFOGRAM as requested by INFOGRAM. BDVD agrees to work with GREENLEAF as
requested by GREENLEAF to assist in the promotion and marketing of the EGPs, but
that as to distribution to OEMs, same must be done in conformity with the WAG
agreement. GREENLEAF and BDVD shall enter into good faith consultation with each
other with respect to packaging design, cover art and art design for each EGP
that contains a BDVD magazine or movie provided, however, that as between the
parties hereto GREENLEAF shall have final right of approval over all such design
and art matters.
c. Press Releases. The parties agree to cooperate with one another in
issuing press releases relating to this Agreement and that the content of such
press releases shall be subject to the mutual agreement of the parties,
realizing same must be done in conjunction with, or with the approval of, the
WAG parties.
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7. Demographic Information
The parties understand that demographic information regarding the end-users
of EGPs is currently governed by the WAG agreement and that BDVD will not have
access to any such information without the express approval of the WAG parties.
8. Confidential Information
a. Protection of Confidential Information. Each party acknowledges that,
during the term of this Agreement, it will have access to proprietary
information ("Confidential Information") of the other party. Each party will use
its best efforts to protect the Confidential Information of the other party in
the same manner in which it protects its own Confidential Information (but in no
event less than reasonable care), and will not use or disclose such Confidential
Information, except to those employees or agents with an absolute need to know
such information provided that those employees and agents shall also be bound by
the terms and conditions of this Agreement.
b. Exceptions to Confidential Treatment. The obligations of confidentiality
and non-use required by Section 8a will not apply to any confidential or
proprietary information of one party which
(i) was known by the receiving party prior to the date of this
Agreement and not obtained or derived, directly or indirectly, from the
disclosing party or its affiliates, or if so obtained or derived, was lawfully
obtained or derived and is not held subject to any confidentiality or non-use
obligations;
(ii) is or becomes public or available to the general public, the
computer software industry or the magazine or movie industries, other than
through any act or default of the receiving party;
(iii) is obtained or derived prior or subsequent to the dates of this
Agreement from a third party which, to the best knowledge of the party acquiring
such information, is lawfully in possession of such information and does not
hold such information subject to any confidentiality or non-use obligations;
(iv) is independently developed by the receiving party without use of
the disclosing party's Confidential Information, or
(v) is required to be disclosed by the receiving party pursuant to
applicable law or under a government or court order, relating, in whole or in
part, to the Title or any other subject matter of this Agreement, provided,
however, that (i) the obligations of confidentiality and non-use will continue
to the fullest extent not in conflict with such law or order, and (ii) if and
when a party is required to disclose such confidential or proprietary
information pursuant to any such law or order, such party will use its
reasonable efforts to obtain a protective order or take such other actions as
will prevent or limit, to the fullest extent possible, public access to, or
disclosure of such Confidential Information.
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c. Continuation of Obligations. The parties' obligations under this Section
will extend for three (3) years following the expiration or termination of this
Agreement.
9. Compensation
a. In General. The parties at present do not anticipate nor plan on
generating revenue from the sale of the EGPs that contain the DVD magazines or
movies to be provided to GREENLEAF by BDVD. The parties intend to generate
revenues from third party sponsorships or advertising, and BDVD agrees to pay a
certain portion of such revenues to GREENLEAF in consideration of the services
rendered by GREENLEAF. The parties may in the future develop a revenue sharing
arrangement for encrypted magazines or movies.
b. GREENLEAF fees. BDVD shall pay GREENLEAF fees in the amount of thirty
percent (30%) of all revenues received by BDVD from sponsorships or advertising
generated or derived directly from the BDVD DVD magazines and movies included on
the EGPs.
c. Payment Terms. All monies owing by BDVD to GREENLEAF shall be paid by
the 10th of the month following BDVD's receipt of same from the sponsors and
advertisers.
d. Accounting. BDVD shall account to GREENLEAF with regard to GREENLEAF's
compensation hereunder on a quarterly basis. The quarterly periods shall end on
March 31st, June 30th, September 30th and December 31st of each year; provided
that no accounting need be rendered for any quarterly period in which no
compensation accrues to GREENLEAF, provided BDVD furnishes a statement to that
effect to GREENLEAF. Accountings shall be render on or before the date thirty
(30) days following the conclusion of each accounting period. In the event
GREENLEAF has an objection to a quarterly accounting, GREENLEAF shall notify
BDVD of such objection within sixty (60) days after GREENLEAF's receipt of the
subject accounting. Upon BDVD's receipt of an objection, BDVD shall deliver same
to BDVD's independent accounting firm ("CPA") regularly employed by BDVD. The
CPA's determination as to the proper amount payable in accordance with this
Agreement shall be conclusive and binding on all parties hereto. In the event no
timely objection is made with regard to a quarterly accounting such accounting
shall be deemed conclusive and not subject to further contest with respect to
matters therein. Notwithstanding the foregoing, GREENLEAF does not waive any
rights in the event of fraud, misrepresentation or illegal conduct.
e. Sales Taxes. Since the DVD magazines and movies are being given away as
a part of the EGPs, there should be no sales tax attributable to such
transactions, and the WAG parties, pursuant to the WAG agreement will be
responsible for any sales taxes due related to the EGPs.
f. Other Taxes. Each party hereto shall be responsible for its respective
taxes, whether federal, state or otherwise, however designated, which are levied
or imposed by reason of the transactions contemplated by this Agreement, other
than sales taxes.
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10. Warranties
a. BDVD's Representations and Warranties. BDVD warrants to GREENLEAF that
none of the DVD magazines or movies it furnishes to GREENLEAF to be included on
EGPs infringes any trade secret, patent, mask work right, copyright, moral
right, intellectual right or contract rights of any third party. BDVD further
warrants that it has the power and authority to enter into this Agreement and to
fully perform its obligations hereunder; that this Agreement has been executed
by its duly authorized representative, and that it is under no contractual or
other legal obligations which would interfere in any way with the full, prompt,
and complete performance of its obligations pursuant to this Agreement.
b. GREENLEAF's Representations and Warranties. GREENLEAF represents and
warrants that it has the power and authority to enter into this Agreement and to
fully perform its obligations hereunder; that this Agreement has been executed
by its duly authorized representative; and that it is under no contractual or
other legal obligations which would interfere in any way with the full, prompt,
and complete performance of its obligations pursuant to this Agreement.
