SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
- -------
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
Commission File Number: 33-15097-D
SYNAPTIX SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-10457105
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
18333 Egret Bay Boulevard
Suite 270, Houston, Texas 77058
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (281) 335-4964
2450 South Shore Boulevard
Suite 210, Houston, Texas 77573 (281) 334-0405
(Former Address, Zip Code, and Telephone Number)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date.
Common Stock, $.003 Par Value 15,665,492
(Shares outstanding as of March 31, 1998)
Transitional Small Business Disclosure Format (Check One) Yes No X
1
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
QUARTERLY REPORT ON FORM 10-QSB FOR THE INTERIM
PERIOD ENDED March 31, 1998
TABLE OF CONTENTS
Page
Number
Part I. Financial Information
Item I. Financial Statements
Balance Sheets at March 31, 1998 and June 30, 1997............... 4
Statements of Operations for the Nine Months Ended March 31, 1998
and 1997..........................................................5
Statements of Changes in Stockholders' Deficit for the Year Ended
June 30, 1997 and Nine Months Ended March 31, 1998................6
Statements of Cash Flows for the Nine Months Ended March 31,
1998 and 1997.....................................................7
Notes to Financial Statements....................................8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................8
Part II. Other Information
Item 1. Legal Proceedings.................................................12
Item 2. Disposition of Assets.............................................12
Item 5. Other Information ................................................13
Subsequent Events.................................................14
Item 6. Resignation of Directors..........................................15
Item 7. Exhibits and Reports on Form 8-K..................................15
Signatures........................................................15
2
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SMITH & COMPANY
A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: 10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801) 575-8297
UTAH ASSOCIATION OF FACSIMILE: (801) 575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: [email protected]
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Synaptix Systems Corporation
Houston, Texas
The accompanying balance sheet of Synaptix Systems Corporation as of March 31,
1998 and the related statements of operations, and cash flows for the nine
months ended March 31, 1998 and 1997 and shareholders' deficit for the nine
months ended March 31, 1998 were not audited by us and, accordingly, we do not
express an opinion on them.
The balance sheet as of June 30, 1997 and the statement of stockholders' deficit
for the year ended June 30, 1997 were audited by us and we expressed an
unqualified opinion on them in our report dated October 7, 1997 which also
contained a going concern paragraph, but we have not performed any auditing
procedures since that date.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
May 11, 1998
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1997
(Unaudited) (Audited)
----------------- -----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,563 $ 989
Prepaid expenses 4,812 72,770
----------------- -----------------
Total Current Assets 6,375 73,759
PROPERTY, PLANT, & EQUIPMENT 86,769 100,873
----------------- -----------------
Total Assets $ 93,144 $ 174,632
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities $ 377,642 $ 163,373
Loans payable - related parties 433,093 0
Current portion of lease 0 1,099
----------------- -----------------
Total Current Liabilities 810,735 164,472
Long-term lease 0 1,239
----------------- -----------------
Total Liabilities 810,735 165,711
Stockholders' Equity (Deficit):
Preferred Stock - $1 par value 10,000,000 shares authorized;
0 shares of
Series A Voting Preferred Stock
outstanding at March 31, 1998 and June 30, 1997 0 0
Common Stock - $.003 par value, 25,000,000 shares authorized;
15,665,492
shares issued and outstanding at March 31, 1998
and 15,473,700 shares issued and outstanding at June 30, 1997 46,996 46,421
Additional paid-in capital 5,448,227 5,337,647
Retained earnings (deficit) (6,012,814) (5,175,147)
Stock subscription receivable (200,000) (200,000)
----------------- -----------------
Total Stockholders' Equity (Deficit) (717,591) 8,921
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 93,144 $ 174,632
================= =================
</TABLE>
See Accompanying Notes to the Financial Statements.
4
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1998 1997
(Unaudited) (Unaudited)
----------------- -----------------
<S> <C> <C>
REVENUES $ 0 $ 0
Cost and Expenses: 837,667 76,026
----------------- -----------------
Total Costs and Expenses 837,667 76,026
----------------- -----------------
Income (loss) from Continuing Operations: (837,667) (76,026)
Income tax expense (benefit) 0 0
----------------- -----------------
Net Income (Loss) $ (837,667) $ (76,026)
================= =================
Income (Loss) Per Share $ (.05) $ (.14)
================= =================
</TABLE>
See Accompanying Notes to the Financial Statements.
5
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SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For Year Ended June 30,1997 (audited) and
For the Nine Months Ended March 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Total
Additional Retained Stockholders'
Common Preferred Paid-In Earnings Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
---------- ----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JUNE 30, 1996 39,668 $ 119 174,865 $ 174,865 $ 4,610,729 $(4,826,922) $ (41,209)
Sale of restricted common stock
for cash 1,217,500 3,652 3,652
Issuance of restricted common stock
for expenses 58,334 175 20,825 21,000
Issuance of common stock for
preferred shares 174,865 525 (174,865) (174,865) 174,340
Sale of common stock (Regulation
S) for stock subscription 2,000,000 6,000 194,000
Sale of common stock (S-8) for
cash and services 6,750,000 20,250 251,500 271,750
Sale of restricted common stock for
cash, assets, and expenses 2,250,000 6,750 27,000 33,750
Issuance of restricted common stock
for assets and expenses 3,000,000 9,000 69,203 78,203
Cancellation of restricted stock (16,667) (50) (9,950) (10,000)
Net loss (348,225) (348,225)
---------- ----------- ---------- ----------- ----------- ----------- ----------
BALANCES AT JUNE 30, 1997 15,473,700 46,421 0 0 5,337,647 (5,175,147) 8,921
Sale of restricted common stock for
cash 20,000 60 15,940 16,000
Issuance of restricted common stock
to pay accounts payable 100,000 300 16,749 17,049
Cancellation of restricted stock (6,333) (19) (19)
Issuance of common stock (S-8)
for services 78,125 234 77,891 78,125
Net loss (837,667) (837,667)
---------- ----------- ---------- ----------- ----------- ----------- ----------
BALANCES AT March 31, 1998 15,665,492 $ 46,996 0 $ 0 $ 5,448,227 $(6,012,814) $ (717,591)
========== =========== ========== =========== =========== =========== ==========
</TABLE>
See Accompanying Notes to the Financial Statements.
6
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1998 1997
------------------ ------------------
CASH FLOWS OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) $ (837,667) $ (76,026)
Adjustments to reconcile net (loss) to net cash used in
operating activities:
Depreciation 22,079 0
Stock issued for expenses 78,125 21,000
Changes in Assets and Liabilities:
Prepaid expenses 67,958 0
Accounts payable and accrued expenses 231,299 31,207
------------------ ------------------
Net Cash Used by Operating Activities (438,206) (23,819)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (7,975) 0
------------------ ------------------
Net Cash Used by Investing Activities (7,975) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 16,000 3,652
Loans 433,093 23,900
Loan repayments (2,338) 0
------------------ ------------------
Net Cash Provided by Financing Activities 446,755 27,552
------------------ ------------------
Net Increase in Cash 574 3,733
CASH AT BEGINNING OF YEAR 989 0
------------------ ------------------
CASH AT END OF PERIOD $ 1,563 $ 3,733
================== ==================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 46 $ 0
Income taxes paid 0 0
------------------ ------------------
$ 46 $ 0
================== ==================
</TABLE>
See Accompanying Notes to the Financial Statements.
7
<PAGE>
SYNAPTIX SYSTEMS CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
1. Basis of Presentation
The financial statements of Synaptix Systems Corporation (the
"Company"), included herein, are unaudited for all periods ended March 31, 1998
and 1997. They reflect all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary to fairly depict
the results for the periods presented. Certain information and note disclosures,
normally included in financial statements prepared in accordance with generally
accepted accounting principles, have been condensed or omitted pursuant to rules
and regulations of the Securities and Exchange Commission. It is suggested that
these financial statements be read in conjunction with the audited financial
statements for the years ended June 30, 1996 and 1997, which are included in the
Company's annual report. The Company believes that the disclosures made herein
are adequate to make the information presented not misleading.
2. Earnings per Common and Common Equivalent Share
Earnings per common and common equivalent share is based on the average
number of common shares and dilutive common share equivalents outstanding for
the nine months ended March 31, 1998 and 1997.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended, and is subject to the
safe harbors created by those sections. These forward- looking statements are
subject to significant risks and uncertainties, including those identified in
the section of this Form 10-QSB and in the Company's Annual Report on Form
10-KSB, filed with the SEC on November 4, 1997, which may cause actual results
to differ materially from those discussed in such forward-looking statement. The
forward-looking statements within this Form 10-QSB are identified by words such
as "believes," "anticipates," "expects," "intends," "may" and other similar
expressions. However, these words are not the exclusive means of identifying
such statements. In addition, any statements which refer to expectations,
projections or other characterizations of future events or circumstances are
forward looking statements. The Company undertakes no obligation to publicly
release the results of any revisions, to these forward-looking statements which
may be made to reflect events or circumstances occurring subsequent to the
filing of this Form 10-QSB with the Securities and Exchange Commission. Readers
are urged to carefully review and consider the various disclosures made by the
Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission, including its Form 10-KSB, that attempt to
advise interested parties of the risks and factors that may affect the Company's
business.
8
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Introduction
During the period ended March 31, 1998, the Company had been engaged in
the development of software products which were directed to the retail consumer
market, and certain of the Company's software products were directed to the
corporate market. With respect to the Company's corporate software products, the
Company had anticipated that it would be able to provide related systems
integration and networking services in connection with the license of its
corporate software products. In March 1998, management entered into an agreement
to sell all of its right, title and interest in its intellectual property and
reposition itself as a company engaged in the oil and gas services industry.
In March 1998, the Company commenced negotiations with Mobilelink
Communications, Inc. ("Mobile") and entered into an agreement to sell to Mobile
all of its right, title and interest in and to all of the intellectual property
(its "Intellectual Property" and other software assets of Synaptix
(collectively, its "Acquired Assets"). In consideration for the sale of these
assets by the Company, Mobile will pay to Synaptix, an amount equal to five
percent of Mobile's gross sales of the Intellectual Property, payment of which
shall be made within 30 days after the end of each quarter, beginning with the
quarter ending June 30, 1998, provided however, that if the gross sales as
determined above, do not equal at least $200,000 within 24 months from the
closing date of the transaction, then the Acquired Assets will be returned to
Synaptix. The decision to sell these assets and retain a royalty interest was
based upon the fact that the Company believes that Mobile has the resources and
funding to develop the intellectual property and software and deliver the
product to market in a more timely manner, which the Company did not have. See
Item 2 "Disposition of Assets."
The Company also entered into a Purchase and Sale Agreement dated March
12, 1998, to purchase all of the outstanding capital stock of Frontier Services,
Inc. ("Frontier") from Dickie McGehee and Denise McGehee, the sole stockholders
of Frontier. The consideration to be paid for the stock of Frontier at the
Closing is a Promissory Note in the aggregate principal amount equal to an
amount that is the product of the Net Profits before Income Taxes of Frontier as
of December 31, 1997, multiplied by 4.2, up to an aggregate of $3,024,000. The
Promissory Note was executed on March 12, 1998, and matures on July 13, 1998
(its "Closing Date"). The Promissory Note is payable by exchange of the
principal of the note for common stock of the Company, and, in certain
instances, up to $1,000,000 in cash, as described below. The shares of common
stock will be valued at the mean between the bid price and the ask price on the
last trading date before the maturity of the Promissory Note. At the Closing
Date, the stockholders of Frontier may elect to take cash in any amount up to
$1,000,000 and the balance of the principal is payable in common stock based on
the above established stock price. The purchase price will be adjusted by mutual
agreement if the current ratio of Frontier is less than 2:1 on the Closing Date
Balance Sheet with the Current Assets Cash being at least $175,000. The Company
has the right to terminate the Agreement and cancel the Promissory Note if this
condition is not met. Upon the closing of this acquisition, which is anticipated
to occur on the Closing Date, Frontier will operate as a wholly-owned subsidiary
with current remaining management in place.
Frontier is an oilfield service company located in Alice, Texas, and is
engaged in the high pressure testing of tubular pipe, pipelines and valve
assemblies in the oil and gas industry. Frontier also provides complimentary
services which include torque control, thread cleaning and steam cleaning.
Frontier markets its services to major oil companies and independent oil
companies in the United States. Frontier's revenues for the year ended December
31, 1997 were $2.1 million, with a net income of $700,000. Frontier has been in
the oil field service business since 1986. See Item 5. Other Information
- -Subsequent Events - Acquisition of Frontier Services, Inc."
9
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The Company had a working capital deficiency at March 31, 1998, and
subsequent thereto, and is uncertain of its ability to raise sufficient funds to
meet its capital commitment for the transaction described in the preceding
paragraph and to otherwise meet its funding needs.
The Company continues to be a development stage company, but is
repositioning itself as a company engaged in the oilfield service industry.
The following discussion is included to describe the Company's
financial position and results of operations for the nine months ended March 31,
1998 an 1997, respectively. The financial statements and notes thereto contain
detailed information that should be referred to in conjunction with this
discussion.
Results of Operations
Analysis of Nine Months ended March 31, 1998 Compared to Nine Months
ended March 31, 1997
Costs and expenses for the nine months ended March 31, 1998 increased
significantly compared to the same period in 1997. The Company recorded a net
loss of $837,667, or a ($.05) loss per share for the nine months ended March 31,
1998, compared with a net loss of $76,026, or a ($.14) loss per share for the
same period in 1997. The Company incurred expenses in the amount of $837,667
related to general and administrative costs associated with the development of
its software for the nine months ended March 31, 1998. The Company did not
conduct any business operations for the nine months ended March 31, 1997.
Revenues
The Company did not record any revenues for the nine months ended March
31, 1998 or 1997, respectively. During these periods, the Company borrowed funds
to pay for working capital expenditures.
Management anticipates that the acquisition that is currently in
progress, if consummated, will generate sufficient revenues. Management is
currently negotiating with other parties to acquire other assets which it
believes will enable the Company to finance future operations and fund
additional acquisitions. Management anticipates that the Company's funding
requirements for the next six months will be in the range of approximately $1
million. This funding would include the purchase price and costs associated with
the acquisition of Frontier. The Company may seek such financing from venture
capital sources or through a subsequent public issuance of stock, if necessary,
or other sources. There can be no assurance that the Company will be successful
in raising such funds.
Financial Condition
The Company continues to be in a development stage, and the
information, financial statements and notes to the financial statements have
been prepared on the premise that it will be successful in raising additional
capital and continue as a going concern. The Company anticipates that capital
expenditures to acquire the assets noted above will be approximately $1,000,000.
Management also believes that it has identified private sources of capital which
will provide sufficient working capital during the next six months. Management
has not made a final decision as to which avenue it will take to secure funds
for working capital. There can be no assurance that the Company will be able to
raise sufficient additional capital to achieve these objectives or meet its
working capital needs.
10
<PAGE>
General and Administrative Expenses
General and administrative expenses were $837,667 and $76,026 for the
nine months ended March 31, 1998 and 1997, respectively, an increase of
$761,641. This increase was attributable to expenses incurred for
administrative, legal, accounting expenses and other expenses associated with
the development of its software.
Loss from Operations
The Company had an operating loss of $837,667 for the nine months ended
March 31, 1998 and $76,026 for the same period in 1997. The loss for the period
ended March 31, 1998, was the result of operating expenses incurred in the
development and production of the Eagle software product, in addition to general
and administrative costs.
