SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: March 8, 2000
LEAPFROG SMART PRODUCTS, INC.
(Exact Name of Registrant as Specified in its Charter)
COLORADO
(State or Other Jurisdiction of Incorporation)
0-20786 84-1076959
(Commission File Number) (I.R.S. Employer Identification Number)
1011 Maitland Center Commons 32751
Maitland, Florida 32751
(Address of Principal Executive Offices) (Zip Code)
(407) 838-0400
(Registrant's Telephone Number, Including Area Code)
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FORWARD LOOKING STATEMENTS
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THIS FORM 8-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY LEAPFROG
SMART PRODUCTS, INC. (HEREINAFTER REFERRED TO AS "LEAPFROG" AND/OR "COMPANY"
AND/OR "REGISTRANT") OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
FIFTEEN U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS
INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF
LEAPFROG AND MEMBERS OF ITS MANAGEMENT TEAM AS WELL AS THE ASSUMPTIONS ON
WHICH SUCH STATEMENTS ARE BASED.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS
ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES,
AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN
FORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE
STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS
FORM 8-K, AND ARE HEREBY INCORPORATED HEREIN BY REFERENCE. THE COMPANY
UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO
REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR
CHANGES TO FUTURE OPERATING RESULTS OVER TIME.
<PAGE>
INFORMATION INCLUDED IN THIS REPORT
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
BACKGROUND INFORMATION
A Plan and Agreement of Merger was executed on October 25, by and among
ALBARA, Leapfrog Merger, Inc., LEAPFROG and Real Provencher, who joined in
the execution of the Agreement for the purpose of making certain covenants
regarding the transaction contemplated therein. ALBARA is a corporation
duly organized and validly existing under the laws of the state of Colorado,
with its registered office at 1560 Broadway, Denver, Colorado 80202, its
principal executive office at 610 South Frazier, Conroe, Texas 77301, and
its phone number is (409) 441-2650; LEAPFROG Merger, Inc. ("Albara
Subsidiary" or the "Merger Surviving Corporation") is a wholly owned
subsidiary of ALBARA duly organized and validly existing under the laws of
the State of Florida, with its registered office located in the city of
Orlando, County of Orange, State of Florida, and its principal executive
office at 101 Maitland Center Commons, Maitland, FL 32751; LEAPFROG is a
corporation duly organized and validly existing under the laws of the state
of Florida, with its registered office located in the city of Orlando,
County of Orange, State of Florida, its principal executive office at 1011
Maitland Center Commons, Maitland, FL 32751, and its phone number is
(407) 838-0400; and Real Provencher is the President of ALBARA.
The respective boards of directors of ALBARA, Albara Subsidiary and LEAPFROG
deemed it desirable and in the best interests of their respective
corporations, for ALBARA to acquire the outstanding capital stock of
LEAPFROG by merging LEAPFROG into Albara Subsidiary in exchange for the
issuance of shares of the common stock of ALBARA and have proposed, declared
advisable and approved such merger (the "LEAPFROG Merger") pursuant to this
Agreement, which Agreement has been duly approved by resolutions of the
respective boards of directors of ALBARA, Albara Subsidiary and LEAPFROG.
This Agreement requires that a shareholders' meeting be called by ALBARA for
the purposes of approving the LEAPFROG Merger prior to closing.
The LEAPFROG Merger shall become effective on the "Effective Date", such
date being the later upon which (i) amended Articles of Incorporation are
filed with the Secretary of State of Colorado and (ii) a Certificate of
Merger is filed with the Secretary of State of Florida. The "Closing Date"
will be on or within one (1) business day of the date the Agreement is
approved by the shareholders of ALBARA.
Effect of LEAPFROG Merger
In all other respects, the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of the Merger Surviving Corporation shall
continue unaffected and unimpaired by the LEAPFROG Merger, and the corporate
identity, existence, purposes, powers, objects, franchises, rights, and
immunities of LEAPFROG shall be wholly merged with and into the Merger
Surviving Corporation, and the Merger Surviving Corporation shall be fully
vested therewith. Accordingly, on the Effective Date, the separate existence
of LEAPFROG, except in so far as continued by statute, shall cease.
The laws of Florida shall continue to govern the Merger Surviving
Corporation. On and after the Effective Date, the articles of incorporation
of LEAPFROG shall be the articles of incorporation of the Merger Surviving
Corporation until further amended in the manner provided by law and in such
articles of incorporation (the "Articles"). On the Effective Date, the
bylaws of LEAPFROG shall be the bylaws of the Merger Surviving Corporation
(the "Restated Bylaws") until altered, amended, or repealed, or until new
bylaws shall be adopted in accordance with the provisions of law, the
Articles, and the Restated Bylaws.
Conversion of LEAPFROG's Stock and Other Securities
On the Effective Date, by virtue of the LEAPFROG Merger each share of
LEAPFROG Common Stock and each LEAPFROG option to purchase LEAPFROG
Common Stock issued and outstanding immediately prior to the Effective Date
shall be converted into the right to receive from ALBARA the following
consideration (in the aggregate, the "LEAPFROG Consideration"):
(i) Issuance of Shares and Options in connection with the LEAPFROG
Merger. The aggregate number of ALBARA Shares of common stock
to be issued or reserved for issuance in connection with the
LEAPFROG merger shall be seven million seven hundred seventy-
five thousand nine hundred ninety-nine (7,775,999). As soon as
practicable after the LEAPFROG Merger becomes effective, ALBARA
shall cause its transfer agent (the "Transfer Agent") to issue
to the shareholders of LEAPFROG, on a pro rata basis, an
aggregate of five million three hundred sixteen thousand
forty-nine (5,316,049) Shares of ALBARA common stock in
exchange for all the existing shares of LEAPFROG stock.
Additionally, on the Effective Date, ALBARA shall issue option
agreements to the option holders of LEAPFROG, on a pro rata
basis, and reserve Shares of ALBARA common stock as a result of
those option agreements totaling two million four hundred
thirty-four thousand nine hundred fifty (2,434,950). In
addition, on the Effective Date, ALBARA shall reserve 25,000
shares of ALBARA common stock for possible issuance in connection
with an existing LEAPFROG Convertible Debt security.
The calculation of pro rata distributions for the purposes of
this section shall be made by dividing the aggregate number of
ALBARA Shares of common stock to be issued or reserved for
issuance in connection with the LEAPFROG merger by the aggregate
number of LEAPFROG Shares of common stock issued or reserved as
a result of options, warrants, convertible securities or other
commitments. No other issuance of securities is required to
effect the LEAPFROG Merger.
(ii) Fractional Interests. No fractional shares of common stock
of ALBARA or certificate or scrip representing the same shall
be issued. In lieu thereof each holder of LEAPFROG Shares or
LEAPFROG Options having a fractional interest arising upon
such conversion will be rounded up into one full additional share
of ALBARA common stock;
(iii) Status of Common Stock. All Shares of common stock of ALBARA
into which LEAPFROG Shares are converted as herein provided
shall be fully paid and non-assessable and shall be issued in
full satisfaction of all rights pertaining to such Shares;
LEAPFROG Shareholder Dissenter's Rights
The Board of Directors of LEAPFROG shall establish the value of LEAPFROG's
Shares prior to the LEAPFROG Merger, and shall afford to the shareholders of
LEAPFROG all of the rights, and implement the procedures for protection of
dissenters' rights, pursuant to the provisions of the Florida Generally accepted
accounting principles, and the capital surplus and retained earnings
accounts of the Merger Surviving Corporation shall be determined, in
accordance with generally accepted accounting principles, by the board of
directors of the Merger Surviving Corporation. Nothing herein shall prevent
the board of directors of the Merger Surviving Corporation from making any
future changes in its accounts in accordance with law.
The LEAPFROG Merger is intended to qualify as a tax free forward triangular
merger transaction described in Sec. 368(a)(2)(D) of the Internal Revenue
Code of 1986, as amended (the "Code") to the shareholders of LEAPFROG.
At the Closing, (a) LEAPFROG shall deliver to ALBARA a statement (in such
form as may be reasonably requested by counsel to ALBARA) conforming to the
requirements of Section 1.897 - 2(h)(1)(i) of the United States Treasury
Regulations, and (b) LEAPFROG shall deliver to the IRS the notification
required under Section 1.897 - 2(h)(2) of the United States Treasury
Regulations.
Investment Representation Letter
At the Closing, each of the LEAPFROG Shareholders shall execute and deliver
to LEAPFROG an investment representation letter statement in such form as
may be reasonably requested by counsel.
ITEMS 2 THROUGH 4, 6 THROUGH 9 NOT APPLICABLE.
ITEM 5. OTHER EVENTS.
Leapfrog Smart Products, Inc.--Description of the Business
Founded in April of 1996, LEAPFROG is a Florida corporation dedicated to
designing, developing, licensing, and marketing Smart card applications and
related database management system and services. The Smart card is a
wallet-sized plastic card with an embedded computer chip carrying a myriad
of accessible data that is retrievable on demand and capable of fully
integrating a variety of everyday functions with strict security features.
Just like Microsoft writes software to operate PCs, LEAPFROG writes software
to make computers called "Smart cards" work.
LEAPFROG currently has 32 full-time employees and a growing sales
representative network. The engineering department is comprised of fourteen
and a total of ten employees are associated with administrative roles. The
sales and marketing team is comprised of eight people, which is expected to
increase when the sales and marketing plan is implemented.
In 1997 and 1998, LEAPFROG invested in developing a technology that would
serve as a platform for developing commercially viable Smart card software
products. That technology is based on an architecture which is designed to
allow any combination of software modules to be activated via a patent
pending "Plug-and-Play" technology. Management believes, the technology
allows a client to choose any number of modules from the LEAPFROG "library"
and have a customized product. For LEAPFROG, this proprietary technology
allows LEAPFROG to re-use software modules numerous times without having to
duplicate previous development efforts. Management believes this technology
is key to LEAPFROG's potential future success and potential future
profitability in the software business.
In 1999, a suite of proprietary software programs is being developed for
commercialization. Six commercial products are nearing completion in
Commercial-Off-The-Shelf form and have been announced by LEAPFROG. They
are: SecurePak, Smart card Commander, MDCard, SmartPoints, SmartExpo, and
SmartResort.
LEAPFROG has two patents pending: ("Plug and Play Architecture", and
"Biometric Identity Verification Authentication" on a Smart card).
Management believes these patents, if eventually awarded, will help to
create a barrier of entry against potential competitors and will help create
an intangible asset value for the shareholders of the Company.
Additionally, LEAPFROG appears to be the only software engineering firm that
is qualified as a "Development Partner" with two Smart card manufacturers:
Schlumberger and Giesecke & Devrient.
On December 21, 1998, LEAPFROG was awarded its Government Services
Administration ("GSA") master contract number, GS-35J-0161. This process
took almost one year to complete. LEAPFROG intends to pursue GSA contracts
in 2000. Management believes the United States federal government is
presently the largest potential domestic issuer of Smart cards for two
reasons: (1) it has the ability to mandate change, and (2) it has the
financial resources to build and upgrade infrastructure. The United States
government has undertaken several initiatives, in pilot form, to test the
viability and use of Smart cards. As a result, the GSA is expected to issue
a Request For Proposal for employee cards which will provide physical as
well as logical access for 2,500,000 federal employees. This contract
could have a substantial value over a ten-year period and is expected to be
awarded to multiple vendors. LEAPFROG intends to actively pursue this
contract opportunity on some basis and will likely enter into an alliance
with a major government contractor to supply Smart card software integration
services over the next ten years in connection with this GSA contract.
Products
In 2000, if financial resources will allow, LEAPFROG intends to enter
several commercial markets with products focusing on market share and
creating barriers for the competition. For each of its targeted markets,
LEAPFROG is in the testing, pilot or final deployment stage. LEAPFROG is
currently targeting the following markets: internet security, medical data
and patient data, authentication, consumer and sports loyalty, conventions
and expos, hospitality and college campuses.
Having developed a proprietary underlying architectural technology, LEAPFROG
is now preparing software products for commercialization. LEAPFROG's
software development strategy is expressly based on creating
Commercial-Off-The-Shelf software. Management believes that software which
can be packaged for mass replication and distribution may provide LEAPFROG a
competitive advantage in that units can be shipped with minimal
customization. This in turn could allow LEAPFROG access to the consumer
market . LEAPFROG hopes to be the first company into the market with a
"boxed" product and the ability to turn out multiple exact copies.
Management of LEAPFROG expects to be able to leverage its proprietary
technology to develop new products that can be marketed and sold as exact
copies all over the world in much the same way as word processing or
spreadsheet programs are marketed today. Additionally, Management of
LEAPFROG believes that its proprietary technology may allow its products to
be designed to be easily configurable providing each user their choice of
preferences, needed accessories, and report requirements.
LEAPFROG's Management believes that a number of markets can be penetrated
with a relatively small number of products. In developing a marketing
strategy, additional considerations such as life expectancy of a product,
enhancement of core services, and product replication become important. If
financial resources will allow, Management intends to make the following
products commercially available in 2000:
SecurePak (Internet/Intranet Security). SecurePak is a tool designed for
sending information through Cyberspace. SecurePak is designed to combine
DES, triple-DES, and RSA encryption with physical security to protect data
and systems.
Smart card Commander (Application Development Tool). The Smart card
Commander is an application program development environment designed for use
by persons seeking to create Smart card applications that interface directly
with in-house proprietary software designed to be a comprehensive suite of
medical software modules that create a digital environment for data collection
and management within the medical community. This product is currently being
beta tested by a hospital group in Florida that intends to utilize a patient
Smart card for a host of interactive functions.
SmartPoints (Loyalty for Sports, Chambers of Commerce, Banks). SmartPoints
is designed to be a loyalty program for closed user groups wishing to
increase member or fan loyalty such as a "frequent flyer" program or a
cash-back program. The user of this software, i.e., a sports team or
Chamber of Commerce, issues cards to their respective affinity group or
member base and then those cards are used to collect SmartPoints at various
points-of-encounter. The SmartPoints can then be redeemed for prizes
providing a way to bring the fans back.
SmartExpo (Expo and Convention Registration). SmartExpo is an offshoot of
the SmartPoints loyalty software. It was designed as an expo registration
and tracking software module. SmartExpo software is designed to allow show
sponsors and exhibitors to gather data on each attendee through the use of a
single card for all expo purposes (registration, lead tracking, purchases,
and continuing education credit tracking).
SmartResort (Hospitality Member Registration/Tracking). SmartResort is
designed to verify membership, while providing guests with a secure way to
enter and exit a destination such as a membership resort, time share, or
other self-contained vacation property. Members enjoy the convenience of
using that same card to check in and out quickly, make reservations, shop,
pay for entertainment, buy snacks and meals, get discounts, rent skis, etc.
SmartResort is designed for use by membership properties to manage a large
database of members with different levels of usage rights, including
reciprocity.
Sales and Marketing
In the technology industry, there are three distinct phases of a company's
development: Formulation, Product Development, and Sales. Management
believes that LEAPFROG has successfully negotiated the Formulation phase in
1997 and 1998. The Product Development phase has been a primary focus in
1999. Although the Sales phase has begun in late 1999, major efforts in
this phase will not begin until 2000 after additional capital becomes
available to fund sales and marketing efforts. While Product Development
creates value for the company, the Sales phase of a business is what creates
value for the shareholder.
Management believes that the winner of the marketing game will generally be
the company that hits critical mass first, by utilizing the most efficient
paths to customers. For smaller companies, strategic marketing alliances
maximize reach while reducing potential competition. LEAPFROG intends to
market its products three ways: (i) partnership distribution and licensing;
(ii) closed user-group decision makers; and (iii) indirect distribution.
Creating strong strategic partnerships is initially of paramount importance
for a smaller company. Management does not believe that LEAPFROG has the
marketing resources and capabilities of major companies in other software
market segments. Instead, LEAPFROG intends to focus on establishing
important relationships and alliances with other companies that can license
LEAPFROG's software and distribute it through their existing channels.
LEAPFROG intends to target alliances which may include Fortune 500 companies
such as Sprint, Motorola, Lockheed Martin, EDS, GTE, AAA and others. If
successful, LEAPFROG can expect to garner license fees on a wholesale basis
from each alliance.
Secondly, LEAPFROG plans to employ a "leadership relationship" marketing
strategy to offer its software to closed user groups. Because emerging
technology demands a certain visionary mentality to embrace it, marketing
requires one-to-one selling with decision-makers. In this regard,
Management intends to utilize sales tactics that are based on portraying a
lead position, utilizing personal contacts at the highest level in each
target user group.
Lastly, LEAPFROG plans to offer certain products through indirect
distribution channels. These channel distributors will be located on a
regional basis and will be chosen based on overall commitment to LEAPFROG.
For example, a company may have the exclusive rights to market specific
LEAPFROG software products in a particular geographic region, but would be a
non-exclusive reseller in other areas. Further, a distributor's discount
level may be determined by the number of units purchased or the level of
value-added services provided.
Competition
The entire Smart card industry is fragmented into several strata.
Management believes that LEAPFROG's direct competitors are companies that
create software applications. They are: 3GI, National CacheCard, Precis,
Cybermark, and RealMed. All of these companies are small privately held
companies.
There are a host of other players in the industry with whom Management
believes LEAPFROG does not compete. Within the Smart card industry, the
sub-markets include: (1) card manufacturers (Schlumberger, Gemplus, Giesecke
& Devrient) and hardware manufacturers (Verifone, DANYL, Intellect) who are
suppliers to LEAPFROG; (2) integrators (IBM, Honeywell/Bull) who generally
do not develop or own any software that is proprietary in nature or are
marketers of limited applications only, which do not currently encroach on
LEAPFROG markets, but are potential customers; (3) American Express, Visa,
Master Card and banks who aid in developing market awareness and are
potential LEAPFROG customers; and (4) system platform providers (Microsoft,
Visa, Mondex, Proton) who write languages for applications but do not market
Smart card products to end users. Management does not believe that LEAPFROG
directly competes with these players, but rather purchases from or sells to
them.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The Company and Leapfrog hereby provides the information as required by
paragraph (a) of this Item as follows:
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements have
been prepared to reflect the reverse acquisition of ALBARA and Albara
Subsidiary by LEAPFROG through the issuance of 5,316,049 shares of no par
value stock to the LEAPFROG shareholders in exchange for 100% of the
outstanding common stock of LEAPFROG. The pro forma consolidated financial
statements have been prepared as if the reverse acquisition had occurred as of
September 30, 1999 with respect to the pro forma consolidated balance sheet,
and as of January 1, 1999 and January 1, 1998 with respect to the pro forma
consolidated statement of operations. The acquisition is accounted for as a
reverse acquisition with LEAPFROG as the accounting acquirer since the
shareholders of LEAPFROG will obtain voting control of ALBARA pursuant to the
transaction. The historical consolidated financial information for ALBARA has
been adjusted to reflect a 1-for-7 reverse stock split and the authorization
of additional shares of stock. See ITEM 14 for additional information
regarding the transaction. In the opinion of management of ALBARA, the pro
forma financial statements should be read in conjunction with the historical
financial statements of ALBARA and LEAPFROG and the notes thereto. In the
opinion of management of ALBARA and LEAPFROG (the "Management"), all
adjustments necessary to present fairly such pro forma unaudited consolidated
financial statements have been made. These statements are provided for
informational purposes only and are not necessarily indicative of what the
actual financial results of operation would have been had the transaction
occurred on the dates indicated above nor do they attempt to represent the
financial results which would have occurred had the merger been consummated on
the dates indicated.
Albara Corporation and Subsidiary and
Leapfrog Smart Products, Inc. and Subsidiary
Pro Forma Consolidated Balance Sheet
Nine Month Period Ended September 30, 1999
Albara Pro Forma
As Restated Leapfrog Adjustments Pro Forma
ASSETS
Current Assets:
Cash $ 450 $ $ 450
Accounts receivable 8,585 8,585
Related party receivables 50,692 50,692
Inventory 17,500 17,500
Prepaid expenses 22,600 22,600
450 99,377 $ 99,827
Property and equipment,net$ 228,965 $ 228,965
Capitalized software 273,000 273,000
Goodwill, net 28,000 28,000
Other assets 7,110 7,110
450 636,452 $ 636,902
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Bank overdraft $ $ 9,363 $ $ 9,363
Accounts payable 14,925 290,957 20,500 3 326,382
Accrued payroll taxes
and interest 58,554 58,554
Notes payable 388,673 388,673
Related party payables 1,540,334 6,288 46,555
(46,555)1 2,468,406
(1,467,882)2
Additional paid-in capital 2,450,951 (3,918,833)1
1,467,882 2
Accumulated deficit (3,965,388) (4,137,165) 3,965,388 1 (4,157,665)
(20,500)3
Total Shareholder's
Deficit (14,475) (1,639,659) (20,500) (1,674,634)
$450 636,452 636,902
Albara Corporation and Subsidiary and
Leapfrog Smart Products, Inc. and Subsidiary
Pro Forma Consolidated Statement of Operations
Nine Month Period Ended September 30, 1999
Albara Pro Forma
As Restated Leapfrog Adjustments Pro Forma
Net revenue $ 71,834 $ 71,834
Cost of sales 57,061 57,061
Gross profit 14,773 14,773
Selling, general and
administrative
expenses 94,461 1,424,387 20,500 1,539,348
Loss from operations (94,461)(1,409,614) (1,524,575)
Other Income (expense)
Other income 5,116 5,116
Interest income 944 944
Interest expense (66) (315,298) (315,364)
Minority interest in loss 752 752
Loss before
extraordinary gain (88,467)(1,724,160) (1,833,127)
Extraordinary gain-
Forgiveness of debt 109,853 109,853
Net Loss 21,386 (1,724,160) $20,500 (1,723,274)
Loss Per Common
and Common Equivalent
Basic
Loss before
extraordinary gain $ (0.35) (0.41) (0.31)
Extraordinary gain 0.44 0.02
Net Loss 0.09 (0.41) (0.29)
Diluted
Loss before
extraordinary gain $ (0.35) (0.41) (0.31)
Extraordinary gain 0.44 0.02
Net loss 0.09 (0.41) (0.29)
Average number of
common and common
equivalent shares
outstanding
Basic 251,643 4,166,032 5,841.293
Diluted 254,429 4,166,032 5,844.079
Albara Corporation and Subsidiary and
Leapfrog Smart Products, Inc and Subsidiary
Pro Forma Consolidated Statement of Operations
Year Ended December 31, 1998
Albara Pro Forma
As Restated Leapfrog Adjustments Pro Forma
Net revenue $ 86,360 $ $ 86,360
Cost of Sales 65,906 65,906
Gross profit 20,454 20,454
Selling, general and
administrative expenses 190,430 1,509,184 20,500 3 1,720,114
Loss from operations (190,430) (1,488,730) (1,699,660)
Other income (expense) (26,729) 4,859 (21,870)
Interest income 1,013 388 1,401
Interest expense (16,360) (36,312) (52,672)
Minority interest in loss 2,046 2,046
Net loss (232,506) (1,517,749) 20,500 (1,770,755)
Loss Per Common
And Common Equivalent
Basic net loss $ (1.11) $ (0.49) $ (0.31)
Diluted net loss $ (1.10) $ (0.49) $ (0.31)
Average Number
of Common and
Common Equivalent
Shares Outstanding
Basic 208,786 3,125,793 5,798,437
Diluted 211,571 3,125,793 5,801,223
Notes to Pro Forma Financial Statements
1. Adjustment to record common stock issued to acquire net assets of Albara
and recapitalize Leapfrog with the capital structure of Albara.
2. Adjustment to reflect the excess of acquisition cost over the fair value
of assets received as a reduction of common stock since there is an
accumulated deficit.
3. Adjustment for the estimated expense of the merger.
LEAPFROG SMART PRODUCTS, INC.
AND SUBSIDIARY
(A Corporation in the Development Stage)
FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1999
(UNAUDITED)
AND FOR THE YEARS
ENDED DECEMBER 31, 1998 AND 1997
(AUDITED)
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
Table of Contents
Report of Independent Certified Public Accountants 1
Consolidated Financial Statements
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Changes in
Stockholders' Deficit 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 16
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Leapfrog Smart Products, Inc. and Subsidiary
Orlando, Florida
We have audited the accompanying consolidated balance sheet of Leapfrog Smart
Products, Inc. (a corporation in the development stage) and Subsidiary as of
December 31, 1998 and the related consolidated statements of operations,
changes in stockholders' deficit and cash flows for the years ended December
31, 1998 and 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Leapfrog Smart Products, Inc. (a corporation in the development stage) and
Subsidiary as of December 31, 1998, and the consolidated results of the
Company.
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Consolidated Balance Sheets
Nine
Month Period
Ended September 30, Year Ended
1999 December31,
(Unaudited) 1998
Assets
Current assets:
Cash $ 0 $ 40,872
Accounts receivable 8,585 3,000
Related party receivables(Note 2) 50,692 35,792
Inventory 17,500 31,500
Prepaid expense 22,600 2,000
Total current assets 99,377 113,164
Property and equipment, net (Note 3) 228,965 201,788
Goodwill, net 28,000 0
Capitalized Software 273,000 0
Other assets 7,110 4,210
Total Current Assets $ 636,452 $ 319,162
Liabilities and Stockholders' Deficit
Current liabilities:
Bank overdraft $ 9,363 $ 0
Accounts payable 290,957 365,340
Accrued payroll taxes
and interest 58,554 36,186
Notes payable (Note 4) 388,673 482,490
Related party payables (Note 5) 1,540,334 44,258
Convertible notes payable (Note 6) 0 25,000
Deferred income (Note 7) 0 11,500
Total current liabilities 2,287,881 964,774
Commitments and contingencies (Note 10) 0 0
Minority interest (11,770) (11,018)
Stockholders' deficit (Note 9):
Common stock, $.01 par value, 5,000,000 shares
issued and authorized, 4,655,554 and 3,767,219
shares outstanding 46,555 37,672
Additional paid-in capital 2,450,951 1,740,739
Accumulated deficit (4,137,165) (2,413,005)
Total stockholders' deficit (1,639,659) (634,594)
$ 636,452 $ 319,162
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Consolidated Statements of Operations
For the Nine
Months
Ended September 30, For the Year
1999 1998 Ended December 31,
(Unaudited) (Unaudited) 1998 1997
Net revenue $ 71,834 $ 60,100 $ 86,360 $ 672,897
Cost of sales 57,061 62,722 65,906 480,324
Gross profit 14,773 (2,622) 20,454 192,573
Selling, general and
administrative expenses 1,424,387 1,125,932 1,509,184 833,904
Loss from operations (1,409,614)(1,128,554) (1,488,730) (641,331)
Other income (expense)
Other income 0 3,381 4,859 4,542
Interest income 0 0 388 0
Interest expense (315,298) (4,634) (36,312) (22,010)
Loss before minority interest (1,724,912)(1,129,807) (1,519,795) (658,799)
Minority interest in loss 752 1,367 2,046 8,972
Net loss $ (1,724,160)(1,128,440) (1,517,749)$ (649,827)
Net loss per share of
common stock $ (0.41) $ (0.38) $ (0.49) $ (0.37)
Weighted average common
shares and share equivalents
outstanding 4,166,032 2,998,520 3,125,793 1,734,305
The accompanying notes are an integral part of these consolidated financial
statements.
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Consolidated Statements of Changes in Stockholders' Deficit
Deficit
Additional Accumulated Total
Common Stock Paid-in During the Stockholders'
Shares Par Value Capital Development Stage Equity
Common stock
issued to
founding
stockholders
on April 11,
1996 1,414,000 $14,140 $ 153,960 $ 0 $ 168,100
Net loss
(Unaudited) 0 0 0 (245,429) (245,429)
Balance,
December31,
1996 1,414,000 14,140 153,960 (245,429) (77,329)
Issuance of
common stock 1,070,846 10,708 418,792 0 429,500
Net loss 0 0 0 (649,827) (649,827)
Balance,
December31,
1997 2,484,846 24,848 572,752 (895,256) (297,656)
Issuance of
common
stock 1,066,373 10,664 954,147 0 964,811
Issuance of
common stock
for conversion
of notes payable 216,000 2,160 213,840 - 216,000
Net loss 0 0 0 (1,517,749) (1,517,749)
Balance,
December31,
1998 3,767,219 37,672 1,740,739 (2,413,005) (634,594)
The accompanying notes are an integral part of these consolidated financial
statements.
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Consolidated Statements of Cash Flows
For the Nine Months
Ended September 30, For the Year
1999 1998 Ended December 31,
(Unaudited) (Unaudited) 1998 1997
Cash flows from operating
activities:
Net loss (1,724,160) (1,128,440)(1,157,749)(649,827)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Issuance of common stock in
connection with the
issuance of related party
notes payable 286,096 0 0 0
Issuance of common stock
consulting services 37,500 0 0 0
Issuance of common stock for
conversion of notes payable 2,000 0 16,000 0
Issuance of c 45,354 24,395
Cash provided by (used for):
Accounts receivable (5,585) (411) (3,000) 0
Inventory 14,000 0 (31,500) 24,000
Prepaid expenses and other assets (23,500) (450) (2,450) (1,212)
Bank overdrafts 9,363 1,949 0 (1,208)
Accounts payable (74,383) 124,932 281,503 83,837
Accrued expenses 22,368 36,400 18,961 13,309
Deferred revenue (11,500) (32,789) (21,289) 32,789
Minority interest in loss (752) (1,367) (2,046) (8,972)
Net cash used by operations (1,434,507) (974,377)(1,212,966)(486,269)
Cash flows from investing activities:
Net increase in related party
receivables (14,900) (18,684) (32,070) 0
Purchases of property and
equipment (57,723) (91,356) (85,626)(146,837)
Capitalized Software 273,000 0 0 0
Proceeds from sale of vehicle 0 0 0 8,473
Net cash used for investing
activities (345,623) (110,040) (117,696)(138,364)
Cash flows from financing activities:
Proceeds from issuance of
common stock 336,999 781,860 964,811 429,500
Proceeds from issuance of
convertible notes payable 0 35,000 25,000 200,000
Net proceeds(payments)from notes
payable (93,817) 239,732 335,890 (3,400)
Net proceeds from related party
payables 1,496,076 15,150 33,158 11,100
Net cash provided by financing
activities 1,739,258 1,071,742 1,358,859 637,200
Increase in cash (40,872) (12,675) 28,197 12,567
Cash, beginning of period 40,872 12,675 12,675 108
Cash, end of period $ 0 0 $ 40,872 $ 12,675
Supplemental disclosures of cash flow information:
Interest paid $ 22,815 $7,575 $ 20,655 $18,013
Conversion of notes payable
plus interest into common stock $ 27,000 $ 0 $216,000 $ 0
Issuance of common stock in
connection with the acquisition
of additional shares of Conduit
Healthcare Solutions, Inc. $30,000 $0 $ 0 $0
The accompanying notes are an integral part of these consolidated financial
statements.