Notwithstanding the foregoing, the parties understand that GREENLEAF is bound by
the WAG agreement and in the event of a conflict between the WAG agreement and
this Agreement, the WAG agreement is controlling.
11. Limitation of Liability
EXCEPT FOR A WILFUL OR INTENTIONAL BREACH HEREOF OR EXCEPT AS TO THE
INDEMNITY PROVISIONS HEREOF, NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY FOR
INDIRECT, SPECIAL INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), HOWEVER CAUSED OR ON ANY THEORY OF LIABILITY, WHETHER OR NOT SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THIS LIMITATION IS
INTENDED TO LIMIT THE LIABILITY OF THE PARTIES AND SHALL APPLY NOTWITHSTANDING
ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
12. Indemnification
a. BDVD Indemnity. BDVD shall indemnify and hold harmless GREENLEAF and/or
WAG from and against any claims, including reasonable legal fees and expenses,
that the DVD magazines or movies, including, but not limited to the content
thereof, furnished by BDVD for inclusion on EGPs, infringes any third party's
proprietary rights, including, patent, copyright, trade secret, trademark,
intellectual or other proprietary right. GREENLEAF agrees to notify BDVD of any
such claim promptly in writing and to allow BDVD to control any proceedings.
BDVD shall defend and settle at its sole expense all proceedings arising out of
the foregoing.
b. General Indemnity.
(i) Each party ("Indemnifying Party") agrees to defend, indemnify and
hold harmless any other party, its officers, directors, employees,
subcontractors, and agents ("Indemnified Parties") against any claims, actions
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or demands, alleging facts which would constitute a breach of the Indemnifying
Party's representations and warranties provided in this Agreement or of the
Indemnifying Party's performance obligations under this Agreement.
(ii) In any case in which indemnification is sought, the Indemnified
Party agrees to (1) give prompt written notice to Indemnifying Party of any such
claim, action or demand, (2) allow Indemnifying Party to control the defense and
related settlement negotiations, and (3) assist in the defense so long as
Indemnifying Party reimburses the Indemnified Party for its reasonable expenses.
The Indemnified Party will invoice Indemnifying Party for such expenses and time
on a calendar quarter basis and Indemnifying Party shall pay such reimbursements
within thirty (30) days after the invoice from the Indemnified Party. The law
firm used by Indemnifying Party to defend the Indemnified Party shall be subject
to the Indemnified Party's reasonable approval. If the Indemnifying Party is
unable to comply with the indemnity obligation set forth above, the Indemnified
Party may defend such suit itself for all Indemnified Parties with counsel of
its choosing and may invoice the Indemnifying Party for all expenses incurred in
defending and/or settling any claim and/or satisfying any resulting judgment.
Any settlement shall be subject to the Indemnified Party's prior written
approval unless the Indemnifying Party has obtained an unconditional release of
all of the Indemnified Parties named in the proceeding.
13. Term and Termination
a. Effective Date. This Agreement and the license granted hereunder shall
take effect upon the date that the last party executes this Agreement, and be
effective for a term of three (3) years, unless sooner terminated or extended by
mutual agreement of the parties.
b. Termination. Each party shall have the right to terminate this Agreement
and the license granted herein upon the occurrence of any one of the following
events (an "Event of Default"):
(i) In the event the other party violates any material provision of
this Agreement; or
(ii) In the event the other party (A) terminates or suspends its
business, (B) becomes subject to any bankruptcy or insolvency proceeding under
Federal or state statute, (C) becomes insolvent or subject to direct control by
a trustee, receiver of similar authority, or (D) has wound up or liquidated,
voluntarily or otherwise.
c. Notice and Opportunity to Cure. Upon the occurrence of an Event of
Default, a party shall deliver to the defaulting party a Notice of Intent to
Terminate that identifies in detail the Event of Default. If the Event of
Default remains uncured for thirty (30) days after such Notice, the party may
terminate this Agreement and the license granted herein by delivering to the
defaulting party a Notice of Termination that identifies the effective date of
the termination, which date shall not be less than thirty (30) days after the
date of delivery of the Notice of Intent to Terminate.
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d. BDVD Option to Terminate. BDVD will have the right to terminate this
Agreement upon any of the following events: (i) the failure of GREENLEAF to
distribute at least 500,000 EGPs which include an unencrypted BDVD magazine or
movie through OEMs and/or retail channels within six months of the Effective
Date of this Agreement; (ii) the failure of GREENLEAF to distribute at least
1,000,000 EGPs which include an unencrypted BDVD magazine or movie through OEMs
and/or retail channels within one year of the Effective Date of this Agreement;
or (iii) the failure of GREENLEAF to distribute at least 2,000,000 EGPs which
include an unencrypted BDVD magazine or movie through OEMs and/or retail
channels within eighteen months of the Effective Date of this Agreement. For
purposes of paragraph 13.e. Greenleaf's failure to distribute the amount of
EGP's pursuant to the terms of subparagraphs (i), (ii), and (iii) shall not be
deemed a breach of this contract by Greenleaf. GREENLEAF shall account to BDVD
with regard to GREENLEAF'S distribution levels of EGPs containing a BDVD
magazine or movie as provided herein on a quarterly basis. The quarterly periods
shall end on March 31st, June 30th, September 30th and December 31st of each
year. Accountings shall be rendered on or before the date thirty (30) days
following the conclusion of each accounting period. In the event BDVD has an
objection to a quarterly accounting, BDVD shall notify GREENLEAF of such
objection within sixty (60) days after BDVD's receipt of the subject accounting.
