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
VideoPropulsion, Inc.
- - --------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Wisconsin 39-1976286
----------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
251 Info Highway, Slinger, WI 53086
----------------------------------------- ---------------------------
(Address of principal executive offices) (Zip code)
Issuer's telephone number (262) 644-1000
----------------------------------------
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
- - --------------------------------- -----------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.01 per share
- - --------------------------------------------------------------------------------
(Title of class)
EXPLANATORY NOTE
This Registration Statement on Form 10-SB has been prepared on a
prospective basis on the assumptions that, among other things, the distribution
will be consummated as contemplated by the Information Statement, which is a
part of this Registration Statement. There can be no assurance, however, that
any or all of such transactions will occur or will occur as so contemplated.
Any significant modifications or variations in the transactions contemplated
will be reflected in an amendment or supplement to this Registration Statement.
THE INFORMATION CONTAINED IN ANNEX A, (THE "INFORMATION STATEMENT") IS SUBJECT
TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO
VIDEOPROPULSION, INC'S COMMON STOCK HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THESE SECURITIES WILL NOT BE ISSUED BEFORE THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS INFORMATION STATEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THESE
SECURITIES.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
Item 1. Description of Business
The information required by this item is contained in the sections
entitled "INTRODUCTION," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," and "BUSINESS OF THE
COMPANY" in the Information Statement dated ---------, 2000 (the
"Information Statement").
Item 2. Management's Discussion and Analysis of Plan of Operations.
The information required by this Item is contained in the sections of
the Information Statement entitled "FINANCING," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "BUSINESS OF THE COMPANY," and "DIVIDEND POLICY."
Item 3. Description of Property
The information required by this Item is contained in the section
entitled "BUSINESS OF THE COMPANY" in the Information Statement.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The information required by this Item is contained in the sections
entitled "MANAGEMENT OF THE COMPANY" and "EXECUTIVE COMPENSATION -
Security Ownership in VideoPropulsion by its Directors and Executive
Officers" in the Information Statement.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
The information required by this Item is contained in the sections
entitled "MANAGEMENT OF THE COMPANY - Directors" and "MANAGEMENT OF
THE COMPANY - Executive Officers" in the Information Statement.
Item 6. Executive Compensation.
The information required by this Item is contained in the section
entitled "EXECUTIVE COMPENSATION - Historical Compensation" in the
Information Statement.
Item 7. Certain Relationships and Related Transactions.
The information required by this Item is contained in the sections
entitled "Summary of Certain Information," "THE DISTRIBUTION -
Relationship Between GENROCO and the company After the Distribution"
and "BUSINESS OF THE COMPANY - Transactions and Agreements Between the
Company and GENROCO" in the Information Statement.
Item 8. Description of Securities.
The information required by this Item is contained in the section
entitled "DISCRIPTION OF THE COMPANY'S CAPITAL STOCK," "PURPOSES AND
EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF
INCORPORATION, BY-LAWS AND WISCONSIN STATUTORY LAW," and "DIVIDEND
POLICY" in the Information Statement.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
The Information required by this Item is contained in the sections
entitled "SUMMARY - Summary of Certain Financial Information for
VideoPropulsion, Inc.," "THE DISTRIBUTION - Manner of Effecting the
Distribution," "THE DISTRIBUTION - Results of the Distribution," "THE
DISTRIBUTION - Listing and Trading of Shares of Company Stock," "THE
DISTRIBUTION - Dividend Policy." "EXECUTIVE COMPENSATION - Security
Ownership in VideoPropulsion by its Directors and Executive Officers,"
and "DESCRIPTION OF COMPANY - Capital Stock" in the Information
Statement.
Item 2. Legal Proceedings.
The information required by this Item is contained in the section
entitled "BUSINESS OF THE COMPANY - Legal Proceedings."
Item 3. Changes in and Disagreements with Accountants.
There have been no changes in and disagreements with accountants as
defined by Item 304 of Regulation S-B.
Item 4. Recent Sales of Unregistered Securities.
The information required by this Item is as follows: On October 4,
1999, the Company issued one thousand shares of its common stock, in
reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act of 1933, for a total consideration of $10,000 in
cash plus $488,532 which represents cumulative capital contributions by
the Parent through October 4, 1999, to GENROCO, Inc. ("GENROCO") which
is and will be the Company's sole shareholder until the Distribution
has been completed as of the Distribution Date as described in the
section entitled "THE DISTRIBUTION" in the Information Statement.
Subsequent to the Distribution, GENROCO will hold no capital stock in
the Company.
Item 5. Indemnification of Directors and Officers.
The information required by this Item is contained in the section
entitled "LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS" in
the Information Statement.
PART F/S
The information required by this Item is contained in the Information
Statement sections entitled "Summary of Certain Information,"
"Capitalization," "Selected Historical financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations, " and "APPENDIX A - FINANCIAL STATEMENTS - VIDEOPROPULSION,
INC." in the Information Statement.
The Financial Statements of VideoPropulsion, Inc. (Appendix A of the
Information Statement) consist of the following:
- Report Of Independent Public Accountants
- Balance Sheet
- Statements Of Operations
- Statements Of Cash Flows
- Statements of Stockholder's Investment
- Notes To Financial Statements
PART III
Item 1. Index to Exhibits.
Exhibit Description
------- -----------
2.1 Annex A - Information Statement of the Registrant dated
---------, 2000 (the "Information Statement")
3.1 Form of Amended and Restated Articles of Incorporation of
the Company is submitted as Appendix B to the Information
Statement
3.2 Form of By-Laws of the Company is submitted as Appendix C to
the Information Statement
4.1 Specimen form of Company stock certificate
10.1 Form of General Assignment, Assumption and Agreement
Regarding Litigation, Claims and Other Liabilities between
GENROCO and the Company
10.2 Form of Contribution Agreement, Plan and Agreement of
Reorganization and Distribution between GENROCO and the
Company
10.3 Form of Lease between GENROCO and the Company
10.4 Form of Tax Sharing And Indemnification Agreement by and
between GENROCO and the Company
10.5 Form of Transitional Trademark Use and License Agreement
10.6 Form of Interim Administrative Services Agreement
10.7 Form of Employee Benefits and Compensation Agreements
between GENROCO and the Company
10.8 Form of Bill of Sale and Assumption of Liabilities
10.9 Form of Composite Certificate of Secretary of GENROCO
10.10 Form of Insurance Matters
10.11 Form of Confidentiality and Nondisclosure Agreement
10.12 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule for period ended December 31, 1999
27.2 Financial Data Schedule for period ended December 31, 1998
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has dully caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto dully authorized.
VideoPropulsion, Inc.
(Registrant)
Date: March 23, 2000 By /s/ Barbara R. Pick
-------------------------------------------------
Barbara R. Pick, President, Chief Executive
Officer and Director.
By /s/ Keith E. Brue
-------------------------------------------------
Keith E. Brue, Secretary, Treasurer, and Director
ANNEX A
SEC Form 10-SB for VideoPropulsion, Inc
Filed on March 23, 2000
(GENROCO LOGO)
- - ------------, 2000
Dear Shareholder:
In August of 1999, the Board of Directors of GENROCO Inc. ("GENROCO") approved
spinning off the Company's digital video business as a separate public
company. This spin-off is intended to focus and strengthen the digital video
business unit and enhance the value of your investment by focusing management
time on each core business. Since that time, we have been working diligently to
implement this plan. In October, GENROCO formed a new subsidiary,
VideoPropulsion, Inc. ("VideoPropulsion"), into which GENROCO's digital video
business was transferred, effective October 4, 1999. The Shares of
VideoPropulsion will be distributed to GENROCO shareholders on or about
- - --------, 2000 to shareholders of record as of ----------, 2000 and
VideoPropulsion, Inc will have begun its new life as an independent company
with you as one of its initial shareholders.
If you are a GENROCO shareholder of record as of the close of business on
- - --------, 2000, you will receive one share of VideoPropulsion, Inc. common stock
for each share of GENROCO common stock that you own. VideoPropulsion stock
certificates will be mailed beginning ---------, 2000. No action is required on
your part to receive your VideoPropulsion shares. You will not be required to
either pay anything for the new shares or to surrender your GENROCO Shares. The
Company believes that the receipt of VideoPropulsion Shares in the spin-off will
be subject to federal income tax.
The enclosed Information Statement describes the spin-off in detail and contains
important information about VideoPropulsion, including historical financial
statements. I encourage you to read it carefully.
We are enthusiastic about the prospects for VideoPropulsion's future business.
GENROCO and VideoPropulsion are dedicated to obtaining leadership positions in
their respective markets and delivering superior value to their shareholders.
Thank you for your continued support as a shareholder.
Sincerely,
Carl A. Pick
Chairman and CEO
GENROCO, Inc.
(VIDEOPROPULSION, INC. LOGO)
- - ---------, 2000
Dear Fellow Shareholder:
You are about to become a shareholder of VideoPropulsion, Inc.
("VideoPropulsion"). On behalf of all of us who are part of VideoPropulsion, I
am pleased to welcome you as a shareholder.
The document that follows contains information about the spin-off of
VideoPropulsion, Inc. from GENROCO, Inc. as well as important financial and
other information about VideoPropulsion. I encourage you to read this document
and become familiar with your new company.
Although we are a new company, we nonetheless have a rich heritage that includes
years of participation in the electronics industry as a supplier and innovator
of network interface equipment . It is a heritage that we intend to build upon
as an independent company.
I believe there are significant opportunities for our company that will be well
served by the business focus resulting from the spin-off. Our management team
is eager to distinguish VideoPropulsion, Inc. I hope you will agree, and share
in our future.
Barbara R. Pick
President and Chief Executive Officer
VideoPropulsion, Inc.
INFORMATION STATEMENT
VideoPropulsion, Inc.
Common Stock
Consider carefully the risk factors, beginning on page 16 of this document.
Stockholder approval of the distribution of VideoPropulsion common stock is not
required. We are not asking you for a proxy and we request that you do not send
us a proxy. While the distribution is expected to be taxable as a dividend, you
are not required to make a payment for the VideoPropulsion shares.
We are providing this information statement to you as a shareholder of GENROCO,
Inc. in connection with the distribution by GENROCO to its shareholders of all
of the stock that it owns of VideoPropulsion, which is equal to 100% of the
total stock of VideoPropulsion.
The spin-off distribution will be made on -------, 2000 to shareholders of
record on -------, 2000. If you are a shareholder of GENROCO, you will receive
one share of VideoPropulsion for every one share of GENROCO stock that you hold
on the record date. Certificates for the shares will be mailed to you, or your
brokerage account, on or about -------, 2000. You will not need to exchange
your GENROCO certificates.
This information statement is subject to completion and will not be issued
before the SEC Form 10SB becomes effective.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the VideoPropulsion Common Stock or
determined that the information statement is truthful or complete. Any
representation to the contrary is a criminal offense.
TABLE OF CONTENTS
Page
----
SUMMARY 17
The Distribution 18
Tax Consequence 19
Why is GENROCO spinning off VideoPropulsiono 21
What do I have to do to participate in the distributiono 22
INTRODUCTION 22
History 22
THE DISTRIBUTION 24
Reasons for the Distribution 24
Distribution Agent 25
Manner of Effecting the Distribution 25
Results of the Distribution 26
Certain Federal Income Tax Consequences of the Distribution 26
Listing and Trading of Shares of Company Common Stock 29
Dividend Policy 29
Relationship between GENROCO and the Company after the Distribution 30
Reasons for Furnishing the Information Statement 31
FINANCING 31
INVESTMENT CONSIDERATIONS AND RISK FACTORS 31
Company Indebtedness 32
Lack of Operating History as an Independent Entity 33
Dependence upon Certain Customers and Suppliers 33
Market for the Company's Products 34
Technological Changes 34
Acceptance of Technology 34
Customers 35
Industry Segments 35
Inability to Penetrate the Digital Video Market 35
Competitive Pricing Pressures may Increase 36
New Products may Contain Undetected Hardware and Software Errors 36
Suppliers 37
Components 38
Regulatory Approvals May Not Be Complied With 39
Quarterly Fluctuations 39
Loss of Key Personnel or Inability To Hire Additional
Qualified Personnel 40
Intellectual Property May Not Protect the Company 40
International Sales May Not Materialize 41
No Prior Public Market for Common Stock 42
Dividend Policy 43
Competition 43
CAPITALIZATION 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 45
Overview 45
Years Ended December 31, 1999 and 1998 45
Selected Historical Financial Data 45
Liquidity and Capital Resources 48
BUSINESS OF THE COMPANY 49
General 49
Business Strategy 50
Markets Defined 50
The Company's Current Products 51
Future Products 53
Patents, Trademarks and Other Intellectual Property 53
Sales and Marketing / Distribution and Sales Channels 54
Major Customers 54
Competition 55
Research and Development 55
Employees 55
Facilities 56
Suppliers 56
Fiscal Year End 58
Legal Proceedings 58
Transactions and Agreements between the Company and GENROCO 58
MANAGEMENT OF THE COMPANY 63
Directors and Executive Officers 63
Committees of the Board of Directors 65
Directors Compensation 65
EXECUTIVE COMPENSATION 67
Historical Compensation 67
Security Ownership in VideoPropulsion
by its Directors and Executive Officers 68
Employee Stock Ownership Plan (ESOP) 70
Employment and Non-Compete Agreements 71
DESCRIPTION OF COMPANY CAPITAL STOCK 72
General 72
Common Stock of VideoPropulsion, Inc 72
Authorized Capital Stock 72
Common Stock 73
Transfer Agent 73
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF
INCORPORATION, BY-LAWS AND WISCONSIN STATUTORY LAW 74
General 74
Classified Board of Directors 75
Certain Anti take-over Provisions 76
Certain Wisconsin Anti-Takeover Effects 79
DIVIDEND POLICY 81
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS 81
Limitation on Liability of Directors 81
Indemnification and Insurance 82
AVAILABLE SEC FILING INFORMATION 83
APPENDIX A - FINANCIAL STATEMENTS -VIDEOPROPULSION, INC. 84
APPENDIX B - ARTICLES OF INCORPORATION, VIDEOPROPULSION, INC. 117
APPENDIX C - BY-LAWS OF VIDEOPROPULSION, INC. 119
SUMMARY
This Summary is qualified by the more detailed information set forth
elsewhere in this Information Statement which should be read in its entirety.
Capitalized terms used but not defined in this summary are defined elsewhere in
this Information Statement. To better understand the distribution, and the
business and financial position of VideoPropulsion, you should review the entire
document.
THE DISTRIBUTION
Distributing Company GENROCO, Inc. a Wisconsin corporation
("GENROCO").
Distributed Company VideoPropulsion, Inc., a Wisconsin
corporation in the development stage (the
"Company"), which will design, develop,
manufacture and market its Digital Video
Broadcast ("DVB") products to be sold to
customers within the digital video industry
worldwide.
Distribution Ratio One share of Company Ccommon Sstock for
every one share of GENROCO stock held as of
the Record Date.
Securities to be Distributed There are 4,401,642 shares of GENROCO common
stock outstanding. 4,401,642 shares of the
Company VideoPropulsion cCommon Sstock will
be distributed.
Record Date -------, 2000 (close of business).
Distribution Date. -------, 2000.
TAX CONSEQUENCE
Tax Consequence The tax basis of the shares of
VideoPropulsion, Inc. stock received by a
holder of GENROCO stock in the Distribution
will be equal to the fair market value of
such shares of VideoPropulsion, Inc. at the
time of Distribution.
Promptly after the distribution,GENROCO will
furnish each holder ana notice information
statement indicating the amount of the
distribution to the holder which isit
estimates will be treated as a dividend.
Risk Factors See "Investment Considerations and Risk
Factors" for a discussion of the risk factors
that should be considered in connection with
the shares received in the Distribution.
Principal Office of Company VideoPropulsion, Inc., 251 Info Highway,
Slinger, WI 53086 Phone # 262-644-1000
Why is GENROCO spinning off GENROCO is creating an independent company
VideoPropulsion? for its digital video business because
GENROCO's management believes the combined
value of two separate businesses will be
greater than the value of GENROCO as a whole.
VideoPropulsion will focus solely on its
business and the market will be able to
directly value VideoPropulsion's activities.
What do I have to do to Nothing. If you own GENROCO's shares on the
participate in the distribution? record date, you will receive one share of
VideoPropulsion common stock for each share
of GENROCO common stock. The number of
shares of GENROCO common stock outstanding
will not change as a result of the
distribution.
Will the distribution affect Yes. After the distribution, the trading
the trading price of GENROCO price of GENROCO common stock is likely to
common stock trade lower. Until the market has fully
analyzed VideoPropulsion's business, the
price of both GENROCO and Video Propulsion
will likely fluctuate.
Who do I contact for more Before the distribution, please contact
Information? GENROCO, Inc.
Attention: Carl A. Pick, Chairman and CEO
Phone: 414-732-7433
E-Mail: [email protected]
----------------
Or
Attention: Keith Brue, Executive Vice
President and Chief Financial Officer
Phone 414-732-5356
E-Mail: [email protected]
-----------------
After the Spin-off, please contact
VideoPropulsion, Inc.
Attention Barbara R. Pick, President and CEO
Phone: 414-732-5433
E-Mail: [email protected]
------------------------
Or
Attention: Keith E. Brue, Secretary and
Treasurer
Phone 414-732-5356
E-Mail: [email protected]
-------------------------
Relationship with GENROCO GENROCO will have no stock ownership in the
After the Distribution. Company after the Distribution. The Company
and GENROCO have entered into several
agreements for the purpose of giving effect
to the Distribution and defining their
ongoing relationships. These include
agreements providing for the transfer to the
Company of substantially all of the assets
and liabilities of the digital video
business, pursuant to which GENROCO generally
will indemnify the Company against
liabilities, litigation and claims arising
out of all GENROCO operations not transferred
to the Company, and the Company generally
will indemnify GENROCO against liabilities,
litigation and claims arising out of the
digital video business. In addition,
following the Distribution Date, the Company
and GENROCO intend to continue other
commercial transactions pursuant to arms-
length negotiations in the ordinary course.
See "BUSINESS OF THE COMPANY."
INTRODUCTION
HISTORY
VideoPropulsion designs and sells a range of digital video products which
provide enabling technology for a variety of applications that allow
consumers to use their TV sets for interactive services including email,
home shopping, web browsing, video-on-demand and Internet based telephony.
A typical application for the Company's products is providing connectivity
between the video servers (which store media that is available to be sent,
via cable TV, to a set-top decoder box at a consumers location) in the
central office of any given cable TV provider and the cable headend (which
is the electronic device in the central office of the cable company that
forwards all TV signals from the central office to the cables leading to
the consumers' set-top box).
GENROCO (VideoPropulsion's sole shareholder) designs, manufactures and
sells a range of high-performance network interface cards, bridges and
switches. GENROCO's products are used in Storage Area Networks (SANs) that
connect data storage to computer processors.
VideoPropulsion's principal executive offices are located at 251 Info
Highway, Slinger, WI 53086.
Telephone (262)-644-1000.
Internet address is: www.videopropulsion.com.
-----------------------
GENROCO's principal executive offices are located at 255 Info Highway,
Slinger, WI 53086.
Telephone (262)-644-8700
Internet address is: www.genroco.com
---------------
GENROCO operates two segments - a storage area network (SAN) segment and a
digital video segment.
The Board of Directors of GENROCO has declared a distribution (the
"Distribution"), payable in accordance with the terms of the Contribution
Agreement to the holders of GENROCO common stock at the close of business
on -------, 2000 (the "Record Date"), of one Share of VideoPropulstion
common stock for each Share of common stock of GENROCO (the "Distribution
Ratio") held on the Record Date. The Shares to be distributed will
constitute all of the outstanding Shares of the Company. See "DISCRIPTION
OF COMPANY CAPITAL STOCK". The Distribution is scheduled to occur on ----
---, 2000 (the "Distribution Date"). See "THE DISTRIBUTION - Manner of
Effecting the Distribution."
The Company is voluntarily registering its common stock under the
Securities Exchange Act of 1934 (as amended) by filing an SEC Form 10-SB.
This filing will serve to obligate the Company to be a reporting company
under Section 13 or 15 (d) of the Securities and Exchange Act of 1934 (as
amended). There is not currently a public market for VideoPropulsion
Shares and there can be no assurance that an active market will develop
following the Distribution.
In its resolutions authorizing the Distribution, the GENROCO Board of
Directors has reserved the right to abandon or postpone the distribution at
any time prior to the Distribution Date, although such action is not
anticipated. See "THE DISTRIBUTION - Manner of Effecting the Distribution"
and "FINANCING."
The fair market value of the forthcoming VideoPropulsion spin-off, which
GENROCO believes will be treated as a taxable dividend, has been estimated
by an independent third-party professional appraisal firm to be
approximately $400,000 in the aggregate (approximately $.09 per share based
upon 4,401,642 shares estimated to be issued upon the Distribution).
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
The primary reason for the distribution is to enhance total shareholder
value over the long run. Even though some technological overlap exists,
the general markets and customer bases served by GENROCO's SAN and digital
video businesses are different. GENROCO's management believes that the
different customer base of each business unit requires that a separate
sales, distribution and service infrastructure be put into place in order
to maximize the chances for economic success for each of the entities.
Given that these infrastructures already include unrelated groups of
strategic business alliances, management has determined that it will be in
the best interest of GENROCO's current shareholders to cause each company
to be operated as a separate entity.
In determining whether the Distribution was in its shareholders' best
interests, GENROCO considered a number of factors, including the short,
intermediate and long-term business impact on GENROCO and the Company, the
tax consequences of the distribution, the likelihood of completing the
transaction and the costs to be incurred in connection with the
transaction. GENROCO recognizes that the formation of the Company may
entail additional incremental costs for management, staff, systems and
support functions, however, GENROCO believes the benefits to GENROCO and
its shareholders outweigh these incremental costs.
DISTRIBUTION AGENT
The distribution agent ("Distribution Agent") is Fidelity Transfer Company,
Registrar & Transfer Agent, 1800 South West Temple, Suite #310, Box 53,
Salt Lake City, UT 84115 (801) 484-7222.
MANNER OF EFFECTING THE DISTRIBUTION
The Distribution will be made on -------, 2000 to shareholders of record
of GENROCO common stock at the close of business on the Record Date. Prior
to the Distribution Date, and in accordance with the terms of the
Contribution Agreement, GENROCO will deliver all of the outstanding shares
owned by it to the distribution agent for distribution. The distribution
agent will mail, beginning on or about the Distribution Date, certificates
representing the Shares to GENROCO shareholders of record on the Record
Date. Each GENROCO shareholder will receive one Share of VideoPropulsion
common stock for every one Share of GENROCO common stock held on the Record
Date. GENROCO shareholders will not be required to pay for Shares received
in the Distribution, or to surrender or exchange GENROCO common stock in
order to receive Shares of the Company. No vote of GENROCO shareholders is
required or sought in connection with the Distribution, and GENROCO
shareholders have no appraisal rights in connection with the distribution.
IN ORDER TO BE ENTITLED TO RECEIVE SHARES OF THE COMPANY IN THE
DISTRIBUTION, GENROCO SHAREHOLDERS MUST BE SHAREHOLDERS AT THE CLOSE OF
BUSINESS ON THE RECORD DATE.
RESULTS OF THE DISTRIBUTION
After the Distribution, the Company will be an independent, public
reporting company. Immediately after the Distribution, the Company expects
to have approximately 170 shareholders of record and approximately
4,401,642 Shares outstanding, based on the estimated number of record
shareholders and outstanding Shares of common stock of GENROCO on the
Record Date, and the Distribution ratio of one Share of VideoPropulsion
common stock for every one Share of GENROCO common stock. The actual
number of Shares to be distributed will be determined as of the Record
Date. The Distribution will not affect the number of outstanding Shares of
GENROCO common stock.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
THIS TAX CONSEQUENCE DISCUSSION IS INTENDED ONLY AS A DESCRIPTION OF THE
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION. IT IS NOT A
COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL TAX EFFECTS OF THE
DISTRIBUTION. THE DISCUSSION DOES NOT ADDRESS ALL OF THE TAX CONSEQUENCES
THAT MAY BE RELEVANT TO PARTICULAR TAXPAYERS IN LIGHT OF THEIR PERSONAL
CIRCUMSTANCES OR TO TAXPAYERS SUBJECT TO SPECIAL TREATMENT UNDER THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") SUCH AS INSURANCE
COMPANIES, FINANCIAL INSTITUTIONS, DEALERS IN SECURITIES, TAX EXEMPT
ORGANIZATIONS, FOREIGN CORPORATIONS, FOREIGN PARTNERSHIPS OR OTHER FOREIGN
ENTITIES AND INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES.
The distribution of the shares of VideoPropulsion, Inc. should be treated
as a taxable distribution with respect to the GENROCO common stock. The
amount of the distribution received by each holder of GENROCO common stock
will equal the fair market value of the shares of VideoPropulsion, Inc.
received. If a trading market develops for the shares of VideoPropulsion,
Inc. within a reasonable period after the Distribution, the fair market
value of the VideoPropulsion, Inc. stock should be based on the selling
price in the market. If no selling prices are available, then the fair
market value of the VideoPropulsion, Inc. stock should be determined taking
into account all of the facts and circumstances including, without
limitation, VideoPropulsion, Inc.'s net worth, prospective earning power,
dividend paying capacity and other relevant factors. Based on an appraisal
by an independent third-party professional appraisal firm, the fair market
value of VideoPropulsion, Inc. stock, as of December 31, 1999, was or
approximately $.09 per share (based upon approximately 4,401,642 shares to
be issued upon the Distribution).
The amount of the distribution to each holder of GENROCO common stock
should for federal income tax purposes be treated as a dividend includable
in gross income to the extent of the holder's pro rata share of GENROCO's
earnings and profits. If the amount of the distribution to the holder
exceeds the holder's pro rata share of the GENROCO earnings and profits,
the distribution to the extent of such excess will be applied against and
reduce the basis of the holder's GENROCO common stock (but not below zero)
and any remaining amount will be treated as a capital gain (provided that
the GENROCO common stock is held as a capital asset). Such capital gain
will be a long-term capital gain if the GENROCO common stock has been held
for more than twelve months.
To the extent the amount of the distribution is treated as a dividend to a
corporate holder of GENROCO common stock, for federal income tax purposes
the holder will be (1) eligible for a deduction of a portion (generally
70%) of the amount of the dividend received (subject to special
limitations); and (2) subject to the "extraordinary dividend" provisions of
the Code. Under recently enacted legislation, in the case of a dividend to
a corporate stockholder that has held GENROCO stock for 2 years or less at
the time of the Distribution which constitutes an extraordinary dividend as
defined in Section 1059(c) of the Code, the nontaxed portion of any such
dividend would reduce a corporate stockholder's basis in the GENROCO stock
but not below zero and would thereafter be taxable as a capital gain
(provided that the GENROCO stock was held as a capital asset). Generally,
an extraordinary dividend is a dividend with respect to a share of stock if
the amount of the dividend exceeds one of several threshold percentages
(generally 10%) of the tax basis in the share of stock. Dividends paid
within certain periods may be aggregated and treated as one dividend for
this purpose. Various exceptions and special rules apply in determining
whether a dividend is an extraordinary dividend.
The tax basis of the shares of VideoPropulsion, Inc. stock received by a
holder of GENROCO stock in the Distribution will be equal to the fair
market value of such shares of VideoPropulsion, Inc. at the time of
Distribution.
GENROCO will furnish each holder an information statement indicating the
amount of the distribution to the holder which is treated as a dividend.
GENROCO should incur a gain on the distribution of the shares to the holder
of GENROCO common stock equal to the excess of the fair market value of the
VideoPropulsion, Inc. shares distributed over GENROCO's tax basis for the
shares.
THIS TAX CONSEQUENCE SUMMARY IS NOT INTENDED TO BE, NOR SHOULD IT BE
CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER OF GENROCO
STOCK. GENROCO SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS
TO THE SPECIFIC TAX CONSEQUENCES TO THE SHAREHOLDER OF THE DISTRIBUTION
INCLUDING INCOME TAX RETURN REPORTING REQUIREMENTS AND THE APPLICABILITY
AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
LISTING AND TRADING OF SHARES OF COMPANY COMMON STOCK
The Company has filed an SEC Form 10-SB which will serve to obligate the
Company to be a reporting company under Section 13 or 15 (d) of the
Securities and Exchange Act of 1934 (as amended). There is not currently a
public market for VideoPropulsion Shares and there can be no assurance that
an active market will develop following the Distribution.
The Shares distributed to GENROCO shareholders will be freely tradable,
except for Shares received by persons who may be deemed to be "affiliates"
of the Company under the Securities Act of 1934, as amended (the
"Securities Act"). Persons who may be deemed to be affiliates of the
Company after the distribution generally include individuals or entities
that control, are controlled by, or are under common control with the
Company and may include directors and certain officers of the Company, as
well as principal shareholders of the Company.
Persons who are affiliates of the Company will be permitted to sell Shares
owned by them only pursuant to an effective registration statement under
the Securities Act or an exemption from the registration requirements of
the Securities Act, such as under Rule 144. It is not expected that Rule
144 will be available for the sale of Shares by affiliates until
approximately ---------, 2000 (90 days after the effectiveness of the
Company's registration statement referred to herein under "Available
Information"). It is believed that persons who may be deemed to be
affiliates of the Company after the Distribution will own approximately ---
--% of the outstanding Shares. See "MANAGEMENT OF THE COMPANY - Security
Ownership of Directors and Executive Officers."
DIVIDEND POLICY
The Company does not intend to pay cash dividends on the Company Common
Stock in the foreseeable future. Rather, it is currently anticipating that
any Company earnings will be retained for use in its business. The future
payment of dividends will depend on business decisions that will be made by
the Company's Board of Directors from time to time, based on the results of
operations and financial condition of the Company and such other business
considerations as the Board of Directors considers relevant.
RELATIONSHIP BETWEEN GENROCO AND THE COMPANY AFTER THE DISTRIBUTION
After the Distribution, GENROCO will have no stock ownership interest in
the Company. A series of agreements have been entered into between GENROCO
and the Company providing for, among other things, the transfer of certain
assets to, and the assumption of certain liabilities by the Company. As a
result of these arrangements, substantially all of the assets and
liabilities of the digital video business, reflected in the financial
information and related notes included elsewhere herein, have been
transferred to the Company. See "CAPITALIZATION - Summary of Historical
Financial Data" and "BUSINESS OF THE COMPANY - Transactions and Agreements
between the Company and GENROCO." See also the "APPENDIX A - FINANCIAL
STATEMENTS OF VIDEOPROPULSION, INC.". In addition, the parties have
provided for certain cross-indemnities, principally to place financial
responsibility for the digital video business with the Company and to place
financial responsibility for other GENROCO business with GENROCO.
The Company also has entered into agreements with GENROCO that fix the
respective responsibilities of GENROCO and the Company regarding the
following: Employee benefit and compensation matters, taxes, intellectual
property rights, certain interim administrative services, insurance,
litigation and other claims, the transfer of real estate and other
miscellaneous matters. See "BUSINESS OF THE COMPANY - Transactions and
Agreements between the Company and GENROCO." The Company and GENROCO
intend to continue to engage in commercial transactions pursuant to arms-
length negotiations in the ordinary course of business.
REASONS FOR FURNISHING THE INFORMATION STATEMENT
This Information Statement is being furnished by GENROCO solely to provide
information to shareholders of GENROCO, who will receive Shares in the
Distribution. It is not, and should not to be construed as, an inducement
or encouragement to buy or sell any securities of GENROCO or the Company.
The information contained in this Information Statement is believed by
GENROCO to be accurate as of the date set forth on the cover of this
Information Statement. Changes may occur after that date, and neither
GENROCO nor the Company will update the information, except as required by
law in the normal course of their respective public disclosure practices.
FINANCING
GENROCO intends to provide interim financing in amounts, believed by
management, adequate to allow the Company to meet its financial obligations
for a period of one year. However, there is no guarantee that GENROCO will
have the financial ability to meet all obligations. In the case that
GENROCO is unable to provide additional support for one year, the Company
will need to raise additional capital either through a private placement or
an offering of Company stock. Further the Company will need to raise
capital to fund operation beyond 2000. There can be no assurances that
there will be a market for Company stock or that capital can be raised
through a private placement. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital
Resources".
INVESTMENT CONSIDERATIONS AND RISK FACTORS
Shareholders of GENROCO should be aware that the Distribution and ownership
of the Shares involves certain investment considerations and risk factors,
including those described below and elsewhere in this Information
Statement, which could adversely affect the value of their holdings.
Neither GENROCO nor the Company makes, nor is any other person authorized
to make, any representations as to the future market value of the Shares.
Any forward-looking statements contained in this Information Statement
should not be relied upon as predictions of future events. Such statements
are necessarily dependent on assumptions, data or methods that may be
incorrect or imprecise and that may be incapable of being realized.
Investors are hereby notified that such information reflects the opinions
of Company management as to the future. Investors should use their own
judgment as to the significance of this information to their individual
investment decisions.
COMPANY INDEBTEDNESS
GENROCO intends to provide interim financing in amounts, believed by
management, adequate to allow the Company to meet its financial obligations
for a period of one year. However, there is no guarantee that GENROCO will
have the financial ability to meet all obligations. In the case that
GENROCO is unable to provide additional support for one year, the Company
will need to raise additional capital either through a private placement or
an offering of Company stock. Further the Company will need to raise
capital to fund operation beyond 2000. There can be no assurances that
there will be a market for Company stock or that capital can be raised
through a private placement. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital
Resources".
LACK OF OPERATING HISTORY AS AN INDEPENDENT ENTITY
The digital video business has been conducted as a product line under the
direction of a product manager for approximately four years and,
accordingly, the Company does not have an operating history as an
independent public company. The Company was formed in October 1999 solely
for the purpose of effecting the Distribution, and will own and conduct the
business previously conducted by the digital video business product line
management team. Management of the Company has historically relied upon
GENROCO for substantially all administrative services required by the
Company. After the Distribution Date, the Company will be responsible for
maintaining its own administrative functions, except for certain
transitional services provided by GENROCO. See "THE DISTRIBUTION -
Relationship between GENROCO and the Company after the Distribution,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and "BUSINESS OF THE COMPANY - Transactions and Agreements
between the Company and GENROCO."
Following the Distribution, the Company will be responsible for obtaining
and maintaining its own financing relationships, except for a transitional
loan from GENROCO on an interim basis. See "FINANCING."
DEPENDENCE UPON CERTAIN CUSTOMERS AND SUPPLIERS
The Company's business is highly focused in the Digital Video Broadcast
industry with 100% of sales coming from approximately 15 manufacturers of
video servers and video signal transmission equipment providers. Details
on customers are included in the following pages.There can be no assurances
that these relationships will continue nor that the Company will be
successful in its efforts to provide goods and services to a larger
customer base.
MARKET FOR THE COMPANY'S PRODUCTS
A market for the Company's products may not develop. If a significant
market for digital video products does not develop, the Company's business
may fail. The Company's growth will be limited if DVB technology and
solutions do not become widely accepted. The Company's product development
and marketing efforts are focused on the digital video market, which has
only recently begun to develop and is evolving rapidly. The markets for
new technology frequently develop more slowly than the technology targeted
to these markets.
TECHNOLOGICAL CHANGES
The Cable Television (CATV) market is subject to rapid technological
change. These include changes in customer requirements, frequent new
product introductions and enhancements and evolving industry standards.
The Company's success depends in part on its ability to keep pace with
technological developments and emerging industry standards. The Company
must also respond to evolving customer requirements by enhancing its
current products and developing new products. There is a risk that if the
Company fails to anticipate or respond rapidly to advances in technology by
adapting its products appropriately, its products may become obsolete. If
this occurs, the business could be adversely affected.
ACCEPTANCE OF TECHNOLOGY
The Company's business strategy includes the sale of technology which
depends on industry acceptance of DVB as a standard of choice. This
technology is also dependent on the availability of software and thus the
loss of significant numbers of key software development personnel would
adversely impact the future results of the Company.
CUSTOMERS
The demands of customers are constantly changing. The increased demand of
customers and the increasing presence of the Internet, in everyday markets,
are creating a customer base that demands a quicker response time. This
customer expectation, coupled with the global economies, make meeting these
expectations a constant challenge, especially for small companies who may
not be able to attract the capital resources needed to meet these demands.
The Company's customer portfolio is composed of a few global companies who
issue purchase orders that to date have not been large multi-year
contracts. The Company's dependence on key customers exposes it to
sporadic order rates, which require higher than normal inventory levels to
support the business.
INDUSTRY SEGMENTS
The Company operates in only one industry segment as a developer, marketer
and manufacturer of DVB based computer hardware, and thus the Company will
be significantly impacted by changes in the industry.
INABILITY TO PENETRATE THE DIGITAL VIDEO MARKET
The Company's ability to penetrate the digital video market is a function
of its:
1. Success in implementation of software drivers for various platforms.
2. Ability to join with appropriate Video Server suppliers as strategic
technology partners.
3. Ability to join with appropriate integration, installation, and
maintenance partners.
Failure to accomplish any one or all of the above could cause the business
to fail. There can be no assurance that the Company will be profitable or
meet its goals.
COMPETITIVE PRICING PRESSURES MAY INCREASE
Because of competitive pricing pressures, the average price of the
Company's products may decline, resulting in a decrease in revenues and
gross margins. The Company expects that the average price of its products
will decrease in the future in response to competitive pricing pressures
and changes in product mix and other factors. If the Company is unable to
offset these decreases by increasing its sales volumes, its revenues and
profits will decline. In addition, to maintain its gross margins, the
Company must develop and introduce new products and product enhancements,
and it must continue to reduce the manufacturing cost of its products. If
the Company fails to do this, its business could suffer.
NEW PRODUCTS MAY CONTAIN UNDETECTED HARDWARE AND SOFTWARE ERRORS
New products that the Company develops may contain undetected hardware and
software errors, which could require significant expenditures of time and
money to correct, harm its relationships with existing customers, and
negatively impact its reputation in the industry.
Despite its testing and quality control efforts, the Company anticipates
that errors may be found from time to time in new or enhanced products
after commercial introduction. In addition, the Company's products are
combined with products from other vendors. As a result, when problems
occur, it may be difficult to identify the source of the problem. If the
Company is unable to rapidly correct any errors, this could result in the
following consequences, among others:
1. Delay or loss of market acceptance of the Company's products.
2. Significant warranty or other liability claims.
3. Diversion of engineering and other resources from product
development efforts.
4. Significant customer relations problems.
5. Loss of credibility in the market.
6. Inability to sell its products until any errors are corrected.
The Company's growth depends on its digital video products and if any of
the above events occur, the Company's business could be adversely impacted.
SUPPLIERS
If the Company's subcontractors do not meet its manufacturing needs, it may
not be able to produce and sell its products. The Company subcontracts a
majority of its production activities, including the manufacture and
assembly of certain products from GENROCO (totaling $132,269, or 100% of
the cost of goods sold in 1999).
The Company and its major supplier (GENROCO) currently depend upon
qualified suppliers to deliver high-quality products in a timely manner,
but they cannot assure that these suppliers will continue to perform
satisfactorily. The Company currently does not have a long-term supply
contract with any of its subcontractors. The Company's subcontractors are
not obligated to supply products for any specific period, or in any
specific quantity, except as may be provided in a particular purchase
order.
The Company generally places orders with its subcontractors between one and
three months before scheduled delivery of products to customers.
Accordingly, if the Company inaccurately forecasts demand for its products,
it may be unable to obtain adequate manufacturing capacity from its
subcontractors to meet its customers' delivery requirements, or it may
accumulate excess inventories. Poor performance by one of the Company's
subcontractors would have a material adverse effect on business until it
finds an alternative subcontractor. The Company cannot assure that it
would be able to find an alternative subcontractor to deliver quality
products at an acceptable price. If the Company experiences problems with
any of its subcontractors, the Company's business could be adversely
affected.
In addition, future growth may cause the Company to increase orders to its
subcontractors. If this happens, the Company may not be able to accurately
forecast its needs or manage its relationship with its subcontractors
during the transition.
Frequently, manufacturers encounter delays or difficulties in beginning
volume production of new product lines. If the Company or any of its
subcontractors is not able to effectively manage the anticipated increase
in production volumes, the Company's business could suffer.
COMPONENTS
The Company's dependence on a limited number of suppliers and the possible
unavailability of some key components may prevent it from being able to
produce its products.
Some of the components the Company uses in its products are available only
from a single supplier, or from a limited number of suppliers. These
components may occasionally be in short supply or unavailable from a sole
source supplier. The following factors could each have an adverse effect
on the Company's ability to obtain components for the Company's products:
1. Scarce quantities of components.
2. A reduction or interruption in component supply.
3. A disruption of existing supplier relationships.
4. An inability to develop alternative sources.
5. A significant increase in the price of components.
If the Company is unable to purchase components on a timely basis, it may
not be able to produce its products.
REGULATORY APPROVALS MAY NOT BE COMPLIED WITH
If the Company fails to comply with evolving regulatory approvals or
government regulations, it may be unable to sell its products. The
Company's products must comply with various regulations and standards
defined by the Federal Communications Commission and Underwriters
Laboratories in the United States. Products sold internationally will also
be required to comply with standards established by authorities in various
countries. To date the Company believes it has met such standards, but
those standards may change.
QUARTERLY FLUCTUATIONS
Quarterly revenues and operating results may fluctuate. The Company's
quarterly revenues and operating results have varied significantly in the
past and are likely to vary significantly in the future. The primary
factors that affect quarterly results include the following:
1. The overall strength of the economy, timing, size and terms of
customer orders.
2. Changes in customer buying patterns.
3. Uncertainties associated with the introduction of any new product or
product enhancement.
4. The timing of the announcement and introduction of new products by
the Company or its competitors.
5. The mix of products sold and the mix of distribution channels
through which products are sold.
6. Deferrals of customer orders in anticipation of new products,
services or product enhancements introduced by the Company or its
competitors.
7. Technological developments affecting the data communication network
and storage market.
LOSS OF KEY PERSONNEL OR INABILITY TO HIRE ADDITIONAL QUALIFIED PERSONNEL
The loss of the services of any key management employees or inability to
attract and retain qualified personnel or delays in hiring required
personnel, particularly engineers and sales personnel, could delay the
development and introduction of, and negatively impact the Company's
ability to sell, its products. In addition to key management personnel,
the Company's success depends on its ability to attract and retain highly
skilled managerial, engineering, sales and marketing and other personnel.
