SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: November 9, 1998
(Date of earliest event reported: October 27, 1998)
Tadeo Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-11568 95-4228470
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
42705 Grand River Avenue - Suite 20, Novi, Michigan 48375
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 344-9599
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N/A
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On October 27, 1998, Tadeo Holdings, Inc., a Delaware corporation
("Tadeo"), completed the acquisition of Astratek, Inc., a New York
corporation ("Astratek"). Tadeo acquired Astratek pursuant to a
merger (the "Merger") of Astratek Acquisition Corp. ("AAC"), a
wholly-owned subsidiary of Tadeo, with and into Astratek, with
Astratek, becoming the wholly-owned subsidiary of Tadeo, as the
surviving corporation of the Merger. The Merger was effected in
accordance with the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of October 23, 1998, among Tadeo, AAC,
Astratek, and the shareholders of Astratek. Astratek develops
software tools and related products for internet and intranet
technology and provides consulting and professional services for
several major companies. As the Merger Consideration delivered to
Astratek shareholders, Tadeo issued 2,294,900 shares of Tadeo common
stock in exchange for cancellation of all the issued and outstanding
shares of the capital stock of Astratek prior to the Merger and the
issuance of 100 shares of Astratek common stock to Tadeo
post-Merger. The acquisition is accounted for as a pooling of
interests business combination.
Tadeo determined the composition of the Merger Consideration based
upon its due diligence and analysis of the market for the products
and services developed and sold by Astratek, Astratek's past sales
history, the potential for future Astratek sales and product
developments and the quality and caliber of Astratek's personnel. In
order to support Astratek's operations and working capital needs,
Tadeo provided $450,000 of short-term financing to Astratek prior to
consummation of the Merger.
As part of the Astratek Merger, Astratek, Tadeo and Alexander
Kalpaxis all executed an Employment Agreement pursuant to which
Alexander Kalpaxis serves as Chairman and Chief Executive Officer of
Astratek, and Executive Vice President and Chief of Engineering and
Technology of Tadeo. Mr. Kalpaxis has also been appointed to the
Tadeo Board of Directors.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. Financial statements of businesses acquired.
Astratek, Inc.
Audited financial Statements for the years ended April 30, 1998
and 1997.
Unaudited Financial Statements for the four months ended August
31, 1998,
b. Pro forma financial information.
Unaudited Pro Forma Financial Information of Astratek, Inc. and
Tadeo Holdings, Inc.
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c. Exhibits.
Exhibit Number Exhibit Name
Exhibit 2.1 Agreement and Plan of Merger, dated
as of October 23, 1998, among Tadeo
Holdings, Inc., Astratek
Acquisition Corp., Astratek, Inc.,
Alexander Kalpaxis, Robert Rubin
and The Rubin Family Irrevocable
Stock Trust.
Exhibit 10.1 Employment Agreement, dated October
23, 1998, among Tadeo Holdings,
Inc., Astratek, Inc. and Alexander
Kalpaxis.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 9, 1998 TADEO HOLDINGS, INC.
By:/s/ Brian Bookmeier
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Brian Bookmeier
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit Number Exhibit Name Location
Exhibit 2.1 Agreement and Plan of Merger, Filed herewith
dated as of October 23, 1998,
among Tadeo Holdings, Inc.,
Astratek Acquisition Corp.,
Astratek, Inc., Alexander
Kalpaxis, Robert Rubin and The
Rubin Family Irrevocable Stock
Trust.
Exhibit 10.1 Employment Agreement, dated Filed herewith
October 1, 1998, among Tadeo
Holdings, Inc., Astratek, Inc.
and Alexander Kalpaxis.
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into this 23rd
day of October, 1998, by and among TADEO HOLDINGS, INC., a Delaware
corporation ("Tadeo"), having its principal offices at 42705 Grand River
Avenue - Suite 20, Novi, Michigan 48375, ASTRATEK ACQUISITION CORP., a New
York corporation ("Mergerco"), having its principal offices at c/o Nixon,
Hargrave, Devans & Doyle llp, 437 Madison Avenue, New York, New York 10022
("Nixon Hargrave"); ASTRATEK, INC., a New York corporation, having its
principal offices at 5 Hanover Square, New York, New York 10004 (the
"Company"); and ALEXANDER KALPAXIS ("Kalpaxis"), ROBERT RUBIN ("Rubin") and
THE RUBIN FAMILY IRREVOCABLE STOCK TRUST U/A DATED April 30, 1997 (the
"Trust"). Kalpaxis, Rubin and the Trust are hereinafter individually
referred to as a "Principal Stockholder" and collectively as the "Principal
Stockholders".
W I T N E S S E T H:
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WHEREAS, Kalpaxis, Rubin and the Trust are the record and beneficial
owners of 100% of the issued and outstanding shares of the common stock of
the Company, $.001 par value (the "Common Stock") and there are (a) no
outstanding options and warrants to purchase Common Stock, (b) no convertible
notes, convertible debentures, shares of convertible preferred stock or other
securities convertible into shares of Common Stock, and (c) no other rights
and privileges to receive or acquire shares of Common Stock (collectively,
the "Fully Diluted Equity");
WHEREAS, Mergerco is a direct wholly-owned subsidiary of Tadeo, which
has been formed for the purpose of merging with and into the Company, and
thereby enabling Tadeo to acquire all of the shares of capital stock of the
Company as shall represent the Fully Diluted Equity of the Company as at the
effective date of the Merger (hereinafter, referred to as the "Stock")
pursuant to the Merger hereinafter provided for; and
WHEREAS, the Principal Stockholders, the Board of Directors of the
Company, the Board of Directors of Mergerco and Tadeo, as the sole
stockholder of Mergerco, have all authorized and approved the Merger and the
consummation of the other transactions contemplated by this Agreement, all on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereby covenant and
agree as follows:
1. THE MERGER.
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1.1 The Merger. At the time of the Closing on the Closing Date
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(as such terms are hereinafter defined) and in accordance with the provisions
of this Agreement and the
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applicable provisions of the New York Business Corporation Law Act ("New York
Law"), Mergerco shall be merged with and into the Company (the "Merger") in
accordance with the terms and conditions of this Agreement and a certificate of
merger in substantially the form of Exhibit A annexed hereto (the "Articles of
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Merger"), with the Company as the surviving corporation of such Merger (the
Company being hereinafter sometimes referred to as the "Surviving Corporation").
Thereupon, the separate existence of Mergerco shall cease, and the Company, as
the Surviving Corporation, shall continue its corporate existence under New York
Law under its current name, Astratek, Inc.
1.2 Effectiveness of the Merger. As soon as practicable upon
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or after the satisfaction or waiver of the conditions precedent set forth in
Sections 8 and 9 below, Mergerco and the Company will execute the Articles of
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Merger (subject to such revisions as to form (but not substance) as may be
required by the relevant provisions of New York Law), and shall file or cause
to be filed such Articles of Merger with the Secretary of State of New York;
and the Merger shall become effective as of the date of the filing of such
Certificate of Merger, which shall occur on the "Closing Date" (as
hereinafter defined), and the Closing shall be deemed to occur as of such
Closing Date in accordance with Section 9 hereof.
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1.3 Effect of the Merger. Upon the effectiveness of the
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Merger: (a) the Surviving Corporation shall own and possess all assets and
property of every kind and description, and every interest therein, wherever
located, and all rights, privileges, immunities, powers, franchises and
authority of a public as well as of a private nature, of each of Mergerco and
the Company (the "Constituent Corporations"), and all obligations owed to,
belonging to or due to each of the Constituent Corporations, all of which
shall be vested in the Surviving Corporation pursuant to New York Law without
further act or deed, and (b) the Surviving Corporation shall be liable for
all claims, liabilities and obligations of the Constituent Corporations, all
of which shall become and remain the obligations of the Surviving Corporation
pursuant to New York Law without further act or deed.
1.4 Surviving Corporation. Upon the effectiveness of the
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Merger, the Articles of Incorporation, By-Laws, directors and officers of the
Surviving Corporation shall be identical to those of Mergerco as in effect
immediately prior to the effectiveness of the Merger.
1.5 Status and Conversion of Securities. At the Closing Date
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and upon the effectiveness of the Merger:
(a) Mergerco Stock. Each share of capital stock of
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Mergerco outstanding immediately prior to the effectiveness of the Merger
shall be converted into and shall become one (1) share of common stock of the
Surviving Corporation; and
(b) Treatment of Fully Diluted Equity. Each share of
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the Stock outstanding immediately prior to the effectiveness of the Merger,
representing the Fully Diluted Equity of the Company, shall be canceled and
extinguished and converted into the right to receive a proportionate amount
of the Merger Consideration payable pursuant to Section 2 below.
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Such Merger Consideration shall be paid and delivered to the holders of the
outstanding Stock upon:
(A) surrender to the Surviving Corporation of the
certificates representing such shares of outstanding Stock
(all of which shall be delivered free and clear of any and
all pledges, liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever,
except any restrictions which may be created by operation
of state or federal securities laws) at the time and place
of the Closing as provided in Section 9 below; and
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(B) delivery to the Surviving Corporation and Tadeo by the
subject holder of Stock of an appropriate letter confirming
(w) such holder's ownership of his or her Stock free and
clear as aforesaid (which representation and warranty shall
survive the Closing), (x) such information regarding such
holder and his background and financial status as may
reasonably be requested by Tadeo, (y) such holder's
investment intent with respect to the Tadeo Securities
being received by such holder pursuant to Section 2 below
and (z) such other representations with respect to the
holder's status as an affiliate of Tadeo post-closing and
the transfer restrictions applicable to such Tadeo
Securities under Rule 144 and 145 as promulgated by the
Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act").
1.6 Books and Records. On the Closing Date, the Company shall
deliver to Tadeo all of the stock books, records and minute books of the
Company, all financial and accounting books and records of the Company, and
all referral, client, customer and sales records of the Company.
2. MERGER CONSIDERATION.
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On consummation of the Merger, the record owners of all outstanding
Fully Diluted Equity of the Company shall receive an aggregate of Two Million
Two Hundred Ninety-Four Thousand Nine Hundred (2,294,900) shares of Common
Stock, $.001 per value, of Tadeo (the "Tadeo Securities"), in such
allocations as are set forth on Attachment I hereto [absent any action to
perfect dissenter's rights, in which case the allocation of Merger
Consideration (as hereinafter defined) shall be in compliance with New York
law]. The Tadeo Securities is hereinafter sometimes referred to as the
"Merger Consideration."
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL STOCKHOLDERS.
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The Company and the Principal Stockholders hereby represent and
warrant to Mergerco and Tadeo as follows; provided, that Tadeo and Mergerco
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acknowledge that: (i) the representations and warranties of the Company and
Kalpaxis are joint and several; (ii) the
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representations and warranties of each Principal Stockholder, other than
Kalpaxis, are limited to those specific representations and warranties set forth
in Section 3.1, Section 3.2(b), and Section 3.27 below, with respect to the
Stock ownership, ownership of Tadeo Common Stock and knowledge of each such
Principal Stockholder; (iii) the representations and warranties of Rubin and the
Trust are made severally and not jointly and severally with Kalpaxis, but the
representations and warranties of Rubin and the Trust are made jointly and
severally; and (iv) while the Principal Stockholders, other than Kalpaxis, are
not liable, joint and several, for the representations and warranties of the
Company, the Company itself is liable, jointly and severally, for the
representations and warranties of the Principal Stockholders; provided, that the
Company shall not be liable for any representations made by Rubin and the Trust
under Section 3.27.
3.1 Ownership of the Stock.
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(a) The number of shares of outstanding Stock, the record
owners thereof, and the record addresses and social security number or tax
identification number of each of the Principal Stockholders, are as set forth
on Schedule 3.1 annexed hereto. Each Principal Stockholder is the legal and
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beneficial owner of his or its shares of the Stock, free and clear of all
pledges, liens, claims, charges, options, calls, encumbrances, restrictions
and assessments whatsoever, except any restrictions which may be created by
operation of state or federal securities laws.
(b) Schedule 3.1 accurately sets forth the number of
shares of Stock owned of record and beneficially by each Principal
Stockholder, and all of the Stock of each Principal Stockholder has been duly
authorized and validly issued, and is fully paid and non-assessable.
3.2 Valid and Binding Agreement.
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(a) The execution, delivery and performance of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby by the Company have been duly and validly authorized by
the Board of Directors of the Company and the Principal Stockholders. The
Company has the full legal right, power and authority to execute and deliver
this Agreement and, upon obtaining necessary shareholder approval, will have
the full power and authority to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement constitutes
the legal, valid and binding obligation of the Company, enforceable against
the Company and the Principal Stockholders in accordance with its terms,
except to the extent limited by bankruptcy, insolvency, reorganization and
other laws affecting creditors' rights generally, and except that the remedy
of specific performance or similar equitable relief is available only at the
discretion of the court before which enforcement is sought.
(b) Each Principal Stockholder has full legal right,
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement and, when executed and
delivered by such Principal
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Stockholder, the Confidentiality Agreement, Employment Agreement, and the
Stockholder Agreement (as such terms are hereinafter defined), constitutes and
will constitute the legal, valid and binding obligations of such Principal
Stockholder, enforceable against such Principal Stockholder in accordance with
their respective terms, except to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and except
that the remedy of specific performance or similar equitable relief is available
only at the discretion of the court before which enforcement is sought.
3.3 Organization, Good Standing and Qualification.
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(a) The Company: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
York; (ii) has all necessary corporate power and authority to carry on its
business and to own, lease and operate its properties; and (iii) is not
required, by the nature of its properties or business, to be qualified to do
business as a foreign corporation in any other foreign jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
Company or its business or financial condition.
(b) The Company has no subsidiary corporations.
(c) True and complete copies of the Articles of
Incorporation and By-Laws of the Company (including all amendments thereto),
and a correct and complete list of the officers and directors of the Company,
are annexed hereto as Schedule 3.3.
3.4 Capital Structure; Stock Ownership.
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(a) The authorized and outstanding shares of capital
stock of the Company, and the record owners of such shares of capital stock,
and all outstanding options, warrants and other securities convertible,
exchangeable or exercisable for shares of common stock of the Company are as
set forth on Schedule 3.4 annexed hereto. Other than as set forth on
Schedule 3.4, no other shares of capital stock of the Company are issued or
outstanding.
(b) Except as set forth in Schedule 3.4 annexed hereto
(all of which agreements and commitments will be terminated and canceled as
of the Closing Date, without any payment by the Company), there are no
outstanding subscriptions, options, rights, warrants, convertible securities
or other agreements or calls, demands or commitments: (i) obligating the
Company to issue, transfer or purchase any shares of its capital stock, or
(ii) obligating the Principal Stockholders or, to the best of the knowledge
of the Company and Kalpaxis, any other stockholder of the Company to transfer
any shares of the Stock owned by such stockholder. Other than in respect of
the stock purchase rights described in Schedule 3.4 (all of which shall be
terminated and canceled as of the Closing Date, without any payment by the
Company), no shares of capital stock of the Company are reserved for issuance
pursuant to stock options, warrants, agreements or other rights to purchase
capital stock.
3.5 Investments. Except as set forth on Schedule 3.5, the
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Company does not own, directly or indirectly, any stock or other equity
securities of any corporation or entity, or
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have any direct or indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business other than the business conducted
by the Company.
3.6 Financial Information.
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(a) The Company has furnished to Tadeo the audited
financial statements of the Company as at April 30, 1998 and for the fiscal
year then ended, including balance sheets, statements of operations,
statements of stockholders' equity, and statements of cash flow, as reported
on by Feldman, Sherb & Ehrlich (the "Audited Financial Statements"). The
Company has also furnished to Tadeo the unaudited financial statements of the
Company as at August 31, 1998 consisting of balance sheets at August 31,
1998, and a statement of operations and a statement of cash flow for the five
months ended August 31, 1998 (the "Unaudited Financial Statements"). Such
Audited Financial Statements and Unaudited Financial Statements are herein
collectively referred to as the "Financial Statements".
(b) Except as provided in Schedule 3.6(b), the Financial
Statements: (i) are complete and correct in all material respects and
present fairly the financial position of the Company as of the dates thereof
and for the periods reflected therein, and (except as indicated in the
financial statements or notes thereto) all in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis; (ii)
make full and adequate provision, in accordance with generally accepted
accounting principles, for the various assets and liabilities of the Company
and provide the results of its operations and transactions in its accounts,
as of the dates and for the periods referred to therein; (iii) reflect only
assets and liabilities and results of operations and transactions of the
Company, and do not include or reflect any assets, liabilities or
transactions of any corporation or entity except the Company; and (iv) were
prepared from the books and records of the Company which accurately and
consistently reflect all transactions to which the Company was and is a
party; provided, that the Unaudited Financial Statements omit footnote
disclosures required under GAAP and are subject to fiscal year end audit
adjustments which would not, individually or in the aggregate, be material.
(c) Except as expressly set forth in the Financial
Statements and/or in the Schedules to this Agreement, or arising in the
normal course of the Company's business since April 30, 1998, to the best
knowledge of the Company and Kalpaxis there are, as at the date hereof, no
liabilities or obligations (including, without limitation, any tax
liabilities or accruals) of the Company, including any contingent
liabilities, that are, in the aggregate, material.