Upon GREENLEAF's receipt of an objection, GREENLEAF shall deliver same to
GREENLEAF's independent accounting firm ("Greenleaf-CPA") regularly employed by
GREENLEAF. Greenleaf-CPA's determination as to the actual levels and amounts of
distribution by GREENLEAF shall be deemed conclusive and not subject to further
contest with respect to matters therein. Notwithstanding the foregoing, BDVD
does not waive any rights in the event of fraud, misrepresentation or illegal
conduct.
e. The following provisions shall survive termination or the earlier
expiration of this Agreement 3.b., 3.c., 3.d., 3.e., 5, 8, 10, 11, 12, 13.e.,
15, 17 and 18. The license granted in Section 3.a shall also survive to the
extent necessary to allow WAG's OEM and retail channels to distribute EGPs
manufactured before the expiration or termination of this Agreement and to allow
end-users access to the DVD magazines and/or movies distributed before the
expiration or termination of this Agreement. In addition, the compensation
payable by BDVD to Greenleaf pursuant to paragraph 9 shall survive the
termination or earlier expiration of this contract provided, however, that the
termination of this contract is not due to or the result of Greenleaf's breach
of any provision of this contract.
14. Assignment
Except as otherwise provided herein, no party shall assign or otherwise
transfer this Agreement to any third party without the prior written consent of
the other party, except that any assignment incident to the sale of
substantially all of a party's assets, or pursuant to any merger, consolidation
or reorganization, shall not be considered a prohibited assignment for purposes
of this Section.
15. Force Majeure
Neither party shall be in default or otherwise liable for any delay in or
failure of its performance under this Agreement if such delay or failure arises
by any reason beyond its reasonable control, including any act of God, any acts
of the common enemy, the elements, earthquakes, floods, fires, epidemics, riots,
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failures or delay in transportation or communications, or any act or failure to
act by the other party or such other party's employees, agents or contractors;
provided, however, that lack of funds shall not be deemed to be a reason beyond
a party's reasonable control. The parties will promptly inform and consult with
each other as to any of the above causes which in their judgment may or could be
the cause of a delay in the performance of this Agreement.
14. Arbitration
The parties shall settle any controversy arising out of this Agreement by
arbitration in the State of Texas in accordance with the rules of the American
Arbitration Association. A single arbitrator shall be agreed upon by the parties
or, if the parties cannot agree upon an arbitrator within thirty (30) days, then
the parties agree that a single arbitrator shall be appointed by the American
Arbitration Association. The arbitrator may award attorneys' fees and costs as
part of the award. The award of the arbitrator shall be binding and may be
entered as a judgment in any court of competent jurisdiction. All proceedings
shall be conducted in Travis County, Texas.
17. Notices
All notices under this Agreement are to be delivered by (i) depositing the
notices in the mail, using registered mail, return receipt requested, addressed
to the address below or to any other address as the party may designate by
providing notice; (ii) telecopying the notice by using the telephone number set
forth below or any other telephone number as the party may designate by
providing notice; (iii) overnight delivery service addressed to the address
below or to any other address as the party may designate by providing notice; or
(iv) hand delivery to the individual designated below or to any other individual
as the party may designate by providing notice. The notice shall be deemed
delivered (i) if by registered mail, four (4) days after the notice's deposit in
the mail, (ii) if by telecopy, on the date the notice is delivered, (iii) if by
overnight delivery service, on the day of delivery, and (iv) if by hand
delivery, on the date of hand delivery.
GREENLEAF: Greenleaf Technologies Corporation
8834 Capital of Texas Highway North
Suite 150
Austin, Texas 78759
Attention: Mr. Christopher Jay Webster
Telephone: 512-343-1300
Telecopier: 512-349-9780
With a copy sent to corporate counsel:
Lee Norton Bain
Attorney at Law
120 West 8th Street
Georgetown, Texas 78625
Telephone: 512-863-2613
Telecopier: 512-869-5090
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BDVD: BroadcastDVD
1543 7th Street
Santa Monica, California 90401
Attention: James T. Voik
Telephone: 310-260-5698
Telecopier: 310-260-7912
18. General Provisions
a. Complete Agreement. The parties agree that this Agreement is the
complete and exclusive statement of the agreement between the parties, which
supersedes and merges all prior proposals, understandings and all other
agreements, oral or written, between the parties relating to this Agreement.
b. Year 2000 Compatibility. The parties warrant and agree that all
software, DVD magazines and movies, and obligations in whatever form which are
to be provided by the respective parties shall be Year 2000 compatible.
c. Warranty that Agreement Does Not Contemplate Corrupt Practices. BDVD and
GREENLEAF both represent and warrant that all payments and authorizations under
this agreement constitute compensation for services performed or to be performed
and do not constitute an offer, payment, promise or authorization for payment of
any money or gift to any official or other person to influence any act or
decision of an official or person to induce such official or person to affect or
influence any act or decision in favor of BDVD or GREENLEAF.
d. Amendment. This Agreement may not be modified, altered or amended except
by written instrument duly executed by both parties.
e. Waiver. The waiver or failure of either party to exercise in any respect
any right provided for in this Agreement shall not be deemed a waiver of any
further right under this Agreement.
f. Severability. If any provision of this Agreement is invalid, illegal or
unenforceable under any applicable statute or rule of law, it is to that extent
to be deemed omitted. The remainder of the Agreement shall be valid and
enforceable to the maximum extent possible.
g. Governing Law. This Agreement and performance hereunder shall be
governed by the laws of the State of Texas and venue shall lie in Travis County.
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h. Read and Understood. Each party acknowledges that it has read and
understands this Agreement and agrees to be bound by its terms. Signatures and
initials conveyed by telecopier shall be deemed originals.
AGREED:
BROADCASTDVD, INC. GREENLEAF TECHNOLOGIES CORPORATION
BY: BY;
____________________________ __________________________________
Signature CHRISTOPHER JAY WEBSTER, Senior Vice-President
____________________________
____________________________
Office
Date Aug. 26, 1999 Date Aug. 26, 1999
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EXHIBIT 10.2
LICENSE AGREEMENT
This Agreement ("Agreement") is entered into between ACCOLADE, INC., a
California corporation, with offices at 5300 Stevens Creek Blvd., San Jose,
California 95129 ("ACCOLADE"), GREENLEAF TECHNOLOGIES CORPORATION, a Delaware
corporation, with offices at 8834 Capital of Texas Highway North, Suite 150,
Austin, Texas 78759 ("GREENLEAF"), and WARNER ADVANCED MEDIA OPERATIONS, a
Delaware corporation, with offices at 1265 Los Angeles Street, Glendale,
California 91204 ("WAMO").