Competition for these personnel is intense. In recent years, there has
been a strong demand for qualified skilled and unskilled employees in the
Wisconsin area, where the Company's main operations are located, and in
other areas where it operates. There is a risk that it will be
unsuccessful in attracting and retaining the personnel it needs for its
business.
INTELLECTUAL PROPERTY MAY NOT PROTECT THE COMPANY
The Company's business is dependent on its intellectual property, and its
success in protecting its intellectual property could negatively affect its
ability to compete.
To establish and protect the Company's intellectual property rights, the
Company will rely on a combination of patent, copyright, trademark and
trade secret laws and restrictions on disclosure. The Company also enters
into confidentiality or license agreements with consultants, customers and
corporate partners. The Company cannot be certain that the steps it takes
to protect its intellectual property will adequately protect its
proprietary rights, or that others will not independently develop or
otherwise acquire equivalent or superior technology. In addition, the laws
of some of the countries in which the Company's products are, or may be
sold, may not protect the Company's proprietary rights as fully as the laws
of the United States.
The Company may be a party to intellectual property litigation, either to
protect its intellectual property or as a result of an alleged infringement
of others' intellectual property. Any litigation or dispute, regardless of
its success would likely result in substantial costs and be time consuming.
An adverse determination could:
1. Subject the Company to significant liabilities from third parties.
2. Invalidate the Company's proprietary rights and require it to seek
licenses from or pay royalties to third parties.
3. Require the Company to develop appropriate alternative technology.
4. Require the Company to stop using the challenged intellectual
property and/or stop selling its products that incorporate it.
Any of these events could have an adverse effect on the business, financial
condition and results of operations.
INTERNATIONAL SALES MAY NOT MATERIALIZE
The Company may not be successful in its international sales activities,
which could adversely affect its growth. The Company's international sales
will be limited if it is unable to establish and maintain relationships
with international distributors and original equipment manufacturers. Even
if the Company increases its international sales efforts, it cannot be
certain that it will increase demand for its products in these markets.
The Company's international operations are subject to a number of risks,
including:
1. Longer sales cycles.
2. Difficulty in collecting accounts receivable.
3. Political and economic instability.
4. Reduced protection of intellectual property rights.
5. Protectionist laws and business practices that favor local
competition.
6. Dependence on local vendors.
To date, none of the Company's international revenues and costs have been
denominated in foreign currencies. As a result, an increase in the value
of the U.S. dollar relative to foreign currencies could make the Company's
products more expensive and therefore less competitive in foreign markets.
A portion of the Company's international revenues may be denominated in
foreign currencies in the future, which would subject it to risks
associated with fluctuations in those foreign currencies.
NO PRIOR PUBLIC MARKET FOR COMMON STOCK
There is presently no public market for the Company's common stock and
there can be no assurance that an active market will develop following the
Distribution. The prices at which the shares trade will be determined by
the market place and could be subject to significant fluctuations in
response to many factors, including, among others, variations in the
Company's quarterly operating results, changing economic conditions in the
industries in which the Company participates and changes in government
regulations. In addition, the general stock market has in recent years
experienced significant price fluctuations, often unrelated to the
operating performance of the specific companies whose stock is traded.
Market fluctuations, as well as economic conditions, may adversely affect
the market price of the Company common stock. Furthermore, given the
relatively small market capitalization of the Company, the market for the
Shares may be subject to greater volatility than would be the case for a
larger company. See "The Distribution - Listing and Trading of Shares of
Company common Stock."
DIVIDEND POLICY
The Company does not intend to pay cash dividends on the Company Common
stock in the foreseeable future. Rather, it is currently anticipating that
any Company earnings will be retained for use in its business. The future
payment of dividends will depend on business decisions that will be made by
the Company's Board of Directors from time to time based on the results of
operations and financial condition of the Company and such other business
considerations as the Board of Directors considers relevant. Certain
covenants in the Company's credit agreement may restrict the payment of
dividends by requiring the maintenance of certain financial ratios. See
"THE DISTRIBUTION - Dividend Policy" and "FINANCING."
COMPETITION
The Company competes with domestic and foreign-based competitors on the
basis of custom product design, engineering support, quality and price.
While the number of direct competitors is at the moment relatively small,
the emergence of the Digital TV market will encourage competition among
potential suppliers.
CAPITALIZATION
Historically, the Company has been capitalized 100% through equity
contributions from GENROCO.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The Company's objective is to maximize stockholder value by executing
strategies that focus on a balance of three priorities: growth,
profitability and liquidity.
During the first three years of its existence, as a division within
GENROCO, the Company focused its efforts on product and market development
activities with a focus on positioning the Company to be a supplier of
networking equipment for the digital video market. In the view of
management, the time for VideoPropulsion, Inc. to operate as a separate
publicly owned and traded company has arrived.
As a result, GENROCO has capitalized the Company at a level which
management feels will allow it to function as a separate entity and,
hopefully, enable it to attract additional investors and equity capital.
The Company will likely require additional capital as described below to
grow the company in the years ahead.
YEARS ENDED DECEMBER 31, 1999 AND 1998
SELECTED HISTORICAL FINANCIAL DATA
FOR YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998
--------- ---------
Net Sales $ 598,482 $ 329,120
Cost of Goods Sold 132,269 88,404
--------- ---------
Gross Profit 466,213 240,716
% 77.9% 73.1%
Operating Expenses:
Research and Development 261,389 169,145
Sales and Marketing 165,229 79,705
Customer Service 5,011 5,098
General and Administrative 82,764 38,258
--------- ---------
Total 514,393 292,206
--------- ---------
Operating Loss $ (48,180) $(51,490)
Net sales for 1999 were $598,482, compared to $329,120 for 1998.
Gross profit for 1999 was $466,213 compared to $240,716 for 1998 or 77.9%
and 73.1% of net sales for 1999 and 1998, respectively.
The Company's major expense is personnel costs. Most employees are highly
skilled and thus costly due to the present state of the labor market.
Personnel costs traditionally represent approximately 65% of total overhead
costs and expenses.
For the two years ended December 31, 1999, operating expenses of GENROCO
were allocated to the Digital Video Division based on the percentage of
hours worked for the Digital Video Division, by employees of GENROCO,
compared to total hours worked by employees of GENROCO each year,
multiplied by the GENROCO's total operating expenses. Management
estimates that ,if the Company had been on a stand-alone basis over the
past two years, operating expenses would have been substantially identical
to the allocated expenses included in the financial statements.
Research and development costs are expensed as incurred. Research and
development expenses for 1999 were $261,389 compared to $169,145 in 1998,
or 43.7% and 51.4% of net sales for 1999 and 1998, respectively. The
Company expects research and development costs in 2000 and 2001 to be in
excess of 35% of net sales.
Selling, customer service and general and administrative expenses for 1999
were $253,004 compared to $123,061 in 1998 or 42.3% and 37.4% of net sales
for 1999 and 1998, respectively.
As of January 1, 2000, the Company and GENROCO entered into an Interim
Administrative Services Agreement. This agreement governs the
administrative and manufacturing services that GENROCO will continue to
provide to the company on an interim basis. In general GENROCO will
provide certain financial, human resource and information system services
(including use of the hardware and furniture and fixtures associated with
these services). Under the terms of the agreement, the Company will
compensate GENROCO at negotiated fees which, the Company believes, would be
comparable to rates the Company could have achieved through arms-length
negotiations.
Loss from operations in 1999 was $48,180 compared to $51,490 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalent position as December 31, 1999 was
$9,947 as compared to zero prior to incorporation as a wholly-owned
subsidiary of GENROCO, Inc in October of 1999. During the year ended
December 31, 1999, net cash used in operating activities was $146,150 as
compared to $314,464 for the year ended December 31, 1998.
Expenditures for plant and equipment prior to December 31, 1999 were zero.
Capital equipment in use by the Company is being provided by GENROCO on an
operating lease basis. The Company anticipates that it will begin
acquiring its own capital equipment during the first quarter of 2000 by
entering into capital lease agreements with a lease company.
GENROCO contributed $146,097 and $314,464 of equity in 1999 and 1998,
respectively. In addition, on October 4, 1999, GENROCO purchased 1,000
shares of the Company's stock for $10,000.
GENROCO's digital video business financing requirements have historically
been fulfilled by GENROCO. For the next year, GENROCO intends to continue
to provide this financial support on an arms-length business loan basis.
The Company believes that business loans from GENROCO and cash flow from
operations, will be adequate to meet its anticipated capital expenditure,
working capital and operating expenditure requirements in the short term.
However, management is anticipating the need to raise additional working
capital during 2000 and may consider a private placement or a public
offering of VideoPropuslion common stock.
BUSINESS OF THE COMPANY
GENERAL
VideoPropulsion designs and sells a range of digital video products which
provide enabling technology for a variety of applications that allow
consumers to use their TV sets for interactive services including email,
home shopping, web browsing, video-on-demand, Internet based telephony. A
typical application for the Company's products is providing connectivity
between the video servers (which store media that is available to be sent,
via cable TV, to a set-top decoder box at a consumers location) in the
central office of any given cable TV provider and the cable headend (which
is the electronic device in the central office of the cable company that
forwards all TV signals from the central office to the cables leading to
the consumers' set-top box).
VideoPropulsion's products are enabling these solutions and providing what
the Company believes to be low cost-per-stream delivery. The Company's
Internet address is www.videopropulsion.com.
-----------------------
The Company is located in Slinger, Wisconsin (30 miles north of Milwaukee)
and has 6 employees. The Company (initially a wholly-owned subsidiary of
GENROCO, Inc.) has existed as a product line of GENROCO since 1996 and was
organized under the laws of the State of Wisconsin in 1999 as
VideoPropulsion, Inc. Initial sales of digital video products, as a
separate product line for GENROCO, occurred in March of 1997.
BUSINESS STRATEGY
The Company's initial objective is to place DVB interface cards into
digital television application servers by offering products with low cost
per video stream.
Next, the Company intends to produce additional types of hardware
interfaces to utilize the software both it and its customers have
developed.
Strategic alliances will be entered into at the product development level
as well as the sales and service levels of customer support.
MARKETS DEFINED
The market can generally be broken into three categories:
1. The "Broadcast" category which includes a wide variety of video
servers used for video editing, store-and-forward applications, pre-
production applications and archiving applications in digital studios,
as well as organizations engaged in the broadcasting of television
content via towers or satellite. This market is being addressed by
most major platform vendors, plus a variety of companies specializing
in digital video devices and applications.
2. The "Cable and Telco" category which consists primarily of products
for Video-on-Demand (VOD) and interactive services being provided by
the cable and telephone industry, as part of the widespread deployment
of the digital cable infrastructure mandated by the FCC over the next
few years.
3."Other" which includes non-broadcast applications such as high-end
non-linear editing for content creation, hospitality services, in
flight communication, distance learning, enterprise training, etc.
The opportunities for VideoPropulsion's products are perceived to be
primarily in the Broadcast and Cable/Telco segments but VideoPropulsion
envisions becoming active with efforts to respond to opportunities in
other areas, as well.
THE COMPANY'S CURRENT PRODUCTS
1. VDOPRO DVB RAW TRANSMIT (DVP-2732AT)
VideoPropulsion's Raw DVB transmit products are DMA engines which
continuously pump a full pipe, 216Mbps, of precisely timed transport
streams. These transmit-only devices are designed with a simple
application program interface (API) that gives developers the ability
to closely couple and control the output of their data. This is the
most cost-effective offering on the market for OEMs who want to add
value and for application providers who need to lower their cost per
stream in transmission-only environments. Device drivers for Windows
NT and Solaris are currently available.
2. VDOPRO DVB RAW TRANSCEIVE (DVP-2732AF)
VideoPropulsion's VDOPro DVB ASI transceive products provide full
duplex transmission and capture of transport streams. The device can
simultaneously send and receive a full pipe, 216Mbps, of MPEG data.
Developer kits provide sample programs for sending and receiving
transport streams, as well as sources to sample programs, to assist in
interfacing to the card. The data is transmitted using a very precise
270 MHz clock. Device drivers for Windows NT and Solaris are
currently available.
3. DOPRO DVB MULTIPLEX TRANSMIT
VideoPropulsion's VDOPro DVB ASI multiplexing products deliver a full
pipe, 216Mbps, of transport streams using patented architecture,
custom firmware, and efficient, low host-overhead device drivers.
These products are the result of extensive experience in cross-
platform support of high performance networking and video streaming
applications. A flexible API offers customers the ability to define
options and provides high levels of functionality facilitating
integration with application layers. Multiple streams of MPEG video
and encapsulated IP data are multiplexed into a single MPTS for
transmission to any other DVB ASI compliant device. The data is
transmitted using a very precise 270MHz clock and the multiplexor
inserts and modifies timing information in the streams as appropriate.
Device drivers for Windows NT and Solaris are currently available.
4. VDOPRO DVBOVS TRANSMIT- DVB TRANSMIT SUPPORT FOR ORACLE VIDEO SERVER ITV
SOLUTIONS
Oracle Video Server, release 3.0, offers greatly enhanced features
such as simplified startup and system management; full VCR controls;
patented Visual Scan; integration with the Oracle8 database; patented
real-time RAID; DVB support; and a robust distribution solution for
delivering from hundreds to thousands of concurrent video streams.
VideoPropulsion has worked with Oracle's OVS team to match
VideoPropulsion's device drivers to Oracle's multiplexing and video
management software. VideoPropulsion's extensive experience and
expertise in high performance controllers for networking and digital
video in a wide variety of superserver configurations has produced
drivers that are optimally tailored. The VDOPro Raw Transmit (DVP-
2732/AT) card acts as a hardware platform for this powerful and
flexible combination. VideoPropulsion's hardware and software have
been carefully integrated into the OVS video pump to provide seamless
output of content from the Oracle Media Data Store (MDS) to digital
QAMs, QPSK, and other DVB ASI compliant devices.
VDOPro DVBASI for OVS is available on SGI Origin platforms with IRIX,
Compaq Alphastations with Tru64 UNIX, and Sun Microsystems Sparc
servers with Solaris.
FUTURE PRODUCTS
VideoPropulsion has new hardware and software under development, that
management believes, will expand and enhance its product offerings as many
new digital television requirements appear and deployment of solutions
begins in earnest. A driving force in the industry is to reduce the cost-
per-stream of delivery to the consumer. VideoPropulsion is addressing this
need with products that will reduce the cost of infrastructure.
PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY
The Company has a license to U.S. patent (Patent # 5,420,984) covering
peripheral controllers and methods for rapid task switching and memory
caching, which was issued on May 30, 1995 and is owned by GENROCO, Inc.
The Company also has a license to U.S. patent (Patent # 6,036,032) covering
high speed data buffers using virtual first-in first-out registers which
was issued in February, 2000.
GENROCO has applied for other patents covering the following technologies:
(1) high-speed data buffer using a virtual first-in first-out register and
(2) buffer memory with parallel data and transfer instruction buffering and
the Company has the right to procure a nonassignable license to use this
technology.
GENROCO has applied for additional patents relative to the digital video
product lines, all of which will be available for use by the Company.
SALES AND MARKETING / DISTRIBUTION AND SALES CHANNELS
The Company currently uses a direct sales force, which receives technical and
sales support from the engineering staff on an as needed basis. Products are
typically shipped from the Company's Wisconsin facility direct to the customer
via an independent shipping service.
The Company sells the majority of its products and technology in Europe, Japan
and the United States. Approximately 39.5%and 17.5% of fiscal 1999 and 1998
sales, respectively, were made to non-U.S. customers. All sales are in U.S.
dollars.
MAJOR CUSTOMERS
The following customers comprise a significant portion of the Company's
business:
CUSTOMER REVENUE AS A PERCENT OF TOTAL REVENUE
--------------------------------------------------------
1999 1998
---- ----
Concurrent Computer Corp. 12.0% 46.1%
Compaq - France. 15.5% 17.9%
Open TV 24.2% 15.0%
SGI 24.0% 0%
Oracle 7.0% 11.0%
The balance of the business is generated from approximately 10 customers.
COMPETITION
Direct competition for the Company's digital video products comes from View
Graphics and Cogent Technologies. Additional direct competitors are
expected to emerge and the market will become more competitive.
Indirect competition for the Company's current digital video products comes
from other digital video transport mechanisms such as DHEI and ATM.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. Research and
development expenses for 1999 were $261,389 compared to $169,145 in 1998,
or 43.7% and 51.4%of net sales for 1999 and 1998, respectively. The
Company expects research and development costs in 2000 and 2002 to be in
excess of 35% of net sales.
EMPLOYEES
As of December 31, 1999, the Company had 6 employees, all of which were
full-time. Some of these full-time employees currently perform selected
duties for GENROCO on a contract employee basis.
None of the Company's employees are represented by a union. The Company
believes that its relations with its employees are good.
FACILITIES
The Company's primary physical presence in the United States is its
corporate headquarters in Slinger, Wisconsin, where it leases approximately
2,250 square feet of space from GENROCO, Inc. GENROCO currently occupies
approximately 12,000 square feet of this shared facility. An additional
6,000 square feet of the facility is used for warehousing and is available
for future growth.
SUPPLIERS
GENROCO produces all of the Company's products, on an arms-length basis,
under an outsourcing contract.
GENROCO purchases its non-critical parts and services from suppliers and
distributors. The following suppliers comprise a significant portion of
the Company's cost of goods sold.
SUPPLIER COSTS AS A PERCENTAGE OF COST OF GOODS SOLD
-------------------------------------------------------
1999 1998
---- ----
Multek 10% 14%
Insight 20% 20%
Hewlett-Packard 10% 10%
Wyle 4% 10%
DASH 5% 10%
GENROCO, in turn, purchases its critical parts directly from manufacturers.
In the event that a manufacturer is unable to supply parts, GENROCO would
then select an alternate supplier, which it believes are generally
available. However a select few components are single-source and if
unavailable, GENROCO would be required to redesign the product. Price
increases are generally passed along to the customer.
All circuit board fabrication and circuit board assembly work is outsourced
to high quality suppliers who are generally ISO-9001 certified and have
demonstrated the skills to produce quality products quickly.
The Company's dependence on a limited number of suppliers and the possible
unavailability of some key components may prevent it from being able to
produce its products at the level desired by customers. Some of the
components the Company uses in its products are available only from a
single supplier, or from a limited number of suppliers. These components
may occasionally be in short supply or unavailable from a sole source
supplier. The following factors could each have a material adverse effect
on the Company's ability to obtain components for the Company's products:
1. Scarce quantities of components.
2. A reduction or interruption in component supply.
3. A disruption of existing supplier relationships.
4. An inability to develop alternative sources.
5.A significant increase in the price of components.
If GENROCO is unable to purchase components on a timely basis, it may not
be able to produce the Company's products. GENROCO's distributors are
beginning to provide allocation schedule information, designed to promote
forward planning and purchase commitments, which in itself constitutes a
business risk beyond the control of the Company.
FISCAL YEAR END
The Company has a fiscal year end of December 31. The results herein
include the years ended December 31, 1999 ("1999") and December 31, 1998
("1998"). The fiscal year ending December 31, 2000 is referred to as
"2000".
LEGAL PROCEEDINGS
The Company and its parent, GENROCO, Inc. are, from time to time, party to
litigation arising in the normal course of business. The Company believes
that none of these actions will have a material adverse effect on the
financial condition or results of operations of the Company. Currently
there are no known litigation claims relating to the Company.
TRANSACTIONS AND AGREEMENTS BETWEEN THE COMPANY AND GENROCO
In order to effect the spin-off, GENROCO and VideoPropulsion have entered
into the following agreements relating to their ongoing relation subsequent
to January 1, 2000 as follows:
. Contribution Agreement, Plan and Agreement of Reorganization and
Distribution.
. Facilities Lease Agreement.
. General Assignment, Assumption and Agreement.
. Transitional Trademark Use and License Agreement.
. Insurance Matters Agreement.
. Employee Benefits and compensation Agreement.
. Tax Sharing and Indemnification Agreement.
. Interim Administrative Services agreement.
. Confidentiality and Non Disclosure Agreement.
. Bill of Sale and Assumption of Liabilities.
These agreements serve to effect the spin-off, describe the restructuring
to reorganize GENROCO, and define the ongoing relationship between the
parties after the spin-off. Because these Agreements were negotiated while
VideoPropulsion was a wholly owned subsidiary, they are not the result of
negotiations between independent parties, although GENROCO and
VideoPropulsion have set pricing terms for services believed to be
comparable to what could be achieved through arms-length negotiation.
Following the spin-off, additional or modified agreements, arrangements and
transactions may be entered into and such agreements and transactions will
be determined through arms-length negotiations.
CONTRIBUTION AGREEMENT - Pursuant to the Contribution Agreement, Plan and
Agreement of Reorganization and Distribution, immediately prior to the
spin-off, substantially all of the assets and liabilities of the digital
video business were transferred by GENROCO to VideoPropulsion.
VideoPropulsion also assumed the indebtedness associated with the certain
transferred assets of the digital video business.
FACILITIES LEASE AGREEMENT - Pursuant to the Facilities Lease Agreement,
GENROCO has agreed to lease approximately 3,000 square feet of dedicated
space to VideoPropulsion for a period of two years at a lease rate of
$2,500 per month, including utilities, taxes, insurance and maintenance
costs.
ASSIGNMENT AND ASSUMPTION AGREEMENT - Pursuant to the General Assignment
and Assumption Agreement regarding Litigation, Claims and other
Liabilities, in general VideoPropulsion assumed and agreed to indemnify
GENROCO and acquire substantially all the liabilities, litigation and
claims arising out of the digital video business including all
environmental liabilities. GENROCO retained and will indemnify
VideoPropulsion against substantially all liabilities, litigation and
claims arising out of its storage area networking business and other items
not transferred to VideoPropulsion. The indemnification obligations will
not entitle the indemnified party to recover to the extent that such
liabilities are covered by proceeds received from a third party insurer.
In circumstances in which the potential liability of GENROCO and
VideoPropulsion is joint, the parties will share responsibility for such
liability on a mutually agreed basis consistent with the principles
established in the Agreement.
TRANSITIONAL TRADEMARK USE AND LICENSE AGREEMENT - Pursuant to the
Transitional Trademark Use and License Agreement, GENROCO will grant to
VideoPropulsiton certain rights to continue to use, for a limited period of
time and under certain defined circumstances, certain GENROCO trademarks
and trade dress already inscribed upon VideoPropulsion's existing inventory
of labels, promotional materials, product materials and other materials
relating to VideoPropulstion's existing inventory of products. Also,
GENROCO has granted VideoPropulsion a royalty free, nontransferable,
nonexclusive license to use certain GENROCO trademarks and intellectual
property for a period of ten (10) years after the spin-off.
INSURANCE MATTERS - An Insurance Matters Agreement was entered into
which governs the rights and obligations of GENROCO and VideoPropulsion
with respect to various pre-existing contracts insuring GENROCO and
covering risks associated with, or arising out of, the digital video
business. The types of policies covered by the insurance Agreement
include, without limitation, automobile liability, comprehensive and
general liability. This agreement also established certain procedures for
dealing with pending litigation, new litigation and the resolution of
disputes between the parties concerning the Insurance Agreement.
EMPLOYEE BENEFIT AND COMPENSATION MATTERS - An Employee Benefits and
Compensation Agreement will govern the rights and obligations of GENROCO
and VideoPropulsion with respect to various matters and obligations
concerning employee benefits for the former GENROCO employees who became
employees of VideoPropulsion as of January 1, 2000. The Benefits Agreement
covers VideoPropulsion's assumption of certain compensation and benefits
obligations relative to VideoPropulsion's employees. Pursuant to the
Benefits Agreement, VideoPropulsion will assume responsibility for certain
benefits previously offered by GENROCO to its employees prior to the spin-
off who became employed by VideoPropulsion and will receive funds from
GENROCO for disbursement to such employees for compensation and certain
employee benefits earned prior to the spin-off.
TAX INDEMNIFICATION AGREEMENT - Pursuant to a Tax Sharing and
Indemnification Agreement (the "Tax Indemnification Agreement"),
VideoPropulsion will indemnify GENROCO for certain tax costs resulting from
Internal Revenue Service and other audit assessments relating to
VideoPropulsion's business from the spin-off. The Tax Indemnification
Agreement will also allocate responsibility for certain taxes resulting
from the transfer of assets and liabilities to VideoPropulsion pursuant to
the Contribution Agreement and the spin-off of VideoPropulsion shares in
the spin-off. In general, VideoPropulsion will indemnify GENROCO for any
liability resulting from a decision that GENROCO is liable to GENROCO's
shareholders or VideoPropulsion's shareholders because the spin-off failed
to meet the requirements of Section 355 of the Code for non-recognition of
gain or loss at the corporate level if such taxes or liability result from
a breach of any representation or covenant made by VideoPropulsion in
connection with the spin-off under the application Code provisions.
INTERIM ADMINISTRATIVE SERVICES AGREEMENT - As of January 1, 2000, GENROCO
and VideoPropulsion entered into an Interim Administrative Services
Agreement. This Agreement governs the administrative and financial
services that GENROCO will continue to provide to VideoPropulsion on an
interim basis and for which VideoPropulsion will provide GENROCO. In
general, GENROCO will provide certain financial services, human resource
services and information system services for a period of up to one year,
with certain limited exceptions. The Interim Administrative Services
Agreement will also provide for certain financial support, technical
support, and staff support services for one year. Under the terms of the
Agreement, each party will compensate the other parties for negotiated
amounts which, VideoPropulsion believes, will be comparable to rates
VideoPropulsion could have achieved through arm's-length negotiations and
approximate current intercompany rates.
CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT - As of January 1, 2000,
VideoPropulsion and GENROCO entered into a Confidentiality and
Nondisclosure Agreement whereby, subject to certain exceptions, each party
agreed to treat as confidential and not disclose certain proprietary and
other confidential information.
BILL OF SALE AND ASSUMPTION OF LIABILITIES AGREEMENT - As of January 1,
2000, GENROCO assigned, free and clear of liens and claims by third
parties, certain assets and liabilities directly associated with the
digital video business. This agreement sets forth the identity of the
related assets and liabilities assigned by GENROCO and assumed by
VideoPropulsion.
MANAGEMENT OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
Listed below is certain information concerning the Company's executive
officers. Pursuant to the Company's By-Laws, each officer is appointed by
the board of Directors and holds office until his or her resignation, death
or removal, or until the Board appoints a different person to the office.
The following is a listing of all directors and executive officers of the
Company. An officer remains in office until he or she resigns, dies or a
different person is appointed to the office. Directors shall hold office
until the next annual shareholders' meeting and until the director's
successor has been elected or until his or her resignation, death or
removal.
Initial
Term
Name Age Expires Position
---------------------------------------------------------------------------
Barbara R. Pick 48 Dec 31, 2003 Director, President and CEO
Chris Good 49 Dec 31, 2002 Director, Executive Vice President
and Chief Technology Officer
Carl A. Pick 52 Dec 31, 2004 Director and Chairman of the Board
Keith E. Brue 62 Dec 31, 2002 Director, Secretary and Treasurer
(Outside Directors To Be Added)
CARL A. PICK - Director and Chairman of the Board. Mr. Pick is also
Director, Chairman and CEO of GENROCO, Inc., the parent company of
VideoPropulsion. Mr. Pick graduated from Yale University in 1971 with a
Bachelor's degree in Computer Engineering. He received a Master's degree in
Computer Science from Yale in 1974. He, along with Barbara Pick, his wife,
founded General Robotics Corporation ("GRC") in August 1974 and reorganized
GRC into GENROCO, Inc. in 1987. Mr. Pick is married to Barbara R. Pick.
Mr. Pick is the Chairman and Marketing Director of the High Speed
Networking Forum.
BARBARA R. PICK - Director, President and Chief Executive Officer of
VideoPropulsion, Inc. since incorporation on October 1, 1999. She is
responsible for corporate development, marketing strategy, and overall
corporate management of the Company. She served as Vice President of
Sales for GENROCO since incorporation to September 30, 1999 and Digital
Video Product manager for digital video products and President of GENROCO
from 1997 to September 30, 1999. Ms. Pick is married to Carl A. Pick and
is a director of GENROCO, Inc.
CHRIS GOOD -. Director, Executive Vice President and Chief Technological
Officer of VideoPropulsion, Inc. since incorporation on October 1, 1999. He
served as Director, Executive Vice President, Chief Technical Officer of
GENROCO, Inc from 1987 to September 30, 1999. He graduated with an honors
degree in Mathematics and Physics from King's College, University of London
in 1971. He was formerly with ITT, then Compaq Computer Corporation, UK.
KEITH E. BRUE - Director, Secretary and Treasurer of VideoPropulsion, Inc.
He is also is Executive Vice President, Chief Operations Officer, Chief
Financial Officer and Secretary of GENROCO, Inc.. He has been a director
of the GENROCO, Inc. since 1986. He is responsible for manufacturing,
materials, logistics, accounting and finance. Mr. Brue received his MBA
degree from the University of Chicago and has extensive operations
experience with a focus on dealing with mergers, acquisitions and business
systems processes. He began his career in public accounting with a
predecessor to Ernst & Young LLP and has over 20 years of experience with
several different high technology companies, including two which were
publicly held and traded on NASDAQ, as the result of initial public
offerings.
COMMITTEES OF THE BOARD OF DIRECTORS
Prior to the Distribution, the Company's Board of Directors is expected to
establish and designate specific functions and areas of oversight to an
Audit Committee and a Compensation Committee.
DIRECTORS COMPENSATION
Directors, who are compensated as employees of the Company, will receive no
additional compensation for service as directors.
Each director, who is not an employee of the Company, will receive a
retainer of $1,000 per quarterly Board meeting and/or committee meeting
attended, payable in cash, not to exceed $6,000 per year in total.
EXECUTIVE COMPENSATION
HISTORICAL COMPENSATION
The following table sets forth the compensation paid by the Company's
parent, GENROCO, Inc. to executives for services rendered to the Company
1999, 1998 and 1997.
All Other
Name and Principal Compensation ($)
Position Salary ($) Note - (1)<F1> and (2)<F2>
----------------------------- ---------- --------------------------
Barbara R. Pick, 1999 84,490 1,682
President and CEO 1998 141,663 1,627
1997 109,528 1,507
Chris Good, CTO 1999 27,200 1,503
1998 23,500 985
1997 11,130 376
Carl A. Pick 1999 0 0
Keith E. Brue 1999 0 0
(1)<F1> These amounts are related to the value of health and life
insurance premiums allocated to the Company on behalf of the
employee.
(2)<F2> VideoPropulsion, Inc. pays no director fees to its two directors
who are also employees of the Company, but compensates directors
who are not employees of the Company at the rate of $1,000 per
meeting, not to exceed $6,000 per year in total.
SECURITY OWNERSHIP IN VIDEOPROPULSION BY ITS DIRECTORS AND EXECUTIVE OFFICERS
All of the Company's outstanding Shares are currently held by GENROCO,
Inc. The following table sets forth information concerning Shares that the
Company believes will be beneficially owned after the Distribution by (i)
each person known to the Company that will own more that 5% of the shares,
(ii) each of the Directors of the Company (iii) each of the executive
officers named in the Summary Compensation Table under "Executive
compensation" and (iv) by all persons chosen to be directors and executive
officers of the Company as a group. The projections reflect the
Distribution Ratio and are based upon: the number of Shares of GENROCO
common stock owned by such persons as of February 29, , 2000. Unless
otherwise noted, each person listed below has sole voting and investment
power with respect to his or her Shares. The address for each individual
set forth below is 251 Info Highway, Slinger, WI 53086.
% of
Name of Beneficial Position With Number of Outstanding
Owner (1)<F3> The Company Shares Shares
--------------------------------------------------------------------------
Barbara R. Pick
(Wife of Carl) Director, CEO 988,004 22.4%
Chris Good Director, CTO 307,956 7.0%
Carl A. Pick
(Husband of Barbara) Director,
Chairman 1,009,631 22.9%
Keith E. Brue Director,
Sec./ Treas. 196,140 4.5%
--------- -----
All Directors and Officers
as a Group (4 persons) 2,501,731 56.8%
GENROCO ESOP (2)<F4> 411,403 8.1%
(1)<F3> The securities "beneficially owned" by a person are determined
in accordance with the definition of "beneficial ownership" set
forth in the regulations of the Securities and Exchange
Commission and, accordingly, may include securities owned by or
for, among others, the spouse, children or certain other
relatives of such person as well as other securities as to
which the person has or shares voting or investment power or
has the right to acquire within 60 days.
(2)<F4> The amounts attributed to the ESOP exclude 152,109 shares
associated with the officers listed here-on and included in
their individual totals.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
GENROCO has had an Employee Stock Ownership Plan (ESOP) since April of
1989, which owns 563,512 Shares (12.8%) of the 4,401,642 total outstanding
Shares of GENROCO, Inc. common stock.
All employees of GENROCO, Inc. and the Company are members of the plan. The
ESOP provides for a five year vesting schedule, except that in the event of
the sale of the Company all employees become fully vested.
EMPLOYMENT AND NON-COMPETE AGREEMENTS
Each employee of the Company has signed a non-compete agreement, as a
condition of employment, which stipulates the following:
(a) Nondisclosure. Except as required in his duties to Company,
-------------
Employee shall not directly or indirectly use, disseminate,
disclose, lecture upon or publish any Confidential Information (as
defined herein) while employed by Company and for a period of two
years thereafter (the "Restricted Period").
(b) Confidential Papers. Upon termination of his employment with
--------------------
Company, all documents, drawings, sketches, designs, listings,
records, notebooks and similar repositories of or containing
Confidential Information, including copies thereof, then in
Employee's possession or under his control, whether prepared by him
or others, shall be left with or returned to Company. All such
material shall remain the property of Company.
(c) No Interference. For a period ending two years after the
----------------
termination of Employee's employment with Company for whatever
reason, Employee shall not, whether for his own account or for the
account of any other individual, partnership, firm, corporation or
other business organization (other than Company), intentionally
solicit, endeavor to entice away from Company, or otherwise
interfere with the relationship of Company, any person who is
employed by or otherwise engaged to perform services for Company.
(d) Inventions. All inventions made or conceived by Employee, whether
----------
or not during the hours of his employment or with the use of
Company facilities, materials, or personnel, either solely or
jointly with others during his employment by Company belong to the
Company.
DESCRIPTION OF COMPANY CAPITAL STOCK
GENERAL
The description of the Company's capital stock contained herein is
qualified by reference to the Company's Articles of Incorporation, as
amended to date, and by-laws.
COMMON STOCK OF VIDEOPROPULSION, INC
As amended, the Company's authorized capital stock consists of 6,000,000
common stock shares, par value $0.01 per share.
AUTHORIZED CAPITAL STOCK
Under the Company's Articles of Incorporation, which are attached as
Appendix B to this Information Statement, the total number of shares of all
classes of stock that the Company shall have authority to issue is
6,000,000, par value of $.01 per Share, all of which shall be Company
common stock
Based on the number of shares of GENROCO common stock outstanding on
December 31, 1999 and the distribution Ratio, it is expected that
approximately 4,401,624 shares of Company common stock will be issued to
shareholders of GENROCO in the Distribution. The Shares to be distributed
will constitute 100% of the outstanding Company common stock immediately
after the Distribution. All of the shares to be distributed to GENROCO
shareholders in the Distribution will be fully paid and non-assessable,
except as provided under applicable Wisconsin statutory law.
COMMON STOCK
Holders of Company common Stock are entitled to one vote for each Share on
all matters voted on by shareholders. Holders of Company common stock do
not have cumulative voting rights in the election of directors. The
Company's Articles of Incorporation provide for the Company's Board of
Directors, effective upon the Distribution, to be divided into three
classes of directors serving staggered three-year terms. Accordingly,
approximately one-third of the Company's directors will be elected at the
Company's annual meeting of shareholders each year. The first annual
meeting of shareholders is expected to be held during July of 2000.
Holders of Company common Stock do not have preemptive rights, or any
subscription, redemption of conversion privileges. Holders of Company
Stock are entitled to participate ratably in dividends on the Company
Common Stock as declared by the Board of Directors, and are entitled to
share ratably in all assets available for distribution to shareholders in
the event of liquidation or dissolution of the Company. See "The
DISTRIBUTION - Dividend Policy" for information concerning dividend
restrictions.
TRANSFER AGENT
The transfer agent is Fidelity Transfer Company, Registrar & Transfer
Agent, 1800 South West Temple, Suite #310, Box 53, Salt Lake City, UT
84115 (801) 484-7222.
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF
INCORPORATION, BY-LAWS AND WISCONSIN STATUTORY LAW
GENERAL
The provisions of the Company's Amended and Restated Articles of
Incorporation, the Company's Bylaws and Wisconsin statutory law described
in this section may delay or make more difficult acquisitions or changes of
control of the Company not approved by the Company's Board of Directors.
Such provisions have been implemented to enable the Company, particularly
(but not exclusively) in the initial years of its existence as an
independent, publicly-traded company, to develop its business in a manner
which will foster its long-term growth without disruption caused by the
threat of a takeover not deemed by its Board of Directors to be in the best
interests of the Company and its shareholders. Such provisions could have
the effect of discouraging third parties from making proposals involving an
acquisition or change of control of the Company, although such proposals,
if made, might be considered desirable by a majority of the Company's
shareholders. Such provisions may also have the effect of making it more
difficult for third parties to cause the replacement of the current
management of the Company without the concurrence of the Board of
Directors.
NUMBER OF DIRECTORS; REMOVAL; VACANCIES
The Company's Amended and Restated Articles of Incorporation provide that
the number of directors shall be determined from time to time exclusively
by vote of a majority of the Company's Board of Directors then in office,
provided that in no case shall the authorized number of directors be less
than three (3) or more then seven (7). The Amended and Restated Articles
of Incorporation also provide that the Company's Board shall have the
exclusive right to fill vacancies in the Board of Directors, including
vacancies created by expansion of the Board, and that any director elected
to fill a vacancy shall serve until the next election of the class of which
such director shall have been chosen. The Amended and Restated Articles of
Incorporation further provide that directors may be removed by the
shareholders but only for cause and only by the affirmative vote of the
holders of at least a majority of the votes then entitled to be cast in an
election of directors. This provision, in conjunction with the provision
of the Amended and Restated Articles of Incorporation authorizing the Board
to fill vacant directorships, could prevent shareholders from removing
incumbent directors without cause and filling the resulting vacancies with
their own nominees.
CLASSIFIED BOARD OF DIRECTORS
The Amended and Restated Articles of Incorporation provide for the
Company's Board of Directors, effective upon the Distribution, to be
divided into three classes of directors serving staggered three-year terms.
Accordingly, approximately one-third of the Company's Board of Directors
will be elected each year. See "MANAGEMENT OF THE COMPANY - Directors".
The Company believes that a classified Board will help assure the
continuity and stability of its Board of' Directors, and its business
strategies and policies as determined by its Board, because a majority of
the directors at any given time will have prior experience as directors of
the Company. This provision should also help to insure that the Company's
Board of Directors, if confronted with an unsolicited proposal from a third
party that has acquired a block of the Company's voting stock, will have
sufficient time to review the proposal and appropriate alternatives and to
seek the best available result for all shareholders.
In addition, this provision could prevent a party who acquires control of a
majority of the outstanding voting stock from obtaining control of the
Company's Board of Directors until the second annual shareholders meeting
following the date the acquirer obtains the controlling stock interest and
could have the effect of discouraging a potential acquirer from making a
tender offer or otherwise attempting to obtain control of the Company and
could thus increase the likelihood that incumbent directors will retain
their positions.
CERTAIN ANTI TAKE-OVER PROVISIONS
Sections 180.1140 to 180.1144 of the "Wisconsin Business Combination Law
(the "WBCL") regulate a broad range of "business combinations" between a
"resident domestic corporation" (which the Company is) and an "interested
shareholder." The Wisconsin Business Combination Statute defines a
"business combination" to include a merger or Share exchange, sale, lease,
exchange, mortgage, pledge, transfer, or other disposition of assets equal
to at least 5% of the market value of the stock or assets of the Company or
10% of its earning power, or issuance of stock or rights to purchase stock
with a market value equal to at least 5% of the outstanding stock, adoption
of a plan of liquidation, and certain other transactions involving an
"interested shareholder." An "interested shareholder" is defined as a
person who beneficially owns, directly or indirectly, 10% of the voting
power of the outstanding voting stock of the corporation or who is an
affiliate or associate of the corporation and beneficially owned 10% of the
voting power of the then outstanding voting stock within the last three
years. The Wisconsin Business Combination Statute prohibits a corporation
from engaging in a business combination (other than a business combination
of a type specifically excluded from the coverage of the statute) with an
interested shareholder for a period of three years following the date such
person becomes an interested shareholder, unless the board of directors
approved the business combination or the acquisition of the stock that
resulted in a person becoming an interested shareholder before such
acquisition. Accordingly, the Wisconsin Business Combination Statute's
prohibition on business combinations cannot be avoided during the three-
year period by subsequent action of the board of directors or shareholders.
Business combinations after the three-year period following the stock
acquisition date are permitted only if (I) the board of directors approved
the acquisition of the stock prior to the acquisition date, (ii) the
business combination is approved by a majority of the outstanding voting
stock not beneficially owned by the interested shareholder, or (iii) the
consideration to be received by shareholders meets certain requirements of
the statute with respect to form and amount.
In addition, the WBCL provides, in Sections 180.1130 to 180.1133, that
certain mergers, share exchanges or sales, leases, exchanges or other
dispositions of assets in a transaction involving a "significant
shareholder" and a "resident domestic corporation" (as defined below) are
subject to a supermajority vote of shareholders (the "Wisconsin Fair Price
Statute"), in addition to any approval otherwise required. A "significant
shareholder," with respect to an issuing public corporation, is defined as
a person who beneficially owns, directly or indirectly, 10% or more of the
voting stock of the corporation, or an affiliate of the corporation which
beneficially owned, directly or indirectly, 10% or more of the voting stock
of the corporation within the last two years. Such business combinations
must be approved by 80% of the voting power of the corporation's stock and
at least two-thirds of the voting power of the corporation's stock not
beneficially held by the significant shareholder who is party to the
relevant transaction or any of its affiliates or associates, in each case
voting together as a single group, unless the following fair price
standards have been met: (I) the aggregate value of the per Share
consideration is equal to the higher of (a) the highest price paid for any
common Shares of the corporation by the significant shareholder in the
transaction in which it became a significant shareholder or within two
years before the date of the business combination, (b) the market value of
the corporation's Shares on the date of commencement of any tender offer by
the significant shareholder, the date on which the person became a
significant shareholder or the date of the first public announcement of the
proposed business combination, whichever is higher, or (c) the highest
liquidation or dissolution distribution to which holders of the Shares
would be entitled, and (ii) either cash, or the form of consideration used
by the significant shareholder to acquire the largest number of Shares, is
offered.