(d) The Company has furnished to Tadeo: (i) an aging
schedule of accounts receivable and accounts payable of the Company as at
August 31, 1998; (ii) a list of the outstanding principal balance of and
approximate accrued interest on all indebtedness (other than accounts
payable), loans and/or notes payable of the Company as of August 31, 1998;
(iii) a list of any leasehold or other contractual obligations of the Company
to the Principal Stockholders, any other stockholder of the Company, and/or
any of their respective Affiliates on the date hereof; (iv) a list of all
obligations of the Company guaranteed by the Principal Stockholders, any
other stockholder of the Company and/or any of their respective Affiliates on
the date hereof, and the terms of such guarantees; (v) a list reflecting the
nature and amount of all obligations
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owed to the Company on the date hereof by the Principal Stockholders, any other
stockholder of the Company, and/or any of their respective Affiliates; and (vi)
a list reflecting the nature and amount of all obligations owed by the Company
on the date hereof to the Principal Stockholders, any other stockholder of the
Company, and/or any of their respective Affiliates. Wherever used in this
Agreement, the term "Affiliate" means, as respects any person or entity, any
other person or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the
first person or entity.
3.7 Certain Adverse Changes. The parties hereto acknowledge
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that, since April 30, 1998, there has been material and adverse changes in
the financial condition, operations or business of the Company from that
shown in the Financial Statements. Except as and to the extent described in
Schedule 3.7 annexed hereto (which Schedule may make reference to any other
Schedule hereto or to any other document(s) referred to in this Agreement
which has heretofore been delivered to Mergerco), since April 30, 1998, the
business of the Company has continued to be operated only in the ordinary
course, and there has not been:
(a) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business,
operations, assets, properties, financial condition or prospects of the
Company; or
(b) Any declaration, setting aside or payment of any
dividend or other distribution with respect to the Stock, any other payment
of any kind by the Company to any of its stockholders or any of their
respective Affiliates outside of the ordinary course of business, any
forgiveness of any debt or obligation owed to the Company by any of its
stockholders or any of their respective Affiliates, or any direct or indirect
redemption, purchase or other acquisition by the Company of any capital stock
of the Company.
3.8 Tax Returns and Tax Audits.
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(a) Except as and to the extent disclosed in Schedule 3.8
annexed hereto: (i) on the date hereof and on the Closing Date, all federal,
state and local tax returns and tax reports required to be filed by the
Company on or before the date of this Agreement or the Closing Date, as the
case may be, have been and will have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports
are required to be filed; (ii) all federal, state and local income,
franchise, sales, use, property, excise and other taxes (including interest
and penalties and including estimated tax installments where required to be
filed and paid) due from or with respect to the Company as of the date hereof
and as of the Closing Date have been and will have been fully paid, and
appropriate accruals shall have been made on the Company's books for taxes
not yet due and payable; (iii) as of the Closing Date, all taxes and other
assessments and levies which the Company is required by law to withhold or to
collect on or before the Closing Date will have been duly withheld and
collected, and will have been paid over to the proper governmental
authorities to the extent due and payable on or before the Closing Date; and
(iv) there are no outstanding or pending claims, deficiencies or assessments
for taxes, interest or penalties with respect to any taxable period of the
Company. At and after the Closing Date, the Company will have no liability
for any federal, state or local
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income tax with respect to any taxable period ending on or before the Closing
Date, except as and to the extent disclosed in Schedule 3.8.
(b) There are no audits pending with respect to any
federal, state or local tax returns of the Company, and no waivers of
statutes of limitations have been given or requested with respect to any tax
years or tax filings of the Company.
3.9 Personal Property; Liens. Except as provided in Schedule
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3.9 annexed hereto, the Company has and owns good and marketable title to all
of its tangible personal property, including therein all software, software
developments and related technology, free and clear of all liens, pledges,
claims, security interests and encumbrances whatsoever, except for:
(a) liens securing the Company's indebtedness for money borrowed as reflected
in the Financial Statements, pursuant to the security agreements listed in
Schedule 3.9 annexed hereto; (b) liens securing the deferred purchase price
of machinery, equipment, vehicles and/or other personal property, as
indicated on Schedule 3.9; and (c) liens for current taxes not yet due and
payable or which are being contested in good faith by appropriate
proceedings. All material items of machinery, equipment, vehicles and other
personal property owned or leased by the Company are listed in Schedule 3.9
annexed hereto, and, except as and to the extent disclosed in Schedule 3.9,
all of such personal property are in good operating condition and repair
(reasonable wear and tear excepted) and are adequate for their use in the
Company's business as presently conducted.
3.10 Real Property.
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(a) The Company neither owns nor has any interest of any
kind (whether ownership, lease or otherwise) in any real property except to
the extent of the Company's leasehold interests under the leases for its
business premises, true and complete copies of which leases (including all
amendments thereto) are annexed hereto as Schedule 3.10 (the "Leases").
(b) The Company is presently in compliance with all of
its obligations under the Leases, and the premises leased thereunder are in
good condition (reasonable wear and tear excepted) and are adequate for the
operation of the Company's business as presently conducted.
3.11 Accounts Receivable. All accounts receivable shown
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on the balance sheet as of April 30, 1998 included in the Financial
Statements (the "Balance Sheet"), and all accounts receivable thereafter
created or acquired by the Company prior to the Closing Date, (a) have arisen
or will arise in the ordinary course of the Company's business, (b) are and
will be subject to no counterclaims, set-offs, allowances or discounts of any
kind, except to the extent of the allowance for doubtful accounts as of April
30, 1998 reflected in the Balance Sheet, and (c) have been, are and will be
valid and collectible in the ordinary course of business within six (6)
months after the Closing Date (subject to the aforesaid allowance for
doubtful accounts), without necessity of instituting any legal proceedings
for collection.
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3.12 Inventories. Except as set forth on Schedule 3.12,
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all supplies and other inventories shown on the Balance Sheet, and all
inventories thereafter acquired by the Company prior to the Closing Date,
have been and will be valued at the lower of cost or market, and consisted
and will consist of items which are of a quality and quantity which are
useable in the ordinary course of the Company's business.
3.13 Insurance Policies. Schedule 3.13 annexed hereto
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contains a true and correct schedule of all insurance coverage's held by the
Company concerning its business and properties (including but not limited to
professional liability insurance).
3.14 Permits and Licenses. The Company possesses all
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permits, licenses and/or franchises, from whatever governmental authorities
or agencies (domestic and/or foreign) requiring the same and having
jurisdiction over the Company, which are necessary in order to operate its
business in the manner presently conducted, all of which permits, licenses
and/or franchises are valid, current and in full force and effect; and none
of such permits, licenses or franchises will be voided, revoked or
terminated, or voidable, revocable or terminable, upon and by reason of the
Merger and the change of ownership of the Company pursuant to this Agreement.
3.15 Contracts and Commitments.
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(a) Schedule 3.15 annexed hereto lists all material
contracts, leases, commitments, technology agreements, software development
agreements, software licenses, indentures and other agreements to which the
Company is a party (collectively, "Material Contracts"), except that Schedule
3.15 need not list any such agreement that is listed on any other Schedule
hereto, or was entered into in the ordinary course of the business of the
Company and that, in any case: (i) is for the purchase of supplies or other
inventory items in the ordinary course of business; (ii) is related to the
purchase or lease of any capital asset involving aggregate payments of less
than $5,000 per annum; or (iii) may be terminated without penalty, premium or
liability by the Company on not more than thirty (30) days' prior written
notice; provided, however, that Schedule 3.15 shall list all technology
agreements, software development agreements and software licenses involving
the Company or any Affiliate, regardless of the duration thereof or the
amount of payments called for or required thereunder.
(b) Except as set forth in Schedule 3.15: (i) all
Material Contracts are in full force and effect; (ii) the Company is in
compliance with all of its obligations under the Material Contracts, and has
not received any written notice that any Material Contract is in breach or
default or is now subject to any condition or event which has occurred and
which, after notice or lapse of time or both, would constitute a default by
any party under any such contract, lease, agreement or commitment; and
(iii) none of the Material Contracts will be voided, revoked or terminated,
or voidable, revocable or terminable, upon and by reason of the Merger and
the change of ownership of the Company pursuant to this Agreement.
(c) No purchase commitment by the Company is in excess of
the normal, ordinary and usual requirements of the business of the Company.
- 9 -
<PAGE>
(d) Except as set forth in Schedule 3.15, the Company
does not have any outstanding contracts with or commitments to officers,
employees, technicians, agents, consultants or advisors that are not
cancelable by the Company without penalty, premium or liability (for
severance or otherwise) on less than thirty (30) days' prior written notice.
(e) There is no outstanding power of attorney granted by
the Company to any person, firm or corporation for any purpose whatsoever.
3.16 Customers and Suppliers. None of the Principal
--------------------------
Stockholders has any knowledge of, and the Company does not have any
knowledge of, nor has it received any written notice of, any existing,
announced or anticipated changes in the policies of any material clients,
customers or suppliers of the Company which will materially adversely affect
the business presently being conducted by the Company.
3.17 Labor, Benefit and Employment Agreements.
----------------------------------------
(a) Except as set forth in Schedule 3.17 annexed hereto,
the Company is not a party to (i) any collective bargaining agreement or
other labor agreement, or (ii) any agreement with respect to the employment
or compensation of any non-hourly and/or non-union employee(s). Schedule
3.17 sets forth the amount of all compensation or remuneration (including any
discretionary bonuses) paid or to be paid by the Company during the fiscal
year ended April 30, 1998 and during the two months ended June 30, 1998 to
employees or consultants who presently receive aggregate compensation or
remuneration at an annual rate in excess of $25,000.
No union is now certified or, to the best of the knowledge
of the Company and Kalpaxis, claims to be certified as a collective
bargaining agent to represent any employees of the Company, and there are no
labor disputes existing or, to the best of the knowledge of the Company or
Kalpaxis, threatened, involving strikes, slowdowns, work stoppages, job
actions or lockouts of any employees of the Company.
(b) Except as set forth on Schedule 3.17, there are no
unfair labor practice charges or petitions for election pending or being
litigated before the National Labor Relations Board or any other federal or
state labor commission relating to any employees of the Company. The Company
has not received any written notice of any actual or alleged violation of any
law, regulation, order or contract term affecting the collective bargaining
rights of employees, equal opportunity in employment, or employee health,
safety, welfare, or wages and hours.
(c) With respect to any "multiemployer plan" (as defined
in Section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) to which the Company has at any time been required to make
contributions, the Company has not, at any time, suffered or caused any
"complete withdrawal" or "partial withdrawal" (as such terms are respectively
defined in Sections 4203 and 4205 of ERISA) therefrom on its part.
- 10 -
<PAGE>
(d) Except as disclosed on Schedule 3.17, the Company
does not maintain, or have any liabilities or obligations of any kind with
respect to, any bonus, deferred compensation, pension, profit sharing,
retirement or other such benefit plan, and does not have any potential or
contingent liability in respect of any actions or transactions relating to
any such plan other than to make contributions thereto if, as and when due in
respect of periods subsequent to the date hereof. Without limitation of the
foregoing, (i) the Company has made all required contributions to or in
respect of any and all such benefit plans, (ii) no "accumulated funding
deficiency" (as defined in Section 412 of the Internal Revenue Code of 1986,
as amended (the "Code")) has been incurred in respect of any of such benefit
plans, and the present value of all vested accrued benefits thereunder does
not, on the date hereof, exceed the assets of any such plan allocable to the
vested accrued benefits thereunder, (iii) there has been no "prohibited
transaction" (as defined in Section 4975 of the Code) with respect to any
such plan, and no transaction which could give rise to any tax or penalty
under Section 4975 of the Code or Section 502 of ERISA, and (iv) there has
been no "reportable event" (within the meaning of Section 4043(b) of ERISA)
with respect to any such plan. All of such plans which constitute, are
intended to constitute, or have been treated by the Company as "employee
pension benefit plans" or other plans within Section 3 of ERISA have been
determined by the Internal Revenue Service to be "qualified" under Section
401(a) of the Code, and have been administered and are in compliance with
ERISA and the Code; and the Principal Stockholders have no knowledge of any
state of facts, conditions or occurrences such as would impair the
"qualified" status of any of such plans.
(e) Except for the group insurance programs listed in
Schedule 3.17, the Company does not maintain any medical, health, life or
other employee benefit insurance programs or any welfare plans (within the
meaning of Section 3(1) of ERISA) for the benefit of any current of former
employees, and, except as required by law, the Company has no liability,
fixed or contingent, for health or medical benefits to any former employee.
3.18 No Breach of Statute, Decree or Other Instrument.
------------------------------------------------
(a) Except as set forth in Schedule 3.18 annexed hereto:
(i) neither the execution and delivery of this Agreement by the Company
and/or the Principal Stockholders, nor the performance of or compliance with
the terms and provisions of this Agreement on the part of the Company and/or
the Principal Stockholders, will violate or conflict with any term of the
Articles of Incorporation or By-Laws of the Company or any statute, law, rule
or regulation of any governmental authority affecting the existing business
of the Company, or will at the Closing Date conflict with, result in a breach
of, or constitute a default under, any of the terms, conditions or provisions
of any judgment, order, award, injunction, decree, contract, lease,
agreement, indenture or other instrument to which the Company or the
Principal Stockholders is a party or by which the Company or the Principal
Stockholders is bound; (ii) no consent, authorization or approval of or
filing with any governmental authority or agency, or any third party, will be
required on the part of the Company or the Principal Stockholders in
connection with the consummation of the transactions contemplated hereby; and
(iii) the Company will not be required, whether by law, regulation or
administrative practice, to reapply for or refile to obtain
- 11 -
<PAGE>
any of the licenses, permits or other authorizations presently held by the
Company and required for the operation of its business as conducted on the date
hereof.
(b) In connection with and as respects the Merger, the
Company and each Principal Stockholder of the Company has waived any and all
rights which it, he or she may have (by way of right of first refusal, right
of first offer, or otherwise) to purchase any of the Stock by reason of the
proposed disposition thereof by any Principal Stockholder pursuant to the
Merger.
3.19 Compliance with Laws.
--------------------
(a) Except as set forth on Schedule 3.19, to the best
knowledge of the Company and Kalpaxis, the Company has not, at any time since
inception of the Company, (i) handled, stored, generated, processed or
disposed of any hazardous substances in violation of any federal, state or
local environmental laws or regulations, (ii) otherwise committed any
material violation of any federal, state or local environmental laws or
regulations (including, without limitation, the provisions of the
Environmental Protection Act and other applicable environmental statutes and
regulations) or any material violation of the Occupational Safety and Health
Act, or (iii) been in material violation of any requirements of its insurance
carriers from time to time.
(b) Except as set forth on Schedule 3.19, neither the
Company nor any of its current officers has received any written notice of
default or violation, nor, to the best knowledge of the Company and Kalpaxis,
is the Company in default or violation, with respect to any judgment, order,
writ, injunction, decree, demand or assessment issued by any court or any
federal, state, local, municipal or other governmental agency, board,
commission, bureau, instrumentality or department, domestic or foreign,
relating to any aspect of the Company's business, affairs, properties or
assets. Neither the Company nor any of its current officers has received
written notice of, been charged with, or is under investigation with respect
to, any violation of any provision of any federal, state, local, municipal or
other law or administrative rule or regulation, domestic or foreign, relating
to any aspect of the Company's business, affairs, properties or assets, which
violation would have a material adverse effect on the Company, its business
or any material portion of its assets.
(c) Schedule 3.19 sets forth the date(s) of the last
known audits or inspections (if any) of the Company conducted by or on behalf
of the Environmental Protection Agency, the Occupational Safety and Health
Administration, and any other governmental and/or quasi-governmental agency
(federal, state and/or local).
3.20 Litigation. Except as disclosed in Schedule 3.20
----------
annexed hereto, there is no suit, action, arbitration, or legal,
administrative or other proceeding, or governmental investigation (including,
without limitation, any claim alleging the invalidity, infringement or
interference of any patent, patent application, or rights thereunder owned or
licensed by the Company) pending, or to the best knowledge of the Company and
Kalpaxis, threatened, by or against the Company or any of its assets or
properties. Except as disclosed in Schedule 3.20
- 12 -
<PAGE>
annexed hereto, the Company and Kalpaxis are not aware of any state of facts,
events, conditions or occurrences which might properly constitute grounds for or
the basis of any meritorious suit, action, arbitration, proceeding or
investigation against or with respect to the Company.
3.21 Patents, Licenses and Trademarks. Schedule 3.21
------------------------------------
annexed hereto correctly sets forth a list and brief description of the
nature and ownership of: (a) all patents, patent applications, copyright
registrations and applications, registered trade names, and trademark
registrations and applications, both domestic and foreign, which are
presently owned, filed or held by the Company and/or any of its directors,
officers, stockholders, employees, or independent contractors and which in
any way relate to or are used in the business of the Company; (b) all
licenses, both domestic and foreign, which are owned or controlled by the
Company and/or any of its directors, officers, stockholders, employees, or
independent contractors and which in any way relate to or are used in the
business of the Company; and (c) all franchises, licenses and/or similar
arrangements granted to the Company by others and/or to others by the
Company. None of the patents, patent applications, copyright registrations
or applications, registered trade names, trademark registrations or
applications, franchises, licenses or other arrangements set forth or
required to be set forth in Schedule 3.21 is subject to any pending
challenge, or threatened challenge known to the Company or Kalpaxis.
3.22 Transactions with Affiliates. Except as disclosed on
-----------------------------
Schedule 3.22, no material asset employed in the business of the Company is
owned by, leased from or leased to any of the stockholders of the Company,
any of their respective Affiliates, members of their families or any
partnership, corporation or trust for their benefit, or any other officer,
director, employee, or independent contractors of the Company or any
Affiliate of the Company.
3.23 Bank Accounts. Annexed hereto as Schedule 3.23 is a
--------------
correct and complete list of all bank accounts and safe deposit boxes
maintained by or on behalf of the Company, with indication of all persons
having signatory, access or other authority with respect thereto.
3.24 Schedules Incorporated by Reference. The making of
--------------------------------------
any recitation in any Schedule hereto shall be deemed to constitute a
representation and warranty that such recitation is an accurate statement and
disclosure of the information required by the corresponding Section(s) of
this Agreement, as, to the extent, and subject to the qualifications and
limitations, set forth in such corresponding Section(s).