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Activities - Leapfrog Smart Products, Inc. ("Leapfrog") and
Subsidiary (the "Company") was incorporated as a Florida corporation on April
11, 1996 originally under the name Telephones! Telephones!, Inc. and later
changed its name to Leapfrog Smart Products, Inc. The Company focuses on the
design, development, licensing and marketing of Smart card applications and
related database management systems and services. The Smart card is a
wallet-sized plastic card with an embedded computer chip carrying a myriad of
accessible data retrievable on demand and capable of fully integrating a
variety of everyday functions with security features.
At December 31, 1997, Leapfrog owned 80% of the common stock of Leapfrog
Health Care Products, Inc., which was incorporated January 2, 1997 as a
Florida corporation. Leapfrog's ownership increased to 96% during 1998.
Principles of Consolidation - The consolidated financial statements include
the accounts of Leapfrog Smart Products, Inc. and its majority owned
subsidiary, Leapfrog Health Care Products, Inc. All material intercompany
transactions and balances have been eliminated with the offsetting creation
of minority interest.
Liquidity - The Company has sustained losses and negative cash flows from
operations since its inception. The Company's ability to meet its obligations
in the ordinary course of business is dependent upon its ability to raise
additional financing through public or private equity financings, establish
profitable operations, enter into collaborative or other arrangements with
corporate sources, or secure other sources of financing to fund operations.
Management intends to raise working capital through additional equity and/or
debt financings in the near future. If anticipated financing transactions and
operating results are not achieved, management has the intent and believes it
has the ability to delay or reduce expenditures so as not to require
additional financial resources, if such resources were not available on terms
acceptable to the Company. In light of management's ability to delay and
reduce expenditures, it is believed by management that it will be able to
continue in business for the next 12 months.
The Company has a limited operating history and its prospects are subject to
the risks, expenses and uncertainties frequently encountered by companies in
the new and rapidly evolving markets for Smart card products and services.
These risks include the failure to develop and extend the Company's products
and services, the rejection of such services by Smart card consumers, vendors
and/or advertisers, the inability of the Company to maintain and increase its
customer base, as well as other risks and uncertainties. In the event that the
Company does not successfully implement its business plan, certain assets may
not be recoverable.
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Development Stage Company - For the period from inception (April 11, 1996)
through December 31, 1998, the Company was a development stage enterprise, as
planned principal operations had not yet begun to generate significant
revenue. In its development stage, all pre-operating costs have been
expensed as incurred.
Cash Equivalents - The Company considers all highly liquid investments with
an original maturity of three months or less as cash equivalents.
Inventory - Inventory consists primarily of software purchased for resale and
is stated at the lower of cost or market determined on a first-in, first-out
basis.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Expenditures for repairs and maintenance are
charged to operating expense when incurred. Expenditures for major renewals
and betterments, which extend the useful lives of existing equipment, are
capitalized and depreciated. Upon retirement or disposition of property and
equipment, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in the statements of
operations.
Software Development Costs - Software development costs incurred prior to the
established judgment by management with respect to certain external
factors, including, but not limited to, anticipated future gross product
revenue, estimated economic product lives and changes in software and
hardware technology.
Revenue Recognition - The Company develops Smart card applications for its
clients that are often specifically developed internally or through
third-party vendors. The Company recognizes revenue when the product is
delivered to the customer.
Income Taxes - The Company follows the provisions of Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes", which requires the
recognition of deferred tax assets and liabilities for expected future tax
consequences of events that have been included in the Company's financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between financial statement
and tax basis of assets and liabilities using enacted tax rates in effect
when these differences are expected to reverse. Valuation allowances are
established when appropriate, to reduce deferred tax assets to the amount
expected to be realized.
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions by management in determining the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Long-Lived Assets - Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" requires that long-lived assets and certain identifiable
intangibles to be held and used or disposed of by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company has adopted
this statement and determined that no impairment loss need be recognized for
applicable assets of continuing operations.
Stock-Based Compensation - Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" encourages, but does not
require companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to
account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related Interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.
Earnings Per Share - During 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share", which requires
presentation of basic earnings per share ("Basic EPS") and diluted earnings
per share ("Diluted EPS"). The computation of Basic EPS is computed by
dividing income available to common stockholders by the weighted average
number of outstanding common shares during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the period.
The computation of Diluted EPS does not assume conversion, exercise or
contingent exercise of securities that would have an anti-dilutive effect on
earnings.
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The shares used in the computation are as follows:
December 31, 1998 1997
Basic EPS 3,125,793 1,734,305
Diluted EPS 3,125,793 1,734,305
Capital Structure - In 1998, the Company has adopted Statement of Financial
Accounting Standards No. 129 ("SFAS No. 129"), "Disclosure of Information
about Capital Structure". Capital structure disclosures required by SFAS 129
include liquidation preferences of preferred stock, information about the
pertinent rights and privileges of the outstanding equity securities, and the
redemption amounts for all issues of capital stock that are redeemable at
fixed or determinable prices on fixed or determinable dates. As of December
31, 1998 and 1997, the Company has no items which would be affected by this
disclosure requirement.
Comprehensive Income - In June 1997, Statement of Financial Accounting
Standards No. 130, ("SFAS No. 130") "Reporting Comprehensive Income", was
issued. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. As of
December 31, 1998 and 1997, the Company has no items that represent
comprehensive income, and therefore, has not included a schedule of
comprehensive income in the consolidated financial statements.
Fair Value Of Financial Instruments - The carrying value of cash and cash
equivalents, accounts receivable, related party receivables, accounts payable,
accrued payroll and interest, notes payable, related party payables,
convertible notes payable, and deferred income approximates fair value due to
the relatively short maturity of these instruments.
Impact of Year 2000 Issue - During the year ended December 31, 1998, the
Company conducted an assessment of issues related to the Year 2000 and
determined that it was not necessary to modify or replace portions of its
software in order to ensure that its computer systems will properly utilize
dates beyond December 31, 1999. At this time, the Company cannot determine
the impact the Year 2000 will have on its key customers or suppliers. If the
Company's customers or suppliers do not convert their systems to become Year
2000 compliant, the Company may be adversely impacted. The Company is
addressing these risks in order to reduce the impact on the Company.
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recent Accounting Pronouncements - During 1998, the Financial Accounting
Standards Board ("FASB") issued statement of Financial Accounting Standards
No. 131 ("SFAS No. 131"), "Disclosure About Segments of an Enterprise and
Related Information" which changes the way public companies report information
about segments. SFAS 131 establishes standards for the way public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. This statement is effective for
the Company's 1998 fiscal year. Management is in the process of evaluating
the Computer Software Developed or Obtained for Internal Use". SOP 98-1
is effective for fiscal years beginning after December 15, 1998. Management
believes that the Company is substantially in compliance with this
pronouncement and that the implementation of this pronouncement will not have
a material effect on the Company's financial position, results of operations
or cash flows.
In 1998, the FASB issued Statement of Financial Accounting Standards No. 133
("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes accounting and reporting guidelines
for derivatives and requires an establishment to record all derivatives as
assets or liabilities on the balance sheet at fair value. Additionally, this
statement establishes accounting treatment for four types of hedges: hedges
of changes in the fair value of assets or liabilities, firm commitments,
forecasted transactions and hedges of foreign currency exposures of net
investments in foreign operations. Any derivative that qualifies as a hedge,
depending upon the nature of that hedge, will either be offset against the
change in fair value of the hedged assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. SFAS No. 133 is effective for years beginning
after June 15, 2000. The Company does not currently participate in these
types of financing activities and does not anticipate that the adoption of
this statement will have a material impact on its consolidated balance
sheets, statements of operations, or cash flows.
Unaudited Interim Statements - The financial statements as of September 30,
1999 and for the nine months ended September 30, 1999 and 1998 are unaudited;
however, in the opinion of the management of the Company, all adjustments
(consisting solely of normal recurring adjustments) necessary to a fair
presentation of the financial statements for these interim periods have been
made. The results for the interim period ended September 30, 1999 are not
necessarily indicative of the results to be obtained for a full year.
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 2 - RELATED PARTY RECEIVABLES
The Company has various notes and balances receivable from employees,
stockholders and/or directors. Some balances are in the form of advances and
others have notes with interest rates ranging from 6% to 8%. All balances
are due within one year and are considered fully collectible by management.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31,:
Estimated
Useful
Lives In
Years
- ------------------------------------------------------------------------
Computer hardware 5 $ 175,937
Computer software 3 32,253
Furniture and fixtures 7 32,118
Leasehold improvements 4 7,000
Construction in progress - 26,830
274,138
Less - accumulated depreciation 72,350
Property and equipment, net $201,788
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 4 NOTES PAYABLE
Notes payable consist of the following:
December 31, 1998
- -----------------------------------------------------------------------------
Note payable to bank, interest due in monthly
installments at the bank's prime rate, principal
due April 20, 1998, guaranteed
by certain stockholders
and officers. $-
Note payable to bank, interest due in monthly
installments at the bank's prime rate plus 1%,
principal due October 5, 1999, guaranteed by certain
stockholders and officers, secured by all company assets. 150,000
Note payable to bank, interest due in monthly
installments at the bank's prime rate plus 1%,
principal due August 18, 1999, guaranteed by certain
stockholders and officers, secured by all company assets. 100,000
Note payable to bank, interest due in monthly
installments at the bank's prime rate plus 1%,
principal due February 21, 1999, guaranteed by certain
stockholders and officers, secured by all company assets. 50,000
Note payable to bank, interest due in monthly
installments at the bank's prime rate plus 1%,
principal due September 4, 1999, guaranteed by certain
stockholders and officers, secured by all company assets. 50,000
Two $50,000 notes payable to Publicker, due
October 9, 1999 and September 18, 1999,
with no interest. 100,000
Note payable of $15,333 to Career Concepts, Inc.,
6% interest, $750 monthly payments. This note
became delinquent on August 15, 1998. 14,083
Note payable of $11,424 to Executive Press,
10% interest, $500 monthly payments. This note
became delinquent on August 13, 1999. 10,174
Note payable of $11,783 to Worldwide Plastics, Inc.,
10% interest, $500 monthly payments.
This note became delinquent on March 15, 1999. 8,233
$482,490
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 5 - NOTES PAYABLE TO RELATED PARTIES
On July 20, 1998 a $15,000 note was issued to a stockholder at 6% interest
with interest and principal due November 1, 1998. This note was past due at
December 31, 1998, but during 1999 it was repaid in cash and stock. A vendor,
also a stockholder, was issued a note for $5,000 during 1998 in lieu of an
outstanding accounts payable balance. During 1998, a $12,958 note was issued
to an employee and stockholder at 10% interest due November 1, 1999. A
$10,000 note was issued to a director and stockholder during 1997 and is still
outstanding. There were other balances due to related parties of $1,300 and
$1,100 as of December 31, 1998.
NOTE 6 - CONVERTIBLE NOTES PAYABLE
The Company issued notes payable to seven stockholders totaling $200,000
during 1997. The notes were issued at 8% interest, interest not due for one
year, principal due in 36 months. The notes were convertible at $1.00, $1.50
and $2.00 per share at the end of year's one, two and three, respectively.
All of these notes were converted into 216,000 shares of common stock during
1998 on the one-year anniversary of each of the notes at $1.00 per share
including interest payable for the year.
During 1998, another convertible note was issued for $25,000. This note is
convertible into stock as stated above, but had not been converted as of
December 31, 1998.
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 8- INCOME TAXES
The components of the net deferred tax assets consist of the following:
December 31, 1998
Deferred tax assets:
Net operating loss carryforwards $662,000
Other 155,000
Gross deferred income tax assets 817,000
Valuation allowance (803,000)
Total deferred income tax assets 14,000
Total deferred income tax liabilities (14,000)
Net deferred income tax assets -
The following summary reconciles differences from taxes at the federal
statutory rate with the effective rate:
December 31, 1998
Federal income taxes at statutory rates (34.0%)
State taxes, net of federal benefit (5.0%)
Losses without tax benefits 39.0%
Income taxes at effective rate
Unused net operating losses for income tax purposes, expiring in various
amounts through 2018, of approximately $1,700,000 are available at December
31, 1998, for carryforward against future years' taxable income. Under
Section 382 of the Internal Revenue Code, the annual utilization of this loss
may be limited due to changes in ownership. The tax benefit of these losses
of approximately $662,000 has been offset by a valuation allowance due to it
being more likely than not that the deferred tax assets will not be
realized.
The valuation allowance increased $551,000 for the year ended December 31,
1998.
NOTE 9 - STOCKHOLDERS' EQUITY
On July 2, 1998, the Company completed a two for one stock split with respect
to its common stock. All common share information, included in the
accompanying consolidated financial statements, has been retroactively
adjusted to give effect to the stock split.
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 9 - STOCKHOLDERS' EQUITY (CONTINUED)
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock Based Compensation," requires the Company to provide pro forma
information regarding net income and earnings per share as if compensation
cost for the Company's stock options had been determined in accordance with
the fair value based method prescribed in SFAS 123. The Company estimates
the fair value of each stock option at the grant date by using a Black-Scholes
option-pricing model with the following assumptions used for grants in the
1998 option-pricing model as follows: no dividend yield, no market for stock,
risk-free interest rate of 6.3% and expected lives ranging from two to five
years. Assumptions used in the year ended 1997 option-pricing model are as
follows: no dividend yield, no market for stock, risk-free interest rates
ranging from 5.3% to 6.5%, and expected lives ranging from three to five
years. Had compensation cost been determined based on the fair value of
options at their grant dates in accordance with SFAS 123, the Company would
have had no effect on net operations for fiscal 1998 or 1997 as the option
exercise price was higher than the determined fair value.
The following table summarizes information about non-plan stock option
activity for the years ended December 31, 1998 and 1997:
Weighted-Average Weighted-Average
Exercise Price Fair Value of
Shares Per Share Options Granted
Balance, December 31, 1996 764,295 $ - $ -
Granted - at market 137,000 .84 -
Exercised (260,846) .25 -
Canceled - - -
Balance, December 31, 1997 640,449 .84 -
Granted - at market 172,000 1.21 -
Exercised (367,390) 1.00 -
Canceled - - -
Balance, December 31, 1998 445,059 $1.16 $ -
The following table summarizes information about non-plan stock options
outstanding and exercisable at December 31, 1998:
Range of Number Options Weighted- Number Weighted-
Exercise Outstanding Outstanding Average Exercisable Average
Prices Weighted- Exercise Exercise
Average Price Price
Remaining Life
$0.25-1.75 445,059 3 years $ 1.16 445,059 $ 1.16
<PAGE>
LEAPFROG SMART PRODUCTS, INC. AND SUBSIDIARY
(A Corporation in the Development Stage)
Notes to Consolidated Financial Statements
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company leases three locations of office space under various leases. The
company also leases one vehicle. Rental expense under the operating leases
for the years ended December 31, 1998 and 1997 amounted to $50,352 and
$35,928, respectively. The Company's future minimum lease payments as of
December 31, 1998 were as follows:
Year ending December 31, Minimum
Commitments
1999 $30,126
2000 26,030
2001 1,850
Total $58,006
NOTE 11 - EMPLOYMENT AGREEMENTS
The Company had an employment agreement in effect with an employee for 12
months beginning July 1, 1997. The contract has expired and has not been
renewed.
The Company currently has an employment agreement with another employee for a
term of 24 months beginning January 6, 1998. The base annual salary under
this agreement is $115,000 per year. The agreement also granted 20,000 stock
options at $1.00 per share which vest at the end of 12 months of employment.
NOTE 12 - SUBSEQUENT EVENTS
On September 3, 1999, the Company entered into a letter of intent with Albara
Corp. ("Albara") whereby Albara shall acquire all of the issued and
outstanding common stock of Leapfrog in consideration for 6,000,000 shares of
Albara common stock. Additionally, Albara will issue 30,000 shares of its
common stock to a consultant in consideration for services rendered in
relation to this transaction. As of November 17, 1999, no closing has
occurred.
On October 18, 1999, the Company changed the name of its subsidiary, Leapfrog
Health Care Products, Inc., to Conduit Healthcare Solutions, Inc.
LEAPFROG MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with plans to hire
additional employees unless Management is successful in securing a substantial
capital infusion. On October 25, 1999, LEAPFROG entered into an Agreement to be
acquired by ALBARA. This transaction will be structured as a reverse
acquisition whereby the existing shareholders of LEAPFROG will obtain control
of ALBARA. Upon completion of this business combination transaction, there can
be no assurance that the combined companies will have sufficient funds to
undertake any significant development, marketing and manufacturing activities.
Accordingly, the combined companies will be required to either seek additional
debt or equity financing or obtain funding from third parties, in exchange for
which the combined companies might be required to issue a substantial equity
position. There is no assurance that the combined companies will be able to
obtain additional financing on terms acceptable to the combined companies. If
Management is successful in obtaining additional funding, these funds will be
used primarily to provide working capital needed for repayment of outstanding
notes payable, software development, sales and marketing expense and to
finance research, development and advancement of intellectual property
concerns. A description of the LEAPFROG business is provided in ITEM 14.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999 Compared to Nine
Months Ended September 30, 1998
Revenues and Gross Profits:
LEAPFROG is a development stage company with virtually no revenues. Revenues
for the nine months ended September 30, 1999 increased $12,000, from $60,000 to
$72,000, a 20% increase compared to the first nine months of 1998. Revenues are
associated with the sale of predominantly hardware related items such as Smart
card readers/writers utilized in pilot evaluation programs, software testing
programs and specialized software solutions by potential future users of
LEAPFROG's software products. Gross profit margin for the nine months ended
September 30, 1999 increased to 21% from a negative 4% in the same period of
1998. In 1998, LEAPFROG initiated its pilot programs by providing hardware at
cost and in some cases below cost. In 1999, Management has focused on selling
these items at a small but positive gross margin to ensure that handling costs
are covered.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses for the nine month period ending
September 30, 1999 increased $298,000 from $1,126,000 to $1,424,000, a 26%
increase compared to the first nine months of 1998. This increase is net of
$273,000 in software development expenditures that have been capitalized during
the nine month period ending September 30, 1999. This increase is primarily
associated with expenses incurred in preparing a marketing plan, hiring senior
marketing and sales personnel to prepare for an intended roll-out of software
products in 2000 and the initial costs of developing sales, advertising and
marketing materials, as well as product packaging. Significant expenses have
been incurred in identifying potential contract opportunities and recruiting
distributors and value added resellers who may participate in the intended
product roll-out in 2000.
Other Income:
Interest expense for the nine month period ending September 30, 1999 increased
$310,000 from $5,000 to $315,000 when compared to the first nine months of 1998.
In May 1999, LEAPFROG completed a debt offering to a select group of accredited
investors providing net proceeds of $1,496,000. As additional consideration
LEAPFROG provided these note holders 381,461 shares of common stock. For
accounting purposes, these shares of common stock were valued at $286,000 and
that value was included as additional interest consideration and expense
associated with the issuance of notes payable. Substantially all of the
remaining interest expense in 1999 is directly associated with these outstanding
notes payable.
Net Loss:
Net loss for the nine month period ending September 30, 1999 increased
$596,000 from $1,128,000 to $1,724,000, a 53% increase compared to the first
nine months of 1998. This increase is net of $273,000 in software development
expenditures that have been capitalized during the nine month period ending
September 30, 1999. This increase is primarily associated with expenses
incurred in preparing a marketing plan, hiring senior marketing and sales
personnel to prepare for an intended roll-out of software products in 2000 and
the initial costs of developing sales, advertising and marketing materials, as
well as product packaging. Significant expenses have been incurred in
identifying potential contract opportunities and recruiting distributors and
value added resellers who may participate in the intended product roll-out in
2000. Net loss per share of common stock increased from $0.38 per share in
1997 to $0.48 per share in 1998. This increase is primarily due to the
increase in losses realized offset by an increase in the weighted average
number of common shares outstanding from 2,998,520 in the first nine months of
1998 to 4,166,032 in the same period of 1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997.
Revenues and Gross Profits:
Revenues for the year ended December 31, 1998 decreased $587,000, from $673,000
to $86,000, an 87% decrease compared to 1997. In early 1997, LEAPFROG's revenues
were primarily generated through the sale of long distance calling cards. As
Management began to focus on developing an improved product offering in the
long distance calling card industry, a decision was made to redirect the
company in an effort to develop Smart card technology. As a result, 1998
revenues are associated with the sale of predominantly hardware related items
such as Smart card readers/writers utilized in pilot evaluation programs,
software testing programs and specialized software solutions by potential
future users of LEAPFROG's software products. Gross profit margin for the year
ended December 31, 1998 decreased to a negative 4% compared to 29% in the same
period of 1997. In 1998, LEAPFROG initiated its pilot programs by providing
hardware at cost and in some cases below cost. In 1997, gross margins were
generated from the sale of long distance calling cards and are typical of that
industry.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses for the year ended December 31,
1998 increased $675,000 from $834,000 to $1,509,000, an 81% increase compared to
1997. This increase is primarily associated with expenses incurred in
establishing technical feasibility for LEAPFROG's "Plug and Play" architecture
technology. Beginning mid-year 1997, as the technology development progressed,
a significantly larger portion of LEAPFROG's financial resources were focused on
establishing technical feasibility. Other Income: Interest expense for year
ended December 31, 1998 increased $14,000 from $22,000 to $36,000 when
compared to 1997. This increase is directly related to the $194,000 increase
in debt financing incurred in 1998 from an aggregate of $358,000 in 1997 to
$552,000 in 1998.Net Loss: Net loss for the year ended December 31, 1998
increased $868,000 from $650,000 to $1,518,000, a 134% increase compared to
1997. This increase is primarily associated with expenses incurred in
establishing technical feasibility for LEAPFROG's "Plug and Play" architecture
technology. Beginning mid-year 1997, as the technology set by an
increase in the weighted average number of common shares outstanding from
1,734,305 in 1997 to 3,125,793 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities increased $460,000 from $974,000 for the
nine months ended September 30, 1998 to $1,434,000 for the nine months ended
September 30, 1999. Net cash provided by financing activities increased
$667,000 from $1,072,000 for the nine months ended September 30, 1998 to
$1,739,000 for the nine months ended September 30, 1999. Financing activities
in the first nine months of 1999 included the issuance of common stock
providing $337,000 in the aggregate and the issuance of notes payable which
provided a net of $1,496,000 offset by a $94,000 repayment of existing notes
payable. Financing activities in the first nine months of 1998 included the
issuance of common stock providing $782,000 in the aggregate and the issuance
of notes payable that provided a net of $290,000.
Net cash used by operating activities increased $727,000 from $486,000 for the
year ended December 31, 1997 to $1,213,000 for the year ended December 31, 1998.
Net cash provided by financing activities increased $667,000 from $637,000 for
the year ended December 31, 1997 to $1,359,000 for the year ended December 31,
1998.
Financing activities in 1998 included the issuance of common stock providing
$965,000 in the aggregate and the issuance of notes payable that provided a
net of $394,000. Financing activities in 1997 included the issuance of common
stock providing $430,000 in the aggregate and the issuance of notes payable
that provided a net of $208,000.
LEAPFROG continues to operate with a substantial working capital deficit.
Working capital decreased from a negative $852,000 at December 31, 1998 to a
negative $2,189,000 at September 30, 1999. This decrease is directly related
to the increase in current liabilities from $965,000 at December 31, 1998 to
$2,288,000 at September 30, 1999.
Like many early stage technology companies, the majority of LEAPFROG's assets
are intangible assets such as copyrights, trademarks, and research and
development costs which by their very nature are not reflected in the Company's
balance sheet as assets. In the past, LEAPFROG's Management has been successful
in attracting accredited investors who have purchased newly issued common stock.
However, there can be no assurance that the combined companies will be able to
obtain additional equity financing on similar terms in the future. Over the
past two years all of LEAPFROG's debt financing has been short-term notes
payable. These notes can only be repaid if the combined companies successfully
raise additional equity or debt financing. In addition to the cash requirement
associated with repaying these notes, LEAPFROG will not be able to mount an
effective national marketing campaign for its products without an additional
infusion of capital. The Company does not have any commitments to provide
additional capital funding. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to repay its
outstanding debt and to cover the expenses associated with executing its sales
and marketing plan.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") issued
by the Financial Accounting Standards Board ("FASB"), under which deferred tax
assets and liabilities are provided on differences between the carrying amounts
for financial reporting and the tax basis of assets and liabilities for income
tax purposes using the enacted tax rates. Under SFAS 109, deferred tax assets
may be recognized for temporary differences that will result in deductible
amounts in future periods. A valuation allowance is recognized, if on the weight
of available evidence, it is more likely than not that some portion or the
entire deferred tax asset will not be realized.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for the Impair-
ment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS
121") issued by the FASB, is effective for financial statements for fiscal years
beginning after December 15, 1995.The standard establishes new guidelines
regarding when impairment losses on long-lived assets, which include plant and
equipment, certain identifiable intangible assets, and goodwill, should be
recognized and how impairment losses should be measured. The Company does not
expect adoption to have a material effect on its financial position or results
of operations. Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123") issued by the FASB, is effective
for specific transactions entered into after December 15, 1995. The disclosure
requirements of SFAS 123 are effective for financial statements for fiscal
years beginning no later than December 15, 1995. The new standard established
a fair value method of accounting for stock-based compensation plans and for
transactions in which an entity acquires goods or services from non-employees
in exchange for equity instruments. The Company does not expect adoption to
have a material effect on its financial position or results of
operations.
FEDERAL INCOME TAX ASPECTS OF INVESTMENT IN THE COMPANY
The discussion contained herein has been prepared by the Company and is based
on existing law as contained in the Code, amended United States Treasury
Regulations ("Treasury Regulations"), administrative rulings and court
decisions as of the date of this Registration Statement. No assurance can be
given that future legislative enactments, administrative rulings or court
decisions will not modify the legal basis for statements contained in this
discussion. Any such development may be applied retroactively to transactions
completed prior to the date thereof, and could contain provisions having an
adverse affect upon the Company and the holders of the Common Stock. In
addition, several of the issues dealt with in this summary are the subjects of
proposed and temporary Treasury Regulations. No assurance can be given that
these regulations will be finally adopted in their present form.
Y2K COMPLIANCE
LEAPFROG has conducted an assessment of issues related to the Year
2000 and determined that all its computer driven systems and software in use
are able to recognize, calculate, and display data-related dates correctly
after the year 1999. At this time, LEAPFROG can not determine the impact the
Year 2000 will have on its key suppliers. However, if LEAPFROG's key suppliers
do not convert their systems to become Year 2000 compliant, LEAPFROG may be
adversely impacted.
FORWARD LOOKING STATEMENT
This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes a number of forward-looking statements that reflect
Management's current views with respect to future events and
financial performance. Those statements include statements regarding the
intent, belief or current expectations of LEAPFROG and members of its
management team as well as the assumptions on which such statements are
based. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risk and
uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements.
The Company undertakes no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes in the future operating results over time. The Company
believes that its assumptions are based upon reasonable data derived from
and known about its business and operations and the business and operations
of LEAPFROG. No assurances are made that actual results of operations or the
results of the Company's future activities will not differ materially from
its assumptions.
EXHIBIT INDEX
Exhibit No. Exhibit
x 2.10 Agreement and Plan of Merger
# 3(a) Articles of Incorporation
# 3(b) Bylaws
# 4(a) Agreements Defining Certain Rights of Shareholders
# 4(b) Specimen Stock Certificate
x 5.10 Legal Opinion (Nadeau & Simmons, P.C.) -
Investment Representation Letter
7 Not applicable
9 Not applicable
Exhibit No. Exhibit
x 10.10 Bleed-out Agreement
x 10.20 Consulting Agreement
x 10.30 Warrant Agreement
x 10.40 Registration Rights Agreement
11 Not applicable
14 Not applicable
16 Not applicable
21 Not applicable
x 23.1 Consent of Counsel
(contained in Exhibit 5.1)
## 24.1 Consent of CPA.
27 Financial Data Schedule
28 Not applicable
## 99.1 Safe Harbor Compliance Statement
____________________________
x filed herewith
# previously filed
## incorporated herein by reference from Registrant's Definitive Information
Statement, filed on Schedule 14C on January 18, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form 8-K and has duly caused this Current
Report to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Maitland, Florida, on the 8th day of March, 2000.
LEAPFROG SMART PRODUCTS, INC.
By: /s/ Randolph Tucker
________________________________
RANDOLPH TUCKER
CEO
Date: March 8, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Current Report on Form 8-K has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title Date
/s/Randolph Tucker CEO March 8, 2000
& Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Randolph Tucker, his true and lawful attorneys-
in-fact and agents with full power of substitution and re-substitution, for then
and in their name, place and stead, in any and all capacities, to sign any and
all amendments this current report and to file the same with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as they
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
This power of attorney may be executed in counterparts.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
current report has been signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------- --------------- --------------
<S> <C> <C>
/s/ Dale Grogan
DALE GROGAN President March 8, 2000
/s/ Jim Grebey
JAMES GREBEY Vice President March 8, 2000
/s/ Jim Gornto
JAMES GORNTO Secretary March 8, 2000
</TABLE>
<PAGE> 1
PLAN AND AGREEMENT OF MERGER
of
ALBARA CORPORATION
LEAPFROG MERGER, INC.
and
LEAPFROG SMART PRODUCTS, INC.
Dated hereof as October 22, 1999
PLAN AND AGREEMENT OF MERGER
This PLAN AND AGREEMENT OF MERGER, dated hereof as October 21, 1999, by and
among Albara Corporation, a Colorado corporation ("ALBARA"), Leapfrog Merger,
Inc., a Florida corporation and wholly-owned subsidiary of ALBARA ("Albara
Subsidiary" or "Merger Surviving Corporation") and Leapfrog Smart Products,
Inc., a Florida corporation ("LEAPFROG"), and Real Provencher ("Provencher"),
who joins in the execution of this Agreement for the limited purpose of making
certain covenants regarding the transaction contemplated herein. Albara
Subsidiary and LEAPFROG are hereinafter collectively referred to as the
"LEAPFROG Merging Corporations."