Under Section 180.1150 (the "Wisconsin Control Share Statute") of the WBCL,
unless otherwise provided in the articles of incorporation (which is not
the case with respect to the Company's Amended and Restated Articles of
Incorporation), the voting power of Shares, including Shares issuable upon
conversion of convertible securities or exercise of options or warrants, of
an issuing public corporation held by any person or persons acting as a
group in excess of 20% of the voting power in the election of directors is
limited (in voting on any matter) to 10% of the full voting power of those
Shares. This restriction does not apply to Shares acquired directly from
the resident domestic corporation, in certain specified transactions, or in
a transaction with respect to which the corporation's shareholders have
approved restoration of the full voting power of otherwise restricted
Shares. In light of the 10% threshold contained in the Wisconsin Business
Combination Statute, the Wisconsin Control Share Statute threshold of 20%
may not be implicated unless the board of directors approves a transaction
that permits the shareholder to exceed the 10% ownership level.
Section 180.1134 (the "Wisconsin Defensive Action Restrictions") of the
WBCL provides that, in addition to the vote otherwise required by law or
the articles of incorporation of a resident domestic corporation, the
approval of the holders of a majority of the Shares entitled to vote is
required before such corporation can take certain action while a takeover
offer is being made or after a takeover offer has been publicly announced
and before it is concluded. Under the Wisconsin Defensive Action
Restrictions, shareholder approval is required for the corporation to (i)
acquire more than 5% of the outstanding voting Shares at a price above the
market price from any individual or organization that owns more than 3% of
the outstanding voting Shares and has held such Shares for less than two
years, unless a similar offer is made to acquire all voting Shares, or (ii)
sell or option assets of the corporation which amount to at least 10% of
the market value of the corporation, unless the corporation has at least
three independent directors (directors who are not officers or employees)
and a majority of the independent directors vote not to have this provision
apply to the corporation. The Company will have, following the
distribution, no independent directors, so the restrictions described in
clause (ii) will initially apply to the Company. The restrictions
described in clause (i) above may have the effect of deterring a
shareholder from acquiring the Company's Shares with the goal of seeking to
have the Company repurchase such Shares at a premium over the market price.
The Company believes that it will qualify as a resident domestic
corporation because it is headquartered in Wisconsin. Accordingly the
Company will have the above antitakeover protection discussed above.
CERTAIN WISCONSIN ANTI-TAKEOVER EFFECTS
Certain provisions of the Company's Articles of Incorporation and By-Laws
may have significant anti-takeover effects, including the inability of
shareholders to remove directors without cause, and the limitation on the
number of directors.
The explicit grant in section 180.0827 of the WBCL, the "Wisconsin
Stakeholder Provisions" of discretion to directors to consider non
shareholder constituencies could, in the context of an active "auction" of
the Company, has anti-takeover effects in situations where the interests of
stakeholders of the Company, including employees, suppliers, customers and
communities in which the Company does business, conflict with the short-
term maximization of shareholder value.
The Wisconsin Control Share Statute may deter any shareholder from
acquiring in excess of 20% of the outstanding stock of the Company and the
Wisconsin Fair Price Statute may discourage any attempt by a shareholder to
squeeze out shareholders without offering an appropriate premium purchase
price. In addition, the Wisconsin Defensive Action Restrictions may have
the effect of deterring a shareholder from acquiring the Company's Shares
with the goal of seeking to have the Company repurchase the Shares at a
premium.
The statutory provisions and the Company's Articles of Incorporation and
By-Law provisions referenced above are intended to encourage persons
seeking to acquire control of the Company to initiate such an acquisition
through arms-length negotiations with the Company's Board of Directors, and
to ensure that sufficient time for consideration of such a proposal, and
any alternatives, is available. Such measures are also designed to
discourage investors from attempting to accumulate a significant minority
position in the Company and then use the threat of a proxy contest as a
means to pressure the Company to repurchase Shares at a premium over the
market value. To the extent that such measures make it more difficult for,
or discourage, a proxy contest or the assumption of control by a holder of
a substantial block of the Company's stock, they could increase the
likelihood that incumbent directors will retain their positions, and may
also have the effect of discouraging a tender offer or other attempt to
obtain control of the Company, even though such attempt might be beneficial
to the Company and its shareholders.
Forms of the Company's Articles of Incorporation and By-Laws are attached
to this Registration Statement as Exhibits 2.1 and 2.4, respectively, and
are incorporated herein by reference. The foregoing description of certain
provisions of the Amended and Restated Articles of Incorporation and the
By-Laws does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the Amended and Restated Articles of
Incorporation and the By-Laws, including definitions of certain terms in
each respective document.
DIVIDEND POLICY
To date the Company has paid no cash dividends on its Common Stock. The
Company intends to retain its future earnings, if any, to finance the
expansion of its business and for general corporate purposes. The Company
does not anticipate paying any cash dividends on its common stock in the
future. Any payment of future dividends will be at the discretion of the
Company's Board of Directors and will depend upon, among other things, the
Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to the payment of
dividends and other factors that the Company's Board of Directors deems
relevant.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATION ON LIABILITY OF DIRECTORS
Under the WBCL, director immunity from liability to a corporation or its
shareholders for monetary liabilities applies automatically unless it is
specifically limited by a corporation's articles of incorporation (which is
not the case with the Company's Articles of Incorporation). Excepted from
that immunity are: (i) a willful failure to deal fairly with the
corporation or its shareholders in connection with a matter in which the
director has a material conflict of interest; (ii) a violation of criminal
law (unless the director had reasonable cause to believe that his or her
conduct was lawful or no reasonable cause to believe that his or her
conduct was unlawful); (iii) a transaction from which the director derived
an improper personal profit; and (iv) willful misconduct.
INDEMNIFICATION AND INSURANCE
Under Section 180.0851 (1) of the WBCL, the Company is required to
indemnify a director or officer to the extent such person is successful on
the merits or otherwise in the defense of a proceeding, for all reasonable
expenses incurred in the proceeding if such person was a party because he
or she was a director or officer of the Company. In all other cases, the
Company is required by Section 180.0851 (2) of the WBCL to indemnify a
director or officer against liability incurred in a proceeding to which
such person was a party because he or she was an officer or director of the
Company, unless it is determined that he or she breached or failed to
perform a duty owed to the Company and the breach or failure to perform
constitutes: (i) a willful failure to deal fairly with the Company or its
shareholders in connection with a matter in which the director or officer
has a material conflict of interest; (ii) a violation of criminal law,
unless the director or officer had reasonable cause to believe his or her
conduct was lawful or no reasonable cause to believe his or her conduct was
unlawful; (iii) a transaction from which the director or officer derived an
improper personal profit; or (iv) willful misconduct. Section 180.0858 (1)
of the WBCL provides that, subject to certain limitations, the mandatory
indemnification provisions do not preclude any additional right to
indemnification or allowance expenses that a director or officer may have
under the Company's articles of incorporation, bylaws, a written agreement
or a resolution of the Board of Directors or shareholders.
Section 180.0859 of the WBCL provides that it is the public policy of the
State of Wisconsin to require or permit indemnification, allowance of
expenses and insurance to the extent required or permitted under Sections
180.0850 to 180.0858 of the WBCL for any liability incurred in connection
with a proceeding involving a federal or state statute, rule or regulation
regulating the offer, sale or purchase of securities.
Section 180.0828 of the WBCL provides that, with certain exceptions, a
director is not liable to a corporation, its shareholders, or any person
asserting rights on behalf of the corporation or its shareholders, for
damages, settlements, fees, fines, penalties or other monetary liabilities
arising from a breach of, or failure to perform, any duty resulting solely
from his or her status as a director, unless the person asserting liability
proves that the breach or failure to perform constitutes any of the four
exceptions to mandatory indemnification under Section 180.0851 (2) referred
to above.
Under Section 180.0833 of the WBCL, the directors of the Company against
whom claims are asserted with respect to the declaration of an improper
dividend or other distribution to shareholders to which they assented are
entitled to contribution from other directors who assented to such
distribution and from shareholders who knowingly accepted the improper
distribution, as provided therein.
Article VIII of the Company's By-Laws contains provisions that generally
parallel the indemnification provisions of the WBCL and cover certain
procedural matters not dealt with in the WBCL.
Directors and officers of the Company are not covered by directors' and
officers' liability insurance under which they would be insured against
expenses and liabilities arising out of proceedings to which they could be
parties by reason of being or having been directors or officers.
AVAILABLE SEC FILING INFORMATION
The Company will file annual, quarterly and special reports, proxy
statements and other information with the SEC. These SEC filings will be
available to the public over the Internet at the SEC's web site -
http:\\www.sec.gov.. The public may also read and copy any document the
Company files at the SEC's public reference rooms in Washington, D.C., New
York, and Chicago. The public can call the SEC at 1-800-732-0330 for
further information about the public reference rooms.
Beginning with its year ending December 31, 2000, the Company will provide
an annual report to its shareholders, including audited financial
statements.
APPENDIX A - FINANCIAL STATEMENTS -VIDEOPROPULSION, INC.
VIDEOPROPULSION, INC.
(A Development Stage Company)
Financial Statements
As Of December 31, 1999 And 1998
Together With Report Of Independent Public Accountants
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of VideoPropulsion, Inc.:
We have audited the accompanying balance sheet of VideoPropulsion, Inc. (a
Wisconsin corporation in the development stage and a wholly owned subsidiary of
GENROCO, Inc.) (the "Company") as of December 31, 1999, and the related
statements of operations, stockholder's investment and cash flows for the two
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of VideoPropulsion, Inc. as of
December 31, 1999, and the results of its operations and its cash flows for the
two years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying
financial statements, the Company is a development stage company with recurring
losses from operations. The factors discussed in Note 2 to the financial
statements raise a substantial doubt about the ability of the Company to
continue as a going concern. Management's plans in regards to those matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 7, 2000
VideoPropulsion, Inc.
(A Development Stage Company)
Balance Sheet
As Of December 31, 1999
Assets
------
Current Assets:
Cash $9,947
Accounts Receivable 11,990
Inventories 61,706
-------
Total Current Assets 83,643
-------
Total Assets $83,643
-------
-------
Liabilities And Stockholder's Investment
----------------------------------------
Current Liabilities:
Accrued Payroll And Payroll Taxes $12,807
Other Accrued Liabilities 7,953
-------
Total Current Liabilities 20,760
Stockholder's Investment:
Common Stock (9,000 Shares Authorized, 1,000 Shares
Outstanding, $0.01 Par Value) 10
Additional Paid-In Capital 498,522
Retained Deficit (110,281)
Unearned Compensation (325,368)
-------
Total Stockholder's Investment 62,883
-------
Total Liabilities And Stockholder's Investment $83,643
-------
-------
The accompanying notes to financial statements are an integral part of this
balance sheet.
VideoPropulsion, Inc.
(A Development Stage Company)
Statements Of Operations
For The Years Ended December 31, 1999 And 1998
1999 1998
-------- --------
Net Sales $598,482 $329,120
Cost Of Goods Sold 132,269 88,404
-------- --------
Gross Profit 466,213 240,716
-------- --------
Operating Expenses:
Research And Development 261,389 169,145
Selling 165,229 79,705
Customer Service 5,011 5,098
General And Administrative 82,764 38,258
-------- --------
Total Operating Expenses 514,393 292,206
-------- --------
Loss Before Income Taxes (48,180) (51,490)
Benefit From Income Taxes - -
-------- --------
Net Loss $(48,180) $(51,490)
-------- --------
-------- --------
Loss Per Share:
Basic And Diluted $(48.18) $(51.49)
Weighted Average Number Of Shares Outstanding 1,000 1,000
Pro forma Loss Per Share (see Note 3) (UNAUDITED)
Basic And Diluted $(0.01) $(0.01)
Weighted Average Number Of Shares Outstanding 4,401,642 4,401,642
The accompanying notes to financial statements are an integral part of these
statements.
VideoPropulsion, Inc.
(A Development Stage Company)
Statements Of Cash Flows
For The Years Ended December 31, 1999 And 1998
1999 1998
-------- --------
Cash Flows From Operating Activities:
Net Loss $(48,180) $(51,490)
Adjustments To Reconcile Net Income To Net Cash
Provided By (Used In) Operating Activities-
Amortization Of Unearned Compensation 128,538 32,644
Unearned Compensation (192,750) (293,800)
Change In Assets And Liabilities-
Accounts Receivable (1,000) 14,985
Inventories (25,284) (22,814)
Accrued Liabilities (7,474) 6,011
-------- --------
Total Adjustments (97,970) (262,974)
-------- --------
Net Cash Used In Operating Activities (146,150) (314,464)
-------- --------
Cash Flows From Investing Activities - -
-------- --------
Cash Flows From Financing Activities:
Capital Contribution From Parent 146,097 314,464
Issuance Of Common Stock 10,000 -
-------- --------
Net Cash Provided By Financing Activities 156,097 314,464
-------- --------
Net Increase In Cash 9,947 -
CASH, Beginning Of Year - -
-------- --------
CASH, End Of Year $ 9,947 $ -
-------- --------
-------- --------
The accompanying notes to financial statements are an integral part of these
statements.
VideoPropulsion, Inc.
(A Development Stage Company)
Statements Of Stockholder's Investment
For The Years Ended December 31, 1999 And 1998
<TABLE>
Deficit
Accumulated
Common Stock Additional Parent's Total During
--------------- Paid-in Divisional Retained Unearned Stockholder's Development
Shares Amount Capital Equity Deficit Compensation Investment Stage
------ ------ ---------- ---------- -------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 - $ - $ - $17,360 $ - $ - $17,360 $(336,951)
Net Loss - - - (51,490) - - (51,490) (51,490)
Capital Contribution From Parent - - - 314,464 - - 314,464 -
Unearned Compensation - - - - - (293,800) (293,800) -
Amortization Of
Unearned Compensation - - - - - 32,644 32,644 -
----- --- -------- --------- --------- --------- --------- ---------
Balance, December 31, 1998 - - - 280,334 - (261,156) 19,178 (388,441)
Net Income To October 4, 1999 - - - 62,101 - - 62,101 62,101
Net Loss From October 4
To December 31, 1999 - - - - (110,281) - (110,281) (110,281)
Net Loss For 1999 - - - - - - (48,180) (48,180)
Capital Contribution From Parent
Prior To October 4, 1999 - - - 146,097 - - 146,097 -
October 4 Transfer Due To
Incorporation Of Company - - 488,532 (488,532) - - - -
Sale Of Stock To Parent 1,000 10 9,990 - - - 10,000 -
Unearned Compensation - - - - - (192,750) (192,750) -
Amortization Of
Unearned Compensation - - - - - 128,538 128,538 -
----- --- -------- --------- --------- --------- --------- ---------
Balance, December 31, 1999 1,000 $10 $498,522 $ - $(110,281) $(325,368) $62,883 $(436,621)
----- --- -------- --------- --------- --------- --------- ---------
----- --- -------- --------- --------- --------- --------- ---------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
VideoPropulsion, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 1999 And 1998
(1) Description of the Company-
--------------------------
In October 1999, VideoPropulsion, Inc. (the "Company" or "VPI"), a
development stage company, became a Wisconsin corporation and a wholly
owned subsidiary of GENROCO, Inc. (the "Parent"). Prior to October 1999,
VPI was operated as the digital video division of the Parent. The Company
designs and sells a range of Digital Video Broadcast (DVB) products which
are being utilized in a wide variety of applications that allow consumers
to use their TV sets for interactive services including e-mail, home
shopping, web browsing, video-on demand, IP telephony, and other functions.
DVB is the digital standard that has been successfully deployed throughout
Europe, Asia, the Pacific and Latin America and is rapidly becoming
accepted in North America.
In August of 1999, the Board of Directors of GENROCO, Inc. approved
spinning off its digital video business as a separately traded public
company. One share of VPI stock will be issued for each share of GENROCO,
Inc. stock outstanding on the spin-off date. It is GENROCO's current
intent to spin-off VPI in 2000.
(2) Development Stage-
-----------------
The Company is considered a development stage company. A market for the
Company's products may not develop. The Company's growth will be limited
if DVB technology and solutions do not become widely accepted. The
Company's development efforts are focused on the DVB market, which has only
begun to develop and is rapidly evolving.
During 1999 and 1998, the Parent contributed $146,097 and $314,464 of
additional equity in addition to purchasing 1,000 shares of VPI stock for
$10,000 on October 4, 1999. In January 2000, the Parent loaned VPI
$200,000 through an arms-length loan. The loan is payable at the end of
2000 and bears interest at 9.5%.
GENROCO intends to provide interim financing in amounts adequate to allow
the Company to meet its financial obligations for a period of one year.
However, there is no guarantee that GENROCO will have the financial ability
to meet that obligation. In the case that GENROCO is unable to provide
support for one year, the Company will need to raise additional capital
either through private placement or an offering of VPI stock. Further, the
Company will need to raise capital to fund operations beyond 2000. There
can be no assurances that there will be a market for VPI stock or that
capital can be raised through a private placement.
(3) Summary of Significant Accounting Policies-
------------------------------------------
(a) Basis For Presentation-
----------------------
Certain items have been incorporated into the preparation of these
December 31, 1999 and 1998 financial statements to reflect the Company
as a stand-alone entity. The financial information included herein
may not necessarily reflect the financial position and results of
operations for the Company if the Company would have been a separate,
stand-alone entity during the periods presented.
(b) Revenue Recognition-
-------------------
Revenue from product sales is recognized when the products are
shipped. Service revenue from engineering and design work is
recognized as the services are provided.
The Company had four customers that individually accounted for 24.2%,
24.0%, 15.5% and 12.0% of net sales in 1999. The Company had four
customers that individually accounted for 46.1%, 17.9%, 15.0% and
11.0% of net sales in 1998.
Exports accounted for approximately 39.5% and 17.9% of the Company's
net sales for 1999 and 1998, respectively.
(c) Inventories-
-----------
Inventories are stated at the lower of average cost, determined using
the first-in, first-out method, or market. Inventories consist of:
Raw materials and work-in-process $38,350
Finished goods 23,356
-------
$61,706
-------
-------
(d) Research And Development Costs-
------------------------------
Research and development costs are expensed as incurred and are
presented as a separate component of the income statement.
(e) Operating Expenses-
------------------
The Company subcontracts a majority of its production activities,
including the manufacture and assembly of certain products, from the
Parent.
Certain operating expenses were allocated based on the percentage of
hours spent on the digital video division at the Parent compared to
total hours of employees each year multiplied by the Parent's total
operating expenses. Management estimates if the Company had been on a
stand-alone basis over the past two years, operating expenses would
have been substantially identical to the allocated expenses included
in the financial statements.
(f) Use Of Estimates-
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(g) Net Income Per Common Share-
---------------------------
The Company accounts for earnings per share according to provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" for purposes of calculating earnings per share.
Basic earnings per share is computed assuming that the number of VPI
shares outstanding was 1,000 for 1999 and 1998. The company does not
have common stock equivalents and therefore diluted earnings per share
equals basic earnings per share.
Pro forma earnings per share (unaudited) is computed assuming that the
number of VPI shares outstanding as a result of the anticipated spin-
off was 4,401,642 for 1999 and 1998. This amount was calculated
assuming one share of VPI stock will be issued for each share of
GENROCO, Inc. stock outstanding at March 7, 2000. The Parent does not
have common stock equivalents and therefore the pro forma diluted
earnings per share equals pro forma basic earnings per share.
(4) Income Taxes-
------------
The Company accounts for income taxes according to provisions of
Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes." The Company is included on the consolidated federal
income tax returns of the Parent. Income tax benefits and liabilities
are based on the Company's activity on a standalone basis.
The Company and the Parent entered into an agreement effective January
1, 2000 under which the Parent will be responsible for substantially
all United States federal, state and local income taxes for periods
prior to the date of spin-off. The Company will be responsible for
all taxes applicable to periods after the spin-off and amounts
exceeding certain thresholds resulting from tax audit adjustments for
periods prior to spin-off. Management believes there are no tax
liabilities over these thresholds.
Net operating losses generated prior to the date of distribution will
remain with the Parent. The Company has therefore recorded a full
valuation allowance against the tax benefits.
Components of the deferred income taxes are as follows:
December 31,
1999
------------
Current Deferred Tax Assets:
Inventory Reserves $2,418
Accrued Employee Costs 1,151
---------
Total Current Deferred Tax Assets 3,569
Current Valuation Allowance (3,569)
---------
Net Current Deferred Taxes $ -
---------
---------
Noncurrent Deferred Tax Assets:
Operating Loss Carryforwards $117,440
---------
Total Net Noncurrent Deferred Tax Assets 117,440
Noncurrent Valuation Allowance (117,440)
---------
Net Noncurrent Deferred Taxes $ -
---------
---------
A summary of the Company's effective tax rates is as follows:
December 31,
---------------------
1999 1998
-------- --------
Federal Tax At Statutory Rate $(16,381) $(17,507)
State Tax At Statutory Rate, Net Of Federal Benefit (2,505) (2,677)
Valuation Allowance 18,886 20184
-------- --------
Total Provision $ - $ -
-------- --------
-------- --------
(5) Lease Commitments-
-----------------
The Company leases its operating facility located in Slinger,
Wisconsin, under an agreement expiring December 31, 2001 with the
Parent. The Company has options from the Parent to renew the lease
agreement. Total rent expense was approximately $22,764 and $17,995
in 1999 and 1998, respectively.
As of December 31, 1999, the approximate future minimum lease payments
under operating leases are as follows:
Year Amount
------ ------
2000 $30,000
2001 $30,000
(6) Employee Benefit Plans-
----------------------
The Parent company has an Employee Stock Ownership Plan and Trust (the
"Plan"), covering substantially all domestic employees. Employees of
VPI are participants in the Plan. The Parent company's contribution
to the Plan is discretionary and is determined annually by the Board
of Directors of the Parent. VPI is charged a portion of this
contribution relating to the VPI employees participating. Expense
recorded by VPI under the Plan was approximately $9,504 and $1,372 in
1999 and 1998, respectively. The Plan owned 12.9% shares of GENROCO,
Inc. stock as of December 31, 1999.
In order to recruit and retain personnel, the Company offers its
employees stock in the Parent. Stock is granted to a participating
employee in exchange for a three-year note from the employee. To the
extent the employee remains employed at the Company, the note is
forgiven over the three-year period. This amount is recorded as
unearned compensation in equity and is amortized on a straight-line
basis as compensation expense over the life of the notes. The
resulting amount due to the Parent for its stock is considered to be
additional capital from the parent since the amounts will not be
settled in cash. As of December 31, 1999, approximately $325,000 of
deferred compensation remained as a reduction of equity. Expense
recorded by VPI under the Plan was $128,538 and $32,644 for 1999 and
1998.
An Employee Benefits and Compensation Agreement governs the rights and
obligations of GENROCO, Inc. and VPI with respect to various matters
and obligations concerning employee benefits for the former GENROCO,
Inc. employees who became employees of VPI as of January 1, 2000. The
Benefits Agreement covers VPI's assumption of certain compensation and
benefits obligations relative to VPI's employees. Pursuant to the
Benefits Agreement, VPI will assume responsibility for certain
benefits previously offered by GENROCO, Inc. to its employees prior to
the spin-off who became employed by VPI and will receive funds from
GENROCO, Inc. for disbursement to such employees for compensation and
certain employee benefits earned prior to the spin-off. No benefit
obligation is outstanding as of December 31, 1999.
(7) Stockholder's Investment-
------------------------
Effective October 4, 1999, common stock authorized was 9,000 shares.
Prior to October 4, 1999, the Company was operated as a division of
the Parent and no stock was authorized. As of December 31, 1999,
1,000 shares were issued and outstanding. The outstanding stock is
owned entirely by GENROCO.
(8) Related Party Funding-
---------------------
The Company's financing requirements have historically been funded
almost entirely by GENROCO. As such at the end of the year amounts
classified as due to Parent were forgiven and reflected as capital
contributions from the parent. For the years ending December 31,1 999
and 1998, the amount due to Parent, which was converted to capital
contributions, was $146,097 and $314,464, respectively. Due to this
financing arrangement, the Company currently does not reflect any
trade payables. Effective January 1, 2000, the Company's operating
expenses will not be funded in this manner and future periods will
require the Company to fund trade payables through operating income
and other financing resources. Additional funding arrangements have
been made between the Company and the Parent, which are outlined in
Note 2.
(9) Administrative Services Agreement-
---------------------------------
As of January 1, 2000, the Company and the Parent entered into an
Interim Administrative Services Agreement. This agreement governs the
administrative and manufacturing services that the Parent will
continue to provide to the company on an interim basis. In general,
the Parent will provide certain financial, human resource and
information system services (including use of the hardware and
furniture and fixtures associated with these services). Under the
terms of the agreement, the Company will compensate the parent at
negotiated fees which, the Company believes, would be comparable to
rates the Company could have achieved through arms-length
negotiations. Management does not believe this agreement will result
in expenses materially different from the amount allocated in these
carved-out financial statements.
(10) Commitments and Contingencies-
-----------------------------
As of January 1, 2000, the Company and the Parent entered into a
General Assignment and Assumption Agreement. Pursuant to the General
Assignment and Assumption Agreement regarding Litigation, Claims and
other Liabilities, in general VPI assumed and agreed to indemnify
GENROCO, Inc. and acquire substantially all the liabilities,
litigation and claims arising out of the digital video business
including all environmental liabilities. GENROCO, Inc. retained and
indemnified VPI against substantially all liabilities, litigation and
claims arising out of its storage area networking business and other
items not transferred to VPI. The indemnification obligations does
not entitle the indemnified party to recover to the extent that such
liabilities are covered by proceeds received from a third party
insurer. In circumstances in which the potential inability of
GENROCO, Inc. and VPI is joint, the parties will share responsibility
for such liability on a mutually agreed basis consistent with the
principles established in the Agreement. As of December 31, 1999,
there were no outstanding commitments or contingencies governed by
this agreement.
(11) Transitional Trademark Use and License Agreement-
------------------------------------------------
As of January 1, 2000, the Company and the Parent entered into a
Transitional Trademark Use and License Agreement. Pursuant to the
Transitional Trademark Use and License Agreement, GENROCO, Inc.
granted to VPI certain rights to continue to use, for a limited
period of time and under certain defined circumstances, certain
GENROCO, Inc. trademarks already inscribed upon VPI's existing
inventory of labels, promotional materials, product materials and
other materials relating to VPI's existing inventory of products.
Also, GENROCO, Inc. has granted VPI a royalty free, nontransferable,
nonexclusive license to use certain GENROCO, Inc. trademarks and
certain products for a period of nine months after the spin-off.
(12) Insurance Matters-
-----------------
As of January 1, 2000, the Company and the Parent entered into an
Insurance Matters Agreement. The Insurance Matters Agreement governs
the rights and obligations of GENROCO, Inc. and VPI with respect to
various pre-existing contracts insuring GENROCO, Inc. and covering
risks associated with, or arising out of, the digital video business.
The types of policies covered by the insurance Agreement include,
without limitation, automobile liability, comprehensive and general
liability. This agreement also established certain procedures for
dealing with pending litigation, new litigation and the resolution of
disputes between the parties concerning the Insurance Agreement.
APPENDIX B - ARTICLES OF INCORPORATION, VIDEOPROPULSION, INC.
(Subject to Amendment)
ARTICLES OF INCORPORATION
OF
VIDEOPROPULSION, INC.
The undersigned incorporator, acting as incorporator of a corporation under
the Wisconsin Business Corporation Law Chapter 180 of the Wisconsin Statutes
(the "WBCL"), adopts the following Articles of Incorporation for such
corporation:
ARTICLE I
Name
----
The name of the corporation is VideoPropulsion, Inc.
ARTICLE II
Purposes
--------
The purposes for which the corporation is organized are to engage in any
lawful activity within the purposes for which a corporation may be organized
under the WBCL.
ARTICLE III
Capital Stock
-------------
The aggregate number of shares which the corporation shall have authority
to issue is Nine Thousand (9,000) shares, consisting of one class only,
designated as "Common Stock," of the par value of one cent ($0.01) per share.
ARTICLE IV
Preemptive Rights
-----------------
No holder of any stock of the corporation shall have any preemptive right
to purchase, subscribe for, or otherwise acquire any shares of stock of the
corporation of any class now or hereafter authorized, or any securities
exchangeable for or convertible into such shares.
ARTICLE V
Registered Office and Agent
---------------------------
The address of the initial registered office of the corporation is 411 East
Wisconsin Avenue, Suite 2550, Milwaukee, WI, 53202, Milwaukee County, Wisconsin
and the name of its initial registered agent at such address is Lawdock, Inc.
ARTICLE VI
Incorporator
------------
The name and address of the incorporator is Walter J. Skipper, 411 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202.
Executed this 4th day of October, 1999.
/s/ Walter J. Skipper
-----------------------------------
Walter J. Skipper, Attorney
APPENDIX C - BY-LAWS OF VIDEOPROPULSION, INC.
BYLAWS
OF
VIDEOPROPULSION, INC.
ADOPTED
OCTOBER ___,1999
TABLE OF CONTENTS
-----------------
ARTICLE I. OFFICES; RECORDS 72
1.01. Principal and Business Offices 72
------------------------------
1.02. Registered Office and Registered Agent 72
--------------------------------------
1.03. Corporate Records 72
-----------------
ARTICLE II. SHAREHOLDERS 73
2.01. Annual Meeting 73
--------------
2.02. Special Meetings 73
----------------
2.03. Place of Meeting 73
----------------
2.04. Notices to Shareholders 73
-----------------------
(a) Required Notice 73
---------------
(b) Adjourned Meeting 73
-----------------
(c) Waiver of Notice 74
---------------
(d) Contents of Notice 74
-----------------
(e) Fundamental Transactions 74
------------------------
2.05. Fixing of Record Date 74
---------------------
2.06. Shareholder List 74
----------------
2.07. Quorum and Voting Requirements 75
------------------------------
2.08. Conduct of Meetings 75
-------------------
2.09. Proxies 75
-------
2.10. Voting of Shares 75
----------------
ARTICLE III. BOARD OF DIRECTORS 75
3.01. General Powers and Number 75
-------------------------
3.02. Election, Removal, Tenure and Qualifications 75
--------------------------------------------
3.03. Regular Meetings 76
----------------
3.04. Special Meetings 76
----------------
3.05. Meetings By Telephone or Other Communication Technology 76
-------------------------------------------------------
3.06. Notice of Meetings 76
------------------
3.07. Quorum 77
------
3.08. Manner of Acting 77
----------------
3.09. Conduct of Meetings 77
-------------------
3.10. Vacancies 77
---------
3.11. Compensation 77
------------
3.12. Presumption of Assent 77
---------------------
3.13. Committees 77
----------
ARTICLE IV. OFFICERS 78
4.01. Appointment 78
-----------
4.02. Resignation and Removal 78
-----------------------
4.03. Vacancies 78
---------
4.04. Chairperson of the Board 78
------------------------
4.05. President 78
---------
4.06. Vice Presidents 78
---------------
4.07. Secretary 79
----------
4.08. Treasurer 79
---------
4.09. Assistants and Acting Officers 79
------------------------------
4.10. Salaries 79
--------
ARTICLE V. CERTIFICATES FOR SHARES AND THEIR TRANSFER 80
5.01. Certificates for Shares 80
-----------------------
5.02. Signature by Former Officers 80
----------------------------
5.03. Transfer of Shares 80
5.04. Restrictions on Transfer 80
------------------------
5.05. Lost, Destroyed or Stolen Certificates 80
--------------------------------------
5.06. Consideration for Shares 80
------------------------
5.07. Stock Regulations 80
-----------------
ARTICLE VI. WAIVER OF NOTICE 81
6.01. Shareholder Written Waiver 81
--------------------------
6.02. Shareholder Waiver by Attendance 81
--------------------------------
6.03. Director Written Waiver 81
-----------------------
6.04. Director Waiver by Attendance 81
-----------------------------
ARTICLE VII. ACTION WITHOUT MEETINGS 82
7.01. Shareholder Action Without Meeting 82
----------------------------------
7.02. Director Action Without Meeting 82
-------------------------------
ARTICLE VIII. INDEMNIFICATION 82
8.01. Indemnification for Successful Defense 82
--------------------------------------
8.02. Other Indemnification 82
---------------------
8.03. Written Request 83
---------------
8.04. Nonduplication 83
--------------
8.05. Determination of Right to Indemnification 83
-----------------------------------------
8.06. Advance of Expenses 84
-------------------
8.07. Nonexclusivity 84
--------------
8.08. Court-Ordered Indemnification 85
-----------------------------
8.09. Indemnification and Allowance of 85
--------------------------------
Expenses of Employees and Agents
--------------------------------
8.10. Insurance 85
---------
8.11. Securities Law Claims 85
---------------------
8.12. Liberal Construction 85
--------------------
8.13. Definitions Applicable to this Article 85
--------------------------------------
ARTICLE IX. SEAL 87
10.01. By Shareholders 87
---------------
10.02. By Directors 87
------------
10.03. Implied Amendments 88
------------------
ARTICLE XI. STOCK TRANSFER RESTRICTION 88
ARTICLE I. OFFICES; RECORDS
1.01. Principal and Business Offices. The corporation may have such
------------------------------
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. Registered Office and Registered. The registered office of the
--------------------------------
corporation required by the Wisconsin Business Corporation Law to be maintained
in the State of Wisconsin may be, but need not be, identical with the principal
office in the State of Wisconsin. The address of the registered office may be
changed from time to time by any officer or by the registered agent. The office
of the registered agent of the corporation shall be identical to such registered
office.
1.03. Corporate Records. The following documents and records shall
-----------------
be kept at the corporation's principal office or at such other reasonable
location as may be specified by the corporation:
(a) Minutes of shareholders' and Board of Directors' meetings
and any written notices thereof.
(b) Records of actions taken by the shareholders or directors
without a meeting.
(c) Records of actions taken by committees of the Board of
Directors.
(d) Accounting records.
(e) Records of its shareholders.
(f) Current Bylaws.
(g) Written waivers of notice by shareholders or directors (if
any).
(h) Written consents by shareholders or directors for actions
without a meeting (if any).
(i) Voting trust agreements (if any).
(j) Stock transfer agreements to which the corporation is a
party or of which it has notice (if any).
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders shall
--------------
be held on the First Monday in July, or at such other time and date as may be
fixed by or under the authority of the Board of Directors, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting is a legal holiday
in the State of Wisconsin, such meeting shall be held on the next succeeding
business day. If the election of directors is not held on the day designated
herein, or fixed as herein provided, for any annual meeting of the shareholders,
or at any adjournment thereof, the Board of Directors shall cause the election
to be held at a meeting of the shareholders as soon thereafter as may be
convenient.
2.02. Special Meetings. Special meetings of the shareholders, for
----------------
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the Chairperson of the Board, if there is one, the President or the Board of
Directors. If and as required by the Wisconsin Business Corporation Law, a
special meeting shall be called upon written demand describing one or more
purposes for which it is to be held by holders of shares with at least 10% of
the votes entitled to be cast on any issue proposed to be considered at the
meeting. The purpose or purposes of any special meeting shall be described in
the notice required by Section 2.04 of these Bylaws.
2.03. Place of Meeting. The Board of Directors may designate any
-----------------
place, either within or without the State of Wisconsin, as the place of meeting
for any annual meeting or any special meeting. If no designation is made, the
place of meeting shall be the principal office of the corporation but any
meeting may be adjourned to reconvene at any place designated by vote of a
majority of the shares represented thereat.
2.04. Notices to Shareholders. (a) Required Notice. 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 five (5) days nor more than sixty (60) days before the
date of the meeting (unless a different time is provided by law or the Articles
of Incorporation), by or at the direction of the Chairperson of the Board, if
there is one, the President or the Secretary, to each shareholder entitled to
vote at such meeting or, for the fundamental transactions described in
subsections (e)(1) to (4) below (for which the Wisconsin Business Corporation
Law requires that notice be given to shareholders not entitled to vote), to all
shareholders. If mailed, such notice is effective when deposited in the United
States mail, and shall be addressed to the shareholder's address shown in the
current record of shareholders of the corporation, with postage thereon prepaid.
At least twenty (20) days' notice shall be provided if the purpose, or one of
the purposes, of the meeting is to consider a plan of merger or share exchange
for which shareholder approval is required by law, or the sale, lease, exchange
or other disposition of all or substantially all of the corporation's property,
with or without good will, otherwise than in the usual and regular course of
business.
(b) Adjourned Meeting. Except as provided in the next sentence,
-----------------
if any shareholder meeting is adjourned to a different date, time, or place,
notice need not be given of the new date, time, and place, if the new date,
time, and place is announced at the meeting before adjournment. If a new record
date for the adjourned meeting is or must be fixed, then notice must be given
pursuant to the requirements of paragraph (a) of this Section 2.04, to those
persons who are shareholders as of the new record date.
(c) Waiver of Notice. A shareholder may waive notice in
------------------
accordance with Article VI of these Bylaws.
(d) Contents of Notice. The notice of each special shareholder
------------------
meeting shall include a description of the purpose or purposes for which the
meeting is called, and only business within the purpose described in the meeting
notice may be conducted at a special shareholders' meeting. Except as otherwise
provided in subsection (e) of this Section 2.04, in the Articles of
Incorporation, or in the Wisconsin Business Corporation Law, the notice of an
annual shareholders' meeting need not include a description of the purpose or
purposes for which the meeting is called.
(e) Fundamental Transactions. If a purpose of any shareholder
------------------------
meeting is to consider either: (1) a proposed amendment to the Articles of
Incorporation (including any restated articles); (2) a plan of merger or share
exchange for which shareholder approval is required by law; (3) the sale, lease,
exchange or other disposition of all or substantially all of the corporation's
property, with or without good will, otherwise than in the usual and regular
course of business; (4) the dissolution of the corporation; or (5) the removal
of a director, the notice must so state and in cases (1), (2) and (3) above must
be accompanied by, respectively, a copy or summary of the: (1) proposed
articles of amendment or a copy of the restated articles that identifies any
amendment or other change; (2) proposed plan of merger or share exchange; or (3)
proposed transaction for disposition of all or substantially all of the
corporation's property. If the proposed corporate action creates dissenters'
rights, the notice must state that shareholders and beneficial shareholders are
or may be entitled to assert dissenters' rights, and must be accompanied by a
copy of Sections 180.1301 to 180.1331 of the Wisconsin Business Corporation Law.
2.05. Fixing of Record Date. The Board of Directors may fix in
-----------------------
advance a date as the record date for one or more voting groups for any
determination of shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to vote, or to take any other action, such date in any
case to be not more than seventy (70) days prior to the meeting or action
requiring such determination of shareholders, and may fix the record date for
determining shareholders entitled to a share dividend or distribution. If no
record date is fixed for the determination of shareholders entitled to demand a
shareholder meeting, to notice of or to vote at a meeting of shareholders, or to
consent to action without a meeting, (a) the close of business on the day before
the corporation receives the first written demand for a shareholder meeting, (b)
the close of business on the day before the first notice of the meeting is
mailed or otherwise delivered to shareholders, or (c) the close of business on
the day before the first written consent to shareholder action without a meeting
is received by the corporation, as the case may be, shall be the record date for
the determination of shareholders. If no record date is fixed for the
determination of shareholders entitled to receive a share dividend or
distribution (other than a distribution involving a purchase, redemption or
other acquisition of the corporation's shares), the close of business on the day
on which the resolution of the Board of Directors is adopted declaring the
dividend or distribution shall be the record date. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall be applied to any adjournment
thereof unless the Board of Directors fixes a new record date and except as
otherwise required by law. A new record date must be set if a meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.
2.06. Shareholder List. The officer or agent having charge of the
----------------
stock transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to notice of
such meeting, arranged by class or series of shares and showing the address of
and the number of shares held by each shareholder. The shareholder list shall
be available at the meeting and may be inspected by any shareholder or his or
her agent or attorney at any time during the meeting or any adjournment. Any
shareholder or his or her agent or attorney may inspect the shareholder list
beginning two (2) business days after the notice of the meeting is given and
continuing to the date of the meeting, at the corporation's principal office or
at a place identified in the meeting notice in the city where the meeting will
be held and, subject to Section 180.1602(2)(b) 3 to 5 of the Wisconsin Business
Corporation Law, may copy the list, during regular business hours and at his or
her expense, during the period that it is available for inspection hereunder.
The original stock transfer books and nominee certificates on file with the
corporation (if any) shall be prima facie evidence as to who are the share-
holders entitled to inspect the shareholder list or to vote at any meeting of
shareholders. Failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting.
2.07. Quorum and Voting Requirements. Except as otherwise provided
------------------------------
in the Articles of Incorporation or in the Wisconsin Business Corporation Law, a
majority of the votes entitled to be cast by shares entitled to vote as a
separate voting group on a matter, represented in person or by proxy, shall
constitute a quorum of that voting group for action on that matter at a meeting
of shareholders. If a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action
unless a greater number of affirmative votes is required by the Wisconsin
Business Corporation Law or the Articles of Incorporation. If the Articles of
Incorporation or the Wisconsin Business Corporation Law provide for voting by
two (2) or more voting groups on a matter, action on that matter is taken only
when voted upon by each of those voting groups counted separately. Action may
be taken by one (1) voting group on a matter even though no action is taken by
another voting group entitled to vote on the matter. Once a share is
represented for any purpose at a meeting, other than for the purpose of
objecting to holding the meeting or transacting business at the meeting, it is
considered present for purposes of determining whether a quorum exists for the
remainder of the meeting and for any adjournment of that meeting unless a new
record date is or must be set for that meeting.
