U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
ENTRADA SOFTWARE INCORPORATED
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Commission File Number: ____________
Nevada 86-0968364
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7825 East Gelding Drive, Suite 102
Scottsdale, Arizona 85260
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (480) 607-3535
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of Class)
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PART I
Except for historical information contained herein, this Form 10-SB
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "SECURITIES ACT") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and Entrada
Software Incorporated ("ENTRADA") intends that such forward-looking statements
be subject to the safe harbors created by these statutes to the extent they
apply.
Wherever possible, we have identified these forward-looking statements
by words such as "ANTICIPATES," "BELIEVES," "ESTIMATES," "EXPECTS," "INTENDS"
and similar expressions. Forward-looking statements involve risks and
uncertainties and include, but are not limited to, statements of future events
and Entrada's plans and expectations. Our actual results may differ materially
from such statements. Factors that may cause or contribute to such differences
include, but are not limited to, those discussed in "ITEM 1. DESCRIPTION OF
BUSINESS - FACTORS AFFECTING FUTURE PERFORMANCE" and "ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," as
well as those discussed elsewhere in this Form 10-SB and in the exhibits
attached or incorporated by reference.
Although we believe that the assumptions underlying the forward-looking
statements herein are reasonable, any of the assumptions could prove inaccurate.
There can be no assurance that the results contemplated in such forward-looking
statements will be realized. In addition, as disclosed under "ITEM 1.
DESCRIPTION OF BUSINESS - FACTORS AFFECTING FUTURE PERFORMANCE," the business
and operations of Entrada are subject to substantial risks which increase the
uncertainties inherent in the forward-looking statements included in this Form
10-SB. The inclusion of such forward-looking information should not be regarded
as a representation by Entrada or any other person that the future events, plans
or expectations contemplated by Entrada will be achieved.
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Entrada has developed and recently commenced active marketing of the
Kinnosa suite of "product content" software. Kinnosa is an enterprise-class
software product specifically designed for management of the manufacturing
process. Kinnosa is targeted to large manufacturing companies and is designed to
be compatible with legacy software and hardware. We believe Kinnosa to be a new
category of software in that it is "product-centric," meaning that it focuses on
the product being manufactured instead of the manufacturing business segments
such as procurement, accounting or engineering. Kinnosa can deliver complete
product content information to manufacturers and their suppliers and customers.
This information can be delivered by Intranet or Internet which enables Kinnosa
users to continuously obtain control and analysis information internally and
from their customers and suppliers. This information is globally integrated from
engineering, manufacturing and customer data systems developed during the
history of a Kinnosa managed product.
Kinnosa has been successfully deployed at Motorola for two years.
Kinnosa enabled Motorola's Satellite Communications Group to successfully track
and manage the configuration and status of the more than 80,000 parts in each of
the sixty-six Iridium(TM) communications satellites.
We believe Kinnosa will enable manufacturers to shorten product
development times, introduce and manage product changes more effectively,
integrate product information with suppliers, and configure products to customer
needs. Kinnosa accomplishes these advantages through its product-centric view
which tracks the manufactured product's complete life history. We believe this
view is unprecedented and is not available through any other existing packaged
software application. With use of the Internet and portal technology, Kinnosa
can deliver critical and timely information directly to company users, partners,
suppliers and even to customers.
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Our product provides analyses and permits decisions to be made
throughout the product development process - from supplier to customer. This
enhances repeatable engineering designs, product manufacture-ability and product
quality, resulting in dramatically reducing the manufacturing time cycle.
Kinnosa solutions enhance a company's existing information systems, creating
simplicity and predictability with highly complex manufacturing environments,
filling information voids and linking businesses and customers together.
An important part of our growth strategy is to become an application
service provider. We can offer all of Kinnosa's capabilities, on a per user
basis, through the Internet. We believe this strategy will become an important
revenue source as manufacturers install Kinnosa, and then require their
suppliers to have the same capabilities.
We believe the Kinnosa suite to be highly functional and that its
acceptance will enable us to meet our business objectives. However, Kinnosa is a
relatively new product that has only been deployed in one application setting,
the manufacture of the Iridium(TM) satellite. Entrada is an early stage company
with no meaningful operating history. Our ability to raise additional capital
and to successfully market and support our Kinnosa product will be critical to
our success. See the sections caption "FACTORS AFFECTING FUTURE PERFORMANCE" and
"ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" for a discussion of capital constraints and other risks
of our business.
Entrada was incorporated in Nevada in August 1999 as a wholly-owned
subsidiary of The Rotherwood Group, Inc. ("TRG"). TRG had originally been
incorporated in June 1990 in Arizona Benchmark Associates, Inc. Benchmark
Associates was initially wholly-owned subsidiary of ShareData, as Inc. and
engaged in the software development and distribution business. ShareData filed
for protection under Chapter 11 of the Bankruptcy Code in December, 1993.
ShareData's plan of reorganization was confirmed in December 1995 which provided
for the reorganization of ShareData as Aztore Holdings, Inc. As part of the plan
of reorganization, certain of the shares and warrants of Benchmark Associates
were distributed to the creditors of ShareData. Benchmark changed its name to
the Rotherwood Group, Inc. in January 1998. TRG had essentially no operations
since 1995. Effective September 1, 1999, TRG acquired all the outstanding stock
of CIMsoft, Inc., which was incorporated in Delaware in 1998. CIMsoft commenced
operations in May 1999. Also effective September 1, 1999, TRG was merged into
Entrada.
with you.
THE MARKET
Manufacturing is a critical component of the world economy and has
increasingly become more information intensive and technology oriented in recent
times. According to a September 1997 report by International Data Corp. ("IDC")
the manufacturing sector accounts for 26% of the world's software applications
market, which would result in over $11 billion of software sales annually in the
United States alone. In a January 1998 report IDC predicted this market to
double by 2001.
Of the two component sectors in manufacturing - discrete and process -
we will target our sales effects to the discrete manufacturing market. Discrete
manufacturing is generally the production of products (such as automobiles,
airplanes and home appliances). The discrete manufacturing software market is
presently a $6.9 billion annual market in the United States according to the
U.S. Department of Commerce 1998 U.S. Industry and Trade Outlook Forecast. The
segments of this market we are initially targeting as potential customers are
the commercial aerospace, transportation and high-technology manufacturing
segments. Within these market segments we have identified some 3,350 companies
in the United States that meet our criteria for potential customers.
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THE KINNOSA PRODUCT SUITE
Kinnosa is a powerful enterprise-class software application that
continuously and directly delivers control and analysis information to
manufacturers and their customers and suppliers. This information is integrated
from all engineering, manufacturing, and customer data systems developed during
the complete history of a product. At the center of Kinnosa is a product
information depository, the contents of which carry the complete description of
a product, including early concept studies, design and engineering data,
detailed manufacturing and assembly history, customer service, maintenance and
support information. This product content data is stored in a universal format
that facilitates quick integration with the source systems, regardless of
location. This depository is bi-directional, in that it can receive and
distribute product information with these other systems.
Kinnosa creates a product-centric information view of all product data.
This means that all data related to a specific product, from conception through
the manufacturing process and to customer use, is available from one source. We
believe this view is unprecedented, and is not available through any existing
packaged applications, which deal primarily with processes or document
management.
Kinnosa is also an Internet-enabled software application. Its
application logic is modular, written in Java and delivered through portal
technology tailored specifically for integration with both customers and
suppliers through the Internet. Its application modules provide analysis,
reporting and a current display of product definitions, configuration history,
planned changes, obsolete inventory, product upgrades, spare parts requirements
and product traceability. Portal technology permits the proactive delivery of
targeted and complete product content - including structured database
information, web pages, documents, notes and other pertinent information -
seamlessly through a standard web browser.
Kinnosa's modular architecture contains integration components that
connect industry-standard design, engineering, manufacturing, distribution and
support systems. Kinnosa is built on an open software framework that assembles
product data from systems worldwide in order to deliver complete and targeted
product information. Kinnosa is presently available with off-the-shelf
connectivity to selected Product Data Management, Shop Floor and other
information systems. Integration with leading Enterprise Resource Management,
Customer Relationship Management and other systems is planned for subsequent
releases.
MARKET POSITIONING AND STRATEGY
Our strategy is based on the assumption that for manufacturers to
remain competitive, and, in some cases to survive in the global economy, their
products must get to market faster. This requires increased agility that enables
significantly shorter design and development times, in conjunction with higher
product quality and lower costs. Manufacturers invest heavily in enterprise
applications to address these needs. We believe that Kinnosa fills critical
needs not addressed by other software applications.
Our products are in the emerging Product Content Management market. The
Kinnosa product suite is a solution for manufacturers who want to improve their
ability to manage product content information across the product life cycle -
from conception to customer use. Kinnosa is targeted to manufacturers that need
to track product designs, configurations, development status and engineering
changes, and perform analyses on the complete life history of their products.
In addition, Kinnosa is an e-business application suite, providing
information, through portal technology and the Internet, based on data
integrated from manufacturers, suppliers, and customers.
Kinnosa is a business solution. The target customers are product
development or operations managers in large companies, and operations executives
in smaller companies. Because Kinnosa provides value across the entire product
life cycle, we believe that it will appeal to any functional point in the
business, including marketing, engineering, procurement, manufacturing and
support.
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Initial penetration into the targeted market will consist of a
combination of strategic partnerships and direct sales. The main marketing
strategies will be personal introductions, market awareness, references,
conferences and symposia, and direct mail. In cases of strategic importance,
special promotions and offers may be used to gain entry into a targeted account.
We will conduct demonstrations and seminars to broaden product interest and
maximize account coverage.
SERVICES DESCRIPTION
In order to provide complete and comprehensive solutions, we intend to
compliment our products with a complete suite of professional education,
training, implementation, and support services. These services include
product-specific training, installations, custom development and integration,
maintenance and product support.
In addition, we will offer complete Kinnosa solutions as a service.
Through our applications service provider model, we will provide total product
capabilities on a per-seat basis. We believe that this turnkey service will
allow us to introduce Kinnosa to most potential customers, regardless of size,
budget or technology capabilities.
BUSINESS STRATEGIES
We intend to combine the existing product suite, Kinnosa, with solution
sales to high technology, transportation and commercial aerospace manufacturers.
The Kinnosa products are ready for market, and sales efforts commenced in the
fourth quarter of 1999. Direct and indirect sales and services, in both domestic
and international markets, are expected to comprise most of our revenues. Also,
as larger companies already selling in this market realize the benefits of our
products, we expect to receive, and will evaluate, partnership opportunities.
We will operate as both a software and services company. At first, we
intend to sell solutions directly to customers in the advanced technology
manufacturing market segment. We will also attempt to develop partner
relationships with consulting firms specializing in providing software and
support solutions for their manufacturing customers. We also expect to sell our
products and services through value-added resellers, also known as VARs.
We expect to offer our applications, and deliver Kinnosa functionality,
to customers as an application service provider. We believe that this is an
important way for manufacturers to obtain an integration and distribution of
product history information with suppliers and customers, who can access Kinnosa
seamlessly through Internet web portals. We plan to offer this service for a
monthly fee per user.
PRICING STRATEGY. We price Kinnosa products according to the
capabilities the customer needs and the number of users accessing the system.
The software modules are separated into three groups: the Kinnosa core,
application modules, and connectivity to data sources. User licensing is tiered
into three classes: workgroup-class (up to 30 users), division-class (up to 100
users) and enterprise-class (up to 400 users). Special bundling and pricing will
be available for some customers for volume purchase agreements in excess of 400
users. Early payment terms, leasing and other financing programs will be offered
to customers as well. In addition, per-user licensing is available through our
application service provider program.
Kinnosa is a fully scalable solution. A customer may begin at a
workgroup level and scale up to a division or even enterprise level over time.
The Kinnosa product suite will grow as the customer's requirements grow.
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We price our professional services on an hourly basis. These services
are tiered by experience and capability into two levels - consultant and senior
consultant. Education and training services are priced based on standard course
curricula.
Our sales approach will place professional services consultants at a
customer's site early in the process to facilitate the customer's shift to the
product-centric view of their business. This strategy will also enable us to
effectively scope and position the implementation and integration of the Kinnosa
product.
GROWTH STRATEGY. Kinnosa sales are expected to commence with larger
customer accounts, usually at a workgroup level. We believe that reference sales
between divisions and departments of an enterprise will increase sales to the
division and enterprise levels. Strategic alliances with consultants and VARs
should add license revenues.
In our second year of operations, we expect to have international
marketing efforts in support of our customers' divisions and affiliates.
Consideration will also be given to growth through the acquisition of, or
affiliation with, competitors or companies that have related products.
STRATEGIC ALLIANCES. The initial approach for taking Kinnosa to market
involves a two-prong effort using direct sales and system integrators. We
believe that the multi-vendor partnerships that exist in the industry today have
failed to resolve the dilemma of users when choosing to buy the best product
available, or dealing with a single vendor. Forrester Research observes that a
new form of systems integrator, called portfolio assembler, is emerging to sell,
implement and support pre-integrated sets of multi-vendor applications. We will
pursue alliances with systems integrators who are firmly committed in this
direction.
PROPRIETARY POSITION
We rely upon copyright, trademark and contractual law to continue to
protect our ownership and proprietary rights to our products. Copyright
protection is in place, and patent applications are being considered, and will
be filed when appropriate. We enter into confidentiality and non-disclosure
agreements with our employees, consultants and others. We also control access to
our confidential information.
PRODUCT DEVELOPMENT
Kinnosa is a functional product suite today operating in a mission
critical product application at a customer's manufacturing facility since 1998.
The current product as installed has full functionality and is ready to be
delivered to additional customers in our targeted markets.
Our near-term product development plan is to incorporate portal
technology into the applications architecture and convert all residual X-windows
and Java interfaces to operate in the portal environment. We expect to be
continuously upgrading and expanding our products, with additional components
and connectivity packages ready for release within one year.
New technologies and initiatives are expected to be evaluated to
determine suitability for use with Kinnosa. These technologies may provide
solutions that will be vital to maintaining market leadership and meeting
customer demands.
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COMPETITION
As an enabling enterprise application, for an entire business
operation, Kinnosa crosses several vertical software markets. We believe that
our products are complementary to each type of potential competitor. However,
due to the infancy of the product content management market, potential customers
will perceive that our products compete in some way with each type of
information technology provider listed below. Manufacturing software vendors
have traditionally created product functionally around business processes like
engineering, manufacturing and purchasing. As a result of this positioning,
competition can come from several other products, depending on the customer.
PRODUCT DATA MANAGEMENT VENDORS. Our most significant competition will
come from the Product Data Management (PDM) vendors. Their products are
essentially document management and workflow applications which they market as
complete PDM solutions. We believe these vendors have difficulty handling
complete product life cycle data, and utilize a document-centric approach to
managing product change. We expect to successfully compete with PDM vendors in
areas of product data management by offering superior functionality.
ENTERPRISE DATA WAREHOUSING VENDORS. Some competition will also come
from data warehouse applications vendors. Many of these vendors have announced
plans to deliver data warehouse packaged solutions for their enterprise
software. These companies could be formidable competitors, but are in the early
stages of bringing these products to market. We expect to be able to compete
successfully with these companies by enriching data with manufacturing business
content, and by making relevant information available to all users through
portals.
INTERNET SUPPLY CHAIN VENDORS. Competition will also come from the
Internet Supply Chain Management (SCM) vendors. They provide an integrated
approach for planning and controlling the flow of products and information
through a distribution channel from suppliers to end-users. Products from these
vendors are new to the market. We do not intend to compete directly with the SCM
vendors, but to become complimentary. We believe our product-centric data store
and connectivity capabilities can provide useful information and connectivity
for these systems.
EMPLOYEES
As of November 30, 1999, we had eight full-time employees, including
three in administration, two in sales, one in marketing and two in engineering.
We are currently recruiting additional engineering, support and sales personnel.
FACTORS AFFECTING FUTURE PERFORMANCE
WE HAVE NO RELEVANT OPERATING HISTORY MAKING IT DIFFICULT TO EVALUATE
OUR BUSINESS AND THE INVESTMENT. We commenced our current operations through the
acquisition CIMsoft in September 1999. CIMsoft has been in business only since
May, 1999. Our predecessor, TRG, had no significant operations since 1995.
CIMsoft had a loss of $23,047 for the fiscal year ended June 30, 1999, which
included only two months of operations. Future losses are likely to occur. We
can give no assurances that our business plan will be successful or that we will
achieve or be able to maintain profitability.
WE ARE DEPENDENT UPON OUR ABILITY TO RAISE CAPITAL. We have received
limited financing to date and current revenues will be insufficient to fund the
increase in the our operations necessary for us to start selling, installing and
servicing our primary product line. While we are actively seeking additional
investment capital, we can not assure you that we will be successful in
attracting additional capital at favorable rates, or at all, or be able to
generate sufficient revenues from our operations to continue our business. If we
are unable to raise additional capital, our operations will be negatively
impacted and may cease. See "ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS PLAN OF
OPERATION - Liquidity and Capital Reserves" and "Plan of Operation."
WE EXPECT RAPID GROWTH, RESULTING IN SIGNIFICANT MANAGEMENT CHALLENGES.
We anticipate very rapid growth in our operations over the next twelve months.
This growth will place significant pressure on limited resources and
infrastructure. We cannot assure you that we will be able to effectively manage
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this growth. Although we believe we will have the management and resources to
achieve our business model, our success will depend upon our ability to
effectively manage our growth. We must implement and improve our operational,
administrative and financial systems and controls, and train and manage our
employees. If we are unable to manage our growth effectively, our business
reputation, results of operations and financial condition could be harmed.
OUR LIMITED OPERATING HISTORY MAKES FORECASTING DIFFICULT. We
essentially restarted our operations through the acquisition of CIMsoft in
September 1999. We will encounter numerous risks and difficulties faced by early
stage companies in the rapidly developing enterprise software markets, and may
not be successful in addressing these risks. We can not assure you that our
business strategy will be successful. As a result of our limited operating
history, it is difficult to accurately forecast future operations, and plan
operating expenses. As a result, we may be unable to timely adjust spending to
compensate for any unexpected revenue shortfall. This inability could cause
profitability to be adversely affected.
OUR QUARTERLY RESULTS ARE LIKELY TO FLUCTUATE. As a response to our
competitors, we may make pricing, service, technology or marketing decisions, or
business and technology acquisitions that could cause our quarterly results to
fluctuate. We may also experience seasonal changes in our business, resulting in
less revenue during certain periods of the year. Our operating results may fall
below the expectations of securities analysts and investors in any future
quarter. In this event, the trading price of our common stock, if the stock is
traded, will likely be materially and adversely affected.
WE ARE IN A HIGHLY COMPETITIVE BUSINESS. Within our identified market
space are large, well-established and well-known companies that have
substantially greater financial, technological, promotional and other resources
than we have. We can not assure you that we will be able to compete effectively
in this marketplace. See "ITEM 1. DESCRIPTION OF THE BUSINESS-Competition."
INTELLECTUAL PROPERTY CLAIMS COULD BE EXPENSIVE AND RESULT IN LOSS OF
RIGHTS. Our property rights to our software products are our primary asset. We
plan to protect and enforce our ownership and proprietary rights to our products
through copyright, trademark, and trade secret laws, as well as confidentiality
and non-disclosure agreements and licensing/usage contracts with our customers
and employees. However, these protections may not prevent competitors from
developing similar software that may have more customers acceptance than our
software. While we do not believe that our software products infringe on the
intellectual property rights of third parties, infringement claims may be made.
We can not assure you that we will have sufficient resources to sustain or
defend lengthy legal actions regarding our intellectual property.
WE EXPECT TO RELY UPON A LIMITED NUMBER OF CUSTOMERS AND THE LOSS OF A
MAJOR CUSTOMER COULD ADVERSELY AFFECT REVENUE. Our business model for the next
several years is based on a relatively small number of sales to a few large
customers. If any one sale does not occur, or if sales to any one customer are
less than expected, our expected operations will be materially affected, if
alternative sources of revenue are not found
WE ARE DEPENDENT UPON CUSTOMER ACCEPTANCE OF OUR PRODUCTS. We have
limited sales of our products to date, and are entering a market characterized
by numerous competitive products. Our ability to meet our business plan and
projections is dependent on our ability to convince prospective customers that
our products are superior to competing products and that we can successfully
deliver and service our products. Our ability to successfully implement our
business plan is also dependent on meeting our expected sales cycle. If our
sales cycle is longer than expected, this will have an adverse effect upon our
projected cash flow and operations.
OUR MARKET IS SUBJECT TO RAPID CHANGES AND NEW PRODUCTS. The computer
software industry is characterized by rapid change, frequent new product
introductions, changing customer demands, evolving standards, and many other
uncontrollable and unforeseeable trends and changes. Our future success will
greatly depend upon our ability to timely and effectively address changes
affecting our industry. We cannot assure you that we will do so, and failure to
effectively respond to these changes could materially and adversely effect our
operations and profitability.
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THE LOSS OF SERVICES OF ONE OR MORE OF OUR KEY PERSONNEL COULD HARM OUR
OPERATIONS. While we cannot assure you that our current management resources
will enable us to succeed as planned, a loss of one or more of our current
officers or key employees could severely and negatively impact our operations.
Future success depends on the ability to attract, retain and motivate highly
skilled employees. Competition for employees in our industry is intense. We may
be unable to retain key employees, or to attract and keep additional highly
qualified employees in the future.
EXISTING MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER ENTRADA. A small
number of stockholders, who comprise our executive management, controls Entrada.
This management, when acting together, can elect or otherwise designate all
members of our Board of Directors. This control by management is expected to
continue into the future.
WE MAY BE ADVERSELY AFFECTED IF OUR PRODUCTS, SOFTWARE AND TECHNOLOGY
ARE NOT YEAR 2000 COMPLIANT. While the Kinnosa product suite has been engineered
to be Year 2000 compliant, products from other software vendors are used in a
typical Kinnosa installation. While these other vendors have told us that their
software is Year 2000 compliant, we cannot be sure that it is. Therefore, we
will continue to monitor this software for compliance. We can not assure you
that all non-complying software will be identified and upgraded. Also, customers
and suppliers may be adversely affected by their own Year 2000 issues, which may
indirectly affect our business.
OUR STOCK IS NOT YET TRADED AND COULD BE SUBJECT TO EXTREME VOLATILITY.
While a potential market maker has applied to the NASD to establish a market in
our stock, our stock is not yet traded on any established market or exchange,
and we can give no assurances that it ever will be traded. If an active market
in our common stock does not develop or continue, holders of our common stock
may be unable to readily liquidate their investment. If a market does develop,
it is anticipated that it will initially be in the over-the-counter market that
is characterized by low volume trading, high volatility and large spreads
between bid and ask prices. A significant amount of common stock coming on the
market at any one time could cause the stock to decline in price. If a market is
established, it is likely to be highly volatile.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
BACKGROUND
Terry L. Simpson, one of our company's founders and a major
shareholder, began working on the Kinnosa software product, then known as
CIMbase, in 1990. Between 1993 and 1996, he completed development of Kinnosa and
installed the product in several locations as beta sites. In 1996, he joined
Sybase, Inc. in order to sell the Kinnosa product to Motorola, Inc. With the
support of Sybase, in 1997 the Kinnosa product was installed at Motorola's
Satellite Communications Group to assist Motorola in producing Iridium
satellites.
In order to turn Kinnosa into a commercially salable product, in May
1998 Mr. Simpson formed CIMsoft, Inc. In January 1999 Mr. Simpson left Sybase to
devote full time to CIMsoft and transferred the Kinnosa technology to this
company. In January 1999, Terry J. Gustafson joined the Company as Chief
Financial Officer, and Bruce Williams as Chief Executive Officer. We began
limited operations in May 1999 and active marketing activities in December 1999.
On September 1, 1999, TRG, an inactive, non-trading public company,
acquired all the outstanding stock of CIMsoft in exchange for 27,000,000 shares
of TRG common stock. Immediately after the acquisition, TRG completed a
one-for-five reverse stock split. As a result of this transaction, the former
CIMsoft stockholders held approximately 77% of TRG's common stock. For financial
accounting purposes, the acquisition was treated as a recapitalization of
CIMsoft, with CIMsoft as the acquirer. Soley to change the state of
incorporation, in August 1999 TRG formed a wholly owned Nevada subsidiary,
Entrada Software, Inc., and merged into the subsidiary in September 1999.
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RESULTS OF OPERATIONS
The following discussion provides information that we believe will help
you understand our financial statements, and should be read along with these
financial statements and related notes. The following discussion also contains
forward-looking information. Actual results will likely be different than
projected results due to several factors.
YEAR ENDED JUNE 30, 1999. Our operations commenced in May 1999 and
generated $40,043 in consulting services revenue, essentially all from one
customer. We had not yet started selling our suite of software products, sales
of which are expected to generate the majority of our future revenues. Our
operating expenses for the period consisted primarily of consulting fees of
$60,000 paid to our officers and stockholders. The results of operations of TRG
for this period were immaterial, and are not discussed because these operations
are not carried forward into our present operation.
ELEVEN MONTHS ENDED NOVEMBER 30, 1999. This period includes the
operations of CIMsoft through the date of merger, and the operations of Entrada
Software for the remaining period. We essentially restarted operations with the
merger between TRG and CIMsoft in September 1999, and as indicated above,
CIMsoft had minimal operations prior to the merger. We generated $44,876 of
consulting revenue for the period, as our planned sales of Kinnosa software
products had not commenced. Of the $231,450 of operating expenses for the
period, approximately $175,000 was related to salaries and other personnel
expenses.
As a result of the factors described above, we had a net loss of
$23,047 for the fiscal year ended June 30, 1999, and a net loss of $183,352 for
the eleven months ended November 30, 1999.
LIQUIDITY AND CAPITAL RESERVES
From the beginning of CIMsoft in May 1998 until June 30, 1999, we had
minimal operations and generated no significant working capital. TRG had no
operations since 1995. In the quarter ended September 30, 1999 we raised
$313,500 from the sale of common stock. In connection with the acquisition of
CIMsoft, an investor purchased $150,000 of our Series A Preferred Stock. This
equity capital of $463,500 was used to establish our corporate headquarters, pay
the costs of the acquisition, and fund the operating deficit for the quarter.
The funds remaining will be used to launch sales of Kinnosa software products,
hire additional personnel, create marketing materials, complete enhancements to
the our products and provide general working capital.
PLAN OF OPERATIONS FOR FISCAL YEAR 2000
In our view, working capital at November 30, 1999 will be sufficient to
fund our operations until January 31, 2000. During this period, we plan to hire
up to five additional employees, and spend significant funds on our marketing
program. Because planned sales will not generate any significant cash flow
before March 2000, we will have to raise $1 million to $1.5 million in
additional funds in order to execute our business plan.
If we are able to raise the funds, we believe that we will have
sufficient working capital to reach a level of operations that will generate a
positive cash flow in 2000. Our operating plan for 2000 projects $3.3 million in
revenue, which should generate approximately $330 thousand in positive cash
flow. Upon receiving any additional funding, we will hire the additional
personnel and complete our marketing plan necessary to meet our business plan.
9
<PAGE>
If we are unable to raise sufficient capital, and are unable to find
alternative funding sources, we will have to significantly reduce our
operations, and may not be able to continue as a going concern.
YEAR 2000 "Y2K" CONSIDERATIONS
We have addressed possible remedial efforts in connection with computer
software that could be affected by the Year 2000 "Y2K" problem. The Y2K problem
is the result of computer programs being written using two digits rather than
four to define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations.
The Y2K problem can affect any modern technology used by a business in
the course its day. Any machine that used embedded computer technology is
susceptible to this problem, including, for example computer and telephone
systems. The impact on a company is determined to a large extent by the
company's dependence on these technologies to perform their day-to-day
operations.
We have reviewed all equipment in our business and have determined that
all critical systems are Y2K compliant, including the telephone system and
computer software. We expect to incur no expenses to bring any systems into
compliance, and expect to have no events that would have a serious impact on our
business.
Externally, the Y2K problem may impact other entities with which we
transact business. We cannot predict the effect of the problem on these entities
or our business. We cannot guarantee that those companies with which we do daily
business will be vigilant about their Y2K plan of action. If these companies
experience serious Y2K events, we expect our potential sales to decrease on the
short term resulting in our anticipated revenues to decrease. Because our plan
of operations is primarily based upon raising additional capital, we expect to
utilize this capital as a reserve in the event our anticipated customers
experience Y2K problem that affect our revenues.
ITEM 3. DESCRIPTION OF PROPERTY
We currently lease a 2,700 square foot facility located in an
industrial/commercial park in Scottsdale, Arizona. The lease on the facility is
for a term through August 2002, and the annual rental is approximately $50,000.
We anticipate acquiring additional facilities for expansion before the end of
the current lease term.
10
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 30, 1999, the ownership
of each person known by us to be the beneficial owner of five percent or more of
Entrada's common stock, each officer and director individually, and all officers
and directors as a group. Entrada has been advised that each person has sole
voting and investment power over the shares listed below unless otherwise
indicated.
PERCENT OF
NAME AND ADDRESS OF OWNER NUMBER OF SHARES BENEFICIAL OWNERSHIP(1)
- ------------------------- ---------------- -----------------------
Terry L. Simpson
18775 N. 95th Way
Scottsdale, Arizona 85255 3,183,674 47.30%
Bruce D. Williams
5201 E. Morning Vista Lane
Cave Creek, Arizona 85331 979,592 14.55%
Terry J. Gustafson
7363 E. Onyx Court
Scottsdale, Arizona 85258 734,694 10.91%
Michael S. Williams
3710 E. Kent Drive
Phoenix, Arizona 85044 1,537,157(2) 21.58%
Aztore Holdings, Inc.
3710 E. Kent Drive
Phoenix, Arizona 85044 1,399,037(2) 19.64%
All Directors and Officers
as a Group (4 persons) 6,435,177 90.36%
- ----------
(1) Based upon 6,731,261 shares of common stock being issued and outstanding,
125,440 exercisable warrants held by Aztore and Michael S. Williams and
250,000 shares of Series A Preferred Stock, convertible into 265,000 shares
of common stock, issued and outstanding as of November 30, 1999.
(2) Mr. Williams holds 74,734 shares and 63,386 warrants personally, and has
voting control over an additional 1,399,037 shares held by Aztore Holdings,
Inc., Including 62,054 exercisable warrants and the 265,000 shares issuable
upon conversion of the Series A Preferred.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and executive officers of Entrada are:
NAME AGE POSITION
---- --- --------
Bruce D. Williams 44 Director, President and Chief
Executive Officer
Terry L. Simpson 48 Chairman and Chief Technical Officer
Terry J. Gustafson 54 Chief Financial Officer, Secretary
and Treasurer
Michael S. Williams 52 Director
11
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
BRUCE D. WILLIAMS, PRESIDENT, DIRECTOR AND CHIEF EXECUTIVE OFFICER. Mr.
Williams was a founder of CIMsoft, Inc. From 1994 to 1999, Mr. Williams was a
Strategic Business Development Manager for Sybase, Inc., responsible for
developing the handheld and embedded strategic business relationships between
Sybase and major partners, including Motorola, Intermec, Symbol, 3Com, Sun,
SAIC, and others. He also developed the strategic business relationship between
Sybase and Motorola, Inc. Earlier he developed a new southwestern professional
services district based in Phoenix, Arizona, and performed staff, sales, and
delivery management of consulting services. This involved managing a
professional services district with a staff of 40 consultants, practice
managers, and district administrators.