Income Taxes
The Company had no income tax expense. As of March 31, 1998, the
Company had net operating loss carryfowards of approximately $4,151,000. The
utilization of net operating carryforwards will be severely limited as
determined pursuant to applicable provisions of the Internal Revenue Code and U.
S. Treasury regulations thereunder.
Net Loss
The Company had a net loss of $837,667 for the nine months ended March
31, 1998, compared with a net loss of $76,026 for the same period in 1997. The
net loss for the nine months ended March 31, 1998 was attributable to an
increase in administrative operating expenses. The increase in expenditures in
administrative expenses was anticipated under the Company's operating plan
following the acquisition of the software products.
Liquidity and Capital Resources
There were no recorded revenues for the nine months ended March 31,
1998. At March 31, 1998, the Company maintained a negative liquidity position
which is evidenced by a current ratio of .01 to 1. In the event the Company is
successful in acquiring Frontier, capital commitments at this time are estimated
to be approximately $1.0 million within the next six months. Management will
continue to restructure the Company and seek acquisitions in order to increase
the Company's current ratio and liquidity, and generate capital which would
provide cash flow for future operations and expansion.
At March 31, 1998, the Company had a working capital deficiency of
$804,360, compared to a working capital deficiency of $92,583 at March 31, 1997.
Subsequent to March 31, 1998, the Company's working capital deficiency has
continued to increase. The cash balance at March 31, 1998 was approximately
$1,563, and at March 31, 1997, was approximately $3,733.
Cash used by operations totaled $428,206 for the nine months ended
March 31, 1998, compared to $23,819 for the same period in 1997. Cash used in
investing activities for the nine months ended March 31, 1998 was approximately
$7,975. Cash provided by financing activities during the nine months ended March
31, 1998 totaled $446,755, which included the proceeds from the sale of stock
and the borrowing of funds.
The Company holds two promissory notes from investors, each in the
amount of $100,000, which were due and payable on November 15, 1998, but were
not paid. These promissory notes were for the purchase of a total of 2,000,000
shares of common stock. The promissory notes are being canceled and 2,000,000
shares will be returned to the treasury.
11
<PAGE>
Analysis of Nine Months ended March 31, 1997 Compared to Nine Months
ended March 31, 1996
During the nine months ended March 31, 1997, the Company had no active
operations, $3,733 in cash, a working capital deficit of $92,583, and
accumulated losses of $4,902,948. The Company was considering entering into the
computer technology industry, and a management change. The Company continued to
seek acquisition and merger candidates with an emphasis in the area of computer
related technologies. Management believed that an acquisition of this nature
would provide an opportunity to enhance shareholder value.
Liquidity and Capital Resources
At March 31, 1997, and 1996, respectively, the Company maintained a
negative liquidity position. The Company had ceased all operations and was
looking for an acquisition candidate.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Synaptix has been named as a defendant in an action by Charles Schwab &
Co. entitled Charles Schwab & Co., Inc. v. Alan W. Harvey, Synaptix Systems
Corporation, and Signature Stock Transfer Incorporated, case no. 98-01336 filed
in the District Court of Harris County, Texas. The suit alleges causes of action
(i) against Synaptix for fraud and wrongful refusal to transfer shares, (ii)
against Alan Harvey, the former president of Synaptix, for fraud and breach of
contract, and (iii) against Signature, the registrant's stock transfer agent,
for wrongful refusal to transfer shares and negligence.
This action arises out of the attempted sale by Alan Harvey of 100,000
shares of Synaptix stock represented by a canceled stock certificate. Harvey had
previously represented to Synaptix and its transfer agent that the stock
certificate had been lost, and arranged for a replacement certificate to be
issued to him. Shortly before Harvey's resignation as president, and unknown to
Synaptix, Harvey deposited the canceled certificate in his personal account at
Charles Schwab & Co. A portion of the shares were sold before Schwab
representatives contacted the transfer agent for re- registration and
verification of the certificate. After the transfer agent advised Schwab that
the certificate had been canceled, Schwab acquired other shares in the market to
cover the shares sold which were represented by the canceled certificate .
Schwab alleges that Harvey intentionally misrepresented the canceled certificate
as a valid certificate. Because Harvey was then president of Synaptix, Schwab
claims that Synaptix is liable for Harvey's actions. Synaptix has denied all of
Schwab's allegations, and maintains that Harvey acted in his own capacity and
not as an agent of the Company, and that Schwab's loss was a result of its own
negligence. Synaptix has also assumed the defense of Signature Stock Transfer,
Inc., who Schwab has alleged wrongfully refused to transfer Harvey's canceled
certificate. The Company has reached a settlement agreement in principal.
Management does not believe that this action will have a material adverse effect
on the Company.
Item 2. Disposition of Assets
The Company has entered into an Asset Purchase Agreement with Mobile to
sell Mobile acquired Assets owned, licensed or otherwise used in the business
conducted by Synaptix for the computer programming code and software owned by
Synaptix including the "Field Express" and the "Eagle" ("Interact") programs
software, and all trademarks with respect to or related to the Intellectual
Property and various related property.
12
<PAGE>
Mobile will pay to Synaptix for the Acquired Assets, an amount equal to
five percent of Mobile's gross sales of the Intellectual Property, payment of
which shall be made within 30 days after the end of each quarter, beginning with
the quarter ending June 30, 1998, provided however, that if the gross sales as
determined above, do not equal at least $200,000 within 24 months from the
closing date of the transaction, then the Acquired Assets will be returned to
Synaptix. A copy of the Asset Purchase Agreement by and between the Company and
Mobile is attached hereto as Exhibit 2.
Neither Mobile, nor any of its officers or directors are affiliates of
the Company.
Termination of Employment Contracts
The Company terminated its employment agreements with all but one of
its employees and entered into independent contractor relationships with certain
former employees in their stead for completion of the Eagle software project,
pursuant to the terms of a Team Development Agreement. Due to the Company's lack
of cash flow, the Company was unable to meet its payroll obligations, and was
approximately six (6) weeks behind in wage payments. The employees and the
Company mutually agreed to compromise these obligations by issuing cash and
shares of common stock to its former employees in settlement of wage claims. The
total number of shares issued to the former employees for services rendered
during this period was 52,125.
During the period ended March 31, 1998, the Company agreed to
compensate its former employees as independent contractors. The terms of the
agreement were such that each Team Member is to be compensated at the rate of
five hundred (500) shares of registered common stock of Synaptix for each week
of services performed as verified and approved by the Team leader, Robert
Tucker. The registered shares of common stock will be issued to the Team members
who have satisfactorily performed twenty (20) hours of work for each weekly
issuance of shares. The share certificates are required to be issued within
seven days of each month, or as soon thereafter as possible, following the
period in which services were performed, for completion of the Eagle project. A
total amount of eight thousand seven hundred fifty (8,750) shares of registered
common stock have been set aside for distribution to those independent
contractors who have performed services for the Company during this period. As a
result of the sale of the intellectual property and software to Mobile, the
agreements have been terminated effective as of March 31, 1998. with certain of
the independent contractors being retained by Mobile in its endeavor to develop
the software.
Item 5. Other Information
Change in Management
Mr. Peter C. Vanucci was elected to serve as a director and Chairman of
the Board in addition to the position of Chief Executive Officer commencing
March 26, 1998. Mr. Vanucci will receive annual compensation of $125,000,
commencing on May 15, 1998, with the stated compensation being accrued until
such time as sufficient funds are available.
Mr. J. Thomas McManamon was also elected to serve as a member of the board
of directors on May 13, 1998. Messrs. Vanucci and McManamon will fill two of the
three vacancies on the board.
Ms. Virginia M. Lazar was also elected to serve as Executive Vice President
and Corporate Secretary on May 13, 1998. Mr. Edward S. Fleming, in addition to
his responsibilities as President, was also elected to serve as the Company's
Chief Operating Officer. Ms. Lazar and Mr. Fleming will receive annual
compensation of $90,000 and $96,000, respectively, commencing on May 15, 1998,
with the stated compensation being accrued until such time as sufficient funds
are available.
13
<PAGE>
Planned Change in Corporate Name
An Assumed Name Certificate for Synaptix Systems Corporation was filed
with the Office of the Secretary of State of the State of Texas on May 13, 1998,
to enable the Company to conduct business under the name Affiliated Resources
Corporation. A proposal will be made for approval of a change of the Company's
name as Affiliated Resources Corporation will be presented at the 1998 Annual
Meeting of Shareholders.
Stock Grants to Officers
On May 13, 1998, the Board of Directors granted options to its
executive officers to purchase the common stock of the corporation at an option
price of $.50 per share. Mr. Vanucci was granted an option to purchase up to one
million (1,000,000) shares of common stock; Ms. Lazar was granted an option to
purchase up to five hundred thousand (500,000) shares of common stock; and Mr.
Fleming was granted an option to purchase up to one hundred fifty thousand
(150,000) shares of common stock. In October 1997, Mr. Fleming was granted an
option to purchase up to three hundred fifty thousand (350,000) shares of common
stock at $.20 per share. The term of the grant of options is for a period of
five (5) years from the date of grant. A copy of each of the Option Agreements
for Mr. Vanucci, Ms. Lazar and Mr. Fleming are attached hereto as Exhibits 4.,
4.1 and 4.2.
Subsequent Events
Acquisition of Frontier Services, Inc.
The Company entered into a Purchase and Sale Agreement dated March 12,
1998, to purchase all of the outstanding capital stock of Frontier Services,
Inc. ("Frontier") from Dickie McGehee and Denise McGehee, the sole stockholders
of Frontier. The consideration to be paid for the stock of Frontier at the
Closing is a Promissory Note in the aggregate principal amount equal to an
amount that is the product of the Net Profits before Income Taxes of Frontier as
of December 31, 1997, multiplied by 4.2, up to an aggregate of $3,024,000. The
Promissory Note was executed on March 12, 1998, and matures on July 13, 1998
(its "Closing Date"). The Promissory Note is payable by exchange of the
principal of the note for common stock of the Company, and, in certain
instances, up to $1,000,000 in cash, as described below. The shares of common
stock will be valued at the mean between the bid price and the ask price on the
last trading date before the maturity of the Promissory Note. At the Closing
Date, the stockholders of Frontier may elect to take cash in any amount up to
$1,000,000 and the balance of the principal is payable in common stock based on
the above established stock price. The purchase price will be adjusted by mutual
agreement if the current ratio of Frontier is less than 2:1 on the Closing Date
Balance Sheet with the Current Assets Cash being at least $175,000. The Company
has the right to terminate the Agreement and cancel the Promissory Note if this
condition is not met. Upon the closing of this acquisition, which is anticipated
to occur on the Closing Date, Frontier will operate as a wholly-owned subsidiary
with current remaining management in place.
Frontier is an oilfield service company located in Alice, Texas, and is
engaged in the high pressure testing of tubular pipe, pipelines and valve
assemblies in the oil and gas industry. Frontier also provides complimentary
services which include torque control, thread cleaning and steam cleaning.
Frontier markets its services to major oil companies and independent oil
companies in the United States. Frontier's revenues for the year ended December
31, 1997 were $2.1 million, with a net income of $700,000. Frontier has been in
the oil field service business since 1986. A copy of the Promissory Note is
attached hereto as Exhibit 2.1.1.
14
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Item 6. Resignation of Registrant's Directors
Mr. Matthew Hutchins resigned as a director and Chairman of the Board on
February 26, 1998. Mr. Hutchins was elected to serve as a director and Chairman
of the Board in November 1997. Mr. Daniel Gillett also resigned as a director
and Chief Executive Officer on February 26, 1998. Mr. Gillett was elected to
serve as a director and Chief Executive Officer in November 1997.
Item 7. Exhibits and Reports on Form 8-K
A. Exhibits
2 Asset Purchase Agreement by and between Synaptix Systems
Corporation, a Colorado corporation, and Mobilelink
Communications, Inc. ("Mobile"), a Nevada corporation, dated
March 26, 1998.
2.1 Purchase and Sale Agreement for Purchase of Stock of Frontier
Services, Inc. By and between Dickie McGehee and Denise McGehee,
Sellers, and Synaptix Systems Corporation, dated March 12, 1998.
2.1.1 Promissory Note between Synaptix Systems Corporation and Dickie
and Denise McGehee in the amount of $3,024,000, dated March 12,
1998.
4 Option Agreement by and between Peter C. Vanucci and Synaptix
Systems Corporation, dated May 20, 1998.
4.1 Option Agreement by and between Virginia M. Lazar and Synaptix
Systems Corporation, dated May 20, 1998.
4.2 Option Agreement by and between Edward S. Fleming and Synaptix
Systems Corporation, dated May 20, 1998.
B. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SYNAPTIX SYSTEMS CORPORATION
Dated: May 26, 1998 By: /s/ Peter C. Vanucci
-------------------------
Peter C. Vanucci, Chairman and CEO
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Exhibit 2
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of March 26, 1998 (the "Agreement"),
by and between SYNAPTIX SYSTEMS CORPORATION, a Colorado corporation
("SYNAPTIX"), and MOBILELINK COMMUNICATIONS, INC., a Nevada Corporation
("MOBILE").
RECITALS
WHEREAS, MOBILE desires to acquire certain assets of SYNAPTIX (the
"Acquired Assets" as defined in Section 1.1), all on the terms and subject to
the conditions hereinafter set forth, and;
WHEREAS, SYNAPTIX desires to sell such assets to MOBILE, on the terms
and subject to the conditions hereinafter set forth;
NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND, and in consideration of
the premises and the mutual representations, warranties, covenants and
agreements contained herein, MOBILE and SYNAPTIX hereby agree as follows:
ARTICLE 1
ACQUISITION AND DISPOSITION OF ACQUIRED ASSETS
1.1 Acquired Assets. Subject to the terms and conditions of this
Agreement, at the Closing (as defined below), SYNAPTIX shall sell, convey,
transfer, assign and deliver to MOBILE, and MOBILE shall purchase, acquire and
accept from SYNAPTIX, certain assets owned by SYNAPTIX as follows:
1.1.1 SYNAPTIX Intellectual Property. "SYNAPTIX Intellectual
Property" which shall mean all the intellectual property (except as expressly
stated below) of SYNAPTIX owned, licensed or otherwise used in the business
conducted by SYNAPTIX for the computer programming code and software owned by
SYNAPTIX including the "Field Express", and the "Eagle" ("Interact") programs
software (as more fully described in Schedule 1.1.1(A), including without
limitation, any and all trademarks with respect to or related to the SYNAPTIX
Intellectual Property listed on Schedule 1.1.1(A), in both machine readable
and/or human readable form, and including: (i) rights to, and any rights to
apply for and/or register, patents and patent applications, copyrights,
trademarks, trade secrets and all other proprietary rights relating to such
intellectual property, (ii) records and files relating to manufacturing, quality
control, sales, marketing and customer support and designs for such intellectual
property, (iii) Derivative Works of such SYNAPTIX Intellectual Property, and
(iv) all related Documentation. "Derivative Work" means any translation
(including any translation into other computer languages), portation,
modification, correction, addition, extension, upgrade, improvement,
compilation, abridgment or other form prepared by or for SYNAPTIX and presently
in the possession of or under the control of SYNAPTIX in which the SYNAPTIX
Intellectual Property has been recast, transformed, or adopted. "Documentation"
means any and all software and firmware listings, fully commented and updated
source code, complete system built software and instructions related to the
SYNAPTIX Intellectual Property in the possession or under the control of
SYNAPTIX, and any and all user, technical and business documentation related to
the SYNAPTIX Intellectual Property in the possession or under the control of
SYNAPTIX in both machine readable and/or human readable form.
