<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 1996
REGISTRATION NO. 33-12959
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
SENTO TECHNICAL INNOVATIONS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
UTAH 7373 87-0284979
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
311 NORTH STATE STREET, OREM, UTAH 84057
(801) 226-3355
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ROBERT K. BENCH, PRESIDENT
SENTO TECHNICAL INNOVATIONS CORPORATION
311 NORTH STATE STREET
OREM, UTAH 84057
(801) 226-3355
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
RICHARD G. BROWN, ESQ.
BRIAN G. LLOYD, ESQ.
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
(801) 532-7840
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
Common Stock, $0.25 par value.............. 1,096,214 shares $3.00 $3,288,642 $1,135.00
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) $950.00 has been paid previously; the balance of $185.00 is paid in
connection with an aggregate increase of 449,000 shares.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
----------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Forepart of the Registration Statement; Outside Front
Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Outside Front Cover Page; Prospectus Summary; Risk
Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Plan of Distribution
6. Dilution............................................. Not Applicable
7. Selling Security Holders............................. Management; Principal and Selling Shareholders
8. Plan of Distribution................................. Plan of Distribution
9. Description of Securities to be Registered........... Description of Capital Stock
10. Interests of Named Experts and Counsel............... Legal Matters; Experts
11. Information with Respect to the Registrant........... Outside Front Cover Page; Prospectus Summary; Risk
Factors; The Company; Recent Developments; Dividend
Policy; Capitalization; Price Range of Common Stock;
Selected Condensed Consolidated Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Relationships and Related Party
Transactions; Principal and Selling Shareholders;
Description of Capital Stock; Shares Eligible for
Future Sale; Consolidated Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Management
</TABLE>
<PAGE>
[ LOGO ]
PROSPECTUS
1,096,214 SHARES
SENTO TECHNICAL
INNOVATIONS CORPORATION
COMMON STOCK
---------------
This Prospectus relates to 1,096,214 shares of outstanding common stock,
$0.25 par value (the "Common Stock"), of Sento Technical Innovations Corporation
(the "Company"). All of the shares of Common Stock offered hereby are being sold
by existing shareholders of the Company (the "Selling Shareholders"). See
"Principal and Selling Shareholders." Approximately 405,000 shares offered
hereby were acquired by certain Selling Shareholders in connection with a
private placement completed by the Company on June 18, 1996. See "Recent
Developments--Private Placement." Approximately 600,000 additional shares
offered hereby were acquired by certain Selling Shareholders in connection with
a share exchange consummated by the Company on April 18, 1996. See "Recent
Developments--Share Exchange." The Company will not receive any of the proceeds
from the sale by the Selling Shareholders of any of the shares offered hereby.
The Common Stock is quoted on the National Association of Securities Dealers
("NASD") over-the-counter bulletin board service under the symbol "STIC." On
October 29, 1996, the last reported sale price of the Common Stock, as reported
by the National Quotation Bureau was $3.00 per share. See "Price Range of Common
Stock." The NASD has approved the Company's application for quotation of the
Common Stock on the NASDAQ Small Cap Market under the symbol "SNTO."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 5 OF THIS PROSPECTUS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1996
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), a registration statement on Form S-1 (the "Registration Statement") with
respect to the shares of Common Stock offered hereby. This Prospectus, filed as
a part of that Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information regarding the Company and
the shares offered hereby, reference is made to the Registration Statement,
including the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete, and, in each instance, reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in its entirety by such
reference.
The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended, and in accordance therewith
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information concerning the Company may be
inspected and copied without charge at the Public Reference Section of the
Commission, 450 5th Street, N.W., Room 1024, Washington, D.C. 20549, and the
Commission's regional offices located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such materials may also be obtained upon written request
from the Public Reference Section of the Commission upon payment of prescribed
fees.
In addition, the Company intends to furnish its shareholders with annual
reports which include financial statements that have been audited with a report
thereon by its independent accountants and quarterly reports containing
unaudited summary financial information for the first three quarters of each
fiscal year.
PROPRIETARY MARKS
The Company and its subsidiaries offer, sell and utilize many third-party
products represented by registered or common law trademarks, including the
following trademarks: Novell-Registered Trademark-and UNIX -Registered
Trademark- are trademarks of Novell, Inc. Wordperfect-Registered Trademark-, WP
Office-TM- and Groupwise-TM- are trademarks of Corel Corporation. DEC-Registered
Trademark-, VMS-Registered Trademark-, Open VMS-TM-, VAX,-Registered Trademark-
Alpha-TM- and Pathworks-TM- are trademarks of Digital Equipment Corporation.
Microsoft-Registered Trademark-, MS-DOS-Registered Trademark-, DOS-TM-,
Windows-Registered Trademark-, Windows NT-Registered Trademark- and Windows
95-TM- are trademarks of Microsoft Corporation. Lotus-Registered Trademark- and
Lotus 1-2-3-TM- are trademarks of Lotus Development Corporation.
Apple-Registered Trademark-, Macintosh-Registered Trademark- and Mac-Registered
Trademark- are registered trademarks of Apple Computer, Inc. OS/2-TM- is a
trademark of IBM Corporation. Intel-Registered Trademark- is a registered
trademark of Intel Corporation. SYSMON-TM- is a trademark of Australian Software
Innovations (Services) Pty Ltd. LANutil-Registered Trademark- and
PC-Duo-Registered Trademark- are registered trademarks of Vector Networks
Limited. TAPESYS-Registered Trademark-, THRUway-Registered Trademark-,
THRUnet-Registered Trademark- and StorageCenter-Registered Trademark- are
registered trademarks of Software Partners/32, Inc. CONTRL-Registered
Trademark-, RaxMaster-TM-, ClydeSupport-TM-, UltraDisk-TM-, and PerfectFile-TM-
are trademarks of Raxco, Inc. This Prospectus also contains trademarks of other
companies.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Sento Technical Innovations Corporation ("Sento" or the "Company") develops,
configures, markets and distributes industry-leading hardware and software
computing solutions, combined with consulting, training and support services, to
business, government and educational organizations world-wide through direct
sales and marketing, channel distribution, and industry partners.
The Company, through its four wholly-owned subsidiaries, Spire Technologies,
Inc. ("Spire Technologies"), Spire Systems Incorporated ("Spire Systems"),
DewPoint Distributed Solutions Incorporated ("DewPoint") and Centerpost
Innovations Pty. Ltd., develops and implements system management and office
automation solutions for open and proprietary computing environments, acts as a
"service and value-added reseller" and distributor of software developed by
third parties, resells Digital Equipment Corporation ("Digital") network
computer systems and components on a value-added basis and manages value-added
reseller and distribution channels in the Americas, Europe, and Southeast Asia.
The Company offers a wide range of desktop, workstation, client/server and
centralized computing software, systems and peripheral equipment, as well as
channel management and support services for both domestic and international
clientele in a wide variety of industries and computing environments, including
UNIX, Windows NT and Digital Open VMS.
In September 1996, the Company obtained an option to acquire the assets
(including all intellectual property) of Australian Software Innovations
(Services) Pty. Ltd. ("ASI"), a developer of UNIX-based management and
performance monitoring software and provider of software education and
consulting services based in Sydney, Australia. ASI develops and markets
performance monitoring software and provides related technical consulting
services to customers located in Asia, Europe, the United Kingdom and the United
States. See "Recent Developments--Australian Software Innovations" and
"Business-- Products--Software."
Unless the context requires otherwise, all references to the "Company" in
this Prospectus refer to the Company and each of its subsidiaries. The Company's
principal executive offices are located at 311 North State Street, Orem, Utah
84057, and its telephone number is (801) 226-3355.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Selling
Shareholders................................ 1,096,214 shares
Common Stock outstanding prior to and after
this offering............................... 4,347,914 shares(1)
Use of Proceeds.............................. The proceeds of the offering will be received
by the Selling Shareholders. See "Use of
Proceeds."
Over-the-counter Bulletin Board symbol....... STIC(2)
</TABLE>
- ------------------------
(1) As of October 31, 1996, and excluding 879,209 shares issuable upon the
exercise of outstanding stock options and warrants granted by the Company.
(2) The National Association of Securities Dealers has approved the Company's
application for quotation of the Common Stock on the NASDAQ Small Cap Market
under the symbol "SNTO."
3
<PAGE>
SUMMARY FINANCIAL DATA (1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED APRIL 30, JUNE 30,
---------------------------------------------------------- --------------------
1996 1995 1994 1993 1992 1996 (2) 1995
---------- --------- --------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
STATEMENTS OF INCOME DATA:
Total revenues....................... $13,873,401 $9,674,683 $6,043,411 $5,949,072 $4,164,044 $4,518,439 $3,302,858
Gross profit......................... 5,421,358 3,060,608 2,076,382 1,875,527 1,437,778 1,568,834 1,385,743
Operating income..................... 547,928 133,527 43,869 27,691 11,884 64,020 250,980
Net income........................... 339,555 98,735 18,233 10,951 (8,109) 51,975 153,462
Net income per common share (3)...... .08 .03 -- -- -- .01 .04
Weighted average common shares
outstanding (3).................... 3,992,768 3,346,274 3,612,328 3,547,861 3,547,861 4,269,140 3,949,750
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
JUNE 30, 1996 1996
------------- -------------
<S> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Cash and Cash Equivalents........................................................... $ 2,459,938 $ 1,552,806
Working Capital..................................................................... 2,692,590 943,332
Total Assets........................................................................ 6,755,007 4,544,825
Total Long-term Debt................................................................ 222,169 223,412
Total stockholders' equity.......................................................... 3,103,490 1,480,907
</TABLE>
- ------------------------------
(1) The consolidated financial statements of the Company as of and for the year
ended April 30, 1996 include the financial statements of the Company and the
three subsidiaries of the Company owned during such year (Spire
Technologies, Spire Systems and DewPoint). The financial statements of the
Company as of April 30, 1995, and for each of the years in the two-year
period then ended are the combined financial statements of Spire
Technologies and Spire Systems prior to the consummation of the share
exchange transaction completed by the Company in April 1996. See "Recent
Developments--Share Exchange." All significant intercompany balances and
transactions have been eliminated in consolidation or combination.
(2) In June 1996, the Company changed its fiscal year end from April 30 to March
31 of each year, commencing with the fiscal year ending March 31, 1997. The
consolidated financial statements set forth in this Prospectus are based
upon the Company's former fiscal year end of April 30.
(3) Per share amounts are computed by dividing net income by the weighted
average number of common shares and common share equivalents resulting from
options outstanding. There were 3,992,768, 3,346,274 and 3,612,328 weighted
average common shares and common share equivalents outstanding for the years
ended April 30, 1996, 1995 and 1994, respectively, and there were 3,547,861
weighted average common shares and common share equivalents outstanding for
the years ended April 30, 1993 and 1992, respectively. Income per share for
the 1995 and prior fiscal years has been restated to give effect to the
share exchange completed by the Company in April 1996. See "Recent
Developments--Share Exchange."
4
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THE
MATERIAL SET FORTH UNDER "PROSPECTUS SUMMARY," "RISK FACTORS," "USE OF
PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS," AS WELL AS WITHIN THE PROSPECTUS
GENERALLY. THE FOLLOWING RISK FACTORS CONSTITUTE CAUTIONARY STATEMENTS
IDENTIFYING IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES, WITH
RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS. IN
ADDITION, ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE MATTERS SET FORTH IN THE
PROSPECTUS GENERALLY. THE COMPANY CAUTIONS THE READER THAT THIS LIST OF FACTORS
MAY NOT BE EXHAUSTIVE. AN INVESTMENT IN THE SHARES OF COMMON STOCK BEING OFFERED
HEREBY INVOLVES A HIGH DEGREE OF RISK. BEFORE MAKING A DECISION TO PURCHASE ANY
OF THE SHARES OF COMMON STOCK DESCRIBED IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS AS WELL AS THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS.
RELIANCE ON SUPPLIERS. The Company is solely dependent on Digital Equipment
Corporation ("Digital") and authorized distributors of Digital products for its
supply of hardware. In addition, the Company obtains and resells software from
various third-party vendors, many of whom are the Company's sole sources for
such software. Over 70% of the combined revenues of the Company are derived from
products it obtains from three suppliers: Digital, Corel Corporation ("Corel")
and Lotus Development Corporation ("Lotus"). If one of the third-party vendors
of such hardware or software products were to become unavailable, the Company
would be required to seek other sources for alternative products. There can be
no assurance that the Company would be able to obtain competitive alternate
sources of supply for such products. The failure of such suppliers to deliver
such items on a timely basis, or the necessity that the Company obtain
replacement products for unavailable suppliers, could adversely affect the
operating results of the Company until alternative sources of supply, if any,
could be arranged. Should these suppliers select a different distribution
channel or fail to renew existing distribution agreements with the Company, the
profitability and ability of the Company to continue in business could be
significantly compromised.
These suppliers could fail to supply hardware or software to the Company for
reasons including but not limited to the following:
- the supplier could go out of business or sell its product line;
- the supplier could change its distribution methods and channels and cancel
agreements with third parties such as the Company or otherwise fail to
renew its agreement with the Company;
- the supplier could increase its product price to the Company thereby
adversely affecting profit margins for such products and the desire of the
Company to continue to represent such products; or
- the Company could fail to meet performance quotas or other standards
contained in certain of its agreements with suppliers, resulting in
termination of the agreements.
Many of the agreements between the Company and third-party suppliers are
verbal agreements and have not been reduced to writing.
CHANGING MARKET. The market for computer products and services is
continually changing. The Company anticipates that the market for office
automation products on server applications will decrease as those functions move
to desk-top computers. Company management has identified the markets for UNIX
and Windows NT operating systems as promising growth potential for the Company;
however, such potential is not yet proven and may not evolve or prove
sufficiently profitable. Company management anticipates that there will be
significant competition for products in the Windows NT market, resulting in
lower margins.
5
<PAGE>
COMPETITION. The market for computer products is competitive, evolving and
subject to rapid technological change. Many of the current and potential
competitors of the Company have longer operating histories, greater name
recognition, larger installed customer bases, and significantly greater
financial, technical and marketing resources than the Company. The methods of
competition in the computer products industry include marketing, product
performance, price, service, technology and compliance with various industry
standards, among others. It is possible for companies to be at various times
competitors, customers and collaborators of each other in different markets.
There can be no assurance that additional products will not be developed in
competition with those sold by the Company. If developed, such products may be
more effective than those sold by the Company. Although the Company continues to
seek new products to complement its existing product lines and, as necessary, to
replace existing products with newer and better products, there can be no
assurance that the Company will be able to do so.
PRODUCT DEVELOPMENT RISK. The information technology industry is
characterized by rapid change, including frequent new product introductions,
continuing advances in technology and changes in customer requirements and
preferences. The introduction of new technologies could render the Company's
existing products obsolete or unmarketable or require the Company to invest
resources in products that may not become profitable. The development cycle for
the Company's new products may be significantly longer than the Company's
historical product development cycle, resulting in higher development costs or a
loss in market share. There can be no assurance that (i) the Company will be
able to counter competition to its current products; (ii) the Company's future
product offerings will keep pace with the technological changes implemented by
competitors; (iii) the Company's products will satisfy evolving preferences of
customers and prospects; or (iv) the Company will be successful in developing
and marketing products for any future technology. Failure to develop and
introduce new products and product enhancements in a timely fashion could have a
material adverse effect on the Company's financial condition and results of
operations.
SALES AND DISTRIBUTION RISKS. As of October 31, 1996, the Company had 40
employees in its direct sales organization and 5 employees in its marketing
organization, many of whom have been employed by the Company for less than a
year. In order to support sales growth, if any, the Company will need to
maintain the size of its sales and marketing staff, increase the staff's
productivity and continue to develop indirect distribution channels. There can
be no assurance that the Company will be able to leverage successfully its sales
force or that the Company's sales and marketing organization will successfully
compete against the sales and marketing organizations of the Company's current
and future competitors. The Company is in the early stages of developing its
indirect distribution channels in North America, Europe and Southeast Asia.
There can be no assurance that the Company will be able to attract third parties
that will be able to market the Company's products effectively and will be
qualified to provide timely and cost-effective customer support and service. The
Company's distributors and resellers may carry competing product offerings.
There can be no assurance that any distributor or reseller will continue to
represent the Company's products. The inability to recruit, or the loss of,
important sales personnel, distributors or resellers could materially adversely
affect the Company's financial condition and results of operations.
MARKETING. The Company markets its products and services through a direct
sales force of approximately 40 persons operating from locations in Utah and
North Carolina. In addition, arrangements with third parties, including hardware
manufacturers, software developers, resellers and authorized distributors, are
becoming an increasingly important part of the Company's focus on providing
solutions to its customers and expanding distribution of its products and
services through indirect channels domestically and internationally. The loss of
services of certain of such third-party distributors or resellers could have a
material adverse effect on the business, financial condition and results of
operations of the Company.
POTENTIAL SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS AND
LENGTHY SALES CYCLE. The value of individual transactions as a percentage of
quarterly revenues can be substantial, and particular transactions
6
<PAGE>
may generate a substantial portion of the operating profits for a quarter. The
sales of the Company's system management products generally involve significant
education of prospective customers as well as a commitment of resources by both
parties. For these and other reasons, the sales cycle associated with the sales
of these products is typically between six and twelve months and subject to a
number of significant risks over which the Company has little or no control.
Because the Company's staffing and other operating expenses are based on
anticipated revenue levels, and a high percentage of the Company's expenses are
fixed, delays in the receipt of orders can cause significant variations in
operating results from quarter to quarter. In addition, the Company may expend
significant resources pursuing potential sales that will not be consummated. The
Company also may choose to reduce prices or to increase spending in response to
competition or to pursue new market opportunities, which may adversely affect
the Company's operating results. Accordingly, the Company believes that
period-to-period comparisons of its results of operations may not be meaningful
and should not be relied upon as an indication of future performance.
Furthermore, there can be no assurance that the Company will be able to grow and
sustain profitability on a quarterly basis.
POSSIBLE VOLATILITY OF STOCK PRICE. The trading price of the Common Stock
could fluctuate widely in response to variations in quarterly operating results,
announcements by the Company or its competitors, industry trends, general
economic conditions or other events or factors. Among other factors, as
described in the preceding paragraph, it is likely that in some future quarters
the Company's operating results will be below the expectations of public market
analysts and investors. Regardless of the general outlook for the Company's
business, the announcement of quarterly operating results below analyst and
investor expectations could have a material and adverse effect on the market
price of the Common Stock.
COLLECTION OF ACCOUNTS. The Company's business of selling hardware and
software products involves certain account collection risks. In the event a
hardware purchaser defaults on its payment obligation, the Company would file a
credit insurance claim; however, the insurer may deny coverage or otherwise fail
to pay. With respect to software sales, a customer who has ordered and received
software from the Company may fail to pay timely for the software, thus creating
a collection problem for the Company. In addition, a distributor may default in
timely payment of amounts owing to the Company.
DEPENDENCE ON KEY PERSONNEL. The success of the Company depends, in large
part, on its ability to attract and retain highly-qualified managerial, sales,
marketing, technical support, and product development personnel. The Company has
not entered into employment agreements that require the services of its key
personnel to remain with the Company for any specified period of time. The loss
of the current key personnel of the Company could have a material adverse effect
on the Company. Competition for such personnel is intense, and there can be no
assurance that the Company will be able to attract and maintain all personnel
necessary for the development and operation of its business. The loss of the
services of key personnel or an inability to attract, retain and motivate
qualified personnel could have a material adverse effect on the business,
financial condition and results of operations of the Company.
ACQUISITION RISKS. The Company plans to evaluate opportunities for the
license or acquisition of additional software products as well as the possible
acquisition of, or development of strategic relations with, other companies who
may have products or distribution channels that are compatible with the business
objectives of the Company. The Company must compete for attractive acquisition
or strategic alliance candidates with numerous other companies, many of whom
have significantly greater financial resources than the Company. There can be no
assurance that the Company will be able to successfully identify acquisition and
strategic alliance opportunities that are appropriate for the Company. Such
acquisitions and alliances could involve the incurrence of additional debt,
amortization expenses related to goodwill and intangible assets or the dilutive
issuance of equity securities, all of which could adversely affect the Company's
operating results. Accordingly, future acquisitions and alliances may have an
adverse effect on the Company's operating results, particularly in the fiscal
quarters immediately following the consummation of such transactions, while the
operations of the acquired or combined business are being
7
<PAGE>
integrated into the Company's operations. There can be no assurance that capital
sought by the Company to pursue such opportunities can be obtained on terms
favorable to the Company, if at all. The failure of the Company to obtain such
financing could restrict its ability to pursue such business opportunities.
Further, there can be no assurance that any particular acquisition or alliance
will be successfully integrated into the Company's operations or will achieve
profitability.
CONCENTRATION OF SHARE OWNERSHIP. The current officers and directors of the
Company own beneficially approximately 50.1% of the issued and outstanding
shares of Common Stock and, upon the sale of the shares offered hereby (assuming
the sale of all such shares), such persons will own beneficially approximately
44.6% of the issued and outstanding shares of Common Stock. As a result, the
current officers and directors of the Company possess voting power sufficient to
influence significantly the affairs of the Company. Such concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control or management of the Company. See "Management--Executive Officers and
Directors," "Principal and Selling Shareholders" and "Description of Capital
Stock." Future sales by current officers and directors of the Company of
substantial amounts of Common Stock, or the potential for such sales, could
adversely affect the prevailing market price for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock. As of October 31, 1996, the
Company had 4,347,914 shares of Common Stock outstanding, of which 1,485,656
shares, including 1,096,214 of the shares offered hereby, will, upon the
effectiveness of the Registration Statement, be eligible under applicable
securities laws for immediate sale in the public market without restriction,
except for any shares purchased by an "affiliate" of the Company (as that term
is defined under the rules and regulations of the Securities Act) which will be
subject to the resale limitations of Rule 144 under the Securities Act ("Rule
144"). The remaining approximately 2,862,258 outstanding shares are "restricted
securities," as that term is defined under Rule 144, and may be eligible for
sale, subject to certain restrictions, in the open market pursuant to Rule 144.
ANTI-TAKEOVER CONSIDERATIONS. The Company's Articles of Incorporation, as
amended (the "Articles"), the Company's Bylaws, as amended (the "Bylaws"), the
Utah Revised Business Corporation Act (the "Corporation Act"), and the Utah
Control Shares Acquisition Act (the "Control Shares Act") contain certain
provisions that may have the effect of inhibiting a non-negotiated merger or
other business combination. These provisions may have the effect of deterring
hostile takeovers or delaying or preventing changes in control or management of
the Company, including transactions in which shareholders might otherwise
receive a premium for their shares over the then-current market prices. In
addition, these provisions may limit the ability of shareholders to approve
transactions that they may deem to be in their best interests. See "Description
of Capital Stock."
8
<PAGE>
THE COMPANY
The Company, through its wholly-owned subsidiaries, Spire Technologies, Inc.
("Spire Technologies"), Spire Systems Incorporated ("Spire Systems"), DewPoint
Distributed Solutions Incorporated ("DewPoint") and Centerpost Innovations Pty.
Ltd. ("Centerpost"), develops and implements system management and office
automation solutions for open and proprietary computing environments, acts as a
"service and value-added reseller" and distributor of software developed by
third parties, resells Digital network computer systems and components on a
value-added basis and manages valued-added reseller ("VAR") and distribution
channels in the Americas, Europe, and Southeast Asia. The Company offers a wide
range of desktop, workstation, client/server and centralized computing software,
systems and peripheral equipment, as well as channel management and support
services for both domestic and international clientele in a wide variety of
industries and computing environments, including UNIX, Windows NT and Digital
OpenVMS.
The Company was incorporated in the State of Utah in May 1969 for the
purpose of mineral exploration and development. From 1974 until April 1996, the
Company was engaged almost exclusively as a participant with others in oil and
gas exploration and development. On April 18, 1996, the Company consummated a
share exchange transaction with Spire Technologies and Spire Systems (the "Spire
Companies"), by which the Company acquired all the issued and outstanding
capital stock of the Spire Companies in exchange for the issuance to the holders
of the capital stock of the Spire Companies of a number of shares of Common
Stock equal to approximately 90% of the number of issued and outstanding shares
of Common Stock immediately after the consummation of the exchange transaction.
See "Recent Developments--Share Exchange." Effective May 1, 1996, the Company
divested itself of all oil and gas interests. The Company does not intend to
participate in any oil and gas operations in the future. See "Business--Oil and
Gas Operations." The Company changed its name from Spire International Corp. to
Sento Technical Innovations Corporation on September 10, 1996. Prior to August
17, 1996, Spire Systems operated under the name Spire Technologies Systems
Division, Inc.
Spire Technologies and Spire Systems were incorporated in the State of Utah
in 1986 and 1992, respectively, and, until the completion of the share exchange
transaction with the Company in April 1996, conducted the business operations
now conducted by the Company. In 1991, Amacan Industries, Inc. was incorporated
in the State of Utah for the purpose of pursuing business opportunities. In
September 1996, Amacan Industries, Inc. changed its name to DewPoint Distributed
Solutions Incorporated and began its current operations providing worldwide
distribution, reseller, and channel management for a number of leading software
manufacturers, including Corel, Trend Micro, Inc., and Secure Computing, Inc.
Centerpost was organized in July 1996 as a limited company under the laws of the
State of New South Wales, Australia. Centerpost conducts the Company's business
operations in Australia, Japan and Southeast Asia.
For purposes of this Prospectus, unless the context indicates otherwise, the
term "Company" includes the Company and its subsidiaries. The Company's
principal offices are located at 311 North State Street, Orem, Utah 84057, and
its telephone number is (801) 226-3355.
9
<PAGE>
RECENT DEVELOPMENTS
SHARE EXCHANGE
Pursuant to an Agreement and Plan of Reorganization dated January 23, 1996
(the "Exchange Agreement") among the Company (formerly known as Amacan Resources
Corporation or "Amacan"), the Spire Companies and the holders of all of the
capital stock of the Spire Companies (collectively, the "Spire Stockholders"),
the Company acquired all of the issued and outstanding stock of the Spire
Companies in exchange for the issuance of 3,502,223 shares of Common Stock to
the Spire Stockholders (together with its related transactions, the "Share
Exchange"). The Exchange Agreement also provided for, among other things, a
one-for-seven reverse split of the shares of Common Stock issued and outstanding
at the effective time of the Share Exchange (the "Effective Time") (excluding
the shares issued to the Spire Stockholders), an amendment of the Company's
Articles to change the Company's name to Spire International Corp., adoption of
the Amacan Resources Corporation Stock Incentive Plan, which was subsequently
renamed the Sento Technical Innovations Corporation Stock Incentive Plan (the
"Option Plan"), and the substitution of options to purchase shares of Common
Stock under the Option Plan for outstanding options to purchase shares of the
common stock, par value $.01 per share, of Spire Technologies (the "Spire
Technologies Common Stock") issued pursuant to the Spire 1995 Stock Option and
Award Plan (the "Spire Option Plan"). As a result of the Share Exchange, the
Spire Companies became wholly-owned subsidiaries of the Company and the Spire
Option Plan was terminated.
At the Effective Time, in accordance with the terms of the Exchange
Agreement, each issued and outstanding share of the Spire Technologies Common
Stock was exchanged for 35.4786 shares of Common Stock, and each issued and
outstanding share of the common stock, no par value, of Spire Systems (the
"Spire Systems Common Stock") was exchanged for 4.0155 shares of Common Stock.
After giving effect to the Share Exchange, the shares of Common Stock owned by
the shareholders of the Company immediately prior to the Share Exchange
represented approximately 10% of the outstanding shares of Common Stock, and the
shares of Common Stock acquired in the Share Exchange by the Spire Stockholders
represented approximately 90% of the outstanding shares of Common Stock.
PRIVATE PLACEMENT
On June 18, 1996, the Company completed a private offering (the "Private
Placement") of 223,024 units (the "Units"), at $7.00 per Unit, with each Unit
consisting of two shares of Common Stock plus one warrant (a "Warrant") to
purchase one share (a "Warrant Share") of Common Stock for $3.50 at any time
prior to or on April 30, 1998. The Units sold in the Private Placement consisted
of 446,048 shares and Warrants exercisable for the purchase of 223,024 Warrant
Shares, from which $1,561,168 of cash proceeds were received. The Company
intends to use the proceeds of the Private Placement to acquire additional
software licenses and technology, to fund additional research and development,
and for additional working capital. As of the date of this Prospectus, no
Warrants have been exercised and no Warrant Shares have been issued by the
Company pursuant thereto.
AUSTRALIAN SOFTWARE INNOVATIONS
EXCLUSIVE LICENSE AGREEMENT. Effective July 1, 1996, the Company, through
Spire Technologies, entered into an Exclusive License and Technical Assistance
Agreement (the "ASI License Agreement") with Australian Software Innovations
(Services) Pty. Ltd., a limited company organized under the laws of the
Commonwealth of Australia ("ASI"). ASI, which maintains its principal office in
Sydney, Australia, develops and markets performance monitoring software and
provides related technical consulting services to customers located in Asia,
Europe, the United Kingdom and the United States. Under the terms of the ASI
License Agreement, the Company acquired an exclusive license (the "ASI License")
in North and South America during a five-year term (which may be extended for up
to three additional five-year periods) to use, market, modify, manufacture,
assemble, test and modify ASI's SYSMON software
10
<PAGE>
program and to use, market, modify, duplicate and sublicense certain technical
information relating to the SYSMON software program. See
"Business--Products--Software." In consideration of the grant of the ASI
License, the Company paid to ASI a non-refundable license fee in the amount of
$550,000 and agreed to pay royalties to ASI during the term of the ASI License
Agreement, based upon product and maintenance revenues generated by the Company
from the use, sale, license and provision of technical support and maintenance
services attributable to the SYSMON software. In the event the Company fails to
meet certain performance criteria set forth in the ASI License Agreement, ASI
may terminate the exclusive nature of the ASI License throughout the remainder
of the ASI License term. The ASI License Agreement is terminable by either party
upon a material breach by the other party which remains uncured for 30 days
following notice from the non-breaching party or by the Company upon 180 days'
notice to ASI.
OPTION AGREEMENT. On September 10, 1996, the Company entered into an Option
Agreement (the "ASI Option Agreement") by and among the Company, ASI, Kilat
Holdings Pty. Limited, a limited company organized under the laws of the
Commonwealth of Australia and the sole shareholder of ASI ("Kilat"), and Eng Lee
and Mary Lee, the sole shareholders of Kilat (the "ASI Shareholders"). The ASI
Option Agreement provides for the Company's acquisition from ASI of all of the
tangible and intangible assets of ASI. Under the terms of the ASI Option
Agreement, ASI granted to the Company an option (the "ASI Option"), exercisable
in the Company's discretion at any time prior to September 10, 1997, to acquire
all or any portion of the tangible and intangible assets (including all
software, trademarks and trade names) of ASI, as determined by the Company;
provided, however, that the Company must notify ASI of its election to exercise
the ASI Option not less than 60 days prior to the expiration of the ASI Option
term.
As consideration for the grant of the ASI Option, the Company paid to ASI an
option purchase payment in the amount of $130,000. In the event the Company
elects to exercise the ASI Option, the Company has agreed to pay to ASI the
exercise price of $1,405,000, consisting of cash in the amount of $1,055,000 and
87,500 shares of Common Stock, subject to certain adjustments to the cash
portion of the exercise price to reflect the profit or loss of ASI for the
period from April 30, 1996 through October 31, 1996. The Company has also agreed
to assume certain liabilities associated with the assets of ASI to be acquired
by the Company. In the event the Company does not exercise the ASI Option prior
to September 10, 1997, the Company will have no obligation to acquire any assets
or assume any liabilities of ASI.
The ASI Option Agreement also contains certain covenants of ASI, Kilat and
the ASI Shareholders to operate the business of ASI during the term of the ASI
Option in a manner consistent with ASI's past practices, to preserve the
Company's exclusive rights during the ASI Option term to acquire the assets of
ASI as contemplated by the ASI Option Agreement and to guarantee the performance
by ASI of its obligations under the ASI Option Agreement. Each of the Company,
ASI, Kilat and the ASI Shareholders has agreed to preserve confidential all
proprietary information of the other parties and to indemnify the other parties
for any losses arising as a result of the indemnifying party's misrepresentation
or breach or nonfulfillment of certain covenants set forth in the ASI Option
Agreement.
In addition to the grant of the ASI Option, Kilat and the ASI Shareholders
agreed to enter into certain restraint of trade agreements prohibiting Kilat and
the ASI Shareholders from engaging, during the ASI Option term and, if the
Company elects to exercise the ASI Option, for a period of three years from the
date of a definitive acquisition agreement, in any business or activity in the
Commonwealth of Australia or elsewhere which is similar to the Company's
business. The ASI Option Agreement also provides for the Company to make
available to ASI a revolving commercial credit facility (the "ASI Facility") in
an amount not to exceed $200,000 on terms to be determined by the mutual
agreement of the Company and ASI. The obligation of ASI to repay all amounts
advanced under the ASI Facility is secured by a pledge by ASI in favor of the
Company of all of ASI's intellectual property. The ASI Facility expires on
September 10, 1997.
11
<PAGE>
USE OF PROCEEDS
All proceeds from any sale of shares offered hereby will be paid directly to
the Selling Shareholders selling such shares. The Company will not receive any
proceeds from the sale of any of the shares offered hereby.
DIVIDEND POLICY
Dividends are payable on the Common Stock when, as and if declared by the
Company's Board of Directors. No dividend has been declared or paid on the
Common Stock to date. At the present time, the Company intends to retain any
future earnings for the further development and growth of its business and
therefore does not anticipate paying any dividends on the Common Stock in the
foreseeable future. The ability of the Company to pay dividends in the future
will be dependent upon earnings levels, liquidity, capital needs, applicable
covenants in the Company's loan agreements, general business conditions and
other factors considered relevant by the Company's Board of Directors.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996. The table should be read in conjunction with the historical financial
statements of the Company and the notes thereto, and the other financial
information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30,
1996
------------
<S> <C>
Total long-term debt................................................................................ $ 222,169
Shareholders' equity:
Common stock, par value $.25 per share, 8,000,000 shares authorized; 4,337,373 shares issued and
outstanding(1).................................................................................... 1,084,343
Additional paid-capital............................................................................. 1,449,656
Retained earnings................................................................................... 569,491
------------
Total shareholders' equity.......................................................................... 3,103,490
------------
Total capitalization................................................................................ $ 3,325,659
------------
------------
</TABLE>
- ------------------------
(1) Does not reflect the possible issuance of up to 1,000,000 shares of Common
Stock that have been reserved for issuance to employees and other
individuals of the Company under the Option Plan, nor the possible issuance
of up to 200,000 shares of Common Stock that are reserved for issuance to
employees of the Company under the Sento Technical Innovations Corporation
1996 Employee Stock Purchase Plan (the "Stock Purchase Plan"). See
"Management--Employee Benefit Plans." As of October 31, 1996, the Company
had granted options for the purchase of 656,135 shares of Common Stock under
the Option Plan and had sold 10,541 shares under the Stock Purchase Plan.
12
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the over-the-counter bulletin board service
maintained by the National Association of Securities Dealers (the "NASD") under
the symbol "STIC." The following table sets forth the range of bid prices for
the Common Stock in the over-the-counter market for the periods indicated, as
reported by the National Quotation Bureau. The quotations represent prices in
the over-the-counter market between dealers in securities, do not include retail
markup, markdown or commissions and do not necessarily represent actual
transactions. Prices shown for the quarters ended April and September 30, 1996
and the two months ended June 30, 1996 reflect the consummation of the Share
Exchange, including a one-for-seven reverse split of the shares of Common Stock
issued and outstanding at the effective time of the Share Exchange.
<TABLE>
<CAPTION>
BID PRICES
--------------------
QUARTER ENDED HIGH LOW
- ------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
September 30, 1996....................................................... $ 6.00 $ 4.25
June 30, 1996 (two months)............................................... 6.00 1.3125
April 30, 1996........................................................... $ 6.00 $ 1.3125
January 31, 1996......................................................... .375 .03125
October 31, 1995......................................................... .125 .03125
July 31, 1995............................................................ .125 .05
April 30, 1995........................................................... $ .125 $ .10
January 31, 1995......................................................... .15 .125
October 31, 1994......................................................... .165 .125
July 31, 1994............................................................ .125 .125
</TABLE>
The closing sale price of the Common Stock, as reported by the National
Quotation Bureau, on October 29, 1996 was $3.00 per share. As of October 31,
1996, the number of shares of Common Stock outstanding was 4,347,914 shares,
held by approximately 422 stockholders of record. The NASD has approved the
Company's application for quotation of the Common Stock on the NASDAQ Small Cap
Market under the symbol "SNTO."
13
<PAGE>
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
The following tables sets forth selected condensed consolidated financial
information with respect to the Company for the periods indicated. This
information should be read in conjunction with the Company's Condensed
Consolidated Financial Statements including the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere herein. The selected condensed consolidated financial
information as of April 30, 1996, 1995 and 1994 and for the three years ended
April 30, 1996 has been derived from consolidated financial statements which
have been audited by KPMG Peat Marwick LLP ("KPMG"), independent auditors, whose
report with respect to such consolidated financial statements appears elsewhere
in this Prospectus. The selected condensed consolidated financial information as
of April 30, 1993 and 1992, and for the two years ended April 30, 1993 and as of
June 30, 1996 and 1995, and for each of the three-month periods then ended, has
been derived from unaudited consolidated financial statements of the Company
which, in the opinion of management, reflect all adjustments which are of a
normal recurring nature necessary for a fair presentation of the results for
such periods. Results for the unaudited period ended June 30, 1996, set forth
herein, are not necessarily indicative of the results to be expected for the
Company's full fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE
YEAR ENDED APRIL 30, 30,
---------------------------------------------------------- ------------------------
1996 1995 1994 1993 1992 1996 (2) 1995
---------- --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
STATEMENTS OF INCOME DATA (1):
Total revenues..................... $13,873,401 $9,674,683 $6,043,411 $5,949,072 $4,164,044 $4,518,439 $3,302,858
Cost of sales...................... 8,452,043 6,614,075 3,967,029 4,073,545 2,726,266 2,949,605 1,917,115
Gross profit....................... 5,421,358 3,060,608 2,076,382 1,875,527 1,437,778 1,568,834 1,385,743
Expenses:
Selling, general and
administrative................. 4,605,402 2,927,081 2,032,513 1,847,836 1,425,894 1,361,315 1,134,763
Research and development......... 268,028 -- -- -- -- 43,499 --
Operating income................. 547,928 133,527 43,869 27,691 11,884 64,020 250,980
Other income (expenses)............ (11,628) 11,696 (16,705) (16,740) (19,993) 10,839 (3,460)
Income before income taxes....... 536,300 145,223 27,164 10,951 (8,109) 74,859 247,520
Income tax expense............... 196,745 46,488 8,931 -- -- 22,884 94,058
Net income....................... 339,555 98,735 18,233 10,951 (8,109) 51,975 153,462
Net income per common share (3).. .08 .03 -- -- -- .01 .04
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, JUNE 30,
---------------------------------------------------------- ------------------------
1996 1995 1994 1993 1992 1996 1995
---------- --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents.......... 1,552,806 766,247 493,460 334,740 194,776 2,459,938 1,652,769
Accounts receivable................ 2,176,642 1,524,948 879,007 1,421,684 868,560 3,523,222 2,110,338
Working capital.................... 943,332 183,268 243,573 845,382 633,737 2,692,590 1,595,650
Total assets....................... 4,544,825 2,815,857 1,821,325 2,238,761 1,425,239 6,755,007 4,981,422
Total liabilities.................. 3,063,918 2,392,563 1,496,766 1,469,381 835,992 3,651,517 3,841,176
Total stockholders' equity......... 1,480,907 423,294 324,559 769,380 589,247 3,103,490 1,140,246
</TABLE>
- ------------------------------
(1) The consolidated financial statements of the Company as of and for the year
ended April 30, 1996 include the financial statements of the Company and the
three subsidiaries of the Company owned during such year (Spire
Technologies, Spire Systems and DewPoint). The financial statements of the
Company as of April 30, 1995, and for each of the years in the two-year
period then ended are the combined financial statements of Spire
Technologies and Spire Systems prior to the completion of the Share
Exchange. All significant intercompany balances and transactions have been
eliminated in consolidation or combination.
(2) In June 1996, the Company changed its fiscal year end from April 30 to March
31 of each year, commencing with the fiscal year ending March 31, 1997. The
consolidated financial statements set forth in the Prospectus are based upon
the Company's former fiscal year end of April 30.
(3) Per share amounts are computed by dividing net income by the weighted
average number of common shares and common share equivalents resulting from
options outstanding. There were 3,992,768, 3,346,274 and 3,612,328 weighted
average common shares and common share equivalents outstanding for the years
ended April 30, 1996, 1995 and 1994, respectively, and there were 3,547,861
weighted average common share and common share equivalents outstanding for
the years ended April 30, 1993 and 1992, respectively. Income per share for
the 1995 and prior fiscal years has been restated to give effect to the
Share Exchange. See "Recent Developments--Share Exchange."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Historically, the Spire Companies have focused their sales and distribution
efforts on two product lines within the mid-range client/server computer market
niche: providing services as a VAR of Digital's network computer hardware
systems and components, and acting as a distributor/VAR for a variety of
software programs and applications developed by third parties. Recently, the
Company has entered into strategic licensing and product development
arrangements with IBM/Lotus, Corel/WordPerfect, Digital, and ASI, through which
the Company became the licensed developer and sole distributor of various
software products.
As part of its ongoing efforts to support customers' needs in the areas of
training, support, and system configuration, the Company offers its customers an
annual maintenance agreement. This allows customers access to the technical
resources and support personnel of the Company, including automatic product
upgrades, "bug fixing" and system configuration consulting. The demand for
technical computer systems consulting represents a growth opportunity for the
Company. The Company hired additional technical consultants in January 1996, and
the Company has begun to concentrate on marketing its consulting services to
generate additional revenues.
Since November 1995, the Company has expanded its distribution model to
include software products that operate in the growing UNIX and NT operating
systems environments. In addition to adding this new family of products, which
serve the UNIX and NT environments, the Company also began marketing a family of
products which provide solutions relating to the Internet. These products
include a third-party product known in the industry as a "firewall," which is
designed to protect an organization's computer network from access by
unauthorized users, and an "antivirus" product which is designed to protect the
computer network from virus intrusion originating from the Internet.
The combined revenues of the Company during fiscal year 1996 from these
various activities are broken down as follows:
- Open VMS software sales amounted to approximately 44% of revenues
- System configuration and hardware sales amounted to approximately 45% of
revenues
- Technical consulting and maintenance services amounted to approximately
11% of revenues
With the addition of new product lines, as described above, the Company's
management anticipates that revenues from the sale of UNIX platform products,
Internet security products, and technical consulting will grow faster, as a
percentage of revenues, than the historical product lines of the Spire
Companies.
No single market sector represents a dominant portion of the Company's
revenue base. Governmental and educational institutions represent approximately
32% of revenues and small to large corporations represent the remaining 68% of
revenues. No single customer represents more than ten percent of the revenues of
the Company. In June 1996, the Company completed the Private Placement of
approximately $1.5 million of Common Stock and Warrants to purchase shares of
Common Stock. See "Recent Developments--Private Placement." The Company intends
to use these funds to acquire additional proprietary software licenses and
provide working capital for expanded operations.
The Company sells its products through a direct sales force of 40
representatives in the United States, and through a number of third-party
resellers in the Americas, Europe, Australia, and Southeast Asia.
15
<PAGE>
RESULTS OF OPERATION
The following table sets forth for the three most recent fiscal years, the
amounts and percentage relationships to revenues of selected items in the
Company's consolidated financial data.
SELECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
1996 1995 1994
AMOUNT % OF REVENUE % CHANGE AMOUNT % OF REVENUE % CHANGE AMOUNT
---------- ------------- ------------ ---------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $13,873,401 100% 43% $9,674,683 100% 60% 6,043,411
Gross Profit.................. 5,421,358 39 77 3,060,608 32 47 2,076,382
Selling, General & Admin...... 4,605,402 33 57 2,927,081 30 44 2,032,513
Research & Development........ 268,028 2 -- -- 0 0 --
Operating Income.............. 547,928 4 310 133,527 1 204 43,869
Net Income.................... 339,555 2 244 98,735 1 442 18,233
Cash and Cash Equivalents..... 1,552,806 103 766,247 55 483,460
Working Capital............... 943,332 415 183,268 (25) 243,579
Total Assets.................. 4,544,825 61 2,815,857 55 1,821,325
Stockholders' Equity.......... 1,480,907 250 423,294 30 324,559
<CAPTION>
% OF REVENUE
-------------
<S> <C>
Revenues...................... 100%
Gross Profit.................. 34
Selling, General & Admin...... 34
Research & Development........ 0
Operating Income.............. 1
Net Income.................... 0
Cash and Cash Equivalents.....
Working Capital...............
Total Assets..................
Stockholders' Equity..........
</TABLE>
FISCAL 1996 COMPARED TO FISCAL 1995
For fiscal 1996, the Company recorded net income of $339,555, or $.08 per
share, on revenues of $13,873,401. This compares to fiscal 1995 net income of
$98,735, or $.03 per share, on revenues of $9,674,683.
REVENUES. Revenues increased $4.2 million or 43% from fiscal 1995 to fiscal
1996. The increase in revenues resulted principally from increased market
penetration in both the software and hardware product lines. Software sales
increased by $2.3 million from fiscal 1995 to fiscal 1996. The increase was due
primarily to the growth of UNIX and Windows NT software product sales and the
release of new versions of WordPerfect for the Digital operating platforms.