3.25 Disclosure to Stockholders. The Company has, or
----------------------------
prior to the Closing Date will have, provided to all holders of shares of
capital stock of the Company a full and fair description of all material
terms and conditions of the Merger and all other material transactions
contemplated by this Agreement, and have made available to all holders of
Company capital stock (a) the reports of Tadeo described in Section 4.5
below, (b) true and complete copies of this Agreement and all of the Exhibits
hereto, and (c) a true and complete copy of Section 910 of the New York Law
(relating to rights of dissenters in a Merger under New York Law); and each
holder of capital stock has had a full and fair opportunity to keep a copy of
such reports and documents and review same to his or her satisfaction.
- 13 -
<PAGE>
3.26 Disclosure and Duty of Inquiry. Neither Tadeo nor
--------------------------------
Mergerco is or will be required to undertake any independent investigation to
determine the truth, accuracy and completeness of the representations and
warranties made by the Company and the Principal Stockholders in this
Agreement.
3.27 Ownership of Tadeo Common Stock or Other Securities. None
-----------------------------------------------------
of (i) the Company, (ii) any individual Principal Stockholder, (iii) the
Principal Stockholders taken together, or (iv) the Company and the Principal
Stockholders, taken together, either individually or in the aggregate own of
record or beneficially (as determined in accordance with the definitions
provided under Regulation 13d-3 promulgated under the Exchange Act) five (5%)
percent or more of the outstanding Common Stock of Tadeo (the "Percentage")
on the date hereof, and such ownership by any of such persons and groups will
not equal or exceed the Percentage on the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF MERGERCO AND TADEO.
----------------------------------------------------
Mergerco and Tadeo hereby jointly and severally represent and
warrant to the Company and the Principal Stockholders, as follows:
4.1 Organization, Good Standing and Qualification. Each of
-------------------------------------------------
Mergerco and Tadeo is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation, with all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby.
4.2 Authorization of Agreement. The execution, delivery and
----------------------------
performance of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby by Mergerco and Tadeo have been duly
and validly authorized by the Board of Directors and sole stockholder of
Mergerco, and by the Board of Directors of Tadeo; and Mergerco and Tadeo have
the full legal right, power and authority to execute and deliver this
Agreement, to perform their respective obligations hereunder, and to
consummate the transactions contemplated hereby. No further corporate
authorization is necessary on the part of Mergerco or Tadeo to consummate the
transactions contemplated hereby.
4.3 Valid and Binding Agreement. This Agreement constitutes
-----------------------------
the legal, valid and binding obligation of Mergerco and Tadeo, enforceable
against Mergerco and Tadeo in accordance with its terms, and this Agreement,
constitutes and will constitute the legal, valid and binding obligations of
the Surviving Corporation and Tadeo (as the case may be), enforceable against
the Surviving Corporation and Tadeo in accordance with their respective
terms, except, in each case, to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and
except that the remedy of specific performance or similar equitable relief is
available only at the discretion of the court before which enforcement is
sought.
- 14 -
<PAGE>
4.4 No Breach of Statute or Contract. Neither the execution
----------------------------------
and delivery of this Agreement by Mergerco or Tadeo, nor compliance with the
terms and provisions of this Agreement on the part of Mergerco or Tadeo,
will: (a) violate any statute or regulation of any governmental authority,
domestic or foreign, affecting Mergerco or Tadeo; (b) require the issuance of
any authorization, license, consent or approval of any federal or state
governmental agency; or (c) conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree,
note, indenture, loan agreement or other agreement or instrument to which
Mergerco or Tadeo is a party, or by which Mergerco or Tadeo is bound, or
constitute a default thereunder.
4.5 Capitalization of Tadeo.
-----------------------
Tadeo is (i) authorized to issue 100,000,000 shares of
Common Stock, $.0001 par value per share ("Tadeo Common Stock") and
10,000,000 shares of Preferred Stock (the "Preferred Stock"), of which no
shares of Series A preferred stock, $.01 par value per share ("Series A
Preferred Stock") are outstanding and 1,000,000 shares of Series B Preferred
Stock, $.01 par value per share ("Series B Preferred Stock") are outstanding;
(ii) 11,507,603 shares of Tadeo Common Stock were issued and outstanding at
October 1, 1998; (iii) 500,000 shares of Tadeo Common Stock are reserved for
issuance pursuant to Tadeo's Employee Incentive Stock Option Plan, of which
approximately 225,833 options are available for grant; (iv) 300,000 stock
options were reserved for non-employee directors under the Non-employee
Director Stock Option Plan, of which 60,000 options are outstanding; (v)
additional options and warrants to purchase no more than an aggregate of
3,229,867 shares of Tadeo Common Stock were issued and outstanding at October
1, 1998. Except as described above, there are no outstanding options,
warrants, shares of capital stock or debentures, rights or subscriptions
which are exercisable or convertible into shares of Common Stock of Tadeo, or
otherwise entitling the holders to purchase shares of Tadeo Common Stock.
4.6 Tadeo Common Stock. When issued and delivered pursuant to
------------------
Section 2.3 above all of the Tadeo Securities shall have been duly authorized
and validly issued, and shall be fully paid and non-assessable, and shall be
free of any pre-emptive rights or other limitations.
4.7 Investment. Tadeo will be acquiring ownership of the
----------
outstanding capital stock of the Surviving Corporation for its own account,
for investment purposes only, and not with a view to the resale or
distribution thereof.
4.8 Business of Mergerco. Mergerco has been formed solely for
--------------------
the purposes of consummating the transactions contemplated by this Merger
Agreement, has not conducted and will not conduct any independent business
operations until the Closing Date of the Merger, and at the Closing Date will
have no liabilities (or obligations to assume any liabilities), except those
acquired from the Company.
4.9 Disclosure and Duty of Inquiry. The Company and the
----------------------------------
Principal Stockholders are not and will not be required to undertake any
independent investigation to
- 15 -
<PAGE>
determine the truth, accuracy and completeness of the representations and
warranties made by Mergerco and Tadeo in this Agreement.
4.10 No Breach of Statute, Decree or Other Instrument.
------------------------------------------------
Neither the execution and delivery of this Agreement by
Tadeo or Mergerco, nor the performance of or compliance with the terms and
provisions of this Agreement on the part of Tadeo or Mergerco, will violate
or conflict with any term of the Articles of Incorporation or By-Laws of the
Tadeo or Mergerco or any statute, law, rule or regulation of any governmental
authority affecting the existing business of Tadeo or Mergerco, or will at
the Closing Date conflict with, result in a breach of, or constitute a
default under, any of the terms, conditions or provisions of any judgment,
order, award, injunction, decree, contract, lease, agreement, indenture or
other instrument to which Tadeo or Mergerco is a party or by which Tadeo or
Mergerco is bound. No consent, authorization or approval of or filing with
any governmental authority or agency, or any third party, will be required on
the part of Tadeo or Mergerco in connection with the consummation of the
transactions contemplated hereby; and (iii) neither Tadeo nor Mergerco will
be required, whether by law, regulation or administrative practice, to
reapply for or refile to obtain any of the licenses, permits or other
authorizations presently held by Tadeo or Mergerco and required for the
operation of its business as conducted on the date hereof.
4.11 Disclosure Documents. Tadeo has delivered to the Company
---------------------
and the Principal Stockholders Tadeo's Annual Report on Form 10-K for the
year ended June 30, 1997, and all other reports filed by Tadeo with the
Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since June 30, 1997 (including the Tadeo Reports on Form
10-K and Form 10-K/A for the fiscal year ended June 30, 1998), all of which
reports are in proper form and are in compliance with Commission rules and
regulations, and none of which contain material misstatements of material
facts or omit such information as would be necessary to make the information
contained therein not materially misleading (except as otherwise corrected by
a subsequent filing delivered to the Company and the Principal Stockholders).
5. THE COMPANY'S OBLIGATIONS BEFORE THE CLOSING DATE.
-------------------------------------------------
The Company covenants and agrees that, from the date hereof until
the Closing Date:
5.1 Access to Information. The Company shall permit Tadeo and
----------------------
its counsel, accountants and other representatives, upon reasonable advance
notice to the Company, during normal business hours and without undue
disruption of the business of the Company, to have reasonable access to all
properties, books, accounts, records, contracts, documents and information
relating to the Company. Tadeo and its representatives shall also be
permitted to freely consult with the Company's counsel concerning the
business of the Company.
5.2 Maintenance of Insurance. The Company shall continue to
--------------------------
carry its existing insurance, to the extent obtainable upon reasonable terms.
- 16 -
<PAGE>
5.3 Corporate Matters. The Company shall not, without the
------------------
prior written consent of Tadeo:
(a) amend its Articles of Incorporation or By-Laws;
(b) issue any shares of the Company's capital stock;
(c) except as contemplated pursuant to Section 2.3 above,
issue or create any warrants, obligations, subscriptions, options,
convertible securities or other commitments under which any additional shares
of the Company's capital stock might be directly or indirectly issued;
(d) amend, cancel or modify any existing Material
Contract or enter into any new agreement, commitment or transaction, whether
or not such revision is material;
(e) pay, grant or authorize any salary increases or
bonuses or enter into any employment, consulting or management agreements;
(f) modify any agreement other than a material contract
to which the Company is a party or by which it may be bound, or modify any
payment terms with any creditor, other than in the ordinary course of
business;
(g) make any change in the Company's management personnel;
(h) except pursuant to commitments in effect on the date
hereof (to the extent disclosed in this Agreement or in any Schedule hereto),
make any capital expenditure(s) or commitment(s), whether by means of
purchase, lease or otherwise, or any operating lease commitment(s), in excess
of $5,000 in the aggregate;
(i) sell, assign or dispose of any capital asset(s) with
a net book value in excess of $5,000 as to any one item;
(j) change its method of collection of accounts or notes
receivable, accelerate or slow its payment of accounts payable, or prepay any
of its obligations or liabilities, other than prepayments to take advantage
of trade discounts not otherwise inconsistent with or in excess of historical
prepayment practices;
(k) declare, pay, set aside or make any dividend(s) or
other distribution(s) of cash or other property, or redeem any outstanding
shares of the Company's capital stock;
(l) incur any liability or indebtedness in excess of
$5,000 as to any one item or $25,000 in the aggregate;
- 17 -
<PAGE>
(m) voluntarily subject any of the assets or properties
of the Company to any further liens or encumbrances;
(n) forgive any liability or indebtedness owed to the
Company by any of its stockholders or any of their respective Affiliates; or
(o) agree to do, or take any action in furtherance of,
any of the foregoing.
6. ADDITIONAL AGREEMENTS OF THE PARTIES.
------------------------------------
6.1 Confidentiality. Notwithstanding anything to the contrary
---------------
contained in this Agreement, and subject only to any disclosure requirements
which may be imposed upon Mergerco or Tadeo under applicable state or federal
securities or antitrust laws, as to which the Company shall be given
reasonable advance notice, it is expressly understood and agreed by Mergerco
and Tadeo that (i) this Agreement, the Schedules hereto, and the
conversations, negotiations and transactions relating hereto and/or
contemplated hereby, and (ii) all financial information, business records and
other non-public information concerning the Company which Mergerco, Tadeo or
their representatives has received or may hereafter receive, shall be
maintained in the strictest confidence by Mergerco, Tadeo and their
representatives, and shall not be disclosed to any person that is not
associated or affiliated with Mergerco or Tadeo and involved in the
transactions contemplated hereby or used for any purpose other than the
transaction contemplated hereby, without the prior written approval of the
Company. The parties hereto shall use their best efforts to avoid disclosure
of any of the foregoing or undue disruption of any of the business operations
or personnel of the Company. In the event that the transactions contemplated
hereby shall not be consummated for any reason, Mergerco and Tadeo covenant
and agree that neither they nor their representatives shall retain any
computer files and other electronic media, documents, lists or other writings
of the Company which they may have received or obtained in connection
herewith or any documents incorporating any of the information contained in
any of the same (all of which, and all copies thereof in the possession or
control of Mergerco, Tadeo or their representatives, shall be returned to the
Company).
6.2 Exclusivity. From the date hereof through any termination
-----------
of this Agreement by the Company in accordance with Section 10 below, the
Company shall not (and shall not permit authorize or approve any of its
stockholders, officers or affiliates to) negotiate with or enter into any
other commitments, agreements or understandings with any person, firm or
corporation (other than Tadeo and its Affiliates) in respect of any sale of
capital stock or assets of the Company, any merger, consolidation or
corporate reorganization, or any other such transaction relating to the
Company or any portion of its business.
6.3 Non-Competition, Confidentiality and Intellectual Property
-----------------------------------------------------------
Agreement; Employment Agreement. On the Closing Date, those key employees of
- --------------------------------
the Company who are listed on Schedule 6.3 annexed hereto and made a part
-------------
hereof, shall execute and deliver to Tadeo and the Surviving Corporation a
non-competition, confidentiality and intellectual property agreement in
substantially the form of Exhibit B-1 annexed hereto (the "Non-Competition
------------
- 18 -
<PAGE>
Agreement"), and Rubin shall execute and deliver to Tadeo and the Surviving
Corporation a confidentiality agreement in substantially the form of Exhibit
-------
B-2 annexed hereto (the "Confidentiality Agreement"). On the Closing Date,
- ---
the Surviving Corporation, Tadeo and Kalpaxis shall execute and deliver to
Tadeo an employment agreement in substantially the form of Exhibit C annexed
---------
hereto (the "Employment Agreement").
6.4 [Intentionally Left Blank.]
6.5 Additional Agreements and Instruments. On or before the
----------------------------------------
Closing Date, the Company, Mergerco and Tadeo shall execute, deliver and file
the Certificate of Merger and all exhibits, agreements, certificates,
instruments and other documents, not inconsistent with the provisions of this
Agreement, which, in the opinion of counsel to the parties hereto, shall
reasonably be required to be executed, delivered and filed in order to
consummate the Merger and the other transactions contemplated by this
Agreement.
6.6 Non-Interference. Neither Mergerco, Tadeo, the Company nor
----------------
the Principal Stockholders shall cause to occur any act, event or condition
which would cause any of their respective representations and warranties made
in this Agreement to be or become untrue or incorrect in any material respect
as of the Closing Date, or would interfere with, frustrate or render
unreasonably expensive the satisfaction by the other party or parties of any
of the conditions precedent set forth in Sections 7 and 8 below.
6.7 Corporate Structure of the Surviving Corporation.
------------------------------------------------
(i) The Surviving Corporation. Under the terms of
---------------------------
the Employment Agreement, Alexander Kalpaxis shall be Chairman and Chief
Executive Officer of the Surviving Corporation. A full-time Chief Operating
Officer and a full time Chief Financial Officer of the Surviving Corporation
will be recruited by Tadeo and shall be hired upon such terms and conditions
as shall be determined by Tadeo and the Board of Directors of the Surviving
Corporation, and which first such candidate(s) that accept(s) being
reasonably acceptable to Kalpaxis. On an interim basis, Michael Niles will
serve as Chief Financial Officer of the Surviving Corporation. The Chief
Operating Officer and Chief Financial Officer of the Surviving Corporation
may hold the same positions at Tadeo. The Board of Directors of the
Surviving Corporation shall initially consist of Alexander Kalpaxis, James
Linesch, and Damon Testaverde. Tadeo shall, at all times, designate a
majority of the Board of Directors of the Company, but senior executive
officers of the Surviving Corporation shall at all times be at least one of
the members of such Board of Directors.
(ii) Tadeo. Following the Closing, under the
-----
terms of the Employment Agreement, Kalpaxis shall be elected to serve as
Executive Vice President and Chief of Engineering and Technology of Tadeo.
Immediately following the Closing, Tadeo will commence a search for a Chief
Financial Officer of Tadeo ("CFO"), which person(s) may also serve as the
Chief Operating Officer of Tadeo ("COO"), who may also serve as the CFO and
COO of the Surviving Corporation. Following selection of a CFO and a COO,
and when the results of Tadeo's operations, in the judgment of Tadeo's Board
of Directors, both warrant and
- 19 -
<PAGE>
will permit Tadeo to attract the caliber of person that the Tadeo Board of
Directors deems desirable to refill the position of President and Chief
Executive Officer of Tadeo (the "CEO"), Tadeo will commence a search for a new
CEO; provided, the person(s) selected for the CFO, COO and CEO positions all
--------
shall have experience in the computer software industry and in public companies,
with the new person selected for the CEO position being highly regarded in the
computer software industry. The first persons selected, who accept the positions
of CFO, COO and CEO, will be reasonably acceptable to both the Board of
Directors of Tadeo and to Kalpaxis. Following the Closing, Kalpaxis shall be
appointed to the Board of Directors of Tadeo, and one additional person who has
a background in the computer software industry shall be appointed to the Board
of Directors of Tadeo, which person shall be reasonably acceptable to Kalpaxis.
6.8 Employee Cash Bonuses. In connection with their employment
---------------------
by the Surviving Corporation, Tadeo shall provide to those employees of the
Surviving Corporation such dollar amounts, up to an aggregate $150,000, as
are set forth on Schedule 6.8 as cash bonuses in consideration for their
-------------
continuing employment by the Surviving Corporation and their execution of the
Non-Competition Agreement.
7. CONDITIONS PRECEDENT TO MERGERCO AND
------------------------------------
TADEO'S PERFORMANCES.
- --------------------
In addition to the fulfillment of the parties' agreements in
Section 6 above, the obligations of Mergerco to consummate the Merger and of
Mergerco and Tadeo to consummate the transactions contemplated by this
Agreement are further subject to the satisfaction, at or before the Closing
Date, of all the following conditions, any one or more of which may be waived
in writing by Mergerco and Tadeo:
7.1 Accuracy of Representations and Warranties. All
----------------------------------------------------
representations and warranties made by the Company and/or the Principal
Stockholders in this Agreement, in any Schedule(s) hereto, and/or in any
written statement delivered to Mergerco or Tadeo under this Agreement shall
be true and correct in all material respects on and as of the Closing Date as
though such representations and warranties were made on and as of that date.