1.1.2. Other Assets. "Other Assets" which shall mean all of
SYNAPTIX's customer lists, contracts, agreements, licenses or license
agreements, commitments, warranties, claims and other existing and inchoate
rights, but excluding without limitation, cash, marketable securities,
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receivables and rights relating to contractual obligation.
All the above, including the SYNAPTIX Intellectual Property, shall be
referred to as the "Acquired Assets."
1.2. Liabilities. MOBILE shall not assume or be deemed to have assumed,
or to have any obligations with respect to, any liabilities or obligations of
SYNAPTIX of any nature whatsoever, whether such other liabilities and
obligations arose or arise before or after, or mature before or after, the
closing (the "Retained Liabilities").
1.3. Purchase Price and Payment. In consideration for the sale by
SYNAPTIX of the Acquired Assets, MOBILE will pay to SYNAPTIX, from and after the
Closing as hereinafter defined, an amount equal to five percent (5%) of MOBILE's
gross sales of the Intellectual Property (as defined by MOBILE's independent
certified public accountants in accordance with generally accepted accounting
principles), payment of which shall be made within 30 days after the end of each
quarter, beginning with the quarter ending June 30, 1998, provided however, that
if the gross sales as determined above, do not equal at least $200,000 within 24
months from the date hereof, then the Acquired Assets will be returned to
SYNAPTIX and MOBILE shall take such steps and execute such documents as are
required to return title to the Acquired Assets to SYNAPTIX
1.4 Closing and Delivery of Acquired Assets. The closing of the
transaction (the "Closing") and delivery of the Acquired Assets will take place
upon execution of this Agreement (the "Closing Date"), at such date or place as
agreed to by the parties hereto.
1.5 Conveyance of Acquired Assets. The sale, conveyance, transfer,
assignment and delivery to MOBILE of the Acquired Assets, as herein provided,
shall be effected by such bills of sale, endorsements, assignments and other
instruments of transfer and conveyance as may be necessary to vest in MOBILE the
right, title and interest of SYNAPTIX in and to the Acquired Assets, free and
clear of all liens, claims, charges and encumbrances, except as otherwise
provided in this Agreement. Such documents shall include, without limitation, a
Bill of Sale and an Assignment of Rights in the forms attached hereto as
Schedules 1.5(A) and (B), respectively. SYNAPTIX shall, at the Closing or at any
time or from time to time after the Closing, upon request, perform or cause to
be performed such acts, and execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such documents, as may be reasonably
required or requested to effectuate the sale, conveyance, transfer, assignment
and delivery to MOBILE of any of the Acquired Assets or for the performance by
SYNAPTIX of any of its obligations hereunder.
ARTICLE II
REPRESENTATION AND WARRANTIES
2.1 Representations and Warranties of SYNAPTIX. SYNAPTIX represents and
warrants to MOBILE on execution of this Agreement and on the Closing Date as
follows:
2.1.1. SYNAPTIX Intellectual Property. SYNAPTIX owns all the
SYNAPTIX Intellectual Property used or under development in SYNAPTIX's business
as currently conducted. Schedule 1.1.1(A) lists: (i) all patents, copyrights,
trademarks, trade names, service marks, and any applications therefor included
in the SYNAPTIX Intellectual Property, together with a list of all of SYNAPTIX's
currently marketed software products; and (ii) all licenses, sublicenses and
other agreements to which SYNAPTIX is a party and pursuant to which SYNAPTIX or
any other person is authorized to use any of the SYNAPTIX Intellectual Property
or other trade secrets of SYNAPTIX, and includes the identities of the parties
thereto, a description of the nature and subject matter thereof, and certain
terms thereof. SYNAPTIX is not, nor as a result of the execution,
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delivery or performance of SYNAPTIX's obligations hereunder will be, in
violation of any license, sublicense or agreement described in Schedule
1.1.1.(A), SYNAPTIX: (i) is the sole and exclusive owner or licensee of, with
all right, title and interest in and to (free and clear of any liens and
encumbrances), the SYNAPTIX Intellectual Property; and (ii) has sole and
exclusive rights to use of the SYNAPTIX Intellectual Property. SYNAPTIX is not
contractually obligated to pay any compensation to any third party, nor is any
third party otherwise entitled to any compensation, with respect to SYNAPTIX's
use of the SYNAPTIX Intellectual Property. The manufacture, sale, or use of any
product or process as now used or offered by SYNAPTIX does not infringe any
copyright, trade secret, trademark, service mark, trade names, firm names, logo,
trade dress or any patent of any person. No claims with respect to the SYNAPTIX
Intellectual Property have been asserted or, to the knowledge of SYNAPTIX,
threatened by any person, nor are there any valid grounds for any bona fide
claims (i) to the effect that the manufacture, sale or sue of any product or
process as now used or offered for sale by SYNAPTIX infringes or will infringe
on any copyright, trade secret, trademark, service mark, logo, trade dress or
patent of any person, (ii) against the use by SYNAPTIX of any trade secrets,
copyrights, trademarks, trade names, firm names, logos, trade dress patents,
technology, know-how, processes or computer software programs and applications
used in the business of SYNAPTIX relating to the Properties as currently
conducted or (iii) challenging the ownership, validity or effectiveness of any
of the SYNAPTIX Intellectual Property. All granted and issued patents and all
registered trademarks listed on Schedule 1.1.1.(A) and all copyrights held by
SYNAPTIX are valid, enforceable and subsisting. To SYNAPTIX's knowledge, there
is no material unauthorized use, infringement or misappropriation of any of the
SYNAPTIX Intellectual Property by any third party, employee or former employee.
2.1.2. Disclosure. No representation or warranty made by
SYNAPTIX in this Agreement, nor any document, written information, statement,
financial statement, certificate or exhibit prepared and furnished by SYNAPTIX
or its representatives pursuant hereto or in connection with the transactions
contemplated hereby, when taken together, contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.
2.1.3. Reliance. The foregoing representations and warranties
are made by SYNAPTIX with the knowledge and expectation that MOBILE is placing
reliance thereon.
2.2 Representations and Warranties of MOBILE. MOBILE represents and
warrants to SYNAPTIX as follows:
2.2.1. Organization, Standing and Power. MOBILE is a
corporation duly organized, validly existing and in good standing under the laws
of Nevada, has all requisite power and authority to won, lease and operate its
properties and to carry on its businesses as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which a
failure to so qualify would have a material adverse effect on the Business
Condition of MOBILE.
2.2.2. Authority. The execution, delivery, and performance of
this Agreement by MOBILE has been duly authorized by all necessary action of the
Board of Directors of MOBILE. MOBILE has duly and validly executed and delivered
this Agreement, and this Agreement constitutes a valid, binding and enforceable
obligation of MOBILE in accordance with its terms.
2.2.3. Disclosure. No representation or warranty made by
MOBILE in this Agreement, nor any document, written information, statement,
financial statement, certificate or exhibit prepared and furnished or to be
prepared and furnished by MOBILE or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make
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the statements or facts contained herein or therein not misleading in light of
the circumstances under which they were furnished.
2.2.4. Reliance. The foregoing representations and warranties
are made by MOBILE with the knowledge and expectation that SYNAPTIX is placing
reliance thereon.
ARTICLE III
CONDITIONS PRECEDENT
3.1 Conditions of Obligation. The obligation of MOBILE to effect the
purchase is subject to the satisfaction of the following conditions:
3.1.1. Termination Agreement. SYNAPTIX shall have executed, and
delivered to MOBILE, a Termination Agreement in which Alan Harvey shall have
irrevocably assigned and transferred to SYNAPTIX any and all right, title and
interest he may hold or may have held in the SYNAPTIX Intellectual Property and
shall have releases SYNAPTIX from any and all claims relating thereto.
ARTICLE IV
ADDITIONAL AGREEMENTS
In addition to the foregoing, MOBILE and SYNAPTIX each agree to take
the following actions after the execution of this Agreement.
4.1. Expenses. Whether or not this Agreement is closed, except as
specifically provided in this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense.
4.2. Additional Agreements. In case at any time after the Closing Date,
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement, the proper representatives of each party to this
Agreement shall take all such necessary action, e.g., in the case of any
documents required to effectuate the transfer of the Acquired Assets, or to make
any governmental filings.
4.3 Taxes. Any sales or use or similar tax or levy arising from the
transactions contemplated by this Agreement shall be the sole responsibility of
MOBILE and MOBILE shall indemnify SYNAPTIX from and against any liability
arising in connection therewith; provided, however, that SYNAPTIX shall pay any
and all state, local, provincial, United States or Canadian income tax or excise
taxes imposed on or assessed against SYNAPTIX as a result of this transaction,
and SYNAPTIX shall indemnify MOBILE from and against any and all liability
arising in connection therewith.
4.4 Brokers and Finders. SYNAPTIX will be responsible for and pay any
fees that may be owed to any broker previously retained (or who claims to have
been retained) by SYNAPTIX, and shall hold MOBILE harmless from any liability
arising from such claim(s).
4.5 Documentation. SYNAPTIX shall provide to MOBILE documentation
containing the source code and the object code of the SYNAPTIX Intellectual
Property, where appropriate.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification Relating to Agreement.
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5.1.1. SYNAPTIX hereby agrees to defend, indemnify, and hold
MOBILE harmless from and against, and to reimburse MOBILE with respect to, any
and all losses, damages, liabilities, claims, judgments, settlements, fines,
costs, and expenses (including attorneys' fees) ("Indemnifiable Amounts") of
every nature whatsoever incurred by MOBILE by reason of or arising out of or in
connection with (i) any breach, or any claim (including claims by parties other
than MOBILE) that would, if true, constitute a breach by SYNAPTIX of any
representation, warranty, or covenant of SYNAPTIX contained in this Agreement or
in any agreement, certificate or other document delivered to MOBILE pursuant to
the provisions of this Agreement, and (ii) the failure, partial or total, of
SYNAPTIX to perform any agreement or covenant required by this Agreement.
5.1.2. MOBILE agrees to defend, indemnify, and hold SYNAPTIX
harmless from and against, and to reimburse SYNAPTIX with respect to, any and
all Indemnifiable Amounts of every nature whatsoever incurred by SYNAPTIX by
reason of or arising out of or in connection with (i) any breach, or any claim
(including claims by parties other than SYNAPTIX) that would, if true,
constitute a breach by MOBILE of any representation, warranty, or covenant of
MOBILE contained in this Agreement (including, but not limited to, MOBILE's
obligations with respect to the Assumed Contracts) or in any agreement,
certificate or other document delivered to SYNAPTIX pursuant to the provisions
of this Agreement, and (ii) the failure, partial or total, of MOBILE to perform
any agreement or covenant required by this Agreement.
5.2 Third Party Claims. For the purposes of this Section 5.2., a party
seeking indemnification pursuant to Section 5.1 shall be referred to as the
"Indemnified Party" and a party to whom such notice is addressed shall be
referred to as the "Indemnitor." With respect to any claims or demands by third
parties, whenever an Indemnified Party shall have received a written notice that
such a claim or demand has been asserted or threatened, the Indemnified Party
shall notify the Indemnitor of such claim or demand and of the facts within the
Indemnified Party's knowledge that relate thereto within a reasonable time after
receiving such written notice. The Indemnitor shall then have the right to
contest, negotiate or settle any such claim or demand through counsel of their
own selection, satisfactory to the Indemnified Party and solely at their own
cost, risk, and expense. Notwithstanding the preceding sentence, the Indemnitor
shall not settle, compromise, or offer to settle or compromise any such claim or
demand without the prior written consent of an Indemnified Party, which consent
shall not be unreasonably withheld. By way of illustration and not limitation,
it is understood that an Indemnified Party may object to a settlement or
compromise which includes any provision which in its reasonable judgment may
have an adverse impact on or establish an adverse precedent for the Business
Condition of an Indemnified Party or any of its Subsidiaries. An Indemnified
Party shall not have the right to object to a settlement which consists solely
of the payment of a monetary damage amount and which is fully indemnified by
SYNAPTIX. If the Indemnitor fails to given written notice to an Indemnified
Party of its intention to contest or settle any such claim or demand within
twenty (20) calendar days after the Indemnified Party has notified the
indemnitor that any such claim or demand has been made in writing and received
by the Indemnified Party, or if any such notice is given but any such claim or
demand is not promptly contested by the Indemnitor, the Indemnified Party shall
have the right to satisfy and discharge the same by payment, compromise, or
otherwise, and the Indemnitor shall be entirely liable therefor to the
Indemnified Party under this indemnity. The Indemnified Party may also, if it so
elects and entirely within its own discretion, defend any such claim or demand
if the Indemnitor fails to give notice of their intention to contest or settle
and such claim or demand, in which event the Indemnitor shall be required to
indemnify the Indemnified Party and its affiliates for any and all costs,
losses, liabilities, and expenses whatsoever, including without limitation
attorneys' and other professional fees, that the Indemnified party may sustain,
suffer, incur, or become subject to as a result of the Indemnified Party's
decision to defend any such claim or demand.
ARTICLE VI
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MISCELLANEOUS
6.1. Entire Agreement. Notwithstanding anything to the contrary, this
Agreement, including the agreements, exhibits and schedules delivered pursuant
to t his Agreement, contain all of the terms and conditions agreed upon by the
parties relating to the subject matter of this Agreement and supersedes all
prior agreements, negotiations, correspondence, undertakings, and communications
of the parties, whether oral or written, respecting that subject matter.
6.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada as applied to agreements entered
into and entirely to be performed within that state.
6.3 Notices. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given (i) on the date of
delivery if personally delivered by hand, (ii) upon the third business day after
such notice is (a) deposited in the United States mail, if mailed by registered
or certified mail, postage prepaid, return required, or (b) sent by a nationally
recognized overnight express courier, or (iii) by facsimile upon written
confirmation (other than the automatic confirmation that is received from the
recipient's facsimile machine) of receipt by the recipient of such notice:
If to MOBILE: Marvin Mikel Barnwell
PO Box 931
Baycliff, Texas 77518
With a copy to: Steven L. Siskind, Esq.
645 Fifth Avenue
New York, NY 10022
Tel: (212) 750-2002
If to SYNAPTIX: 2450 South Shore Boulevard
Suite 210
League City, Texas 77573
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 5.3.
6.4. Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be modified rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other provisions of this Agreement shall be
deemed valid and enforceable to the full extent.
6.5. Survival of Representations and Warranties. All representations
and warranties contained in this Agreement, including the exhibits and schedules
delivered pursuant to this Agreement, shall survive the Closing Date.
6.6. Assignment. No party to this Agreement may assign, by operation of
law or otherwise, all or any portion of its rights, obligations, or liabilities
under this Agreement without the prior written consent of the other party to
this Agreement, which consent may be withheld in the absolute discretion of the
party asked to grant such consent. Any attempted assignment in violation of this
Section 6.6 shall be voidable and shall entitle the other party to this
Agreement to terminate this
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Agreement at its option.
6.7. Counterparts. This Agreement may be signed in any number of
facsimile counterparts with the same effect as if the signatures to each
counterpart were upon a single instrument. All facsimile counterparts shall be
deemed an original of this Agreement.