Hardware sales in fiscal 1996 increased by $1.9 million compared to fiscal 1995,
largely as a result of the release and customer acceptance of Digital's Alpha
operating platform hardware system during fiscal 1996. The Company's promotional
efforts to bundle the new Alpha Server and Alpha Version of WordPerfect
contributed to the increase in hardware sales. The expansion of the Company's
technical consulting services and maintenance program also contributed to
revenue growth during fiscal 1996.
GROSS PROFIT. As a percentage of revenues, gross profit increased from 32%
in fiscal 1995 to 39% in fiscal 1996. The increase in gross profit as a
percentage of revenues can be attributed primarily to three major factors.
First, the Company received the full license rights to WordPerfect for VMS and
Lotus products. This decreased the royalty paid to the owners and manufacturers
of those products. Second, the new product lines sold by the Company are more
technical in nature, and therefore carry a higher discount from the
manufacturers. Third, the Company enjoyed a higher growth in revenues than the
corresponding growth required for personnel; therefore, fixed costs related to
cost of sales were spread over a larger sales base.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses increased as a percentage of revenues from 30% in fiscal
1995 to 33% in fiscal 1996. The increase was due primarily to four factors:
First, the Company began expanding its international sales channel aggressively
during fiscal 1996. Second, a new UNIX sales division was created to focus on
new product lines. Third, activities relating to the Company's expanded
accounting, legal, and public reporting requirements increased expenses. Fourth,
activities relating to the Company's strategy of acquiring additional products
and other companies required greater expenditures.
16
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist principally of programming costs for new software. During fiscal 1996,
the Company had total responsibility for several newly licensed products. During
that year, the Company released a WordPerfect upgrade, version 5.1+ for Open
VMS/VAX, WordPerfect 5.1+ for Open VMS/Alpha, and Lotus 1-2-3 for Open
VMS/Alpha. Ongoing programming is necessary to keep pace with software
innovations in several segments of the Company's market niche. With the
Company's strategy to acquire additional exclusive licenses and proprietary
technology, management expects this expense category to increase more rapidly as
a percentage of sales in future periods. Research and development costs prior to
fiscal 1996 were not material.
OTHER INCOME. Other income consists primarily of interest income and
interest expense. Interest income has been earned on excess cash invested in
interest-bearing instruments. Interest income is expected to decline in the
future as cash is used increasingly for operational needs and strategic
expansion.
FISCAL 1995 COMPARED TO FISCAL 1994
For fiscal 1995, the Company recorded net income of $98,735 on revenues of
$9,674,683. This compares to fiscal 1994 net income of $18,233 on revenues of
$6,043,411.
REVENUES. Revenues increased 60% from $6,043,411 in fiscal 1994 to
$9,674,683 for fiscal 1995. The growth in revenues resulted primarily from
increases in sales volume of the Company's historic line of products, the
Company's expanded market presence and its entrance into the UNIX and Windows NT
market niches. During fiscal 1995, the Company expanded its direct sales force
and expanded its relationship with additional third party distributors. The
Company also expanded its product line to include network management and
performance software tools which operate on the UNIX and Windows NT operating
systems platforms. Product pricing and sales margins remained relatively stable
during these periods.
GROSS PROFIT. Gross profit as a percentage of revenues decreased from 34%
for fiscal 1994 to 32% for fiscal 1995. This decrease was attributable primarily
to fluctuations in royalties required by the various manufacturers of software
and the increase as a percentage of sales in hardware which generally carries
lower margins. Competition in the Company's industry remains very high and plays
a significant role in determining the margins that the Company is able to
maintain.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased from 34% of revenues for fiscal 1994 to 30% of
revenues for fiscal 1995. The decrease was due primarily to the decrease in
marketing expenditures and increased direct sales efficiencies.
OTHER INCOME. Other income (expense) increased from a deficit of $16,705
for fiscal 1994 to $11,696 for fiscal 1995. Other income consists primarily of
interest income and interest expense. In addition, for fiscal 1995 other income
reflected receipt of a one-time consulting fee in the amount of $29,772.
Interest expense increased from $25,517 for fiscal 1994 to $28,348 in fiscal
1995. This was due primarily to interest charged on short-term borrowings
relating to working capital funding needs.
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THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH
THREE MONTHS ENDED JUNE 30, 1995
The following table sets forth, for the periods indicated, the amounts and
percentage relationships to revenues of selected items in the Company's
consolidated financial statements:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE
30, 1996 THREE MONTHS ENDED JUNE
-------------------------- 30, 1995
% OF % --------------------------
AMOUNT REVENUE CHANGE AMOUNT % OF REVENUE
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.............................................. $ 4,518,439 100% 37% $ 3,302,858 100%
Gross Profit.......................................... 1,568,834 35 13 1,385,743 42
Selling, General & Administrative..................... 1,361,315 30 20 1,134,763 34
Research & Development................................ 143,499 3 100 -- --
Operating Income...................................... 64,020 1 (74) 250,980 8
Net Income............................................ 51,975 1 (66) 153,462 5
Cash and Cash Equivalents............................. 2,459,938 1,652,769
Working Capital....................................... 2,692,590 1,595,650
Total Assets.......................................... 6,755,007 4,981,422
Stockholders Equity................................... 3,103,490 1,140,246
</TABLE>
REVENUES. Revenues for the three months ended June 30, 1996 increased to
$4,518,439 from $3,302,858 for the three months ended June 30, 1995, an increase
of 37%. The increase in revenues reflects increases in both software product
sales and hardware product sales. New versions of existing software as well as
software for new operating platforms were released. The release of Digital's
Alpha operating platform hardware system contributed substantially to the
increase in hardware revenues.
GROSS PROFIT. Gross profit decreased from 42% of revenues for the three
months ended June 30, 1995 to 35% of revenues for the three months ended June
30, 1996. The strong sales of hardware products, which generally carry a lower
margin than software products, along with increased start-up costs associated
with expanding the Company's new UNIX product lines, contributed to the increase
in cost of sales, resulting in lower gross profit margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $1,134,763 for the three months ended
June 30, 1995, as compared to $1,361,315 for the three months ended June 30,
1996, reflecting an increase of 20%. This represents a decrease as a percentage
of sales from 34% for the three months ended June 30, 1995 to 30% for the three
months ended June 30, 1996. The decrease is attributable primarily to a
reduction in marketing and "product show" expenses.
RESEARCH AND DEVELOPMENT EXPENSES. Prior to fiscal 1996, research and
development expenses were minimal as the Company relied as its third party
manufacturers for substantially all product development activities. For the
three months ended June 30, 1996, research and development expenses were
$143,499, due principally to the Company's assumption of the full development
responsibilities for several newly licensed software products.
OTHER INCOME. Other income consists primarily of interest income and
interest expense. Interest income increased during the three months ended June
30, 1996 due to interest earned on the proceeds received by the Company from the
issuance of shares of Common Stock in the Private Placement. See "Recent
Developments--Private Placement."
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LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has satisfied its liquidity and capital
resource requirements primarily through cash flow from operations. Long-term
bank borrowings have been kept to a minimum and used primarily for the purchase
of a building to house a portion of the Company's operations.
During fiscal 1996 and 1995, the Company generated cash from operating
activities in the amounts of $362,131 and $434,910 respectively. For the same
years, net cash increased $786,559 and $272,787 respectively. The Company's cash
equivalents at the end of fiscal 1996 reflected the additional cash obtained by
the Company in the Share Exchange. In addition, the Company acquired additional
cash through completion of the Private Placement in June 1996, which is
reflected in the unaudited financial information at June 30, 1996.
Working capital increased from $183,268 at April 30, 1995 to $943,332 at
April 30, 1996. The Company's current ratio increased from 1.08 at April 30,
1995 to 1.33 at April 30, 1996. This increase was due primarily to cash
generated from operations and the cash received in the Share Exchange. Working
capital was $2,692,590 at June 30, 1996, reflecting the addition of proceeds
received by the Company in the Private Placement.
Effective June 1, 1996, the Company established two lines of credit with a
commercial bank, one for $1,000,000, secured by trade receivables, at prime plus
two percent, expiring June 1, 1997; the other for $350,000, secured by
equipment, at prime plus two percent, expiring May 1, 1999. As of October 31,
1996, neither of these lines of credit had been used.
Based on anticipated working capital requirements, management believes that
existing cash and cash equivalents, cash generated from operations, and
long-term debt financing and borrowings under the Company's existing lines of
credit will be sufficient to finance the operations of the Company for the
foreseeable future. The Company continues to evaluate opportunities for the
license or acquisition of additional software products as well as the possible
acquisition of, or development of strategic alliances with, other companies
which may have products or distribution channels that are compatible with the
business objectives of the Company. The Company has obtained the ASI Option,
which is exercisable until September 10, 1997; if the Company exercises the ASI
Option or identifies and proceeds with any other acquisition or alliance
opportunity, additional capital, in the form of debt or equity financing, may be
required. See "Recent Development--Australian Software Innovations."
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BUSINESS
GENERAL
The Company, through Spire Technologies, Spire Systems, DewPoint and
Centerpost, develops and implements system management and office automation
solutions for open and proprietary computing environments, acts as a "service
and value-added reseller" and distributor of software developed by third
parties, resells Digital network computer systems and components on a
value-added basis and manages VAR and distribution channels in the United
States, Europe, and Southeast Asia. The Company offers a wide range of desktop,
workstation, client/server and centralized computing software, systems and
peripheral equipment, as well as channel management and support services for
both domestic and international clientele in a wide variety of industries and
computing environments, including UNIX, Windows NT and Digital OpenVMS.
BACKGROUND
The Company was incorporated in the State of Utah in May 1969 for the
purpose of mineral exploration and development. From 1974 until April 1996, the
Company operated as Amacan Resources Corporation and was almost exclusively
engaged as a participant with others in oil and gas exploration and development.
On April 18, 1996, the Company consummated the Share Exchange by which the
Company acquired all the issued and outstanding capital stock of the Spire
Companies in exchange for the issuance to the Spire Stockholders of a number of
shares of Common Stock equal to approximately 90% of the number of issued and
outstanding shares of Common Stock immediately after the consummation of the
Share Exchange. See "The Company" and "Recent Developments--Share Exchange."
Effective May 1, 1996, the Company divested itself of all oil and gas interests.
The Company does not intend to participate in any oil and gas operations in the
future. See "Business--Oil and Gas Operations."
THE INDUSTRY
Technological advances in the computer industry continue to create
increasingly smaller, faster and less costly computing solutions. The result is
that, while some users continue to need and utilize mainframe technology, the
largest and fastest growing segment of the computing marketplace is mid-range,
mid-sized computing equipment for government, education and business users, and
smaller, consumer-oriented equipment, including personal computers.
With the proliferation of these new systems, particularly in the mid-range
market, there has been a proliferation of new computer operating systems
designed for these specialized machines. Like the well-recognized "operating
systems" or "platforms" for PCs (MS-DOS, Windows, and Windows 95 developed by
Microsoft Corporation ("Microsoft"), IBM's OS/2, and the operating systems
developed for Apple Computer Inc. ("Apple")), the mid-range market utilizes a
series of unique operating system platforms. These platforms include Digital's
VMS and Open VMS operating systems, a variety of UNIX operating systems which
have been separately developed by many different manufacturers, and Microsoft's
new Windows NT.
Computer application software products (such as wordprocessors,
spreadsheets, management tools, and other types of programs) are typically
designed for use on only one operating system. They generally cannot operate on
other platforms without making extensive and often costly modifications to the
original programming code. As a result of the complexity inherent in a market
which utilizes a wide variety of hardware and software systems, as well as the
changing needs of buyers of such products, the Spire Companies were formed to
serve the role of an "integrator" of solutions for the full range of mid-range
hardware and software users in government, education, and business environments.
The Company has reviewed the hardware and software being offered by current
manufacturers, compared the various competing products, and elected to represent
and sell those software and hardware systems which the Company considers to be
the finest products available on a stand-alone basis, but which are also capable
of
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being integrated with the other software and hardware product needs of its
customers. Accordingly, the Company is principally a sales and technical support
organization for third-party products which its employees have tested and, if
necessary, adapted for cross-operating system operation so that its customers
can obtain the benefits of products that function well together in an often
heterogeneous systems environment.
SALES AND DISTRIBUTION
The Company markets its products and services domestically through a direct
sales force of 40 representatives based in Utah and North Carolina, as well as
through a team of distributors and resellers operating in the U.S., Canada,
Europe and Southeast Asia managed by DewPoint. Arrangements with manufacturers,
resellers and authorized distributors are an increasingly important part of the
Company's focus on providing complete solutions to its customers and expanding
distribution of its products and services through indirect channels to domestic
and international customers.
PRODUCTS
OVERVIEW. Through Spire Technologies, the Company strives to fill the
computer needs of its customers by providing a combination of integrated
software packages from different manufacturers and technical support for such
products, including office automation, system management, performance, and
Internet security solutions. The Company is the licensing and support
organization for cross-platform compatible VMS and OpenVMS versions of
WordPerfect, WP Office, and Lotus 1-2-3. Spire Systems is an authorized VAR of
hardware and components manufactured by Digital, and provides its customers with
desktop integration and system hardware. The Company endeavors to meet the
specialized mid-range computing needs of government, education, and corporate
organizations worldwide by providing networking expertise in integrating
multi-vendor networks, network consulting with respect to connectivity,
compatibility, inter-operability and management of the end-user's local area
network ("LAN"), installation of the end-user's LAN, including interface
hardware and software, and timely and professional technical support.
SOFTWARE. Spire Technologies designs, develops, acquires from third parties
and distributes under license, or acts as a reseller for, various software
products for use on Digital computer operating systems, and computer operating
systems such as UNIX and Windows NT developed by other vendors. In July 1996,
Spire Technologies entered into an Exclusive License and Technical Assistance
Agreement with ASI, pursuant to which the Company acquired the exclusive rights
to use, develop and sublicense the SYSMON and other ASI software products in
North and South America. See "Recent Developments--Australian Software
Innovations" and "Network Management and Performance."
Office Automation. Under licenses from Corel, Lotus and Novell, the Company
has obtained the right to create derivative works of the source code for
WordPerfect, Lotus 1-2-3 and WP Office (a.k.a. Groupwise) with ownership of such
derivative works remaining in the licensors. The Company's engineers have
developed, and the Company now markets, these software solutions for the OpenVMS
operating platform. The Company also markets these same office automation
products (developed by third parties) for UNIX, Digital UNIX, MS-DOS and Windows
95 operating platforms. Because of the wide variety of computing platforms used
today in many organizations, management believes the ability of the Company to
offer powerful office tools which provide cross-platform compatibility and user
familiarity is important in assisting customers to create effective corporate
standards. The Company also offers other third-party office automation products.
The following paragraphs describe the office automation products currently
offered by the Company:
- WORDPERFECT (COREL). WordPerfect for OpenVMS systems is one of the
leading word processing programs, and Digital's word processing
application of choice for OpenVMS users. Powerful word processing tools,
graphics integration and drawing capabilities, flexible tables, an
equation editor
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and cross-platform file compatibility have earned WordPerfect nine TARGET
AWARDS for best word processing software.
- LOTUS 1-2-3 (LOTUS). Lotus 1-2-3 for OpenVMS provides users with
spreadsheet tools combined with the power and resources of an OpenVMS
environment. The Company believes features such as three dimensional
worksheets, cross-platform file compatibility, high impact business
graphics, and presentation quality output capabilities make Lotus 1-2-3
the preferred spreadsheet application for OpenVMS environments.
- FAX SR. (OMTOOL, INC.). Fax Sr. enterprise server sends and receives
faxes directly from within WordPerfect, or almost any other OpenVMS
application, as easily as printing a document or receiving a mail message.
Faxes are sent directly to a recipient's fax machine via a server's modem,
and can include text, pictures, graphics, scanned images, logos, cover
sheets, and special characters. Clients are available for Windows, Mac,
Windows NT, MS-DOS, and Motif users.
- WP OFFICE (NOVELL, INC.). WP Office is an office automation package which
provides electronic mail, personnel and resources scheduling, a floating
calendar and planner, a multi-function calculator, a customizable database
notebook and a file manager. Each component is integrated through a
flexible shell menu which allows users to switch between programs and
launch non-WordPerfect programs with a single keystroke.
System Security. The Company offers a range of third-party UNIX and OpenVMS
operating system security products. These security software tools are designed
to protect an organization's computer network from unauthorized external access,
such as from the Internet, user monitoring, auditing and logging, authorization
and access control, message integrity and confidentiality protocols, and
automated system security analysis, reporting and correction tools. System
security products offered by the Company include the following:
- THE BORDERWARE FIREWALL SERVER (SECURE COMPUTING CORPORATION). The
BorderWare Firewall Server provides comprehensive gateway services while
maintaining security for organizations connecting to the Internet (and
other TCP/IP networks). Virtual Private Networks (VPN) can be created
using BorderWare's "IPSEC" encryption capability, and Secure Public
Servers can be setup on BorderWare's Secure Server Network. BorderWare
combines Internet application-level servers (like Worldwide Web ("Web"),
electronic mail ("E-Mail"), NEWSGROUPS ("News") and File Transfer Protocol
("FTP") with a transparent IP Firewall, and uses its knowledge of
application processes and protocols to examine, control, audit and
validate network traffic to and from the trusted network at both the
packet and connection level. The BorderWare Firewall Server has been
promoted as a one-stop solution to a complete and secure Internet gateway.
- WEBTRACK (SECURE COMPUTING CORPORATION). WebTrack controls Internet usage
based on duration of sessions or actual sites visited. WebTrack restricts
access to sites containing undesirable or inappropriate content so the
Internet can be used to increase productivity, not detract from it. Its
customizable site list is updated daily, with sites listed into one of
sixteen different categories, including gambling, sports, criminal skills,
humor, sex, hate speech, job search, and entertainment. With WebTrack
on-line, companies can protect their organizations from lost productivity
and liability without eliminating the Internet as a valuable business
tool.
- INTERSCAN VIRUSWALL (TREND MICRO, INC.). InterScan VirusWall detects and
eliminates viruses attached to Web, FTP, and E-Mail traffic at the
Internet gateway in real time--before they reach the network. InterScan
VirusWall currently detects more than 6,000 known viruses. Using a
flexible central management interface, organizations can administer
Internet activity, isolate viruses before they reach the LAN--even those
hidden in other files, including compressed or encoded formats such as
ZIP, UUENCODE, and MIME, and identify the origin of infected files for
future reference, to prevent down time and loss of critical data and
systems due to virus infection.
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- KBLOCK (RAXCO, INC.). KBLock lets users lock their unattended, logged-in
terminals to make them unavailable to unauthorized users. It can also
automatically lock and remove idle processes when they have been inactive
for a prescribed period of time.
Storage Management. The Company offers third-party media management and
remote device access products including media libraries, backup and restoration
applications, and data recovery solutions, including the following:
- THRUWAY AND THRUNET (SOFTWARE PARTNERS/32, INC.). THRUway and THRUnet are
remote device access tools which bridge the gap between remote OpenVMS and
UNIX systems and a central site. They simplify file access and provide
easy and direct management, backup and restoration of remote data to and
from an organization's central system.
- TAPESYS (SOFTWARE PARTNERS/32, INC.). TAPESYS is a tape management system
which gives organizations complete control of their OpenVMS libraries,
including magnetic tapes, optical disks and super-high-density cartridges.
TAPESYS also automates backup scheduling and keeps an on-line directory of
backed-up files for easy restoring.
- RAXMASTER (RAXCO, INC.). RaxMaster is a comprehensive OpenVMS performance
solution combining PerfectDisk, PerfectTune, PerfectCache and I/O Monitor
into an integrated performance enhancing tool. Whether problems are due to
CPU, files, resource allocation, memory, or I/O, RaxMaster provides
proactive, multi-function performance solutions to help organizations
utilize their existing systems.
- STORAGECENTER (SOFTWARE PARTNERS/32, INC.). StorageCenter provides
comprehensive system backup, media management and administration,
archiving, and restore functions for multi-vendor computing environments.
StorageCenter works across a mix of UNIX and Windows NT environments.
- PERFECTFILE (RAXCO, INC.). PerfectFile improves system performance by
reducing the internal fragmentation of RMS indexed files. It identifies
those files in need of reorganization, determines the optimal File
Definition Language ("FDL") parameters settings, and restructures them.
PerfectFile is useful for sites with large databases or
transaction-processing applications prone to performance degradation due
to defragmentation.
- ULTRADISK (RAXCO, INC.). UltraDisk allows system managers to safely move
and defragment open files while they are being read or written to by
users. PerfectDisk and UltraDisk make fragmented files contiguous,
consolidate free disk space, and place files to minimize seek time and
head movement. UltraDisk requires no modifications to existing
applications, and features both a Digital Command Language ("DCL") and
Menu interface.
User Training and Support. The third-party software solutions offered by
the Company for training and support allow customers to track user problems and
establish interactive links between the terminals of trainers and users. From
the trainer's keyboard, the trainer may intervene, create log files of sessions
and conduct local and remote product training for groups of users. The following
user-training and support products are offered by the Company:
- CONTRL AND CLYDESUPPORT (RAXCO, INC.). Contrl and ClydeSupport are
integrated user-support tools for training, monitoring and assisting
OpenVMS users. Utilizing these tools, the customer can monitor users'
terminals, establish interactive links between terminals, create log files
of sessions, communicate with and transfer files to sites not connected by
DECnet, and create and run multiple interactive terminal sessions
simultaneously.
- PC-DUO (VECTOR NETWORKS LIMITED). PC-Duo is a remote control software
solution that returns control of distributed PC users to the customer. The
customer can conduct interactive on-line conversations or training
sessions, provide immediate on-line help, perform file transfers across
networks and monitor user productivity.
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- LANUTIL (VECTOR NETWORKS LIMITED). LANutil is the only OpenVMS based
system designed for complete remote PC LAN management. It can automate LAN
management policies and procedures through: facilitating OpenVMS backups
and restores, managing hardware and software inventories, standardizing PC
configurations and centralizing LAN software distribution. LANutil for NT
features a 32-bit graphical user interface ("GUI") which acts as a front
end to the OpenVMS host, making LANutil a full client/server product. This
gives organizations the flexibility to select a mix of OpenVMS and NT
back-end hosts that best serves their users' environments.
Network Management and Performance. The third-party software offered by the
Company relative to system performance management allows customers to monitor
systems, databases, events and remote nodes to manage performance tuning,
capacity planning, saturation analysis, bench marking and resource accounting
from a central site. This performance management is conducted in real-time
interactive or background modes, across a wide array of UNIX and database
environments. The Company offers the following management and performance
products:
- OPENAVIATOR (ASI). Open Aviator is a modular system availability and
analysis utility which provides system administrators with the ability to
immediately access and analyze the events which affect the availability of
computing resources. Easy to understand meters, graphs, and charts enhance
an organization's ability to anticipate critical system events, manage
system resources, and resolve problems and bottlenecks on their
heterogeneous UNIX and NT systems before they occur. Available modules
include:
- COPILOT is an interactive system monitoring, critical analysis, and
management tool designed to provide organizations with real-time
information about the ongoing availability of their systems and
applications data. Its advanced MAPS GUI interface provides
organizations with at-a-glance feedback about their systems, letting
them intelligently and accurately correct those conditions which affect
the availability of their computing resources.
- AUTOPILOT runs in the background, monitoring and logging key system,
database, and application activities. Its definable monitors can be set
to automatically watch for events, trigger alarms, and activate
scripted event interventions, problem resolutions, and actions.
- NAVIGATOR is launched from CoPilot and AutoPilot to retrieve the
critical information gathered by OpenAviator's data collectors and
customizable third-party application connections. This information is
fed into CoPilot and AutoPilot's graphical analysis modules to provide
users with real-time and/or recorded data and information.
- DATA COLLECTORS are customizable data collection interfaces which
gather critical management and availability information from all major
UNIX operating systems, Windows NT, databases such as Oracle, Ingres,
Informix and Sybase, and a growing list of third-party applications.
This information can be gathered in either real-time or background
modes, and is used by CoPilot and AutoPilot for critical data analysis
and management.
- CONTROL TOWER reduces data vulnerability, security risk, and resource
degradation caused by unattended station and session inactivity.
Control Tower provides login session monitoring coupled with warning
messages and definable automatic logout procedures.
- FLIGHTLOG tracks computing resource usage by department, group or
individual for accurate charge-back accounting, capacity planning and
resource growth analysis.
- POLYCENTER CAPACITY PLANNER (DIGITAL). POLYCENTER is a critical planning
and evaluation tool which helps organizations plan accurately for future
resource expansion in their dynamic, heterogeneous computing environments.
Workload and "what-if" analysis tools allow for accurate determination of
current resource limitations and cost justification for additional systems
or peripherals as resource demands change.
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- ENSIGN R3 (BOOLE & BABBAGE). Ensign R3 provides distributed system
administration and centralized control for UNIX and Windows NT. Ensign
automates and simplifies system administration tasks, eliminates
repetitive administrative activities, reduces reactive tasks through a
surveillance and recovery facility and permits delegation of routine
processes to others. Administrative tasks are managed through a GUI
interface, eliminating the need to learn different UNIX syntax and
commands.
- PATHWORKS (DIGITAL). PATHWORKS allows users to share applications,
information, and large system resources within OpenVMS, UNIX, Windows,
MS-DOS and Mac environments. It provides users with LAN Manager file and
print services, compatibility with network systems of Novell, E-Mail
communications, security for PC files, LAN and Wide Area Network ("WAN")
capabilities and a host of network management and integration tools.
- XJET AND XCONNECT (XCD CORPORATION). XJet and XConnect are Ethernet print
servers which allow users of all six major network operating systems to
share printer resources simultaneously. Users on Digital, UNIX, Novell and
Apple networks can all print jobs to the same printer as if it were
connected directly to their computers--without any modification to
application programs. Concurrent support for LAN Manager, LAN Server and
Banyan VINES is also available.
HARDWARE. Spire Systems is an authorized VAR for Digital, and provides its
customers with desktop integration, system and networking hardware, and Digital
Services solutions. Spire Systems is licensed to sell Digital's 64-bit reduced
instruction set computing (RISC) architecture known as "Alpha", which is
designed to support multiple operating systems. Through Spire Systems, the
Company offers Digital's line of Alpha-based products ranging from chips and
boards to high performance workstations and servers. Alpha supports three major
operating systems: Digital's 64-bit UNIX operating system, Digital's OpenVMS
operating system and Microsoft's Windows NT operating system. The Alpha-based
systems include high performance database servers and workstations. Spire
Systems also offers and sells Digital's VAX computer systems, components and
Intel-based personal computer systems, as well as peripherals manufactured by
Digital and other entities, including magnetic disk drives, tape drives, solid
state disk and in-film heads, video terminals, printers and network components.
TECHNICAL SERVICES AND SUPPORT. The Company provides technical consulting,
systems integration and product support services to help its customers plan,
implement and manage their information technology solutions. The Company's
services include maintenance and support services for Company software
solutions, as well as third-party products sold by the Company; information
systems consulting; technical and application design services; education and
training services; systems integration and project management services; network
design and support services; and outsourcing and resourcing management services.
COMPETITION
The information technology industry is highly competitive, international in
scope, and comprised of many companies. The methods of competition include, but
are not limited to, marketing, product performance, price, service, technology
and compliance with various industry standards. Present and potential
competition in the various markets served by the Company comes from firms of
various sizes and types, many of which are larger and have greater resources
than the Company. Firms not now in direct competition with the Company may
introduce competing products in the future. It is possible for companies to be
at various times competitors, customers and collaborators of each other in
different markets.
MATERIALS
The Company is solely dependent on Digital and authorized distributors of
Digital products for its supply of hardware. In addition, the Company obtains
software from numerous third-party vendors, many of which are the sole sources
for such software. The Company then incorporates the various hardware,
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peripheral and software components into an integrated system for on-site
installation at each customer's location. If one of the Company's third-party
vendors of either hardware or software were to become unavailable to the
Company, management believes that the Company would be able to obtain competing
and alternate sources of supply of similar but not identical products.
Nonetheless, the failure of such suppliers to deliver such items on a timely
basis could adversely affect the operating results of the Company until
alternative sources of supply could be arranged. Also, if any of the license
agreements relating to the office automation products developed by the Company
were to be terminated, the operating results of the Company could also be
adversely affected.
SIGNIFICANT CUSTOMERS
Although the Company sells to many customers involved in certain industries
such as government and education which, if aggregated, would result in sales to
a particular industry of more than ten percent, there is no single customer to
which sales by the Company in the aggregate amount exceed ten percent of the
Company's consolidated revenues. Accordingly, Company management believes that
the loss of any single customer would not have a material adverse effect on the
Company taken as a whole.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company does not own any patents nor has it filed any patent
applications relating to its products. The Company has a limited number of
copyrights and has obtained licenses to create derivative works relative to
copyrights owned by third parties. The ownership of such derivative works vests
in the licensor. The Company is also seeking tradename and trademark protection
for certain of its names and marks. Management does not believe that any
particular patent or group of patents, copyrights, trademarks, or tradenames is
of material importance to the business of the Company as a whole.
RESEARCH AND DEVELOPMENT
The Company competes in an industry which is characterized by rapid
technological change. Historically, neither the Company nor the Spire Companies
(prior to the consummation of the Share Exchange) have incurred significant
expenses for research and development. Management anticipates that it will begin
investing in research and development during the 1997 fiscal year to maintain
and strengthen its competitive position. Management does not anticipate that
research and development expense will exceed five percent of the Company's gross
revenues for the fiscal year ending March 31, 1997.
OIL AND GAS OPERATIONS
Prior to the consummation of the Share Exchange, the Company had operated
almost exclusively since 1974 as a participant with others in oil and gas
exploration and development. The Company's principal assets during this period
were working interests in producing oil and gas wells and options or rights to
participate in the drilling of additional wells. During this period, the Company
participated almost exclusively with an independent operator, Luff Exploration
Company ("Luff Exploration") of Denver, Colorado, in its exploration activity.
From 1974 to April 1996, the Company participated with Luff Exploration in
drilling a total of 122 wells, 31 of which were productive as of April 1996. Of
the 122 wells, 50 were exploratory wells and 72 were developmental wells. During
its participation with Luff Exploration, the Company farmed out its interests
for drilling by other companies, at their expense, in a total of 28 additional
wells, one of which was productive as of April 1996. Effective May 1, 1996, the
Company transferred to a group of purchasers, including Kenneth D. Luff,
President of Luff Exploration and a former director of the Company, all of the
Company's oil and gas interests in exchange for the payment of $197,000. The
Company does not intend to participate in any oil or gas operations in the
future.
26
<PAGE>
EMPLOYEES
As of October 31, 1996, the Company had approximately 76 total employees,
approximately 64 of which were full-time employees. Competition for qualified
personnel in the computer industry is intense. The future success and growth of
the Company will depend in large measure upon its ability to attract and retain
qualified management and technical personnel. Failure of the Company to attract
and retain key management and technical personnel and qualified personnel
required to continue the Company's operations could have a material adverse
impact on the Company. None of the Company's employees is represented by a labor
organization with respect to his or her employment with the Company, the Company
has never had a work stoppage, and the Company considers its employee relations
satisfactory.
FACILITIES
The headquarters and research and development facilities of the Company are
located at 311 North State Street, Orem, Utah. The Company owns a 5,200 square
foot building, subject to encumbrances of $121,236 and $100,933 at June 30,
1996, which bear interest at rates of 8.25% and 8.70%, respectively. In
addition, the Company occupies 17,500 square feet of contiguous space under two
leases of one year and two years, respectively, both subject to options to
extend the terms thereof for an additional five lease periods of one year each.
The monthly base rents of these leases are $5,500 and $4,675, respectively,
subject to adjustment during the renewal periods. Company management believes
these contiguous facilities are suitable and adequate to meet the anticipated
needs of the Company for the current fiscal year. Management anticipates that
continued growth of the Company will necessitate acquisition of additional
office space in the future.
LEGAL AND ADMINISTRATIVE PROCEEDINGS
There are currently no material pending or, to the knowledge of the Company,
threatened legal proceedings, other than ordinary, routine litigation incidental
to the business of the Company, to which the Company is a party or to which any
of its property is subject.
27
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information regarding the executive officers and
directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ------------------------------------ --- ------------------------------------------------------ ---------------
<S> <C> <C> <C>
Gary B. Godfrey..................... 36 Chairman of the Board and Chief Executive Officer 1996
Robert K. Bench..................... 46 President, Chief Financial Officer and Director 1996
Brian W. Braithwaite................ 35 Secretary, Treasurer and Director 1996
William A. Fresh.................... 67 Director 1996
Eng H. Lee.......................... 36 Director 1996
Sherman H. Smith.................... 51 Director 1996
</TABLE>
All directors are elected to one-year terms yearly at the annual meeting of
shareholders. All officers serve at the discretion of the Board of Directors.
GARY B. GODFREY serves as Chairman of the Board and Chief Executive Officer
of the Company pursuant to his appointment as such following consummation of the
Share Exchange in April 1996. Mr. Godfrey has been President and a director of
Spire Technologies since its organization in 1986, exercising primary
responsibility for financial management, marketing and personnel. Mr. Godfrey
has been President and a director of Spire Systems since 1992.
ROBERT K. BENCH serves as President, Chief Financial Officer and a director
of the Company pursuant to his appointment as such following consummation of the
Share Exchange in April 1996. In addition, he continues to serve as the Chief
Financial Officer and a director of Spire Technologies, and as the Chief
Financial Officer and a director of Spire Systems, positions to which he was
appointed in January 1996. Mr. Bench served as the Chief Financial Officer for
CerProbe Corporation ("CerProbe"), a publicly-held corporation which
manufactures products for the semi-conductor industry, from April 1995 through
February 1996. CerProbe acquired, through a merger, Fresh Test Technology
Corporation ("Fresh Test") in April 1995. Mr. Bench was President of Fresh Test
from April 1993 to the time of the merger. From 1991 through 1993, Mr. Bench
served as Vice President and Chief Operating Officer for Fresh Technology
Company, an affiliate of Fresh Test. From 1986 through 1991, Mr. Bench served as
Vice President and Chief Financial Officer at Clyde Digital Corporation, a
private company engaged in computerized software engineering.
BRIAN W. BRAITHWAITE is Secretary, Treasurer and a director of the Company,
and has so served since consummation of the Share Exchange in April 1996. Mr.
Braithwaite has been Vice President, Secretary, Treasurer and a director of
Spire Technologies since its inception in 1986. Mr. Braithwaite has also served
as Vice President, Secretary, Treasurer and a director of Spire Systems since
1992.
WILLIAM A. FRESH is a director of the Company pursuant to his appointment as
such following consummation of the Share Exchange. Mr. Fresh also serves as
Chairman of the Board and Chief Executive Officer of Magellan Technology, Inc.
("Magellan"), a publicly-held corporation engaged in the business of providing
image-based data entry services. Mr. Fresh founded EFI Electronics Corporation
("EFI"), a manufacturer and marketer of surge suppression equipment for
computer, industrial, medical and telecommunication devices, in 1981 and
subsequently served as its chairman and president until 1986. Mr. Fresh is
currently president, chairman and owner of Orem Tek Development Corporation, a
consulting and business park development corporation. In addition, Mr. Fresh has
served as a director of CerProbe since April 1995. Mr. Fresh co-founded Fresh
Test and served as its chairman and Chief Executive Officer from January 1986
through March 1995.
28
<PAGE>
ENG H. LEE serves as a director of the Company pursuant to his appointment
as such by the Board of Directors in September 1996, to fill a vacancy created
by the resolution of the Board of Directors to increase the number of directors
of the Company. Mr. Lee is the founder and Managing Director of ASI, a position
he has held since 1987. See "Recent Developments--Australian Software
Innovations" and "Certain Relationships and Related Party Transactions."
SHERMAN H. SMITH serves as a director of the Company, and has done so since
consummation of the Share Exchange in April 1996. Pursuant to the terms of the
Exchange Agreement, Mr. Smith was designated by the Board of Directors of Amacan
to serve as a director of the Company upon consummation of the Share Exchange;
however, no arrangement or understanding exists whereby Mr. Smith must be
retained as a director. Mr. Smith, a certified public accountant, is engaged in
the practice of accounting with the accounting firm of Schmitt, Griffiths, Smith
& Co. in Ogden, Utah, with which he has practiced accounting since 1974.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for each of the last three
fiscal years, for services rendered to the Company by any individual who served
as the Company's Chief Executive Officer at any time during the 1996 fiscal year
(collectively, the "Named Executive Officers"). No executive officer of the
Company was paid in excess of $100,000 in salary and bonus by the Company during
the fiscal year ended April 30, 1996. The following table does not reflect
compensation paid to Gary B. Godfrey or any other executive officer of the
Company by Spire Technologies and Spire Systems prior to the consummation of the
Share Exchange.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------------ ------------------------ ---------
OTHER ANNUAL RESTRICTED SECURITIES LTIP
YEAR ENDED SALARY BONUS COMPENSATION STOCK UNDERLYING PAYOUTS
NAME AND PRINCIPAL POSITION APRIL 10, ($) ($) ($) AWARDS ($) OPTIONS (#) ($)
- ------------------------------------- ----------- --------- --------- ------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Tad M. Ballantyne.................... 1996 10,008 0 0 0 0 0
Former President and Chief 1995 10,000 0 0 0 0 0
Executive Officer 1994 0 0 0 0 0 0
Gary B. Godfrey...................... 1996 2,692 0 0 0 0 0
Chief Executive Officer 1995 0 0 0 0 0 0
1994 0 0 0 0 0 0
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)
- ------------------------------------- -------------
<S> <C>
Tad M. Ballantyne.................... 0
Former President and Chief 0
Executive Officer 0
Gary B. Godfrey...................... 0
Chief Executive Officer 0
0
</TABLE>
EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN. The Board of Directors adopted the Option Plan effective
as of January 31, 1996. As part of the Share Exchange, the Company's
shareholders approved the Option Plan on April 18, 1996, and the Company has
substituted options to purchase shares of the Common Stock pursuant to the
Option Plan for each outstanding option to purchase shares of the Spire
Technologies Common Stock pursuant to the Spire Option Plan. The Option Plan is
designed to promote the long-term success of the Company and the creation of
incremental stockholder value by (a) encouraging directors and key employees of
the Company and its subsidiaries to focus on critical long-range objectives, (b)
encouraging the attraction and retention of key employees with exceptional
qualifications, and (c) linking the interests of key employees of the Company
directly to stockholder interests through increased stock ownership. Awards
under the Option Plan may be in the form of stock options, stock appreciation
rights ("SARs"), restricted shares of
29
<PAGE>
Common Stock or stock units, commonly known as phantom stock awards. The Option
Plan is administered by a committee (the "Option Plan Committee") of two or more
disinterested directors appointed by the Board of Directors. The Option Plan
Committee is presently composed of the Compensation Committee of the Board of
Directors. As of October 31, 1996, the Company had granted options for the
purchase of 656,185 shares of Common Stock under the Option Plan. The following
description of the Option Plan does not purport to be complete and is qualified
in its entirety by reference to the full text thereof.
Grants under the Option Plan may be made to directors, executive officers
and key employees of the Company who are expected to make significant
contributions to the Company. Except with respect to the annual grant of options
to non-employee directors described below, the Option Plan Committee, in its
sole discretion, determines the number and type of awards granted to a
participant under the Option Plan, and the terms and conditions of such award,
including any vesting conditions. The Option Plan specifically provides for an
initial grant to each non-employee director of the Company of 5,000 options upon
election or appointment as a director of the Company (which options vest in
increments of 1,667 options over a three-year period) and an annual grant to
each non-employee director of 2,000 options which are immediately exercisable at
the fair market value of shares of Common Stock on the date of grant. The Option
Plan provides that up to 1,000,000 shares of Common Stock are available for
issuance thereunder, and that no participant may receive awards for more than an
aggregate of 200,000 options, restricted shares or stock units in any single
calendar year.
Options may be incentive stock options, as that term is defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
nonstatutory stock options. The exercise price of an option may not be less than
the fair market value of a share of Common Stock on the date of the grant. The
Committee may grant SARs in tandem with any option granted in an amount equal to
or less than the number of options so granted. Generally, SARs may be exercised
at any time after the underlying option vests. Upon exercise, each SAR entitles
a participant to receive from the Company a payment equal to the excess of the
fair market value of a share of Common Stock, determined at the time the SAR is
exercised, over the exercise price of the related option. At the discretion of
the Committee, payments may be made in cash, shares of Common Stock or a
combination thereof.
EMPLOYEE STOCK PURCHASE PLAN. On April 18, 1996, the Board of Directors of
the Company adopted the Stock Purchase Plan and reserved 200,000 shares of
Common Stock for possible future issuance to employees of the Company and other
individuals thereunder. The shareholders of the Company ratified and approved
the adoption of the Stock Purchase Plan on September 10, 1996. The purpose of
the Stock Purchase Plan is to provide a method whereby employees of the Company
and certain of its subsidiaries, except for employees who own beneficially five
percent or more of the voting stock of the Company, may acquire a proprietary
interest in the Company through the purchase of shares of Common Stock. The
Stock Purchase Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Code. The Stock Purchase Plan is administered by a
committee (the "Purchase Plan Committee") of no fewer than two members of the
Board of Directors. The Purchase Plan Committee is presently composed of the
Compensation Committee of the Board of Directors. As of October 31, 1996, the
Company had sold 10,541 shares under the Stock Purchase Plan. The following
description of the Stock Purchase Plan does not purport to be complete and is
qualified in its entirety by reference to the full text thereof.
The Stock Purchase Plan provides for a series of six semi-annual offerings
commencing on April 1 and October 1, respectively, in each of the years 1996
through 1998, and terminating on the succeeding September 30 and March 31,
respectively; provided, however, that the initial offering under the Stock
Purchase Plan was deemed to have commenced on April 18, 1996, the effective date
of the Stock Purchase Plan. On the applicable offering commencement date, a
participating employee will be deemed to have been granted an option to
purchase, on the offering termination date, a maximum number of shares of Common
Stock determined by multiplying 15% by the employee's projected base pay for the
offering period, and dividing by 85% of the fair market value of Common Stock on
the applicable offering
30
<PAGE>
commencement date. No employee will be granted an option which permits him or
her to purchase in excess of $25,000 of Common Stock per calendar year.
The price per share of Common Stock paid by participants under the Stock
Purchase Plan is the lesser of (a) 85% of the fair market value of the Common
Stock on the applicable offering commencement date or (b) 85% of the fair market
value of the Common Stock on the applicable offering termination date. The
exercise price is payable through payroll deduction from an employee's
compensation (beginning with the commencement of the second offering on October
1, 1996) or by delivering payment of the exercise price to the Company prior to
the offering termination date.
COMPENSATION OF DIRECTORS
The directors of the Company are not presently compensated for attendance at
board and committee meetings. All directors are reimbursed for expenses in
connection with attendance at Board and committee meetings. The Compensation
Committee of the Board is currently reviewing and preparing proposals relating
to director compensation for submission to the Board.
EMPLOYMENT ARRANGEMENTS
In connection with the appointment of Messrs. Godfrey and Bench as executive
officers of the Company, the Company and Messrs. Godfrey and Bench agreed that
the Company will pay to Messrs. Godfrey and Bench, as aggregate compensation for
their services to the Company and its subsidiaries, the annual amount of
$125,000 each. The Company has also agreed to pay to each of Messrs. Godfrey and
Bench the annual amount of $10,000 to fund insurance policies maintained by
Messrs. Godfrey and Bench. The Company has no plans or arrangements with any
officer or director whereby any such person would obtain remuneration in
connection with the resignation, retirement or other termination of his
employment. Likewise, the Company has no remunerative plans or arrangements
covering any officer or director that would arise from a change in control of
the Company or a change in the individual's responsibilities following a change
in control of the Company. The Company is not currently the owner or beneficiary
of any life insurance policies on any of its officers or key employees.
COMMITTEES AND MEETINGS
The Board of Directors has formed a standing Audit Committee, the members of
which are Sherman H. Smith and William A. Fresh. Prior to the Share Exchange,
the Audit Committee was comprised of Lamar H. Holley and Tad M. Ballantyne, and
did not hold any meetings during the fiscal year ended April 30, 1996. The Audit
Committee's functions include the recommendation of the Company's independent
auditor and the review of the Company's internal accounting and financial
practices and controls and all services performed by the Company's independent
auditor.
The Board of Directors also has formed a standing Compensation Committee
comprised solely of non-employee directors, the members of which are Sherman H.
Smith and William A. Fresh. The Compensation Committee currently serves as the
Option Plan Committee and the Purchase Plan Committee pursuant to the Option
Plan and the Stock Purchase Plan, respectively. Prior to the Share Exchange, the
Board of Directors had not formed a standing Compensation Committee.
Prior to the Share Exchange, the Board of Directors was comprised of Tad M.
Ballantyne, Lamar H. Holley, Russell G. Holley and Kenneth D. Luff. Lamar H.
Holley and Russell G. Holley are brothers. Upon the completion of the Share
Exchange on April 18, 1996, Messrs. Godfrey, Bench, Braithwaite, Smith and Fresh
were appointed as directors of the Company and Messrs. Ballantyne, Holley,
Holley and Luff resigned as directors of the Company as contemplated by the
Exchange Agreement. See "Recent Developments--Share Exchange." During the fiscal
year ended April 30, 1996, there were three meetings held by the Board of
Directors. No director attended fewer than 75% of the total number of meetings
of
31
<PAGE>
the Board and of the committees on which he served. The Company does not
maintain a standing nominating committee of the Board of Directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws contain certain provisions which provide for the
indemnification of the Company's directors and officers against expenses,
including attorney's fees, judgments, fines and amounts paid in settlement
incurred by a director or officer in connection with any threatened, pending or
completed action, suit or proceeding arising from his or her service to or for
the benefit of the Company and to which he or she is made a party. At present
there is no pending litigation or proceeding involving any director or officer
of the Company where indemnification will be required or permitted under the
Company's Bylaws. The Company is not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification. The Company
currently maintains no policy of director's and officer's liability insurance.