WITNESSETH:
WHEREAS, ALBARA is a corporation duly organized and validly existing under the
laws of the state of Colorado, with its registered office at 1560 Broadway,
Denver, Colorado 80202 and its principal executive office at 610 South Frazier,
Conroe, Texas 77301; and
WHEREAS, Albara Subsidiary is a corporation duly organized and validly existing
under the laws of the State of Florida, with its registered office located in
the city of Orlando, County of Dade, State of Florida, and its principal
executive office at 545 Delaney Avenue, Bldg. 2, Orlando, Florida 32801; and
WHEREAS, LEAPFROG is a corporation duly organized and validly existing under
the laws of the state of Florida, with its registered office located in the
city of Orlando, County of Dade, State of Florida, and its principal executive
office at 545 Delaney Avenue, Bldg. 2, Orlando, Florida 32801; and
<PAGE> 2
WHEREAS, the respective boards of directors of ALBARA, Albara Subsidiary and
LEAPFROG deem it desirable and in the best interests of their respective
corporations, for ALBARA to acquire the outstanding capital stock of LEAPFROG
by merging LEAPFROG into Albara Subsidiary in exchange for the issuance of
shares of the common stock of ALBARA (together with other consideration
provided for herein) and have proposed, declared advisable and approved such
merger (the "LEAPFROG Merger") pursuant to this Agreement, which Agreement
has been duly approved by resolutions of the respective boards of directors of
ALBARA, Albara Subsidiary and LEAPFROG;
WHEREAS, this Agreement shall require that a shareholders' meeting be called
by ALBARA for the purposes of approving the LEAPFROG Merger prior to closing.
Upon execution of this Agreement, ALBARA shall file a PRESCH14C, Information
Statement and accompanying shareholders' meeting notice, with the Office of
Small Business Policy, Securities and Exchange Commission ("SEC"). Albara
will schedule the Shareholders' meeting for the purposes of: (i) approving
the contemplated LEAPFROG Merger; (ii) reverse splitting the existing shares
1 for 10; (iii) increasing the number of common shares authorized; (iv)
approving the selection of auditors; (v) changing the name of the corporation;
(vi) electing the Board of Directors; (vii) approving all past transactions
conducted by the past officers and directors; and (viii) approving the
formation of a qualified employee stock option program; and
WHEREAS, this Agreement shall require a shareholders' meeting be called by
Albara Subsidiary and LEAPFROG for the purposes of approving the LEAPFROG
Merger prior to closing.
Upon the successful completion of these shareholder meetings, and the filing
of a Articles of Merger with the Florida Secretary of State, the LEAPFROG
Merger shall be considered closed (the "Closing Date")
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements herein contained, and to prescribe the terms and conditions of
the LEAPFROG Merger, the mode of carrying the same into effect, the manner and
basis of converting the LEAPFROG Shares into shares of common stock of ALBARA
(together with other consideration provided for herein) and such other details
and provisions as are deemed necessary or proper, the parties hereto also
hereby agree as follows:
<PAGE> 3
ARTICLE 1
LEAPFROG MERGER
1:1 LEAPFROG Merger.
1:1:1 Surviving Corporation.
Subject to the terms and conditions of this Agreement, LEAPFROG and Albara
Subsidiary shall be, upon the "Effective Date" as defined in Section 1:1:3
hereof, merged into a single surviving corporation, which shall be Albara
Subsidiary, which shall continue its corporate existence and remain a Florida
corporation governed by and subject to the laws of that state.
1:1:2 Stockholder Approval.
This Agreement will be submitted for approval by the stockholders of ALBARA
and each of the LEAPFROG Merging Corporations in accordance with the
applicable laws of the State of Colorado and Florida.
1:1:3 Effective Date and Closing Date.
The LEAPFROG Merger shall become effective on the "Effective Date", such date
being the later upon which (i) Articles of Merger, attached hereto as Appendix
A, are filed with the Secretary of State of Colorado and (ii) a Certificate
of Merger is filed with the Secretary of State of Florida.
The "Closing Date" will be on or within one (1) business day of the date this
Agreement is approved by the stockholders of Albara.
1:2 Effect of LEAPFROG Merger.
In all other respects, the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of the Merger Surviving Corporation shall
continue unaffected and unimpaired by the LEAPFROG Merger, and the corporate
identity, existence, purposes, powers, objects, franchises, rights, and
immunities of LEAPFROG shall be wholly merged with and into the Merger
Surviving Corporation, and the Merger Surviving Corporation shall be fully
vested therewith. Accordingly, on the Effective Date, the separate existence
of LEAPFROG, except in so far as continued by statute, shall cease.
<PAGE> 4
1:3 Governing Law and Articles of Incorporation of Merger Surviving
Corporation.
1:3:1 Florida Law Governs; Merger Surviving Corporation's
Articles of Incorporations, Amended and Restated, Survive.
The laws of Florida shall continue to govern the Merger Surviving
Corporation. On and after the Effective Date, the articles of incorporation
of LEAPFROG shall be the articles of incorporation of the Merger Surviving
Corporation until further amended in the manner provided by law and in such
articles of incorporation (the "Articles").
1:4 Bylaws of Surviving Corporation.
1:4:1 Merger Surviving Corporation's Bylaws, as Amended and
Restated, Survive.
On the Effective Date, the bylaws of LEAPFROG shall be the bylaws of the
Merger Surviving Corporation (the "Restated Bylaws") until altered, amended,
or repealed, or until new bylaws shall be adopted in accordance with the
provisions of law, the Articles, and the Restated Bylaws.
1:5 Directors and Officers of Albara and Merger Surviving Corporation.
1:5:1 Directors of Albara.
The names and addresses of the persons who, upon the Effective Date, shall
constitute the board of directors of Albara, and who shall hold office until
the first annual meeting of stockholders of Albara following the Effective
Date, are as follows:
Name Address
Ron Breland Washington, D.C.
Dr. William Campion El Paso, Texas
Jim Grebey Orlando, Florida
Dale Grogan Orlando, Florida
Bob Hartnett Orlando, Florida
George MacKay Maitland, Florida
Randall Schrader Philadelphia, Pennsylvania
Bruce Starling Orlando, Florida
<PAGE> 5
Van Staton Ocala, Florida
George Stuart
Orlando, Florida
Randolph Tucker Orlando, Florida
1:5:2 Officers of Albara.
The names and addresses of the persons who, upon the Effective Date, shall
constitute the officers of Albara, and who shall hold office, subject to the
Restated Articles of Incorporation until the first meeting of directors
following the next annual meeting of stockholders thereof, are as follows:
Name Title Address
Randolph Tucker CEO/Secretary and Orlando, Florida
Treasurer
Bruce Starling Chairman Orlando, Florida
Dale Grogan President Orlando, Florida
Jim Grebey Executive Vice President Orlando, Florida
1:5:3 Directors of Merger Surviving Corporation.
The names and addresses of the persons who, upon the Effective Date, shall
constitute the board of directors of the Merger Surviving Corporation, and
who shall hold office until the first annual meeting of stockholders of the
Merger Surviving Corporation following the Effective Date, are as follows:
Name Address
Dale Grogan Orlando, Florida
Randolph Tucker Orlando, Florida
<PAGE> 6
1:5:4 Officers of Merger Surviving Corporation.
The names and addresses of the persons who, upon the Effective Date, shall
constitute the officers of the Merger Surviving Corporation, and who shall
hold office, subject to the Restated Bylaws, until the first meeting of
directors following the next annual meeting of stockholders thereof, are as
follows:
Name Title Address
Randolph Tucker CEO/Secretary and Orlando, Florida
Treasurer
Dale Grogan President Orlando, Florida
1:5:5 Vacancies.
On or after the Effective Date, if a vacancy shall for any reason exist in the
board of directors or in any of the offices of Albara or the Merger Surviving
Corporation, such vacancy shall be filled in the manner provided in the
Articles and/or Restated Bylaws.
1:6 Capital Stock of Merging Surviving Corporation.
1:6:1 Capital Stock as in Merger Surviving Corporation's
Articles of Incorporation.
The authorized number of shares of capital stock of the Merger Surviving
Corporation, and the par value, designations, preferences, rights, and
limitations thereof, and the express terms thereof, shall be as set forth in
the Articles.
1:7 Conversion of Securities on LEAPFROG Merger.
1:7:1 General.
The manner and basis of converting the LEAPFROG Shares into shares of the
capital stock of ALBARA or the other consideration herein provided for shall
be as hereinafter set forth in this Section 1:7 as follows.
<PAGE> 7
1:7:2 Conversion of LEAPFROG's Stock.
On the Effective Date, by virtue of the LEAPFROG Merger, without any action
on the part of any party, each share of LEAPFROG Common Stock issued and
outstanding immediately prior to the Effective Date shall be converted into
the right to receive from ALBARA the following consideration (in the aggregate,
the "LEAPFROG Consideration"):
(i) One (1) share, no par value, of duly authorized, validly
issued, fully paid and nonassessable common stock of ALBARA
("ALBARA Common Stock");
(ii) ALBARA Common Stock. None of the currently issued and
outstanding shares of Albara Common Stock, no par value,
issued and outstanding at the effective time of the LEAPFROG
Merger shall be converted as a result of the LEAPFROG Merger;
(iii) Issuance of Shares Subsequent to LEAPFROG Merger. As soon
as practicable after the LEAPFROG Merger becomes effective,
Albara shall cause its transfer agent (the "Transfer Agent")
to issue to the shareholders of LEAPFROG, on a pro rata basis,
an aggregate of four million seven hundred seventeen thousand
five hundred fifty-nine (4,717,559) Shares of common stock in
ALBARA and one million five hundred eleven nine hundred fifty
(1,511,950) shall be reserved for future issuance of options,
warrants and consulting fees.
(iv) Fractional Interests. No fractional shares of common stock
of ALBARA or certificate or scrip representing the same shall
be issued. In lieu thereof each holder of LEAPFROG Shares
having a fractional interest arising upon such conversion will
be rounded up into one full additional share of common stock
of ALBARA;
(v) Status of Common Stock. All Shares of common stock of ALBARA
into which Leapfrog Shares are converted as herein provided
shall be fully paid and non-assessable and shall be issued in
full satisfaction of all rights pertaining to such Shares;
(vi) Independent Appraisal, Right to Dissent and Obtain Payment
for Shares; Procedures for Protection of Dissenter's Rights.
In order to establish a "fair value" for the LEAPFROG Shares
which are paid in cash in lieu of conversion into the Shares
of ALBARA, as provided in this Article VI, the Board of
Directors of LEAPFROG shall establish the value of LEAPFROG'S
Shares prior to the LEAPFROG Merger, and shall afford to such
shareholders of LEAPFROG all of the rights, and implement the
procedures for protection of dissenters' rights, pursuant to
the provisions of the Florida General Corporation Law, Section
10.22 et seq., as amended, the terms and provisions of which
are hereby incorporated by reference and made a part hereof.
<PAGE> 8
1:7:3 Surrender of LEAPFROG's Certificates.
On the Effective Date, all holders of LEAPFROG Shares (the "LEAPFROG
Shareholders") will surrender each outstanding certificate or certificates
theretofore representing LEAPFROG Shares to ALBARA and receive in exchange
therefor certificates representing the number of whole shares of ALBARA
Common Stock into which the LEAPFROG Shares therefor represented by
the certificate so surrendered shall have been converted as aforesaid.
1:8 Closing of LEAPFROG's Transfer Books.
At the Effective Date, holders of certificates representing LEAPFROG Shares
that were outstanding immediately prior to the Effective Date shall cease to
have any rights as stockholders of LEAPFROG, and the stock transfer books of
LEAPFROG shall be closed with respect to all shares of such common stock
outstanding immediately prior to the Effective Date. As of the date of
execution of this Agreement, no further transfer of any such LEAPFROG Shares
shall be made on such stock transfer books after the Effective Date. If,
after the Effective Date, a valid certificate previously representing any of
LEAPFROG's Shares (a "LEAPFROG Stock Certificate") is presented to ALBARA,
such LEAPFROG Stock Certificate shall be canceled and shall be exchanged as
provided in Section 1:7:3.
1:9 Exchange of Certificates.
(a) Upon surrender of a LEAPFROG Stock Certificate to the Transfer Agent for
exchange, together with such other documents as may be reasonably required by
ALBARA, the holder of such LEAPFROG Stock Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
ALBARA Shares that such holder has the right to receive pursuant to the
provisions of Section 1:7, and LEAPFROG Stock Certificate so surrendered
shall be canceled. Until surrendered as contemplated by this Section 1:10,
each LEAPFROG Stock Certificate shall be deemed, from and after the Effective
Date, to represent only the right to receive upon such surrender a certificate
representing shares of ALBARA Common Stock as contemplated by Section 1:7.
If any LEAPFROG Stock Certificate shall have been lost, stolen or destroyed,
ALBARA may, in its discretion and as a condition precedent to the issuance of
any certificate representing ALBARA Common Stock, require the owner of such
lost, stolen or destroyed LEAPFROG Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as ALBARA may reasonably direct)
as indemnity against any claim that may be made against ALBARA with respect
to such LEAPFROG Stock Certificate.
<PAGE> 9
(b) No dividends or other distributions declared or made with respect to
ALBARA Common Stock with a record date after the Effective Date shall be paid
to the holder of any un-surrendered LEAPFROG Stock Certificate with respect
to the shares of ALBARA Common Stock represented thereby until such holder
surrenders such LEAPFROG Stock Certificate in accordance with this Section
1:7:3 (at which time such holder shall be entitled to receive all such
dividends and distributions).
(c) ALBARA shall not be liable to any holder or former holder of common
stock of LEAPFROG for any shares of ALBARA Common Stock (or dividends or
distributions with respect thereto), or for any cash amounts, delivered to
any public official pursuant to any applicable abandoned property, escheat
or similar law.
1:10 LEAPFROG Shareholder Approval; Dissenting Shares.
Based upon their approval of the LEAPFROG Merger, each of the shareholders of
LEAPFROG (the "Leapfrog Shareholders") hereby agrees and acknowledges the
following:
(a) that the terms of the LEAPFROG Merger, this Agreement, and all other
agreements contemplated herein are hereby approved, ratified and confirmed
and the officers of LEAPFROG are, and each of them hereby is, authorized and
directed, in the name and on behalf of LEAPFROG, to consummate the
transactions contemplated by this Agreement, on the terms set forth in such
documents and such other agreements, and any amendments thereto, as the
officers executing such agreements may in their discretion deem reasonable
and appropriate; and
(b) that he or she hereby agrees to waive any "appraisal rights" within the
meaning of Section 10.22 et seq of the Florida General Corporation Law with
respect to the LEAPFROG Merger.
1:11 Accounting and Tax Treatment.
1:11:1 GAAP Treatment.
The assets and liabilities of LEAPFROG shall be taken up on the books of the
Merger Surviving Corporation in accordance with generally accepted accounting
principles, and the capital surplus and retained earnings accounts of the
Merger Surviving Corporation shall be determined, in accordance with
generally accepted accounting principles, by the board of directors of the
Merger Surviving Corporation. Nothing herein shall prevent the board of
directors of the Merger Surviving Corporation from making any future changes
in its accounts in accordance with law.
<PAGE> 10
1:11:2 Federal Income Tax Treatment of LEAPFROG Merger.
The LEAPFROG Merger is intended to qualify as a forward triangular merger
transaction described in Sec. 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended (the "Code").
<PAGE> 11
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LEAPFROG
2:1 Representations and Warranties of LEAPFROG.
Representations and warranties shall be made by LEAPFROG and shall survive
the Effective Date of the LEAPFROG Merger for one (1) year, subject to
mutually satisfactory exceptions, claims and caveats:
2:1:1 Disclosure Schedule.
Except as set forth in the schedule of disclosure attached hereto as Appendix
IV (the "Disclosure Schedule"), LEAPFROG hereby represents and warrants as
follows:
2:1:2 Organization, Standing and Qualification.
LEAPFROG and all of its subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the State of Florida, and
have all requisite corporate powers and authority to own, to lease or to
operate their properties and to carry on their business as it is now being
conducted.
2:1:3 Authority.
The execution and delivery of this Agreement has been authorized by the Board
of Directors of LEAPFROG, and the completion of these transactions have been
duly and validly authorized by all necessary corporate and shareholder action
on the part of LEAPFROG. This Agreement has been duly executed and delivered
by LEAPFROG and, assuming the due and valid execution and delivery of this
Agreement by the other parties hereto, constitutes the legal, valid and
binding obligation of LEAPFROG, to the extent applicable, enforceable in
accordance with its terms, all as may be subject to or affected by any
bankruptcy, reorganization, insolvency, moratorium or similar laws of general
application from time to time in effect and relating to or affecting the
rights or remedies of creditors generally.
2:1:4 No Conflict, Breach, Default or Violation.
Except as set forth in Section 2:1:4 of the Disclosure Schedule, the execution
and delivery of this Agreement does not, and the completion of transactions
contemplated by this Agreement will not conflict with, result in a breach of
or the acceleration of any obligation under, or constitute a default or event
of default (or event which with notice or lapse of time or both would
constitute a default)
<PAGE> 12
under, any provision of any charter, bylaw, indenture, mortgage, lien, lease,
license, agreement, contract, permit, order, judgment, or, to the best of the
LEAPFROG's knowledge, any judicial or administrative decree, ordinance or
regulation, or any restriction to which any property of LEAPFROG is subject
or by which LEAPFROG is bound, the result of which would have a material
adverse effect on the business of LEAPFROG.
2:1:5 Approvals.
No consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
governmental agency or instrumentality, domestic or foreign (a "Governmental
Entity"), or third party is required by or with respect to LEAPFROG or any
LEAPFROG Shareholder in connection with the execution and delivery by
LEAPFROG or any LEAPFROG Shareholder of this Agreement, or the completion of
the transactions contemplated hereby, the absence of which would have a
material adverse effect on LEAPFROG.
2:1:6 Capitalization of LEAPFROG and Subsidiaries.
(a) The authorized capital stock of LEAPFROG consists of five
million (5,000,000) shares of LEAPFROG common stock, $0.01
par value per share, of which four million seven hundred
seventeen thousand five hundred fifty-nine (4,717,559) are
issued and outstanding. The LEAPFROG Shares are validly
issued, fully paid and non-assessable and not subject to
preemptive rights. Section 2:1:6 of the Disclosure Schedule
sets forth a true, complete and correct list of the holders
of record of the issued and outstanding LEAPFROG Shares, and
all claims, commitments or agreements to which LEAPFROG is
a party or by which it is bound, obligating LEAPFROG to issue,
deliver or sell, or to cause to be issued, delivered or sold,
additional shares of capital stock of LEAPFROG or obligating
LEAPFROG to grant, extend or enter into any such option,
warrant, call, right or agreement with respect to its capital
stock. There are no agreements obligating LEAPFROG to redeem,
repurchase or otherwise acquire the capital stock of LEAPFROG,
or any other securities issued by it, or to register the sale
of the capital stock of LEAPFROG under applicable securities
laws. There are no agreements or arrangements prohibiting or
otherwise restricting the payment of dividends or
distributions to the LEAPFROG Shareholders by LEAPFROG.
(b) The authorized capital stock of Leapfrog Health Care Products
("LHCP") consists of five million (5,000,000) shares of common
stock, no par value per share, of which one million
(1,000,000) shares are issued and outstanding and owned by
LEAPFROG and 42,200 are issued and owned by Linda McClintock
Greco. The LHCP Shares are validly issued, fully paid and
non-assessable and not subject to preemptive rights. Section
2:1:6 of the Disclosure Schedule sets forth a true, complete
and correct list of the holders of record of the issued and
outstanding LHCP Shares, and all claims, commitments or
agreements to which LHCP is a party or by which it is bound,
obligating LHCP to issue, deliver or sell, or to cause to be
issued, delivered or sold, additional shares of capital stock
of LHCP or obligating LHCP to grant, extend or enter into any
such option, Warrant, call, right or agreement with
<PAGE> 13
respect to its capital stock. Except as set forth in Section
2:1:6 of the Disclosure Schedule, there are no agreements
obligating LHCP to redeem, repurchase or otherwise acquire the
capital stock of LHCP, or any other securities issued by it,
or to register the sale of the capital stock of LHCP under
applicable securities laws. Except as set forth in Section
2:1:6 of the Disclosure Schedule, there are no agreements or
arrangements prohibiting or otherwise restricting the payment
of dividends or distributions to the LHCP Shareholders by LHCP.
(c) The authorized capital stock of Leapfrog Global IC Products,
Inc. ("LGIC") consists of five million (5,000,000) shares of
common stock, no par value per share, of which one million
(1,000,000) shares are issued and outstanding and owned by
LEAPFROG. The LGIC Shares are validly issued, fully paid and
non-assessable and not subject to preemptive rights. Section
2:1:6 of the Disclosure Schedule sets forth a true, complete
and correct list of the holders of record of the issued and
outstanding LGIC Shares, and all claims, commitments or
agreements to which LGIC is a party or by which it is bound,
obligating LGIC to issue, deliver or sell, or to cause to be
issued, delivered or sold, additional shares of capital stock
of LGIC or obligating LGIC to grant, extend or enter into any
such option, warrant, call, right or agreement with respect
to its capital stock. Except as set forth in Section 2:1:6 of
the Disclosure Schedule, there are no agreements obligating
LGIC to redeem, repurchase or otherwise acquire the capital
stock of LGIC, or any other securities issued by it, or to
register the sale of the capital stock of LGIC under
applicable securities laws. Except as set forth in Section
2:1:6 of the Disclosure Schedule, there are no agreements or
arrangements prohibiting or otherwise restricting the payment
of dividends or distributions to the LGIC Shareholders by
LGIC.
2:1:7 Information Supplied.
To the best knowledge of LEAPFROG or any of its subsidiaries, no written
statement, certificate, schedule, list or other written information furnished
by or on behalf of LEAPFROG or any of its subsidiaries on or prior to the
date hereof in connection herewith contains (after giving effect to
any correction thereof furnished to LEAPFROG or any of its subsidiaries in
writing prior to the date hereof) any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
2:1:7 Financial Statements.
LEAPFROG has furnished to ALBARA true, complete and correct copies of the
audited balance sheet at December 31, 1998 and the related audited income
statement, and statements of operations, cash flows and changes in
stockholders equity for the same year ended, and an unaudited balance sheet
at September 30, 1999 and the related unaudited income statement, and
statements of operations, cash flows and changes in stockholders equity for
the same period ended (all of these financial statements being collectively
referred to herein as the "LEAPFROG Financials"). The LEAPFROG Financials
are consistent in all material respects with the books and records of
<PAGE> 14
LEAPFROG, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present the financial position of LEAPFROG as at the date thereof.
2:1:8 Liabilities.
To the best of LEAPFROG's knowledge, LEAPFROG has no liabilities or
obligations, either accrued, absolute, contingent, or otherwise, required
to be but not reflected or reserved against in the LEAPFROG Financials in
accordance with generally accepted accounting principles, except
those incurred in the ordinary course of business, or those that are not
material, and LEAPFROG knows of no potential liability that would result
in material adverse effect on the business of LEAPFROG, other than those
(a) reflected or reserved against in the LEAPFROG Financials, (b)incurred
in the ordinary course of business since December 31, 1998 or (c) set forth
in Section 2:1:8 of the Disclosure Schedule.
2:1:9 Additional Information.
Section 2:1:9 of the Disclosure Schedule sets forth a true, complete and
correct list, or references the attachment as an appendix thereto, of the
following items:
2:1:9:1 Real Property.
Section 2:1:9:1 of the Disclosure Schedule sets forth a true, complete and
correct list of all real property and structures thereon, presently (i) owned
by, or subject to a contract of purchase and sale or option agreement
involving LEAPFROG (collectively, the "Real Property"), (ii) leased by, or
subject to a lease commitment involving, LEAPFROG (collectively, the "Leased
Property"), with a description of: (x) the general use to which such real
property is or was put; (y) the general nature and amount of any Encumbrances
thereon; and (z) if leased the name of the lessor and a true, complete and
correct copy of any written agreement pursuant to which such real property
is leased.
2:1:9:2 Machinery and Equipment.
Section 2:1:9:1 of the Disclosure Schedule sets forth a true, complete and
correct list of all machinery, work product, tools, equipment, furnishings,
and fixtures (excluding such items that had a cost basis of $20,000 or less
at the date hereof) owned, leased or subject to a contract of purchase and
sale or lease commitment, by LEAPFROG with, to the extent practical, a
description with respect to each such of: (i) the serial number of such item;
(ii) the general location at which such item is kept; (ii) whether such item
is owned or leased; (iv) if owned, a general description of the nature and
amount of any Encumbrances thereon; and (v) if leased, the name of the
lessor and a true, complete and correct copy of any written agreement
pursuant to which such item is leased.
<PAGE> 15
2:1:9:3 Receivables.
Section 2:1:9:3 of the Disclosure Schedule sets forth a true, complete and
correct list of all accounts and notes receivable presently owned by LEAPFROG,
together with an appropriate aging schedule, as of December 31, 1998, which
list separately all amounts receivable from the LEAPFROG Shareholders,
director, officer, employee, or agent of LEAPFROG, from or from any of their
respective affiliates. All accounts and notes receivable of LEAPFROG
represent bona fide claims against debtors for services performed or other
charges arising in the ordinary course of business and are subject to no
material defenses, counterclaims or rights of set-off.
2:1:9:4 Payables.
Section 2:1:9:1 of the Disclosure Schedule sets forth a true, complete and
correct list of all accounts and notes payable owed by LEAPFROG, together
with an appropriate aging schedule, as of December 31, 1998, which list
separately all such amounts payable to any LEAPFROG Shareholder, director,
officer, employee, or agent of LEAPFROG, to LEAPFROG Shareholders or to any
of the irrespective affiliates. To the best of LEAPFROG's knowledge, all
accounts and notes payable of LEAPFROG represent bona fide claims against
LEAPFROG for services performed or other charges arising in the ordinary
course of business.
2:1:9:5 Contracts.
Section 2:1:9:5 of the Disclosure Schedule sets forth a true, complete and
correct list of all contracts, agreements and commitments of LEAPFROG,
whether or not made in the ordinary course of business, including leases
under which LEAPFROG is lessor or lessee, which are to be performed in whole
or in part after the Effective Date, and which (i)involve or may involve
aggregate payments by or to LEAPFROG of $20,000 or more after the Effective
Date, (ii) are not terminable by LEAPFROG without premium or penalty on 60
(or fewer) days' notice, (iii)purport to prohibit or restrict the ability of
LEAPFROG to participate or compete in any material line of business or with
any person, (iv) purport to prohibit or restrict another person's
ability to be in the line of business of LEAPFROG or to compete with LEAPFROG
or (v) are otherwise material to the business or properties of LEAPFROG. To
the best of LEAPFROG'S knowledge, except as set forth on Schedule 2:1:9:5 of
the Disclosure Schedule, LEAPFROG has complied in all material respects with
all commitments, contracts, agreements and obligations pertaining to it
listed on Section 2:1:9:5 of the Disclosure Schedule and is not in material
default under any such contracts and agreements and no notice of material
default has been received, in each case which would have a material adverse
effect on the business of LEAPFROG.
<PAGE> 16
2:1:9:6 Licenses; Permits.
All approvals, authorizations, consents, licenses, orders, franchises, rights,
registrations and permits of any type held by LEAPFROG, which together
constitute all material approvals, authorizations, consents, licenses,
orders, franchises, rights, registrations and permits (the "Permits")
required to operate its business as presently conducted. To the best of
LEAPFROG'S knowledge, all such Permits are currently in full force and effect
and LEAPFROG is in compliance therewith, except to the extent noncompliance
would not have a material adverse effect on the business of LEAPFROG. The
execution and delivery of this Agreement and the completion of the transactions
contemplated hereby will not result in any revocation, cancellation, suspension
or modification of any such approval, authorization, consent, license, order,
franchise, right, registration or permit, which revocation, cancellation,
suspension or modification would have a material adverse effect on the
business of LEAPFROG.
2:1:9:7 Employment Agreements.
Except for the Employment Agreements substantially in the form attached hereto
as Appendix V (the "Employment Agreements"), there are no oral or written
employment or consulting agreements to which LEAPFROG is a party or by which
LEAPFROG is bound, including, without limitation, all oral or written employment
or consulting agreements or any other arrangements with any person which
provide for the payment of any consideration by LEAPFROG to such person as a
result of the termination of such person's employment with LEAPFROG, or on
the completion of the transactions contemplated hereby.
2:1:9:8 Insurance Policies.
Section 2:1:9:8 of the Disclosure Schedule sets forth a true, complete and
correct list of all (i) policies of property, fire and casualty, product
liability, worker's compensation, professional liability and title insurance
and other forms of insurance, under which LEAPFROG is insured, and (ii) bonds
issued or posted by any person which respect to any operation or other
activities of LEAPFROG.
2:1:9:9 Transactions with Management.
Section 2:1:9:1 of the Disclosure Schedule sets forth a true, complete and
correct list of all material contracts, leases and commitments by and between
LEAPFROG and any of its officers, directors, stockholders, employees, or
agents, or any affiliate of any such person. None of the officers,
directors, stockholders, or employees of LEAPFROG owns, leases or licenses any
interest in any asset used by LEAPFROG in its business, other than solely by
and through ownership of the capital stock of LEAPFROG.
<PAGE> 17
2:1:9:10 Assumed Names.
All assumed or fictitious names under which LEAPFROG engages in or conducts
any business.
2:1:9:11 Personnel.
With respect to LEAPFROG, section 2:1:9:11 of the Disclosure Schedule sets
forth a true, complete and correct list of: (i) the name, current salary or
wage rate of each employee; (ii) the current bonus arrangements applicable to
each employee; (iii) any other material compensation arrangements (excluding
employee insurance or benefit plans) with each employee; and (iv) a
description of any licenses or permits held by an employee that are material
and germane to the business of LEAPFROG.
2:1:9:12 Bank Accounts and Powers of Attorney.
Section 2:1:9:12 of the Disclosure Schedule sets forth the name and address of
each bank or other financial institution in which LEAPFROG has an account or
safe deposit box, the account number, the account name and type of account,
the names of all persons authorized to draw thereon and have access thereto,
and the name of all persons, if any, holding powers of attorney to act for
LEAPFROG, and the name and address of al persons, other than officers and
full-time employees, authorized to bind LEAPFROG contractually, including,
without limitation, independent marketing agents or independent contractors.
2:1:10 Litigation.
Except as set forth in Section 2:1:10 of the Disclosure Schedule, there is no
each suit, action, proceeding or investigation pending or, to the best
knowledge of LEAPFROG, threatened against or affecting LEAPFROG (or any of
its officers or directors in connection with the business of LEAPFROG), nor is
there any outstanding judgment, order, writ, injunction or decree against
LEAPFROG.
2:1:11 Absence of Certain Changes.