6.8. Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
6.9 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section, Exhibit
or Schedule to this Agreement unless otherwise indicated. The words "include,"
"includes," and "including," when used therein shall be deemed in each case to
be followed by the words "without limitation." The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
6.10. No Third Party Beneficiaries. Nothing in this Agreement shall be
deemed to create in any person not a signatory to this Agreement any rights
(including rights as a third party beneficiary) under this Agreement.
IN WITNESS WHEREOF, MOBILE and SYNAPTIX have executed this Agreement as
of the date first written above.
MOBILE COMMUNICATIONS, INC.
By:
Marvin Mikel Barnwell, President
SYNAPTIX SYSTEMS CORPORATION
By:
Edward S. Fleming, President
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Exhibit 2.1
PURCHASE AND SALE AGREEMENT
FOR PURCHASE OF STOCK OF FRONTIER SERVICES, INC.
BY AND BETWEEN
DICKIE MCGEHEE
AND
DENISE MCGEHEE
SELLERS
AND
SYNAPTIX SYSTEMS CORPORATION
BUYER
DATED: FEBRUARY ______, 1998
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I: DEFINITIONS AND RULES OF CONSTRUCTION..................1
ARTICLE II: SALE AND PURCHASE.....................................5
ARTICLE III: REPRESENTATIONS AND WARRANTIES.......................7
ARTICLE IV: COVENANTS............................................14
ARTICLE V: TAXES.................................................18
ARTICLE VI: INDEMNITY............................................18
ARTICLE VII: CONDITIONS PRECEDENT................................21
ARTICLE VIII: MISCELLANEOUS......................................22
EXHIBITS:
EXHIBIT A: SCHEDULE OF PURCHASE CONSIDERATION
EXHIBIT B: SCHEDULE OF DISCHARGED LIABILITIES
EXHIBIT C: SCHEDULE OF TARGET ACCOUNTS
EXHIBIT D: DISCLOSURE SCHEDULE
EXHIBIT E: OPINION OF COUNSEL FOR SELLER ADDRESSED TO BUYER
EXHIBIT F: OPINION OF COUNSEL FOR BUYER ADDRESSED TO SELLER
EXHIBIT G: FINANCIAL STATEMENTS
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<PAGE>
PURCHASE AND SALE AGREEMENT
This Agreement dated as of February ____, 1998, is made and entered
into by and between DICKIE McGEHEE and DENISE McGEHEE of Alice, Texas (jointly
and severally referred to as "Seller"), and SYNAPTIX SYSTEMS CORPORATION, a
Colorado corporation, having an office at 2450 South Shore Boulevard, Suite 210,
League City, Texas 77573 ("Buyer").
The Seller, in the aggregate, owns all of the outstanding capital stock of
Frontier Services, Inc. (the "Target").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of the Target ("Target Shares"), in return for
restricted securities of public companies.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
Article I
Definitions and Rules of Construction
1.1 Definitions. For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the terms
defined in this section have the meanings herein assigned to them and
the capitalized terms defined elsewhere in this Agreement, by inclusion
in quotation marks and parentheses, shall have the meanings so ascribed
to them.
1.1.1 "Accounts" means the accounts payable of Target identified on
Exhibit C of this Agreement, which are all of the accounts payable of
Target owed to Persons related to the presence, use, or operation of
the Target, which accounts payable are, or as of the Closing Date will
be, past due.
1.1.2 "Affiliate" means, with respect to any specified Person, or other
Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For the
purposes of this definition, "control" means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing. With respect to a corporation, control shall mean a
direct or indirect ownership of more than 50 percent of the voting
stock.
1.1.3 "Agreed Rate" means a rate per annum calculated on a 360-day
basis which is equal to the lesser of:
(a) a rate which is two percent above the prime rate of
interest as published by the Wall Street Journal under the
heading "Money Rates" or another similar heading in its first
issue of each calendar month (adjusted each month to reflect
any changes in the rate), or
(b) the maximum rate from time to time permitted by applicable
law.
1.1.4 "Agreement" means this Purchase and Sale Agreement, including the
Exhibits.
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1.1.5 "Business Day" means any day when commercial banks are generally
open for regular business in the state of Texas.
1.1.6 "Buyer Note" has the meaning set forth in 2.2, below, including
the Security Agreement-Pledge.
1.1.7 "Closing" means the closing of the transactions contemplated by
this Agreement at 10:00 A.M., local time, at Sellers' offices in Alice,
Texas, on the Closing Date.
1.1.8 "Closing Date" means on or before February 27, 1998; provided,
however, that either Party may by notice to the other Party no later
than 10 days prior to the Closing Date, extend the Closing Date until a
Business Day on or before March 31, 1998.
1.1.9 "Code" means the United States Internal Revenue Code of 1986, as
amended.
1.1.10 "Corporate Documents" means a corporation's articles of
incorporation (or charter or certificate of incorporation), by-laws,
minutes, resolutions, or the equivalent documents.
1.1.11 "Disclosed Liabilities" means all liabilities and obligations of
the Target related to the Seller; provided, however, that the Disclosed
Liabilities shall not include any liability or obligation of the Seller
or Target under this Agreement.
1.1.12 "Disclosure Schedule" means Exhibit D on which is scheduled all
items required by Sections 3.1.6, 3.1.8, 3.3.2, 3.3.8, and 3.3.10.
1.1.13 "Effective Date" shall mean 12:01 A.M., January 1, 1998, Central
Standard Time.
1.1.14 "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multi-employer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit plan or
program.
1.1.15 "Environmental Claims" means actions, claims, or proceedings by
Third Persons associated with the Assets and based on Environmental
Conditions or Environmental Law.
1.1.16 "Environmental Condition" means a condition that exists prior to
the Effective Date, and only to the extent in existence on the
Effective Date, with respect to the air, land, soil, surface,
subsurface strata, surface water, ground water, or sediments which
causes an Asset or a purchase of an Asset to be not in compliance with
an Environmental Law.
1.1.17 "Environmental Law" means any Law relating to pollution, the
protection of the environment, or the release or disposal of waste
materials.
1.1.18 "Environmental Matter" means an Environmental Condition or an
Environmental Claim.
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1.1.19 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.1.20 "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
1.1.21 "Governmental Body" means any federal, state, republic,
territorial, national, tribal, county, municipal, or other federal,
state or local governmental authority or judicial or regulatory agency,
board, body, department, bureau, inspectorate, ministry, commission,
instrumentality, court, tribunal or quasi-governmental authority in any
jurisdiction (domestic or foreign) having jurisdiction over any Asset
or Party to this transaction, or any of the transactions or matters
contemplated by this Agreement.
1.1.22 "Knowledge" means the actual knowledge of a Party's corporate
officers and their direct reports, after reasonable inquiry.
1.1.23 "Losses" means any and all losses, costs, expenses, liabilities,
claims, demands, penalties, fines, assessments, settlements, damages
and any related expenses of whatever kind or nature, including, without
limitation, legal, accounting, consulting and investigation expenses
and litigation costs, but excluding consequential damages of a Party.
1.1.24 "Net Profits" means gross revenues less all direct costs of
variable elements of operation, including materials, direct labor,
direct utilities including energy, indirect labor, warehouse and
distribution expense, depreciation, other fixed overhead,
administration costs, sales expense, interest, property taxes,
franchise taxes, and other general expenses, but excluding federal
income taxes.
1.1.25 "Party" means either Buyer or Seller.
1.1.26 "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company,
trust, estate, unincorporated organization, other business entity or
any Governmental Body.
1.1.27 "Tax" means any and all fees (including, without limitation,
documentation, license, recording, filing and registration fees), taxes
(including without limitation, gross receipts, ad valorem, value added,
environmental tax, turnover, sales, use, property (tangible and
intangible), stamp, leasing, lease, user, leasing use, excise,
franchise, transfer, fuel, excess profits, occupational, interest
equalization, and other taxes), levies, imposts, duties, charges or
withholdings of any nature whatsoever, imposed by any Governmental Body
or taxing authority thereof, domestic or foreign, together with any and
all penalties, fines, additions to Tax and interest thereon, whether or
not such Tax shall be existing or hereafter adopted.
1.1.28 "Third Person" means a Person other than a Party or an Affiliate
of a Party.
1.1.29 Other Definitions in this Agreement. The following terms shall
have the respective meanings ascribed to them as found on the pages of
this Agreement set forth below opposite such terms:
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Term
Page
AAA Rules.............................26
Buyer..................................1
Claim Notice..........................19
Disputed Claim........................20
Employees.............................17
Indemnified Party.....................19
Laws...................................8
Notice Period.........................19
Purchase Consideration.................5
Seller.................................1
Target.................................1
Target Shares..........................1
1.2 Rules of Construction. For purposes of this Agreement:
1.2.1 General. Unless the context otherwise requires
(a) "or" is not exclusive;
(b)an accounting term not otherwise defined has the meaning
assigned to it in accordance with accounting principles that
are generally accepted in the United States of America;
(c)words in the singular include the plural and words in the
plural include the singular;
(d)words in the masculine include the feminine and words in
the feminine include the masculine;
(e)any date specified for any action that is not a Business
Day shall be deemed to mean the first Business Day after such
date; and
(f)a reference to a Person includes its successors and assigns.
1.2.2 Articles and Sections. References to Articles and Sections are,
unless otherwise specified, to Articles and Sections of this Agreement.
Neither the captions to Articles or Sections hereof nor the Table of
Contents shall be deemed to be a part of this Agreement.
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1.2.3 Exhibits. The Exhibits form a part of this Agreement and shall
have the same force and effect as if set out in the body of this
Agreement.
1.2.4 Other Agreements. References herein to any agreement or other
instrument shall, unless the context otherwise requires (or the
definition thereof otherwise specifies), be deemed references to that
agreement or instrument as it may from time to time be changed, amended
or extended.
Article II
Sale and Purchase
2.1 Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees
to sell to the Buyer, all of his Target Shares for the consideration specified
in this section II.
2.2 Purchase Consideration. The Buyer agrees to deliver to the Seller at Closing
(the "Purchase Consideration") which shall be a promissory note (the "Buyer
Note") in the form of Exhibit A in the principal amount that is the product of
the Net Profits before Income Taxes as of December 31, 1997, times 4.2, but such
product shall not exceed $3,024,000. The Buyer Note shall be payable by exchange
of the principal of the note for common stock of Buyer. The value of the shares
of common stock offered for exchange shall be the mean between the bid price and
the ask price on the last trading date before the maturity of the Buyer Note. At
the maturity of the Buyer Note, Seller shall elect to take cash in any amount up
to $1,000,000 and the balance of the principal shall be paid in common stock
based on the above established stock price. 2.3 Deliveries at the Closing. At
the Closing, (i) the Seller will deliver to the Buyer the various certificates,
instruments, and documents referred to in 2.3.1, below, (ii) the Buyer will
deliver to the Seller the various certificates, instruments, and documents
referred to in 2.3.2, below, (iii) the Seller will deliver to the Buyer stock
certificates representing all of the Target Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv) the Buyer will
deliver to the Seller the consideration specified in 2.2, above.
2.3.1.............................. Seller Responsibility.
(a)the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified in this
Agreement by Seller is satisfied in all respects;
(b)the Buyer shall have received from counsel to the Seller an
opinion in form and substance as set forth in Exhibit E
attached hereto, addressed to the Buyer, and dated as of the
Closing Date;
(c)the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Target
other than those whom the Buyer shall have specified in
writing at least 10 business days prior to the Closing;
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(d)Buyer and Target shall receive from Seller a written
release and discharge of all Discharged Liabilities owed by
Target to Seller; and
(e)all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the Buyer.
2.3.2............................. Buyer's Responsibility.
(a)the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(b)the Seller shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit F
attached hereto, addressed to the Seller, and dated as of the
Closing Date; and
(c)all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the
Seller.
(d)the Seller shall have received assignments sufficient to
transfer the stock of Seller.
2.4 Preparation of Closing Date Balance Sheet.
2.4.1 At the Closing, Seller shall deliver an Audited Balance Sheet and
Income Statement for the year ending December 31, 1997.
2.4.2 Within 30 days after the Closing Date the Target will prepare and
deliver to the Buyer a balance sheet (the "Closing Date Balance Sheet")
for the Target as of the close of business on the Closing Date prepared
by an independent certified public accountant. The Target will prepare
the Closing Date Balance Sheet on a basis consistent with the
preparation of the previously prepared Financial Statements.
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2.4.3 If the Seller has any objections to the Closing Date Balance
Sheet, it will deliver a detailed statement describing its objections
to the Buyer, and attach its own Closing Date Balance Sheet within 15
days after receiving the Target's Closing Date Balance Sheet. The Buyer
and the Seller will use reasonable efforts to resolve any such
objections themselves. If the parties do not reach a final resolution
within 15 days after the Buyer has received the Seller's statement of
objections, however, the Buyer and the Seller will promptly select an
accounting firm mutually acceptable to them to resolve any remaining
objections. Each Party will cooperate with the accounting firm to
facilitate its determination, and the accounting firm will make its
determination within 30 days of its selection. The cost of the
accounting firm shall be paid by the party whose Closing Date Balance
Sheet is most different from the accountant's determination. The
accountant's determination shall be final and binding on the parties.
The Buyer will revise the Closing Date Balance Sheet as appropriate to
reflect the resolution of any objections.
2.5 Adjustment to Purchase Price or Termination. The Purchase Price will be
adjusted by mutual agreement if the Current Ratio is less than 2:1 on the
Closing Date Balance Sheet with the Current Assets-Cash being at least $175,000.
Buyer has the right to terminate this Agreement if this condition is not met.
Article III
Representations and Warranties
3.1 Seller. Seller represents and warrants to Buyer that:
3.1.1 Authority. Seller has the power and authority to enter into and
perform this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Seller of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized and this Agreement has been duly executed and
delivered by Seller. 3.1.2 Validity of Agreement. This Agreement is a
legal, valid and binding obligation of Seller enforceable against
Seller in accordance with the terms of this Agreement, except as
enforcement may be limited by bankruptcy, insolvency or other similar
Laws affecting the enforcement of creditors' rights in general. The
enforceability of Seller's obligations under this Agreement is subject
to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.1.3 No Violation. The execution and delivery of this Agreement and
the performance by the Seller of the terms of this Agreement do not
conflict with or result in a violation of any agreement, instrument,
order, writ, judgment or decree to which Seller is a party or is
subject.
3.1.4 Legal Proceedings. As of the date of this Agreement, there are
no pending suits, actions, arbitrations, mediations or proceedings as
to which Seller has been served
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process or received notice before any court or Governmental Body which
would adversely affect the Target, or hinder, impede or prevent Seller
from consummating the transactions contemplated by this Agreement. To
Seller's knowledge, there are no pending suits, actions, arbitrations,
mediations or proceedings as to which Seller has not been served
process or received notice, or that are threatened before any court or
Governmental Body which would adversely affect the Target, or hinder,
impede or prevent Seller from consummating the transactions
contemplated by this Agreement.
3.1.5 Compliance with Applicable Laws. Target is in compliance with any
applicable laws, orders, rules, regulations, judgments or decrees of
any Governmental Bodies relating to the business of Target and its
Assets, including the common or civil law, and including, but not
limited to, those relating to occupational safety and health, consumer
product safety, employee benefits, environmental laws, zoning laws or
regulations or other applicable laws or regulations ("Laws"), except
insofar as non-compliance with Laws would not diminish Buyer's
ownership of the Target and the Assets or interfere with Buyer's
operation of the Target.