1. Business Intent. ACCOLADE is an interactive entertainment software
developer and publisher and intends to offer to Original Equipment Manufacturers
("OEMs") at least one compilation of several interactive entertainment software
programs and demos thereof (such programs are hereinafter referred to
individually as "Game" or collectively as "Games"), bundled with interface
software created by or for ACCOLADE ("Interface Software") and additional
content in partially-encrypted DVD ROM format. (Such compilations shall be
referred to as "Encrypted Game Packs" throughout this Agreement.) ACCOLADE
wishes to contract with GREENLEAF and WAMO for encryption and manufacturing
services in connection with Encrypted Game Packs. The parties intend for
GREENLEAF to create master discs for such compilations containing encrypted
versions of the Games, the decrypting "wrapper" software, and the unlocking
software ("unlocking software") for use with ACCOLADE's non-encrypted Interface
Software and additional non- encrypted content provided by ACCOLADE. The parties
intend for ACCOLADE to provide the set-up programs and to perform the final
integration of the Encrypted Game Packs. The parties intend for WAMO to
replicate such compilations discs in DVD ROM format for ACCOLADE to distribute
to its OEM customers. The parties further intend for GREENLEAF to provide the
services necessary for end users to unlock the encrypted Games, including
establishing unlocking centers initially in the U.S.A. (Austin) and Europe
(Dublin, Ireland). A merchant account will be established at an agreed upon Bank
for the automatic handling and transfer to the parties of generated revenues
based on the formulas set forth in this Agreement.
2. Scope
a. General. The parties intend and agree that this Agreement, including its
attachments, shall constitute a master agreement under which ACCOLADE shall
initiate the creation, replication and distribution of Encrypted Game Packs
with GREENLEAF and WAMO. ACCOLADE shall initiate such creation by
submitting a specification for each Encrypted Game Packs ("Specification").
Each Specification shall be considered a separate agreement between the
parties incorporating the applicable terms and conditions hereof. In the
event of any inconsistency between this Agreement and the applicable
Specification, this Agreement shall control unless expressly superseded.
b. Specifications. Each Specification shall contain, at a minimum, (i) a
description of the Encrypted Game Packs, including a list of all content,
(ii) an implementation plan with the delivery date for each deliverable;
and (iii) any other material details for the Encrypted Game Packs.
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3. Licenses
a. Grant of Distribution License.
(i) GREENLEAF grants ACCOLADE, pursuant to the terms and conditions
of this Agreement, a worldwide, nontransferable license to use,
copy, and distribute the computer encryption technology referred
to by GREENLEAF as "DigiGuard(TM)" and any corrections, bug
fixes, enhancements, updates or other standard or custom
modifications ("Wrapper Software") as installed by GREENLEAF only
as part of Encrypted Game Packs during the term of this
Agreement. This distribution license shall be sublicensable to
the extent necessary to allow ACCOLADE's OEM customers to
distribute copies of Encrypted Game Packs to end-users.
(ii) This license shall be exclusive in that GREENLEAF agrees that it
shall not grant any other licenses to use, copy or distribute the
Wrapper Software in connection with interactive entertainment
software compilations to be distributed in DVD ROM format through
the OEM channel. This license shall remain exclusive for a term
of one (1) year from the Effective Date or for as long as
ACCOLADE makes commercially reasonable efforts to market and sell
Encrypted Game Packs utilizing the Wrapper Software, whichever is
longer. In the event that this license becomes non-exclusive
under the terms of this Subsection, the exclusivity provision
contained in Subsection 3(a)(iii) shall be terminated.
(iii)During the term of this Agreement, ACCOLADE agrees that it will
not use any other third party's encryption technology to enable
distribution of its Encrypted Game Packs in the OEM channel for
as long as the following requirements are met:
1) The Wrapper Software continues to meet ACCOLADE's technical
requirements as set forth in Exhibit A hereto; and
2) If ACCOLADE becomes aware of features included in encryption
software offered by a third-party and requests that
GREENLEAF make such features available, GREENLEAF agrees to
make such features available within a reasonable amount of
time.
If the preceding requirements are not met, then ACCOLADE shall be
entitled to terminate the exclusivity requirement contained
herein and shall be free to use alternative encryption technology
in its Encrypted Game Packs. In such event, Subsection 3(a)(ii)
shall also be terminated such that GREENLEAF may license the
Wrapper Software to other companies for use in connection with
interactive entertainment software compilations to be distributed
in DVD ROM format through the OEM channel.
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iv) In the event that ACCOLADE or GREENLEAF assigns this Agreement
incident to the sale of substantially all of its assets, or
pursuant to any merger, consolidation or reorganization, the
exclusivity provisions contained in Subsections (ii) and (iii) of
this Section shall not apply to the business activities of the
acquiring, parent, or affiliated company and shall only apply to
the software products of ACCOLADE or GREENLEAF.
b. Grant of Manufacturing Licenses. GREENLEAF grants WAMO a worldwide,
nontransferable license to use, manufacture, and copy the Wrapper
Software as installed by GREENLEAF as part of Encrypted Game Pack
during the term of this Agreement. ACCOLADE grants WAMO a worldwide,
nontransferable license to use, manufacture, and copy the Games,
Interface Software and any other content comprising the Encrypted Game
Packs for the sole purpose of fulfilling ACCOLADE's purchase orders
for Encrypted Game Packs. This license may be sublicensed by WAMO to
entities participating in the WAMO Worldwide Affiliate Program only to
the extent necessary to allow such entities to manufacture Encrypted
Game Packs for ACCOLADE; provided, however, such entities shall comply
with the obligations and restrictions imposed by this Agreement, and
WAMO shall be responsible to ACCOLADE and GREENLEAF for the
performance of its sublicenses. WAMO acknowledges that it shall have
no right to manufacture any ACCOLADE Encrypted Game Pack for any
entity other than ACCOLADE.
c. Restrictions on Use. ACCOLADE shall not permit any parent,
subsidiaries, affiliated entities or third parties to use or copy the
Wrapper Software, other than as contemplated in this Agreement.
