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 (Date of earliest event reported): February 18, 2000
XCEL MANAGEMENT, INC.
----------------------
(Exact name of Registrant as specified in its Charter)
UTAH 0-22814 87-0363613
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(State or other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File No.) Identification No.)
1101 Broadway Plaza
Tacoma, Washington 98401
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number including Area Code: (253) 383-1085
781 East 2300 South, Bountiful, Utah 84010
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Former name, former address and former fiscal year,
if changed since last report.
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Item 1. Changes in Control of Registrant.
On February 18, 2000, Xcel Management, Inc. (the "Company" or the
"Registrant") completed an Asset Purchase Agreement (the "Agreement") with
Insynq, Inc. ("Insynq"), a privately-held Washington corporation, under the
terms of which the Registrant acquired substantially all of the assets of
Insynq, and assumed substantially all of the obligations of Insynq, in
exchange for the issuance of a total of 7,604,050 shares of restricted common
stock of the Company which were distributed to the shareholders of Insynq in a
liquidating dissolution of Insynq. The terms of the Asset Purchase Agreement
were negotiated between the Registrant and its representatives, and Insynq and
its representatives, and were not based on an appraisal or any other formal
method of valuation of the respective companies or businesses.
As a result of the completion of this transaction, the Registrant now
has a total of approximately 9,404,050 shares issued and outstanding, of which
7,604,050 shares, or 81% of the issued and outstanding common stock, are held
by the former Insynq shareholders. In connection with the consummation of the
Agreement, Dallin Bagley and Steve Rippon, officers and directors of the
Registrant, resigned as officers and directors, and were replaced as
directors, seriatum, by John Gorst and Carroll Benton, who were officers,
directors and the principal shareholders of Insynq. In addition, the board of
directors was expanded to three individuals, and Mr. David Selmon was elected
as an additional director of the Registrant. On February 19, 2000, John
Gorst was elected by the new board of directors as the Chairman of the Board
and Chief Executive Officer of the Company, and M. Carroll Benton was elected
as the Secretary/Treasurer of the Company.
In connection with the completion of the transaction, Mr. Gorst and Ms.
Benton were issued a total of 3,609,418 and 1,946,956 shares, respectively, of
the Company's restricted common stock, as a pro rata distribution of their
ownership interest in Insynq. As a result, Mr. Gorst now holds approximately
38%, and Ms. Benton now holds approximately 21%, of the issued and outstanding
common stock of the Company following the transaction. Mr. Gorst and Ms.
Benton together hold an aggregate of 5,556,374 shares, or approximately 59% of
the issued and outstanding common stock of the Company. Therefore, as a
result of the completion of the Agreement, Mr. Gorst and Ms. Benton may be
deemed to be in control of the Registrant. Mr. Selmon is not a shareholder of
the Company.
For details regarding the terms of the Agreement and the assets and
business acquired, see "Item 2. Acquisition or Disposition of Assets," below.
Item 2. Acquisition or Disposition of Assets.
General
On January 26, 2000, the Registrant entered into an Asset Purchase
Agreement with Insynq, a Washington corporation. The terms of the Agreement
were substantially completed on February 18, 2000. Under the terms of the
Agreement, the Registrant acquired substantially all of the assets of Insynq,
and assumed substantially all of the obligations of Insynq, in exchange
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for the issuance by the Company of a total of 7,604,050 shares of restricted
common stock of the Company, to the Insynq shareholders pro rata in a
liquidating distribution. As a result of the transaction, the Company now has
a total of approximately 9,404,050 shares issued and outstanding, of which
7,604,050 shares, or approximately 81% are now held by the former Insynq
shareholders. In connection with the Agreement, Insynq obtained approval of
the sale of its assets by its shareholders at a duly called and convened
shareholders' meeting.
As a result of the Agreement, the Registrant has acquired essentially all
of the assets, tangible and intangible, of Insynq. These assets include
computer hardware and software, related equipment, furniture and fixtures,
proprietary technology developed by Insynq, described below, all contractual
rights including capitalized lease equipment and other leasehold rights,
tradenames and trademarks and all client lists and marketing data and
materials, cash and cash equivalents, accounts receivable, inventory, work in
progress and related assets. As of October 31, 1999, Insynq reported in an
audited balance sheet as of that date, total assets of $1,068,829. As
indicated below, the asset considered most valuable by Insynq and the
Registrant in completing the Agreement, is Insynq's proprietary data utility
services system that was designed to offer enhanced technological computer
processing and communication capabilities.