3.1.6 Target Shares. The Seller holds of record and has authority to
transfer the number of Target Shares set forth next to his name on the
Disclosure Schedule, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
The Seller is not a party to any option, warrant, purchase right, or
other contract or commitment that could require the Seller to sell,
transfer, or otherwise dispose of any capital stock of the Target
(other than this Agreement). The Seller is not a party to any voting
trust, proxy, or other agreement or understanding with respect to the
voting Target Shares.
3.1.7 No Consents Required. No preferential purchase rights, consents,
approvals or other action by, or filing with any Person or Governmental
Body is required in connection with the execution, delivery and
performance by Seller of this Agreement, except for ministerial acts of
Governmental Bodies in connection with filing instruments of transfer
of title and except for Consents that will be delivered to Buyer by
Seller at Closing.
3.1.8 Payments. Except only for Taxes and those matters listed on the
Disclosure Schedule, no payments of any kind are required to be made by
Seller to Third Persons or an Affiliate of Seller under any contract or
otherwise with respect to the Target.
3.1.9 Disclosure. Seller has no Knowledge of any facts or circumstances
affecting or relating to the Target that might result in Losses to
Target or Buyer for any Environmental Matter or for any violation of
ERISA or under any Employee Benefit Plan.
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3.1.10 Adverse Claims. To the Knowledge of Seller, no person has
asserted or has threatened to assert any claim, fact, liability,
interest, condition, or event that, if true and valid, would violate
any representation or warranty of Seller.
3.2 Buyer. Buyer represents and warrants to Seller that:
3.2.1 Organization and Standing. Buyer has been duly organized, validly
existing in good standing under the laws of the State of Delaware.
3.2.2 Authority. Buyer has the corporate power and authority to enter
into and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Buyer
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action and
this Agreement has been duly executed and delivered.
3.2.3 Validity of Agreement. This Agreement is a legal, valid and
binding obligation by Buyer enforceable against Buyer in accordance
with the terms of this Agreement, except as enforcement may be limited
by bankruptcy, insolvency or other similar Laws affecting the
enforcement of creditors' rights in general. The enforceability of
Buyer's obligations under this Agreement is subject to general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
3.2.4 No Violation. The execution and delivery of this Agreement and
the performance by Buyer of the terms of this Agreement do not conflict
with or result in a violation of the Corporate Documents of Buyer or of
any agreement, instrument, order, writ, judgment or decree to which
Buyer is a party or is subject.
3.2.5 Adverse Claims. To the Knowledge of Buyer, no person has asserted
or has threatened to assert any claim, fact, liability, interest,
condition, or event that, if true and valid, would violate any
representation or warranty of Buyer.
3.3 Representations and Warranties Concerning the Target. The Seller represents
and warrants to the Buyer that the statements contained in this section 3.3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this section
3.3.
3.3.1 Organization, Qualification, and Corporate Power. The Target is a
corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. Target is duly
authorized to conduct business and is in good standing under the laws
of each jurisdiction where such qualification is required. Target has
full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is
engaged (and in which it presently
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proposes to engage) and to own and use the properties owned and used by
it. The Seller has delivered to the Buyer correct and complete copies
of the charter and bylaws of Target (as amended to date). The minute
books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the
stock certificate books, and the stock record books of Target are
correct and complete. Target is not in default under or in violation of
any provision of its charter or bylaws.
3.3.2 Capitalization. The entire authorized capital stock of the Target
consists of _____ Target Shares, of which __________ Target Shares are
issued and outstanding. All of the issued and outstanding Target Shares
have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the respective Sellers as set
forth in the Disclosure Schedule. There are no outstanding or
authorized preferred stock, options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Target to issue, sell,
or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to the
Target. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Target.
3.3.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
Target is subject or any provision of the charter or bylaws of Target
or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which Target is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Target does not need to give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
for the Parties to consummate the transactions contemplated by this
Agreement.
3.3.4 Financial Statements. Attached hereto as Exhibit G are the
following financial statements of Target (collectively the "Financial
Statements"): (i) unaudited balance sheets and statements of income as
of and for the period ending December 31, 1995 and 1996, and the
Federal Income Tax Returns for 1995 and 1996 for the Target; and (ii)
audited balance sheets and statements of income (the "Most Recent
Financial Statements') as of and for the twelve months ending December
31, 1997 (the "Most Recent Fiscal Year End") for the Target. The
Financial Statements (including the notes thereto) have been prepared
in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of
Target as of such dates and the results of operations of Target for
such periods, are correct and
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complete, and are consistent with the books and records of Target
(which books and records are correct and complete).
3.3.5 Undisclosed Liabilities. Target has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability), except for (i) Liabilities set forth on
the face of the Most Recent Financial Statements (rather than in any
notes thereto) and (ii) Liabilities which have arisen after the Most
Recent Fiscal Year End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
3.3.6 Legal Compliance. Target has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against Target
alleging any failure so to comply.
(a).........................Tax Matters.
(i) Target has filed all Tax Returns that it was
required to file. All such Tax Returns were correct
and complete in all respects. All Taxes owed by
Target (whether or not shown on any Tax Return) have
been paid. Target currently is not the beneficiary of
any extension of time within which to file any Tax
Return. No claim has ever been made by an authority
in a jurisdiction where Target does not file Tax
Returns that it is or may be subject to taxation by
that jurisdiction. There are no Security Interests on
any of the assets of Target that arose in connection
with any failure (or alleged failure) to pay any Tax.
(ii) Target has withheld and paid all Taxes required
to have been withheld and paid in connection with
amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third
party.
(b)Title to Assets. Target has good and marketable
title to, or a valid leasehold interest in, the
properties and assets used by Target, located on its
premises, or shown on the Most Recent Financial
Statement or acquired after the date thereof, free
and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent
Financial Statements.
3.3.7 Intellectual Property.
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(a)To the knowledge of Seller, Target has not
interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the
Sellers and the directors and officers (and employees
with responsibility for Intellectual Property
matters) of Target has ever received any charge,
complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or
violation (including any claim that Target must
license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge
of the Sellers and the directors and officers (and
employees with responsibility for Intellectual
Property matters) of Target, no third party has
interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual
Property rights of Target.
3.3.8 Contracts. The Disclosure Schedule lists the following contracts
and other agreements to which Target is a party:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for
lease payments in excess of $100,000 per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over
a period of more than one year, results in a material loss to
Target, or involve consideration in excess of $100,000;
(c)any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $100,000 or under which it has
imposed a Security Interest on any of its assets, tangible or
intangible;
(e) any agreement concerning confidentiality or
noncompetition;
(f) any agreement with the Seller and its Affiliates (other
than Target);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other
material plan or arrangement for the benefit of its current or
former directors, officers, and employees;
(h) any collective bargaining agreement;
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(i) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing
annual compensation in excess of $100,000 or providing
severance benefits;
(j) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees
outside the Ordinary Course of Business;
(k) any agreement under which the consequences of a default or
termination could have a material adverse effect on the
business, financial condition, operations, results of
operations, or future prospects of Target; or
(l) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of
$100,000.
The Seller has delivered to Buyer a correct and complete copy of each
written agreement listed in the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of
each oral agreement referred to in the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default,
and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any
provision of the agreement.
3.3.9 Notes and Accounts Receivable. All notes and accounts receivable
of Target are reflected properly on Target's books and records, are
valid receivables subject to no setoffs or counterclaims, are current
and collectible, and will be collected in accordance with their terms
at their recorded amounts, subject only to the reserve for bad debts,
if any, set forth on the face of the Most Recent Financial Statements
(rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and
practice of Target.
3.3.10 Insurance. The Disclosure Schedule sets forth the material
information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which Target has been a
party, a named insured, or otherwise the beneficiary of coverage at any
time within the past five years.
3.3.11 Product Liability. Target has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) arising out of any injury to
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individuals or property as a result of the ownership, possession, or
use of any product manufactured, sold, leased, or delivered by Target.
3.3.12 Employee Benefits. With respect to any Employee Benefit Plan
that Target maintains or ever has maintained or to which Target
contributes, ever has contributed, or ever has been required to
contribute, the Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan. Target does not maintain and
has never maintained or contributed, or has never been required to
contribute to any Employee Welfare Plan providing medical, health, or
life insurance or other welfare-type benefits for current or future
required or terminated employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B).
3.3.13 Certain Business Relationships with Target. The Seller has not
been involved in any business arrangement or relationship with Target
within the past 12 months, and the Seller does not own any asset,
tangible or intangible, which is used in the business of Target.
3.3.14 Disclosure. The representations and warranties contained in this
Section III do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements and information contained in this III not misleading.
Article IV
Covenants
4.1 Seller's Covenants. Seller covenants with Buyer as follows:
4.1.1. Access. Except as set forth in Articles V and VI, from the date
hereof to the Closing Date, Seller shall afford and shall cause to be
afforded to Buyer and Buyer's representatives full and reasonable
access to the Target, to all books and records in the possession or
control of Target regarding the Assets, and to the charter, by-laws,
minutes, and corporate resolutions of the Target subject to the Trade
Secrets Agreement between Target and Buyer.
4.1.2. Exclusive Dealing. From and after the date of this Agreement
until Closing, except as otherwise consented to by Buyer in writing,
and except for the termination of dealings with other parties with whom
Seller had previously communicated regarding the purchase of the
Assets, Seller shall not either directly or indirectly through a
representative:
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(a)provide information to any Person or
representative of such Person, which would assist
such Person in evaluating the prospects of purchasing
the Target or its Assets;
(b)initiate, encourage, solicit, analyze or respond
to any inquiries, offers, proposals, bids, or other
investigations by any Person to acquire all or any of
the shares of Target (other than to indicate that the
shares of Target are not for sale);
(c)enter into or agree to enter into any transaction,
the result of which would interfere, hinder, delay or
materially change the effect of the transaction
contemplated by this Agreement; or
(d)negotiate with any Person with respect to any such
transaction.
4.1.3. Conduct of Business.
(a).......Prior to Closing Seller shall:
(i) maintain, repair and operate the Target in
accordance with standard practices and the practices
historically employed with respect to the business of
Target and comply in all material respects with Laws
and perform in all material respects the obligations
under the Contracts;
(ii) provide Buyer, as soon as reasonably practicable
following receipt by Seller, with written notice of
all proposals regarding the business and Assets of
Target;
(iii) maintain the Target in its present customary
offices, except to the extent that the Assets are
moved for use at work locations and returned to their
present customary locations after the work is
complete;
(iv) promptly notify Buyer of any Loss, damage, or injury to, relating
to, or wholly or partly caused by, any of the Assets.
(b)With the consent of Buyer, prior to Closing Seller
shall not permit Target to:
(i) incur obligations with respect to, or
undertake any transactions relating to, the
Target, other than transactions (1) in the
normal, usual and customary manner, (2) of a
nature and in an amount consistent with
prior practice, and (3) in the ordinary
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course of business and operating the Target;
(ii) enter into any new material agreements
or commitments with respect to the business
of the Target;
(iii) abandon or scrap any part of the Assets
of Target; or
(iv) sell, lease, rent, encumber,
hypothecate, sell or otherwise dispose of
any part of, or interest in, any of the
Assets of Target.
4.2 Covenants of Seller and Buyer. Seller and Buyer covenant to each
other as follows:
4.2.1 Compliance with Conditions Precedent. Each Party shall use its
best efforts to cause the conditions precedent set forth in Article
VII, applicable to such Party, to be fulfilled and satisfied as soon as
practicable but in any event prior to Closing.
4.2.2 Preparation of Closing Documents. With respect to Closing
Documents, each Party shall deliver proposed forms of all other
documents to be delivered at Closing pursuant to this Agreement for
which such Party is responsible no later than 10 days prior to Closing.
4.2.3 Press Release. Prior to Closing and for a period of 30 days
following Closing, neither Party shall make any press release or other
announcement in connection with this Agreement without first consulting
with the other Party and accommodating all reasonable requests to the
other Party regarding the statements made in such press release or
announcement. Following such consultation and good faith attempt to
make reasonable accommodations, either Party may make any announcement
or press release that it believes is either required by applicable Law
or the rules of any stock exchange, or is advisable in connection with
such Party's obligation to provide public disclosure regarding its
activities. This provision shall not apply to any filing with any
Governmental Body or stock exchange required by Law, rule or
regulation.
4.2.4 Brokers. The Parties represent to each other that no broker,
finder, financial advisor, investment banker, or similar person has
been retained by a Party in connection with this Agreement.
4.2.5 Post-Closing Access. Except as otherwise expressly provided
herein, from and after the Closing Date, Buyer and Seller shall
reasonably cooperate and afford each other or cause to be afforded to
their respective officers, employees, accountants and other
representatives access, upon reasonable notice, during business hours
with respect to the facility to which access has been requested, to
review and copy the books, documents, databases, or other records
relating to the Assets (which books, documents, databases, records, or
employees files or other information the Parties shall cooperate and
assist one
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another in identifying and locating), interview, depose or seek
testimony of employees, provide assistance in proceedings with
employees as witnesses or advisors, investigate the physical premises,
take photographs or videotapes, identify employees and contractors with
knowledge of any matter which is the subject of a claim for which a
Party has responsibility and make such employees available to such
Party and provide reasonable office space to do any of the foregoing in
connection with any matter affecting or alleged to affect the Party
requesting such access.
4.2.6 Employee Matters. Subject to the Trade Secrets Agreement between
Target and Buyer, Buyer shall have the right to solicit the employees
of Target or of any Affiliate of Seller who work directly on or in
connection with the Target ("Employees"), and shall have the right to
offer employment to and hire any Employees. If Buyer hires any
Employee, the terms of employment shall be at Buyer's discretion.
4.2.7 Further Assurances. Each Party shall, from time to time at the
request of the other, and without further consideration, execute and
deliver such other instruments of sale, transfer conveyance,
assignment, clarification and termination and take such other action as
the Party making the request may require to effect the intentions of
the Parties, including those required to sell, transfer, convey and
assign to, and vest in Buyer, and to place Buyer in possession of the
Assets, and to give Buyer full and unencumbered rights of ownership,
operation, use, possession, and enjoyment of the Assets. Seller intends
to convey all the stock of Target at Closing.
4.2.8 Files Transfer. Seller shall deliver to Buyer the originals of
all the files and records relating to the Target. Seller shall have the
right to make copies of all originals. For five years after Closing,
Seller shall have the right, during regular business hours, and at its
expense, to inspect and copy the files and records relating to the
Target.
4.2.9 Post-Closing Covenants. The parties agree as follows with
respect to the period following the Closing:
(a)General. In case at any time after the Closing any
further action is necessary or desirable to carry out
the purposes of this Agreement, each of the Parties
will take such further action (including the
execution and delivery of such further instruments
and documents) as any other Party reasonably may
request, all at the sole cost and expenses of the
requesting Party (unless the requesting Party is
entitled to indemnification thereof under section VI
below). The Seller acknowledges and agrees that from
and after the Closing the Buyer will be entitled to
possession of all documents, books, records
(including Tax records), agreements, and financial
data of any sort relating to Target.
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(b)Covenant Not to Compete. For a period of two years
from and after the Closing Date, (i) the Seller will
not engage directly or indirectly in any business
that Target conducts as of the Closing Date within
200 miles of any office in which Target conducts that
business as of the Closing Date.
(c)Consulting Services. Sellers shall remain
available for consultation at compensation mutually
agreed by the parties for a period of 180 days
following the Closing.