From 1978 to 1994, Mr. Williams was a technical manager and systems and
software engineer for Ball Aerospace Systems in Boulder, Colorado. He led the
development, implementation, and integration of information technology solutions
as chief architect for an open-systems client/server environment. He managed a
department of 40 engineers, analysts, and computer scientists who developed
flight and ground software for aerospace applications. He also managed a field
team of engineers developing and testing flight and ground operations software
for the Hubbell Space Telescope.
Mr. Williams received a Master of Engineering, Engineering Management
and Computer Science degree in 1982, and a Bachelor of Science, Physics and
Astrophysics degree in 1978 from the University of Colorado. In addition, he
performed work in Graduate Study, Project and Organizational Management at the
Whiting School of Engineering Johns Hopkins University.
TERRY L. SIMPSON, CHAIRMAN AND CHIEF TECHNICAL OFFICER. Mr. Simpson was
a founder of CIMsoft, Inc., and the inventor of the Kinnosa product suite. From
1996 through 1999 Mr. Simpson was employed by Sybase, Inc. to manage the
implementation of Kinnosa product at Motorola. He was responsible for
successfully planning resources and delivering major consulting projects on
schedule, to successfully put Kinnosa into a production environment. From 1991
to 1996 Mr. Simpson was a consultant and completed the Kinnosa product
development.
Mr. Simpson holds a Bachelor of Science Degree in Engineering from West
Virginia University.
TERRY J. GUSTAFSON, CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER.
Mr. Gustafson was a founder of CIMsoft, Inc. From 1993 to 1998 he was Vice
President Finance, Chief Financial Officer, Secretary and Treasurer of Xantel
Corporation, a high-tech start-up company he co-founded in 1993. While at Xantel
he performed virtually all administrative, finance and accounting functions for
the company until 1998.
Mr. Gustafson has over twenty years experience with KPMG Peat Marwick
where he served as a partner from 1984 until 1991. Mr. Gustafson joined KPMG
Peat Marwick in 1969 in Cleveland, Ohio. While in public accounting, he
specialized in providing accounting, auditing and business advisory services to
high technology companies. Mr. Gustafson left KPMG Peat Marwick in 1979 to
become Chief Financial Officer and Treasurer for Wien Air Alaska, a
publicly-held $150 million regional air carrier, until he rejoined KPMG Peat
Marwick in 1982.
Mr. Gustafson holds a Bachelor of Arts Degree in Business
Administration from Baldwin-Wallace College, Berea, Ohio and a Masters in
Business Administration from Kent State University, Kent, Ohio.
MICHAEL S. WILLIAMS, DIRECTOR. Mr. Williams has been the President and
Chief Portfolio Manager of Aztore Holdings, Inc. since December 1995. Aztore is
an investment company, with approximately 300 shareholders, which also performs
corporate advisory and consulting services focusing on both high growth and
financially troubled public companies. Aztore was the controlling shareholder of
TRG until it acquired the stock of CIMsoft in September 1999. Aztore is the
successor to Bulldog Investment Company, L.L.C. of which Mr. Williams was the
Managing Director and founder. Bulldog was formed in November 1993.
12
<PAGE>
Mr. Williams holds various officer and board positions in Aztore
portfolio companies, some of which may be in extended financial condition. Some
Aztore portfolio companies have been in bankruptcy proceedings, managed by
Aztore or Bulldog. Mr. Williams' prior experience includes managerial and
financial consulting, executive positions with public and private companies, six
years of investment banking with NASD member firms, and nine years of commercial
banking experience including secured lending, work-out specialist, and credit
analysis.
Mr. Williams received a Bachelor of Arts in history and political
science from Pennsylvania State University and a Masters in Business
Administration in Strategic Planning and Corporate Finance from the Wharton
Graduate School at the University of Pennsylvania.
ITEM 6. EXECUTIVE COMPENSATION
For the year ended June 30, 1999, we had no employees. Our two officers
during this period, Mr. Simpson and Mr. Gustafson, received consulting fees
during the year of $10,000 and $50,000, respectively. As of November 1, 1999,
our three officers were receiving total annual compensation of $255,000. We
currently have "at will" employment contracts with Messrs. Bruce Williams,
Simpson and Gustafson that provide for 9 months salary continuation in the event
of termination of employment under certain conditions.
STOCK OPTION PLAN
Our Board of Directors and shareholders adopted the 1999 Equity
Incentive Plan (the "Plan"), to promote the interests of Entrada and to
motivate, attract and retain the services of key employees. The Plan also aligns
the personal interests of these persons with the interests of our shareholders
through equity participation in our growth and success. The Plan provides for
granting non-qualified and incentive stock options and restricted stock awards.
We have reserved 2,100,000 shares of stock for option grants. As of November 30,
1999, options to purchase 265,000 shares have been granted or committed to
employees other than the officers.
COMPENSATION OF DIRECTORS
The present directors of Entrada are not compensated for their services
as directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 15, 1999, CIMsoft was capitalized with $2,100 cash and the
rights to the Kinnosa software in exchange for 6,000,000 shares of its common
stock. These 6,000,000 shares were issued in the amount of 3,900,000 to Mr.
Simpson, 1,200,000 to Mr. Bruce Williams and 900,000 to Mr. Gustafson.
On June 30, 1999 Aztore Holdings, Inc., then the majority shareholder
of TRG, converted $82,820 in debt and assumed an approximate $20,000 liability
of TRG in exchange for 100,000 shares of TRG Series A preferred stock. The
$82,820 debt resulted from advances made to TRG by Aztore.
Effective September 1, 1999, TRG acquired 100% of the outstanding stock
of CIMsoft in exchange for 5,400,000 shares of its common stock. These shares
were issued 3,183,674 to Mr. Simpson, 979,592 to Mr. Bruce Williams, 734,694 to
Mr. Gustafson and the remaining 502,040 shares to sixteen other shareholders of
CIMsoft. In conjunction with the acquisition, Aztore Holdings, Inc. purchased
150,000 shares of TRG's Series A preferred stock for $150,000.
13
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES
Entrada is a Nevada corporation, and is authorized to issue 70,000,000
shares of common stock, $.001 par value, and 5,000,000 shares of preferred
stock, $.001 par value. As of November 30, 1999, 6,731,261 shares of common
stock were outstanding and 250,000 shares of preferred had been designated as
Series A preferred stock all of which were outstanding. As of November 30, 1999,
Entrada had committed or outstanding 265,000 options to purchase common stock at
$0.50 per share under the Plan and had outstanding 500,000 warrants to purchase
common stock at $1.50 per share.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of our shareholders. In addition, holders are
entitled to receive any dividends declared by the Board of Directors. No
dividends are payable on common stock until all dividends due Series A Preferred
shares have been paid. If Entrada is ever liquidated, common stockholders share
all assets remaining after payment of liabilities and amounts due on the
outstanding Series A preferred shares. The holders of common stock do not have
any subscription, redemption or conversion rights, nor do they have and
preemptive or other rights to acquire any more shares.
The holders of a majority of the outstanding common stock would be a
quorum for the transaction of business at shareholder meetings. The affirmative
vote of a majority of the common stock represented at any meeting will approve
any business brought to a vote except for matters requiring a greater percentage
vote for approval under Nevada law. The holders of the common stock do not have
cumulative voting rights. Therefore, the holders of more than half of the
outstanding shares of common stock may elect all of the directors to be elected
in any election. In this event, the holders of the remaining shares of common
stock would not be able to elect any directors. The Board of Directors may fill
any vacancies on the Board created by the resignation, death or removal of
directors.
Shareholders may take action without holding a meeting by written
consents signed by the holders of a majority of the outstanding shares of stock
entitled to vote. This provision makes actions by shareholders easier, and
reduces the corporate expense of special meetings of shareholders.
PREFERRED STOCK
Our Board of Directors may divide the shares of preferred stock into
series, and sets the dividend rate, designations, preferences, privileges,
restrictions and qualifications of each series of preferred stock without
shareholder approval. The Board's authority to issue preferred stock provides a
means for acquisitions and other corporate purposes, and could make it more
difficult for someone to gain control of Entrada. We have no plans at this time
to issue any new shares of preferred stock.
SERIES A 10% CONVERTIBLE PREFERRED STOCK
The holder of our outstanding Series A 10% Convertible Preferred Stock
("Series A") has a preference in payment of dividends and a $1.00 per share
liquidation preference over the holders of our common stock. Each share of
Series A stock is convertible into 1.06 shares of common stock. We may redeem
the shares at $1.00 each if our common stock trades at certain prices. We may
not establish a series of preferred superior to the Series A without the consent
of the Series A holder. In the event of any liquidation of the Company, the
holder of the Series A preferred will receive any cumulative but unpaid
dividends, in addition to a $1.00 per share liquidation preference, before the
common stockholders receive any assets.
14
<PAGE>
Each share of Series A is entitled to a $.10 per share (10%) annual,
cumulative dividend accruing ratably each January 1, April 1, July 1 and October
1 commencing October 1, 1999.
The holder of the Series A preferred is entitled to votes equal to the
number of shares of common stock into which these shares are convertible. The
shares of Series A preferred will generally vote with the common stock as a
class on all matters except for matters where vote as a class is specified.
WARRANTS AND OPTIONS
As of November 30, 1999, Entrada had 500,000 warrants outstanding. Each
warrant entitles the holder to purchase one share of our common stock for $1.50
per share, until expiration on December 15, 2000. We may call the warrants if
our stock trades at certain prices. Also as of November 30, 1999, Entrada had
outstanding 65,000 options and has committed an additional 200,000 options to
purchase shares of its common stock issued under the Plan at $0.50 per share,
none of which have vested.
TRANSFER AGENT
The transfer agent for Entrada's common stock and warrants is American
Securities Transfer & Trust, Inc., 12039 West Alameda Parkway, Suite Z-2,
Lakewood, Colorado 80228.
15
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
Our common stock is not yet traded on any established market or
exchange. A market maker has applied for qualification to trade our stock in the
over-the-counter market. This market maker has indicated its willingness to
apply to list our stock on the OTC Bulletin Board when we meet the listing
criteria. We cannot guarantee that our stock will be qualified for
over-the-counter trading or meet the criteria for listing in the OTC Bulletin
Board, successful in becoming listed, or that a market for our common stock will
develop if trading is established. At November 30, 1999, there were
approximately 220 Entrada shareholders.
We have never declared or paid a dividend on our common stock, and we
do not intend to pay dividends in the foreseeable future. We are required to
accrue a 10% ($0.10 per share) cumulative annual dividend for each share of
Series A preferred stock outstanding. This dividend is payable only when
declared by the Board of Directors, and must be paid before any dividends on
common stock.
ITEM 2. LEGAL PROCEEDINGS
We are not involved in any litigation, nor are we aware of any
potential or threatened litigation, or any asserted claims that may result in
litigation.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In January, 1999, CIMsoft issued 6,000,000 shares of its common stock
to its founders, Terry Simpson, Bruce Williams and Terry Gustafson, in exchange
for $2,100 cash and the rights to the Kinnosa software. The shares were issued
in reliance upon the exemption from registration under Section 4(2) of the
Securities Act.
In June, 1999, TRG issued 100,000 shares of its Series A preferred
stock in exchange for cancellation of $82,820 of debt and the assumption of an
approximate $20,000 liability. The shares were issued to its then majority
shareholder, Aztore Holdings, Inc., in reliance on the exemption from
registration provided under Section 4(2) of the Securities Act.
In July and August 1999, CIMsoft issued 615,000 shares of its common
stock for $307,500 cash. No commissions were payable and CIMsoft received all
proceeds. The shares were issued to 16 investors all of whom had a pre-existing
relationship with the officers and directors of CIMsoft. The issuance was made
in reliance upon the exemption from registration under Section 4(2) of the
Securities Act.
Effective September 1, 1999, TRG issued 5,400,000 shares of its common
stock in exchange for 100% of the outstanding stock of CIMsoft. The shares were
issued to the 19 shareholders of CIMsoft. Also effective as of September 1,
1999, TRG issued 150,000 shares of its Series A preferred stock to Aztore
Holdings, Inc. for $150,000. These issuances were made in reliance on Section
4(2) of the Securities Act.
16
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
We are required by our Articles of Incorporation and bylaws to
indemnify our officers and directors against claims resulting from their
association with us. Under Nevada law, we have agreed to eliminate the personal
liability of our directors and officers for losses resulting from any breach of
their duty of care. These provisions do not limit equitable remedies, nor
eliminate directors' and officers' liability for intentional misconduct, fraud
or other illegal activities.
Nevada law allows a corporation to eliminate or limit personal
liability of members of its board of directors for violations of their fiduciary
duties. However, Nevada law does not allow the elimination of a director's
liability for transactions resulting in improper personal gains, or for illegal
payments. Equitable remedies for breach of fiduciary duty, such as an injunction
or rescission, are also still available.
We have been advised that it is the position of the Securities and
Exchange Commission that insofar as the foregoing provision may be invoked to
disclaim liability for damages arising under the Securities Act, such provision
is against public policy as expressed in the Securities Act and therefore
unenforceable.
17
<PAGE>
PART F/S
INDEX TO FINANCIAL STATEMENTS
The Rotherwood Group, Inc.
Report of Independent Public Accountants ................................19
Balance Sheet at June 30, 1999...........................................20
Statements of Operations for the Years Ended June 30, 1999 and 1998......21
Statements of Stockholders' Equity (Deficit)
for the Years Ended June 30, 1999 and 1998..............................22
Statements of Cash Flows for the Years Ended June 30, 1999 and 1998......23
Notes to the Financial Statements .......................................24
CIMsoft, Inc.
Report of Independent Public Accountants ................................32
Balance Sheet at June 30, 1998 ..........................................33
Statement of Operations for the Year Ended June 30, 1999.................34
Statement of Stockholders' Deficit for the Years Ended June 30, 1999 ....35
Statement of Cash Flows for the Year Ended June 30, 1999.................36
Notes to Financial Statements ...........................................37
Entrada Software, Inc.
Balance Sheet at November 30, 1999 (unaudited) ..........................40
Statement of Operations for the Eleven Months Ended
November 30, 1998 (unaudited)..........................................41
Statement of Stockholders' Equity for the Eleven Months Ended
November 30, 1999 (unaudited)..........................................42
Statement of Cash Flows for the Eleven Months Ended
November 30, 1999 (unaudited)..........................................43
Notes for the Financial Statements.......................................44
18
<PAGE>
THE ROTHERWOOD GROUP, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors
of The Rotherwood Group, Inc.
We have audited the accompanying balance sheet of The Rotherwood Group, Inc. (an
Arizona corporation; the "Company") as of June 30, 1999 and the related
statements of operations, stockholders' deficit and cash flows for each of the
two years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Rotherwood Group, Inc. as
of June 30, 1999, and the results of its operations and its cash flows for each
of the two years in the period 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. The Company has had recurring losses.
In addition, the Company does not have any revenue producing operations as of
June 30, 1999. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans with regard to these matters
are discussed in Note 1. The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
King, Weber & Associates, P.C.
Tempe, Arizona
September 4, 1999
19
<PAGE>
THE ROTHERWOOD GROUP, INC.
================================================================================
BALANCE SHEET
JUNE 30, 1999
ASSETS
CURRENT ASSETS:
Cash $ 146
-----------
Total current assets $ 146
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 66
-----------
Total current liabilities 66
-----------
COMMITMENTS AND CONTINGENCIES --
-----------
STOCKHOLDERS' DEFICIT:
Series A Preferred stock; $1.00 liquidation preference,
authorized 250,000 shares, 100,000 shares issued
and outstanding 100,000
Undesignated Preferred stock; authorized 9,750,000 shares,
no shares issued and outstanding --
Common stock; no par value, authorized 100,000,000 shares,
7,925,282 shares issued and outstanding 2,782,659
Paid-in capital 34,405
Accumulated deficit (2,916,984)
-----------
Total stockholders' deficit 80
-----------
$ 146
===========
The accompanying notes are an integral part to this financial statement.
20
<PAGE>
THE ROTHERWOOD GROUP, INC.
================================================================================
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
1999 1998
----------- -----------
REVENUES $ -- $ --
----------- -----------
COSTS AND EXPENSES:
Accounting and professional fees 560 7,144
General and administrative 1,799 2,296
----------- -----------
Total costs and expenses 2,359 9,440
----------- -----------
LOSS FROM OPERATIONS (2,359) (9,440)
OTHER INCOME (EXPENSE)
Interest expense (8,640) (7,501)
----------- -----------
Total other income (expense) (8,640) (7,501)
=========== ===========
NET (LOSS) $ (10,999) $ (16,941)
=========== ===========
(LOSS) PER COMMON SHARE:
Basic $ (.01) $ (.01)
=========== ===========
Diluted $ .(01) $ (.01)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 7,925,282 7,925,282
=========== ===========
Diluted 7,925,282 7,925,282
=========== ===========
The accompanying notes are an integral part to these financial statements.
21
<PAGE>
THE ROTHERWOOD GROUP, INC.
================================================================================
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
Stock-
Common Stock Series A holders'
-------------------- Preferred Paid-in Accumulated equity
Shares Amount Stock Capital (deficit) (deficit)
------ ------ ----- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 7,925,282 $2,782,659 $ -- $ -- $(2,889,044) $(106,385)
Net loss -- -- -- -- (16,941) (16,941)
--------- ---------- -------- -------- ----------- ---------
Balance, June 30, 1998 7,925,282 2,782,659 -- -- (2,905,985) (123,326)
Shares issued upon
conversion of debt -- -- 100,000 34,405 -- 134,405
Net loss -- -- -- -- (10,999) (10,999)
--------- ---------- -------- -------- ----------- ---------
Balance, June 30, 1999 7,925,282 $2,782,659 $100,000 $ 34,405 $(2,916,984) $ 80
========= ========== ======== ======== =========== =========
</TABLE>
The accompanying notes are an integral part to these financial statements
22
<PAGE>
THE ROTHERWOOD GROUP, INC.
================================================================================
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
1999 1998
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (10,999) $(16,941)
Adjustments to reconcile net loss to
net cash used in operating activities:
Changes in assets and liabilities-
Increase (decrease) in accounts payable (2,135) 2,200
Increase in accrued interest to
affiliated company 8,640 7,502
--------- --------
Net cash used in operating activities (4,494) (7,239)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable to affiliated company 4,600 7,220
--------- --------
Net cash provided by financing activities 4,600 7,220
--------- --------
NET INCREASE (DECREASE) IN CASH 106 (19)
CASH, beginning of year 40 59
========= ========
CASH, end of year $ 146 $ 40
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ -- $ --
========= ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Series A Preferred stock issued upon conversion
of debt and accrued interest $ 134,405 $ --
========= ========
The accompanying notes are an integral part to these financial statements.
23
<PAGE>
THE ROTHERWOOD GROUP, INC.
================================================================================
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1999
(1) ORGANIZATION AND OPERATIONS:
CURRENT OPERATIONS
The Rotherwood Group, Inc. (an Arizona corporation; the "Company") was
incorporated on June 27, 1990 under the laws of the state of Arizona as
Benchmark Associates, Inc. The Company ceased its initial software business and
has been seeking new business opportunities and merger candidates for the
Company since fiscal 1995. As a result, the Company had no revenue producing
operations during the years ended June 30, 1999 and 1998. In January 1998, the
stockholders of the Company voted to approve a name change to The Rotherwood
Group, Inc. and file amended Articles of Incorporation in Arizona to effect this
name change.
On August 4, 1999, the Board of Directors approved an acquisition agreement to
acquire CIMsoft, Inc., a Phoenix, Arizona-based software company (the
"Acquisition"). Pursuant to the terms of the acquisition agreement, the Company
agreed to acquire 100% of the outstanding common stock of CIMsoft in exchange
for 25,175,000 shares of common stock of the Company. That number of shares
could be increased if CIMsoft exceeded certain cash goals prior to the
Acquisition. As a condition to the closing of the Acquisition, the Company was
required to obtain shareholder ratification to reverse split the Company's
outstanding common stock on a one-for-five basis, modify the terms of the
Company's outstanding warrants, merge into a wholly owned subsidiary solely for
the purpose of changing the state of organization of the Company from Arizona to
Nevada and take certain other actions as set forth in the definitive agreement.
The Company's shareholders approved the Acquisition and ratified these actions
and other matters at a Special Meeting of Shareholders held August 23, 1999 (see
Note 8).
On September 1, 1999 the Company consummated the acquisition of CIMsoft by
issuing 27,000,000 shares of common stock and completed the merger and
reincorporation into its newly formed Nevada subsidiary. After September 1,
1999, the Company will operate as a Nevada corporation under the name Entrada
Software, Inc.
BACKGROUND AND HISTORY
The Company was formed to acquire the source code and continue development and
marketing of an integrated office software package for personal computers
operating in a network environment. The source code was acquired from ShareData
Inc. ("SDI"), which provided a significant portion of the funding for this
purchase by carrying back a promissory note in the principal amount of
$1,940,000 (the "SDI Acquisition Note"). In December 1991, SDI gained control of
90.5% of the Company through a settlement agreement with the Company's
shareholders in lieu of foreclosure.
SDI filed for Chapter 11 bankruptcy in December 1993 and its plan of
reorganization was confirmed in December 1995. SDI was merged into Aztore
Holdings, Inc. ("Aztore"), which was authorized as the reorganized debtor. As of
June 30, 1999, Aztore owned 83.3% of the Company's common stock and all of the
Series A Preferred stock outstanding. As a result of the acquisition of CIMsoft
subsequent to year-end, Aztore's ownership of common stock was reduced to
approximately 15.7% (see Note 9).
24
<PAGE>
MANAGEMENT PLANS
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has had recurring losses
in prior years and has stockholders' deficit of $80 as of June 30, 1999. In
addition, the Company does not have any revenue producing operations as of June
30, 1999. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
During fiscal 1995, management ceased actively soliciting opportunities in its
prior business and implemented plans to focus on merger and/or acquisition
opportunities that represent the potential to generate positive cash flow and
profitable operations. This activity continued during fiscal 1999, during which
time the Company had no revenue producing operations. On September 1, 1999, the
Company consummated the acquisition of CIMsoft, Inc., a Phoenix, Arizona-based
software company. CIMsoft has developed and currently markets software which
tracks product content information for manufacturers and their suppliers and
customers. CIMsoft's software enables manufacturers to shorten product
development times, introduce and manage product changes effectively, integrate
product information with suppliers and configure products to customer needs.
Even with the acquisition of CIMsoft, the Company expects to face many operating
and industry challenges and will be doing business in a highly competitive
industry. Although Aztore purchased an additional 150,000 shares of Series A
Preferred stock for $150,000 upon closing of the acquisition of CIMsoft, the
Company expects to require substantial additional financing to fully implement
its plan of operations. If additional financial resources are needed, management
intends to obtain financing from private individuals, including officers and
shareholders of CIMsoft and the Company. Although no assurances can be given,
management believes that the acquisition of CIMsoft and its current actions and
plans for financing and development of the CIMsoft business will allow it to be
successful.
(2) SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statements include only the accounts of The
Rotherwood Group, Inc. During the years ended June 30, 1999 and 1998, the
Company entered into transactions with related parties (see Note 6). The
accompanying financial statements include the effects of the transactions
between related parties, including entities under common control. The effects of
those transactions may have been eliminated in the consolidated financial
statements of Aztore, the Company's parent.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and all highly liquid investments
with a maturity of three months or less.
INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires the use of an asset and
liability approach in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between their financial
statement basis and their tax basis and the tax rates in effect when these
differences are expected to reverse. SFAS No. 109 requires the reduction of
deferred tax assets by a valuation allowance, if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
25
<PAGE>
LOSS PER COMMON SHARE
The Company adopted Financial Accounting Standards Board issued SFAS No. 128,
EARNINGS PER SHARE, which supercedes APB Opinion No. 15 as the new authoritative
guidance. The new statement modifies the calculations of primary and fully
diluted earnings per share ("EPS") and replaces them with basic and diluted
earnings per share. The basic EPS differs from the primary EPS calculation in
that the basic EPS does not include any potentially dilutive securities. Fully
diluted EPS is replaced with diluted EPS and must be disclosed regardless of
dilutive impact to basic EPS. Convertible preferred stock were not considered in
the calculation for diluted earnings per share for the years ended December 31,
1998 and 1997 because the effect of their inclusion would be antidilutive.
Cumulative dividends on preferred stock do not begin accruing until January 1,
1999 and therefore no adjustment to income available to common stockholders is
necessary.
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 amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME, which became
effective for fiscal year 1998. SFAS No. 130 establishes standards for reporting
and displaying comprehensive income, defined as all changes in a company's net
assets except changes resulting from transactions with shareholders. SFAS No.
130 did not have any impact on the Company's financial statements.
The Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION, which became effective for fiscal 1998. SFAS No. 131
requires disclosures of certain financial and descriptive information about a
company's operating segments based on the way management disaggregates the
company for making internal operating decisions. SFAS No. 131 did not have any
impact on the Company's financial statements.
The Company adopted SFAS No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND
OTHER POSTRETIREMENT BENEFITS, which became effective for fiscal year 1998. SFAS
No. 132 standardizes the disclosure requirements for pensions and other
postretirement benefits. SFAS No. 131 did not have any impact on the Company's
financial statements.
During 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, was issued effective for fiscal years beginning after June 15, 1999.
SFAS No. 133 is not expected to have any impact on the Company's financial
statements and will be adopted when required under the standard.
(3) NOTES PAYABLE:
During the year, the Company was obligated under two notes payable to Aztore; a
note payable in the amount of $70,000 with interest at 10% per annum, and a note
payable in the amount of $12,820 with interest at 15% per annum. The note
payable for $70,000 is the balance remaining under the SDI Acquisition Note and
was due on November 30, 1999.
On June 30, 1999, Aztore agreed to convert the notes, together with accrued
interest through June 30, 1999, and assume an IRS liability (see Note 7), for
the issuance of 100,000 shares of Series A Preferred stock (see Note 4). The
transaction was recorded at the book value of the liabilities at June 30, 1999
of $134,405.
26
<PAGE>
(4) STOCKHOLDERS' EQUITY:
AUTHORIZED CAPITAL
The Company's authorized capital consists of 100,000,000 shares of common stock,
no par value, and 10,000,000 shares of preferred stock, undesignated as to par
value. The Board of Directors of the Company, in its sole discretion, may
establish par value, divide the shares of preferred stock into series, and fix
and determine the dividend rate, designations, preferences, privileges, and
ratify the powers, if any, and determine the restrictions and qualifications of
each series of preferred stock as established. The Company has designated a
Series A Preferred Stock.
The September 1, 1999 merger and reincorporation into a Nevada corporation
resulted in the Company ceasing to exist as an Arizona corporation and of all
assets, rights, privileges, obligations and liabilities of the Company were
transferred to the new Nevada corporation. All former shareholders of the
Corporation automatically became shareholders of the new Nevada corporation. The
Company is to be governed by Nevada law and the Articles of Incorporation and
Bylaws of the new Nevada corporation after the merger. In addition, the Merger
caused each share of common stock and each share of Series A Preferred stock of
the Company to be exchanged for one share of like stock in the new Nevada
corporation. The merger did not result in any material change in the business,
management, location of the facilities, fiscal year, assets, liabilities or net
worth of the Company has no material accounting implications.
The new Nevada company's authorized capital consists of 70,000,000 shares of
common stock, $.001 par value, and 10,000,000 shares of preferred stock,
undesignated as to par value. The Board of Directors of the Company, in its sole
discretion, may establish par value, divide the shares of preferred stock into
series, and fix and determine the dividend rate, designations, preferences,
privileges, and ratify the powers, if any, and determine the restrictions and
qualifications of each series of preferred stock as established.
SERIES A PREFERRED STOCK
The Board of Directors has designated 250,000 shares of the authorized preferred
stock as Series A Preferred stock. The Series A Preferred stock has a $1.00 per
share liquidation preference and a 10% cumulative dividend. Each share of the
Series A Preferred stock is convertible at a conversion price of $0.189 (or
equivalent to 5.3 shares of common stock). In connection with an agreement to
convert debt (see Note 3), Aztore was issued 100,000 of Series A Preferred stock
and accordingly, 100,000 shares are issued and outstanding as of June 30, 1999.
In addition, Aztore purchased an additional 150,000 shares of Series A Preferred
stock for $150,000 upon closing of the acquisition of CIMsoft (see Note 8).
Other attributes of the Series A Preferred stock are priority of class,
liquidation preference, anti-dilution protection and adjustment, right of first
refusal to the holders, and voting rights. The Series A Preferred stock is
senior to all other capital stock of the Company. In the event of liquidation,
the holders of Series A Preferred stock will be entitled to be paid an amount in
cash equal to the liquidation preference amount plus any accrued dividends,
before any other payment or distribution is made. The Series A Preferred stock
is protected from a dilutive issuance of additional shares of stock at a per
share less than the conversion price at the dated of such new issuance. Each
holder of the Series A Preferred stock shall be given the first right to
purchase their pro rata portion of any equity securities offered by the Company
(except for shares offered under the Company's Incentive Equity Plan) on the
same terms and conditions as the Company offers to other investors. Each share
of Series A Preferred stock votes with the shares of common stock as a single
class on all matters except for matters that affect the rights of the Series A
Preferred stock in which case the Series A Preferred stock votes separately as a
single class.
27
<PAGE>
1990 EMPLOYEE STOCK OPTION PLAN
Effective on June 30, 1990, the Company approved a stock option plan ("1990
Plan") for certain directors, officers, key employees and consultants covering
1,000,000 shares of Company common stock. Options granted under the 1990 Plan
may be either "incentive stock options", as defined in Section 422A of the
Internal Revenue Code, or "nonqualified stock options", subject to Section 83 of
the Internal Revenue Code, at the discretion of the Board of Directors and as
reflected in the terms of the written option agreement. The option price shall
not be less than 100% of the fair market value of the optioned common stock on
the date the option is granted. The option price shall not be less than 110% of
the fair market value of the optioned common stock for an optionee holding at
the time of grant, more than 10% of the total combined voting power of all
classes of stock of the Company. Options become exercisable based on the
discretion of the Board of Directors and must be exercised within ten years of
the date of grant. The 1990 Plan expires June 30, 2000. No options have been
granted under the 1990 Plan as of June 30, 1999.
1999 EQUITY INCENTIVE PLAN
Subsequent to year-end, the Board of Directors terminated the 1990 Plan and
approved a new Equity Incentive Plan (the "1999 Plan") covering 2,100,000 shares
of common stock after the proposed one-for-five reverse stock split. The 1999
Plan replaces the 1990 Plan and options granted under the 1999 Plan will have
the same characteristics as those described under the 1990 Plan. The Company's
shareholders ratified the 1999 Equity Incentive Plan as well as the reverse
stock split at a Special Meeting of Shareholders on August 23, 1999 (see Note
8).
COMMON STOCK WARRANTS
The Company's three series of warrants are shown in table below. Each warrant is
callable by the Company for the call price at any time the average trading price
of the Company's common stock exceeds 120% of the exercise price for five
consecutive trading days.