The Company believes that the indemnification of its directors and officers
will facilitate the Company's ability to continue to attract and retain
qualified individuals to serve as directors and officers of the Company. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the provisions described above, the Company has been informed that in the
opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During the fiscal year ended April 30, 1996, the Company paid approximately
$58,100 to Luff Exploration for the Company's share of expenses associated with
the production of oil and gas. Such expense was allocated based on the Company's
interest in each oil or gas well. The President and principal shareholder of
Luff Exploration is Mr. Kenneth D. Luff, who was a director of the Company until
the consummation of the Share Exchange.
On September 10, 1996, the Board appointed Mr. Eng H. Lee to serve as a
director of the Company. Mr. Lee is the record owner of fifty percent (50%), and
through his wife, Mary Lee, is the beneficial owner of one hundred percent
(100%), of the capital stock of Kilat, the sole shareholder of ASI. Mr. Lee also
currently serves as the Managing Director of Kilat and ASI. Effective July 1,
1996, the Company, through Spire Technologies, entered into the ASI License
Agreement with ASI, pursuant to which the Company obtained the ASI License, paid
ASI a license fee in the amount of $550,000 and agreed to pay certain royalties
to ASI. On September 10, 1996, the Company entered into the ASI Option Agreement
with ASI, Kilat and Mr. and Mrs. Lee, pursuant to which the Company obtained the
ASI Option to acquire all or any portion of the assets of ASI, paid to ASI an
option purchase payment in the amount of $130,000 and will make available to ASI
the ASI Credit Facility in an amount not to exceed $200,000. See "Recent
Developments--Australian Software Innovations."
32
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information as of October 31, 1996 with
respect to the beneficial ownership of shares of the Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of the Common
Stock, by each director and current Named Executive Officer (see
"Management--Executive Compensation"), by each shareholder of the Company
electing to offer or sell shares of the Common Stock offered hereby
(collectively, the "Selling Shareholders") and by all directors and officers as
a group. Unless otherwise noted, each person named has sole voting and
investment power with respect to the shares indicated. The percentages set forth
below have been computed based on the number of outstanding securities,
excluding treasury shares held by the Company, which was 4,347,914 shares of
Common Stock as of October 31, 1996.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP AS OF BENEFICIALLY OWNED AFTER
OCTOBER 31, 1996 SHARES NUMBER OF OFFERING (2)
------------------------------- SHARES ------------------------
NUMBER BEING NUMBER
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES PERCENT* OFFERED (1) OF SHARES PERCENT*
- ------------------------------------------------- ----------------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Gary B. Godfrey.................................. 1,101,701(3) 25.3% 119,000 982,701 22.6%
149 North 835 East
Lindon, Utah 84042
Douglas D. Yates................................. 635,711(4) 14.6 170,000 465,711 10.7
797 North 500 West
Lehi, Utah 84043
Jeffrey L. Webster............................... 625,970 14.4 191,000 434,970 10.0
465 West 320 North
American Fork, UT 84003
Brian W. Braithwaite............................. 537,265 12.4 120,000 417,265 9.6
1348 North 1400 West
Provo, Utah 84604
Robert K. Bench.................................. 454,261(5) 10.3 0 454,261 10.3
626 East 1820 North
Orem, Utah 84057
William A. Fresh................................. 99,804(6)(7) 2.3 0 99,804 2.3
Hsi-Che Chen..................................... 80,000 ** 80,000 0 0
William Coffin................................... 75,000 1.7 75,000 0 0
Keith A. Cannon.................................. 30,000 ** 30,000 0 0
Corporation of the President of The Church of
Jesus Christ of Latter Day Saints.............. 36,000 ** 36,000 0 0
Banyan Investment Company........................ 20,000 ** 20,000 0 0
Clemons and Leslie Walker Family Trust........... 14,000 ** 14,000 0 0
Robert P. Ellis.................................. 12,000 ** 12,000 0 0
Ballard Investment Corporation................... 10,000 ** 10,000 0 0
David M. Berkowitz IRA........................... 10,000 ** 10,000 0 0
LuDene F. Dallimore IRA.......................... 10,000 ** 10,000 0 0
Paul N. Davis.................................... 10,000 ** 10,000 0 0
Howard and Beth Falco............................ 10,000 ** 10,000 0 0
James K. Farrelly Retirement Plan................ 10,000 ** 10,000
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP AS OF BENEFICIALLY OWNED AFTER
OCTOBER 31, 1996 SHARES NUMBER OF OFFERING (2)
------------------------------- SHARES ------------------------
NUMBER BEING NUMBER
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES PERCENT* OFFERED (1) OF SHARES PERCENT*
- ------------------------------------------------- ----------------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Max C. Tanner Keogh.............................. 10,000 ** 10,000 0 0
James W. Loss.................................... 10,000 ** 10,000 0 0
Allan R. Lyons................................... 10,000 ** 10,000 0 0
The Mart Warehousing and Storage, Inc............ 10,000 ** 10,000 0 0
Petroventure Holdings Limited.................... 10,000 ** 10,000 0 0
Sheldon and Janet Razin.......................... 10,000 ** 10,000
San Joaquin Construction Corporation............. 10,000 ** 10,000 0 0
September Corporation............................ 10,000 ** 10,000 0 0
Andrew E. Shapiro................................ 10,000 ** 10,000 0 0
Lincoln F. Stock................................. 10,000 ** 10,000 0 0
Clemons F. Walker................................ 10,000 ** 10,000 0 0
John and Carolyn Witkowski....................... 10,000 ** 10,000 0 0
Wasatch Family Dental P.C. Trust................. 8,000 ** 8,000 0 0
Sherman H. Smith................................. 6,360(7)(8) ** 0 6,360 **
Wayne M. Hammersly............................... 6,000 ** 6,000 0 0
Hoya Investments................................. 6,000 ** 6,000 0 0
John and Marilyn Chatterton...................... 5,714 ** 5,714 0 0
Bruce Cox........................................ 5,000 ** 5,000 0 0
Melvin R. Stoltz, MD Inc. Defined Benefit Plan... 5,000 ** 5,000 0 0
Walfred J. and Vida Fassler...................... 2,500 ** 2,500 0 0
David J. Enzer................................... 2,500 ** 2,500 0 0
Greg Flynn....................................... 2,500 ** 2,500
Stephen L. Hunsaker.............................. 2,000 ** 2,000 0 0
Glenn Holley..................................... 2,000 ** 2,000 0 0
Guy and Norma Ivins.............................. 2,000 ** 2,000 0 0
Eng H. Lee....................................... 0 0 0 0 0
All officers and directors as a group (6
persons)....................................... 2,199,391(5)(7) 50.1 239,000 1,960,391 44.6
</TABLE>
- ------------------------
* Shares of the Common Stock underlying options or other convertible
securities are deemed to be outstanding for purposes of calculating the
percentage of class for the owner of such securities, but not for purposes
of calculating any other person's percentage ownership.
** Represents less than 1% of the outstanding shares of Common Stock.
(1) Each Selling Shareholder reserves the right, in the sole discretion of such
Selling Shareholder, to offer or sell or not to offer or sell any or all of
the shares offered hereby and held by such Selling Shareholder.
(2) Assumes the sale of all shares of Common Stock offered hereby.
34
<PAGE>
(3) Shares held by Gary B. Godfrey and Karie Godfrey, Trustees of the Gary B.
Godfrey Family Revocable Trust dated July 1, 1993.
(4) Shares held by Douglas D. Yates and Rita S. Yates, Trustees of the Rita S.
Yates Family Revocable Trust dated July 1, 1993.
(5) Includes presently exercisable options to purchase 41,829 shares of Common
Stock issued to Mr. Bench under the Option Plan in connection with the Share
Exchange in substitution for options to purchase shares of Spire
Technologies Common Stock. See "Recent Developments--Share Exchange."
(6) Includes 20,000 shares owned of record by Mr. Fresh's individual retirement
account.
(7) Includes presently exercisable options to purchase 2,000 shares of Common
Stock issued to each of Mr. Fresh and Mr. Smith pursuant to the Option Plan.
See "Management--Employee Benefit Plans-- Stock Option Plan."
(8) Includes 2,000 shares owned of record by the Gerald Smith Family
Partnership, of which Mr. Smith is a limited partner. Mr. Smith disclaims
beneficial ownership of such shares.
35
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby will not be offered or sold
through any underwriting syndicate, nor has the Company retained any
underwriter, broker or dealer to facilitate the offer or sale of such shares. No
underwriting commissions or discounts will be paid by the Company in connection
therewith. Those Selling Shareholders electing to offer or sell shares of Common
Stock offered hereby will do so through the use of brokers in private
transactions. The Company will receive no proceeds from the sale of any of the
shares of Common Stock offered hereby.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Articles authorize the issuance of eight million (8,000,000) shares of
Common Stock, par value $.25 per share. As of October 31, 1996, there were
4,347,914 shares of Common Stock issued and outstanding, held by approximately
422 stockholders of record. Except as otherwise required by law, each share of
Common Stock entitles the stockholder to one vote on each matter which
stockholders may vote on at all meetings of stockholders of the Company. Holders
of the Common Stock are not entitled to cumulative voting in the election of
directors. Holders of the Common Stock do not have preemptive, subscription or
conversion rights, and there are no redemption or sinking fund provisions
applicable thereto. Shares of Common Stock are entitled to share equally and
ratably in dividends paid from the funds legally available for the payment
thereof, when, as and if declared by the Board of Directors of the Company. The
declaration of dividends, however, is subject to the discretion of the Board of
Directors. Holders of Common Stock are also entitled to share ratably in the
assets of the Company available for distribution to holders of Common Stock
after payment of liabilities of the Company upon liquidation or dissolution of
the Company, whether voluntary or involuntary. All the outstanding shares of
Common Stock are fully paid and nonassessable.
The Company has no present intention of paying any cash dividends on the
Common Stock and plans currently to retain any earnings to finance the
development and expansion of its operations. The payment of cash dividends also
may be restricted by a number of other factors, including future earnings,
capital requirements and the financial condition of the Company, and
restrictions on the payment of dividends imposed under Utah law.
CERTAIN INDEMNIFICATION AND LIMITED LIABILITY PROVISIONS
The Company's Bylaws provide that the Company shall indemnify all directors
and officers of the Company as permitted by Utah's Corporation Act. Under such
provisions, any director or officer, who in his capacity as such, is made a
party to any suit or proceeding, shall be indemnified if such director or
officer acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interest of the Company and, in the case of a
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful; provided, however, that no indemnification may be given a
director or officer where the claim or liability arose out of that person's own
negligence or willful misconduct, or if such person is ultimately adjudged in
the proceeding to be liable to the Company or liable on the basis that he or she
derived an improper personal benefit. The Bylaws and the Corporation Act further
provide that such indemnification is not exclusive of any other rights to which
such individuals may be entitled under the Articles, the Bylaws, any agreement,
vote of stockholders or otherwise.
The Company currently maintains no policy of director's and officer's
liability insurance for the benefit of the officers and directors of the
Company.
UTAH CONTROL SHARES ACQUISITION ACT
Utah's Control Shares Act provides that any person or entity which acquires
20% or more of the outstanding voting shares of a publicly-held Utah corporation
is denied voting rights with respect to the
36
<PAGE>
acquired shares, unless a majority of the disinterested shareholders of the
corporation elects to restore such voting rights. A "control share acquisition"
is generally defined as the direct or indirect acquisition of either ownership
or voting power associated with previously issued and outstanding control
shares. The shareholders of a corporation may elect to exempt the stock of the
corporation from the provisions of the Control Shares Act through adoption of a
provision to that effect in the articles of incorporation or bylaws of the
corporation. Neither the Company's Articles nor its Bylaws exempt the Common
Stock from the Control Shares Act.
The provisions of the Control Shares Act may discourage companies interested
in acquiring a significant interest in or control of the Company from doing so.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Atlas Stock
Transfer, Inc., 5899 South State Street, Murray, Utah 84107 (801) 266-7151.
SHARES ELIGIBLE FOR FUTURE SALE
As of October 31, 1996, the Company had 4,347,914 shares of Common Stock
outstanding. 1,485,656 of these shares, including 1,096,214 of the shares
offered hereby, will, upon the effectiveness of the Registration Statement, be
freely tradeable without restriction or further registration under the
Securities Act, except for any shares purchased by an "affiliate" of the Company
(as defined in the Securities Act and the rules and regulations thereunder)
which will be subject to the resale limitations of Rule 144. The remaining
2,862,258 shares are "restricted securities" as that term is defined under Rule
144.
In general, under Rule 144, as currently in effect, a shareholder (or
shareholders whose shares are aggregated), including an affiliate of the
Company, who beneficially has owned his or her restricted securities (as that
term is defined in Rule 144) for at least two years from the later of the date
such securities were acquired from the Company or (if applicable) the date they
were acquired from an affiliate, is entitled to sell, within any three-month
period, a number of such shares that does not exceed the greater of 1% of the
then outstanding shares of Common Stock or the average weekly trading volume in
the Common Stock during the four calendar weeks preceding the date on which
notice of such sale was filed under Rule 144, provided certain requirements
concerning availability of public information, manner of sale and notice of sale
are satisfied. In addition, affiliates of the Company must comply with the
restrictions and requirements of Rule 144, other than the two-year holding
period requirement, in order to sell shares of Common Stock which are not
restricted securities. Under Rule 144(k), if a period of at least three years
has elapsed between the later of the date the restricted securities were
acquired from the Company or the date they were acquired from an affiliate of
the Company, a shareholder who is not an affiliate of the Company at the time of
sale and has not been an affiliate at any time during the 90 days prior to the
sale would be entitled to sell the shares immediately without compliance with
the foregoing requirements under Rule 144, other than the requirements as to the
availability of current public information about the Company.
The Commission has proposed certain amendments to Rule 144 that would reduce
to one year the holding period required prior to restricted securities becoming
eligible for resale in the public market under Rule 144 and reduce to two years
the holding period required prior to a person becoming eligible to effect sales
under Rule 144(k). This proposal, if adopted, would result in a substantial
number of shares of Common Stock becoming eligible for resale in the public
markets significantly sooner than would otherwise be the case, which could
adversely affect the market price for the Common Stock. No assurances can be
given concerning whether or when such proposal will be adopted by the
Commission.
The Common Stock is quoted on the NASD's OTC Bulletin Board under the symbol
"STIC." The NASD has approved the Company's application for quotation of the
Common Stock on the NASDAQ Small Cap Market under the symbol "SNTO." No
prediction can be made of the effect, if any, that sales of shares of Common
Stock under Rule 144 or the availability of shares for sale will have on the
market price
37
<PAGE>
of the Common Stock prevailing from time to time after the offering. The Company
is unable to estimate the number of shares that may be sold in the public market
under Rule 144, because such amount will depend on the trading volume in, and
market price for, the Common Stock and other factors. Nevertheless, sales of
substantial amounts of Common Stock in the public market, or the perception that
such sales could occur, could adversely affect the market price of the Common
Stock.
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby and certain
other matters are being passed upon for the Company by Kimball, Parr, Waddoups,
Brown & Gee, Salt Lake City, Utah.
EXPERTS
The financial statements of Sento Technical Innovations Corporation and
subsidiaries (formerly Spire International Corp.) as at April 30, 1996 and 1995,
and for each of the years in the two-year period ended April 30, 1996 have been
included herein and in the registration statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
From 1979 to July, 1995, KPMG was retained by Amacan to audit Amacan's
financial statements. On July 14, 1995, upon the recommendation and approval of
the Board of Directors, Amacan engaged Tanner & Co. ("Tanner"), independent
certified public accountants, as independent auditor to audit Amacan's financial
statements for the year ending April 30, 1995, and notified KPMG of their
dismissal as independent auditor. KPMG's reports on Amacan's financial
statements for the fiscal years ended April 30, 1994 and 1993 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. Amacan had no
disagreements with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if not
resolved, would have caused KPMG to make reference to the subject matter of the
disagreement in connection with its reports. In addition, during the fiscal year
and the interim period during which KPMG served Amacan preceding its dismissal,
Amacan had no reportable events ("Reportable Events") as defined in Item
304(a)(1)(v) of Regulation S-K, promulgated pursuant to the Securities Exchange
Act of 1934, as amended. No consultations occurred between Amacan and Tanner
during the fiscal year and any interim period preceding the recent appointment
of Tanner regarding the application of accounting principles, the type of audit
opinion that might be rendered or other information considered by Amacan in
reaching a decision as to an accounting, auditing or financial reporting issue.
Upon consummation of the Share Exchange on April 18, 1996, and pursuant to
the recommendation and approval of the Board of Directors, the Company
determined to retain the services of KPMG, who had served as the independent
auditor of the Spire Companies since October 1995, to audit the financial
statements of the Company for the fiscal year ending April 30, 1996, and to
dismiss Tanner. Tanner's reports on Amacan's financial statements for the fiscal
year ended April 30, 1995 contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. The Company had no disagreements with Tanner on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved, would have caused Tanner to make
reference to the subject matter of the disagreement in connection with its
reports. In addition, during the two fiscal years and the interim period
preceding Tanner's dismissal, the Company had no Reportable Events. No
consultations occurred between the Company and KPMG during the fiscal year and
any interim period preceding the recent retention of KPMG regarding the
application of accounting principles, the type of audit opinion that might be
rendered or other information considered by the Company in reaching a decision
as to an accounting, auditing or financial reporting issue.
38
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2
Balance Sheets at June 30, 1996 (unaudited) and April 30, 1996 and 1995.................................... F-3
Statements of Income for the three-month periods ended June 30, 1996 and 1995 (unaudited) and years ended
April 30, 1996, 1995 and 1994............................................................................ F-4
Statements of Stockholders' Equity for the two months ended June 30, 1996 (unaudited) and years ended April
30, 1996, 1995 and 1994.................................................................................. F-5
Statements of Cash Flows for the three month periods ended June 30, 1996 and 1995 (unaudited) and years
ended April 30, 1996, 1995 and 1994...................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Sento Technical Innovations Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Sento
Technical Innovations Corporation and subsidiaries (formerly Spire International
Corp.) as of April 30, 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended. We have also
audited the combined balance sheet of Spire Technologies, Inc. and Spire
Technologies Systems Division, Inc. as of April 30, 1995, and the related
combined statements of income, stockholders' equity, and cash flows for each of
the years in the two-year period then ended. These consolidated and combined
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these consolidated and combined
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 the Companies as of April
30, 1996 and 1995, and the results of their operations and their cash flows for
each of the years in the three year period ended April 30, 1996, in accordance
with generally accepted accounting principles.
Salt Lake City, Utah
June 21, 1996
F-2
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
BALANCE SHEETS
JUNE 30, 1996, APRIL 30, 1996, AND 1995
ASSETS
<TABLE>
<CAPTION>
JUNE 30, APRIL 30, APRIL 30,
1996 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
Current assets:
Cash.............................................. $ 2,459,938 1,552,806 766,247
Accounts receivable............................... 3,523,222 2,176,642 1,524,948
Other current assets.............................. 92,248 7,806 17,410
Deferred tax asset (note 4)....................... 42,723 42,723 39,041
------------ ------------ ------------
Total current assets............................ 6,118,131 3,779,977 2,347,646
Fixed assets (note 3):
Land.............................................. 36,021 36,021 36,021
Buildings......................................... 250,489 250,489 250,489
Furniture and equipment........................... 608,483 526,005 372,669
Transportation equipment.......................... 11,516 11,516 11,516
Accumulated depreciation.......................... (269,633 ) (256,183) (202,484)
------------ ------------ ------------
Net fixed assets................................ 636,876 567,848 468,211
Interest in oil and gas properties (note 2)......... -- 197,000 --
------------ ------------ ------------
$ 6,755,007 4,544,825 2,815,857
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (note 3)........ $ 7,775 7,721 87,527
Accounts payable.................................. 1,871,909 1,050,535 998,115
Accrued liabilities............................... 198,582 488,660 360,388
Income taxes payable (note 4)..................... 135,599 52,715 32,154
Deferred maintenance revenue...................... 1,018,208 1,017,364 686,194
Other deferred revenue............................ 193,468 219,650 --
------------ ------------ ------------
Total current liabilities....................... 3,425,541 2,836,645 2,164,378
------------ ------------ ------------
Long-term liabilities:
Long-term debt, excluding current portion (note
3).............................................. 214,394 215,691 223,412
Deferred tax liability (note 4)................... 11,582 11,582 4,773
------------ ------------ ------------
Total long-term liabilities..................... 225,976 227,273 228,185
------------ ------------ ------------
Stockholders' equity (notes 2 and 7):
Common stock, $.25 par value. Authorized 8,000,000
shares; issued and outstanding 4,337,373 at June
30, 1996, 3,891,325 at April 30, 1996, and
183,000 at April 30, 1995....................... 1,084,343 972,832 2,000
Additional paid-in capital........................ 1,449,656 -- 7,410
Treasury stock, 17,000 shares in 1995, at cost.... -- -- (170,000)
Retained earnings................................. 569,491 508,075 583,884
------------ ------------ ------------
Total stockholders' equity...................... 3,103,490 1,480,907 423,294
------------ ------------ ------------
Commitments (note 5)................................ $ 6,755,007 4,544,825 2,815,857
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
STATEMENTS OF INCOME
THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995, AND
YEARS ENDED APRIL 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
THREE
THREE MONTHS MONTHS YEAR YEAR ENDED YEAR ENDED
ENDED JUNE ENDED JUNE ENDED APRIL APRIL 30, APRIL 30,
30, 1996 30, 1995 30, 1996 1995 1994
------------ ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Software licenses and maintenance................... $ 1,846,529 1,793,795 7,694,695 5,356,572 3,136,919
Hardware sales and service.......................... 2,671,910 1,509,063 6,178,706 4,318,111 2,906,492
------------ ---------- ------------ ---------- ----------
Total revenues.................................... 4,518,439 3,302,858 13,873,401 9,674,683 6,043,411
------------ ---------- ------------ ---------- ----------
Cost of sales:
Software licenses and maintenance................... 741,732 734,811 3,100,738 2,879,943 1,441,133
Hardware sales and service.......................... 2,207,873 1,182,304 5,351,305 3,734,132 2,525,896
------------ ---------- ------------ ---------- ----------
Total cost of sales............................... 2,949,605 1,917,115 8,452,043 6,614,075 3,967,029
------------ ---------- ------------ ---------- ----------
Gross profit...................................... 1,568,834 1,385,743 5,421,358 3,060,608 2,076,382
Selling, general, and administrative expenses......... 1,361,315 1,134,763 4,605,402 2,927,081 2,032,513
Research and development expense...................... 143,499 -- 268,028 -- --
------------ ---------- ------------ ---------- ----------
Income from operations............................ 64,020 250,980 547,928 133,527 43,869
Other income (expense):
Interest income..................................... 14,420 2,117 24,918 10,272 8,812
Interest expense.................................... (4,761) (5,886) (31,831) (28,348) (25,517)
Other income (expense).............................. 1,180 309 (4,715) 29,772 --
------------ ---------- ------------ ---------- ----------
Total other income (expense)...................... 10,839 (3,460) (11,628) 11,696 (16,705)
------------ ---------- ------------ ---------- ----------
Income before income taxes........................ 74,859 247,520 536,300 145,223 27,164
Income tax expense (note 4)........................... 22,884 94,058 196,745 46,488 8,931
------------ ---------- ------------ ---------- ----------
Net income........................................ $ 51,975 153,462 339,555 98,735 18,233
------------ ---------- ------------ ---------- ----------
------------ ---------- ------------ ---------- ----------
Net income per share.............................. $ 0.01 0.04 0.08 0.03 --
------------ ---------- ------------ ---------- ----------
------------ ---------- ------------ ---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC.
(COMBINED)
STATEMENTS OF STOCKHOLDERS' EQUITY
TWO MONTHS ENDED JUNE 30, 1996 (UNAUDITED), AND
YEARS ENDED APRIL 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN TREASURY RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCK EARNINGS EQUITY
---------- ------------ ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at April 30, 1993......... 100,000 $ 1,000 7,410 -- 466,916 475,326
Stock issuance..................... 100,000 1,000 -- -- -- 1,000
Stock repurchase................... (17,000) -- -- (170,000) -- (170,000)
Net income......................... -- -- -- -- 18,233 18,233
---------- ------------ ---------- ---------- ---------- ------------
Balances at April 30, 1994......... 183,000 2,000 7,410 (170,000) 485,149 324,559
Net income......................... -- -- -- -- 98,735 98,735
---------- ------------ ---------- ---------- ---------- ------------
Balances at April 30, 1995......... 183,000 2,000 7,410 (170,000) 583,884 423,294
Issuance of treasury stock......... 4,386 -- 65,790 43,860 -- 109,650
Business combination (note 2)...... 3,703,939 970,832 (73,200) 126,140 (415,364) 608,408
Net income......................... -- -- -- -- 339,555 339,555
---------- ------------ ---------- ---------- ---------- ------------
Balances at April 30, 1996......... 3,891,325 972,832 -- -- 508,075 1,480,907
---------- ------------ ---------- ---------- ---------- ------------
Stock issuance (unaudited)......... 446,048 111,511 1,449,656 -- -- 1,561,167
Net income (unaudited)............. -- -- -- -- 61,416 61,416
---------- ------------ ---------- ---------- ---------- ------------
Balances at June 30, 1996
(unaudited)...................... 4,337,373 $ 1,084,343 1,449,656 -- 569,491 3,103,490
---------- ------------ ---------- ---------- ---------- ------------
---------- ------------ ---------- ---------- ---------- ------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
STATEMENTS OF CASH FLOWS
THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED),
AND YEARS ENDED APRIL 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, APRIL 30, APRIL 30, APRIL 30,
1996 1995 1996 1995 1994
------------- ------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................. $ 51,975 153,462 339,555 98,735 18,233
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred taxes........................... -- -- 3,127 (12,931) 12,249
Depreciation............................. 18,901 31,758 53,699 41,056 37,313
Stock issued in lieu of compensation..... -- -- 109,650 -- --
Decrease (increase) in assets:
Accounts receivable.................... (952,267) (299,285) (632,225) (645,941) 368,801
Other current assets................... (97,817) (21,451) 9,604 9,108 (26,518)
Increase (decrease) in liabilities:
Accounts payable....................... 287,736 260,363 5,327 456,304 (304,540)
Accrued liabilities.................... 214,952 (3,552) (95,987) 305,018 20,929
Income taxes payable................... (59,597) 82,116 18,561 19,417 (2,135)
Deferred maintenance revenue........... (37,189) 330,522 331,170 164,144 89,877
Other deferred revenue................. -- -- 219,650 -- --
------------- ------------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities............... (573,306) 533,933 362,131 434,910 214,209
------------- ------------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures....................... (104,085) (21,779) (153,336) (114,395) (25,123)
Net cash acquired in business combination.. -- -- 484,781 -- --
Sale of interest in oil and gas
properties............................... 197,000 -- -- -- --
------------- ------------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities............... 92,915 (21,779) 331,445 (114,395) (25,123)
------------- ------------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of stock............ -- -- -- -- 1,000
Net borrowings on note payable to bank..... -- -- -- -- (13,166)
Principal payments of long-term debt....... (1,857) (1,707) (87,527) (176,167) (52,167)
Proceeds from issuance of long-term debt... -- -- -- 128,439 --
Deposit for private placement
subscriptions............................ -- -- 180,510 -- --
------------- ------------- ----------- ----------- -----------
Net proceeds from issuance of common
stock.............................. 1,561,167 --
------------- ------------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............... 1,559,310 (1,707) 92,983 (47,728) (64,333)
------------- ------------- ----------- ----------- -----------
Net increase in cash......................... 1,078,919 510,447 786,559 272,787 124,753
Cash at beginning of period.................. 1,381,019 1,652,769 766,247 493,460 368,707
------------- ------------- ----------- ----------- -----------
Cash at end of period........................ $ 2,459,938 2,163,216 1,552,806 766,247 493,460
------------- ------------- ----------- ----------- -----------
------------- ------------- ----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest....................... $ 4,761 5,886 21,016 28,348 25,517
Cash paid for income taxes................... 191,596 11,585 378,587 23,832 17,705
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED CONDENSED INFORMATION, YEAR END, AND NAME CHANGE
The balance sheet as of June 30, 1996, the statements of income and cash
flows for the three-month periods ended June 30, 1996 and 1995, and the
statement of stockholder's equity for the two-month period ended June 30, 1996,
have been prepared by the Company without an audit. Accordingly, they do not
include all of the information and footnotes required by generally-accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
Management has determined that commencing in fiscal year 1997, a new fiscal
year end of March 31 will be adopted to coincide with the calendar quarter end.
Form 8-K was filed June 18, 1996, reporting this change. The transition to a
March 31 fiscal year end will be accomplished via filing one 11-month year as
allowed by SEC regulations.
On September 10, 1996, the name of the parent company was changed from Spire
International Corp. to Sento Technical Innovations Corporation.
DESCRIPTION OF BUSINESS
Sento Technical Innovations Corporation (Sento) at April 30, 1996 was the
parent of Spire Technologies, Inc. (STI), Spire Technologies Systems Division,
Inc. (STSDI) and Dewpoint Distributed Solutions Incorporated (formerly Amacan
Industries, Inc.) (Dewpoint) (collectively, the Company). STI and STSDI are
resellers of computer software and hardware respectively, and also provide
technical support for certain software. STSDI has no employees or facilities,
with all work performed by STI in exchange for a management fee. Dewpoint had no
operations in fiscal 1996, but will provide worldwide distribution, reseller,
and channel management for leading software manufacturers. The Company's
customers consist of business and governmental entities, geographically
dispersed throughout the United States and abroad. Revenue from foreign sales
was insignificant in previous years, and in the year ended April 30, 1996, was
approximately nine percent of total sales. As a reseller the Company is
dependent on third-party suppliers, with over seventy percent of the Company's
revenues derived from products it obtains from three suppliers. At April 30,
1996, Sento owned certain investments in oil and gas producing properties, which
were disposed of in May 1996 as discussed in note 2.
BASIS OF PRESENTATION
The consolidated financial statements as of and for the year ended April 30,
1996, include the financial statements of Sento and its wholly-owned
subsidiaries, STI, STSDI, and Dewpoint. The financial statements as of April 30,
1995, and for each of the years in the two-year period then ended are the
combined financial statements of STI and STSDI. All significant intercompany
balances and transactions have been eliminated in consolidation or combination.
F-7
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FIXED ASSETS
Fixed assets are stated at cost. Depreciation of fixed assets is computed on
the straight-line method over the estimated useful lives of individual classes
of assets. The estimated useful lives of the individual classes of assets are as
follows:
<TABLE>
<S> <C>
Buildings................................................ 40 years
3-10
Furniture and equipment.................................. years
Transportation equipment................................. 5 years
</TABLE>
INTERESTS IN OIL AND GAS PROPERTIES
Interests in oil and gas properties, acquired in the business combination
discussed in note 2 are stated at cost to the Company, which is fair market
value at the date of the business combination.
REVENUE RECOGNITION
Revenue from the sale of software licenses and hardware sales is recognized
at the time of delivery. Revenue from maintenance contracts and customer service
is recognized as the service is performed. Deferred maintenance revenue consists
of payments received on software maintenance contracts and recorded as revenue
over the period of the contract, which is typically one year.
RESEARCH AND DEVELOPMENT
Research and development costs are expended as incurred.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
INCOME PER SHARE
Per share amounts are computed by dividing net income by the weighted
average number of common shares and common share equivalents resulting from
options outstanding. There were 3,992,768, 3,346,274, and 3,612,328 weighted
average common shares and common share equivalents outstanding for the years
ended April 30, 1996, 1995, and 1994, respectively. Income per share for 1995
and 1994 have been restated for the effects of the business combination
discussed in note 2 which for accounting purposes represented stock splits for
the STI and STSDI stockholders.
F-8
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of trade receivables, notes payable, trade accounts
payable, accrued expenses, and long-term debt approximate fair value.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) BUSINESS COMBINATION AND ASSET DISPOSITION
On January 23, 1996, STI and STSDI, which were both privately held by the
same group of owners, entered into an agreement and plan of reorganization
(Exchange Agreement) with Amacan Resources Corporation (Amacan) wherein STI and
STSDI became wholly owned subsidiaries of Amacan. The Exchange Agreement was
approved by Amacan stockholders on April 18, 1996. Since 1974, Amacan, a
publicly-traded company, has been almost exclusively engaged as a participant
with others in oil and gas operations and development. Amacan's principal assets
were working interests in producing oil and gas wells and options or rights to
participate in the drilling of additional wells. As part of the merger, Amacan
was renamed Spire International Corp.
Upon approval of the Exchange Agreement by the Amacan stockholders, (a) the
389,102 shares of Amacan's common stock previously outstanding (as adjusted for
a reverse stock split) remained outstanding and (b) Amacan issued an additional
3,502,223 shares of its common stock for all of the issued and outstanding
shares of STI and STSDIs' common stock. The business combination is treated for
accounting purposes as a "reverse merger" wherein STI and STSDI are shown as the
acquiring companies because the former stockholders of STI and STSDI have the
significant majority of the outstanding common stock after the combination, and
management of STI and STSDI has become the management of the combined companies.
The business combination is accounted by the purchase method of accounting with
the net assets of Amacan being recorded at their fair value at the date of
closing and the operating results of Amacan prior to the business combination
are not included with the historical operating results of STI and STSDI.
The following pro forma financial information presents the combined results
of operations of STI, STSDI, and Amacan as if the acquisition had occurred as of
May 1, 1993. The pro forma financial information does not necessarily reflect
the results of operations that would have occurred had STI, STSDI, and Amacan
constituted a single entity during such periods.
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-------------------------------------
1996 1995 1994
------------- ---------- ----------
<S> <C> <C> <C>
Net sales............................................ $ 14,020,329 9,862,216 6,231,833
Net income........................................... $ 238,365 127,258 31,242
Net income per share................................. $ 0.06 0.04 0.01
</TABLE>
F-9
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) BUSINESS COMBINATION AND ASSET DISPOSITION (CONTINUED)
As described above, the Company acquired Amacan's interest in oil and gas
producing properties in the business combination. On May 1, 1996, these
properties were sold to an unrelated party. The properties were recorded at fair
market value as of acquisition date, as determined by the subsequent sales
price. Accordingly, no gain or loss was recorded on disposal. The operating loss
for the oil and gas operations during the period from date of acquisition (April
18, 1996) to April 30, 1996, was insignificant.
(3) NOTE PAYABLE TO BANK AND LONG-TERM DEBT
The Company had a $75,000 unsecured line of credit with a commercial bank
that expired March 23, 1996. No amounts were outstanding at April 30, 1996 or
April 30, 1995. Subsequent to year-end, the Company established two new lines of
credit with a commercial bank: one for $1,000,000, secured by trade receivables,
at prime plus two percent, expiring June 1, 1997; the other for $350,000,
secured by equipment, at prime plus two percent, expiring May 1, 1999.
Long-term debt at April 30, 1996 and 1995, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
8.25% first mortgage payable in monthly installments of $1,173,
including interest, with final payment of $107,417 due July 15, 1999,
secured by the Company's land and building with a financial statement
carrying value of $255,831 at April 30, 1996......................... $ 121,909 125,755
8.70% SBA loan payable in monthly installments of $1,078, including
interest, secured by the Company's land and building with a financial
statement carrying value of $255,831 at April 30, 1996............... 101,503 104,754
5% simple interest loan payable in monthly installments of 1.4% of the
Spire Technologies gross margin from the prior month, secured by
common stock of Spire Technologies. Paid off in December 1995........ -- 80,430
---------- ---------
Total long-term debt................................................. 223,412 310,939
Less current portion................................................... 7,721 87,527
---------- ---------
Long-term debt, excluding current portion............................ $ 215,691 223,412
---------- ---------
---------- ---------
</TABLE>
Aggregate maturities of long-term debt are as follows: 1997, $7,721; 1998,
$8,400; 1999, $9,139; 2000, $112,877; 2001, $5,469; and thereafter $79,806.
F-10
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) INCOME TAXES
Income tax expense consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- --------- ----------
<S> <C> <C> <C>
Year ended April 30, 1996:
Federal................................................. $ 165,923 5,139 171,062
State................................................... 25,683 -- 25,683
---------- --------- ----------
$ 191,606 5,139 196,745
---------- --------- ----------
---------- --------- ----------
Year ended April 30, 1995:
Federal................................................. $ 50,242 (11,273) 38,969
State................................................... 9,177 (1,658) 7,519
---------- --------- ----------
$ 59,419 (12,931) 46,488
---------- --------- ----------
---------- --------- ----------
Year ended April 30, 1994:
Federal................................................. $ (3,179) 10,679 7,500
State................................................... (139) 1,570 1,431
---------- --------- ----------
$ (3,318) 12,249 8,931
---------- --------- ----------
---------- --------- ----------
</TABLE>
Actual income tax expense differs from the "expected" tax expense (computed
by applying the U.S. federal corporate income tax rate of 34 percent to income
before income taxes) as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense................................ $ 182,342 49,376 9,236
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal tax benefit............... 16,950 4,963 840
Other........................................................ (2,547) (7,851) (1,145)
---------- --------- ---------
Income tax expense......................................... $ 196,745 46,488 8,931
---------- --------- ---------
---------- --------- ---------
</TABLE>
F-11
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to current deferred
tax assets and noncurrent deferred tax liabilities at April 30, 1996 and 1995,
are presented below:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Current deferred tax assets:
Deferred compensation.................................................. $ 16,514 9,232
Allowance for bad debts................................................ 42,723 29,809
---------- ---------
Total gross current deferred assets.................................. 59,237 39,041
Less valuation allowance................................................. (16,514) --
---------- ---------
Net current deferred tax assets...................................... $ 42,723 39,041
---------- ---------
---------- ---------
Noncurrent deferred tax assets:
Investment tax credit carryforwards.................................... $ 10,095 --
Net operating loss carryforward........................................ 73,903 --
---------- ---------
Total gross noncurrent deferred assets............................... 83,998 --
Less valuation allowance................................................. (3,667) --
---------- ---------
Net noncurrent deferred tax assets................................... 80,331 --
Deferred tax liability--tax depreciation in excess of book
depreciation........................................................... 91,913 4,773
---------- ---------
Net noncurrent deferred tax liability................................ $ 11,582 4,773
---------- ---------
---------- ---------
</TABLE>
The valuation allowance for deferred tax assets as of May 1, 1994, was $-0-.
The net change in the total valuation allowance for the years ended April 30,
1996 and 1995, was an increase of $-0- and $20,181, respectively.
Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of April 30, 1996, will be allocated as an income tax
benefit to be reported in the statement of operations.
At April 30, 1996, the Company has net operating loss carryforwards for
federal income tax purposes of $189,500 which expire from 1997 to 2008. The
Company also has investment tax credit carryforwards for federal income tax
purposes of $10,095 which expire from 1997 to 2001.
As a result of the business combination discussed in note 2, Sento has
undergone greater than 50 percent change of ownership under the rules of the Tax
Reform Act of 1986. Consequently, certain of the Company's net operating loss
carryforwards and investment credit carryforwards may expire unutilized. The
maximum amount of the remaining carryforwards available to offset future income
in a given year is limited to the product of Sento's value on the date of
ownership change and the federal long-term tax-exempt rate, plus any limited
carryforward not utilized in prior years.
(5) LEASES
The Company has operating leases for office space and equipment. The Company
incurred rent expense of $80,426, $19,973 and $-0- for the years ended April 30,
1996, 1995, and 1994, respectively.
F-12
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(5) LEASES (CONTINUED)
Future minimum rent payments under existing operating leases are $128,476 in
fiscal 1997 and $122,425 in fiscal 1998.
(6) RETIREMENT PLAN
The Company has a qualified defined contribution retirement plan under
Section 401(k) of the Internal Revenue Code. The plan covers all employees who
meet minimum age and service requirements, and allows participants to defer a
portion of their annual compensation on a pretax basis. In addition, employer
contributions are made at the discretion of the Board of Directors. Participants
are fully vested at all times in employee contributions. Employer contributions
vest over a six-year period. Employer contributions of $12,376, $11,545, and
$6,001 were made for the years ended April 30, 1996, 1995, and 1994,
respectively.
(7) COMMON STOCK
At April 30, 1995, STI had common stock with a par value of $.01 per share
and 100,000 shares authorized and issued. STSDI had common stock with no par
value, 1,000,000 shares authorized and 100,000 shares issued and outstanding.
The Company has a stock option plan under which incentive stock options,
nonqualified stock options, stock appreciation rights, and stock units may be
granted to directors and employees of the Company. The Company has reserved
1,000,000 shares of common stock for issuance under the plan. The number of
shares, exercise price, terms, and exercise period are determined by the Board
of Directors on an option-by-option basis. No options were granted prior to May
1, 1995. At April 30, 1996, options to acquire 551,685 shares had been granted
of which 41,830 were exercisable. A summary of activity follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE PER
SHARES SHARE
----------- -------------
<S> <C> <C>
Options outstanding at beginning of year............................ -- $ --
Plus options granted................................................ 551,685 1.24 - 3.50
Less options canceled or expired.................................... -- --
----------- -------------
Options outstanding at end of year.................................. 551,685 $ 1.24 - 3.50
----------- -------------
----------- -------------
</TABLE>
On April 18, 1996, the Board of Directors of the Company adopted the Stock
Purchase Plan and reserved 200,000 shares of Common Stock for possible future
issuance to employees of the Company and other individuals thereunder. The
shareholders of the Company ratified and approved the adoption of the Stock
Purchase Plan on September 10, 1996. The Stock Purchase Plan is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code. As of April 30, 1996, the Company had not sold any shares under
the Stock Purchase Plan.
(8) SUBSEQUENT EVENTS
In April, 1996, the Company undertook a private offering to sell
unregistered shares of its common stock to certain accredited investors. The
Company intends to use the proceeds to acquire additional
F-13
<PAGE>
SENTO TECHNICAL INNOVATIONS CORPORATION AND SUBSIDIARIES (CONSOLIDATED)
(FORMERLY SPIRE INTERNATIONAL CORP.)
SPIRE TECHNOLOGIES INC. AND SPIRE TECHNOLOGY SYSTEMS DIVISION, INC. (COMBINED)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(8) SUBSEQUENT EVENTS (CONTINUED)
software licenses and technology, to fund additional research and development,
and for additional working capital. The shares were offered in units, at $7.00
per unit, with each unit consisting of two shares of common stock plus one
warrant to buy one share of common stock for $3.50 before April 30, 1998. The
Company closed the offering in June 1996, when 223,024 units had been subscribed
from which $1,561,167 of cash proceeds were received.
F-14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 5
The Company.................................... 9
Recent Developments............................ 10
Use of Proceeds................................ 12
Dividend Policy................................ 12
Capitalization................................. 12
Price Range of Common Stock.................... 13
Selected Condensed Consolidated Financial
Data......................................... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 15
Business....................................... 20
Management..................................... 28
Certain Relationships and Related Party
Transactions................................. 32
Principal and Selling Shareholders............. 33
Plan of Distribution........................... 36
Description of Capital Stock................... 36
Shares Eligible for Future Sale................ 37
Legal Matters.................................. 38
Experts........................................ 38
Additional Information......................... 38
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL NOVEMBER 26, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
1,096,214 SHARES
SENTO TECHNICAL
INNOVATIONS CORPORATION
COMMON STOCK
---------------------
PROSPECTUS
---------------------
NOVEMBER 1, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth expenses in connection with the issuance and
distribution of the Common Stock being registered, other than underwriting
discounts and commissions. All of the expenses listed below will be borne by the
Company. All of the amounts shown are estimates, except the SEC registration
fees.
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
SEC registration fees.............................................................. $ 1,135
Accounting fees and expenses....................................................... 9,000
Legal fees and expenses............................................................ 25,000
Blue sky fees and expenses......................................................... 1,000
Miscellaneous expenses............................................................. 4,000
---------
Total.......................................................................... $ 40,135
---------
---------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16-10a-902 ("Section 902") of the Corporation Act provides that a
corporation may indemnify any individual who was, is, or is threatened to be
made a named defendant or respondent (a "Party") in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (a "Proceeding"), because he is or
was a director of the corporation or, while a director of the corporation, is or
was serving at its request as a director, officer, partner, trustee, employee,
fiduciary or agent of another corporation or other person or of an employee
benefit plan (an "Indemnifiable Director"), against any obligation incurred with
respect to a Proceeding, including any judgment, settlement, penalty, fine or
reasonable expenses (including attorneys' fees), incurred in the Proceeding if
his conduct was in good faith, he reasonably believed that his conduct was in,
or not opposed to, the best interests of the corporation, and, in the case of
any criminal Proceeding, he had no reasonable cause to believe his conduct was
unlawful; provided however, that, pursuant to Subsection 902(4), (i)
indemnification under Section 902 in connection with a Proceeding by or in the
right of the corporation is limited to payment of reasonable expenses (including
attorneys' fees) incurred in connection with the Proceeding and (ii) the
corporation may not indemnify an Indemnifiable Director in connection with a
Proceeding by or in the right of the corporation in which the Indemnifiable
Director was adjudged liable to the corporation, or in connection with any other
Proceeding charging that the Indemnifiable Director derived an improper personal
benefit, whether or not involving action in his official capacity, in which
Proceeding he was adjudged liable on the basis that he derived an improper
personal benefit.