To the best of LEAPFROG's knowledge, since the interim period of September 30,
1999, there has not been: (i) any material adverse change in the financial
condition, assets, liabilities (contingent or otherwise), income or business of
LEAPFROG; (ii) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties or business of
LEAPFROG; (iii) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of LEAPFROG; (iv) any increase
in the compensation, bonus, sales commissions or fee arrangement payable or to
become payable by LEAPFROG to any of its officers, directors, employees,
consultants or agents other than raises or increases in compensation
consistent with prior policy that are not in excess of five percent of the
individual's annual compensation or hourly rate; (v) the creation of any
<PAGE> 18
material Encumbrance on any of the assets of LEAPFROG, or the amendment,
modification or extension of any existing material Encumbrance on any such
asset other than any such creation, amendment, modification or extension
effected (A) in the ordinary course of business, (B) as required in
connection with the LEAPFROG Merger, or (C) for current taxes or assessments
which are not yet due, or being contemplated in good faith by appropriate
proceedings; (vi) any sale, assignment, transfer, conveyance, lease,
hypothecation, abandonment or other disposition of or agreement to sell,
assign, transfer, convey, lease, hypothecate, abandon or otherwise dispose of,
any of the material assets of LEAPFROG, other that (A) assets sold in the
ordinary course of business, or; (B) any assets which are scrapped as
obsolete in conformance with customary procedure.
2:1:12 Title to Assets; Encumbrances.
2:1:12:1 Except as set forth in Section 2:1:12 of the Disclosure
Schedule, to the best of LEAPFROG'S knowledge, LEAPFROG owns its material
assets, whether real, personal or intangible, free and clear of all
Encumbrances, except for (i) liens for current taxes and assessments not yet
due, or being contested in good faith by appropriate proceedings, (ii)
mechanic's liens arising under the operation of law or for actions contested
in good faith or for which payment arrangements have been made, (iii) liens
granted or incurred by LEAPFROG in the ordinary course of its business or in
connection with the financing of office space, furniture and equipment in the
ordinary course of its business, (iv) easements, covenants, restrictions and
other exception to title of record (which do not materially and adversely
affect the operation of LEAPFROG), (v) Encumbrances reflected on the balance
sheet at December 31, 1998 of LEAPFROG;
2:1:12:2 To the best of LEAPFROG'S knowledge, there are no parties
in possession of any of the material assets of LEAPFROG other than LEAPFROG,
other than personal property held by third parties in the reasonable and
ordinary course of business. Subject to the Encumbrances set forth in Section
2:1:12 of the Disclosure Schedule or described in Section 2:1:12:1, LEAPFROG
enjoys full, free and exclusive use and quiet enjoyment of its material
assets and its rights pertaining thereto. To the best of LEAPFROG'S
knowledge, LEAPFROG enjoys peaceful and undisturbed possession under all leases
under which it is lessee.
2:1:13 Condition of Assets.
2:1:13:1 To the best of LEAPFROG'S knowledge, each of the buildings,
structures, equipment or other items of tangible personal property of
LEAPFROG with a cost basis of at least $20,000 is in working order and repair,
ordinary wear and tear excepted.
2:1:14 Taxes and Returns.
2:1:14:1 To the best of LEAPFROG'S knowledge, LEAPFROG has (i)
filed all tax returns and reports required to be filed by it and (ii) paid all
taxes, assessments and governmental charges and penalties which it has incurred
and which have become due and payable, except such as are being or may be
contested in good faith by appropriate proceedings or relate to the fiscal year
<PAGE> 19
ended December 31, 1998. To the best of LEAPFROG'S knowledge, LEAPFROG is
not delinquent in the payment of any material tax, assessment or governmental
charge, and no deficiencies for any taxes have been proposed, asserted, or
formally assessed against LEAPFROG, and no requests for waivers of the time to
assess any such tax are pending. The LEAPFROG Financials reflect an adequate
accrual, based on the facts and circumstances existing as of the date hereof,
for all material taxes payable by LEAPFROG (whether or not shown in any
return) through the date thereof.
2:1:15 Employment Practices.
To the best of LEAPFROG'S knowledge, LEAPFROG has complied with the Occupational
Safety and Health Act and all other laws relating to equal employment of labor
including, without limitation, laws relating to equal employment opportunity
and employment discriminations, employment of illegal aliens, wages, hours and
collective bargaining, the violation or failure to comply with which would have
a material adverse effect on the business of LEAPFROG. Notwithstanding anything
here into the contrary, LEAPFROG has complied with all laws relating to the
collection and payment of social security and withholding taxes, or both, and
similar taxes except where the failure to comply with such laws would not
have a material adverse effect on the business of LEAPFROG. To the best of
LEAPFROG'S knowledge, LEAPFROG is not liable for any arrear age of wages or any
taxes or penalties for failure to comply with any of the foregoing, which would
have a material adverse effect on the business of LEAPFROG. To the best
knowledge of LEAPFROG, there are no organizational efforts presently being
made or threatened by or on behalf of any labor union with respect to any
employees of LEAPFROG, which would have a material adverse effect on the
business of LEAPFROG.
2:1:16 Compliance with Law.
To the best knowledge of LEAPFROG, LEAPFROG is in compliance with and is not
in violation of or in default with respect to, or in alleged violation of or
alleged default with respect to: (a) any applicable law, rule, regulation or
statute applicable to the operations of LEAPFROG, or (b) any order, permit,
certificate, writ, judgment, injunction, decree, determination, award or other
decision of any court or any Government Entity to which LEAPFROG is a party or
by which LEAPFROG is bound, which violation or default or alleged violation or
default would materially and adversely affect the business, operations,
properties, assets, profits or condition of LEAPFROG.
2:1:17 Environmental Requirements and Health and Safety Requirements.
To the best of LEAPFROG'S knowledge, there are no material claims and
complaints, or reports or other documents related to such material claims or
complaints, in the files of LEAPFROG made by or against LEAPFROG during the
past three years pursuant to Environmental Requirements or Health or Safety
Requirements (other than those documents which LEAPFROG has determined, in good
faith and after consultation with counsel, should remain protected by the
attorney-client
<PAGE> 20
privilege). At present, to the best of LEAPFROG'S knowledge, none of the
operations of LEAPFROG is subject to any judicial or administrative
proceeding, order, judgment, decree or settlement alleging or addressing a
material violation of or a material liability under any Environmental
Requirement or any Health and Safety Requirement.
2:1:18 Books and Records.
To the best of LEAPFROG'S knowledge, all the records and stock minute books of
LEAPFROG have been delivered to or made available upon request for inspection
by ALBARA. To the best of LEAPFROG'S knowledge, such books and stock minute
books are true and correct in all material respects.
2:1:19 Compliance with ERISA.
Except as set forth in Section 2:1:19 LEAPFROG has no other benefit plans (the
"Benefit Plans") within the meaning of the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code
and other applicable laws to the best of LEAPFROG'S knowledge.
2:1:19:1 Prohibited Transactions.
To the knowledge of LEAPFROG and all its subsidiaries, LEAPFROG or any of its
subsidiaries have not engaged in a transaction in connection with which it
could be subject (either directly or indirectly) to a material liability for
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code.
2:1:19:2 Plan Termination; Material Liabilities.
To the best of LEAPFROG'S knowledge, there has been no termination of an
"employee pension benefit plan" as defined in ERISA which is subject to Title
IV of ERISA (a "Statutory Plan") or trust created under any Statutory Plan that
would give rise to a material liability to the Pension Benefit Guaranty
Corporation ("PBGC") on the part of LEAPFROG or any of its subsidiaries. To
the best knowledge of LEAPFROG and all of its subsidiaries, all statutory
Plans intended to be tax-qualified under Section 401(a) or 403(a) of the Code
have complied in the past, both in form and operation, with every provision
of the Code, regulation promulgated pursuant thereto, and every ruling,
notice or announcement issued by the Internal Revenue Service necessary to
maintain the qualified status of such Statutory Plans, except where non
compliance would not have a material adverse effect on LEAPFROG or any of its
subsidiaries. No material liability to the PBGC has been or is expected to be
incurred with respect to any Statutory Plan. The PBGC has not instituted
proceedings to terminate any Statutory Plan. To the best knowledge of
LEAPFROG and all of its subsidiaries, there exists no condition or set of
circumstances which presents a material risk of termination or partial
termination of any Statutory Plan by the PBGC.
<PAGE> 21
2:1:19:3 Accumulated Funding Deficiency.
To the best of LEAPFROG'S knowledge, full payment has been made of all
amounts, if any, which are required under the terms of each statutory plan,
ERISA or other applicable laws to have been paid as contributions to such
Statutory Plan, and no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Statutory Plan.
2:1:19:4 Relationship of Benefits to Pension Plan Assets.
To the best of LEAPFROG'S knowledge, the current value of all accrued
benefits, both vested and unvested, under all Statutory Plans does not exceed
the current value of the assets of such Statutory Plans allocable to such
accrued benefits, except as disclosed in the financial statements described
in Section 2:1:19. For purposes of the representation in this Section
2:1:19:4, the term "current value" has the meaning specified in Section
4062(b)(1)(A) of ERISA, the term "accrued benefit" has the meaning specified in
Section 3 of ERISA and "current value" is based upon the same actuarial
assumptions used by ALBARA.
2:1:19:5 Execution of Agreements.
To the best of LEAPFROG'S knowledge, the execution and delivery of this
Agreement and the Transaction Documents, and the consummation of the
transaction contemplated hereby will not involve any transaction which is
subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975 of the Code.
2:1:19:6 Fiduciary Liability.
To the best of LEAPFROG and its subsidiaries' knowledge, there have been no
acts, failures to act, omissions or transactions involving a Statutory Plan
or the assets thereof which could result in imposition on LEAPFROG or its
subsidiaries (whether direct or indirect) of material damages or liability in
actions brought under Section 502 or Sections 404 through 409 of ERISA.
2:1:19:7 Pending Claims.
To the best of LEAPFROG and its subsidiaries' knowledge, there are no claims,
pending or overtly threatened, involving any of the Benefit Plans by any
current or former employee (or beneficiary thereof) of LEAPFROG which allege
any material violation of ERISA or the terms of the Benefit Plans, nor is
there any reasonable basis to anticipate any such claims involving such
Benefit Plans which would likely be successfully maintained against LEAPFROG
or any of it subsidiaries.
<PAGE> 22
2:1:19:8 Multiemployer Plans.
To the best of LEAPFROG'S knowledge, neither LEAPFROG nor any trade or
business (whether or not incorporated) which together with LEAPFROG or any its
subsidiaries would be deemed to be a "single employer" within the meaning of
Section 400(b) of ERISA or Subsections 414(b), (c), (m) or (o) of the Code
sponsors, maintains, or contributes to, or has at any time in the six year
period proceeding the date of this Agreement sponsored, maintained or
contributed to, any place (not exempt from the provisions of ERISA),
including, but not limited to, any plan which is a "multiemployer plan" as such
term is defined in Section 3(37) or 4001(a)(3) of ERISA.
2:1:19:9 No Reportable Event.
To the best of LEAPFROG or any of its subsidiaries' knowledge, there has been
no "reportable event" (within the meaning of Section 4043(b) of ERISA with
respect to a Statutory Plan) or any "prohibited transaction" (as such term is
defined in Section 406 of ERISA and Section 4975(c) of the Code) with respect
to any of the Employee Plans. All reporting and disclosure requirements under
Title I of ERISA have been met.
2:1:20 No Undisclosed Defaults.
To the best knowledge of LEAPFROG and any of its subsidiaries, neither
LEAPFROG or any of its subsidiaries is not in material default with respect to
any obligation, agreement or covenant to be performed by it under any
contract or arrangement of any kind, which default would have a material
adverse effect on LEAPFROG or any of its subsidiaries.
<PAGE> 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALBARA AND ALBARA SUBSIDIARY
Representations and warranties shall be made by ALBARA and Albara Subsidiary
and shall survive the Effective Date of the LEAPFROG Merger for a period of one
(1) year, subject to mutually satisfactory exceptions, claims and caveats:
3:1 Representations and Warranties of ALBARA and Albara Subsidiary.
ALBARA and Albara Subsidiary, jointly and severally, represent and warrant to
LEAPFROG as follows:
3:1:1 Organization and Standing.
ALBARA and Albara Subsidiary are corporations duly organized, validly existing
and in good standing under the laws of the States of Colorado and Florida,
respectively, and are duly authorized, qualified and in good standing under all
applicable laws, regulations, ordinances and orders of public authorities and
have all requisite corporate power and authority to own, lease and operate
their properties and to carry on their businesses as they are now being
conducted, except where the failure to be so authorized, qualified or licensed
would not have a material adverse effect on the business of ALBARA and its
subsidiaries, taken as a whole. ALBARA and Albara Subsidiary are duly
licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the character of their properties, owned or leased, or
the nature of their activities, makes such licensing or qualification
necessary, except for where the failure to be so licensed and qualified would
not have a material adverse effect on the business of ALBARA or Albara
Subsidiary.
True and correct copies of the Articles of Incorporation (certified by the
Secretary of State of the States of Colorado and Florida) and the Bylaws, as
amended, of ALBARA and Albara Subsidiary (certified by the Secretary of the
respective corporations) are attached hereto as Section 3:1:1 of the
Disclosure Schedule.
3:1:2 Authority.
ALBARA and Albara Subsidiary have the necessary corporate power and authority
to enter into this Agreement, as well as the Transaction Documents more fully
defined in Section 6:4, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Transaction Documents, and the completion of the transactions contemplated
hereby and thereby have been duly authorized by corporate action of the part
of the Board of Directors of each of ALBARA and Albara Subsidiary, and subject
to the convening of a shareholder's meeting pursuant to Article 7-111-101-109
of the Colorado Business Corporation Act in order to approve this Agreement and
the Transaction Documents, no further corporate proceedings
<PAGE> 24
on the part of ALBARA or Albara Subsidiary will be necessary. When issued
pursuant to this Agreement, the Shares of ALBARA common stock to
be issued to Leapfrog Shareholders on the Effective Date will be duly
authorized, validly issued, fully paid and non-assessable, and the ALBARA
Shares to be issued to Leapfrog Shareholders on the Effective Date shall be
legally equivalent in all respects to the ALBARA Common Stock issued and
outstanding as of the date hereof. This Agreement has been executed and
delivered by ALBARA and Albara Subsidiary and constitutes the legal, valid and
binding obligation of ALBARA, enforceable in accordance with its terms. As
of the Effective Date, each of the Transaction Documents will constitute a
legal, valid and binding obligation of ALBARA and Albara Subsidiary, each
enforceable in accordance with its terms.
3:1:3 No Conflict, Default, Breach or Violation.
The execution and delivery of this Agreement does not, and the completion of
the transactions contemplated hereby and thereby will not, conflict with or
result in a breach of or the acceleration of any obligation under, or
constitute a default or event of default (or event which with notice or
lapse of time or both would constitute a default) under, any provision of any
charter, bylaw, indenture, mortgage, lien, lease, agreement, contract, order,
judgment, or, to the best knowledge of ALBARA, any judicial or administrative
decree, ordinance or regulation, permit, license, franchise or any restriction
to which any property of ALBARA or any of its subsidiaries is subject or by
which ALBARA or any of its subsidiaries is bound, the effect of which would be
materially adverse to ALBARA and its subsidiaries taken as a whole. Neither
ALBARA nor any of its subsidiaries is alleged to be in violation or default or
under any applicable law, statute, order, rule or regulation promulgated or
judgment entered by any Governmental Entity, relating to or affecting the
Operation, conduct or ownership of the property or business of ALBARA or
such subsidiaries, which violation or default or alleged violation or default
would have a material, adverse effect, on ALBARA and its subsidiaries taken as
a whole.
3:1:4 Approvals.
Except for usual and customary compliance with the Securities Act, the
securities or blue sky laws of various states as set forth in Section 3:1:4 of
the Disclosure Schedule, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental agency or instrumentality, domestic or
foreign (a "Governmental Entity"), or third party is required by or with
respect to ALBARA or Albara Subsidiary in connection with the execution and
delivery by ALBARA and Albara Subsidiary of this Agreement, or the completion
of the transactions contemplated hereby, the absence of which would have a
material adverse effect on ALBARA or Albara Subsidiary.
<PAGE> 25
3:1:5 SEC Documents; Filings; Financial Statements.
(a) Albara has delivered to Leapfrog accurate and complete copies
(excluding copies of exhibits) of each report, registration
statement (on a form other than Form S-8) and definitive proxy
statement filed by Albara with the SEC between January 1, 1998
and the date of this Agreement (the "Albara SEC Documents"). As
of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then
on the date of such filing): (i) each of the Albara SEC
Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the
case may be); and (ii) none of the Albara SEC Documents contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The consolidated financial statements contained in the
Albara SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC
Applicable thereto; (ii) were prepared in accordance with GAAP
Applied on a consistent basis throughout the periods covered,
except as may be indicated in the notes to such financial
statements and (in the case of unaudited statements) as permitted
by Form 10-QSB of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end
audit adjustments; and (iii) fairly present the consolidated
financial position of Albara and its subsidiaries as of the
respective dates thereof and the consolidated results of operations
of Albara and its subsidiaries for the periods covered thereby.
3:1:6 Capitalization of Albara Subsidiary.
The authorized capital stock of Albara Subsidiary consists of fifty million
(50,000,000) shares of no par value Common Stock, of which one thousand shares
(1,000) shares are outstanding and owned by ALBARA, and ten thousand (10,000)
shares of Preferred Stock, no par value, of which no shares are outstanding.
3:1:7 Information Supplied.
To the best knowledge of ALBARA and Albara Subsidiary, no written statement,
certificate, schedule, list or other written information furnished by or on
behalf of ALBARA or Albara Subsidiary to LEAPFROG on or prior to the date
hereof in connection herewith contains (after giving effect to any correction
thereof furnished to LEAPFROG in writing prior to the date hereof) any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated herein or therein or necessary to make the statements
herein or therein, in light of the circumstances under which they were made,
not misleading.
<PAGE> 26
3:1:8 Capitalization of ALBARA.
As of the date hereof, the authorized capital stock of ALBARA consists of six
hundred sixty-six thousand six hundred sixty-seven (666,667) shares of ALBARA
Common Stock, of which (i) 397,671 shares of common stock are issued and
outstanding after giving effect to a proposed 10:1 reverse stock split and a
conversion of Series C Preferred Stock to ALBARA Common Stock; (ii) warrants
providing for the sale of a total of 3,335 shares of common stock at $5 per
share are outstanding to a former director, issued in 1995, expiring at year
end 2005; and (iii) 195 shares of Series F Preferred are issued and
outstanding, convertible to 1,950 common shares in the aggregate at the option
of the holders. All of the issued and outstanding shares of capital stock of
ALBARA have been duly and validly authorized and validly issued and are fully
paid and non-assessable. As of the date hereof, except as disclosed herein,
there are no authorized or outstanding subscriptions, options, conversion
rights, warrants or other agreements, securities or commitments of any nature
whatsoever (whether oral or written and whether firm or conditional)
obligating ALBARA or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, to any person any shares of ALBARA
Common Stock or any other shares of the capital stock of ALBARA or any shares
of the capital stock of any of its subsidiaries, or any securities convertible
into or exchangeable for any such shares, or obligating any such person to
grant, extend or enter into any such agreement or commitment. Except as set
forth in Section 3:1:8 of the Disclosure Schedule, there are no agreements
obligating ALBARA to redeem, repurchase or otherwise acquire the capital stock
of ALBARA, or any other securities issued by it, or to register the sale of the
capital stock of ALBARA under applicable securities laws. Except as set forth
in Section 3:1:8 of the Disclosure Schedule, there are no agreements or
arrangements prohibiting or otherwise restricting the payment of dividends or
distributions to the ALBARA Shareholders by ALBARA.
3:1:9 Title to Assets; Encumbrances.
3:1:9:1 Except as set forth in Section 3:1:9 of the Disclosure
Schedule, ALBARA and its subsidiaries own their respective assets, whether real,
personal or intangible, free and clear of all Encumbrances, except (i) liens
for current taxes and assessments not yet due or being contested in good
faith by appropriate proceedings, (ii) mechanic's liens arising under the
operation of law or for actions contested in good faith or for which payment
arrangements have been made, (iii) liens granted or incurred by ALBARA or any
of its subsidiaries in the ordinary course of its business or in connection
with the financing of office space, furniture and equipment in the ordinary
course of its business, (iv) easements, covenants, restrictions and other
exceptions to title of record which do not materially and adversely affect the
operations of ALBARA and its subsidiaries, (v) such Encumbrances as do not
secure indebtedness in excess of $10,000, which in the aggregate (meaning as
to ALBARA and all of its subsidiaries) do not secure indebtedness in excess of
$10,000, or are otherwise described in Section 3:1:9 of the Disclosure
Schedule, or (vi) Encumbrances reflected in the SEC Documents;
<PAGE> 27
3:1:9:2 Except as set forth in the 10-KSB for the period ended
December 31, 1998 ("10-K") or Section 3:1:9 of the Disclosure Schedule, there
are no parties in possession of any of the assets of ALBARA or its subsidiaries
other than ALBARA or such subsidiaries, other than personal property held by
third parties in the reasonable and ordinary course of business. Except as
set forth in the 10-K or Section 3:1:9 of the Disclosure Schedule, ALBARA and
each of its subsidiaries enjoy full, free and exclusive use and quiet
enjoyment of their respective assets and all rights pertaining thereto, and
ALBARA and its subsidiaries enjoy peaceful and undisturbed possession under all
leases under which any of them is lessee.
3:1:10 Subsidiaries.
Section 3:1:10 of the Disclosure Schedule sets forth a complete and correct
list of each subsidiary of ALBARA, together with the jurisdiction of
incorporation or organization of such subsidiary and the percentage of each
such subsidiary's outstanding capital stock or other equity interest owned by
ALBARA or another subsidiary of ALBARA.
Except as set forth in the 10-K or Section 3:1:10 of the Disclosure Schedule,
ALBARA owns all of the securities of each of its operating subsidiaries, free
and clear of all Encumbrances, and all capital stock of such subsidiaries has
been duly authorized and validly issued and is fully paid and nonassessable.
None of the subsidiaries has any commitment to issue or sell any shares of its
capital stock, or any securities or obligations convertible into or
exchangeable for, or to give any person other than ALBARA any right to
acquire from it, any shares of its capital stock. Each subsidiary is a
corporation duly organized validly existing and in good standing under the
laws of its jurisdiction of incorporation, has the corporate power and all
necessary authorizations to own all of its properties and assets and to carry
on its business as it is now being conducted, and, to the extent required by
law, is duly qualified to do business and is in good standing in each
jurisdiction in which it owns property or conducts business, except where the
failure to have such authorization or to be so qualified would not have a
material adverse effect on the business or operations of ALBARA and its
subsidiaries as a whole.
3:1:11 Litigation.
Except as set forth in the 10-K or Section 3:1:11 of the Disclosure Schedule,
there is no suit, action, proceeding or investigation pending or, to the best
knowledge of ALBARA, threatened against or affecting ALBARA or any of its
subsidiaries (or any of its officers or directors in connection with the
business of ALBARA or any of its subsidiaries), nor is there any outstanding
judgment, order, writ, injunction or decree against ALBARA or any of its
subsidiaries, which suit, action, proceeding or investigation had or could
reasonably be expected to have a material adverse effect on ALBARA and its
subsidiaries, taken as a whole. Except as set forth in the SEC Documents or
Section 3:1:11 of the Disclosure Schedule, to the best knowledge of ALBARA:
(i) there are no facts upon which
<PAGE> 28
any action, suit or proceeding could be brought against ALBARA or any of
its subsidiaries that would have a material adverse effect on ALBARA; and
(ii) neither ALBARA nor any of its subsidiaries is subject to any court
order, writ, injunction, decree, settlement agreement or judgment that
contains or orders any ongoing obligations, whether prohibitory or
mandatory in nature, on the part of ALBARA or its subsidiaries.
3:1:12 Environmental Requirements and Health and Safety Requirements.
To the best of ALBARA'S and Albara Subsidiary's knowledge, Section 3:1:12 of
the Disclosure Schedule sets forth true, correct and complete copies of all
material claims and complaints, or reports or other documents related to such
material claims or complaints, in the files of ALBARA or Albara Subsidiary
made by or against ALBARA or Albara Subsidiary during the past three years
pursuant to Environmental Requirements or Health or Safety Requirements
(other than those documents which ALBARA and Albara Subsidiary have
determined, in good faith and after consultation with counsel, should remain
protected by the attorney-client privilege). At present, to the best of
ALBARA's and Albara Subsidiary's knowledge, none of the operations of ALBARA
or Albara Subsidiary is subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a material
violation of or a material liability under any Environmental Requirement or
any Health and Safety Requirement, except as set forth in Section 3:1:12 of
the Disclosure Schedule.
3:1:13 Absence of Undisclosed Liabilities.
To the best of ALBARA and Albara Subsidiary's knowledge, except as set forth
in Section 3:1:13 of the Disclosure Schedule, ALBARA or Albara Subsidiary
have no liabilities or obligations, either accrued, absolute, contingent, or
otherwise, required to be but not reflected or reserved against in the ALBARA
or Albara Subsidiary Financials in accordance with generally accepted
accounting principles, except those incurred in the ordinary course of
business, and ALBARA or Albara Subsidiary know of no potential liability that
would result in material adverse effect on the value or business of ALBARA or
Albara Subsidiary other than those (a) reflected or reserved against in the
ALBARA Financials, (b)incurred in the ordinary course of business since
December 31, 1998 or (c) set forth in Section 3:1:13 of the Disclosure
Schedule.
3:1:14 Financial Statements.
ALBARA has furnished to LEAPFROG true, complete and correct copies of the
financial statements of ALBARA, at and for the fiscal year ended December 31,
1998 and for the interim period ended June 30, 1999 (which financial
statements consist of at least a balance sheet, income statement, and
statements of operations, cash flows and changes in stockholders equity, and
which interim unaudited financial statements consist of at least a balance
sheet, income statement, and statement of operations, and will deliver an
interim unaudited balance sheet as of June 30, 1999 (all of these financial
statements being collectively referred to herein as the "ALBARA Financials").
The ALBARA Financials will be in accordance with the books and records of
ALBARA, comply as to
<PAGE> 29
form in all material respects with applicable accounting requirements, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the financial position of
ALBARA as at the date thereof. Since December 31, 1998, there has not been,
occurred or arisen (a) any material adverse change in the business or the
consolidated financial condition of ALBARA and its subsidiaries, considered
as a whole, from that shown on the aforementioned balance sheet as of December
31, 1998, or (b) any event, condition or state of facts of any character
which, to the best of the knowledge of ALBARA, materially and adversely
affects, or threatens to materially and adversely affect, the business or
results of operations or financial condition of ALBARA and its subsidiaries,
considered as a whole.
3:1:15 Contracts.
All contracts, agreements and commitments of ALBARA, whether or not made in
the ordinary course of business, including leases under which ALBARA is
lessor or lessee, which are to be performed in whole or in part after the
Effective Date, and which (i)involve or may involve aggregate payments by or
to ALBARA of $10,000 or more after the Effective Date, (ii) are not
terminable by ALBARA without premium or penalty on 60 (or fewer) days' notice,
(iii) purport to prohibit or restrict the ability of ALBARA or Albara
Subsidiary to participate or compete in any material line of business or with
any person, (iv) purport to prohibit or restrict another person's ability to be
in the line of business of ALBARA or to compete with ALBARA or (v) are
otherwise material to the business or properties of ALBARA. To the best of
ALBARA'S knowledge, except as set forth on Schedule 3:1:15 of the Disclosure
Schedule, ALBARA and the Albara Subsidiary have complied with all
commitments, contracts, agreements and obligations pertaining to it listed on
Section 3:1:15 of the Disclosure Schedule and is not in material default
under any such contracts and agreements and no notice of material default has be
received.
3:1:16 Insurance Policies.
All (i) policies of property, fire and casualty, product liability, worker's
compensation, professional liability and title insurance and other forms of
insurance, under which ALBARA or Albara Subsidiary is insured, and (ii) bonds
issued or posted by any person which respect to any operation or other
activities of ALBARA are in full force and effect on the date hereof.
3:1:17 Transactions with Management.
All material contracts, leases and commitments by and between ALBARA and
Albara Subsidiary and any of its officers, directors, stockholders,
employees, or agents, or any affiliate of any such person are set forth in
Section 3:1:17 of the Disclosure Schedule, and none of the officers,
directors, stockholders, or employees of ALBARA or Albara Subsidiary owns,
leases or licenses any interest in any asset used by ALBARA or Albara
Subsidiary in its business, other than solely by and through ownership of the
capital stock of ALBARA.
<PAGE> 30
3:1:18 Compliance with ERISA.
Each benefit plan set forth in Section 3:1:18 of the Disclosure Schedule
(collectively the "Benefit Plans") substantially complies with the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code and other applicable laws. Except as provided in Section
3:1:18 of the Disclosure Schedule, all contributions required to be made to
each Benefit Plan under the terms of such Benefit Plans, ERISA or other
applicable laws have been timely made. Except as provided in Section 3:1:18
of the Disclosure Schedule.
3:1:18:1 Prohibited Transactions.
To the knowledge of ALBARA and Albara Subsidiary, ALBARA or Albara Subsidiary
has not engaged in a transaction in connection with which it could be subject
(either directly or indirectly) to a material liability for either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code.
3:1:18:2 Plan Termination; Material Liabilities.
There has been no termination of an "employee pension benefit plan" as
defined in ERISA which is subject to Title IV of ERISA (a "Statutory Plan")
or trust created under any Statutory Plan that would give rise to a material
liability to the Pension Benefit Guaranty Corporation ("PBGC") on the part of
ALBARA or Albara Subsidiary. To the best knowledge of ALBARA and Albara
Subsidiary, all ALBARA statutory Plans intended to be tax-qualified under
Section 401(a) or 403(a) of the Code have complied in the past, both in form
and operation, with every provision of the Code, regulation promulgated
pursuant thereto, and every ruling, notice or announcement issued by the
Internal Revenue Service necessary to maintain the qualified status of such
Statutory Plans, except where non-compliance would not have a material
adverse effect on ALBARA or Albara Subsidiary. No material liability to the
PBGC has been or is expected to be incurred with respect to any Statutory
Plan. The PBGC has not instituted proceedings to terminate any Statutory
Plan. To the best knowledge of ALBARA and Albara Subsidiary, there exists no
condition or set of circumstances which presents a material risk of
termination or partial termination of any Statutory Plan by the PBGC.
3:1:18:3 Accumulated Funding Deficiency.
Except as provided in Section 3:1:18:3 of the Disclosure Schedule, full
payment has been made of all amounts which are required under the terms of
each statutory plan, ERISA or other applicable laws to have been paid as
contributions to such Statutory Plan, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether
or not waived, exists with respect to any Statutory Plan.
<PAGE> 31
3:1:18:4 Relationship of Benefits to Pension Plan Assets.
The current value of all accrued benefits, both vested and unvested, under all
Statutory Plans does not exceed the current value of the assets of such
Statutory Plans allocable to such accrued benefits, except as disclosed in
the financial statements described in Section 3:1:18. For purposes of the
representation in this Section 3:1:18:4, the term "current value" has the
meaning specified in Section 4062(b)(1)(A) of ERISA, the term "accrued
benefit" has the meaning specified in Section 3 of ERISA and "current value"
is based upon the same actuarial assumptions used by ALBARA.