Warrants outstanding at
beginning of period: 500,000 500,000 500,000
Exercised -- -- --
Canceled -- -- --
------------- ------------- -------------
Warrants outstanding and
exercisable at end of period 500,000 500,000 500,000
============= ============= =============
Exercise price $ 0.25 $ 0.50 $ 0.75
============= ============= =============
Call price $ 0.02 $ 0.02 $ 0.02
============= ============= =============
Expiration date Dec. 15, 1999 Dec. 15, 1999 June 15, 2000
============= ============= =============
In connection with the acquisition of CIMsoft (see Note 8), the Board of
Directors has approved a modification of the outstanding warrants to group the
warrants into "Units." Each Unit is to consist of one each of a Series A, B and
C Warrant and will be modified to be exercisable as a "Unit" prior to December
15, 2000 at $1.50 per unit. Each Unit exercised will receive one share of common
stock on a post-reverse split basis. The Company's shareholders ratified the
modification of the outstanding warrants at a Special Meeting of Shareholders on
August 23, 1999 (see Note 8).
28
<PAGE>
(5) INCOME TAXES:
The Company has various timing differences resulting from the establishment of
reserves for financial statement purposes and other transactions. The Company
has a net deferred tax asset at June 30, 1999 of approximately $973,000
resulting primarily from net operating loss carryforwards. The net deferred tax
asset has been reduced in its entirety by a valuation allowance. No provision or
benefit for income taxes has been reported in the accompanying statements of
operations as any current income tax benefit would be offset by increasing the
valuation allowance.
A current income tax benefit of $2,000 and $3,000 for the years ended June 30,
1999 and 1998 respectively, were offset by an increase of equal amounts in the
valuation allowance
The income tax effect of the Company's operations has been included in the
consolidated income tax return of its parent company. The current and deferred
income tax expense and benefit are determined and allocated to the Company as if
it were a separate taxpayer. The Company has cumulative net operating loss carry
forwards as of June 30, 1999 of approximately $2,880,000 that begin expiring in
2008. Due to change of control issues under Section 382 of the Internal Revenue
Code, uncertainty exists as to the Company's ability to utilize the benefits of
net operating loss carryforwards.
(6) RELATED PARTIES TRANSACTIONS:
AZTORE HOLDINGS, INC.
Aztore Holdings, Inc. is a Tempe, Arizona-based closed-end management investment
company with several hundred shareholders, which holds various interests in
companies and provides corporate restructuring and consulting services. Aztore
is the reorganized debtor of SDI. Aztore has provided management and
administrative services to the Company since January 1, 1996 and until September
1, 1999, the Company's operations are conducted from the offices of Aztore. No
management or other fees were paid or accrued to Aztore during the years ended
June 30, 1999 and 1998.
The Company had a note payable to Aztore for $70,000 representing the balance on
the Acquisition Note (see Note 1). In addition, Aztore advanced funds to the
Company from time to time to provide working capital and the Company owed Aztore
$12,820 as of June 29, 1999 (see Note 3). On June 30, 1999, Aztore agreed to
convert the notes, together with accrued interest through June 30, 1999, as well
as assuming the IRS liability (see Note 7), for the issuance of 100,000 shares
of Series A Preferred stock (see Note 3). The transaction was recorded at the
book value of the liabilities at June 30, 1999 of $134,405. On September 1,
1999, Aztore purchased an additional 150,000 shares of Series A Preferred stock
for $150,000 (see Note 8).
The Company recorded interest expense to Aztore of $8,640 and $7,501 for the
years ending June 30, 1999 and 1998, respectively. Aztore owned 83.3% of the
Company's common stock outstanding as of June 30, 1999. As a result of the
acquisition of CIMsoft subsequent to year-end, Aztore's ownership of common
stock was reduced to approximately 15.7% (see Note 9).
(7) COMMITMENTS AND CONTINGENCIES:
During 1991 and early 1992, the Internal Revenue Service filed federal tax liens
against the Company for delinquent payroll tax liabilities for the quarters of
September 1990 through June 1991 (the "IRS Liability"). The tax liens as filed
aggregate to $32,388 and accrue penalties and interest at the statutory rates
since the filing dates. In April 1992, subsequent to the lien filing dates, the
Company paid $13,211 to the IRS and the IRS abated prior taxes assessed of
$5,600. In addition, the Company discovered an input error for one of the
quarters assessed of $2,808. The Company is attempting to settle this matter
with the IRS. On June 30, 1999, in connection with an agreement to settle debt,
Aztore agreed to assume the IRS Liability and indemnify the Company against any
claim by the IRS.
29
<PAGE>
(8) SUBSEQUENT EVENTS
ACQUISITION OF CIMSOFT ON SEPTEMBER 1, 1999
On August 4, 1999, the Board of Directors approved an acquisition agreement to
acquire CIMsoft, Inc., a Phoenix, Arizona-based software company (the
"Acquisition"). Pursuant to the terms of the acquisition agreement, the Company
agreed to acquire 100% of the outstanding common stock of CIMsoft in exchange
for 25,175,000 shares of common stock of the Company. That number of shares
could be increased if CIMsoft exceeded certain cash goals prior to the
Acquisition. As a condition to the closing of the Acquisition, the Company was
required to obtain shareholder ratification to reverse split the Company's
outstanding common stock on a one-for-five basis, modify the terms of the
Company's outstanding warrants, merge into a wholly owned subsidiary solely for
the purpose of changing the state of organization of the Company from Arizona to
Nevada and take certain other actions as set forth in the definitive agreement.
The Company's shareholders approved the Acquisition and ratified these actions
and other matters at a Special Meeting of Shareholders held August 23, 1999.
On September 1, 1999 the Company consummated the acquisition of CIMsoft by
issuing 27,000,000 shares of common stock and completed the merger and
reincorporation into its newly formed Nevada subsidiary. After September 1,
1999, the Company will operate as a Nevada corporation under the name Entrada
Software, Inc.
CIMsoft has developed and currently markets software which tracks product
content information for manufacturers and their suppliers and customers.
CIMsoft's software enables manufacturers to shorten product development times,
introduce and manage product changes effectively, integrate product information
with suppliers and configure products to customer needs.
REVERSE STOCK SPLIT
The Board of Directors approved and the shareholders subsequently ratified a
one-for-five reverse stock split of the common shares outstanding with no impact
on the number of authorized shares. Fractional share interests that will be
created by the reverse stock split will be rounded up to the next whole share.
Shareholders holding 500 or fewer shares but at least 100 shares of common stock
as of the record date will receive 100 shares after the reverse stock split.
Shareholders holding less than 100 shares of common stock as of the record date
will not be effected by the reverse stock split. The reverse split is effective
September 1, 1999 concurrently with the reincorporation and merger of the
Company into a new Nevada subsidiary.
MODIFICATION OF THE OUTSTANDING WARRANTS
The Board of Directors has approved a modification of the outstanding warrants
to group the warrants into "Units." Each Unit is to consist of one each of a
Series A, B and C Warrant and will be modified to be exercisable as a "Unit"
prior to December 15, 2000 at $1.50 per unit. Each Unit exercised will receive
one share of common stock on a post-reverse split basis, without consideration
to the reverse stock split. The Company's shareholders ratified the modification
of the outstanding warrants.
REINCORPORATION
The Board of Directors approved, and the shareholders subsequently ratified, a
Plan and Agreement of Merger with a newly formed wholly owned subsidiary of the
Company for the purpose of changing the state of incorporation of the Company
from Arizona to Nevada and changing the name of the Company (the "Merger"). The
Merger results in the Company ceasing to exist as an Arizona corporation (see
Note 4).
30
<PAGE>
1999 EQUITY INCENTIVE PLAN
The Board of Directors terminated the 1990 Employee Stock Option Plan and
approved a new Equity Incentive Plan (the "1999 Plan") covering 2,100,000 shares
of common stock, after the proposed one-for-five reverse stock split. The 1999
Plan replaces the 1990 Plan and options granted under the 1999 Plan will have
the same characteristics as those described under the 1990 Plan (see Note 4).
The Company's shareholders ratified the 1999 Equity Incentive Plan.
ADDITION SALE OF STOCK
On September 1, 1999, Aztore purchased an additional 150,000 shares of Series A
Preferred stock for $150,000.
(9) PRESENTATION OF CAPITAL STOCK OUTSTANDING
On September 1, 1999 the Company consummated the acquisition of CIMsoft by
issuing 27,000,000 shares of common stock and effected a 1-for-5 reverse split
of its outstanding shares. The Company also has 250,000 issued and outstanding
shares of Series A Preferred stock, owned by Aztore, which Aztore may convert
into shares of common stock at its option. The following table shows the
expected capital structure of the Company as a result of these transactions
(includes an estimate of rounding shares to be issued as a result of the special
treatment of shareholders owning less than 500 shares). The column titled "Fully
diluted" assumes conversion of the Series A Preferred stock by Aztore. However,
this column does not include any shares that could be issued under the 1999
Equity Incentive Plan nor any of the shares that may be issued upon the exercise
of any of the 500,000 outstanding Units, as modified. As of September 7, 1999,
no options have been granted under the 1999 Plan.
Aztore Holdings, Inc. 6,600,817 (1,302,952) 1,059,572 1,324,572
Public shareholders 1,324,465 271,681 271,681
CIMsoft shareholders -- 27,000,000 5,400,008 5,400,008
--------- --------- ---------
7,925,282 6,731,261 6,996,261
========= ========= =========
31
<PAGE>
CIMSOFT, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors of CIMsoft, Inc.
We have audited the accompanying balance sheet of CIMsoft, Inc. (a Delaware
corporation; the "Company") as of June 30, 1999 and the related statements of
operations, stockholders' 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
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 of CIMsoft, Inc. as of June 30,
1999, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
King, Weber & Associates, P.C.
Tempe, Arizona
October 14, 1999
32
<PAGE>
CIMSOFT, INC.
================================================================================
BALANCE SHEET
JUNE 30, 1999
ASSETS
Current assets:
Cash $ 15,353
Accounts receivable 9,950
--------
Total current assets 25,303
Acquired technology 3,900
--------
Total assets $ 29,203
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Due to officers $ 46,250
--------
Total current liabilities 46,250
--------
Commitments and contingencies --
--------
Stockholders' deficit:
Serial Preferred stock, $.001 par value; authorized
10,000,000 shares, no shares issued and outstanding
Common stock; $.001 par value; authorized 20,000,000
shares, 6,000,000 shares issued and outstanding 6,000
Accumulated deficit (23,047)
--------
Total stockholders' deficit (17,047)
--------
Total liabilities and stockholders' deficit $ 29,203
========
The accompanying notes are an integral part of this financial statement.
33
<PAGE>
CIMSOFT, INC.
================================================================================
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
Sales $ 40,043
General and administrative expenses 63,090
-----------
Net loss (23,047)
===========
Loss per common share:
Basic $ (.01)
===========
Diluted $ (.01)
===========
Weighted average shares outstanding:
Basic 2,745,205
===========
Diluted 2,745,205
===========
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
CIMSOFT, INC.
================================================================================
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED JUNE 30, 1999
Common stock
------------------- Accumulated Stockholders'
Shares Amount deficit deficit
------ ------ ------- -------
Balance June 30, 1998 -- -- -- --
Shares sold to founders 6,000,000 6,000 -- 6,000
Net loss -- -- (23,047) (23,047)
--------- ------ -------- --------
Balance June 30, 1999 6,000,000 $6,000 $(23,047) $(17,047)
========= ====== ======== ========
The accompanying notes are an integral part of these financial statements
35
<PAGE>
CIMSOFT, INC.
================================================================================
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
Cash flows from operating activities:
Net loss $(23,047)
Increase in accounts receivable (8,750)
Increase in due to officer for consulting fees 47,000
--------
Net cash provided by operating activities 15,203
--------
Cash flows from financing activities:
Borrowings from officer 150
--------
Net cash provided by financing activities 150
--------
Net increase in cash: 15,353
Cash, beginning of year --
========
Cash, end of year $ 15,353
========
Supplemental disclosure of non-cash investing
and financing activities:
Common stock issued in payment for consulting fees $ 900
========
Stock issued in exchange for technology $ 3,900
========
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
CIMSOFT, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(1) ORGANIZATION AND OPERATIONS:
CIMsoft, Inc. (a Delaware corporation; the "Company") was incorporated in May
1998. The Company has developed and currently markets software which tracks
product content information for manufacturers and their suppliers and customers.
CIMsoft's software enables manufacturers to shorten product development times,
introduce and manage product changes effectively, integrate product information
with suppliers and configure products to customer needs. The Company commenced
limited operations on May 1, 1999.
Effective September 1, 1999, an Arizona corporation, The Rotherwood Group, Inc.
("TRG") acquired 100% of the outstanding common stock of CIMsoft in exchange for
27,000,000 shares of common stock of TRG. After the acquisition, TRG reverse
split its common stock on a one-for-five basis and reincorporated in Nevada as
Entrada Software, Inc ("Entrada"). As a result of these transactions, the former
CIMsoft stockholders hold approximately 77% of Entrada's common stock. For
financial accounting purposes, the acquisition was treated as a recapitalization
with CIMsoft as the acquirer. TRG had no operations since 1995.
Subsequent to June 30, 1999, the Company raised $307,500 through the sale of
615,000 shares of common stock. In addition, as part of the merger with TRG, the
major shareholder of TRG purchased 150,000 shares of Entrada preferred stock for
$150,000. With the financing received, and the merger with TRG, the Company has
commenced its planned operations of providing software and services to the
manufacturing industry.
(2) SIGNIFICANT ACCOUNTING POLICIES:
INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires the use of an asset and
liability approach in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between their financial
statement basis and their tax basis and the tax rates in effect when these
differences are expected to reverse. SFAS No. 109 requires the reduction of
deferred tax assets by a valuation allowance, if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
The Company had a net operating loss of approximately $24, 000 at June 30, 1999.
The effect of recognizing the tax effect of this loss results in a deferred
income tax asset of $3,450, which is fully offset by a valuation allowance.
CASH
Cash includes all short-term liquid investments with original maturities of
three months or less.
37
<PAGE>
NET LOSS PER SHARE
Net loss per share is calculated using the weighted average number of shares of
common stock outstanding during the year. The Company had no securities
outstanding that were potential common stock at June 30, 1999.
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 amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as incurred.
REVENUE RECOGNITION
Revenue from the sale of software products is generally recognized when the
product has been installed and accepted by the customer. Services revenue is
recognized when the services are preformed.
(3) STOCKHOLDERS' EQUITY:
AUTHORIZED CAPITAL
The Company's authorized capital consists of 20,000,000 shares of common stock,
$.001 par value, and 10,000,000 shares of preferred stock, $.001 par value. The
Board of Directors of the Company establishes series of preferred stock, fixes
dividend rates, designations, preferences and privileges.
STOCK OPTION PLAN
The Company established the 1998 Equity Incentive Plan, and reserved 2,500,000
shares of common stock. The Board of Directors sets the exercise price and
vesting period for all grants. No options have been granted under this Plan as
of June 30, 1999.
(4) ACQUISITION OF TECHNOLOGY:
In 1999 the Company acquired the technology, underlying its suite of software
products, from a founder of the Company in exchange for 3,900,000 shares of
common stock. The value of the technology was set by the price of the stock
exchanged, which was the same price as shares sold to other founders of the
Company. The cost of the technology will be amortized over three years starting
with the initial sale of the Company's products.
(5) COMMITMENTS:
CONSULTING CONTRACT
The Company has a consulting contract with a stockholder and officer of the
Company. The arrangement requires monthly consulting fees of $5,000 until the
officer became a full-time employee of the Company on September 1, 1999. The
balance due this officer under this agreement was $46,250 at June 30, 1999. On
July 31, 1999 the net amount due the officer was converted into a 9% note due
August 1, 2000.
38
<PAGE>
EMPLOYMENT CONTRACTS
The Company has employment contracts with three officer/stockholders that
require exclusive service to the Company in exchange for up to nine month's
salary continuation in certain events of termination.
(6) CONCENTRATIONS:
All the Company's revenue and accounts receivable balance was from a single
customer for the year ended and at June 30, 1999, respectively.
39
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
BALANCE SHEET
NOVEMBER 30, 1999
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 286,642
Accounts receivable 28,000
Prepaid expenses and deposits 20,240
---------
Total current assets 334,882
---------
Furniture, fixtures and equipment 32,587
Less accumulated depreciation (1,043)
---------
Net furniture, fixtures and equipment 31,544
---------
Deposits 16,089
Acquired technology, net of accumulated
amortization of $195 3,705
=========
Total assets $ 386,220
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 27,484
Accrued expenses 2,530
Deferred revenue 25,667
Note payable 49,100
---------
Total current liabilities 104,781
---------
Other liabilities 5,028
---------
Total liabilities 109,809
---------
Commitments
Stockholders' Equity:
Series A convertible preferred stock, $.001 par
value; $1.00 liquidation preference, 250,000 shares
authorized, issued and outstanding 250
Serial preferred stock, $.001 par value; authorized
4,750,000 shares, no shares issued and outstanding --
Common stock; $.001 par value, authorized 70,000,000
shares, 6,731,261 shares issued and outstanding 6,731
Paid in capital 456,519
Accumulated deficit (187,089)
---------
Total stockholders' equity 276,411
---------
Total liabilities and stockholders' equity $ 386,220
=========
The accompanying notes are an integral part of this financial statement.
40
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
STATEMENT OF OPERATIONS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
Sales $ 44,876
Selling, general and administrative expenses 231,450
-----------
Loss from operations (186,574)
-----------
Other income (expense)
Interest expense (1,477)
Interest income 4,699
-----------
Total other income 3,222
-----------
Net loss $ (183,352)
===========
Loss per common share
Basic $ (.04)
===========
Diluted $ (.04)
===========
Weighted average number of common shares outstanding
Basic 5,211,442
===========
Diluted 5,211,442
===========
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Series A
Common Stock Preferred Stock
----------------- ---------------- Paid in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1999 -- -- -- -- -- -- --
Sale of preferred stock 150,000 $150 $ 149,850 $ 150,000
Sale of common stock 6,615,000 $6,615 306,885 313,500
Recapitalization as a
result of merger 116,261 116 100,000 100 (216)
Accrued dividends (3,737) (3,737)
Net loss (183,352) (183,352)
--------- ------ ------- ---- --------- --------- ---------
November 30, 1999 6,731,261 $6,731 250,000 $250 $ 456,519 ($187,089) $ 276,411
========= ====== ======= ==== ========= ========= =========
</TABLE>
The accompanying notes are an integral part to these financial statements
42
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
STATEMENT OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1999
(UNAUDITED)
Cash flows from operating activities:
Net loss $(183,352)
Adjustments to reconcile loss to net cash
used in operating activities:
Depreciation and amortization 1,238
Changes in assets and liabilities:
Prepaid expenses and deposits (36,329)
Accounts receivable (28,000)
Deferred revenue 25,667
Other liabilities 1,291
Accounts payable 27,484
Accrued expenses 2,530
---------
Net cash used in operating activities (189,471)
---------
Cash flows from financing activities:
Note payable 49,100
Sale of common stock 309,600
Sale of preferred stock 150,000
---------
Net cash provided by financing activities 508,700
---------
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (32,587)
---------
Net cash used in investing activities (32,587)
---------
Net increase (decrease) in cash $ 286,642
Cash, beginning of period 0
---------
Cash, end of period $ 286,642
---------
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,477
=========
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
ENTRADA SOFTWARE, INC.
================================================================================
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1999
(UNAUDITED)
(1) ORGANIZATION AND OPERATIONS:
CURRENT OPERATIONS
Entrada Software, Inc. (a Nevada corporation; the "Company") was incorporated in
Delaware on May 7, 1998 as CIMsoft, Inc., and commenced limited operations on
May 1, 1999. The Company has developed and currently markets software which
tracks product content information for manufacturers and their suppliers and
customers. The Company's software enables manufacturers to shorten product
development times, introduce and manage product changes effectively, integrate
product information with suppliers and configure products to customer needs.
On September 1, 1999 The Rotherwood Group, Inc. ("TRG"), a non-trading public
company with no operations, acquired 100% of the outstanding stock of CIMsoft in
exchange for 27,000,000 shares of TRG common stock. After the acquisition, TRG
reverse split its common stock on a one-for-five basis, and reincorporated in
Nevada as Entrada Software, Inc. (Entrada). As a result of these transactions,
the former CIMsoft stockholders held approximately 77% of Entrada's common
stock, and Entrada is continuing the business and operations of CIMsoft.
(2) SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
For financial accounting purposes, the acquisition of CIMsoft, Inc. was treated
as a recapitalization, with Entrada (CIMsoft), as the acquirer. The accompanying
financial statements include the operations of CIMsoft for the period January 1,
1999 to September 1, 1999 and Entrada for the period September 1, 1999 to
November 30, 1999.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash and liquid investments with a maturity
of three months or less
INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires the use of an asset and
liability approach in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between their financial
statement basis and their tax basis and the tax rates in effect when these
differences are expected to reverse. SFAS No. 109 requires the reduction of
deferred tax assets by a valuation allowance, if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
The Company had a net operating loss of approximately $183,000 at November 30,
1999. The effect of recognizing the tax effect of this loss would result in a
deferred income tax, which would be fully offset by a valuation allowance.
44
<PAGE>
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 amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as incurred.
REVENUE RECOGNITION
Revenue from the sale of software products is generally recognized when the
product has been installed and accepted by the customer. Services revenue is
recognized when the services are preformed.
LOSS PER SHARE
Net loss per share is calculated using the weighted average number of shares of
common stock outstanding during the year. The Company had convertible preferred
stock and warrants outstanding that were potential common stock at November 30,
1999. However, these securities were not considered in the calculation for
diluted earnings per share because the effect would be anti-dilutive.
(3) NOTES PAYABLE:
Prior to September 1, 1999 the Company had a consulting contract with a
stockholder and officer of the Company. The arrangement required monthly
consulting fees of $5,000 until the officer became a full-time employee of the
Company on September 1, 1999. On July 31, 1999 the net amount due the officer
was converted into a 9%, unsecured note payable due August 1, 2000.
(4) STOCKHOLDERS' EQUITY:
AUTHORIZED CAPITAL
The Company's authorized capital consists of 70,000,000 shares of common stock,
$.001 par value, and 5,000,000 shares of preferred stock, $.001 par value. The
Company's Board of Directors divides the preferred shares into series,
establishes par value, and fixes dividend rates, designations, preferences,
privileges.
SERIES A PREFERRED STOCK
The Company designated 250,000 shares as Series A Preferred stock, with a $1.00
per share liquidation preference and a 10% cumulative dividend. Each share of
the Series A Preferred stock is convertible into 1.06 shares of common stock. In
connection with an agreement to convert debt a stockholder of TRG was issued
100,000 of Series A Preferred. In addition, this same stockholder purchased an
additional 150,000 shares of Series A Preferred stock for $150,000 upon closing
of the acquisition of CIMsoft.
EMPLOYEE STOCK OPTION PLAN
The 1999 Equity Incentive Plan (the "Plan") reserves 2,100,000 shares of common
stock for option and stock grants. The Board of Directors determines grants,
vesting periods and exercise prices. The Plan expires September 30, 2009. As of
November 30, 1999, the Company had granted or committed 265,000 options with a
four year vesting period and a $.50 exercise price. No options were exercisable.
45
<PAGE>
COMMON STOCK WARRANTS
In connection with the acquisition of CIMsoft, TRG modified the terms of
previously outstanding warrants to group the warrants into 500,000 warrant
units, each consisting of one each of three previous warrant series. Each
warrant unit is exercisable, at $1.50 per unit, for one share of common stock
prior to December 15, 2000. Each warrant unit is callable by the Company at any
time the average trading price of the Company's common stock exceeds 120% of the
exercise price for five consecutive trading days.
(5) ACQUISITION OF TECHNOLOGY:
In January 1999 CIMsoft acquired the technology, underlying its suite of
software products, from a founder of the Company in exchange for 3,900,000
shares of CIMsoft, Inc. common stock. The cost of the technology will be
amortized over three years starting in September 1999.
(6) COMMITMENTS:
EMPLOYMENT CONTRACTS
The Company has employment contracts with three officers/stockholders that
require exclusive service to the Company in exchange for up to nine month's
salary continuation in certain events of termination.
LEASES
The Company leases its corporate offices for minimum annual rent of $51,600
through August 2002.
(7) CONCENTRATIONS:
Substantially all the Company's revenue and its accounts receivable balance was
from a single customer as of and for the period ended November 30, 1999.
46
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
2.1 Stock Exchange Agreement by and between TRG and CIMsoft,
dated as of August 4, 1999.
3.1 Articles of Incorporation of Entrada
3.2 Certificate of Designation/Resolution of Designation - Series A
10% Cumulative Convertible Preferred Stock
3.3 Bylaws of Entrada
4.1 Specimen common stock certificate of Entrada
10.1 Commercial Lease dated August 22, 1999
10.2 Entrada 1999 Equity Incentive Plan, Effective July 23, 1999.
10.3 Employment Agreement by and between Entrada and Bruce Williams,
dated as of July 26, 1998.
10.4 Employment Agreement by and between Entrada and Terry Gustafson,
dated as of September 1, 1998.
10.5 Employment Agreement by and between Entrada and Terry Simpson,
dated as of August 1, 1998.
11.1 Statement re: computation of per share earnings
23.1 Auditor's Consent from King, Weber & Associates, P.C.
27.1 Financial Data Schedule
47
<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.
ENTRADA SOFTWARE INCORPORATED
(Registrant)
Dated: December 10, 1999 By: /s/Bruce D. Williams
--------------------------------
Bruce D. Williams
Chief Executive Officer
48
ACQUISITION AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (the "Agreement") is made and entered into as
of this 4th day of August, 1999 by and among THE ROTHERWOOD GROUP, INC., an
Arizona corporation ("TRG"), CIMSOFT, INC. a Delaware corporation ("CSI") and
the shareholders of CSI. Such shareholders are listed on Schedule A attached and
made part hereto (the "CSI Shareholders").
RECITALS
A. The CSI Shareholders own and control all of the issued and outstanding
shares of CSI.
B. TRG desires to acquire and the CSI Shareholders desire to transfer to
TRG all outstanding shares of CSI on the terms and conditions set forth herein.
AGREEMENTS
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1
EXCHANGE TERMS
1.1 ACQUISITION. At the closing of the acquisition (the "Closing"), the CSI
Shareholders shall sell, transfer and deliver to TRG certificates endorsed to
the order of TRG representing all outstanding shares of the CSI Common Stock
$.001 par value, (the "CSI Shares"), or a certificate from the Secretary of CSI
indicating that certificates have not been issued, and listing all CSI
shareholders and the number of CSI shares owned by each.
1.2 CONSIDERATION. In exchange for the delivery of the CSI Shares at the
Closing, TRG shall issue and deliver to the CSI Shareholders certificates
representing 4.0698 shares of the Common Stock of TRG (the "TRG Shares") for
each share of CSI Common Stock. Aztore Holdings, Inc. ("Aztore") shall have
canceled and returned to TRG 1,302,957 shares of Common Stock.
1.3 CLOSING. The Closing shall take place effective September 1, 1999.
ARTICLE 2
ADDITIONAL TERMS
2.1 ADDITIONAL INVESTMENT. At the Closing, TRG's controlling shareholder prior
to the Closing, Aztore Holdings, Inc. ("Aztore") shall purchase 150,000 shares
of Series A Preferred stock. These shares shall have the terms set forth in the
Series A Certificate of Designation including but not limited to a liquidation
preference of $1.00 per share and convertibility into 5.3 shares of TRG Common
Stock for each preferred share.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 2 of 23
- --------------------------------------------------------------------------------
2.2 TAX TREATMENT. The exchange of shares is intended to qualify as a
reorganization within the meaning of ss.368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended (the "Code"). The parties hereto will perform and
refrain from performing all acts as required by the Code and all rules,
regulations or judicial interpretations thereof which would jeopardize this
transaction being treated as a reorganization as stated above.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CSI
AND THE CSI SHAREHOLDERS
CSI and the CSI Shareholders hereby represent and warrant, as of the date
hereof and as of the Closing Date, as follows:
3.1 ORGANIZATION, CAPACITY AND AUTHORITY. CSI has been duly organized and
is validly existing and in good standing under the laws of the State of
Delaware. CSI has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by the Shareholders and
Board of Directors of CSI and no other corporate proceedings on the part of CSI
are necessary to authorize this Agreement or the transactions contemplated
hereby. The CSI Shareholders have full capacity to enter into this Agreement and
perform its obligations hereunder. The execution, delivery and performance of
this Agreement by the CSI Shareholders are duly authorized and no other
proceeding or action on behalf of the CSI Shareholders is necessary to authorize
the transactions contemplated hereby.
3.2 TITLE TO SHARES. The CSI Shares held by the CSI Shareholders and to be
transferred at the Closing are and will be free and clear of any lien, charge,
claim, security interest or other encumbrance. The CSI Shareholders hold legal
and beneficial title to such CSI Shares. No restriction on transfer, stop order
or other instruction with respect to such CSI Shares is or will be entered on
CSI's transfer records with respect to such CSI Shares prior to, at or after
Closing, other than customary restrictive legends and stop order instructions
related to the transfer of such shares in compliance with applicable federal and
state securities laws.
3.3 NO CONFLICT, BREACH, OR DEFAULT. The execution and delivery of this
Agreement and the performance by CSI and the CSI Shareholders of the terms
hereof do not (i) conflict with or result in a violation of the Articles of
Incorporation or Bylaws of CSI; (ii) violate any order, writ, judgment or decree
to which CSI or any CSI Shareholders are a party or are subject, or (iii)
conflict with or result in a violation of, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of CSI or any CSI Shareholders under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, lease,
license, agreement or other instrument or obligation to which CSI or any CSI
Shareholders are bound or by which CSI, the CSI Shareholders or any of their
properties or assets may be bound.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 3 of 23
- --------------------------------------------------------------------------------
3.4 APPROVALS AND CONSENTS. No approval, authorization, consent, exemption,
filing or other action by or filing with any governmental authority is required
in connection with the execution and delivery by CSI or the CSI Shareholders of
this Agreement or the transactions contemplated herein or therein.
3.5 VALID OBLIGATION. This Agreement constitutes a legal, valid and binding
obligation of CSI or the CSI Shareholders enforceable against all of them in
accordance with its terms, except that (i) the enforceability of the same may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting enforcement of creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.6 CAPITAL STOCK OF CSI. The authorized capital stock of CSI consists of
3,000,000 shares of Preferred Stock, $ .001 par value, of which no shares are
issued and outstanding, and 10,000,000 shares of Common Stock, $.001 par value,
of which 6,000,000 shares were issued and outstanding as of July 1, 1999.
Additional shares will be issued prior to the Closing. All the outstanding
shares of Common Stock of CSI are duly and validly authorized and issued,
fully-paid and non-assessable, none of the shares of Common Stock have been
issued in violation of any state or federal securities or banking laws, and
there exist no preemptive rights of any present or former stockholders of the
Common Stock. CSI has no other outstanding securities convertible into or
exercisable for its Common Stock and no other agreements of any nature what so
ever whereby CSI may, under any circumstances be obligated to issue additional
shares of Common Stock.
3.7 CSI FINANCIAL STATEMENTS.
(a) Schedule 3.7(a) hereto sets forth a listing of financial
statements of CSI delivered or to be promptly delivered to TRG (collectively,
the "CSI Financial Statements"). The CSI Financial Statements are true, accurate
and complete and present fairly the financial position of CSI as of the dates
stated and the results of the operations of CSI for the periods stated and have
been prepared in accordance with generally accepted accounting principles,
consistently applied with all adjustments as mandated by any agency or other
authority.