Section 16-10a-903 ("Section 903") of the Corporation Act provides that,
unless limited by its articles of incorporation, a corporation shall indemnify
an Indemnifiable Director who was successful, on the merits or otherwise, in the
defense of any Proceeding, or in the defense of any claim, issue or matter in
the Proceeding, to which he was a Party because he is or was an Indemnifiable
Director of the corporation, against reasonable expenses (including attorneys'
fees) incurred by him in connection with the Proceeding or claim with respect to
which he has been successful.
In addition to the indemnification provided by Sections 902 and 903, Section
16-10a-905 ("Section 905") of the Corporation Act provides that, unless
otherwise limited by a corporation's articles of incorporation, an Indemnifiable
Director may apply for indemnification to the court conducting the
II-1
<PAGE>
Proceeding or to another court of competent jurisdiction. On receipt of an
application and after giving any notice the court considers necessary, (i) the
court may order mandatory indemnification under Section 903, in which case the
court shall also order the corporation to pay the director's reasonable expenses
to obtain court-ordered indemnification, or (ii) upon the court's determination
that the director is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances and regardless of whether the director met the
applicable standard of conduct set forth in Section 902 or was adjudged liable
as described in Subsection 902(4), the court may order indemnification as the
court determines to be proper, except that indemnification with respect to
certain Proceedings resulting in a director being found liable as described in
Subsection 902(4) is limited to reasonable expenses (including attorneys' fees)
incurred by the director.
Section 16-10a-904 ("Section 904") of the Corporation Act provides that a
corporation may pay for or reimburse the reasonable expenses (including
attorneys' fees) incurred by an Indemnifiable Director who is a Party to a
Proceeding in advance of the final disposition of the Proceeding if (i) the
director furnishes the corporation a written affirmation of his good faith
belief that he has met the applicable standard of conduct described in Section
902, (ii) the director furnishes to the corporation a written undertaking,
executed personally or in his behalf, to repay the advance if it is ultimately
determined that he did not meet the required standard of conduct, and (iii) a
determination is made that the facts then known to those making the
determination would not preclude indemnification.
Section 16-10a-907 of the Corporation Act provides that, unless a
corporation's articles of incorporation provide otherwise, (i) an officer of the
corporation is entitled to mandatory indemnification under Section 903 and is
entitled to apply for court ordered indemnification under Section 905, in each
case to the same extent as an Indemnifiable Director, (ii) the corporation may
indemnify and advance expenses to an officer, employee, fiduciary or agent of
the corporation to the same extent as an Indemnifiable Director, and (iii) a
corporation may also indemnify and advance expenses to an officer, employee,
fiduciary or agent who is not an Indemnifiable Director to a greater extent than
the right of indemnification granted to Indemnifiable Directors, if not
inconsistent with public policy, and if provided for by its articles of
incorporation, bylaws, general or specific action of its board of directors or
contract.
Article 9 of the Company's Bylaws provides that the Company shall indemnify
all directors and officers of the Company as permitted by the Corporation Act.
Under such provisions, any director or officer, who in his capacity as such, is
made a party to any suit or proceeding, shall be indemnified if such
director or officer acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interest of the Company and, in the
case of a criminal proceeding, he or she had no reasonable cause to believe his
or her conduct was unlawful; provided, however, that no indemnification may be
given a director or officer where the claim or liability arose out of that
person's own negligence or willful misconduct, or if such person is ultimately
adjudged in the proceeding to be liable to the Company or liable on the basis
that he or she derived an improper personal benefit. The Bylaws further provide
that such indemnification is not exclusive of any other rights to which such
individuals may be entitled under the Articles, the Bylaws, any agreement, vote
of stockholders or otherwise.
Indemnification may be granted pursuant to any other agreement, bylaw, or
vote of shareholders or directors. The Company currently maintains no policy of
director's and officer's insurance for the benefit of the officers and directors
of the Company. The foregoing description is necessarily general and does not
describe all details regarding the indemnification of officers, directors or
controlling persons of the Company.
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
SHARE EXCHANGE. Pursuant to the Exchange Agreement among Amacan, Spire
Technologies, Spire Systems, and the Spire Stockholders, the Company acquired
all of the issued and outstanding stock of the Spire Companies in exchange for
the issuance of 3,501,883 unregistered shares of Common Stock to the Spire
Stockholders. At the Effective Time, in accordance with the terms of the
Exchange Agreement, each issued and outstanding share of the Spire Technologies
Common Stock was exchanged for 35.4786 shares of Common Stock, and each issued
and outstanding share of the Spire Systems Common Stock was exchanged for 4.0155
shares of Common Stock. After giving effect to the Share Exchange, including the
related one-for-seven reverse split of all issued and outstanding shares of
Common Stock (excluding the shares issued to the Spire Stockholders), the shares
of Common Stock owned by the shareholders of the Company immediately prior to
the Share Exchange represented approximately 10% of the outstanding shares of
Common Stock, and the shares of Common Stock acquired in the Share Exchange by
the Spire Stockholders represented approximately 90% of the outstanding shares
of Common Stock. The shares of Common Stock issued to the Spire Stockholders in
the Share Exchange were issued by the Company in reliance upon exemptions from
registration contained in Section 4(2) of the Securities Act.
PRIVATE PLACEMENT. On June 18, 1996, the Company completed a Private
Placement of unregistered shares of the Common Stock to certain accredited
investors. The shares were offered in Units, at $7.00 per Unit, with each Unit
consisting of two shares of Common Stock plus one Warrant to purchase one
Warrant Share for $3.50 at any time prior to or on April 30, 1998. A total of
223,024 Units were sold in the Private Placement, consisting of 446,048 shares
and Warrants exercisable for the purchase of 223,024 Warrant Shares, from which
the Company received cash proceeds of $1,561,167. The Company intends to use the
proceeds of the Private Placement to acquire additional software licenses and
technology, to fund additional research and development, and for additional
working capital. The Company completed the Private Placement in reliance upon
exemptions from registration contained in Section 3(b) and 4(2) of the
Securities Act and in Rule 506 of Regulation D promulgated thereunder.
ITEM 16. EXHIBITS
(a) EXHIBITS TO THE REGISTRATION STATEMENT.
The following exhibits required by Item 601 of Regulation S-K have been
included herewith or have been filed previously with the Commission as indicated
below.
<TABLE>
<CAPTION>
REGULATION S-K
EXHIBIT NO. DESCRIPTION EXHIBIT NO.
- ----------------- --------------------------------------------------------------------------------------- -------------
<C> <S> <C>
2 Agreement and Plan of Reorganization dated January 23, 1996, among the Company, Spire (1)
Technologies, Spire Systems and the Spire Stockholders.
3.1 Articles of Incorporation of the Company, as amended. (2)
3.2 Articles of Amendment and Share Exchange. (3)
3.4 Bylaws of the Company. (4)
4.1 Articles of Incorporation of the Company, as amended. (2)
4.2 Bylaws of the Company. (4)
4.3 Specimen Certificate. 4.3
5 Legal Opinion of Kimball, Parr, Waddoups, Brown & Gee, counsel to the Company, as to 5
the legality of the securities offered.
10.1 Exclusive License and Technical Assistance Agreement dated as of July 1, 1996 by and (4)
between Australian Software Innovations (Services) Pty. Ltd., and the Company.
10.2 Sento Technical Innovations Corporations Stock Incentive Plan. (4)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
REGULATION S-K
EXHIBIT NO. DESCRIPTION EXHIBIT NO.
- ----------------- --------------------------------------------------------------------------------------- -------------
10.3 Option Agreement by and among Spire International Corp., Australian Software 10.3
Innovations (Services) Pty. Ltd., Kilat Holdings Pty. Limited, and Eng Lee and Mary
Lee, dated September 10, 1996.
<C> <S> <C>
21 Subsidiaries of the Registrant. 21
23.1 Consent of Kimball, Parr, Waddoups, Brown & Gee (included in their legal opinion filed --
as Exhibit 5 to this Registration Statement).
23.3 Consent of KPMG Peat Marwick LLP, independent public accountants. 23.3
24 Power of Attorney (included on page II-5 of this Registration Statement). --
</TABLE>
- ------------------------
(1) Incorporated by reference to the exhibits to Current Report on Form 8-K
filed by the Company with the Securities and Exchange Commission on February
2, 1996.
(2) Incorporated by reference to the exhibits to a Registration Statement on
Form S-8 filed with the Securities and Exchange Commission on September 27,
1996.
(3) Incorporated by reference to the exhibits to the Current Report on Form 8-K
filed with the Securities and Exchange Commission on May 2, 1996, as amended
by Form 8-K/A filed with the Securities and Exchange Commission on July 29,
1996.
(4) Incorporated by reference to the exhibits to Annual Report on Form 10-KSB
for the fiscal year ended April 30, 1996 filed by the Company on July 29,
1996, as amended by Form 10-KSB/A filed with the Securities and Exchange
Commission on August 1, 1996.
(b) FINANCIAL STATEMENT SCHEDULES.--NOT APPLICABLE.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or on the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
II-4
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Orem, State of Utah, on November 1, 1996.
SENTO TECHNICAL INNOVATIONS CORPORATION
By: /s/ ROBERT K. BENCH
-----------------------------------------
Robert K. Bench, PRESIDENT AND CHIEF
FINANCIAL OFFICER
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and as of the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board and
/s/ GARY B. GODFREY* Chief Executive Officer
- ------------------------------ (principal executive November 1, 1996
Gary B. Godfrey officer)
President, Chief Financial
/s/ ROBERT K. BENCH Officer and Director
- ------------------------------ (principal accounting November 1, 1996
Robert K. Bench and
financial officer)
/s/ BRIAN W. BRAITHWAITE*
- ------------------------------ Secretary, Treasurer and November 1, 1996
Brian W. Braithwaite Director
/s/ WILLIAM A. FRESH*
- ------------------------------ Director November 1, 1996
William A. Fresh
- ------------------------------ Director
Eng H. Lee
/s/ SHERMAN H. SMITH*
- ------------------------------ Director November 1, 1996
Sherman H. Smith
<TABLE>
<S> <C>
*By: /s/ ROBERT K. BENCH
--------------------------------------
Robert K. Bench, ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C>
COMMON STOCK
NUMBER SENTO SHARES
TECHNICAL INNOVATIONS
SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF UTAH - TRANSFERABLE IN THE CITY OF SALT LAKE CITY, UTAH CUSIP 816918 10 6
- --------------------------------------------------------------------------------------------------------------------------
THIS CERTIFIES THAT
SPECIMEN
IS THE RECORD HOLDER OF
- --------------------------------------------------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK $.25 PAR VALUE OF
SENTO TECHNICAL INNOVATIONS CORPORATION
CERTIFICATE OF STOCK
TRANSFERABLE ON THE BOOKS OF THE CORPORATION IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE
PROPERLY ENDORSED. THIS CERTIFICATE IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT AND REGISTERED BY THE
REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED:
COUNTERSIGNED AND REGISTERED
SECRETARY/TREASURER [SEAL] ATLAS STOCK TRANSFER CORPORATION
5899 SOUTH STATE STREET
SALT LAKE CITY, UTAH 84107
BY
PRESIDENT AUTHORIZED SIGNATURE
</TABLE>
<PAGE>
<TABLE>
<S><C>
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ................Custodian...............
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ....................................
in common (State)
UNIF TRF MIN ACT - ..........Custodian (until age.........)
(Cust)
................ under Uniform Transfers
(Minor)
to Minors Act ..........................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
| |
| |
| |
- --------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney
- ------------------------------------------------------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated
------------------------------------
X
---------------------------------------------------------------------
X
---------------------------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
----------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
</TABLE>
<PAGE>
EXHIBIT 5
[LETTERHEAD]
November 1, 1996
The Board of Directors of
Sento Technical Innovations Corporation
311 North State Street
Orem, Utah 84057
Re: Sento Technical Innovations Corporation
Registration Statement on Form S-1
Gentlemen:
As counsel to Sento Technical Innovations Corporation, a Utah corporation
(the "Company"), in connection with the sale by certain selling shareholders
of the Company (the "Selling Shareholders") of up to 1,096,214 shares (the
"Shares") of the Common Stock of the Company and the filing of a Registration
Statement on Form S-1 (the "Registration Statement") under the Securities Act
of 1933, as amended, for registration of the Shares, we have examined the
originals or certified, conformed or reproduction copies of all such records,
agreements, instruments and documents as we have deemed necessary as the
basis for the opinion expressed herein. In all such examinations, we have
assumed the genuineness of all signatures on original or certified copies and
the conformity to original or certified copies of all copies submitted to us
as conformed or reproduction copies. As to various questions of fact relevant
to the opinion hereinafter expressed, we have relied upon certificates of
public officials and statements or certificates of officers or
representatives of the Company and others.
Based upon and subject to the foregoing, we are of the opinion that the
Shares being offered by the Selling Shareholders pursuant to the Registration
Statement are legally issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under "Legal Matters" in
the prospectus which constitutes a part of the Registration Statement and the
filing of this opinion as an exhibit to the Registration Statement.
KIMBALL, PARR, WADDOUPS, BROWN & GEE
<PAGE>
OPTION AGREEMENT
BY AND AMONG
SPIRE INTERNATIONAL CORP.,
AUSTRALIAN SOFTWARE INNOVATIONS (SERVICES) PTY LTD,
KILAT HOLDINGS PTY. LIMITED,
AND
ENG LEE AND MARY LEE, INDIVIDUALLY
SEPTEMBER 10, 1996
<PAGE>
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "AGREEMENT") is entered into in Orem, Utah,
effective as of the 10th day of September, 1996 (the "EFFECTIVE DATE"), by
and among Spire International Corp., a Utah corporation (the "BUYER"),
Australian Software Innovations (Services) Pty. Ltd ACN 050-053-355, a
limited company organized under the laws of Australia (the "SELLER"), Kilat
Holdings Pty. Limited ACN 003-982-616, a limited company organized under the
laws of Australia ("KILAT") and Eng Lee and Mary Lee (collectively, the
"SHAREHOLDERS"), individually.
RECITALS
A. Buyer, Seller and Eng Lee have reached certain understandings with
respect to the acquisition by Buyer of an option to purchase certain assets of
Seller on the terms and subject to the conditions set forth therein.
B. Eng Lee is the Managing Director of Seller, Kilat owns all of the
issued and outstanding shares of the capital stock of Seller and the
Shareholders own all of the issued and outstanding shares of the capital stock
of Kilat.
C. Buyer desires to acquire, and Seller desires to grant to Buyer, an
option (the "OPTION") to purchase all of Seller's right, title and interest in
and to the Assets, as defined in ARTICLE 9 (the "ACQUISITION") on the terms and
subject to the conditions set forth herein. All capitalized terms used herein
without definition shall have the meanings set forth in ARTICLE 9.
AGREEMENT
NOW, THEREFORE, in consideration of the respective representations,
warranties and covenants contained herein and for other good and valuable
consideration, the receipt, adequacy and legal sufficiency of which are hereby
acknowledged, Buyer, Seller, Kilat and the Shareholders hereby agree as
follows:
ARTICLE 1
GRANT OF OPTION; ADDITIONAL AGREEMENTS; CLOSING
1.1 GRANT OF OPTION. Subject to the terms and conditions of this
Agreement, Seller hereby grants the Option to Buyer and its nominee,
Centerpost, to be effective as of the Effective Date. Seller acknowledges
and agrees that Buyer, in its discretion, may elect to transfer and assign
its rights hereunder to Centerpost, and Centerpost shall be entitled to
exercise
2
<PAGE>
all of the rights and privileges and obtain all of the benefits to
which Buyer shall be entitled pursuant to the terms of this Agreement.
1.2 ADDITIONAL UNDERSTANDINGS. In connection with the grant of the
Option, Seller, Kilat and each of the Shareholders shall, from the date of
this Agreement until exercise by Buyer of the Option or the expiration of the
Option Term, afford Buyer's employees, auditors, legal counsel and other
authorized representatives reasonable access to the properties, records and
personnel of Seller in order to inspect, investigate and audit the Assets and
the operations and business of Seller. Buyer agrees to conduct any such
inspection, investigation or audit in a reasonable manner, during regular
business hours, so as not to disrupt the normal functioning of Seller's
business. Seller, Kilat and the Shareholders agree to cooperate fully with
Buyer and to make Seller's books and records, the Assets and the employees of
Seller available to Buyer as reasonably required by Buyer in order for Buyer
to complete its due diligence in a timely fashion.
1.3 OPTION CONSIDERATION. As consideration (the "OPTION CONSIDERATION")
for Seller's grant of the Option, Buyer shall, at or prior to the Option
Closing:
(a) Subject to the provisions of SECTION 1.7, pay to Seller the
option purchase price (the "OPTION PURCHASE PAYMENT") of One Hundred Thirty
Thousand Dollars ($130,000); and
(b) Buyer shall arrange for a lender (the "LENDER") to provide to
Seller a commercial credit facility (the "FACILITY") in the principal amount
of Two Hundred Thousand Dollars ($200,000) on terms mutually acceptable to
Buyer, Seller and Lender. In Buyer's sole discretion, the Lender shall be
either (1) Buyer or (2) a commercial lending institution. In the event Buyer
elects to act as the Lender, Seller shall execute and deliver to Buyer at the
Option Closing a promissory note substantially in the form of EXHIBIT B, as
determined by Buyer in its reasonable discretion, together with a Fixed
Charge substantially in the form of EXHIBIT C, as determined by Buyer in its
reasonable discretion, and such additional documents determined necessary by
Buyer in its reasonable discretion. Seller shall use the proceeds of the
Facility solely for purposes mutually approved by Buyer and Seller in
advance. All amounts advanced (the "LOAN") to Seller by the Lender under the
Facility shall be secured by a pledge by Seller in favor of the Lender of all
of Seller's right, title and interest in and to the Intellectual Property of
ASI, including, without limitation, the intellectual property described on
EXHIBIT D.
1.4 OPTION CLOSING. Upon satisfaction or waiver of the conditions to
closing contained in ARTICLE 4 and ARTICLE 5 hereof, the parties hereto agree
to close the grant of the Option (the "OPTION CLOSING") on the terms set
forth in this Agreement. The Option Closing shall take place at Orem, Utah,
or such other place as may be agreed to by the parties, on the date agreed to
by the parties, but in all events on or before September 10, 1996. It is the
intent of the parties to consummate the Option Closing contemporaneously the
execution of this Agreement. The parties agree to use their good faith and
reasonable efforts to close the grant
3
<PAGE>
of the Option as soon as possible and to cooperate fully with each other to
complete the Option Closing.
1.5 OPTION CLOSING DELIVERIES.
(a) Prior to or at the Option Closing, Seller shall deliver to
Buyer:
(i) If Buyer is the Lender, executed counterparts of the
applicable Loan Documents, or, if Buyer is not the Lender, copies of the
executed Loan Documents, as applicable;
(ii) Complete and accurate Disclosure Schedules;
(iii) Such other documents, including certificates of
independent legal advice and appropriate statutory declarations, as may be
required by this Agreement, or reasonably requested by Buyer to carry out the
transactions contemplated hereby, including, without limitation, declarations
in the form attached hereto as EXHIBIT E; and
(iv) Evidence, in form and substance acceptable to Buyer in its
reasonable discretion, of Seller's compliance with the requirements of
SECTION 1.7.
(b) Prior to or at the Option Closing, Buyer shall deliver to
Seller:
(i) In immediately available funds, the amount of the Option
Purchase Payment, subject to the provisions of SECTION 1.7;
(ii) If Buyer is the Lender, the amount of the initial advance
of the proceeds of the Loan requested by Seller and approved by Buyer
pursuant to the Facility, not to exceed Two Hundred Thousand Dollars
($200,000) in immediately available funds, and executed counterparts of the
applicable Loan Documents; and
(iii) Such other documents, including certificates of
independent legal advice and appropriate statutory declarations, as may be
required by this Agreement, or as reasonably requested by Seller to carry out
the transactions contemplated hereby.
1.6 EXERCISE OF OPTION.
(a) The Option shall be exercisable at any time, in Buyer's sole
discretion, during the period commencing on the Effective Date and continuing
for a period of one year thereafter (the "OPTION TERM").
(b) In the event Buyer elects to exercise the Option, Buyer shall
deliver to Seller and the Shareholders notice (the "EXERCISE NOTICE") of its
intention to exercise the Option;
4
<PAGE>
provided, however, that in such event Buyer shall deliver the Exercise Notice
to Seller and the Shareholders not less than sixty (60) days prior to the
expiration of the Option Term.
(c) Within sixty (60) days following the date of the Exercise
Notice, Buyer, Seller, Kilat and the Shareholders shall execute the following
definitive acquisition agreements pursuant to which Buyer, Seller, Kilat and
the Shareholders shall consummate the Acquisition:
(i) an asset acquisition agreement providing for the
acquisition by Buyer of all of the Assets (excluding only the
Intellectual Property Assets)(the "ASSET PURCHASE AGREEMENT" ),
substantially in the form of EXHIBIT F;
(ii) an intellectual property purchase agreement providing for
the acquisition of all of the Intellectual Property Assets (the
"INTELLECTUAL PROPERTY PURCHASE AGREEMENT"), substantially in the form of
EXHIBIT G; and
(iii) a deed of restraint of trade (the "DEED OF RESTRAINT
OF TRADE"), substantially in the form of EXHIBIT H, pursuant to which the
Shareholders shall undertake the covenants set forth therein in partial
consideration for the payment by Buyer of the Exercise Price.
Among other things, the Purchase Agreements shall provide for the acquisition
by Buyer of all or any lesser portion of the Assets as Buyer desires, in its
discretion, to purchase from Seller, at purchase price (the "EXERCISE PRICE")
to be paid by Buyer in the amount of One Million Four Hundred Five Thousand
Dollars ($1,405,000), payable at the closing of the Acquisition, subject to
the amount of the Exercise Price Adjustment. The Exercise Price shall be
paid in the form of cash in the amount of One Million Fifty Five Thousand
Dollars ($1,055,000) and Eighty Seven Thousand Five Hundred (87,500) shares
of Spire Common Stock; PROVIDED, HOWEVER, that (i) the amount of the cash
portion of the Exercise Price shall be adjusted to reflect the amount of the
Exercise Price Adjustment and (ii) the number of shares of Spire Common Stock
to be delivered by Buyer to Seller pursuant to this Section 1.6(c) shall not
be adjusted for any change in the value of the Spire Common Stock after the
Effective Date. The Purchase Agreements shall credit the full amount of the
Option Purchase Payment against Buyer's obligation to pay the Exercise Price.
(d) If Buyer exercises the Option and acquires the Assets, Buyer
shall assume only those Liabilities of Seller set forth on EXHIBIT A,
including, without limitation, the obligations of Seller under the promissory
note described in SECTION 1.3(b), unless the Liabilities of Seller to be
assumed by Buyer are subsequently adjusted by the mutual written agreement of
Buyer and Seller, which agreement Buyer may withhold in its absolute
discretion.
(e) If Buyer does not elect to exercise the Option, this Agreement
shall not convey to Buyer any interest in the Assets or the business of Seller,
except as expressly set forth in the promissory note and the Fixed Charge
described in SECTION 1.3(b).
5
<PAGE>
1.7 PAYMENT OF TAXES; STAMP DUTY. Seller shall pay any and all Taxes
payable to Governmental Authorities of the Commonwealth of Australia or any
political subdivision thereof which are related in any manner to the
execution of this Agreement, the grant and exercise of the Option or the
execution and performance of the Purchase Agreements, including, without
limitation, the full amount of any stamp duty payable to Governmental
Authorities of the Commonwealth of Australia or any political subdivision
thereof. Seller, Kilat and each of the Shareholders shall jointly and
severally indemnify, defend and hold Buyer harmless from any and all Tax
liabilities associated with the execution of this Agreement, the grant and
exercise of the Option and the execution and performance of the Purchase
Agreements. To facilitate Seller's performance of the obligations set forth
in this SECTION 1.7, at the Option Closing Buyer shall withhold from the
Option Purchase Payment an amount equal to Four Thousand Australian Dollars
(AUS$4,000), representing the estimated amount of Taxes payable in connection
with the execution of this Agreement, the grant and exercise of the Option
and the execution and performance of the Purchase Agreements. The amount so
withheld by Buyer shall be paid to the law firm of Thomas Osborne Kitamura,
to be held in trust by such law firm and released solely for the purpose of
fulfilling Seller's Tax obligations under the terms of this SECTION 1.7.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER, KILAT
AND THE SHAREHOLDERS
Except as otherwise indicated, Seller, Kilat and each of the Shareholders
jointly and severally represent and warrant to Buyer that the following
representations and warranties are true, correct and complete as of the date of
this Agreement and will be true, correct and complete as of the Effective Date:
2.1 AUTHORITY. Seller, Kilat and each of the Shareholders have the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement, to perform his, her or its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Seller, Kilat and each of the
Shareholders, and this Agreement constitutes the legal, valid and binding
agreement of Seller, Kilat and each of the Shareholders enforceable against
Seller, Kilat and each of the Shareholders in accordance with its terms except
as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditors' rights generally.
2.2 ORGANIZATION, EXISTENCE AND GOOD STANDING OF SELLER AND KILAT.
Seller is a limited company duly organized, validly existing and in good
standing under the laws of Australia and has full power and authority to
carry on its business as now being conducted, to own and operate its
properties and assets, and to perform all its obligations under the
Contracts. Kilat is a limited company duly organized, validly existing and
in good standing under the laws of Australia and has full power and authority
to carry on its business and to perform all its obligations under this
Agreement.
6
<PAGE>
2.3 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in the
Disclosure Schedules, neither the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby, nor the compliance
by Seller and Kilat with any of the provisions thereof will, as of the
Closing Date, (i) conflict with or violate any provision of the Memorandum
and Articles of Association or other charter or governing documents of Seller
or Kilat respectively, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, contract, agreement, commitment,
bond, mortgage, indenture, license, lease, pledge agreement or other
instrument or obligation to which Seller or Kilat is a party or by which
Seller or Kilat or any of their respective properties or assets may be bound,
including, without limitation, any other agreement with respect to the sale
by Seller of any of its properties or assets, (iii) to the best knowledge of
Seller, Kilat and the Shareholders, violate or conflict with any provision of
any Legal Requirement binding upon Seller or Kilat respectively, or (iv) to
the best knowledge of Seller, Kilat and the Shareholders, result in, or
require, the creation or imposition of, any Encumbrance upon or with respect
to any properties of Seller or Kilat, including, without limitation, the
Assets, or impair the ability of Seller, Kilat or the Shareholders to carry
out their respective obligations under this Agreement.
2.4 BOOKS AND RECORDS. The books of account and other business records
of Seller regarding the Assets and the business and operations of Seller have
all been made available to Buyer and such books and records are complete and
correct with regard to the matters which are the subject of this Agreement.
2.5 ABSENCE OF UNDISCLOSED LIABILITIES. Other than the Liabilities
created pursuant to the Facility and except as and to the extent fully
disclosed in writing to Buyer in the Disclosure Schedules, as of the
Effective Date, Seller will have no Liabilities, including, without
limitation, any Liabilities resulting from failure to comply with any Legal
Requirement applicable to Seller, its business or operations or the Assets
due or to become due and whether incurred in respect of or measured by the
income or sales of Seller for any period or arising out of any transactions
entered into, or any state of facts existing, on or before the Effective Date
which could, as of or after the Effective Date, materially adversely affect
Seller's business or operations or the Assets, give rise to an Encumbrance
against the Assets or materially adversely affect Seller's ability to carry
out the transactions contemplated by this Agreement.
2.6 CONTRACTS. Except as set forth on the Disclosure Schedules or as
otherwise described in this Agreement:
(a) Complete and accurate copies, including all amendments, of all
contracts and agreements to which Seller is a party or by which its business or
operation or the Assets may be materially affected (collectively, the
"CONTRACTS") have been delivered to Buyer.
(b) All of the Contracts are in full force and effect and are valid
and enforceable in accordance with their terms, there are no material defaults
thereunder or breaches
7
<PAGE>
thereof, and no condition exists or event has occurred
which, with notice or lapse of time or both, would constitute a default
thereunder.
(c) Seller has the right to assign its rights and obligations
under the Contracts to Buyer, and such assignment will not result in a
default, breach or right of termination thereunder.
2.7 PERSONAL PROPERTY.
(a) Seller has disclosed to Buyer all the Assets owned by Seller,
including all rights under the Contracts.
(b) There is no asset, property, right or interest of any nature
whatsoever necessary to or currently utilized in the operation of Seller's
business which is not included in the Assets and has not been disclosed to
Buyer in the Disclosure Schedules.
(c) Set forth in the Disclosure Schedules is a complete and
accurate description of all obligations or commitments of Seller with respect
to any asset of any nature whatsoever that is used in whole or in part for
the personal use or benefit of any shareholder, officer, director or employee
of Seller or any Affiliate thereof.
2.8 TITLE TO ASSETS AND RELATED MATTERS. Except as fully and accurately
disclosed in the Disclosure Schedules, Seller owns all of the Assets free and
clear of all Encumbrances and the claims or rights of any other party, except
for such Encumbrances created pursuant to the Facility. Seller has the power,
authority and right to sell the Assets to Buyer free and clear of any
Encumbrances, except for such Encumbrances created pursuant to the Facility.
2.9 INTELLECTUAL PROPERTY. Except as set forth in the Disclosure
Schedules:
(a) All of the Intellectual Property necessary to or currently
utilized in Seller's business is owned by Seller free and clear of all
Encumbrances, and is not subject to any license, royalty or other agreement,
and Seller has not granted any license or agreed to pay any royalty in
respect of any Intellectual Property necessary to or currently utilized in
Seller's business, except for that license granted pursuant to a License
Agreement between Seller and Spire Technologies, Inc. dated as of July 1,
1996;
(b) None of the Intellectual Property necessary to or currently
utilized in Seller's business has been or is the subject of any pending or
threatened Proceeding or claim of infringement;
(c) No license or royalty agreement to which Seller is a party or by
which any of the Intellectual Property necessary to or currently utilized in
Seller's business is or could be materially affected is in breach or default by
any party thereto or the subject of any notice of termination given or
threatened;
8
<PAGE>
(d) To the best knowledge of Seller and each of the Shareholders,
the products manufactured or sold by Seller and any process, method, part,
design, material or other Intellectual Property they employ, and the
marketing and use by Seller of any such product, service or other
Intellectual Property, do not infringe any Intellectual Property or
confidential or proprietary rights of another, and Seller has not received
any notice contesting its right to use any Intellectual Property; and
(e) Seller owns or possesses adequate rights in perpetuity in and to
all Intellectual Property necessary to conduct its business as presently
conducted.
2.10 COMPLIANCE WITH LAWS. Seller is in compliance with all Legal
Requirements applicable to the ownership of the Assets and the operation of
its business where the failure so to comply would have a material adverse
effect on Seller's ability to carry out its obligations under this Agreement
or the ability of Buyer to carry on the business operations related to the
Assets after the Acquisition, and the Seller does not have any basis to
expect, nor has it received, any Order, notice, or other communication from
any Governmental Authority of any alleged, actual, or potential violation
and/or failure to comply with any such Legal Requirement, except as disclosed
on the Disclosure Schedules.
2.11 LITIGATION. Except as set forth in the Disclosure Schedules, (i)
neither Seller, Kilat nor either of the Shareholders is subject to any Order
in which relief is sought involving, affecting, or relating to the ownership,
operation, or use of the Assets, the operation of Seller's business or the
matters covered by this Agreement which would prevent, delay or make illegal
the transactions contemplated by this Agreement, (ii) there are no
Proceedings pending or threatened against, involving, affecting or relating
to Seller, Kilat or either of the Shareholders, the operation of Seller's
business or to Sellers ownership, operation or use of the Assets before any
arbitrator or Governmental Authority, and (iii) to the best knowledge of
Seller and each of the Shareholders, there exist no facts to serve as a basis
for the institution of any Proceeding against Seller, Kilat, either of the
Shareholders or any of the Assets which would prohibit or adversely affect
the Assets or the ability of Seller, Kilat or the Shareholders to carry out
their respective obligations under this Agreement.
2.12 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker
or similar Person has acted directly or indirectly on behalf of Seller in
connection with this Agreement or the transactions contemplated hereby, and
no Person, including Seller, Kilat or either of the Shareholders, is or will
be entitled to any broker's or finder's fee or any other commission or
similar fee or expense, directly or indirectly, in connection with this
Agreement, the Purchase Agreements or the transactions contemplated hereby or
thereby.
2.13 BANKRUPTCY. Seller has not made any assignment for the benefit of
creditors, filed any petition in bankruptcy, been adjudicated insolvent or
bankrupt, petitioned or applied to any tribunal for any receiver, conservator
or trustee of it or any of its property or assets, or commenced any
proceeding under any reorganization arrangement, readjustment of debt,
conservation, dissolution or liquidation law or statute or any jurisdiction;
and no such action or
9
<PAGE>
proceeding has been commenced or threatened against
Seller by any creditor, claimant, governmental authority or any other person.
2.14 LABOR MATTERS. Except as set forth in the Disclosure Schedules,
(a) Seller has made all payments to its employees required by any
Legal Requirement or any Employee Benefit Plan;
(b) To the best knowledge of Seller, Kilat and each of the
Shareholders, there has not been, and there is not presently pending or
threatened, any Proceeding against Seller under any Legal Requirement governing
the conditions of Seller's employment of its employees, or any basis or ground
for any such claim;
(c) Seller has not been a party to any collective bargaining
agreement or other labor contract affecting the employees of Seller;
(d) To the best knowledge of Seller, Kilat and each of the
Shareholders, there has not been, and there is not presently pending or
existing or threatened, any strike, slowdown, picketing, work stoppage, labor
arbitration or proceeding in respect of the grievance of any employee, an
application or complaint filed by an employee or union with any Governmental
Authority, or organizational activity or labor dispute against or affecting
the business of Seller; and
(e) Seller has complied with all its obligations under all
relevant superannuation legislation and has made all contributions required
to be made in respect of its employees for their period of employment up to
and including the Effective Date. Seller has established reserves and
accruals (each of which is reflected on Seller's balance sheet attached
hereto as EXHIBIT A) in amounts sufficient to satisfy all superannuation
obligations in respect of its employees for their period of employment up to
and including the Effective Date.
2.15 DISCLOSURE. No representation or warranty of Seller, Kilat or the
Shareholders contained in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which
they were made, not misleading. There is no fact known to Seller, Kilat or
either of the Shareholders which has specific application to Seller (other
than general economic or industry conditions) and which materially and
adversely affects or, so far as Seller, Kilat or either of the Shareholders
can reasonably foresee, materially threatens, the Assets or the ability of
Seller, Kilat or the Shareholders to carry out their respective obligations
under this Agreement, which has not been set forth in this Agreement or in
the Disclosure Schedules.
2.16 TAX MATTERS. With respect to Taxes, including, without limitation,
Taxes imposed by the Income Tax Assessment Act of 1936 of the Commonwealth of
Australia (the "TAX ACT") and any other Australian national, state or
territorial law or regulation:
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(a) Seller has lodged, or will lodge, at or before the correct
time all Tax Returns required by law to be lodged on or before the Effective
Date and all such Tax Returns have been, or will be, as the case may be,
fully and accurately completed;
(b) Seller has made, to the Commissioner of Taxation or the
appropriate Governmental Authority a full and true disclosure of all material
facts necessary for the proper assessment of Seller and each deduction,
rebate or credit claimed in those Tax Returns has been properly claimed and
is duly allowable;
(c) All other necessary information, documents and notices in
respect of Tax have been properly and duly submitted by Seller to all
relevant Governmental Authorities in respect of Tax for all periods up to the
Effective Date and will continue to be properly and duly submitted up to the
later of the expiration of the Option Term and the execution of the Purchase
Agreement, and there is no unresolved dispute with any of those authorities
nor is any such dispute foreshadowed or contemplated;
(d) All Taxes which have been assessed or imposed or are lawfully
assessable upon or are payable by Seller and which are due and payable or
which may become due and payable subsequent to but are referable to the
period ending on the Effective Date have been paid by Seller or adequate
provisions has been made for them in Seller's accounts and such provisions
have been fully disclosed to Buyer; and
(e) All obligations imposed on Seller under all laws relating to
Tax have been complied with and, without limiting the generality of the
foregoing, all amounts of income tax and medicare levy required by law to be
deducted by Seller from salary or wages of Seller's employees (including,
without limitation, Seller's directors and officers) and from prescribed
payments as defined in Section 2321YHA(1) of the Tax Act and all amounts of
withholding tax have been duly deducted and where payable to the relevant
axing authority have been duly paid.
2.17 INSURANCE. The assets of Seller (including, without limitation,
the Assets) are adequately insured by respect of the risks to which they are
subject (including loss or damage by disease, fire, theft, storm and tempest)
in such amounts as accord with sound business principles and such policies of
insurance will not expire earlier than the later of the expiration of the
Option Term and the execution of the Purchase Agreements. Seller is
adequately insured against public liability in such amounts as accord with
sound business principles and such policies of insurance will not expire
prior to the later of the expiration of the Option Term and the execution of
the Purchase Agreements. Seller is adequately insured against workers'
compensation liability and has complied with all respects with the
legislation relating to workers' compensation in all jurisdictions where
relevant. All premiums in respect of the insurance coverages referred to in
this Agreement will have been paid prior to the Effective Date, Seller has
complied with all the conditions of the associated policies and has not made
any false or misleading statement or done or omitted to do anything which
would entitle the insurers to avoid the policies or refuse to meet any claim
thereunder in full other than as disclosed by Seller to Buyer in writing
prior to the Effective Date. There is no fact or matter of which Seller,
Kilat
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or the Shareholders is aware which could lead to Seller's insurance
policies being vitiated or repudiated and neither Seller, Kilat nor the
Shareholders will permit any such policies to lapse prior to the later of the
expiration of the Option Term and the execution of the Purchase Agreements,
nor will Seller, Kilat or the Shareholders do or fail to do anything which
will render any of Seller's insurance policies void or voidable prior to the
later of the expiration of the Option Term and the execution of the Purchase
Agreements.
2.18 TRADE PRACTICES. There is no agreement, arrangement or activity
whether by commission or omission in which Seller has been or will be
concerned which infringes or which has been or which is required to be
authorized under the Australian Trade Practices Act of 1974 of the
Commonwealth of Australia or any other anti-trust legislation in relation to
the Assets, including, without limitation, any Australian national, state or
territorial law or regulation.
2.19 ENVIRONMENTAL LIABILITIES. There are no Environmental Liabilities
(as defined below) affecting any of Seller's business premises. There are no
factors affecting any of Seller's business premises which are likely within
the next twelve months to give rise to any Environmental Liability. For the
purposes of this clause, the term "ENVIRONMENTAL LAW" means any planning,
environmental, health, toxic, hazardous substances, dangerous goods,
waste/disposal or pollution laws, regulations, orders, notices, ordinances or
requirements, and the term "ENVIRONMENTAL LIABILITY" means any obligation,
expense, penalty or fine under an Environmental Law which could be imposed on
any occupier in possession of Seller's business premises.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, Kilat and the Shareholders as
follows:
3.1 ORGANIZATION, EXISTENCE AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Utah and has full power and authority to purchase the Assets and to
carry on its intended business therewith.
3.2 AUTHORITY. Buyer has full power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Buyer and constitutes the legal,
valid and binding agreement of Buyer enforceable against Buyer in accordance
with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws affecting creditor's rights generally.
3.3 CONSENTS AND APPROVALS; NO VIOLATION. No filing or registration
with, no notice to and no Governmental Authorization, consent or approval of
any Governmental Authority, creditor or other person in a contractual
relationship with Buyer is necessary in connection with
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Buyer's execution and delivery of this Agreement, the performance of its
obligations hereunder or the consummation of the transactions contemplated
hereby or thereby. Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the compliance by
Buyer with any of the provisions hereof will, as of the Effective Date, (i)
result in a material violation or breach of, or constitute (with or without
due notice or lapse of time or both) a material default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of the Buyer's Articles of Incorporation or Bylaws,
or of any note, contract, agreement, commitment, bond, mortgage, indenture,
license, lease, pledge agreement or other instrument or obligation to which
Buyer is a party or by which Buyer or any of its properties or assets may be
bound, or (ii) violate or conflict with any provision of any Legal
Requirement binding upon Buyer.
3.4 BANKRUPTCY. Buyer has not made any assignment for the benefit of
creditors, filed any petition in bankruptcy, been adjudicated insolvent or
bankrupt, petitioned or applied to any tribunal for any receiver, conservator
or trustee of it or any of its property or assets, or commenced any
proceeding under any reorganization arrangement, readjustment of debt,
conservation, dissolution or liquidation law or statute or any jurisdiction;
and no such action or proceeding has been commenced or threatened against
Buyer by any creditor, claimant, governmental authority or any other person.
3.5 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker
or similar Person has acted directly or indirectly on behalf of Buyer in
connection with this Agreement or the transactions contemplated hereby, and
no Person, including Buyer, is or will be entitled to any broker's or
finder's fee or any other commission or similar fee or expense, directly or
indirectly, in connection with this Agreement, the Purchase Agreements, the
Loan Documents or the transactions contemplated hereby or thereby.
ARTICLE 4
CONDITIONS PRECEDENT
TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to fulfillment of the following conditions, any one
or more of which may be waived in whole or in part by Buyer in the manner
provided for herein.
4.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Seller, Kilat and the Shareholders
contained in this Agreement are true, correct and complete in all material
respects as of the Effective Date.
4.2 COMPLIANCE WITH AGREEMENT. Seller, Kilat and each of the
Shareholders shall have performed and complied with all obligations,
agreements, covenants and conditions required by this Agreement to be
performed or complied with by them on or before the Effective Date,
including, without limitation, making all the deliveries required by
SECTION 1.5.
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4.3 AUTHORIZATION; THIRD-PARTY CONSENTS. All filings and registrations
with and notices to, and each Governmental Authorization, consent or approval
of, any Governmental Authority, creditor or other Person which is necessary
in connection with the execution and delivery of this Agreement by Seller,
Kilat and the Shareholders, the performance of their respective obligations
hereunder, or the consummation of the transactions contemplated hereby shall
have been made or obtained. All corporate actions necessary to authorize the
execution, delivery and performance of this Agreement by Seller and Kilat,
and the consummation by Seller and Kilat of the transactions contemplated by
this Agreement shall have been duly and validly taken, Seller shall have full
right and power to sell the Assets (except as may be limited pursuant to the
Facility) and Seller and Kilat shall have full right and power to perform
their respective obligations upon the terms provided in this Agreement. On
or prior to the Effective Date, Seller, Kilat and the Shareholders shall have
furnished to the Buyer evidence of the foregoing filings, notices, consents,
stipulations and assignments.
4.4 ACTIONS SATISFACTORY. The form and substance of all actions,
proceedings, instruments and documents required to consummate the
transactions contemplated by this Agreement shall have been satisfactory in
all reasonable respects to Buyer and its counsel.
ARTICLE 5
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER, KILAT AND THE SHAREHOLDERS
The obligations of Seller, Kilat and the Shareholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment of
the following conditions, any one or more of which may be waived in whole or
in part by the Seller, Kilat or the Shareholders in the manner provided for
herein.
5.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Buyer contained in this Agreement shall be
true, correct and complete in all material respects as of the Effective Date.
5.2 BUYER'S PERFORMANCE; COMPLIANCE WITH AGREEMENT. Buyer shall have
performed and complied with all obligations, agreements, covenants and
conditions required by this Agreement to be performed or complied with by
Buyer on or before the Effective Date, including without limitation making
all the deliveries required by SECTION 1.5.
5.3 AUTHORIZATION; THIRD PARTY CONSENTS. All filings and registrations
with and notices to, and each Governmental Authorization, consent or approval
of, any Governmental Authority, creditor or other Person which is necessary
in connection with Buyer's execution and delivery of this Agreement, the
performance of its obligations hereunder, or the consummation of the
transactions contemplated hereby shall have been made or obtained. All
corporate action necessary to authorize the execution, delivery and
performance of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated by this Agreement shall have been
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duly and validly taken. Buyer shall have furnished to Seller, Kilat and the
Shareholders evidence of the foregoing filings, notices, consents and
actions, if requested.
5.4 ACTIONS SATISFACTORY. The form and substance of all actions,
proceedings, instruments and documents required to consummate the
transactions contemplated by this Agreement shall have been satisfactory in
all reasonable respects to Seller, Kilat and the Shareholders and their
counsel.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 EXPENSES. Except as otherwise expressly provided herein, each
party to this Agreement shall bear its respective expenses incurred in
connection with the preparation, execution and performance of this Agreement
and the transactions contemplated hereby, including without limitation all
fees and expenses of agents, business brokers, legal counsel, accountants,
tax and financial advisors and other facilitators and advisors.
6.2 CONFIDENTIALITY.
(a) NON-DISCLOSURE AND USE. Each of Buyer, Seller, Kilat and the
Shareholders acknowledges that, in connection with the transactions
contemplated by this Agreement, each has become or may become privy to the
technical, marketing and other proprietary information of another party,
including, without limitation, information, material, documents and data
related to such other party, to the business activities of such other party
and/or to its customers, trade secrets and other proprietary information
(collectively, the "PROPRIETARY INFORMATION"). Each agrees (i) to take at
all times all reasonably necessary steps to safeguard the confidentiality of
any Proprietary Information; (ii) not to disclose, reveal, make accessible or
make available to any third Person any Proprietary Information; and (iii) not
to use any Proprietary Information for such party's own benefit or for any
other Person's benefit; PROVIDED, HOWEVER, that Buyer, Seller, Kilat or the
Shareholders may disclose (A) Proprietary Information which at the time of
the disclosure is part of the public knowledge and readily accessible to such
third party and (B) Proprietary Information which is required by law to be
disclosed.