3:1:18:5 Execution of Agreements.
The execution and delivery of this Agreement and the Transaction Documents,
and the consummation of the transaction contemplated hereby will not involve
any transaction which is subject to the prohibitions of Section 406 of ERISA
or in connection with which a tax could be imposed pursuant to Section 4975
of the Code.
3:1:18:6 Fiduciary Liability.
To the best of ALBARA or Albara Subsidiary's knowledge, there have been no
acts, failures to act, omissions or transactions involving a Statutory Plan
or the assets thereof which could result in imposition on ALBARA or Albara
Subsidiary (whether direct or indirect) of material damages or liability in
actions brought under Section 502 or Sections 404 through 409 of ERISA.
3:1:18:7 Pending Claims.
To the best of ALBARA or Albara Subsidiary's knowledge, there are no claims,
pending or overtly threatened, involving any of the Benefit Plans by any
current or former employee (or beneficiary thereof) of ALBARA which allege
any material violation of ERISA or the terms of the Benefit Plans, nor is
there any reasonable basis to anticipate any such claims involving such
Benefit Plans which would likely be successfully maintained against ALBARA or
Albara Subsidiary.
3:1:18:8 Multiemployer Plans.
Except as may be set forth in Schedule 3:1:18 of the Disclosure Schedule,
neither ALBARA nor any trade or business (whether or not incorporated) which
together with ALBARA or Albara Subsidiary would be deemed to be a "single
employer" within the meaning of Section 400(b) of ERISA or Subsections
414(b), (c), (m) or (o) of the Code sponsors, maintains, or contributes to,
or has at any time in the six year period proceeding the date of this
Agreement sponsored, maintained or contributed to, any place (not exempt
from the provisions of ERISA), including, but not limited to, any plan which
is a "multiemployer plan" as such term is defined in Section 3(37) or
4001(a)(3) of ERISA.
<PAGE> 32
3:1:18:9 No Reportable Event.
To the best of ALBARA or Albara Subsidiary's knowledge, there has been no
"reportable event" (within the meaning of Section 4043(b) of ERISA with
respect to a Statutory Plan) or any "prohibited transaction" (as such term is
defined in Section 406 of ERISA and Section 4975(c) of the Code) with respect
to any of the Employee Plans. All reporting and disclosure requirements under
Title I of ERISA have been met.
3:1:19 No Undisclosed Defaults.
Except as set forth in Section 3:1:19 of the Disclosure Schedule, to the best
knowledge of ALBARA or Albara Subsidiary, ALBARA or Albara Subsidiary is not in
material default with respect to any obligation, agreement or covenant to be
performed by it under any contract or arrangement of any kind, including,
without limitation, those described in Section 3:1:19 of the Disclosure
Schedule, which default would have a material adverse effect on ALBARA or Albara
Subsidiary.
3:1:20 Taxes and Returns.
3:1:20:1 Except as set forth on Section 3:1:20 of the Disclosure
Schedule, ALBARA has (i) filed all tax returns and reports required to be filed
by it and (ii) paid all taxes, assessments and governmental charges and
penalties which it has incurred and which have become due and payable, except
such as are being or may be contested in good faith by appropriate
proceedings or relate to the fiscal year ended December 31, 1998. Except as
set forth on Section 3:1:20 of the Disclosure Schedule, ALBARA is not
delinquent in the payment of any material tax, assessment or governmental
charge, and no deficiencies for any taxes have been proposed, asserted, or
formally assessed against ALBARA, and no requests for waivers of the time to
assess any such tax are pending, the ALBARA Financials reflect an adequate
accrual, based on the facts and circumstances existing as of the date hereof,
for all material taxes payable by ALBARA (whether or not shown in any
return) through the date thereof. Except as set forth in Section 3:1:20 of
the Disclosure Schedule, all tax returns and taxes for periods after December
31, 1998 have or will be filed and paid by ALBARA on a timely basis, unless
said taxes are being contested in good faith by appropriate proceedings.
3:1:21 Compliance with Law.
Except as set forth in Section 3:1:21 or any other Section of the Disclosure
Schedule, to the best knowledge of ALBARA and Albara Subsidiary, ALBARA and
Albara Subsidiary is in compliance with and is not in violation of or in
default with respect to, or in alleged violation of or alleged default with
respect to: (a) any applicable law, rule, regulation or statute applicable to
the operations of ALBARA or Albara Subsidiary, or (b) any order, permit,
certificate, writ, judgment, injunction, decree, determination, award or
other decision of any court or any Government Entity to which ALBARA or
Albara Subsidiary is a party or by which ALBARA or Albara Subsidiary is
bound, which violation or default or alleged violation or default would
materially and adversely affect the
<PAGE> 33
business, operations, affairs, prospects, properties, assets, profits or
condition of ALBARA or Albara Subsidiary. To the best knowledge of ALBARA
and Albara Subsidiary, ALBARA is not delinquent with respect to (a) any
report required to be filed with any Governmental Entity or (b) the
preparation and delivery of any reports required by private agreements to
which ALBARA or Albara Subsidiary is a party, which delinquency might
materially and adversely affect the business, operations, affairs,
prospects, properties, assets, profits, conditions of ALBARA or Albara
Subsidiary.
3:1:22 Environmental Requirements and Health and Safety Requirements.
To the best of ALBARA and Albara Subsidiary's knowledge, Section 3:1:22 of the
Disclosure Schedule sets forth true, correct and complete copies of all
material claims and complaints, or reports or other documents related to such
Material claims or complaints, in the files of ALBARA made by or against
ALBARA during the past three years pursuant to Environmental Requirements or
Health or Safety Requirements (other than those documents which ALBARA has
determined, in good faith and after consultation with counsel, should remain
protected by the attorney-client privilege). At present, to the best of
ALBARA's knowledge, none of the operations of ALBARA or Albara Subsidiary is
subject to any judicial or administrative proceeding, order, judgment, decree
or settlement alleging or addressing a material violation of or a material
liability under any Environmental Requirement or any Health and Safety
Requirement, except as set forth in Section 3:1:22 of the Disclosure Schedule.
3:1:23 Agreements, Contracts and Commitments.
Except as set forth in Section 3:1:23 of the Disclosure Schedule, ALBARA or
Albara Subsidiary are not parties to (a) any collective bargaining agreement,
(b) any bonus, deferred compensation, pension, profit-sharing, or retirement
plan or other arrangement, (c) any employment or other agreement, contract,
or commitment requiring ALBARA or Albara Subsidiary to pay any employee more
than $100,000 a year or any severance pay in excess of four weeks' salary,
(d) any agreement of guarantee or indemnification which involves, singly or
together with other such agreements, a potential material liability, (e) any
agreement, contract, or commitment which, to the best of the knowledge of
ALBARA or Albara Subsidiary, might reasonably be expected to have a potential
material adverse impact on the business, financial condition or earnings of
ALBARA or Albara Subsidiary, (f) any agreement, contract, or commitment
containing any covenant limiting the freedom of ALBARA or Albara Subsidiary
to engage in any line of business in any area of the world or to compete with
any person, (g) any agreement, contract, or commitment relating to capital
expenditures and involving future payments which, together with future
payments under all other agreements, contracts, or commitments relating to
the same capital project, exceed $500,000, (h) any agreement, contract, or
commitment (other than leases of real property) relating to the acquisition
of assets or capital stock of any business enterprise, (i) any agreement,
contract, or commitment which involves $500,000 or more, or which has a
remaining term (including options of renewal or extension to the extent
exercisable by a person other than ALBARA or Albara Subsidiary) of three
years or more from the date hereof, or which is not cancelable without
penalty of less than $25,000,
<PAGE> 34
or (j) any other agreement or contract which ALBARA or Albara Subsidiary
would be required to file with the Securities and Exchange Commission
("SEC") as an exhibit were ALBARA or Albara Subsidiary to file with the SEC
on the date hereof a registration statement on Form SB-1 or SB-2 covering
securities to be offered by ALBARA or Albara Subsidiary to the
public. To the best of the knowledge of ALBARA or Albara Subsidiary, neither
party has not in any material respect breached, nor to the best of the
knowledge of them is there any pending or threatened claim or any legal basis
for a claim that they have breached, any of the terms or conditions of (1)
any agreement contract or commitment set forth in any of the schedules
heretofore delivered by ALBARA or Albara Subsidiary to LEAPFROG pursuant to
this agreement or (2) any other agreement, contract or commitment, the
breach or breaches of which singly or in the aggregate could result in the
imposition of damages in an amount material to ALBARA or Albara Subsidiary.
3:1:24 Intellectual Property
Section 3:1:24 of the Disclosure Schedule furnished by ALBARA to LEAPFROG
correctly sets forth a list of all letters patent, patent applications,
inventions upon which patent applications have not yet been filed, trade
names, trademarks, trademark registrations and applications, copyrights,
copyright registrations and applications, both domestic and foreign,
presently owned, possessed, used or held by ALBARA and Albara Subsidiary.
Unless otherwise indicated in such schedule, ALBARA and Albara Subsidiary own
the entire right, title and interest in and to the same. Such schedule also
correctly sets forth a list of all licenses granted/software sales to others
by ALBARA and Albara Subsidiary. All letters patent, patent applications,
trade names, trademarks, trademark registrations and applications,
copyrights, copyright registrations, and applications, and grants of licenses
set forth in such schedule are subject to no pending or, to the best of the
knowledge of ALBARA and Albara Subsidiary threatened challenge except as set
forth in said schedule, and neither the execution and delivery of this
agreement or of the Articles of Share Exchange not the consummation of this
agreement will give any licensor or licensee of ALBARA or Albara Subsidiary
any right to change the terms or provisions of, or terminate or cancel, any
license to which is a party. ALBARA and Albara Subsidiary have not agreed to
indemnify any person for or against any infringement of any patent, trademark,
or copyright except as shown on Section 3:1:24 of the Disclosure Schedule.
3:1:25 Brokers' or Finders' Fees
Zenith Holdings Limited will be entitled to a consulting fee of thirty
thousand (30,000) Shares in Albara. No additional agent, broker, person or
firm acting on behalf of ALBARA or Albara Subsidiary or under its authority
is or will be entitled to any commission, broker, finder, or financial
advisory fees from any of the parties hereto in connection with any of the
transactions contemplated herein.
<PAGE> 35
ARTICLE IV
OBLIGATIONS PENDING EFFECTIVE DATE
4:1 Agreements of LEAPFROG.
LEAPFROG agrees that from the date hereof to and through the Effective Date,
LEAPFROG will:
4:1:1 Corporate Approvals.
Use its best efforts for the purpose of authorizing and obtaining the consent
of the LEAPFROG Shareholders to this Agreement and the merger contemplated
hereby.
4:1:2 Maintenance of Present Business.
Except as contemplated by this Agreement, operate its business only in the
usual, regular, and ordinary manner so as to maintain the goodwill it now
enjoys and, to the extent consistent with such operation, use all reasonable
efforts to preserve intact its present business organization, keep available
the services of its present officers and employees, and preserve its
relationship with all material customers, suppliers, jobbers, distributors,
and others having business dealings with it. If LEAPFROG proposes to secure
a waiver of this covenant from ALBARA with respect to a particular
transaction, LEAPFROG shall be deemed in compliance with this covenant if the
President of ALBARA or his successor does not deliver to LEAPFROG his
objection in writing to any action described in such waiver request within 72
hours of receiving notice of such waiver request from LEAPFROG.
4:1:3 Maintenance of Properties.
At its expense, maintain all of its property and assets in customary (for
LEAPFROG) repair, order, and condition, reasonable wear and use and damage by
fire or unavoidable casualty excepted.
4:1:4 Maintenance of Books and Records.
Maintain its books of account and records in the usual, regular, and ordinary
manner, in accordance with generally accepted accounting principles applied
on a consistent basis.
4:1:5 Compliance with Law.
Continue to conduct its activities in a manner consistent with its current
understanding of the laws applicable to it, unless and until it receives
written notice from a Governmental Entity that it is not in compliance with a
particular law or laws, at which time LEAPFROG will modify its conduct to
comply with such law or laws.
<PAGE> 36
4:1:6 Inspection.
Allow ALBARA and Albara Subsidiary, and their directors, officers and
authorized representatives, during normal business hours, to inspect its
records and to consult with its officers, employees, attorneys, and agents
for the purpose of determining the accuracy of the representations and
warranties made, and the compliance with covenants contained, in this
Agreement. ALBARA and Albara Subsidiary agree that they and their officers
and representatives shall hold all data and information obtained with respect
to the other parties hereto in strict confidence, and each further agrees
that it will not use such data or information or disclose the same to others,
except to the extent such date or information either is, or becomes,
published or a matter of public knowledge.
ALBARA, Albara Subsidiary and LEAPFROG agree that they will not issue any
press release or other disclosure of this Agreement without the prior approval
of the other, which shall not be unreasonably withheld, unless, in the good
faith opinion of counsel, such disclosure is required by law and time does
not permit the obtaining of such consent, or such consent is withheld.
In the event of a breach or threatened breach by ALBARA or Albara Subsidiary
or their officers or representatives of the provision of this Section,
LEAPFROG shall be entitled, in addition to any other available remedy, to an
injunction restraining any disclosure by ALBARA, Albara Subsidiary or their
officers or representatives of any of such confidential information.
4:1:7 Prohibition of Certain Contracts.
Not enter into any contracts outside of the ordinary course of business
without the prior written consent of ALBARA, which consent will not be
unreasonably withheld. If LEAPFROG proposes to secure a waiver of this
covenant from ALBARA with respect to a particular transaction, LEAPFROG shall
be deemed in compliance with this covenant if the President of ALBARA or
his successor does not deliver to LEAPFROG his objection in writing to any
action described in such waiver request within 72 hours of receiving notice of
such waiver request from LEAPFROG.
4:1:8 Prohibition of Loans.
Not incur any borrowings, except in the usual and ordinary course of business,
without the prior written consent of ALBARA, which consent will not be
unreasonably withheld.
4:1:9 Prohibition of Certain Commitments.
Not enter into a commitment for expenditures or incur any liability exceeding
$25,000, in the aggregate, except (i) as may be necessary or desirable for the
maintenance of existing facilities, machinery and equipment in the ordinary
course of business or in connection with measures taken to effect the Merger,
as described herein, (ii) as in otherwise consented to in writing by ALBARA,
or (iii) as may otherwise be in the ordinary course of business.
<PAGE> 37
4:1:10 Disposal of Assets.
The company shall not sell, dispose of, or encumber, any property or assets,
except (i) in the usual and ordinary course of business; or (ii) as is
otherwise consented to in writing by ALBARA or authorized hereunder.
4:1:11 Maintenance of Insurance.
Keep in full force and effect present insurance policies or other comparable
coverage on all its properties.
4:1:12 No Amendment to Articles of Incorporation.
Not amend its certificate of incorporation or merge or consolidate with or
into any other corporation or change in any manner the rights of its capital
stock or the character of its business.
4:1:13 No Issuance, Sale, or Purchase of Securities.
Except as contemplated by this Agreement, not issue or sell, or issue options
or rights to subscribe to, or enter into any contract or commitment to issue
or sell (upon conversion or otherwise), any shares of its capital stock, or
subdivide or in any way reclassify any shares of its capital stock, or
acquire, or agree to acquire, any shares of its capital stock.
4:1:14 Prohibition of Dividends.
Not declare or pay any dividend on shares of its capital stock or make any
other distribution of assets to the holders thereof.
4:1:15 Notice of Material Developments.
Promptly notify ALBARA in writing of any material adverse change in, or any
changes which in the aggregate would likely result in a material adverse change
in, the business, properties, condition(financial or otherwise) or results of
operations of LEAPFROG, whether or not occurring in the usual and ordinary
course of its business, but only to the extent LEAPFROG has actual knowledge
of any such changes.
4:2 Agreements of ALBARA and Albara Subsidiary.
Each of ALBARA and Albara Subsidiary agrees that from the date hereof to the
Effective Date, it will:
4:2:1 Corporate Approvals.
Call and hold a meeting of its shareholders to approve the Transaction
contemplated herein, and its board of directors for the purpose of
authorizing and obtaining the consent of ALBARA as sole stockholder of
Albara Subsidiary to this Agreement and the merger contemplated hereby.
<PAGE> 38
4:2:2 Maintenance of Present Business.
Except as contemplated by this Agreement, operate its business and the
businesses of its subsidiaries only in the usual, regular, and ordinary manner
so as to maintain the goodwill they now enjoy and, to the extent consistent
with such operation, use all reasonable efforts to preserve intact their
present business organization, keep available the services of their present
officers and employees, and preserve their relationships with customers,
suppliers, jobbers, distributors, and others having business dealings with
them.
4:2:3 Maintenance of Books and Records.
Maintain the books of account and records of ALBARA and each of its
subsidiaries in the usual, regular, and ordinary manner, in accordance with
generally accepted accounting principles applied on a consistent basis.
4:2:4 Compliance with Law.
Continue, and cause its subsidiaries to continue, to conduct its and their
activities in a manner consistent with ALBARA's current understanding of the
laws applicable to said entities, unless and until ALBARA receives written
notice from a Government Entity that said entities are not in compliance with a
particular law or laws, at which time ALBARA will cause said entity or
entities to comply with such law or laws.
4:2:5 Inspection.
Allow LEAPFROG and its directors officers and authorized representatives,
during normal business hours, to inspect its and each of its subsidiaries'
records and to consult with its and each of its subsidiaries' officers,
employees, attorneys, and agents for the purpose of determining the accuracy
of the representations and warranties made, and the compliance with covenants
contained, in this Agreement. LEAPFROG agrees that it and its officers and
representatives shall hold all data and information obtained with respect to
the other parties hereto in strict confidence, and each further agrees that
it will not use such data or information or disclose the same to others,
except to the extent such data or information either is, or becomes,
published or a matter of public knowledge. In the event of a breach or
threatened breach by LEAPFROG or its officers or representatives of the
provisions of this Section, ALBARA and Albara Subsidiary shall be entitled,
in addition to any other available remedy, to an injunction restraining any
disclosure by LEAPFROG or its officers or representatives of any of such
confidential information.
<PAGE> 39
4:2:6 Prohibition of Certain Contracts.
Give prompt written notice to LEAPFROG of any material contracts of ALBARA or
any of its subsidiaries, except those entered into in the ordinary course of
business. In any event, ALBARA shall promptly give written notice to LEAPFROG
of any stock or asset acquisition by ALBARA or any of its subsidiaries.
4:2:7 Prohibition of Loans.
Give prompt written notice to LEAPFROG of any borrowings of ALBARA or any of
its subsidiaries, except those made in the usual and ordinary course of
business.
4:2:8 Disposal of Assets.
Give prompt written notice to LEAPFROG of any sale, disposal of, or
Encumbrance on, any property or assets of ALBARA or any of its subsidiaries,
except in the usual and ordinary course of business.
4:2:9 Maintenance of Insurance.
Keep in full force and effect present insurance policies or other comparable
coverage on all of the assets of ALBARA and all of its subsidiaries.
4:2:10 No Amendments to Articles of Incorporation.
Not amend its Articles of Incorporation, or merge into any other corporation.
4:2:11 Notice of Material Developments.
Promptly notify LEAPFROG in writing of any material adverse change in, or any
changes which in the aggregate would likely result in a material adverse change
in, the business, properties, condition (financial or otherwise), results of
operations or prospects of ALBARA or any of its subsidiaries, whether or not
occurring in the usual and ordinary course of business, but only to the
extent ALBARA or any of such subsidiaries has actual knowledge of any such
changes.
4:2:12 Performance of Contracts.
Perform and/or cause to be performed all material obligations of ALBARA or any
of its subsidiaries under agreements relating to or affecting their respective
assets, properties or rights.
<PAGE> 40
ARTICLE V
ADDITIONAL COVENANTS OF THE PARTIES
5:1 Filings and Consents.
As promptly as practicable after the execution of this Agreement, each party
to this Agreement (a) shall make all filings (if any) and give all notices (if
any) required to be made and given by such party in connection with the
LEAPFROG Merger and the other transactions contemplated by this Agreement,
and (b) shall use all commercially reasonable efforts to obtain all Consents
(if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
LEAPFROG Merger and the other transactions contemplated by this Agreement,
other than those Consents identified on Section 2.25 of the Disclosure
Schedule. LEAPFROG shall (upon request) promptly deliver to ALBARA a copy of
each such filing made, each such notice given and each such Consent obtained
by LEAPFROG during the Pre-Closing Period.
5:2 Public Announcements.
After the date hereof, (a) LEAPFROG shall not (and LEAPFROG shall not permit
any of its Representatives to) issue any press release or make any public
statement regarding this Agreement or the Merger, or regarding any of the
other transactions contemplated by this Agreement, without ALBARA's prior
written consent, and (b) ALBARA will use reasonable efforts to consult with
LEAPFROG prior to issuing any press release or making any public statement
regarding the Merger.
5:3 Best Efforts.
During the Pre-Closing Period, ALBARA, Albara Subsidiary and LEAPFROG shall
use their best efforts to cause the conditions set forth in Section 6 to be
satisfied on a timely basis.
5:4 Employment and Consulting Agreements.
At or prior to the Closing, Provencher, Randolph Tucker, Dale Grogan and Jim
Grebey shall execute and deliver employment and/or consulting agreements in
the forms attached hereto at Appendix V (the "Employment Agreements").
<PAGE> 41
5:5 FIRPTA Matters.
At the Closing, (a) LEAPFROG shall deliver to ALBARA a statement (in such form
as may be reasonably requested by counsel to ALBARA) conforming to the
requirements of Section 1.897 - 2(h)(1)(i) of the United States Treasury
Regulations, and (b) LEAPFROG shall deliver to the IRS the notification
required under Section 1.897 - 2(h)(2) of the United States Treasury
Regulations.
5:6 Investment Representation Letter.
At the Closing, each of the LEAPFROG Shareholders shall execute and deliver to
LEAPFROG an investment representation letter in the form attached hereto at
Appendix VI (an "Investment Representation Letter").
<PAGE> 42
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF
ALBARA, ALBARA SUBSIDIARY AND LEAPFROG
The obligations of ALBARA, Albara Subsidiary and LEAPFROG to effect the
LEAPFROG Merger and otherwise consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions:
6:1 Accuracy of Representations.
Each of the representations and warranties made by ALBARA, Albara Subsidiary
and LEAPFROG in this Agreement and in each of the Transaction Documents and
instruments delivered to ALBARA, Albara Subsidiary and LEAPFROG in connection
with the transactions contemplated by this Agreement shall have been accurate
in all material respects as of the date of this Agreement (without giving
effect to any Material Adverse Effect or other materiality qualifications, or
any similar qualifications, contained or incorporated directly or indirectly in
such representations and warranties), and shall be accurate in all material
respects as of the Closing Date as if made at the Closing Date (without
giving effect to any update to the Disclosure Schedule, and without giving
effect to any Material Adverse Effect or other materiality qualifications, or
any similar qualifications, contained or incorporated directly or indirectly
in such representations and warranties).
6:2 Performance of Covenants.
All of the covenants and obligations that ALBARA, Albara Subsidiary and
LEAPFROG are required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
6:3 Consents.
All Consents required to be obtained in connection with the LEAPFROG Merger
and the other transactions contemplated by this Agreement (other than the
Consents identified in Part 2.25 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6:4 Agreements and Documents.
ALBARA and LEAPFROG shall have received the following agreements and
documents, each of which will be in full force and effect as of the Effective
Date:
(i) Articles of Merger
(ii) a "Bleed-Out" Letter executed by Provencher, a copy of which is
attached hereto as Appendix II;
(iii) a Registration Rights Agreement executed between ALBARA and
Provencher, a copy of which is attached hereto as Appendix III;
<PAGE> 43
(iv) a Disclosure Schedule executed by ALBARA and LEAPFROG;
(v) Employment Agreements executed by Randolph Tucker, Dale Grogan
and an extension of Jim Grebey's existing contract; and a
Consulting and Warrant Agreement executed between ALBARA and
Provencher;
(vi) Investment Representation Letters executed by each of the LEAPFROG
Shareholders;
(vii) Legal Opinions of Nadeau & Simmons, P.C. and Haynes and Boone, LLP,
dated as of the Closing Date, outstanding in the forms attached
hereto at Appendix VIII;
(viii) a certificate executed by both parties and containing the
representation and warranty of each party that each of the
representations and warranties set forth in Section 2 and 3 is
accurate in all respects as of the Closing Date as if made on the
Closing Date and that the conditions set forth in Section 6 have
been duly satisfied (the "Closing Certificate"); and
(ix) written resignations of all officers and directors of ALBARA,
effective as of the Effective Date.
(x) The options for LHLP and LGIC shall represent on a fully diluted
basis no more than 15% of the common stock of each such
subsidiary of LEAPFROG.
6:5 FIRPTA Compliance.
LEAPFROG shall have filed with the IRS the notification referred to in Section
5.5(b).
6:6 No Restraints.
No temporary restraining order, preliminary or permanent injunction or other
order preventing the consummation of the LEAPFROG Merger shall have been
issued by any court of competent jurisdiction and remain in effect, and there
shall not be any Legal Requirement enacted or deemed applicable to the
LEAPFROG Merger that makes consummation of the LEAPFROG Merger illegal.
6:7 No Legal Proceedings.
No Person shall have commenced or threatened to commence any Legal Proceeding
challenging or seeking the recovery of a material amount of damages in
connection with the LEAPFROG Merger or seeking to prohibit or limit the
exercise by ALBARA of any material right pertaining to its ownership of the
assets of LEAPFROG.
6:8 Employees.
No more than one of the individuals identified on Appendix X shall have ceased
to be employed by, or expressed an intention to terminate their employment
with, LEAPFROG.
<PAGE> 44
ARTICLE VII
TERMINATION
7:1 Termination Events.
This Agreement may be terminated prior to the Closing:
(a) by ALBARA if ALBARA reasonably determines that the timely satisfaction of
any condition set forth in Section 6 has become impossible (other than as a
result of any failure on the part of ALBARA to comply with or perform any
covenant or obligation of ALBARA set forth in this Agreement);
(b) by LEAPFROG if LEAPFROG reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of LEAPFROG to comply with
or perform any covenant or obligation set forth in this Agreement or in any
other agreement or instrument delivered to ALBARA);
(c) by ALBARA at or after the Scheduled Closing Time if any condition set
forth in Section 6 has not been satisfied by the Scheduled Closing Time;
(d) by LEAPFROG at or after the Scheduled Closing Time if any condition set
forth in Section 6 has not been satisfied by the Scheduled Closing Time;
(e) by ALBARA if the Closing has not taken place on or before December 31,
1999 (other than as a result of any failure on the part of ALBARA to comply
with or perform any covenant or obligation of ALBARA set forth in this
Agreement);
(f) by LEAPFROG if the Closing has not taken place on or before December 31,
1999 (other than as a result of the failure on the part of LEAPFROG to comply
with or perform any covenant or obligation set forth in this Agreement or in
any other agreement or instrument delivered to ALBARA); or
(g) by the mutual consent of ALBARA and LEAPFROG.
7:2 Termination Procedures.
If ALBARA wishes to terminate this Agreement pursuant to Section 7:1(a),
Section 7:1(c) or Section 7:1(e), ALBARA shall deliver to LEAPFROG a written
notice stating that ALBARA is terminating this Agreement and setting forth a
brief description of the basis on which ALBARA is terminating this Agreement.
If LEAPFROG wishes to terminate this Agreement pursuant to Section 7:1(b),
<PAGE> 45
Section 7:1(d) or Section 7:1(f), LEAPFROG shall deliver to ALBARA a written
notice stating that LEAPFROG is terminating this Agreement and setting forth a
brief description of the basis on which LEAPFROG is terminating this Agreement.
7:3 Effect of Termination.
If this Agreement is terminated pursuant to Section 7:1, all further
obligations of the parties under this Agreement shall terminate; provided,
however, that: (a) neither LEAPFROG nor ALBARA shall be relieved of any
obligation or liability arising from any prior breach by such party of any
provision of this Agreement; (b) the parties shall, in all events, remain
bound by and continue to be subject to the provisions set forth in Section 9;
and (c) ALBARA and LEAPFROG shall, in all events, remain bound by and
continue to be subject to Section 5:2.
<PAGE> 46
ARTICLE VIII
INDEMNIFICATION, ETC.
8:1 Survival of Representations, Etc.
(a) The representations and warranties made by ALBARA, Albara Subsidiary and
LEAPFROG (including the representations and warranties set forth in Sections 2
and 3, shall survive the Effective Date for a period of one (1) year,
provided, however, that if, at any time prior to the first anniversary of the
Closing Date, any Indemnitee (acting in good faith) delivers to either party
a written notice alleging the existence of an inaccuracy in or a breach of
any of the representations and warranties made by either party (and setting
forth in reasonable detail the basis for such Indemnitee's belief that such
an inaccuracy or breach may exist) and asserting a claim for recovery under
Section 8.2 based on such alleged inaccuracy or breach, then the claim
asserted in such notice shall survive the first anniversary of the Closing
until such time as such claim is fully and finally resolved. Notwithstanding
the foregoing, the representations and warranties set forth in Section 2.14
shall survive until the expiration of the applicable statutes of limitations,
including extensions thereof.
(b) The representations, warranties, covenants and obligations of ALBARA,
Albara Subsidiary and LEAPFROG, and the rights and remedies that may be
exercised by either party, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
knowledge of either party or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made
by ALBARA, Albara Subsidiary or LEAPFROG in this Agreement.
8:2 Cross Indemnification.
From and after the Effective Time (but subject to Section 8.1(a)), ALBARA and
the Albara Subsidiary and Leapfrog shall hold harmless and indemnify each
other from and against, and shall compensate and reimburse the other party
for, any Damages which are directly or indirectly suffered or incurred by
either party or to which either party may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim)
and which arise from or as a result of, or are directly or indirectly
connected with: (i) any inaccuracy in or breach of any representation or
warranty set forth in Sections 2 or 3 (without giving effect to any Material
Adverse Effect or other materiality qualification or any similar qualification
contained or incorporated directly or indirectly in such representation or
warranty, but giving effect to any update to the Disclosure Schedule
<PAGE> 47
delivered by ALBARA and LEAPFROG prior to the Closing); (ii) any breach of any
covenant or obligation of ALBARA, Albara Subsidiary or LEAPFROG (including the
covenants set forth in Sections 4 and 5); or (iii) any Legal Proceeding
relating to any inaccuracy or breach of the type referred to in clause "(i)"
or "(ii)" above (including any Legal Proceeding commenced by any Indemnitee
for the purpose of enforcing any of its rights under this Section 8).