7.2 Performance. The Company and the Principal Stockholders
-----------
shall have performed, satisfied and complied with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by them on or before the Closing Date.
7.3 Certification. Mergerco and Tadeo shall have received a
-------------
certificate, dated the Closing Date, signed by the Principal Stockholders,
certifying, in such detail as Mergerco and Tadeo and their counsel may
reasonably request, that, the conditions specified in Sections 7.1, 7.2 and
7.8 above and below have been fulfilled.
7.4 Resolutions. Mergerco and Tadeo shall have received
-----------
certified resolutions of the Board of Directors and the stockholders of the
Company, in form reasonably satisfactory to counsel for Mergerco, authorizing
the Company's execution, delivery and performance of this
- 20 -
<PAGE>
Agreement and the Merger, and all actions to be taken by the Company hereunder,
and shall have received certified copies of the Certificate of Incorporation as
amended, and By-laws of the Company.
7.5 Termination of Employment Agreements. The Company shall
---------------------------------------
have delivered to Mergerco evidence, reasonably satisfactory to Mergerco, of
the termination and cancellation of any existing employment agreements
between the Company and Kalpaxis or any other employees of the Company on or
prior to the Closing Date.
7.6 Absence of Litigation. No action, suit or proceeding by or
---------------------
before any court or any governmental body or authority, against the Company
or pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on the Company, its business or any material portion of its
assets, or impair the ability of any of the stockholders of the Company to
deliver in the Merger all of his/her or its Stock free and clear of all
pledges, liens, claims, charges, options, calls, encumbrances, restrictions
and assessments whatsoever (except any restrictions which may be created by
operation of state or federal securities laws).
7.7 Consents. All necessary disclosures to and agreements and
--------
consents of (a) any parties to any Material Contracts and/or any licensing
authorities which are material to the Company's business, and (b) any
governmental authorities or agencies to the extent required in connection
with the transactions contemplated by this Agreement, shall have been
obtained in such form as is reasonably satisfactory to counsel to Tadeo, and
true and complete copies thereof delivered to Tadeo and Mergerco, including
but not limited to, a waiver of outstanding defaults under obligations of the
Company to Robert M. Rubin and Galaxy..
7.8 Settlement of Accounts. All debts, liabilities and other
-----------------------
monetary obligations (if any) owed to the Company by any of the Principal
Stockholders of the Company and/or any of their respective Affiliates shall
have been fully paid to the Company, such that no such debts, liabilities or
obligations shall be outstanding on the Closing Date, except the Promissory
Notes of the Company made in favor of Kalpaxis and Arion Kalpaxis, copies of
which are annexed hereto as Exhibits D-1 and D-2.
--------------------
7.9 Condition of Property. Between the date of this Agreement
----------------------
and the Closing Date, assets of the Company having an aggregate fair market
value of $10,000 or more shall not have been lost, destroyed or irreparably
damaged by fire, flood, explosion, theft or any other cause, if not fully
covered by insurance.
7.10 No Material Adverse Change. On the Closing Date,
-----------------------------
there shall not have occurred any event or condition (including, without
limitation, third party claims) not disclosed on Schedules to this Agreement
which, in the reasonable opinion of Tadeo and its counsel, would materially
and adversely affecting the value of the technologies, software and other
assets owned or used by the Company.
- 21 -
<PAGE>
7.11 Execution and Delivery of Exhibits. On or before the
-----------------------------------
Closing Date: (a) the Company shall have executed and delivered to Mergerco
the Certificate of Merger; (b) each of the Principal Stockholders shall have
executed and delivered to all other parties thereto the Confidentiality
Agreement (to which it is a party), the Subscription Agreement substantially
in the form annexed hereto as Exhibit E (as hereinafter defined) and the
---------
Stockholder Agreement substantially in the form annexed hereto as Exhibit F;
---------
and (c) Kalpaxis shall have executed and delivered the Employment Agreement.
7.12 Company Shareholders' Approval. The requisite
-----------------------------------
percentage of holders of all shares of capital stock of the Company entitled
to vote shall have, in their capacities as shareholders of the Company,
approved or ratified this Agreement, the consummation of the Merger and all
other transactions contemplated by this Agreement, all in accordance with the
applicable provisions of New York Law, and on or prior to the Closing Date
each of the Principal Stockholders shall execute and deliver on or prior to
the Closing Date the Subscription Agreement (the "Subscription Agreement").
7.13 Dissenters' Rights. On or before the Closing Date,
-------------------
no holders of the outstanding capital stock of the Company shall have timely
elected to exercise their dissenters' rights pursuant to the applicable
provisions of New York Law.
7.14 Proceedings and Instruments Satisfactory. All
----------------------------------------------
proceedings, corporate or other, to be taken in connection with the
transactions contemplated by this Agreement, and all documents incidental
thereto, shall be reasonably satisfactory in form and substance to Mergerco,
Tadeo and their counsel. The Company shall have submitted to Tadeo or its
representatives for examination the originals or true and correct copies of
all records and documents relating to the business and affairs of the Company
which Tadeo may have requested in connection with said transactions.
7.15 Due Diligence. Mergerco and Tadeo shall be
---------------
satisfied, in their sole discretion, with the results of their due diligence
investigation of the Company and its business including, but not limited to,
investigation of its technologies (both proprietary and those licensed from
third parties), its existing computer software products currently marketed
and its proposed computer software products, and the marketability and size
of the markets for all such products.
7.16 Opinion of Counsel. Mergerco and Tadeo shall receive
------------------
opinions of counsel from counsel to the Company and counsel to the Principal
Stockholders, which counsel shall be reasonably satisfactory to Mergerco and
Tadeo, substantially in such form as set forth on Exhibit G annexed hereto.
---------
7.17 Evidence of Compliance with Section 3.27. Each of
--------------------------------------------
Mergerco and Tadeo shall receive evidence satisfactory to it and its counsel
that none of (i) the Company, (ii) any individual Principal Stockholder,
(iii) the Principal Stockholders taken together, or (iv) the Company and the
Principal Stockholders, taken together, either individually or in the
aggregate own of record or beneficially (as determined in accordance with the
definitions provided under
- 22 -
<PAGE>
Regulation 13d-3 promulgated under the Exchange Act) an amount equal to or
greater than the Percentage of the outstanding Common Stock of Tadeo on the date
of this Agreement and on the Closing Date.
8. CONDITIONS PRECEDENT TO THE COMPANY AND THE
PRINCIPAL STOCKHOLDERS' PERFORMANCES.
-------------------------------------------
In addition to the fulfillment of the parties' agreements in
Section 6 above, the obligations of the Company to consummate the Merger and
of the Principal Stockholders to consummate the transactions contemplated by
this Agreement are further subject to the satisfaction, at or before the
Closing Date, of all of the following conditions, any one or more of which
may be waived in writing by the Company and the Principal Stockholders:
8.1 Accuracy of Representations and Warranties. All
----------------------------------------------------
representations and warranties made by Mergerco and Tadeo in this Agreement
and/or in any written statement delivered by Mergerco or Tadeo under this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though such representations and warranties were made on and
as of that date.
8.2 Performance. Mergerco and Tadeo shall have performed,
-----------
satisfied and complied with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by Mergerco and
Tadeo on or before the Closing Date.
8.3 Certification. The Principal Stockholders and the Company
-------------
shall have received a certificate, dated the Closing Date, signed by Mergerco
and Tadeo, certifying, in such detail as the Principal Stockholders and his
counsel may reasonably request, that the conditions specified in Sections 8.1
and 8.2 above have been fulfilled.
8.4 Resolutions. The Principal Stockholders and the Company
-----------
shall have received certified resolutions of the Board of Directors and sole
stockholder of Mergerco and of the Board of Directors of Tadeo, in form
reasonably satisfactory to counsel for the Principal Stockholders and the
Company, authorizing the Merger and Mergerco and Tadeo's execution, delivery
and performance of this Agreement and all actions to be taken by Mergerco and
Tadeo hereunder, and shall have received certified copies of the Certificate
of Incorporation, as amended, and By-laws of each of Tadeo and Mergerco.
8.5 Approval of Company Stockholders. The holders of the
-----------------------------------
requisite percentage of the outstanding shares of capital stock of the
Company entitled to vote shall have approved, adopted and ratified this
Agreement and the transactions contemplated hereby.
8.6 Execution and Delivery of Exhibits. Mergerco shall have
-------------------------------------
executed and delivered to the Company the Certificate of Merger, and Tadeo
and/or the Surviving Corporation (as applicable) shall have executed and
delivered to each of the Principal Stockholders duly executed counterparts of
the Non-Competition Agreement, the Confidentiality Agreement, the
Subscription Agreement, the Stockholder Agreement and the Employment
Agreement.
- 23 -
<PAGE>
8.7 Delivery of Merger Consideration. Tadeo and Mergerco shall
---------------------------------
have delivered to the Principal Stockholders stock certificates evidencing
the Tadeo Securities, in amounts representing their allocable shares of the
Merger Consideration described in Section 2 of this Agreement.
8.8 Proceedings and Instruments Satisfactory. All proceedings
------------------------------------------
to be taken in connection with the transactions contemplated by this
Agreement, and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to the Company, the Principal Stockholders
and their respective counsel.
8.9 Opinion of Counsel. The Company and the Principal
--------------------
Stockholders shall receive an opinion of counsel from counsel to Mergerco and
Tadeo substantially in such form as set forth on Exhibit H annexed hereto.
---------
9. CLOSING.
-------
9.1 Place and Date of Closing. Unless this Agreement shall be
-------------------------
terminated pursuant to Section 10 below, the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place in New York,
New York at the offices of Nixon Hargrave, counsel to Mergerco and Tadeo,
located at 437 Madison Avenue, 24th Floor, New York, New York 10022, or such
other location as is agreed to between the parties, at 9:30 a.m. local time
on a date which shall be not more than five business days following notice by
Tadeo that it is ready to close (the "Closing Date"); provided, that in no
--------
event shall such Closing Date, the Closing and consummation of the Merger,
occur later than October 31, 1998, unless approved in writing by Tadeo and
Mergerco. The effectiveness of the Merger shall occur on the Closing Date
simultaneous with the Closing.
9.2 Actions at Closing. On the Closing Date, simultaneous with
------------------
the Closing, Mergerco and the Company shall file or cause to be filed the
Certificate of Merger with the Secretary of State of New York. At such
Closing, there shall be made, by all necessary and appropriate persons, all
payments and deliveries stated in this Agreement to be made at the Closing
and/or on or prior to the Closing Date.
10. TERMINATION OF AGREEMENT.
------------------------
10.1 General. This Agreement may be terminated and the
-------
transactions contemplated hereby may be abandoned at any time prior to the
Closing: (a) by the mutual written consent of the Company, the Principal
Stockholders, Mergerco and Tadeo; (b) by Mergerco and Tadeo, on one hand, or
by the Company and the Principal Stockholders, on the other hand, if: (i) a
material breach shall exist with respect to the written representations and
warranties made by the other party or parties, as the case may be, (ii) the
other party or parties, as the case may be, shall take any action prohibited
by this Agreement, if such actions shall or may have a material adverse
effect on the Company and/or the transactions contemplated hereby, (iii) the
other party or parties, as the case may be, shall not have furnished, upon
reasonable
- 24 -
<PAGE>
notice therefor, such certificates and documents required in connection with the
transactions contemplated hereby and matters incidental thereto as it or they
shall have agreed to furnish, and it is reasonably unlikely that the other party
or parties will be able to furnish such item(s) prior to the Outside Closing
Date specified below, or (iv) any consent of any third party to the transactions
contemplated hereby (whether or not the necessity of which is disclosed herein
or in any Schedule hereto) is reasonably necessary to prevent a default under
any outstanding material obligation of Mergerco or Tadeo, on one hand, and the
Principal Stockholders or the Company, on the other hand, and such consent is
not obtainable without material cost or penalty (unless the party or parties not
seeking to terminate this Agreement agrees or agree to pay such cost or
penalty); or (c) by Mergerco and Tadeo, at any time on or after September 15,
1998 (the "Outside Closing Date"), if the transactions contemplated hereby shall
not have been consummated prior thereto, and the party directing termination
shall not then be in breach or default of any obligations imposed upon such
party by this Agreement.
10.2 Notice of Termination.
---------------------
In the event of termination of this Agreement pursuant to
this Section 11, prompt written notice shall be given by the terminating
party or parties to the other party or parties.
11. INDEMNIFICATION.
---------------
11.1 General.
-------
(a) By the Company and the Principal Stockholders.
-----------------------------------------------------
Without prejudice to any rights of contribution as between the Principal
Stockholders and any other stockholder(s) of the Company, from and after the
Closing Date: (i) the Company and Kalpaxis shall jointly and severally; and
(ii) the other Principal Stockholders, to the extent set forth in Section 3
of this Agreement, defend, indemnify and hold harmless the Surviving
Corporation and Tadeo from, against and in respect of any and all claims,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees,
that the Surviving Corporation or Tadeo (collectively, the "Tadeo Group") may
incur, sustain or suffer ("Losses") as a result of any breach of, or failure
by the Company or such Principal Stockholder(s) to perform, any of the
representations, warranties, covenants or agreements of the Company or such
Principal Stockholder(s) contained in this Agreement or in any Exhibit or any
Schedule(s) furnished by or on behalf of the Company or such Principal
Stockholder(s) under this Agreement.
(b) By the Tadeo Group. From and after the Closing Date,
------------------
the Tadeo Group shall jointly and severally indemnify, defend and hold
harmless the Principal Stockholders and each other shareholder of the Company
from, against and in respect of any and all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies, including
interest, penalties and reasonable attorneys' fees, that such person may
incur, sustain or suffer as a result of any breach of, or failure by Mergerco
or Tadeo to perform, any of the representations, warranties, covenants or
agreements of Mergerco or Tadeo contained in this Agreement.
- 25 -
<PAGE>
11.2 Limitations on Certain Indemnities.
----------------------------------
(a) The Basket. Notwithstanding any other provision of
----------
this Agreement to the contrary, except for Losses arising out of claims for
breach of any of the warranties made under Sections 3.1, 3.2, 3.4, 3.8, 3.11,
3.15, 3.16 and/or 3.22 above, neither the Company nor any Principal
Stockholder shall be liable to the Tadeo Group with respect to Losses unless
and until the aggregate amount of all Losses incurred by the Surviving
Corporation or Tadeo shall exceed the sum of $60,000 (the "Basket"). The
applicable Principal Stockholder(s) shall thereafter be liable for all Losses
in excess of the Basket.
11.3 Limitation on Indemnity.
-----------------------
(a) Time Limitation on Indemnity for Breach of
-----------------------------------------------------
Representation and Warranty. The Tadeo Group shall be entitled to
- -------------------------------
indemnification by a Principal Stockholder and/or the Company for Losses
relating to: (i) breach of any representation or warranty hereunder only in
respect of claims for which notice of claim shall have been given to the
Principal Stockholder on or before the second anniversary of the Closing
Date, or (ii) with respect to Losses relating to a breach of any
representations or warranties under Section 3.8 above, the expiration of the
final statute of limitations for those tax returns covered by the warranties
under Section 3.8 above; provided, however, that there shall be no time
limitation on the Tadeo Group's right to indemnification in respect of any
violation of any covenant or agreement on the part of such Principal
Stockholder contained in any Exhibit hereto, including the Subscription
Agreement, the Affiliate Letter, the Non-Competition Agreement, the Proxy or
the Employment Agreement.
(b) Prejudice of Rights to Defend. No member of the
---------------------------------
Tadeo Group shall be entitled to indemnification in the event that the
subject claim for indemnification relates to a third-party claim and the
Tadeo Group delayed giving notice thereof to the Company and/or the Principal
Stockholder to such an extent as to cause material prejudice to the defense
of such third-party claim.
11.4 Claims for Indemnity. Whenever a claim shall arise
---------------------
for which any party shall be entitled to indemnification hereunder, the
indemnified party shall notify the indemnifying party in writing within sixty
(60) days of the indemnified party's first receipt of notice of, or the
indemnified party's obtaining actual knowledge of, such claim, and in any
event within such shorter period as may be necessary for the indemnifying
party or parties to take appropriate action to resist such claim. Such
notice shall specify all facts known to the indemnified party giving rise to
such indemnity rights and shall estimate (to the extent reasonably possible)
the amount of potential liability arising therefrom. If the indemnifying
party shall be duly notified of such dispute, the parties shall attempt to
settle and compromise the same or may agree to submit the same to arbitration
or, if unable or unwilling to do any of the foregoing, such dispute shall be
settled by appropriate litigation, and any rights of indemnification
established by reason of such settlement, compromise, arbitration or
litigation
- 26 -
<PAGE>
shall promptly thereafter be paid and satisfied by those indemnifying parties
obligated to make indemnification hereunder.
11.5 Right to Defend. If the facts giving rise to any
-----------------
claim for indemnification shall involve any actual or threatened action or
demand by any third party against the indemnified party or any of its
Affiliates, the indemnifying party or parties shall be entitled (without
prejudice to the indemnified party's right to participate at its own expense
through counsel of its own choosing), at their expense and through a single
counsel of their own choosing, to defend or prosecute such claim in the name
of the indemnifying party or parties, or any of them, or if necessary, in the
name of the indemnified party. In any event, the indemnified party shall
give the indemnifying party advance written notice of any proposed compromise
or settlement of any such claim. If the remedy sought in any such action or
demand is solely money damages, the indemnifying party shall have fifteen
(15) days after receipt of such notice of settlement to object to the
proposed compromise or settlement, and if it does so object, the indemnifying
party shall be required to undertake, conduct and control, though counsel of
its own choosing and at its sole expense, the settlement or defense thereof,
and the indemnified party shall cooperate with the indemnifying party in
connection therewith; if the remedy sought is other than one for solely money
damages, the indemnifying party shall not resolve such claim on behalf of
itself and the indemnified party over the reasonable objection of the
indemnified party.