2.08. Conduct of Meetings. The Chairperson of the Board, or if there
-------------------
is none, or in his or her absence, the President, and in the President's
absence, a Vice President in the order provided under Section 4.06 of these
Bylaws, and in their absence, any person chosen by the shareholders present
shall call the meeting of the shareholders to order and shall act as chairperson
of the meeting, and the Secretary shall act as secretary of all meetings of the
shareholders, but, in the absence of the Secretary, the presiding officer may
appoint any other person to act as secretary of the meeting.
2.09. Proxies. At all meetings of shareholders, a shareholder
-------
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his or her duly authorized attorney-in-fact. All proxy
appointment forms shall be filed with the Secretary or other officer or agent of
the corporation authorized to tabulate votes before or at the time of the
meeting. Unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest, a proxy appointment
may be revoked at any time. The presence of a shareholder who has filed a proxy
appointment shall not of itself constitute a revocation. No proxy appointment
shall be valid after eleven months from the date of its execution, unless
otherwise expressly provided in the appointment form. The Board of Directors
shall have the power and authority to make rules that are not inconsistent with
the Wisconsin Business Corporation Law as to the validity and sufficiency of
proxy appointments.
2.10. Voting of Shares. Each outstanding share shall be entitled to
----------------
one (1) vote on each matter submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of the shares are enlarged, limited
or denied by the Articles of Incorporation or the Wisconsin Business Corporation
Law. Shares owned directly or indirectly by another corporation are not
entitled to vote if this corporation owns, directly or indirectly, sufficient
shares to elect a majority of the directors of such other corporation. However,
the prior sentence shall not limit the power of the corporation to vote any
shares, including its own shares, held by it in a fiduciary capacity.
Redeemable shares are not entitled to vote after notice of redemption is mailed
to the holders and a sum sufficient to redeem the shares has been deposited with
a bank, trust company, or other financial institution under an irrevocable
obligation to pay the holders the redemption price on surrender of the shares.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. All corporate powers shall be
--------------------------
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, its Board of Directors.
The number of directors of the corporation shall be three (3). The number of
directors may be increased or decreased from time to time by amendment to this
Section adopted by the shareholders or the Board of Directors, but no decrease
shall have the effect of shortening the term of an incumbent director.
3.02. Election, Removal, Tenure and Qualifications. Unless action is
--------------------------------------------
taken without a meeting under Section 7.01 of these Bylaws, directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a shareholders meeting at which a quorum is present; i.e., the
----
individuals with the largest number of votes in favor of their election are
elected as directors up to the maximum number of directors to be chosen in the
election. Votes against a candidate are not given legal effect and are not
counted as votes cast in an election of directors. In the event two (2) or more
persons tie for the last vacancy to be filled, a run-off vote shall be taken
from among the candidates receiving the tie vote. Each director shall hold
office until the next annual meeting of shareholders and until the director's
successor shall have been elected or there is a decrease in the number of
directors, or until his or her prior death, resignation or removal. If
cumulative voting for directors is not authorized by the Articles of
Incorporation, any director or directors may be removed from office by the
shareholders if the number of votes cast to remove the director exceeds the
number cast not to remove him or her, taken at a meeting of shareholders called
for that purpose (unless action is taken without a meeting under Section 7.01 of
these Bylaws), provided that the meeting notice states that the purpose, or one
of the purposes, of the meeting is removal of the director. The removal may be
made with or without cause unless the Articles of Incorporation or these Bylaws
provide that directors may be removed only for cause. If a director is elected
by a voting group of shareholders, only the shareholders of that voting group
may participate in the vote to remove that director. A director may resign at
any time by delivering a written resignation to the Board of Directors, to the
Chairperson of the Board (if there is one), or to the corporation through the
Secretary or otherwise. Directors need not be residents of the State of
Wisconsin or shareholders of the corporation.
3.03. Regular Meetings. A regular meeting of the Board of Directors
----------------
shall be held, without other notice than this Bylaw, immediately after the
annual meeting of shareholders, and each adjourned session thereof. The place
of such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors and any committee may
provide, by resolution, the time and place, either within or without the State
of Wisconsin, for the holding of additional regular meetings without other
notice than such resolution.
3.04. Special Meetings. Special meetings of the Board of Directors
----------------
may be called by or at the request of the Chairperson of the Board, if there is
one, the President or any two (2) directors. Special meetings of any committee
may be called by or at the request of the foregoing persons or the chairperson
of the committee. The persons calling any special meeting of the Board of
Directors or committee may fix any place, either within or without the State of
Wisconsin, as the place for holding any special meeting called by them, and if
no other place is fixed the place of meeting shall be the principal office of
the corporation in the State of Wisconsin.
3.05. Meetings By Telephone or Other Communication Technology. (a)
--------------------------------------------------------
Any or all directors may participate in a regular or special meeting or in a
committee meeting of the Board of Directors by, or conduct the meeting through
the use of, telephone or any other means of communication by which either: (i)
all participating directors may simultaneously hear each other during the
meeting or (ii) all communication during the meeting is immediately transmitted
to each participating director, and each participating director is able to
immediately send messages to all other participating directors.
(b) If a meeting will be conducted through the use of any means
described in paragraph (a), all participating directors shall be informed that a
meeting is taking place at which official business may be transacted. A
director participating in a meeting by any means described in paragraph (a) is
deemed to be present in person at the meeting.
3.06. Notice of Meetings. Except as otherwise provided in the
-------------------
Articles of Incorporation or the Wisconsin Business Corporation Law, notice of
the date, time and place of any special meeting of the Board of Directors and of
any special meeting of a committee of the Board shall be given orally or in
writing to each director or committee member at least 48 hours prior to the
meeting, except that notice by mail shall be given at least 72 hours prior to
the meeting. The notice need not describe the purpose of the meeting. Notice
may be communicated in person, by telephone, telegraph or facsimile, or by mail
or private carrier. Oral notice is effective when communicated. Written notice
is effective as follows: If delivered in person, when received; if given by
mail, when deposited, postage prepaid, in the United States mail addressed to
the director at his or her business or home address (or such other address as
the director may have designated in writing filed with the Secretary); if given
by facsimile, at the time transmitted to a facsimile number at any address
designated above; and if given by telegraph, when delivered to the telegraph
company.
3.07. Quorum. Except as otherwise provided by the Wisconsin Business
------
Corporation Law, a majority of the number of directors as provided in Section
3.01 shall constitute a quorum of the Board of Directors. Except as otherwise
provided by the Wisconsin Business Corporation Law, a majority of the number of
directors appointed to serve on a committee shall constitute a quorum of the
committee.
3.08. Manner of Acting. Except as otherwise provided by the
------------------
Wisconsin Business Corporation Law or the Articles of Incorporation, the
affirmative vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors or any committee
thereof.
3.09. Conduct of Meetings. The Chairperson of the Board, or if there
-------------------
is none, or in his or her absence, the President, and in the President's
absence, a Vice President in the order provided under Section 4.06 of these
Bylaws, and in their absence, any director chosen by the directors present,
shall call meetings of the Board of Directors to order and shall chair the
meeting. The Secretary of the corporation shall act as secretary of all
meetings of the Board of Directors, but in the absence of the Secretary, the
presiding officer may appoint any assistant secretary or any director or other
person present to act as secretary of the meeting.
3.10. Vacancies. Any vacancy occurring in the Board of Directors,
---------
including a vacancy created by an increase in the number of directors, may be
filled by the shareholders or the Board of Directors. If the directors
remaining in office constitute fewer than a quorum of the Board, the directors
may fill a vacancy by the affirmative vote of a majority of all directors
remaining in office. If the vacant office was held by a director elected by a
voting group of shareholders, only the holders of shares of that voting group
may vote to fill the vacancy if it is filled by the shareholders, and only the
remaining directors elected by that voting group may vote to fill the vacancy if
it is filled by the directors. A vacancy that will occur at a specific later
date (because of a resignation effective at a later date or otherwise) may be
filled before the vacancy occurs, but the new director may not take office until
the vacancy occurs.
3.11. Compensation. The Board of Directors, irrespective of any
------------
personal interest of any of its members, may fix the compensation of directors.
3.12. Presumption of Assent. A director who is present and is
----------------------
announced as present at a meeting of the Board of Directors or a committee
thereof at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (i) the director objects at the
beginning of the meeting or promptly upon his or her arrival to holding the
meeting or transacting business at the meeting, or (ii) the director's dissent
or abstention from the action taken is entered in the minutes of the meeting, or
(iii) the director delivers his or her written dissent or abstention to the
presiding officer of the meeting before the adjournment thereof or to the
corporation immediately after the adjournment of the meeting, or (iv) the
director dissents or abstains from the action taken, minutes of the meeting are
prepared and fail to show the director's dissent or abstention from the action
taken, and the director delivers to the corporation a written notice of that
omission from the minutes promptly after receiving a copy of the minutes. Such
right to dissent or abstain shall not apply to a director who voted in favor of
such action.
3.13. Committees. Unless the Articles of Incorpoation otherwise
----------
provide, the Board of Directors, by resolution adopted by the affirmative vote
of a majority of all the directors then in office, may create one (1) or more
committees, each committee to consist of two (2) or more directors as members,
which to the extent provided in the resolution as initially adopted, and as
thereafter supplemented or amended by further resolution adopted by a like vote,
may exercise the authority of the Board of Directors, except that no committee
may: (a) authorize distributions; (b) approve or propose to shareholders action
that the Wisconsin Business Corporation Law requires be approved by share-
holders; (c) fill vacancies on the Board of Directors or any of its committees,
except that the Board of Directors may provide by resolution that any vacancies
on a committee shall be filled by the affirmative vote of a majority of the
remaining committee members; (d) amend the Articles of Incorporation; (e) adopt,
amend or repeal Bylaws; (f) approve a plan of merger not requiring shareholder
approval; (g) authorize or approve reacquisition of shares, except according to
a formula or method prescribed by the Board of Directors or (h) authorize or
approve the issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except within limits prescribed by the Board of Directors.
All members of the Board of Directors who are not members of a given committee
shall be alternate members of such committee and may take the place of any
absent member or members at any meeting of such committee, upon request by the
Chairperson of the Board, if there is one, the President or upon request by the
chairperson of such meeting. Each such committee shall fix its own rules
(consistent with the Wisconsin Business Corporation Law, the Articles of Incor-
poration and these Bylaws) governing the conduct of its activities and shall
make such reports to the Board of Directors of its activities as the Board of
Directors may request. Unless otherwise provided by the Board of Directors in
creating a committee, a committee may employ counsel, accountants and other
consultants to assist it in the exercise of authority. The creation of a
committee, delegation of authority to a committee or action by a committee does
not relieve the Board of Directors or any of its members of any responsibility
imposed on the Board of Directors or its members by law.
ARTICLE IV. OFFICERS
4.01. Appointment. The principal officers shall include a Presi
-----------
dent, one or more Vice Presidents (the number and designations to be determined
by the Board of Directors), a Secretary and such other officers, if any, as may
be deemed necessary by the Board of Directors, each of whom shall be appointed
by the Board of Directors. Any two or more offices may be held by the same
person.
4.02. Resignation and Removal. An officer shall hold office until he
-----------------------
or she resigns, dies, is removed hereunder, or a different person is appointed
to the office. An officer may resign at any time by delivering an appropriate
written notice to the corporation. The resignation is effective when the notice
is delivered, unless the notice specifies a later effective date and the
corporation accepts the later effective date. Any officer may be removed by the
Board of Directors with or without cause and notwithstanding the contract
rights, if any, of the person removed. Except as provided in the preceding
sentence, the resignation or removal is subject to any remedies provided by any
contract between the officer and the corporation or otherwise provided by law.
Appointment shall not of itself create contract rights.
4.03. Vacancies. A vacancy in any office because of death,
---------
resignation, removal or otherwise, shall be filled by the Board of Directors.
If a resignation is effective at a later date, the Board of Directors may fill
the vacancy before the effective date if the Board of Directors provides that
the successor may not take office until the effective date.
4.04. Chairperson of the Board. The Board of Directors may at its
-------------------------
discretion appoint a Chairperson of the Board. The Chairperson of the Board, if
there is one, shall preside at all meetings of the shareholders and Board of
Directors, and shall carry out such other duties as directed by the Board of
Directors.
4.05. President. The President shall be the principal executive
---------
officer and, subject to the control and direction of the Board of Directors,
shall in general supervise and control all of the business and affairs of the
corporation. He or she shall, in the absence of the Chairperson of the Board
(if one is appointed), preside at all meetings of the shareholders and of the
Board of Directors. The President shall have authority, subject to such rules
as may be prescribed by the Board of Directors, to appoint such agents and
employees of the corporation as he or she shall deem necessary, to prescribe
their powers, duties and compensation, and to delegate authority to them. Such
agents and employees shall hold office at the discretion of the President. The
President shall have authority to sign, execute and acknowledge, on behalf of
the corporation, all deeds, mortgages, bonds, stock certificates, contracts,
leases, reports and all other documents or instruments necessary or proper to be
executed in the course of the corporation's regular business, or which shall be
authorized by resolution of the Board of Directors; and, except as otherwise
provided by law or directed by the Board of Directors, the President may
authorize any Vice President or other officer or agent of the corporation to
sign, execute and acknowledge such documents or instruments in his or her place
and stead. In general he or she shall perform all duties incident to the office
of President and such other duties as may be prescribed by the Board of Direc-
tors from time to time.
4.06. Vice Presidents. In the absence of the President, or in the
---------------
event of the President's death, inability or refusal to act, or in the event for
any reason it shall be impracticable for the President to act personally, a Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their appointment) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may
sign, with the Secretary or Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him or her by the President or the
Board of Directors. The execution of any instrument of the corporation by any
Vice President shall be conclusive evidence, as to third parties, of the Vice
President's authority to act in the stead of the President.
4.07. Secretary. The Secretary shall: (a) keep (or cause to be
---------
kept) regular minutes of all meetings of the shareholders, the Board of
Directors and any committees of the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation, if any, and see that
the seal of the corporation, if any, is affixed to all documents which are
authorized to be executed on behalf of the corporation under its seal; (d) keep
or arrange for the keeping of a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the corporation; and (g) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time to
time may be delegated or assigned to him or her by the President or by the Board
of Directors.
4.08. Treasurer. If the Board of Directors appoints a Treasurer, the
---------
Treasurer shall: (a) have charge and custody of and be responsible for all
funds and securities of the corporation; (b) receive and give receipts for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies or other depositories as shall be selected by the corporation; and (c)
in general perform all of the duties incident to the office of Treasurer and
have such other duties and exercise such other authority as from time to time
may be delegated or assigned to him or her by the President or by the Board of
Directors.
4.09. Assistants and Acting Officers. The Board of Directors and the
------------------------------
President shall have the power to appoint any person to act as assistant to any
officer, or as agent for the corporation in the officer's stead, or to perform
the duties of such officer whenever for any reason it is impracticable for such
officer to act personally, and such assistant or acting officer or other agent
so appointed by the Board of Directors or President shall have the power to
perform all the duties of the office to which that person is so appointed to be
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors or the
President.
4.10. Salaries. The salaries of the principal officers shall be
--------
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that such officer is also a director of the corporation.
ARTICLE V. CERTIFICATES FOR SHARES AND THEIR TRANSFER
5.01. Certificates for Shares. All shares of this corporation shall
-----------------------
be represented by certificates. Certificates representing shares of the
corporation shall be in such form, consistent with law, as shall be determined
by the Board of Directors. At a minimum, a share certificate shall state on its
face the name of the corporation and that it is organized under the laws of the
State of Wisconsin, the name of the person to whom issued, and the number and
class of shares and the designation of the series, if any, that the certificate
represents. If the corporation is authorized to issue different classes of
shares or different series within a class, the front or back of the certificate
must contain either (a) a summary of the designations, relative rights,
preferences and limitations applicable to each class, and the variations in the
rights, preferences and limitations determined for each series and the authority
of the Board of Directors to determine variations for future series, or (b) a
conspicuous statement that the corporation will furnish the shareholder the
information described in clause (a) on request, in writing and without charge.
Such certificates shall be signed, either manually or in facsimile, by the
President or a Vice President and by the Secretary or an Assistant Secretary.
All certificates for shares shall be consecutively numbered or otherwise identi-
fied. The name and address of the person to whom the shares represented thereby
are issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except as provided in Section 5.05.
5.02. Signature by Former Officers. If an officer or assistant
------------------------------
officer, who has signed or whose facsimile signature has been placed upon any
certificate for shares, has ceased to be such officer or assistant officer
before such certificate is issued, the certificate may be issued by the
corporation with the same effect as if that person were still an officer or
assistant officer at the date of its issue.
5.03. Transfer of Shares. Prior to due presentment of a certificate
------------------
for shares for registration of transfer, and unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the shareholder, the corporation may
treat the registered owner of such shares as the person exclusively entitled to
vote, to receive notifications and otherwise to have and exercise all the rights
and power of an owner. The corporation may require reasonable assurance that
all transfer endorsements are genuine and effective and in compliance with all
regulations prescribed by or under the authority of the Board of Directors.
5.04. Restrictions on Transfer. The face or reverse side of each
-------------------------
certificate representing shares shall bear a conspicuous notation of any
restriction upon the transfer of such shares imposed by the corporation or
imposed by any agreement of which the corporation has written notice.
5.05. Lost, Destroyed or Stolen Certificates. Where the owner claims
--------------------------------------
that his or her certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the corporation has notice that such shares have been acquired
by a bona fide purchaser, and (b) if required by the corporation, files with the
corporation a sufficient indemnity bond, and (c) satisfies such other reasonable
requirements as may be prescribed by or under the authority of the Board of
Directors.
5.06. Consideration for Shares. The shares of the corporation may be
------------------------
issued for such consideration as shall be fixed from time to time and determined
to be adequate by the Board of Directors, provided that any shares having a par
value shall not be issued for a consideration less than the par value thereof.
The consideration may consist of any tangible or intangible property or benefit
to the corporation, including cash, promissory notes, services performed,
contracts for services to be performed, or other securities of the corporation.
When the corporation receives the consideration for which the Board of Directors
authorized the issuance of shares, such shares shall be deemed to be fully paid
and non-assessable by the corporation.
5.07. Stock Regulations. The Board of Directors shall have the power
-----------------
and authority to make all such rules and regulations not inconsistent with the
statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the cor-
poration, including the appointment or designation of one or more stock transfer
agents and one or more registrars.
ARTICLE VI. WAIVER OF NOTICE
6.01. Shareholder Written Waiver. A shareholder may waive any notice
--------------------------
required by the Wisconsin Business Corporation Law, the Articles of
Incorporation or these Bylaws before or after the date and time stated in the
notice. The waiver shall be in writing and signed by the shareholder entitled
to the notice, shall contain the same information that would have been required
in the notice under the Wisconsin Business Corporation Law except that the time
and place of meeting need not be stated, and shall be delivered to the
corporation for inclusion in the corporate records.
6.02. Shareholder Waiver by Attendance. A shareholder's attendance
---------------------------------
at a meeting, in person or by proxy, waives objection to both of the following:
(a) Lack of notice or defective notice of the meeting,
unless the shareholder at the beginning of the meeting or
promptly upon arrival objects to holding the meeting or
transacting business at the meeting.
(b) Consideration of a particular matter at the
meeting that is not within the purpose described in the
meeting notice, unless the shareholder objects to
considering the matter when it is presented.
6.03. Director Written Waiver. A director may waive any notice
------------------------
required by the Wisconsin Business Corporation Law, the Articles of
Incorporation or the Bylaws before or after the date and time stated in the
notice. The waiver shall be in writing, signed by the director entitled to the
notice and retained by the corporation.
6.04. Director Waiver by Attendance. A director's attendance at or
-----------------------------
participation in a meeting of the Board of Directors or any committee thereof
waives any required notice to him or her of the meeting unless the director at
the beginning of the meeting or promptly upon his or her arrival objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE VII. ACTION WITHOUT MEETINGS
7.01. Shareholder Action Without Meeting. Action required or
-------------------------------------
permitted by the Wisconsin Business Corporation Law to be taken at a
shareholders' meeting may be taken without a meeting (a) by all shareholders
entitled to vote on the action, or (b) if the Articles of Incorporation so
provide (and except with respect to an election of directors for which
shareholders may vote cumulatively) by shareholders who would be entitled to
vote at a meeting shares with voting power sufficient to cast not less than the
minimum number (or, in the case of voting by voting groups, the minimum numbers)
of votes that would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed by
the shareholders consenting thereto and delivered to the corporation for
inclusion in its corporate records. A consent hereunder has the effect of a
meeting vote and may be described as such in any document. The Wisconsin
Business Corporation Law requires that notice of the action be given to certain
shareholders and specifies the effective date thereof and the record date in
respect thereto.
7.02. Director Action Without Meeting. Unless the Articles of
---------------------------------
Incorporation provide otherwise, action required or permitted by the Wisconsin
Business Corporation Law to be taken at a Board of Directors meeting or
committee meeting may be taken without a meeting if the action is taken by all
members of the Board or committee. The action shall be evidenced by one or more
written consents describing the action taken, signed by each director and
retained by the corporation. Action taken hereunder is effective when the last
director signs the consent, unless the consent specifies a different effective
date. A consent signed hereunder has the effect of a unanimous vote taken at a
meeting at which all directors or committee members were present, and may be
described as such in any document.
ARTICLE VIII. INDEMNIFICATION
8.01. Indemnification for Successful Defense. Within twenty (20)
----------------------------------------
days after receipt of a written request pursuant to Section 8.03, the
corporation shall indemnify a director or officer, to the extent he or she has
been successful on the merits or otherwise in the defense of a proceeding, for
all reasonable expenses incurred in the proceeding if the director or officer
was a party because he or she is a director or officer of the corporation.
8.02. Other Indemnification.
---------------------
(a) In cases not included under Section 8.01, the corporation
shall indemnify a director or officer against all liabilities and
expenses incurred by the director or officer in a proceeding to which
the director or officer was a party because he or she is a director or
officer of the corporation, unless liability was incurred because the
director or officer breached or failed to perform a duty he or she
owes to the corporation and the breach or failure to perform
constitutes any of the following:
(1) A willful failure to deal fairly with the corporation
or its shareholders in connection with a matter in which the
director or officer has a material conflict of interest.
(2) A violation of criminal law, unless the director or
officer had reasonable cause to believe that his or her conduct
was lawful or no reasonable cause to believe that his or her
conduct was unlawful.
(3) A transaction from which the director or officer
derived an improper personal profit.
(4) Willful misconduct.
(b) Determination of whether indemnification is required under
this Section shall be made pursuant to Section 8.05.
(c) The termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an
equivalent plea, does not, by itself, create a presumption that
indemnification of the director or officer is not required under this
Section.
8.03. Written Request. A director or officer who seeks
-----------------
indemnification under Sections 8.01 or 8.02 shall make a written request to the
corporation.
8.04. Non-duplication. The corporation shall not indemnify a
---------------
director or officer under Sections 8.01 or 8.02 to the extent the director or
officer has previously received indemnification or allowance of expenses from
any person, including the corporation, in connection with the same proceeding.
However, the director or officer has no duty to look to any other person for
indemnification.
8.05. Determination of Right to Indemnification.
-----------------------------------------
(a) Unless otherwise provided by the Articles of Incorporation or
by written agreement between the director or officer and the
corporation, the director or officer seeking indemnification under
Section 8.02 shall select one of the following means for determining
his or her right to indemnification:
(1) By a majority vote of a quorum of the Board of
Directors consisting of directors not at the time parties to the
same or related proceedings. If a quorum of disinterested
directors cannot be obtained, by majority vote of a committee
duly appointed by the Board of Directors and consisting solely of
two (2) or more directors who are not at the time parties to the
same or related proceedings. Directors who are parties to the
same or related proceedings may participate in the designation of
members of the committee.
(2) By independent legal counsel selected by a quorum of
the Board of Directors or its committee in the manner prescribed
in sub. (1) or, if unable to obtain such a quorum or committee,
by a majority vote of the full Board of Directors, including
directors who are parties to the same or related proceedings.
(3) By a panel of three (3) arbitrators consisting of one
arbitrator selected by those directors entitled under sub. (2) to
select independent legal counsel, one arbitrator selected by the
director or officer seeking indemnification and one arbitrator
selected by the two (2) arbitrators previously selected.
(4) By an affirmative vote of shares represented at a
meeting of shareholders at which a quorum of the voting group
entitled to vote thereon is present. Shares owned by, or voted
under the control of, persons who are at the time parties to the
same or related proceedings, whether as plaintiffs or defendants
or in any other capacity, may not be voted in making the
determination.
(5) By a court under Section 8.08.
(6) By any other method provided for in any additional
right to indemnification permitted under Section 8.07.
(b) In any determination under (a), the burden of proof is on
the corporation to prove by clear and convincing evidence that
indemnification under Section 8.02 should not be allowed.
(c) A written determination as to a director's or officer's
indemnification under Section 8.02 shall be submitted to both the
corporation and the director or officer within 60 days of the
selection made under (a).
(d) If it is determined that indemnification is required under
Section 8.02, the corporation shall pay all liabilities and expenses
not prohibited by Section 8.04 within ten (10) days after receipt of
the written determination under (c). The corporation shall also pay
all expenses incurred by the director or officer in the determination
process under (a).
8.06. Advance of Expenses. Within ten (10) days after receipt of a
-------------------
written request by a director or officer who is a party to a proceeding, the
corporation shall pay or reimburse his or her reasonable expenses as incurred if
the director or officer provides the corporation with all of the following:
(1) A written affirmation of his or her good faith belief
that he or she has not breached or failed to perform his or her
duties to the corporation.
(2) A written undertaking, executed personally or on his or
her behalf, to repay the allowance to the extent that it is
ultimately determined under Section 8.05 that indemnification
under Section 8.02 is not required and that indemnification is
not ordered by a court under Section 8.08(b)(2). The undertaking
under this subsection shall be an unlimited general obligation of
the director or officer and may be accepted without reference to
his or her ability to repay the allowance. The undertaking may
be secured or unsecured.
8.07. Non-exclusivity.
--------------
(a) Except as provided in (b), Sections 8.01, 8.02 and 8.06 do
not preclude any additional right to indemnification or allowance of
expenses that a director or officer may have under any of the
following:
(1) The Articles of Incorporation.
(2) A written agreement between the director or officer and
the corporation.
(3) A resolution of the Board of Directors.
(4) A resolution, after notice, adopted by a majority vote
of all of the corporation's voting shares then issued and
outstanding.
(b) Regardless of the existence of an additional right under
(a), the corporation shall not indemnify a director or officer, or
permit a director or officer to retain any allowance of expenses
unless it is determined by or on behalf of the corporation that the
director or officer did not breach or fail to perform a duty he or she
owes to the corporation which constitutes conduct under Section
8.02(a)(1), (2), (3) or (4). A director or officer who is a party to
the same or related proceeding for which indemnification or an
allowance of expenses is sought may not participate in a determination
under this subsection.
(c) Sections 8.01 to 8.13 do not affect the corporation's power
to pay or reimburse expenses incurred by a director or officer in any
of the following circumstances.
(1) As a witness in a proceeding to which he or she is not
a party.
(2) As a plaintiff or petitioner in a proceeding because he
or she is or was an employee, agent, director or officer of the
corporation.
8.08. Court-Ordered Indemnification.
-----------------------------
(a) Except as provided otherwise by written agreement between
the director or officer and the corporation, a director or officer who
is a party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent
jurisdiction. Application shall be made for an initial determination
by the court under Section 8.05(a)(5) or for review by the court of an
adverse determination under Section 8.05(a) (1), (2), (3), (4) or (6).
After receipt of an application, the court shall give any notice it
considers necessary.
(b) The court shall order indemnification if it determines any
of the following:
(1) That the director or officer is entitled to
indemnification under Sections 8.01 or 8.02.
(2) That the director or officer is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, regardless of whether indemnification is required
under Section 8.02.
(c) If the court determines under (b) that the director or
officer is entitled to indemnification, the corporation shall pay the
director's or officer's expenses incurred to obtain the court-ordered
indemnification.
8.09. Indemnification and Allowance of Expenses of Employees and
--------------------------------------------------------------
Agents. The corporation shall indemnify an employee of the corporation who is
- - ------
not a director or officer of the corporation, to the extent that he or she has
been successful on the merits or otherwise in defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the employee was a party
because he or she was an employee of the corporation. In addition, the
corporation may indemnify and allow reasonable expenses of an employee or agent
who is not a director or officer of the corporation to the extent provided by
the Articles of Incorporation or these Bylaws, by general or specific action of
the Board of Directors or by contract.
8.10. Insurance. The corporation may purchase and maintain insurance
---------
on behalf of an individual who is an employee, agent, director or officer of the
corporation against liability asserted against or incurred by the individual in
his or her capacity as an employee, agent, director or officer, regardless of
whether the corporation is required or authorized to indemnify or allow expenses
to the individual against the same liability under Sections 8.01, 8.02, 8.06,
8.07 and 8.09.
8.11. Securities Law Claims.
---------------------
(a) Pursuant to the public policy of the State of Wisconsin, the
corporation shall provide indemnification and allowance of expenses
and may insure for any liability incurred in connection with a
proceeding involving securities regulation described under (b) to the
extent required or permitted under Sections 8.01 to 8.10.
(b) Sections 8.01 to 8.10 apply, to the extent applicable to any
other proceeding, to any proceeding involving a federal or state
statute, rule or regulation regulating the offer, sale or purchase of
securities, securities brokers or dealers, or investment companies or
investment advisers.
8.12. Liberal Construction. In order for the corporation to obtain
--------------------
and retain qualified directors, officers and employees, the foregoing provisions
shall be liberally administered in order to afford maximum indemnification of
directors, officers and, where Section 8.09 of these Bylaws applies, employee.
The indemnification above provided for shall be granted in all applicable cases
unless to do so would clearly contravene law, controlling precedent or public
policy.
8.13. Definitions Applicable to this Article. For purposes of this
---------------------------------------
Article:
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit plan, trust
or other enterprise that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, the corporation.
(b) "Corporation" means this corporation and any domestic or
foreign predecessor of this corporation where the predecessor
corporation's existence ceased upon the consummation of a merger or
other transaction.
(c) "Director or officer" means any of the following:
(1) An individual who is or was a director or officer of
this corporation.
(2) An individual who, while a director or officer of this
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, member of any governing or
decision-making committee, employee or agent of another corpora-
tion or foreign corporation, partnership, joint venture, trust or
other enterprise.
(3) An individual who, while a director or officer of this
corporation, is or was serving an employee benefit plan because
his or her duties to the corporation also impose duties on, or
otherwise involve services by, the person to the plan or to
participants in or beneficiaries of the plan.
(4) Unless the context requires otherwise, the estate or
personal representative of a director or officer.
For purposes of this Article, it shall be conclusively presumed that
any director or officer serving as a director, officer, partner,
trustee, member of any governing or decision-making committee,
employee or agent of an affiliate shall be so serving at the request
of the corporation.
(d) "Expenses" include fees, costs, charges, disbursements,
attorney fees and other expenses incurred in connection with a
proceeding.
(e) "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine, including an
excise tax assessed with respect to an employee benefit plan, and
reasonable expenses.
(f) "Party" includes an individual who was or is, or who is
threatened to be made, a named defendant or respondent in a
proceeding.
(g) "Proceeding" means any threatened, pending or completed
civil, criminal, administrative or investigative action, suit,
arbitration or other proceeding, whether formal or informal, which
involves foreign, federal, state or local law and which is brought by
or in the right of the corporation or by any other person.
ARTICLE IX. SEAL
The Board of Directors may provide a corporate seal which may be
circular in form and have inscribed thereon the name of the corporation and the
state of incorporation and the words "Corporate Seal."
ARTICLE X. AMENDMENTS
10.01. By Shareholders. These Bylaws may be amended or repealed and
---------------
new Bylaws may be adopted by the shareholders by the vote provided in Section
2.07 of these Bylaws or as specifically provided below. If authorized by the
Articles of Incorporation, the shareholders may adopt or amend a Bylaw that
fixes a greater or lower quorum requirement or a greater voting requirement for
shareholders or voting groups of shareholders than otherwise is provided in the
Wisconsin Business Corporation Law. The adoption or amendment of a Bylaw that
adds, changes or deletes a greater or lower quorum requirement or a greater
voting requirement for shareholders must meet the same quorum requirement and be
adopted by the same vote and voting groups required to take action under the
quorum and voting requirement then in effect.
10.02. By Directors. Except as the Articles of Incorporation may
------------
otherwise provide, these Bylaws may also be amended or repealed and new Bylaws
may be adopted by the Board of Directors by the vote provided in Section 3.08,
but (a) no Bylaw adopted by the shareholders shall be amended, repealed or
readopted by the Board of Directors if the Bylaw so adopted so provides and (b)
a Bylaw adopted or amended by the shareholders that fixes a greater or lower
quorum requirement or a greater voting requirement for the Board of Directors
than otherwise is provided in the Wisconsin Business Corporation Law may not be
amended or repealed by the Board of Directors unless the Bylaw expressly
provides that it may be amended or repealed by a specified vote of the Board of
Directors. Action by the Board of Directors to adopt or amend a Bylaw that
changes the quorum or voting requirement for the Board of Directors must meet
the same quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then in effect, unless a
different voting requirement is specified as provided by the preceding sentence.
A Bylaw that fixes a greater or lower quorum requirement or a greater voting
requirement for shareholders or voting groups of shareholders than otherwise is
provided in the Wisconsin Business Corporation Law may not be adopted, amended
or repealed by the Board of Directors.
10.03. Implied Amendments. Any action taken or authorized by the
------------------
shareholders or by the Board of Directors, which would be inconsistent with the
Bylaws then in effect but is taken or authorized by a vote that would be
sufficient to amend the Bylaws so that the Bylaws would be consistent with such
action, shall be given the same effect as though the Bylaws had been temporarily
amended or suspended so far, but only so far, as is necessary to permit the
specific action so taken or authorized.
ARTICLE XI. STOCK TRANSFER RESTRICTION
In the event the corporation makes a valid election, pursuant to
Section1362 of the Internal Revenue Code of 1986, or any successor provision
thereto, to be treated as an S Corporation, no shareholder of the corporation
shall, without the written consent of shareholders holding more than fifty
percent (50%) of the outstanding stock of the corporation, transfer any shares
of stock to any person who, by reason of being a shareholder of the corporation,
will cause a termination of the corporation's election to be treated as an S
Corporation.
EXHIBIT 4.1 - SPECIMEN FORM OF COMPANY STOCK CERTIFICATE
- - --------------------------------------------------------
NUMBER SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF WISCONSIN
VIDEOPROPULSION, INC.
AUTHORIZED COMMON 9,000 SHARES $0.01 PAR VALUE
This Certifies That -------------------------------------------------------- is
the owner of -------------------------------------- full paid and non-assessable
COMMON SHARES $0.01 PAR VALUE OF VIDEOPROPULSION, INC.
transferable on the books of the Corporation in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and sealed with the Seal of the
Corporation.
This -------------------------- day of --------------------- A.D. ---------
- - --------------------------------------- ------------------------------------
SECRETARY PRESIDENT
For Value Received, ------ hereby sell, assign and transfer unto ---------------
- - ----------- Shares represented by the within Certificate, and do hereby
irrevocably constitute and appoint ----------------------------- Attorney to
transfer the said Shares on the books of the within named Corporation with full
power of substitution in the premises.
Dated---------------------------- ----------------
In presence of
- - --------------------------------- -------------------------------------
RESTRICTIONS:
SALES, PLEDGE, GIFT, BEQUEST, OR OTHER TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY REASON OF ARTICLE XI
OF THE BYLAWS, A COPY OF WHICH IS AVAILABLE FOR INSPECTION BY ANY
INTERESTED PERSON AT THE OFFICE OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE (THE "STATE LAWS"), BUT HAVE BEEN
ISSUED IN RELIANCE UPON EXEMPTIONS THEREFROM. NO TRANSFER OF THESE
SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND THE APPROPRIATE
STATE LAWS, UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE SUCH
REGISTRATION.
GENERAL ASSIGNMENT, ASSUMPTION AND AGREEMENT
REGARDING LITIGATION, CLAIMS AND OTHER LIABILITIES
Between
GENROCO, INC.
and
VIDEOPROPULSION, INC.
Dated ------- --, 2000
GENERAL ASSIGNMENT, ASSUMPTION AND AGREEMENT
REGARDING LITIGATION, CLAIMS AND OTHER LIABILITIES
This Agreement dated as of ------- --, 2000 between GENROCO, INC.
("GENROCO"), a Wisconsin corporation with offices at 255 Info Highway,
Slinger, WI 53086, and VIDEOPROPULSION, INC. ("VideoPropulsion"), a Wisconsin
corporation with offices at 251 Info Highway, Slinger, WI 53086, shall govern
the rights and obligations of GENROCO and VideoPropulsion with respect to the
assignment of assets and assumption of liabilities associated with, or arising
out of, the assets, business or operations of the video business referred to
collectively in this Agreement as the "Division." The term "GENROCO" when
used in this Agreement shall not be construed to include the Division where
such construction would have the effect of negating any obligation of
VideoPropulsion or the Division hereunder. The term VideoPropulsion when used
shall not be construed to include GENROCO where such construction would have
the effect of negating any obligation of GENROCO hereunder.
RECITALS
WHEREAS, GENROCO hereby and by certain other instruments of even date
herewith transfers or will transfer to VideoPropulsion effective as of 12:01
a.m., Central Standard Time, ------- --, 2000 or such other date as specified
in the Contribution Agreement, Plan and Agreement of Reorganization and
Distribution ("Contribution Agreement") dated as of ------- --, 2000 as the
effective date ("Effective Date"), those assets of GENROCO arising out of,
relating to, or associated with GENROCO's video business as conducted by the
Division ("Division Assets") in accordance with the Contribution Agreement
between the parties, and including, without limitation, assets associated with
the past, present and future development, production, manufacture, marketing,
use, storage, distribution, disposal and sale of the related products
manufactured by the Division ("Division Products") throughout the world.
WHEREAS, and except as specifically provided herein, the assets, business
and operations formerly and currently used and conducted by the Division are
herein referred to collectively as the "Division Business".
WHEREAS, the parties hereto intend, by this Agreement and the other
agreements and instruments provided for in the Contribution Agreement, to
convey to VideoPropulsion substantially all of the business and assets of the
Division Business.
WHEREAS, the parties further intend that VideoPropulsion shall assume
substantially all of the liabilities related to the Division Business.
WHEREAS, and without limiting the generality of the foregoing, the parties
acknowledge that, as of the Effective Date, there will be pending certain
litigation brought and threatened against GENROCO, and there will be certain
claims alleged against GENROCO associated with or arising out of the Division
Business, which may include, without limitation, civil actions, workers'
compensation proceedings, administrative and regulatory proceedings,
investigations, audits, inquiries, demands, claims and threatened actions
("Litigation and Claims").
WHEREAS, it is anticipated that after the Effective Date there may be
further Litigation and Claims brought, threatened or alleged against GENROCO
associated with or arising out of the activities of the Division Business
prior to the Effective Date and other instances of Litigation and Claims
brought, threatened or alleged against either VideoPropulsion or GENROCO
associated with or arising out of the activities of the other party after the
Effective Date.
WHEREAS, by this Agreement GENROCO and VideoPropulsion seek to implement
the general principle that with the exceptions noted herein, in the
Contribution Agreement and in the other agreements and instruments provided
for in the Contribution Agreement including any Schedules, Exhibits or Annexes
thereto ("Contribution Documents"), VideoPropulsion shall be responsible for
any Litigation and Claims associated with or arising at any time out of the
Division Business and the assets, business and operations used and conducted
by VideoPropulsion following the Effective Date and GENROCO shall be
responsible for any Litigation and Claims associated with or arising at any
time out of GENROCO's other assets, business and operations.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained in this Agreement, the Contribution Documents, the parties hereto
agree as follows:
1. ASSIGNMENT AND ASSUMPTION.
1.1 General Assignment. At the Effective Date, and except as
------------------
specifically provided in the Contribution Documents, GENROCO hereby assigns,
transfers, conveys and delivers to VideoPropulsion and VideoPropulsion hereby
accepts the assets, whether tangible or intangible, known or unknown arising
out of, relating to, or associated with the Division Business, Division
Products or Division Assets consisting of:
(a) all inventories unique to VideoPropulsion's products consisting
of materials, parts, supplies, work in process and finished
goods as reflected on the balance sheet or underlying accounting
records of the Division ("Accounting Records"), as of the
Effective Date ("Inventory");
(b) all machinery, equipment, furniture and fixtures as reflected on
the Accounting Records, and, except as specifically provided
elsewhere in the Contribution Documents, any machinery,
equipment, furniture and fixtures used or held for use in the
Division Business, wherever located, as of the Effective Date
("Equipment");
(c) to the extent related to the Division Business, Division
Products or Division Assets, all customer lists (including sales
and service lists), prospect lists, and supplier records,
correspondence and product literature, artwork, accounting
records and files, design, development and manufacturing files,
vendor and customer drawings, formulas and specifications for
equipment and raw materials currently used in the operation of
the Division Business, wherever located ("Business Records") and
in whatever form such Business Records may exist as of the
Effective Date;
(d) the rights of GENROCO under all agreements for the purchase by
or the furnishing to or for the benefit of the Division of raw
materials, parts, supplies and services relating to the Division
Business, including the Division Products, as of the Effective
Date ("Purchase Orders");
(e) the rights, title, and interest of GENROCO under every agreement
or contract of the Division or GENROCO on behalf of the Division
to sell Division Products and services arising before the
Effective Date, and any bids or offers made by the Division or
GENROCO on behalf of the Division to sell Division Products or
services in connection therewith to the extent such Division
Products have not been shipped or such services have not been
rendered prior to the Effective Date ("Sales Orders");
(f) the rights of GENROCO under the miscellaneous agreements listed
on Exhibit B hereto ("Miscellaneous Agreements")
(g) all trade accounts and notes receivable related to the sale of
Division Products and services ("Receivables") as reflected on
the Accounting Records as of the Effective Date;
(h) prepaid expenses incurred for the benefit of the Division as
reflected on the Accounting Records, as of the Effective Date;
(i) except as specifically provided elsewhere in the Contribution
Documents, and except for assets the disposition of which is
subject to separate agreements between the parties, all other
assets, tangible or intangible, known or unknown, related to,
arising out of, or associated with, or used or held for use in
the Division Business, whether or not reflected or required to
be reflected on the Accounting Records, as of the Effective
Date;
(j) cash in the amount of $9,947.00;
Notwithstanding anything above, and except as specifically provided in the
Contribution Documents, VideoPropulsion will not receive any of GENROCO cash
on hand, cash in banks, cash equivalents and investments, GENROCO checkbooks
and canceled checks, or any tax and accounting records located at GENROCO
headquarters, provided that VideoPropulsion shall be entitled to copies of tax
and accounting records relating to the Division located at GENROCO
headquarters, with GENROCO and VideoPropulsion sharing the copying expense
equally.