Neither GREENLEAF nor WAMO shall permit third parties to use or copy
the Games, Interface Software, or any other content comprising any
Encrypted Game Pack other than as contemplated in this Agreement.
d. Copies. ACCOLADE shall ensure that all copies of any Encrypted Game
Packs shall include GREENLEAF's and WAMO's proprietary notices,
substantially in the form of the text attached hereto as Schedule B.
e. Modifications, Reverse Engineering. ACCOLADE agrees that only
GREENLEAF shall have the right to alter, maintain, enhance or
otherwise modify the Wrapper Software. ACCOLADE shall not disassemble,
decompile or reverse engineer the Wrapper Software. GREENLEAF and WAMO
agree that, as between the parties, only ACCOLADE has the right to
alter, maintain, enhance or other wise modify the Games, Interface
Software, and any other content comprising the Encrypted Game Packs.
Neither GREENLEAF nor WAMO shall disassemble, decompile or reverse
engineer any of the Games, Interface Software, and any other content
comprising the Encrypted Game Packs.
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c. Reserved Rights. All rights in Encrypted Game Packs, Games, Interface
Software and any other content comprising the Encrypted Game Packs not
expressly granted to GREENLEAF or WAMO are reserved by ACCOLADE. All
rights in the Wrapper Software not expressly granted to ACCOLADE or
WAMO are reserved by GREENLEAF.
4. Delivery and Installation
a. Delivery by ACCOLADE. ACCOLADE shall be responsible for delivering the
Games, the Interface Software, and any other content comprising an
Encrypted Game Pack to GREENLEAF in accordance with the project
schedule set forth in a Specification. All such items shall be
delivered on a separate CD-ROM unless otherwise agreed by the parties.
The parties agree that ACCOLADE shall be entitled to include as part
of an Encrypted Game Pack both Games that ACCOLADE publishes and Games
that are published by companies other than ACCOLADE.
b. Delivery by GREENLEAF. GREENLEAF shall encrypt any Games and any other
content that are to be encrypted and combine them with the Wrapper
Software and Unlocking Software on master compact discs ("Master
Disc") for delivery to ACCOLADE within fourteen (14) days after
ACCOLADE delivers all the content required by such Encrypted Game
Pack. Upon completion of the encryption and delivery of a Master Disc,
GREENLEAF shall provide ACCOLADE with written notice certifying that
the Encrypted Game Pack Master Disc has been encrypted per the
Specification and the requisite Wrapper Software has been produced
("Certificate of Installation"). Upon receipt of the Encrypted Game
Pack Master Disc, ACCOLADE shall integrate the Unlock Software with
the Interface Software, complete the set-up programs and test the
delivered Master Disc to ensure that it meets ACCOLADE's requirements.
If a Master Disc does not meet the requirements, ACCOLADE shall
provide written notice to GREENLEAF, and GREENLEAF shall make any
necessary corrections.
5. Ownership
a. Title to Wrapper Software. The parties agree that GREENLEAF owns all
proprietary rights, including patent, copyright, trade secret,
trademark and other proprietary rights, in and to the Wrapper Software
and any corrections, bug fixes, enhancements, updates or other
modifications, including custom modifications, to the Wrapper
Software, whether made by GREENLEAF or any third party.
b. Title to Encrypted Game Packs and their Individual Components. The
parties agree that, as between the parties, ACCOLADE owns all
proprietary rights, including patent, copyright, trade secret,
trademark and other proprietary rights, in and to Encrypted Game
Packs, and each of the components which comprise the Encrypted Game
Packs, both before and after encryption with the Wrapper Software, and
any connections, bug fixes, enhancements, updates or other
modifications, including custom modifications, to Encrypted Game Pack,
whether made by ACCOLADE or any third party.
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6. Production, Distribution and Promotion
a. Production. During the term of this Agreement, after encryption of the
games and delivery of the Master Disc as called for in Section 4.b
above and the relevant Specification, WAMO shall have the exclusive
right to manufacture Encrypted Game Packs utilizing the Wrapper
Software for ACCOLADE. WAMO agrees to manufacture, package, and
assemble Encrypted Game Packs for ACCOLADE on behalf of its OEM
customers at the lower of: (i) the lowest unit price WAMO offers any
of its other non- affiliated manufacturing customers of similar
quantity and quality for DVD discs only; or (ii) the following
amounts:
Mastering: US$2950.00 per master
DVD-5: US$1.65 per unit
DVD-10: US$2.40 per unit.
WAMO may elect to arrange the manufacture of the Encrypted Game Packs
at a WAMO Affiliate. If such Affiliate is located outside the United
States, WAMO will be responsible for the cost of shipping the
Encrypted Game Packs from such Affiliate to Irvine, California. These
prices include all fees for both manufacturing, packaging (sleeve or
jewel case), and assembly, but do not include the cost of any printed
components or materials, nor the shipping of Encrypted Game Packs from
Irvine, California to the delivery location(s) designated by ACCOLADE.
b. Orders. WAMO agrees to accept purchase orders from ACCOLADE on behalf
of its OEM customers for orders for Encrypted Game Pack units. Such
purchase orders from Accolade will be placed at a minimum quantity of
50,000 units per order, and Accolade shall pay WAMO all amounts due to
WAMO with respect to each order within thirty (30) days of WAMO's
delivery of such units in accordance with Section 6(a) above.
c. Warner Content. If any of ACCOLADE's OEM customers ask ACCOLADE to
place Warner content on the reverse side of an Encrypted Game Pack,
WAMO shall have the option of making such content available and to
replicate such Encrypted Game Pack with Warner content on a DVD-10
disc at the DVD-5 pricing set forth in Section 6(a) above.
d. Press Releases. The parties agree to cooperate with one another in
issuing press releases relating to Encrypted Game Packs. The content
of such press releases shall be subject to the mutual agreement of the
parties.