(b) CSI has, and as of the Closing Date will have, no liabilities or
obligations of any nature (whether accrued, absolute, asserted, unasserted,
known, unknown, contingent or otherwise) except for those disclosed in the most
current CSI Financial Statement ("Current Financial Statement") or in Schedule
3.7(b) hereto.
3.8 REGULATORY FILINGS. CSI has heretofore filed all reports, registration
statements and schedules as required pursuant to any applicable law. All such
filings by CSI complied as of their respective dates in all material respects
with the applicable requirements of such laws and the rules and regulations
adopted thereunder.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 4 of 23
- --------------------------------------------------------------------------------
3.9 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since the date of the most
Current Financial Statements delivered to TRG (the "Current Financial
Statements"), there have not been any changes in the affairs, prospects,
condition (financial or otherwise, or arising as a result of any legislative or
regulatory change), operations, liabilities, earnings or business of CSI which
have been or will be, individually or in the aggregate with other changes,
adverse.
3.10 NO BREACH OF STATUTE, DECREE OR ORDER. Except as disclosed in Schedule
3.10, CSI is not in default under, or in violation in any respect of any
material applicable statute, law ordinance, decree, order, rule or regulation of
any state or federal regulatory agency or any other governmental body, and the
consummation of this Agreement and the transactions contemplated hereby will not
constitute or result in any such default, breach or violation. Except as set
forth in Schedule 3.10, there is no known or suspected material action or
proceeding by any governmental body, pending or threatened against CSI relating
to the conduct of its business, and there is no basis for any such action or
proceeding.
3.11 LITIGATION. Except as disclosed in Schedule 3.11, there is no suit,
claim, action proceeding or governmental investigation now pending or
threatened, nor, to the best of its knowledge, is there any condition or set of
facts which will give rise to any litigation, against CSI before any court,
administrative or regulatory body or any governmental agency arising out of or
relating to any aspect of the business, or any part of the properties, of CSI,
or concerning the transactions contemplated by this Agreement. Except as
disclosed in Schedule 3.11, there are no decrees, injunctions or orders of any
court or governmental department or agency outstanding or threatened against CSI
relating to any aspect of its business or any part of its properties.
3.12 EMPLOYEE BENEFIT PLANS. Schedule 3.12 contains a list of all
employment contracts (including agreements with any union) and all employee
policy manuals, all deferred compensation amounts and agreements, all
non-competition agreements, all bonus, stock option, profit-sharing, pension,
retirement, consultation after retirement, payment upon retirement, or severance
agreements, all incentive pay agreements, any extraordinary vacation accruals,
education payments or benefits, all disability, medical, life or other insurance
plans or arrangements, or any other fringe benefits applicable to employees of
CSI, and a list of any determination letters issued by the Internal Revenue
Service with respect thereto. Each employee plan is in full compliance with all
applicable government laws, rules and regulations.
3.13 PERMITS AND LICENSES. CSI has, as of the date hereof, and will have as
of the Closing Date, such permits, licenses and authorities as required by any
governmental authority with jurisdiction over CSI with respect to its business
as currently conducted. Except as may be expressly permitted by the terms of
this Agreement or otherwise disclosed in this Agreement or any schedule hereto,
the business of CSI as presently conducted in any jurisdiction meets all known
and suspected applicable legal requirements of such jurisdiction, all known and
suspected requisite governmental approvals have been duly obtained and are in
full force and effect, and there is no basis for any governmental body to deny
or rescind any approval for the conduct of the business of CSI.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 5 of 23
- --------------------------------------------------------------------------------
3.14 ACCURACY OF BOOKS AND RECORDS. The books and records, financial and
otherwise, of CSI accurately set out and disclose the financial position of CSI,
and all transactions CSI have been accurately recorded in such books and records
in accordance with generally accepted accounting principals.
3.15 MATERIAL CONTRACTS. Attached hereto as Schedule 3.15 is a list of all
contracts of CSI involving either (a) an aggregate payment by or to it of more
than $2,500; (b) or extending for a term beyond 12 months; and (c) a list
showing all policies of insurance in force as of the date hereof.
3.16 TAXES. Except as listed on Schedule 3.16 CSI has filed all federal and
state tax returns as required to be filed; all taxes, assessments and other
governmental charges known by the officers of CSI to be due from CSI or with
respect to any of its income, payroll, sales, property or assets have been duly
paid and no extensions for the time of payment have been requested. There are no
pending or threatened audits or additional assessments of taxes of any kind by
any governmental authority known to any of the officers of CSI. No unexpired
waivers of the statute of limitations executed by CSI with respect to taxes of
any kind are in effect on the date hereof. The accruals and reserves made for
tax liabilities of CSI in the Current Financial Statements are adequate for the
payment of all of CSI's federal, state and local tax liabilities of any kind for
all periods ending on or before the date of the Current Financial Statements.
3.17 TITLE TO PROPERTIES. Except as disclosed in Schedule 3.17, the CSI has
good and marketable title, free and clear of any mortgage, pledge, lien, charge
or other encumbrance, to all of its real and/or personal property and other
assets reflected on the Current Financial Statements, or acquired by it
subsequent to the date thereof or used by it in the ordinary course of its
business, except for (a) liens or encumbrances on such property or assets
described in the Current Financial Statements, (b) liens for current taxes not
yet due and payable, (c) such imperfections of title and encumbrances, if any,
as are not material in character, amount or extent and do not detract from the
value or interfere with the present or presently contemplated future use of the
properties subject thereto or affected thereby, and (d) acquisition and
dispositions in the ordinary course of business. CSI enjoys peaceable and
undisturbed possession under all material leases under which it is operating,
and all of its premises, which are leased, are in good condition and repair and
are suitable for the purposes for which such premises are being utilized. CSI
has not received any notice of violation of any applicable zoning ordinance or
other law, order, regulation or requirement relating to its operations or to its
owned or leased properties. Each parcel of real property owned or leased by CSI
is free of any and all hazardous wastes, hazardous emissions, toxic substances
or other types of contamination or matters of environmental concern, and CSI is
not subject to any liability (under the Comprehensive Environmental Response,
Compensation and Liability Act or otherwise) resulting from or related to any
such wastes, emissions, substances, contaminants or matters of environmental
concern in connection with any such property.
3.18 ACCURACY OF STATEMENTS. CSI and the CSI Shareholders have disclosed to
TRG herein all facts required by this Agreement and material to the liabilities,
assets, business, prospects, conditions, organization and operations (financial
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 6 of 23
- --------------------------------------------------------------------------------
and otherwise) of CSI. Neither this Agreement nor any exhibit or schedule hereto
nor any certificate, documents, instrument or information furnished or to be
furnished by CSI to TRG in connection with this Agreement or any of the
transactions contemplated hereby contained, or will contain, any untrue
statement of a material fact or omit or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they are made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TRG
TRG hereby represents and warrants to CSI and the CSI Shareholders, as of
the date hereof as of the Closing Date, as follows:(Shouldn't TRG have the same
Reps and Warranties as CSI?)
4.1 ORGANIZATION AND AUTHORITY OF TRG. TRG has been duly organized and is
validly existing and in good standing under the laws of the State of Arizona and
full corporate power and authority to enter into this Agreement. The execution,
delivery and performance of this Agreement has been duly authorized by TRG and
no other corporate proceedings on the part of TRG are necessary to authorize
this Agreement and the transactions contemplated hereby or thereby.
4.2 NO CONFLICT, BREACH OR DEFAULT. The execution and delivery of this
Agreement and the performance by TRG of its terms do not (i) conflict with or
result in a violation of the Articles of Incorporation or Bylaws of TRG; (ii)
violate any order, writ, judgment or decree to which TRG is a party or is
subject, or (iii) conflict with or result in a violation of, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of TRG under, any of the terms, conditions or provisions of
any note, bond mortgage, indenture, deed of trust, lease, license, agreement or
other instrument or obligation to which TRG is bound or by which TRG or any of
their properties or assets may be bound.
4.3 APPROVALS AND CONSENTS. No approval, authorization, consent, exemption,
filing or other action by or filing with any governmental authority is required
in connection with the execution and delivery by TRG of this Agreement or the
transactions contemplated herein or therein.
4.4 VALID OBLIGATION. This Agreement constitutes a legal, valid and binding
obligation of TRG enforceable against it in accordance with its terms, except
that (i) the enforceability of the same may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting enforcement of creditors'
rights generally, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefore may be brought.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 7 of 23
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4.5 VALIDLY ISSUED SHARES. Upon issuance, all TRG Shares to be issued to
the CSI Shareholders in exchange for their CSI Shares will be duly authorized,
validly issued and nonassessable outstanding shares of the capital stock of TRG.
4.6 CAPITAL STOCK OF TRG. The authorized and outstanding capital stock of
TRG is specified on the audit attached and made part hereto under section 4.7.
No additional shares will be issued prior to the Closing. All the outstanding
shares of Common Stock of TRG are duly and validly authorized and issued,
fully-paid and non-assessable, none of the shares of Common Stock have been
issued in violation of any state or federal securities or banking laws, and
there exist no preemptive rights of any present or former stockholders of the
Common Stock. Other than as disclosed in the financial statements, TRG has no
other outstanding securities convertible into or exercisable for its Common
Stock and no other agreements of any nature what so ever whereby TRG may, under
any circumstances be obligated to issue additional shares of Common Stock.
4.7 TRG FINANCIAL STATEMENTS.
(a) Schedule 4.7(a) hereto sets forth a listing of financial
statements of TRG delivered or to be promptly delivered to CSI (collectively,
the "TRG Financial Statements"). The TRG Financial Statements are true, accurate
and complete and present fairly the financial position of TRG as of the dates
stated and the results of the operations of TRG for the periods stated and have
been prepared in accordance with generally accepted accounting principles,
consistently applied with all adjustments as mandated by any agency or other
authority.
(b) TRG has, and as of the Closing Date will have, no liabilities or
obligations of any nature (whether accrued, absolute, asserted, unasserted,
known, unknown, contingent or otherwise) except for those disclosed in the most
current TRG Financial Statement ("Current Financial Statement") or in Schedule
4.7(b) hereto.
4.8 REGULATORY FILINGS. TRG has heretofore filed all reports, registration
statements and schedules as required pursuant to any applicable law. All such
filings by TRG complied as of their respective dates in all material respects
with the applicable requirements of such laws and the rules and regulations
adopted thereunder.
4.9 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since the date of the most
Current Financial Statements delivered to CSI (the "Current Financial
Statements"), there have not been any changes in the affairs, prospects,
condition (financial or otherwise, or arising as a result of any legislative or
regulatory change), operations, liabilities, earnings or business of TRG which
have been or will be, individually or in the aggregate with other changes,
adverse.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 8 of 23
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4.10 NO BREACH OF STATUTE, DECREE OR ORDER. Except as disclosed in Schedule
4.10, TRG is not in default under, or in violation in any respect of any
material applicable statute, law ordinance, decree, order, rule or regulation of
any state or federal regulatory agency or any other governmental body, and the
consummation of this Agreement and the transactions contemplated hereby will not
constitute or result in any such default, breach or violation. Except as set
forth in Schedule 4.10, there is no known or suspected material action or
proceeding by any governmental body, pending or threatened against TRG relating
to the conduct of its business, and there is no basis for any such action or
proceeding.
4.11 LITIGATION. Except as disclosed in Schedule 4.11, there is no suit,
claim, action proceeding or governmental investigation now pending or
threatened, nor, to the best of its knowledge, is there any condition or set of
facts which will give rise to any litigation, against TRG before any court,
administrative or regulatory body or any governmental agency arising out of or
relating to any aspect of the business, or any part of the properties, of TRG,
or concerning the transactions contemplated by this Agreement. Except as
disclosed in Schedule 4.11, there are no decrees, injunctions or orders of any
court or governmental department or agency outstanding or threatened against TRG
relating to any aspect of its business or any part of its properties.
4.12 EMPLOYEE BENEFIT PLANS. Schedule 4.12 contains a list of all
employment contracts (including agreements with any union) and all employee
policy manuals, all deferred compensation amounts and agreements, all
non-competition agreements, all bonus, stock option, profit-sharing, pension,
retirement, consultation after retirement, payment upon retirement, or severance
agreements, all incentive pay agreements, any extraordinary vacation accruals,
education payments or benefits, all disability, medical, life or other insurance
plans or arrangements, or any other fringe benefits applicable to employees of
TRG, and a list of any determination letters issued by the Internal Revenue
Service with respect thereto. Each employee plan is in full compliance with all
applicable government laws, rules and regulations.
4.13 PERMITS AND LICENSES. TRG has, as of the date hereof, and will have as
of the Closing Date, such permits, licenses and authorities as required by any
governmental authority with jurisdiction over TRG with respect to its business
as currently conducted. Except as may be expressly permitted by the terms of
this Agreement or otherwise disclosed in this Agreement or any schedule hereto,
the business of TRG as presently conducted in any jurisdiction meets all known
and suspected applicable legal requirements of such jurisdiction, all known and
suspected requisite governmental approvals have been duly obtained and are in
full force and effect, and there is no basis for any governmental body to deny
or rescind any approval for the conduct of the business of TRG.
4.14 ACCURACY OF BOOKS AND RECORDS. The books and records, financial and
otherwise, of TRG accurately set out and disclose the financial position of TRG,
and all transactions TRG have been accurately recorded in such books and records
in accordance with generally accepted accounting principals.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 9 of 23
- --------------------------------------------------------------------------------
4.15 MATERIAL CONTRACTS. Attached hereto as Schedule 3.15 is a list of all
contracts of TRG involving either (a) an aggregate payment by or to it of more
than $2,500; (b) or extending for a term beyond 12 months; and (c) a list
showing all policies of insurance in force as of the date hereof.
4.16 TAXES. Except as listed on Schedule 4.16 TRG has filed all federal and
state tax returns as required to be filed; all taxes, assessments and other
governmental charges known by the officers of TRG to be due from TRG or with
respect to any of its income, payroll, sales, property or assets have been duly
paid and no extensions for the time of payment have been requested. There are no
pending or threatened audits or additional assessments of taxes of any kind by
any governmental authority known to any of the officers of TRG. No unexpired
waivers of the statute of limitations executed by TRG with respect to taxes of
any kind are in effect on the date hereof. The accruals and reserves made for
tax liabilities of TRG in the Current Financial Statements are adequate for the
payment of all of TRG's federal, state and local tax liabilities of any kind for
all periods ending on or before the date of the Current Financial Statements.
4.17 TITLE TO PROPERTIES. Except as disclosed in Schedule 4.17, the TRG has
good and marketable title, free and clear of any mortgage, pledge, lien, charge
or other encumbrance, to all of its real and/or personal property and other
assets reflected on the Current Financial Statements, or acquired by it
subsequent to the date thereof or used by it in the ordinary course of its
business, except for (a) liens or encumbrances on such property or assets
described in the Current Financial Statements, (b) liens for current taxes not
yet due and payable, (c) such imperfections of title and encumbrances, if any,
as are not material in character, amount or extent and do not detract from the
value or interfere with the present or presently contemplated future use of the
properties subject thereto or affected thereby, and (d) acquisition and
dispositions in the ordinary course of business. TRG enjoys peaceable and
undisturbed possession under all material leases under which it is operating,
and all of its premises, which are leased, are in good condition and repair and
are suitable for the purposes for which such premises are being utilized. TRG
has not received any notice of violation of any applicable zoning ordinance or
other law, order, regulation or requirement relating to its operations or to its
owned or leased properties. Each parcel of real property owned or leased by TRG
is free of any and all hazardous wastes, hazardous emissions, toxic substances
or other types of contamination or matters of environmental concern, and TRG is
not subject to any liability (under the Comprehensive Environmental Response,
Compensation and Liability Act or otherwise) resulting from or related to any
such wastes, emissions, substances, contaminants or matters of environmental
concern in connection with any such property.
4.18 ACCURACY OF STATEMENTS. TRG and the TRG Shareholders have disclosed to
CSI herein all facts required by this Agreement and material to the liabilities,
assets, business, prospects, conditions, organization and operations (financial
and otherwise) of TRG. Neither this Agreement nor any exhibit or schedule hereto
nor any certificate, documents, instrument or information furnished or to be
furnished by TRG to CSI in connection with this Agreement or any of the
transactions contemplated hereby contained, or will contain, any untrue
statement of a material fact or omit or will omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which they are made, not misleading.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 10 of 23
- --------------------------------------------------------------------------------
ARTICLE 5
COVENANTS OF CSI AND THE CSI SHAREHOLDERS
5.1 ACCESS TO INFORMATION. CSI and the CSI Shareholders shall provide TRG,
its counsel, accountants and other representatives full access, from and after
the date of this Agreement, to all of CSI's properties, books, contracts,
commitments and records, and CSI shall furnish to TRG during such period all
such information concerning CSI and its affairs as TRG may reasonably request.
In addition, CSI shall make its officers, personnel and vendors available to
discuss with the designated representatives of TRG the substance of all
documents, financial statements and other information provided by CSI to TRG and
such other matters as TRG shall deem pertinent to the transactions contemplated
by this Agreement.
5.2 CONDUCT OF BUSINESS. Except as otherwise consented to in writing by
TRG, from the date of execution of this Agreement until the Closing Date or the
date of termination of this Agreement, the CSI Shareholders shall cause CSI to
and CSI shall:
(a) maintain and operate its properties in a manner consistent with
the efficient operation of its business and conduct its business only in the
ordinary course. It shall not be considered to be in the ordinary course of its
business to make any acquisition of direct or indirect ownership or control of
voting shares of any other corporation, or of any interest in any partnership,
joint venture, association or similar organization, other than shares acquired
in satisfaction of a security interest or of a debt previously contracted or in
a fiduciary or custodial capacity.
(b) punctually pay and discharge all taxes, assessments and
governmental charges lawfully imposed upon it or any of its property, or upon
the income and profits thereof; provided, however, that nothing herein contained
shall require CSI to pay or discharge any tax assessment or governmental charge
so long as the validity thereof shall be contested in good faith and by
appropriate proceedings unless property essential to the conduct of its business
will be lost, forfeited or materially endangered.
(c) maintain its existence as a corporation in good standing under the
laws of the State of Delaware and comply in all material respects with all laws,
governmental regulations , rules and ordinances, and judicial orders, judgments
and decrees applicable to its business or its properties, except while
contesting the validity of any of the foregoing in good faith and by appropriate
proceedings.
(d) notify TRG of the commencement of any material litigation against
CSI or of the existence of any adverse business conditions threatening the
continued, normal business operations of CSI or of any agreement, consent or
order involving CSI.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 11 of 23
- --------------------------------------------------------------------------------
(e) at all times maintain, preserve and keep its properties in good
repair, working order and condition in all material respects so that the
business carried on in connection therewith may be properly and advantageously
conducted.
(f) make every reasonable effort to fulfill its contractual
obligations and to maintain in effect its insurance as currently in effect.
(g) use its best efforts to preserve its business relations with its
present customers.
(h) use its best efforts to assure, to the extent within its control,
the satisfaction of the conditions to the effectiveness of the transactions
contemplated in this Agreement.
5.3 NEGATIVE COVENANTS. Prior to the Closing Date or the termination of
this Agreement, the CSI Shareholders shall not permit CSI to and CSI shall not,
unless TRG shall have otherwise consented in writing:
(a) amend its Articles of Incorporation or Bylaws, except to the
extent necessary to effect the transactions contemplated by this Agreement;
(b) issue, sell or otherwise dispose of any shares of its capital
stock or any of its securities convertible into or representing a right or
option to purchase any such shares or enter into other agreements to issue or
sell any shares of its capital stock or change the presently outstanding shares
of such stock into a greater or lesser number of shares either by way of a
recapitalization, reorganization, consolidation of shares or the like, or by way
of a merger or consolidation;
(c) purchase, redeem, retire or otherwise acquire or sell,
hypothecate, pledge or otherwise encumber, any shares of its capital stock;
(d) declare, set aside, make or pay stock or cash dividends on any
share of its capital stock or make any other distribution of assets to the
holders of any shares of its capital stock;
(e) institute a wage or salary adjustment increasing the base
compensation rate of any person whose annual base compensation rate on the date
hereof exceeds $25,000, pay a new employee an annual base compensation rate
exceeding $50,000, enter into any agreement, understanding or commitment,
written or oral, which obligates CSI, its successors or assigns, to pay, at any
time, to a new employee an annual base compensation rate exceeding $50,000, or
institute or agree to institute wage or salary adjustments which, taken either
individually or in the aggregate, increase by more than 10% the aggregate of the
annual base compensation rates paid by CSI on the date hereof to all of its
employees;
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 12 of 23
- --------------------------------------------------------------------------------
(f) Enter into or institute any employment contracts, including but
not limited to employee policy manual, deferred compensation, non-competition,
bonus, stock option, profit-sharing, pension, retirement, consultation after
retirement, payments upon retirement, severance agreement, incentive,
extraordinary vacation accrual, education payment or benefit, disability,
medical, life or other insurance plan or arrangement or, except as required by
applicable law or regulation, renew, amend, modify or terminate any such
arrangement or plan now in existence;
(g) enter into any agreement, understanding or commitment, written or
oral, with any other person which is in any manner inconsistent with obligations
of CSI arising under this Agreement; and
(h) make any loan, advance or commitment to extend credit to any of
its directors, officers or any affiliated or related persons of such directors
or officers; renew any outstanding loan or any outstanding commitment to extend
credit to any of its directors, officers or any affiliated or related persons of
such directors or officers; increase any outstanding loan to any of its
directors, officers or any affiliated or related persons of such directors or
officers; or enter into any agreement, understanding or commitment, written or
oral, which obligates CSI, its successors or assigns, to make any loan or
advance or payment to any of its directors or officers or to any affiliated or
related persons of any such directors or officers.
5.4 SHAREHOLDER STATUS/RESTRICTED STOCK. Each of the CSI Shareholders
exchanging shares hereunder acknowledge that they have had the opportunity to
conduct a review of the business, operations and prospects of TRG and the
management of TRG has provided any and all such information requested and
answered such questions regarding TRG as requested by the CSI Shareholders. The
CSI Shareholders have reviewed such information and conducted their own
independent due diligence of TRG to the extent desired by the CSI Shareholders
and are basing their investment decision with respect to the transactions
contemplated by this Agreement solely upon such independent review. The CSI
Shareholders are acquiring the TRG Shares hereunder for its own account and not
with a view to transfer or distribute such shares. The CSI Shareholders
acknowledge that the TRG Shares issued under the terms of this Agreement are
"Restricted Securities" as defined under Rule 144 and Rule 145 of the Act and
shall bear appropriate legends setting forth such restrictions. The CSI
Shareholders further acknowledge that the covenants set forth herein are being
relied upon by TRG with respect to its qualification for exemption from
registration of the TRG Shares being issued hereunder.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO THE OBLIGATION OF TRG TO CLOSE. The obligation of TRG to
consummate the transactions contemplated hereby shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 13 of 23
- --------------------------------------------------------------------------------
(a) TRG and its authorized agents shall have been given access to the
properties, books, records and reports of CSI; shall have conducted the review,
searches and tests of such information as TRG, in its reasonable discretion,
shall determine to conduct, and shall have, on or before August 31, 1999, set
forth in writing the statement that TRG is satisfied with the results of such
review, searches and test and intents to proceed with the transactions
contemplated by this Agreement;
(b) during the period from the date of the Current Financial
Statements to the Closing Date, there shall not have occurred any material
adverse change, other than as set forth on any schedule or exhibit hereto, in
the financial condition, business or operation of CSI taken as a whole, and TRG
shall have received at the Closing a certificate dated as of the Closing Date,
signed by the Chief Executive Officer and Chief Financial Officer if CSI to that
effect;
(c) each of the representations and warranties of CSI contained in
this Agreement shall, in all material respects, be true when made and as of the
Closing Date, with the same effect as though such representations and warranties
had been made on and as of such date; each of the covenants and agreements to
CSI to be performed on or prior to the Closing Date shall have been duly
performed in all material respects; and TRG shall have received at the Closing a
certificate to that effect dated as of the Closing Date and executed by the
Chief Executive Officer and Chief Financial Officer of CSI;
(d) any item listed in Schedule 3.10 hereto shall have been removed,
lifted or abated and there shall not have been issued or be in effect any order
of any court, agency or other tribunal of competent jurisdiction which has the
effect of prohibiting or prohibits the performance of the Agreement and the
transactions contemplated thereby or imposes limitations on the ability of CSI
to exercise and possess all of its rights, privileges, immunities and franchises
or to otherwise conduct its business (with limitations applicable only to all
similar entities engaged in similar business) as of the Closing Date;
(e) all proceedings, corporate or otherwise, to be taken in connection
with the transactions contemplated by this Agreement, including the shareholder
approvals of the transactions contemplated by this Agreement, shall have
occurred and all appropriate documents incident thereto as TRG may reasonably
request shall have been delivered to it, including, without limitation, the
receipt of appropriate consents from any third parties which may be necessary to
effect the transactions contemplated hereby;
(f) no action, suit or proceeding before any court or any governmental
or regulatory authority shall have been commenced or threatened, and no
investigation by any governmental or regulatory authority shall have been
commenced against the parties hereto or any of the affiliates, associates,
officers or directors, or any of them, seeking to restrain, prevent or change
the transactions contemplated hereby, or questioning the validity or legality of
any such transactions contemplated hereby, or questioning the validity or
legality of any such transactions, or seeking damages in connection with any of
such transactions; and
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 14 of 23
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(g) within 45 days after the execution of this Agreement, CSI shall
have received any requisite approvals to this Agreement from all third parties
referred to in the schedules attached hereto, having, under the terms of its
respective loan, lease and other agreements, the right to approve or reject this
Agreement or to cancel its agreement with CSI on or before the Closing; CSI
hereby represents that all such third parties have been disclosed to TRG as
required by this Agreement.
(h) CSI shall have sold at least $150,000 of new common stock, net of
commission or finder's fees.
(i) TRG shall enter into an anti-dilution agreement with Aztore for
all of Aztore's remaining shares acceptable to Aztore and CSI.
6.2 CONDITIONS TO THE CSI SHAREHOLDERS' AND CSI'S OBLIGATIONS TO CLOSE. The
obligation of CSI and the CSI Shareholders to consummate the transactions
contemplated hereby shall be subject to each of the representations and
warranties of TRG contained in this Agreement being, in all material respects,
true when made and as of the Closing Date, with the same effect as though such
representations and warranties had been made on and as of such date; each of the
covenants and agreements of TRG to be performed on or prior to the Closing Date
being duly performed in all material respects; and CSI shall have received at
the Closing a certificate, to that effect dated as of the Closing Date and
executed on behalf of TRG by its Chief Executive Officer and Chief Financial
Officer. In addition TRG shall meet the following conditions precedent:
(a) the TRG shareholders shall ratify the Agreement;
(b) the TRG shareholders shall vote to reverse TRG's common stock on a
five shares for one share basis with special effect for shareholders with less
than 500 shares;
(c) the TRG shareholders shall vote in favor of the modification of
TRG's outstanding warrants to create a unit exercisable into one share for $1.50
and ignoring the impact of the reverse split;
(d) the TRG shareholders shall ratify a new stock option plan covering
2,100,000 shares of common stock on a post reverse basis; and the CSI
Shareholders shall have received a legal opinion that the shares and warrants
held by the public are available for transfer without registration due to their
issuance under a bankruptcy plan.
ARTICLE 7
CLOSING
The Closing of this Agreement (the "Closing") shall take place on or before
September 1, 1999 at such place and time as TRG and CSI shall mutually agree,
such time and date being herein referred to as the "Closing Date".
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 15 of 23
- --------------------------------------------------------------------------------
ARTICLE 8
AMENDMENT AND WAIVER
8.1 AMENDMENT AND MODIFICATION. This Agreement may only be amended or
modified in writing signed by TRG and CSI with the approval of their respective
Board of Directors at any time prior to the Closing Date.
8.2 WAIVER. At any time prior to the Closing Date, the parties hereto may
by mutual agreement extend the time for the performance of any of the
obligations or other acts of any other party hereto. Any party may waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any schedule or document delivered pursuant hereto and waive
compliance by any other party with any of the covenants, agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the parties hereto.
ARTICLE 9
TERMINATION
9.1 TERMINATION BY PARTIES. This Agreement may be terminated prior to the
Closing Date:
(a) at the option of the respective Board of Directors of either TRG
or CSI, upon written notice to the other parties, if in the good faith opinion
of such Board of Directors any other party has breached any of the
representations and warranties or other covenants of this Agreement or the
failure to occur of any of the conditions precedent set forth in Article 6
hereof;
(b) by mutual agreement of the Board of Directors of TRG and CSI; and
(c) at the option of the respective Board of Directors of TRG or CSI,
if any litigation is instituted against CSI or TRG, the object of which is to
enjoin any party from proceeding with the transactions contemplated under this
Agreement or to seek damages against any party hereto or any officer, director
or agent of any party as a result of the transactions proposed under this
Agreement.
9.2 EFFECT OF TERMINATION. In the event this Agreement is terminated as
provided in Sections 9.1(b) and 9.1(c), this Agreement shall be void and of no
further force and effect, and, except as set forth herein and Section 9.3 below,
there shall be no further liability on the part of TRG or CSI or any of their
respective directors, officers or stockholders as a result of this Agreement. In
the event this transaction is terminated by any party or parties under the
provisions of Section 9.1(a), the parties agree that CSI shall pay TRG $10,000
in liquidated damages or for expense reimbursement. Article 10 and Section 9.3
shall survive any termination of this Agreement.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 16 of 23
- --------------------------------------------------------------------------------
9.3 CONFIDENTIAL INFORMATION. If this Agreement is terminated for any
reason, each of the parties hereto shall hold in confidence all information it
and its representative have obtained from any other party hereto and promptly
shall return or cause to be returned to the party supplying the same any and all
documents or summaries in the possession of such party or its representatives.
ARTICLE 10
POST CLOSING UNDERTAKING OF CSI SHAREHOLDERS
10.1 REGISTRATION STATEMENT. The CSI Shareholders shall cause TRG to file a
registration statement with the SEC registering all the shares received by new
investors in CSI plus up to 400,000 shares, after any reverse split is
implemented, held by Aztore or its affiliates. TRG shall bear the expense of
this registration but not any commission necessary to sell the shares. TRG shall
maintain the registration for six months after the effective date of such
registration statement.
10.2 TRADING. The CSI Shareholders shall cause TRG to pursue such actions
with brokers, regulatory bodies (such as the NASD) or reporting agencies such as
S&P to allow the shares in TRG to trade on the "pink sheets" and as soon as
reasonable, the OTC-Bulletin Board.
ARTICLE 11
MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties included or provided for herein or in any exhibit or schedule or
certificate or other document delivered pursuant to this Agreement shall survive
the Closing Date for a period of five years.
11.2 MATERIALITY. The parties hereto acknowledge that they have made
numerous representations and warranties in this Agreement, and hereby agree
that, notwithstanding any other provisions contained herein to the contrary, no
actionable claim, right or cause of action shall exist on the part of any party
against the other, including, in particular, any right to terminate this
Agreement as a result of a breach of any representations or warranties, unless
and until the dollar value of the aggregate of all such claims, rights or causes
of action shall exceed $5,000.
11.3 COUNTERPARTS. This Agreement may be executed in one or mare
counterparts, each of which shall be deemed to be an original, but all of which
shall be considered one and the same instrument.