1.2 Accounting Records. The parties acknowledge and agree that the
------------------
Accounting Records as of the Effective Date will be prepared by GENROCO as soon
as practicable after the Effective Date. Each party agrees to use the normal
accounting procedures and practices, consistent with past practices, in
preparing the Accounting Records which will be used as a reference for
conveying the assets and liabilities to VideoPropulsion. In case of any
differences or questions about the preparation of such documents, the parties
agree to resolve any controversy in accordance with Section 8 of this
Agreement.
1.3 General Assumption. At the Effective Date, and except as
------------------
specifically provided in the Contribution Documents, VideoPropulsion hereby
irrevocably assumes the obligations and liabilities of GENROCO incurred by the
Division or otherwise arising out of, relating to or associated with the
Division Business, the Division Products or the Division Assets, whether
matured or unmatured, liquidated or unliquidated, fixed or contingent, known or
unknown, and whether arising out of circumstances existing prior to or on and
after the Effective Date, (such liabilities and obligations, being herein
referred to collectively as the "Assumed Liabilities") consisting of:
(a) obligations and liabilities arising out of, relating to, or
associated with all Inventory and Equipment;
(b) obligations and liabilities arising out of, relating to, or
associated with all Sales Orders and Receivables;
(c) obligations and liabilities arising out of, relating to, or
associated with all Purchase Orders;
(d) obligations and liabilities arising out of, relating to, or
associated with all Miscellaneous Agreements;
(e) obligations and liabilities arising out of, relating to, or
associated with all accounts payable as reflected on the
Accounting Records, as of the Effective Date;
(f) obligations and liabilities arising out of, relating to, or
associated with all product warranty obligations, including any
product recall obligations or liabilities whenever arising,
directly or indirectly, with respect to Division Products
whether shipped prior to or on or after the Effective Date;
(g) obligations and liabilities resulting from claims for, directly
or indirectly, personal injury or property damage or
consequential damage which are caused by any defect in or breach
of warranty related to any Division Products or from the
Division Assets or Division Business, whether arising prior to
or on or after the Effective Date;
(h) all Litigation and Claims pending as of the Effective Date
against GENROCO or any GENROCO subsidiary ("Pending Division
Litigation") and all Litigation and Claims brought against
VideoPropulsion or GENROCO, or any VideoPropulsion or GENROCO
subsidiary, after the Effective Date ("New Division
Litigation"), in each case if and solely to the extent that such
Litigation and Claims (in whole or in part) arise out of or are
associated with (regardless of the party named in the allegation
or complaint) the Division Business, any Division Products or
any Division Assets, or the assets, business and operations used
and conducted by VideoPropulsion on and after the Effective
Date, or arise out of, relate to or are associated with
VideoPropulsion's obligations, covenants, warranties,
representations, assumptions and agreements contained or
reflected in the Contribution Documents, or any other activities
of VideoPropulsion (whether or not in the ordinary course of
business and whether occurring before or on or after the
Effective Date);
(i) except to the extent provided to the contrary by Section 4.2,
every and all obligations, liabilities and expenses (including
closure or remediation costs) of GENROCO for harm or alleged
harm to the environment arising out of or associated with the
Division Business, any Division Products or any Division Assets
("Environmental Liabilities"); provided, however,
VideoPropulsion does not assume any such obligations,
liabilities or expenses with respect to the disposal or use by
GENROCO of Division or VideoPropulsion products purchased by
GENROCO after the Effective Date;
(j) all liabilities of GENROCO in any instance where VideoPropulsion
is operating as agent or subcontractor under Section 4.3 of the
Contribution Agreement or any agreement or instrument provided
for therein provided that VideoPropulsion will not be
responsible for or indemnify GENROCO for any claims, damages,
liabilities and expenses whatsoever to the extent such arose out
of or in connection with GENROCO's performance of or omission to
perform any of its remaining obligations under Section 4.3 of
the Contribution Agreement; and
(k) except as provided above, elsewhere in the Contribution
Documents, and except for obligations, liabilities and expenses
the allocation of responsibility for which is subject to
separate agreements between the parties, all other obligations,
liabilities and expenses relating to, arising out of, or
associated with the Division Business, Division Products or any
Division Assets, whether or not reflected or required to be
reflected in the Accounting Records.
VideoPropulsion shall be responsible for the Assumed Liabilities, regardless
of when or where such Assumed Liabilities arose or arise, or whether the facts
on which they are based occurred prior to or subsequent to the Effective Date,
regardless of where or against whom such Assumed Liabilities are asserted
(including any Assumed Liabilities arising out of claims made by
VideoPropulsion's directors, officers, employees, agents, subsidiaries and
affiliates against GENROCO) or whether asserted prior or subsequent to the
Effective Date and regardless of whether such Assumed Liabilities arose from
negligence, reckless, violation of law, fraud, or misrepresentation by GENROCO
or any of its directors, officers, employees, agents, subsidiaries or
affiliates.
1.4 Special Assumption Arrangements. The parties acknowledge and agree
-------------------------------
that certain assets and obligations, liabilities, and expenses relating to,
arising out of or associated with the Division Business, the Division Products
and the Division Assets or assumed by VideoPropulsion as of the Effective Date,
are the subject of separate agreements between the parties. The transfer of
assets and assumption of obligations, liabilities, and expenses provided for in
this Agreement is subject in all respects to the provisions of such separate
agreements insofar as the provisions of this Agreement may be deemed to related
to the subject matter of such separate agreements and this Agreement shall not
be deemed to effect the transfer of any asset or assumption of any obligation,
liability, or expense expressly provided for pursuant to any of the separate
agreements.
1.5 Liabilities Not Assumed. VideoPropulsion does not assume any
-----------------------
obligation, liability or expense if and solely to the extent that: (i) such
obligation, liability, or expense (in whole or in part) arises out of or is
associated with the assets, business or operations of GENROCO other than the
Division Business, Division Products or Division Assets; or (ii) GENROCO has
expressly agreed to retain such obligation, liability, or expense pursuant to
the Contribution Documents (such obligations, liabilities, and expenses
referred to in clauses (i) and (ii) of this sentence, together with all
obligations, liabilities, and expenses of GENROCO arising out of or associated
with Pending GENROCO Litigation and New GENROCO Litigation (each as hereinafter
defined), being referred to herein as "Retained Liabilities"). VideoPropulsion
does not assume, and shall not be responsible for, any Litigation and Claims
pending as of the Effective Date against GENROCO, exclusive of Litigation and
Claims set forth in Section 1.3(h) or specifically retained by VideoPropulsion
in the Contribution Documents, or any GENROCO subsidiary, ("Pending GENROCO
Litigation"), or Litigation and Claims brought, threatened or alleged against
GENROCO, including any subsidiary, exclusive of Litigation and Claims set forth
in Section 1.3(h) or specifically retained by VideoPropulsion in the
Contribution Documents, after the Effective Date ("New GENROCO Litigation").
GENROCO shall be responsible for the Retained Liabilities, regardless of
when or where such obligation, liability, or expense arose or arise, or
whether the facts on which they are based occurred prior to or subsequent to
the Effective Date, regardless of where or against whom such obligation,
liability, or expense is asserted or determined or whether asserted or
determined prior to or subsequent to the Effective Date.
1.6 Allocation of Joint Assets and Liabilities. The parties agree that
------------------------------------------
by this Agreement, GENROCO and VideoPropulsion, except as specifically provided
in the Contribution Documents, seek to transfer, assign, and convey to
VideoPropulsion, and/or have VideoPropulsion assume, as the case may be, the
assets and liabilities of the Division Business, Division Products and the
Division Assets. By this Agreement and except as otherwise provided in the
Contribution Documents, GENROCO does not intend to transfer, assign, and convey
to VideoPropulsion and have VideoPropulsion assume, as the case may be, the
assets and liabilities of GENROCO business, products, assets other than the
Division Business, Division Products or Division Assets.
In the case of an asset or liability, if any, which relates to, arises out
of, or is associated with both the Division Business and GENROCO business,
exclusive of the Division Business, both parties agree to apportion the asset
or liability among the parties pursuant to the provisions of Section 8 of this
Agreement. If the asset or liability is not divisible, the asset or liability
will be wholly allocated to the party to which party's business the
indivisible asset or liability primarily relates. The parties will make this
decision in accordance with Section 8 of this Agreement. The parties will use
reasonable efforts to resolve any controversy or disputes as promptly as
possible.
1.7 Classification of Litigation and Claims. The parties acknowledge
---------------------------------------
that VideoPropulsion has previously informed GENROCO of all Pending Division
Litigation known to VideoPropulsion, other than workers' compensation claims.
Such information was prepared by VideoPropulsion to the best of its ability
based upon facts reasonably available to it as of the date hereof and that
there may be additional Pending Division Litigation either commenced or
threatened between the date such information was provided and the Effective
Date or which was not reasonably identifiable and which should have been
included in such information. The parties agree that such Litigation and
Claims when identified shall be classified as Pending Division Litigation. The
parties also agree that with respect to certain Litigation and Claims currently
considered to be Pending Division Litigation, or later deemed as included, it
may become difficult in the future to determine whether they were properly so
classified, in which case the parties agree to appropriately reclassify any
such Litigation and Claims as newly discovered facts may indicate or, in the
case of disputed facts, to negotiate their proper handling under Section 6 or
Section 8 hereof.
2. ASSUMED LIABILITIES, EXCULPATION AND GENERAL INDEMNIFICATION BY
VIDEOPROPULSION.
2.1 Subject to the provisions of Section 4 hereof, from and after the
Effective Date, VideoPropulsion shall, without any further responsibility or
liability of or recourse to, GENROCO, or any subsidiary of GENROCO or any of
their respective directors, shareholders, officers, employees, agents,
consultants, representatives, successors, transferees or assignees
(collectively, the "GENROCO Parties"), absolutely and irrevocably assume and
be solely liable and responsible for the Assumed Liabilities. Neither GENROCO
nor any of the other GENROCO Parties shall be liable to VideoPropulsion or any
subsidiary of VideoPropulsion or any of their respective directors,
shareholders, officers, employees, agents, consultants, customers,
representatives, successors, transferees or assignees for any reason
whatsoever on account of (i) any Assumed Liabilities or (ii) any obligations,
liabilities or expenses arising out of or associated with or any Litigation
and Claims arising out of or associated with the assets, business and
operations used and conducted by VideoPropulsion following the Effective Date,
arising from or associated with VideoPropulsion's obligations, covenants,
warranties, representations, assumptions, agreements contained or reflected in
the Contribution Documents, or any other activities of VideoPropulsion
(whether or not in the ordinary course of business, and whether occurring
before or on or after the Effective Date), except as otherwise specifically
provided in the Contribution Documents; provided, that GENROCO shall remain
liable to VideoPropulsion for any breach by GENROCO of any of its obligations,
covenants, warranties, representations, assumptions or agreements contained or
reflected in the Contribution Documents. The matters with respect to which
the liability of GENROCO and the other GENROCO Parties is excluded pursuant to
clauses (i) and (ii) of the preceding sentence are hereby referred to as the
"Division Liabilities."
VideoPropulsion shall fully indemnify, defend, save and hold harmless
GENROCO and each of the other GENROCO Parties from and against all claims,
liabilities, obligations, leases, costs, costs of defense (as and when
incurred, and including reasonable outside attorneys' and consultants' or
others' fees), expenses, fines, taxes, levies, imports, duties, deficiencies,
assessments, charges, penalties, allegations, demands, damages (including but
not limited to actual, punitive or consequential, foreseen or unforeseen,
known or unknown), settlements, awards or judgments of any kind or nature
whatsoever, arising out of or associated with the Division Liabilities (all of
which are hereinafter in this Section collectively called the "GENROCO
Damages").
Except as specifically provided elsewhere, the indemnities provided by
VideoPropulsion hereunder shall extend to any and all Division Liabilities of
whatsoever nature, including, without limitation, any and all Division
Liabilities with respect to environment, health, safety, personal injury,
property damage, employment, benefits, compensation, pension rights, claims
arising out of contracts, product liability, warranty, merchantability or
fitness of goods for any particular purpose, conformity of goods to
contractual requirements, deceptive trade practice, misrepresentation, fraud
or any other actual breach or violation of any obligation or requirement
arising out of, or in connection with, Division Assets, the Division Business,
Division Products or the assets, business and operations of VideoPropulsion.
3. EXCULPATION AND INDEMNIFICATION BY GENROCO.
3.1 Subject to the provisions of Section 4 hereof, from and after the
Effective Date, GENROCO shall, without any further responsibility or liability
of, or recourse to, VideoPropulsion, or any subsidiary of VideoPropulsion or
any of its respective directors, shareholders, officers, employees, agents,
consultants, representatives, successors, transferees or assignees
(collectively, the "VideoPropulsion Parties"), absolutely and irrevocably be
solely liable and responsible for the Retained Liabilities. From and after
the Effective Date, neither VideoPropulsion nor any of the other
VideoPropulsion Parties shall be liable to GENROCO or any subsidiary of
GENROCO or any of their respective directors, shareholders, officers,
employees, agents, consultants, customers, representatives, successors,
transferees or assignees for any reason whatsoever: (i) on account of any
Retained Liabilities; or (ii) on account of any obligations, liabilities or
expenses arising out of or associated with the breach by GENROCO of any of its
obligations under the Contribution Documents. The matters with respect to
which GENROCO retains liability pursuant to clauses (i) and (ii) of the
preceding sentence are herein referred to as the "GENROCO Liabilities."
GENROCO shall fully indemnify, defend, save and hold harmless
VideoPropulsion and each of the other VideoPropulsion Parties from and
against, all claims, liabilities, obligations, leases, costs, costs of defense
as and when incurred, and including reasonable outside attorneys' and
consultants' fees, expenses, fines, taxes, levies, imports, duties,
deficiencies, assessments, charges, penalties, allegations, demands, damages
(including but not limited to actual, punitive or consequential, foreseen or
unforeseen, known or unknown), settlements, awards or judgments of any kind or
nature whatsoever, arising out of or associated with the GENROCO Liabilities
or, except as otherwise provided in the Contribution Documents, that otherwise
are related to, arise from, or associated with the ownership, use, possession,
operation or conduct of the assets, business or operations of GENROCO, other
than the Division Assets and VideoPropulsion assets, Division Business and
VideoPropulsion's business or Division Products or VideoPropulsion's products,
before or after the Effective Date (all of which are hereinafter collectively
called the "VideoPropulsion Damages").
Except as specifically provided in the Contribution Documents, the
indemnities provided by GENROCO hereunder shall extend to any and all GENROCO
Liabilities of whatsoever nature, including, without limitation, any and all
GENROCO Liabilities with respect to environment, health, safety, personal
injury, property damage, employment, benefits, compensation, pension rights,
claims arising out of contracts, product liability, warranty, merchantability
or fitness for any particular purpose of goods, conformity of goods to
contractual requirements, deceptive trade practice misrepresentation, fraud or
any other alleged or actual breach or violation of any obligation of or
requirement arising out of, or in connection with, the assets, business or
operations of GENROCO other than the Division Business, Division Assets,
Division Products or the assets, business and operations of VideoPropulsion.
4. SPECIFIC INDEMNIFICATION ISSUES.
4.1 Worker's Compensation. Workers' compensation claims filed with the
---------------------
appropriate state administrative agency prior to the Effective Date by a person
employed at the time of filing by GENROCO alleging that prior to the Effective
Date such employee was injured while employed by GENROCO shall be considered to
be GENROCO Liabilities. Any workers' compensation claims made against
VideoPropulsion (including any subsidiaries) which are filed after the
Effective Date shall be considered to be an Assumed Liabilities. Any workers'
compensation claims made against GENROCO which are filed after the Effective
Date shall be considered to be GENROCO Liabilities. In the event a party has a
claim filed against it after the Effective Date which the party believes should
be the responsibility of the other party (i.e. a misfiled claim), the parties
agree to use the procedures set forth at Section 8 of the Agreement to resolve
any dispute or controversy.
4.2 Officer, Director, Employee or Agent Liability. It is understood and
----------------------------------------------
agreed that, with respect to any obligation, liability, or expense or any
Litigation and Claims arising out of or associated with, an act or omission of
any officer, director, employee or agent of GENROCO prior to the Effective
Date, the respective obligations of VideoPropulsion and GENROCO pursuant to
this Agreement (including their respective indemnification obligations) shall
remain unaffected and in full force and effect, regardless of whether such
person was, at the time of such act or omission, an officer, director, employee
or agent of the Division (including VideoPropulsion) or of GENROCO (excluding
the Division) and regardless of whether such obligation, liability, or expense
or Litigation and Claims are alleged or determined in any judgment, award or
decree after trial to arise out of or be associated with such person's
negligence, gross negligence, recklessness or intentional conduct or
culpability.
4.3 Post-Effective Date Contracts Between GENROCO & VideoPropulsion. It
---------------------------------------------------------------
is acknowledged that after the Effective Date the parties may have arms length
negotiated business relationships, which relationships are or shall be
described in contracts, agreements and other documents entered into in the
normal course of business. Such documents may include agreements by the
parties and their affiliates and subsidiaries to supply after the Effective
Date materials or services. Such business relationships shall not be subject
to the indemnity or other provisions hereof or any other agreements covered by
the Contribution Documents, unless the parties expressly agree to such in the
agreements governing such relationships.
4.4 Joint Liability. In the event a claim, demand, action or proceeding
---------------
is brought by a third party in which the liability as between GENROCO and
VideoPropulsion is determined after trial in any judgment, award or decree to
be joint or in which the entitlement to indemnification hereunder is not
readily determinable, the parties shall negotiate in good faith in an effort to
agree, as between GENROCO and VideoPropulsion, on the proper allocation of
liability or entitlement to indemnification, as well as the proper allocation
of the costs of any joint defense or settlement pursuant to Section 6.4, all in
accordance with the provisions of and the principles set forth in this
Agreement. In the absence of any such agreement, such allocation of liability
or entitlement to indemnification, and such allocation of costs, shall be
subject to ultimate resolution between GENROCO and VideoPropulsion pursuant to
Section 8.
5. NOTICE AND PAYMENT OF CLAIMS.
5.1 Procedure for Notification. If either a party to this Agreement or a
--------------------------
person entitled to a defense and/or indemnification under this Agreement ("the
Indemnified Party") determines that it is or may be entitled to a defense or
indemnification by VideoPropulsion or GENROCO, as the case may be ("the
Indemnifying Party"), under this Agreement:
(a) The Indemnified Party shall deliver promptly to the Indemnifying
Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense
and/or indemnification, the nature of the claim, and, if known,
the amount for which the Indemnified Party reasonably believes
it is entitled to be indemnified;
(b) The Indemnifying Party shall have 30 days from receipt of the
notice requesting indemnification within which to either (1)
assume the defense of such litigation or claim; (2) pay the
claim in immediately available funds; (3) reserve its rights
pending negotiations under Section 6.4; or (4) object in
accordance with Section 5.2. This 30 day period may be extended
by express agreement of the parties.
(c) However, if the amount for which the Indemnifying Party may be
liable is not known or reasonably determinable at the time of
such notice, the Indemnified Party shall deliver to the
Indemnifying Party a further notice specifying the amount for
which the Indemnified Party reasonably believes it is entitled
to be indemnified as soon as reasonably practicable after such
amount is known or reasonably determinable and the Indemnifying
Party shall have a further opportunity to take action as set
forth above. Nothing in this subparagraph shall be interpreted
to abrogate or delay an Indemnifying Party's obligation to
provide the other with a defense under this Agreement.
5.2 Waiver of Objection. The Indemnifying Party may object to the claim
-------------------
for defense and/or indemnification set forth in any notice; provided, however,
that if the Indemnifying Party does not give the Indemnified Party written
notice setting forth its objection to such claim (or the amount thereof) and
the grounds therefor within the same 30-day period (or any extended period),
the Indemnifying Party shall be deemed to have acknowledged its liability to
provide a defense or for the amount of such claim and the Indemnified Party may
exercise any and all of its rights under applicable law to collect such amount
or obtain such defense. Any objection to a claim for a defense or
indemnification shall be resolved in accordance with Section 8.
5.3 Insurance Coverage. The right to a defense or indemnification under
------------------
this Agreement applies only insofar as defense and indemnification are not
covered by proceeds or the provision of legal defense received by a party.
Nevertheless, the potential availability of insurance coverage to GENROCO or
VideoPropulsion shall not relieve the other party of its obligations for
defense or indemnification hereunder, or delay either party's obligation to the
other to assume a defense or pay any sums due hereunder. Once proceeds are
received appropriate adjustments will be made under the Insurance Matters
Agreement, dated as of the date hereof, between GENROCO and VideoPropulsion,
which governs the rights and obligations of GENROCO and VideoPropulsion with
respect to such insurance.
6. DEFENSE OF THIRD-PARTY CLAIMS.
6.1 Assumption of Third-Party Claims. If the Indemnified Party's claim
--------------------------------
for indemnification is based, under this Agreement, on a claim, demand,
investigation, action or proceeding, judicial or otherwise, brought by a third
party, and the Indemnifying Party does not object under Section 5.2 hereof, the
Indemnifying Party shall, within the 30-day period (or any extended period)
referred to in Section 5 above, assume the defense of such third-party claim at
its sole cost and expense and shall thereafter be designated as the case
handler. Any such defense shall be conducted by attorneys employed by the
Indemnifying Party. The Indemnified Party may retain attorneys of its own
choosing to participate in such defense at the Indemnified Party's sole cost
and expense.
6.2 Settlement of Third-Party Claims. If the Indemnifying Party assumes
--------------------------------
the defense of any such third-party claim, the Indemnifying Party may settle or
compromise the claim without the prior consent of the Indemnified Party so long
as all present and future claims against the Indemnified Party relating to such
third-party claim(s) are irrevocably and unconditionally released in full.
6.3 Indemnification After Settlement. The Indemnifying Party shall pay
--------------------------------
to the Indemnified Party in immediately available funds the amount for which
the Indemnified Party is entitled to be indemnified within 30 days after the
settlement or compromise of such third-party claim or the final unappealable
judgment of a court of competent jurisdiction (or within such longer period as
agreed to by the parties). If the Indemnifying Party does not assume the
defense of any such third-party claim, the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party, except that
the Indemnifying Party has the right to contest that it is obligated to the
Indemnified Party under the terms of this Agreement, provided the Indemnifying
Party shall have raised its objections in a timely manner under Section 5.2.
6.4 Third-Party Joint and Several Liability Claim. In the event a claim,
---------------------------------------------
demand, action or proceeding is brought by a third party in which the liability
as between GENROCO and VideoPropulsion is alleged to be joint or in which the
entitlement to indemnification hereunder is not readily determinable (or, if an
objection, in good faith, pursuant to Section 5.2 has been received), the
parties shall cooperate in a joint defense. Such joint defense shall be under
the general management and supervision of the party which is expected to bear
the greater share of the liability, as determined by representatives of GENROCO
and VideoPropulsion, and which will be considered the case handler, unless
otherwise agreed, provided, however, that neither party shall settle or
compromise any such joint defense matter without the consent of the other. The
costs of such joint defense, any settlement and any award or judgment (unless
the award or judgment specifies otherwise) shall be borne as the parties may
agree or, in the absence of such agreement, such costs shall be borne by the
party incurring such costs, subject to ultimate resolution between
VideoPropulsion and GENROCO pursuant to Section 8.
7. COOPERATION AND PRESERVATION OF RECORDS.
7.1 General. VideoPropulsion and GENROCO shall cooperate with one
-------
another fully and in a timely manner in connection with the defense of any
Pending Division Litigation, Threatened Division Litigation, New Division
Litigation, Retained Liabilities or any other actual or threatened claim,
investigation, audit or administrative or judicial action or proceeding brought
or commenced by a third party (including any governmental agency or authority)
involving any matter affecting the potential liability of GENROCO or
VideoPropulsion, so long as GENROCO and VideoPropulsion are not directly
adverse in a lawsuit between each other in that specific matter.
7.2 Availability of Records. Such cooperation shall include, without
-----------------------
limitation, making available to the other party during such normal business
hours and upon reasonable notice, appropriate books, records and information
("Litigation Records"), officers and employees (without substantial
interruption of employment) necessary or useful in connection with any accrued
or actual or threatened claim, investigation, audit, action or proceeding, so
long as GENROCO and VideoPropulsion are not directly adverse in a lawsuit
between each other in that specific matter.
7.3 Retention of Records. Each party shall continue in force or at the
--------------------
request of the other party, shall issue notices exempting from destruction at
the expiration of normal records retention periods any Litigation Records which
the requesting party represents may be necessary to the defense of, or required
to be produced in discovery in connection with, any such claim, investigation,
audit, action or proceeding and shall refrain from destroying any such
Litigation Records until authorized by the requesting party. The requesting
party shall notify the other party promptly when the Litigation Records are no
longer required to be maintained.
7.4 Cost of Access to Records. The party requesting access to Litigation
-------------------------
Records or officers and employees pursuant to Section 7.2 or preservation of
Litigation Records under Section 7.3 shall bear all reasonable out-of-pocket
expenses (except reimbursement of salaries, employee benefits and general
overhead) incurred in connection with providing such Litigation Records or
officers and employees.
7.5 Confidential or Proprietary Records. The party providing Litigation
-----------------------------------
Records under this Section 7 may elect, upon a reasonable basis and within a
reasonable time, to designate all or a portion of the Litigation Records as
confidential or proprietary. If Litigation Records are so designated, the
party receiving them will treat them as it would its own confidential or
proprietary information and will take all reasonable steps to protect and
safeguard the Litigation Records while in its own custody and will attempt to
shield such information from disclosure by motions to quash, motions for a
protective order, reduction or other appropriate actions.
8. DISPUTE RESOLUTION.
8.1 General. In an effort to resolve informally and amicably any claim
-------
or controversy arising out of or related to the interpretation or performance
of this Agreement without resorting to litigation, a party shall first notify
the other of any difference or dispute hereunder that requires resolution.
GENROCO and VideoPropulsion each shall designate an employee to investigate,
discuss and seek to settle the matter between them. If the two are unable to
settle the matter within 30 days after such notification (or such longer period
as may be agreed upon), the matter shall be submitted to a senior officer of
GENROCO and VideoPropulsion, respectively, for consideration.
8.2 Arbitration. If settlement cannot be reached through the efforts of
-----------
the senior officers within an additional 30 days or such longer period as may
be agreed upon, the parties shall consider arbitration or other alternative
means to resolve the dispute.
8.3 Legal Proceedings. If the parties are unable to agree on an
-----------------
alternative dispute resolution mechanism within 30 days, either party may
initiate legal proceedings to resolve such matter.
9. NOTICES.
9.1 General. All notices and communications required or permitted under
-------
this Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been duly made if actually delivered, or if mailed by
first class mail, postage prepaid, or by air express service, with charges
prepaid and addressed as follows:
If to GENROCO: GENROCO, Inc.
255 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
If to VideoPropulsion: VideoPropulsion, Inc.
251 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
9.2 Change in Address. Either party may, by written notice so
-----------------
delivered to the other, change the address to which future delivery shall be
made.
10. AMENDMENT AND NON-WAIVER.
10.1 Written Amendment and Waiver. This Agreement may not be altered or
----------------------------
amended nor any rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver.
10.2 Limited Amendment or Waiver. No waiver of any term, provision or
---------------------------
condition of this Agreement or failure to exercise any right, power or remedy
or failure to enforce any provision of this Agreement, in any one or more
instances, shall be deemed to be a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition or enforcement right of this Agreement or deemed to be an impairment
of any right, power or remedy or acquiescence to any breach.
11. MISCELLANEOUS.
11.1 Governing Law. This Agreement and the transactions contemplated
-------------
hereby shall be construed in accordance with and governed by the internal laws
of the State of Wisconsin.
11.2 Entire Agreement. The Contribution Documents constitute the entire
----------------
understanding of the parties hereto with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter; provided, however, that the
specific provisions of any other agreement between the parties executed and
delivered by the parties in connection with the closing under the Contribution
Agreement shall not be superseded by this Agreement and to the extent any such
other agreement is in conflict herewith, such specific agreement shall control.
11.3 Parties In Interest. Neither party may assign its rights or
-------------------
delegate any of its duties under this Agreement without prior written consent
of the other. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
Nothing contained in this Agreement, express or implied, is intended to confer
upon any third party any benefits, rights or remedies.
11.4 Effectiveness. This Agreement shall become effective at the
-------------
Effective Date and may be terminated by GENROCO at any time prior thereto
without any liability on GENROCO's part.
11.5 Reformation and Severability. If any provision of this Agreement
----------------------------
shall be held to be invalid, unenforceable or illegal in any jurisdiction under
any circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or
severance shall affect or impair the legality, validity or enforceability of
any other provisions of this Agreement to the extent that such other provision
is not itself actually in conflict with any applicable law.
11.6 Titles and Headings. All titles and headings have been inserted
-------------------
solely for the convenience of the parties and are not intended to be a part of
this Agreement or to affect its meaning or interpretation.
IN WITNESS WHEREOF the Parties have caused this Agreement to be executed
by their duly authorized officers as of this ---- day of -------, 2000.
GENROCO, INC.
By:-------------------------------
Keith Brue
Executive Vice President and
Chief Financial Officer
VIDEOPROPULSION, INC.
By:-------------------------------
Chris Good
Executive Vice President and
Chief Technical Officer
CONTRIBUTION AGREEMENT,
PLAN AND AGREEMENT OF REORGANIZATION AND DISTRIBUTION
This Agreement is made as of ------- --, 2000, by GENROCO, INC.
("GENROCO"), a Wisconsin corporation, with offices at 255 Info Highway,
Slinger, Wisconsin 53086 and VIDEOPROPULSION, INC. ("VideoPropulsion"), a
Wisconsin corporation, with offices at 251 Info Highway, Slinger, Wisconsin
53086.
WHEREAS, VideoPropulsion is a corporation formed on [October --, 1999],
and established for the purpose of taking title to certain assets associated
with the video business of GENROCO (the "Division") and assuming certain of
the liabilities associated with the video Division, such that VideoPropulsion
will own substantially all of the assets, business and operations formerly and
currently used and conducted by the Division (the "Division Business");
WHEREAS, the parties wish to provide for the transfer of such net assets
as will be transferred and delivered to VideoPropulsion, solely in exchange
for the common stock of VideoPropulsion in accordance with the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended;
WHEREAS, the parties wish to provide for the assumption by
VideoPropulsion of certain liabilities associated with the Division and the
Division Business;
WHEREAS, GENROCO intends to distribute all of the common stock of
VideoPropulsion, pro rata, to the shareholders of GENROCO in accordance with
resolu tions of the Board of Directors of GENROCO and in accordance with the
terms of a tax opinion obtained from GENROCO's tax counsel to the effect that
such distribution will not be taxable to the shareholders of GENROCO (the
"Distribution"), so that after the Distribution GENROCO will own no shares of
stock representing the equity of VideoPropulsion and VideoPropulsion will be a
corporation whose shares are quoted and traded as an over the counter
security;
WHEREAS, the parties wish to provide for their agreements with respect to
certain matters pertaining to their business relationships following the
Distribution and other matters mutual to their interest;
NOW THEREFORE, in furtherance of the foregoing purposes and in considera
tion of the issuance of the common stock of VideoPropulsion to GENROCO as
provided in Section 3.1 and the mutual promises and undertakings herein
contained and contained in any agreement or other document executed in
connection with this Agreement, the parties agree as follows:
ARTICLE I
EFFECTIVE DATE AND CLOSING
SECTION 1.1 Unless otherwise provided in this Agreement, or in any
agreement to be executed in connection with this Agreement, the effective date
of each transfer of property, assumption of liability, license, undertaking,
or agreement in connection herewith shall be 12:01 a.m., Central Standard
Time, January 1, 2000 (the "Effective Date"), or such other date as may be
fixed by the Board of Directors of GENROCO.
SECTION 1.2 This Agreement shall be void if the Board of Directors of
GENROCO refrains from declaring or proceeding with the Distribution.
SECTION 1.3 Unless otherwise provided herein, the closing of the
transactions contemplated hereunder shall occur by the lodging of each of the
executed instruments of transfer, assumptions of liability, undertakings,
agreements, instruments or other documents executed or to be executed in
connection with this Agreement with Quarles & Brady LLP, 411 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, attorneys for GENROCO, to be held in
escrow for delivery as provided in Section 1.4 of this Agreement.
SECTION 1.4 Upon receipt of a certificate of the Secretary of GENROCO in
the form attached to this Agreement as Exhibit A, Quarles & Brady LLP shall
deliver to VideoPropulsion on behalf of GENROCO all of the items required to
be delivered by GENROCO hereunder lodged with it pursuant to Section 1.3 of
this Agreement and each such item shall be deemed to be delivered to
VideoPropulsion as of the Effective Date upon delivery of such certificate.
Upon receipt of a certificate of the Secretary of VideoPropulsion in the form
attached to this Agreement as Exhibit B, Quarles & Brady LLP shall deliver to
GENROCO on behalf of VideoPropulsion all of the items required to be delivered
by VideoPropulsion hereunder and each such item shall be deemed to be
delivered to GENROCO as of the Effective Date upon receipt of such
certificate.
ARTICLE II
CLOSING
SECTION 2.1 As of the Effective Date, GENROCO will or will cause an
appropriate subsidiary to deliver to VideoPropulsion all of the following:
(a) Duly executed lease, substantially in the form annexed as Exhibit C,
to certain facilities used by VideoPropulsion;
(b) Duly executed General Assignment, Assumption and Agreement Regarding
Litigation, Claims and Other Liabilities (the "Assignment")
substantially in the form annexed as Exhibit D;
(c) Duly executed assignments of the patents listed on Schedule 2.1(c)
and a license of certain patents listed on Schedule 2.1(c), and a
duly executed Transitional Trademark Use and License Agreement
substantially in the form annexed as Exhibit E;
(d) Duly executed Insurance Matters Agreement substantially in the form
annexed as Exhibit F;
(e) Cash, as provided in the Assignment;
(f) A duly executed Employee Benefits and Compensation Agreement
substantially in the form annexed as Exhibit G;
(g) A duly executed Tax Sharing and Indemnification Agreement (the "Tax
Agreement") substantially in the form annexed as Exhibit H;
(h) Such documents or instructions as may be necessary to satisfy the
provisions of Section 4.7 of this Agreement;
(i) A duly executed Interim Administrative Services Agreement
substantially in the form annexed as Exhibit I;
(j) A duly executed Confidentiality and Non-Disclosure Agreement
substantially in the form annexed as Exhibit J;
(k) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes
hereof including a Bill of Sale and Assumption of Liabilities in the
form annexed as Exhibit K;
SECTION 2.2 As of the Effective Date, VideoPropulsion will deliver to
GENROCO all of the following:
(a) In each case where VideoPropulsion is a party to any agreement or
instrument referred to in Section 2.1, a duly executed counterpart
of such agreement or instrument;
(b) A certificate or certificates representing all of the outstanding
shares of the common stock of VideoPropulsion other than those
already owned by GENROCO, all as provided in Section 3.1;
(c) Resignations of each person employed by VideoPropulsion who is an
officer of GENROCO, or any of its subsidiaries or affiliates not
constituting part of the Division, immediately prior to the
Effective Date;
(d) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes
hereof.
ARTICLE III
THE DISTRIBUTION
SECTION 3.1 By the Effective Date, VideoPropulsion shall issue and
deliver to GENROCO a certificate or certificates registered in the name of
GENROCO representing that number of shares of the common stock of
VideoPropulsion which, when taken together with the shares of common stock
already owned by GENROCO, will result in GENROCO owning, of record and
beneficially, all of the issued and outstanding shares of VideoPropulsion
common stock and a number such that GENROCO shall own one (1) share of the
common stock of VideoPropulsion for each one (1) share of the common stock of
GENROCO issued and outstanding (the "Distribution Ratio") on the Record Date
for the Distribution (the "Record Date"). Each share of the common stock of
VideoPropulsion shall be validly issued, fully paid, nonassessable and free of
preemptive rights, except for statutory liability under Wis. Stats. Section
180.0622(2)(b). References to Wis. Stats. Section 180.0622(2)(b) shall
include authoritative judicial interpretations thereof (and of the
substantially identical predecessor statute, Section 180.40(6) of the
Wisconsin Business Corporation Law, in effect prior to January 1, 1991).
SECTION 3.2 Nothing contained in Section 3.1 or elsewhere in this
Agreement, including the Schedules, Exhibits, and Annexes hereto, shall be
construed to limit or alter the authority of the Board of Directors of GENROCO
to declare or refrain from declaring the Distribution, fixing or changing the
Record Date, fixing or changing the Effective Date, or fixing or changing all
the appropriate procedures in connection with the Distribution, including the
Distribution Ratio, and no rights shall have been created hereunder in favor
of any person, whether or not a party to this Agreement, in respect of this
Distribution. In the event the Board of Directors of GENROCO refrains from
declaring the Distribution, GENROCO will be responsible for any costs or
expenses incurred by GENROCO or VideoPropulsion in connection with the
Distribution.
ARTICLE IV
OTHER MATTERS
SECTION 4.1 In addition to the specific agreements, documents and
instruments of transfer and assumption annexed to this Agreement as Exhibits,
GENROCO and VideoPropulsion agree to execute or cause to be executed by the
appropriate parties and deliver, as appropriate, such other agreements,
instruments and other documents as may be necessary or desirable in order to
effect the purposes of this Agreement.
SECTION 4.2 GENROCO does not, in this Agreement or any other agreement,
instrument or document contemplated by this Agreement, make any representation
as to, warranty of or covenant with respect to:
(a) the value of any asset or thing of value to be transferred to
VideoPropulsion;
(b) the freedom from encumbrance of any asset or thing of value to be
transferred to VideoPropulsion;
(c) the absence of defenses or freedom from counterclaims with respect
to any claim, including accounts receivable, to be transferred to
VideoPropulsion; or
(d) the legal sufficiency of any assignment, document or instrument
delivered hereunder to convey title to any asset or thing of value
upon its execution, delivery and filing.
All assets to be transferred to VideoPropulsion shall be transferred "AS
IS, WHERE IS" and VideoPropulsion shall bear the economic, legal or other risk
that any conveyance shall prove to be insufficient to vest in VideoPropulsion
good and marketable title, free and clear of any lien, claim, equity or other
encumbrance.
SECTION 4.3 Each of GENROCO and VideoPropulsion will execute and deliver
such further instruments of conveyance, transfer and assignment and will take
such other actions as either of them may reasonably request of the other in
order to effectuate the purposes of this Agreement and to carry out the terms
hereof. At the request of VideoPropulsion and without further consideration,
GENROCO will execute and deliver to VideoPropulsion such other instruments of
transfer, conveyance, assignment, substitution and confirmation and take such
action as VideoPropulsion may reasonably deem necessary or desirable in order
more effectively to transfer, convey and assign to VideoPropulsion and,
subject to the provisions of Section 4.2, confirm VideoPropulsion's title to
all of the assets, rights and other things of value contemplated to be
transferred to VideoPropulsion hereunder, to place VideoPropulsion in actual
possession and operating control thereof and to permit VideoPropulsion to
exercise all rights with respect thereto (including, without limitation,
rights under contracts and other arrangements as to which the consent of any
third party to the transfer thereof shall not have previously been obtained).
At the request of GENROCO and without further consideration, VideoPropulsion
will execute and deliver to GENROCO all instruments, assumptions, novations,
undertakings, substitutions or other documents and take such other action as
GENROCO may reasonably deem necessary or desirable in order to have
VideoPropulsion fully and unconditionally assume and discharge the liabilities
contemplated to be assumed by VideoPropulsion under this Agreement or any
document in connection herewith and to relieve GENROCO of any liability or
obligation with respect thereto and evidence the same to third parties.
Neither GENROCO nor VideoPropulsion shall be obligated, in connection with the
foregoing, to expend money other than reasonable out-of-pocket expenses,
attorneys' fees and recording or similar fees.
GENROCO and VideoPropulsion will use their reasonable efforts to obtain
any consent, substitution, approval or amendment required to novate or assign
all agreements, leases, licenses and other rights of any nature whatsoever
relating to the assets, rights and other things of value to VideoPropulsion;
provided, however, that neither GENROCO nor VideoPropulsion shall be obligated
to pay any consideration therefor (except for filing fees and other similar
charges) to the third party from whom such consents, approvals, substitutions
and amendments are requested. If GENROCO or VideoPropulsion is unable to
obtain any such required consent, approval, substitution or amendment, GENROCO
shall continue to be bound by such agreements, leases, licenses and other
rights and, unless not permitted by law or the terms thereof, VideoPropulsion
shall, as agent for GENROCO or as subcontractor, pay, perform and discharge
fully all the obligations of GENROCO thereunder from and after the Effective
Date and indemnify and hold harmless GENROCO from and against all losses,
claims, damages, liabilities and expenses whatsoever arising out of or in
connection with VideoPropulsion's performance of, or omission to perform, its
obligations thereunder. VideoPropulsion will not be responsible for or
indemnify GENROCO for any claims, damages, liabilities, and expenses
whatsoever arising out of or in connection with GENROCO performance of or
omissions to perform any of its remaining obligations under such agreements,
leases, licenses and other rights thereof. GENROCO shall, without further
consideration, pay, transfer or remit, as the case may be, to VideoPropulsion
promptly all money, rights and other consideration received in respect of such
performance. GENROCO shall exercise its rights and options under all such
agreements, leases, licenses and other rights and obligations referred to in
this Section 4.3 only as reasonably directed by VideoPropulsion and at
VideoPropulsion's expense. If and when any such consent shall be obtained or
such agreement, lease, license or other rights shall otherwise become
assignable or able to be novated, GENROCO shall promptly assign all its rights
and obligations thereunder to VideoPropulsion without payment of further
consideration and VideoPropulsion shall, without the payment of any further
consideration, assume such rights and obligations. To the extent that the
assignment of any contract or agreement or the proceeds thereof pursuant to
this Section 4.3 is prohibited by law, the assignment provisions of this
paragraph shall operate to create a subcontract with VideoPropulsion to
perform each relevant, unassignable contract or agreement, and the subcontract
price paid to VideoPropulsion shall be equal to the money, rights and other
consideration received by GENROCO with respect to the performance by
VideoPropulsion under such subcontract.