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e. Selling Encrypted Game Packs. The parties agree that ACCOLADE shall be
solely responsible for marketing and selling Encrypted Game Packs to
its OEM customers; however, GREENLEAF and WAMO agree to provide
reasonable cooperation and assistance to ACCOLADE as requested by
ACCOLADE. WAMO agrees to make reasonable best efforts to incorporate
ACCOLADE's Encrypted Game Packs into its WAMO Worldwide Affiliate
program and that it shall not market or promote to the OEM channel any
other entity's Encrypted Game Packs for a period of one (1) year from
the Effective Date of this Agreement. In no event shall GREENLEAF or
WAMO discuss any pricing or OEM compensation with ACCOLADE's OEM
customers unless specifically authorized by ACCOLADE's Director of
Sales.
7. Unlock Centers
GREENLEAF shall establish unlock centers and be responsible for all
unlocks of Encrypted Game Packs, both in the U.S.A. and in Europe.
GREENLEAF agrees to establish the infrastructure necessary to allow
end-users to unencrypt or unlock Encrypted Game Packs by calling a
toll-free telephone number and speaking with a customer service
representative or by accessing a secure website. GREENLEAF shall
initially provide unlock centers in Austin, Texas, and Dublin,
Ireland. All unlock centers shall be secure, fireproof centers,
providing for limited, recorded access by management designated
persons of GREENLEAF only, on an as needed basis. GREENLEAF shall bear
full responsibility for paying administrative and other compensation
to be paid to the unlock center, including the per unit charge to be
assessed by the unlock center. GREENLEAF agrees that, once any
Encrypted Game Pack has been distributed by ACCOLADE's OEM customers,
it shall continue to administer the unlock centers for a period of two
(2) years after the last shipment of an Encrypted Game Pack by one of
ACCOLADE's OEM customers despite the earlier termination or expiration
of this Agreement. ACCOLADE shall provide GREENLEAF with written
notice of the date of the last such shipment.
8. Demographic Information
The parties understand that demographic information regarding the purchases
of Encrypted Game Packs will be collected at the time of unlock of the
Encrypted Game Packs product, and that this information shall be the sole
property and Confidential Information of ACCOLADE and shall be transferred
to ACCOLADE by GREENLEAF on a regular basis. GREENLEAF agrees that it shall
not copy, reproduce or transfer this information to any other party, nor
keep or use same for its own purposes, unless approved in advance in
writing by ACCOLADE for purposes of carrying out the terms of this
AGREEMENT. ACCOLADE agrees to make such demographic information available
to WAMO at its reasonable request.
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9. Confidential Information
a. Protection of Confidential Information. Each party acknowledges that,
during the term of this Agreement, it will have access to proprietary
or confidential information ("Confidential Information") of the other
party. Each party will use its best efforts to protect the
Confidential Information of the other party in the same manner in
which it protects its own Confidential Information (but in no event
less than reasonable care), and will not use or disclose such
Confidential Information, except to those employees or agents with an
absolute need to know such information provided that those employees
and agents shall also be bound by the term and conditions of this
Agreement.
b. Exceptions to Confidential Treatment. The obligations of
confidentiality and non-use required by Section 9.a will not apply to
any confidential or proprietary information of one party which:
(a) was known by the receiving party prior to the date of this
Agreement and not obtained or derived, directly or indirectly,
from the disclosing party or its affiliates; or if so obtained or
derived, was lawfully obtained or derived and is not held subject
to any confidentiality or non-use obligations;
(b) is or becomes public or available to the general public or the
computer software industry other than through any act or default
of the receiving party;
(c) is obtained or derived prior or subsequent to the date of this
Agreement from a third party which, to the best knowledge of the
party acquiring such information, is lawfully in possession of
such information and does not hold such information subject to
any confidentiality or non-use obligations;
(d) is independently developed by the receiving party without use of
the disclosing party's Confidential Information; or
(e) is required to be disclosed by the receiving party pursuant to
applicable law or under a government or court order, relating, in
whole or in part, to the Title or any other subject matter of
this Agreement; provided, however, that (i) the obligations of
confidentiality and non-use will continue to the fullest extent
not in conflict with such law or order, and (ii) if and when a
party is required to disclose such confidential or proprietary
information pursuant to any such law or order, such party will
use its reasonable efforts to obtain a protective order or take
such other actions as will prevent or limit, to the fullest
extent possible, public access to, or disclosure of, such
Confidential Information.
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c. Continuation of Obligations. The parties' obligations under this
Section 9 will extend for three (3) years following the expiration or
termination of this Agreement.
10. License and Unlock Fees
a. General. In consideration for the license granted by GREENLEAF for the
use by ACCOLADE of the Wrapper Software, GREENLEAF is entitled to the
collection of a license fee. However, in consideration of this entire
Agreement, GREENLEAF waives the collection of any and all upfront
license fees and agrees to be paid based upon the unlocks of any
Encrypted Game Packs.
b. The parties agree to share in the Net Revenues resulting from
end-users' purchases according to the following schedule. Net Revenues
shall be defined as gross amounts paid by end users minus: 1) any
compensation due ACCOLADE's OEM customer; 2) actual returns of
Encrypted Game Packs governed by this Agreement; 3) bank fees for the
Merchant Account contemplated by this Agreement; and 4) credit card
fees (inclusive of chargebacks) for end users' transactions. The
revenue-sharing schedule is as follows:
ACCOLADE: 60%
GREENLEAF: 33%, or US$2.40, whichever is higher.
WAMO: 7%
c. Payment Terms. All revenues from the unlocks of Encrypted Game Packs
shall be immediately credited to a Merchant Account established by
ACCOLADE. Within seven (7) business days of the close of each month,
ACCOLADE will issue a check to WAMO and GREENLEAF based on the revenue
breakdown shown above. At the end of each calendar quarter, ACCOLADE
shall distribute any funds remaining in the returns reserve to the
parties in accordance with the professional shares.
d. Taxes. ACCOLADE shall, in addition to the other amounts payable under
this Agreement, pay all use, value added or other taxes, federal,
state or otherwise, however designated, which are levied or imposed by
reason of the transactions contemplated by this Agreement, other than
sales taxes or taxes on the other parties' income.
e. Sales Taxes. In the event any sales taxes are due on any unlock of
Encrypted Game Packs sold to an individual customer, such tax shall be
collected at the time of the unlock, credited to the Merchant Account
and designated as sales tax, then transferred to ACCOLADE for payment
and reporting to the proper governmental authorities.