11.4 ENTIRE AGREEMENT. This Agreement, and the exhibits and schedules
attached hereto, and the agreements contemplated by this Agreement contain the
entire agreement among the parties and supersede all prior agreements,
arrangements and understandings relating to the subject matter hereof. There are
nor written or oral agreements, understandings, representations or warranties
between the parties other than those set forth or referred to in this Agreement.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 17 of 23
- --------------------------------------------------------------------------------
11.5 EXPENSES. All legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
11.6 BROKER's OR FINDER'S COMMISSIONS. The parties warrant, each to the
other, that there are no broker's commissions, finder's fees or payments of any
nature due to any third party as a result of the consummation of this Agreement.
11.7 SECTION HEADINGS. The section headings contained in this Agreement are
for reference purpose only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.8 ASSIGNMENT. This Agreement shall not be assigned by any party without
the written consent of the other parties and any attempted assignment without
such written consent shall be null and void and without legal effect.
11.9 NOTICES. All notices hereunder shall be deemed given if in writing and
delivered personally or sent by telex, telegram, telecopier, registered mail or
certified mail (return receipt requested) to the parties at the following
addresses below (or at such other addresses as shall be specified by like
notice). Any notice, however given, shall be effective 5 days after it is sent.
If to TRG: The Rotherwood Group, Inc.
3710 East Kent Dr.
Phoenix, Arizona 85044
Attn: Mr. Michael S. Williams, President
If to CSI: CIMsoft, Inc.
7363 East Onyx Court
Scottsdale, AZ
Attn: Terry Gustafson
11.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona without regard to conflict of
law principles.
11.11 ILLEGALITY. In the event that any provision in this Agreement shall
be held to be invalid, illegal or enforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
impaired thereby.
11.12 EQUITABLE REMEDIES. The parties hereto hereby agree that the remedies
at law may be inadequate to protect against an Event of Default, and therefore,
the parties hereto hereby agree and consent to the granting of injunctive relief
or other forms of equitable relief by a court of competent jurisdiction or a
similar judicial body, whether temporary, preliminary or final, whether or not
actual damages can be shown.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 18 of 23
- --------------------------------------------------------------------------------
11.13 NUMBER OF DAYS. In computing the number of days for purposes of this
Agreement, all days will be counted, including Saturdays, Sundays and holidays;
provided, however, that if the final day of any time period falls on a Saturday,
Sunday or day that is a legal holiday in the State of Arizona, then the final
day will be deemed to be the next day that is not a Saturday, Sunday or day that
is a legal holiday in the State of Arizona.
11.14 PROVISIONS SEVERABLE. The provisions of this Agreement are
independent of and severable from each other, and no provision will be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
Further, if a court of competent jurisdiction determines that any provision of
this Agreement is invalid or unenforceable as written, the court may interpret,
construe, rewrite or revise such provision, to the fullest extent allowed by
law, so as to make it valid and enforceable, consistent with the intent of the
parties hereto.
11.15 CONSTRUCTION. The parties hereto hereby acknowledge and agree that
each party has participated in the drafting of this Agreement and that this
Agreement has been, to the extent it was felt necessary, reviewed by the
respective legal counsel for the parties hereto and that the rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party will not be applied to the interpretation of this Agreement. No
inference in favor of, or against, any party will be drawn from the fact that
one party has drafted any portion hereof.
11.16 ADVICE OF COUNSEL. Each Party hereby acknowledges that they are
entitled to and have been afforded the opportunity to consult legal counsel of
their choice regarding the terms and conditions and legal effects of this
Agreement, as well as the advisability and propriety thereof. Each party hereby
further acknowledges that having so consulted with legal counsel of their
choosing or having chosen not to consult, hereby waives any right to such legal
representation or effective representation and any right to raise or rely upon
the lack of representation or effective representation in any future proceedings
or in connection with any future claim.
11.17 HEADINGS. The headings contained in this Agreement are for
convenience only and will not affect the meaning or interpretation of this
Agreement.
11.18 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original as against any
party whose signature appears thereon, and all of which will together constitute
one and the same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, bears the signatures of all
of the parties reflected hereon as the signatories. Any photocopy of this
Agreement, with all signatures reproduced on one or more sets of signature
pages, will be considered for all purposes as if it were an executed counterpart
of this Agreement.
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 19 of 23
- --------------------------------------------------------------------------------
11.19 RECITALS, SCHEDULES AND EXHIBITS. The Recitals, Schedules and
Exhibits referred to in this Agreement shall be construed with and are an
integral part of this agreement to the same extent as if the same had been set
forth verbatim herein.
IN WITNESS WHEREOF, this Agreement has been executed by each of the parties
as of the day and year first above written.
THE ROTHERWOOD GROUP, INC. CIMSOFT INC.
/s/ Michael S. Williams /s/ Terry J. Gustafson
- ---------------------------------- ----------------------------------
Michael S. Williams, President
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 20 of 23
- --------------------------------------------------------------------------------
EXHIBIT AND SCHEDULE LIST
Schedule A CSI Shareholders Names, Address, Social Security Numbers
and CSI Shares held
Schedule 3.7(a) CSI Financial Statement
Schedule 3.7(b) CSI Additional Liabilities
Schedule 3.10 CSI Defaults
Schedule 3.11 Litigation
Schedule 3.12 Employee Contracts, Manual, Etc.
Schedule 3.15 Material Contracts and Insurance Policy
Schedule 3.16 Taxes due or unfiled or extended
Schedule 3.17 Encumbrances
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 21 of 23
- --------------------------------------------------------------------------------
SCHEDULE A
THE CSI SHAREHOLDERS
Alan R. Cornfield and Sharyn B. Cornfield JTWROS
30691 Tanglewood Trail
Farmington Hills
Michigan 48331
David R. Cornfield and Kristen L. Cornfield JTWROS
5805 Cochise Drive
West Bloomfield
Michigan 48322
James R. Cornfield and Viviette Hunt
821 Solar NW
Albuquerque
New Mexico 87107
Ida Epstein and Alan Epstein
1191 River Valley, Apt. 6
Flint
Michigan 48532
Jaime B. Goldberg
9933 NW Maring Dr.
Portland
Oregon 97229
Melville R. Goldberg and Audrey B. Goldberg JTWROS
5980 Pinetree Drive
West Bloomfield
Michigan 48322
Miriam Davenport and Melville R. Goldberg
5980 Pinetree Drive
West Bloomfield
Michigan 48322
Cesar A. Goulart
7420 Lantern Dr. NE
Albuquerque
New Mexico 87109
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 22 of 23
- --------------------------------------------------------------------------------
Terry J. Gustafson and Sherrie L. Tjonn JTWROS
7363 E. Onyx Court
Scottsdale
Arizona 85258
Phillip J. Kaplan and Rosan Kaplan JTWROS
2850 Middlebelt
West Bloomfield
Michigan 48324
Alex Kuhn and Dorothy Kuhn JTWROS
29077 Laurel Woods, Apt. #106
Southfield
Michigan 48034
Alan R. Lappin
1480 Fairway
Birmingham
Michigan 48009
Samuel E. Lappin, Trustee
Samuel E. Lappin Trust DTD 8/1/73
25871 Ivanhoe
Huntington Woods
Michigan 48070
Liberation Limited Partners
Robert H. Coven
1204 Summer NW
Albuquerque
New Mexico 87104
Marjorie S. Mellen, Trustee
Marjorie S. Mellen Revocable Trust UAD 12/17/98
5653 Powder Horn Drive
West Bloomfield
Michigan 48322
Neil D. Pivar
6301 Wilmington Dr. NE
Albuquerque
New Mexico 87111
<PAGE>
Acquisition Agreement between The Rotherwood Group, Inc. and
CIMSoft, Inc., dated August 4, 1999
page 23 of 23
- --------------------------------------------------------------------------------
Terry L. Simpson and Valerie C. Simpson JTWROS
18775 N. 95th Way
Scottsdale
Arizona 85255
Bruce D. Williams
1278 Camino Hermosa
Corrales
New Mexico 87048
Edwin Coe Williams
107 Hunt Club Lane
Newtown Square
Pennsylvania 19073
ARTICLES OF INCORPORATION
OF
ENTRADA SOFTWARE, INC.
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 Nevada (particularly Chapter 78 of the Nevada Revised Statutes and the
acts mandatory thereof and supplemental thereto), hereby declares that:
FIRST: The name of the corporation (hereinafter called the "CORPORATION")
is:
ENTRADA SOFTWARE, INC.
SECOND: The name of the person designated as the resident agent of the
Corporation and the street address of the resident agent where process may be
served upon the Corporation, which is also the mailing address of the resident
agent, are:
Capitol Document Services, Inc.
202 South Minnesota Street
Carson City, Nevada 89703
THIRD: The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under Chapter
78 of the Nevada Revised Statutes.
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is seventy million (70,000,000) shares of common
stock with a par value of one-tenth of one cent ($.001) per share and five
million (5,000,000) shares of preferred stock with a par value of one-tenth of
one cent ($.001) per share, undesignated as to class, powers, designations,
preferences, limitations, restrictions or relative rights. The board of
directors of the Corporation is authorized to fix and determine any class or
series of preferred stock and the number of shares of each class or series and
to prescribe the powers, designations, preferences, limitations, restrictions
and relative rights of any class or series established, all by resolution of the
board of directors and in accordance with Section 78.1955 of the Nevada Revised
Statutes, as the same may be amended and supplemented.
FIFTH: The governing board of this Corporation shall be known as directors,
and the number of directors may from time to time be increased or decreased in
such manner as shall be provided in the Bylaws of this Corporation.
<PAGE>
SIXTH: The first board of directors of the Corporation shall consist of
three directors whose names and street addresses are:
Bruce Williams
18775 North 95th Way
Scottsdale, AZ 85255
Terry L. Simpson
18775 North 95th Way
Scottsdale, AZ 85255
Michael S. Williams
3710 East Kent Drive
Scottsdale, AZ 85044
SEVENTH: The name and the mailing address of the incorporator are:
Thomas J. Morgan
40 North Central Avenue
Phoenix, Arizona 85004
EIGHTH: The personal liability of the directors and officers of the
corporation is hereby eliminated to the fullest extent permitted by the
provisions of the Nevada Revised Statues and particularly Section 78.037.1
thereof, as the same may be amended and supplemented.
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of Section 78.751 of the Nevada Revised Statutes, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under such section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by such section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified persons may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in any other
capacity while holding such office, and shall continue as to persons who have
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such persons. The
Corporation shall pay or otherwise advance all expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding
as such expenses are incurred and in advance of the final disposition of the
action, suit or proceeding, provided that the indemnified officer or director
undertakes to repay the amounts so advanced if a court of competent jurisdiction
2
<PAGE>
ultimately determines that such officer or director is not entitled to be
indemnified by the Corporation. Nothing herein shall be construed to affect any
rights to advancement of expenses to which personnel other than officers or
directors of the Corporation may be entitled under any contract or otherwise by
law.
TENTH: From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Nevada at the time in force may be added
or inserted in the manner and at the time prescribed by such laws, and all
rights at any time conferred upon the stockholders of the Corporation by these
Articles of Incorporation are granted subject to the provisions of this Article.
THE UNDERSIGNED, being the incorporator hereinabove named, for the purpose
of forming a corporation pursuant to Chapter 78 of the Nevada Revised Statutes,
does make and file these Articles of Incorporation and hereby declares and
certifies that the facts herein stated are true.
DATED this __________ day of August, 1999.
------------------------------
Thomas J. Morgan, Incorporator
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
August, 1999, by Thomas J. Morgan.
------------------------------
Notary Public
My Commission Expires:
------------------------------
3
CERTIFICATE OF DESIGNATION
1. NAME. The name of the corporation is Entrada Software, Inc. (the
"Corporation").
2. TEXT OF RESOLUTION. The Board of Directors (the "Board") of the
Corporation duly adopted a resolution in the form attached hereto as Exhibit A
and incorporated herein by this reference, establishing and designating the
Series A 10% Cumulative Convertible Preferred Stock of the Corporation, and
fixing and determining the relative preferences, privileges and voting powers of
the shares of such series and the restrictions and qualifications thereof, all
as set forth in such resolution.
3. STATEMENT AND DATE OF ADOPTION. The aforementioned resolution was duly
adopted by the Board effective as of August 25, 1999.
IN WITNESS WHEREOF, the undersigned hereby certify this _____ day of
____________ that the foregoing statement has been duly adopted by and on behalf
of the Corporation as set forth above.
------------------------------
ATTEST: Bruce Williams, President
- ------------------------------
Terry J. Gustafson, Secretary
ACKNOWLEDGEMENT
STATE OF ARIZONA )
)
COUNTY OF MARICOPA )
On this _____ day of _________________, 1999, before me the undersigned
Notary Public personally appeared Bruce Williams, known personally to me,
acknowledged that he was the duly executed and acting President of Entrada
Software, Inc., and, that the foregoing instrument was executed for the purposes
therein contained, on behalf of the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
------------------------------
Notary Public
------------------------------
My Commission Expires
<PAGE>
RESOLUTION OF DESIGNATION OF
SERIES A 10% CUMULATIVE CONVERTIBLE PREFERRED STOCK OF
ENTRADA SOFTWARE, INC.
RESOLVED, that pursuant to the authority granted to the Board
of Directors (the "BOARD") of Entrada Software, Inc. (the "COMPANY") and in
accordance with the provisions of the Articles of Incorporation of the Company,
the Board hereby creates a series of preferred stock designated as Series A 10%
Cumulative Convertible Preferred Stock with a Preference Amount equal to $1.00
per share, states the number thereof to be 250,000 shares and fixes the relative
rights, preferences and limitations of such shares as follows:
SECTION 1. DEFINITIONS.
For purposes of this Resolution, the following definitions shall apply:
1.1 ACCRUAL DATE shall mean each January 1st, April 1st, July, 1st and
October 1st following July 1, 1999 for so long as any Shares remain outstanding.
1.2 BOARD shall mean the Board of Directors of the Company.
1.3 COMMON STOCK shall mean the common stock, $.001 par value, of the
Company.
1.4 COMMON STOCK EQUIVALENTS shall mean any security convertible or
exercisable for Common Stock, directly or indirectly.
1.5 COMPANY shall mean Entrada Software, Inc., a Nevada corporation.
1.6 CONVERSION DATE shall mean the date on which the Shares are converted
to Common Stock whereby the rights of the Record Holders will cease with respect
to the Shares and certificates for shares of Common Stock will be issued to such
Record Holders who will become the record holders of record of the Shares of
Common Stock represented thereby.
1.7 CONVERSION PRICE shall mean the price of $.189
1.8 CONVERSION RIGHTS shall mean the rights of the Record Holder to convert
the Shares into shares of Common Stock as provided in Section 4.1.
1.9 CUMULATIVE DIVIDEND shall mean a dividend with respect to the Shares
accruing from the date of payment of consideration for the Shares, until the
Shares are converted or otherwise retired, at the rate of 10% per annum of the
Preference Amount ($.10 per Share per annum).
1.10 DISTRIBUTION shall mean the transfer of cash or property without
consideration or for consideration less than fair market value of the property
transferred, by way of dividend or otherwise (except a dividend in shares of the
capital stock of the Company), or the purchase or redemption of shares of
capital stock of the Company for cash or property, excluding the repurchase of
any shares from a terminated employee or consultant of the Company within terms
of the agreement providing such repurchase.
<PAGE>
1.11 LIQUIDATION EVENT shall mean any liquidation, dissolution or winding
up of the Company or the sale or transfer of all or substantially all of the
assets of the Company, whether voluntary or involuntary. This shall include a
merger where the common shareholders of the Company do not hold a majority of
the equity in the surviving entity.
1.12 PERSON shall mean an individual, a partnership, a joint venture, a
limited liability company, a corporation, a trust, an unincorporated
organization or government or any department or any agency thereof.
1.13 PREFERENCE AMOUNT shall mean $1.00 per Share.
1.14 RECORD HOLDER shall mean any Person who has legal title to the Series
A Preferred Stock as set forth by the stock ownership records of the Company as
of the particular record date.
1.15 REDEMPTION DATE shall mean the date fixed by the Board of Directors
for redemption of the Shares as provided in Section 3.2(b) which shall be not
less than 45 days following the date a Redemption Notice is mailed.
1.16 REDEMPTION NOTICE shall mean the written notice of the Board of
Directors' determination to redeem the Shares as provided in Section 3.2(a)
which shall be mailed postage prepaid to each Record Holder and which shall
specify the Company's intent to redeem the shares, the Redemption Date and the
Record Holder's Conversion Rights.
1.17 REDEMPTION PRICE shall mean the sum of (a) $1.00 per share plus (b)
all unpaid dividends accruing through the Redemption Date.
1.18 SECURITIES shall mean the Common Stock issuable on conversion of the
Series A Preferred Stock.
1.19 SENIOR PREFERRED STOCK shall mean any Preferred Stock series with a
conversion price at least 200% greater than the Conversion Price of the Series A
Preferred Stock with a dividend rate no greater then the Shares.
1.20 SERIES A PREFERRED STOCK shall mean all Series A Preferred Stock of
the Company, the rights and privileges as set forth in this Resolution.
1.21 SHARE shall mean a share of Series A Preferred Stock.
1.22 SHAREHOLDER shall mean any Person who has legal title to the Common
Stock, Series A Preferred Stock or any other series of preferred stock of the
Company designated with the right to receive liquidation proceeds of the Company
as set forth by the stock ownership records of the Company as of the particular
record date.
2
<PAGE>
SECTION 2. DIVIDENDS.
2.1 GENERAL OBLIGATION. When and as declared by the Board, the Company
shall pay dividends to the Record Holders. Except as otherwise provided herein,
Cumulative Dividends on each Share will accrue on each Accrual Date after
consideration for the Shares is received whether or not such dividends shall
have been declared or whether or not there are profits, surplus or other funds
of the Company legally available for the payment of such dividends, provided,
however, dividends will be paid only at such time as both (a) funds of the
Company are legally available for payment thereof, and (b) the Board declares
and authorizes such payment.
2.2 PRIORITY. Except as otherwise specifically provided herein, the Series
A Preferred Stock is senior to all other capital stock of the Company, including
the Common Stock and any other series or class of stock as may be designated by
the Board from time to time, in right of priority to Distributions paid as
dividends or otherwise. Except, as otherwise specifically provided herein, no
dividends or other Distributions with respect to any other series or class of
capital stock of the Company shall be declared or paid prior to the declaration
and payment in full of all Cumulative Dividends accrued as of the last preceding
Accrual Date.
SECTION 3. LIQUIDATION AND REDEMPTION
3.1. LIQUIDATION. Upon occurrence of a Liquidation Event, the Record
Holders will be entitled to be paid, except at otherwise specifically provided
herein, before any payment or other Distribution is made upon any other equity
securities of the Company, an amount in cash equal to the Preference Amount plus
any accrued but unpaid dividends thereon up to the date of occurrence of the
Liquidation Event. If upon any Liquidation Event, the assets of the Company to
be distributed among the Record Holders are insufficient to permit such payment
in full to each Record Holder, then the entire assets to be distributed will be
distributed ratably among such Record Holders. The Company will mail written
notices of a Liquidation Event not less than 20 days prior to the payment date
stated therein to each Record Holder.
3.2. COMPANY REDEMPTION.
(a) The Company may at any time it may lawfully do so, at the option of the
Board of Directors, redeem all, but not less than all of the Shares by paying in
cash therefor the Redemption Price.
(b) At least 45 days prior to the Redemption Date, a Redemption Notice
shall be mailed, to each Record Holder at such Record Holder's post office
address last shown on the records of the Company. On or after the Redemption
Date, each Record Holder of the Shares to be redeemed shall surrender the
certificate or certificates representing the Shares to the Company in the manner
and at the place designated in the Redemption Notice, and thereupon the
Redemption Price shall be paid to the order of the person whose name appears on
3
<PAGE>
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled. From and after the Redemption Date, unless there
shall be a default in the payment of the Redemption Price, all rights of the
Record Holders of the Shares, except the right to receive the Redemption Price
without interest upon the surrender of their certificate or certificates, shall
cease. Such Shares shall not thereafter be transferable on the books of the
Company or be deemed outstanding for any purpose whatsoever.
(c) On or prior to the Redemption Date, the Company shall deposit the
Redemption Price of all Shares then outstanding with a United States bank with
assets in excess of $100 million as a trust fund for the benefit of the Record
Holders. Any moneys so deposited by the Company relating to Shares converted
into Common Stock shall be returned to the Company on the 5th day after the
conversion. Any moneys remaining unclaimed at the expiration of one year
following the Redemption Date shall be returned to the Company upon its request
expressed in a resolution of the Company's Board of Directors.
3.3 DEFAULT ON THE REDEMPTION DEMAND. If the Company fails to pay the
Redemption Price when due, a majority of the Record Holders may claim a default
and after 10 days notice declare the Redemption Notice void.
SECTION 4. CONVERSION.
4.1 VOLUNTARY CONVERSION. Record Holders of Shares shall have the right to
convert the Shares at any time into shares of Common Stock in accordance with
the conversion ratio in Section 4.2 hereof.
4.2 CONVERSION RATIO. Upon conversion of the Series A Preferred Stock,
Record Holders shall receive the number of shares of Common Stock equal to (a)
the Preference Amount (b) divided by the Conversion Price, as adjusted from time
to time pursuant to Section 5 hereof.
4.3 MECHANICS OF CONVERSION. Each Record Holder who converts Shares into
Common Stock shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or of any transfer agent for the Series A
Preferred Stock and shall give written verification to the Company of the number
of Shares of Series A Preferred Stock being converted. Thereupon, the Company
shall promptly issue and deliver at its office to such Record Holder a
certificate or certificates for the number of shares of Common Stock to which
such Record Holder is entitled. The Company shall pay undeclared Cumulative
Dividends as accrued under the provisions of Section 2 on the Shares of Series A
Preferred Stock in cash within 30 days of surrender of the Share certificate and
conversion documentation.
4.4 FRACTIONAL SHARE. Any fractional shares of Common Stock issued upon the
conversion of Series A Preferred Stock shall be paid in cash.
SECTION 5. ANTI-DILUTION ADJUSTMENTS.
The Conversion Price and the number and kind of Shares shall be subject to
adjustment from time to time upon the happening of certain events as provided in
this Article 5.
4
<PAGE>
5.1 MECHANICAL ADJUSTMENTS.
(a) In the event the Company shall, at any time or from time to time prior
to the exercise of Conversion Rights in full, declare or pay any dividend on the
Common Stock payable in Common Stock or Common Stock Equivalents, or effect a
subdivision or combination of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock or
Common Stock Equivalents), then and in any such event, the Conversion Price
shall be adjusted by multiplying the Conversion Price prior to the adjustment by
the number of shares of Common Stock (including all Common Stock issuable in
exchange for Common Stock Equivalents, if applicable) outstanding immediately
prior to the effective time of such event and dividing the result by the number
of shares of Common Stock outstanding immediately after the effective time of
such event, effective in the case of such dividend, immediately after the close
of business on the record date for the determination of record holders of Common
Stock entitled to receive such dividend, or in the case of a subdivision or
combination, at the close of business immediately prior to the date upon which
such corporate action becomes effective.
(b) In the event the Company shall, at any time or from time to time prior
to the exercise of the Conversion Rights in full, makes, or fixes a record date
for the determination of record holders of Common Stock entitled to receive a
dividend or other distribution payable in capital stock of the Company other
than shares of Common Stock or Common Stock Equivalents, then and in each such
event provision shall be made so that the Record Holders receive upon exercise
of their Conversion Rights, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities which such Record Holders would
have received had they exercised their Conversion Rights prior to such effective
record date.
5.2 DILUTIVE ISSUANCE. Except as provided in Section 5.8 below, in the
event the Company shall issue additional shares of Common Stock or Common Stock
Equivalents without consideration or for a consideration per share less than the
effective Conversion Price in effect on the date of and immediately prior to
such issuance, then and in each such event the Conversion Price shall be reduced
concurrently with such issue to the Conversion Price determined as follows: (a)
the number of shares of Common Stock outstanding immediately prior to the
issuance that results in the adjustment, (b) shall be multiplied by such
Conversion Price in effect immediately prior to such issuance, (c) to the result
of (b) shall be added the actual consideration received for the additional
shares of Common Stock or Common Stock Equivalents, (d) the resulting total
shall be divided by the sum of (i) the number of shares of Common Stock
outstanding immediately prior to the issuance that results in the adjustment and
(ii) the number of additional shares of Common Stock resulting in the
adjustment. If the quotient thus obtained is less than the Conversion Price then
in effect, such quotient shall be the adjusted Conversion Price until further
adjusted as provided herein. For purposes of this Section 5.2, all Common Stock
Equivalents shall be deemed to have been exercised and converted for calculating
the number of shares of Common Stock outstanding.
5.3 CALCULATIONS. All calculations under this Section 5 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.
Notwithstanding anything in this Section 5 to the contrary, the Conversion Price
shall not be reduced to less than the then existing par value of the Common
Stock, if any, as a result of any adjustment made hereunder.
5
<PAGE>
5.4 NOTICES OF ADJUSTMENT. Whenever the Exercise Price is adjusted as
herein provided, the Company shall prepare and deliver forthwith to the Record
Holders a certificate signed by (a) its Chief Executive Officer or President;
and (b) any Vice President, Treasurer or Secretary. Such certificate shall set
forth the adjusted Conversion Price, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was made.
5.5 DIVIDENDS. Except as provided in Section 5.1 of this Agreement, no
adjustment in respect of any cash dividends shall be made during the period any
Shares remain outstanding.
5.6 PRESERVATION OF PURCHASE RIGHTS IN CERTAIN TRANSACTIONS. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock (other than a subdivision or combination of the outstanding
Common Stock and other than a change in the par value of the Common Stock) or in
case of any consolidation or merger of the Company with or into another
corporation (other than merger with a subsidiary in which the Company is the
continuing corporation and that does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of the Conversion Rights) or in the case of any
sale, lease, transfer or conveyance to another corporation of the property and
assets of the Company as an entirety or substantially as an entirety, as a
condition precedent to such transaction, the Company shall or shall cause such
successor or purchasing corporation, as the case may be, to execute an agreement
granting the Record Holders the right thereafter, to receive upon exercise of
the Conversion Rights the kind and amount of shares, and other securities and
property which the Record Holder would have owned or have been entitled to
receive after the happening of such reclassification, change, consolidation,
merger, sale or conveyance had the Shares been converted immediately prior to
such action. Such agreement shall provide for adjustments in respect of such
shares of stock, and other securities and property, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
5. In the event that in connection with any such reclassification, capital
reorganization, change, consolidation, merger, sale or conveyance, additional
shares of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for, or of, a security of the Company other than
Common Stock, any such issue shall be treated as an issue of Common Stock
covered by the provisions of Article 5. The provisions of this Section 5.6 shall
similarly apply to successive reclassifications, capital reorganizations,
consolidations, mergers, sales or conveyances.
5.7 DETERMINATION OF CONSIDERATION.
(a) For purposes of Section 5.2, the consideration received by the Company
for the issuance of any additional shares of Common Stock shall be computed as
follows:
(i) insofar as the consideration consists of cash, be computed at the
aggregate amount of cash received by the Company excluding amounts paid or
payable for accrued interest or accrued dividends;
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(ii) insofar as the consideration consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board; and
(iii) in the event additional shares of Common Stock are issued
together with other shares of securities or other assets of the Company for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in (A) and (B) above, as determined in good
faith by the Board.
(b) For the purpose of computing the initial adjustment of the Conversion
Price in the event the Company issues Common Stock Equivalents, the
consideration per share received by the Company for such securities or options
shall be determined by dividing:
(i) the total amount, if any, received or receivable by the Company as
consideration for the issue of such Common Stock Equivalents, plus the
minimum aggregate amount of additional consideration payable to the Company
upon the exercise or the conversion or exchange of such Common Stock
Equivalents, or in the case of options for convertible securities, the
exercise of such options for Common Stock Equivalents and the conversion or
exchange of such Common Stock Equivalents, by
(ii) the maximum number of shares of Common Stock issuable upon the
exercise of or the conversion or exchange of such Common Stock Equivalents.
(c) Any commission, fees, costs or other expenses related to the issuance
of any additional shares of Common stock or securities or options convertible
into shares of Common Stock shall not be included in the consideration received
by the Company.
5.8 EXCEPTIONS. The foregoing provisions of the Section 5 notwithstanding,
no adjustment shall apply to the issuance of (a) up to 2,100,000 of the shares
of Common Stock issued or reserved for issuance to employees, directors,
consultants or advisors of the Company pursuant to the Company's Incentive Stock
Option Plan and any other stock purchase, stock option or other agreements
approved by the Board since the Company's inception, or (b) any Common Stock or
other securities or options issued or issuable with approval of the Record
Holders holding a majority of the outstanding Shares, or (c) any Common Stock
issued or issuable for exercise of warrants existing at the date of adoption of
this Resolution, or (d) any Common Stock or other securities issued in
connection with a private placement or other financing transaction where the
price per share is at least equal to the Conversion Price, as adjusted to date.
SECTION 6. RESTRICTIONS.
6.1 PROHIBITED TRANSACTIONS. Without the affirmative vote of Record Holders
holding at least 67% of the Shares, the Company may not:
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(a) Authorize or issue, or obligate itself to issue, any other equity
security senior to or on a parity with the Series A Preferred, as to dividend,
liquidation preferences or conversion rights, other than the Senior Preferred
Stock;
(b) Increased or decrease (other than by redemption or conversion) the
total number of authorized shares of Series A Preferred Stock;
(c) Change, by amending Company's Articles of Incorporation, Bylaws, or
otherwise, any of the rights, preferences, privileges or limitations provided
for herein for the benefit of the Series A Preferred Stock.
(d) Make any Distribution, as a dividend, in liquidation or otherwise, in
preference to the Series A Preferred Stock.
6.2 SENIOR PREFERRED STOCK. All provisions herein to the contrary
notwithstanding, the Company may, upon resolution of the Board and prior notice
to the Record Holders, issue Senior Preferred Stock which may have preference to
dividends and distributions superior to the preferences of the Series A
Preferred Stock.
6.3 BUSINESS COMBINATIONS. Nothing herein shall be construed as limiting
the Company's ability to make any subdivision or combination of the outstanding
Common Stock or approving any merger, consolidation, asset sale or stock sale.
SECTION 7. RIGHT OF FIRST REFUSAL.
Each Record Holder shall be given the right to purchase such Record
Holder's pro rata portion of any equity securities offered by the Company (other
than the shares offered to employees and consultants under the Incentive Stock
Option Plan, shares issued in a merger or in connection with obtaining a lease
line, line of credit or a similar financing transaction) on the same terms and
conditions as the Company offers such securities to other potential investors.
The pro rata portion to which each Record Holder is entitled shall be calculated
based upon such Record Holder's percentage of ownership of the Company's
outstanding Common Stock assuming conversion of all outstanding convertible
securities and of the Shares as provided in Section 4 hereof.
SECTION 8. VOTING RIGHTS.
Each Share will vote with the shares of Common Stock as a single class on
all matters except the Shares shall vote separately as a single class (a) with
respect to all matters which affect rights, preferences or priority of the
Series A Preferred Stock or (b) as otherwise required by Nevada law. Upon any
vote with all the outstanding other capital shares as a single class, each Share
shall have the number of votes equal to (a) the Preference Amount (b) divided by
the Conversion Price then in effect. Record Holders shall be entitled to receive
notice of all matters submitted to a vote of shareholders. Any action to be
taken by the Record Holder may be taken without a meeting in accordance with
Nevada law.