Article V
Taxes
5.1 Tax Proceedings. If Buyer or any of Buyer's Affiliates receives
notice of any examination, claim, adjustment or other proceeding
relating to the liability for Taxes of or with respect to Seller for
any period Seller is or may be liable under this Agreement, Buyer shall
notify Seller in writing within 20 days of receiving notice thereof. As
to any such Taxes for which Seller is or may be liable under this
Agreement, Seller shall at Seller's expense control or settle the
contest of such examination, claim, adjustment or other proceeding, and
shall indemnify Buyer against all Losses in connection therewith. The
Parties shall cooperate with each other and with their respective
Affiliates in the negotiation and settlement of any proceeding
described in this Article. Buyer shall provide, or cause to be
provided, to Seller necessary authorizations, including powers of
attorney, to control any proceeding which Seller is entitled to control
pursuant to this Article.
Article VII
Indemnity
6.1 Indemnification by Seller. Seller shall indemnify, defend and hold
harmless Buyer from and against all Losses based upon, arising out of,
in connection with, or relating to:
6.1.1 any breach of any representation, warranty, covenant or agreement
of Seller contained in this Agreement;
6.1.2 any matter arising in connection with the ownership, possession,
use, enjoyment, or operation of the Target prior to the Effective Date;
6.1.3 any claim of any Third Party to any right to ownership,
possession, use, enjoyment, or operation of the Target arising prior to
the Effective Date;
6.1.4 any matter relating to the Employees and relating to periods
prior to the Effective Date; and
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6.1.5 all actions, proceedings, claims, litigation, arbitration,
mediation or other dispute resolution procedure pending as of the
Effective Date relating to or affecting the Target.
6.1.1
6.2 Indemnification by Buyer. Buyer shall indemnify, defend and hold
harmless Seller from and against all Losses based upon, arising out of,
in connection with, or relating to:
6.2.1 any breach of any representation, warranty, covenant or agreement
of Buyer contained in this Agreement;
6.2.2 if the Closing occurs, any matter arising in connection with the
ownership, possession, use, enjoyment, or operation of the Target on or
after the Effective Date;
6.2.3 Buyer's inspection of the Target; and
6.2.4 any matter relating to the Employees and relating to periods
after the Effective Date.
6.3 Method of Asserting Claims. All claims for indemnification under
this Agreement shall be asserted and resolved as follows:
6.3.1 Third Person Claims. If any claim for which a Party providing
indemnification (the "Indemnifying Party") would be liable to a Party
or any of its officers, directors, employees, agents or representatives
entitled to indemnification hereunder (the "Indemnified Party") is
asserted against or sought to be collected by a Third Person, the
Indemnified Party shall promptly notify the Indemnifying Party of such
claim, specifying the nature of such claim and the amount or the
estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim) (the "Claim
Notice"). The Indemnifying Party shall have 30 days from its receipt of
the Claim Notice (the "Notice Period") to notify the Indemnified Party
(a)whether or not it disputes its liability to the
Indemnified Party hereunder with respect to such
claim, and
(b)if it does not dispute such liability, whether or
not it desires, at its sole cost and expense, to
defend the Indemnified Party against such claim;
provided, however, that the Indemnified Party is
hereby authorized prior to and during the Notice
Period to file any motion, answer or other pleading,
submission or document which it shall deem necessary
or appropriate to protect its interests. If the
Indemnifying Party notifies the Indemnified Party
within the Notice Period that it does not dispute
such liability and desires to defend against such
claim or demand, then, except as hereinafter
provided, the Indemnifying Party shall have the right
to defend such claim or demand by appropriate
proceedings, which proceedings shall be promptly
settled or
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prosecuted to a final conclusion, in such a manner as
to avoid any risk of the Indemnified Party becoming
subject to liability. If the Indemnified Party
desires to participate in, but not control, any such
defense or settlement, it may do so at its own cost
and expense. If the Indemnifying Party disputes its
liability with respect to such claim, or elects not
to defend against such claim, whether by not giving
timely notice as provided above or otherwise, the
Indemnified Party shall have the right but not the
obligation to defend against such claim, and the
amount of any such claim, or if the same be contested
by the Indemnifying Party or by the Indemnified
Party, then that portion thereof as to which such
defense is unsuccessful, shall be conclusively deemed
to be a liability of the Indemnifying Party hereunder
(subject, if it has timely disputed liability, to a
determination in accordance with this Agreement that
the disputed liability is covered by this Article).
(c)Other Claims. In the event that the Indemnified
Party shall have a claim against the Indemnifying
Party hereunder which does not involve a claim or
demand being asserted against or sought to be
collected from it by a Third Person, the Indemnified
Party shall promptly send a Claim Notice with respect
to such claim to the Indemnifying Party. If the
Indemnifying Party does not notify the Indemnified
Party within the Notice Period that it disputes such
claim, the amount of such claim shall be conclusively
deemed a liability of the Indemnifying Party
hereunder.
6.4 Payment. Payments in regard to Third Person claims under this
Agreement shall be made as follows:
6.4.1 Payment of Undisputed Amount. If the Indemnifying Party is
required to make any payment, the Indemnifying Party shall promptly pay
the Indemnified Party the amount so determined. If there should be a
dispute as to the amount or manner of determination of any indemnity
obligation owed, the Indemnifying Party shall nevertheless pay when due
such portion, if any, of the obligation as shall not be subject to
dispute. Upon the payment in full of any claim, the Indemnifying Party
shall be subrogated to the rights of the Indemnified Party against any
Person or other entity with respect to the subject matter of such
claim.
6.4.1 Interest. If all or part of any indemnification obligation under
this Agreement is disputed or is otherwise not paid when due, then upon
resolution of the claim the Indemnifying Party shall pay on demand to
the Indemnified Party interest at the Agreed Rate on that part of the
obligation for each day from the date the amount became due until
payment in full.
6.4.2 Disputed Claims. If the Indemnifying Party shall notify the
Indemnified Party during the Notice Period that it disputes any claim
for indemnification (the "Disputed
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Claim"), the Disputed Claim shall be subject to the dispute resolution
procedures provided in this Agreement.
6.4.1
Article VII
Conditions Precedent
7.1 Conditions Precedent of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject
to the following conditions:
7.1.1 Representations and Warranties True at Closing. The
representations and warranties of Seller contained in this Agreement or
in any certificate or document delivered pursuant to the provisions
hereof, or in connection with the transaction contemplated hereby, were
true and complete when made, and shall be true and complete on and as
of the Closing Date as though such representations and warranties were
made at and as of such date except as otherwise expressly provided
herein.
7.1.2 Compliance with Agreement. On and as of the Closing Date, Seller
and Target shall have performed and complied with all agreements,
covenants, and conditions required by this Agreement to be performed
and complied with prior to or on the Closing Date.
7.1.3 Approval of Proceedings. All actions, proceedings, instruments
and documents required of Seller to carry out this Agreement, or
incidental thereto, and all other related legal matters shall have been
approved by William Vincent Walker, as counsel for Buyer, which
approval shall not be unreasonably withheld.
7.1.4 Opinion of Counsel. There shall have been delivered to Buyer the
opinion of Clyde Wright, Jr., as counsel for Seller, dated the Closing
Date and in the form set forth on Exhibit F.
7.1.5 Conveyance. Seller shall execute, acknowledge and deliver to
Buyer such other documents as may be necessary to carry out the purpose
of this Agreement.
7.1.6 No Material Adverse Change. There shall not have occurred with
respect to Target any material adverse change in the condition or value
thereof other than changes in the ordinary course of business and there
has been no material adverse changes resulting from events or
circumstances that affect the financial markets.
7.2 Conditions Precedent of Seller. The obligations of Seller to
consummate the transactions contemplated by this Agreement are subject
to the following conditions:
7.2.1 Representations and Warranties True at Closing. The
representations and warranties of Buyer contained in this Agreement or
in any certificate or document
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delivered pursuant to the provisions hereof, or in connection with the
transactions contemplated hereby, were true and complete when made, and
shall be true and complete on and as of the Closing Date as though such
representations and warranties were made at and as of such date except
as otherwise expressly provided herein.
7.2.2 Compliance with Agreement. On and as of the Closing Date, Buyer
shall have performed and complied with all agreements, covenants, and
conditions required by this Agreement to be performed and complied with
prior to or on the Closing Date.
7.2.3 Certified Resolutions and Officers' Certificate. Buyer shall
have delivered to Seller
(a)a certificate dated the Closing Date signed by the
Secretary of Buyer with respect to the action of
Buyer's Board of Directors authorizing the
transactions contemplated by this Agreement in
accordance with Buyer's Corporate Documents, and
(b)a certificate dated the Closing Date and signed by
the President of Buyer certifying in such detail as
Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.2.1 and 7.2.2.
7.2.4 Approval of Proceedings. All actions, proceedings, instruments
and documents required for Buyer to carry out this Agreement, or
incidental thereto, and all other related legal matters shall have been
approved by Clyde Wright, Jr., as counsel for Seller, which approval
shall not be unreasonably withheld.
7.2.5 Opinion of Counsel. There shall have been delivered to Seller an
opinion of William Vincent Walker, dated the Closing Date and in the
form set forth on Exhibit E.
7.2.6 Injunction. On the Closing Date, there shall be no injunction,
writ, or preliminary restraining order or any order of any nature
issued by a court or other Governmental Body of competent jurisdiction
directing that the transactions provided for herein or any of them not
be consummated as herein provided or imposing any conditions on the
consummation of the transactions contemplated hereby and no material
proceeding or lawsuit shall have been commenced or threatened by any
Governmental Body or other Person with respect to any of the
transactions contemplated by this Agreement.
7.2.7 Conveyance. Buyer shall execute, acknowledge and deliver to
Seller such documents as may be necessary to carry out the purposes of
this Agreement.
Article VIII
Miscellaneous
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8.1 Notices. All notices, consents, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to
have been duly given or delivered if
8.1.1 delivered by hand,
8.1.2 delivered by a recognized overnight commercial courier (receipt
requested), or
8.1.3 sent by telecopier (with receipt confirmed), provided that a copy
is promptly thereafter mailed in the United States by first-class
postage prepaid mail,
to the Party as follows (or to such other address as any Party shall
have last designated by 15 days' notice to the other Parties).
If to Seller:
Dickie McGehee
P.O. Box 4037
Alice, Texas 7332
Telecopier: (512) 668-1170
If to Buyer:
Frank Moss
2450 South Shore Boulevard, Suite 210
League City, Texas 77573
Telecopier: (281) 535-0410
A notice shall also be deemed given if an original, photocopy or facsimile is
actually received by the Persons designated to receive notice, regardless of the
manner of transmission.
8.2 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the Laws of the State of Texas, with
venue established in the State Courts of Harris County, Texas, and the
United States District Court for the Southern District of Texas
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8.3 Assignment. This Agreement and the rights and obligations created
hereunder shall not be assigned prior to Closing by either Party except
that Buyer may assign its rights to a single Affiliate of Buyer
provided Buyer remains primarily liable for the performance of all
obligations hereunder. Subsequent to Closing either Party may assign
their obligations hereunder to an Affiliate provided the Party remains
primarily liable for the performance of the Party's obligations
hereunder. Subsequent to Closing neither Party may assign its rights or
interests under this Agreement except in connection with a sale of all
or substantially all of Target Shares or in connection with a merger or
similar transaction.
8.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
8.5 Invalidity. If any of the provisions of this Agreement including
the Exhibits is held invalid or unenforceable, such invalidity or
unenforceability shall not affect in any way the validity or
enforceability of any other provision of this Agreement. In the event
any provision is held invalid or unenforceable, the Parties shall
attempt to agree on a valid or enforceable provision which shall be a
reasonable substitute for such invalid or unenforceable provision in
light of the tenor of this Agreement and, on so agreeing, shall
incorporate such substitute provision in this Agreement.
8.6 Entire Agreement and Construction. This Agreement contains the
entire agreement between the Parties with respect to the transactions
contemplated hereby and all prior understandings and agreements shall
merge herein. There are no additional terms, whether consistent or
inconsistent, oral or written, which are intended to be part of the
Parties' understandings which have not been incorporated into this
Agreement and the Exhibits which have been incorporated herein by
reference. The Parties agree that they have jointly participated in the
drafting and preparation of this Agreement and that the language of
this Agreement shall be construed as a whole according to its fair
meaning and not strictly for or against any of the Parties hereto.
8.7 Expenses. Except as otherwise expressly provided herein, each Party
shall bear its fees, costs and expenses in connection with the
transactions contemplated herein, including, without limitation, all
legal and accounting fees and disbursements and fees and expenses of
other advisors retained by such Party.
8.8 Waivers and Amendments. All amendments and other modifications
hereof shall be in writing and signed by each of the Parties. Either
Party may by written instrument
8.8.1 waive any inaccuracies in any of the representations or
warranties made to it by any other Party contained in this Agreement or
in any instruments and documents delivered to it pursuant to this
Agreement;
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8.8.2 waive compliance or performance by the other Party with or of any
of the covenants or agreements made to it by the other Party contained
in this Agreement; or
8.8.3 waive any of its conditions precedent to Closing;
The delay or failure on the part of a Party hereto to insist, in any
one instance or more, upon strict performance of any of the terms or
conditions of this Agreement, or to exercise any right or privilege
herein conferred shall not be construed as a wavier of any such terms,
conditions, rights or privileges but the same shall continue and remain
in full force and effect. All rights and remedies are cumulative. The
waiver of a condition to Closing by a Party regarding a warranty,
representation or covenant shall not constitute a waiver or a breach of
such warranty, representation or covenant; provided, however, that the
Parties shall attempt in good faith to agree prior to closing upon the
resolution of a breach of a representation or warranty that arises
after the date of this Agreement which could result in liability to the
breaching Party and of which the other Party has actual Knowledge, and
if the Parties cannot agree upon a resolution, the breach shall be
deemed waived if the Closing occurs.
8.9 Survival of Warranties, Representations and Covenants. All
representations and warranties contained in this Agreement shall
survive the Closing and continue with respect to claims made on or
before two years following the Closing Date. The covenants, indemnities
and agreements contained in this Agreement shall survive the Closing
and continue in accordance with their respective terms.
8.10 Section Headings. The section headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or
affect the interpretation of any provision thereof.
8.11 Termination. This Agreement may be terminated
8.11.1 by mutual written consent of the Parties at any time prior to
the Closing;
8.11.2 by Buyer by notice to Seller given on or before the Closing
Date, if Buyer shall discover any material fact or condition existing
on the date of such variance with any of the representations and
warranties of Seller contained in this Agreement; or
8.11.3 by Buyer by notice to Seller given on or before the Closing
Date, if Buyer is not satisfied, in its sole and absolute discretion,
with the condition, location, ownership, encumbrance, title or
existence of the property and business of Target necessary to obtain
the full and unencumbered ownership, operation, possession, use, and
enjoyment of the business of Target, or with the conditions, restraints
or restrictions on Target.
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8.11.4 by Seller or Buyer if the Closing shall not have occurred on or
before February 27, 1998, other than through the fault of the
terminating Party.
Upon any termination the Parties shall have no further obligations
under this Agreement, except that the provisions of Section 8.1 through
8.8, 8.10, and 8.12 shall remain in full force and effect.