(b) RETURN. Buyer, Seller, Kilat and the Shareholders agree that
if the Option is not exercised, each of them will, upon the expiration of the
Option Term, return to the other parties hereto any and all material
containing or reflecting Proprietary Information.
(c) REMEDIES. Each of Buyer, Seller, Kilat and the Shareholders
acknowledges and agrees that any breach of the terms of this SECTION 6.2
would result in irreparable injury and damage to the injured party for which
such party would have no adequate remedy at law; each of Buyer, Seller, Kilat
and the Shareholders therefore also acknowledges and agrees that in the event
of such breach or any threat of breach, the injured or threatened
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party shall be entitled, in addition to any other remedies to which such
party may be entitled at law or in equity, to an immediate injunction and
restraining order to prevent such breach and/or threatened breach by the
breaching or threatening party and/or any and all persons and/or entities
acting for and/or with such breaching or threatening party, without having to
provide a bond or other security or to prove actual damages.
6.3 OPERATION OF BUSINESS.
(a) Seller shall remain in possession of Seller's business and
assets during the period from the Effective Date until the execution of the
Purchase Agreements.
(b) Neither Seller, Kilat nor either of the Shareholders will
engage in any practice, take any action or enter into any transaction outside
the Ordinary Course of Business with respect to the Assets or the operation
of Seller's business from the date of this Agreement until the expiration of
the Option Term or, if Buyer exercises the Option, until the consummation of
the transactions described in the Purchase Agreements. Without in any manner
limiting the foregoing, Seller, Kilat and the Shareholders covenant and agree
that during such period,
(i) the aggregate monthly remuneration (including, without
limitation, all salary, distributions, dividends, bonuses, deferred
compensation, automobile lease expense, superannuation payments and other
payments) paid to or for the benefit of Kilat and the Shareholders and all
Affiliates of Kilat and the Shareholders shall not exceed Sixteen Thousand
Six Hundred Sixty Seven Australian Dollars (Aus$16,667), and
(ii) except as set forth in the Disclosure Schedules, Seller will
not, and Kilat and the Shareholders will not permit Seller to, make any
payment or incur any obligation with respect to any asset of any nature
whatsoever that is used in whole or in part for the personal use or benefit
of any shareholder, officer, director or employee of Seller or any
Affiliate thereof.
Seller, Kilat and the Shareholders will use their best efforts to preserve the
Assets and the goodwill and value of Seller's business, to comply with all laws
applicable to the Assets and Seller's business and to maintain good working
relationships with lessors, licensors, suppliers, customers and employees. In
addition, Seller will not sell or contract to sell any interest in Seller or
lease, license, transfer, pledge, mortgage, hypothecate or otherwise dispose of
any of the Assets.
(c) Seller will not, and Kilat and the Shareholders will not
permit Seller to, do any act or thing or suffer or permit any omission which
would make any policy of insurance of Seller written with respect to the
Assets void or voidable or do anything that would mean that any existing
insurance policy of Seller is not materially in full force and effect during
the period from the Effective Date until the later of the expiration of the
Option Term and the consummation of the transactions described in the
Purchase Agreements.
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6.4 PUBLICITY. The parties hereto agree, subject to the provisions of
SECTION 6.2, to advise and confer with each other, to the maximum extent
possible, regarding and prior to the issuance of any reports, statements,
releases, public announcements or similar publicity with respect to this
Agreement or the transactions contemplated hereby; PROVIDED, HOWEVER, that any
of the parties may make such announcements, give such notices and provide such
information to Governmental Authorities, employees, creditors, affiliates and
the public as its counsel may advise is legally required.
6.5 EXCLUSIVITY. From and after the date of this Agreement until the
expiration of the Option Term:
(a) Neither Seller nor any of its officers, directors, stockholders
or agents (including, without limitation, Kilat and the Shareholders) shall
directly or indirectly:
(i) Enter into any transaction with any party other than Buyer
relative to any disposition of the Assets or Seller's business or operations or
any part thereof; or
(ii) Solicit or encourage submission of inquiries, proposals or
offers from any other party relative to potential disposition of the Assets or
Seller's business or operations or any part thereof; or
(iii) Provide further information to any party other than
Buyer relating to any possible disposition of the Assets or Seller's business
or operations or any part thereof.
(b) Seller, Kilat and the Shareholders agree that if Seller, Kilat
or either of the Shareholders receives an offer or proposal relating to the
possible disposition of the Assets or Seller's business or operations or any
part thereof, Seller, Kilat and the Shareholders will immediately notify
Buyer of such offer or proposal, the identity of the party making the offer
or proposal and the specific terms of the offer or proposal.
6.6 COOPERATION. Each of Kilat and the Shareholders agrees to cause
Seller to take, or to refrain from taking, all actions necessary to fulfill
Seller's covenants and obligations under this Agreement.
6.7 RESTRAINT OF TRADE. Seller, Kilat and the Shareholders each
acknowledges the receipt of valuable consideration from Buyer. In
consideration of that valuable consideration and to protect the goodwill
associated with the Assets, each of Seller, Kilat, the Shareholders and their
respective Affiliates agree to be bound by the following restrictions:
(a) For the purpose of SECTION 6.7. "engaged or involved in"
includes direct or indirect involvement as a principal, agent, partner,
employee, shareholder, unitholder, director, trustee, beneficiary, manager,
consultant, adviser or financier;
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(b) During the term of this Agreement none of them will be engaged
or involved in any capacity in any business or activity which is the same as
or similar to the business of Seller in the Commonwealth of Australia;
(c) Without in any manner limiting the provisions of SECTION
6.7(B), if the Option is exercised,
(i) for a period of twelve months from the date of execution of
the Purchase Agreements;
(ii) for a period of twelve months from the first anniversary of
the date of execution of the Purchase Agreements; and
(iii) for a period of twelve months from the second
anniversary of the date of execution of the Purchase Agreements,
none of them will, be engaged or involved in any capacity in any business or
activity which is the same as or similar to the business of Buyer, as successor
to Seller in relation to the Assets, in the Commonwealth of Australia.
(d) If any of the prohibitions or restrictions contained in this
section are judged by any court to go beyond what is reasonable in the
circumstances, but would be reasonable and necessary if any activity were
deleted or a period or area were reduced, then the prohibitions or restrictions
will apply with that activity deleted or period or area reduced by the minimum
amount determined necessary by the relevant court.
(e) Each of the prohibitions and restrictions in this section has
effect as a separate and several prohibition or restriction and is to be
enforced accordingly.
(f) Notwithstanding any of the other provisions of this section,
Seller, Kilat, the Shareholders and their respective Affiliates may hold in
aggregate up to, but not more than, ten percent of the capital stock of a
public company, the shares of which are quoted in Australian Stock Exchange
Limited, even though that company carried on any of the activities referred
to in this clause.
(g) Seller, Kilat and the Shareholders each acknowledge that all the
prohibitions and restrictions contained in this clause are reasonable in these
circumstances and warrant that
(i) they have received independent legal advice with respect to
this clause;
(ii) they consider such prohibitions and restrictions to go no
further than reasonably necessary to protect the goodwill associated with
the Assets; and
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(iii) damages would not be an adequate remedy to protect the
goodwill associated with the Assets.
ARTICLE 7
INDEMNIFICATION AND LIMITATION
7.1 INDEMNIFICATION BY SELLER AND THE SHAREHOLDERS. Subject to the
limitation set forth in SECTION 7.4, Seller, Kilat and each of the
Shareholders, jointly and severally, unconditionally, absolutely and
irrevocably agree to and shall defend, indemnify and hold harmless Buyer, and
each of Buyer's officers, directors, employees, counsel, successors, assigns,
and legal representatives (Buyer and such persons are collectively referred
to as the "BUYER'S INDEMNIFIED PERSONS") from and against, and shall
reimburse Buyer's Indemnified Persons for, each and every Loss paid, imposed
on or incurred by Buyer's Indemnified Persons, directly or indirectly,
relating to, resulting from or arising out of any inaccuracy in any
representation or warranty of Seller, Kilat or the Shareholders under this
Agreement, the Loan Documents or any agreement, certificate or document
delivered by Seller, Kilat or the Shareholders pursuant hereto in any
respect, or any breach or nonfulfillment of any covenant, agreement or other
obligation of Seller, Kilat or the Shareholders under this Agreement, the
Loan Documents or any agreement, certificate or document to be delivered by
Seller, Kilat or the Shareholders pursuant hereto (including, without
limitation, Seller's obligation to pay Taxes required pursuant to SECTION
1.7). With respect to matters not involving Proceedings brought or asserted
by third parties against Buyer's Indemnified Persons, within thirty (30) days
after notification from Buyer's Indemnified Persons supported by reasonable
documentation setting forth the nature of the circumstances entitling Buyer's
Indemnified Persons to indemnity hereunder, Seller, Kilat and the
Shareholders shall, at no cost or expense to Buyer's Indemnified Persons,
diligently commence resolution of such matters in a manner reasonably
acceptable to Buyer's Indemnified Persons and shall diligently and timely
prosecute such resolution to completion; PROVIDED, HOWEVER, with respect to
those valid claims that may be satisfied by payment of a liquidated sum of
money and which are not disputed reasonably and in good faith by Seller,
Kilat and the Shareholders, Seller, Kilat and the Shareholders shall promptly
pay the amount so claimed. If litigation or any other Proceeding is commenced
or threatened, the provisions of SECTION 7.3 shall control over the
immediately preceding sentence. Buyer shall be entitled to offset against
any amounts owed by Buyer to Seller, Kilat or the Shareholders under this
Agreement any amounts owed by Seller, Kilat or the Shareholders,
respectively, to Buyer hereunder.
7.2 INDEMNIFICATION BY BUYER. Buyer unconditionally, absolutely and
irrevocably agrees to and shall defend, indemnify and hold harmless Seller,
Kilat, the Shareholders and the successors, assigns, heirs and legal and
personal representatives of Seller, Kilat and the Shareholders (Seller,
Kilat, the Shareholders and such persons are collectively referred to as the
"SELLER'S INDEMNIFIED PERSONS") from and against, and shall reimburse
Seller's Indemnified Persons for, each and every Loss paid, imposed on or
incurred by Seller's Indemnified Persons, directly or indirectly, relating
to, resulting from or arising out of any inaccuracy in any representation or
warranty of Buyer under this Agreement, the Loan Documents or any
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agreement, certificate or other document delivered or to be delivered by
Buyer pursuant hereto in any respect, or any breach or nonfulfillment of any
covenant, agreement or other obligation of Buyer under this Agreement, the
Loan Documents or any agreement, certificate or document to be delivered by
Buyer pursuant hereto. With respect to matters not involving Proceedings
brought or asserted by third parties against Seller's Indemnified Persons,
within thirty (30) days after notification from Seller's Indemnified Persons
supported by reasonable documentation setting forth the nature of the
circumstances entitling Seller's Indemnified Persons to indemnity hereunder,
the Buyer, at no cost or expense to Seller's Indemnified Persons, shall
diligently commence resolution of such matters in a manner reasonably
acceptable to Seller's Indemnified Persons and shall diligently and timely
prosecute such resolution to completion; PROVIDED, HOWEVER, with respect to
those valid claims that may be satisfied by payment of a liquidated sum of
money and which are not disputed reasonably and in good faith by Buyer, Buyer
shall promptly pay the amount so claimed. If litigation or any other
Proceeding is commenced or threatened, the provisions of SECTION 7.3 shall
control over the immediately preceding sentence.
7.3 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. If any Proceeding shall
be brought or asserted against a party entitled to indemnification pursuant
to SECTIONS 7.1 or 7.2, or any successor thereto (the "INDEMNIFIED PERSON")
in respect of which indemnity may be sought under this Article from an
indemnifying person or any successor thereto (the "INDEMNIFYING PERSON"), the
Indemnified Person shall give prompt written notice of such Proceeding to the
Indemnifying Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and
the payment of all expenses; provided, that any delay or failure to so notify
the Indemnifying Person shall relieve the Indemnifying Person of its
obligations hereunder only to the extent, if at all, that it is prejudiced by
reason of such delay or failure. In no event shall any Indemnified Person be
required to make any expenditure or bring any cause of action to enforce the
Indemnifying Person's obligations and liability under and pursuant to the
indemnification obligations set forth in this Article. In addition, actual
or threatened action by a Governmental Authority or other Person is not a
condition or prerequisite to the Indemnifying Person's obligations under this
Article. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing Proceedings and to participate in the defense
thereof, but the reasonable fees and expenses of such counsel shall be at the
expense of the Indemnified Person unless the Indemnified Person shall in good
faith determine that there exist actual or potential conflicts of interest
which make representation by the same counsel inappropriate. The Indemnified
Person's right to participate in the defense or response to any Proceeding
should not be deemed to limit or otherwise modify its rights and obligations
under this Article. In the event that the Indemnifying Person, within
fifteen (15) days after notice of any such Proceeding, fails to assume the
defense thereof, the Indemnified Person shall have the right to undertake the
defense, compromise or settlement of such Proceeding for the account of the
Indemnifying Person, subject to the right of the Indemnifying Person to
assume the defense of such Proceeding with counsel reasonably satisfactory to
the Indemnified Person at any time prior to the settlement, compromise or
final determination thereof. If the Indemnifying Person assumes the defense
of any Proceeding, the Indemnified Person shall, reasonably and in good
faith, assist and cooperate in the defense thereof. Anything in this Article
to the contrary notwithstanding, the Indemnifying Person shall not, without
the Indemnified Person's prior
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written consent, settle or compromise any Proceeding or consent to the entry
of any judgment with respect to any Proceeding for anything other than money
damages paid by the Indemnifying Person. The Indemnifying Person may,
without the Indemnified Person's prior written consent, settle or compromise
any such Proceeding or consent to entry of any judgment with respect to any
such Proceeding that requires solely the payment of money damages by the
Indemnifying Person and that includes as an unconditional term thereof the
release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such Proceeding.
7.4 LIMITATION OF LIABILITY. Notwithstanding any other provision of
this Agreement, Buyer agrees that the maximum monetary amount for which the
Shareholders shall be liable to Buyer's Indemnified Persons in connection
with the provisions of this Agreement shall be limited to the aggregate
amount of One Million Eight Hundred Thousand Dollars ($1,800,000); PROVIDED,
HOWEVER, that the foregoing limitation on the liability of the Shareholders
shall not apply to, and each of the Shareholders shall be jointly and
severally liable to Buyer's Indemnified Persons, and any of them, for the
aggregate amount of actual damages resulting from:
(a) any representation made by Seller, Kilat or either of the
Shareholders which any of Seller, Kilat or either of the Shareholders knows
is false or misleading at the Effective Date, or
(b) any fraudulent conduct of Seller, Kilat or either of the
Shareholders.
Furthermore, each of Seller, Kilat and the Shareholders acknowledges and agrees
that the foregoing limitation of liability shall not in any manner limit the
liability of Seller and Kilat for any reason whatsoever.
7.5 GUARANTEE.
(a) Kilat and each of the Shareholders gives the indemnity set
forth in SECTION 7.1 and the guarantee set forth in this SECTION 7.5 in
consideration of Buyer's agreement to enter into this Agreement. Kilat and
each of the Shareholders acknowledges the receipt of valuable consideration
from Buyer for the agreement of Kilat and the Shareholders to incur
obligations and give rights under such indemnity and guarantee.
(b) Kilat and each of the Shareholders unconditionally and
irrevocably guarantees to Buyer the due and punctual performance and
observance by Seller of its obligations under this Agreement including,
without limitation, any obligation to pay money.
(c) Kilat and each of the Shareholders waive any right it, he or
she have of first requiring Buyer to commence proceedings or enforce any
other right against Seller or any other person before claiming under such
indemnity and guarantee.
21
<PAGE>
(d) This guarantee and the foregoing indemnity are continuing
security obligations and are not discharged by any one payment. Such guarantee
and indemnity do not merge on completion.
(e) The liabilities of Kilat and each of the Shareholders under
such guarantee and indemnity are as a guarantor, indemnifier and principal
debtor and the rights of Buyer under such guarantee and indemnity are not
affect by anything which might otherwise affect them at law or in equity
including, but not limited, one or more of the following:
(i) Buyer granting time or other indulgence to, compounding or
compromising with or releasing Seller, or any other guarantor;
(ii) acquiescence, delay, acts, omissions or mistakes on the
part of Buyer;
(iii) any novation of a right of Buyer;
(iv) any variation of this Agreement, or any agreement entered
into in performance of it; or
(v) the invalidity or unenforceability of an obligation or
liability of a person other than the relevant guarantor (being Kilat or
one of the Shareholders).
(f) Kilat and each of the Shareholders may not, without the consent
of Buyer:
(i) raise a set-off or counterclaim available to it or Seller
against Buyer in reduction of it's liability under such guarantee and
indemnity;
(ii) claim to be entitled by way of contribution, indemnity,
subrogation, marshaling or otherwise to the benefit of any security or
guarantee held by Buyer in connection with this Agreement; or
(iii) prove in competition with Buyer, if a liquidator,
provisional liquidator, receiver, official manager or trustee in bankruptcy
is appointed in respect of Seller or Seller is otherwise unable to pay its
debts when they fall due,
until all money payable to Buyer in connection with this Agreement is paid.
(g) If a claim that a payment or transfer to Buyer in connection
with this Agreement is void or voidable (including, but not limited to, a
claim under laws relating to liquidation, insolvency or protection of
creditors) is upheld, conceded or compromised, then Buyer is entitled
immediately as against Kilat and each Shareholder to the rights to which it
would have been entitled under such guarantee and indemnity if the payment or
transfer had not occurred.
22
<PAGE>
(h) Kilat and each of the Shareholders agree to pay or reimburse
Buyer on demand for its costs, charges and expenses in making, enforcing and
doing anything in connection with such guarantee and indemnity including,
without limitation, legal costs and expenses on a full indemnity basis. Any
amounts paid to Buyer by Kilat or one of the Shareholders must be applied first
against payment of costs, charges and expenses under this SECTION 7.5(H), then
against other obligations under such guarantee and indemnity.
(i) Kilat and each of the Shareholders acknowledges having been
given a copy of this Agreement and having had full opportunity to consider its
provisions before entering into such guarantee and indemnity.
ARTICLE 8
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any investigation made at any time by or on behalf of the
parties hereto, all of the representations and warranties of the parties shall
survive the consummation of the transactions contemplated by this Agreement
(even if the other party knew or had reason to know of any misrepresentation or
breach of any warranty at the time of the Option Closing) and all of the
covenants of the parties shall survive the Option Closing, including but not
limited to the obligations of the parties set forth in SECTION 6.2 and the
indemnification obligations of the parties hereto. In addition, the covenants
and obligations set forth in SECTION 6.2 shall survive the termination of this
Agreement.
8.2 AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified, terminated, rescinded or supplemented only by written agreement of
the parties hereto.
8.3 WAIVER; CONSENTS. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Any failure of a party to
comply with any obligation, covenant, agreement or condition herein may be
waived by each party affected thereby only by a written instrument signed by
the party granting such waiver. No waiver, or failure to insist upon strict
compliance, by any party of any condition or any breach of any obligation,
term, covenant, representation, warranty or agreement contained in this
Agreement, in any one or more instances, shall be construed to be a waiver
of, or estoppel with respect to, any other condition or any other breach of
the same or any other obligation, term, covenant, representation, warranty or
agreement. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver.
8.4 FURTHER ASSURANCES; COOPERATION. The parties hereto agree (i) to
furnish upon request to each other such further information, (ii) to execute
and deliver to each other such other documents, and (iii) to do such other
acts and things, all as another party hereto may at
23
<PAGE>
any time reasonably request, including before, at and after the Closing, for
the purpose of carrying out the intent of this Agreement and the documents
referred to herein.
8.5 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when (i) delivered
personally, (ii) sent by telecopier (with receipt confirmed), or (iii) received
by the addressee, if sent by Express Mail, Federal Express or other express
delivery service (receipt requested) or (iv) three business days after being
sent by registered or certified mail, return receipt requested, in each case to
the other party at the following addresses and telecopier numbers (or to such
other address or telecopier number for a party as shall be specified by like
notice; provided that notices of a change of address or telecopier number shall
be effective only upon receipt thereof):
if to Seller, to:
Australian Software Innovations (Services) Pty Ltd
51 Rawson Street, Suite 301
Epping NSW 2121
Attn: Eng Lee, Managing Director
telecopier: 61-2-869-0280
if to Kilat or the Shareholders, to:
Eng Lee
51 Rawson Street, Suite 301
Epping NSW 2121
telecopier: 61-2-869-0280
if to Buyer, to:
Spire International Corp.
311 North State Street
Orem, Utah 84057
Attn: Robert K. Bench, President
Telecopier: (801) 224-2426
with copies to:
Brian G. Lloyd
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Telecopier: (801) 532-7750
24
<PAGE>
8.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and permitted assigns.
Buyer may, in its discretion, assign its rights, interest and obligations
hereunder to any Person without the prior consent of any other party hereto.
Neither Seller, Kilat nor either of the Shareholders may assign any of their
respective rights, interests or obligations hereunder without the prior
written consent of the Buyer. This Agreement is not intended to and shall
not confer upon any person other than the parties any rights or remedies
hereunder or with respect hereto.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of New South Wales, Australia applicable to contracts
made and to be performed wholly therein.
8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
8.9 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Unless otherwise provided, all references
in this Agreement to articles and sections refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require.
Unless otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer
to this Agreement as a whole and not to any particular article, section,
clause or other subdivision hereof. Whenever the term "including" or a
similar term is used in this Agreement, it shall be read as if it were
written "including by way of example only and without in any way limiting the
generality of the clause or concept to which reference is made." This
Agreement shall be construed as though all parties had drafted it.
8.10 ENTIRE AGREEMENT. This Agreement, including the Exhibits and the
documents, instruments and schedules referred to herein, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings other than those
expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
8.11 ATTORNEYS' FEES. In the event a Proceeding is brought by any party
under this Agreement to enforce or construe any of its terms, the party that
prevails by enforcing this Agreement shall be entitled to recover, in addition
to all other amounts and relief, its reasonable costs and attorneys' fees
incurred in connection with such Proceeding.
8.12 TIME OF ESSENCE. With regard to all time periods set forth or
referred to in this Agreement, time is of the essence.
25
<PAGE>
8.13 SEVERABILITY. If any part of this Agreement is or becomes legally
ineffective, invalid or unenforceable in any jurisdiction, the effectiveness,
validity or enforceability of this Agreement in any other jurisdiction, or the
remainder of it in that jurisdiction, will not be affected.
8.14 JOINT AND SEVERAL. In this Agreement:
(a) any agreement, covenant, obligation, representation or warranty
on the part of two or more persons binds them jointly and severally; and
(b) any agreement, covenant, obligation, representation or warranty
in favor of two or more persons is for the benefit of them jointly and
severally.
ARTICLE 9
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings specified or referred to below when used in this Agreement. Any
reference or citation to a law, statute or regulation shall be deemed to
include any amendments to that law, statute or regulation and judicial and
administrative interpretations of it.
9.1 "ACQUISITION" shall have the meaning set forth in SECTION 1.1.
9.2 "AFFILIATE" means, with respect to any specified Person, each other
Person which, directly or indirectly, controls, is controlled by or is under
common control with such specified Person (whether a general or limited
partner), each officer, director or general partner of such specified Person,
and each other Person who is the beneficial owner of five percent (5%) or more
of any class of the voting securities of such specified Person or five percent
(5%) or more in market value of the outstanding securities of such Person. For
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of all or any part of the management and policies
of a specified Person, whether through the ownership of voting securities, by
contract or otherwise.
9.3 "AGREEMENT" means this Option Agreement, including the Exhibits
hereto, which are hereby incorporated herein.
9.4 "ASSET PURCHASE AGREEMENT" shall have the meaning set forth in
SECTION 1.6.
9.5 "ASSETS" means all of the tangible and intangible assets of Seller
identified on EXHIBIT A, compiled from Seller's balance sheet dated April 30,
1996, also attached hereto as EXHIBIT A, and including, without limitation, the
following:
(a) all of Seller's cash, accounts, investments, securities,
commercial paper, notes receivable and accounts receivable;.
26
<PAGE>
(b) all of Seller's fixed assets and tangible personal property,
wherever located, including, without limitation, all inventory and removable
fixtures;
(c) all of Seller's Intellectual Property and other intangible
assets; and
(d) all of Seller's contracts, customer and supplier lists,
marketing and promotional materials, marketing agreements, supply and service
agreements and other personal property rights;
together with all additions to and proceeds of the foregoing items (both cash
and noncash additions and proceeds) received by or for the benefit of Seller,
Kilat or the Shareholders after the Effective Date; PROVIDED, HOWEVER, that
the Assets shall expressly exclude (i) the amount of Five Hundred Fifty
Thousand Dollars ($550,000) paid by Buyer to Seller, constituting a license
fee pursuant to the terms of an Exclusive License and Technical Assistance
Agreement, (ii) the amount of the Option Purchase Payment, (iii) all amounts
paid by Buyer to Seller in payment of the Exercise Price, (iv) loans
receivable or payable in the aggregate amount of Five Hundred Thirty Four
Thousand One Hundred Forty Two and 63/100 Australian Dollars (AUS
$534,142.63) with any associated party of the Shareholders, including,
without limitation, Shareholders, Kilat, Northside Software Services Pty Ltd
(ACN: 003 258 817) and Southern Cross Executive Helicopters Pty Ltd (ACN: 064
785 977), and (v) loans receivable or payable in the aggregate amount of
Twenty Six Thousand Seven Hundred Forty Eight Australian Dollars
(AUS$26,748.92) with Software Innovations Limited (a company incorporated
under the laws of the United Kingdom).
9.6 "BUYER" means Spire International Corp., a Utah corporation, or any
successor, transferee or assignee thereof.
9.7 "BUYER'S INDEMNIFIED PERSONS" shall have the meaning set forth in
SECTION 7.1.
9.8 "CENTERPOST" mean Centerpost Innovations Pty Limited, ACN
074-678-774, a limited company organized under the laws of Australia.
9.9 "CONTRACTS" shall have the meaning set forth in SECTION 2.6.
9.10 "DEED OF RESTRAINT OF TRADE" shall have the meaning set forth in
SECTION 1.6.
9.11 "DISCLOSURE SCHEDULES" means the disclosure schedules prepared and
delivered by Seller and the Shareholders to Buyer and accepted by Buyer prior
to the Option Closing. The Disclosure Schedules shall contain all
information necessary to make the representations and warranties set forth in
ARTICLE 2 true and correct.
9.12 "DOLLARS" or "$" means United States dollars, except as expressly
indicated otherwise.
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<PAGE>
9.13 "EFFECTIVE DATE" means the effective date of this Agreement, as set
forth in the opening paragraph hereof.
9.14 "EMPLOYEE BENEFIT PLAN" means any stock option, stock right, profit
sharing, thrift-savings, simplified employee pension plan, deferred
compensation plan, severance pay, golden parachute, cafeteria plan, flexible
compensation plan, life insurance, medical, dental, disability, welfare,
superannuation or vacation plans or any other similar plan or arrangement of
any kind or character.
9.15 "ENCUMBRANCE" means any lien, pledge, hypothecation, charge,
mortgage, deed of trust, security interest, encumbrance, equity, trust,
equitable interest, claim, easement, right-of-way, servitude, right of
possession, lease tenancy, license, encroachment, burden, intrusion,
covenant, infringement, interference, proxy, option, right of first refusal,
community property interest; or legend, defect, impediment, exception,
condition, restriction, reservation, limitation, impairment, imperfection of
title; or restriction on or condition to the voting of any security,
restriction on the transfer of any security or other asset, restriction on
the receipt of any income derived from any security or other asset, and
restriction on the possession, use, exercise or transfer of any other
attribute of ownership, whether based on or arising from common law,
constitutional provision, statute or contract.
9.16 "ENTITY" means any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
company, joint venture, joint stock association, estate, trust, cooperative,
foundation, union, syndicate, league, consortium, coalition, committee,
society, firm, company or other enterprise, association, organization or
entity of any nature, other than a Governmental Authority.
9.17 "EXERCISE NOTICE" shall have the meaning set forth in SECTION 1.6(B).
9.18 "EXERCISE PRICE" shall have the meaning set forth in SECTION 1.6(C).
9.19 "EXERCISE PRICE ADJUSTMENT" shall mean an amount equal to the
profit or loss of the business of Seller (after payment or accrual of all
Taxes and appropriate reserves) for the period from April 30, 1996 through
October 31, 1996, calculated in a manner consistent with generally accepted
accounting principles, as approved by Buyer in its reasonable discretion. If
the Exercise Price Adjustment is a positive amount, the amount of the
Exercise Price shall be increased by such amount. If the Exercise Price
Adjustment is a negative amount, the amount of the Exercise Price shall be
decreased by such amount.
9.20 "FACILITY" shall have the meaning set forth in SECTION 1.3(B).
9.21 "GOVERNMENTAL AUTHORITY" means any Australian national, state,
territorial or local governmental authority or semi-governmental authority,
any foreign governmental authority, the United States of America, any State
of the United States, any local authority and any political subdivision of
any of the foregoing, any multi-national organization or body, any
28
<PAGE>
agency, department, commission, board, bureau, court or other authority
thereof, or any quasi-governmental or private body exercising, or purporting
to exercise, any executive, legislative, judicial, administrative, police,
regulatory or taxing authority or power of any nature.
9.22 "GOVERNMENTAL AUTHORIZATION" means any permit (including without
limitation any Environmental Permit), license, franchise, approval,
certificate, consent, ratification, permission, confirmation, endorsement,
waiver, certification, registration, transfer, qualification or other
authorization issued, granted, given or otherwise made available by or under
the authority of any Governmental Authority or pursuant to any Legal
Requirement.
9.23 "INTELLECTUAL PROPERTY" means any and all trademarks, tradenames,
service marks, patents, copyrights (including any registrations,
applications, licenses or rights relating to any of the foregoing),
technology, trade secrets, inventions, know-how, names, logos, artwork,
designs, discoveries, computer programs, software products and related source
code and documentation, processes, and all other intangible assets,
properties and rights.
9.24 "INTELLECTUAL PROPERTY ASSETS" shall mean all Intellectual Property
of Seller, including, without limitation, all Intellectual Property necessary
to or currently utilized in Seller's business.
9.25 "INTELLECTUAL PROPERTY PURCHASE AGREEMENT" shall have the meaning set
forth in SECTION 1.6.
9.26 "KILAT" means Kilat Holding Pty. Limited ACN 003-982-616, a limited
company organized under the laws of Australia.
9.27 "KNOWLEDGE" or "KNOWN" - An individual shall be deemed to have
"knowledge" of or to have "known" a particular fact or other matter if such
individual is actually aware of such fact or other matter. An Entity shall be
deemed to have "knowledge" of or to have "known" a particular fact or other
matter if any individual who is serving or who has at any time served as an
officer, director, member, manager, trustee, or shareholder of such Entity (or
in any similar capacity) has, or at any time had, knowledge of such fact or
other matter.
9.28 "LEGAL REQUIREMENT" means any law (including without limitation any
Environmental Laws), statute, ordinance, decree, requirement, Order, treaty,
proclamation, convention, rule or regulation (or interpretation of any of the
foregoing) of, and the terms of any Governmental Authorization issued by, any
Governmental Authority.
9.29 "LENDER" shall have the meaning set forth in SECTION 1.3(b).
9.30 "LIABILITY" means any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unfixed, unliquidated, unsecured,
unmatured, unaccrued, unasserted, contingent, conditional, inchoate, implied,
vicarious, joint, several or secondary liability),
29
<PAGE>
regardless of whether such debt, obligation, duty or liability would be
required to be disclosed on a balance sheet prepared in accordance with
generally accepted accounting principles.
9.31 "LOAN" shall have the meaning set forth in SECTION 1.3(b).
9.32 "LOAN DOCUMENTS" means all documents executed in connection with the
establishment and maintenance of the Facility and any security interest
associated therewith, including, without limitation, the promissory note and
[FIXED CHARGE] described in SECTION 1.3(b).
9.33 "LOSS" means any loss, damage, injury, harm, detriment, decline in
value, lost opportunity, Liability, exposure, claim, demand, cost of any
Proceeding, settlement, judgment, award, punitive damage award, fine,
penalty, Tax, fee, charge, cost or expense (including, without limitation,
costs of attempting to avoid or in opposing the imposition thereof, interest,
penalties, costs of preparation and investigation, and the fees,
disbursements and expenses of attorneys, accountants and other professional
advisors).
9.34 "OPTION" shall have the meaning set forth in RECITAL C.
9.35 "OPTION CLOSING" shall have the meaning set forth in SECTION 1.4.
9.36 "OPTION CONSIDERATION" shall have the meaning set forth in
SECTION 1.3.
9.37 "OPTION PURCHASE PAYMENT" shall have the meaning set forth in
SECTION 1.3(a).
9.38 "OPTION TERM" shall have the meaning set forth in SECTION 1.6(a).
9.39 "ORDER" means any order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, sentence, subpoena, consent
decree, writ or award issued, made, entered or rendered by any court,
administrative agency or other Governmental Authority or by any arbitrator.
9.40 "ORDINARY COURSE OF BUSINESS" means an action taken by a Person if:
(a) such action is recurring in nature, is consistent with the past
practices of such Person and is taken in the ordinary course of the normal day-
to-day operations of such Person;
(b) the aggregate monetary amount associated with such action (or
any series of related actions) is less than Twenty Five Thousand Dollars
($25,000), unless prior to taking such action, Seller obtains from Buyer
written consent to the taking of such action; and
30
<PAGE>
(c) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day-to-day operations of other persons that are
in the same line of business as such Person.
9.41 "PERSON" means any individual, Entity or Governmental Authority.
9.42 "PROCEEDING" means any action, suit, litigation, arbitration,
lawsuit, claim, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding),
prosecution, contest, hearing, inquiry, inquest, audit, examination,
investigation, challenge, controversy or dispute commenced, brought,
conducted or heard by or before, or otherwise involving, any Governmental
Authority or any arbitrator.
9.43 "PROPRIETARY INFORMATION" shall have the meaning set forth in
SECTION 6.2.
9.44 "PURCHASE AGREEMENTS" shall refer collectively to the Asset Purchase
Agreement, the Intellectual Property Purchase Agreement and the Deed of
Restraint of Trade.
9.45 "SELLER" means Australian Software Innovations (Services) Pty. Ltd
ACN 050-053-355, a limited company organized under the laws of Australia.
9.46 "SELLER'S INDEMNIFIED PERSONS" shall have the meaning set forth in
SECTION 7.2.
9.47 "SHAREHOLDERS" refers collectively to Eng Lee and Mary Lee, in their
individual capacities.
9.48 "SPIRE COMMON STOCK" shall mean the Common Stock, $.25 par value, of
Buyer.
9.49 "TAX" means any federal, national, state, territorial, local or
foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, environmental, customs duties,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, fringe benefits, or other tax or assessment of any
nature whatsoever, including, without limitation, any customs duty, municipal
rates, stamp duties and all other charges and levies which may be imposed by
a Governmental Authority (including any interest, penalties and additions
thereto that may arise in connection therewith), whether disputed or not.
9.50 "TAX RETURNS" means any return (including any information return),
report, statement, declaration, schedule, notice, notification, form,
certificate or other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Authority in
connection with the determination, assessment, collection or payment of any
Tax or in connection with the administration, implementation or enforcement
of or compliance with any Legal Requirement relating to any Tax.
31
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf as of the date first above written.
"BUYER:"
SPIRE INTERNATIONAL CORP., a Utah corporation
By: ____________________________________
Its: _____________________________________
"SELLER:"
THE COMMON SEAL of AUSTRALIAN SOFTWARE
INNOVATIONS (SERVICES) PTY. LTD
ACN 050-053-355, a limited company organized
under the laws of Australia was hereunto
affixed in accordance with its articles of
association in the presence of:
_________________________________ ____________________________________
Signature of Director Signature of Director/Secretary
_________________________________ ____________________________________
Print Name Print Name
_________________________________ ____________________________________
Office Held Office Held
"KILAT:"
THE COMMON SEAL of KILAT HOLDINGS PTY.
LIMITED ACN 003-982-616, a limited
company organized under the laws of Australia
was hereunto affixed in accordance with
its articles of association in the presence of:
_________________________________ ____________________________________
Signature of Director Signature of Director/Secretary
_________________________________ ____________________________________
Print Name Print Name
_________________________________ ____________________________________
Office Held Office Held
"SHAREHOLDERS:"
_________________________________ ____________________________________
Eng Lee, individually Mary Lee, individually
32
<PAGE>
EXHIBIT A
TO
OPTION AGREEMENT
DESCRIPTION OF ASSETS (INCLUDING SELLER'S BALANCE SHEET DATED APRIL 30, 1996)
Attached
<PAGE>
AUSTRALIAN SOFTWARE INNOVATIONS SERVICES PTY LTD
Reconciliation for "Purchase Price Adjustment" under Option Agreement
A.S.I.S. - BALANCE SHEET AS AT 30TH APRIL 1996
<TABLE>
Items
Exempt subject to
Items Reconciliation
----------- --------------
<S> <C> <C> <C> <C>
ASSETS
Cash on Hand 302.00 302.00
Trade Receivables 125,299.46 125,299.46
Less Unearned Income
in Debtors (36,631.73) (36,631.73)
Sundry Debtors
(Reimbursements
due from Spire) 1,597.40 1,597.40
Loans to Associated
Parties 262,364.71 262,364.71
Term Deposit-Bank 3,000.00 3,000.00
Rental Bond/Deposit 840.00 840.00
Loans due from
S.1 (UK) 26,748.92 26,748.92
Loans to Related
Companies 271,777.92 271,777.92
Plant & Equipment
(at cost) 356,896.82 356,896.82
Less Accumulated
Depreciation (145,492.00) (145,492.00)
Motor Vehicles 237,055.00 237,055.00
Less Accumulated
Depreciation (79,130.00) 157,925.00 (79,130.00)
------------ ---------- -----------
1,024,628.50 560,891.55 463,736.95
LIABILITIES
Bank Overdraft 2,616.30 2,616.30
Trade Creditors 36,229.08 36,229.08
Hire Purchase-Current 76,618.86 76,618.86
PAYE taxes & Super'n 17,141.62 17,141.62
Provision-Staff Leave 13,515.00 13,515.00
Provision-Income Tax (1,157.81) (1,157.81)
Accrual for Unearned Income 123,198.19 123,198.19
Hire Purchase Creditors-N/C 194,729.12 194,729.12
------------ ---------- -----------
462,890.36 0.00 462,890.36
NET ASSETS 561,738.14 560,891.55 846.59
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
<PAGE>
Notes:
1. Purchase Price Adjustment shall be calculated from the above Net Asset
position of $846.59 by:
(a) adjusting for any after tax profits or (losses) derived up to
31st October 96
(b) adjusting for any movements in the above "Exempt items" accounts
through to the exercise closing date (from this point on Lee's personal
drawings are limited under the option agreement)
(c) adjusting for any dividend payments made by the company to its
shareholders
2. The above items are not necessarily those subject to actual transfer on
exercise of the option agreement but are just used for purposes of the
reconciliation of the "Purchase Price Adjustment". A further schedule will
be prepared detailing which assets of ASI are subject to transfer and what
liabilities attach to those assets (including items both on and off the
balance sheet & accounts).
<PAGE>
AUSTRALIAN SOFTWARE INNOVATIONS SERVICES PTY LTD
A.C.N. 050 053 355
BALANCE SHEET
AS AT 30 APRIL, 1996
1996 1995
$ $
CURRENT ASSETS
Cash Note 2 302.00 252.00
Receivables Note 3 352,629.84 426,934.55
Other Note 4 3,840.00 -.
---------- ----------
Total current assets 356,771.84 427,186.55
NON CURRENT ASSETS
Receivables Note 3 271,777.92 177,266.55
Property, plant & equipment Note 5 369,329.82 346,311.00
---------- ----------
Total non-current assets 641,107.74 523,577.55
TOTAL ASSETS 997,879.58 950,764.10
CURRENT LIABILITIES
Creditors and borrowings Note 6 132,605.86 199,887.35
Provisions Note 7 12,357.19 5,000.00
Other Note 8 96,449.27 121,614.46
---------- ----------
Total current liabilities 241,412.32 326,501.81
NON CURRENT LIABILITIES
Creditors and borrowings Note 6 194,729.12 210,635.19
---------- ----------
Total non-current liabilities 194,729.12 210,635.19
Total liabilities 436,141.44 537,137.00
NET ASSETS 561,738.14 413,627.10
---------- ----------
---------- ----------
SHAREHOLDERS' EQUITY
Share capital 2.00 2.00
Retained profits 561,736.14 413,625.10
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 561,738.14 413,627.10
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------
Unaudited. To be read in conjunction with the Accountants Disclaimer.
<PAGE>
EXHIBIT B
TO
OPTION AGREEMENT
FORM OF PROMISSORY NOTE
U.S. $ 200,000 Dated: November 4, 1996
FOR VALUE RECEIVED, the undersigned, AUSTRALIAN SOFTWARE INNOVATIONS
(SERVICES) PTY LTD. a limited company organized under the laws of Australia
("BORROWER"), promises to pay to SPIRE INTERNATIONAL CORP., a Utah
corporation ("LENDER"), or order, at 311 North State Street, Orem, Utah
84057, or such other place as Lender may designate, in lawful money of the
United States of America, the principal sum of Two Hundred Thousand Dollars
($200,000), or, if less, the aggregate unpaid principal amount of all
advances made by Lender to Borrower in accordance with the provisions of this
Note and an Option Agreement of even date herewith executed by Borrower and
Lender, among other parties (the "OPTION AGREEMENT"), together with interest
from the dates set forth herein on the unpaid principal, payable at the times
and in the manner set forth below.
1. This Note is made by Borrower pursuant to the terms of the Option
Agreement and all amounts advanced by Lender to Borrower pursuant to the Option
Agreement shall be repaid in accordance herewith.
2. Subject to the provisions of Paragraph 5, interest shall accrue on
the unpaid principal balance outstanding under this Note from time to time at
the rate of Eighteen Percent (18%) per annum.
3. Principal and interest which is provided for in the preceding
Paragraph shall be paid in full on August 10, 1997 (the "MATURITY DATE"). On
the Maturity Date, the entire then-remaining unpaid principal balance of
principal, accrued interest and all other fees and charges required by this
Note shall be due and payable in full. Interest shall accrue based upon a
year of 360 days.
4. This Note may be prepaid in full or in part at any time without the
consent of Lender. Each payment under this Note shall be applied first to
late charges, second to interest, and any balance shall be applied to
reduction of unpaid principal.
5. (a) Notwithstanding the provisions of Paragraph 2, if the payment
described in Paragraph 3 is paid in full on or before the Maturity Date and
no "Event of Default" (as such term is defined in that certain Fixed Charge
of even date herewith executed by Borrower in favor of Lender (the "Fixed
Charge") has occurred, interest payable on this Note shall accrue
<PAGE>
on the principal balance outstanding under this Note from time to time at the
rate of Eight Percent (8%) per annum.
(b) If an Event of Default occurs prior to Borrower's payment in
full of all amounts owing under this Note or the amounts described in
Paragraph 3 are not paid in full on or before the Maturity Date, the entire
unpaid principal balance, together with all accrued but unpaid interest and
all fees and charges required by this Note, shall, at the option of the
holder hereof, at once become due and payable without notice (time being of
the essence hereof). Failure to exercise such option shall not constitute a
waiver of the right to exercise the same in the event of any subsequent
default, event or circumstance giving rise to such right of acceleration.
6. Notwithstanding any other provision contained in this Note or in
any agreement, document or instrument related to the transaction of which
this Note is a part: (a) the rates of interest and charges and the payments
provided for herein and therein shall in no event exceed the rates and
charges and the payments which result in interest being charged at a rate
equalling the maximum allowed by law; and (b) if, for any reason whatsoever,
the holder hereof ever receives as interest (or as a charge in the nature of
interest) in connection with the transaction of which this Note is a part an
amount which would result in interest being charged at a rate exceeding the
maximum allowed by law, such amount or portion thereof as would otherwise be
excessive interest shall automatically be applied toward reduction of the
unpaid principal balance then outstanding hereunder and not toward payment of
interest (or toward payment of a charge in the nature of interest).
7. In the event that (a) any payment under this Note is not made at
the time and in the manner required, or (b) the holder hereof exercises its
right to accelerate the maturity of the obligations hereunder, the
undersigned agrees to pay any and all costs and expenses (regardless of the
particular nature thereof and whether incurred before or after the initiation
of suit or before or after judgment) which may be incurred by the holder
hereof in connection with the enforcement of any of its rights under this
Note, including, without limitation, court costs and attorneys' fees.
8. The undersigned, sureties, guarantors and endorsers hereof
severally waive presentment for payment, demand, protest and notice of
dishonor of this Note, and consent to any and all extensions of time,
renewals, waivers or modifications that may be granted by the holder hereof
with respect to the payment or other provisions of this Note, and to the
release of any security, or any part thereof, with or without substitution.
9. This Note is made and given pursuant to the terms of the Option
Agreement and is secured by, and entitled to the benefits of, the Fixed Charge.
10. This Note shall be governed by and construed in accordance with the
laws of the New South Wales, Australia without reference to choice of law rules.