12. COSTS.
-----
12.1 Finder's or Broker's Fees. Except as set forth
----------------------------
herein, each of Mergerco and Tadeo (on the one hand) and the Company and the
Principal Stockholders (on the other hand) represents and warrants that
neither they nor any of their respective Affiliates have dealt with any
broker or finder in connection with any of the transactions contemplated by
this Agreement, and no broker or other person is entitled to any commission
or finder's fee in connection with any of these transactions.
12.2 Expenses. Mergerco, Tadeo, the Company and the
--------
Principal Stockholders shall each pay all of their own respective costs and
expenses incurred or to be incurred by them, respectively, in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement. Notwithstanding the foregoing, it is agreed
by and among the parties hereto that a maximum of $30,000 shall be paid by
Tadeo for the legal fees and disbursements of the Company and the Principal
Stockholders incurred in connection with the negotiation, preparation and
investigation of this Agreement and the other Exhibits, documents and
schedules as are prepared and delivered in connection with the consummation
of the transactions contemplated by this Agreement, to Messrs. Sweeney Lev
and Blinkoff LLP, counsel to the Company and the Principal Stockholders, with
any fees and disbursements of such legal counsel in addition to such amounts
in the aggregate to be borne solely by persons or entities other than Tadeo
or the Company; provided, that if the Company or any of the Principal
Stockholders elect not to consummate the Merger for any reason other than
Tadeo's: (i) termination of good faith negotiations or other refusal to
proceed to close the Merger based on other than the results of Tadeo's due
diligence investigation, (ii) failure to execute agreements
- 27 -
<PAGE>
substantially in accordance with the business and other terms contained in this
Agreement, without being based upon the results of its due diligence
investigation, or (iii) failure or refusal to comply with its contractual
obligations, covenants and agreements to be performed as conditions of the
Company and the Principal Stockholders to closing of the transactions
contemplated by this Agreement, without being based upon the results of its due
diligence investigation, then Tadeo shall not be obligated to pay any of such
fees or expenses of counsel to the Company and the Principal Stockholders.
13. FORM OF AGREEMENT.
-----------------
13.1 Effect of Headings. The Section headings used in
--------------------
this Agreement and the titles of the Schedules hereto are included for
purposes of convenience only, and shall not affect the construction or
interpretation of any of the provisions hereof or of the information set
forth in such Schedules.
13.2 Entire Agreement; Waivers. This Agreement constitutes
--------------------------
the entire agreement between the parties pertaining to the subject matter
hereof, and supersedes all prior agreements or understandings as to such
subject matter. No party hereto has made any representation or warranty or
given any covenant to the other except as set forth in this Agreement and the
Schedules and Exhibits hereto. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by
the party making the waiver.
13.3 Counterparts. This Agreement may be executed
------------
simultaneously in any number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
13.4 Confidentiality. Tadeo, the Company and each of the
---------------
Principal Stockholders agree and acknowledge that in connection with Tadeo's
due diligence investigation of the Company, and the further negotiations to
be conducted between the parties regarding the terms of the proposed Merger,
each of the parties will receive confidential information of the other
party. Tadeo, each of the Principal Stockholders and the Company do hereby
agree to maintain, and to cause their representatives to maintain, such
information as confidential; and except as may be necessary to protect the
legal rights of a party in litigation if the proposed Merger is not
consummated, each party shall not divulge the confidential information of the
other party. In the event that the Merger is not consummated, each of the
parties agrees to return to the other party all confidential information of
the other party then in the receiving party's possession. The obligation of
confidentiality created herein shall not apply to information which was known
to a party prior to its disclosure hereunder, or which is, or falls into the
public domain (provided such did not fall into the public domain through the
unauthorized acts of a receiving party), or which a party is required to
disclose by law.
14. PARTIES.
-------
- 28 -
<PAGE>
14.1 Parties in Interest. Nothing in this Agreement,
---------------------
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to
it and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns, nor is anything in this
Agreement intended to relieve or discharge the obligations or liability of
any third persons to any party to this Agreement, nor shall any provision
give any third persons any right of subrogation or action over or against any
party to this Agreement.
14.2 Notices. All notices, requests, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
to have been duly given on the date of service if served personally on the
party to whom notice is to be given, or on the third day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed as follows:
(a) If to the Company and to Kalpaxis:
Astratek, Inc.
5 Hanover Square
New York, NY 10004
Attention: Alexander Kalpaxis
(b) If to Rubin and the Trust:
c/o Robert M. Rubin
6060 Kings Gate Circle
Del Ray Beach, Florida 33484
with a copy sent concurrently to:
Sweeney Lev and Blinkoff LLP
708 Third Avenue
New York, New York 10022
Attn: Sharon Blinkoff
(c) If to Mergerco, the Surviving Corporation
or Tadeo:
Tadeo Holdings, Inc.
42705 Grand River Avenue - Suite 20
Novi, Michigan 48375
Attention: Brian Bookmeier, President
- 29 -
<PAGE>
with a copy sent concurrently to:
Nixon, Hargrave, Devans & Doyle llp
437 Madison Avenue,
New York, New York 10022
Attention: Peter W. Rothberg, Esq.
or to such other address as any party shall have specified by notice in
writing given to all other parties.
15. MISCELLANEOUS.
-------------
15.1 Amendments and Modifications. No amendment or
--------------------------------
modification of this Agreement or any Exhibit or Schedule hereto shall be
valid unless made in writing and signed by the party to be charged therewith.
15.2 Non-Assignability; Binding Effect. Neither this
-----------------
Agreement, nor any of the rights or obligations of the parties hereunder,
shall be assignable by any party hereto without the prior written consent of
all other parties hereto. Otherwise, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors and
permitted assigns.
15.3 Governing Law; Jurisdiction. This Agreement shall be
----------------------------
construed and interpreted and the rights granted herein governed in
accordance with the laws of the State of New York applicable to contracts
made and to be performed wholly within such state.
15.4 Definition. Whenever in this Agreement the phrase
----------
"to the knowledge of" or "to the best knowledge of" is used, such person
shall be held to have made such investigation of the facts and circumstances,
including but not limited to communications with relevant employees,
consultants or other representatives as a reasonable person, given his/her
position with the Company or Tadeo, as applicable, would be expected to make
in order to be able to make the representations, warranties or other
statements made by such persons in this Agreement.
- 30 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on and as
of the date first set forth above.
TADEO HOLDINGS, INC.
By:--------------------------
Brian Bookmeier, President
ASTRATEK ACQUISITION CORP.
By:---------------------------
Damon Testaverde, President
ASTRATEK, INC.
By:----------------------------
Alexander Kalpaxis, President
THE PRINCIPAL STOCKHOLDERS:
------------------------------
Alexander Kalpaxis
-------------------------------
Robert M. Rubin
THE RUBIN FAMILY IRREVOCABLE
STOCK TRUST U/A DATED April 30, 1997
By:----------------------------------
, Trustee
By:----------------------------------
, Trustee
- 31 -
<PAGE>
EXHIBITS
A - Certificate of Merger
B-1 - Form of Non-Competition Agreement
B-2 - Form of Confidentiality Agreement
C - Form of Employment Agreement
D-1 - Promissory Note of Alexander Kalpaxis
D-2 - Promissory Note of Arion Kalpaxis
E - Form of Subscription Agreement
F - Form of Stockholder Agreement
G - Opinion of Counsel to the
Company and the Principal
Stockholders
H - Opinion of Counsel to
Mergerco and Tadeo
- 32 -
<PAGE>
Exhibit 2.1
Exhibits and Schedules to the Agreement and Plan of Merger have been
omitted. The following is a list of the omitted Exhibits and Schedules which
Tadeo agrees to furnish supplementally to the Commission upon request:
Exhibits:
Exhibit A Certificate of Merger
Exhibit B-1 Form of Non-Competition Agreement
Exhibit B-2 Form of Confidentiality Agreement
Exhibit C Form of Employment Agreement
Exhibit D-1 Promissory Note of Alexander Kalpaxis
Exhibit D-2 Promissory Note of Arion Kalpaxis
Exhibit E Form of Subscription Agreement
Exhibit F Form of Stockholder Agreement
Exhibit G Opinion of Counsel to the Company
and the Principal Stockholders
Exhibit H Opinion of Counsel to Mergerco and Tadeo
Schedules:
Schedule 3.1 Ownership of the Stock
Schedule 3.4 Capital Structure; Stock Ownership
Schedule 3.5 Investments
Schedule 3.6(b) Financial Information
Schedule 3.7 Certain Adverse Changes
Schedule 3.8 Tax Returns and Tax Audits
Schedule 3.9 Personal Property; Liens
Schedule 3.10 Real Property
Schedule 3.12 Inventories
Schedule 3.13 Insurance Policies
Schedule 3.15 Contracts and Commitments
Schedule 3.17 Labor, Benefit and Employment Agreements
Schedule 3.18 No Breach of Statute, Decree or Other Instrument
Schedule 3.19 Compliance with Laws
Schedule 3.20 Litigation
Schedule 3.21 Patents, Licenses and Trademarks
Schedule 3.22 Transactions with Affiliates
Schedule 3.23 Bank Accounts
Schedule 6.3 Key Employees
Schedule 6.8 Employee Cash Bonuses
<PAGE>
EXHIBIT D
---------
STOCKHOLDER AGREEMENT
This Stockholder Agreement (this "Agreement"), entered into this 23rd
day of October, 1998, among ALEXANDER KALPAXIS ("Kalpaxis"), ROBERT RUBIN
("Rubin") and THE RUBIN FAMILY IRREVOCABLE STOCK TRUST U/A DATED April 30,
1997 (the "Trust"), TADEO HOLDINGS, INC., a Delaware corporation ("Tadeo"),
having its principal offices at 42705 Grand River Avenue - Suite 20, Novi,
Michigan 48375, and ASTRATEK ACQUISITION CORP., a New York corporation
("Mergerco"), having its principal executive offices at c/o Nixon, Hargrave,
Devans & Doyle llp, 437 Madison Avenue, New York, New York 10022;. Kalpaxis,
Rubin and the Trust are hereinafter individually referred to as the
"Stockholders."
W I T N E S S E T H:
WHEREAS, Tadeo and Mergerco have entered into that certain Agreement
and Plan of Merger, dated October 23, 1998 (the "Merger Agreement") with
ASTRATEK, INC., a New York corporation (the "Company"), having its principal
offices at 5 Hanover Square, New York, New York 10004; and KALPAXIS, RUBIN
and THE TRUST; and
WHEREAS, as an inducement to cause Tadeo and Mergerco to enter into the
Merger Agreement with the Company, Kalpaxis, Rubin and the Trust have agreed
to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto intending to be bound hereby, it is
hereby agreed as follows:
1. Representations and Warranties of the Stockholders. Each of the
-------------------------------------------------------
Stockholders who has executed this Agreement does hereby severally and
individually (and not jointly and severally) represent and warrant to Tadeo
and Mergerco, as follows:
(a) The number of shares of common stock of the Company (the
"Stock") owned beneficially by such Stockholder is as set forth on Schedule A
annexed hereto. Such Stockholder is the legal and beneficial owner of his or
her shares of the Stock, free and clear of all pledges, liens, claims,
charges, options, calls, encumbrances, restrictions and assessments
whatsoever, except any restrictions which may be created by operation of
state or federal securities laws.
(b) The execution, delivery and performance of this Agreement,
the Merger Agreement and the consummation of the Merger and the other
transactions contemplated by the Merger Agreement has been duly and validly
authorized by such Stockholder in his or her capacity as a stockholder of the
Company, and, with respect to Kalpaxis and Rubin , in his capacity as a
member of the Board of Directors of the Company. Such Stockholder has full
legal right, power and authority to execute and deliver this Agreement and to
consummate the
<PAGE>
transactions contemplated hereby. This Agreement and, when executed and
delivered by such Stockholder, the Subscription Agreement to be executed by each
Stockholder in favor of Tadeo, constitutes and will constitute the legal, valid
and binding obligations of such Stockholder, enforceable against such
Stockholder in accordance with their respective terms, except to the extent
limited by bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and except that the remedy of specific performance
or similar equitable relief is available only at the discretion of the court
before which enforcement is sought.
2. Representations With Respect to the Percentage. Rubin and the Trust do
-----------------------------------------------
hereby represent that Rubin and the Trust, along with any affiliates of
either, do not have, in the aggregate, record or beneficial ownership of more
than 613,798 shares of Tadeo Common Stock (which includes Rubin's ownership
of warrants to acquire 100,000 shares of Tadeo Common Stock exercisable at
$1.00 per share).
3. Binding Effect; Definitions. This Agreement shall be valid and binding
----------------------------
upon each Stockholder executing this Agreement even if all of the persons
named as Stockholders herein do not so execute such Agreement. All
capitalized terms used herein and not otherwise defined shall have the same
definitions as are contained in the Merger Agreement.
IN WITNESS WHEREOF, each of the undersigned have executed this
Agreement, the date and year first above written.
TADEO HOLDINGS, INC.
By:_____________________________________
Brian Bookmeier, President
ASTRATEK ACQUISITION CORP.
By:_____________________________________
Damon Testaverde, President
THE STOCKHOLDERS:
_______________________________________
ALEXANDER KALPAXIS
_______________________________________
ROBERT M. RUBIN
- 2 -
<PAGE>
THE RUBIN FAMILY IRREVOCABLE
STOCK TRUST U/A DATED April 30, 1997
By:_______________________________________
, Trustee
By:_______________________________________
, Trustee
- 3 -
<PAGE>
SCHEDULE A
----------
Number of Astratek, Inc.
Name Common Shares Owned
Alexander Kalpaxis 1,410,350
Robert M. Rubin 261,710
THE RUBIN FAMILY IRREVOCABLE STOCK 811,769
TRUST U/A DATED April 30, 1997
Exhibit 10.1
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT (this "Agreement") dated as of October 1, 1998, is made
by and between Tadeo Holdings Inc., a Delaware corporation (the "Company"),
having offices at 42705 Grand River Avenue - Suite 20, Novi, Michigan 48375
and Alexander John Kalpaxis, residing at 88-27 82nd Avenue, Glendale, NY
11385 (the "Executive").
WHEREAS, the Executive is currently Chairman of the Board, President,
and Chief Executive Officer, of Astratek, Inc. ("Astratek") a New York
Corporation having its offices at 5 Hanover Square, New York, New York;
WHEREAS, Astratek, Inc. is a party to a Merger Agreement dated
_________________, whereby Astratek will be merged into a wholly owned
Subsidiary of the Company and become the surviving corporation of the merger
("Merger")and a wholly owned subsidiary of the Company;
WHEREAS, the Company wishes to provide for the continued services of
the Executive following the Merger, to serve as Chairman of the Board,
President and Chief Executive Officer, of Astratek, and to serve as Executive
Vice-President, Chief of Technology, and a member of the Board of Directors
of the Company;
WHEREAS, the Executive is willing to continue to serve in his current
capacities for Astratek following the Merger and is willing to also serve as
a Member of the Board of Directors of the Company as well as an Executive
Vice-President and Chief of Technology, on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
1.1 "Affiliate" means any person or entity controlling, controlled by
or under common control with the Company including Astratek after the Merger.
1.2 "Board" means the Board of Directors of the Company.
1.3 "Cause" means (a) the Executive is convicted of a felony involving
actual dishonesty as against the Company or an Affiliate, or (b) the
Executive, in carrying out his duties and responsibilities under this
Agreement, is guilty of gross neglect or gross misconduct resulting, in
either case, in material harm to the Company and/or any Affiliate, or (c) the
Executive fails to follow the lawful directions of the Board of Directors of
Astratek, or of the Chief Executive Officer and the Board of Directors of
Tadeo.
1
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1.4 "Commencement Date" has the meaning set forth in Section 3 below.
1.5 "Date of Termination" means (a) in the case of a termination for
which a Notice of Termination is required, the date of actual receipt of such
Notice of Termination or, if later, the date specified therein, as the case may
be, and (b) in all other cases, the actual date on which the Executive's
employment terminates during the Term of Employment. (As that term is defined in
Section 3 below.)
1.6 "Disability" means the Executive's inability to render, for a period
of one hundred and twenty (120)days in any period of six consecutive months,
services hereunder by reason of permanent disability, as determined by the
written medical opinion of an independent medical physician mutually
acceptable to the Executive and the Company. If the Executive and the
Company cannot agree as to such an independent medical physician, each shall
appoint one medical physician and those two physicians shall appoint a third
physician who shall make such a determination. Notwithstanding the above, the
Executive shall not be deemed disabled for the purposes of this Agreement
unless he would be deemed disabled under any long-term disability policy
obtained by Company and/or Astratek for the benefit of Executive, which
policy is approved in writing by Astratek and the Company.