8.12 Dispute Resolution. Except as expressly provided to the contrary
in this Agreement, the parties shall submit every dispute relating to
this Agreement to binding arbitration as follows:
8.12.1 Selection of Arbitrator. The Parties shall use reasonable
efforts to select a mutually acceptable arbitrator. If the Parties fail
to agree on an arbitrator within 15 days, either Party may request the
judge of the United States District Court for the Southern District of
Texas having greatest tenure, but not yet on retired or senior status,
to appoint an arbitrator. If that
8.12.2 Qualifications of Arbitrator. Each arbitrator shall be
knowledgeable about matters affecting the issue(s) for which such
arbitrator is appointed (and where applicable, shall be a professional
in the matter of dispute) or shall be a former member of the Texas or
federal judiciary, and shall be required to meet the qualification
requirements of the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA Rules"). If prior to rendering a
decision an arbitrator resigns or becomes unable to serve, the
arbitrator will be replaced using the mechanism set forth herein.
8.12.3 Suit Prohibited. No Party will commence or prosecute any suit or
action against another Party other than as may be necessary to compel
arbitration or to enforce the award of an arbitrator.
8.12.4 Damages. The arbitrator shall not have any authority to award
consequential, exemplary or punitive damages. The sole forum for the
arbitration shall be Harris County, Texas, and all hearings shall be
conducted in Harris County, Texas.
8.12.5 Decision. The decision of the arbitrator shall be rendered in
writing and shall be final and binding upon the Parties. Any Party
shall have the right to entry of judgment, by any court of competent
jurisdiction, upon the decision of the arbitrator. Unless declared
otherwise by the arbitrator:
(a) the expenses of arbitration, including compensation to
the aribtrator, shall be borne equally by the Parties;
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(b) each Party shall bear the compensation and
expenses of its own counsel, witnesses and employees;
and
(c) if the testimony of a witness is obtained by both
Parties, the costs associated with obtaining such
testimony shall be borne equally between the Parties.
8.12.6 AAA Rules. Matters not specifically provided for herein shall be
governed by the AAA Rules on procedure matters and by laws of the State
of Texas and United States of America on substantive law matters.
IN WITNESS WHEREOF, the Parties hereto have entered into this
Agreement as of the date first herein above written.
SELLER: BUYER:
SYNAPTIX SYSTEMS CORPORATION
Dickie McGehee
By
Denise McGehee
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Exhibit 2.1.1
PROMISSORY NOTE
$3,024,000.00 Alice, Texas March 12, 1998
FOR VALUE RECEIVED, the undersigned SYNAPTIX SYSTEMS CORPORATION
(hereinafter called "Maker"), promisses to pay to the order of Dickie McGehee
and Denise McGehee (hereinafter called "Payee"), at Alice Texas, in lawful money
of the United States of America, the sum of THREE MILLION TWENTY FOUR THOUSAND
and NO/100 $3,024,000.00) with no interest on unpaid balance from date of this
Note until maturity. All past due principle shall bear interest at twelve
percent (12%) per annum. Past due interest shall be computed on a per annum
basis of a year of 365 days and for the actual number of days (including the
first but excluding the last day) elapsed.
This note shall be due and payable as follows, to wit:
Principal in full is payable on or before July 13, 1998, as follows:
Payee, at its election, may demand any cash sum up to
$1,000,000 payable against the principal with the balance of
the principal discharged by delivery of common stock of Maker
valued on the last trading day before the maturity or payment
date as the mean between the average closing bid and ask price
reported by the market makers for the common stock, but the
value per share credited against the note shall not exceed
$2.50 per share. Payee shall give Maker notice 20 days before
maturity of the amount of cash to be demanded.
Maker promises to pay to the order of Payee at Alice, Texas, according
to the terms of payment the principal amount. Maker can prepay (advance the
maturity) of this Note with 10 days' prior notice to payee.
If Maker defaults in the payment of this note or in the performance of
any obligation in any instrument securing it, and the default continues after
Payee gives Maker notice of the default and the time within which it must be
cured, as may be required by law or by written agreement, then payee may declare
the unpaid principal balance and earned interest on this note immediately due.
Maker and each surety, endorser, and guarantor waive all demands for payment,
presentations for payment, notices of intention to accelerate maturity, notices
of acceleration of maturity, protests, and notices of protest, to the extent
permitted by law.
If this note is given to an attorney for collection or enforcement, or
if suit is brought for collections or enforcement, or if it is collected or
enforced through probate bankruptcy, or other
28
<PAGE>
judicial proceeding, then Maker shall pay Payee all costs of collections and
enforcement, including reasonable attorney's fees and court costs, in addition
to other amounts due.
Interest on the debt evidenced by this Note shall not exceed the
maximum amount of nonusurious interest that may be contracted for, taken,
reserved, charged, or received under law; any interest in excess of that maximum
amount shall be credited on the principal of the debt or, if that has been paid,
refunded. On any acceleration or required or permitted prepayment, any such
excess shall be canceled automatically as of the acceleration or prepayment or,
if already paid, credited on the principal of the debt or, if the principal of
the debt has been paid, refunded. This provision overrides other provisions in
this and all other instruments concerning the debt.
When the context requires, singular nouns and pronouns include the
plural.
This note shall be construed under and governed by the laws of the
State of Texas.
Wherefore, intended to be legally bound hereby, Maker has executed this
note this 12th day of March, 1998.
Maker
Synaptix Systems Corporation
/s/ Peter Vanucci
Peter Vanucci, chairman / CEO
29
<PAGE>
Exhibit 4
SYNAPTIX SYSTEMS CORPORATION
EMPLOYEE STOCK OPTION AGREEMENT
This Agreement is made effective as of the 13th day of May, 1998 (the
"Option Grant Date"), by and between SYNAPTIX SYSTEMS CORPORATION (the
"Company") and PETER C. VANUCCI (the "Optionee").
RECITALS
WHEREAS, the Board of Directors of the Company has established the
Synaptix Systems Corporation 1997 Incentive Stock Option Plan (the "Plan"); and
WHEREAS, pursuant to the provisions of said Plan, the Board of
Directors of the Company, by action duly taken on May 13, 1998, granted to the
Optionee an option or options (the "Option(s)") to purchase up to 1,000,000
shares of the common stock of the Company on the terms and conditions set forth
herein, and further, that such grant of options shall be for a period of five
(5) years wherein said Optionee shall have the right to purchase said shares,
even in the event of resignation as a member of the board of directors, as the
shares were granted to Optionee in consideration of Mr. Vanucci's acceptance of
employment as Chief Executive Officer, in addition to his election as Chairman
of the Board of Directors, in accordance with a resolution that was adopted by
the board of directors on May 13, 1998.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. The Option(s). The Optionee may, at his option and on the terms and
conditions set forth herein, purchase all or any part of an aggregate of One
Million (1,000,000) shares of common stock under the Plan, at the price of $.50
per share.
2. Plan Type and Exercise Dates. The Options (if more than one) are
intended as separate incentive stock options. The Option(s) shall be exercisable
at the option price(s) as to the specific number of shares on and after the
"Start" dates and on or before the "Terminate" dates set forth below:
Numbers of Option Exercise Dates
Shares Price Start Date Termination Date
1,000,000 $.50 May 13, 1998 May 13, 2003
Optionee acknowledges that he understands that he has no right
whatsoever to exercise the Option(s) granted hereunder with respect to any
optioned shares covered by any installment, until
30
<PAGE>
such installment accrues as provided above. Optionee further understands that
the Option(s) granted hereunder shall expire and become unexercisable as
provided in Section 3c below.
3. Governing Plans. This Agreement hereby incorporates by reference the
Plan and all of the terms and conditions of the Plan and as the same may be
amended from time to time hereafter in accordance with the terms thereof, but no
such subsequent amendment shall adversely affect the Optionee's rights under
this Agreement and the Plan, except as may be required by applicable law. The
Optionee expressly acknowledges and agrees that the provisions of this Agreement
are subject to the Plan; the terms of this Agreement shall in no manner limit or
modify the controlling provisions of the Plan, and in case of any conflict
between the provisions of the Plan and this Agreement, the provisions of the
Plan shall be controlling and binding upon the parties hereto. The Optionee also
hereby expressly acknowledges, represents and agrees as follows:
(a) Acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto and by reference, incorporated herein, and
represents that he is familiar with the terms and provisions
of said Plan, and hereby accepts this Agreement, subject to
all of the terms and provisions of said Plan, with the
exception that the Optionee shall have the right to exercise
said options for a period of five (5) years, notwithstanding
the resignation of said director during the five year period.
(b) Agrees to accept as binding, conclusive and final, all
decisions or interpretations of the Board of Directors (or the
Committee, if so authorized) upon any questions arising under
the Plan.
(c) Acknowledges that he is familiar with Section 7 of the Plan
regarding the exercise of the Option(s) and represents that he
understands that said Option(s) must be exercised on or before
the earliest of the following dates, whichever is applicable: (I)
the "Terminate" date noted above in Section 2; (ii) the day prior
to the fifth anniversary of the Option(s) Grant Date, as provided
in Section 7(b) of the Plan; (iii) the Effective Date of a sale
or other disposition of all or substantially all of the stock or
assets of the Company, as provided in Subsection 7(c) of the
Plan; (iv) the date which is 30 days prior to the Optionee's
fifth anniversary of the Options Grant Date, other than death or
total and permanent disability, as provided under Subsection 7(d)
of the Plan; or (v) the date that is one year following his
death. or the date that is one year following his total and
permanent disability, whichever is applicable, as provided in
Subsection 7(e) of the Plan.
(d) Acknowledges and understands that the use by Optionee of
Company Stock to pay the exercise price of an Option, as
permitted by Section 4 of this Agreement, may have significant
adverse tax consequences for Optionee, and that Optionee
should consult with a knowledgeable tax advisor prior to
utilizing Company Stock to exercise an Option.
31
<PAGE>
4. Exercise. In order to exercise an Option, the Optionee shall deliver
a written notice of exercise to the Company at its principal business office,
which notice shall specify the number of shares purchased and shall be
accompanied by payment in cash or check, made payable to the order of the
Company in the full amount of the purchase price of the shares to be purchased.
5. Representation and Warranties. As a condition to the exercise of any
portion of an Option, the Company may require the person exercising such Option
to make any representation and/or warranty to the Company as may, in judgment of
Counsel to the Company, be required under any applicable law or regulation,
including but not limited to, a representation and warranty that the shares are
being acquired only for investment and without any present intention to sell or
distribute such shares, in the opinion of counsel for the Company, such a
representation is required under the Securities Act of 1933, or any other
applicable law, regulation or rule of any governmental agency.
6. Options Not Transferable. The Option(s) may be exercised during the
lifetime of the Optionee, only by the Optionee. The Optionee's rights and
interests under this Agreement and in and to the Option (s) may not be sold,
pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred in
any manner, either voluntarily or involuntarily, by operation of law, except by
will or the laws of descent or distribution, subject to the provisions of
Section 7(e) of the Plan.
7. No Enlargement of Employee Rights. Nothing in this Agreement shall
be construed to confer upon the Optionee (if any employee) any right to continue
employment with the Company (or an Affiliated Company), or to restrict in any
way the right of the Company (or an Affiliated Company, if he is an employee
thereof) to terminate his employment.
8. Withholding of Taxes. Subject to any election by Optionee to deliver
stock owned by Optionee or to withhold shares of stock exercised pursuant to
such option to satisfy such withholding obligation, Optionee authorizes the
Company to withhold, in accordance with any applicable law, from any
compensation payable to him, any taxes required to be withheld by Federal, State
or local law, as a result of the Grant of the Option(s) or the issuance of
stock, pursuant to the exercise of such Option(s).
9. Laws Applicable to Construction. This Agreement shall be construed
and enforced in accordance with the laws of the State of Texas.
10. Agreement Binding on Successors. The terms of this Agreement shall
be binding upon the executors, administrators, heirs, successors, transferees
and assignees of the Optionee.
32
<PAGE>
11. Costs of Litigation. In any action at law or in equity to enforce
any of the provisions or rights under this Agreement or the Plan, the
unsuccessful party to such litigation, as determined by the Court in a final
judgment or decree, shall pay the successful party or parties all costs,
expenses an reasonable attorney's fees incurred by the successful party or
parties (including without limitation, costs, expenses and fees on any appeals),
and if the successful party recovers judgment in any such action or proceeding,
such costs, expenses and attorney's fees shall be included as part of the
judgment .
12. Necessary Acts. The Optionee agrees to perform all acts and execute
and deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement, including but not limited to, all acts and
documents related to compliance with Federal and/or State securities laws.
13. Counterparts. For convenience, this Agreement may be executed in
any number of identical counterparts, each of which shall be deemed a complete
original in itself, and may be introduced in evidence or used for any other
purpose without the production of any counterparts.
14. Invalid Provisions. In the event that any provision of this
Agreement is found to be invalid or otherwise unenforceable under any applicable
law, such invalidity or unenforceability shall not be construed as rendering any
other provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision was not contained herein.
IN WITNESS WHEREOF, the Company and the Optionee have executed
this Agreement, effective as of the date first written hereinabove.
SYNAPTIX SYSTEMS CORPORATION OPTIONEE
By:
Peter C. Vanucci, Peter C. Vanucci
Title: Chairman and CEO
Three Brecksville Commons
8221 Brecksville Road, Suite 207
Brecksville, Ohio 44141
By:
Virginia M. Lazar
Title: Secretary
33
<PAGE>
SPOUSAL CONSENT
By his or her signature below, the spouse of the Optionee, if such
Optionee be legally married as of the date of his execution of this Agreement,
acknowledges that he or she has read this Agreement and Plan, and is familiar
with the terms and provisions thereof, and agrees to be bound by all of the
terms and conditions of said Agreement and said Plan document.
Dated:
Spouse
REPRESENTATION OF MARITAL STATUS
By his or her signature below, the Optionee represents that he or she
is not legally married as of the date of execution of this Agreement.
Dated:
Optionee
34
<PAGE>
Exhibit 4.1
SYNAPTIX SYSTEMS CORPORATION
EMPLOYEE STOCK OPTION AGREEMENT
This Agreement is made effective as of the 13th day of May, 1998 (the
"Option Grant Date"), by and between SYNAPTIX SYSTEMS CORPORATION (the
"Company") and VIRGINIA M.
LAZAR (the "Optionee").
RECITALS
WHEREAS, the Board of Directors of the Company has established the Synaptix
Systems Corporation 1997 Incentive Stock Option Plan (the "Plan"); and
WHEREAS, pursuant to the provisions of said Plan, the Board of Directors of
the Company, by action duly taken on May 13, 1998, granted to the Optionee an
option or options (the "Option(s)") to purchase up to 500,000 shares of the
common stock of the Company on the terms and conditions set forth herein, and
further, that such grant of options shall be for a period of five (5) years
wherein said Optionee shall have the right to purchase said shares, even in the
event of resignation as a member of the board of directors, as the shares were
granted to Optionee in consideration of Ms. Lazar's acceptance of employment as
Executive Vice President and Corporate Secretary, in accordance with a
resolution that was adopted by the board of directors on May 13, 1998.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. The Option(s). The Optionee may, at his option and on the terms and
conditions set forth herein, purchase all or any part of an aggregate of Five
Hundred Thousand (500,000) shares of common stock under the Plan, at the price
of $.50 per share.
2. Plan Type and Exercise Dates. The Options (if more than one) are
intended as separate incentive stock options. The Option(s) shall be exercisable
at the option price(s) as to the specific number of shares on and after the
"Start" dates and on or before the "Terminate" dates set forth below:
Numbers of Option Exercise Dates
Shares Price Start Date Termination Date
500,000 $.50 May 13, 1998 May 13, 2003
Optionee acknowledges that he understands that he has no right whatsoever
to exercise the Option(s) granted hereunder with respect to any optioned shares
covered by any installment, until
35
<PAGE>
such installment accrues as provided above. Optionee further understands that
the Option(s) granted hereunder shall expire and become unexercisable as
provided in Section 3c below.