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11. GREENLEAF's Representations and Warranties
a. Scope of Warranty. GREENLEAF warrants to ACCOLADE that during the term
of this Agreement the Wrapper Software will act in accordance with its
specifications and documentation and that each Master Disc shall be
free of defects in materials and workmanship. GREENLEAF further
warrants and represents that, based on its conducting diligent test
procedures, the Wrapper Software is sufficient to prevent unauthorized
users from accessing the games; provided, however, that due to the
nature of hacker operations, GREENLEAF cannot guarantee that the
Wrapper Software is absolutely immune from unauthorized access.
GREENLEAF also warrants that neither the Wrapper Software nor the
method of distributing Encrypted Game Packs to ACCOLADE's OEM
customers contemplated by this agreement infringes any trade secret,
patent, mask work right, copyright, moral right or contract right of
any third party. Finally, GREENLEAF warrants that it has the power and
authority to enter into this Agreement and to fully perform its
obligations hereunder; that this Agreement has been executed by its
duly authorized representative; and that it is under no contractual or
other legal obligation which would interfere in any way with the full,
prompt, and complete performance of its obligations pursuant to this
Agreement.
b. EXCEPT FOR THOSE WARRANTIES GIVEN IN SECTION 11.A, GREENLEAF DISCLAIMS
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ARISING OUT OF OR RELATING
TO THE WRAPPER SOFTWARE OR ANY USE THEREOF, INCLUDING (WITHOUT
LIMITATION) ANY WARRANTY WHATSOEVER AS THE FITNESS FOR A PARTICULAR
PURPOSE OR THE MERCHANTABILITY OF THE WRAPPER SOFTWARE.
12. ACCOLADE's Representations and Warranties.
a. Scope of Warrant. ACCOLADE represents and warrants that it has the
power and authority to enter into this Agreement and to fully perform
its obligations hereunder; that this Agreement has been executed by
its duly authorized representative; and that it is under no
contractual or other legal obligation which would interfere in any way
with the full, prompt, and complete performance of its obligations
pursuant to this Agreement. ACCOLADE further warrants that the Games,
the Interface Software, and any other content comprising the Encrypted
Game Packs shall not violate the intellectual property rights of any
third party.
b. EXCEPT FOR THOSE WARRANTIES GIVEN IN SECTION 12.A, ACCOLADE DISCLAIMS
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ARISING OUT OF OR RELATING
TO THE GAMES OR ENCRYPTED GAME PACK OR ANY USE THEREOF, INCLUDING
(WITHOUT LIMITATION) ANY WARRANTY WHATSOEVER AS THE FITNESS FOR A
PARTICULAR PURPOSE OR THE MERCHANTABILITY OF THE GAMES OR ENCRYPTED
GAME PACK.
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13. WAMO's Representations and Warranties.
a. Scope of Warranty. WAMO represents and warrants that it has the power
and authority to enter into this Agreement and to fully perform its
obligations hereunder; that this Agreement has been executed by its
duly authorized representative; and that it is under no contractual or
other legal obligation which would interfere in any way with the full,
prompt, and complete performance of its obligations pursuant to this
Agreement; and that the manufacturing services contemplated by this
agreement will be performed in a workmanlike manner and in accordance
with the generally prevailing standards in the industry. WAMO also
warrants that its participation in this Agreement does not infringe
any trade secret, patent, mask work right, copyright, moral right or
contract right of any third party.
b. EXCEPT FOR THOSE WARRANTIES GIVEN IN SECTION 13.A, WAMO DISCLAIMS ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING (WITHOUT LIMITATION)
ANY WARRANTY WHATSOEVER AS THE FITNESS FOR A PARTICULAR PURPOSE OR
MERCHANTABILITY.
14. Limitation of Liability
EXCEPT FOR A WILFULL OR INTENTIONAL BREACH OF SECTIONS 3(E) OR 9, OR ANY
PARTY'S OBLIGATIONS UNDER SECTION 15, NO PARTY SHALL BE LIABLE TO ANY OTHER
PARTY FOR INDIRECT, SPECIAL INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), HOWEVER CAUSED OR ON ANY THEORY OF LIABILITY,
WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE. THIS LIMITATION IS INTENDED TO LIMIT THE LIABILITY OF THE PARTIES
AND SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.
15. Indemnification
a. Intellectual Property Rights Indemnity. GREENLEAF shall indemnify and
hold harmless ACCOLADE and/or WAMO from and against any claims,
including reasonable legal fees and expenses, that the Wrapper
Software infringes any third party's intellectual property right.
ACCOLADE and/or WAMO agrees to notify GREENLEAF of any such claim
promptly in writing and to allow GREENLEAF to control the proceedings.
ACCOLADE and/or WAMO agrees to cooperate fully with GREENLEAF during
such proceedings. GREENLEAF shall defend and settle at its sole
expense all proceedings arising out of the foregoing. In the event of
such infringement, GREENLEAF may replace, in whole or in part, the
Wrapper Software with a substantially compatible and functionally
equivalent product or modify the Wrapper Software to avoid the
infringement.
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b. General Indemnity.
i. Each party ("Indemnifying Party") agrees to defend, indemnify and
hold harmless any other party, its officers, directors, employees,
subcontractors, and agents ("Indemnified Parties") against any claims,
actions or demands, alleging facts which would constitute a breach of
the Indemnify Party's representations and warranties provided in this
agreement or of the Indemnifying Party's performance obligations under
this Agreement.
ii. In any case in which indemnification is sought, the Indemnified
Party agrees to (1) give prompt written notice to Indemnifying Party
of any such claim, action or demand, (2) allow Indemnifying Party to
control the defense and related settlement negotiations, and (3)
assist in the defense so long as Indemnifying Party reimburses the
Indemnified Party for its reasonable expenses. The Indemnified Party
will invoice Indemnifying Party for such expenses and time on a
calendar quarter basis and Indemnifying Party shall pay such
reimbursements within thirty (30) days after the invoice from the
Indemnified Party. The law firm used by Indemnifying Party to defend
the Indemnified Party shall be subject to the Indemnified Party's
reasonable approval. If the Indemnifying Party is unable to comply
with the indemnity obligation set forth above, the Indemnified Party
may defend such suit itself for all Indemnified Parties with counsel
of its choosing and may invoice the Indemnifying Party for all
expenses incurred in defending and/or settling any claim and/or
satisfying any resulting judgment. Any settlement shall be subject to
the Indemnified Party's prior written approval unless the Indemnifying
Party has obtained an unconditional release of all of the Indemnified
Parties in the proceeding.