8:3 Threshold; Ceiling.
(a) ALBARA, Albara Subsidiary or LEAPFROG shall not be required to make any
indemnification payment pursuant to Section 8.2(a) for any inaccuracy in or
breach of any of their representations and warranties set forth in Sections 2
and 3 until such time as the total amount of all Damages (including the
Damages arising from such inaccuracy or breach and all other Damages arising
from any other inaccuracies in or breaches of any representations or
warranties) that have been directly or indirectly suffered or incurred by the
other party, exceeds $100,000 in the aggregate. (If the total amount of such
Damages exceeds $100,000, then the Indemnitee shall be entitled to be
indemnified against and compensated and reimbursed for all of such Damages,
including claims for Damages included in the initial $100,000.
8:4 Satisfaction of Indemnification Claim.
In the event either party had any liability (for indemnification or otherwise)
to the other party under this Section 8, the indemnifying party shall satisfy
such liability first, by delivering to such Indemnitee the number of shares
of Albara determined by dividing (a) the aggregate dollar amount of such
liability by (b) the average closing price of Albara as reported for the ten
trading days preceding the date such liability is satisfied, and second, to
the extent shares of Albara are not available to satisfy in full such
liability, then such difference in cash.
8:5 No Contribution.
ALBARA, Albara Subsidiary and LEAPFROG waive, acknowledge and agree that they
shall not have and shall not exercise or assert (or attempt to exercise or
assert), any right of contribution, right of indemnity or other right or
remedy against each other in connection with any third party indemnification
obligation or any other liability to which either party may become subject under
or in connection with this Agreement.
8:6 Interest.
Any party who is required to hold harmless, indemnify, compensate or reimburse
any Indemnitee pursuant to this Section 8 with respect to any Damages shall
also be liable to such Indemnitee for interest on the amount of such Damages
(for the period commencing as of the date on which
<PAGE> 48
indemnifying party first received notice of a claim for recovery by such
Indemnitee and ending on the date on which the liability of such indemnifying
party to such Indemnitee is fully satisfied by such indemnifying party) at a
floating rate equal to the rate of interest publicly announced by Bank of
America, N.T. & S.A. from time to time as its prime, base or reference rate.
8:7 Defense of Third Party Claims.
In the event of the assertion or commencement by any Person of any claim or
Legal Proceeding (whether against ALBARA, Albara Subsidiary or LEAPFROG) with
respect to which either party may become obligated to hold harmless,
indemnify, compensate or reimburse any third party Indemnitee pursuant to
this Section 8, such party shall have the right, at its election, to proceed
with the defense of such claim or Legal Proceeding on its own.
<PAGE> 49
ARTICLE IX
MISCELLANEOUS PROVISIONS
9:1 Further Assurances.
Each party hereto shall execute and cause to be delivered to each other party
hereto such instruments and other documents, and shall take such other
actions, as such other party may reasonably request (prior to, at or after
the Closing) for the purpose of carrying out or evidencing any of the
transactions contemplated by this Agreement.
9:2 Fees and Expenses.
If the LEAPFROG Merger is not consummated for any reason whatsoever, each
party to this Agreement shall bear and pay all fees, costs and expenses
(including legal fees and accounting fees) ("Fees and Expenses") that have
been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement. If the LEAPFROG Merger is
consummated, LEAPFROG shall pay all Fees and Expenses of ALBARA.
9:3 Attorneys' Fees.
If any action or proceeding relating to this Agreement or the enforcement of
any provision of this Agreement is brought against any party hereto, the
prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the
prevailing party may be entitled).
9:4 Notices.
All notices and other communications required or permitted under this
Agreement and the transactions contemplated hereby shall be in writing and
shall be deemed to have been duly given, made and received on the date when
delivered by hand delivery with receipt acknowledged, or upon the next
Business Day following receipt of facsimile transmission, or upon the fifth day
after deposit in the United States mail, registered or certified with postage
prepaid, return receipt requested, addressed as set forth below:
<PAGE> 50
(a) If to ALBARA:
610 South Frazier
Conroe, Texas 77301
Attention: Real Provencher
Telephone: 409-539-2992
Facsimile: 409-539-4141
with a copy (not constituting notice) to:
Haynes and Boone, LLP
1000 Louisiana, Suite 4300
Houston, TX 77002
Attention: Charles D. Powell, Esq.
Telephone: 713-547-2052
Facsimile: 713-236-5513
(b) If to LEAPFROG:
545 Delaney Avenue, Bldg. 2
Orlando, FL 32801
Attention: Dale Grogan
Telephone: 407-872-1161
Facsimile: 407-872-0508
with a copy (not constituting notice) to:
Nadeau & Simmons, P.C.
1250 Turks Head Building
Providence, RI 02903
Attention: Mark T. Thatcher
Telephone: (401) 272-5800
Facsimile: (401) 272-5858
and
Brennan Dyer & Company, LLC
735 Broad Street, Suite 800
Chattanooga, TN 37402
Attention: James H. Brennan, III
Telephone: (423) 265-5062
Facsimile: (423) 265-5068
<PAGE> 51
9:5 Confidentiality.
Without limiting the generality of anything contained in Section 5.2, on and
at all times after the Closing Date, each party shall keep confidential, and
shall not use or disclose to any other Person, any non-public document or other
non-public information in such party's possession that relates to the
business of LEAPFROG or ALBARA.
9:6 Time of the Essence.
Time is of the essence of this Agreement.
9:7 Headings.
The bolded headings contained in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not
be referred to in connection with the construction or interpretation of this
Agreement.
9:8 Counterparts.
This Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
9:9 Governing Law.
This Agreement shall be construed in accordance with, and governed in all
respects by, the internal laws of the State of Colorado and Florida (without
giving effect to principles of conflicts of laws).
9:10 Successors and Assigns.
The rights and obligations of ALBARA, Albara Subsidiary or LEAPFROG may not be
assigned without the prior written consent of both parties. Subject to the
foregoing, the provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
9:11 Remedies Cumulative; Specific Performance.
The rights and remedies of the parties hereto shall be cumulative (and not
alternative). The parties to this Agreement agree that, in the event of any
breach or threatened breach by any party to this Agreement of any covenant,
obligation or other provision set forth in this Agreement for the benefit
<PAGE> 52
of any other party to this Agreement, such other party shall be entitled (in
addition to any other remedy that may be available to it) to (a) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (b) an
injunction restraining such breach or threatened breach.
9:12 Waiver.
(a) No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9:13 Amendments.
This Agreement may not be amended, modified, altered or supplemented other
than by means of a written instrument duly executed and delivered on behalf of
all of the parties hereto.
9:14 Severability.
In the event that any provision of this Agreement, or the application of any
such provision to any Person or set of circumstances, shall be determined to
be invalid, unlawful, void or unenforceable to any extent, the remainder of
this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be impaired or otherwise affected
and shall continue to be valid and enforceable to the fullest extent permitted
by law.
9:15 Entire Agreement.
This Agreement and the other agreements referred to herein set forth the
entire understanding of the parties hereto relating to the subject matter
hereof and thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter hereof and
thereof.
<PAGE> 53
9:16 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections" and "Appendix" are intended to refer to Sections of this Agreement
and Appendices to this Agreement.
IN WITNESS WHEREOF, ALBARA, Albara Subsidiary and LEAPFROG have signed this
Agreement as of the date first written above.
ALBARA CORPORATION
a Colorado Corporation
/s/ Real Provencher
By: _____________________________________
Real Provencher, Chief Executive Officer
LEAPFROG SMART PRODUCTS, INC.
a Florida Corporation
/s/ Dale Grogan
By: _____________________________________
Dale Grogan, President
LEAPFROG MERGER, INC.
a Florida Corporation
/s/ Real Provencher
By: _____________________________________
Real Provencher, President
<PAGE> 54
Exhibit A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
"Acquisition Transaction" means any transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of Albara or Leapfrog's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of Albara or Leapfrog, (ii) any option,
call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of Albara or
Leapfrog, or (iii) any security, instrument or obligation that is
or may become convertible into or exchangeable for any capital
stock or other equity security of Albara or Leapfrog; or
(c) any merger, consolidation, business combination, reorganization or
similar transaction involving Albara or Leapfrog.
"Affiliate" means, with respect to any specified Person, any other Person in
which the specified Person has a direct or indirect interest (except through
ownership of less than 5% of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in the
national over-the-counter market).
"Agreement" shall have the meaning specified in the preamble to the Agreement.
"Albara" shall have the meaning specified in the preamble to the Agreement.
"Albara Common Stock" shall have the meaning specified in Section 1:7:2(i) of
the Agreement.
"Albara SEC Documents" shall have the meaning specified in Section 3:1:5(a)
of the Agreement.
"Balance Sheet" shall have the meaning specified in Section 2:1:7 of the
Agreement.
"Business Day" means a day, other than a Saturday or a Sunday, or a federal
holiday upon which offices of the federal government are not open for business.
"Closing" and "Closing Date" shall have the meanings specified in Section
1:1:3 of the Agreement.
"Code" shall have the meaning specified in the recitals to the Agreement.
"Leapfrog" shall have the meaning specified in the preamble to the Agreement.
<PAGE> 55
"Leapfrog Common Stock" shall have the meaning specified in the recitals to the
Agreement.
"Leapfrog Contract" means any Contract: (a) to which Leapfrog is a party;
(b) by which Leapfrog or any of its assets is or may become bound or under
which Leapfrog has, or may become subject to, any obligation; or (c) under
which Leapfrog has or may acquire any right or interest.
"Leapfrog Financials" shall have the meaning specified in Section 2:1:7 of the
Agreement.
"Leapfrog Proprietary Asset" means any Proprietary Asset owned by or licensed to
Leapfrog or otherwise used by Leapfrog.
"Leapfrog Returns" shall have the meaning specified in Section 2:1:7 of the
Agreement.
"Leapfrog Stock Certificate" shall have the meaning specified in Section 1:8
of the Agreement.
"Consent" means any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
"Contract" means any written, oral or other agreement, contract, subcontract,
lease, understanding, instrument, note, warranty, insurance policy, benefit
plan or legally binding commitment or undertaking of any nature.
"Damages" shall include any loss, damage, injury, decline in value, lost
opportunity, liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
"Disclosure Schedule" means the schedule (dated as of the date of the
Agreement) delivered to Albara on behalf of Leapfrog and the Stockholders.
"Effective Date" shall have the meaning specified in Section 1:1:3
of the Agreement.
"Employment Agreements" shall have the meaning specified in Section
2:1:9:7 of the Agreement.
"Encumbrance" means any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, claim, infringement, interference, option,
right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on
<PAGE> 56
the voting of any security, any restriction on the transfer of any
security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute
of ownership of any asset).
"Entity" means any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, Leapfrog (including any limited liability
Leapfrog or joint stock Leapfrog), firm or other enterprise, association,
organization or entity.
"Environmental Law" means any federal, state, local or foreign Legal
Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"ERISA" shall have the meaning specified in Section 2:1:19 of the
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fees and Expenses" shall have the meaning specified in Section 9:2
of the Agreement.
"First Anniversary" shall have the meaning specified in Section 8:1
of the Agreement.
"GAAP" means generally accepted accounting principles.
"Governmental Authorization" means any: (a) permit, license, certificate,
franchise, permission, clearance, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority
of any Governmental Body or pursuant to any Legal Requirement; or (b) right
under any Contract with any Governmental Body.
"Governmental Body" means any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
"Indemnitees" means the following Persons: (a) Albara or Leapfrog;
(b) Albara or Leapfrog's current and future affiliates; (c) the respective
Representatives of the Persons referred to in clauses "(a)" and "(b)" above;
and (d) the respective successors and assigns of the Persons referred to in
clauses "(a)", "(b)" and "(c)" above; provided, however, that the
Stockholders shall not be deemed to be "Indemnitees."
<PAGE> 57
"Investment Representation Letter" shall have the meaning specified
in Section 5.6 of the Agreement.
"IRS" means the Internal Revenue Service.
"Legal Proceeding" means any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative
or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or
otherwise involving, any court or other Governmental Body or any arbitrator
or arbitration panel.
"Legal Requirement" means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise put into
effect by or under the authority of any Governmental Body.
"Material Adverse Effect" means a violation or other matter will be deemed
to have a "Material Adverse Effect" on Leapfrog if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
but for the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) would have a material adverse effect on Leapfrog's
business, condition, assets, liabilities, operations, financial performance
or prospects.
"Material Contracts" shall have the meaning specified in Section
2:1:9:9 of the Agreement.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products
and any other substance that is now or hereafter regulated by any
Environmental Law or that is otherwise a danger to health, reproduction
or the environment.
"Merger" shall have the meaning specified in the recitals to the Agreement.
"Person" means any individual, Entity or Governmental Body.
"Pre-Closing Period" shall have the meaning specified in Section 5:1
of the Agreement.
"Proprietary Asset" means any: (a) patent, patent application,
trademark (whether registered or unregistered), trademark application,
trade name, fictitious business name, service mark (whether registered or
unregistered), service mark application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork
<PAGE> 58
application, trade secret, know-how, client list, franchise, system,
computer software, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right
or other intellectual property right or intangible asset; or (b) right
to use or exploit any of the foregoing.
"Registration Statement" shall have the meaning specified in Section
3:1:5 of the Agreement.
"Related Party" means: (i) the Stockholders; (ii) each individual
who is, or who has at any time since October 15, 1997 been, an officer
of Leapfrog; (iii) each member of the immediate family of each of the
individuals referred to in clauses "(i)" and "(ii)" above; and (iv) any
trust or other entity (other than Leapfrog) in which any one of the
individuals referred to in clauses "(i)", "(ii)" and "(iii)" above holds
(or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity
interest).
"Representatives" means officers, directors, employees, agents, attorneys,
accountants, advisors and representatives.
"Scheduled Closing Time" shall have the meaning specified in Section
7:1(c) of the Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" shall have the meaning specified in Section 1:6:1 of the
Agreement.
"Stockholders" shall have the meaning specified in the preamble to
the Agreement.
"Tax" means any tax (including any income tax, franchise tax, capital
gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment, tariff,
duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), imposed,
assessed or collected by or under the authority of any Governmental Body.
"Tax Return" means any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification,
form, election, certificate or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection or
payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to
any Tax.
<PAGE> 59
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
among:
Albara Corporation,
a Colorado corporation;
Leapfrog Smart Products, Inc.,
a Florida corporation;
___________________________
Dated as of October 22, 1999
___________________________
<PAGE> 60
EXHIBITS
Exhibit Document
(I) Articles of Merger
(II) a "Bleed-Out" Letter to be executed by Provencher; at closing
(III) a Registration Rights Agreement to be executed between Albara
and Provencher; at closing
(IV) a Disclosure Schedule to be executed by Albara and Leapfrog;
at closing
(V) Employment Agreements to be executed by Randolph Tucker,
Dale Grogan and an extension of Jim Grebey's existing contract;
at closing and a Consulting Agreement and Warrant to be
executed between Albara and Provencher; at closing
(VI) Investment Representation Letters to be executed
by each of the LEAPFROG Shareholders; at closing
(VII) Legal Opinions of Nadeau & Simmons, P.C. and Hayes and
Boone, LLP dated as of the Closing Date, substantially in the
forms attached hereto at Exhibit I;
<PAGE> 61
Table of Contents
SECTION 1. Description of Transaction 1
1.1 Merger of Leapfrog into Albara 1
1.2 Effect of the Merger 1
1.3 Closing; Effective Time 1
1.4 Conversion of Shares 2
1.5 Piggy Back Registration Rights 4
1.6 Closing of Leapfrog's Transfer Books 5
1.7 Exchange of Certificates 6
1.8 Stockholder Approval; Dissenting Shares 7
1.10 Tax Consequences 7
1.11 Accounting Treatment 7
1.12 Further Action 7
SECTION 2. Representations and Warranties of Leapfrog 7
2.1 Due Organization; Good Standing; No Subsidiaries 7
2.2 Certificate of Incorporation and Bylaws; Records 8
2.3 Capitalization; Title to Shares 8
2.4 Financial Statements 8
2.5 Absence of Changes 9
2.6 Title to Assets 10
2.7 Bank Accounts; Receivables 11
2.8 Equipment; Leasehold 11
2.9 Proprietary Assets 11
2.10 Contracts 13
2.11 Liabilities 15
2.12 Compliance with Legal Requirements 15
2.13 Governmental Authorizations 15
2.14 Tax Matters 15
2.15 Employee and Labor Matters; Benefit Plans 16
2.16 Environmental Matters 18
2.17 Insurance 18
2.18 Related Party Transactions 19
2.19 Legal Proceedings; Orders 19
2.20 Clients 19
2.21 Material Relationships 20
2.22 Sales Policies; Warranties 20
2.23 Brokers and Finders 20
2.24 Authority; Binding Nature of Agreement 20
2.25 Non-Contravention; Consents 20
<PAGE> 62
2.26 Database Backup 21
2.27 Full Disclosure 21
SECTION 3. Representations and Warranties of Albara 21
3.1 SEC Filings; Financial Statements 21
3.2 Authority; Binding Nature of Agreement 22
3.3 Valid Issuance 22
SECTION 4. Certain Covenants of Leapfrog and the
Stockholders 22
4.1 Access and Investigation 22
4.2 Operation of Leapfrog's Business 22
4.3 Notification; Updates to Disclosure Schedule 24
4.4 No Negotiation 25
SECTION 5. Additional Covenants of the Parties 25
5.1 Filings and Consents 25
5.2 Public Announcements 25
5.3 Best Efforts 26
5.4 Employment and Noncompetition Agreements 26
5.5 FIRPTA Matters 26
5.6 Release 26
5.7 Investment Representation Letter 26
5.8 Proprietary Information Agreement 26
SECTION 6. Conditions Precedent to Obligations
of Albara 27
6.1 Accuracy of Representations 27
6.2 Performance of Covenants 27
6.3 Consents 27
6.4 Agreements and Documents 27
6.5 FIRPTA Compliance 28
6.6 No Restraints 28
6.7 No Legal Proceedings 28
6.8 Employees 28
6.9 Stockholder Approval 28
SECTION 7. Termination 29
7.1 Termination Events 29
7.2 Termination Procedures 30
7.3 Effect of Termination 30
7.4 Termination Fee 30
<PAGE> 63
SECTION 8. Indemnification, Etc. 30
8.1 Survival of Representations, Etc. 30
8.2 Indemnification by Principal Stockholders 31
8.3 Threshold; Ceiling 31
8.4 Satisfaction of Indemnification Claim 32
8.5 No Contribution 32
8.6 Interest 32
8.7 Defense of Third Party Claims 32
8.8 Exercise of Remedies by Indemnitees
Other Than Albara 33
SECTION 9. Miscellaneous Provisions 33
9.1 Stockholders' Agent 33
9.2 Further Assurances 33
9.3 Fees and Expenses 33
9.4 Attorneys' Fees 33
9.5 Notices 34
9.6 Confidentiality 35
9.7 Time of the Essence 35
9.8 Headings 35
9.9 Counterparts 35
9.10 Governing Law 35
9.11 Successors and Assigns 35
9.12 Remedies Cumulative; Specific Performance 35
9.13 Waiver 36
9.14 Amendments 36
9.15 Severability 36
9.16 Entire Agreement 36
9.17 Construction 36
LEGAL OPINIONS
October 21, 1999
CONFIDENTIAL
The Board of Directors
Albara Corporation
610 South Frazier
Conroe, TX 77301
Re: Plan and Agreement of Merger dated October 21, 1999
between Albara Corporation, Leapfrog Merger, Inc. and
Leapfrog Smart Products, Inc.
Ladies and Gentlemen:
We render herewith our opinion as to certain matters pursuant to
the Plan and Agreement of Merger dated October 21, 1999 (the "Plan"),
made by and among LEAPFROG MERGER, INC. (the Surviving Corporation ) a
wholly-owned subsidiary of ALBARA CORPORATION, a Colorado corporation
("Albara"), and LEAPFROG SMART PRODUCTS, NC., a Florida corporation (the
"Disappearing Corporation"), involved in the Section 4(2), 4(6) or
Regulation D private placement of common shares of Albara (the "Shares"),
conducted in compliance with the Securities Act of 1933 (the Act ).
In rendering our opinion, we have examined and relied upon
the following:
(a) The Articles of Incorporation of the Disappearing Corporation
filed with the State of Florida.
(b) The materials contained in the Plan, Bleed-Out Letter,
Registration Rights Agreement, Disclosure Schedules, Employment
Agreements, Consulting Agreement and Certificates of the Board of
Directors (the "Confidential Documents") concerning the transactions
contemplated thereby and the surrender by the Disappearing
Corporation of all of its issued and outstanding common shares
(the Surrendered Shares ) to the Surviving Corporation;
(c) The Certificate of Good Standing dated October __, 1999,
attached hereto as Exhibit "A" (the "Company's Certificate").
The opinions expressed in subparagraphs three, four, six,
seven and nine below, as to factual matters, are given in reliance
upon the Company's Securities Certificates and the Certificate of the
Board of Directors, attached hereto as Exhibit B , confirming the
fully diluted capitalization of the Disappearing Corporation and
all of its subsidiaries;
(d) Such other documents and instruments as we have deemed necessary in
order to enable us to render the opinions expressed herein.
For the purposes of rendering this opinion, we have assumed
that no person or entity has engaged in fraud or misrepresentation
regarding the inducement relating to, or the execution or delivery
of, the documents reviewed. Furthermore, we express no opinion as
the validity of any of the assumptions, form, or content of any financial or
statistical data contained in the Confidential Documents. We do not
assume any obligation to advise officers, directors, their advisors or
representatives of the parties to the Plan, beyond the opinions specifically
expressed herein. The terms used in this opinion shall have the meaning
ascribed to them in the Plan and other documents relied upon in rendering
our opinion. As used in paragraphs five and nine hereof the phrase "of
which we have knowledge" means that such knowledge is based solely
upon conversations with representatives of the Disappearing Corporation
and a review of our own files.
Based upon the foregoing assumptions, our review of the above
documents and our reliance, as to factual matters, upon the representations
in the Company's Board of Director Certificates, and subject to the
qualifications listed herein, we are of the opinion that:
1. The Disappearing Corporation is a duly organized and validly
existing corporation under the laws of the State of Florida, and upon
the filing of required state documents with the appropriate authorities,
is fully authorized to transact the business in which it is engaged in
accordance with the Plan and as described in the Confidential Documents.
2. The Plan has been duly authorized, executed and delivered
and is a valid and binding agreement of the Disappearing Corporation,
having adequate authorization and having taken all action necessary to
authorize the indemnification provisions contained therein; provided,
however, that no opinion is rendered as to the validity or enforceability
of such indemnification provisions insofar as they are or may be held to be
violative of public policy (under either state or federal law) against such
types of provisions in the context of the offer, offer for sale, or sale of
securities.
3. The Surrendered Shares, when transferred, will be validly and
legally issued under the laws of the State of Florida. The Surrendered Shares,
when transferred, will be fully paid and non-assessable.
4. The Surrendered Shares, when transferred, will conform in all
material respects to all statements concerning them contained in the
Confidential Documents.
5. The consummation of the transactions discussed in the
Confidential Documents by the Disappearing Corporation will not result in
any breach of any of the terms of, or constitute a default under, any
mortgage, loan commitment, indenture, deed of trust, agreement or other
instrument to which it is a party and of which we have knowledge, or violate,
insofar as it is directed to the Disappearing Corporation, any order of any
court or any federal or state regulatory body or administrative agency having
jurisdiction over it or over its property and of which we have knowledge.
6. To the best of our knowledge after making reasonable inquiry,
there is not in existence, pending or threatened any action, suit or proceeding
to which the Disappearing Corporation is a party, except as set forth in the
Confidential Documents, before any court or governmental agency or body,
which might, if decided adversely, materially affect the subject matter of
the Plan or the financial condition, business or prospects of the
Disappearing Corporation.
7. The Disappearing Corporation has full power and authority
to own its properties and conduct its business as described in the
Confidential Documents, including, but not limited to, the full power and
authority to transact business as a foreign corporation in the
State of __________________________.
8. The disclosures contained in the Confidential Documents,
taken together with Albara's offer to the Disappearing Corporation
to provide access to additional information, are sufficient to satisfy
the "information requirements" of the registration exemptions under
the Securities Act of 1933, as amended, assuming the receipt by the
Disappearing Corporation of a copy of the Confidential Documents.
9. Based upon the Disappearing Corporation s Certificate,
we are unaware of any legal or governmental proceedings required to
be described in the Confidential Documents which are not described
therein or any contracts or documents of any character required to be
described in the Confidential Documents which are not described as
required.
Nothing herein shall constitute an opinion as to the laws of any state or
jurisdiction other than the laws of the State of Florida and federal
law regardless of the selected choice of law stated in any document
discussed in this letter.
Our opinion is limited to the specific opinions expressed above.
No other opinions are intended to be inferred therefrom. This opinion
is addressed to and is for the benefit solely of the Board of Directors,
and no other person or persons shall be furnished a copy of this opinion
or are entitled to rely on the contents herein without our express written
consent; provided, however, that counsel to Albara shall be entitled to rely
on this opinion. In the event that any of the facts are different from those
which have been furnished to us and upon which we have relied, the
conclusions as set forth above cannot be relied upon.
The opinions contained in this letter are rendered as of the
date hereof, and we undertake no, and hereby disclaim any, obligation
to advise you of any changes in or any new developments which might
affect any matters or opinions set forth herein.
Very truly yours,
Nadeau & Simmons, P.C.
MTT/jet
cc: Charles D. Powell
Real Provencher
Randolph Tucker
Dale Grogan
November __, 1999
Leapfrog Smart Products, Inc.
C/O Nadeau & Simmons, P.C.
1250 Turks Head Building
Providence, RI 02903
Re Investment Representation Letter - Plan of
Merger between Leapfrog Smart Products, Inc.
and Albara Corporation
Gentlemen:
In connection with the exchange of all of the outstanding capital
stock of Leapfrog Smart Products, Inc., a Florida corporation
(the "Company"), of which I am a stockholder, with Albara
corporation, a Colorado corporation ("Albara"), pursuant to a
merger of the Company with and into a wholly-owned subsidiary
of Albara as the surviving corporation, and the Company's common
stock converting into the right to receive a certain number of shares
of Albara's common stock, no par value per share ("Common Stock")
including shares of Common Stock issuable pursuant to the Plan of
Merger by and between Albara, its wholly-owned subsidiary and the
Company, as outlined in the Plan of Merger, each of the undersigned
hereby makes the following certifications and representations with respect
to the Common Stock that is being exchanged by the undersigned pursuant
to the Plan of Merger (the "Shares").
The undersigned is either an "accredited investor," as that term is defined
in Regulation D of the Securities Act of 1933, as amended (the "Securities
Act") or prior to the acquisition of Common Stock, (i) has been given an
opportunity by Albara to ask questions and receive answers concerning
the terms and conditions of the offering and to obtain any additional
information from Albara that is necessary to make an informed decision
regarding the offering, and (ii) has been advised by Albara of the limitations
on resale.
By answering the questions listed below, the undersigned further represents
that the undersigned has the educational background and the business and
financial knowledge and experience necessary to evaluate the prospective
investment in Albara:
1. Please describe your educational background, indicating
degrees obtained.
2.a) Please state your present occupation, employer, primary
business address, and business phone number.
(b) Please describe your occupational history briefly.
Specific employers need not be identified. What is
sought is a description of your experience in financial
and business matters.
3. Please indicate your prior experience in investing in new,
speculative, companies.
4. Please indicate any other relevant investment experience.
5. Please describe any pre-existing personal or business relationship
between you and Albara, or any of its officers or directors.
Page 2
Leapfrog Smart Products, Inc.
November __, 1999
_________________________
6. If you have a background or experience in the business
conducted by Albara, please describe.
The undersigned represents and warrants that the undersigned is
acquiring the Shares solely for the undersigned's account for investment
and not with a view to or for sale or distribution of the Shares or any
part thereof. The undersigned also represents that the entire legal and
beneficial interests of the Shares the undersigned is acquiring is being
acquired for, and will be held for, the undersigned's account only.
The undersigned understands that the Shares have not been registered
under the Securities Act on the basis that no distribution or public
offering of the Shares is to be effected. The undersigned realizes that
the basis for the exemption may not be present if, notwithstanding the
undersigned's representations, the undersigned has in mind merely
acquiring the Shares for a fixed or determinable period in the future,
or for a market rise, or for sale if the market does not rise.
The undersigned has no such intention.
The undersigned recognizes that the Shares being acquired by the
undersigned must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. The undersigned is aware that the Shares may
not be sold pursuant to Rule 144 adopted under the Securities Act
("Rule 144") unless certain conditions are met including, among
other things, (1) the availability of certain current public information
about the Purchaser, (2) the passage of required holding periods under
Rule 144 and (3) compliance with limitations on the volume of shares
which may be sold during any three-month period. The undersigned
acknowledges that the certificates representing the Shares will be
legended to reflect these restrictions.
The undersigned further agrees not to make any disposition of all or
any part of the Shares being acquired in any event unless and until:
1.The Shares are transferred pursuant to Rule 144; or
2.Albara shall have received a letter secured by the undersigned
from the Securities and Exchange Commission stating that no
action will be recommended to the Commission with respect to
the proposed disposition; or
3.There is then in effect a registration statement under the
Securities Act covering such proposed disposition and
such disposition is made in accordance with said registration
statement; or
4.(i) The undersigned shall have notified Albara of the
proposed disposition and shall have furnished Albara with
a detailed statement of the circumstances surrounding the
proposed disposition and (ii) the undersigned shall have
furnished Albara with an opinion of counsel for the
undersigned to the effect that such disposition will not
require registration of such Shares under the Securities Act.
Signature
_________________________________
Print Name
__________________________________
BLEED-OUT LETTER
PROVENCHER
BLEED OUT AGREEMENT
TO ARRANGE THE SALE OF CERTAIN SHARES AND
AGREEING TO RESTRICT THE SALE OF SHARES
OF COMMON STOCK
AFTER THE EFFECTIVENESS OF THE PLAN OF MERGER
November ___, 1999
The Board of Directors
Attn: Mr. Randolph Tucker
LEAPFROG SMART PRODUCTS, INC.
f/k/a ALBARA CORPORATION
545 Delaney Avenue, Bldg. 2
Orlando, FL 32801
Re: Leapfrog Smart Products, Inc., a Colorado corporation
f/k/a Albara Corporation ( Corporation )
Dear Sirs:
We have agreed to the following regarding the arrangement of the sale of
shares of Common Stock (the Shares ) of the Corporation owned by me
and restrictions imposed on my remaining Shares. You will arrange the
sale of:
30,000 to 40,000 Shares of the Corporation that I own for the sum of
approximately $150,000, on substantially the same terms and conditions
as a contemplated private offering, such shares to be sold at or about the
time of execution of this letter; and
20,000 to 30,000 Shares of the Corporation (60,000 shares in the aggregate
between (A) and (B)) that I own on substantially the same terms and
conditions as a contemplated private offering at the time such offering
is closed.