3. Governing Plans. This Agreement hereby incorporates by reference the
Plan and all of the terms and conditions of the Plan and as the same may be
amended from time to time hereafter in accordance with the terms thereof, but no
such subsequent amendment shall adversely affect the Optionee's rights under
this Agreement and the Plan, except as may be required by applicable law. The
Optionee expressly acknowledges and agrees that the provisions of this Agreement
are subject to the Plan; the terms of this Agreement shall in no manner limit or
modify the controlling provisions of the Plan, and in case of any conflict
between the provisions of the Plan and this Agreement, the provisions of the
Plan shall be controlling and binding upon the parties hereto. The Optionee also
hereby expressly acknowledges, represents and agrees as follows:
(a) Acknowledges receipt of a copy of the Plan, a copy of which is attached
hereto and by reference, incorporated herein, and represents that he is
familiar with the terms and provisions of said Plan, and hereby accepts
this Agreement, subject to all of the terms and provisions of said
Plan, with the exception that the Optionee shall have the right to
exercise said options for a period of five (5) years, notwithstanding
the resignation of said director during the five year period.
(b) Agrees to accept as binding, conclusive and final, all decisions or
interpretations of the Board of Directors (or the Committee, if so
authorized) upon any questions arising under the Plan.
(c) Acknowledges that he is familiar with Section 7 of the Plan regarding
the exercise of the Option(s) and represents that he understands that
said Option(s) must be exercised on or before the earliest of the
following dates, whichever is applicable: (I) the "Terminate" date
noted above in Section 2; (ii) the day prior to the fifth anniversary
of the Option(s) Grant Date, as provided in Section 7(b) of the Plan;
(iii) the Effective Date of a sale or other disposition of all or
substantially all of the stock or assets of the Company, as provided in
Subsection 7(c) of the Plan; (iv) the date which is 30 days prior to
the Optionee's fifth anniversary of the Options Grant Date, other than
death or total and permanent disability, as provided under Subsection
7(d) of the Plan; or (v) the date that is one year following his death.
or the date that is one year following his total and permanent
disability, whichever is applicable, as provided in Subsection 7(e) of
the Plan.
(d) Acknowledges and understands that the use by Optionee of Company Stock
to pay the exercise price of an Option, as permitted by Section 4 of
this Agreement, may have significant adverse tax consequences for
Optionee, and that Optionee should consult with a knowledgeable tax
advisor prior to utilizing Company Stock to exercise an Option.
4. Exercise. In order to exercise an Option, the Optionee shall deliver a
written notice of exercise to the Company at its principal business office,
which notice shall specify the number of
36
<PAGE>
shares purchased and shall be accompanied by payment in cash or check, made
payable to the order of the Company in the full amount of the purchase price of
the shares to be purchased.
5. Representation and Warranties. As a condition to the exercise of any
portion of an Option, the Company may require the person exercising such Option
to make any representation and/or warranty to the Company as may, in judgment of
Counsel to the Company, be required under any applicable law or regulation,
including but not limited to, a representation and warranty that the shares are
being acquired only for investment and without any present intention to sell or
distribute such shares, in the opinion of counsel for the Company, such a
representation is required under the Securities Act of 1933, or any other
applicable law, regulation or rule of any governmental agency.
6. Options Not Transferable. The Option(s) may be exercised during the
lifetime of the Optionee, only by the Optionee. The Optionee's rights and
interests under this Agreement and in and to the Option (s) may not be sold,
pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred in
any manner, either voluntarily or involuntarily, by operation of law, except by
will or the laws of descent or distribution, subject to the provisions of
Section 7(e) of the Plan.
7. No Enlargement of Employee Rights. Nothing in this Agreement shall be
construed to confer upon the Optionee (if any employee) any right to continue
employment with the Company (or an Affiliated Company), or to restrict in any
way the right of the Company (or an Affiliated Company, if he is an employee
thereof) to terminate his employment.
8. Withholding of Taxes. Subject to any election by Optionee to deliver
stock owned by Optionee or to withhold shares of stock exercised pursuant to
such option to satisfy such withholding obligation, Optionee authorizes the
Company to withhold, in accordance with any applicable law, from any
compensation payable to him, any taxes required to be withheld by Federal, State
or local law, as a result of the Grant of the Option(s) or the issuance of
stock, pursuant to the exercise of such Option(s).
9. Laws Applicable to Construction. This Agreement shall be construed and
enforced in accordance with the laws of the State of Texas.
10. Agreement Binding on Successors. The terms of this Agreement shall be
binding upon the executors, administrators, heirs, successors, transferees and
assignees of the Optionee.
11. Costs of Litigation. In any action at law or in equity to enforce any
of the provisions or rights under this Agreement or the Plan, the unsuccessful
party to such litigation, as determined by the Court in a final judgment or
decree, shall pay the successful party or parties all costs, expenses an
reasonable attorney's fees incurred by the successful party or parties
(including without limitation, costs, expenses and fees on any appeals), and if
the successful party recovers judgment in any such action or proceeding, such
costs, expenses and attorney's fees shall be included as part of the judgment .
37
<PAGE>
12. Necessary Acts. The Optionee agrees to perform all acts and execute and
deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement, including but not limited to, all acts and
documents related to compliance with Federal and/or State securities laws.
13. Counterparts. For convenience, this Agreement may be executed in any
number of identical counterparts, each of which shall be deemed a complete
original in itself, and may be introduced in evidence or used for any other
purpose without the production of any counterparts.
14. Invalid Provisions. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision was not contained herein.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement, effective as of the date first written hereinabove.
SYNAPTIX SYSTEMS CORPORATION OPTIONEE
By:
Peter C. Vanucci, Virginia M. Lazar
Title: Chairman and CEO
18333 Egret Bay Boulevard, Suite 270
Houston, Texas 77058
By:
Virginia M. Lazar
Title: Secretary
38
<PAGE>
SPOUSAL CONSENT
By his or her signature below, the spouse of the Optionee, if such
Optionee be legally married as of the date of his execution of this Agreement,
acknowledges that he or she has read this Agreement and Plan, and is familiar
with the terms and provisions thereof, and agrees to be bound by all of the
terms and conditions of said Agreement and said Plan document.
Dated:
Spouse
REPRESENTATION OF MARITAL STATUS
By his or her signature below, the Optionee represents that he or she
is not legally married as of the date of execution of this Agreement.
Dated: 5/20/98 /s/ Virginia M. Lazar
Optionee
39
<PAGE>
Exhibit 4.2
SYNAPTIX SYSTEMS CORPORATION
EMPLOYEE STOCK OPTION AGREEMENT
This Agreement is made effective as of the 13th day of May, 1998 (the
"Option Grant Date"), by and between SYNAPTIX SYSTEMS CORPORATION (the
"Company") and EDWARD S.
FLEMING (the "Optionee").
RECITALS
WHEREAS, the Board of Directors of the Company has established the Synaptix
Systems Corporation 1997 Incentive Stock Option Plan (the "Plan"); and
WHEREAS, pursuant to the provisions of said Plan, the Board of Directors of
the Company, by action duly taken on May 13, 1998, granted to the Optionee an
option or options (the "Option(s)") to purchase up to 150,000 shares of the
common stock of the Company on the terms and conditions set forth herein, and
further, that such grant of options shall be for a period of five (5) years
wherein said Optionee shall have the right to purchase said shares, even in the
event of resignation as a member of the board of directors, as the shares were
granted to Optionee in consideration of Mr. Fleming's continued employment as
President and Chief Operating Officer, in accordance with a resolution that was
adopted by the board of directors on May 13, 1998.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. The Option(s). The Optionee may, at his option and on the terms and
conditions set forth herein, purchase all or any part of an aggregate of One
Hundred Fifty Thousand (150,000) shares of common stock under the Plan, at the
price of $.50 per share.
2. Plan Type and Exercise Dates. The Options (if more than one) are
intended as separate incentive stock options. The Option(s) shall be exercisable
at the option price(s) as to the specific number of shares on and after the
"Start" dates and on or before the "Terminate" dates set forth below:
Numbers of Option Exercise Dates
Shares Price Start Date Termination Date
150,000 $.50 May 13, 1998 May 13, 2003
Optionee acknowledges that he understands that he has no right whatsoever
to exercise the Option(s) granted hereunder with respect to any optioned shares
covered by any installment, until
40
<PAGE>
such installment accrues as provided above. Optionee further understands that
the Option(s) granted hereunder shall expire and become unexercisable as
provided in Section 3c below.
3. Governing Plans. This Agreement hereby incorporates by reference the
Plan and all of the terms and conditions of the Plan and as the same may be
amended from time to time hereafter in accordance with the terms thereof, but no
such subsequent amendment shall adversely affect the Optionee's rights under
this Agreement and the Plan, except as may be required by applicable law. The
Optionee expressly acknowledges and agrees that the provisions of this Agreement
are subject to the Plan; the terms of this Agreement shall in no manner limit or
modify the controlling provisions of the Plan, and in case of any conflict
between the provisions of the Plan and this Agreement, the provisions of the
Plan shall be controlling and binding upon the parties hereto. The Optionee also
hereby expressly acknowledges, represents and agrees as follows:
(a) Acknowledges receipt of a copy of the Plan, a copy of which is attached
hereto and by reference, incorporated herein, and represents that he is
familiar with the terms and provisions of said Plan, and hereby accepts
this Agreement, subject to all of the terms and provisions of said
Plan, with the exception that the Optionee shall have the right to
exercise said options for a period of five (5) years, notwithstanding
the resignation of said director during the five year period.
(b) Agrees to accept as binding, conclusive and final, all decisions or
interpretations of the Board of Directors (or the Committee, if so
authorized) upon any questions arising under the Plan.
(c) Acknowledges that he is familiar with Section 7 of the Plan regarding
the exercise of the Option(s) and represents that he understands that
said Option(s) must be exercised on or before the earliest of the
following dates, whichever is applicable: (I) the "Terminate" date
noted above in Section 2; (ii) the day prior to the fifth anniversary
of the Option(s) Grant Date, as provided in Section 7(b) of the Plan;
(iii) the Effective Date of a sale or other disposition of all or
substantially all of the stock or assets of the Company, as provided in
Subsection 7(c) of the Plan; (iv) the date which is 30 days prior to
the Optionee's fifth anniversary of the Options Grant Date, other than
death or total and permanent disability, as provided under Subsection
7(d) of the Plan; or (v) the date that is one year following his death.
or the date that is one year following his total and permanent
disability, whichever is applicable, as provided in Subsection 7(e) of
the Plan.
(d) Acknowledges and understands that the use by Optionee of Company Stock
to pay the exercise price of an Option, as permitted by Section 4 of
this Agreement, may have significant adverse tax consequences for
Optionee, and that Optionee should consult with a knowledgeable tax
advisor prior to utilizing Company Stock to exercise an Option.
4. Exercise. In order to exercise an Option, the Optionee shall deliver a
written notice of exercise to the Company at its principal business office,
which notice shall specify the number of
41
<PAGE>
shares purchased and shall be accompanied by payment in cash or check, made
payable to the order of the Company in the full amount of the purchase price of
the shares to be purchased.
5. Representation and Warranties. As a condition to the exercise of any
portion of an Option, the Company may require the person exercising such Option
to make any representation and/or warranty to the Company as may, in judgment of
Counsel to the Company, be required under any applicable law or regulation,
including but not limited to, a representation and warranty that the shares are
being acquired only for investment and without any present intention to sell or
distribute such shares, in the opinion of counsel for the Company, such a
representation is required under the Securities Act of 1933, or any other
applicable law, regulation or rule of any governmental agency.
6. Options Not Transferable. The Option(s) may be exercised during the
lifetime of the Optionee, only by the Optionee. The Optionee's rights and
interests under this Agreement and in and to the Option (s) may not be sold,
pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred in
any manner, either voluntarily or involuntarily, by operation of law, except by
will or the laws of descent or distribution, subject to the provisions of
Section 7(e) of the Plan.
7. No Enlargement of Employee Rights. Nothing in this Agreement shall be
construed to confer upon the Optionee (if any employee) any right to continue
employment with the Company (or an Affiliated Company), or to restrict in any
way the right of the Company (or an Affiliated Company, if he is an employee
thereof) to terminate his employment.
8. Withholding of Taxes. Subject to any election by Optionee to deliver
stock owned by Optionee or to withhold shares of stock exercised pursuant to
such option to satisfy such withholding obligation, Optionee authorizes the
Company to withhold, in accordance with any applicable law, from any
compensation payable to him, any taxes required to be withheld by Federal, State
or local law, as a result of the Grant of the Option(s) or the issuance of
stock, pursuant to the exercise of such Option(s).
9. Laws Applicable to Construction. This Agreement shall be construed and
enforced in accordance with the laws of the State of Texas.
10. Agreement Binding on Successors. The terms of this Agreement shall be
binding upon the executors, administrators, heirs, successors, transferees and
assignees of the Optionee.
11. Costs of Litigation. In any action at law or in equity to enforce any
of the provisions or rights under this Agreement or the Plan, the unsuccessful
party to such litigation, as determined by the Court in a final judgment or
decree, shall pay the successful party or parties all costs, expenses an
reasonable attorney's fees incurred by the successful party or parties
(including without limitation, costs, expenses and fees on any appeals), and if
the successful party recovers judgment in any such action or proceeding, such
costs, expenses and attorney's fees shall be included as part of the judgment .
42
<PAGE>
12. Necessary Acts. The Optionee agrees to perform all acts and execute and
deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement, including but not limited to, all acts and
documents related to compliance with Federal and/or State securities laws.
13. Counterparts. For convenience, this Agreement may be executed in any
number of identical counterparts, each of which shall be deemed a complete
original in itself, and may be introduced in evidence or used for any other
purpose without the production of any counterparts.
14. Invalid Provisions. In the event that any provision of this Agreement
is found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision was not contained herein.
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement, effective as of the date first written hereinabove.
SYNAPTIX SYSTEMS CORPORATION OPTIONEE
By:
Peter C. Vanucci, Edward S. Fleming
Title: Chairman and CEO
18333 Egret Bay Boulevard, Suite 270
Houston, Texas 77058
By:
Virginia M. Lazar
Title: Secretary
43
<PAGE>
SPOUSAL CONSENT
By his or her signature below, the spouse of the Optionee, if such
Optionee be legally married as of the date of his execution of this Agreement,
acknowledges that he or she has read this Agreement and Plan, and is familiar
with the terms and provisions thereof, and agrees to be bound by all of the
terms and conditions of said Agreement and said Plan document.
Dated:
Spouse
REPRESENTATION OF MARITAL STATUS
By his or her signature below, the Optionee represents that he or she
is not legally married as of the date of execution of this Agreement.
Dated:
Optionee
44
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Synaptix Systems Corporation March 31, 1998 financial
statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000817125
<NAME> Synaptix Systems Corporation
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,563
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,375
<PP&E> 108,729
<DEPRECIATION> (21,960)
<TOTAL-ASSETS> 93,144
<CURRENT-LIABILITIES> 810,735
<BONDS> 0
0
0
<COMMON> 46,996
<OTHER-SE> (764,587)
<TOTAL-LIABILITY-AND-EQUITY> 93,144
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 837,621
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (837,667)
<INCOME-TAX> 0
<INCOME-CONTINUING> (837,667)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (837,667)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