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SECTION 9. INFORMATION RIGHTS.
The Company shall provide to all Record Holders an unaudited annual report
containing a balance sheet, income statement and statement of cash flows for the
fiscal year within 120 days after the end of each fiscal year. All Record
Holders shall have the right to inspect the records of the Company as provided
by Nevada law.
SECTION 10. NOTICES.
All notices referred to herein, except as otherwise expressly provided,
will be hand delivered or made by mail, postage prepaid, and will be deemed to
have been given when so hand delivered or mailed to the last known address of
the Record Holder as set forth on the stock ledger of the Company.
BYLAWS
OF
ENTRADA SOFTWARE, INC.
ARTICLE I
OFFICES AND CORPORATE SEAL
1.1 OFFICES. The registered office of the Corporation in the State of
Nevada shall be located at 202 South Minnesota Street. The Corporation may
conduct business and may have such other offices, either within or without the
state of incorporation, as the Board of Directors may designate or as the
business of the Corporation may from time to time require.
1.2 CORPORATE SEAL. A corporate seal is not required on any instrument
executed for the Corporation. If a corporate seal is used, it shall be either a
circle having on its circumference "Entrada Software, Inc.," and in the center
"Incorporated 1999 Nevada," or a circle having on its circumference the words
"Corporate Seal."
ARTICLE II
SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of the shareholders shall be
held at such time and on such day as shall be designated by the Board of
Directors, for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. At the annual meeting,
any business may be transacted and any corporate action may be taken, whether
stated in the notice of meeting or not, except as otherwise expressly provided
by statute or the Articles of Incorporation.
2.2 SPECIAL MEETINGS. The Chairman of the Board may and the Chairman of
the Board or the Secretary shall, on written request of two members of the Board
of Directors or of shareholders owning not less than 20 percent of the
outstanding voting shares of the Corporation, call special meetings of the
shareholders, for any purpose or purposes unless otherwise prescribed by
statute. The written request and the notice of the special meeting shall state
the purposes of the meeting and the business transacted at the meeting shall be
limited to the purposes stated in the notice.
2.3 PLACE OF MEETING. The Board of Directors and the Chairman of the
Board or the Secretary shall fix the time and place of all meetings of
shareholders.
2.4 NOTICE OF MEETING. Written notice stating the place, day and hour
of the meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 10 nor more than
60 days before the date of the meeting either personally, by facsimile or by
mail to each shareholder 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 shareholder at this address as it appears on the stock
transfer books of the Corporation, with postage thereon prepaid.
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2.5 FIXING DATE FOR DETERMINATION OF SHAREHOLDERS OF RECORD. To
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to express written 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 shares
or for the purpose of any other lawful action, the Board of Directors of the
Corporation may fix, in advance, a record date which shall not be more than 60
days nor less than 10 days before the date of such meeting, nor more than 60
days nor less than 10 days prior to any other action.
2.6 SHAREHOLDER LIST. The officer or agent having charge of the stock
transfer books shall prepare, at least 10 days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order with the
address of and the number of shares held by each shareholder of record.
2.7 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 shareholders. All shares represented and entitled to vote on any
single subject matter, which may be brought before the meeting shall be counted
for the purposes of a quorum. Only those shares entitled to vote on a particular
subject matter shall be counted for the purposes of voting on that subject
matter. Business may be conducted once a quorum is present and may continue
until adjournment of the meeting notwithstanding the withdrawal or temporary
absence of sufficient shares to reduce the number present to less than a quorum.
Unless otherwise required by law, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on a subject matter shall
constitute the act of the shareholders; provided, however, that if the shares
then represented are less than required to constitute a quorum, the affirmative
vote must be such as would constitute a majority if a quorum were present and,
provided further, that the affirmative vote of the majority of the shares then
present is sufficient in all cases to adjourn the meeting.
2.8 PROXIES. At all meetings of shareholders, a shareholder may vote in
person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. No proxy shall be valid after six months from the
date of its execution, unless otherwise provided in the proxy, but in no event
shall the proxy be valid for greater than seven years. Subject to these
restrictions, any proxy properly created is not revoked and continues in full
force and effect until another instrument or transmission revoking it or a
properly created proxy bearing a later date is filed with or transmitted to the
Secretary.
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2.9 VOTING RIGHTS. Unless otherwise provided in the Articles of
Incorporation or by the Nevada Revised Statutes, each outstanding share of
capital stock shall be entitled to one vote on each matter submitted to a vote
at a meeting of shareholders. Directors shall be elected by a plurality of the
votes cast at the election and cumulative voting shall not be permitted. The
candidates receiving the highest number of votes up to the number of directors
to be elected shall be elected.
2.10 VOTING OF SHARES. The following additional provisions shall apply
to the voting of shares:
(a) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
elections of directors of such other corporation is held by this Corporation,
shall neither be entitled to vote nor counted for quorum purposes. Nothing in
this paragraph shall be construed as limiting the right of this Corporation to
vote its own stock held by it in a fiduciary capacity.
(b) A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact. In the event any instrument granting a proxy shall designate
two or more persons to act as proxy, the majority of such persons present at the
meeting, or if only one should be present then that one, shall have and may
exercise all the powers conferred by such instrument upon all the persons so
designated, unless such instrument shall otherwise provide. No proxy shall be
valid after 11 months from the date of its execution, unless otherwise provided
in the proxy. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient at law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the share itself or an interest in the Corporation generally. A
proxy is not revoked by the death or incapacity of the maker unless, before the
vote is counted or quorum is determined, written notice of the death or
incapacity is given to the Corporation. A proxy may be revoked by an instrument
expressly revoking it, a duly executed proxy bearing a later date, or by the
attendance of the person executing the proxy at the meeting and his voting of
his shares personally.
(c) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxy as the bylaws
of such other corporation may prescribe or, in the absence of such provision, as
the Board of Directors of such other corporation may determine. The Secretary of
the Corporation shall have the authority to require that such documents be filed
with the Secretary of the Corporation as the Secretary shall reasonably require
in order to verify the authority and power of any such officer, agent or proxy
to vote the shares of the Corporation held by any such other corporation.
(d) Shares held by an administrator, executor, guardian,
conservator or personal representative may be voted by him, either in person or
by proxy, without a transfer of such shares into his name. Shares standing in
the name of a trustee, other than a trustee in bankruptcy, may be voted by him,
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either in person or by proxy, but no such trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name. Shares
standing in the name of a receiver, trustee in bankruptcy, or assignee for the
benefit of creditors may be voted by such representative, either in person or by
proxy. Shares held by or under the control of such a receiver or trustee may be
voted by such receiver or trustee, either in person or by proxy, without the
transfer thereof into his name if authority so to do be contained in an
appropriate order of the court by which such receiver or trustee was appointed.
The Secretary of the Corporation shall have the authority to require that such
documents be filed with the Secretary of the Corporation as the Secretary shall
reasonably require in order to verify the authority and power of such
representative or other fiduciary to vote the shares of the Corporation
registered in the name of such other person.
(e) A shareholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into the name of the
pledgee or unless the pledgee is specifically empowered by such shareholder to
vote the shareholder's shares.
(f) If shares stand in names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety of tenants by community property or otherwise, or if two or more
persons have the same fiduciary relationship respecting the same shares, unless
the Corporation is given written notice to the contrary and is 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 have the
following effect:
(i) If only one votes, his acts bind.
(ii) If more than one votes, the act of the majority so
voting binds all.
(iii) If more than one votes, but the vote is evenly
split on any particular matter, each faction may vote the shares in question
proportionally.
2.11 NOMINATIONS OF DIRECTORS. Nomination for election to the Board of
Directors of the Corporation at a meeting of shareholders may be made by the
Board of Directors or on behalf of the Board by a nominating committee appointed
by the Board, or by any shareholder of the Corporation entitled to vote for the
election of directors at such meeting. Such nominations, other than those made
by or on behalf of the Board, shall be made by notice in writing delivered or
mailed by United States mail, first class postage prepaid, to the Secretary of
the Corporation, and received by him not less than 30 days nor more than 60 days
prior to any meeting of shareholders called for the election of directors;
PROVIDED, HOWEVER, that if less than 35 days' notice of the meeting is given to
shareholders, such nomination shall have been mailed or delivered to the
Secretary of the Corporation not later than the close of business on the seventh
day following the day on which the notice of meeting was mailed. The foregoing
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notwithstanding, if the Corporation is subject to the proxy solicitation rules
under the Securities Exchange Act of 1934, the timing of nominations by
shareholders shall be as determined by the Board of Directors in compliance with
such rules. Such notice shall set forth as to each proposed nominee who is not
an incumbent director (a) the name, age, business address and telephone number
and, if known, residence address of each nominee proposed in such notice; (b)
the principal occupation or employment of each such nominee; (c) the number of
shares of stock of the Corporation which are beneficially owned by each such
nominee and by the nominating shareholder; and (d) any other information
concerning the nominee that must be disclosed with respect to nominees in proxy
solicitations pursuant to the rules, regulations and forms then promulgated
under Section 14(a) of the Securities Exchange Act of 1934. The chairman of the
meeting may, if the facts warrant, determine that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
2.12 INFORMALITIES AND IRREGULARITIES. All informalities and
irregularities in any call or notice of a meeting, or in the areas of
credentials, proxies, quorums, voting and similar matters, will be deemed waived
if no objection is made at the meeting.
ARTICLE III
BOARD OF DIRECTORS
3.1 GENERAL POWERS. The business and affairs of the Corporation shall
be managed by its Board of Directors. The directors shall in all cases act as a
Board, and they may adopt such rules and regulations for the conduct of their
meetings and the management of the Corporation, as they may deem proper, not
inconsistent with these Bylaws and the laws of Nevada.
3.2 NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors shall
consist of a minimum of three, and a maximum of nine, directors. The Board of
Directors shall have the authority to fix the number of directors comprising the
Board within the limits set forth above; PROVIDED, HOWEVER, that no decrease in
the number of directors comprising the Board shall affect the term of any
incumbent director. Each director shall hold office until the next annual
meeting of shareholders and until his successor shall have been elected and
qualified, or until his earlier resignation or removal. Directors need not be
residents of the State of Nevada or shareholders of the Corporation.
3.3 ANNUAL MEETINGS. The Board of Directors shall hold its annual
meeting immediately following the annual meeting of shareholders at the place
announced at the annual meeting of shareholders. No notice is necessary to hold
the annual meeting, provided a quorum is present. If a quorum is not present,
the annual meeting shall be held at the next regular meeting or as a special
meeting.
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3.4 REGULAR MEETINGS. The Board of Directors may hold regular meetings
without notice at the times and places determined by the Board of Directors.
3.5 SPECIAL MEETINGS. The Chairman of the Board or Secretary may, and
on written request of two directors shall, call special meetings of the Board of
directors on not less than two days' notice to each director personally or by
facsimile or telephone, or on not less than five days' notice to each director
by mail.
3.6 TELEPHONIC MEETINGS. Regular or special meetings of the Board of
Directors may be held at any place within or without State of Nevada and may be
held by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
their participation in such a meeting to constitute presence in person.
3.7 WAIVER OF NOTICE. Attendance of a director at a meeting shall
constitute waiver of notice unless the director objects at the commencement of
the meeting that the meeting is not lawfully called or convened. Any director
may waive notice of any meeting by executing a written waiver of notice.
3.8 QUORUM. A majority of the directors then serving shall constitute a
quorum for the transaction of business, but if less than said number is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice. The act of a majority of the directors
present at a meeting at which a quorum is present, unless otherwise provided by
the Nevada Revised Statutes, these Bylaws or the Articles of Incorporation,
shall be the act of the Board of Directors.
3.9 NEWLY CREATED DIRECTORSHIPS. The Board of Directors may increase
the number of directors by a majority vote. Newly created directorships
resulting from an increase in the number of directors may be filled by a
majority vote of the directors then in office. The term of any newly created
directorship shall be determined by the Board of Directors.
3.10 REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose and by a vote of the holders of not less than
two-thirds of the shares then entitled to vote at an election of the directors,
any director or the entire Board of Directors may be removed, with or without
cause.
3.11 VACANCIES. Directors shall be elected to fill any vacancy by a
majority vote of the remaining directors, though not less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his or her successor.
3.12 COMMITTEES OF THE BOARD. The Board of Directors, by resolution
adopted by a majority of the Board of Directors, may designate from among its
members an executive committee and one or more other committees each of which,
to the extent provided in such resolution and permitted by the Nevada Revised
Statutes, shall have and may exercise all the authority of the Board. The Board,
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with or without cause, may dissolve any such committee or remove any member
thereof at any time. The designation of any such committee and the delegation
thereto of authority shall not operate to relieve the Board, or any member
thereof, of any responsibility imposed by law. No committee shall have the power
or authority to amend the Articles of Incorporation or Bylaws; adopt a plan of
merger or consolidation, recommend to the shareholders the sale, lease, or other
disposition of all or substantially all the property and assets of its business,
or recommend to the shareholders a voluntary dissolution of the Corporation.
Each committee shall keep regular minutes of its meetings.
3.13 ACTION WITHOUT A MEETING. Any action required or permitted to be
taken by the Board of Directors at a meeting may be taken without a meeting if
all directors consent thereto in writing. Such consent shall have the same
effect as a unanimous vote. The writing or writings shall be filed with the
minutes of the Board of Directors.
3.14 COMPENSATION. The Corporation may pay, or reimburse the directors
for, the expenses of attendance at each meeting of the Board of Directors. The
Corporation may pay the directors a fixed sum for attendance at each meeting of
the Board of Directors and a stated salary as director or directors may be
granted stock options or a combination thereof. The Board of Directors shall
establish and set forth in its minutes the amount or rate of compensation of
directors.
3.15 PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file a
written dissent to such action with the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered or certified
mail to the Secretary of the Corporation within three business days after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV
OFFICERS
4.1 NUMBER. The officers of the Corporation shall be a Chairman of the
Board, a President, a Secretary and a Treasurer, each of whom shall be appointed
by the Board of Directors. Such other officers, assistant officers and agents as
deemed necessary may be elected or appointed by the Board of Directors. Any two
or more offices may be held by the same person, except the offices of President
and Secretary.
4.2 TENURE AND DUTIES OF OFFICERS. The officers of the Corporation to
be appointed by the Board of Directors at the annual meeting of the Board of
Directors. Officers shall hold office at the pleasure of the Board and shall
exercise the power and perform the duties determined from time to time by the
Board of Directors until his successor shall have been duly elected and shall
have qualified or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided.
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4.3 REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed by the affirmative vote of a majority of the directors,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed.
4.4 CHAIRMAN OF THE BOARD. The Chairman of the Board shall be the chief
executive officer of the Corporation and, subject to the control of the
directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the shareholders and of the directors and in general shall perform all duties
incident to the office of Chairman of the Board and such other duties as may be
prescribed by the directors from time to time. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board shall have full power and
authority on behalf of the Corporation to attend and to act and to vote at any
meeting of security holders of other corporations in which the Corporation may
hold securities. At such meeting, the Chairman of the Board shall possess and
may exercise any and all rights and powers incident to the ownership of such
securities which the Corporation might have possessed and exercised if it had
been present. The Board of Directors from time to time may confer similar powers
upon any other person or persons.
4.5 PRESIDENT. In the absence of the Chairman of the Board or in the
event of his inability or refusal to act, the President shall perform the duties
of the Chairman of the Board, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Chairman of the Board.
4.6 VICE PRESIDENTS. There shall be as many vice presidents as the
Board of Directors chooses to appoint. Vice Presidents shall perform the duties
assigned to them by the Board of Directors of the Chairman of the Board or the
President. Any one of the vice Presidents, as authorized by the Board of
Directors, shall have all the powers and perform all the duties of President if
the President is temporarily absent or unable to act.
4.7 SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and the shareholders and shall keep the minutes of the shareholders'
and of the directors' meetings in one or more books provided for that purpose,
see that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law, have charge of the corporate records, books, and
accounts, and keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder, have general
charge of the stock transfer books of the Corporation, sign with the Chairman of
the Board certificates for shares of the Corporation, and in general perform all
duties incident to the office of Secretary, and perform such other duties as
from time to time may be assigned to him by the Board of Directors or the
Chairman of the Board.
4.8 TREASURER. The Treasurer shall be the chief financial officer of
the Corporation. If required by the Board of Directors, the Treasurer shall give
a bond for the faithful discharge of his duties in such sum and with such surety
as the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected by the Board
of Directors and in general perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Chairman of the Board or by the directors.
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ARTICLE V
CERTIFICATES FOR SHARES AND THEIR TRANSFER
5.1 CERTIFICATES FOR SHARES.
(a) Certificates representing the shares of the Corporation shall be in
such form as shall be determined by the Board of Directors. Such certificates
shall be signed by the Chairman of the Board or President and by the Secretary
or an Assistant Secretary of the Corporation. The signatures of such officers
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar, other than the Corporation itself
or an employee of the Corporation. No certificate shall be issued for any share
until such share is fully paid.
(b) If the Corporation is authorized to issue shares of more than one
class, every certificate representing shares issued by the Corporation shall set
forth or summarize upon the face or back of the certificate, or shall state that
the Corporation will furnish to any shareholder upon request and without charge,
a full statement of the designations, preferences, limitations and relative
rights of the shares of each class authorized to be issued, together with the
variations in the relative rights and preferences between the various shares.
(c) Each certificate representing shares shall state upon the face
thereof (i) that the Corporation is organized under the laws of the State of
Nevada, (ii) the name of the person to whom issued, (iii) the number, class and
designation of the series, if any, which the certificate represents, and (iv)
the par value of each share represented by the certificate or a statement that
the shares are without par value; and the (v) date of issue.
(d) Any restriction on the right to transfer shares and any reservation
of lien on the shares shall be noted on the face or the back of the certificate
by providing (i) a statement of the terms of such restriction or reservation,
(ii) a summary of the terms of such restriction or reservation and a statement
that the Corporation will mail to the shareholder a copy of such restrictions or
reservations without charge within five days after receipt of written notice
therefor, (iii) if the restriction or reservation is contained in the Articles
of Incorporation or Bylaws of the Corporation, or in an instrument in writing to
which the Corporation is a party, a statement of that effect and a statement
that the Corporation will mail to the shareholder a copy of such restriction or
reservation without charge within five days after receipt of written request
therefor, or (iv) if each such restriction or reservation is contained in an
instrument in writing to which the Corporation is not a party, a statement to
that effect.
(e) Each certificate for shares shall be consecutively numbered or
otherwise identified.
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5.2 TRANSFERS OF SHARES.
(a) Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the Corporation.
(b) The Corporation shall be entitled to treat the holder of record of
any shares as the holder in fact thereof, and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share on the
part of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of Nevada.
5.3 LOST, DESTROYED, MUTILATED, OR STOLEN CERTIFICATES. The holder of
any shares of the Corporation shall immediately notify the Corporation of any
loss, destruction, mutilation, or theft of the certificate therefor, and the
Board of Directors, may, in its discretion, cause a new certificate or
certificates to be issued to him, in case of mutilation of the certificate, upon
the surrender of the mutilated certificate, or, in case of loss, destruction, or
theft of the certificate, upon a satisfactory proof of such loss, destruction,
or theft, and, if the Board of Directors shall so determine, the submission of a
properly executed lost security affidavit and indemnity agreement, or the
deposit of a bond in such form and in such sum, and with such surety or
sureties, as the Board may direct.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION. Every person who was or is a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or a person of whom he is the legal representative is or was
a director or officer of the Corporation or is or was serving at the request of
the Corporation or for its benefit as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust or
other enterprise, shall be indemnified and held harmless to the fullest extent
10
<PAGE>
legally permissible under the general corporation law of the State of Nevada
from time to time against all expenses, liability and loss (including attorneys'
fees, judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. The Board of Directors may
in its discretion cause the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding to be paid by the
Corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
Corporation. No such person shall be indemnified against, or be reimbursed for,
any expense or payments incurred in connection with any claim or liability
established to have arisen out of his own willful misconduct or gross
negligence. Any right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter
acquire and, without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any bylaws,
agreement, vote of stockholders, provision of law or otherwise, as well as their
rights under this Article VI.
6.2 INSURANCE. The Board of Directors may cause the Corporation to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the Corporation would
have the power to indemnify such person.
6.3 RIGHT TO AMEND INDEMNIFICATION PROVISIONS. The Board of Directors
may from time to time adopt further bylaws with respect to indemnification and
may amend these and such bylaws to the full extent permitted by the General
Corporation Law of the State of Nevada.
ARTICLE VII
REPEAL, ALTERATION OR AMENDMENT
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted by a vote of the majority of the Board of Directors.
11
<PAGE>
CERTIFICATE
I, Terry J. Gustafson, the duly elected, qualified and acting Secretary
of ENTRADA SOFTWARES. INC., a Nevada corporation, do hereby certify that the
above and foregoing are the Bylaws of this Corporation duly and regularly
adopted by the Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand effective as of the
25th day of August, 1999.
--------------------------------
Terry J. Gustafson, Secretary
12
[Front]
Number ____________ Shares _________
ENTRADA SOFTWARE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
70,000,000 AUTHORIZED SHARES $.001 PAR VALUE
CUSIP _________
SEE REVERSE
FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT ________________________________________
IS THE OWNER OF ____________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF $.001 PAR VALUE COMMON STOCK OF
ENTRADA SOFTWARE, INC.
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 unless countersigned by the Transfer Agent and
Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Corporation.
Dated: ________________
- ------------------------------- -------------------------------
Secretary President
[SEAL]
[Back]
ENTRADA SOFTWARE, INC.
TRANSFER FEE: $20.00 PER NEW CERTIFICATE ISSUED
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 under
(Cust)(Minor)
TEN ENT - as tenants by the entireties Uniform Gifts to Minor Act
JT TEN - as joint tenants with right
of Survivorship and not as
tenants in common (State)
<PAGE>
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 TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________ Shares
of Common Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint attorney-in-fact to transfer the said stock on the books
of the within-named Corporation, with full power of substitution in the
premises.
__________________
Dated
________________________________________________
________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
Signature(s) Guaranteed:
________________________________________________
The signature(s) must 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
17Ad-15.
COMMERCIAL LEASE
THIS LEASE is made on the 22nd of August, 1999
The landlord hereby agrees to lease to the Tenant, and the Tenant hereby agrees
to hire and take from the Landlord, the Leased Premises described below pursuant
to the terms and conditions specified herein:
LANDLORD: Nader F. Arvanaghi TENANTS: Cim Soft, INC., DBA
Entrada Software, Inc.
Address: 11259 E. Via Linda #100-951 Address: 18775 N. 45 Way
Scottsdale, AZ 85259 Scottsdale, AZ 85255
1. LEASED PREMISES. The Leased Premises are those premises described as:
7825 E. Gelding Dr. Scottsdale, AZ 8260 Portion of first floor, Suite 102 and
103 approximately 2750 square feet +/- with load
2. TERM. The term of the Lease shall be for a period of (SEE ADDENDUM A)
commencing on the (SEE ADDENDUM A) and ending on the (SEE ADDENDUM A) unless
sooner terminated as hereinafter provided. If Tenant remains in possession of
the Leased Premises with the written consent of the Landlord after the lease
expiration date stated above, the Lease will be converted to a month-to-month
Lease and each party shall have the right to terminate the Lease by giving at
least one months' prior written notice to the other party.
3. RENT. The Tenant agrees to pay the ANNUAL RENT of (SEE ADDENDUM A) in
advance on the first day of each and every calendar month during the full term
of this Lease.
(SEE ADDENDUM A) payable in equal installments (SEE ADDENDUM A) in advance on
the first day of each and every calendar month during the full term of this
Lease.
4. RENT ADJUSTMENT. If in any tax year commencing with the fiscal year N/A the
real 0estate taxes on the land and buildings, of which the Leased Premises are a
part, are in excess of the amount of the real estate taxes thereon for the
fiscal year (hereinafter called the "Base Year"), Tenant will pay to Landlord as
additional rent hereunder, when and as designated by notice in writing by
Landlord. N/A percent of such excess that may occur in each year of the term of
this Lease or any extension or renewal thereof and proportionately for any part
of a fiscal year.
5. SECURITY DEPOSIT. The sum of (Thirteen Thousand Sixty two and 50/100)
13,062.50 is deposited by the Tenant with the Landlord as security for the
faithful performance of all the covenants and conditions of the lease by the
said Tenant. If the Tenant faithfully performs all the covenants and conditions
on his part to be performed, then the sum deposited shall be returned to the
Tenant.
<PAGE>
6. DELIVERY OF POSSESSION. If for any reason the Landlord cannot deliver
possession of the leased property to the Tenant when the lease term commences,
this Lease shall not be voided or voidable, nor shall the Landlord be liable to
the Tenant for any loss or damage resulting therefrom. However, there shall be
an abatement of rent for the period between the commencement of the lease term
and the time when the Landlord delivers possession.
7. USE OF LEASED PREMISES. The Leased Premises may be used only for the
following purpose:
Office space for computer software
8. UTILITIES. Except as specified below, the Tenant shall be responsible for
all utilities and services that are furnished to the Lease Premises. The
application for and connecting of utilities, as well as all services, shall be
made by and only in the name of the Tenant.
9. CONDITION OF LEASED PREMISE: MAINTENANCE AND REPAIR. The Tenant
acknowledges that the Leased Premises are in good order and repair. The Tenant
agrees to take good care of and maintain the Leased Premises in good condition
throughout the term of the Lease.
The Tenant, at his expense, shall make all necessary repairs and replacements to
the Leased Premises, including the repair and replacement of pipes, electrical
wiring, heating and plumbing systems, fixtures and all other systems and
appliances and their appurtenances. The quality and class of all repairs and
replacements shall be equal to the original worth. If Tenant defaults in making
such repairs or replacements, Landlord may make them for Tenant's account, and
such expenses will be considered additional rent.
10. COMPLIANCE WITH LAWS AND REGULATIONS./ Tenant, at its expense, shall
promptly comply with all federal, state, and municipal laws, orders, and
regulations, and with all lawful directives of public officers, which impose any
duty upon it or Landlord with respect tot he Leased Premises. The tenant at its
expense, shall obtain all required licenses or permits for the conduct of its
business within the terms of this lease, or for the making of repairs,
alternations, improvements, or additions. Landlord, when necessary, will join
with the Tenant in applying for all such permits of licenses.
11. ALTERATIONS AND IMPROVEMENTS. Tenant shall not make any alterations,
additions, or improvements to, or install any fixtures on, the Leased Premises
without Landlord's prior written consent. If such consent is given, all
alterations, additions, and improvements made, and fixtures installed, by Tenant
shall become Landlord's property upon the expiration or sooner termination of
this Lease. Landlord may, however, require Tenant to remove such fixtures, at
Tenant's cost, upon termination hereof.
12. ASSIGNMENT/SUBLETTING RESTRICTIONS. Tenant may not assign this agreement or
sublet the Leased Premises without the prior written consent of the Landlord.
Any assignment, sublease or other purported license to use the Leased Premises
by Tenant without the Landlord's consent shall be void and shall (at Landlord's
option) terminate this Lease.
<PAGE>
13. INSURANCE.
(I) BY LANDLORD. Landlord shall at all times during the term of this Lease,
at its expense, insure and keep in effect on the building in which the Leased
Premises is located fire insurance with extended coverage. The Tenant shall not
permit any use of the Leased Premises which will make voidable any insurance on
the property of which the Leased Premises are a part, or on the contents of said
property or which shall be contrary to any law or regulation from time to time
established by the applicable fire insurance rating association. Tenant shall on
demand reimburse the Landlord, and all other tenants, all extra insurance
premiums caused by the Tenant's use of the premises.
(II) BY TENANT. Tenant shall, at its expense, during the term hereof,
maintain and deliver to Landlord public liability and property damage and plate
glass insurance policies with respect to the Leased Premises. Such policies
shall name the Landlord and Tenant as insureds, and have limits of at least
$1,000,000.00 for injury or death to any one person and $500,000.00 for any one
accident, and $500,000.00 with respect to damage to property and with full
coverage for plate glass. Such policies shall be in whatever form and with such
insurance companies as are reasonably satisfactory to Landlord, shall name the
Landlord as additional insured, and shall provide for at least ten days' prior
notice to Landlord of cancellation.
14. INDEMNIFICATION OF LANDLORD. Tenant shall defend, indemnify, and hold
Landlord harmless from and against any claim, loss, expense or damage to any
person or property in or upon the Leased Premises, arising out of Tenant's use
or occupancy of the Leased Premises, or arising out of any act or neglect of
Tenant or its servants, employees, agents, or invitees.
15. CONDEMNATION. If all or any part of the Leased Premises is taken by eminent
domain, this lease shall expire on the date of such taking, and the rent shall
be apportioned as of the date. No part of any award shall belong to Tenant.
16. DESTRUCTION OF PREMISES. If the building in which the Leased Premises is
located is damaged by fire or other casualty, without Tenant's fault, and the
damage is so extensive as to effectively constitute a total destruction of the
property or building, this Lease shall terminate and the rent shall be
apportioned to the time of the damage. In all other cases of damage without
Tenant's fault, Landlord shall repair the damage without reasonable dispatch,
and if the damage has rendered the Leased Premises wholly or partially
untenantable, the rent shall be apportioned until the damage is repaired. In
determining what constitutes reasonable dispatch, consideration shall be given
to delays caused by strikes, adjustment of insurance, and other causes beyond
the Landlord's control.
17. LANDLORD'S RIGHTS UPON DEFAULT. In the event of any breach of this lease by
the Tenant, which shall not have been cured within TEN (10) DAYS, then the
Landlord, besides other rights or remedies it may have, shall have the immediate
right of reentry and may remove all personal and property from the Leased
<PAGE>
Premises; such property may be removed and stored in a public warehouse, or
elsewhere at the cost of, and for the account of, the Tenant. If the Landlord
elects to reenter as herein provided, or should it take possession pursuant to
any notice provided for by law, it may either terminate this Lease or may, from
time to time, without terminating this Lease, relet the Leased Premises or any
part thereof, for such term or terms and at such rental or rentals and upon such
other terms and conditions as the Landlord in Landlord's own discretion may deem
advisable. Should rentals received from such reletting during any month be less
than the agreed to be paid during the month by the Tenant hereunder, the Tenant
shall pay such deficiency to the Landlord monthly. The Tenant shall also pay to
the landlord, as soon as ascertained, the cost and expenses incurred by the
Landlord in such reletting.
18. QUITE ENJOYMENT. The Landlord agrees that if the Tenant shall pay the rent
as aforesaid and perform the covenants and agreements herein contained on its
part to be performed, the Tenant shall peaceably hold and enjoy the said rented
premises without hindrance or interception by the Landlord or by any other
person or persons acting under or through the Landlord.
19. LORD'S RIGHT TO ENTER. Landlord may, at reasonable times, enter the Leased
Premises to inspect it, to make repairs or alternations, and to potential buyer,
lenders or tenants.
20. SURRENDER UPON TERMINATION. At the expiration of the lease term the Tenant
shall surrender the leased property in as good condition as it was in at the
beginning of the term, reasonable use and wear excepted.