In connection with the Agreement, the Registrant has assumed essentially
all of the obligations and liabilities of Insynq, including capital lease
obligations on equipment (approximately $587,517 as of October 31, 1999),
accounts payable, accrued payroll and other business taxes, notes payable, and
other liabilities. As of October 31, 1999, total liabilities were
$787,806.67. In addition to such liabilities, the Registrant has agreed to
assume all other contractual obligations of Insynq. In that regard, it is
anticipated that the Registrant will enter into employment contracts with
James R. Leigh III, Carey M. Holladay and Donald L. Manzano, key employees, on
substantially the same terms as the employment contracts between each of said
individuals and Insynq. In addition, the Company has agreed to assume all
equipment leases, leasehold obligations covering office space utilized by
Insynq, all consulting contracts, and all other contract obligations.
Finally, at the time of completion of the Insynq asset acquisition, Insynq had
outstanding to various shareholders, a number of warrants and options,
entitling the holders to purchase shares up to a total of 6,220,300 shares of
restricted common stock of Insynq. The Registrant has agreed to convert the
outstanding Insynq warrants and options, to substantially equivalent warrants
and options to purchase restricted shares of common stock of the Registrant,
subject to appropriate compliance with state and federal securities laws.
Following such conversion, it is anticipated the Registrant will have
outstanding warrants and options to purchase a total of approximately
3,110,150 shares of common stock, at exercise prices of between $1.00 and
$15.00 per share.
New Business of Registrant
As a result of the acquisition by the Company of the assets of Insynq,
the Company will continue the business of Insynq. The Company has been
assigned the tradename "InsynQ," which it intends to use as a tradename and
d/b/a in its business. The Registrant is currently considering whether it
will undertake efforts to call a meeting of the Registrant's shareholders to
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amend the Company's articles of incorporation to make a formal corporate name
change to "Insynq, Inc.,"or such similar name as determined by the board of
directors.
Insynq is a provider of computer hardware, software, computer/internet
related telephonic requirements and services, access to web services of all
kinds, access to internet marketing assistance and related equipment and
services. It offers these services as an integrated whole; in other words,
Insynq is an on-line provider of hardware and software, together with related
support services, on a rental, fee or sales basis, with its best margins
arising from fee services. Insynq was incorporated in August, 1998, and,
therefore, it is in the development stage with a limited history of
operations. During the ten (10) months ended October 31, 1999, Insynq had
total revenue of $91,075, with operating losses for such ten month period of
$128,220.
Insynq targets small businesses and high-end home offices for the sale
of hardware and software and access to related services. It provides these
not in a retail setting, but by attempting to convince customers and
subscribers to adopt a cost effective on-line solution to building and to
maintain an information technology system through the adoption of a
"server-based" computing as an alternative to both local area networks
(LAN's), and traditional client/server implementations. Insynq will
concentrate on the small business and high-end home office user ("SOHO"), and
markets itself as an "internet utility company" that can provide
cost-effectively all of the computer software, hardware, telecommunication and
internet needs for the SOHO markets.
The Company's offices and headquarters, consisting of approximately 1,800
square feet, are located at 705 South 9th, Suite 305, Tacoma, Washington
98405. In approximately the end of March, 2000, the Company will be moving to
new space, consisting of approximately 18,000 square feet, located at 1101
Broadway Plaza, Tacoma, Washington 98401. The Company has assumed Insynq's
leasehold obligations at these locations. The Company has also assumed
Insynq's leasehold obligation covering office space located at 3017 Douglas
Boulevard, Suite 300, Roseville, California, consisting of approximately 2,000
square feet.
The Company has approximately 30 employees, formerly Insynq employees,
consisting of the Company's management, clerical, approximately 10 to12
technical people, and an additional 10 marketing and sales personnel.
Management
As a result of the consummation of the Asset Purchase Agreement, the
Registrant has new management consisting of John P. Gorst, Chief Executive
Officer, Chairman and a director; M. Carroll Benton, Secretary/ Treasurer and
a director; and David D. Selmon, a director. A brief biographical description
of each of these individuals is set forth below.
John P. Gorst was the co-founder of Insynq and has directed all
development and business efforts for Insynq. Mr. Gorst has over eleven (11)
years experience in founding entrepreneurial technology ventures, specifically
in the development of software and data
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services for business. His prior experience includes serving as Vice
President and General Manager of Interactive Information Systems Corp., a
business based in the Pacific Northwest Region, and a training/IS consulting
business in conjunction with Nynex Business Centers of New York. Mr. Gorst's
primary responsibilities will be as Chairman of the Board and Chief Executive
Officer. In such capacities, Mr. Gorst will be responsible for directing
company strategy, and positioning the Registrant in the marketing by forging
strategic business alliances. It is also anticipated that Mr. Gorst will
also serve as the Company's spokesperson at tradeshows, press conferences and
industry meetings. Mr. Gorst earned a bachelors degree in business
administration from Harrington University, and expects to complete his masters
in business administration degree in the first quarter of 2000.