1.7 "Good Reason" means and shall be deemed to exist if, without the
prior express written consent of the Executive, (a) in the absence of Cause, the
Executive is assigned any duties or responsibilities inconsistent in any
material respect with the scope of the duties or responsibilities associated
with the Executive's titles or positions, as set forth and described in Section
4 of this Agreement; (b) in the absence of Cause, the Executive suffers a
reduction in the duties, responsibilities or effective authority associated with
his titles and positions as set forth and described in Section 4 of this
Agreement; (c) in the absence of Cause, the Executive is not appointed to, or is
removed from, the offices or positions provided for in Section 4 of this
Agreement (other than membership on the Board of Directors of Company, so long
as Company has nominated Executive for election to the Board of Directors of
Company); (d) in the absence of Cause, the Company fails to substantially
perform any material term or provision of this Agreement, if following notice
the Company is given adequate time to cure any such failure (which time period
shall be less than thirty (30) days); (e) in the absence of Cause, the
Executive's compensation provided for hereunder is decreased; (f) the Company
fails to obtain the full assumption of this Agreement by a successor entity; (g)
the Company continually fails to reimburse the Executive for business expenses
in accordance with Section 5 of this Agreement; (h) the Company fails to use
reasonable efforts to maintain, or cause to be maintained, directors and
officers liability insurance coverage for the Executive as provided in Section
15.7 of this Agreement; (i) the Company purports to terminate the Executive's
employment for Cause and such purported termination of employment is not
effected in accordance with the requirements of this Agreement; or (j) there
shall be consummated (x)any liquidation of the Company or the sale of
substantially all of the assets of the Company and its Affiliates taken as a
whole, or (y) any merger, consolidation and/or other business combination
involving the Company and/ or Astratek or any combination of any such
transactions (a "Transaction"), other than a Transaction (A) involving only the
Company and Astratek or another
2
<PAGE>
Affiliate of the Company, or (B) immediately after which the shareholders of the
Company who were shareholders immediately prior to the Transaction continue to
own beneficially, directly or indirectly, in substantially similar proportions
to those in effect immediately prior to such Transaction, more than 50% of the
then outstanding voting securities of the Company; or (C) in which any Person or
group (as such term is defined in Rule 13d-5 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), of related Persons which is not an
Affiliate of the Company as of the Commencement Date shall beneficially own,
directly or indirectly, more than 50% of the then outstanding voting stock of
the Company. For purposes of this Agreement, "Person(s)" means any individual,
entity, or other person, as defined in Section 3(a) (9) of the Exchange Act, and
as used in Sections 13 (d) and 14 (d) thereof.
1.8 "Subsidiary" means each corporation, limited liability company,
partnership, joint venture or other form of business entity more than 50% of
whose equity is beneficially owned by a person or entity.
1.9 "Year" means each 12 month period during the Term of Employment,
the first day of which commences on the Commencement Date and terminates 12
months thereafter.
2. Employment
----------
The Company agrees to employ the Executive, and Executive agrees to serve the
Company and Astratek, upon the terms and conditions hereinafter set forth.
3 Term
----
Subject to the terms of this Agreement, the employment of Executive will be
for a period of three (3) years, commencing on the effective date of the
Merger ("Commencement Date") and ending on the fourth anniversary of such
date (the "Term of Employment"). On such fourth anniversary, the Term of
Employment shall automatically be extended for an additional one year period,
unless not later than ninety days (90) prior to the end of the fourth Year,
either party to this Agreement shall have given written notice to the other
that the Term of Employment shall not be extended beyond its then current
expiration date.
4. Position, Responsibilities and Duties.
-------------------------------------
4.1 Executive shall devote his full time, energy, skills and attention
to the performance of his duties and responsibilities hereunder and shall use
his best efforts to perform faithfully and efficiently the duties and
responsibilities contemplated by this Agreement.
4.2 Executive shall have the title and hold the position Of Chairman of
the Board, President and Chief Executive Officer of Astratek and the additional
title and position of Executive Vice- President and Chief of Technology for the
Company. Executive shall also serve, without additional compensation, as a
director of Company. The Company will in the absence of receipt of notice by
Executive of a proposed termination for Cause under Section 10.3
4
<PAGE>
nominate him for election to the Board of the Company, and recommend his
election to the shareholders in appropriate proxy or other election solicitation
material.
4.3 Executive shall report directly to the Chairman of the Board,
President and Chief Executive Officer of the Company. If the foregoing offices
are held by different individuals the Executive will report directly to the
Chairman of the Board. All other officers and employees of the Company in the
areas of research, development, engineering, technology, and product marketing
shall report to the Executive, as well as all employees of Astratek or
Subsidiaries of the Company or Astratek. No other employee, executive, or
officer of the Company or Astratek or any Subsidiary of Company or Astratek
shall have the authority or the responsibilities in those areas reserved for the
Executive herein.
4.4 Executive shall perform the duties and shall have the
responsibilities and authorities for Astratek as are normally associated with
the offices of Chairman of the Board, President and Chief Executive Officer for
a corporation of Astratek's size which is engaged in the business conducted by
Astratek. Executive shall perform such duties under the general direction of the
Chairman of the Board, President and Chief Operating Officer of the Company, in
consultation with the Company's Board and in accordance with the budget and
plans approved by the Boards of both the Company and Astratek. As Executive
Vice-President and Chief of Technology for the Company, the Executive shall, in
consultation with and under the general direction of the Board of Directors, and
the Company's Chief Executive Officer, be responsible for preparing the budget
for the Company and Astratek's research and development, and computer/products
marketing efforts, and establishing the strategy and overall direction of the
Company and Astratek's research and development efforts and for the
implementation of the corporate plans and policies for computer product
development.
4.5 Following the Merger, Company will conduct a search for a
President and Chief Executive Officer ("CEO") for Company, as well as a Chief
Financial Officer ("CFO") of Company, who will also hold the positions of CFO
of Astratek and Chief Operating Officer ("COO") of the Company and Astratek,
respectively. The individual selected for the CEO position will have
experience and stature in the software industry and the first such person
selected will be reasonably acceptable to both the Board of Directors of the
Company and the Executive. The individual selected for the CFO and COO
positions will be required to have experience in the software industry, and
the first such person selected will be reasonably acceptable to both the
Board of Directors of the Company and the Executive.
4.6 Following completion of the Merger, The Executive shall be
appointed to the Board of Directors of the Company. One additional Board
Member who has knowledge of and a background in the Computer Software
Industry, and is reasonably acceptable to both the Executive and the Company,
will be appointed to the Board of Directors of Company.
5. Compensation; Benefits; Expenses; and Bonus.
-------------------------------------------
5.1 As compensation for the services to be rendered
4
<PAGE>
hereunder, Astratek shall pay to Executive a base salary ("Base Salary") at
the rate of $160,000 per annum, payable in equal installments at such times
as shall be agreed upon by the Company and Executive but no less frequently
than monthly. Executive's Base Salary shall also be reviewed annually by the
Compensation Committee of the Board of Directors of Company, or the full
Board of Company if no such Committee is constituted, for consideration of
merit increases. In conducting any such annual review, the Compensation
Committee or the Board shall take into account any change in the Executive's
responsibilities, increases in the compensation of other executives of the
Company or Astratek, and the salaries being paid by public companies in the
computer software industry that have similar financial results and operating
performance, the performance of the Executive and other pertinent factors.
In addition to consideration for merit increases, commencing on January 1,
2000 and on each succeeding January 1 thereafter during the Term of
Employment Executive's Base Salary will be increased by the percentage
increase in the national consumer price index ("CPI") as issued by the United
States Department of Labor. The Base Salary, once increased by either merit
or CPI increase, shall then constitute the "Base Salary"
5.2 During the Term of Employment, the Executive shall be eligible to
participate, as determined by the Compensation Committee of the Board or the
full Board, in the event no separate Compensation Committee is established,
in all incentive compensation, bonus, and benefit plans and programs
howsoever defined and maintained by the Company and or Astratek for the
benefit of its executives and employees, including without limitation
bonuses, stock option plans or other stock-based compensation plans, or
equity appreciation plans, disability and retirement plans. In addition to
the foregoing, Astratek shall pay to the Executive a Performance Bonus based
on the operating results of Astratek. For any fiscal year ending during the
Term of Employment in which Earnings Before Taxes Interest Depreciation and
Amortization ("EBITDA") equals or exceed one million dollars ($1,000,000),
Executive shall receive a bonus computed as follows: one and one half per
cent (1.5%) of EBITDA equal to or in excess of one million dollars
($1,000,000), but less than ten million dollars ($10,000,000); and two and
one half per cent (2.5%) of EBITDA in excess of ten million dollars
($10,000,000), but less than fifteen million dollars ($15,000,000).
Executive shall not be entitled to a bonus on EBITDA in excess of fifteen
million dollars ($15,000,000). The foregoing performance bonus shall be paid
by Astratek within sixty (60) days of the carry over payment end of each
Fiscal Year of Astratek ending during the Term of Employment.
5.3 Company shall advance and/or reimburse reasonable travel and
other reasonable out-of-pocket expenses incurred or to be incurred by
Executive in rendering the services hereunder on behalf of Company in
accordance with Company's then current policies regarding same.
5.4 During the Term of Employment Executive shall be entitled to four
weeks of paid vacation (or longer if longer periods are provided to other
Executives of the Company or its Subsidiaries, and such other fringe benefits
and perquisites as may be provided to other Executives of the Company or its
Subsidiaries).
5.5 Company will pay the Executive the sums due under Sections 5.1,
5.2 and 5.3 to the extent that Astratek's cash flow from operations and other
sources of liquidity are insufficient to
5
<PAGE>
make such payments.
6. Insurance.
---------
6.1 Company shall, for so long as Executive is employed by it, pay
for the benefit of Executive the premiums on a life insurance policy insuring
the life of Executive in the amount of $250,000. The Company in its
discretion may at any time after the execution of this Agreement apply for
and procure as owner and for its own benefit, key man life insurance on the
life of Executive, and Executive shall have no interest whatsoever in any
such key man policy, Executive shall at the request of the Company cooperate
with the Company in assisting it to obtain or maintain such coverage.
6.2 Company shall, for so long as Executive is employed by it, pay
for the benefit of Executive and Executive's Family the premiums for medical
insurance, including basic as well as major medical coverage, pursuant to
such policies as are made available to other senior executives of the
Company, and on the same basis therefor. The Company shall also, for so long
as Executive is employed by it, obtain and pay the premiums for the benefit
of Executive disability insurance policy, as agreed by the parties.
7. Non-Competition and Confidential Information.
--------------------------------------------
7.1 Executive will not at any time, whether during or after the Term
of Employment, reveal to any person or entity any of the Confidential
Information of Company, which includes the information of its Affiliates, or
of any third party which the Company, or its Affiliates is under an
obligation to keep confidential. The term "Confidential Information" as used
throughout this Agreement shall mean all trade secrets, proprietary
information and other data or information (and any tangible evidence, record
or representation thereof), whether prepared, conceived or developed by
Executive or any other employee or contractor for the Company, or its
Affiliates or received by the Company or its Affiliates from an outside
source, which is in the possession of the Company or an Affiliate (whether or
not the property of the Company), which in any way relates to the present or
future business of the Company including its Affiliates, or any customer or
supplier of the Company or its Affiliates, and which is maintained in
confidence by the Company and/ or its Affiliates. Without limiting the
generality of the foregoing, "Confidential Information" shall mean all trade
secrets, know-how, proprietary information and other information or data
relating to the present or future business of the Company and its Affiliates,
including but not limited to:
(i) any idea, improvement, invention, innovation, development
technical data, design, formula, device, pattern, concept,
computer program, software, firmware, source code, object code,
algorithm, subroutine, object module, schematic, model, diagram,
flow chart, chip masking specification, user manual, training or
service manual, product specification, plan for a new or revised
product, compilation of information, or work in process, and any
and all revisions and improvements relating to any of the
foregoing (in each case whether or not reduced to tangible
form); and
6
<PAGE>
(ii) the name of any customer, employee, prospective customer or
consultant, any sales plan, marketing material, plan or survey,
business plan, product or development plan or specification,
business proposal, financial record, or business record or other
record or information relating to the business of the Company or
its Affiliates. Notwithstanding the foregoing, the term
Confidential Information shall not apply to information (w) which
the Company or an Affiliate has voluntarily disclosed to the
public without restriction, (x) which has otherwise lawfully
entered the public domain, (y) which the Company or an Affiliate
has permitted Executive to disclose by its prior written consent;
or (z) which Executive may disclose at a forum, workshop or round
table conference with the prior knowledge and consent of the
Company.
7.2 Executive further represents that Executive's performance of all
of the terms of this Agreement and as an Executive of the Company does not
and will not breach any agreement to keep in confidence Confidential
Information acquired by Executive prior to employment by the Company.
Executive has not entered into, and agrees not to enter into, any agreement
either written or oral in conflict herewith.
7.3 During the Term of Employment, Executive agrees not to make, use
or permit to be used any notes, memoranda, reports, lists, records, drawings,
sketches, specifications, software programs, data, documentation or other
materials of any nature relating to any matter within the scope of the
business of Company or its Affiliates concerning any of its dealings or
affairs otherwise than for the benefit of Company and its Affiliates.
Executive further agrees, after the termination of his Employment, not to use
or permit to be used any such notes, memoranda, reports, lists, records,
drawings, sketches, specifications, software programs, data, documentation or
other materials including Company's manuals and policy statements or those of
its Affiliates, it being agreed that all of the foregoing shall be and remain
the sole and exclusive property of the Company subject to the obligation of
confidentiality created herein. Executive agrees that within ten (10) days
after the termination of Executive's Term of Employment, Executive shall
either (i) deliver all of the foregoing, and all copies thereof, to the
Company, at its main office or (ii) destroy all of the foregoing, and all
copies thereof, and deliver a sworn notice to the Company certifying to such
destruction.
7.4 For a period of one (1) year following termination of Executive's
employment with Company, regardless of the reason for such termination, be it
voluntary by resignation of the Executive, or involuntary and at the request of
the Company, for Cause or otherwise (subject to the provisions of Section 10.4
(iv) of this Agreement), Executive agrees not to either directly or indirectly,
as an owner, manager, stockholder, consultant, director, officer or employee of
any business entity, participate in the development or provision of goods or
services which are competitive with goods or services sold or licensed, or under
development, by the Company or its Affiliates, or which are otherwise in
competition with Company and/or its Affiliates, without first obtaining the
prior written consent and authorization of the Company which Company may in its
7
<PAGE>
sole discretion grant or deny. The foregoing restriction shall not prohibit
Executive from owning up to one percent (1%) of the issued and outstanding
securities of any publicly held corporation. The determination of whether
services are competitive with those of Company or its Affiliates or an entity or
activity is otherwise competition shall be solely within the discretion of
Company's Board of Directors whose decisions will be final.
7.5 Upon the termination or expiration of this Agreement or at such
other time as Company and its Affiliates may request, Executive agrees to
return to Company all originals and copies, whether generated by Executive or
anyone else, of all versions of software code in hardcopy or machine readable
form, all document files, lists, forms, contracts, notebooks, rolodexes,
keys, credit cards, and any other material which came into, and continues to
be in, Executive's possession and relate to the Company, its Affiliates on
their respective businesses or their potential acquisitions and investments
to the extent such documents; notebooks; code; subsist in computers which are
the property of Executive and Executive will be deemed to have returned such
to the Company and/or its Affiliate by printing a hard copy of such and
submitting a certificate affirming under oath that the information has been
deleted.
7.6 Executive recognizes that the Company and its Affiliates develop
highly specialized products and services in competition with the other
business entities throughout the United States and the world, which products
and services are designed to compete in regional, nation-wide and world-wide
markets. In light of the highly competitive nature of the Company's products
and services, Executive agrees that the restrictions contained in this
Section 7 are reasonable and cannot be limited to any geographic area or to
any narrower field. The Executive acknowledges that the provision of this
Section 7 are essential to the continued goodwill and profitability of the
Company and necessary for the preservation of confidentiality of Confidential
Information and further acknowledges that the application or operation
thereof will not involve a substantial hardship upon his future livelihood.
Should any court determine that the provisions of this Paragraph shall be
unenforceable in respect of scope, duration or geographic area, such court
shall be empowered to substitute, to the extent enforceable, provisions
similar hereto or other provisions so as to provide to the Corporation, to
the fullest extent permitted by applicable law, the benefits intended by this
Section 7.
8. Publications
------------
While Company recognizes the importance of publishing technical articles and
making presentations at technical symposiums and the like and generally
encourages such academic activities, in the interests of insuring appropriate
protection on Executive's work product and insuring that Confidential
Information or other Proprietary nonpublic information of the Company is not
inadvertently disseminated, Executive agrees that he shall not publish or
cause to be published any articles, oral presentations, or other materials
related to the business or activities of the Company its Affiliates or its
clients without first obtaining the consent of the Company.
9. Developments Agreement
----------------------
8
<PAGE>
9.1 If at any time or times during Executive's Employment, including
Executive's employment prior to the term hereof by Astratek, Executive
(either alone or with others) made or makes, conceives, discovers or reduces
to practice any invention, modification, discovery, design, development,
improvement, process, software program, work of authorship, documentation,
formula, data technique know-how, secret or any interest therein (whether or
not patentable or registrable under copyright or similar statutes or subject
to analogous protection) (herein called "Developments") that relate to the
business of Company, its Affiliates including Astratek or that of any
supplier or customer of Company of any of the goods and services sold,
licensed or under development by the Company or result from the use of
premises or personal property tangible or intangible owned, leased or
contracted for by Company or its Affiliates including Astratek such
Developments and the benefits thereof shall immediately become the sole and
absolute property of the Company or its Affiliates and Executive shall
promptly disclose to the Company (or any persons designated by it) each such
Development. Executive hereby assigns any rights which Executive may have or
acquire in the Developments and benefits and/or rights resulting therefrom to
the Company and its assigns without further compensation and shall
communicate, without cost or delay, and without publishing the same, all
available information relating thereto (with all necessary plans and models
to Company.