SECTION 4.4 VideoPropulsion and GENROCO agree to cooperate to determine
the amount of sales, transfer or other similar taxes or fees (including, but
not limited to, all patent, copyright transfer taxes and recording fees)
payable in connection with the transactions contemplated by this Agreement.
GENROCO and VideoPropulsion agree to file promptly and timely returns for such
taxes with the appropriate taxing authorities and remit payment thereof in
accordance with the terms of the Tax Agreement.
SECTION 4.5 VideoPropulsion shall authorize the execution and cause the
authorized officers of VideoPropulsion to execute all documents, notes and
undertakings and to do such other things required in connection with the
irrevocable and unconditional assumption by VideoPropulsion without any
recourse whatsoever to GENROCO of all obligations of GENROCO related to the
Division including the assumption of any debt outstanding thereunder and the
novation thereof.
SECTION 4.6 VideoPropulsion shall, in addition to its obligations under
the Tax Agreement, cooperate with GENROCO and tax counsel to GENROCO in
obtaining an opinion from the tax counsel to the effect that the Distribution
will be tax free to GENROCO and GENROCO shareholders. In that regard,
VideoPropulsion agrees that it will authorize, cause to be executed and comply
with any and all undertakings, representations or agreements required in
connection with obtaining tax counsel's opinion.
SECTION 4.7 GENROCO and VideoPropulsion agree that the expenses
associated with preparation of this Agreement, the transfers contemplated
hereunder, matters related to the organization of VideoPropulsion, the
Distribution and related employment matters shall be borne by GENROCO.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 This Agreement, including the Schedules, Annexes and Exhibits
hereto, any related agreements and the agreements and other documents referred
to herein, shall constitute the entire Agreement between GENROCO and
VideoPropulsion with respect to the subject matter hereof and shall supersede
all previous negotiations, commitments and writings with respect to such
subject matter.
SECTION 5.2 This Agreement shall be governed and construed and enforced
in accordance with the internal laws of the State of Wisconsin as to all
matters, including without limitation, matters of validity, construction,
effect, performance and remedies.
SECTION 5.3 This Agreement may be amended, modified or supplemented only
by a written agreement of the parties.
SECTION 5.4 This Agreement and all the provisions hereof shall be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either party without
the prior written consent of the other party.
SECTION 5.5 This Agreement is solely for the benefit of the parties and
is not intended to confer upon any person except the parties any rights or
remedies hereunder. There are no third party beneficiaries to this Agreement.
SECTION 5.6 This Agreement, and any other agreement to be executed in
connection herewith, may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 5.7 In the event of conflict between this Agreement and any other
agreement executed in connection herewith, the provisions of such other
agreement, including the Schedules, Annexes, and Exhibits hereto, shall
prevail.
SECTION 5.8 If any section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, such determination
shall not affect the validity or enforceability of any other section,
paragraph or provision hereof.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed
by their duly authorized officers this ---- day of -------, 2000.
GENROCO, INC. VIDEOPROPULSION, INC.
By: ----------------------------- By: -----------------------------
Keith Brue Chris Good
Executive Vice President Executive Vice President
and Chief Financial Officer and Chief Technical Officer
Exhibit C
---------
LEASE
-----
dated as of January 1, 2000
between
GENROCO, INC., A WISCONSIN CORPORATION
as Landlord
and
VIDEOPROPULSION, INC., A WISCONSIN CORPORATION
as Tenant
BASIC TERMS
-----------
LANDLORD: GENROCO, Inc.
- - -------- 255 Info Highway
Slinger, WI 53086
TENANT: VideoPropulsion, Inc.
- - ------ 251 Info Highway
Slinger, WI 53086
TERM: The term of this Lease (the "Term") shall be two (2) years,
- - ---- commencing January 1, 2000 ("Commencement Date") and terminating
at 11:59 p.m. on December 31, 2001, unless terminated earlier in
accordance with the terms of this Lease.
RENTAL: Thirty-Thousand Dollars ($30,000) per year, payable in monthly
- - ------ installments of Two Thousand Five Hundred Dollars ($2,500) as set
forth in Paragraph 2.
PREMISES: The Premises consist of approximately 2,200 square feet, as shown
- - -------- on the diagram attached as Exhibit A, within the building located
---------
at 281 Enders Court, Slinger, Wisconsin (the "Building"; the
property on which the Building is situated is referred to as the
"Property").
1. Lease of Premises. Landlord hereby leases to Tenant and Tenant hereby
-----------------
leases from Landlord the Premises for the Term and at the Rental set forth above
and upon the other provisions contained herein.
2. Rental Payments. Tenant covenants and agrees to pay to Landlord the
---------------
Rental as set forth herein in advance on the first day of each month during the
Term, payable without demand and without offset or deduction, at the place
designated for notices as hereinafter provided, or at such other place as
Landlord may from time to time designate in writing.
3. Early Termination. The Term of this Lease may be terminated at any
-----------------
time upon three (3) months written notice by either party.
4. Compliance With Law. Tenant shall obey, observe and promptly comply
-------------------
with all regulations, ordinances and laws which shall be applicable, now or at
any time during the Term, to the Premises or to Tenant's activities on the
Premises or adjacent property owned by Landlord, and shall promptly comply with
all orders and directives of the Board of Fire Underwriters and of any
governmental authority having jurisdiction of the Premises.
5. Use. Tenant may use the Premises only as a sales and engineering lab
---
facility.
6. Utilities and Taxes. The Landlord shall obtain and pay for
-------------------
electricity and janitorial services for the Premises. Tenant shall arrange and
pay for its telephone services. Landlord shall provide heat and water/sewer
service to the Premises. Landlord shall pay any and all real estate taxes and
assessments on the Property and the Building during the Term. Tenant shall
promptly pay any and all personal property taxes on Tenant's property on the
Premises.
7. Maintenance and Repair. Tenant has inspected the Premises and accepts
----------------------
the same "AS IS" in their current condition without any express or implied
warranties by Landlord. Tenant shall maintain the Premises in good order and
repair and in a safe, clean and sanitary condition. Tenant may not make any
alterations to the Premises without Landlord's prior written consent; provided,
however, that Tenant may make minor redecorations of the Premises at Tenant's
own expense. Landlord shall maintain the roof and exterior walls of the
Building.
8. Insurance; Waiver of Liability.
------------------------------
(a) Tenant shall keep in effect, at its sole expense, a comprehensive
general liability policy or policies satisfactory to Landlord covering the
Premises and Tenant's activities in the Building and on the Property, and
providing coverage for bodily injury, death and property damage with a combined
single limit of at least One Million Dollars ($1,000,000)(or such increased
limit as Landlord shall reasonably request). Tenant shall also be responsible
for insuring its personal property and trade fixtures located on the Premises.
Tenant shall have Landlord named as an additional insured on Tenant's liability
insurance, which insurance shall be in form and substance acceptable to
Landlord. Upon request, Tenant shall provide Landlord with a copy of Tenant's
liability insurance policy.
(b) Anything in this Lease to the contrary notwithstanding, Landlord
shall not be liable to Tenant or anyone claiming under Tenant for any loss or
damage to property or injury to or death of persons occurring on or about the
Premises, or in any manner growing out of or in connection with Tenant's use and
occupancy of the Premises, regardless of the cause. As long as their respective
insurers so permit, Landlord and Tenant hereby mutually waive their respective
rights of recovery against each other for any loss insured by fire, extended
coverage and other property insurance policies existing for the benefit of the
respective parties.
(c) Tenant agrees to protect and save Landlord harmless and
indemnified against and from any loss, damage, expense, liability, demand and
cause of action, and any reasonable expenses (including attorneys' fees) arising
out of (i) any violation of any laws or ordinances, whether occasioned by Tenant
or those holding under Tenant, (ii) any failure of Tenant in any respect to
comply with and perform all of the requirements and provisions of this Lease, or
(iii) any injury or death of persons or damage to any property, including
without limitation the person and property of Tenant, its agents, employees and
invitees, occurring on or about the Premises, Building or Property and in any
manner directly or indirectly growing out of the use and occupancy of the
Premises.
(d) Landlord shall insure the Building against property damage in a
reasonable manner, and Tenant agrees to reimburse Landlord for Tenant's Pro-Rata
Share of the cost of such insurance.
9. Trade Fixtures. Tenant may install its trade fixtures ("Trade
--------------
Fixtures") in the Premises. The Trade Fixtures may be affixed to the Premises
and Tenant may remove the same at will, and shall remove the same at the
termination of this Lease if so requested by Landlord. All damage to the
Premises as a result of any affixation or removal hereunder shall be promptly
repaired by and at the sole cost and expense of Tenant. Any Trade Fixtures not
removed as herein permitted or required shall, at the option of Landlord, be
deemed abandoned by Tenant, to be disposed of by Landlord in accordance with
this Lease.
10. Entry for Inspection. Landlord and its representatives shall have the
--------------------
right to enter upon the Premises for the purposes of examining and inspecting
the same, showing the Premises to prospective purchasers, or, within the last
six (6) months of the Term, showing the Premises to prospective tenants; said
inspection, however, shall not unreasonably interfere with the business of
Tenant. This paragraph shall not be construed as imposing any obligation upon
Landlord to inspect the Premises. Tenant shall permit "For Sale" and "For Rent"
signs to be placed upon the Premises at any time during the last sixty (60) days
of the Term.
11. Damage by Fire or Other Casualty. In the event of damage to the
--------------------------------
Premises or the Building which is so extensive that Landlord decides not to
repair or rebuild the same, this Lease shall, at the option of Landlord, be
terminated as of the date of such damage by written notice given within thirty
(30) days after the date of such damage, the Rental shall be adjusted to the
date of such damage, and Tenant shall thereupon promptly vacate the Premises.
If Landlord does decide to repair or rebuild the Premises, this Lease shall
continue, except that Rental shall abate to the extent the Premises are unusable
by Tenant during the time of such repair or rebuilding.
12. Assignment and Subletting. Tenant shall not assign this Lease,
-------------------------
whether voluntarily or by operation of law, nor sublet or license the use of any
portion of the Premises without the prior written consent of Landlord, which
will not be unreasonably withheld. Tenant acknowledges that it shall not be
unreasonable for Landlord to withhold its consent to an assignment or sublease
where the proposed subtenant's or assignee's use of the Premises is inconsistent
with the uses of the other tenants in the Building or will detract from the use
or enjoyment by other tenants of their leased premises.
13. Defaults and Remedies.
---------------------
(a) The occurrence of any one or more of the following shall
constitute a default by Tenant:
(1) Failure by Tenant to pay Rental or to make any other payment
required to be made by Tenant hereunder when due, which failure continues for
thirty (30) days; or
(2) Failure by Tenant to perform any other of its covenants
under this Lease which continues for thirty (30) days after the obligation to
perform such covenant arises.
(b) In the event of any default by Tenant hereunder, Tenant hereby
authorizes and empowers Landlord to:
(1) Cancel and terminate this Lease and immediately reenter and
take possession of the Premises without the requirement of any previous notice
of intention to reenter, and remove all persons and their property therefrom
using such force and assistance in effecting and protecting such removal as
Landlord may deem reasonably necessary to recover full and exclusive possession
of the Premises; or
(2) Reenter and take possession of the Premises in the manner
provided in subparagraph (1) above without such reentry constituting a
cancellation or termination of this Lease or a forfeiture of any rental or other
monies to be paid hereunder or of the covenants, agreements and conditions to be
kept and performed by Tenant for and during the remainder of the Term hereof.
(c) Nothing contained in this paragraph shall exclude any other right
or remedy allowed by law or equity to Landlord, nor shall the invalidity or
unenforceability of any one right or remedy affect or impair the validity or
enforceability of any other right or remedy.
14. Abandonment of Tenant's Property. If Tenant fails to remove any
--------------------------------
property belonging to it within five (5) days after the termination of this
Lease, the same shall be deemed abandoned by Tenant and shall, at Landlord's
option, become the property of Landlord, or may be removed from the Premises and
stored or disposed of by Landlord at the expense of Tenant.
15. Enforcement Costs. In the event of any action or proceeding between
-----------------
Landlord and Tenant to enforce the provisions of this Lease, the prevailing
party shall be entitled to an award of all reasonable costs, reasonable
attorneys' fees and reasonable expenses incurred by it in such action or
proceeding.
16. Surrender at Termination. At the termination of this Lease, Tenant
------------------------
shall quietly and peaceably surrender possession of the Premises (and any
improvements located thereon) to Landlord, in good order, condition and repair
and broom-clean and free of any and all claims, including, but not limited to,
claims by Tenant or any party holding under Tenant.
17. Landlord's Right to Cure; Interest. In the event of a default by
----------------------------------
Tenant, Landlord, at its option, may perform any obligation of Tenant under this
Lease. Tenant shall pay to Landlord the cost of performing such obligation
within five (5) days of receipt of a statement therefor. Any amounts so owing,
all Rental and any other payments to be made hereunder by Tenant to Landlord
shall bear interest to be paid by Tenant from and after the due date thereof to
the date of payment at the rate of one and one-half percent (1.5%) per month.
18. Notices. Any notice required or permitted under this Lease may be
-------
personally served or given and shall be deemed sufficiently given or served if
personally served or sent by registered or certified mail, with postage prepaid
thereon, to the respective addresses set forth above. Either party may by like
notice at any time, and from time to time, designate a different address to
which notices shall be sent. Notices given in accordance with these provisions
shall be deemed received when mailed.
19. Landlord Liability. Landlord's liability hereunder is limited to
------------------
Landlord's interest in the Premises.
20. Accord and Satisfaction. No payment by Tenant or receipt by Landlord
-----------------------
of a lesser amount than the full Rental due or the full amount of any other
payments to be made by the Tenant hereunder shall be deemed to be other than on
account of the earliest stipulated unpaid installment thereof, nor shall any
endorsement or statement on any check or letter accompanying any check or
payment be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover an amount due
hereunder or pursue any other remedy provided in this Lease.
21. Miscellaneous. If any provision, clause or part of this Lease, or
-------------
the application thereof under certain circumstances, is held invalid, the
remainder of this Lease, or the application of such provision, clause or part
under other circumstances, shall not be affected thereby. No term or provision
of this Lease may be changed, waived, supplemented or discharged orally, except
by an instrument in writing signed by the party sought to be charged thereby.
All terms of this Lease shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns. The failure of either party hereto in one or more instances to insist
upon the performance of any term or condition of this Lease, or to exercise any
rights or privilege by this Lease conferred, or the waiver of any breach of the
terms or conditions of this Lease, shall not be construed as thereafter waiving
any such term, condition, right or privilege, but the same shall continue to
remain in full force and effect the same as if no forbearance or waiver had
occurred. This Lease shall be governed by the law of the State of Wisconsin.
IN WITNESS WHEREOF, this Lease has been executed as of the day and year
first above written.
LANDLORD:
--------
GENROCO, INC.
By:---------------------------
Name: Keith Brue
Title: Executive Vice President and Chief
Financial Officer
TENANT:
------
VIDEOPROPULSION, INC.
By:---------------------------
Name: Chris Good
Title: Executive Vice President and Chief
Technical Officer
EXHIBIT A
---------
Description of the Premises
---------------------------
See the attached diagram, hand-marked to show the Premises, which are located
within the Building.
The legal description of the Property on which the Building is situated is as
follows:
Lot Seven (7) of Certified Survey Map No. 3994, recorded in the
Washington County Registry on December 4, 1992 in Volume 25 of
Certified Survey Maps, pages 277-279 as Document No. 619618, being a
redivision of Lot 6 of Certified Survey Map No. 3885 recorded in
Volume 24 of Certified Survey Maps, pages 306-308 and Lot 3 of
Certified Survey Map No. 3713, recorded in Volume 23 of Certified
Survey Maps, pages 156-158, and being a part of the NE 1/4 and NW 1/4
of the NW 1/4 of Section 20, T 10 N, R 19 E, Village of Slinger,
Washington County, Wisconsin.
FOR INFORMATIONAL PURPOSES ONLY
Tax Key No. V5-0650-00G
TAX SHARING AND INDEMNIFICATION AGREEMENT
By and Between
GENROCO, INC.
and
VIDEOPROPULSION, INC.
Dated ------- --, 2000
TABLE OF CONTENTS
TAX SHARING AND INDEMNIFICATION AGREEMENT
Page
----
ARTICLE I DEFINITIONS 2
1.1 Affiliated Group 2
1.2 GENROCO Group 2
1.3 VideoPropulsion Group 2
1.4 Business of VideoPropulsion 2
1.5 Code 2
1.6 Consolidated Returns 2
1.7 Contribution 2
1.8 Distribution 2
1.9 Date of Distribution or Distribution Date 2
1.10 Expenses 3
1.11 Final Determination 3
1.12 IRS 3
1.13 Party 3
1.14 Personal and Real Property Taxes 3
1.15 Restructuring Taxes 3
1.16 Significant Audit Issue 3
1.17 Tainting Act 4
1.18 Tax Benefit 4
1.19 Tax or Taxes 4
1.20 Tax Controversy 4
1.21 Tax Item 4
1.22 Tax Returns 4
ARTICLE II LIABILITY FOR PRE-DISTRIBUTION AND OTHER TAX LIABILITIES 5
2.1 Income Taxes 5
(a) Current and Prior Periods 5
-------------------------
(b) Future Periods 5
--------------
2.2 Property Taxes 5
2.3 5
2.4 Restructuring Taxes 6
(a) Generally 6
---------
(b) Indemnification for Tainting Acts 6
---------------------------------
ARTICLE III REFUNDS OF TAXES 7
3.1 Refunds and Credits 7
3.2 Exports 7
ARTICLE IV TAX RETURN PREPARATION 7
4.1 Consolidated Returns 7
4.2 Pre-Distribution Returns 7
4.3 Post-Distribution Returns 7
4.4 Cooperation; Exchange of Information 8
ARTICLE V TAX AUDITS 8
5.1 Tax Controversies 8
5.2 Cooperation 8
5.3 Record Retention 8
ARTICLE VI PAYMENTS 9
6.1 Payments in General 9
6.2 Interest on Late Payments 9
6.3 Character and Effect of Payments 9
ARTICLE VII OTHER TAX MATTERS 10
7.1 10
7.2 10
ARTICLE VIII ADMINISTRATIVE PROVISIONS 10
8.1 Interest 10
8.2 Agency 10
8.3 Expenses 10
ARTICLE IX DISPUTE RESOLUTION 10
9.1 General 10
9.2 Arbitration 11
9.3 Legal Proceedings 11
ARTICLE X MISCELLANEOUS 11
10.1 Enforceability 11
10.2 Modification of Agreement 11
10.3 Successors and Assigns 11
10.4 Term 11
10.5 Rights Confined to Parties 11
10.6 Notices 12
10.7 Effect of Headings 12
10.8 Governing Law 12
10.9 Counterparts 12
TAX SHARING AND INDEMNIFICATION AGREEMENT
This Tax Sharing and Indemnification Agreement dated ------- --, 2000, is
entered into by and between GENROCO, INC., a Wisconsin corporation
("GENROCO"), and VIDEOPROPULSION, INC., a Wisconsin corporation
("VideoPropulsion").
WHEREAS, VideoPropulsion is a Wisconsin corporation formed on October --,
1999 that recently has acquired the assets and liabilities of GENROCO's
division known as the Video Division (the "Division") pursuant to a separate
Contribution Agreement Plan and Agreement of Reorganization and Distribution
dated ------- --, 2000 (the "Contribution Agreement"); and
WHEREAS, GENROCO is the common parent and VideoPropulsion is currently a
member of an "affiliated group", as that term is defined in Section 1504 of
the Code, which now files consolidated federal income tax returns; and
WHEREAS, pursuant to the Contribution Agreement, GENROCO and
VideoPropulsion have agreed to a Plan and Agreement of Reorganization and
Distribution (the "Plan") which provides for the pro rata distribution to
GENROCO shareholders of all of the outstanding shares of the common stock of
VideoPropulsion (the "Distribution"); and
WHEREAS, as a consequence of the Distribution VideoPropulsion will no
longer be a subsidiary of GENROCO and will no longer be a member of GENROCO's
affiliated group; and
WHEREAS, pursuant to Treas. Reg. Section 1.1502-6, GENROCO and each
subsidiary which was a member of the GENROCO Group (as hereinafter defined)
during any part of a consolidated return year is severally liable for the
consolidated federal income tax liability of the GENROCO group for such year;
and
WHEREAS, GENROCO or VideoPropulsion might be liable for certain taxes as a
result of the transfer of assets and liabilities to VideoPropulsion pursuant
to the Contribution Agreement and the Distribution pursuant to the Plan; and
WHEREAS, GENROCO and VideoPropulsion desire to set forth their rights and
obligations with respect to foreign, federal, state and local taxes due for
periods both before and after the Distribution and with respect to certain tax
liabilities that may be asserted in connection with the Distribution.
NOW THEREFORE, GENROCO on behalf of itself and members of the GENROCO
Group other than VideoPropulsion and its subsidiary, and VideoPropulsion, on
behalf of itself and its subsidiary of the VideoPropulsion Group (as
hereinafter defined), in consideration of the mutual covenants contained
herein, agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
1.1 AFFILIATED GROUP means an affiliated group of corporations within the
meaning of section 1504(a) (determined without regard to the exceptions
contained in section 1504(b)) of the Code for the taxable period in question.
1.2 GENROCO GROUP means, for each taxable period, the Affiliated Group of
which GENROCO or any successor of GENROCO is the common parent.
1.3 VIDEOPROPULSION GROUP means (i) with respect to periods prior to the
Date of Distribution, the Division, and (ii) with respect to periods after the
Date of Distribution, the Affiliated Group of which VideoPropulsion or any
successor of VideoPropulsion is the common parent.
1.4 BUSINESS OF VIDEOPROPULSION means the Business of the Division as
defined in the Contribution Agreement and Exhibits thereto, including any
capitalized interest applicable to assets of Division.
1.5 CODE means the Internal Revenue Code of 1986, as amended from time to
time.
1.6 CONSOLIDATED RETURNS means the consolidated United States federal
income tax returns of the GENROCO Group for consolidated return years
beginning before the Date of Distribution and any consolidated or combined
state income tax returns of any members of the GENROCO Group for taxable years
beginning before the Date of Distribution.
1.7 CONTRIBUTION shall mean the transfer to VideoPropulsion by GENROCO of
the Business of VideoPropulsion pursuant to the Contribution Agreement.
1.8 DISTRIBUTION shall mean the distribution by GENROCO of the stock of
VideoPropulsion to GENROCO shareholders pursuant to the Plan.
1.9 DATE OF DISTRIBUTION or DISTRIBUTION DATE means 12:01 a.m. Central
Standard Time on [May 1, 2000, or such other date as to which the parties
hereto may agree], at which time the GENROCO Group ceases to own at least 80%
of the vote and value of the stock of VideoPropulsion within the meaning of
Section 1504 of the Code and thus the date on which VideoPropulsion ceases to
be a member of the GENROCO Group.
1.10 EXPENSES means out-of-pocket expenses paid to third party providers
and shall not include any overhead or indirect costs.
1.11 FINAL DETERMINATION means the final resolution of liability for any
Tax for a taxable period (i) by IRS Form 870 or 870-AD (or any successor forms
thereto), on the date of acceptance by or on behalf of the IRS, or by a
comparable agreement form under the laws of other jurisdictions, except that a
Form 870 or 870-AD or comparable form that reserves the right of the taxpayer
to file a claim for refund and/or the right of the taxing authority to assert
a further deficiency shall not constitute a Final Determination, to the extent
of the reservation; (ii) by a decision, judgment, decree, or other order by a
court or agency of competent jurisdiction which has become final and
unappealable; (iii) by a closing agreement or offer in compromise under
Section 7121 or 7122 of the Code or any subsequently enacted corresponding
provisions of the Code, or comparable agreements under the laws of other
jurisdictions; (iv) by an allowance of a refund or credit in respect of an
overpayment of Tax, but only after the expiration of all periods during which
such refund may be recovered (including by way of offset) by the Tax imposing
jurisdiction; or (v) by any other final disposition by reason of the
expiration of the applicable statutes of limitations.
1.12 IRS means the Internal Revenue Service.
1.13 PARTY means either of the parties to this Agreement.
1.14 PERSONAL AND REAL PROPERTY TAXES mean all Taxes which are assessed
upon the value of real or personal property owned, leased, rented or used by
any member of the GENROCO Group or the VideoPropulsion Group, including, but
not limited to, real and personal property taxes, use taxes, value added taxes
or other ad valorem taxes.
1.15 RESTRUCTURING TAXES means any Taxes resulting from the Contribution
of the Business of VideoPropulsion pursuant to the Contribution Agreement and
the Distribution of the stock of VideoPropulsion pursuant to the Plan,
including, without limitation, any transfer taxes or any Tax imposed pursuant
to or as a result of Section 311, 355(c), 361 or 1001 of the Code.
1.16 SIGNIFICANT AUDIT ISSUE means an issue raised in connection with a
Tax Return pertaining to the Business of VideoPropulsion if the amount of the
proposed increase in income attributable to the issue for any taxable period
(less any proposed decrease in income attributable to the issue for any other
taxable period of the GENROCO Group) exceeds $25,000 or if the proposed
increase in Tax (not including interest or penalties) attributable to the
issue for any taxable period (less any proposed decrease in Tax attributable
to the issue for any other taxable period of the GENROCO Group) exceeds the
product of $25,000 multiplied by the maximum statutory marginal rate of
federal income taxation imposed on corporations for such taxable period. For
this purpose, an issue means all Tax Items of a similar type that are proposed
to be adjusted for the same reason. Notwithstanding anything provided in this
section 1.16 to the contrary, a Significant Audit Issue shall not include an
issue relating to Restructuring Taxes unless VideoPropulsion receives a Tax
Benefit in years subsequent to the Distribution as a result of such increase
in income.
1.17 TAINTING ACT means (i) any breach of any representation or covenant
as set forth in a letter dated [----------------] to Quarles & Brady LLP
relating to the qualification of the Contribution and Distribution as a
distribution described in Section 355 of the Code given by VideoPropulsion or
(ii) any transaction publicly announced or consummated within the two-year
period following the Distribution Date that results in the shareholders of
VideoPropulsion after the Distribution losing control of VideoPropulsion
within the meaning of Code section 368(c) or in VideoPropulsion ceasing to own
and operate the Business of VideoPropulsion (in either a taxable or tax-free
transaction) unless (i) GENROCO consents in writing or (ii) GENROCO is
provided (at VideoPropulsion's expense) with an IRS ruling that it will not
cause the Distribution to fail to qualify as a distribution described in
Section 355 of the Code.
1.18 TAX BENEFIT means any Tax Item which decreases Taxes paid or payable.
1.19 TAX OR TAXES means all forms of taxation, whenever created or
imposed, whether domestic or foreign, and whether imposed by a nation,
locality, municipality, government, state, federation, or other body (a
"Taxing Authority"), and without limiting the generality of the foregoing
shall include net income, alternative or add-on minimum tax, gross income,
sales, use, franchise, gross receipts, value added, ad valorem, profits,
license, payroll, withholding, social security, unemployment insurance,
employment, property, transfer, recording, excise, severance, stamp,
occupation, premium, windfall profit, custom duty, or other tax, governmental
fee of other like assessment or charge of any kind whatsoever, together with
any related interest, penalties or other additions to tax, or additional
amounts imposed by any such Taxing Authority.
1.20 TAX CONTROVERSY means any audit, examination, dispute, suit, action,
litigation or other judicial or administrative proceeding by or against the
IRS or any other Taxing Authority.
1.21 TAX ITEM means any item of income, gain, loss, deduction, credit,
recapture of credit or any other item, including, but not limited to, an
adjustment under Code section 481 resulting from a change in accounting
method, which increases or decreases Taxes paid or payable.
1.22 TAX RETURNS means all reports, estimates, declarations of estimated
tax, information statements, returns or other documents required to be filed
in connection with any Taxes, including but not limited to requests for
extensions of time, information statements and reports, claims for refund, and
amended returns.
ARTICLE II
LIABILITY FOR PRE-DISTRIBUTION AND OTHER TAX LIABILITIES
2.1 INCOME TAXES.
(a) Current and Prior Periods. Except as otherwise provided in this
-------------------------
Agreement, GENROCO shall pay, on a timely basis, all Taxes based upon income of
the GENROCO Group for the taxable year that includes the Distribution Date (the
"1999 Income Taxes") and for all periods ending prior to the Distribution Date.
GENROCO hereby assumes all such liability and shall indemnify and hold harmless
VideoPropulsion and any member of the VideoPropulsion Group from and against
any share or amount of the 1999 Income Taxes and all income taxes based upon
income of the GENROCO Group for periods ending prior to the Distribution Date.
(b) Future Periods. Except as otherwise provided in this Agreement,
--------------
VideoPropulsion shall pay, on a timely basis, all Taxes based upon income of
the VideoPropulsion Group for any period beginning after the Distribution Date,
and shall indemnify and hold harmless GENROCO and any member of the GENROCO
Group from and against all income taxes based upon the income of the
VideoPropulsion Group for any period beginning after the Distribution Date.
2.2 PROPERTY TAXES. Personal and Real Property Taxes for any period
after January 1, 2000 on property of the Business of VideoPropulsion
(including, but not limited to, the prorated portion of Wisconsin Personal and
Real Property Taxes on such property which are based on the value of such
property on January 1, 2000) shall be the liability of VideoPropulsion. All
other Personal and Real Property Taxes for any period prior to January 1, 2000
shall be the liability of GENROCO. VideoPropulsion shall indemnify and hold
harmless GENROCO and any member of the GENROCO Group from and against all
Personal and Real Property Taxes on property of the Business of
VideoPropulsion apportioned to VideoPropulsion hereunder. GENROCO shall
indemnify and hold harmless VideoPropulsion and any member of the
VideoPropulsion Group from and against all Personal and Real Property Taxes
apportioned to GENROCO hereunder.
2.3 Notwithstanding any other provision of this Agreement to the
contrary, VideoPropulsion shall pay, and shall indemnify and hold harmless
GENROCO and any member of the GENROCO Group from and against:
(a) Taxes attributable to a Significant Audit Issue but only to the
extent that (i) such Taxes are attributable to that portion of a Significant
Audit Issue that exceeds a $25,000 increase in income attributable to the
issue for any taxable period (less any decrease in income attributable to the
issue for any other taxable period of the GENROCO Group) or (ii) the increase
in Tax (not including interest and penalties) attributable to such issue for
any taxable period (less any decrease in Tax attributable to the issue for any
other taxable period of the GENROCO Group) exceeds the product of $25,000
multiplied by the maximum statutory marginal rate of federal income taxation
imposed on corporations for such taxable period;
(b) any Tax liability with respect to separate returns for foreign,
state or local taxes on or measured by income filed by GENROCO or a GENROCO
subsidiary with respect to the Business of VideoPropulsion to the extent it
results in a Tax Benefit to the VideoPropulsion Group (such as the
disallowance of a deduction claimed by GENROCO or a subsidiary of GENROCO in a
year prior to the Distribution that is available to VideoPropulsion or a
subsidiary of VideoPropulsion in a period after the Distribution);
(c) any sales, use, property, transfer, value added, recordation,
excise and similar Taxes with respect to the Business of VideoPropulsion which
are not Restructuring Taxes and which are generated by transactions occurring
on or after January 1, 2000; and
(d) any payroll Taxes with respect to employees of VideoPropulsion
or a VideoPropulsion subsidiary or of the Business of VideoPropulsion which
relate to periods after January 1, 2000.
2.4 RESTRUCTURING TAXES.
(a) Generally. Notwithstanding any other provision of this
---------
Agreement to the contrary, and except as otherwise provided in section 2.3(a)
and subsection (b) hereof, GENROCO shall pay, and shall indemnify and hold
harmless VideoPropulsion and any member of the VideoPropulsion Group from and
against, any and all Restructuring Taxes.
(b) Indemnification for Tainting Acts. Anything in this Agreement
---------------------------------
to the contrary notwithstanding, VideoPropulsion shall pay, and shall indemnify
and hold harmless GENROCO from and against, (i) any Restructuring Taxes and
related Expenses, (ii) any liability and related Expenses resulting from a
decision that GENROCO is liable to GENROCO or VideoPropulsion shareholders
because of a Final Determination that the Distribution failed to meet the
requirements of Section 355 of the Code for nonrecognition of gain or loss, and
(iii) any Taxes and related Expenses payable by GENROCO by reason of the
receipt of such payment, to the extent such Restructuring Taxes, liability to
shareholders, Taxes, or Expenses would not have been imposed but for a Tainting
Act of VideoPropulsion or any member of the VideoPropulsion Group.
ARTICLE III
REFUNDS OF TAXES
3.1 REFUNDS AND CREDITS. Except as set forth in section 3.2, GENROCO
shall be entitled to retain or be paid all refunds of Tax received, whether in
the form of payment, credit or otherwise, from any Taxing Authority with
respect to any Tax Returns filed or to be filed by GENROCO.
3.2 EXPORTS. VideoPropulsion shall be entitled to any refund or credit
of superfund excise Taxes or customs duties drawbacks received by GENROCO or a
GENROCO Subsidiary with respect to goods exported by VideoPropulsion.
ARTICLE IV
TAX RETURN PREPARATION
4.1 CONSOLIDATED RETURNS.
(a) GENROCO shall prepare and timely file all Consolidated Returns.
The Consolidated Returns shall be prepared and filed by GENROCO in compliance
with applicable tax laws and on a basis that is consistent with any IRS ruling
or opinion of tax counsel obtained by GENROCO in connection with the
Contribution and Distribution and with the provisions of Article VII hereof,
and, subject to the foregoing, consistent with GENROCO's prior Consolidated
Returns.
(b) VideoPropulsion shall be responsible for preparing all
information relating to the VideoPropulsion Group necessary for GENROCO to
prepare and file the Consolidated Returns.
4.2 PRE-DISTRIBUTION RETURNS. All Tax Returns required to be filed for
periods beginning before, or beginning and ending on the Distribution Date,
shall be filed by GENROCO.
4.3 POST-DISTRIBUTION RETURNS. All Tax Returns of the VideoPropulsion
Group for periods beginning after the Distribution Date (including all tax
returns related to Wisconsin Personal and Real Property Taxes on property of
the Business of VideoPropulsion which are based on the value of such property
on or after January 1, 1999) shall be filed by VideoPropulsion, and all Tax
Returns of the GENROCO Group for periods beginning after the Distribution Date
shall be filed by GENROCO. VideoPropulsion, with the assistance of GENROCO as
needed, shall be responsible for filing all Forms 1099, if any, due with
respect to the receipt by shareholders of any cash in lieu of fractional
shares in the Distribution.
4.4 COOPERATION; EXCHANGE OF INFORMATION. Each Party shall be
responsible for the timely submission to the other Party of information of
which it has knowledge regarding any Tax Item which may properly be included
in any Tax Return to be filed by the other Party, and shall provide any and
all other information and documentation (including, but not by way of
limitation, working papers and schedules) reasonably requested by the other
Party for use in connection with the preparation and filing of any Tax
Returns.
ARTICLE V
TAX AUDITS
5.1 TAX CONTROVERSIES.
(a) Except as otherwise provided in this Article VI, GENROCO shall
have full responsibility and discretion in handling, settling or contesting
any Tax Controversy involving a Tax Return for which it has filing
responsibility, and VideoPropulsion shall have full responsibility and
discretion in handling, settling or contesting any Tax Controversy involving a
Tax Return for which it has filing responsibility, and any legal and
accounting costs incurred in handling, settling or contesting any Tax
Controversy shall be borne by the Party having full responsibility and
discretion therefor.
(b) The Party responsible for any Tax Controversy shall use all
reasonable efforts to resist any deficiency assertions by any Taxing Authority
regardless of which Party is ultimately responsible for any such Tax under
this Agreement.
(c) GENROCO shall notify VideoPropulsion promptly if any Taxing
Authority proposes an adjustment relating in whole or in part to (i)
Restructuring Taxes for which VideoPropulsion could be liable to GENROCO
pursuant to Section 2.4 hereof or (ii) Taxes for which VideoPropulsion could
be liable to GENROCO pursuant to Section 2.3 hereof (a "VideoPropulsion
Indemnity Issue").
(d) VideoPropulsion and its representatives, at VideoPropulsion's
expense, shall be entitled to participate in (i) all conferences, meetings, or
proceedings with any Taxing Authority, the subject matter of which is or
includes a VideoPropulsion Indemnity Issue, and (ii) all appearances before
any court, the subject matter of which includes a VideoPropulsion Indemnity
Issue; provided, however, that GENROCO shall have full responsibility,
discretion and control of all such conferences, meetings, proceedings, and
appearances.
5.2 COOPERATION. GENROCO and VideoPropulsion agree to afford full
cooperation to one another and to their respective representatives, if any, in
any Tax Controversy.
5.3 RECORD RETENTION. The parties agree to retain all books, records,
returns, schedules, documents and all material papers or relevant items of
information for periods prior to the Date of Distribution for the later of (i)
seven (7) years or (ii) the full period of the applicable statute of
limitations, including any extensions thereof.
ARTICLE VI
PAYMENTS
6.1 PAYMENTS IN GENERAL. Except as otherwise provided in this Agreement,
any amount required to be paid by one Party pursuant to this Agreement shall
be paid in immediately available funds within thirty (30) days after written
demand therefor from the other Party given after a Final Determination of the
amount thereof, provided that if any portion of a VideoPropulsion Indemnity
Issue results in both (i) an additional liability of GENROCO for Taxes and
(ii) a corresponding Tax Benefit to the VideoPropulsion Group in a taxable
period beginning after the Distribution Date, then payment with respect to
such portion of the VideoPropulsion Indemnity Issue shall not be due prior to
120 days after the close of the taxable period in which such Tax Benefit is
realized.
6.2 INTEREST ON LATE PAYMENTS. Any amount payable under this Agreement
by one Party to another Party shall, if not paid within ten (10) business days
after the due date specified in this Agreement, bear interest from such due
date until the date paid at the applicable Federal short term rate as defined
in Section 6621 of the Code in effect on the due date.
6.3 CHARACTER AND EFFECT OF PAYMENTS. The Parties agree that for income
and other Tax purposes all amounts paid pursuant to this Agreement by one
Party to the other Party (other than interest payments pursuant to Section
7.2) shall be treated by the Parties as adjustments of the cash amount due to
VideoPropulsion under Exhibit D of the Contribution Agreement on the Date of
Distribution. All other payments made by either Party pursuant to this
Agreement directly to third parties shall be treated as the discharge of
liabilities incurred by such Party with respect to transactions occurring on
or before the Date of Distribution. Except as provided in section 2.4(b), if,
notwithstanding such treatment by the Parties, any payment by either Party is
determined to be taxable to the other Party by any Taxing Authority, the payor
shall also indemnify the other Party for fifty percent (50%) of the amount of
any Taxes and related Expenses payable by the other Party by reason of the
receipt of such payment. In addition, the amount of any indemnity payment due
under this Agreement shall be computed by properly taking into account any Tax
Benefit actually realized by the recipient from the payment of the item at
issue.
ARTICLE VII
OTHER TAX MATTERS
7.1 VideoPropulsion agrees (i) to pay on or before March 15, 2000 any
recurring items within the meaning of Code section 461(h)(3) which had been
accrued by GENROCO at the end of its fiscal year which ended in 1999 and for
which VideoPropulsion is responsible and (ii) to pay on or before March 15,
1996 any other recurring item within the meaning of Code section 461(h)(3)
which has been accrued by GENROCO on the Date of Distribution and for which
VideoPropulsion is responsible.
7.2 GENROCO shall be entitled to any tax deductions arising from the
exercise of stock options on GENROCO stock by VideoPropulsion employees who
were retired as of the Date of Distribution or who continued employment with
VideoPropulsion after the Date of Distribution but retained options on GENROCO
stock.
ARTICLE VIII
ADMINISTRATIVE PROVISIONS
8.1 INTEREST. Except as expressly provided herein, no obligation to pay
or right to collect interest or other amounts shall arise by virtue of this
Agreement.
8.2 AGENCY. It is understood and acknowledged that in accordance with
Section 1.1502-77 of the IRS Regulations, GENROCO, as the common parent of the
GENROCO Group, is the agent for the GENROCO Group (including VideoPropulsion
and the VideoPropulsion Group with respect to their taxable years beginning
before the Date of Distribution) with respect to all matters referred to
therein.
8.3 EXPENSES. Except as otherwise provided in this Agreement, each Party
to this Agreement hereby agrees to be responsible for all of the expenses
which it may incur in carrying out its duties hereunder.
ARTICLE IX
DISPUTE RESOLUTION
9.1 GENERAL. In an effort to resolve informally and amicably any claim
or controversy arising out of or related to the interpretation or performance
of this Agreement without resorting to litigation, a party shall first notify
the other of any difference or dispute hereunder that requires resolution.
GENROCO and VideoPropulsion each shall designate an employee to investigate,
discuss and seek to settle the matter between them. If the two are unable to
settle the matter within 30 days after such notification (or such longer
period as may be agreed upon), the matter shall be submitted to a senior
officer of GENROCO and VideoPropulsion, respectively, for consideration.
9.2 ARBITRATION. If settlement cannot be reached through the efforts of
the senior officers within an additional 30 days or such longer period as may
be agreed upon, the parties shall consider arbitration or other alternative
means to resolve the dispute.
9.3 LEGAL PROCEEDINGS. If the parties are unable to agree on an
alternative dispute resolution mechanism within 30 days, either party may
initiate legal proceedings to resolve such matter.
ARTICLE X
MISCELLANEOUS
10.1 ENFORCEABILITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby.
10.2 MODIFICATION OF AGREEMENT. No modification, amendment or waiver of
any provision of this Agreement shall be effective unless the same shall be in
writing, and signed by each of the Parties hereto and then such modification,
amendment or waiver shall be effective only in the specific instance and for
the purpose for which given.