21. SUBORDINATION. This lease, and the Tenant's leasehold interest, is and
shall be subordinate, subject and inferior to any and all liens and encumbrances
now and thereafter placed on the Leased Premises by Landlord, any and all
extensions of such liens and encumbrances and all advances paid under such liens
and encumbrances.
22. ADDITIONAL PROVISIONS. (See Addendum A)
1. MISCELLANEOUS TERMS.
(I) NOTICES. Any notice, statement, demand or other communication by one
party to the other, shall be given by personal delivery or by mailing the same,
postage prepaid, addressed to the Tenant at the premises, or to the Landlord at
the address set forth above.
(II) SEVERABILITY. If any clause or provision herein shall be adjudged
invalid or unenforceable by a court of competent jurisdiction or by operation of
any applicable law, it shall not affect the validity of any other clause or
provision, which shall remain in full force and effect.
(III) WAIVER. The failure of either party to enforce any of the provisions
of this lease shall not be considered a waiver of that provision or the right of
the party to thereafter enforce the provision.
<PAGE>
(IV) COMPLETE AGREEMENT. This Lease constitutes the entire understanding of
the parties with respect to the subject matter hereof and may not be modified
except by an instrument in writing and signed by the parties.
(V) SUCCESSORS. This Lease is binding on all parties who lawfully succeed
to the rights or take the place of the Landlord or Tenant.
IN WITNESS WHEREOF the parties have set their hands and seals on this 22nd
day of August, 1999.
CIMSoft, Inc.
- ------------------------------------- -------------------------------------
Landlord or Landlord's Tenant
Authorized Agent
/s/ Nader F. Arvanaghi /s/ Terry J. Gustafson
- ------------------------------------- -------------------------------------
Signature Signature
<PAGE>
ADDENDUM (A)
1. LEASE TERM WILL BE THREE YEARS
2. LEASE RATE: YEAR 1 - $19.00 SQ. FT. MODIFIED GROSS
YEAR 2 - $20.00 SQ. FT. MODIFIED GROSS
YEAR 3 - $21.00 SQ. FT. MODIFIED GROSS
3. LESSEE WILL HAVE THEIR ELECTRIC SERVICE TURNED ON IN OWN NAME AND LESSEE
WILL PAY OWN ELECTRIC.
4. LEASE AMOUNT PER YEAR:
YEAR 1 - $52,250.00 PLUS APPLICABLE RENTAL TAX
YEAR 2 - $55,000.00 PLUS APPLICABLE RENTAL TAX
YEAR 3 - $57,750.00 PLUS APPLICABLE RENTAL TAX
5. FIRST AND LAST MONTH'S RENT TO BE PAIN IN ADVANCE AT SIGNING OF LEASE IN
THE AMOUNT OF $9,340.82
6. SECURITY DEPOSIT WILL BE PAID AT SIGNING OF LEASE IN THE AMOUNT OF
$13,062.50 WHICH IS EQUAL TO FIRST YEAR'S PER MONTH LEASE AMOUNT.
7. LEASE EFFECTIVE AND BINDING AT SIGNING OF LEASE.
8. LESSEE WILL NOT BE PERMITTED TO PUT ANY SIGNS ON BUILDING, OTHER THAN
REASONABLE TENANT IDENTIFICATION.
9. LATE FEES AND AGREEMENT - SEE ADDENDUM (B)
10. PAYABLE WITH EXECUTION OF THIS LEASE WILL BE FIRST MONTH'S RENT AND LAST
MONTHS RENT OF $9,340.82 AND SECURITY DEPOSIT IN THE AMOUNT OF $13,052.50
TOTAL AMOUNT DUE WITH EXECUTION OF LEASE WILL BE $22,403.32
11. OCCUPANCY TO THE SPACE FOR LESSEE SHOULD OCCUR APPROXIMATELY SEPTEMBER 15,
1999. THIS WILL BE DEPENDENT ON THE FINAL INSPECTION BY THE CITY OF
SCOTTTSDALE, ARIZONA.
12. LEASE IS SUBJECT TO APPROVAL BY LANDLORD OF CIM SOFT, INC. FINANCIAL
INFORMATION.
13. IF THERE IS A FAILURE BY THE LANDLORD TO PERFORM AND COMPLETE THE REQUIRED
TENANT IMPROVEMENTS BY OCTOBER 1, 1999, WITH THE EXCEPTION OF CIRCUMSTANCES
BEYOND HIS CONTROL, THEN THE LEASE MAY, AT OPTION OF TENANT BE TERMINATED.
ENTRADA SOFTWARE, INC.
1999 EQUITY INCENTIVE PLAN
ARTICLE 1 - PURPOSE
The purpose of this Plan is to promote the interests of the Company and to
motivate, attract, and retain the services of persons upon whose judgment,
efforts, and contributions the success of the Company's business depends. The
plan is further intended to align the personal interests of such persons with
the interests of the shareholders of the Company through equity participation in
the Company's growth and success. Capitalized terms not otherwise defined in the
text are defined in Article 2.
ARTICLE 2 - DEFINITIONS
The following words and phrases shall have the following meanings for purposes
of this Plan:
(a) "Award" means any Option, or any Restricted Stock Award or any other right
or interest relating to Stock, cash or property, granted to a Participant
under the Plan.
(b) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(c) "Board of Directors" means the Board of Directors of the Company or, if
the context so requires, a Committee thereof appointed pursuant to Article
6.
(d) "Cause" means (i) conviction of any crime involving fraud or gross
misconduct, (ii) noncompliance with reasonable directives of the Board or
its designees, (iii) violation of Company rules, policies or procedures or
of the Plan or any applicable Award Agreement.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(f) "Committee" means the committee of the Board described in Article 6.
(g) "Disability" means the following: a Participant shall be disabled if he or
she is unable to perform the duties of his customary position of
employment by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which can be
expected to last for a continuous period of not less than 12 months. The
Board may require such medical or other evidence, as it deems necessary to
judge the nature and permanency of the Participant's condition.
(h) "Effective Date" shall mean July 23, 1999.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(j) "Fair Market Value" means with respect to Stock or any other property, the
fair market value of such Stock or other property determined by the Board
in good faith using such methods or procedures as may be established from
SOP-1
<PAGE>
time to time by the Board. Unless otherwise determined by the Board, the
Fair Market Value of Stock as of any date shall be the mean between the bid
and asked quotations for the Stock on that date as reported by the National
Association of Securities Dealers Automated Quotation System (NASDAQ) or,
if there are no bid or asked quotations on such date, the mean between the
bid and asked quotations on the next preceding date for which quotations
are available. If the Stock is subsequently listed and traded upon a
recognized securities exchange or shall be quoted on a recognized national
market system, the Fair Market Value shall be the closing price on such
date or, if no closing price is so reported for that date, the closing
price on the next preceding date for which a closing price was reported.
(k) "Incentive Stock Option" means an Option that is intended to meet the
requirements of Section 422 of the Code or any successor provision
thereto.
(l) "Non-Qualified Stock Option" means an Option that is not intended to be an
Incentive Stock Option.
(m) "Option" means a right granted to a Participant under Article 7 of the
Plan to purchase Stock at a specified price during specified time periods.
An Option may be either an Incentive Stock Option or a Non-Qualified Stock
Option.
(n) "Participant" means a person who, as an employee, officer, director,
consultant, independent contractor, or adviser of the Company or any
Subsidiary, has been granted an Award under the Plan.
(o) "Plan" means The Entrada Software, Inc. 1999 Equity Incentive Plan, as
amended from time to time.
(p) "Restricted Stock Award" means Stock granted to a Participant or offered
for sale to a Participant under Article 8.
(q) "Retirement" means a Participant's termination of employment with the
Company after attaining any normal or early retirement age specified in
any pension, profit sharing, or other retirement program sponsored by the
Company, if any.
(r) "Securities Act" means the Securities Act of 1933, as amended.
(s) "Stock" means Common Stock of the Company.
(t) "Subsidiary" means any corporation of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or indirectly
by the Company.
(u) "Ten Percent Owner" means any individual who, at the date of grant of an
Incentive Stock Option, owns stock possessing more than ten percent of the
total combined voting power of all classes of Stock of the Company or a
Subsidiary. For purposes of determining such percentage, the individual
with respect to whom such percentage is being determined shall be
SOP-2
<PAGE>
considered as owning the Stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants; and Stock owned, directly or indirectly,
by or for a corporation, partnership, estate, or trust, shall be considered
as being owned proportionately by or for its shareholders, partners, or
beneficiaries.
(v) "Termination Date" means the date on which the employment (or other
service or relationship in the case of a Participant who is not an
employee of the Company) of a Participant terminates for any reason or no
reason.
(w) "Transfer Agent" means American Securities Transfer & Trust, Inc. or its
successor or assigns.
ARTICLE 3 - EFFECTIVE DATE AND TERM
3.1 Effective Date. The Plan was approved by the Board of Directors and
stockholders of the Company as of the Effective Date.
3.2 Term. This Plan shall terminate on the tenth anniversary of the Effective
Date, subject to Article 12.
ARTICLE 4 - SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. The aggregate number of shares of Stock reserved and
available for Awards shall initially be two million one hundred thousand
(2,100,000) shares of Stock.
4.2 Lapsed Awards. To the extent that an Award terminates, expires or lapses for
any reason, any shares of Stock subject to the Award will again be available for
the grant of an Award under the Plan provided the Participant has not received
any benefits of ownership of the Shares subject to the terminated expired or
lapsed Award, in each case to the full extent available pursuant to the
applicable rules and interpretations of the Exchange Act and Code.
4.3 Payments in Stock. Any shares of Stock tendered to or withheld by the
Company in connection with payment for Stock purchased pursuant to the Plan or
withholding taxes thereon shall be added back to the aggregate number of shares
reserved and available for Awards under the Plan in each case to the fullest
extent permitted under the applicable rules and interpretations of the Exchange
Act and Code.
4.4 Stock Distributed. Any Stock distributed pursuant to an Award may consist,
in whole or in part, of authorized and unissued Stock, treasury Stock, or Stock
purchased on the open market subject to applicable rules and interpretation of
the Exchange Act.
SOP-3
<PAGE>
ARTICLE 5 - ELIGIBILITY
Awards may be granted only to an individual who is an employee (including an
employee who also is a director or officer), officer, director, consultant,
independent contractor, or adviser of the Company or a Subsidiary, as determined
by the Board.
ARTICLE 6 - ADMINISTRATION AND AUTHORITY
6.1 Administration. The Plan shall be administered by the Board or a Committee
appointed by the Board to administer the Plan at any time or from time to time.
Once appointed, the Committee shall continue to serve until otherwise directed
by the Board. From time to time, the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause), appoint new members in substitution therefor, and fill vacancies
however caused.
6.2 Authority. The Committee (or if authorized as Committee, the Board) has the
exclusive power, authority, and discretion to:
(a) designate Participants;
(b) determine the type or types of Awards to be granted to each Participant;
(c) determine the number of Awards to be granted and the number of shares of
Stock subject to an Award;
(d) prescribe the form of each Award Agreement, which need not be identical for
each Participant;
(e) determine the terms and conditions of any Award granted under the Plan,
including but not limited to, the exercise price, grant price, or purchase
price, any restrictions or limitations on the Award, any schedule for lapse
of forfeiture restrictions or restrictions on the exercisability of an
Award and accelerations or waivers thereof, and any modification or
amendment of any Award previously granted, based in each case on such
considerations as the Board in its sole discretion determines;
(f) determine whether, to what extent, and under what circumstances an Award
may be settled in, or the exercise price of an Award may be paid in, cash,
Stock, other Awards, or other property, or an Award may be canceled,
forfeited, or surrendered;
(g) determine whether, to what extent, and under what circumstances cash,
Stock, other Awards, other property, and other amounts payable with respect
to an Award shall be deferred either automatically or at the election of
the holder thereof or of the Board;
(h) decide all other matters that must be determined in connection with an
Award;
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(i) establish, adopt, or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan;
(j) interpret the Plan, any Award, and any Award Agreement in its discretion;
and
(k) make all other decisions and determinations that may be required under the
Plan or as the Board deems necessary or advisable to administer the Plan.
6.3 Decisions Binding. All decisions, interpretations, and determinations by the
Board with respect to the Plan, any Award, and any Award Agreement are final,
binding, and conclusive on all parties.
ARTICLE 7 - STOCK OPTIONS
7.1 Terms and Conditions. The Board is authorized to grant Options to
Participants on the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock under an Option shall
be determined by the Board.
(b) Payment. Payment for Stock issued upon exercise of an Option shall be made
in accordance with Article 9 of the Plan.
(c) Time and Conditions of Exercise. The Board shall determine the time or
times at which an Option may be exercised in whole or in part, provided
that no Option may be exercisable prior to six months following the date of
the grant of such Option if and to the extent such limitation is necessary
or required under Rule 16b-3, or successor authority, under the Exchange
Act.
(d) Evidence of Option. All Options shall be evidenced by a written Award
Agreement between the Company and the Participant. The Award Agreement
shall include such provisions as may be specified by the Board.
7.2 Incentive Stock Options. The terms of any Incentive Stock Options granted
under the Plan must comply with the following additional rules:
(a) Employees Only. Incentive Stock Options may only be granted to employees
(including officers and directors who are also employees) of the Company or
a Subsidiary.
(b) Exercise Price. The exercise price per share of Stock shall be set by the
Board, provided that the exercise price for any Incentive Stock Option may
not be less than the Fair Market Value as of the date of the grant.
(c) Exercise. In no event may any Incentive Stock Option be exercisable for
more than ten years from the date of its grant.
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(d) Individual Dollar Limitation. The aggregate Fair Market Value (determined
as of the time an Award is made) of all shares of Stock with respect to
which Incentive Stock Options are first exercisable by any one Participant
in any calendar year may not exceed $100,000. Options granted in excess of
this limitation shall be deemed to be Non-Qualified Stock Options.
(e) Ten Percent Owners. An Incentive Stock Option may be granted to a Ten
Percent Owner, provided that at the time such option is granted the
exercise price per share of Stock shall not be less than 110% of the Fair
Market Value and such option by its terms is not exercisable after the
expiration of five years from the date of its grant.
(f) Expiration of Incentive Stock Options. No Award of an Incentive Stock
Option may be made pursuant to this Plan after the expiration of ten years
from the Effective Date.
(g) Right to Exercise. During a Participant's lifetime, an Incentive Stock
Option may be exercised only by the Participant.
(h) Tax-Qualified ISOP Options. All provisions of the Plan relating to
Incentive Stock Options shall be administered and interpreted in
accordance, and so as to comply, with the provisions of Section 422 of the
Code.
7.3 Termination of Participant. Notwithstanding the exercise periods set forth
in any Award Agreement, Options shall be subject to the following:
(a) An Option shall lapse ten years after it is granted, unless an earlier time
is set in the Award Agreement.
(b) If a Participant's employment is terminated due to Disability, Retirement,
or for any other reason other than for Cause, such Participant may exercise
his or her Incentive Stock Options only to the extent that such Incentive
Stock Options would have been exercisable on the Termination Date;
provided, that such exercise is made prior to the earlier of (i) the
expiration of three months (one year in the case of Disability) after the
Termination Date or (ii) the expiration date of the Option set forth in the
Award Agreement. If a Participant's employment is terminated due to Cause,
the Participant's Incentive Stock Options shall automatically lapse and not
be exercisable by the Participant, whether or not such Options were vested.
(c) Except as otherwise provided in the Award Agreement or thereafter
determined by the Board in writing, if a Participant's employment,
contractual or other relationship with the Company is terminated due to
Disability, Retirement, or for any other reason other than for Cause, such
Participant may exercise his or her Non-Qualified Stock Options, only to
the extent that such Options would have been exercisable on the Termination
Date; provided, that such exercise is made within six months after the
Termination Date, or such other time period as set forth in the Award
Agreement. If a Participant's employment, contractual or other relationship
is terminated due to Cause, the Participant's Non-Qualified Stock Options
shall automatically lapse and not be exercisable by the Participant,
whether or not such Options were vested.
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(d) If a Participant dies before his or her Options lapse pursuant to this
Section, then the Participant's Options may be exercised, only to the
extent that such Options would have been exercisable on the date of the
Participant's death; provided, that such exercise is made prior to the
earlier of (i) the first anniversary of such Participant's death or (ii)
the expiration date of the Option set forth in the Award Agreement. Upon
the Participant's death, any exercisable Options may be exercised by the
Participant's legal representative or representatives.
ARTICLE 8 - RESTRICTED STOCK AWARDS
8.1 Restricted Stock Awards. The Board is authorized to make Awards of
Restricted Stock to Participants either in the form of a grant of Stock or an
offer to sell Stock to a Participant, in such amounts and subject to such terms,
conditions and restrictions as may be selected by the Board. All Awards of
Restricted Stock shall be evidenced by an Award Agreement. An Award Agreement
may specify whether, and to what extent, holders of Restricted Stock Awards
shall have voting, dividend and other rights of holders of Stock.
8.2 Issuance and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions, including without
limitation "vesting" or forfeiture restrictions, as the Board may impose. These
restrictions may lapse separately or in combination at such times, under such
circumstances, in such installments, or otherwise, as the Board determines at
the time of the grant of the Award or thereafter.
8.3 Forfeiture. Except as otherwise determined by the Board at the time of the
grant of the Award or thereafter, upon termination of employment during the
applicable restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company; provided,
however, that the Board may provide in any Award Agreement that restrictions or
forfeiture conditions relating to Restricted Stock will be waived in whole or in
part in specified circumstances, and the Board may in other cases waive in whole
or in part restrictions or forfeiture conditions relating to Restricted Stock.
8.4 Payment and Certificates for Restricted Stock. If a Restricted Stock Award
provides for the purchase of Stock by a Participant, payment shall be made
pursuant to Article 9 of the Plan. Restricted Stock granted under the Plan may
be evidenced in such manner as the Board shall determine. To the extent that an
Award is granted in the form of newly issued Restricted Stock, the Award
recipient, as a condition to the grant of such an Award, shall be required to
pay to the Company in cash, cash equivalents or other legal consideration an
amount equal to the par value of such Restricted Stock. To the extent that an
Award is granted in the form of Restricted Stock from the Company's treasury, no
such cash consideration shall be required of the Award recipients. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock, and
the Company shall retain physical possession of the certificate until such time
as all applicable restrictions lapse.
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ARTICLE 9 - PAYMENT FOR STOCK PURCHASES; WITHHOLDING TAXES; RELOAD OPTIONS
9.1 Payment. Payment for Stock purchased pursuant to the Plan may be made in
cash (by check) or, where expressly approved for the Participant by the Board in
an Award Agreement or otherwise in writing and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of (or attestation to the ownership of) Stock valued at Fair
Market Value on the date new Stock is purchased under the Plan; provided,
however, that such surrender or attestation shall not be permitted if such
action would cause the Company to recognize compensation expense (or
additional compensation expense) with respect to the Award for financial
reporting purposes;
(c) by waiver of compensation due or accrued to Participant for services
rendered;
(d) by tender of property acceptable to the Board;
(e) with respect only to purchases upon exercise of an Option, and provided
that a public market for the Stock then exists:
(i) through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (a "NASD Dealer") whereby Participant irrevocably
elects to exercise the Option and to sell a portion of the Stock so
purchased to pay for the exercise price (and any applicable
withholding taxes), and whereby the NASD Dealer irrevocably commits
upon receipt of such Stock to forward the exercise price and any such
withholding taxes directly to the Company's Transfer Agent;
(ii) through a "margin" commitment from Participant and a NASD Dealer
whereby Participant irrevocably elects to exercise the Option and to
pledge the Stock so purchased to the NASD Dealer in a margin account
as security for a loan from the NASD Dealer in the amount of the
exercise price (and any applicable withholding taxes), and whereby the
NASD Dealer irrevocably commits upon receipt of such Stock to forward
the exercise price and any such withholding taxes directly to the
Company's Transfer Agent; or
(iii) through any other "cashless exercise" procedure approved by the
Board; or
(iv) by any combination of the foregoing, or any other method of payment
acceptable to the Board in its sole discretion.
9.2 Loan Guarantees. The Board may, in its discretion, help the Participant pay
for Shares purchased under the Plan by authorizing a guarantee by the Company of
a third-party loan to the Participant.
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9.3 Tax Withholding. The Company or any Subsidiary shall have the authority and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan. Whenever,
under the Plan, payments in satisfaction of Awards are to be made in cash, such
payment shall be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements. With respect to withholding required upon
any taxable event relating to the issuance of Stock under the Plan, Participants
may elect (the "Election"), on or prior to the date of such taxable event, to
satisfy the withholding requirement, in whole or in part, by having the Company
or any Subsidiary withhold shares of Stock having a Fair Market Value on the
date of withholding equal to the amount to be withheld for tax purposes. The
Board may disapprove any Election or may suspend or terminate the right to make
Elections. An Election is irrevocable. The Board may, at the time any Award is
granted, require that any and all applicable tax withholding requirements be
satisfied by the withholding of shares of Stock as set forth above.
9.4 Reload Options. Award Agreements may contain a provision pursuant to which a
Participant who pays all or a portion of the exercise price of an Option or the
tax required to be withheld pursuant to an exercise of an Option by surrendering
shares of Stock pursuant to Sections 9.1 or 9.3, respectively, shall be
automatically granted an Option for the purchase of Stock equal to the number of
shares surrendered (a "Reload Option"). The grant of the Reload Option shall be
effective on the date the Participant surrenders the shares of Stock in respect
of which the Reload Option is granted (the "Reload Date"). The Reload Option
shall have an exercise price equal to the Fair Market Value of the Stock on the
Reload Date, and shall have a term which is no longer, and which shall lapse no
later, than the original term of the underlying option. If Stock otherwise
available under an Incentive Stock Option is withheld pursuant to Section 9.3,
any Reload Option granted in connection with the withholding shall be treated as
a new Incentive Stock Option, subject to the rules set forth in Section 7.2.
ARTICLE 10 - PROVISIONS APPLICABLE TO AWARDS
10.1 Stand Alone, Tandem, and Substitute Awards. Awards granted under the Plan
may, in the discretion of the Board, be granted either alone or in addition to,
in tandem with, or in substitution for, any other Award granted under the Plan.
Awards granted in addition to or in tandem with other Awards may be granted
either at the same time as or at a different time from the grant of such other
Awards.
10.2 Modification or Assumption of Awards. Within the limitations of the Plan,
the Board may modify, extend or assume outstanding Awards or may accept the
cancellation of outstanding Awards (whether granted by the Company or by another
issuer) in return for the grant of new Awards for the same or a different number
of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an Award shall, without the consent of the
Participant, alter or impair his or her rights or obligations under such Award.
10.3 Exchange Provisions. The Board may at any time offer to exchange or buy out
any previously granted Award for a payment in cash, Stock, or another Award,
based on the terms and conditions the Board determines and communicates to the
Participant at the time the offer is made.
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10.4 Term of Award. The term of each Award shall be for the period as determined
by the Board, provided that in no event shall the term of any Incentive Stock
Option exceed a period of ten years from the date of its grant.
10.5 Form of Payment for Awards. Subject to the terms of the Plan and any
applicable law or Award Agreement, payments or transfers to be made by the
Company or a Subsidiary on the grant or exercise of an Award may be made in such
forms as the Board determines at or after the time of grant, including without
limitation, cash, Stock, other Awards, or other property, or any combination,
and may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case determined in accordance with rules adopted by, and
at the discretion of, the Board.
10.6 Limits on Transfer. No right or interest of a Participant in any Award may
be pledged, encumbered, or hypothecated to or in favor of any party other than
the Company or a Subsidiary, or shall be subject to any lien, obligation, or
liability of such Participant to any other party other than the Company or a
Subsidiary. Except as otherwise provided below, no Award shall be assignable or
transferable by a Participant other than by will or the laws of descent and
distribution or, except in the case of an Incentive Stock Option, pursuant to a
"domestic relations order" as defined in the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. In the Award Agreement
for any Award other than an Award that includes an Incentive Stock Option, the
Board may allow a Participant to assign or otherwise transfer all or a portion
of the rights represented by the Award to specified individuals or classes of
individuals, or to a trust benefiting such individuals or classes of
individuals, subject to such restrictions, limitations, or conditions as the
Board deems appropriate. At the discretion of the Board, the Company may reserve
to itself or its assignees in any Award a right of first refusal to purchase any
Stock which a Participant may propose to transfer to a third party and/or a
right to repurchase any and all Stock held by a Participant upon the
Participant's termination of employment or other relationship with the Company
or its Parent or Subsidiary for any reason, including Death or Disability, at a
price for such Stock as determined by the Board.
10.7 Lock-up Agreement. In addition to any other restrictions on transfer, a
Participant shall not, without the prior written consent of the Board in its
discretion, offer or sell any Stock acquired pursuant to the Plan for at least
180 days after the closing of the initial public offering of securities of the
Company registered under the Securities Act, or in the event that subsequent to
such initial public offering the Stock is not listed and traded upon a
recognized securities exchange or quoted on a recognized national market system,
the closing of each offering of securities of the Company registered under the
Securities Act subsequent to such initial public offering through and including
the offering after which the Stock is listed and traded upon such exchange or
system.
10.8 Stock Certificates. All Stock certificates delivered under the Plan are
subject to any stop-transfer orders and other restrictions as the Board deems
necessary or advisable to comply with federal or state securities laws, rules,
and regulations and the rules of any national securities exchange or automated
quotation system on which the Stock is listed, quoted, or traded. The Board may
place legends on any Stock certificate to reference restrictions applicable to
the Stock.
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ARTICLE 11 - CHANGES IN CAPITAL STRUCTURE
11.1 General; Adjustments. In the event of a subdivision of the outstanding
Stock, a declaration of a dividend payable in Stock, a declaration of a dividend
payable in a form other than Stock in an amount that has a material effect on
the price of the Stock, a combination or consolidation of the outstanding Stock
(by classification or otherwise) into a lesser number of shares of Stock, a
recapitalization, a spin-off or a similar occurrence, the Board shall make such
adjustments as it, in its sole discretion, deems appropriate in one or more of
(a) the number of shares of Stock available for future Awards under Article 4,
(b) the limitations set forth in Article 4, (c) the number and kind of shares of
Stock covered by each outstanding Award or (d) the exercise price under each
outstanding Option and other Award in the nature of rights that may be
exercised. Except as provided in this Article 11, a Participant shall have no
rights by reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
11.2 Dissolution or Liquidation. To the extent not previously exercised, Awards
shall terminate immediately prior to the dissolution or liquidation of the
Company.
11.3 Reorganizations. In the event that the Company is a party to a merger,
consolidation or other reorganization, outstanding Awards shall be subject to
the agreement of merger, consolidation or reorganization. The Board may cause
such agreement to provide, without limitation, (a) for the continuation of
outstanding Awards by the Company (if the Company is a surviving corporation),
(b) for their assumption by the surviving corporation or its parent or
subsidiary, (c) for the substitution by the surviving corporation or its parent
or subsidiary of its own awards for such Awards, (d) for accelerated vesting,
accelerated expiration and/or lapse of restrictions, or (e) for settlement in
cash or cash equivalents. If the Board does not cause such agreement to provide
for one of the alternatives in (a), (b), (c), (d) or (e) above, then all
outstanding Options and other Awards in the nature of rights that may be
exercised shall become fully exercisable and all restrictions on other Awards
shall lapse, upon the effectiveness of the transactions contemplated by such
agreement.
ARTICLE 12 - AMENDMENT, MODIFICATION, AND TERMINATION
12.1 General. With the approval of the Board, at any time and from time to time,
the Board may terminate, amend, or modify the Plan. An amendment or modification
of the Plan shall be subject to the approval of the shareholders of the Company
only to the extent required by applicable laws, regulations and rules.
12.2 Awards Previously Granted. No termination, amendment, or modification of
the Plan shall adversely affect in any material way any Award previously granted
under the Plan, without the written consent of the Participant.
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ARTICLE 13 - GENERAL PROVISIONS
13.1 No Rights to Awards. No Participant or employee shall have any claim to be
granted any Award under the Plan, and neither the Company nor the Board is
obligated to treat Participants and employees uniformly.
13.2 No Stockholder Rights. No Award gives the Participant any of the rights of
a shareholder of the Company unless and until shares of Stock are in fact issued
to such person in connection with such Award.
13.3 No Right to Employment. Nothing in the Plan or any Award Agreement shall
interfere with or limit in any way the "at will" nature of any Participant's
employment or other relationship with the Company or any Subsidiary, nor confer
upon any Participant any right to continue in the employment or any other
relationship of the Company or any Subsidiary, and the Company and each
Subsidiary reserve the right to terminate any Participant's employment or other
relationship at any time.
13.4 Unfunded Status of Awards. The Plan is intended to be an "unfunded" plan
for incentive and deferred compensation. With respect to any payments not yet
made to a Participant pursuant to an Award, nothing contained in the Plan or any
Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Company or any Subsidiary.
13.5 Relationship to Other Benefits. No payment under the Plan shall be taken
into account in determining any benefits under any pension, retirement, savings,
profit sharing, group insurance, welfare or other benefit plan of the Company or
any Subsidiary.
13.6 Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.
13.7 Titles and Headings. The titles and headings of the Articles and Sections
in the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
13.8 Fractional Shares. No fractional shares of stock shall be issued and the
Board shall determine, in its discretion, whether cash shall be given in lieu of
fractional shares or whether such fractional shares shall be eliminated by
rounding up to the next whole number of shares.
13.9 Securities Law Compliance. With respect to any person who is, on the
relevant date, obligated to file reports under Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Section 16 or its successors under the Exchange Act. To the extent
any provision of the Plan or any Award Agreement or any action by the Board
fails to so comply, it shall be void to the extent required by law and voidable
as deemed advisable by the Board.
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13.10 Government and Other Regulations. The obligation of the Company to make
payment of awards in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by government agencies as may be
required. The Company shall be under no obligation to register under the
Securities Act, any of the shares of Stock paid under the Plan. If the shares of
Stock paid under the Plan may in certain circumstances be exempt from
registration under the Securities Act, the Company may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
13.11 Governing Law. The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of Arizona.
13.12 Nonexclusivity of the Plan. Neither the adoption of the Plan nor the
submission of the Plan to the shareholders of the Company for approval shall be
construed as creating any limitations upon the right and authority of the Board
to adopt such other incentive compensation arrangements (which arrangements may
be applicable either generally to a class or classes of individuals or
specifically to a particular individual or individuals) as the Board in its
discretion determines desirable, including, without limitation, the granting of
stock options or other rights otherwise than under the Plan.
DATED: July 23, 1999
BY THE BOARD OF DIRECTORS:
ENTRADA SOFTWARE, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of July 26, 1998
(the "Effective Date") between CIMsoft, Inc., a Delaware Corporation (the
"Company"), and Bruce D. Williams ("Employee").
RECITALS
A. The Company desires to retain Employee to provide the services described
below.
B. Employee is willing to provide such services to the Company on the terms and
conditions described below.
AGREEMENT
In consideration of the promises and the terms and conditions set forth in this
Agreement, the parties agree as follows:
1. POSITION. During the term of this Agreement, Company will employ Employee as
the Company's Chief Executive Officer. Employee will have such responsibilities
and authority as may from time to time be assigned to Employee in accordance
with Section 2 below. Employee will report directly to the Board of Directors of
the Company.