9.2 Upon disclosure of each Development to the Company, Executive
will, during the Term of Employment and at any time thereafter, at the
request and cost of the Company, sign, execute, make and do all such deeds,
documents, acts and things as the Company or its Affiliates and its duly
authorized agents may reasonably require:
(i) to apply for, obtain and vest in the name of the
Company or its Affiliates alone (unless the Company otherwise
directs) letters patent, copyrights or other analogous or other
forms of intellectual property protection in any country
throughout the world and when so obtained or vested to renew and
restore the same; and
(ii) to defend any opposition proceedings in respect of
such applications and any opposition proceedings or petitions or
applications for revocation of such letters patent, copyright, or
other analogous protection or other forms of intellectual
property protection. In the event the Company or its Affiliates
is unable, after reasonable effort, to secure Executive's
signature on a letters patent, copyright or other analogous or
other forms of intellectual property protection relating to a
Development, whether because of Executive's physical or mental
incapacity or for any other reason whatsoever, Executive hereby
irrevocably designates and appoints Company and its duly
authorized officers and agents as Executive's agent and
attorney-in-fact, to act for and in Executive's behalf and stead
to execute and file any such application or applications and to
do all other lawfully permitted acts to further the prosecution
and issuance of letters patent, copyright or other analogous
protection thereon with the same legal force and effect as if
executed by Executive.
9
<PAGE>
9.3 Executive understands that the Developments including, but not
limited to, those identified in the pages, if any, attached hereto which
Executive can demonstrate to the satisfaction of the Company or its
Affiliates were made or conceived prior to Employment by Company, or by
Astratek prior to the Merger, are excluded from this Agreement. Executive
understands that it may have to list a short description and is only
necessary to list the title and purpose of such Developments.
9.4 To the maximum extent permitted by law, all written material or
material committed to a fixed form and components thereof, prepared in the
course of Executive's employment with Company and its Affiliates, or prior to
the Commencement Date while Executive was an Employee of Astratek, including
rough drafts and other materials created in the developmental stages of
preparation of finished materials shall be regarded as "works for hire" for
Company. Executive agrees that all such materials and components thereof as
described, may be used by Company without additional compensation to
Executive and that Company shall have the right to change any such
materials. Executive furthermore assigns all rights, title and interest in
and to all said materials and components thereof, as aforedescribed,
including all worldwide copyright rights including any renewals or extensions
available thereon, and agrees to execute whatever powers of Attorney, or
other documents which Company deems necessary or advisable to apply for
obtain, or maintain such copyright protection or to otherwise better enjoy
the rights granted in this Section.
10. Death or Disability of Executive; Other Termination.
---------------------------------------------------
10.1 The Company may terminate the Executive's employment hereunder
due to Disability. In the event of the Executive's death or a Termination of
the Executive's employment due to Disability, the Executive, his estate or
his legal representative, as the case may be shall be entitled to receive:
(i) Base Salary continuation at the rate in effect on the
date of Termination through the end of the year in which
the Executive died or became Disabled;
(ii) Any deferred compensation not yet paid to the Executive;
(iii) Reimbursement for expenses incurred but not yet paid
prior to such death or Disability;
(iv) Continued health insurance for Executive's family for
the year in which Executive died or became Disabled to
the extent that such benefits legally can be provided by
the Company; and
(v) Any other compensation or benefits which may be owed or
provided to the Executive in accordance with the terms and
provisions of any
10
<PAGE>
applicable agreements, plans and programs of or made by the
Company or Astratek including a Performance Bonus that
may be due which shall be computed in accordance with
the terms of paragraph 10.4 (ii).
10.2 The Company may terminate the Executive's employment hereunder
for Cause. If the Company terminates the Executive's employment for Cause,
the Executive shall be entitled to receive:
(i) his Base Salary at the rate in effect at the time of
such termination through the Date of Termination
(ii) any deferred compensation and any accrued vacation pay
as of the Date of Termination;
(iii) reimbursement for expenses incurred, but not yet paid
prior to such termination of employment; and
(iv) any other compensation or benefits which may be owed or
provided to the Executive in accordance with the terms
and provisions of any applicable agreements, plans and
programs of or made by the Company and/ or Astratek
through the Date of Termination.
10.3 In the event of a proposed Termination by the Company for Cause
under Section 1.3(c), the Executive shall be given written notice authorized
by a vote of at least a majority of the members of the Board of Company
(excluding Executive), that Company intends to terminate the Executive's
employment for Cause. Such notice shall specify the particular acts or acts,
or failure to act, which is or are the basis for the decision to so terminate
the Executive's Employment for Cause. The Executive shall be given the
opportunity within ten (10) calendar days of the receipt of such notice to
meet with the Board to defend such act or acts, or failure to act, and the
Executive shall be given ten (10) days after such meeting to correct such
acts or failure to act; provided that if such act or failure to act
reasonably requires a longer period to correct, Executive shall be provided
such longer period as shall be reasonably specified by the Board. If such
acts or failure to act are not correctable, or upon failure of the Executive,
within such periods provided above to correct such acts or failure to act,
the Executive's employment by the Company and Astratek shall automatically be
terminated for Cause immediately upon receipt of Notice of Termination, or as
of the date specified in the Board's Notice, respectively. Termination for
Cause under Sections 1.3(a) and (b) shall be immediate upon receipt of Notice
of Termination for Cause as provided herein.
10.4 In the event the Company seeks to terminate Executive's
Employment without Cause, or in the event the Executive effects a Voluntary
Termination of his employment for Good Reason, by giving 120 days prior
written notice to the Company of his intention to resign for Good Reason
(with a resignation for Good Reason, not being, nor shall it be deemed to be,
a breach of this Agreement), the Executive shall be entitled to all of the
rights and benefits which the Executive would be entitled to under this
Agreement as follows:
(i) at the Company's option, either a lump sum payment in
an amount equal
11
<PAGE>
to the present value of the Base Salary owed through the
end of the Term of Employment, or those payments of the
Base Salary through the Term of Employment, paid at
such times as is in accordance with the terms of this
Agreement;
(ii) any Performance Bonus pay due for the Fiscal Year in
which this Agreement is terminated, deferred
compensation and any accrued vacation pay, accrued
through the Date of Termination (calculated, pro rata,
with the Date of Termination being deemed the last day
of the Fiscal Year);
(iii) reimbursement for expenses incurred but not paid prior
to such termination of employment; any other
compensation benefits which may be owed or provided to
the Executive in accordance with the terms and provision
of any application of agreements, plans and programs of
or made by the Company or Astratek. All outstanding
warrants, options, which require a vesting period shall
immediately be vested and the Company shall be deemed to
have waived such vesting periods; and
(iv) The Executive shall be relieved from and as of the Date
of Termination from complying with the restrictions on
competitive activities set forth in Sections 7.4 (only
if the Executive is terminated by the Company without
Cause).
10.5 Company shall have the right to set off and apply against any
amount due and payable to Executive hereunder any other amount then due and
owing by Executive to Company or any Subsidiary or Affiliate thereof, whether
arising under this Agreement or otherwise.
11. Survival of Obligations.
-----------------------
Notwithstanding the expiration Term of Employment or the earlier
termination of this Agreement, any duty or obligation which has been
incurred and which has not been fully observed, performed and/or discharged,
and any right, unconditional or conditional, which has been created and has
not been fully enjoyed, enforced, and/or satisfied, shall survive such
expiration or termination until such duty or obligation has been fully
observed, performed and/or discharged and such right has been enforced,
enjoyed and/or satisfied. Additionally, the parties agree that the
obligations set forth in Sections 7 and 9 shall survive such termination or
expiration in accordance with their terms without time limitation.
12. Remedies.
--------
12.1 The parties recognize that irreparable damage will result in the
event that the provisions of Section 7 shall not be specifically enforced. If
any dispute arises concerning action in violation of any such provisions, the
parties hereto agree that an injunction may issue restraining such action
pending determination of such controversy and that no bond or other security
shall be required in
12
<PAGE>
connection therewith. Such remedy shall, however, not be exclusive and shall be
in addition to any other remedies which the parties may have.
12.2 In the event that any action, suit or other proceeding in law or
in equity is brought to enforce the covenants contained in Section 7 hereof,
or to obtain money damages for the breach thereof, and such action results in
the award of a judgment for money damages or in the granting of any
injunction or restraining order in favor of Company, all expenses (including
reasonable attorneys' fees) of Corporation in such action, suit or other
proceeding shall be paid promptly by Executive.
13. Notices.
-------
All notices or other communications hereunder shall be in writing and
shall be given by hand-delivery to the other party or by registered or
certified mail return receipt requested, postage prepaid address as follows:
If to the Executive: Alexander J. Kalpaxis (at the address above)
With a copy to: Sharon A. Blinkoff, Esq./Sweeney Lev & Blinkoff LLP,
708 Third Avenue, New York, NY 10017
If to the Company: Tadeo Holdings Inc. (at the address above)
With a copy to: Peter Rothberg, Esq., Nixon Hargrave Devans & Doyle
LLP, 437 Madison Avenue, New York, NY 10022
Or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and Communications shall be deemed to
have been given or delivered three days after the date mailed in any general
or branch United States Post Office enclosed in a registered, postpaid
envelope addressed to the address of the respective parties stated above, or
on the date of hand delivery if delivered by hand provided there is an
appropriate receipt, or one day after delivery to a nationally recognized
overnight carrier, or upon delivery if delivered by facsimile, with
confirmation back.
14. Waiver.
------
Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
15. Indemnification.
---------------
13
<PAGE>
15.1 General. The Company agrees that if the Executive is made a
-------
party or is threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director or officer of the Company, or
any other Affiliate or is or was serving at the request of the Company, or
any other Affiliate as a director, officer, member, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action
in an official capacity as a director, officer, member, employee or agent
while serving as a director, officer, member, employee or agent, he shall be
indemnified and held harmless by the Company and/or the Affiliate as
permitted by and to the fullest extent authorized by Delaware law and any
other applicable law, as the same exists or may hereafter be amended, against
all Expenses incurred or suffered by the Executive in connection therewith,
and such indemnification shall continue as to the Executive even if the
Executive has ceased to be an officer, director or agent, or is no longer
employed by the Corporation and shall inure to the benefit of his heirs,
executors and administrators.
15.2 Expenses. As used in this Agreement, the term "Expenses" shall
--------
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements and costs, reasonable attorneys' fees,
reasonable accountants' fees, and disbursements and costs of attachment or
similar bonds, reasonable investigations, and any reasonable expenses of
establishing a right to indemnification under this Agreement.
15.3 Advances of Expenses. Expenses incurred by the Executive in
--------------------
connection with any Proceeding shall be paid by the Company or the Affiliate
in advance upon request of the Executive that the Company pay such Expenses
subject to the restrictions of Delaware law.
15.4 Notice of Claim. The Executive shall give to the Company notice
---------------
of any claim made against him for which indemnity will or could be sought
under this Agreement. In addition, the Executive shall give the Company
such information and cooperation as it may reasonably require and as shall be
within the Executive's power and at such times and places as are convenient
for the Executive.
15.5 Defense of Claim. With respect to any Proceeding as to which the
----------------
Executive notifies the Corporation of the commencement thereof:
(a) The Company will be entitled to participate therein at its
own expense; and
(b) Except as otherwise provided, to the extent that it may
wish, the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the Executive (subject to Nixon Hargrave,
Devans & Doyle LLP being hereby approved as counsel). The Executive
also shall have the right to employ his own counsel in such action,
suit or proceeding and the fees and expenses of such counsel shall be
at the expense of the Company, if the Company
14
<PAGE>
fails to assume the defense of the action, as foresaid. The
Company shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Company or the
Affiliate or as to which the Executive shall have reasonably
concluded, based on opinion of counsel, that there exists a conflict
of interest between the Company or the Affiliate and the Executive in
the conduct of the defense of such action, and Executive may engage
separate counsel in those circumstances.
(c) The Company shall not be liable to indemnify the Executive
under this Agreement for any amounts paid in settlement of any action
or claim effected without its written consent. The Company shall not
settle any action or claim in any manner which would impose any
penalty or limitation on the Executive without Executive's written
consent. Neither the Corporation nor the Executive will unreasonably
withhold or delay their consent to any proposed settlement.
15.6 Non-exclusivity. The right to indemnification and the payment of
---------------
expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other
right which the Executive may have or hereafter may acquire under any
statute, provision of the certificate of incorporation or by-laws of the
Company or its Affiliates.
15.7 Directors and Officers Liability Policy. The Company agrees to
-----------------------------------------
use reasonable efforts to obtain or cause the Subsidiary to obtain a
Directors and Officers Liability Insurance Policy covering the Executive.
The Company shall use its reasonable efforts to maintain during the Term of
Employment (and for so long thereafter as is practicable in the circumstances
taking account of prevailing conditions as to availability of such insurance)
coverage to the Executive in an amount at least equal to that maintained
immediately prior to the Commencement Date.
16. Severability.
------------
The invalidity or unenforceability of any provisions hereof shall now
be in any affect the validity or enforceability of any other provision.
17. Modification.
------------
This Agreement cannot be changed, modified or discharged orally, but
only if consented to in writing by both parties.
18. Assignment.
----------
18.1 The Executive. This Agreement is personal to the Executive and
--------------
without the prior express written consent of the Company shall not be
assignable by the Executive, except that the Executive's rights to receive
any compensation or benefits under this Agreement may be transferred or
disposed of pursuant to testamentary disposition; or intestate succession.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's heirs, beneficiaries and/or legal
15
<PAGE>
representatives.
18.2 The Company. This Agreement shall inure to the benefit of and be
-----------
binding upon the Company and its successors and assigns.
19. Withholding.
-----------
The Company may withhold from any amounts payable under this Agreement such
as Federal, State or Local Income Taxes as shall be required to be withheld
pursuant to any applicable law or regulations.
20. Applicable Law.
--------------
This Agreement shall be governed by and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed
entirely within such State.
21. Contract Headings.
-----------------
All headings of the Sections of this Agreement have been inserted for
convenience of reference only, are not to be considered a part of this
Agreement, and shall in no way affect the interpretation of any of the
provisions of this Agreement.
22. Entire Agreement and Counterparts.
---------------------------------
The foregoing contains the entire agreement of the parties and supersedes
any prior understanding or agreement relating to the subject matter hereof.
This Agreement may be executed simultaneously in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
23. Representation.
--------------
The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any Agreement between the
Company and any other persons, firm, organization or any applicable laws or
regulations.
16
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement the day and
year first above written.
Tadeo Holdings Inc.
By:_____________________________
Astratek, Inc.
By:_____________________________
By:_____________________________
Alexander J. Kalpaxis
17
ASTRATEK, INC.
REPORT ON AUDIT OF FINANCIAL
STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
<PAGE>
August 6, 1998 and
October 22, 1998 as
to Note 4
INDEPENDENT AUDITORS' REPORT
Board of Directors
Astratek, Inc.
New York, New York
We have audited the accompanying balance sheets of Astratek, Inc. as of
April 30, 1998 and 1997, and the combined statements of operations and
accumulated deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, the financial position of Astratek, Inc. as of April 30, 1998 and 1997
and the results of its operations and its cash flows for the years then ended,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered a significant loss from
operations and has a working capital deficiency that raises substantial doubt
about its ability to continue as a going concern. Managements' plans in regard
to these matters are described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/S/Feldman Sherb Ehrlich & Co., P.C.
Feldman Sherb Ehrlich & Co., P.C.
<PAGE>
<TABLE>
<CAPTION>
ASTRATEK, INC.
BALANCE SHEET
APRIL 30, 1998
Years Ended
April 30,
--------------------------------
1998 1997
-------------- ---------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 4,052 $ 231,949
Accounts receivable, net 81,700 -
Prepaid expenses and other current assets 2,195 -
-------------- --------------
TOTAL CURRENT ASSETS 87,947 231,949
FURNITURE, FIXTURES AND EQUIPMENT 79,838 -
CAPITALIZED SOFTWARE COSTS, net 596,654
DEFERRED FINANCE COSTS 72,913 -
OTHER ASSETS 33,225 -
-------------- --------------
$ 870,577 $ 231,949
============== ==============
LIABILITIES AND DEFICIT IN ASSETS
CURRENT LIABILITIES:
Accounts payable $ 429,863 $ -
Accrued expenses 140,684 -
Notes payable 31,500 -
Current portion of long-term debt, net of discount 561,250 229,944
-------------- --------------
TOTAL CURRENT LIABILITIES 1,163,297 -
-------------- --------------
COMMITMENTS
DEFICIT IN ASSETS:
Preferred stock, 2,500,000 shares authorized, none issued - -
Common stock, 12,500,000 shares authorized $.001 par,
2,105,000 shares issued and outstanding 2,105 100
Additional paid in capital 67,500 -
Accumulated deficit (362,325) 1,905
-------------- --------------
TOTAL DEFICIT IN ASSETS (292,720) 2,005
-------------- --------------
$ 870,577 $ 231,949
============== ==============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASTRATEK, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Years Ended
April 30,
----------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
SALES $ 1,039,710 $ -
COST OF SALES 255,977 -
---------------- ---------------
GROSS PROFIT 783,733 -
OPERATING EXPENSES:
Selling, general and administrative 1,009,805 -
Research and development 61,008 -
Depreciation and amortization 8,356 -
---------------- ---------------
TOTAL OPERATING EXPENSES 1,079,169 -
---------------- ---------------
INCOME (LOSS) FROM OPERATIONS (295,436) -
INTEREST EXPENSE (INCOME) 68,794 (1,905)
---------------- ---------------
NET INCOME (LOSS) (364,230) 1,905
RETAINED EARNINGS - beginning of year 1,905 -
---------------- ---------------
ACCUMULATED DEFICIT - end of year $ (362,325) $ 1,905
================ ===============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASTRATEK, INC.