<PAGE>
"BORROWER"
AUSTRALIAN SOFTWARE INNOVATIONS (SERVICES) PTY
LTD, ACN 050-053-355,
a limited company organized under the laws of Australia
By: ______________________________________________________
Its: ______________________________________________________
<PAGE>
EXHIBIT C
TO
OPTION AGREEMENT
FORM OF FIXED CHARGE
[Not Filed Herewith]
<PAGE>
EXHIBIT D
TO
OPTION AGREEMENT
INTELLECTUAL PROPERTY
[Not Filed Herewith]
<PAGE>
EXHIBIT E
TO
OPTION AGREEMENT
FORM OF STATUTORY DECLARATION
[Not Filed Herewith]
<PAGE>
EXHIBIT F
TO
OPTION AGREEMENT
FORM OF ASSET PURCHASE AGREEMENT
[Attached]
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
SENTO TECHNICAL INNOVATION CORPORATION,
KILAT HOLDINGS PTY. LIMITED,
AUSTRALIAN SOFTWARE INNOVATIONS (SERVICES) PTY LTD,
AND
ENG LEE AND MARY LEE, INDIVIDUALLY
________________, 199__
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into in
Orem, Utah effective as of the ____ day of ________________, 199__, by and
among Sento Technical Innovations Corporation, a Utah corporation (the
"BUYER"), Australian Software Innovations (Services) Pty. Ltd ACN
050-053-355, a limited company organized under the laws of Australia (the
"SELLER"), Kilat Holdings Pty. Limited ACN 003-982-616, a limited company
organized under the laws of Australia ("KILAT"), and Eng Lee and Mary Lee
(collectively, the "SHAREHOLDERS"), individually.
RECITALS
1. Pursuant to an Option Agreement (the "OPTION AGREEMENT") dated
as of the 10th day of September, 1996 between Buyer, Seller, Kilat and the
Shareholders, Seller granted to Buyer and its nominee, Centerpost, an option
(the "OPTION") to purchase the Assets and the Intellectual Property Assets,
Kilat and the Shareholders agreed to facilitate Buyer's purchase of Assets
and Seller, Kilat and the Shareholders agreed to execute the Deed of
Restraint of Trade.
A. Eng Lee is the Managing Director of Seller, Kilat owns all of the
issued and outstanding shares of the capital stock of Seller and the
Shareholders own all of the issued and outstanding shares of the capital
stock of Kilat.
B. Buyer has elected pursuant to Section 1.6 of the Option Agreement to
exercise the Option with respect to the Assets and the Intellectual Property
Assets.
C. Buyer desires to purchase the Assets and the Intellectual Property
Assets from Seller, and Seller is obligated pursuant to the Option Agreement to
sell the Assets and the Intellectual Property Assets to Buyer, in accordance
with the terms and conditions of the Option Agreement. All capitalized terms
used herein without definition shall have the meanings set forth in ARTICLE 9.
AGREEMENT
NOW, THEREFORE, in consideration of the respective representations,
warranties and covenants contained herein and for other good and valuable
consideration, the receipt, adequacy and legal sufficiency of which are hereby
acknowledged, Buyer, Seller, Kilat and the Shareholders hereby agree as
follows:
<PAGE>
ARTICLE 1
SALE OF ASSETS; ADDITIONAL AGREEMENTS; CLOSING
1.1 ACQUISITION. Subject to the terms and conditions of the Transaction
Agreements, at the Closing, Seller shall sell, transfer and deliver to Buyer,
and Buyer shall purchase, all of Seller's right, title and interest in and to
the Assets and the Intellectual Property Assets (the "ACQUISITION").
1.2 ADDITIONAL UNDERSTANDINGS. In connection with the Acquisition, the
parties hereto agree as follows:
(a) Buyer will not, pursuant to this Agreement, acquire any
property of Seller other than the Assets except as specifically set forth in
this Agreement or the Intellectual Property Assets to be acquired by Buyer
from Seller pursuant to the terms of the Intellectual Property Purchase
Agreement; nor will Buyer assume or be bound by any contract or agreement
other than the Contracts and the Deed of Restraint of Trade (PROVIDED,
HOWEVER, that Buyer shall not assume any obligation of Seller thereunder);
nor will Buyer assume any other debt, claim, Liability, Tax, judgment or
obligation whatsoever of Seller except for those obligations under the
Contracts to be performed after the Closing Date. Except as set forth on
EXHIBIT B, Buyer will not recognize or assume any obligations of Seller to
employees of Seller or any collective bargaining agreements between Seller
and any labor organizations. Except as set forth on EXHIBIT B, Buyer will
not assume or be obligated to pay any debts, obligations, responsibilities,
Liabilities, claims, damages, judgments or settlements arising from any such
labor contracts or agreements or any other employment-related matter
involving Seller.
(b) In connection with the Acquisition, Seller, Kilat and each of
the Shareholders shall, from the date of this Agreement until the Closing
Date, afford Buyer's employees, auditors, legal counsel and other authorized
representatives reasonable access to the properties, records and personnel of
Seller in order to inspect, investigate and audit the Assets, the
Intellectual Property Assets and the operations and business of Seller.
Buyer agrees to conduct any such inspection, investigation or audit in a
reasonable manner, during regular business hours, so as not to disrupt the
normal functioning of Seller's business. Seller, Kilat and the Shareholders
agree to cooperate fully with Buyer and to make Seller's books and records,
the Assets, the Intellectual Property Assets and the employees of Seller
available to Buyer as reasonably required by Buyer in order for Buyer to
complete its due diligence in a timely fashion.
(c) The parties agree to allocate those portions of the Purchase
Price attributable to various components of the Assets for all purposes
(including accounting and tax purposes) in accordance with the allocation
schedule (the "ALLOCATION SCHEDULE") set forth on EXHIBIT C.
(d) Except as set forth on EXHIBIT B, Buyer will not have any
obligation for, and the parties specifically understand and acknowledge that
Buyer will not be assuming any responsibility for or liability under any
Employee Benefit Plan of Seller. Except as set forth on EXHIBIT B, Buyer
does not and shall not recognize or assume any Liability with respect to any
Employee Benefit Plan of Seller, nor shall the inclusion by Buyer, or an
Affiliate of Buyer, of a former employee of Seller in an Employee Benefit
Plan of Buyer or an Affiliate of Buyer, be
2
<PAGE>
deemed to constitute the adoption or continuation by Buyer of any Employee
Benefit Plan of Seller except as set forth on EXHIBIT B.
(e) Seller, Kilat and the Shareholders covenant and agree that they
will do all acts and execute or cause Seller to execute all such documents as
are necessary to cause the name of Seller to be changed as of the Closing Date
to a name that does not include the words "Australian Software Innovations" or
the acronym "ASI" or any similar name and will on or before the Closing Date
deliver to Buyer appropriate signed notices to the Australian Securities
Commission having such effect and all other materials reasonably requested by
Buyer in connection therewith, together with all filing fees payable in respect
of lodging such notices. Seller, Kilat and the Shareholders consent to Buyer
causing a company controlled by Buyer or its Affiliates to change its name to
Australian Software Innovations Pty Limited on or after the Closing Date.
(f) Pursuant to the Option Agreement, Buyer has elected to acquire,
as part of the Acquisition, the rights of Seller under the Contracts. In
connection with Buyer's acquisition of Seller's rights under the Contracts,
Buyer agrees to assume all of Seller's obligations under the Contracts which
arise on or after the Closing Date.
1.3 PURCHASE PRICE. The price to be paid by Buyer for the purchase of
the Assets (the "PURCHASE PRICE") shall be Seven Hundred Fifty Thousand
Dollars ($750,000).
1.4 PAYMENT OF PURCHASE PRICE. Payment of the Purchase Price shall be
made by Buyer to Seller as follows:
(a) Seller acknowledges the receipt of cash in the amount of One
Hundred Thirty Thousand Dollars ($130,000) (the "OPTION PURCHASE PAYMENT")
paid by Buyer in conjunction with the execution and delivery of the Option
Agreement. At the Closing, Seller shall credit the full amount of the Option
Purchase Payment against Buyer's payment of the Purchase Price.
(b) At the Closing, Buyer shall pay to Seller Two Hundred Seventy
Thousand Dollars ($270,000), in the form of cash, certified funds or wire
transferred funds, with the transfer of such funds to be initiated by Buyer
within twenty-four hours of the Closing; provided, however, that such amount
shall be adjusted by an amount equal to the Exercise Price Adjustment pursuant
to SECTION 1.6 of this Agreement.
(c) At the Closing, Buyer shall issue and deliver to Seller Eighty
Seven Thousand Five Hundred (87,500) shares of Sento Common Stock; provided,
however, that if at any time prior to the Closing the Company effects a
reclassification, change, subdivision or combination of the Sento Common Stock
or pays to the holders of Sento Common Stock a dividend payable in shares of
Sento Common Stock, the number os shares of Sento Common Stock to be issued and
delivered to Seller pursuant to this SECTION 1.4(B) shall be adjusted
proportionately.
1.5 CLOSING. Upon satisfaction or waiver of the conditions to Closing
contained in ARTICLE 4 and ARTICLE 5 hereof, the parties hereto agree to close
the Acquisition contemporaneously with the consummation of the transactions
described in the Intellectual
3
<PAGE>
Property Purchase Agreement and the Deed of Restraint of Trade (the
"CLOSING"). The Closing shall take place at the principal offices of Buyer,
or such other place as may be agreed to by the parties, on the date agreed to
by the parties, but in all events on or before thirty (30) days from the date
hereof. It is the intent of the parties to consummate the Closing as soon as
possible after the execution of this Agreement. The parties agree to use
their good faith and reasonable efforts to close the Acquisition as soon as
possible and to cooperate fully with each other to complete the Closing.
1.6 CLOSING DELIVERIES.
(a) At the Closing, Seller shall deliver to Buyer:
(i) A Bill of Sale transferring the Assets to Buyer, free and
clear of all Encumbrances except as expressly assumed by Buyer and described on
EXHIBIT B;
(ii) An Assignment Agreement assigning to Buyer the Contracts,
free and clear of all Encumbrances except as expressly assumed by Buyer and
described on EXHIBIT B;
(iii) Titles to all titled properties constituting part of
the Assets being transferred by Seller to Buyer, such titles duly executed for
transfer to Buyer, free and clear of all Encumbrances except as expressly
assumed by Buyer and described on EXHIBIT B;
(iv) Complete and accurate Disclosure Schedules;
(v) An executed subscription agreement, substantially in the
form of EXHIBIT D, acceptable to Buyer in its discretion;
(vi) An executed registration rights agreement, substantially in
the form of EXHIBIT E, acceptable to Buyer in its discretion;
(vii) An executed employment agreement, substantially in the
form of EXHIBIT F, acceptable to Buyer in its discretion;
(viii) An executed Intellectual Property Purchase Agreement,
substantially in the form of EXHIBIT G, acceptable to Buyer in its discretion;
(ix) An executed Deed of Restraint of Trade, substantially in
the form of EXHIBIT H, acceptable to Buyer in its discretion;
(x) Such other documents, including certificates of
independent legal advice and appropriate statutory declarations, as may be
required by the Transaction Agreements, or the Intellectual Property Purchase
Agreement or reasonably requested by Buyer to carry out the transactions
contemplated hereby or thereby; and
(xi) Possession of the Assets.
(b) At the Closing, Buyer shall deliver to Seller:
4
<PAGE>
(i) Subject to the Purchase Price Adjustment, the amount of
Three Hundred Seventy Thousand Dollars ($370,000) in the form of cash,
certified funds or wire transferred funds, with the transfer of such funds to
be initiated by Buyer within twenty-four hours of the Closing;
(ii) Certificates evidencing Eighty Seven Thousand Five Hundred
(87,500) shares of Sento Common Stock (or such other amount as shall be
determined pursuant to SECTION 1.4(c)
(iii) An executed subscription agreement, substantially in
the form of EXHIBIT D, acceptable to Buyer in its discretion;
(iv) An executed registration rights agreement, substantially in
the form of EXHIBIT E, acceptable to Buyer in its discretion;
(v) An executed employment agreement, substantially in the form
of EXHIBIT F, acceptable to Buyer in its discretion;
(vi) An executed Intellectual Property Purchase Agreement,
substantially in the form of EXHIBIT G, acceptable to Buyer in its discretion;
(vii) An executed Deed of Restraint of Trade, substantially
in the form of EXHIBIT H, acceptable to Buyer in its discretion;
(viii) An Assignment Agreement accepting assignment to Buyer
of all Seller's rights under the Contracts and assuming the obligations arising
under the Contracts to be performed after the Closing Date; and
(ix) Such other documents, including officers' certificates, as
may be required by the Transaction Agreements, or as reasonably requested by
Seller to carry out the transactions contemplated hereby.
1.7 PAYMENT OF TAXES; STAMP DATA. Seller shall pay any and all Taxes
payable to Governmental Authorities of the Commonwealth of Australia or any
political subdivision thereof which are related in any manner to the grant
and exercise of the Option or the execution and performance of the
Transaction Agreements, including, without limitation, the full amount of any
stamp duty payable to Governmental Authorities of the Commonwealth of
Australia or any political subdivision thereof. Seller, Kilat and each of
the Shareholders shall jointly and severally indemnify, defend and hold
harmless Buyer from any and all Tax liabilities associated with the grant and
exercise of the Option and the execution and performance of the Transaction
Agreements. To facilitate Seller's performance of the obligations set forth
in this SECTION 1.7, at the Closing Buyer shall withhold from the Purchase
Price an amount equal to _______________ Australian Dollars (AUS
$__________), representing the estimated amount of Taxes payable in
connection with the execution and performance of the Transaction Agreements.
The amount so withheld by Buyer shall be paid to ____________________ to be
held in trust by ______________ and released solely for the purpose of
fulfilling Seller's Tax obligations under the terms of this SECTION 1.7.
5
<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER,
KILAT AND THE SHAREHOLDERS
Except as otherwise indicated, Seller, Kilat and each of the Shareholders
jointly and severally represent and warrant to Buyer that the following
representations and warranties are true, correct and complete as of the date of
this Agreement and will be true, correct and complete as of the Closing Date:
2.1 AUTHORITY. Seller, Kilat and each of the Shareholders have the
absolute and unrestricted right, power, authority and capacity to execute and
deliver the Transaction Agreements, as applicable, to perform his, her or its
obligations thereunder and to consummate the transactions contemplated thereby.
This Agreement has been, and each of the Transaction Agreements will be, when
executed, duly and validly executed and delivered by Seller, Kilat and each
of the Shareholders, and each of the Transaction Agreements, as applicable,
constitutes, or will, when executed, constitute, the legal, valid and binding
agreement of Seller, Kilat and each of the Shareholders, enforceable against
Seller, Kilat and each of the Shareholders in accordance with its terms
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditors' rights generally.
2.2 ORGANIZATION, EXISTENCE AND GOOD STANDING OF SELLER AND KILAT.
Seller is a limited company duly organized, validly existing and in good
standing under the laws of Australia and has full power and authority to
carry on its business as now being conducted, to own and operate its
properties and assets, and to perform all its obligations under the
Transaction Agreements and the Contracts. Kilat is a limited company duly
organized, validly existing and in good standing under the laws of Australia
and has full power and authority to carry on its business as now being
conducted, to own and operate its properties and assets, and to perform all
its obligations under the Transaction Agreements.
2.3 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in the
Disclosure Schedules, neither the execution and delivery of the Transaction
Agreements, the consummation of the transactions contemplated thereby, nor
the compliance by Seller and Kilat with any of the provisions thereof will,
as of the Closing Date, (I) conflict with or violate any provision of the
Memorandum and Articles of Association or other charter or governing
documents of Seller or Kilat, respectively, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
contract, agreement, commitment, bond, mortgage, indenture, license, lease,
pledge agreement or other instrument or obligation to which Seller or Kilat
is a party or by which Seller or Kilat or any of their respective properties
or assets may be bound, including, without limitation, any other agreement
with respect to the sale by Seller of any of its properties or assets, (iii)
to the best knowledge of Seller, Kilat and the Shareholders, violate or
conflict with any provision of any Legal Requirement binding upon Seller or
Kilat, or (iv) to the best knowledge of Seller, Kilat and the Shareholders,
result in, or require, the creation or imposition of, any Encumbrance upon or
with respect to any properties of Seller or Kilat, including, without
limitation, the Assets or
6
<PAGE>
the Intellectual Property Assets, or impair the ability of Seller, Kilat or
the Shareholders to carry out their respective obligations under the
Transaction Agreements.
2.4 BOOKS AND RECORDS. The books of account and other business records
of Seller regarding the Assets and the business and operations of Seller have
all been made available to Buyer and such books and records are complete and
correct with regard to the matters which are the subject of the Transaction
Agreements.
2.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
fully disclosed in writing to Buyer in the Disclosure Schedules, as of the
Closing Date, Seller will have no Liabilities, including, without limitation,
any Liabilities resulting from failure to comply with any Legal Requirement
applicable to Seller, its business or operations, the Assets or the
Intellectual Property Assets due or to become due and whether incurred in
respect of or measured by the income or sales of Seller for any period or
arising out of any transactions entered into, or any state of facts existing,
on or before the Closing Date which could, as of or after the Closing Date,
materially adversely affect Seller's business or operations, the Assets or
the Intellectual Property Assets, give rise to an Encumbrance against the
Assets or the Intellectual Property Assets or materially adversely affect
Seller's ability to carry out the transactions contemplated by the
Transaction Agreements.
2.6 ABSENCE OF CHANGES. Between the date of this Agreement and the
Closing Date, there will not have been (I) any material adverse change, or any
event, condition or contingency that is likely to result in a material adverse
change in the condition of Seller's business or operations, the Assets or the
Intellectual Property Assets; (ii) any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting Seller's
business or operations, the Assets or the Intellectual Property Assets; (iii)
any termination or receipt of notice of termination of one or more of the
Contracts; (iv) any dispute or any other occurrence, event or condition of any
character, which reasonably could be anticipated to give rise to a legal or
administrative action or to a material adverse change affecting the Assets or
the Intellectual Property Assets or Seller's ability to carry out its
obligations hereunder; or (v) any agreement to do any of the foregoing.
2.7 CONTRACTS. Except as set forth on the Disclosure Schedules or as
otherwise described in this Agreement:
(a) Complete and accurate copies, including all amendments, of the
Contracts have been delivered to Buyer.
(b) All of the Contracts are in full force and effect and are valid
and enforceable in accordance with their terms, there are no material defaults
thereunder or breaches thereof, and no condition exists or event has occurred
which, with notice or lapse of time or both, would constitute a default
thereunder.
(c) Seller has the right to assign its rights and obligations
under the Contracts to Buyer, and such assignment will not result in a
default, breach or right of termination thereunder.
7
<PAGE>
(d) Set forth in the Disclosure Schedules is a complete and
accurate description of all obligations or commitments of Seller with respect
to any asset of any nature whatsoever that is used in whole or in part for
the personal use or benefit of any shareholder, officer, director or employee
of Seller or any Affiliate thereof.
2.8 PERSONAL PROPERTY.
(a) Except as set forth in the Disclosure Schedules, there is no
asset, property, right or interest of any nature whatsoever necessary to or
currently utilized in the operation of Seller's business which is not
included in the Assets or the Intellectual Property Assets and Buyer has been
given, pursuant to the Option, an opportunity to acquire all of such assets,
properties, rights and interests.
(b) Seller has made available to the Buyer true, correct and
complete copies of all material contracts, agreements, mortgages, leases and
commitments relating to or affecting any interest in the Assets or the
Intellectual Property Assets.
(c) Other than the Contracts, there are no agreements, whether
verbal or written, affecting any of the Assets or the Intellectual Property
Assets which have not been disclosed in writing to Buyer. Other than the
Contracts or as authorized by Buyer in writing prior to the Closing, all such
agreements affecting the Assets or the Intellectual Property Assets will be
terminated prior to or at the Closing.
2.9 TITLE TO ASSETS AND RELATED MATTERS. Seller owns all of the Assets
and Intellectual Property Assets free and clear of all Encumbrances and the
claims or rights of any other party. Seller has the power, authority and
right to sell the Assets and Intellectual Property Assets to Buyer free and
clear of any Encumbrances.
2.10 COMPLIANCE WITH LAWS. Seller is in compliance with all Legal
Requirements applicable to the ownership of the Assets and the Intellectual
Property Assets and the operation of its business where the failure so to
comply would have a material adverse effect on Seller's ability to carry out
its obligations under the Transaction Agreements, or the ability of Buyer to
carry on the business operations related to the Assets or the Intellectual
Property Assets after the Closing, and Seller does not have any basis to
expect, nor has it received, any Order, notice, or other communication from
any Governmental Authority of any alleged, actual, or potential violation
and/or failure to comply with any such Legal Requirement, except as disclosed
on the Disclosure Schedules.
2.11 LITIGATION. Except as set forth in the Disclosure Schedules, (i)
neither Seller, Kilat nor either of the Shareholders is subject to any Order
in which relief is sought involving, affecting, or relating to the ownership,
operation, or use of the Assets or the Intellectual Property Assets, the
operation of Seller's business or the matters covered by the Transaction
Agreements which would prevent, delay, or make illegal the transactions
contemplated by the Transaction Agreements, (ii) there are no Proceedings
pending or threatened against, involving, affecting, or relating to Seller,
Kilat or either of the Shareholders, the operation of Seller's business or to
Seller's ownership, operation or use of the Assets or the Intellectual
Property Assets before any arbitrator or Governmental Authority, and (iii) to
the best knowledge of Seller, Kilat and each of the Shareholders, there exist
no facts to serve as a basis for the
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institution of any Proceeding against Seller, Kilat, either of the
Shareholders or any of the Assets or Intellectual Property Assets which would
prohibit or adversely affect the Assets or the Intellectual Property Assets
or the ability of Seller, Kilat or the Shareholders to carry out their
respective obligations under the Transaction Agreements.
2.12 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker
or similar Person has acted directly or indirectly on behalf of Seller in
connection with the Transaction Agreements or the transactions contemplated
hereby, and no Person, including Seller, Kilat or either of the Shareholders,
is or will be entitled to any broker's or finder's fee or any other
commission or similar fee or expense, directly or indirectly, in connection
with the Transaction Agreements or the transactions contemplated thereby.
2.13 BANKRUPTCY. Seller has not made any assignment for the benefit of
creditors, filed any petition in bankruptcy, been adjudicated insolvent or
bankrupt, petitioned or applied to any tribunal for any receiver, conservator
or trustee of it or any of its property or assets, or commenced any
proceeding under any reorganization arrangement, readjustment of debt,
conservation, dissolution or liquidation law or statute or any jurisdiction;
and no such action or proceeding has been commenced or threatened against
Seller by any creditor, claimant, Governmental Authority or any other person.
2.14 LABOR MATTERS. Except as set forth in the Disclosure Schedules,
(a) Seller has made all payments to its employees required by any
Legal Requirement or any Employee Benefit Plans;
(b) To the best knowledge of Seller, Kilat and each of the
Shareholders, there has not been, and there is not presently pending or
threatened, any Proceeding against Seller under any Legal Requirement governing
the conditions of Seller's employment of its employees, or any basis or ground
for any such claim;
(c) Seller has not been a party to any collective bargaining
agreement or other labor contract affecting the employees of Seller;
(d) To the best knowledge of Seller, Kilat and each of the
Shareholders, there has not been, and there is not presently pending or
existing or threatened, any strike, slowdown, picketing, work stoppage, labor
arbitration or proceeding in respect of the grievance of any employee, an
application or complaint filed by an employee or union with any Governmental
Authority, or organizational activity or labor dispute against or affecting
the business of Seller; and
(e) Seller has complied with all its obligations under all
relevant superannuation legislation and has made all contributions required
to be made in respect of its employees for their period of employment up to
and including the Closing Date. Seller has established reserves and accruals
(each of which is accurately set forth in the Disclosure Schedules) in
amounts sufficient to satisfy all superannuation obligations in respect of
its employees for their period of employment up to and including the Closing
Date.
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2.15 DISCLOSURE. No representation or warranty of Seller, Kilat or the
Shareholders contained in this Agreement, the Exhibits hereto, or any other
Transaction Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made,
not misleading. There is no fact known to Seller, Kilat or either of the
Shareholders which has specific application to Seller (other than general
economic or industry conditions) and which materially and adversely affects
or, so far as Seller, Kilat or either of the Shareholders can reasonably
foresee, materially threatens, the Assets, the Intellectual Property Assets
or the ability of Seller, Kilat or the Shareholders to carry out their
respective obligations under the Transaction Agreements, which has not been
set forth in this Agreement or in the Disclosure Schedules.
2.16 TAX MATTERS. With respect to Taxes, including, without limitation,
Taxes imposed by the Income Tax Assessment Act of 1936 of the Commonwealth of
Australia (the "TAX ACT") and any other Australian national, state or
territorial law or regulation:
(a) Seller has lodged, or will lodge, at or before the correct time all
Tax Returns required by law to be lodged on or before the Closing Date and
all such Tax Returns have been, or will be, as the case may be, fully and
accurately completed;
(b) Seller has made, to the Commissioner of Taxation or the appropriate
Governmental Authority a full and true disclosure of all material facts
necessary for the proper assessment of Seller and each deduction, rebate or
credit claimed in those Tax Returns has been properly claimed and is duly
allowable;
(c) All other necessary information, documents and notices in respect
of Tax have been properly and duly submitted by Seller to all relevant
Governmental Authorities in respect of Tax for all periods up to the Closing
Date and will continue to be properly and duly submitted up to the Closing
Date and there is no unresolved dispute with any of those authorities nor is
any such dispute foreshadowed or contemplated;
(d) All Taxes which have been assessed or imposed or are lawfully
assessable upon or are payable by Seller and which are due and payable or
which may become due and payable subsequent to but are referable to the
period ending on the Closing Date have been paid by Seller or adequate
provisions has been made for them in Seller's accounts and such provisions
have been fully disclosed to Buyer; and
(e) All obligations imposed on Seller under all laws relating to Tax
have been complied with and, without limiting the generality of the
foregoing, all amounts of income tax and medicare levy required by law to be
deducted by Seller from salary or wages of Seller's employees (including,
without limitation, Seller's directors and officers) and from prescribed
payments and all amounts of withholding tax have been duly deducted and where
payable to the relevant taxing authority have been duly paid.
2.17 INSURANCE. The assets of Seller (including, without limitation,
the Assets and the Intellectual Property Assets) are adequately insured by
respect of the risks to which they are subject (including loss or damage by
disease, fire, theft, storm and tempest) in such amounts as accord with sound
business principles and such policies will not expire earlier than the
Closing
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Date. Seller is adequately insured against public liability in such amounts
as accord with sound business principles and such policies will not expire
prior to the Closing Date. Seller is adequately insured against workers'
compensation liability and has complied with all respects with the
legislation relating to workers' compensation in all jurisdictions where
relevant. All premiums in respect of the insurance coverage referred to in
this Agreement will have been paid prior to the Closing Date, Seller has
complied with all the conditions of the associated policies and has not made
any false or misleading statement or done or omitted to do anything which
would entitle the insurers to avoid the policies or refuse to meet any claim
thereunder in full other than as disclosed by Seller to Buyer in writing
prior to the Closing Date. There is no fact or matter of which Seller, Kilat
or the Shareholders is aware which could lead to Seller's insurance policies
being vitiated or repudiated and neither Seller, Kilat nor the Shareholders
will permit any such policies to lapse prior to the Closing Date, nor will
Seller, Kilat or the Shareholders do or fail to do anything which will render
any of Seller's insurance policies void or voidable prior to the Closing
Date.
2.18 TRADE PRACTICES. There is no agreement, arrangement or activity
whether by commission or omission in which Seller has been or will be concerned
which infringes or which has been or which is required to be authorized under
the Trade Practices Act of 1974 of the Commonwealth of Australia or any other
anti-trust legislation in relation to the Assets or the Intellectual Property
Assets, including, without limitation, any Australian national, state or
territorial law or regulation.
2.19 ENVIRONMENTAL LIABILITIES. There are no Environmental Liabilities
(as defined below) affecting any of Seller's business premises. There are no
factors affecting any of Seller's business premises which are likely within
the next twelve months to give rise to any Environmental Liability. For the
purposes of this clause, the term "ENVIRONMENTAL LAW" means any planning,
environmental, health, toxic, hazardous substances, dangerous goods,
waste/disposal or pollution laws, regulations, orders, notices, ordinances or
requirements, and the term "ENVIRONMENTAL LIABILITY" means any obligation,
expense, penalty or fine under an Environmental Law which could be imposed on
any occupier in possession of Seller's business premises.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, Kilat and the Shareholders as
follows:
3.1 ORGANIZATION, EXISTENCE AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Utah and has full power and authority to purchase the Assets and the
Intellectual Property Assets and to carry on its intended business therewith.
3.2 AUTHORITY. Buyer has full power and authority to execute and
deliver the Transaction Agreements, to perform its obligations thereunder,
and to consummate the transactions contemplated thereby. This Agreement has
been, and each of Transaction Agreements will be, when executed, duly and
validly executed and delivered by Buyer and each of the Transaction
Agreements constitutes, as applicable, constitutes, or will, when executed,
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constitute, the legal, valid, and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally.
3.3 CONSENTS AND APPROVALS; NO VIOLATION. No filing or registration
with, no notice to and no Governmental Authorization, consent or approval of
any Governmental Authority, creditor or other person in a contractual
relationship with Buyer is necessary in connection with Buyer's execution and
delivery of the Transaction Agreements, the performance of its obligations
hereunder or thereunder or the consummation of the transactions contemplated
hereby or thereby. Neither the execution and delivery of the Transaction
Agreements, the consummation of the transactions contemplated thereby, nor
the compliance by Buyer with any of the provisions thereof will, as of the
Closing Date, (i) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of the Buyer's Articles of Incorporation or Bylaws,
or of any note, contract, agreement, commitment, bond, mortgage, indenture,
license, lease, pledge agreement or other instrument or obligation to which
Buyer is a party or by which Buyer or any of its properties or assets may be
bound, or (ii) violate or conflict with any provision of any Legal
Requirement binding upon Buyer.
3.4 BANKRUPTCY. Buyer has not made any assignment for the benefit of
creditors, filed any petition in bankruptcy, been adjudicated insolvent or
bankrupt, petitioned or applied to any tribunal for any receiver, conservator
or trustee of it or any of its property or assets, or commenced any
proceeding under any reorganization arrangement, readjustment of debt,
conservation, dissolution or liquidation law or statute or any jurisdiction;
and no such action or proceeding has been commenced or threatened against
Buyer by any creditor, claimant, governmental authority or any other person.
3.5 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker
or similar Person has acted directly or indirectly on behalf of Buyer in
connection with the Transaction Agreements or the transactions contemplated
thereby, and no Person, including Buyer, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee or expense,
directly or indirectly, in connection with the Transaction Agreements or the
transactions contemplated thereby.
ARTICLE 4
CONDITIONS PRECEDENT
TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
the Transaction Agreements at the Closing are subject to fulfillment of the
following conditions, any one or more of which may be waived in whole or in
part by Buyer in the manner provided for herein.
4.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties of Seller, Kilat and the Shareholders contained in the
Transaction Agreements, including the Exhibits thereto, are true, correct and
complete in all material respects as of the Closing Date.
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4.2 PERFORMANCE; COMPLIANCE WITH AGREEMENT. Seller, Kilat and each of
the Shareholders shall have performed and complied with all obligations,
agreements, covenants and conditions required by the Transaction Agreements
to be performed or complied with by them on or before the Closing Date,
including without limitation making all the deliveries required by
SECTION 1.6.
4.3 AUTHORIZATION; THIRD-PARTY CONSENTS. All filings and registrations
with and notices to, and each Governmental Authorization, consent or approval
of, any Governmental Authority, creditor or other Person which is necessary
in connection with the execution and delivery of the Transaction Agreements
by Seller, Kilat and the Shareholders, the performance of their respective
obligations hereunder and thereunder, or the consummation of the transactions
contemplated hereby and thereby shall have been made or obtained. All
corporate actions necessary to authorize the execution, delivery and
performance of the Transaction Agreements by Seller and Kilat, and the
consummation by Seller and Kilat of the transactions contemplated by the
Transaction Agreements shall have been duly and validly taken, and Seller and
Kilat shall have full right and power to sell the Assets and the Intellectual
Property Assets and to perform their respective obligations upon the terms
provided in the Transaction Agreements. On or prior to the Closing Date,
Seller, Kilat and the Shareholders shall have furnished to the Buyer evidence
of the foregoing filings, notices, consents, stipulations and assignments.
4.4 NO MATERIAL ADVERSE CHANGE. During the period from the date of this
Agreement through the Closing Date, there shall not have been any material
adverse change in the Assets or the Intellectual Property Assets, and none of
the events described in SECTION 2.6 shall have occurred.
4.5 COMPLETION OF BUYER'S INVESTIGATION. Buyer shall have completed,
to its sole satisfaction and at its expense, an investigation into the
condition of the Assets and the Intellectual Property Assets and the business
and operations of Seller. If Buyer is not satisfied with any matter revealed
during its investigation, or with any matter set forth on the Disclosure
Schedules, Buyer shall have the right to terminate this Agreement if notice
of termination is given to the Seller, Kilat and the Shareholders prior to
the Closing.
4.6 GOOD TITLE TO BUYER. Seller shall have conveyed the Assets and the
Intellectual Property Assets to Buyer, free and clear of all Encumbrances.
4.7 ACTIONS SATISFACTORY. The form and substance of all actions,
proceedings, instruments and documents required to consummate the
transactions contemplated by the Transaction Agreements shall have been
satisfactory in all reasonable respects to Buyer and its counsel.
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ARTICLE 5
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER, KILAT AND THE SHAREHOLDERS
The obligations of Seller, Kilat and the Shareholders to consummate the
transactions contemplated by the Transaction Agreements at the Closing are
subject to the fulfillment of the following conditions, any one or more of
which may be waived in whole or in part by Seller, Kilat or the Shareholders
in the manner provided for herein.
5.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties of Buyer contained in the Transaction Agreements shall be true,
correct and complete in all material respects as of the Closing Date.
5.2 BUYER'S PERFORMANCE; COMPLIANCE WITH AGREEMENT. Buyer shall have
performed and complied with all obligations, agreements, covenants and
conditions required by the Transaction Agreements to be performed or complied
with by Buyer on or before the Closing Date, including without limitation
making all the deliveries required by SECTION 1.6.
5.3 AUTHORIZATION; THIRD PARTY CONSENTS. All filings and registrations
with and notices to, and each Governmental Authorization, consent or approval
of, any Governmental Authority, creditor or other Person which is necessary
in connection with Buyer's execution and delivery of the Transaction
Agreements, the performance of its obligations thereunder, or the
consummation of the transactions contemplated thereby shall have been made or
obtained. All corporate action necessary to authorize the execution,
delivery and performance the Transaction Agreements by Buyer and the
consummation by Buyer of the transactions contemplated by the Transaction
Agreements shall have been duly and validly taken, and Buyer shall have full
right and power to purchase the Assets and the Intellectual Property Assets
and to perform its obligations upon the terms provided in the Transaction
Agreements. Buyer shall have furnished to Seller, Kilat and the Shareholders
evidence of the foregoing consents and actions, if requested.
5.4 NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement and
the Closing Date, there will not have been any material adverse change, or
any event, condition or contingency that results in a material adverse change
affecting the ability of Buyer to carry out its obligations under the
Transaction Agreements.
5.5 ACTIONS SATISFACTORY. The form and substance of all actions,
proceedings, instruments and documents required to consummate the transactions
contemplated by the Transaction Agreements shall have been satisfactory in all
reasonable respects to Seller, Kilat and the Shareholders and their counsel.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 EXPENSES. Except as otherwise expressly provided herein, each
party to this Agreement shall bear its respective expenses incurred in
connection with the preparation,
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execution and performance of the Transaction Agreements and the transactions
contemplated hereby, including without limitation all fees and expenses of
agents, business brokers, legal counsel, accountants, tax and financial
advisors and other facilitators and advisors.
6.2 CONFIDENTIALITY.
(a) NON-DISCLOSURE AND USE. Each of Buyer, Seller, Kilat and the
Shareholders acknowledges that, in connection with the transactions
contemplated by the Option Agreement and the Transaction Agreements, each has
become or may become privy to the technical, marketing and other proprietary
information of another party, including, without limitation, information,
material, documents and data related to such other party, to the business
activities of such other party and/or to its customers, trade secrets and
other proprietary information (collectively, the "PROPRIETARY INFORMATION").
Each agrees (i) to take at all times all reasonably necessary steps to
safeguard the confidentiality of any Proprietary Information; (ii) not to
disclose, reveal, make accessible or make available to any third Person any
Proprietary Information; and (iii) not to use any Proprietary Information for
such party's own benefit or for any other Person's benefit; PROVIDED,
HOWEVER, that Buyer, Seller, Kilat or the Shareholders may disclose (A)
Proprietary Information which at the time of the disclosure is part of the
public knowledge and readily accessible to such third party and (B)
Proprietary Information which is required by law to be disclosed.
(b) RETURN. Buyer, Seller, Kilat and the Shareholders agree that if
the Acquisition is not consummated, each of them will return to the other
parties hereto any and all material containing or reflecting Proprietary
Information.
(c) REMEDIES. Each of Buyer, Seller, Kilat and the Shareholders
acknowledges and agrees that any breach of the terms of this SECTION 6.2
would result in irreparable injury and damage to the injured party for which
such party would have no adequate remedy at law; each of Buyer, Seller, Kilat
and the Shareholders therefore also acknowledges and agrees that in the event
of such breach or any threat of breach, the injured or threatened party shall
be entitled, in addition to any other remedies to which such party may be
entitled at law or in equity, to an immediate injunction and restraining
order to prevent such breach and/or threatened breach by the breaching or
threatening party and/or any and all persons and/or entities acting for
and/or with such breaching or threatening party, without having to provide a
bond or other security or to prove actual damages.
6.3 OPERATION OF BUSINESS. Neither Seller, Kilat nor either of the
Shareholders will engage in any practice, take any action or enter into any
transaction outside the Ordinary Course of Business with respect to the
Assets, the Intellectual Property Assets or the operation of Seller's
business from the date of this Agreement until the Closing Date without the
prior written consent of Buyer. Without in any manner limiting the
foregoing, Seller, Kilat and the Shareholders covenant and agree that during
such period,
(i) the aggregate monthly remuneration (including, without
limitation, all salary, distributions, dividends, bonuses, deferred
compensation, automobile lease expense, superannuation payments and other
payments) paid to or for the benefit of Kilat and the Shareholders and all
Affiliates of Kilat and the Shareholders shall not exceed Sixteen Thousand
Six Hundred Sixty Seven Australian Dollars (AUS $16,667), and
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(ii) Except as set forth in the Disclosure Schedules, Seller will
not, and Kilat and the Shareholders will not permit Seller to, make any
payment or incur any obligation with respect to any asset of any nature
whatsoever that is used in whole or in part for the personal use or benefit
of any shareholder, officer, director or employee of Seller or any
Affiliate thereof.
Seller, Kilat and the Shareholders will use their best commercially reasonable
efforts to preserve the Assets, the Intellectual Property Assets and the
goodwill and value of Seller's business, to comply with all laws applicable to
the Assets, the Intellectual Property Assets and Seller's business and to
maintain good working relationships with lessors, licensors, suppliers,
customers and employees. In addition, Seller will not sell or contract to sell
any interest in Seller or lease, license, transfer, pledge, mortgage,
hypothecate or otherwise dispose of any of the Assets or the Intellectual
Property Assets and Kilat and the Shareholders will not permit Seller to take
any such action. Seller will not, and Kilat and the Shareholders will not
permit Seller to, do any act or thing or suffer or permit any omission which
would make any policy of insurance of Seller written with respect to the Assets
or the Intellectual Property Assets void or voidable or do anything that would
mean that any existing insurance policy of Seller is not materially in full
force and effect at all times prior to the Closing Date.
6.4 PUBLICITY. The parties hereto agree, subject to the provisions of
SECTION 6.2, to advise and confer with each other, to the maximum extent
possible, regarding and prior to the issuance of any reports, statements,
releases, public announcements or similar publicity with respect to this
Agreement or the transactions contemplated hereby; PROVIDED, HOWEVER, that any
of the parties may make such announcements, give such notices and provide such
information to Governmental Authorities, employees, creditors, affiliates and
the public as its counsel may advise is legally required.
6.5 EXCLUSIVITY. From and after the date of this Agreement until the
Closing:
(a) Neither Seller nor any of its officers, directors, stockholders
or agents (including, without limitation, Kilat and the Shareholders) shall
directly or indirectly:
(i) Enter into any transaction with any party other than Buyer
relative to any disposition of the Assets, the Intellectual Property Assets or
Seller's business or operations or any part thereof; or
(ii) Solicit or encourage submission of inquiries, proposals
or offers from any other party relative to potential disposition of the
Assets, the Intellectual Property Assets or Seller's business or operations
or any part thereof; or
(iii) Provide further information to any party other than
Buyer relating to any possible disposition of the Assets, the Intellectual
Property Assets or Seller's business or operations or any part thereof.
(b) Seller, Kilat and the Shareholders agree that if Seller, Kilat
or either of the Shareholders receives an offer or proposal relating to the
possible disposition of the Assets, the Intellectual Property Assets or
Seller's business or operations or any part thereof, Seller,
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Kilat and the Shareholders will immediately notify Buyer of such offer or
proposal, the identity of the party making the offer or proposal and the
specific terms of the offer or proposal.
6.6 COOPERATION. Kilat and each of the Shareholders agrees to cause
Seller to take, or to refrain from taking, all actions necessary to fulfill
Seller's covenants and obligations under the Transaction Agreements.
ARTICLE 7
INDEMNIFICATION AND LIMITATION
7.1 INDEMNIFICATION BY SELLER AND THE SHAREHOLDERS. Subject to the
limitations set forth in SECTION 7.4, Seller, Kilat and each of the
Shareholders, jointly and severally, unconditionally, absolutely and
irrevocably agree to and shall defend, indemnify and hold harmless Buyer, and
each of Buyer's officers, directors, employees, counsel, successors, assigns,
and legal representatives (Buyer and such persons are collectively referred
to as the "BUYER'S INDEMNIFIED PERSONS") from and against, and shall
reimburse Buyer's Indemnified Persons for, each and every Loss paid, imposed
on or incurred by Buyer's Indemnified Persons, directly or indirectly,
relating to, resulting from or arising out of any inaccuracy in any
representation or warranty of Seller, Kilat or the Shareholders under the
Option Agreement, the Transaction Agreements or the Exhibits thereto or any
agreement, certificate or document delivered by Seller, Kilat or the
Shareholders pursuant hereto in any respect, or any breach or nonfulfillment
of any covenant, agreement or other obligation of Seller, Kilat or the
Shareholders under the Option Agreement, the Transaction Agreements or the
Exhibits thereto or any agreement, certificate or document to be delivered by
Seller, Kilat or the Shareholders pursuant hereto (including, without
limitation, Seller's obligation to pay Taxes pursuant to SECTION 1.7). With
respect to matters not involving Proceedings brought or asserted by third
parties against Buyer's Indemnified Persons, within thirty (30) days after
notification from Buyer's Indemnified Persons supported by reasonable
documentation setting forth the nature of the circumstances entitling Buyer's
Indemnified Persons to indemnity hereunder, Seller, Kilat and the
Shareholders shall, at no cost or expense to Buyer's Indemnified Persons,
diligently commence resolution of such matters in a manner reasonably
acceptable to Buyer's Indemnified Persons and shall diligently and timely
prosecute such resolution to completion; PROVIDED, HOWEVER, with respect to
those valid claims that may be satisfied by payment of a liquidated sum of
money and which are not disputed reasonably and in good faith by Seller,
Kilat and the Shareholders, Seller, Kilat and the Shareholders shall promptly
pay the amount so claimed. If litigation or any other Proceeding is
commenced or threatened, the provisions of SECTION 7.3 shall control over the
immediately preceding sentence. Buyer shall be entitled to offset against
any amounts owed by Buyer to Seller, Kilat or the Shareholders under any
Transaction Agreement any amounts owed by Seller, Kilat or the Shareholders,
respectively, to Buyer hereunder.
7.2 INDEMNIFICATION BY BUYER. Buyer unconditionally, absolutely and
irrevocably agrees to and shall defend, indemnify and hold harmless Seller,
Kilat, the Shareholders and the successors, assigns, heirs and legal and
personal representatives of Seller, Kilat and the Shareholders (Seller,
Kilat, the Shareholders and such persons are collectively referred to as the
"SELLER'S INDEMNIFIED PERSONS") from and against, and shall reimburse
Seller's Indemnified Persons for, each and every Loss paid, imposed on or
incurred by Seller's Indemnified Persons, directly or indirectly, relating
to, resulting from or arising out of any inaccuracy in any
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representation or warranty of Buyer under the Option Agreement, the
Transaction Agreements or the Exhibits thereto or any agreement, certificate
or other document delivered or to be delivered by Buyer pursuant hereto in
any respect, or any breach or nonfulfillment of any covenant, agreement or
other obligation of Buyer under the Option Agreement, the Transaction
Agreements, the Exhibits thereto or any agreement, certificate or document to
be delivered by Buyer pursuant hereto. With respect to matters not involving
Proceedings brought or asserted by third parties against Seller's Indemnified
Persons, within thirty (30) days after notification from Seller's Indemnified
Persons supported by reasonable documentation setting forth the nature of the
circumstances entitling Seller's Indemnified Persons to indemnity hereunder,
the Buyer, at no cost or expense to Seller's Indemnified Persons, shall
diligently commence resolution of such matters in a manner reasonably
acceptable to Seller's Indemnified Persons and shall diligently and timely
prosecute such resolution to completion; PROVIDED, HOWEVER, with respect to
those valid claims that may be satisfied by payment of a liquidated sum of
money and which are not disputed reasonably and in good faith by Buyer, Buyer
shall promptly pay the amount so claimed. If litigation or any other
Proceeding is commenced or threatened, the provisions of SECTION 7.3 shall
control over the immediately preceding sentence.