10.3 SUCCESSORS AND ASSIGNS. Except as hereinafter provided, neither this
Agreement nor any rights hereunder shall be assignable or transferable by
either Party hereto, without the prior written consent of the other Party
hereto, except by operation of law. Each Party hereby guarantees the
performance of all actions, agreements and obligations provided for under this
Agreement of each of its subsidiaries. Each Party shall, upon the written
request of the other Party, cause any of its subsidiaries formally to execute
this Agreement. This Agreement shall be binding upon, and shall inure to the
benefit of, the successors, assigns and persons controlling any of the
corporations bound hereby for so long as such successors, assigns or
controlling persons are a subsidiary of a Party or its successors and assigns
by operation of law.
10.4 TERM. This Agreement shall commence on the date of execution
indicated below and shall continue in effect until otherwise agreed to in
writing by the Parties or their successors. Notwithstanding any other
provision in this Agreement, this Agreement shall remain in effect and its
provisions shall survive for the full period of all applicable statutes of
limitation (giving effect to any extension, waiver or mitigation thereof).
10.5 RIGHTS CONFINED TO PARTIES. Nothing expressed or implied herein is
intended or shall be constructed to confer upon or to give to any person, firm
or corporation (other than the Parties hereto, members of their Affiliated
Groups, and their successors and assigns) any right, remedy or claim under or
by reason of this Agreement or of any term, covenant or condition hereof. All
terms, covenants, conditions, promises and agreements contained herein shall
be for the sole and exclusive benefit of the Parties hereto, the members of
their Affiliated Groups, and their successors and assigns.
10.6 NOTICES. All demands, notices and communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
personally delivered or sent by certified or registered United States Mail,
postage prepaid, to:
(a) in the case of GENROCO, Inc.
GENROCO, Inc.
255 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
(b) in the case of VideoPropulsion, Inc.
VideoPropulsion, Inc.
251 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
10.7 EFFECT OF HEADINGS. The paragraph headings herein are for
convenience only and shall not affect the construction hereof.
10.8 GOVERNING LAW. The provisions of this Agreement and all rights and
obligations of the parties hereunder shall be governed by the internal laws of
the State of Wisconsin.
10.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall, when so executed, be considered an original
and all of which, taken together, shall be considered one document.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers this ---- day of -------, 2000.
GENROCO, INC.
By-----------------------------------
Keith Brue
Executive Vice President and
Chief Financial Officer
VIDEOPROPULSION, INC.
By-----------------------------------
Chris Good
Executive Vice President and
Chief Technical Officer
Exhibit 10.5
- - ------------
TRANSITIONAL TRADEMARK USE AND LICENSE AGREEMENT
This Agreement dated as of January 1, 2000 is made by and between GENROCO,
INC., a Wisconsin corporation with its principal place of business at 255 Info
Highway, Slinger, Wisconsin 53086 ("GENROCO") and VIDEOPROPULSION, INC., a
Wisconsin corporation with its principal place of business at 251 Info Highway,
Slinger, Wisconsin 53086 ("VideoPropulsion").
1. TRANSITIONAL USE OF INVENTORY MATERIALS ON EXISTING INVENTORY.
GENROCO and VideoPropulsion recognize that VideoPropulsion possesses a certain
inventory of labels, promotional materials, product literature and other
materials produced by GENROCO ("Inventory Materials"), bearing the trademark:
GENROCO, and other trademarks and trade dress of GENROCO ("Trademarks/Trade
Dress"). GENROCO agrees to permit VideoPropulsion to use such Inventory
Materials in existence as of the date of this Agreement in connection with the
distribution of the inventory of products produced by GENROCO and transferred to
VideoPropulsion under the Contribution Agreement, Plan and Agreement of
Reorganization and Distribution ("Inventory Products") until the Inventory
Materials are exhausted or until December 31, 2000, whichever occurs first.
2. TRANSITIONAL TRADEMARK AND TRADE NAME LICENSE. Solely for the purpose
of enabling VideoPropulsion to inform its customers of its new identity, GENROCO
grants to VideoPropulsion, for a period of ten years, a royalty free,
nontransferable, nonexclusive license to use the trade name GENROCO in
VideoPropulsion's advertising and promotional materials. Such materials shall
be subject to GENROCO's approval, pursuant to the provisions of Section 6 of
this Agreement.
3. TRADEMARKS LICENSE. GENROCO grants to VideoPropulsion for the term of
this Agreement, on the terms and conditions of this Agreement, a royalty free,
nontransferable, nonexclusive license to continue to sell and distribute
Inventory Products bearing the trademark GENROCO ("Licensed Trademarks"), and to
affix the Licensed Trademarks to the products described in Annex A of this
Agreement (all such products, collectively, "Licensed Products"), in connection
with the manufacture, sale, and distribution of the Licensed Products throughout
the world.
4. PROPRIETARY TECHNOLOGY LICENSE. From the date hereof, GENROCO grants
to VideoPropulsion a ten (10) year royalty free, nontransferable, nonexclusive,
perpetual, irrevocable, worldwide license to use the Licensed Assets (defined
below) in the operation of the Division Business as defined in the Contribution
Agreement, Plan and Agreement of Reorganization and Distribution between the
parties hereto. For purposes hereof "Licensed Assets" shall mean the software,
software documentation, hardware documentation, data bases, patents, patent
applications listed on Annex A of this Agreement and all trade secrets, know-
how, data, plans, designs, specifications, operating methods and procedures,
proprietary information, processes, technical knowledge and related rights that
are owned by GENROCO and used in the operation of the Division Business.
5. QUALITY STANDARDS. VideoPropulsion shall distribute and sell
Inventory Products and shall label, distribute, and sell Licensed Products under
VideoPropulsion's own trade name.
6. QUALITY CONTROL. VideoPropulsion shall submit to GENROCO, at
GENROCO's request, for GENROCO's inspection and retention, representative
samples of Licensed Products. VideoPropulsion shall, on reasonable notice from
GENROCO, permit an auditor mutually satisfactory to VideoPropulsion and GENROCO
(the "Auditor") to inspect and audit during any operational hours the
facilities, operations, and procedures of VideoPropulsion and submit to the
Auditor such relevant information on the sale and distribution of Inventory
Products and on the manufacture, sale and distribution of the Licensed Products,
as is reasonably requested by the Auditor on behalf of GENROCO. The Auditor
shall report to VideoPropulsion and GENROCO on the results of its inspections,
audits and reviews.
VideoPropulsion will also submit all advertising and promotional materials
for the Licensed Products to GENROCO (together with an outline of the intended
use of the materials) for GENROCO's written approval before their use, and if
GENROCO does not respond to such submission within 10 business days it shall be
deemed to have approved such advertising and promotional materials.
7. NON-CONFORMING AND NON-LICENSED PRODUCTS. VideoPropulsion agrees that
products not meeting the quality standards will not be labeled or used or
offered for sale under or with any reference to the Licensed Trademarks. Any
products that are not Licensed Products may not be advertised or otherwise
promoted directly or indirectly by VideoPropulsion or its customers with any
reference to the Licensed Trademarks, or otherwise as meeting any GENROCO
approval or quality standards, whether or not such products are similar to any
Licensed Products.
8. RECORDS. The Auditor may on reasonable notice to VideoPropulsion
examine during normal business hours VideoPropulsion's books of account and
records covering its transactions and sales under this Agreement. The Auditor
shall report to VideoPropulsion and GENROCO on the results of its examination.
9. LIMITATIONS. No license or rights under any other trademark, trade
name, or trade dress or any other property right of GENROCO is granted by this
Agreement. VideoPropulsion has no right to assign, transfer, subcontract, or
sublicense any of its rights acquired or obligations assumed under this
Agreement. Any other such attempted assignment, transfer or sublicense shall be
void. No right to authorize others to use the Trademarks/Trade Dress or
Licensed Trademarks to identify the Inventory Products or Licensed Products is
granted, except for informational use by VideoPropulsion and its customers.
VideoPropulsion will comply with all of GENROCO's use requirements (which use
requirements shall not be more stringent than those in effect for GENROCO's own
products) of the Licensed Trademarks as may be provided by written notice to
VideoPropulsion from time to time. VideoPropulsion agrees not to use or to
permit the use of any trade dress or trademarks that are likely to be
confusingly similar to the trademarks and trade dress of GENROCO.
VideoPropulsion will promptly notify GENROCO of any conflicting use of or acts
of infringement concerning the Licensed Assets, Trademarks/Trade Dress or the
Licensed Trademarks and will cooperate as GENROCO reasonably may deem advisable
to protect GENROCO's rights.
10. OWNERSHIP OF LICENSED ASSETS AND LICENSED TRADEMARKS. VideoPropulsion
acknowledges that GENROCO is the owner of and has acquired substantial goodwill
in the Licensed Assets, Trademarks/Trade Dress and Licensed Trademarks and
agrees that every use thereof in connection with the Inventory Products and
Licensed Products shall inure solely to the benefit of GENROCO. VideoPropulsion
further agrees to put any reasonable notice of such ownership that GENROCO shall
require on Inventory Materials, Inventory Products, Licensed Products, and
labels or advertising and promotional materials therefor. VideoPropulsion
agrees not to dispute or assist in disputing directly or indirectly GENROCO's
rights therein.
11. GENROCO WARRANTY. GENROCO warrants that it has full power to make
this Agreement and to grant the rights as provided herein and that it has no
actual knowledge that the Licensed Assets or Licensed Trademarks violates the
valid rights of any third party. GENROCO agrees to indemnify and defend
VideoPropulsion against any claims of third parties (and to pay any damages and
attorneys' fees awarded) based on a breach of the foregoing express warranty.
The parties agree to generally utilize the notice and payment provisions and
defense of third-party claims as set forth in the General Assignment, Assumption
and Agreement Regarding Litigation, Claims and Other Liabilities, dated January
1, 2000.
12. PRODUCT CLAIMS: RESPONSIBILITY. VideoPropulsion agrees not to make
any claims for or about the Licensed Assets, Inventory Products or Licensed
Products that have not been approved in advance by GENROCO.
VideoPropulsion agrees to comply with all laws and regulations applicable
to the use of the Licensed Assets, the sale and distribution of Inventory
Products and the manufacture, sale, and distribution of Licensed Products.
VideoPropulsion will defend, indemnify and hold GENROCO harmless against all
loss, expense, and damage occasioned by any claim, action or recovery by any
party (including any government agency) against GENROCO arising out of any use
by VideoPropulsion of the Licensed Assets, any sale, distribution, or use of the
Inventory Products or any design, manufacture, sale, distribution, or use of the
Licensed Products both during and after expiration or termination of this
Agreement and not based upon breach of the foregoing warranty provided by
GENROCO. To the extent not inconsistent with the foregoing, the parties agree
to generally utilize the notice and payment provisions and defense of third-
party claims as set forth in the General Assignment, Assumption and Agreement
Regarding Litigation, Claims and Other Liabilities dated January 1, 2000.
13. LICENSE TERM. The license granted by this Agreement for the Licensed
Assets listed on Annex A shall commence as of the date first above written and
shall expire ten (10) years after the date of this Agreement. VideoPropulsion
agrees to notify GENROCO when it has ceased using any of the Licensed
Trademarks.
14. TERMINATION. Either party may promptly terminate this Agreement upon
written notice to the other party with cause for any material breach of this
Agreement by the other party, unless within a period of thirty days after
written notice the other party remedies the breach. This Agreement will
terminate automatically (to the extent permitted by law at the time) in the
event VideoPropulsion files a petition in bankruptcy, becomes insolvent, makes
an assignment for the benefit of creditors or an arrangement pursuant to any
bankruptcy law, discontinues its business or has a receiver appointed for it, is
acquired or merged into or consolidated with any other corporation, or sells all
or substantially all of its assets.
15. POST TERMINATION/EXPIRATION RIGHTS. Except as specified herein, upon
expiration or termination, all rights of VideoPropulsion under this Agreement
will cease and immediately revert to GENROCO and VideoPropulsion will promptly
deliver to GENROCO or destroy all Inventory Materials and all labels, packaging,
and promotional and other material in its possession that bear the Licensed
Trademarks. VideoPropulsion shall discontinue and use its best efforts to
require its customers to discontinue forthwith the use of any Inventory
Materials and the Licensed Trademarks (other than for products previously sold)
and any and all products, packaging, and advertising using and/or making
reference in any manner to the Licensed Trademarks (other than for products
previously sold). All artwork, plates, and other manufacturing aids used by
VideoPropulsion and incorporating the Licensed Trademarks are to become
GENROCO's property upon expiration or termination and are to be disposed of by
VideoPropulsion according to instructions from GENROCO.
16. SURVIVAL OF TERMS. The obligations of the parties under paragraphs 4,
8, 9, 10, 11, 12, 13 and 14 shall survive expiration or termination of this
Agreement and they shall not be relieved of any of their continuing obligations
thereunder.
17. MISCELLANEOUS. This Agreement shall be construed in accordance with
the internal laws of the State of Wisconsin.
The parties intend to enter into a license agreement only and this
Agreement shall not in any way be deemed to establish any other relationship
between them. VideoPropulsion agrees that it does not have the authority and
will not directly or indirectly contract any obligations of any kind in the name
of or chargeable against GENROCO or agents or employees of GENROCO.
All notices provided for herein shall be given in writing by personal
delivery or first class mail, addressed to the party to be notified (Attention
CEO, in the case of GENROCO and Attention CEO in the case of VideoPropulsion) at
the address specified above for such party.
This Agreement supersedes all prior and contemporaneous agreements between
the parties in connection with the matters set forth herein and may only be
amended in a writing signed by both Parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written by their duly authorized officers.
GENROCO, INC.
By: -----------------------------------------
Keith Brue
Executive Vice President and
Chief Financial Officer
VIDEOPROPULSION, INC.
By: -----------------------------------------
Chris Good
Executive Vice President and
Chief Technical Officer
ANNEX A
LICENSED TRADEMARKS
o GENROCO(R)
o TURBOFIBRE(R)
o SOLSTOR(R)
o TURBOSTOR(R)
LICENSED ASSETS - SOFTWARE
o All driver and micro-code software now owned by GENROCO or hereafter
developed and/or acquired by GENROCO during the life of this contract
(including but not limited to the example list of software as attached hereto
on Annex A-1).
LICENSED ASSETS - PATENTS
o U.S. Patent #5,420,984 covering peripheral controllers and methods for rapid
task switching and memory caching, issued in May of 1995.
o U.S. Patent #6,036,032 covering high speed data buffers using virtual first-
in first-out registers, issued in February 0f 2000.
EXHIBIT 10.6
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INTERIM ADMINISTRATIVE SERVICES AGREEMENT
This Interim Administrative Services Agreement ("Agreement"), dated as of
January 1, 2000 (the "Effective Date"), is made between GENROCO, INC., a
Wisconsin corporation ("GENROCO"), with offices at 255 Info Highway, Slinger,
Wisconsin 53086, and VideoPropulsion, Inc., a Wisconsin corporation
("VideoPropulsion"), with offices at 251 Info Highway, Slinger, Wisconsin 53086.
WHEREAS, the video Division was a division of GENROCO (the "Division"),
until the Effective Date when it was contributed to a separate and independent
company, VideoPropulsion (the "Contribution");
WHEREAS, VideoPropulsion acquired the business of the Division in the
Contribution, and will be in the business of research, development, manufacture
and sale of various video related products as a separate company;
WHEREAS, prior to the Spin-Off, GENROCO provided certain administrative and
manufacturing services to support the Division's operations;
WHEREAS, VideoPropulsion intends to provide such administrative and
manufacturing support services for its operations, without GENROCO assistance,
as soon as it is reasonably feasible to do so;
WHEREAS, VideoPropulsion desires and GENROCO is willing to provide certain
administrative and manufacturing support services (as herein defined) for
VideoPropulsion's operations for certain specified interim periods after the
Spin-off solely for purposes of permitting VideoPropulsion to make an orderly
transition to independent status as soon as reasonably feasible.
NOW THEREFORE, in consideration of the promises set forth herein, the
parties do hereby agree as follows:
1. ADMINISTRATIVE AND MANUFACTURING SUPPORT SERVICES. Subject to the
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terms and conditions provided herein, GENROCO shall provide VideoPropulsion with
General Administrative Services (hereafter referred to collectively as
"Services" and individually as a "Service") on an interim basis, consisting of:
A. General Administrative Services which shall consist of:
(i) "Financial Services" which shall mean the general accounting
services previously provided by GENROCO to the Division, and
shall consist of general ledger use and reporting services,
cost accounting services, receivable and payable processing
services, the computation of gross payroll services for hourly
workers of VideoPropulsion and property accounting services
for VideoPropulsion. Financial Services shall not include any
services by GENROCO relating to treasury, tax, shareholder
relations, legal, salaried payroll and hourly payroll check
preparation, credit or collection procedure functions.
(ii) "Human Resources Services" which shall mean the human
resources services previously provided by GENROCO to the
Division and shall consist of employment services, personnel
administrative (salaried and hourly) services, benefits and
claims processing services, and medical reporting services.
Human Resources Services shall not include services relating
to corporate training and development and mail and messenger
department functions.
(iii) "Information Systems Services" which shall mean data
processing, communications and maintenance of records and
files, arising from centralized data processing and file
storage operations, as previously provided by GENROCO to the
Division and shall consist of accounting system services, cost
accounting system services, E-Mail system services, EDI system
services, engineering system services, order entry system
services, purchasing system services, time system services,
payroll (hourly) system services, human resource system
services, PERMAC system services, and records and files system
services, and shall also include the use of hardware,
furniture and fixtures associated with the foregoing services.
2. AGREEMENT PRINCIPLES AND GUIDELINES. By this Agreement, GENROCO and
------------------------------------
VideoPropulsion seek to implement the general principle that with the exceptions
noted herein or in the Contribution Agreement, Plan and Agreement of
Reorganization and Distribution including any Schedules, Exhibits or Annexes
thereto ("Contribution Documents"), GENROCO will provide Services on an interim
basis similar to those previously offered to the Division while it is not
reasonably feasible for VideoPropulsion to independently provide such Services
itself. Except as specifically provided in the Contribution Documents, GENROCO
does not agree, promise or covenant to provide any other services to
VideoPropulsion. GENROCO will continue to offer Services in the same or similar
magnitude as previously offered to the Division and by this Agreement does not
promise, covenant, or agree to provide a greater level or magnitude of Services.
VideoPropulsion acknowledges and covenants to use reasonable efforts to
independently provide such Services for itself as soon as reasonably feasible.
If reasonably feasible, VideoPropulsion will provide such Services for itself,
prior to the term limits set forth in Section 4 of this Agreement.
VideoPropulsion hereby acknowledges that the requirement for VideoPropulsion to
use reasonable efforts to independently provide such Services as soon as
reasonably feasible is a material element and condition to this Agreement and
that failure to fully comply with such provision will give rise to, among other
provisions, the termination rights set forth in Paragraph 19(e) of this
Agreement. Nothing in this Agreement shall be construed to cause GENROCO to
become a service bureau or to perform a Service which it cannot provide (i)
without conflict with a third-party contract to which GENROCO is a party or (ii)
a breach of any third- party contract to which GENROCO is a party. In no event
will GENROCO be responsible for any damages if it is unable to offer or continue
to provide a Service to VideoPropulsion pursuant to this paragraph.
3. FEES AND ADDITIONAL CHARGES. VideoPropulsion agrees to pay for the
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Services received hereunder as follows:
For all the functions referenced in Section 1 above, except for
Information Systems Services which are discussed separately, GENROCO and
VideoPropulsion agree the following per hour fee structure shall apply:
Level Billing Rate per Hour
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Class I $ 80.00
Class II $ 50.00
Class III $ 20.00
In the event that VideoPropulsion provides like services to GENROCO, the
above fee structure shall apply.
Exhibit 3 attached hereto sets forth a list of the Class I, Class II
or Class III category classification for GENROCO employees who may provide
Services. The classification and the employees may change at GENROCO's
discretion and notice thereof will be provided to VideoPropulsion. GENROCO
agrees to bill VideoPropulsion for the Services on a monthly basis.
GENROCO will provide certain financial, Human resource and Information
Systems Services (including use of the hardware and furniture and fixtures
associated with these services) to VideoPropulsion at the rate of $5,000 per
month.
Upon VideoPropulsion's request, upgrades (hardware and/or software) to
existing GENROCO's systems during the applicable Service Periods described below
(including any extension, if any), that benefit VideoPropulsion in any form or
manner, may be undertaken in GENROCO's sole discretion, and the costs thereof,
will be billed to VideoPropulsion (including all costs of installing or
implementing all upgrades). GENROCO can make upgrades (hardware or software) to
its existing systems, in its sole discretion, and may bill VideoPropulsion for
its proportionate share of the costs of the upgrades appropriately allocable to
VideoPropulsion (considering, among other factors, use and the period of time
VideoPropulsion could utilize the upgrades) provided GENROCO provides
VideoPropulsion with 10 days notice of the event on an upgrade.
(A) ADDITIONAL CHARGES. In addition to the charges set forth above,
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VideoPropulsion agrees to pay for any manufacturers, sales, use, excise,
personal property, or any other tax or charge, or duty or assessment cost,
expense, or fee attributable to the execution or performance of any Service
pursuant to this Agreement, except (i) any income, franchise, doing business or
similar taxes levied or assessed on or based on GENROCO' s income, capital stock
or other similar base, and (ii) employment taxes with respect to employees of
GENROCO (including, but not limited to, unemployment taxes, social security
taxes and income tax withholdings). VideoPropulsion also agrees to pay any fee,
expense, or charge associated with obtaining consents from any party other than
GENROCO to utilize software or other contracts necessary to offer any Service
under this Agreement. VideoPropulsion also agrees to reimburse GENROCO for its
reasonable out-of-pocket expenses directly attributable to the provision of
Services hereunder.
(B) TERMS OF PAYMENT. VideoPropulsion shall pay the fees and any
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additional charges owed within thirty (30) days of invoice. VideoPropulsion
shall also pay any collection fees and reasonable attorneys' fees incurred by
GENROCO in collecting payment of the charges and other amounts for which
VideoPropulsion is liable under the terms and conditions of this Agreement.
Without limiting the foregoing, if VideoPropulsion is more then two months in
arrears on any payment, GENROCO may terminate this Agreement pursuant to the
provisions of Paragraph 19(e).
4. TERM. This Agreement shall be effective upon January 1, 2000 or such
----
other date as agreed upon by the parties ("Effective Date"). Subject to the
requirement set forth in Section 2 that VideoPropulsion must use reasonable
efforts to independently provide such Services when reasonably feasible, the
respective periods during which GENROCO shall perform the Services (a "Service
Period") offered pursuant to this Agreement shall be as follows:
Term of Services
General Administrative Services (In Months)
------------------------------- ----------------
Financial Services
- General Ledger Use/Reporting 24
- Cost Accounting 24
- Receivables/Payables 24
- Hourly Payroll (Gross Pay
Computation) 24
- Property Accounting 24
Human Resources Services
- Employment 24
- Personnel Administration 24
- Benefits and Claims Processing 24
- Medical Reporting 24
Information Systems Services
- Accounting 24
- Cost Accounting 24
- E-Mail 24
- Purchasing 24
- Time & Attendance 24
- Payroll (Hourly) 24
- Human Resources 24
- Records and Files 24
GENROCO, at its sole discretion, and upon request of VideoPropulsion at
least 30 days prior to termination of any Service Period, may extend the term
date for an additional period. Such Services will then be offered at a rate of
up to 125% of the billing rate in effect at such time, subject to any subsequent
adjustment pursuant to Section 3 of this Agreement.
5. TELEPHONE AND LAN. Any costs in creating VideoPropulsion's telephone
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and voicemail system accrued by GENROCO, on or after the Effective Date, will be
billed to VideoPropulsion as part of the invoice for Services. After the
Effective Date, VideoPropulsion will utilize GENROCO's telephone and voicemail
system as part of the Information Systems Services provided by GENROCO.
GENROCO will provide data communication links between the VideoPropulsion
facilities and GENROCO Information System Services for the applicable Service
Period. All third party network costs (MCI, AT&T, etc.) related to
VideoPropulsion's data communication circuits, traffic and services will be
billed by GENROCO or the respective third parties, if appropriate, monthly to
VideoPropulsion. GENROCO or its representatives will be permitted reasonable
access to any Data Communication equipment located on VideoPropulsion's property
in order to provide maintenance, repair or updates.
All MIS equipment, including any located at VideoPropulsion, as set forth
on related Exhibit 7 hereto, will remain solely the property of GENROCO.
GENROCO shall remain responsible for all maintenance of the MIS equipment,
wherever located. GENROCO will be permitted access to any MIS equipment located
on VideoPropulsion's property in order to provide maintenance, repair or
updates, in order to remove such equipment or for any reasonable request related
to the MIS equipment. There will be no charge for GENROCO's right to enter
VideoPropulsion's property. GENROCO will indemnify VideoPropulsion for any
damage or injury arising from its entrance rights, provided the damage or injury
arises from GENROCO gross negligence or willful misconduct.
6. PROGRAMMING. GENROCO reserves the right to determine the programming
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(whether hardware or software) used in fulfilling the Services under this
Agreement. All programs (including ideas and know-how and concepts) now
existing or developed by GENROCO in connection with the Services are and remain
GENROCO sole property.
7. EQUIPMENT. VideoPropulsion, at its own cost, may obtain and maintain
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such data processing, computer and communications equipment as may be necessary
or appropriate to facilitate the proper use and receipt of the Services set
forth in this Agreement. GENROCO will be permitted access to any
VideoPropulsion equipment or property in order (i) to provide maintenance,
repair or updates, or (ii) to remove such equipment listed on GENROCO accounting
records, if appropriate, or (iii) to respond to any reasonable request related
to VideoPropulsion's equipment. There will be no charge for GENROCO's right to
enter VideoPropulsion's property.
8. SYSTEMS MODIFICATION; AMENDMENT OF SERVICES. GENROCO, at its sole
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discretion, may modify, amend, enhance, update or provide an appropriate
replacement for any of the Services offered by this Agreement, the software used
to provide the Services or any element of its systems (hardware or software) at
any time.
9. INSURANCE AND BONDS.
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(A) FIDELITY BONDS. At VideoPropulsion's request, GENROCO shall
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obtain, at VideoPropulsion's expense, fidelity bond coverage for GENROCO's
employees who provide Services hereunder.
(B) INSURANCE. Throughout the term of this Agreement, GENROCO may
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maintain insurance coverage for losses from fire, disaster and other causes
contributing to interruption of the Services. The proceeds of any such
insurance shall be payable to GENROCO. Nothing in this Agreement shall be
construed as to permit VideoPropulsion to receive any of such proceeds, or to be
named as an additional loss payee under any such insurance policy.
10. RESPONSIBILITY.
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(A) GENERAL. GENROCO agrees to perform the Services in a reasonable
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manner, which is similar to services GENROCO provides for its own operations,
and assumes no other or higher degree of care. In connection with providing
Services, both parties acknowledge that it is a reasonable manner for GENROCO to
mail items or documents to VideoPropulsion, provided that VideoPropulsion may
request documents or items to be delivered via messenger, at VideoPropulsion's
cost. Except as specifically provided herein, GENROCO assumes no other
obligations as to performance, timing or quality of the Services provided under
this Agreement, all risks of error are expressly and solely assumed by
VideoPropulsion and GENROCO shall not be responsible for loss or damage due to
delays in providing the Services under this Agreement. GENROCO WILL IN NO EVENT
BE LIABLE FOR ANY INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES INCURRED BY
VIDEOPROPULSION INCLUDING, BUT NOT LIMITED TO, LOST PROFITS OR BUSINESS
OPERATION LOSS, REGARDLESS OF WHETHER GENROCO WAS ADVISED OF THE POSSIBLE
OCCURRENCE OF SUCH DAMAGES. GENROCO shall not be required to maintain
throughout the term of this Agreement, off-site disaster recovery capabilities
which permit GENROCO to recover from a disaster and continue providing Services
to VideoPropulsion within a commercially reasonable period.
GENROCO shall use reasonable efforts to keep the equipment necessary
to provide Services operational, but does not warrant the availability,
performance, capacity or capabilities of the equipment or any Service offered by
GENROCO. Except as specifically provided hereunder, VideoPropulsion remains
solely liable and responsible for any damages suffered arising from GENROCO
performance of this Agreement.
(B) RELIANCE ON VIDEOPROPULSION. In connection with the foregoing,
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VideoPropulsion agrees that VideoPropulsion and its employees will have a
significant impact on the timing and quality of the performance of the Services
offered. GENROCO will provide those Services described in this Agreement on the
basis of information and/or instructions furnished by VideoPropulsion. GENROCO
shall be entitled to rely upon any such data, information, or instructions as
provided by VideoPropulsion. If any error results from incorrect input supplied
by VideoPropulsion, VideoPropulsion shall be responsible for discovering and
reporting such error and supplying the information or instructing necessary to
correct such error to GENROCO. GENROCO may rely upon any instrument, signature,
instruction or telephone call from any employee of VideoPropulsion as to
Services requested under this Agreement. In connection with providing such
Services, GENROCO shall not be liable for any action taken or omitted by it in
good faith and believed to have been authorized by VideoPropulsion or its
employees. In any event, VideoPropulsion will indemnify and hold GENROCO
harmless from any cost, claim, damage, or liability (including attorneys' fees)
whatsoever arising out of such data, information or instructions, or any
inaccuracy or inadequacy therein. Except as specifically provided herein,
VideoPropulsion assumes all risk of loss, delay, and miscommunication in the
transportation or transmission by electronic means of data and information from
any terminal or remote unit.
11. WARRANTIES. EXCEPT AS SPECIFICALLY DESCRIBED IN THIS AGREEMENT,
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GENROCO DISCLAIMS ALL OTHER WARRANTIES, WHETHER WRITTEN, ORAL, EXPRESSED OR
IMPLIED INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
12. FORCE MAJEURE. GENROCO shall not be liable to VideoPropulsion if
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GENROCO's fulfillment or performance of any terms or provisions of this
Agreement is delayed or prevented by revolution or other civil disorders, wars,
act of enemies, strikes, electrical equipment availability failures, labor
disputes, fires, floods, act of God, federal, state, or municipal action,
statute, ordinance or regulation, or, without limiting the foregoing, any other
causes not within its reasonable control, and which by the exercise of
reasonable diligence it is unable to prevent, whether of the class of causes
hereinbefore enumerated or not. In case of emergency, GENROCO may also select
the order, timeliness, or availability of providing any Services to
VideoPropulsion.
13. EMPLOYEES. All employees of GENROCO providing Services to
---------
VideoPropulsion will continue to remain employees of GENROCO. All employees of
VideoPropulsion providing services to GENROCO will continue to remain employees
of VideoPropulsion.
14. CONFIDENTIALITY. Both parties recognize that the rendering of
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Services will be governed by the Confidentiality and Nondisclosure Agreement
entered into by the parties in connection with the Spin-Off, except the
confidentiality requirements of both parties will survive for one (1) year after
termination of the Services under this Agreement, regardless of the reason for
termination. In the event of any dispute concerning confidentiality, the
parties agree to utilize the provisions of Section 17.
15. DISPUTE RESOLUTION PROCEDURE.
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(A) GENERAL. Subject to the parties respective rights under Section
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19(e), in an effort to resolve informally and amicably any claim or controversy
arising out of or related to the interpretation or performance of this Agreement
without resorting to litigation, a party shall first notify the other of any
difference or dispute hereunder that requires resolution. The CEOs of GENROCO
and VideoPropulsion, respectively, or their designated successor each shall
investigate, discuss and seek to settle the matter between them. If the two are
unable to settle the matter within 30 days after such notification (or such
longer period as may be agreed upon), the matter shall be submitted to another
executive officer of GENROCO and VideoPropulsion, respectively, for considera-
tion.
(B) ARBITRATION. If settlement cannot be reached through the efforts
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of the senior officers within an additional 30 days or such longer period as may
be agreed upon, the parties shall consider arbitration or other alternative
means to resolve the dispute.
(C) LEGAL PROCEEDINGS. If the parties are unable to agree on an
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alternative dispute resolution mechanism within 30 days, either party may
initiate legal proceedings to resolve such matter.
16. PRECEDENCE AND UPDATING OF AGREEMENT. This Agreement is being
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executed contemporaneously with Contribution Documents. To the extent the
Contribution Documents, or any other document or other agreement executed in
connection with the Contribution Documents, is in conflict with any term of
provision of this Agreement or any Exhibit to this Agreement, this Agreement
will take precedence. To the extent this Agreement is in conflict with any
Exhibit, the Exhibit will take precedence.
17. MISCELLANEOUS.
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(A) GOVERNING LAW. This Agreement shall be construed in accordance
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with the internal laws of the State of Wisconsin.
(B) LIMITATIONS. Nothing in this Agreement is to be construed as an
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assignment or grant of any right, title or interest in any trademark, copyright,
design or trade dress or patent right.
(C) PARTIES IN INTEREST. This Agreement may be assigned to a parent
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or subsidiary of a party, or to a third party acquiring substantially all of the
assets of a party, provided that prior to such assignment the other party has
granted its written consent to the assignment, and further provided that neither
party may unreasonably withhold its consent to a request for assignment. Except
as provided above, this Agreement may not be assigned to a third party.
(D) ENTIRE AGREEMENT. This Agreement and the Exhibits are the entire
----------------
Agreement between the Parties in connection with the matters set forth herein.
This Agreement may only be amended in writing signed by both Parties.
(E) TERMINATION.
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(i) GENROCO may promptly terminate this Agreement upon
written notice to VideoPropulsion with cause for any material breach
of this Agreement by VideoPropulsion, unless within a period of thirty
(30) days after written notice the VideoPropulsion remedies the breach
or proposes a course of action, reasonably acceptable to GENROCO, to
remedy the breach within a reasonable time. This Agreement will
terminate automatically (to the extent permitted by law at the time)
in the event VideoPropulsion files a petition in bankruptcy, becomes
insolvent, makes an assignment for the benefit of creditors or an
arrangement pursuant to any bankruptcy law, or discontinues its
business or has a receiver appointed for it. GENROCO, in its sole
discretion, may also terminate this Agreement in the event that
VideoPropulsion's ownership changes from its current ownership, namely
ownership of the stock by the public with no single shareholder having
more than 20% of the outstanding shares of common stock or having the
power to elect a majority of the board of directors, whether such
power is conferred by voting power or by agreement with
VideoPropulsion.
In addition, GENROCO shall have the right to terminate this
Agreement, upon 90 days notice to VideoPropulsion in the event
VideoPropulsion consolidates with or merges into any other Person or
conveys, transfers or leases all or any substantial portion of its
properties and assets to any Person, permits any Person to consolidate
with or merge into VideoPropulsion or convey, transfer or lease all or
any substantial portion of its properties and assets to
VideoPropulsion. For purposes of the above, "Person" shall mean any
individual, corporation, partnership, joint venture, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
(ii) VideoPropulsion can terminate at will, upon 90 days'
notice.
(iii) Upon any termination hereunder, VideoPropulsion will
promptly pay any charges or fees owed to GENROCO. There will be no
cost or charge to GENROCO if it elects to terminate its Services under
this Agreement.
(F) NOTICES. All notices and communications required or permitted
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under this Agreement shall be in writing and any communication or delivery
hereunder shall be deemed to have been duly made if personally delivered, or if
mailed by first class mail, postage prepaid, or by air express service, with
charges prepaid and addressed as follows:
If to GENROCO: GENROCO, Inc.
255 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
If to VideoPropulsion: VideoPropulsion, Inc.
251 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
Either party may, by written notice so delivered to the other, change
the address to which future delivery shall be made.
(G) NO RELIANCE. No third party is entitled to rely on any of the
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representations, warranties and agreements of the parties contained in this
Agreement. The parties assume no liability to any third party because of any
reliance on the representation, warranties and agreements of the parties
contained in this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers this ----- day of --------, 2000.
GENROCO, INC.
By: --------------------------------------------
Keith Brue
Executive Vice President and
Chief Financial Officer
VIDEOPROPULSION, INC.
By: --------------------------------------------
Chris Good
Executive Vice President and
Chief Technical Officer
EMPLOYEE BENEFITS AND COMPENSATION
AGREEMENT
Between
GENROCO, INC.
and
VIDEOPROPULSION, INC.
Dated ------- --, 2000
EMPLOYEE BENEFITS AND COMPENSATION
This Agreement dated as of ------- --, 2000 between GENROCO, INC. ("GENROCO"),
a Wisconsin corporation with offices at 255 Info Highway, Slinger, WI 53086,
and VIDEOPROPULSION, INC. ("VideoPropulsion"), a Wisconsin corporation with
offices at 251 Info Highway, Slinger, WI 53086, shall govern the rights and
obligations of GENROCO and VideoPropulsion with respect to the employees
(including their compensation and benefits) of the Video Division in
connection with the transaction effected by the Contribution Agreement as
defined below. The term "GENROCO" when used in this Agreement shall not be
construed to include the Division where such construction would have the
effect of negating any obligation of VideoPropulsion or the Division
hereunder. The term VideoPropulsion when used shall not be construed to
include GENROCO where such construction would have the effect of negating any
obligation of GENROCO hereunder.
RECITALS
WHEREAS, GENROCO hereby and by certain other instruments of even date
herewith transfers or will transfer to VideoPropulsion effective as of 12:01
a.m., Central Standard Time, ------- --, 2000 or such other date as specified
in the Contribution Agreement, Plan and Agreement of Reorganization and
Distribution ("Contribution Agreement") dated as of ------- --, 2000 as the
effective date ("Effective Date"), those assets of GENROCO related to
GENROCO's video and related products business as conducted by the Division
("Division Assets") in accordance with the Contribution Agreement between the
parties, and including, without limitation, assets associated with the past,
present and future development, production, manufacture, marketing, use,
storage, distribution, disposal and sale of certain video products
manufactured by the Division throughout the world.
WHEREAS, the assets, business and operations formerly and currently used
and conducted by the Division are herein referred to collectively as the
"Division Business".
WHEREAS, the parties hereto intend, by this Agreement and the other
agreements and instruments provided for in the Contribution Agreement, to
convey to VideoPropulsion substantially all of the business and assets of the
Division Business.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained in this Agreement, the Contribution Agreement and in the other
agreements and instruments provided for in the Contribution Agreement, the
parties hereto agree as follows:
ARTICLE I
Additional Definitions
----------------------
"Active Division Employees" means employees of GENROCO who are actively
working for the Division immediately prior to the Effective Date.
"Benefit Plans" means, collectively, all Pension Plans, Welfare Plans and
Other Benefit Plans maintained by GENROCO and covering Division Employees or
their dependents or beneficiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Employees" means employees of GENROCO who work at the Division, including
those who are not actively working for the Division immediately prior to the
Effective Date solely by reason of vacation, sick leave, family or medical
leave, military leave, short-term disability leave, long-term disability
leave, leave compensated by workers' compensation or other leave of absence or
layoff or strike, but excluding persons for whom the employment relationship
has been finally terminated whether by retirement, discharge, quit or death,
and excluding persons who prior to the Effective Date have, pursuant to
procedures established by GENROCO, elected to transfer to employment with
GENROCO other than Division employment.
"Other Benefit Plans" means any written or oral plan, contract or other
arrangement of benefits or advantage to any group of employees, including
without limitation bonus, profit sharing, deferred compensation, stock
purchase, stock option, severance plan, salary continuation, vacation, sick
leave, fringe benefit, incentive, insurance, training program, apprenticeship
program, welfare or similar arrangement (other than a Pension Plan or Welfare
Plan) maintained by GENROCO and covering Division Employees or their
beneficiaries or dependents.
"Welfare Plan" means any employee welfare benefit plan, as defined in
Section 3(1) of ERISA, maintained by GENROCO and covering Division Employees
or dependents or beneficiaries of Division Employees.
ARTICLE II
Identification of Benefit Plans
--------------------------------
Schedule H-2 sets forth a list of the Benefit Plans maintained by GENROCO
with respect to Employees. VideoPropulsion acknowledges that it has been
furnished with descriptions of all Benefit Plans described on Schedule H-2.
In the event another benefit plan is offered to Employees which is not listed
on Schedule H-2, the parties agree to allocate financial responsibility
between themselves consistent with the approach taken for similar benefits
listed under Schedules H-2. The parties agree to resolve any disputes in
accordance with the procedures set forth at Article VII.
The parties agree that all matters concerning the Worker's Compensation
Plans listed on Schedule H-2 will be treated as set forth in the General
Assignment, Assumption and Agreement regarding Litigation, Claims and Other
Liabilities, dated ------- --, 2000 (the "General Assignment, Assumption and
Agreement").
The parties further agree that all matters concerning the Stock Incentive
Plan (including Employment Agreement) will be governed by the Release and
Settlement Agreement, dated ------- --, 2000.
ARTICLE III
Employees and Employee Benefits
-------------------------------
3.1 Employees. (a) Effective as of the Effective Date, VideoPropulsion
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shall offer employment to all persons who are Employees. VideoPropulsion shall
on the Effective Date assume the employment responsibilities for each Employee
and shall offer to return each such employee to a position with job
responsibilities comparable to such employee's prior position of employment in
the Division if such position is available or if required by law, or otherwise
to any other open position for which such employee is qualified.
(b) Employees (and their dependents and beneficiaries) shall be provided
compensation and benefits by VideoPropulsion comparable to compensation and
benefits being provided to them by GENROCO immediately prior to the Effective
Date.
(c) Employees shall be given credit for GENROCO service under
VideoPropulsion's benefit plans.
(d) (i) GENROCO, in good faith, will calculate the estimated liability
amount related to Employees' unpaid and accrued vacation expense earned for the
period January 1, 2000 through ------- --, 2000. GENROCO will remit to
VideoPropulsion cash equal to 1.0765 times this liability amount.
(ii) VideoPropulsion will assume all liability related to Employees'
payroll taxes. VideoPropulsion will remit the payroll taxes to the
appropriate regulatory authorities. GENROCO will not be responsible for any
of the payroll taxes relating to Employees.
(iii) GENROCO will calculate all wages due to Employees for the payroll
period ending on ------- --, 2000. GENROCO will directly remit such wages,
net of deductions, to all Employees. On and after the Effective Date,
VideoPropulsion shall remain solely liable for all compensation and wages to
be paid to Employees.