STATEMENT OF CASH FLOWS
Years Ended
April 30,
----------------------------------
1998 1997
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (364,230) $ 1,905
---------------- ---------------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:
Depreciation 8,356 -
Amortization of deferred finance costs and debt discount 50,837 -
Amortization of capitalized software costs 36,345 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (81,700) -
Additions to capitalize software costs (632,999) -
(Increase) decrease in prepaid expenses and other current assets (2,195) -
(Increase) decrease in deferred finance costs (105,000) -
(Increase) decrease in other assets (33,225) -
Increase (decrease) in accounts payable 429,863 -
Increase (decrease) in accrued expenses 140,684 -
---------------- ---------------
Total Adjustments (189,034) -
---------------- ---------------
CASH PROVIDED BY (USED IN) OPERATIONS (553,264) 1,905
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (88,194) -
---------------- ---------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (88,194) -
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 411,556 229,944
Proceeds from sale of common stock 2,005 100
---------------- ---------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 413,561 230,044
---------------- ---------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (227,897) 231,949
CASH AND CASH EQUIVALENTS - beginning of year 231,949 -
---------------- ---------------
CASH AND CASH EQUIVALENTS - end of year $ 4,052 $ 231,949
================ ===============
CASH PAID FOR INTEREST $ 68,794 $ -
================ ===============
CASH PAID FOR INCOME TAX $ - $ -
================ ===============
See notes to financial statements
</TABLE>
<PAGE>
ASTRATEK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation - The company's financial statements
have been presented on the basis that it is a going concern,
which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company's viability as a going concern is dependent upon
the Company obtaining additional debt or equity funding and
achieving operating profitability.
There was negative working capital of $1,058,779 at April 30,
1998 and the Company recorded a loss of $347,659 for its
fiscal year ended April 30, 1998. Additionally, the Company
was in default of its major loan.
B. Business Activity - Astratek, Inc. ("The Company") was
incorporated in the state of New York on May 12, 1995 and was
inactive until commencing operations in May 1997. The Company
develops software products and provides consulting services.
C. Equipment - Equipment is carried at cost. Depreciation and
amortization is computed using the straight-line method over
the useful lives of the various assets, which is generally
five years for office equipment, and furniture and fixtures.
Leasehold improvements are amortized over the lesser of their
useful life or the lease term.
D. Fair Value of Financial Instruments - The carrying amounts
reported in the balance sheet for cash, receivables, and
accounts payable approximate their fair market value based on
the short-term maturity of these instruments.
E. Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could
differ from those estimates. The Company's significant areas
of estimation, include estimates of the product lives and
future revenues of its software products.
F. Revenue Recognition - The Company licenses software to end
users under license agreements. The Company has recognized
revenues in accordance with Statement of Position 97-2
entitled "Software Revenue Recognition" ("SOP 97-2"), issued
by the American Institute of Certified Public Accountants
("AICPA").
<PAGE>
G. Capitalized Software Costs - The Company accounts for costs of
developing computer software for sale in accordance with
Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed", under which costs incurred
prior to the establishment of a product's technological
feasibility are expensed as research and development and costs
incurred from the point of technological feasibility are
capitalized and amortized in the greater of the relation that
revenues earned bear to total expected revenues over the life
of the product or straight-line over the life of the product.
Costs incurred for enhancements to subsequent releases are
capitalized and amortization is adjusted prospectively.
Capitalized software costs are evaluated periodically and
written down to net realizable value when necessary.
Amortization of capitalized software costs for the period
ended April 30, 1998 totaled $36,345.
2. FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment are as follows for the year
then ended:
Furniture and fixtures $ 16,262
Software 8,287
Computer equipment 63,645
Less: Accumulated
depreciation (8,356)
----------------
$ 79,838
================
3. COMMITMENTS AND CONTINGENCIES
The Company leases it's office under a non-cancelable operating lease.
Rent expense for the year ended April 30, 1998 was $113,860 The lease
commenced December 1, 1997 and expires on November 30, 2002.
Minimum rental commitment until the lease expires is as follows:
1999 $ 115,655
2000 117,898
2001 132,898
2002 132,898
4. NOTES PAYABLE
Notes payable at April 30, 1998 consist of the following:
Creditor Maturity Date Interest Rate
Officer (C) None $ 7,500
Officer (C) None 24,000
Trust (A) (B) June 1, 2000 Floating Prime 610,000
-----------------
641,500
Less: Unamortized discount (48,750)
-----------------
592,750
Less: Short Term Notes (31,500)
-----------------
Long Term Notes,
classified as
current because of
default $ 561,250
=================
(A) Agreement dated June 1, 1997, subsequently assigned to a Trust, the
beneficiaries of which are relatives of an officer, shareholder and
director, to provide maximum funding of $750,000, collateralized by
substantially all of the assets of The Company. The Company incurred a
finders fee of $105,000 in connection with obtaining this funding,
which is recorded as deferred finance costs and is being amortized over
the term of the loan agreement. The debt went into default because of
the non-payment of interest. On October 22, 1998, the Company obtained
a waiver from the holder to forbear any action through November 30,
1998. In exchange, the Company agreed to pay a fee of $10,000 and to
convert $350,000 of principal into 378,829 shares of common stock.
(B) In connection with agreeing to provide funding the assignor entered
into a Securities Purchase Agreement under which he purchased 694,650
shares of the Company's common stock for $.01 per share. The Company
has valued these shares by reference to effecting fair market rate of
interest, estimated to be 3% over prime. Accordingly a discount of
$67,500 was recorded, which is being amortized over the term of the
loan agreement. A portion of these shares were subsequently assigned to
the Trust.
(C) To be repaid out of future profits, if any, at a maximum aggregate
amount of $2,000 per month.
5. PRODUCT ROYALTY AGREEMENT
The Company has entered into a product royalty agreement with a
marketer of computer software. Earned prepaid royalties of $210,000
have been received to date. The agreement requires that prepaid
royalties are credited to earned sales royalties $.75 for every $1.00
earned until the credit is exhausted.
6. ASSET PURCHASE AGREEMENT
In August 1997, The Company executed an agreement with Bankers Trust,
under which the Company acquired the rights to certain software which
was under development by certain principals of the Company in their
capacity as employees of Bankers Trust. In connection with the
agreement, the Company is obligated to pay to Banker's Trust 10% of its
revenues from Visual Audit for Excel, up to a maximum of $250,000, of
which approximately $21,000 is accrued at April 30, 1998. The
consideration to Banker's Trust by the Company was $26,929 in cash and
a payable of $100,000, which is included in accrued expenses.
7. INCOME TAXES
The Company follows SFAS 109 "Accounting for Income Taxes". At April
30, 1998, The Company had deferred tax assets aggregating approximately
$384,000 related to net operating loss carry forwards of approximately
$960,000 expiring in the year 2013. The Company had deferred tax
liabilities of approximately $239,000 related to capitalized software
costs. At April 30, 1998, the net deferred tax asset of $145,000 is
reserved by a valuation allowance.
8. MERGER AGREEMENT
In August 1998, the Company entered into a Merger Agreement, whereby
the Company would be acquired by a publicly traded Company.
ASTRATEK, INC.
UNAUDITED FINANCIAL STATEMENTS
FOR THE FOUR MONTHS ENDED
AUGUST 31, 1998
<PAGE>
October 22, 1998
Board of Directors
Astratek, Inc.
New York, New York
We have compiled the accompanying balance sheet of Astratek, Inc. as of
August 31, 1998, and the related statements of operations and accumulated
deficit and cash flows for the four months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles. If the omitted disclosures
were included in the financial statements, they might influence the user's
conclusions about the Company's financial condition. Accordingly, the financial
statements are not designed for those who are not informed about such matters.
/S/Feldman Sherb Ehrlich & Co., P.C.
Feldman Sherb Ehrlich & Co., P.C.
<PAGE>
<TABLE>
<CAPTION>
ASTRATEK, INC.
BALANCE SHEET
AUGUST 31, 1998
(Unaudited - see accountants' compilation report)
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 74,577
Accounts receivable, net 135,821
Prepaid expenses and other current assets 3,293
--------------
TOTAL CURRENT ASSETS 213,690
FURNITURE, FIXTURES AND EQUIPMENT 75,100
CAPITALIZED SOFTWARE COSTS, net 774,342
DEFERRED FINANCE COSTS 61,245
OTHER ASSETS 33,225
--------------
$ 1,157,601
==============
LIABILITIES AND DEFICIT IN ASSETS
CURRENT LIABILITIES:
Accounts payable $ 276,568
Accrued expenses 200,226
Notes payable 182,500
Loans payable 300,000
Current portion of long-term debt, net of discount 610,750
--------------
TOTAL CURRENT LIABILITIES 1,570,045
--------------
COMMITMENTS
DEFICIT IN ASSETS:
Preferred stock, 2,500,000 shares authorized, none issued -
Common stock, 12,500,000 shares authorized $.001 par,
2,105,000 shares issued and outstanding 2,105
Additional paid in capital 67,500
Accumulated deficit (482,048)
--------------
TOTAL DEFICIT IN ASSETS (412,443)
--------------
$ 1,157,601
==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASTRATEK, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOUR MONTHS ENDED AUGUST 31, 1998
(Unaudited - see accountants' compilation report)
<S> <C>
SALES $ 467,916
COST OF SALES 172,111
----------------
GROSS PROFIT 295,805
OPERATING EXPENSES:
Selling, general and administrative 302,733
Research and Development 59,556
Depreciation 5,598
----------------
TOTAL OPERATING EXPENSES 367,887
----------------
LOSS FROM OPERATIONS (72,082)
INTEREST EXPENSE 47,641
----------------
NET LOSS (119,723)
ACCUMULATED DEFICIT - beginning of period (362,325)
----------------
ACCUMULATED DEFICIT - end of period $ (482,048)
================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ASTRATEK, INC.
STATEMENT OF CASH FLOWS
FOUR MONTHS ENDED AUGUST 31, 1998
(Unaudited - see accountants' compilation report)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $ (119,723)
----------------
Adjustments to reconcile net loss to net cash
provided by (used in) operations:
Depreciation 5,598
Amortization of deferred finance costs and debt discount 19,168
Amortization of capitalized software costs 55,801
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (54,122)
Additions to capitalize software costs (233,488)
(Increase) decrease in prepaid expenses and other current assets (1,098)
(Increase) decrease in deferred finance costs -
(Increase) decrease in other assets -
Increase (decrease) in accounts payable (48,295)
Increase (decrease) in accrued expenses 59,542
----------------
Total Adjustments (196,893)
----------------
CASH PROVIDED BY (USED IN) OPERATIONS (316,616)
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (860)
----------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (860)
----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 88,000
Proceeds from loan 300,000
----------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 388,000
----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 70,525
CASH AND CASH EQUIVALENTS - beginning of period 4,052
----------------
CASH AND CASH EQUIVALENTS - end of period $ 74,577
================
</TABLE>
TADEO HOLDINGS, INC. AND SUBSIDIARIES/ASTRATEK, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed financial statements
have been prepared to show the effects of the October 27, 1998 acquisition of
Astratek, Inc. ("Astratek") by Tadeo Holdings, Inc. through a share exchange of
2,294,900 shares of the Company's common stock in exchange for all of the issued
common stock of Astratek. The acquisition is accounted for as a pooling of
interests business combination.
The following unaudited pro forma consolidated balance sheet presents
the pro forma financial position of the Company at June 30, 1998 as if the
acquisition of Astratek had occurred on such date. Included is an adjustment to
record the elimination of Astratek's previous shares and the issuance of the
Company's shares to former Astratek shareholders.
The unaudited pro forma consolidated statements of operations for the
years ended June 30, 1998 and 1997 reflect the combined results of the Company
and Astratek as if the acquisition had occurred on July 1, 1996.
The unaudited pro forma consolidated statements of operations do not
necessarily represent actual results that would have been achieved had the
companies been together as of July 1, 1996, nor may they be indicative of future
operations. These unaudited pro forma consolidated financial statements should
be read in conjunction with the Company's historical financial statements and
notes thereto.
<PAGE>
<TABLE>
<CAPTION>
TADEO HOLDINGS, INC. AND SUBSIDIARIES/ASTRATEK,INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
Tadeo Holdings, Inc.
and Subsidiaries Astratek, Inc.
Balance at Balance at Pro Forma
June 30, April 30, Adjustments
------------------- ----------------- ---------------
1998 1998 DR (CR) Total
------------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 2,406,045 $ 4,052 $ $ 2,410,097
Accounts receivable, net - 81,700 81,700
Interest receivable 276,005 - 276,005
Note receivable - officer 162,627 - 162,627
Prepaid expenses and other current assets - 2,195 2,195
-------------------- ----------------- ----------------
TOTAL CURRENT ASSETS 2,844,677 87,947 2,932,624
LONG TERM NOTES RECEIVABLE 6,000,000 - 6,000,000
PROPERTY AND EQUIPMENT 10,326 79,838 90,164
CAPITALIZED SOFTWARE COSTS, net - 596,654 596,654
DEFERRED FINANCE COSTS - 72,913 72,913
DEPOSITS AND OTHER ASSETS 9,834 33,225 43,059
--------------------- ----------------- --------------- ----------------
$ 8,864,837 $ 870,577 $ - $ 9,735,414
===================== ================= =============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 41,269 $ 570,547 $ $ 611,816
Notes payable 85,760 31,500 117,260
Current portion of long-term debt, net
of discount - 561,250 561,250
State audit reserve 700,000 - 700,000
Accrued termination costs, short-term 784,053 - 784,053
--------------------- ----------------- ----------------
TOTAL CURRENT LIABILITIES 1,611,082 1,163,297 2,774,379
ACCRUED TERMINATION COSTS, long-term 280,209 - 280,209
LONG-TERM NOTES PAYABLE , net of current portion 23,260 - 23,260
REDEEMABLE PREFERRED STOCK, Series A 1,219,141 - 1,219,141
STOCKHOLDERS' EQUITY:
Preferred Stock, Series B Cumulative
Convertible, $.0001 par value, 10,000,000
shares authorized, 1,000,000 shares
issued and outstanding 505,000 - 505,000
Common stock, $ .0001 par value,
100,000,000 shares authorized,
9,724,579 shares issued and outstanding -
(actual) and 12,019,479 (pro forma) 972 2,105 (1) (1,875) 1,202
Additional paid-in capital 14,045,838 67,500 (1) 1,875 14,115,213
Accumulated deficit (8,820,665) (362,325) (9,182,990)
--------------------- ----------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 5,731,145 (292,720) 5,438,425
--------------------- ----------------- ----------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,864,837 $ 870,577 $ - $ 9,735,414
==================== ================= =========== ===============
See notes to pro forma financial statements.
</TABLE>
<TABLE>
<CAPTION>
TADEO HOLDINGS, INC. AND SUBSIDIARIES/ASTRATEK, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Tadeo Holdings, Inc.
and Subsidiaries Astratek, Inc.
Year ended Year ended Pro Forma
June 30, April 30, Adjustments
---------------- --------------- ----------------
1997 1997 DR (CR) Total
---------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
REVENUES $ - $ $ $ -
COST OF GOODS SOLD - -
---------------- -------------- -------------
GROSS PROFIT - - -
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 836,894 (1) 160,000 996,894
---------------- -------------- -------------
OPERATING LOSS (836,894) - (996,894)
INTEREST INCOME (EXPENSE) - 1,905 1,905
---------------- -------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES (836,894) 1,905 (994,989)
PROVISION FOR INCOME TAXES - - -
---------------- -------------- ---------------- -------------
LOSS FROM CONTINUING OPERATIONS $ (836,894) $ 1,905 $ 160,000 $ (994,989)
================ ============== ================ =============
LOSS FROM CONTINUING OPERATIONS PER SHARE $ (0.10) $ (0.10)
================ =============
WEIGHTED AVERAGE SHARES 8,084,278 2,294,900 10,379,178
================ ================ =============
See notes to pro forma financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TADEO HOLDINGS, INC. AND SUBSIDIARIES/ASTRATEK, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Tadeo Holdings, Inc.
and Subsidiaries Astratek, Inc.
Year ended Year ended Pro Forma
June 30, April 30, Adjustments
-------------------- ------------- -----------------
1998 1998 DR (CR) Total
-------------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ - $ 1,039,710 $ $ 1,039,710
COST OF GOODS SOLD - 255,977 255,977
-------------------- -------------- --------------
GROSS PROFIT - 783,733 783,733
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,160,761 1,079,169 (1) 70,000 2,309,930
-------------------- -------------- --------------
OPERATING LOSS (1,160,761) (295,436) (1,526,197)
INTEREST INCOME (EXPENSE) 536,523 (68,794) 467,729
-------------------- -------------- --------------
LOSS BEFORE INCOME TAXES (624,238) (364,230) (1,058,468)
PROVISION FOR INCOME TAXES - - - -
-------------------- -------------- ---------------- --------------
LOSS FROM CONTINUING OPERATIONS $ (624,238) $ (364,230) $ 70,000 $ (1,058,468)
==================== ============== ================ ==============
LOSS FROM CONTINUING OPERATIONS PER SHARE $ (0.06) $ (0.09)
==================== ==============
WEIGHTED AVERAGE SHARES 9,724,579 2,294,900 12,019,479
==================== ================ ==============
See notes to pro forma financial statements.
</TABLE>
<PAGE>
TADEO HOLDINGS, INC. AND SUBSIDIARIES/ASTRATEK, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
A. The following unaudited pro-forma adjustments are included in the
accompanying unaudited pro forma consolidated balance sheet at June
30, 1998:
(1) To record the acquisition of all of the issued stock of Astratek
for 2,294,900 shares of the Company's common stock, with the
acquisition accounted for as a pooling of interests business
combination.
B. The following pro-forma adjustments are included in the accompanying
unaudited pro forma consolidated statements of operations for the years
ended June 30, 1998 and June 30, 1997:
(1) To record the increased salary level per the employment agreement
with the officer of Astratek to a salary level of $160,000 per year.
(2) To reflect the additional shares issued in weighted average shares
outstanding.
.