2. DUTIES. Employee will have the day-to-day responsibilities for carrying on
the duties of Chief Executive Officer, and other assignments given to him by the
Board of Directors or the Chairman. Employee will serve the Company in such
capacities and with such duties and responsibilities as the Chairman and Board
of Directors of the Company may from time to time determine. Employee will
comply with and be bound by Company's operating policies, procedures, and
practices from time to time in effect during Employee's employment. Employee
will perform his duties under this Agreement at the offices of Company;
provided, that Employee may be required to do some traveling in connection with
the performance of his duties.
3. EXCLUSIVE SERVICE. Until such time as the Company commences operations,
Employee will devote all time necessary to perform all reasonable activities
requested of him. Once the Company commences operations, as evidenced by
Employee being included as a full-time employee in the Company's payroll,
Employee will devote his full time and efforts exclusively to this employment
and apply all his skill and experience to the performance of his duties and
advancing the Company's interests in accordance with Employee's experience and
skills. In addition, Employee will not engage in any consulting activity except
with the prior written approval of Company, or at the direction of Company, and
Employee will otherwise do nothing inconsistent with the performance of his
duties.
4. TERM OF AGREEMENT. This Agreement will commence on the Effective Date, and
will continue until terminated pursuant to Section 7 hereof.
5. COMPENSATION AND BENEFITS.
5.1 BASE SALARY, BONUSES AND STOCK. The Company agrees to pay Employee at a
salary to be determined by the Board of Directors. Employee salary will be
payable as earned in accordance with Company's customary payroll practice.
Employee will be eligible to receive Salary Bonuses and salary increases or
decreases as may be declared from time to time by the Board of Directors.
Employee will be offered the opportunity to purchase shares of the Common Stock
of the Company upon the same terms and conditions as such stock is purchased by
other officers and directors of the Company. Employee will receive a pro-rata
share of any qualified and non-qualified stock options issued to the other
officers and directors of the Company subsequent to the execution of this
agreement, until such time as the Company closes an equity financing of at least
$3 million.
5.2 ADDITIONAL BENEFITS. Employee will be eligible to participate in Company's
standard employee benefit plans, including without limitation those plans
covering pension and profit sharing, executive bonuses, stock purchases, stock
options, and those plans covering life, health, and dental insurance in
accordance with the rules established for individual participation in any such
plan and applicable law. Employee will receive such other benefits, including
vacation, holidays and sick leave, as the Company generally provides to its
employees holding similar positions as that of Employee.
<PAGE>
5.3 EXPENSES. The Company will reimburse Employee for all reasonable and
necessary expenses incurred by Employee in connection with the Company's
business, in accordance with the Company's applicable policy and are properly
documented and accounted for in accordance with the requirements of the Internal
Revenue Service.
6. PROPRIETARY RIGHTS. Employee hereby agrees to execute an Employee Invention
Assignment and Confidentiality Agreement with the Company within thirty days of
the commencement of his full-time employment.
7. TERMINATION.
7.1 EVENTS OF TERMINATION. Employee's employment with the Company shall
terminate upon any one of the following:
(a) the Company's determination made in good faith that it is terminating
Employee for "cause" as defined under Section 7.2 below ("Termination for
Cause");
(b) the effective date of a written notice sent to Employee stating that
the Company is terminating his employment, without cause, which notice can be
given by the Company at any time after the Effective Date at the Company's sole
discretion, for any reason or for no reason ("Termination Without Cause"); or
(c) the effective date of a written or oral notice sent to the Company from
Employee stating that Employee is electing to terminate his employment with the
Company ("Voluntary Termination"), provided that the Company may, upon receiving
a notice of Voluntary Termination from Employee, accelerate the effective date
to as soon as immediately upon receipt of such notice.
7.2 "CAUSE" DEFINED. For purposes of this Agreement, "cause" for Employee's
termination will exist at any time after the happening of one or more of the
following events:
(a) a failure or a willful refusal to comply with the policies, standards,
and orders of the Board of Directors of the Company;
(b) a failure or a willful refusal in any material respect, to perform his
duties determined by the Company in accordance with this Agreement;
(c) Employee's material breach of the terms of this Agreement or the
Employee Invention Assignment and Confidentiality Agreement, including, without
limitation, Employee's theft of the Company's proprietary information or
quantifiable assets;
(d) Employee's commission of a criminal act or conviction of any felony, or
commission of an act of fraud, embezzlement, dishonesty, moral turpitude, breach
of trust, or gross misconduct;
(e) Employee's use, possession, or being impaired by or under the influence
of illegal drugs or controlled substances, or being impaired by alcohol, on
Company property or while working for or representing the Company.
8. EFFECT OF TERMINATION.
8.1 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event of any
termination of this Agreement pursuant to Sections 7.1(a) or 7.1(c), the Company
shall pay Employee the compensation and benefits otherwise payable to Employee
under Section 5 through the date of termination. Employee's rights under the
Company's benefit plans of general application shall be determined under the
provisions of those plans.
<PAGE>
8.2 TERMINATION WITHOUT CAUSE. In the event of any termination of this Agreement
pursuant to Section 7.1(b):
(a) the Company shall pay Employee the compensation and benefits otherwise
payable to Employee under Section 5 through the date of termination;
(b) the Company shall continue to pay Employee his base salary and benefits
for the period of nine (9) months at Employee's then-current salary, less
applicable withholding taxes, payable on the Company's normal payroll dates
during that period;
(c) Employee's rights under the Company's benefit plans of general
application shall be determined under the provisions of those plans.
9. MISCELLANEOUS.
9.1 ARBITRATION. Employee and the Company shall submit to mandatory binding
arbitration in any controversy or claim arising out of, or relating to, this
Agreement or any breach hereof; provided, however, that the Company retains its
right to, and shall not be prohibited, limited or in any other way restricted
from, seeking or obtaining equitable relief from a court having jurisdiction
over the parties. Such arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association in effect
at that time, and judgment upon the determination or award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
9.2 SEVERABILITY. If any provision of this Agreement shall be found by any
arbitrator or court of competent jurisdiction to be invalid or unenforceable,
then the parties hereby waive such provision to the extent that it is found to
be invalid or unenforceable and to the extent that to do so would not deprive
one of the parties of the substantial benefit of its bargain. Such provision
shall, to the extent allowable by law and the preceding sentence, be modified by
such arbitrator or court so that it becomes enforceable and, as modified, shall
be enforced as any other provision hereof, all the other provisions continuing
in full force and effect.
9.3 REMEDIES. The Company and Employee acknowledge that the service to be
provided by Employee is of a special, unique, unusual, extraordinary and
intellectual character, which gives it peculiar value the loss of which cannot
be reasonably or adequately compensated in damages in an action at law.
Accordingly, Employee hereby consents and agrees that for any breach or
violation by Employee of any of the provisions of this Agreement including,
without limitation, Section 3), a restraining order and/or injunction may be
issued against Employee, in addition to any other rights and remedies the
Company may have.
9.4 NO WAIVER. The failure by either party at any time to require performance or
compliance by the other of any of its obligations or agreements shall in no way
affect the right to require such performance or compliance at any time
thereafter. The waiver by either party of a breach of any provision hereof shall
not be taken or held to be a waiver of any preceding or succeeding breach of
such provision or as a waiver of the provision itself. No waiver of any kind
shall be effective or binding, unless it is in writing and is signed by the
party against whom such waiver is sought to be enforced.
9.5 ASSIGNMENT. This Agreement and all rights hereunder are personal to Employee
and may not be transferred or assigned by Employee at any time. The Company may
assign its rights, together with its obligations hereunder, to any parent,
subsidiary, affiliate or successor, or in connection with any sale, transfer or
other disposition of all or substantially all of its business and assets;
provided, however, that any such assignee assumes the Company's obligations
hereunder.
9.6 WITHHOLDING. All sums payable to Employee hereunder shall be reduced by all
federal, state, local and other withholding and similar taxes and payments
required by applicable law.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire and only agreement
between the parties relating to employment of Employee with the Company, and
this Agreement supersedes and cancels any and all previous contracts,
arrangements or understandings with respect thereto.
<PAGE>
9.8 AMENDMENT. This Agreement may be amended, modified, superseded, canceled,
renewed or extended only by an agreement in writing executed by both parties
hereto.
9.9 NOTICES. All notices and other communications required or permitted under
this Agreement shall be in writing and hand delivered, sent by fax, sent by
certified first class mail, postage pre-paid, or sent by nationally recognized
express courier service. Such notices and other communications shall be
effective upon receipt if hand delivered or sent by fax, five (5) days after
mailing if sent by mail, and one (l) day after dispatch if sent by express
courier, to the following addresses, or such other addresses as any party shall
notify the other parties:
If to the Company: CIMsoft, Inc.
If to Employee: At his current address.
9.10 BINDING NATURE. This Agreement shall be binding upon, and inure to the
benefit of, the successors and personal representatives of the respective
parties hereto.
9.11 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall in no way affect the meaning or interpretation of this
Agreement. In this Agreement, the singular includes the plural, the plural
included the singular, the masculine gender includes both male and female
referents, and the word "or" is used in the inclusive sense.
9.12 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which, taken
together, constitute one and the same agreement.
9.13 GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereto shall be construed in accordance with the laws of the State of Arizona,
without giving effect to the principles of conflict of laws.
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement as of
the July 26, 1998.
CIMSOFT, INC.
By: /s/ Terry L. Simpson
-----------------------------
Name:
Title: Chairman
By: /s/ Bruce D. Williams
-----------------------------
Name: Bruce D. Williams
Title: Chief Executive Officer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of September 1,
1998 (the "Effective Date") between CIMsoft, Inc., a Delaware Corporation (the
"Company"), and Terry J. Gustafson ("Employee").
RECITALS
A. The Company desires to retain Employee to provide the services described
below.
B. Employee is willing to provide such services to the Company on the terms and
conditions described below.
AGREEMENT
In consideration of the promises and the terms and conditions set forth in this
Agreement, the parties agree as follows:
1. POSITION. During the term of this Agreement, Company will employ Employee as
the Company's Chief Financial Officer. Employee will have such responsibilities
and authority as may from time to time be assigned to Employee in accordance
with Section 2 below. Employee will report directly to the Chairman and Chief
Executive Officer (CEO) of the Company.
2. DUTIES. Employee will have the day-to-day responsibilities for carrying on
the duties of Chief Financial Officer, and other assignments given to him by the
Board of Directors, the Chairman or the CEO. Employee will serve the Company in
such capacities and with such duties and responsibilities as the CEO, Chairman
and Board of Directors of the Company may from time to time determine. Employee
will comply with and be bound by Company's operating policies, procedures, and
practices from time to time in effect during Employee's employment. Employee
will perform his duties under this Agreement at the offices of Company;
provided, that Employee may be required to do some traveling in connection with
the performance of his duties.
3. EXCLUSIVE SERVICE. Until such time as the Company commences operations,
Employee will devote all time necessary to perform all reasonable activities
requested of him. Once the Company commences operations, as evidenced by
Employee being included as a full-time employee in the Company's payroll,
Employee will devote his full time and efforts exclusively to this employment
and apply all his skill and experience to the performance of his duties and
advancing the Company's interests in accordance with Employee's experience and
skills. In addition, Employee will not engage in any consulting activity except
with the prior written approval of Company, or at the direction of Company, and
Employee will otherwise do nothing inconsistent with the performance of his
duties.
4. TERM OF AGREEMENT. This Agreement will commence on the Effective Date, and
will continue until terminated pursuant to Section 7 hereof.
5. COMPENSATION AND BENEFITS.
5.1 BASE SALARY, BONUSES AND STOCK. During the pre-operating period as described
in paragraph 3 above, the Company agrees to pay Employee a minimum salary of
$60,000 per year. Such salary will be accrued and paid to Employee in the first
payroll period after the Company commences operations. If the Company never
commences operations, or if Employee never becomes a full-time employee of the
Company, Employee will not be entitled to any such accrued salary. Once the
Company commences operations, the Company agrees to pay Employee an initial
minimum salary of $120,000 per year. Employee salary will be payable as earned
in accordance with Company's customary payroll practice. Employee will be
eligible to receive Salary Bonuses and salary increases or decreases as may be
declared from time to time by the Board of Directors. Employee will be offered
the opportunity to purchase shares of the Common Stock of the Company upon the
<PAGE>
same terms and conditions as such stock is purchased by other officers and
directors of the Company. Employee will receive a pro-rata share of any
qualified and non-qualified stock options issued to the other officers and
directors of the Company subsequent to the execution of this agreement, until
such time as the Company closes an equity financing of at least $3 million.
5.2 ADDITIONAL BENEFITS. Employee will be eligible to participate in Company's
standard employee benefit plans, including without limitation those plans
covering pension and profit sharing, executive bonuses, stock purchases, stock
options, and those plans covering life, health, and dental insurance in
accordance with the rules established for individual participation in any such
plan and applicable law. Employee will receive such other benefits, including
vacation, holidays and sick leave, as the Company generally provides to its
employees holding similar positions as that of Employee.
5.3 EXPENSES. The Company will reimburse Employee for all reasonable and
necessary expenses incurred by Employee in connection with the Company's
business, in accordance with the Company's applicable policy and are properly
documented and accounted for in accordance with the requirements of the Internal
Revenue Service.
6. PROPRIETARY RIGHTS. Employee hereby agrees to execute an Employee Invention
Assignment and Confidentiality Agreement with the Company within thirty days of
the commencement of his full-time employment.
7. TERMINATION.
7.1 EVENTS OF TERMINATION. Employee's employment with the Company shall
terminate upon any one of the following:
(a) the Company's determination made in good faith that it is terminating
Employee for "cause" as defined under Section 7.2 below ("Termination for
Cause");
(b) the effective date of a written notice sent to Employee stating that
the Company is terminating his employment, without cause, which notice can be
given by the Company at any time after the Effective Date at the Company's sole
discretion, for any reason or for no reason ("Termination Without Cause"); or
(c) the effective date of a written or oral notice sent to the Company from
Employee stating that Employee is electing to terminate his employment with the
Company ("Voluntary Termination"), provided that the Company may, upon receiving
a notice of Voluntary Termination from Employee, accelerate the effective date
to as soon as immediately upon receipt of such notice.
7.2 "CAUSE" DEFINED. For purposes of this Agreement, "cause" for Employee's
termination will exist at any time after the happening of one or more of the
following events:
(a) a failure or a willful refusal to comply with the policies, standards,
and orders of the Board of Directors of the Company;
(b) a failure or a willful refusal in any material respect, to perform his
duties determined by the Company in accordance with this Agreement;
(c) Employee's material breach of the terms of this Agreement or the
Employee Invention Assignment and Confidentiality Agreement, including, without
limitation, Employee's theft of the Company's proprietary information or
quantifiable assets;
(d) Employee's commission of a criminal act or conviction of any felony, or
commission of an act of fraud, embezzlement, dishonesty, moral turpitude, breach
of trust, or gross misconduct;
(e) Employee's use, possession, or being impaired by or under the influence
of illegal drugs or controlled substances, or being impaired by alcohol, on
Company property or while working for or representing the Company.
<PAGE>
8. EFFECT OF TERMINATION.
8.1 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event of any
termination of this Agreement pursuant to Sections 7.1(a) or 7.1(c), the Company
shall pay Employee the compensation and benefits otherwise payable to Employee
under Section 5 through the date of termination. Employee's rights under the
Company's benefit plans of general application shall be determined under the
provisions of those plans.
8.2 TERMINATION WITHOUT CAUSE. In the event of any termination of this Agreement
pursuant to Section 7.1(b):
(a) the Company shall pay Employee the compensation and benefits otherwise
payable to Employee under Section 5 through the date of termination;
(b) the Company shall continue to pay Employee his base salary and benefits
for the period of nine (9) months at Employee's then-current salary, less
applicable withholding taxes, payable on the Company's normal payroll dates
during that period;
(c) Employee's rights under the Company's benefit plans of general
application shall be determined under the provisions of those plans.
9. MISCELLANEOUS.
9.1 ARBITRATION. Employee and the Company shall submit to mandatory binding
arbitration in any controversy or claim arising out of, or relating to, this
Agreement or any breach hereof; provided, however, that the Company retains its
right to, and shall not be prohibited, limited or in any other way restricted
from, seeking or obtaining equitable relief from a court having jurisdiction
over the parties. Such arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association in effect
at that time, and judgment upon the determination or award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
9.2 SEVERABILITY. If any provision of this Agreement shall be found by any
arbitrator or court of competent jurisdiction to be invalid or unenforceable,
then the parties hereby waive such provision to the extent that it is found to
be invalid or unenforceable and to the extent that to do so would not deprive
one of the parties of the substantial benefit of its bargain. Such provision
shall, to the extent allowable by law and the preceding sentence, be modified by
such arbitrator or court so that it becomes enforceable and, as modified, shall
be enforced as any other provision hereof, all the other provisions continuing
in full force and effect.
9.3 REMEDIES. The Company and Employee acknowledge that the service to be
provided by Employee is of a special, unique, unusual, extraordinary and
intellectual character, which gives it peculiar value the loss of which cannot
be reasonably or adequately compensated in damages in an action at law.
Accordingly, Employee hereby consents and agrees that for any breach or
violation by Employee of any of the provisions of this Agreement including,
without limitation, Section 3), a restraining order and/or injunction may be
issued against Employee, in addition to any other rights and remedies the
Company may have.
9.4 NO WAIVER. The failure by either party at any time to require performance or
compliance by the other of any of its obligations or agreements shall in no way
affect the right to require such performance or compliance at any time
thereafter. The waiver by either party of a breach of any provision hereof shall
not be taken or held to be a waiver of any preceding or succeeding breach of
such provision or as a waiver of the provision itself. No waiver of any kind
shall be effective or binding, unless it is in writing and is signed by the
party against whom such waiver is sought to be enforced.
9.5 ASSIGNMENT. This Agreement and all rights hereunder are personal to Employee
and may not be transferred or assigned by Employee at any time. The Company may
assign its rights, together with its obligations hereunder, to any parent,
subsidiary, affiliate or successor, or in connection with any sale, transfer or
<PAGE>
other disposition of all or substantially all of its business and assets;
provided, however, that any such assignee assumes the Company's obligations
hereunder.
9.6 WITHHOLDING. All sums payable to Employee hereunder shall be reduced by all
federal, state, local and other withholding and similar taxes and payments
required by applicable law.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire and only agreement
between the parties relating to employment of Employee with the Company, and
this Agreement supersedes and cancels any and all previous contracts,
arrangements or understandings with respect thereto.
9.8 AMENDMENT. This Agreement may be amended, modified, superseded, canceled,
renewed or extended only by an agreement in writing executed by both parties
hereto.
9.9 NOTICES. All notices and other communications required or permitted under
this Agreement shall be in writing and hand delivered, sent by fax, sent by
certified first class mail, postage pre-paid, or sent by nationally recognized
express courier service. Such notices and other communications shall be
effective upon receipt if hand delivered or sent by fax, five (5) days after
mailing if sent by mail, and one (l) day after dispatch if sent by express
courier, to the following addresses, or such other addresses as any party shall
notify the other parties:
If to the Company: CIMsoft, Inc.
If to Employee: At his current address.
9.10 BINDING NATURE. This Agreement shall be binding upon, and inure to the
benefit of, the successors and personal representatives of the respective
parties hereto.
9.11 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall in no way affect the meaning or interpretation of this
Agreement. In this Agreement, the singular includes the plural, the plural
included the singular, the masculine gender includes both male and female
referents, and the word "or" is used in the inclusive sense.
9.12 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which, taken
together, constitute one and the same agreement.
9.13 GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereto shall be construed in accordance with the laws of the State of Arizona,
without giving effect to the principles of conflict of laws.
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement as of
the September 1, 1998.
CIMSOFT, INC.
By: /s/ Bruce Williams
-----------------------------
Name:
Title: Chief Executive Officer
TERRY J. GUSTAFSON
By: /s/ Terry J. Gustafson
-----------------------------
Name: Terry J. Gustafson
Title: Chief Financial Officer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of August 1, 1998
(the "Effective Date") between CIMsoft, Inc., a Delaware Corporation (the
"Company"), and Terry L. Simpson ("Employee").
RECITALS
A. The Company desires to retain Employee to provide the services described
below.
B. Employee is willing to provide such services to the Company on the terms and
conditions described below.
AGREEMENT
In consideration of the promises and the terms and conditions set forth in this
Agreement, the parties agree as follows:
1. POSITION. During the term of this Agreement, Company will employ Employee as
the Company's Chairman. Employee will have such responsibilities and authority
as may from time to time be assigned to Employee in accordance with Section 2
below. Employee will report directly to the Board of Directors of the Company.
2. DUTIES. Employee will have the day-to-day responsibilities for carrying on
the duties of Chairman, and other assignments given to him by the Board of
Directors. Employee will serve the Company in such capacities and with such
duties and responsibilities as the Board of Directors of the Company may from
time to time determine. Employee will comply with and be bound by Company's
operating policies, procedures, and practices from time to time in effect during
Employee's employment. Employee will perform his duties under this Agreement at
the offices of Company; provided, that Employee may be required to do some
traveling in connection with the performance of his duties.
3. EXCLUSIVE SERVICE. Until such time as the Company commences operations,
Employee will devote all time necessary to perform all reasonable activities
requested of him. Once the Company commences operations, as evidenced by
Employee being included as a full-time employee in the Company's payroll,
Employee will devote his full time and efforts exclusively to this employment
and apply all his skill and experience to the performance of his duties and
advancing the Company's interests in accordance with Employee's experience and
skills. In addition, Employee will not engage in any consulting activity except
with the prior written approval of Company, or at the direction of Company, and
Employee will otherwise do nothing inconsistent with the performance of his
duties.
4. TERM OF AGREEMENT. This Agreement will commence on the Effective Date, and
will continue until terminated pursuant to Section 7 hereof.
5. COMPENSATION AND BENEFITS.
5.1 BASE SALARY, BONUSES AND STOCK. The Company agrees to pay Employee at a
salary to be determined by the Board of Directors. Employee salary will be
payable as earned in accordance with Company's customary payroll practice.
Employee will be eligible to receive Salary Bonuses and salary increases or
decreases as may be declared from time to time by the Board of Directors.
Employee will be offered the opportunity to purchase shares of the Common Stock
of the Company upon the same terms and conditions as such stock is purchased by
other officers and directors of the Company. Employee will receive a pro-rata
share of any qualified and non-qualified stock options issued to the other
officers and directors of the Company subsequent to the execution of this
agreement, until such time as the Company closes an equity financing of at least
$3 million.
5.2 ADDITIONAL BENEFITS. Employee will be eligible to participate in Company's
standard employee benefit plans, including without limitation those plans
covering pension and profit sharing, executive bonuses, stock purchases, stock
options, and those plans covering life, health, and dental insurance in
accordance with the rules established for individual participation in any such
plan and applicable law. Employee will receive such other benefits, including
vacation, holidays and sick leave, as the Company generally provides to its
employees holding similar positions as that of Employee.
<PAGE>
5.3 EXPENSES. The Company will reimburse Employee for all reasonable and
necessary expenses incurred by Employee in connection with the Company's
business, in accordance with the Company's applicable policy and are properly
documented and accounted for in accordance with the requirements of the Internal
Revenue Service.
6. PROPRIETARY RIGHTS. Employee hereby agrees to execute an Employee Invention
Assignment and Confidentiality Agreement with the Company within thirty days of
the commencement of his full-time employment.
7. TERMINATION.
7.1 EVENTS OF TERMINATION. Employee's employment with the Company shall
terminate upon any one of the following:
(a) the Company's determination made in good faith that it is terminating
Employee for "cause" as defined under Section 7.2 below ("Termination for
Cause");
(b) the effective date of a written notice sent to Employee stating that
the Company is terminating his employment, without cause, which notice can be
given by the Company at any time after the Effective Date at the Company's sole
discretion, for any reason or for no reason ("Termination Without Cause"); or
(c) the effective date of a written or oral notice sent to the Company from
Employee stating that Employee is electing to terminate his employment with the
Company ("Voluntary Termination"), provided that the Company may, upon receiving
a notice of Voluntary Termination from Employee, accelerate the effective date
to as soon as immediately upon receipt of such notice.
7.2 "CAUSE" DEFINED. For purposes of this Agreement, "cause" for Employee's
termination will exist at any time after the happening of one or more of the
following events:
(a) a failure or a willful refusal to comply with the policies, standards,
and orders of the Board of Directors of the Company;
(b) a failure or a willful refusal in any material respect, to perform his
duties determined by the Company in accordance with this Agreement;
(c) Employee's material breach of the terms of this Agreement or the
Employee Invention Assignment and Confidentiality Agreement, including, without
limitation, Employee's theft of the Company's proprietary information or
quantifiable assets;
(d) Employee's commission of a criminal act or conviction of any felony, or
commission of an act of fraud, embezzlement, dishonesty, moral turpitude, breach
of trust, or gross misconduct;
(e) Employee's use, possession, or being impaired by or under the influence
of illegal drugs or controlled substances, or being impaired by alcohol, on
Company property or while working for or representing the Company.
8. EFFECT OF TERMINATION.
8.1 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event of any
termination of this Agreement pursuant to Sections 7.1(a) or 7.1(c), the Company
shall pay Employee the compensation and benefits otherwise payable to Employee
under Section 5 through the date of termination. Employee's rights under the
Company's benefit plans of general application shall be determined under the
provisions of those plans.
<PAGE>
8.2 TERMINATION WITHOUT CAUSE. In the event of any termination of this Agreement
pursuant to Section 7.1(b):
(a) the Company shall pay Employee the compensation and benefits otherwise
payable to Employee under Section 5 through the date of termination;
(b) the Company shall continue to pay Employee his base salary and benefits
for the period of nine (9) months at Employee's then-current salary, less
applicable withholding taxes, payable on the Company's normal payroll dates
during that period;
(c) Employee's rights under the Company's benefit plans of general
application shall be determined under the provisions of those plans.
9. MISCELLANEOUS.
9.1 ARBITRATION. Employee and the Company shall submit to mandatory binding
arbitration in any controversy or claim arising out of, or relating to, this
Agreement or any breach hereof; provided, however, that the Company retains its
right to, and shall not be prohibited, limited or in any other way restricted
from, seeking or obtaining equitable relief from a court having jurisdiction
over the parties. Such arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association in effect
at that time, and judgment upon the determination or award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
9.2 SEVERABILITY. If any provision of this Agreement shall be found by any
arbitrator or court of competent jurisdiction to be invalid or unenforceable,
then the parties hereby waive such provision to the extent that it is found to
be invalid or unenforceable and to the extent that to do so would not deprive
one of the parties of the substantial benefit of its bargain. Such provision
shall, to the extent allowable by law and the preceding sentence, be modified by
such arbitrator or court so that it becomes enforceable and, as modified, shall
be enforced as any other provision hereof, all the other provisions continuing
in full force and effect.
9.3 REMEDIES. The Company and Employee acknowledge that the service to be
provided by Employee is of a special, unique, unusual, extraordinary and
intellectual character, which gives it peculiar value the loss of which cannot
be reasonably or adequately compensated in damages in an action at law.
Accordingly, Employee hereby consents and agrees that for any breach or
violation by Employee of any of the provisions of this Agreement including,
without limitation, Section 3), a restraining order and/or injunction may be
issued against Employee, in addition to any other rights and remedies the
Company may have.
9.4 NO WAIVER. The failure by either party at any time to require performance or
compliance by the other of any of its obligations or agreements shall in no way
affect the right to require such performance or compliance at any time
thereafter. The waiver by either party of a breach of any provision hereof shall
not be taken or held to be a waiver of any preceding or succeeding breach of
such provision or as a waiver of the provision itself. No waiver of any kind
shall be effective or binding, unless it is in writing and is signed by the
party against whom such waiver is sought to be enforced.
9.5 ASSIGNMENT. This Agreement and all rights hereunder are personal to Employee
and may not be transferred or assigned by Employee at any time. The Company may
assign its rights, together with its obligations hereunder, to any parent,
subsidiary, affiliate or successor, or in connection with any sale, transfer or
other disposition of all or substantially all of its business and assets;
provided, however, that any such assignee assumes the Company's obligations
hereunder.
9.6 WITHHOLDING. All sums payable to Employee hereunder shall be reduced by all
federal, state, local and other withholding and similar taxes and payments
required by applicable law.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire and only agreement
between the parties relating to employment of Employee with the Company, and
this Agreement supersedes and cancels any and all previous contracts,
arrangements or understandings with respect thereto.
<PAGE>
9.8 AMENDMENT. This Agreement may be amended, modified, superseded, canceled,
renewed or extended only by an agreement in writing executed by both parties
hereto.
9.9 NOTICES. All notices and other communications required or permitted under
this Agreement shall be in writing and hand delivered, sent by fax, sent by
certified first class mail, postage pre-paid, or sent by nationally recognized
express courier service. Such notices and other communications shall be
effective upon receipt if hand delivered or sent by fax, five (5) days after
mailing if sent by mail, and one (l) day after dispatch if sent by express
courier, to the following addresses, or such other addresses as any party shall
notify the other parties:
If to the Company: CIMsoft, Inc.
If to Employee: At his current address.
9.10 BINDING NATURE. This Agreement shall be binding upon, and inure to the
benefit of, the successors and personal representatives of the respective
parties hereto.
9.11 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall in no way affect the meaning or interpretation of this
Agreement. In this Agreement, the singular includes the plural, the plural
included the singular, the masculine gender includes both male and female
referents, and the word "or" is used in the inclusive sense.
9.12 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original but all of which, taken
together, constitute one and the same agreement.
9.13 GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereto shall be construed in accordance with the laws of the State of Arizona,
without giving effect to the principles of conflict of laws.
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement as of
the August 1, 1998.
CIMSOFT, INC.
By: /s/ Terry J. Gustafson
-----------------------------
Name: Terry J. Gustafson
Title: CFO
By: /s/ Terry L. Simpson
-----------------------------
Name: Terry L Simpson
Title: Chairman
Statement re: computation of earnings per share
CIMSOFT, INC. Year Ended
June 30, 1999
-------------
BASIC LOSS PER SHARE
Weighted average of common shares outstanding 2,745,205
Net loss $ (23,047)
Basic loss per share $ (.01)
FULLY DILUTED LOSS PER SHARE
Weighted average of common shares outstanding 2,745,205
Net loss $ (23,047)
Fully diluted loss per share $ (.01)
ENTRADA SOFTWARE, INC. Three Months Ended
September 30, 1999
------------------
BASIC LOSS PER SHARE
Weighted average of common shares outstanding 4,921,163
Net loss $ (65,670)
Basic loss per share $ (.01)
FULLY DILUTED LOSS PER SHARE
Weighted average of common shares outstanding 4,921,163
Net loss $ (65,670)
Fully diluted loss per share $ (.01)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in the General Form for Registration of Securities of
Small Business Issuers on Form 10-SB of our report dated October 14, 1999, on
our audit of the financial statements of CIMsoft, Inc. as of June 30, 1999 and
for the year then ended.
We also consent to the use in the General Form for Registration of Securities of
Small Business Issuers on Form 10-SB of our report dated September 4, 1999, on
our audits of the balance sheet of The Rotherwood Group, Inc. as of June 30,
1999 and the related statements of operations stockholders' deficit and cash
flows for each of the two years in the period then ended.
KING, WEBER & ASSOCIATES, P.C.
Tempe, Arizona
November 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ENTRADA SOFTWARE, INC. FOR THE ELEVEN MONTHS ENDED
NOVEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 11-MOS
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0
250
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