7.3 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. If any Proceeding shall
be brought or asserted against a party entitled to indemnification pursuant
to SECTIONS 7.1 or 7.2, or any successor thereto (the "INDEMNIFIED PERSON")
in respect of which indemnity may be sought under this Article from an
indemnifying person or any successor thereto (the "INDEMNIFYING PERSON"), the
Indemnified Person shall give prompt written notice of such Proceeding to the
Indemnifying Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and
the payment of all expenses; provided, that any delay or failure to so notify
the Indemnifying Person shall relieve the Indemnifying Person of its
obligations hereunder only to the extent, if at all, that it is prejudiced by
reason of such delay or failure. In no event shall any Indemnified Person be
required to make any expenditure or bring any cause of action to enforce the
Indemnifying Person's obligations and liability under and pursuant to the
indemnification obligations set forth in this Article. In addition, actual
or threatened action by a Governmental Authority or other Person is not a
condition or prerequisite to the Indemnifying Person's obligations under this
Article. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing Proceedings and to participate in the defense
thereof, but the reasonable fees and expenses of such counsel shall be at the
expense of the Indemnified Person unless the Indemnified Person shall in good
faith determine that there exist actual or potential conflicts of interest
which make representation by the same counsel inappropriate. The Indemnified
Person's right to participate in the defense or response to any Proceeding
should not be deemed to limit or otherwise modify its rights and obligations
under this Article. In the event that the Indemnifying Person, within
fifteen (15) days after notice of any such Proceeding, fails to assume the
defense thereof, the Indemnified Person shall have the right to undertake the
defense, compromise or settlement of such Proceeding for the account of the
Indemnifying Person, subject to the right of the Indemnifying Person to
assume the defense of such Proceeding with counsel reasonably satisfactory to
the Indemnified Person at any time prior to the settlement, compromise or
final determination thereof. If the Indemnifying Person assumes the defense
of any Proceeding, the Indemnified Person shall, reasonably and in good
faith, assist and cooperate in the defense thereof. Anything in this Article
to the contrary notwithstanding, the Indemnifying Person shall not, without
the Indemnified Person's prior written consent, settle or compromise any
Proceeding or consent to the entry of any judgment with respect to any
Proceeding for anything other than money damages paid by the Indemnifying
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<PAGE>
Person. The Indemnifying Person may, without the Indemnified Person's prior
written consent, settle or compromise any such Proceeding or consent to entry
of any judgment with respect to any such Proceeding that requires solely the
payment of money damages by the Indemnifying Person and that includes as an
unconditional term thereof the release by the claimant or the plaintiff of
the Indemnified Person from all liability in respect of such Proceeding.
7.4 LIMITATION OF LIABILITY. Notwithstanding the foregoing provisions
of this ARTICLE 7, Buyer agrees that the maximum monetary amount for which
the Shareholders shall be liable to Buyer's Indemnified Persons in connection
with the provisions of the Transaction Agreements, shall be limited to the
aggregate amount of One Million Eight Hundred Thousand Dollars ($1,800,000);
PROVIDED, HOWEVER, that the foregoing limitation on the liability of the
Shareholders shall not apply to, and each of the Shareholders shall be
jointly and severally liable to Buyer's Indemnified Persons, and any of them,
for the aggregate amount of actual damages resulting from:
(a) any representation made by Seller, Kilat or either of the
Shareholders which any of Seller, Kilat or either of the Shareholders knows
or has reason to know is false or misleading at the Closing Date, or
(b) any fraudulent conduct of Seller, Kilat or either of the
Shareholders.
Furthermore, each of Seller, Kilat and the Shareholders acknowledges and agrees
that the foregoing limitation of liability shall not in any manner limit the
liability of Seller and Kilat for any reason whatsoever.
7.5 GUARANTEE.
(a) Kilat and each of the Shareholders gives the indemnity set forth
in SECTION 7.1 and the guarantee set forth in this SECTION 7.5 in consideration
of Buyer's agreement to enter into the Transaction Agreements. Kilat and each
of the Shareholders acknowledges the receipt of valuable consideration from
Buyer for the agreement of Kilat and the Shareholders to incur obligations and
give rights under such indemnity and guarantee.
(b) Kilat and each of the Shareholders unconditionally and
irrevocably guarantees to Buyer the due and punctual performance and
observance by Seller of its obligations under the Transaction Agreements
including, without limitation, any obligation to pay money.
(c) Kilat and each of the Shareholders waive any right it, he or
she have of first requiring Buyer to commence proceedings or enforce any
other right against Seller or any other person before claiming under such
indemnity and guarantee.
(d) This guarantee and the foregoing indemnity are continuing
security obligations and are not discharged by any one payment. Such guarantee
and indemnity do not merge on completion.
(e) The liabilities of Kilat and each of the Shareholders under
such guarantee and indemnity are as a guarantor, indemnifier and principal
debtor and the rights of Buyer under
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<PAGE>
such guarantee and indemnity are not affect by anything which might otherwise
affect them at law or in equity including, but not limited, one or more of
the following:
(i) Buyer granting time or other indulgence to, compounding or
compromising with or releasing Seller, or any other guarantor;
(ii) acquiescence, delay, acts, omissions or mistakes on the part
of Buyer;
(iii) any novation of a right of Buyer;
(iv) any variation of the Transaction Agreements, or any
agreement entered into in performance thereof; or
(v) the invalidity or unenforceability of an obligation or
liability of a person other than the relevant guarantor (being Kilat or one
of the Shareholders).
(f) Kilat and each of the Shareholders may not, without the consent
of Buyer:
(i) raise a set-off or counterclaim available to it or Seller
against Buyer in reduction of it's liability under such guarantee and
indemnity;
(ii) claim to be entitled by way of contribution, indemnity,
subrogation, marshaling or otherwise to the benefit of any security or
guarantee held by Buyer in connection with the Transaction Agreements; or
(iii) prove in competition with Buyer, if a liquidator,
provisional liquidator, receiver, official manager or trustee in bankruptcy
is appointed in respect of Seller or Seller is otherwise unable to pay its
debts when they fall due, until all money payable to Buyer in connection
with the Transaction Agreements is paid.
(g) If a claim that a payment or transfer to Buyer in connection
with the Transaction Agreements is void or voidable (including, but not
limited to, a claim under laws relating to liquidation, insolvency or
protection of creditors) is upheld, conceded or compromised, then Buyer is
entitled immediately as against Kilat and each Shareholder to the rights to
which it would have been entitled under such guarantee and indemnity if the
payment or transfer had not occurred.
(h) Kilat and each of the Shareholders agree to pay or reimburse
Buyer on demand for its costs, charges and expenses in making, enforcing and
doing anything in connection with such guarantee and indemnity including,
without limitation, legal costs and expenses on a full indemnity basis. Any
amounts paid to Buyer by Kilat or one of the Shareholders must be applied
first against payment of costs, charges and expenses under this SECTION
7.5(h), then against other obligations under such guarantee and indemnity.
(i) Kilat and each of the Shareholders acknowledges having been
given a copy of this Agreement and having had full opportunity to consider
its provisions before entering into such guarantee and indemnity.
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<PAGE>
ARTICLE 8
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any investigation made at any time by or on behalf of the
parties hereto, all of the representations and warranties of the parties shall
survive the Closing of the transactions contemplated by the Transaction
Agreements (even if the other party knew or had reason to know of any
misrepresentation or breach of any warranty at the time of the Closing) and all
of the covenants of the parties shall survive the Closing, including but not
limited to the obligations of the parties set forth in SECTION 6.2 and the
indemnification obligations of the parties hereto. In addition, the covenants
and obligations set forth in SECTION 6.2 shall survive the termination of this
Agreement.
8.2 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified,
terminated, rescinded or supplemented only by written agreement of the parties
hereto.
8.3 WAIVER; CONSENTS. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Any failure of a party to
comply with any obligation, covenant, agreement or condition herein may be
waived by each party affected thereby only by a written instrument signed by
the party granting such waiver. No waiver, or failure to insist upon strict
compliance, by any party of any condition or any breach of any obligation,
term, covenant, representation, warranty or agreement contained in this
Agreement, in any one or more instances, shall be construed to be a waiver
of, or estoppel with respect to, any other condition or any other breach of
the same or any other obligation, term, covenant, representation, warranty or
agreement. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver.
8.4 FURTHER ASSURANCES; COOPERATION. The parties hereto agree (I) to
furnish upon request to each other such further information, (ii) to execute
and deliver to each other such other documents, and (iii) to do such other
acts and things, all as another party hereto may at any time reasonably
request, including before, at and after the Closing, for the purpose of
carrying out the intent of the Transaction Agreements and the documents
referred to therein.
8.5 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when (I) delivered
personally, (ii) sent by telecopier (with receipt confirmed), or (iii)
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested) or (iv) three business days
after being sent by registered or certified mail, return receipt requested,
in each case to the other party at the following addresses and telecopier
numbers (or to such other address or telecopier number for a party as shall
be specified by like notice; provided that notices of a change of address or
telecopier number shall be effective only upon receipt thereof):
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if to Seller, to:
Australian Software Innovations (Services) Pty Ltd
51 Rawson Street, Suite 301
Epping NSW 2121
Attn: Eng Lee, Managing Director
Telecopier: 61-2-869-0280
if to Kilat or the Shareholders, to:
Eng Lee
51 Rawson Street, Suite 301
Epping NSW 2121
Telecopier: 61-2-869-0280
if to Buyer, to:
Sento Technical Innovations Corporation
311 North State Street
Orem, Utah 84057
Attn: Robert K. Bench, President
Telecopier: (801) 224-2426
with copies to:
Brian G. Lloyd
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Telecopier: (801) 532-7750
8.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and permitted assigns.
Buyer may, in its discretion, assign its rights, interests and obligations
hereunder to any Person without the prior consent of any other party hereto.
Neither Seller, Kilat nor either of the Shareholders may assign any of their
respective rights, interests or obligations hereunder without the prior
written consent of Buyer. This Agreement is not intended to and shall not
confer upon any person other than the parties any rights or remedies
hereunder or with respect hereto.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of New South Wales, Australia applicable to contracts
made and to be performed wholly therein.
8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
23
<PAGE>
8.9 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Unless otherwise provided, all references
in this Agreement to articles and sections refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require.
Unless otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer
to this Agreement as a whole and not to any particular article, section,
clause or other subdivision hereof. Whenever the term "including" or a
similar term is used in this Agreement, it shall be read as if it were
written "including by way of example only and without in any way limiting the
generality of the clause or concept to which reference is made." This
Agreement shall be construed as though all parties had drafted it.
8.10 ENTIRE AGREEMENT. This Agreement and the Transaction Agreements,
including the Exhibits and the documents, instruments and schedules referred
to herein and therein, embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, representations, warranties, covenants, or
undertakings other than those expressly set forth or referred to herein and
in the Transaction Agreements. The Transaction Agreements supersede all
prior agreements and understandings between the parties with respect to such
subject matter.
8.11 ATTORNEYS' FEES. In the event a Proceeding is brought by any party
under this Agreement to enforce or construe any of its terms, the party that
prevails by enforcing this Agreement shall be entitled to recover, in
addition to all other amounts and relief, its reasonable costs and attorneys'
fees incurred in connection with such Proceeding.
8.12 SEVERABILITY. If any part of this Agreement is or becomes legally
ineffective, invalid or unenforceable in any jurisdiction, the effectiveness,
validity or enforceability of this Agreement in any other jurisdiction, or
the remainder of it in that jurisdiction, will not be affected.
8.13 JOINT AND SEVERAL. In this Agreement:
(a) any agreement, covenant, obligation, representation or warranty
on the part of two or more persons binds them jointly and severally; and
(b) any agreement, covenant, obligation, representation or
warranty in favor of two or more persons is for the benefit of them jointly
and severally.
ARTICLE 9
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings specified or referred to below when used in this Agreement. Any
reference or citation to a law, statute or regulation shall be deemed to
include any amendments to that law, statute or regulation and judicial and
administrative interpretations of it.
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<PAGE>
9.1 "ACQUISITION" shall have the meaning set forth in SECTION 1.1.
9.2 "AFFILIATE" means, with respect to any specified Person, each other
Person which, directly or indirectly, controls, is controlled by or is under
common control with such specified Person (whether a general or limited
partner), each officer, director or general partner of such specified Person,
and each other Person who is the beneficial owner of five percent (5%) or
more of any class of the voting securities of such specified Person or five
percent (5%) or more in market value of the outstanding securities of such
Person. For purposes of this definition, "control" means the possession of
the power to direct or cause the direction of all or any part of the
management and policies of a specified Person, whether through the ownership
of voting securities, by contract or otherwise.
9.3 "AGREEMENT" means this Asset Purchase Agreement, including the
Exhibits hereto, which are hereby incorporated herein.
9.4 "ALLOCATION SCHEDULE" shall have the meaning set forth in
SECTION 1.2(c).
9.5 "ASSETS" means the assets of Seller identified more particularly on
EXHIBIT A.
9.6 "BUYER" means Sento Technical Innovations Corporation, a Utah
corporation, or any successor, transferee or assignee thereof.
9.7 "BUYER'S INDEMNIFIED PERSONS" shall have the meaning set forth in
SECTION 7.1.
9.8 "CENTERPOST" means Centerpost Innovations Pty Limited, ACN 074-678-
774, a limited company organized under the laws of Australia.
9.9 "CLOSING" shall have the meaning set forth in SECTION 1.5(a).
9.10 "CLOSING DATE" means the date and time as of which the Closing
actually takes place.
9.11 "CONTRACTS" means those contracts and agreements identified more
particularly on EXHIBIT B, the rights of which Buyer has elected to acquire
from Seller hereunder.
9.12 "DEED OF RESTRAINT OF TRADE" shall mean that certain Deed of
Restraint of Trade to be executed by and among Buyer and the Shareholders
contemporaneously with the execution of this Agreement, substantially in the
form of EXHIBIT H, acceptable to Buyer in its discretion.
9.13 "DISCLOSURE SCHEDULES" means the disclosure schedules prepared and
delivered by Seller, Kilat and the Shareholders to Buyer prior to the Closing.
The Disclosure Schedules shall contain all information necessary to make the
representations and warranties set forth in ARTICLE 2 true and correct.
9.14 "DOLLARS" or "$" means United States dollars.
9.15 "EMPLOYEE BENEFIT PLAN" means any stock option, stock right, profit
sharing, thrift-savings, simplified employee pension plan, deferred
compensation plan, severance pay,
24
<PAGE>
golden parachute, cafeteria plan, flexible compensation plan, life insurance,
medical, dental, disability, welfare, superannuation or vacation plans or any
other similar plan or arrangement of any kind or character.
9.16 "ENCUMBRANCE" means any lien, pledge, hypothecation, charge,
mortgage, deed of trust, security interest, encumbrance, equity, trust,
equitable interest, claim, easement, right-of-way, servitude, right of
possession, lease tenancy, license, encroachment, burden, intrusion,
covenant, infringement, interference, proxy, option, right of first refusal,
community property interest; or legend, defect, impediment, exception,
condition, restriction, reservation, limitation, impairment, imperfection of
title; or restriction on or condition to the voting of any security,
restriction on the transfer of any security or other asset, restriction on
the receipt of any income derived from any security or other asset, and
restriction on the possession, use, exercise or transfer of any other
attribute of ownership, whether based on or arising from common law,
constitutional provision, statute or contract.
9.17 "ENTITY" means any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
company, joint venture, joint stock association, estate, trust, cooperative,
foundation, union, syndicate, league, consortium, coalition, committee,
society, firm, company or other enterprise, association, organization or
entity of any nature, other than a Governmental Authority.
9.18 "GOVERNMENTAL AUTHORITY" means any Australian national, state,
territorial or local governmental authority or semi-governmental authority,
any foreign governmental authority, the United States of America, any State
of the United States, any local authority and any political subdivision of
any of the foregoing, any multi-national organization or body, any agency,
department, commission, board, bureau, court or other authority thereof, or
any quasi-governmental or private body exercising, or purporting to exercise,
any executive, legislative, judicial, administrative, police, regulatory or
taxing authority or power of any nature.
9.19 "GOVERNMENTAL AUTHORIZATION" means any permit (including without
limitation any Environmental Permit), license, franchise, approval,
certificate, consent, ratification, permission, confirmation, endorsement,
waiver, certification, registration, transfer, qualification or other
authorization issued, granted, given or otherwise made available by or under
the authority of any Governmental Authority or pursuant to any Legal
Requirement.
9.20 "INTELLECTUAL PROPERTY" means any and all trademarks, trade names,
service marks, patents, copyrights (including any registrations,
applications, licenses or rights relating to any of the foregoing),
technology, trade secrets, inventions, know-how, names, logos, artwork,
designs, discoveries, computer programs, software products and related source
code and documentation, processes, and all other intangible assets,
properties and rights.
9.21 "INTELLECTUAL PROPERTY ASSETS" means all Intellectual Property of
Seller, including, without limitation, all Intellectual Property necessary to
or currently utilized in Seller's business.
25
<PAGE>
9.22 "INTELLECTUAL PROPERTY PURCHASE AGREEMENT" means that certain
Intellectual Property Purchase Agreement to be executed by and among Buyer,
Seller, Kilat and the Shareholders contemporaneously with the execution of
this Agreement, substantially in the form of EXHIBIT G, acceptable to Buyer
in is discretion.
9.23 "KILAT" means Kilat Holding Pty. Limited ACN 003-982-616, a limited
company organized under the laws of Australia.
9.24 "KNOWLEDGE" or "KNOWN" - An individual shall be deemed to have
"knowledge" of or to have "known" a particular fact or other matter if such
individual is actually aware of such fact or other matter. An Entity shall be
deemed to have "knowledge" of or to have "known" a particular fact or other
matter if any individual who is serving or who has at any time served as an
officer, director, member, manager, trustee, or shareholder of such Entity (or
in any similar capacity) has, or at any time had, knowledge of such fact or
other matter.
"LEGAL REQUIREMENT" means any law (including without limitation any
Environmental Laws), statute, ordinance, decree, requirement, Order, treaty,
proclamation, convention, rule or regulation (or interpretation of any of the
foregoing) of, and the terms of any Governmental Authorization issued by, any
Governmental Authority.
9.26 "LIABILITY" means any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unfixed, unliquidated, unsecured,
unmatured, unaccrued, unasserted, contingent, conditional, inchoate, implied,
vicarious, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles.
9.27 "LOSS" means any loss, damage, injury, harm, detriment, decline in
value, lost opportunity, Liability, exposure, claim, demand, cost of any
Proceeding, settlement, judgment, award, punitive damage award, fine,
penalty, Tax, fee, charge, cost or expense (including, without limitation,
costs of attempting to avoid or in opposing the imposition thereof, interest,
penalties, costs of preparation and investigation, and the fees,
disbursements and expenses of attorneys, accountants and other professional
advisors).
9.28 "OPTION" shall have the meaning set forth in RECITAL A.
9.29 "OPTION AGREEMENT" shall have the meaning set forth in RECITAL A.
9.30 "OPTION PURCHASE PAYMENT" shall have the meaning set forth in
SECTION 1.4(a).
9.31 "ORDER" means any order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, sentence, subpoena, consent
decree, writ or award issued, made, entered or rendered by any court,
administrative agency or other Governmental Authority or by any arbitrator.
9.32 "ORDINARY COURSE OF BUSINESS" means an action taken by a Person if:
26
<PAGE>
(I) such action is recurring in nature, is consistent with the past
practices of such Person and is taken in the ordinary course of the normal day-
to-day operations of such Person;
(ii) the aggregate monetary amount associated with such action (or
any series of related actions) is less than Twenty-Five Thousand Dollars
($25,000), unless prior to taking such action, the Person obtains from Buyer
written consent to the taking of such action; and
(iii) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day-to-day operations of other persons that are
in the same line of business as such Person.
9.33 "PERSON" means any individual, Entity or Governmental Authority.
9.34 "PROCEEDING" means any action, suit, litigation, arbitration,
lawsuit, claim, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding),
prosecution, contest, hearing, inquiry, inquest, audit, examination,
investigation, challenge, controversy or dispute commenced, brought,
conducted or heard by or before, or otherwise involving, any Governmental
Authority or any arbitrator.
9.35 "PROPRIETARY INFORMATION" shall have the meaning set forth in SECTION
6.2.
9.36 "PURCHASE PRICE" shall have the meaning set forth in SECTION 1.3.
9.37 "SELLER" means Australian Software Innovations (Services) Pty Ltd ACN
050-053-355, a limited company organized under the laws of Australia.
9.38 "SELLER'S INDEMNIFIED PERSONS" shall have the meaning set forth in
SECTION 7.2.
9.39 (a) "SENTO COMMON STOCK" means the Common Stock, $.25 par value, of
Sento Technical Innovations Corporation.
9.40 "SHAREHOLDERS" refers collectively to Eng Lee and Mary Lee, in their
individual capacities.
9.41 (a) "TAX" means any federal, national, state, territorial, local
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, environmental, customs duties,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, fringe benefits or other tax or assessment of any
nature whatsoever, including, without limitation, any customs duty, municipal
rates, stamp duties and all other charges and levies which may be imposed by
a Governmental Authority (including any interest, penalties and additions
thereto that may arise in connection therewith), whether disputed or not.
9.42 "TAX RETURNS" means any return (including any information return),
report, statement, declaration, schedule, notice, notification, form,
certificate or other document or information filed with or submitted to, or
required to be filed with or submitted to, any
27
<PAGE>
Governmental Authority in connection with the determination, assessment,
collection or payment of any Tax or in connection with the administration,
implementation or enforcement of or compliance with any Legal Requirement
relating to any Tax.
9.43 "TRANSACTION AGREEMENTS" means this Agreement and such other
documents as are entered into in connection with this Agreement in order to
complete the transactions contemplated hereby, including, without limitation,
the Option Agreement, the Intellectual Property Purchase Agreement and the
Deed Restraint of Trade.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf as of the date first above written.
"BUYER":
SENTO TECHNICAL INNOVATIONS CORPORATION, a Utah corporation
By: _________________________________________________
Its: _________________________________________________
"SELLER":
THE COMMON SEAL of AUSTRALIAN SOFTWARE
INNOVATIONS (SERVICES) PTY. LTD
ACN 050-053-355, a limited company organized
under the laws of Australia was hereunto
affixed in accordance with its articles of
association in the presence of:
____________________________ _______________________________
Signature of Director Signature of Director/Secretary
____________________________ _______________________________
Print Name Print Name
____________________________ _______________________________
Office Held Office Held
"KILAT":
THE COMMON SEAL of KILAT HOLDINGS PTY.
LIMITED ACN 003-982-616, a limited
company organized under the laws of Australia
was hereunto affixed in accordance with
its articles of association in the presence of:
____________________________ _______________________________
Signature of Director Signature of Director/Secretary
____________________________ _______________________________
Print Name Print Name
____________________________ _______________________________
Office Held Office Held
29
<PAGE>
"SHAREHOLDERS":
_________________________
Eng Lee, individually
_________________________
Mary Lee, individually
30
<PAGE>
EXHIBIT A
TO
ASSET PURCHASE AGREEMENT
ASSETS
[To be completed- Non-intellectual property assets only]
<PAGE>
EXHIBIT B
TO
ASSET PURCHASE AGREEMENT
CONTRACTS
[To be completed]
<PAGE>
EXHIBIT C
TO
ASSET PURCHASE AGREEMENT
ALLOCATION SCHEDULE
Tangible Assets: $100,000
Good Will: $650,000
Purchase Price: $750,000
<PAGE>
EXHIBIT D
TO
ASSET PURCHASE AGREEMENT
FORM OF SUBSCRIPTION AGREEMENT
[To Be Attached]
<PAGE>
EXHIBIT E
TO
ASSET PURCHASE AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
[To Be Attached]
<PAGE>
EXHIBIT F
TO
ASSET PURCHASE AGREEMENT
FORM OF EMPLOYMENT AGREEMENT
[To Be Attached]
<PAGE>
EXHIBIT G
TO
ASSET PURCHASE AGREEMENT
FORM OF INTELLECTUAL PROPERTY PURCHASE AGREEMENT
[To Be Attached]
<PAGE>
EXHIBIT H
TO
ASSET PURCHASE AGREEMENT
FORM OF DEED OF RESTRAINT OF TRADE
[To Be Attached]
<PAGE>
EXHIBIT G
TO
OPTION AGREEMENT
FORM OF INTELLECTUAL PROPERTY PURCHASE AGREEMENT
Attached
<PAGE>
INTELLECTUAL PROPERTY PURCHASE AGREEMENT
BY AND AMONG
SENTO TECHNICAL INNOVATIONS CORPORATION,
KILAT HOLDINGS PTY. LIMITED,
AUSTRALIAN SOFTWARE INNOVATIONS (SERVICES) PTY LTD,
AND
ENG LEE AND MARY LEE, INDIVIDUALLY
________________, 199__
<PAGE>
INTELLECTUAL PROPERTY PURCHASE AGREEMENT
THIS INTELLECTUAL PROPERTY PURCHASE AGREEMENT (this "AGREEMENT") is
entered into in Orem, Utah effective as of the ____ day of ________________,
199__, by and among Sento Technical Innovations Corporation, a Utah
corporation (the "BUYER"), Australian Software Innovations (Services) Pty.
Ltd ACN 050-053-355, a limited company organized under the laws of Australia
(the "SELLER"), Kilat Holdings Pty. Limited ACN 003-982-616, a limited
company organized under the laws of Australia ("KILAT"), and Eng Lee and Mary
Lee (collectively, the "SHAREHOLDERS"), individually.
RECITALS
9.44 Pursuant to an Option Agreement (the "OPTION AGREEMENT") dated as
of the 10th day of September, 1996 between Buyer, Seller, Kilat and the
Shareholders, Seller granted to Buyer and its nominee, Centerpost, an option
(the "OPTION") to purchase the Assets and the Intellectual Property Assets,
Kilat and the Shareholders agreed to facilitate Buyer's purchase of the
Assets and the Intellectual Property Assets and Seller, Kilat and the
Shareholders agreed to execute the Deed of Restraint of Trade.
9.45 Eng Lee is the Managing Director of Seller, Kilat owns all of the
issued and outstanding shares of the capital stock of Seller and the
Shareholders own all of the issued and outstanding shares of the capital
stock of Kilat.
9.46 Buyer has elected pursuant to Section 1.6 of the Option Agreement to
exercise the Option with respect to the Assets and the Intellectual Property
Assets.
9.47 Buyer desires to purchase the Assets and the Intellectual Property
Assets from Seller, and Seller is obligated pursuant to the Option Agreement to
sell the Assets and the Intellectual Property Assets to Buyer, in accordance
with the terms and conditions of the Option Agreement. All capitalized terms
used herein without definition shall have the meanings set forth in ARTICLE 9.
AGREEMENT
NOW, THEREFORE, in consideration of the respective representations,
warranties and covenants contained herein and for other good and valuable
consideration, the receipt, adequacy and legal sufficiency of which are hereby
acknowledged, Buyer, Seller, Kilat and the Shareholders hereby agree as
follows:
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ARTICLE 1
SALE OF INTELLECTUAL PROPERTY ASSETS;
ADDITIONAL AGREEMENTS; CLOSING
1.1 ACQUISITION. Subject to the terms and conditions of this Agreement,
at the Closing, Seller shall sell, transfer and deliver to Buyer, and Buyer
shall purchase, all of Seller's right, title and interest in and to the
Intellectual Property Assets (the "ACQUISITION").
1.2 ADDITIONAL UNDERSTANDINGS. In connection with the Acquisition, the
parties hereto agree as follows:
(a) Buyer will not, pursuant to this Agreement, acquire any
property of Seller other than the Intellectual Property Assets to be acquired
by Buyer from Seller pursuant to the terms of this Agreement; nor will Buyer
assume or be bound by any contract or agreement other than the Contracts and
the Deed of Restraint of Trade (PROVIDED, HOWEVER, that Buyer shall not
assume any obligation of Seller thereunder); nor will Buyer assume any other
debt, claim, Liability, Tax, judgment or obligation whatsoever of Seller
except for those obligations under the Contracts to be performed after the
Closing Date. Except as set forth on EXHIBIT B, Buyer will not recognize or
assume any obligations of Seller to employees of Seller or any collective
bargaining agreements between Seller and any labor organizations. Except as
set forth on EXHIBIT B, Buyer will not assume or be obligated to pay any
debts, obligations, responsibilities, Liabilities, claims, damages, judgments
or settlements arising from any such labor contracts or agreements or any
other employment-related matter involving Seller.
(b) In connection with the Acquisition, Seller, Kilat and each of
the Shareholders shall, from the date of this Agreement until the Closing
Date, afford Buyer's employees, auditors, legal counsel and other authorized
representatives reasonable access to the properties, records and personnel of
Seller in order to inspect, investigate and audit the Intellectual Property
Assets and the operations and business of Seller. Buyer agrees to conduct
any such inspection, investigation or audit in a reasonable manner, during
regular business hours, so as not to disrupt the normal functioning of
Seller's business. Seller, Kilat and the Shareholders agree to cooperate
fully with Buyer and to make the Seller's books and records, the Assets, the
Intellectual Property Assets and the employees of Seller available to Buyer
as reasonably required by Buyer in order for Buyer to complete its due
diligence in a timely fashion.
(c) Except as set forth on EXHIBIT B, Buyer will not have any
obligation for, and the parties specifically understand and acknowledge that
Buyer will not be assuming any responsibility for or liability under any
Employee Benefit Plan of Seller. Except as set forth on EXHIBIT B, Buyer
does not and shall not recognize or assume any Liability with respect to any
Employee Benefit Plan of Seller, nor shall the inclusion by Buyer, or an
Affiliate of Buyer, of a former employee of Seller in an Employee Benefit
Plan of Buyer or an Affiliate of Buyer, be deemed to constitute the adoption
or continuation by Buyer of any Employee Benefit Plan of Seller except as set
forth on EXHIBIT B.
(d) Seller, Kilat and the Shareholders covenant and agree that
they will do all acts and execute or cause Seller to execute all such
documents as are necessary to cause the name of Seller to be changed as of
the Closing Date to a name that does not include the words
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"Australian Software Innovations" or the acronym "ASI" or any similar name
and will on or before the Closing Date deliver to Buyer appropriate signed
notices to the Australian Securities Commission having such effect and all
other materials reasonably requested by Buyer in connection therewith,
together with all filing fees payable in respect of lodging such notices.
Seller, Kilat and the Shareholders consent to Buyer causing a company
controlled by Buyer or its Affiliates to change its name to Australian
Software Innovations Pty Limited on or after the Closing Date.
1.3 PURCHASE PRICE. The price to be paid by Buyer for the purchase of
the Intellectual Property Assets (the "PURCHASE PRICE") shall be Five Hundred
Fifty Five Thousand Dollars ($555,000).
1.4 PAYMENT OF PURCHASE PRICE. At the Closing, Buyer shall pay to
Seller Five Hundred Fifty Five Thousand Dollars ($555,000), representing the
full amount of the Purchase Price, in the form of cash, certified funds or
wire transferred funds, with the transfer of such funds to be initiated by
Buyer within twenty-four hours of the Closing.
1.5 CLOSING. Upon satisfaction or waiver of the conditions to Closing
contained in ARTICLE 4 and ARTICLE 5 hereof, the parties hereto agree to
close the Acquisition contemporaneously with the consummation of the
transactions described in the Asset Purchase Agreement and the Deed of
Restraint of Trade (the "CLOSING"). The Closing shall take place at the
principal offices of Buyer, or such other place as may be agreed to by the
parties, on the date agreed to by the parties, but in all events on or before
thirty (30) days from the date hereof. It is the intent of the parties to
consummate the Closing as soon as possible after the execution of this
Agreement. The parties agree to use their good faith and reasonable efforts
to close the Acquisition as soon as possible and to cooperate fully with each
other to complete the Closing.
1.6 CLOSING DELIVERIES.
(a) At the Closing, Seller shall deliver to Buyer:
(i) A Bill of Sale transferring the Intellectual Property
Assets to Buyer, free and clear of all Encumbrances except as expressly
assumed by Buyer and described on EXHIBIT B;
(ii) An Assignment Agreement assigning to Buyer the Contracts,
free and clear of all Encumbrances except as expressly assumed by Buyer and
described on EXHIBIT B;
(iii) Complete and accurate Disclosure Schedules;
(iv) An executed Asset Purchase Agreement, acceptable to Buyer
in its discretion;
(v) An executed Deed of Restraint of Trade, acceptable to Buyer
in its discretion;
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(vi) Such other documents, including certificates of independent
legal advice and appropriate statutory declarations, as may be required by this
Agreement or the Asset Purchase Agreement, or reasonably requested by Buyer to
carry out the transactions contemplated hereby or thereby; and
(vii) Possession of the Intellectual Property Assets.
(b) At the Closing, Buyer shall deliver to Seller:
(i) The amount of Five Hundred Fifty Five Thousand Dollars
($555,000) in the form of cash, certified funds or wire transferred funds, with
the transfer of such funds to be initiated by Buyer within twenty-four hours of
the Closing;
(ii) An executed Asset Purchase Agreement, acceptable to Buyer
in its discretion;
(iii) An Assignment Agreement accepting assignment to
Buyer of all Seller's rights under the Contracts and assuming the obligations
arising under the Contracts to be performed after the Closing Date; and
(iv) Such other documents, including officers' certificates,
as may be required by this Agreement or the Asset Purchase Agreement, or as
reasonably requested by Seller to carry out the transactions contemplated
hereby or thereby.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER,
KILAT AND THE SHAREHOLDERS
Except as otherwise indicated, Seller, Kilat and each of the
Shareholders jointly and severally represent and warrant to Buyer that the
following representations and warranties are true, correct and complete as of
the date of this Agreement and will be true, correct and complete as of the
Closing Date:
2.1 AUTHORITY. Seller, Kilat and each of the Shareholders have the
absolute and unrestricted right, power, authority and capacity to execute and
deliver the Transaction Agreements, as applicable, to perform his, her or its
obligations thereunder and to consummate the transactions contemplated
thereby. This Agreement has been, and each of the Transaction Agreements will
be when executed, duly and validly executed and delivered by Seller, Kilat
and each of the Shareholders, and each of the Transaction Agreements, as
applicable, constitutes, or will when executed constitute, the legal, valid
and binding agreement of Seller, Kilat and each of the Shareholders,
enforceable against Seller, Kilat and each of the Shareholders in accordance
with its terms except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other laws
affecting creditors' rights generally.
2.2 ORGANIZATION, EXISTENCE AND GOOD STANDING OF SELLER AND KILAT.
Seller is a limited company duly organized, validly existing and in good
standing under the laws of
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Australia and has full power and authority to carry on its business as now
being conducted, to own and operate its properties and assets, and to perform
all its obligations under the Transaction Agreements and the Contracts. Kilat
is a limited company duly organized, validly existing and in good standing
under the laws of Australia and has full power and authority to carry on its
business as now being conducted, to own and operate its properties and
assets, and to perform all its obligations under the Transaction Agreements.
2.3 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in the
Disclosure Schedules, neither the execution and delivery of the Transaction
Agreements, the consummation of the transactions contemplated thereby, nor
the compliance by Seller and Kilat with any of the provisions thereof will,
as of the Closing Date, (i) conflict with or violate any provision of the
Memorandum and Articles of Association or other charter or governing
documents of Seller or Kilat, respectively, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
contract, agreement, commitment, bond, mortgage, indenture, license, lease,
pledge agreement or other instrument or obligation to which Seller or Kilat
is a party or by which Seller or Kilat or any of their respective properties
or assets may be bound, including, without limitation, any other agreement
with respect to the sale by Seller of any of its properties or assets, (iii)
to the best knowledge of Seller, Kilat and the Shareholders, violate or
conflict with any provision of any Legal Requirement binding upon Seller or
Kilat, or (iv) to the best knowledge of Seller, Kilat and the Shareholders,
result in, or require, the creation or imposition of, any Encumbrance upon or
with respect to any properties of Seller or Kilat, including, without
limitation, the Assets or the Intellectual Property Assets, or impair the
ability of Seller, Kilat or the Shareholders to carry out their respective
obligations under or the Transaction Agreements.
2.4 BOOKS AND RECORDS. The books of account and other business records
of Seller regarding the Intellectual Property Assets and the business and
operations of Seller have all been made available to Buyer and such books and
records are complete and correct with regard to the matters which are the
subject of the Transaction Agreements.
2.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
fully disclosed in writing to Buyer in the Disclosure Schedules, as of the
Closing Date, Seller will have no Liabilities, including, without limitation,
any Liabilities resulting from failure to comply with any Legal Requirement
applicable to Seller, its business or operations, the Intellectual Property
Assets due or to become due and whether incurred in respect of or measured by
the income or sales of Seller for any period or arising out of any
transactions entered into, or any state of facts existing, on or before the
Closing Date which could, as of or after the Closing Date, materially
adversely affect Seller's business or operations or the Intellectual Property
Assets, give rise to an Encumbrance against the Intellectual Property Assets
or materially adversely affect Seller's ability to carry out the transactions
contemplated by the Transaction Agreements.
2.6 ABSENCE OF CHANGES. Between the date of this Agreement and the
Closing Date, there will not have been (i) any material adverse change, or
any event, condition or contingency that is likely to result in a material
adverse change in the condition of Seller's business or operations or the
Intellectual Property Assets; (ii) any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting Seller's
business or operations, the Assets or the Intellectual Property Assets; (iii)
any termination or receipt of notice of
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termination of one or more of the Contracts; (iv) any dispute or any other
occurrence, event or condition of any character, which reasonably could be
anticipated to give rise to a legal or administrative action or to a material
adverse change affecting the Assets or the Intellectual Property Assets or
Seller's ability to carry out its obligations hereunder; or (v) any agreement
to do any of the foregoing.
2.7 CONTRACTS. Except as set forth on the Disclosure Schedules or as
otherwise described in this Agreement:
(a) Complete and accurate copies, including all amendments, of the
Contracts have been delivered to Buyer.
(b) All of the Contracts are in full force and effect and are valid
and enforceable in accordance with their terms, there are no material defaults
thereunder or breaches thereof, and no condition exists or event has occurred
which, with notice or lapse of time or both, would constitute a default
thereunder.
(c) Seller has the right to assign its rights and obligations
under the Contracts to Buyer, and such assignment will not result in a
default, breach or right of termination thereunder.
(d) Set forth in the Disclosure Schedules is a complete and
accurate description of all obligations or commitments of Seller with respect
to any asset of any nature whatsoever that is used in whole or in part for
the personal use or benefit of any shareholder, officer, director or employee
of Seller or any Affiliate thereof.
2.8 PERSONAL PROPERTY.
(a) Except as set forth in the Disclosure Schedules, there is no
asset, property, right or interest of any nature whatsoever necessary to or
currently utilized in the operation of Seller's business which is not
included in the Assets or the Intellectual Property Assets and Buyer has been
given, pursuant to the Option, an opportunity to acquire all of such assets,
properties, rights and interests.
(b) Seller has made available to the Buyer true, correct and
complete copies of all material contracts, agreements, mortgages, leases and
commitments relating to or affecting any interest in the Intellectual
Property Assets.
(c) Other than the Contracts, there are no agreements, whether
verbal or written, affecting any of the Intellectual Property Assets which
have not been disclosed in writing to Buyer. Other than the Contracts or as
authorized by Buyer in writing prior to the Closing, all such agreements
affecting the Intellectual Property Assets will be terminated prior to or at
the Closing.
2.9 TITLE TO ASSETS AND RELATED MATTERS. Seller owns all of the
Intellectual Property Assets free and clear of all Encumbrances and the
claims or rights of any other party. Seller has the power, authority and
right to sell the Intellectual Property Assets to Buyer free and clear of any
Encumbrances.
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2.10 INTELLECTUAL PROPERTY. Except as set forth in the Disclosure
Schedules:
(a) The Intellectual Property Assets constitute all of the
Intellectual Property necessary to or currently utilized in Seller's business
and all such Intellectual Property is owned by Seller free and clear of all
Encumbrances, and is not subject to any license, royalty or other agreement,
and Seller has not granted any license or agreed to pay any royalty in
respect of any Intellectual Property necessary to or currently utilized in
Seller's business, except for that license granted pursuant to an Exclusive
License and Technical Assistance Agreement between Seller and Spire
Technologies, Inc. dated as of July 1, 1996;
(b) None of the Intellectual Property necessary to or currently
utilized in Seller's business has been or is the subject of any pending or
threatened Proceeding or claim of infringement;
(c) No license or royalty agreement to which Seller is a party or
by which any of the Intellectual Property necessary to or currently utilized
in Seller's business is or could be materially affected is in breach or
default by any party thereto or the subject of any notice of termination
given or threatened;
(d) To the best knowledge of Seller and each of the Shareholders,
the products manufactured or sold by Seller and any process, method, part,
design, material or other Intellectual Property they employ, and the
marketing and use by Seller of any such product, service or other
Intellectual Property, do not infringe any Intellectual Property or
confidential or proprietary rights of another, and Seller has not received
any notice contesting its right to use any Intellectual Property; and
(e) Seller owns or possesses adequate rights in perpetuity in and
to all Intellectual Property necessary to conduct its business as presently
conducted.
2.11 COMPLIANCE WITH LAWS. Seller is in compliance with all Legal
Requirements applicable to the ownership of the Assets and the Intellectual
Property Assets and the operation of its business where the failure so to
comply would have a material adverse effect on Seller's ability to carry out
its obligations under the Transaction Agreements, or the ability of Buyer to
carry on the business operations related to the Intellectual Property Assets
after the Closing, and Seller does not have any basis to expect, nor has it
received, any Order, notice, or other communication from any Governmental
Authority of any alleged, actual, or potential violation and/or failure to
comply with any such Legal Requirement, except as disclosed on the Disclosure
Schedules.
2.12 LITIGATION. Except as set forth in the Disclosure Schedules, (i)
neither Seller, Kilat nor either of the Shareholders is subject to any Order
in which relief is sought involving, affecting, or relating to the ownership,
operation, or use of the Intellectual Property Assets, the operation of
Seller's business or the matters covered by the Transaction Agreements which
would prevent, delay, or make illegal the transactions contemplated by the
Transaction Agreements, (ii) there are no Proceedings pending or threatened
against, involving, affecting, or relating to Seller, Kilat or either of the
Shareholders, the operation of Seller's business or to Seller's ownership,
operation or use of the Intellectual Property Assets before any arbitrator or
Governmental Authority, and (iii) to the best knowledge of Seller, Kilat and
each of the
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Shareholders, there exist no facts to serve as a basis for the institution of
any Proceeding against Seller, Kilat, either of the Shareholders or any of
the Intellectual Property Assets which would prohibit or adversely affect the
Assets or the Intellectual Property ability of Seller, Kilat or the
Shareholders to carry out their respective obligations under the Transaction
Agreements.
2.13 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker or
similar Person has acted directly or indirectly on behalf of Seller in
connection with the Transaction Agreements or the transactions contemplated
thereby, and no Person, including Seller, Kilat or either of the Shareholders,
is or will be entitled to any broker's or finder's fee or any other commission
or similar fee or expense, directly or indirectly, in connection with the
Transaction Agreements or the transactions contemplated thereby.
2.14 BANKRUPTCY. Seller has not made any assignment for the benefit of
creditors, filed any petition in bankruptcy, been adjudicated insolvent or
bankrupt, petitioned or applied to any tribunal for any receiver, conservator
or trustee of it or any of its property or assets, or commenced any
proceeding under any reorganization arrangement, readjustment of debt,
conservation, dissolution or liquidation law or statute or any jurisdiction;
and no such action or proceeding has been commenced or threatened against
Seller by any creditor, claimant, Governmental Authority or any other person.
2.15 LABOR MATTERS. Except as set forth in the Disclosure Schedules,
(a) Seller has made all payments to its employees required by any
Legal Requirement or any Employee Benefit Plans;
(b) To the best knowledge of Seller, Kilat and each of the
Shareholders, there has not been, and there is not presently pending or
threatened, any Proceeding against Seller under any Legal Requirement
governing the conditions of Seller's employment of its employees, or any
basis or ground for any such claim;
(c) Seller has not been a party to any collective bargaining
agreement or other labor contract affecting the employees of Seller;
(d) To the best knowledge of Seller, Kilat and each of the
Shareholders, there has not been, and there is not presently pending or
existing or threatened, any strike, slowdown, picketing, work stoppage, labor
arbitration or proceeding in respect of the grievance of any employee, an
application or complaint filed by an employee or union with any Governmental
Authority, or organizational activity or labor dispute against or affecting
the business of Seller; and
(e) Seller has complied with all its obligations under all
relevant superannuation legislation and has made all contributions required
to be made in respect of its employees for their period of employment up to
and including the Closing Date. Seller has established reserves and accruals
(each of which is accurately set forth in the Disclosure Schedules) in
amounts sufficient to satisfy all superannuation obligations in respect of
its employees for their period of employment up to and including the Closing
Date.
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2.16 DISCLOSURE. No representation or warranty of Seller, Kilat or the
Shareholders contained in this Agreement, the Exhibits hereto, or any other
Transaction Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made,
not misleading. There is no fact known to Seller, Kilat or either of the
Shareholders which has specific application to Seller (other than general
economic or industry conditions) and which materially and adversely affects
or, so far as Seller, Kilat or either of the Shareholders can reasonably
foresee, materially threatens, the Intellectual Property Assets or the
ability of Seller, Kilat or the Shareholders to carry out their respective
obligations under the Transaction Agreements, which has not been set forth in
this Agreement or in the Disclosure Schedules.