(iv) VideoPropulsion will assume all liability relating to Employees'
compensation for holidays occurring on or after the Effective Date.
(v) Any disputes concerning the calculation of the liability will be
resolved by the dispute resolution provisions of this Agreement.
(e) Both before and after the Effective Date, GENROCO and VideoPropulsion
shall coordinate with each other and shall take all actions necessary to
effect the smooth transfer of Employees and continuing benefit coverage and
administration.
3.2 Allocation of Benefit Payment Responsibility. Except as provided in
--------------------------------------------
Section 3.1(f), Article IV and Article V, VideoPropulsion is not assuming any
benefit or compensation program maintained by GENROCO and GENROCO is not
assigning any such program to VideoPropulsion. VideoPropulsion's obligations
with respect to benefit and compensation programs shall be as described
therein. As to all other Benefit Plans, from and after the Effective Date
VideoPropulsion shall provide Employees with all benefits and payments which
would have been provided to them under the Benefit Plans (other than stock
option or stock purchase plans) with respect to claims for benefits incurred
prior to the Effective Date so long as GENROCO would not ordinarily have paid
such benefits in accordance with its ordinary benefit payment practices prior
to the Effective Date. However, notwithstanding the foregoing, with respect to
(a) health benefits, (b) dental benefits, (c) vision benefits, (d) life
insurance, (e) travel accident insurance and (f) other benefits for which an
insurance carrier or some party other than GENROCO is responsible, GENROCO
shall remain responsible, subject to and in accordance with the terms of the
applicable Benefits Plan, for all claims incurred by Employees prior to the
Effective Date even if such claims are not filed until after the Effective
Date. Further, if any Hired Division Employee or dependent is not actively at
work by reason of hospitalization on the Effective Date, GENROCO shall retain
responsibility for the payment of health care claims until the end of such
hospitalization, subject to and in accordance with the terms and conditions of
the applicable health benefits plan as in effect on the Effective Date.
3.3 VideoPropulsion to Indemnify GENROCO. VideoPropulsion shall
------------------------------------
indemnify, hold harmless and defend GENROCO from and against any damages,
claims (including, but not limited to, unfair labor practice claims),
liabilities, obligations, costs of defense (including attorney fees), expenses,
fines, levies, assessments, charges, penalties, damages, settlements or awards
asserted against GENROCO associated with Benefit Plans or compensation
applicable to Employees (including dependents or beneficiaries, if any) except
to the extent liability has been specifically retained by GENROCO in this
Agreement, provided that VideoPropulsion's obligation to indemnify, hold
harmless, and defend shall not apply to the extent (a) an insurance carrier or
(b) any party other than GENROCO or VideoPropulsion is responsible. Without
limiting the foregoing, it is specifically contemplated that VideoPropulsion's
indemnity shall extend to any claims (except to the extent (a) liability has
been specifically retained by GENROCO in this Agreement, (b) an insurance
carrier is responsible, or (c) any party other than GENROCO or VideoPropulsion
is responsible) made against GENROCO for benefits which would have been
provided by GENROCO to the Employees under its Benefit Plans had the Employees
remained GENROCO employees throughout the remainder of their careers but are
not provided by VideoPropulsion which would have been applicable to them had
they continued to be covered under the GENROCO Benefit Plans. The parties
agree to generally follow the procedure for notification of a claim for defense
or indemnification and the procedures for obtaining indemnification or defense
as set forth in Articles V and VI of the General Assignment, Assumption and
Agreement.
3.4 Retirees. Those individuals who were employees of the Division who
--------
retired prior to the Effective Date and were eligible for benefits available to
retired employees of the Division under a plan maintained by GENROCO shall
continue to be the responsibility of GENROCO after the Effective Date.
3.5 COBRA. (a) This paragraph (a) applies to (i) those individuals who
-----
are Employees (and their dependents) and (ii) those individuals who are not
Employees but who had been employees of the Division (in this circumstance
meaning an individual who for over 50% of the time in the most recent 2 years
of his employment was an employee of the Division) prior to the Effective Date
(or their dependents). If an election for any such person of continuing
coverage under a health, dental and/or vision benefits plan sponsored by
GENROCO as a result of the requirements of ERISA Sections 601-608 is in effect
on the Effective Date or if such an election for any such person is made on or
after the Effective Date, VideoPropulsion shall at its option either (i)
reimburse GENROCO for the amount of health, dental and vision benefit claims
paid by GENROCO for such person for claims incurred after the Effective Date
less the amount of any premiums paid by such person to GENROCO with respect to
periods after the Effective Date for the right to receive such continuing
coverage or (ii) provide replacement coverage with no applicable pre-existing
condition exclusion.
(b) Notwithstanding any other provision of this agreement to the
contrary, GENROCO shall retain all liabilities for the provision of continuing
coverage under a health, dental and/or vision benefits plan sponsored by
GENROCO as a result of the requirements of ERISA Section 601-608 for those
individuals who had been employees of the Division (or their dependents) for
whom the employment relationship with the Division and GENROCO ended prior to
the Effective Date and who are not otherwise described in paragraph (a) above.
3.6 Personnel and Medical Records. GENROCO shall transfer or make
-----------------------------
available to VideoPropulsion the personnel and medical records of Employees.
VideoPropulsion shall indemnify, hold harmless, and defend GENROCO from and
against any damages, claims, liabilities, obligations, costs of defense
(including attorney fees), expenses, fines, levies, assessments, charges,
penalties, damages, settlements or awards asserted against GENROCO resulting
from the release of any personnel and medical records under this Section 3.6.
3.7 Reimbursement for Compensation Arising From Note Forgiveness.
------------------------------------------------------------
VideoPropulsion shall pay Genroco in cash amounts forgiven for employees of
VideoPropulsion under the related Genroco employee stock purchase agreements
as such amounts are forgiven. The total amount outstanding between Genroco and
VideoPropulsion for VideoPropulsion employees as of December 31, 1999 is
$325,368.06. Such amounts will be forgiven as vested as described specifically
in Schedule H-3.
ARTICLE IV
Dispute Resolution
------------------
4.1 General. In an effort to resolve informally and amicably any claim
-------
or controversy arising out of or related to the interpretation or performance
of this Agreement without resorting to litigation, a party shall first notify
the other of any difference or dispute hereunder that requires resolution.
GENROCO and VideoPropulsion each shall designate an employee to investigate,
discuss and seek to settle the matter between them. If the two are unable to
settle the matter within 30 days after such notification (or such longer period
as may be agreed upon), the matter shall be submitted to a senior officer of
GENROCO and VideoPropulsion, respectively, for consideration.
4.2 Arbitration. If settlement cannot be reached through the efforts of
-----------
the senior officers within an additional 30 days or such longer period as may
be agreed upon, the parties shall consider arbitration or other alternative
means to resolve the dispute.
4.3 Legal Proceedings. If the parties are unable to agree on an
-----------------
alternative dispute resolution mechanism within 30 days, either party may
initiate legal proceedings to resolve such matter.
ARTICLE V
Notices
-------
5.1 General. All notices and communications required or permitted under
-------
this Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been duly made if actually delivered, or if mailed by
first class mail, postage prepaid, or by air express service, with charges
prepaid and addressed as follows:
If to GENROCO: GENROCO, Inc.
255 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
If to VideoPropulsion: VideoPropulsion, Inc.
251 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
5.2 Change in Address. Either party may, by written notice so delivered
-----------------
to the other, change the address to which future delivery shall be made.
ARTICLE VI
Written Amendment and Non-Waiver
--------------------------------
6.1 Written Amendment and Waiver. This Agreement may not be altered or
----------------------------
amended nor any rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver.
6.2 Limited Amendment or Waiver. No waiver of any term, provision or
---------------------------
condition of this Agreement or failure to exercise any right, power or remedy
or failure to enforce any provision of this Agreement, in any one or more
instances, shall be deemed to be a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition or enforcement right of this Agreement or deemed to be an impairment
of any right, power or remedy or acquiescence to any breach.
ARTICLE VII
Miscellaneous
-------------
7.1 Governing Law. This Agreement and the transactions contemplated
-------------
hereby shall be construed in accordance with and governed by the internal laws
of the State of Wisconsin.
7.2 Entire Agreement. This Agreement constitutes the entire
----------------
understanding of the parties hereto with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior agreements. To the
extent a subject is specifically covered in this Agreement and to the extent
any other agreement (other than the Release and Settlement Agreement and
General Assignment Agreement provision on Worker's Compensation described in
Article II) is in conflict herewith, this Agreement, if specific, shall
control.
7.3 Parties In Interest. Neither party may assign its rights or
-------------------
delegate any of its duties under this Agreement without prior written consent
of the other. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
Nothing contained in this Agreement, express or implied, is intended to confer
upon any third party any benefits, rights or remedies.
7.4 Effectiveness. This Agreement shall become effective at the
-------------
Effective Date and may be terminated by GENROCO at any time prior thereto
without any liability on GENROCO's part.
7.5 Consolidation, Merger, Etc. Involving VideoPropulsion.
-----------------------------------------------------
VideoPropulsion shall not consolidate with or merge into any other Person or
convey, transfer or lease all or any substantial portion of its properties and
assets to any Person, and VideoPropulsion shall not permit any Person to
consolidate with or merge into VideoPropulsion or convey, transfer or lease all
or any substantial portion of its properties and assets to VideoPropulsion,
unless, in case VideoPropulsion shall consolidate with or merge into another
Person or convey, transfer or lease all or any substantial portion of its
properties and assets to any Person, the Person formed by such consolidation or
into which VideoPropulsion is merged or the Person which acquires by conveyance
or transfer, or which leases, all or any substantial portion of properties and
assets of VideoPropulsion shall be a corporation, partnership or trust
organized and validly existing under the laws of the United States of America,
any State thereof or the District of Columbia and shall expressly assume, by a
written agreement, executed and delivered to GENROCO, in form reasonably
satisfactory to GENROCO, all the liabilities, obligations and expenses to be
assumed by VideoPropulsion under this Agreement and the due and punctual
performance or observance of every agreement and covenant of this Agreement on
the part of VideoPropulsion to be performed or observed.
For purposes of this Section, "Person" shall mean any individual,
corporation, partnership, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
7.6 Reformation and Severability. If any provision of this Agreement
----------------------------
shall be held to be invalid, unenforceable or illegal in any jurisdiction under
any circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or
severance shall affect or impair the legality, validity or enforceability of
any other provisions of this Agreement to the extent that such other provision
is not itself actually in conflict with any applicable law.
7.7 Titles and Headings. All titles and headings have been inserted
-------------------
solely for the convenience of the parties and are not intended to be a part of
this Agreement or to affect its meaning or interpretation.
7.8 No Reliance. No third party is entitled to rely on any of the
-----------
representations, warranties and agreements of the parties contained in this
Agreement. The parties assume no liability to any third party because of any
reliance on the representation, warranties and agreements of the parties
contained in this Agreement.
IN WITNESS WHEREOF the Parties have caused this Agreement to be
executed by their duly authorized officers as of this ---- day of -------,
2000.
GENROCO, INC.
By:-------------------------------
Keith Brue
Executive Vice President and
Chief Financial Officer
VIDEOPROPULSION, INC.
By:-------------------------------
Chris Good
Executive Vice President
and Chief Technical Officer
TABLE OF CONTENTS
EMPLOYEE BENEFITS AND COMPENSATION H-1
RECITALS H-1
ARTICLE I Additional Definitions H-3
ARTICLE II Identification of Benefit Plans H-5
ARTICLE III Employees and Employee Benefits H-6
3.1 Employees H-6
3.2 Allocation of Benefit Payment Responsibility H-7
3.3 VideoPropulsion to Indemnify GENROCO H-8
3.4 Retirees H-9
3.5 COBRA H-9
3.6 Personnel and Medical Records H-10
3.7 Reimbursement for Compensation Arising From Note Forgiveness H-10
ARTICLE IV Dispute Resolution H-11
4.1 General H-11
4.2 Arbitration H-11
4.3 Legal Proceedings H-11
ARTICLE V Notices H-12
5.1 General H-12
5.2 Change in Address H-12
ARTICLE VI Written Amendment and Non-Waiver H-13
6.1 Written Amendment and Waiver H-13
6.2 Limited Amendment or Waiver H-13
ARTICLE VII Miscellaneous H-14
7.1 Governing Law H-14
7.2 Entire Agreement H-14
7.3 Parties In Interest H-14
7.4 Effectiveness H-14
7.5 Consolidation, Merger, Etc. Involving VideoPropulsion H-14
7.6 Reformation and Severability H-15
7.7 Titles and Headings H-16
7.8 No Reliance H-16
EXHIBIT 10.8
- - ------------
BILL OF SALE AND ASSUMPTION OF LIABILITIES
THIS BILL OF SALE AND ASSUMPTION OF LIABILITIES is made as of this -----
day of January 1, 2000 by GENROCO, INC. ("GENROCO"), a Wisconsin corporation,
with offices at its principal place of business at 255 Info Highway, Slinger,
Wisconsin 53086 and VIDEOPROPULSION, INC., ("VideoPropulsion"), a Wisconsin
corporation with its principal place of business at 251 Info Highway, Slinger,
Wisconsin 53086.
RECITALS
WHEREAS, GENROCO and VideoPropulsion are parties to a Contribution
Agreement, Plan and Agreement of Reorganization and Distribution (the
"Contribution Agreement") dated as of January 1, 2000; and
WHEREAS, GENROCO desires to sell and assign to VideoPropulsion, and
VideoPropulsion wishes to purchase and accept from GENROCO, for the consi-
deration and upon the terms and conditions set forth in the Contribution
Agreement, certain of the assets, leases and rights of GENROCO, and
VideoPropulsion wishes to assume certain of the liabilities and obligations of
GENROCO;
NOW, THEREFORE, pursuant to the Contribution Agreement and in consideration
of the foregoing, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed that:
1. Conveyance. GENROCO does hereby sell, assign, convey, and deliver to
----------
VideoPropulsion all of GENROCO's right, title and interest in and to the assets,
including any properties of GENROCO, and the liabilities and obligations as set
forth in the Contribution Agreement and the Exhibits, Schedules, Instruments and
Conveyances attached thereto or incorporated therein.
2. Acceptance and Assumption. VideoPropulsion hereby accepts the
---------------------------
foregoing sale, assignment and conveyance. VideoPropulsion hereby assumes and
agrees to pay, perform in accordance with the terms of and be bound by, all of
the covenants, terms and obligations under the Contribution Agreement and the
Exhibits, Schedules, Instruments and Conveyances attached thereto or
incorporated therein.
3. Power of Attorney. Subject to the provisions of the Contribution
------------------
Agreement, GENROCO hereby constitutes and appoints VideoPropulsion, its
successors or assigns, the true and lawful attorney of GENROCO with full power
of substitution, for the benefit and at the expense of VideoPropulsion: (a) to
institute and prosecute all proceedings which VideoPropulsion may deem proper in
order to collect, assert or enforce any claim, right or title of any kind in or
to any of the conveyed assets and liabilities, to defend or compromise any and
all actions, suits and proceedings in respect of any of the conveyed assets and
liabilities, and to do all such acts and things in relation thereto as
VideoPropulsion shall deem advisable; and (b) to take all action which
VideoPropulsion may deem proper in order to provide VideoPropulsion the benefits
or obligations under any of the conveyed assets or liabilities where any
required consent of another party to the assignment thereof to VideoPropulsion
pursuant to the Contribution Agreement and the related Exhibits, Schedules,
Instruments and Conveyances shall not have been obtained. GENROCO acknowledges
that the foregoing powers are coupled with an interest and shall be irrevocable
by GENROCO in any manner or for any reason. VideoPropulsion shall be entitled
to retain for its own account any amounts collected pursuant to the foregoing
powers, including any amounts payable as interest in respect thereto.
4. Rights. Nothing contained in this Bill of Sale and Assumption of
------
Liabilities shall be deemed to supersede, enlarge, diminish or otherwise modify
any of the obligations, agreements, covenants or warranties of GENROCO or
VideoPropulsion contained in the Contribution Agreement and the Exhibits,
Schedules, Instruments and Conveyances attached thereto or incorporated therein.
IN WITNESS WHEREOF, the parties hereto have caused this Bill of Sale and
Assumption of Liabilities to be executed by their duly authorized officers this
- - ----- day of ---------, 2000.
GENROCO, INC.
By: -----------------------------------------
Keith Brue
Executive Vice President and
Chief Financial Officer
VideoPropulsion, Inc.
By: -----------------------------------------
Chris Good
Executive Vice President and
Chief Technical Officer
COMPOSITE CERTIFICATE OF SECRETARY
OF
GENROCO, INC.
I, Keith Brue, do hereby certify that I am the duly elected, qualified
and acting Secretary of GENROCO, Inc., a Wisconsin corporation (the
"Company"), and as such Secretary have custody of the corporate seal and
records of corporate proceedings of the Company and am authorized to certify
extracts therefrom.
In my capacity as Secretary, I further certify as follows:
1. The copies of the Articles of Incorporation and Bylaws of the
Company attached as Exhibit A are true and complete copies of the Company's
Articles of Incorporation and Bylaws as in effect at all times since January
1, 1999 to and including the date hereof.
2. (a) Attached hereto as Exhibit B are true and complete copies of
certain resolutions duly adopted by the Board of Directors of the Company at
meetings duly called and held on August 13, 1999, November 15, 1999 and
December 22, 1999, concerning the distribution to holders of common stock of
the Company (the "Distribution") of all of the outstanding shares of common
stock of the Company's subsidiary, VideoPropulsion, Inc. ("VideoPropulsion").
(b) Attached hereto as Exhibit C is a true and complete copy of
certain resolutions duly adopted by the Company, as sole shareholder of
VideoPropulsion, by a unanimous written consent action dated as of ------- --,
2000.
(c) The resolutions referred to in subparagraphs (a)-(b) above
have not been modified or rescinded; all such resolutions are now in full
force and effect; and such resolutions are all of the resolutions and actions
of the Board of Directors of the Company or any committee thereof, or of the
Company as sole shareholder of VideoPropulsion, adopted or taken in connection
with the Distribution and related transactions.
3. Each person who, as a director or officer of the Company or
attorney-in- fact of such director or officer, signed any of the following:
(i) the Contribution Agreement, Plan and Agreement of Reorganization and
Distribution, dated as of January 1, 2000, between the Company and
VideoPropulsion (the "Contribution Agreement"); and (ii) any other document
delivered prior hereto or on the date hereof in connection with Distribution,
the other transactions contemplated by the Contribution Agreement, the
resolutions referred to in paragraph 2 hereof was, at the respective times of
such signing and delivery and, as to documents dated the date hereof, is now,
duly elected or appointed, qualified and acting as such director or officer or
duly appointed and acting as such attorney-in-fact, and was duly authorized to
take the actions evidenced by such signature, and the signatures of such
persons appearing on such documents are their genuine signatures.
4. The Contribution Agreement, and each other agreement or other
document executed and delivered on behalf of the Company in connection with
the Distribution and related transactions, is substantially in the form
authorized or approved by or pursuant to the resolutions and actions referred
to in paragraph 2 hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of GENROCO, Inc. as of this ---- day of -------, 2000.
------------------------------------
Keith Brue, Secretary
The undersigned, being the Chairman of the Company, do hereby certify
that Keith Brue is the duly elected, qualified and acting Secretary of the
Company and that the above signature is his genuine signature.
------------------------------------
Carl A. Pick, Chairman
INSURANCE MATTERS
This Agreement, dated as of ------- --, 2000, between GENROCO, INC., a
Wisconsin corporation ("GENROCO"), and VIDEOPROPULSION, INC., a Wisconsin
corporation ("VideoPropulsion"), shall govern the rights and obligations of
GENROCO and VideoPropulsion with respect to various pre-existing contracts
insuring GENROCO and covering risks associated with, or arising out of, the
assets, business or operations of its video Division.
WHEREAS, GENROCO has transferred to VideoPropulsion, effective as of
January 1, 2000 (the "Effective Date"), certain GENROCO assets related to
GENROCO's video business formerly conducted by the Division as described in
the Contribution Agreement, Plan and Agreement of Reorganization and
Distribution (the "Contribution Agreement") of even date herewith, including,
without limitation, the development, production, manufacture, marketing, use,
storage, distribution, disposal and sale of certain video products (all of
which shall be referred to collectively as the "Division Business.")
WHEREAS, in certain years prior to this transfer, GENROCO obtained
various policies of insurance (the "Policies"), covering, among other things,
risks associated with, or arising out of, the assets, business or operations
of the Division.
WHEREAS, the Policies may provide coverage in a number of areas,
including, without limitation: automobile liability; comprehensive and
general liability; employer's liability; fiduciary liability, directors' and
officers' liability and excess liability; including liabilities under the
owner controlled insurance program.
WHEREAS, without relinquishing its rights as an owner of, and insured
under, the Policies, GENROCO now wishes to permit VideoPropulsion to share
certain of GENROCO's benefits, and VideoPropulsion wishes to assume certain of
GENROCO's responsibilities, under the Policies.
NOW THEREFORE, in consideration of the mutual promises contained in this
document, the parties agree that:
1. INSURANCE COVERAGE.
1.1. GENROCO shall continue at all times as owner of, and beneficiary
under, the Policies, and this Agreement shall not be considered as an
attempted assignment of the Policies or as a contract of insurance.
1.2. The Policies which are listed on related Exhibit 1.2 were obtained
by GENROCO at various times prior to the date of this Agreement and may cover
risks associated with, or arising out of, the Division Business. GENROCO does
not warrant that related Exhibit 1.2 contains or will contain an accurate or
complete list of the insurance potentially available to cover the Division
Business, and states only that it has compiled the list to the best of its
abilities based on currently available information. GENROCO shall have no
obligation to undertake any further search of its records, or the records of
any third parties, to seek additional policies or information about policies
not found on the exhibit. However, each party agrees that it will share with
the other any information it gathers about additional policies, and that such
additional policies which are found potentially to provide coverage for risks
associated with the Division Business shall be subject to the provisions of
this Agreement as if listed on related Exhibit 1.2 and shall be deemed within
the definition of Policies.
1.3. GENROCO does not warrant that the Policies or any other policies of
insurance provide any coverage to VideoPropulsion or GENROCO generally, or
with respect to any particular risk.
1.4. With respect to coverages after the Effective Date, GENROCO shall
have no obligation to continue in force the Policies or any other policy of
insurance and may cease to continue in force any policy of insurance without
notice to VideoPropulsion and GENROCO will be entitled to receive any refund
of proceeds or policy premium thereof. After March 1, 2000 VideoPropulsion
shall be solely responsible for obtaining and maintaining all policies of
insurance covering its business and other activities after such date.
2. PENDING INSURED LITIGATION.
2.1. VideoPropulsion shall compile Exhibit 2.1 which contains a list of
the litigation, if any, allegedly associated with, or arising out of, the
Division Business prior to the date of this Agreement for which
VideoPropulsion believes there may be insurance coverage under the Policies.
This litigation together with all threatened litigation and claims arising out
of the Division Business shall be referred to as "Pending Insured Litigation".
VideoPropulsion does not warrant that this exhibit will contain an accurate or
complete list of such litigation, and states only that it has compiled and
will compile the list to the best of its abilities based on currently
available information. Additional litigation and threatened litigation
determined by VideoPropulsion at a later date as having been omitted from the
exhibit shall be subject to this Agreement as if listed on the exhibit and
shall be deemed included within the definition of litigation or threatened
litigation.
2.2. With respect to Pending Insured Litigation, VideoPropulsion states
to the best of its knowledge that all appropriate insurance carriers have been
or will be placed on notice in a timely fashion, as or if required by the
terms of the Policies.
3. NEW INSURED LITIGATION.
3.1. The parties acknowledge that after the Effective Date there may be
further litigation or other claims made, filed, commenced or threatened
against VideoPropulsion or GENROCO allegedly associated with, or arising out
of, the Division Business ("New Insured Litigation").
3.2. VideoPropulsion shall notify GENROCO of any New Insured Litigation
which may be covered under GENROCO's insurance policies and Mr. Keith Brue, a
GENROCO employee, shall be responsible for notifying any appropriate insurance
carriers.
3.3. Except as provided in Paragraph 3.2 above, VideoPropulsion shall be
solely responsible for notifying all appropriate insurance carriers providing
coverage to VideoPropulsion or for the activities and operations of the
Division, if any, regarding New Insured Litigation and all other litigation
and claims, except in cases where the insurance carriers have refused in
writing to deal directly with VideoPropulsion, in which case VideoPropulsion
shall promptly notify GENROCO. VideoPropulsion shall notify GENROCO of any
litigation and claims VideoPropulsion has submitted to GENROCO's excess
insurers. VideoPropulsion also shall notify GENROCO promptly if it appears
that New Insured Litigation may involve the assets, business or operations of
GENROCO.
4. CASE HANDLING AND COOPERATION.
4.1. VideoPropulsion agrees that it shall notify, report to, and
cooperate fully with the insurance carriers and GENROCO with respect to
Pending Insured Litigation and New Insured Litigation as though
VideoPropulsion were the named insured under the policies of insurance.
4.2. The parties acknowledge that VideoPropulsion has been designated the
case handler for all Pending Insured Litigation and, likewise, may be
designated by GENROCO as the case handler for all New Insured Litigation,
under the terms of the Assignment Agreement.
4.3. GENROCO will notify the insurance carriers issuing the Policies of
the terms of this Agreement and the Contribution Agreement and the Assignment
Agreement and will request that the insurance carriers deal directly with
VideoPropulsion, as case handler regarding the management of any Pending
Insured Litigation and any New Insured Litigation.
4.4. In the event that an insurance carrier shall refuse or fail to deal
directly with VideoPropulsion, VideoPropulsion shall continue as case handler
and GENROCO shall provide reasonable support to VideoPropulsion in
communicating with the insurance carrier.
4.5. In the event VideoPropulsion wishes to commence an action against an
insurance carrier for failure to provide defense or indemnification for
Pending Insured Litigation or New Insured Litigation under one or more of the
Policies, it shall not do so without the written consent of GENROCO. Upon a
request by VideoPropulsion, GENROCO may, in its sole discretion, permit
VideoPropulsion to prosecute such an action in the name of GENROCO, in which
case VideoPropulsion shall bear all expenses of the litigation and shall hold
GENROCO harmless from any costs of such litigation, including without
limitation fees, expenses, charges, awards of any type or judgments which may
be assessed against GENROCO. GENROCO's consent to the prosecution of such an
action will not be withheld or delayed unreasonably.
5. PAYMENT OF COSTS AND PROCEEDS.
5.1. To the extent that an insurance carrier pays GENROCO for all or any
portion of the costs of defense of, or pays all or any portion of the amounts
in settlement of, or in satisfaction of a judgment for, Pending Insured
Litigation or New Insured Litigation, for which VideoPropulsion provided
GENROCO with defense and indemnification as required by the Assignment
Agreement, GENROCO shall pay over such sums in excess of GENROCO's own
reasonable expenses and costs (including attorneys' fees) or cause such sums
to be paid over to VideoPropulsion or for its benefit within thirty days of
their receipt.
5.2. If VideoPropulsion fails to defend and indemnify GENROCO for a
Pending Insured Litigation matter or New Insured Litigation matter as required
under the Assignment Agreement, GENROCO shall have no obligation to pay over
to VideoPropulsion any portion of the payments received with respect to that
matter from the insurance carriers; however, receipt of such payments by
GENROCO shall not relieve VideoPropulsion of its obligations to defend or
indemnify GENROCO to the extent such proceeds are insufficient to meet
VideoPropulsion's obligations.
5.3. To the extent that a Pending Insured Litigation matter or New
Insured Litigation matter involves assets, businesses or operations of GENROCO
not transferred to VideoPropulsion, and GENROCO is wholly or partially
responsible for the costs of defense, costs of settlement or costs of
satisfaction of a judgment under the Assignment Agreement, then the amounts
paid by the insurance carriers with respect to that matter under this
Agreement will be shared by the parties in the same proportion as the parties
are responsible for paying such amounts under the Assignment Agreement.
5.4. Notwithstanding the foregoing, if GENROCO incurs out-of-pocket
expenses prior to the time VideoPropulsion defends and indemnifies GENROCO as
required under the Assignment Agreement for a Pending Insured Litigation
matter or a New Insured Litigation matter, then GENROCO shall first apply the
payments received with respect to that matter from the insurance carriers to
offset GENROCO's own reasonable expenses and costs and then shall pay over any
balance received to VideoPropulsion.
5.5. It is understood between the parties that VideoPropulsion's
obligation to defend, indemnify, save and hold harmless GENROCO under the
Assignment Agreement shall arise at a time specified in that Agreement which
will often be prior to the time insurance proceeds will be available.
Furthermore, it is agreed that, ultimately, the right to a defense and
indemnification under the Assignment Agreement applies only insofar as it is
not covered by insurance. Therefore, the parties acknowledge that
VideoPropulsion's obligation to provide a defense and indemnification under
the Assignment Agreement shall not be delayed pending the results of any
claims made under insurance policies and that GENROCO and VideoPropulsion
shall account between themselves at the conclusion of a matter if any
financial adjustments are required due to the receipt of such proceeds.
6. DISPUTE RESOLUTION.
6.1. In an effort to resolve informally and amicably any claim or
controversy arising out of or related to the interpretation or performance of
this Agreement without resorting to litigation, a party shall first notify the
other of any difference or dispute under this Agreement that requires
resolution. GENROCO and VideoPropulsion each shall designate an employee to
investigate, discuss and seek to settle the matter between them. If the two
are unable to settle the matter within 30 days after notification (or such
longer period as may be agreed to expressly by the parties), the matter shall
be submitted to a senior officer of GENROCO and VideoPropulsion, respectively,
for consideration.
6.2. If settlement cannot be reached through the efforts of the senior
officers within an additional 30 days, or such longer time period as they
shall agree upon, the parties shall consider mediation, arbitration or other
alternative means to resolve the dispute. If they are unable to agree on an
alternative dispute resolution mechanism, either party may initiate legal
proceedings to resolve the matter.
7. NOTICES.
7.1. All notices and communications required or permitted under this
Agreement shall be in writing and any communication or delivery of them shall
be deemed to have been duly made if actually delivered, or if mailed by first
class or certified mail, postage prepaid, or by air express service, with
charges prepaid. Except for notices to insurance carriers under Section 3.2
and 3.3 and for bills and payments under Section 6 of this Agreement, all
notices and communications shall be addressed as follows:
If to GENROCO: GENROCO, Inc.
255 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
If to VideoPropulsion: VideoPropulsion, Inc.
251 Info Highway
Slinger, Wisconsin 53086
Attention: CEO
7.2. Either party may, by written notice so delivered to the other,
change the address to which future delivery shall be made.
8. AMENDMENT AND NON-WAIVER.
8.1. This Agreement may not be altered or amended, nor any rights
hereunder be waived, except by an instrument in writing executed by the party
or parties to be charged with such amendment or waiver.
8.2. No waiver of any term, provision or condition of this Agreement or
failure to exercise any right, power or remedy or failure to enforce any
provision of this Agreement, in any one or more instances, shall be deemed to
be a further or continuing waiver of any such term, provision or condition or
as a waiver of any other term, provision or condition or enforcement right of
this Agreement or deemed to be an impairment of any right, power or remedy or
acquiescence to any breach.
9. GOVERNING LAW.
This Agreement and the transactions it contemplates shall be construed in
accordance with, and governed by, the internal laws of the State of Wisconsin.
10. ENTIRE AGREEMENT.
This Agreement and the Contribution Agreement and the other agreements
executed and delivered thereunder constitute the entire understanding of the
parties with respect to their subject, superseding all negotiations, prior
discussions and prior agreements and understandings relating to such subject
matter.
11. PARTIES IN INTEREST.
Neither party may assign its rights or delegate any of its duties under
this Agreement without prior written consent of the other. This Agreement
shall be binding upon, and shall inure to the benefit of, the parties hereto
and their respective successors and assigns. Nothing contained in this
Agreement, express or implied, is intended to confer upon any third party any
benefits, rights or remedies.
12. REFORMATION AND SEVERABILITY.
If any provision of this Agreement shall be held to be invalid,
unenforceable or illegal in any jurisdiction under any circumstances for any
reason, (i) such provision shall be reformed to the minimum extent necessary
to cause such provision to be valid, enforceable and legal and preserve the
original intent of the parties, or (ii) if such a provision cannot be
reformed, such provision shall be severed from this Agreement. Such holding
shall not affect or impair the validity, enforceability or legality of such
provision in any other jurisdiction or under any other circumstances. Neither
such holding nor such reformation or severance shall affect or impair the
legality, validity or enforceability of any other provision of this Agreement
to the extent that such other provision is not itself actually in conflict
with any applicable law.
13. TITLES AND HEADINGS.
All titles and headings have been inserted solely for the convenience of
the parties and are not intended to be a part of this Agreement or to affect
its meaning or interpretation.
14. CONFLICTS
In the event of conflict between this Agreement and the Contribution
Agreement or any agreement, schedule, exhibit, or annex thereto, this
Agreement, to the extent any part specifically covers a matter, shall control;
provided that any specific matters covered in the Employee Benefits and
Compensation Agreement, dated December 31. 1999 will control over any
conflicting provisions of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized officers as of this ---- day of -------, 2000.
GENROCO, INC.
By:-------------------------------
Keith Brue
Executive Vice President and
Chief Financial Officer
VIDEOPROPULSION, INC.
By:-------------------------------
Chris Good
Executive Vice President and
Chief Technical Officer
CONFIDENTIALITY AND
NONDISCLOSURE AGREEMENT
This Agreement, dated as of January 1, 2000 (the "Effective Date"), is made
between GENROCO, INC., a Wisconsin corporation ("GENROCO"), with offices at 255
Info Highway, Slinger, Wisconsin 53086, and VIDEOPROPULSION, INC., a Wisconsin
corporation ("VideoPropulsion"), with offices at 251 Info Highway, Slinger,
Wisconsin 53086.
WHEREAS, the video Division was a division as a functional unit thereof
(the "Division"), of GENROCO until the Effective Date when it was spun off as a
separate and independent company, VideoPropulsion (the "Spin-off");
WHEREAS, GENROCO and the Division (and now VideoPropulsion) are the
respective proprietary owners of confidential information concerning technical
and other confidential data (the "Proprietary Information");
WHEREAS, GENROCO and VideoPropulsion consider the Proprietary Information
to be valuable, confidential and not otherwise available for disclosure;
WHEREAS, GENROCO and VideoPropulsion have entered into certain agreements
to govern their relationship after the Spin-off (the "Spin-off Agreements") and
the Spin-off Agreements will require that GENROCO and VideoPropulsion disclose
information to one another which one or the other safeguards as confidential
(the "Spin-off Confidential Information"); and
WHEREAS, prior to the Spin-off certain of GENROCO's and VideoPropulsion's
employees were privy to information regarding GENROCO's and VideoPropulsion's
business operations which one or the other regards as confidential (the "General
Confidential Information").
NOW THEREFORE, in consideration of the promises set forth herein, the
parties do hereby agree as follows:
1. PROPRIETARY INFORMATION
VideoPropulsion and GENROCO agree to treat the Proprietary Information as
confidential and acknowledge that an equivalent of a fiduciary and confidential
relationship between GENROCO and VideoPropulsion is established as a result of
each party providing any Proprietary Information to the other party.
VideoPropulsion and GENROCO agree to disclose the Proprietary Information
of the other only to such employee(s), representatives, advisers, officers,
directors and agents as necessary and only if such persons agree to respect the
fiduciary and confidential relationship between GENROCO and VideoPropulsion.
VideoPropulsion or GENROCO or any of their respective employee(s),
representatives, advisers, officers, directors and agents shall not make any use
or disclosure of the Proprietary Information to any other third party without
the owner's prior written consent.
GENROCO and VideoPropulsion shall safeguard all General Confidential
Information possessed by either of their employee(s) from disclosure to third
parties in the same manner that either GENROCO or VideoPropulsion safeguards its
own information of a similar nature and neither GENROCO nor VideoPropulsion
shall disclose General Confidential Information to any other person without the
prior consent of GENROCO or VideoPropulsion, as applicable. Such consent shall
not be unreasonably withheld.
GENROCO and VideoPropulsion shall restrict use and disclosure of all
General Confidential Information to employee(s), advisers and agents having a
need to know for purposes of facilitating GENROCO's or VideoPropulsion's
business operations.
GENROCO and VideoPropulsion shall, during the period of confidentiality,
restrict use and disclosure of all Spin-off Confidential Information to
employee(s), advisers and agents having a reasonable need to know for the
purpose of facilitating GENROCO's or VideoPropulsion's business operations.
2. NON-CONFIDENTIAL INFORMATION.
The provisions of Section 1 of this Agreement shall not apply to:
(a) information which at the time of disclosure is generally available to
the public in a published work; or
(b) information which after disclosure by either GENROCO or
VideoPropulsion becomes published or generally available to the
public, otherwise than through any act or omission on the part of
GENROCO or VideoPropulsion; or
(c) information which either GENROCO or VideoPropulsion can show was in
its possession at the time of disclosure and which was not acquired
directly or indirectly from the other either prior to, on or after the
Effective Date; or
(d) information rightfully acquired from others who did not obtain it
under pledge of secrecy to either GENROCO or VideoPropulsion; or
(e) information required to be disclosed pursuant to a court, federal
regulatory agency, or state regulatory agency order, or required to be
disclosed pursuant to any federal or state statutory or regulatory
provision provided the party provides the other party with five
business days written notice of such disclosure.
3. REMEDIES.
In an effort to resolve informally and amicably any claim or any
controversy arising out of or relating to the interpretation or performance of
this Confidentiality and Nondisclosure Agreement without resorting to
litigation, a party shall first notify the other of any difference or dispute
hereunder that requires resolution. GENROCO and VideoPropulsion each shall
designate an employee to investigate, discuss and seek to settle the matter
between them. If the two are unable to settle the matter within 30 days after
such notification (or such longer period as may be explicitly agreed upon), the
matter shall be submitted to a senior officer of GENROCO and VideoPropulsion,
respectively, for consideration.
If settlement cannot be reached through the efforts of the senior officers
within an additional 30 days (or such longer period as may be agreed upon), the
parties shall consider arbitration or other alternative means to resolve the
dispute.
If the parties are unable to agree on an alternative dispute resolution
mechanism, either party may initiate legal proceedings to resolve such matter.
In the event of legal proceedings, GENROCO and VideoPropulsion agree that
it is impossible to measure in money the damages that may accrue to a party
hereto by reason of a failure to perform any of the obligations hereunder.
Therefore, in the event of any controversy concerning the rights or obligations
under this Confidentiality Agreement such rights or obligations shall be
enforceable in a court of equity by a decree of specific performance. Such
remedy, however, shall be cumulative and non-exclusive and it shall be in
addition to any other remedy which the parties may have.
4. MISCELLANEOUS.
(a) Governing Law. This Agreement and the transactions contemplated
-------------
hereby shall be construed in accordance with and governed by the internal laws
of the State of Wisconsin.
(b) Entire Agreement. This Agreement, the Contribution Agreement and the
----------------
other Agreements and instruments executed and delivered pursuant to this
Agreement or the Contribution Agreement constitute the entire understanding of
the parties hereto with respect to the subject matter hereof, superseding all
negotiations, prior discussions and prior agreements and understandings relating
to such subject matter; provided, however, that the specific provisions of any
other agreement between the parties executed and delivered by the parties in
connection with the closing under the Contribution Agreement shall not be
superseded by this Agreement and to the extent any such other agreement is in
conflict herewith, such specific agreement shall control.
(c) Parties In Interest. Neither party may assign its rights or delegate
-------------------
any of its duties under this Agreement without prior written consent of the
other. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
third party any benefits, rights or remedies.
(d) Effectiveness. This Agreement shall become effective at the Effective
-------------
Date and may be terminated by GENROCO at any time prior thereto without any
liability on GENROCO's part.
(e) Consolidation, Merger, Etc. Involving VideoPropulsion. VideoPropulsion
-----------------------------------------------------
shall not consolidate with or merge into any other Person or convey, transfer or
lease all or any substantial portion of its properties and assets to any Person,
and VideoPropulsion shall not permit any Person to consolidate with or merge
into VideoPropulsion or convey, transfer or lease all or any substantial portion
of its properties and assets to VideoPropulsion, unless, in case VideoPropulsion
shall consolidate with or merge into another Person or convey, transfer or lease
all or any substantial portion of its properties and assets to any Person, the
Person formed by such consolidation or into which VideoPropulsion is merged or
the Person which acquires by conveyance or transfer, or which leases all or any
substantial portion of properties and assets of VideoPropulsion shall be a
corporation, partnership or trust shall be organized and validly existing under
the laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by a written agreement, executed and
delivered to GENROCO, in form reasonably satisfactory to GENROCO, all the
liabilities, obligations and expenses to be assumed by VideoPropulsion under
this Agreement and the due and punctual performance or observance of every
agreement and covenant of this Agreement on the part of VideoPropulsion to be
performed or observed.
For purposes of this Section, "Person" shall mean any individual, corpora-
tion, partnership, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(f) Reformation and Severability. If any provision of this Agreement
-----------------------------
shall be held to be invalid, unenforceable or illegal in any jurisdiction under
any circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (ii) if such provision
cannot be so reformed, such provision shall be severed from this Agreement.
Such holding shall not affect or impair the validity, enforceability or legality
of such provision in any other jurisdiction or under any other circumstances.
Neither such holding nor such reformation or severance shall affect or impair
the legality, validity or enforceability of any other provisions of this
Agreement to the extent that such other provision is not itself actually in
conflict with any applicable law.
(g) Titles and Headings. All titles and headings have been inserted
--------------------
solely for the convenience of the parties and are not intended to be a part of
this Agreement or to affect its meaning or interpretation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers this ----- day of ----------, 2000.
GENROCO, INC.
By: -------------------------------------
Keith Brue
Executive Vice President and
Chief Financial Officer
VIDEOPROPULSION, INC.
By: -------------------------------------
Chris Good
Executive Vice President and
Chief Technical Officer
EXHIBIT 10.10 - CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
- - ---------------------------------------------------------
As independent public accountants, we hereby consent to the use of our report
(and to all references made to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 22, 2000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1998
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<CGS> 132,000
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<EPS-BASIC> (48.18)
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
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<RECEIVABLES> 11,000
<ALLOWANCES> 0
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