In exchange for arranging the foregoing sale, I hereby agree not to
offer for sale, sell, distribute or otherwise dispose (the Transfer ) of any
Shares not sold as provided in (A) or (B) above for a period of one year
from the date hereof, except as follows:
(i) No Shares may be sold during the first sixty (60) days following the
date hereof; and
(ii) Sixty thousand (60,000) Shares will be released and may be sold without
restriction beginning on the sixty-first (61st) day after the date hereof; and
An additional twenty thousand (20,000) Shares will be released every thirty
days thereafter and may be sold without restriction on a cumulative basis at
any time thereafter; and
All restrictions imposed by this Letter shall be extinguished on the 151st
day from the date hereof in the event the Company shall not have closed
within 150 days of the date hereof an equity offering raising an aggregate
of at least $2,500,000; and
If a registration statement is filed by the Corporation pursuant to the
Securities Act of 1933 (the "Act"), and subsequently declared effective
by the SEC, all restrictions imposed by this Letter shall be extinguished;
and
In any event, all restrictions imposed by this Agreement shall be
extinguished one (1) calendar year from the date hereof.
The Corporation may consent to Transfers prior to expiration of the
above restrictions. Such consent notice and other communication
required or permitted under this Agreement and the transactions
contemplated hereby shall be in writing and shall be deemed to
have been duly given, made and received on the date when delivered
by hand delivery with receipt acknowledged, or upon the next
"Business Day" (meaning a day, other than a Saturday or a Sunday,
or a federal holiday upon which offices of the federal government are
not open for business) following receipt of facsimile transmission,
or upon the fifth day after deposit in the United States mail,
registered or certified with postage prepaid, return receipt requested,
addressed as set forth below:
If to LEAPFROG SMART PRODUCTS, INC.:
545 Delaney Avenue, Bldg. 2
Orlando, FL 32801
Attention: Randolph Tucker, CEO
Telephone: (407) 872-1161
Facsimile: (407) 872-0508
with a copy (not constituting notice) to:
Nadeau & Simmons, P.C.
1250 Turks Head Building
Providence, RI 02903
Attention: Mark T. Thatcher
Telephone: (401) 272-5800
Facsimile: (401) 272-5858
and
Brennan Dyer & Company, LLC
735 Broad Street, Suite 800
Chattanooga, TN 37402
Attention: James H. Brennan, III
Telephone: (423) 265-5062
Facsimile: (423) 265-5068
The Corporation may act upon any instrument or other writing believed
by it in good faith to be genuine and to be signed or presented by the
proper person or persons and shall not be liable in connection with
the performance by it of its duties pursuant to the paragraphs hereof,
except for its own willful misconduct or gross negligence.
Sincerely yours,
Real Provencher
RP
cc: Mark T. Thatcher
James R. Simmons
EMPLOYMENT/CONSULTING/WARRANT AGREEMENTS
CONSULTING AGREEMENT
This Consulting Agreement (the Agreement ) is entered into effective
as of November ___, 1999, by and between LEAPFROG SMART PRODUCTS, Inc.,
a Colorado corporation f/k/a ALBARA CORPORATION, (the Company ), and
REAL PROVENCHER ( Consultant ). The Company and Consultant are each a
party and together are the parties to this Agreement.
W I T N E S S E T H:
WHEREAS, the Company desires to engage Consultant to provide
certain services on the terms provided herein; and
WHEREAS, Consultant desires to provide such services
to the Company.
NOW THEREFORE, in consideration of the mutual benefits to be
derived and the representations and warranties, conditions and
promises herein contained, and other good and valuable consideration,
the sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Services to be Provided. The Company hereby employs
Consultant to provide and Consultant hereby agrees to provide to the
Company for the Term as defined below) the following services (the
Services ):
(a) Executive, management and marketing services and other
services consistent with the office of Vice President of the
Company;
(b) Business development services; and
(c) Strategic planning services, including but not limited to
acquisition strategies and exit strategies for investors.
2. Consultant Fees. As compensation for Consultant s performance
of the Services, the Company shall issue to Consultant upon the
date of execution of this Agreement a Warrant ( Warrant ) in
the form of Exhibit A attached hereto providing for the right
to purchase common stock of the Company.
3. Reimbursable Expenses. Notwithstanding any provision
herein, the Company shall remain directly and primarily responsible
for all reasonable expenses incurred in connection
with Consultant rendering the Services. Consultant shall be
entitled to reimbursement, in cash at the time incurred, for
reasonable expenses incurred by or on behalf of Consultant for
the benefit of the Company and attributable to the business of
the Company.
4. Indemnification. In addition to the other remedies specified
hereunder, the Company agrees to hold harmless, defend and
indemnify Consultant from any claim, demand, obligation, action,
suit, judgment, penalty, loss, damage, liability, cost or
expense of any kind or any nature whatsoever arising out of the
actions of Consultant on behalf of the Company in accordance
with the terms of this Agreement. Notwithstanding the above, the
Company shall not be liable in any such case to the extent that
any such loss, claim, damage or liability: (i) is found in the
judgement of a court of competent jurisdiction to have resulted
from Consultant s gross negligence or misfeasance in performing
the Services; or (ii) arises out of, or is based upon, any untrue
statement of a material fact or omission of a material fact made in
any written communication or any amendment or supplement
thereto in reliance upon, and in conformity with, information
furnished to the Company by Consultant expressly for use
therein. Such indemnification pursuant to this Section 4 shall
include attorneys fees, incurred by or against Consultant.
5. Independent Manager and Operator. Consultant and the Company
hereby acknowledge that Consultant is and will be an independent
contractor. Accordingly, Consultant has the sole right to manage,
control and direct the method, manner and means by which the
Services are executed, as long as the manner of execution meets
with the terms and conditions in this Agreement. Further, the
Company hereby acknowledges that Consultant is engaged
in business activities and will continue to have certain business
responsibilities in addition to the Services to be provided
hereunder. Further, the Company hereby acknowledges that
Consultant does not guaranty the favorable results of any
activity performed by Consultant pursuant to this Agreement.
6. Duties and Conflicts. The Company recognizes that Consultant
has other business interests, activities and investments, some of
which may be in conflict or competition with the business of the
Company, and that Consultant is entitled to carry on such other
business interests, activities and investments during the Term.
Consultant may each engage in or possess an interest in any
other business or venture of any kind, independently or with others,
on his own behalf or on the behalf of other entities, with which
he is affiliated or associated, and Consultant may engage in
any activities, whether or not competitive with the Company,
without any obligation to offer any interest in such activities to
the Company and the Company shall not have any right, by
virtue of this Agreement, in or to such activities, or the income or
profits derived therefrom. In addition, the parties acknowledge
that nothing contained herein shall affect their ownership rights,
interests or title to any of their tangible and intangible property,
including any intellectual property, and nothing contained herein
shall cause or affect a transfer, assignment, sale or disposition
of such property.
7. Confidentiality. Consultant will obtain certain confidential and
proprietary information from the Company for the sole purpose
of performing his obligations under this Agreement, and the
Company is willing to provide such information to Consultant
for the limited purpose and under the terms and conditions
set forth herein:
(a) The terms of this confidentiality provision (the Confidentiality
Provision ) shall be for a period of three (3) years from the date
of execution of this Agreement.
(b) Definitions:
Trade Secrets include, but shall not be limited to, information
encompassed in all scientific research and development, related
scientific experimentation, sources of information, scientific
formulas, leads, drawings, designs, plans, flow charts, proposals,
marketing and sales plans, financial information, costs, pricing
information, and all concepts or ideas in or reasonably related to
the business of Company or a third party that have not previously
been publicly released and which give Company a competitive
advantage in the relevant industry;
Copyright means any claim to copyright protection in works of
authorship that describe any scientific research and design methods,
scientific procedures, calculations, formulas or research and
development prototypes, or programs, whether they are in machine
readable form, in English or any other language. The term shall not
be limited to the requirement of any notice as required in the United States
of America, but shall include that subject matter in its published
or unpublished form under the copyright statutes of the United
States, the Universal Copyright Convention, the Berne Convention,
and/or any other convention to which the United States is a signatory; and
Confidential Information includes all Trade Secrets and all Copyrighted
materials, as well as any scientific technology, research and development
diagrams, instruction manuals, scientific studies, technical
specifications, procedures, scientific formulas and all other
information that has been marked confidential or is known to be
proprietary, whether it has a copyright notice or a claim to copyright
thereon.
(c) Consultant acknowledges and agrees that Confidential
Information is a valuable asset of the Company and that any disclosure
or unauthorized use thereof will cause irreparable harm and loss to the
Company.
(d) In consideration of the disclosure to Consultant of Confidential
Information, Consultant agrees to treat Confidential Information in
confidence and to undertake the following additional obligations
with respect thereto:
(i) to use Confidential Information for the sole purpose of
performing his obligations under this Agreement;
(ii) not to disclose Confidential Information outside of the scope
of this Agreement;
(iii)to limit dissemination of Confidential Information to only
those of Consultant's employees who have a need to know to perform
the limited tasks set forth in item (a) above; and
(iv) to return Confidential Information and all documents, notes
or physical evidence thereof to the Company upon the expiration or
termination of this Agreement, a decision by Consultant not to
enter into this Agreement, a determination that Consultant no longer
has a need therefor, or a request therefor from the Company,
whichever occurs first, except that Consultant may retain one (1)
copy of such documents for his personal business records and files
so long as he advises the Company of said actions.
(e) The restrictions and obligations of this Confidential Provision
shall survive any expiration, termination or cancellation of this
Agreement and shall continue to bind Consultant, his successors,
heirs and assigns.
(f) Except as expressly set forth herein, no rights or licenses,
expressed or implied, are hereby granted to Consultant as a result
of or related to this Agreement.
(g) Any controversy or claim arising out of or related to this
Confidential Provision, or breach thereof, which cannot be resolved
by the parties hereto, shall be subject to arbitration under the rules
of the American Arbitration Association, requiring three arbitrators,
subject to arbitration in the County and State where the Company
normally shall conduct its business. The Consultant further agrees that the
award of the three appointed arbitrators shall be binding under Title IX
of the United States Code.
8. Effective Date, Term and Termination. This Agreement shall
take effect on November ___, 1999, and shall continue in effect for
ninety (90) days (the Term ).
9. Amendments. This Agreement may be amended or
modified only by written agreement of the parties.
10. No Assignment or Waiver. This Agreement is personal in
nature and may not be assigned, sold, pledged as security or
otherwise transferred, nor may any provision hereof be waived by
either party without the prior written consent of the other party.
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal law, and not the law of
conflicts, of the State of Texas.
12. Notices. All notices given hereunder shall be considered as
properly given when delivered by hand or sent by first class
mail to the parties at the following addresses:
If to the Company:
Leapfrog Smart Products, Inc.
545 Delaney Ave.
Orlando, FL 32801
If to Consultant:
Real Provencher
13469 Laramie Trail
Montgomery, TX 77316
Each party shall have the right to change its address for notice by
giving fifteen (15) days prior written notice thereof to the other
party hereto.
13. Captions. The captions of the sections herein are for convenience
of reference only and shall be accorded no substantive significance in the
construction hereof.
14. Binding Effect. This Agreement shall be binding upon and inure the
benefit of Consultant, the Company and their respective successors and
assigns. This Agreement or a similar agreement providing in substance
for the same Consultant fees and reimbursement rights to Consultant
and its Affiliates shall remain in effect upon any reconstitution and
continuation of the Company after a dissolution, merger or liquidation
of the Company.
15. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which
shall constitute one and the same instrument.
16. Authorization. The Company hereby represents that it has
received and has become duly authorized by all necessary corporate
action on behalf of such entity, including but not limited to the
proper approval by the Board of Directors of such entity, and that the
execution of this Agreement shall constitute a legal, valid and binding
obligation of the Company in accordance with its terms.
17. Limitation of Liability. In no event shall Consultant be liable to the
Company for any damages, including, without limitation, liability arising
out of contract, strict liability and tort for any consequential, incidental
or punitive loss, damages or expenses (including lost profits or savings).
18. Severability. If any of the terms and conditions of this
Agreement are held by any court of competent jurisdiction to contravene,
or to be invalid under, the laws of any political body having jurisdiction
over this subject matter, that contravention or invalidity shall not
invalidate the entire Agreement. Instead, this Agreement shall be
construed as reformed to the extent necessary to render valid the particular
provision or provisions held to be invalid, consistent with the original
intent of that provision and the rights and obligations of the parties
shall be construed and enforced accordingly, and this Agreement
shall remain in full force and effect as reformed.
19. No Third Party Beneficiary. Any agreement to pay an amount
or any assumption of liability herein contained, express or implied, shall
be only for the benefit of the undersigned parties and their permitted
successors and assigns, and such agreements and assumption shall
not inure to the benefit of the obligees of any other party,
whomsoever, it being the intention of the undersigned that no one
shall be deemed to be a third party beneficiary of this Agreement.
EXECUTED this day of November, 1999.
LEAPFROG SMART PRODUCTS, INC.
f/k/a ALBARA CORPORATION,
a Colorado corporation
__________________________________
By: Randolph Tucker
Its: CEO
__________________________________
By: Real Provencher
Individual
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
ACT OF ANY STATE (COLLECTIVELY, THE "ACTS"). NEITHER
THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT HERETO UNDER ALL OF THE
APPLICABLE ACTS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH REGISTRATIONS ARE NOT REQUIRED. THIS
WARRANT IS SUBJECT TO OTHER LIMITATIONS ON TRANSFER.
No. 1999-01
WARRANT
to Purchase Common Stock of
LEAPFROG SMART PRODUCTS, INC.
f/k/a ALBARA CORPORATION
Expiring on November ___, 2009
THIS IS TO CERTIFY THAT, for value received, REAL PROVENCHER, or permitted
assigns, is entitled to purchase from LEAPFROG SMART PRODUCTS, INC., a
Colorado corporation f/k/a ALBARA CORPORATION (the "Company"), at the place
where the Warrant Office designated pursuant to Section 2.1 is located, at a
purchase price per share of $5.00 (as adjusted pursuant to the terms of this
Warrant, the "Exercise Price"), 350,000 shares of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock, no par value,
of the Company (the "Common Stock"), and is entitled also to exercise the
other appurtenant rights, powers and privileges hereinafter set forth.
The Exercise Price shall be adjusted to an amount per share determined
by dividing the Exercise Price by 100 in the event the Company shall not
have closed within 150 days of the date hereof an equity offering
raising an aggregate of at least $2,500,000. The number of shares of the
Common Stock purchasable hereunder and the Exercise Price are subject
to additional adjustments in accordance with Article III hereof. This Warrant
is exercisable on or after the 90th day following the date hereof and shall
expire at 5:00 p.m., C.S.T., on November ___, 2009.
Certain Terms used in this Warrant are defined in Article IV.
ARTICLE I
EXERCISE OF WARRANT
1.1 Method of Exercise. This Warrant may be exercised as
a whole or in part from time to time. To exercise this Warrant, the holder
hereof or permitted assignees of all rights of the registered owner hereof
shall deliver to the Company, at the Warrant Office designated in
Section 2.1, (a) a written notice in the form of the Subscription Notice
attached as an exhibit hereto, stating therein the election of such holder
or such permitted assignees of the holder to exercise this Warrant in
the manner provided in the Subscription Notice, (b) payment in full of the
Exercise Price (in the manner described below) for all Warrant Shares
purchased hereunder, and (c) this Warrant. Subject to compliance
with Section 3.1(a)(viii), this Warrant shall be deemed to be exercised
on the date of receipt by the Company of the Subscription Notice,
accompanied by payment for the Warrant Shares and surrender of this
Warrant, as aforesaid, and such date is referred to herein as the
"Exercise Date." Upon such exercise (subject as aforesaid), the
Company shall issue and deliver to such holder a certificate for the full
number of the Warrant Shares purchasable by such holder hereunder,
against the receipt by the Company of the total Exercise Price payable
hereunder for all the Warrant Shares, in cash or by certified or cashier's
check. The Person in whose name the certificate(s) for Common Stock is
to be issued shall be deemed to have become a holder of record of such
common stock on the Exercise Date.
1.2 Fractional Shares. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon exercise of this
Warrant, no shares will be issued for less than one-half a share and the
Company shall issue a certificate for the next higher number of whole
shares of Common Stock for any fraction of a share which is one-half
or greater.
ARTICLE II
WARRANT OFFICE; TRANSFER
2.1 Warrant Office. The Company shall maintain an office
for certain purposes specified herein (the "Warrant Office"), which
office shall initially be the Company's office at 545 Delaney Ave.,
Orlando FL 32801, and may subsequently be such other office of the
Company or of any transfer agent of the Common Stock in the continental
United States as to which written notice has previously been given to the
holder of this Warrant. The Company shall maintain, at the Warrant Office,
a register for the Warrant, in which the Company shall record the name
and address of the person in whose name this Warrant has been issued, as
well as the name and address of each permitted assignee of the rights of
the registered owner hereof.
2.2 Ownership of Warrant. The Company may deem and
treat the Person in whose name this Warrant is registered as
the holder and owner hereof (notwithstanding any notations of ownership
or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in
this Article II.
2.3 Transfer of Warrants. The Company agrees to maintain
at the Warrant Office books for the registration and transfer of this
Warrant. The Company, from time to time, shall register the transfer
of this Warrant in such books upon surrender of this Warrant at the
Warrant Office properly endorsed or accompanied by appropriate
instruments of transfer and written instructions for transfer satisfactory to
the Company. Upon any such transfer, a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled
by the Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses and charges payable in connection
with the transfer of Warrants pursuant to this Section 2.3.
2.4 "Piggyback" Registration. If at any time or times the
Company proposes to register any of its Common Stock or other securities
under the Securities Act, the Company will at such time give prompt
notice of its intention so to do to the registered holder hereof or to the
then registered holders of any Warrant Shares not theretofore registered in
any offering pursuant to this Section 2.4. If the holder hereof or any
such holder of such Warrant Shares wishes to have any Warrant Shares
or other securities of Company owned by Holder ( Registrable
Securities ) included in any such registration(s), then such holder,
at such holder's option, within 15 business days after receipt of such
notice from the Company shall make written request of the Company
to include in any such registration(s) any such Registrable Securities
owned by holder, or in the case of Warrant Shares which may be owned at the
time of the effective date of the registration statement by exercise of this
Warrant, and the Company agrees to use its best efforts to include such
Registrable Securities owned by Holder in such registration(s); provided
that such holder so requesting such registration shall agree, within such
15-day time period (i) to sell and distribute the Registrable Securities in
the method adopted by and through underwriters acting for the Company,
(ii) to bear a pro rata share of underwriters' commissions and other
expenses which by law may be required to be paid by a selling
shareholder (but all other costs and expenses of the registration,
including, without limitation, registration and filing fees, printing,
accounting and legal fees, costs and disbursements (excluding those of
such holder's own counsel, if any), not required by law to be paid by a
selling shareholder, shall be paid by the Company), and (iii) to accept with
the other selling shareholders a pro rata reduction in the number of shares
of Registrable Securities to be sold to the extent that the Company's
underwriters are unwilling to purchase for sale or distribution, or sell for
the account of the Company and the selling shareholders, the total number
of shares that the Company and the selling shareholders desire to sell. Any
holder desiring to have any such Registrable Securities included in any
such registration(s) shall promptly provide to the Company such
information with respect to his Registrable Securities to be so
registered as is required for such registration statement.
2.5 Inclusion of Shares in Underwriting. If the securities
(other than the Common Stock to be registered pursuant to the registration
statement) to be registered for sale pursuant to Section 2.4 are to be
distributed by or through a firm of underwriters of recognized standing under
underwriting terms appropriate for such transaction, then the holder of
Registrable Securities agrees that it shall execute appropriate
custody agreements and powers of attorney covering such shares.
2.6 Company Indemnification. In the event of any registration
under the Securities Act of any securities pursuant to this Article II, the
Company will indemnify and hold harmless each holder of the Warrant
Shares and each other Person, if any, which controls (within the meaning
of the Securities Act) such holder, against any losses, claims, damages
or liabilities, joint or several, to which such holder or controlling Person
may become subject under the Securities Act or otherwise, to the
extent that such losses, claims, damages or liabilities (or proceedings in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained, on the effective
date thereof, in any registration statement under which such securities
were registered under the Securities Act, in any preliminary prospectus
or final prospectus contained therein, or in any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse such holder
and each such controlling Person for any legal or any other expenses
reasonably incurred by such holder or such controlling Person in
connection with investigating or defending any loss, claim, damage,
liability or proceeding, except insofar as any such losses, claims, damages,
liabilities or expenses result from an untrue statement or omission
contained in information furnished in writing to the Company by such
holder expressly for use therein.
2.7 Indemnification by Holder. In the event of any
registration of any securities under the Securities Act pursuant to this
Article II, the holder of Warrant Shares will (or will furnish the
written undertaking of such other Person or Persons as shall be
acceptable to the Company to) indemnify and hold harmless the
Company and each other Person, if any, who controls the
Company within the meaning of the Securities Act, against any losses,
claims, damages, or liabilities, joint or several, to which the Company
or such controlling Person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered
under the Securities Act, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent that any
such loss, claim, damage, or liability arising out of or is based upon
an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus, or said prospectus or said amendment or supplement in
reliance upon and in conformity within written information furnished
to the Company through an instrument duly executed by such holder
or any underwriter of such holder's securities specifically for use in the
preparation thereof, and such holder will (or will furnish the written
undertaking of such other Person or Persons as shall be acceptable to the
Company to) reimburse the Company and each such controlling Person
for any legal and any other expenses reasonably incurred by the Company
or such controlling Person in connection with investigation or defending
any such loss, claim, damage, liability, or action.
2.8 Acknowledgment of Rights. The Company will, at the time of the
exercise of this Warrant in accordance with the terms hereof, upon the
request of the registered holder hereof, acknowledge in writing its continuing
obligation to afford to such holder any rights (including without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions
of this Warrant, provided that if the holder of this Warrant shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.
2.9 Expenses of Delivery of Warrants. The Company shall pay all expenses,
taxes (other than transfer taxes) and other charges payable in connection with
the preparation, issuance and delivery of Warrants and related Warrant Shares
hereunder.
ARTICLE III
ANTI-DILUTION PROVISIONS
3.1 Adjustment of Exercise Price and Number of Warrant Shares.
The Exercise Price shall be subject to adjustment from time to time as
hereinafter provided in this Article III. Upon each adjustment of the
Exercise Price, the registered holder of the Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment,
the number of shares of the Common Stock (calculated to the nearest
whole share pursuant to Section 1.2) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of
shares of the Common Stock purchasable pursuant hereto immediately
prior to such adjustment and dividing the product thereof by the Exercise
Price resulting from such adjustment.
(a) Exercise Price Adjustments. The Exercise Price
shall be subject to adjustment from time to time as follows:
(i) Issuance of Common Stock. If, at any time,
the Company shall issue any Common Stock other than Excluded Stock
(as hereinafter defined) without consideration or for a consideration per
share less than the Exercise Price applicable immediately prior to such
issuance, the Exercise Price in effect immediately prior to each such issuance
shall immediately (except as provided below) be reduced to the price
determined by dividing (A) an amount equal to the sum of (x) the number
of shares of Common Stock outstanding immediately prior to such
issuance multiplied by the Exercise Price in effect immediately prior to
such issuance and (y) the consideration, if any, received by the
Company upon such issuance, by (B) the total number of shares of
Common Stock outstanding immediately after such issuance.
For the purposes of any adjustment of the Exercise Price pursuant
to this clause (i) of this Section 3.1(a), the following provisions shall be
applicable:
(A) Cash. In the case of the issuance of Common Stock for
cash, the amount of the consideration received by the Company shall be
deemed to be the amount of the cash proceeds received by the Company for
such Common Stock before deducting therefrom any reasonable discounts,
commissions, taxes or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with
the issuance and sale thereof.
(B) Consideration Other Than Cash. In the case of the
issuance of Common Stock (otherwise than upon the conversion of
shares of capital stock or other securities of the Company) for a consideration
in whole or in part other than cash, including securities acquired in
exchange therefor (other than securities by their terms so exchangeable),
the consideration other than cash shall be deemed to be the fair value
thereof as determined by the Board of Directors in good faith, irrespective
of any accounting treatment; provided, however, that such fair value as
determined by the Board of Directors shall not exceed the aggregate fair
market value of the shares of Common Stock being issued as of the
date the Board of Directors authorizes the issuance of such shares.
(ii) Options and Convertible Securities. In case, at any time,
the Company shall issue any (a) options, warrants or other rights to purchase
or acquire Common Stock other than Excluded Stock (whether or
not at the time exercisable), (b) securities by their terms convertible into
or exchangeable for Common Stock (whether or not at the time so
convertible or exercisable) or (c) options, warrants or rights to
purchase such convertible or exchangeable securities (whether or
not at the time exercisable), the Exercise Price in effect immediately
prior to each such issuance shall immediately (except as provided
below) be reduced to the lower of the prices determined in accordance
with subparagraph (A) and (B) of Section 3.1(a)(i) and the following:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options, warrants or other rights to
purchase or acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or rights were issued and
for a consideration equal to the consideration (determined in the manner
provided in subparagraph (A) and (B) above), if any, received by the
Company upon the issuance of such options, warrants or rights plus
the minimum purchase price provided in such options, warrants
or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible
or exchangeable securities, or upon the exercise of options, warrants or
other rights to purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange thereof, shall be
deemed to have been issued at the time such securities were issued or such
options, warrants or rights were issued and for a consideration equal
to the consideration, if any, received by the Company for any such
securities and related options, warrants or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the Company upon the
conversion or exchange of such securities and the exercise of any related
options, warrants or rights (the consideration in each case to be determined
in the manner provided in subparagraph (A) and (B) above);
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options, warrants or rights of
conversion or of exchange for such convertible or exchangeable
securities or any change in the consideration to be received by the
Company upon such exercise, conversion or exchange, including,
but not limited to, a change resulting from the antidilution
provisions thereof, the Exercise Price as then in effect shall forthwith
be readjusted to such Exercise Price as would have been obtained had an
adjustment been made upon the issuance of such options, warrants or rights
not exercised prior to such change, or securities not converted or exchanged
prior to such change, on the basis of such change;
(D) on the expiration or cancellation of any such options,
warrants or rights, or the termination of the right to convert or exchange such
convertible or exchangeable securities, if the Exercise Price shall have
been adjusted upon the issuance thereof, the Exercise Price shall
forthwith be readjusted to such Exercise Price as would been obtained
had an adjustment been made upon the issuance of such options, warrants,
rights or securities on the basis of the issuance of only the number of shares
of Common Stock actually issued upon the exercise of such options,
warrants or rights, or upon the conversion or exchange of such securities;
and
(E) if the Exercise Price shall have been adjusted upon the
issuance of any such options, warrants, rights or convertible or
exchangeable securities, no further adjustment of the Exercise Price
shall be made for the actual issuance of Common Stock upon the
exercise, conversion or exchange thereof;
provided, however, that no increase in the initial Exercise Price
shall be made pursuant to this Section 3.1(a)(ii) (except as necessary
to reverse a decrease in the Exercise Price under the circumstances
described in subparagraph (ii)(D)).
(iii) Excluded Stock. "Excluded Stock" shall mean shares
of Common Stock issued or reserved for issuance by the Company;
(A) upon exercise of any options or warrants issued to officers,
directors, consultants,
or employees of the Company pursuant to a stock option incentive
plan approved by the Board of Directors of the Company (provided that
the aggregate number of shares of Common Stock which may be issued
under any employee stock option incentive plans shall not exceed ten
percent (10%) shares of Common Stock of the Company;
(B) upon exercise of this Warrant; (C) pursuant to a stock dividend,
subdivision or split-up covered by Section 3.1(a)(iv); or (D) in
connection with a firm underwritten public offering of Common
Stock by the Company; (E) in connection with the issuance of shares in
a private placement of at least $2,500,000 of the Company s equity
securities or; (F) pursuant to an acquisition or merger involving
the issuance of the Company s Common Stock.
(iv) Stock Dividends. If the number of outstanding shares of Common
Stock is increased at any time after the date of this Warrant by a stock
dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then immediately after the record date
fixed for the determination of holders of Common Stock entitled to receive
such stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Exercise Price shall be appropriately
adjusted so that the adjusted Exercise Price shall bear the same relation
to the Exercise Price in effect immediately prior to such adjustment as
the total number of shares of Common Stock outstanding immediately
prior to such action shall bear to the total number of shares of Common
Stock outstanding immediately after such action.
(v) Combination of Stock. If the number of outstanding shares of
Common Stock is decreased at any time after the date of issuance of this
Warrant by a combination of such shares, then, immediately after
the effective date of such combination, the Exercise Price shall be
appropriately adjusted so that the adjusted Exercise Price shall bear the
same relation to the Exercise Price in effect immediately prior to such
adjustment as the total number of outstanding shares of Common Stock
immediately prior to such action shall bear to the total number of
outstanding shares of Common Stock immediately after such action.
(vi) Reorganizations. In case of any capital reorganization
of the Company, or of any reclassification of the Common Stock, or in
case of the consolidation of the Company with or the merger of the
Company with or into any other Person or of the sale, lease or other
transfer of all or substantially all of the assets of the Company to any
other Person, this Warrant shall, after such capital reorganization,
reclassification, consolidation, merger, sale, lease or other transfer,
be exercisable for the number of shares of stock or other securities or
property to which the Common Stock issuable (at the time
of such capital reorganization, reclassification, consolidation, merger,
sale, lease or other transfer) upon exercise of this Warrant would have been
entitled to receive upon such capital reorganization, reclassification,
consolidation, merger, sale, lease or other transfer if such exercise had
taken place; and in any such case, if necessary, the provisions set forth
herein with respect to the rights and interests thereafter of the holder
of this Warrant shall be appropriately adjusted so as to be applicable,
as nearly as may reasonably be, to any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant.
In case of any distribution by the Company of any security (including
rights or warrants to subscribe for any such securities but excluding
Common Stock and any securities referred to in Section 3.1(a)(ii) of the
Company, evidence of its indebtedness, cash or other assets to all of the
holders of its Common Stock, then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the Exercise Price
in effect immediately prior thereto by a fraction the numerator of which
shall be the total number of outstanding shares of Common Stock
multiplied by the Current Market Price on the record date mentioned
below, less the fair market value (as determined in good faith by the
Board of Directors) of the securities, evidences of its indebtedness, cash
or other assets distributed by the Company and the denominator of which
shall be the total number of outstanding shares of Common Stock
multiplied by the Current Market Price; such adjustment shall become
effective as of the record date for the determination of stockholders
entitled to receive such distribution. The subdivision or combination
of shares of Common Stock issuable upon exercise of this Warrant at any
time outstanding into a greater or lesser number of shares of Common
Stock (whether with or without par value) shall not be deemed to be a
reclassification of the Common Stock of the Company for the purposes
of this clause (vi).