2.17 TAX MATTERS. With respect to Taxes, including, without limitation,
Taxes imposed by the Income Tax Assessment Act of 1936 of the Commonwealth of
Australia (the "TAX ACT") and any other Australian national, state or
territorial law or regulation:
(a) Seller has lodged, or will lodge, at or before the correct time all
Tax Returns required by law to be lodged on or before the Closing Date and
all such Tax Returns have been, or will be, as the case may be, fully and
accurately completed;
(b) Seller has made, to the Commissioner of Taxation or the appropriate
Governmental Authority a full and true disclosure of all material facts
necessary for the proper assessment of Seller and each deduction, rebate or
credit claimed in those Tax Returns has been properly claimed and is duly
allowable;
(c) All other necessary information, documents and notices in respect
of Tax have been properly and duly submitted by Seller to all relevant
Governmental Authorities in respect of Tax for all periods up to the Closing
Date and will continue to be properly and duly submitted up to the Closing
Date and there is no unresolved dispute with any of those authorities nor is
any such dispute foreshadowed or contemplated;
(d) All Taxes which have been assessed or imposed or are lawfully
assessable upon or are payable by Seller and which are due and payable or
which may become due and payable subsequent to but are referable to the
period ending on the Closing Date have been paid by Seller or adequate
provisions has been made for them in Seller's accounts and such provisions
have been fully disclosed to Buyer; and
(e) All obligations imposed on Seller under all laws relating to Tax
have been complied with and, without limiting the generality of the
foregoing, all amounts of income tax and medicare levy required by law to be
deducted by Seller from salary or wages of Seller's employees (including,
without limitation, Seller's directors and officers) and from prescribed
payments and all amounts of withholding tax have been duly deducted and where
payable to the relevant taxing authority have been duly paid.
2.18 INSURANCE. The Intellectual Property Assets are adequately insured
by respect of the risks to which they are subject (including loss or damage
by disease, fire, theft, storm and tempest) in such amounts as accord with
sound business principles and such policies will not expire earlier than the
Closing Date. Seller is adequately insured against public liability in such
amounts as accord with sound business principles and such policies will not
expire prior to the
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Closing Date. Seller is adequately insured against workers' compensation
liability and has complied with all respects with the legislation relating to
workers' compensation in all jurisdictions where relevant. All premiums in
respect of the insurance coverage referred to in this Agreement will have
been paid prior to the Closing Date, Seller has complied with all the
conditions of the associated policies and has not made any false or
misleading statement or done or omitted to do anything which would entitle
the insurers to avoid the policies or refuse to meet any claim thereunder in
full other than as disclosed by Seller to Buyer in writing prior to the
Closing Date. There is no fact or matter of which Seller, Kilat or the
Shareholders is aware which could lead to Seller's insurance policies being
vitiated or repudiated and neither Seller, Kilat nor the Shareholders will
permit any such policies to lapse prior to the Closing Date, nor will Seller,
Kilat or the Shareholders do or fail to do anything which will render any of
Seller's insurance policies void or voidable prior to the Closing Date.
2.19 TRADE PRACTICES. There is no agreement, arrangement or activity
whether by commission or omission in which Seller has been or will be
concerned which infringes or which has been or which is required to be
authorized under the Trade Practices Act of 1974 of the Commonwealth of
Australia or any other anti-trust legislation in relation to the Intellectual
Property Assets, including, without limitation, any Australian national,
state or territorial law or regulation.
2.20 ENVIRONMENTAL LIABILITIES. There are no Environmental Liabilities
(as defined below) affecting any of Seller's business premises. There are no
factors affecting any of Seller's business premises which are likely within
the next twelve months to give rise to any Environmental Liability. For the
purposes of this clause, the term "ENVIRONMENTAL LAW" means any planning,
environmental, health, toxic, hazardous substances, dangerous goods,
waste/disposal or pollution laws, regulations, orders, notices, ordinances or
requirements, and the term "ENVIRONMENTAL LIABILITY" means any obligation,
expense, penalty or fine under an Environmental Law which could be imposed on
any occupier in possession of Seller's business premises.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, Kilat and the Shareholders as
follows:
3.1 ORGANIZATION, EXISTENCE AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Utah and has full power and authority to purchase the Assets and the
Intellectual Property Assets and to carry on its intended business therewith.
3.2 AUTHORITY. Buyer has full power and authority to execute and
deliver the Transaction Agreements, to perform its obligations thereunder,
and to consummate the transactions contemplated thereby. This Agreement has
been, and each of the Transaction Agreements will be, when executed, duly and
validly executed and delivered by Buyer and each of the Transaction
Agreements, as applicable, constitutes, or will, when executed, constitute,
the legal, valid, and binding agreement of Buyer, enforceable against Buyer
in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency,
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reorganization, fraudulent conveyance, moratorium or other laws affecting
creditor's rights generally.
3.3 CONSENTS AND APPROVALS; NO VIOLATION. No filing or registration
with, no notice to and no Governmental Authorization, consent or approval of
any Governmental Authority, creditor or other person in a contractual
relationship with Buyer is necessary in connection with Buyer's execution and
delivery of the Transaction Agreements, the performance of its obligations
hereunder or thereunder or the consummation of the transactions contemplated
hereby or thereby. Neither the execution and delivery of the Transaction
Agreements, the consummation of the transactions contemplated thereby, nor
the compliance by Buyer with any of the provisions thereof will, as of the
Closing Date, (i) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of the Buyer's Articles of Incorporation or Bylaws,
or of any note, contract, agreement, commitment, bond, mortgage, indenture,
license, lease, pledge agreement or other instrument or obligation to which
Buyer is a party or by which Buyer or any of its properties or assets may be
bound, or (ii) violate or conflict with any provision of any Legal
Requirement binding upon Buyer.
3.4 BANKRUPTCY. Buyer has not made any assignment for the benefit of
creditors, filed any petition in bankruptcy, been adjudicated insolvent or
bankrupt, petitioned or applied to any tribunal for any receiver, conservator
or trustee of it or any of its property or assets, or commenced any
proceeding under any reorganization arrangement, readjustment of debt,
conservation, dissolution or liquidation law or statute or any jurisdiction;
and no such action or proceeding has been commenced or threatened against
Buyer by any creditor, claimant, governmental authority or any other person.
3.5 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker
or similar Person has acted directly or indirectly on behalf of Buyer in
connection with the Transaction Agreements or the transactions contemplated
hereby, and no Person, including Buyer, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee or expense,
directly or indirectly, in connection with the Transaction Agreements or the
transactions contemplated thereby.
ARTICLE 4
CONDITIONS PRECEDENT
TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
the Transaction Agreements at the Closing are subject to fulfillment of the
following conditions, any one or more of which may be waived in whole or in
part by Buyer in the manner provided for herein.
4.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Seller, Kilat and the Shareholders
contained in the Transaction Agreements, including the Exhibits thereto, are
true, correct and complete in all material respects as of the Closing Date.
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4.2 PERFORMANCE; COMPLIANCE WITH AGREEMENT. Seller, Kilat and each of
the Shareholders shall have performed and complied with all obligations,
agreements, covenants and conditions required by the Transaction Agreements
to be performed or complied with by them on or before the Closing Date,
including without limitation making all the deliveries required by SECTION
1.6.
4.3 AUTHORIZATION; THIRD-PARTY CONSENTS. All filings and registrations
with and notices to, and each Governmental Authorization, consent or approval
of, any Governmental Authority, creditor or other Person which is necessary
in connection with the execution and delivery of the Transaction Agreements
by Seller, Kilat and the Shareholders, the performance of their respective
obligations hereunder and thereunder, or the consummation of the transactions
contemplated hereby and thereby shall have been made or obtained. All
corporate actions necessary to authorize the execution, delivery and
performance of the Transaction Agreements by Seller and Kilat, and the
consummation by Seller and Kilat of the transactions contemplated by the
Transaction Agreements shall have been duly and validly taken, and Seller and
Kilat shall have full right and power to sell the Intellectual Property
Assets and to perform their respective obligations upon the terms provided in
the Transaction Agreements. On or prior to the Closing Date, Seller, Kilat
and the Shareholders shall have furnished to the Buyer evidence of the
foregoing filings, notices, consents, stipulations and assignments.
4.4 NO MATERIAL ADVERSE CHANGE. During the period from the date of
this Agreement through the Closing Date, there shall not have been any
material adverse change in the Intellectual Property Assets, and none of the
events described in SECTION 2.6 shall have occurred.
4.5 COMPLETION OF BUYER'S INVESTIGATION. Buyer shall have completed,
to its sole satisfaction and at its expense, an investigation into the
condition of the Intellectual Property Assets and the business and operations
of Seller. If Buyer is not satisfied with any matter revealed during its
investigation, or with any matter set forth on the Disclosure Schedules,
Buyer shall have the right to terminate this Agreement if notice of
termination is given to the Seller, Kilat and the Shareholders prior to the
Closing.
4.6 GOOD TITLE TO BUYER. Seller shall have conveyed the Intellectual
Property Assets to Buyer, free and clear of all Encumbrances.
4.7 ACTIONS SATISFACTORY. The form and substance of all actions,
proceedings, instruments and documents required to consummate the
transactions contemplated by the Transaction Agreements shall have been
satisfactory in all reasonable respects to Buyer and its counsel.
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ARTICLE 5
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF SELLER, KILAT AND THE SHAREHOLDERS
The obligations of Seller, Kilat and the Shareholders to consummate the
transactions contemplated by the Transaction Agreements at the Closing are
subject to the fulfillment of the following conditions, any one or more of
which may be waived in whole or in part by Seller, Kilat or the Shareholders
in the manner provided for herein.
5.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Buyer contained in the Transaction
Agreements shall be true, correct and complete in all material respects as of
the Closing Date.
5.2 BUYER'S PERFORMANCE; COMPLIANCE WITH AGREEMENT. Buyer shall have
performed and complied with all obligations, agreements, covenants and
conditions required by the Transaction Agreements to be performed or complied
with by Buyer on or before the Closing Date, including without limitation
making all the deliveries required by SECTION 1.6.
5.3 AUTHORIZATION; THIRD PARTY CONSENTS. All filings and registrations
with and notices to, and each Governmental Authorization, consent or approval
of, any Governmental Authority, creditor or other Person which is necessary
in connection with Buyer's execution and delivery of the Transaction
Agreements, the performance of its obligations thereunder, or the
consummation of the transactions contemplated thereby shall have been made or
obtained. All corporate action necessary to authorize the execution,
delivery and performance of the Transaction Agreements by Buyer and the
consummation by Buyer of the transactions contemplated by the Transaction
Agreements shall have been duly and validly taken, and Buyer shall have full
right and power to purchase the Intellectual Property Assets and to perform
its obligations upon the terms provided in the Transaction Agreements. Buyer
shall have furnished to Seller, Kilat and the Shareholders evidence of the
foregoing consents and actions, if requested.
5.4 NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement and
the Closing Date, there will not have been any material adverse change, or
any event, condition or contingency that results in a material adverse change
affecting the ability of Buyer to carry out its obligations under the
Transaction Agreements.
5.5 ACTIONS SATISFACTORY. The form and substance of all actions,
proceedings, instruments and documents required to consummate the
transactions contemplated by the Transaction Agreements shall have been
satisfactory in all reasonable respects to Seller, Kilat and the Shareholders
and their counsel.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 EXPENSES. Except as otherwise expressly provided herein, each
party to this Agreement shall bear its respective expenses incurred in
connection with the preparation, execution and performance of the Transaction
Agreements and the transactions contemplated
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hereby, including without limitation all fees and expenses of agents,
business brokers, legal counsel, accountants, tax and financial advisors and
other facilitators and advisors.
6.2 CONFIDENTIALITY.
(a) NON-DISCLOSURE AND USE. Each of Buyer, Seller, Kilat and the
Shareholders acknowledges that, in connection with the transactions
contemplated by the Option Agreement and the Transaction Agreements, each has
become or may become privy to the technical, marketing and other proprietary
information of another party, including, without limitation, information,
material, documents and data related to such other party, to the business
activities of such other party and/or to its customers, trade secrets and
other proprietary information (collectively, the "PROPRIETARY INFORMATION").
Each agrees (i) to take at all times all reasonably necessary steps to
safeguard the confidentiality of any Proprietary Information; (ii) not to
disclose, reveal, make accessible or make available to any third Person any
Proprietary Information; and (iii) not to use any Proprietary Information for
such party's own benefit or for any other Person's benefit; PROVIDED,
HOWEVER, that Buyer, Seller, Kilat or the Shareholders may disclose (A)
Proprietary Information which at the time of the disclosure is part of the
public knowledge and readily accessible to such third party and (B)
Proprietary Information which is required by law to be disclosed.
(b) RETURN. Buyer, Seller, Kilat and the Shareholders agree that
if the Acquisition is not consummated, each of them will return to the other
parties hereto any and all material containing or reflecting Proprietary
Information.
(c) REMEDIES. Each of Buyer, Seller, Kilat and the Shareholders
acknowledges and agrees that any breach of the terms of this SECTION 6.2
would result in irreparable injury and damage to the injured party for which
such party would have no adequate remedy at law; each of Buyer, Seller, Kilat
and the Shareholders therefore also acknowledges and agrees that in the event
of such breach or any threat of breach, the injured or threatened party shall
be entitled, in addition to any other remedies to which such party may be
entitled at law or in equity, to an immediate injunction and restraining
order to prevent such breach and/or threatened breach by the breaching or
threatening party and/or any and all persons and/or entities acting for
and/or with such breaching or threatening party, without having to provide a
bond or other security or to prove actual damages.
6.3 OPERATION OF BUSINESS. Neither Seller, Kilat nor either of the
Shareholders will engage in any practice, take any action or enter into any
transaction outside the Ordinary Course of Business with respect to the
Intellectual Property Assets or the operation of Seller's business from the
date of this Agreement until the Closing Date without the prior written
consent of Buyer. Without in any manner limiting the foregoing, Seller,
Kilat and the Shareholders covenant and agree that during such period,
(i) the aggregate monthly remuneration (including, without
limitation, all salary, distributions, dividends, bonuses, deferred
compensation, automobile lease expense, superannuation payments and other
payments) paid to or for the benefit of Kilat and the Shareholders and all
Affiliates of Kilat and the Shareholders shall not exceed Sixteen Thousand
Six Hundred Sixty Seven Australian Dollars (AUS$16,667), and
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(ii) Except as set forth in the Disclosure Schedules, Seller will
not, and Kilat and the Shareholders will not permit Seller to, make any
payment or incur any obligation with respect to any asset of any nature
whatsoever that is used in whole or in part for the personal use or benefit
of any shareholder, officer, director or employee of Seller or any
Affiliate thereof.
Seller, Kilat and the Shareholders will use their best commercially
reasonable efforts to preserve the Intellectual Property Assets and the
goodwill and value of Seller's business, to comply with all laws applicable
to the Intellectual Property Assets and Seller's business and to maintain
good working relationships with lessors, licensors, suppliers, customers and
employees. In addition, Seller will not sell or contract to sell any
interest in Seller or lease, license, transfer, pledge, mortgage, hypothecate
or otherwise dispose of any of the Intellectual Property Assets and Kilat and
the Shareholders will not permit Seller to take any such action. Seller will
not, and Kilat and the Shareholders will not permit Seller to, do any act or
thing or suffer or permit any omission which would make any policy of
insurance of Seller written with respect to the Intellectual Property Assets
void or voidable or do anything that would mean that any existing insurance
policy of Seller is not materially in full force and effect at all times
prior to the Closing Date.
6.4 PUBLICITY. The parties hereto agree, subject to the provisions of
SECTION 6.2, to advise and confer with each other, to the maximum extent
possible, regarding and prior to the issuance of any reports, statements,
releases, public announcements or similar publicity with respect to this
Agreement or the transactions contemplated hereby; PROVIDED, HOWEVER, that
any of the parties may make such announcements, give such notices and provide
such information to Governmental Authorities, employees, creditors,
affiliates and the public as its counsel may advise is legally required.
6.5 EXCLUSIVITY. From and after the date of this Agreement until the
Closing:
(a) Neither Seller nor any of its officers, directors, stockholders
or agents (including, without limitation, Kilat and the Shareholders) shall
directly or indirectly:
(i) Enter into any transaction with any party other than Buyer
relative to any disposition of the Intellectual Property Assets or Seller's
business or operations or any part thereof; or
(ii) Solicit or encourage submission of inquiries, proposals or
offers from any other party relative to potential disposition of the
Intellectual Property Assets or Seller's business or operations or any part
thereof; or
(iii) Provide further information to any party other than
Buyer relating to any possible disposition of the Intellectual Property Assets
or Seller's business or operations or any part thereof.
(b) Seller, Kilat and the Shareholders agree that if Seller, Kilat
or either of the Shareholders receives an offer or proposal relating to the
possible disposition of the Intellectual Property Assets or Seller's business
or operations or any part thereof, Seller, Kilat
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and the Shareholders will immediately notify Buyer of such offer or proposal,
the identity of the party making the offer or proposal and the specific terms
of the offer or proposal.
6.6 COOPERATION. Kilat and each of the Shareholders agrees to cause
Seller to take, or to refrain from taking, all actions necessary to fulfill
Seller's covenants and obligations under the Transaction Agreements.
ARTICLE 7
INDEMNIFICATION AND LIMITATION
7.1 INDEMNIFICATION BY SELLER AND THE SHAREHOLDERS. Subject to the
limitations set forth in SECTION 7.4, Seller, Kilat and each of the
Shareholders, jointly and severally, unconditionally, absolutely and
irrevocably agree to and shall defend, indemnify and hold harmless Buyer, and
each of Buyer's officers, directors, employees, counsel, successors, assigns,
and legal representatives (Buyer and such persons are collectively referred
to as the "BUYER'S INDEMNIFIED PERSONS") from and against, and shall
reimburse Buyer's Indemnified Persons for, each and every Loss paid, imposed
on or incurred by Buyer's Indemnified Persons, directly or indirectly,
relating to, resulting from or arising out of any inaccuracy in any
representation or warranty of Seller, Kilat or the Shareholders under the
Option Agreement, the Transaction Agreements or the Exhibits thereto or any
agreement, certificate or document delivered by Seller, Kilat or the
Shareholders pursuant hereto in any respect, or any breach or nonfulfillment
of any covenant, agreement or other obligation of Seller, Kilat or the
Shareholders under the Option Agreement, the Transaction Agreements or the
Exhibits thereto or any agreement, certificate or document to be delivered by
Seller, Kilat or the Shareholders pursuant hereto. With respect to matters
not involving Proceedings brought or asserted by third parties against
Buyer's Indemnified Persons, within thirty (30) days after notification from
Buyer's Indemnified Persons supported by reasonable documentation setting
forth the nature of the circumstances entitling Buyer's Indemnified Persons
to indemnity hereunder, Seller, Kilat and the Shareholders shall, at no cost
or expense to Buyer's Indemnified Persons, diligently commence resolution of
such matters in a manner reasonably acceptable to Buyer's Indemnified Persons
and shall diligently and timely prosecute such resolution to completion;
PROVIDED, HOWEVER, with respect to those valid claims that may be satisfied
by payment of a liquidated sum of money and which are not disputed reasonably
and in good faith by Seller, Kilat and the Shareholders, Seller, Kilat and
the Shareholders shall promptly pay the amount so claimed. If litigation or
any other Proceeding is commenced or threatened, the provisions of SECTION
7.3 shall control over the immediately preceding sentence. Buyer shall be
entitled to offset against any amounts owed by Buyer to Seller, Kilat or the
Shareholders under any Transaction Agreement any amounts owed by Seller,
Kilat or the Shareholders, respectively, to Buyer hereunder.
7.2 INDEMNIFICATION BY BUYER. Buyer unconditionally, absolutely and
irrevocably agrees to and shall defend, indemnify and hold harmless Seller,
Kilat, the Shareholders and the successors, assigns, heirs and legal and
personal representatives of Seller, Kilat and the Shareholders (Seller,
Kilat, the Shareholders and such persons are collectively referred to as the
"SELLER'S INDEMNIFIED PERSONS") from and against, and shall reimburse
Seller's Indemnified Persons for, each and every Loss paid, imposed on or
incurred by Seller's Indemnified Persons, directly or indirectly, relating
to, resulting from or arising out of any inaccuracy in any
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representation or warranty of Buyer under the Option Agreement, the
Transaction Agreements or the Exhibits thereto or any agreement, certificate
or other document delivered or to be delivered by Buyer pursuant hereto in
any respect, or any breach or nonfulfillment of any covenant, agreement or
other obligation of Buyer under the Option Agreement, the Transaction
Agreements, the Exhibits thereto or any agreement, certificate or document to
be delivered by Buyer pursuant hereto. With respect to matters not involving
Proceedings brought or asserted by third parties against Seller's Indemnified
Persons, within thirty (30) days after notification from Seller's Indemnified
Persons supported by reasonable documentation setting forth the nature of the
circumstances entitling Seller's Indemnified Persons to indemnity hereunder,
the Buyer, at no cost or expense to Seller's Indemnified Persons, shall
diligently commence resolution of such matters in a manner reasonably
acceptable to Seller's Indemnified Persons and shall diligently and timely
prosecute such resolution to completion; PROVIDED, HOWEVER, with respect to
those valid claims that may be satisfied by payment of a liquidated sum of
money and which are not disputed reasonably and in good faith by Buyer, Buyer
shall promptly pay the amount so claimed. If litigation or any other
Proceeding is commenced or threatened, the provisions of SECTION 7.3 shall
control over the immediately preceding sentence.
7.3 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. If any Proceeding shall
be brought or asserted against a party entitled to indemnification pursuant
to SECTIONS 7.1 or 7.2, or any successor thereto (the "INDEMNIFIED PERSON")
in respect of which indemnity may be sought under this Article from an
indemnifying person or any successor thereto (the "INDEMNIFYING PERSON"), the
Indemnified Person shall give prompt written notice of such Proceeding to the
Indemnifying Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and
the payment of all expenses; provided, that any delay or failure to so notify
the Indemnifying Person shall relieve the Indemnifying Person of its
obligations hereunder only to the extent, if at all, that it is prejudiced by
reason of such delay or failure. In no event shall any Indemnified Person be
required to make any expenditure or bring any cause of action to enforce the
Indemnifying Person's obligations and liability under and pursuant to the
indemnification obligations set forth in this Article. In addition, actual
or threatened action by a Governmental Authority or other Person is not a
condition or prerequisite to the Indemnifying Person's obligations under this
Article. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing Proceedings and to participate in the defense
thereof, but the reasonable fees and expenses of such counsel shall be at the
expense of the Indemnified Person unless the Indemnified Person shall in good
faith determine that there exist actual or potential conflicts of interest
which make representation by the same counsel inappropriate. The Indemnified
Person's right to participate in the defense or response to any Proceeding
should not be deemed to limit or otherwise modify its rights and obligations
under this Article. In the event that the Indemnifying Person, within
fifteen (15) days after notice of any such Proceeding, fails to assume the
defense thereof, the Indemnified Person shall have the right to undertake the
defense, compromise or settlement of such Proceeding for the account of the
Indemnifying Person, subject to the right of the Indemnifying Person to
assume the defense of such Proceeding with counsel reasonably satisfactory to
the Indemnified Person at any time prior to the settlement, compromise or
final determination thereof. If the Indemnifying Person assumes the defense
of any Proceeding, the Indemnified Person shall, reasonably and in good
faith, assist and cooperate in the defense thereof. Anything in this Article
to the contrary notwithstanding, the Indemnifying Person shall not, without
the Indemnified Person's prior written consent, settle or compromise any
Proceeding or consent to the entry of any judgment with respect to any
Proceeding for anything other than money damages paid by the Indemnifying
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Person. The Indemnifying Person may, without the Indemnified Person's prior
written consent, settle or compromise any such Proceeding or consent to entry
of any judgment with respect to any such Proceeding that requires solely the
payment of money damages by the Indemnifying Person and that includes as an
unconditional term thereof the release by the claimant or the plaintiff of
the Indemnified Person from all liability in respect of such Proceeding.
7.4 LIMITATION OF LIABILITY. Notwithstanding the foregoing provisions
of this ARTICLE 7, Buyer agrees that the maximum monetary amount for which
the Shareholders shall be liable to Buyer's Indemnified Persons in connection
with the provisions of the Transaction Agreements shall be limited to the
aggregate amount of One Million Eight Hundred Thousand Dollars ($1,800,000);
PROVIDED, HOWEVER, that the foregoing limitation on the liability of the
Shareholders shall not apply to, and each of the Shareholders shall be
jointly and severally liable to Buyer's Indemnified Persons, and any of them,
for the aggregate amount of actual damages resulting from:
(a) any representation made by Seller, Kilat or either of the
Shareholders which any of Seller, Kilat or either of the Shareholders knows
or has reason to know is false or misleading at the Closing Date, or
(b) any fraudulent conduct of Seller, Kilat or either of the
Shareholders.
Furthermore, each of Seller, Kilat and the Shareholders acknowledges and
agrees that the foregoing limitation of liability shall not in any manner
limit the liability of Seller and Kilat for any reason whatsoever.
7.5 GUARANTEE.
(a) Kilat and each of the Shareholders gives the indemnity set
forth in SECTION 7.1 and the guarantee set forth in this SECTION 7.5 in
consideration of Buyer's agreement to enter into the Transaction Agreements.
Kilat and each of the Shareholders acknowledges the receipt of valuable
consideration from Buyer for the agreement of Kilat and the Shareholders to
incur obligations and give rights under such indemnity and guarantee.
(b) Kilat and each of the Shareholders unconditionally and
irrevocably guarantees to Buyer the due and punctual performance and
observance by Seller of its obligations under the Transaction Agreements
including, without limitation, any obligation to pay money.
(c) Kilat and each of the Shareholders waive any right it, he or
she have of first requiring Buyer to commence proceedings or enforce any
other right against Seller or any other person before claiming under such
indemnity and guarantee.
(d) This guarantee and the foregoing indemnity are continuing
security obligations and are not discharged by any one payment. Such
guarantee and indemnity do not merge on completion.
(e) The liabilities of Kilat and each of the Shareholders under
such guarantee and indemnity are as a guarantor, indemnifier and principal
debtor and the rights of Buyer under
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such guarantee and indemnity are not affect by anything which might otherwise
affect them at law or in equity including, but not limited, one or more of
the following:
(i) Buyer granting time or other indulgence to, compounding or
compromising with or releasing Seller, or any other guarantor;
(ii) acquiescence, delay, acts, omissions or mistakes on the part
of Buyer;
(iii) any novation of a right of Buyer;
(iv) any variation of the Transaction Agreements, or any
agreement entered into in performance of thereof; or
(v) the invalidity or unenforceability of an obligation or
liability of a person other than the relevant guarantor (being Kilat or one
of the Shareholders).
(f) Kilat and each of the Shareholders may not, without the consent
of Buyer:
(i) raise a set-off or counterclaim available to it or Seller
against Buyer in reduction of it's liability under such guarantee and
indemnity;
(ii) claim to be entitled by way of contribution, indemnity,
subrogation, marshaling or otherwise to the benefit of any security or
guarantee held by Buyer in connection with the Transaction Agreements; or
(iii) prove in competition with Buyer, if a liquidator,
provisional liquidator, receiver, official manager or trustee in bankruptcy
is appointed in respect of Seller or Seller is otherwise unable to pay its
debts when they fall due,
until all money payable to Buyer in connection with the Transaction
Agreements is paid.
(g) If a claim that a payment or transfer to Buyer in connection
with the Transaction Agreements is void or voidable (including, but not
limited to, a claim under laws relating to liquidation, insolvency or
protection of creditors) is upheld, conceded or compromised, then Buyer is
entitled immediately as against Kilat and each Shareholder to the rights to
which it would have been entitled under such guarantee and indemnity if the
payment or transfer had not occurred.
(h) Kilat and each of the Shareholders agree to pay or reimburse
Buyer on demand for its costs, charges and expenses in making, enforcing and
doing anything in connection with such guarantee and indemnity including,
without limitation, legal costs and expenses on a full indemnity basis. Any
amounts paid to Buyer by Kilat or one of the Shareholders must be applied first
against payment of costs, charges and expenses under this SECTION 7.5(H), then
against other obligations under such guarantee and indemnity.
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(i) Kilat and each of the Shareholders acknowledges having been
given a copy of this Agreement and having had full opportunity to consider
its provisions before entering into such guarantee and indemnity.
ARTICLE 8
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Notwithstanding any investigation made at any time by or on behalf of the
parties hereto, all of the representations and warranties of the parties
shall survive the Closing of the transactions contemplated by the Transaction
Agreements (even if the other party knew or had reason to know of any
misrepresentation or breach of any warranty at the time of the Closing) and
all of the covenants of the parties shall survive the Closing, including but
not limited to the obligations of the parties set forth in SECTION 6.2 and
the indemnification obligations of the parties hereto. In addition, the
covenants and obligations set forth in SECTION 6.2 shall survive the
termination of this Agreement.
8.2 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified,
terminated, rescinded or supplemented only by written agreement of the parties
hereto.
8.3 WAIVER; CONSENTS. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Any failure of a party to
comply with any obligation, covenant, agreement or condition herein may be
waived by each party affected thereby only by a written instrument signed by
the party granting such waiver. No waiver, or failure to insist upon strict
compliance, by any party of any condition or any breach of any obligation,
term, covenant, representation, warranty or agreement contained in this
Agreement, in any one or more instances, shall be construed to be a waiver
of, or estoppel with respect to, any other condition or any other breach of
the same or any other obligation, term, covenant, representation, warranty or
agreement. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver.
8.4 FURTHER ASSURANCES; COOPERATION. The parties hereto agree (i) to
furnish upon request to each other such further information, (ii) to execute
and deliver to each other such other documents, and (iii) to do such other
acts and things, all as another party hereto may at any time reasonably
request, including before, at and after the Closing, for the purpose of
carrying out the intent of the Transaction Agreements, the Transaction
Agreements and the documents referred to therein.
8.5 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when (i) delivered
personally, (ii) sent by telecopier (with receipt confirmed), or (iii)
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested) or (iv) three business days
after being sent by registered or certified mail, return receipt requested,
in each case to the other party at the following addresses and telecopier
numbers (or to such other address or telecopier number for a party as shall
be specified by like notice; provided that notices of a change of address or
telecopier number shall be effective only upon receipt thereof):
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if to Seller, to:
Australian Software Innovations (Services) Pty Ltd
51 Rawson Street, Suite 301
Epping NSW 2121
Attn: Eng Lee, Managing Director
Telecopier: 61-2-869-0280
if to Kilat or the Shareholders, to:
Eng Lee
51 Rawson Street, Suite 301
Epping NSW 2121
Telecopier: 61-2-869-0280
if to Buyer, to:
Sento Technical Innovations Corporation
311 North State Street
Orem, Utah 84057
Attn: Robert K. Bench, President
Telecopier: (801) 224-2426
with copies to:
Brian G. Lloyd
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Telecopier: (801) 532-7750
8.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and permitted assigns.
Buyer may, in its discretion, assign its rights, interests and obligations
hereunder to any Person without the prior consent of any other party hereto.
Neither Seller, Kilat nor either of the Shareholders may assign any of their
respective rights, interests or obligations hereunder without the prior
written consent of Buyer. This Agreement is not intended to and shall not
confer upon any person other than the parties any rights or remedies
hereunder or with respect hereto.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of New South Wales, Australia applicable to
contracts made and to be performed wholly therein.
8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
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8.9 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. Unless otherwise provided, all references
in this Agreement to articles and sections refer to the corresponding
articles and sections of this Agreement. All words used herein shall be
construed to be of such gender or number as the circumstances require.
Unless otherwise specifically noted, the words "herein," "hereof," "hereby,"
"hereinabove," "hereinbelow," "hereunder," and words of similar import, refer
to this Agreement as a whole and not to any particular article, section,
clause or other subdivision hereof. Whenever the term "including" or a
similar term is used in this Agreement, it shall be read as if it were
written "including by way of example only and without in any way limiting the
generality of the clause or concept to which reference is made." This
Agreement shall be construed as though all parties had drafted it.
8.10 ENTIRE AGREEMENT. This Agreement and the Transaction Agreements,
including the Exhibits and the documents, instruments and schedules referred
to herein and therein, embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are
no restrictions, promises, representations, warranties, covenants, or
undertakings other than those expressly set forth or referred to herein and
in the Transaction Agreements. The Transaction Agreements supersede all
prior agreements and understandings between the parties with respect to such
subject matter.
8.11 ATTORNEYS' FEES. In the event a Proceeding is brought by any party
under this Agreement to enforce or construe any of its terms, the party that
prevails by enforcing this Agreement shall be entitled to recover, in
addition to all other amounts and relief, its reasonable costs and attorneys'
fees incurred in connection with such Proceeding.
8.12 SEVERABILITY. If any part of this Agreement is or becomes legally
ineffective, invalid or unenforceable in any jurisdiction, the effectiveness,
validity or enforceability of this Agreement in any other jurisdiction, or
the remainder of it in that jurisdiction, will not be affected.
8.13 JOINT AND SEVERAL. In this Agreement:
(a) any agreement, covenant, obligation, representation or warranty
on the part of two or more persons binds them jointly and severally; and
(b) any agreement, covenant, obligation, representation or
warranty in favor of two or more persons is for the benefit of them jointly
and severally.
ARTICLE 9
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings specified or referred to below when used in this Agreement. Any
reference or citation to a law, statute or regulation shall be deemed to
include any amendments to that law, statute or regulation and judicial and
administrative interpretations of it.
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9.1 "ACQUISITION" shall have the meaning set forth in SECTION 1.1.
9.2 "AFFILIATE" means, with respect to any specified Person, each other
Person which, directly or indirectly, controls, is controlled by or is under
common control with such specified Person (whether a general or limited
partner), each officer, director or general partner of such specified Person,
and each other Person who is the beneficial owner of five percent (5%) or
more of any class of the voting securities of such specified Person or five
percent (5%) or more in market value of the outstanding securities of such
Person. For purposes of this definition, "control" means the possession of
the power to direct or cause the direction of all or any part of the
management and policies of a specified Person, whether through the ownership
of voting securities, by contract or otherwise.
9.3 "AGREEMENT" means this Asset Purchase Agreement, including the
Exhibits hereto, which are hereby incorporated herein.
9.4 "ASSETS" means the assets of Seller identified more particularly on
EXHIBIT A.
9.5 "ASSET PURCHASE AGREEMENT" means that certain Asset Purchase
Agreement to be executed by and among Buyer, Seller, Kilat and the
Shareholders contemporaneously with the execution of this Agreement,
acceptable to Buyer in its discretion.
9.6 "BUYER" means Sento Technical Innovations Corporation, a Utah
corporation, or any successor, transferee or assignee thereof.
9.7 "BUYER'S INDEMNIFIED PERSONS" shall have the meaning set forth in
SECTION 7.1.
9.8 "CENTERPOST" means Centerpost Innovations Pty Limited, ACN
074-678-774, a limited company organized under the laws of Australia.
"CLOSING" shall have the meaning set forth in SECTION 1.5(a).
9.10 "CLOSING DATE" means the date and time as of which the Closing
actually takes place.
9.11 "CONTRACTS" means those contracts and agreements identified more
particularly on EXHIBIT B, the rights of which Buyer has elected to acquire
from Seller hereunder.
9.12 "DEED OF RESTRAINT OF TRADE" shall mean that certain Deed of
Restraint of Trade to be executed by and among Buyer and the Shareholders
contemporaneously with the execution of this Agreement, acceptable to Buyer
in its discretion.
9.13 "DISCLOSURE SCHEDULES" means the disclosure schedules prepared and
delivered by Seller, Kilat and the Shareholders to Buyer prior to the
Closing. The Disclosure Schedules shall contain all information necessary to
make the representations and warranties set forth in ARTICLE 2 true and
correct.
9.14 "DOLLARS" or "$" means United States dollars.
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9.15 "EMPLOYEE BENEFIT PLAN" means any stock option, stock right, profit
sharing, thrift-savings, simplified employee pension plan, deferred
compensation plan, severance pay, golden parachute, cafeteria plan, flexible
compensation plan, life insurance, medical, dental, disability, welfare,
superannuation or vacation plans or any other similar plan or arrangement of
any kind or character.
9.16 "ENCUMBRANCE" means any lien, pledge, hypothecation, charge,
mortgage, deed of trust, security interest, encumbrance, equity, trust,
equitable interest, claim, easement, right-of-way, servitude, right of
possession, lease tenancy, license, encroachment, burden, intrusion,
covenant, infringement, interference, proxy, option, right of first refusal,
community property interest; or legend, defect, impediment, exception,
condition, restriction, reservation, limitation, impairment, imperfection of
title; or restriction on or condition to the voting of any security,
restriction on the transfer of any security or other asset, restriction on
the receipt of any income derived from any security or other asset, and
restriction on the possession, use, exercise or transfer of any other
attribute of ownership, whether based on or arising from common law,
constitutional provision, statute or contract.
9.17 "ENTITY" means any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
company, joint venture, joint stock association, estate, trust, cooperative,
foundation, union, syndicate, league, consortium, coalition, committee,
society, firm, company or other enterprise, association, organization or
entity of any nature, other than a Governmental Authority.
9.18 "GOVERNMENTAL AUTHORITY" means any Australian national, state or
territorial or local governmental authority or semi-governmental authority,
and foreign governmental authority, the United States of America, any State
of the United States, any local authority and any political subdivision of
any of the foregoing, any multi-national organization or body, any agency,
department, commission, board, bureau, court or other authority thereof, or
any quasi-governmental or private body exercising, or purporting to exercise,
any executive, legislative, judicial, administrative, police, regulatory or
taxing authority or power of any nature.
9.19 "GOVERNMENTAL AUTHORIZATION" means any permit (including without
limitation any Environmental Permit), license, franchise, approval,
certificate, consent, ratification, permission, confirmation, endorsement,
waiver, certification, registration, transfer, qualification or other
authorization issued, granted, given or otherwise made available by or under
the authority of any Governmental Authority or pursuant to any Legal
Requirement.
9.20 "INTELLECTUAL PROPERTY" means any and all trademarks, tradenames,
service marks, patents, copyrights (including any registrations,
applications, licenses or rights relating to any of the foregoing),
technology, trade secrets, inventions, know-how, names, logos, artwork,
designs, discoveries, computer programs, software products and related source
code and documentation, processes, and all other intangible assets,
properties and rights.
9.21 "INTELLECTUAL PROPERTY ASSETS" means all Intellectual Property of
Seller, including, without limitation, all Intellectual Property necessary to
or currently utilized in
24
<PAGE>
Seller's business and all of the intangible assets of Seller identified more
particularly on EXHIBIT C.
9.22 "INTELLECTUAL PROPERTY PURCHASE AGREEMENT" means that certain
Intellectual Property Purchase Agreement to be executed by and among Buyer,
Seller, Kilat and the Shareholders contemporaneously with the execution of
this Agreement, substantially in the form of EXHIBIT G, acceptable to Buyer
in is discretion.
9.23 "KILAT" means Kilat Holding Pty. Limited ACN 003-982-616, a limited
company organized under the laws of Australia.
9.24 "KNOWLEDGE" or "KNOWN" - An individual shall be deemed to have
"knowledge" of or to have "known" a particular fact or other matter if such
individual is actually aware of such fact or other matter. An Entity shall
be deemed to have "knowledge" of or to have "known" a particular fact or
other matter if any individual who is serving or who has at any time served
as an officer, director, member, manager, trustee, or shareholder of such
Entity (or in any similar capacity) has, or at any time had, knowledge of
such fact or other matter.
9.25 "LEGAL REQUIREMENT" means any law (including without limitation any
Environmental Laws), statute, ordinance, decree, requirement, Order, treaty,
proclamation, convention, rule or regulation (or interpretation of any of the
foregoing) of, and the terms of any Governmental Authorization issued by, any
Governmental Authority.
9.26 "LIABILITY" means any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unfixed, unliquidated, unsecured,
unmatured, unaccrued, unasserted, contingent, conditional, inchoate, implied,
vicarious, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles.
9.27 "LOSS" means any loss, damage, injury, harm, detriment, decline in
value, lost opportunity, Liability, exposure, claim, demand, cost of any
Proceeding, settlement, judgment, award, punitive damage award, fine,
penalty, Tax, fee, charge, cost or expense (including, without limitation,
costs of attempting to avoid or in opposing the imposition thereof, interest,
penalties, costs of preparation and investigation, and the fees,
disbursements and expenses of attorneys, accountants and other professional
advisors).
9.28 "OPTION" shall have the meaning set forth in RECITAL A.
9.29 "OPTION AGREEMENT" shall have the meaning set forth in RECITAL A.
"ORDER" means any order, judgment, injunction, edict, decree,
ruling, pronouncement, determination, decision, opinion, sentence, subpoena,
consent decree, writ or award issued, made, entered or rendered by any court,
administrative agency or other Governmental Authority or by any arbitrator.
9.31 "ORDINARY COURSE OF BUSINESS" means an action taken by a Person if:
25
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(i) such action is recurring in nature, is consistent with the past
practices of such Person and is taken in the ordinary course of the normal day-
to-day operations of such Person;
(ii) the aggregate monetary amount associated with such action (or
any series of related actions) is less than Twenty-Five Thousand Dollars
($25,000), unless prior to taking such action, the Person obtains from Buyer
written consent to the taking of such action; and
(iii) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day-to-day operations of other persons that are
in the same line of business as such Person.
9.32 "PERSON" means any individual, Entity or Governmental Authority.
9.33 "PROCEEDING" means any action, suit, litigation, arbitration,
lawsuit, claim, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding),
prosecution, contest, hearing, inquiry, inquest, audit, examination,
investigation, challenge, controversy or dispute commenced, brought,
conducted or heard by or before, or otherwise involving, any Governmental
Authority or any arbitrator.
9.34 "PROPRIETARY INFORMATION" shall have the meaning set forth in
SECTION 6.2.
9.35 "PURCHASE PRICE" shall have the meaning set forth in SECTION 1.3.
9.36 "SELLER" means Australian Software Innovations (Services) Pty Ltd
ACN 050-053-355, a limited company organized under the laws of Australia.
9.37 "SELLER'S INDEMNIFIED PERSONS" shall have the meaning set forth in
SECTION 7.2.
9.38 "SHAREHOLDERS" refers collectively to Eng Lee and Mary Lee, in
their individual capacities.
9.39 "TAX" means any federal, national, state, territorial, local or
foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, environmental, customs duties,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, fringe benefits or other tax or assessment of any
nature whatsoever, including, without limitation, any customs duty, municipal
rates, stamp duties and all other charges and levies which may be imposed by
a Governmental Authority (including any interest, penalties and additions
thereto that may arise in connection therewith), whether disputed or not.
9.40 "TAX RETURNS" means any return (including any information return),
report, statement, declaration, schedule, notice, notification, form,
certificate or other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Authority in
connection with the determination, assessment, collection or payment of any
Tax or in connection with the administration, implementation or enforcement
of or compliance with any Legal Requirement relating to any Tax.
26
<PAGE>
9.41 "TRANSACTION AGREEMENTS" means this Agreement and such other
documents as are entered into in connection with this Agreement in order to
complete the transactions contemplated hereby, including, without limitation,
the Option Agreement, the Asset Purchase Agreement and the Deed of Restraint
of Trade.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf as of the date first above written.
"BUYER":
SENTO TECHNICAL INNOVATIONS CORPORATION, a Utah corporation
By: _______________________________________
Its: _______________________________________
"SELLER":
THE COMMON SEAL of AUSTRALIAN SOFTWARE
INNOVATIONS (SERVICES) PTY. LTD
ACN 050-053-355, a limited company organized
under the laws of Australia was hereunto
affixed in accordance with its articles of
association in the presence of:
________________________________ _______________________________
Signature of Director Signature of Director/Secretary
________________________________ _______________________________
Print Name Print Name
________________________________ _______________________________
Office Held Office Held
27
<PAGE>
"KILAT":
THE COMMON SEAL of KILAT HOLDINGS PTY.
LIMITED ACN 003-982-616, a limited
company organized under the laws of Australia
was hereunto affixed in accordance with
its articles of association in the presence of:
________________________________ _______________________________
Signature of Director Signature of Director/Secretary
________________________________ _______________________________
Print Name Print Name
________________________________ _______________________________
Office Held Office Held
"SHAREHOLDERS":
________________________________
Eng Lee, individually
________________________________
Mary Lee, individually
28
<PAGE>
EXHIBIT A
TO
INTELLECTUAL PROPERTY PURCHASE AGREEMENT
ASSETS
[To be completed - Non-intellectual property assets only]
<PAGE>
EXHIBIT B
TO
INTELLECTUAL PROPERTY PURCHASE AGREEMENT
CONTRACTS
[To be completed]
<PAGE>
EXHIBIT C
TO
INTELLECTUAL PROPERTY PURCHASE AGREEMENT
INTELLECTUAL PROPERTY ASSETS
[To Be Attached]
<PAGE>
EXHIBIT H
TO
OPTION AGREEMENT
FORM OF DEED OF RESTRAINT OF TRADE
[Not Filed Herewith]
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
JURISDICTION OF
NAME INCORPORATION OR ORGANIZATION
---- -----------------------------
Spire Technologies, Inc. Utah
Spire Systems Incorporated Utah
DewPoint Distributed Solutions
Incorporated Utah
Centerpost Innovations Pty. Ltd. New South Wales, Australia
<PAGE>
EXHIBIT 23.3
The Board of Directors
Sento Technical Innovations Corporation:
We consent to the use of our report dated June 21, 1996 on the financial
statements of Sento Technical Innovations Corporation and subsidiaries
(formerly Spire International Corp.) as of April 30, 1996 and 1995 and the
related statements of income, stockholders' equity, and cash flows for each of
the years in the three year period ended April 30, 1996, included herein and
to the references to our firm under the headings "Experts" and "Selected
Condensed Consolidated Financial Data" in the Prospectus.
KPMG Peat Marwick LLP
Salt Lake City, Utah
November 1, 1996