16. Term and Termination
a. Effective Date. This Agreement and the license granted hereunder shall
take effect upon the date that the last party executes this Agreement,
and be effective for a term of three (3) years, unless sooner
terminated or extended by mutual agreement of the parties.
b. Termination. Each party shall have the right to terminate this
Agreement and the license granted herein upon the occurrence of the
following events (an "Event of Default"):
i. In the event the other party violates any provision of this
Agreement; or
(ii) In the event the other party (A) terminates or suspends its
business, (B) becomes subject to any bankruptcy or insolvency
proceeding under Federal or state statute, (C) becomes insolvent or
subject to direct control by a trustee, receiver or similar authority,
or (D) has wound up or liquidated, voluntarily or otherwise.
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c. Notice and Opportunity to Cure. Upon the occurrence of an Event of
Default, a party shall deliver to the defaulting party a Notice of
Intent to Terminate that identifies in detail the Event of Default. If
the Event of Default remains uncured for thirty (30) days, the party
may terminate this Agreement and the license granted herein by
delivering to the defaulting party a Notice of Termination that
identifies the effective date of the termination, which date shall not
be less than thirty (30) days after the date of delivery of the Notice
of Intent to Terminate.
d. The following provisions shall survive termination or the earlier
expiration of this Agreement: 5, 7, 8, 9, 10, 11, 12, 13, 16(d), 19,
and 20. The license granted in Section 3(a) shall also survive to the
extent necessary to allow ACCOLADE's OEM customers to distribute
Encrypted Game Packs manufactured before the expiration or termination
of this Agreement and to allow end-users to unlock Encrypted Game
Packs distributed before the expiration or termination of this
Agreement.
17. Assignment
Except as otherwise provided herein, no party shall assign or otherwise
transfer this Agreement to any third party without the prior written
consent of the other parties, except that any assignment incident to the
sale of substantially all of a party's assets, or pursuant to any merger,
consolidation or reorganization, shall not be considered a prohibited
assignment for purposes of this Section.
18. Force Majeure
Neither party shall be in default or otherwise liable for any delay in or
failure of its performance under this Agreement if such delay or failure
arises by any reason beyond its reasonable control, including any act of
God, any acts of the common enemy, the elements, earthquakes, floods,
fires, epidemics, riots, failures or delay in transportation or
communications, or any act or failure to act by the other party or such
other party's employees, agents or contractors; provided, however, that
lack of funds shall not be deemed to be a reason beyond a party's
reasonable control. The parties will promptly inform and consult with each
other as to any of the above causes which in their judgment may or could be
the cause of a delay in the performance of this Agreement.
19. Notices
All notices under this Agreement are to be delivered by (i) depositing the
notice in the mail, using registered mail, return receipt requested,
addressed to the address below or to any other address as the party may
designate by providing notice, (ii) telecopying the notice by using the
telecopier number set forth below or any other telecopier as the party may
designate by providing notice, (iii) overnight delivery service addressed
to the address below or to any other address as the party may designate by
providing notice, or (iv) hand delivery to the individual designated below
or to any other individual as the party may designate by providing notice.
The notice shall be deemed delivered (i) if by registered mail, four (4)
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days after the notice's deposit in the mail, (ii) if by telecopy, on the
date the notice is delivered, (iii) if by overnight delivery service, on
the day of delivery, and (iv) if by hand delivery, on the date of hand
delivery.
GREENLEAF Greenleaf Technologies Corporation
8834 Capital of Texas Highway North
Suite 150
Austin, TX 78759
Attention: Christopher Webster
Telecopy No.: 512-349-9780
ACCOLADE: Accolade Inc.
5300 Stevens Creek Blvd., Suite 500
San Jose, CA 95129
Attention: Director, Operations & OEM Sales
Telecopy No.: 408-246-1282
With a copy sent to the Attention of the Legal Dep't
WAMO: WEA Inc.
4000 Warner Blvd.
Burbank, CA 91522
Attention: Brian Keys
Telepcopy No.:
20. General Provisions
a. Complete Agreement. The parties agree that this Agreement is the
complete and exclusive statement of the agreement between the parties,
which supersedes and merges all prior proposals, understandings and
all other agreements, oral or written, between the parties relating to
this Agreement. Notwithstanding the foregoing, the parties agree that
that certain MUTUAL NON-DISCLOSURE AGREEMENT executed by the parties
and dated October 7, 1998, a copy of which is appended hereto, is
hereby renewed and extended to be effective during the entire term of
this Agreement.
b. Year 2000 Compatibility. GREENLEAF warrants and agrees that the
Wrapper Software and all systems utilized by the Unlocking Center
shall be Year 2000 compatible.
c. Amendment. This Agreement may not be modified, altered or amended
except by written instrument duly executed by both parties.
d. Waiver. The waiver or failure of either party to exercise in any
respect any right provided for in this Agreement shall not be deemed a
waiver of any further right under this Agreement.
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e. Severability. If any provision of this Agreement is invalid, illegal
or unenforceable under any applicable statute or rule of law, it is to
that extent to be deemed omitted. The remainder of the Agreement shall
be valid and enforceable to the maximum extent possible.
f. Governing Law. This Agreement and performance hereunder shall be
governed by the laws of the State of California, without reference to
conflict of laws provisions.
g. Read and Understood. Each party acknowledges that it has read and
understands this Agreement and agrees to be bound by its terms.
AGREED:
ACCOLADE, Inc. GREENLEAF TECHNOLOGIES CORPORATION
By: ____________________________ By: ____________________________
Signature Signature
________________________________ ________________________________
Name Name
________________________________ ________________________________
Title Title
________________________________ ________________________________
Date Date
WAMO
By: ____________________________
Signature
________________________________
Name
________________________________
Title
________________________________
Date
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