(vii) Rounding of Calculations; Minimum Adjustment. All calculations
under this Section 3.1(a) and under Section 3.1(b) shall be made to the
nearest cent or to the nearest whole share (as provided in Section 1.2),
as the case may be. Any provision of this Section 3.1 to the contrary
notwithstanding, no adjustment in the Exercise Price shall be made if the
amount of such adjustment would be less than one percent, but any
such amount shall be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so
carried forward, shall aggregate one percent or more.
(viii) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this Section 3.1(a)
shall require that an adjustment shall become effective immediately after
a record date for an event, the Company may defer until the occurrence
of such event issuing to the holder of this Warrant the additional shares
of Common Stock or other property issuable or deliverable upon exercise
by reason of the adjustment required by such event over and above the
shares of Common Stock or other property issuable or deliverable upon
such exercise before giving effect to such adjustment; provided, however,
that the Company upon request shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares or other property, and such cash, upon the occurrence of
the event requiring such adjustment.
(b) Statement Regarding Adjustments. Whenever the Exercise Price
shall be adjusted as provided in Section 3.1(a), and upon each change in
the number of shares of the Common Stock issuable upon exercise of this
Warrant, the Company shall forthwith file, at the office of any transfer
agent for this Warrant and at the principal office of the Company, a statement
showing in detail the facts requiring such adjustment and the Exercise
Price and new adjustment, and the Company shall also cause a copy of
such statement to be given to the holder of this Warrant. Each such
statement shall be signed by the Company's chief financial or accounting
officer. Where appropriate, such copy may be given in advance and may
be included as part of a notice required to be mailed under the provisions
of Section 3.1(c).
(c) Notice to Holders. In the event the Company shall propose to
take any action of the type described in Section 3.1(a)(i) or (ii) (but
only if the action of the type described in such clauses or (v) of
Section 3.1(a)), the Company shall give notice to the holder of this
Warrant, in the manner set forth in Section 6.6, which notice shall specify
the record date, if any, with respect to any such action and the approximate
date on which such action is to take place. Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect may be known
at the date of such notice) on the Exercise Price and the number, kind
or class of shares or other securities or property which shall be
deliverable upon exercise of this Warrant. In the case of any action which
would require the fixing of a record date, such notice shall be given at
least 10 days prior to the date so fixed, and in case of all other action, such
notice shall be given at least 15 days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall not affect
the legality or validity of any such action.
(d) Treasury Stock. For the purposes of this Section 3.1, the sale
or other disposition of any Common Stock of the Company theretofore
held in its treasury shall be deemed to be an issuance thereof.
3.2 Costs. The Company shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock of the Company upon exercise of this Warrant; provided,
however, that the Company shall not be required to pay any taxes which
may be payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than that of
the holder of this Warrant in respect of which such shares are being issued.
3.3 Reservation of Shares. The Company shall reserve at all times so
long as this Warrant remains outstanding, free from preemptive
rights, out of its treasury or its authorized but unissued shares of Common
Stock, or both, solely for the purpose of effecting the exercise of this
Warrant, sufficient shares of Common Stock to provide for the exercise
hereof.
3.4 Valid Issuance. All shares of Common Stock which may be
issued upon exercise of this Warrant will upon issuance by the Company
be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof attributable
to any act or omission by the Company, and the Company shall take
no action which will cause a contrary result (including without limitation,
any action which would cause the Exercise Price to be less than the par
value, if any, of the Common Stock).
ARTICLE IV
TERMS DEFINED
4.1 As used in this Warrant, unless the context otherwise requires,
the following terms have the respective meanings set forth below or in
the Section indicated:
(a) Board of Directors -- the Board of Directors of the Company.
(b) Common Stock -- the Company's authorized Common Stock,
no par value per share.
(c) Company Leapfrog Smart Products, Inc., a Colorado corporation,
f/k/a Albara Corporation, and any other corporation assuming or required
to assume the obligations undertaken in connection with this Warrant.
(d) Current Market Price -- of shares of Common Stock
shall mean, per share:
(i) if the Common Stock is listed on a national securities exchange
(as defined in the Securities Exchange Act of 1934, as amended), the
closing price for a share of Common Stock on the last trading day
immediately preceding the date of the event for which such
determination is made;
(ii) if the Common Stock is listed on NASDAQ, the average of the
last reported bid and asked prices for the last trading date
immediately preceding the date of the event for which such
determination is made; and
(iii) if the Common Stock is not listed on a national securities
exchange or NASDAQ, the fair market value as determined by the
Board of Directors of the Company in good faith.
(e) Excluded Stock -- Section 3.1(a)(iii).
(f) Outstanding -- when used with reference to Common Stock at
any date, all issued shares of Common Stock (including, but without
duplication, shares deemed issued pursuant to Article III) at such
date, except shares then held in the treasury of the Company.
(g) NASDAQ -- The National Association of Securities Dealers,
Inc. Automated Quotation System.
(h) Net Income After Taxes -- the consolidated net income
of the Company determined in accordance with generally accepted
accounting principles.
(i) Person -- any individual, corporation, partnership, trust,
organization, association or other entity or individual.
(j) Securities Act -- the Securities Act of 1933 and the rules
and regulations thereunder, all as the same shall be in effect at the
time.
(k) Warrant -- this Warrant and any successor or
replacement Warrant delivered in accordance with the provision
of this Warrant.
(l) Warrant Office -- Section 2.1.
(m) Warrant Shares -- shall mean the shares of Common Stock
purchased or purchasable by the registered holder of this Warrant or
the permitted assignees of such holder upon exercise thereof pursuant
to Article I hereof.
ARTICLE V
COVENANT OF THE COMPANY
The Company covenants and agrees that this Warrant shall be binding
upon any corporation succeeding to the Company by merger, consolidation
or acquisition of all or substantially all of the Company's assets.
ARTICLE VI
MISCELLANEOUS
6.1 Entire Agreement. This Warrant contains the entire agreement
between the holder hereof and the Company with respect to the shares
which he can purchase upon exercise hereof and the related transactions
and supersedes all prior arrangements or understanding with respect thereto.
6.2 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas.
6.3 Waiver and Amendment. Any term or provision of this Warrant
may be waived at any time by the party which is entitled to the benefits
thereof and any term or provision of this Warrant may be amended or
supplemented at any time by agreement of the holder hereof and the
Company, except that any waiver of any term or condition, or any
amendment or supplementation, of this Warrant must be in writing. A
waiver of any breach or failure to enforce any of the terms or conditions
of this Warrant shall not in any way effect, limit or waive a party's
rights hereunder at anytime to enforce strict compliance thereafter with
every term or condition of this
Warrant.
6.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom
the benefits of the provision exists, be in any way impaired.
6.5 Copy of Warrant. A copy of this Warrant shall be filed among the
records of the Company.
6.6 Notice. Any notice or other document required or permitted to
be given or delivered to the holder hereof shall be delivered at, or sent
by certified or registered mail to such holder at, the last address shown
on the books of the Company maintained at the Warrant Office for the
registration of this Warrant or at any more recent address of which the
holder hereof shall have notified the Company in writing. Any notice
or other document required or permitted to be given or delivered to the
Company, other than such notice or documents required to be delivered to
the Warrant Office, shall be delivered at, or sent by certified or registered
mail to, the office of the Company at 545 Delaney Ave., Orlando FL
32801, or such other address within the continental United States
of America as shall have been furnished by the Company to the holders
of this Warrant.
6.7 Limitation of Liability; Not Stockholders. No provision of this
Warrant shall be construed as conferring upon the holder hereof the
right to vote, consent, receive dividends or receive notices other than as
herein expressly provided in respect of meetings of stockholders for the
election of directors of the Company or any other matter whatsoever as a
stockholder of the Company. No provision hereof, in the absence of
affirmative action by the holder hereof to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the purchase price
of any shares of Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of
the Company.
6.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the
event of such mutilation upon surrender and cancellation of this Warrant,
the Company will make and deliver a new Warrant of like tenor, in lieu of
such lost, stolen, destroyed or mutilated Warrant; provided, however, that
the original recipient of this Warrant shall not be required to provide any
such bond of indemnity and may in lieu thereof provide his agreement
of indemnity. Any Warrant issued under the provisions of this
Section 6.8 in lieu of any Warrant alleged to be lost, destroyed or stolen,
or in lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company. This Warrant shall be promptly
canceled by the Company upon the surrender hereof in connection with
any exchange or replacement. The Company shall pay all taxes (other
than securities transfer taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery
of Warrants pursuant to this Section 6.8.
6.9 Headings. The Article and Section and other headings herein are
for convenience only and are not a part of this Warrant and shall not affect
the interpretation thereof.
IN WITNESS WHEREOF, the Company has caused this
Warrant to be signed in its name.
COMPANY:
Dated: November ___, 1999
LEAPFROG SMART PRODUCTS, INC.
f/k/a ALBARA CORPORATION
________________________________
By: Randolph Tucker
Title: Chief Executive Officer
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby
elects to exercise purchase rights represented by said Warrant for,
and to purchase thereunder __________________ shares of the
Common Stock covered by said Warrant and herewith makes
payment in full therefor pursuant to Section 1.1 of such Warrant, and
request (a) that certificates for such shares (and any securities or other
property issuable upon such exercise) be issued in the name
of, and delivered to, _________________________________________
____________________ and (b) if such shares shall not include all of the
shares issuable as provided in said Warrant, that a new Warrant of like
tenor and date for the balance of the shares issuable thereunder be
delivered to the undersigned.
____________________________________
Dated: ____________________, 20__
ASSIGNMENT
For value received, _______________________________________
hereby sells, assigns and transfers unto _________________________
the within Warrant, together with all right, title and interest therein
and does hereby irrevocably constitute
and appoint _____________________________________________
___________ attorney, to transfer said Warrant on the books of
the Company, with full power of substitution.
____________________________________
Dated: ____________________, 19__
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement")
is made and entered into this ____ day of November, 1999, by and among
LEAPFROG SMART PRODUCTS, INC., a Colorado corporation f/k/a
ALBARA CORPORATION (the "Corporation") and REAL
PROVENCHER (the Shareholder ) who holds or will hold restricted
shares of the Corporation's Common Stock.
RECITALS:
WHEREAS, pursuant to a Warrant issued in connection with a
Consulting Agreement dated as of November ___, 1999 the
Shareholder will receive restricted shares of the Corporation's Common
Stock and other restricted shares held by the Shareholder;
WHEREAS, the Shareholder wishes to have the right to require the
Corporation to register his shares of the Corporation's Common Stock
under the Securities Act of 1933, as amended; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions.
For purposes of this Agreement, the following terms shall have
the following meanings:
(a) Closing Date: The Closing Date defined in the Merger Agreement.
(b) Exchange Act: The Securities Exchange Act of 1934, as it is or
may be amended.
(c) Person: Any individual, partnership, corporation, trust or
unincorporated organization, or government or agency or political
subdivision thereof.
(d) Prospectus: The prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration
Statement and by all other amendments and supplements to the prospectus,
including post-effective amendments and all material incorporated by
eference in such prospectus.
(e) Registrable Securities: As defined in Section 2(a) below.
(f) Registration: As defined in Section 3 below.
(g) Registration Statement: Any registration statement of the Corporation
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements
to such Registration Statement, including post-effective amendments, all
exhibits and all material incorporated by reference in such Registration
Statement.
(h) SEC: The Securities and Exchange Commission.
(i) Securities Act: The Securities Act of 1933, as it is or may be amended.
(j) Underwritten Registration of Underwritten Offering: A Registration
in which securities of the Corporation are sold to an underwriter for
re-offering to the public.
2. Securities Subject to this Agreement.
(a) Registrable Securities. The securities entitled to the benefit of this
Agreement (the "Registrable Securities") are sixty thousand (60,000)
shares of the Corporation s Common Stock, and the shares underlying
Warrant 1999-01 which on the date hereof comprise three hundred fifty
thousand (350,000) shares of the Corporation s Common Stock, to be
issued to the Shareholder (including such shares received as share dividends
or shares issued on stock splits, mergers, consolidations or other
reorganizations), provided that, (subject to the shareholder election
provided in the next sentence) a share of the Corporation's Common
Stock shall be a Registrable Security only for so long as such share
continues to be a Restricted Security. A share of the Corporation's
Common Stock ceases to be a "Restricted Security" when it has been
effectively registered under the Securities Act and disposed of in
accordance with the Registration Statement covering it, and
(b) Holders of Registrable Securities. A Person is deemed to be a
"holder" of Registrable Securities for purposes of this Agreement
whenever such Person owns Registrable Securities or has the right
to acquire such Registrable Securities, whether or not such acquisition
has actually been effected and disregarding any legal restrictions upon
the exercise of such right.
3. Registration of Registrable Securities.
(a) Upon the written request of the Shareholder to register at least 50%
of the Registrable Securities owned by Shareholder, the Corporation shall
within ninety (90) days of such request file a registration statement on any
appropriate form under the Securities Act. The Corporation shall use its
best efforts to cause such Registration to become effective as promptly
as possible after such filing and thereafter to keep such Registration
continuously effective, and to prevent the happening of any event of
the kind described in Section 4(c)(2)-(5) hereof that requires the Corporation
to give notice pursuant to the last paragraph of Section 4 hereof, for a period
(the "Applicable Period") of two years from the date on which the SEC
declares the Registration effective or such shorter period which will terminate
when all the Registrable Securities covered by the Registration have been
sold pursuant to such Registration or under Rule 144.
(b) The Shareholder shall advise the Corporation in such written request
of the proposed method of distribution.
(c) Notwithstanding the foregoing, the Corporation may postpone the filing
of a registration statement (for a period not exceeding 90 days) if its
Board of Directors or the Executive Committee thereof in good faith
determines that the filing or the distribution of the Registrable Securities
will adversely interfere with a public offering by the Corporation or
with a financing, acquisition, corporate reorganization or similar
corporate transaction.
4. Registration Procedures.
In connection with the registration of Registrable Securities
pursuant to Section 3 hereof, the Corporation will use its best efforts
to effect such registration to permit the sale of such Registrable
Securities in accordance with the intended method or methods
of distribution by the selling holders thereof and accordingly will:
(a) prepare and file with the SEC, as soon as practicable, a Registration
Statement or Registration Statements on any appropriate form under the
Securities Act, which form shall be available for the sale of the Registrable
Securities to be covered thereby in accordance with the intended method
or methods of distribution by the selling holders thereof and shall include
all financial statements required by the SEC to be filed therewith;
provided that before filing a Registration Statement or any amendments
or supplements thereto or Prospectus, including in each case documents
incorporated by reference, the Corporation will furnish to the holders
of the Registrable Securities covered by such Registration Statement
and the underwriters, if any, copies of all such documents at least five
business days prior to the day they are proposed to be filed, which
documents will be subject to the reasonable review of the Shareholder
and/or his underwriters, and the Corporation will not file any
Registration Statement or any amendment or supplement thereto or any
Prospectus (including in each case such documents as are incoporated
by reference) to which the Shareholder or the underwriters, if any,
shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep
the Registration Statement effective for the Applicable Period; cause the
Prospectus used in connection therewith to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the Applicable
Period in accordance with the intended method or methods of distribution
by the selling holders thereof set forth in such Registration Statement as
amended or supplement to the Prospectus used in connection therewith;
(c) notify the selling holders of Registrable Securities and the managing
underwriters, if any, promptly, and (if requested by any such Person)
confirm such advice in writing, (1) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-effective amendment,
when the same has become effective, (2) of any request by the SEC for
amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (3) of the issuance by the SEC
of any stop order suspending the effectiveness of the Registration Statement
or the initiation of any proceedings for that purpose, (4) of the receipt
by the Corporation of any notification with respect to the suspension
of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceedings for
such purpose, and (5) of the happening of any event which makes
any statement made in the Registration Statement, the Prospectus,
any amendment or supplement thereto, or any document incorporated
therein by reference untrue or which requires the making of any changes
in the Registration Statement, the Prospectus or any document incorporated
therein by reference in order to make the statements therein not misleading;
(d) upon the occurrence of any event contemplated by paragraph (c)(5)
above, prepare a supplement or post-effective amendment to the Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, the Prospectus will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(e) use its best efforts to obtain the withdrawal at the earliest possible time
of any order suspending or preventing the use of any Prospectus or
suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto or suspending the qualification of any
of the Corporation's Common Stock included in such Registration
Statement for sale in any jurisdiction;
(f) furnish each selling holder of Registrable Securities and each managing
underwriter, if any, without charge, at least one signed copy of the
Registration Statement and every post-effective amendment thereto,
including financial statements and schedules, all documents incorporated
therein by reference, and all exhibits (including those incorporated
by reference);
(g) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; consent
to the use of the Prospectus or any amendment or supplement thereto
by each of the selling holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment
or supplement thereto;
(h) prior to any public offering of Registrable Securities, register or
qualify or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel on a best efforts basis
to register or qualify such Registrable Securities for offer and sale under
the securities or blue sky laws of such jurisdictions as any selling holder
or underwriter reasonably requests in writing and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided that the Corporation will not be required to qualify
generally to do business in any jurisdiction where it is not then so
qualified;
(i) cooperate with the selling holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities
to be sold and not bearing any restrictive legends; enable such
Registrable Securities to be in such denominations and registered in
such names as the selling holders or managing underwriters may
request at least two business days prior to any sale of Registrable
Securities to the underwriters;
(j) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the applicable registration;
(k) enter into such agreements (including any underwriting agreements)
and take all such other actions as the Shareholder may reasonably require
in order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an
underwritten registration (1) make such representations and warranties
to the holders of such Registrable Securities and the underwriters, if any,
in form, substance and scope as are customarily made by issuers comparable
to the Corporation to underwriters in primary underwritten offerings;
(2) obtain opinions of counsel to the Corporation and updates thereof
[which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and the
Shareholder] addressed to each selling holder and the underwriters,
if any, covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by such holders and underwriters; (3) obtain "cold comfort"
letters and updates thereof from the Corporation's independent certified
public accountants addressed to the selling holders of Registrable
Securities and the underwriters, if any, such letters to be in customary
form and covering such matters of the type customarily covered in
"cold comfort" letters and as the Shareholder and underwriters, if any,
shall reasonably require; and (4) deliver such documents and certificates
as may be requested by the Shareholder and/or his Shareholder
Representatives and the managing underwriters, if any, to evidence
compliance with clause (1) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into
by the Corporation, provided that if an underwriting agreement is entered
into, the same shall set forth in full the indemnification provisions and
procedures of Section 6 hereof with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing under
such underwriting or similar agreement or as and to the extent required
thereunder;
(l) make available for inspection by the Shareholder and/or his
Shareholder Representatives, any underwriter, or any attorney
or accountant retained by the Shareholder or any underwriter, all financial
and other records, pertinent corporate documents and properties of the
Corporation, and cause the Corporation's officers, directors and employees
to supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such registration;
provided, that any records, information or documents that are designated by
the Corporation in writing as confidential shall be kept confidential by such
Persons unless disclosure of such records, information or documents
is required by court or administrative order to become publicly available
or becomes publicly available without the fault of such Person;
(m) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder, as soon as practicable but
in any event no later than 45 days after the end of any 12-month period
(or 90 days, if such period is a fiscal year) (1) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm or best efforts Underwritten Offering, or (2) if not
sold to underwriters in such an offering, beginning with the first month
of the Corporation's first fiscal quarter commencing after the effective
date of the Registration Statement, which statements shall cover said
12-month periods; and
(n) permit any selling holder of Registrable Securities which holder
believes he, she or it may be deemed to be an underwriter to require the
insertion in the Registration Statement, Prospectus, preliminary prospectus,
or any supplement or amendment thereto, any material which in such
holder's reasonable judgment should be inserted therein, provided that such
material be furnished under circumstances as shall cause it to be subject
to the indemnification provisions of Section 6(b) hereto and provided that
the Corporation shall not be required to insert any material that it
believes to contain any untrue statement of a material fact or any omission
of a material fact required to be stated therein or necessary to make
the statements therein not misleading.
The Corporation may require such holder of Registrable Securities as
to which any registration is being effected to furnish to the Corporation
such information regarding the distribution of such securities as the
Corporation may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by reason of its acquisition
and holding of such Registrable Securities that, upon receipt of any notice
from the Corporation of the happening of any event of the kind described
in Section 4(c) (2)-(5) hereof, such holder will forthwith discontinue
disposition of Registrable Securities until such holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by
Section 4(d) hereof, or until it is advised in writing (the "Advice") by the
Corporation that the use of the Prospectus may be resumed, and, if so
directed by the Corporation in writing, such holder will deliver to the
Corporation (at the Corporation's expense) all copies, other than permanent
file copies than in such holder's possession, of the Prospectus covering
such Registrable Securities current at the time of receipt of such notice.
5. Registration Expenses.
(a) Except as such expenses provided in Section 5(b) below regarding
the expenses incident to the Corporation's performance of or
compliance with Section 3 of this Agreement are to be borne by
the Corporation, all expenses, commissions, fees or discounts of
underwriters, selling brokers, dealer managers or similar securities
industry professionals relating to the distribution of the Registrable
Securities and legal expenses of any Person other than the Corporation
will be borne by the holders of Registrable Securities, regardless of
whether the Registration Statement becomes effective.
(b) All expenses incident to the Corporation's performance of or
compliance with this Agreement including without limitation all
registration and filing fees, fees with respect to listings or filings
required to be made with the National Association of Securities
Dealers ( NASD ), major stock exchanges, fees and expenses of
compliance with securities or Blue Sky laws, printing expenses,
messenger, telephone and delivery expenses, fees and disbursements
of counsel for the Corporation and of all independent certified public
accountants of the Corporation (including the expenses of any special
audit and "cold comfort" letters required by or incidental to such
performance), and securities acts liability insurance if the Corporation
so desires, and reasonable fees and expenses of other
Persons retained by the Corporation in connection with the registration,
will be borne by the Corporation.
6. Indemnification.
(a) Indemnification by the Corporation. The Corporation agrees to
indemnify and hold harmless, to the full extent permitted by law, each
holder of Registrable Securities, against all losses, claims, damages,
liabilities and expenses (including reasonable attorney's fees and
disbursements) caused by (i) any violation of law by the Corporation
in connection with or any breach by the Corporation of its undertakings
hereunder or (ii) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement or any amendment or
supplement thereto, Prospectus, preliminary prospectus or amendment
or supplement thereto, or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Corporation by
such holder expressly for use therein or by such holder's failure to deliver
a copy of the Registration Statement or Prospectus or any amendment or
supplement thereto after the Corporation has furnished such holder with
a sufficient number of copies of the same. The Corporation will also
indemnify underwriters, selling brokers, dealer-managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such persons (within
the meaning of the Securities Act) to the same extent as provided
above with respect to the indemnification of the holders of Registrable
Securities, if requested.
(b) Indemnification by Holders of Registrable Securities. In connection
with the Registration, each holder of Registrable Securities will furnish
to the Corporation in writing such information and affidavits as the
Corporation reasonably requests in connection with any Registration
Statement or Prospectus and agrees to indemnify and hold harmless, to
the full extent permitted by law, the Corporation, its directors and
officers and each Person who controls the Corporation (within the
meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses (including reasonable attorney's fees and
disbursements) resulting from any untrue statement of a material
fact contained in the Registration Statement, Prospectus, preliminary
prospectus, amendment or supplement thereto, or any omission of a
material fact required to be stated in the Registration Statement or Prospectus
or preliminary prospectus necessary to make the statements therein not
misleading, to the extent, but only the extent, that such untrue statement
or omission is contained in any information or affidavit so furnished in
writing by such holder to the Corporation specifically for inclusion in
such Registration Statement, Prospectus, preliminary prospectus,
amendment or supplement thereto. The Corporation shall be entitled
to receive indemnities from underwriters, selling brokers, dealer--managers
and similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to
information so furnished in writing by such Person specifically for
the inclusion in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume
the defense of such claims with counsel reasonably satisfactory to
the indemnified party, provided, however, that any Person entitled to
indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claims, but the fees
and expense of such counsel shall be at the expense of such Person
unless (a) the indemnifying party has agreed to pay such fees or
expenses, or (b) the indemnifying party shall have failed to assume
the defense of such claim and employ counsel reasonably satisfactory
to such Person, or (c) in the reasonable judgment of any such Person,
based upon advice of its counsel, a conflict of interest may exist
between such Person and the indemnifying party with respect to such
claims (in which case, if the Person notifies the indemnifying party in
writing that such Person elects to employ separate counsel at the expense
of the indemnifying party, the indemnifying party shall not have the right
to assume the defense of such claim on behalf of such Person). If such
defense is not assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made by the indemnified
party without its consent (but such consent will not be unreasonably withheld).
No indemnifying party will be required to consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the indemnified party of a
release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect
to such claim, in which event the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnification provided for
in Sections 6(a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless as contemplated by Sections 6(a) and
(b), then the indemnifying party shall contribute to the amount paid
or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations, provided that
no selling holder shall be required to contribute an amount greater
than the dollar amount of the proceeds received by such selling
holder with respect to the sale of the shares of the Corporation's
Common Stock giving rise to the claim.
(e) Survival of Indemnification Obligation. The indemnifications
provided for under this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified
party or the controlling Person of each indemnified party and will
survive the transfer of the Registrable Securities.
7. Rule 144.
In addition to its other obligations hereunder, the Corporation shall file
the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC
thereunder (or, if the Corporation is not required to file such reports,
it will, upon the request of any holder of Registrable Securities made
after the Closing Date, make publicly available other information so long
as necessary to permit sales pursuant to Rule 144 under the Securities Act),
and it will take such further action as any holder of the Registrable
Securities may reasonably request, all to the extent required from time
to time to enable such holder to sell the Corporation's Common Stock
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any holder of
Registrable Securities, the Corporation will deliver to such holder a
written statement as to whether it has complied with such information
and requirements.
8. Participation in Underwritten Registrations.
If any of the Registrable Securities covered by the Registration Statement
filed pursuant to Section 3 above are to be sold in an Underwritten Offering,
the investment banker or investment bankers and manager or managers
who will administer the offering will be selected by the holders of a majority
of the outstanding shares of such Registrable Securities included in such
offering, provided that such investment bankers and managers must be
reasonably satisfactory to the Corporation.
No Person may participate in any unwritten registration hereunder
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person
entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements, provided that no selling holder
of Registered Securities in any underwritten registration shall be required
to make any representation or warranty to the Corporation or the
underwriters other than representations and warranties regarding such
holder and such holder's intended method of distribution. Nothing in this
Section 8 shall be construed to create any additional rights regarding
the registration of Registrable Securities in any Person otherwise than
as set forth therein.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be waived, amended,
modified or supplemented except by a written instrument signed on behalf
of the Corporation and the Shareholder making specific reference to this
agreement and expressing the intention to waive, amend, modify or
supplement it.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery,
registered or certified first-class mail, telex, telecopier, or air courier
guaranteeing overnight delivery. All such notices and communications
shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when
receipt acknowledged, if by facsimile transmission; and on the next
business day if timely delivered to an air courier guaranteeing
overnight delivery.
(a)
If to SHAREHOLDER:
13469 Laramie Trail
Montgomery, Texas 77358
Attention:
Real Provencher
Telephone:
(409) 588-2632
Facsimile:
(409) 539-4141
with a copy (not constituting notice) to:
Haynes and Boone, LLP
1000 Louisiana, Suite 4300
Houston, TX 77002
Attention:
Charles D. Powell, Esq.
Telephone:
713-547-2052
Facsimile:
713-236-5513
(b)
If to LEAPFROG SMART PRODUCTS, INC.:
545 Delaney Avenue, Bldg. 2
Orlando, FL 32801
Attention:
Randolph Tucker
Telephone:
407-872-1161
Facsimile:
407-872-0508
with a copy (not constituting notice) to:
Nadeau & Simmons, P.C.
1250 Turks Head Building
Providence, RI 02903
Attention:
Mark T. Thatcher
Telephone:
(401) 272-5800
Facsimile:
(401) 272-5858
and
Brennan Dyer & Company, LLC
735 Broad Street, Suite 800
Chattanooga, TN 37402
Attention:
James H. Brennan, III
Telephone:
(423) 265-5062
Facsimile:
(423) 265-5068
(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express
assignment, each subsequent holder of Registrable Securities.
The Corporation shall be entitled to rely on the directions of the
Shareholder herein until receipt of notice from them as to the due
appointment of a successor.
(d) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all
of which taken together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of
any provision hereof.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Florida.
(g) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any provision in any other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(h) Entire Agreement. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
LEAPFROG SMART PRODUCTS, INC.,
f/k/a ALBARA CORPORATION
_____________________________________
By:
Randolph Tucker
Its:
CEO
THE SHAREHOLDER
_____________________________________
By:
Real Provencher
CONSENT OF COUNSEL
We hereby consent to the incorporation by reference in this Current Report
on Form 8-K of our consent dated March 8, 2000 appearing in the Leapfrog
Smart Products, Inc. Form 8-K, filed March 8, 2000. We also consent to the
reference to us under the heading "Exhibits" in such Current Report.
NADEAU & SIMMONS, P.C.
/s/ Nadeau & Simmons, P.C.
By:_______________________
Providence, RI
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 450
<SECURITIES> 0
<RECEIVABLES> 8,585
<ALLOWANCES> 22,600
<INVENTORY> 17,500
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<PP&E> 228,965
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14,625
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<OTHER-SE> 1,674,634
<TOTAL-LIABILITY-AND-EQUITY> 1,674,634
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<TOTAL-REVENUES> 71,834
<CGS> 57,061
<TOTAL-COSTS> 57,061
<OTHER-EXPENSES> 1,539,348
<LOSS-PROVISION> (1,833,127)
<INTEREST-EXPENSE> (315,364)
<INCOME-PRETAX> (1,833,127)
<INCOME-TAX> (1,723,274)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 109,853
<CHANGES> 0
<NET-INCOME> (1,723,274)
<EPS-BASIC> (.29)
<EPS-DILUTED> (.31)
</TABLE>
EXHIBIT 99.1
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Leapfrog Smart Products, Inc. ("Leapfrog" or
the "Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe
harbor provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Leapfrog. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, Leapfrog undertakes no obligation
to update or revise forward-looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes to future operating results
over time.