M. Carroll Benton has been with Insynq since its inception in 1997, and
is a co-founder of Insynq. She has directed and managed the fiscal
responsibilities of Insynq. Ms. Benton's early career spanned both the public
and private sectors working largely with the banking system and higher
education institutions, assisting in the development and deployment of
computer systems. Ms. Benton has managed a 13 state insurance brokerage firm
and has been a consultant to the small to medium business markets via
accounting system design, support and business practice analysis. She has
taught undergraduate accounting courses at several Puget Sound colleges and
universities. With an in-depth understanding of Insynq's accounting
infrastructure and vendor leases, Ms. Benton directs Insynq's current
financial practices. Formerly with Benton & Benton, a certified public
accounting firm, for a period of over twenty (20) years, Ms. Benton has over
twenty five (25) years of financial expertise to the business.
David D. Selmon, age 43, has been employed as an accountant and tax
professional since approximately 1979. Mr. Selmon is a certified tax
professional. He graduated from the University of Houston, magna cum laude,
in 1983, with a bachelor's degree in accounting and business administration.
Item 6. Resignations of Registrant's Directors.
In connection with the consummation of the Asset Purchase Agreement, on
February 18, 2000, described under Item 1 and Item 2 above, Steve Rippon and
Dallin Bagley have resigned as officers and directors of the Corporation.
Item 7. Financial Statements and Exhibits.
a) Financial Statements of Business Acquired.
Pursuant to subparagraphs (a)(4) and (b)(4) of Item 7 of Form 8-K, the
financial statements of Insynq and the pro forma financial information
required under Item 7, shall be provided by amendment to this Form 8-K no
later than sixty (60) after the date of filing of this initial Form 8-K.
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b) Exhibits
The following exhibits are filed as part of this report:
Exhibit No. SEC Ref. No. Description/Title of Document
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1 EX - 2 Asset Purchase Agreement
2 EX- 17 Director Resignations
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
REGISTRANT:
XCEL MANAGEMENT, INC.
Date: March 3, 2000 By: /s/ John Gorst
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John Gorst, President
ASSET PURCHASE AGREEMENT
Dated as of January 26, 2000, by and between
XCEL MANAGEMENT, INC.,
a Utah corporation,
and INSYNQ, INC.,
a Washington corporation
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TABLE OF CONTENTS
Page
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RECITALS ................................................... 1
AGREEMENT.................................................. 1
ARTICLE I
DEFINITIONS ............................................ 1
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase and Sale of Assets ................... 5
2.2 Assumption of Liabilities..................... 5
2.3 Issuance of Shares ............................ 5
2.4 The Closing ................................... 5
2.5 Deliveries at the Closing ..................... 5
ARTICLE III
DIRECTORS AND OFFICERS OF XCEL
3.1 Directors ..................................... 5
3.2 Xcel Officers................................. 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INSYNQ
4.1 Existence; Good Standing; Corporate Authority;
Compliance with Law............................ 6
4.2 Authorization, Validity and Effect of Agreements 7
4.3 Other Interests ................................ 7
4.4 No Violation ................................... 7
4.5 Financial Statements ........................... 8
4.6 Absence of Undisclosed Liabilities ............. 8
4.7 Absence of Certain Changes or Events............ 8
4.8 No Contracts, Etc............................... 10
4.9 Litigation...................................... 11
4.10 Authorization .................................. 11
4.11 Taxes .......................................... 11
4.12 Proprietary Rights ............................. 12
4.13 ERISA .......................................... 12
4.14 Fees ........................................... 12
4.15 Books and Records .............................. 12
4.16 Disclosure ..................................... 12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF XCEL
5.1 Existence; Good Standing; Corporate Authority;
Compliance with Law............................. 13
5.2 Authorization, Validity and Effect of Agreements 13
5.3 Capitalization............................... . 14
5.4 Other Interests .............................. 14
5.5 No Violation ................................. 14
5.6 SEC Documents ................................ 15
5.7 Financial Statements......................... 15
5.8 Absence of Undisclosed Liabilities ............. 16
5.9 Absence of Certain Changes or Events .......... 16
5.10 No Contracts, Etc ............................ 18
5.11 Authorization................................ 18
5.12 Litigation ................................... 18
5.13 Taxes......................................... 19
5.14 Proprietary Rights ........................... 19
5.15 ERISA........................................ 19
5.16 Fees......................................... 20
5.17 Books and Records ............................ 20
5.18 Disclosure ................................... 20
5.19 Purchase Accounting Treatment................ 20
5.20 No Obligations at the Closing ............... 20
ARTICLE VI
INTERIM OPERATING COVENANTS OF INSYNQ
6.1 Operations.................................... 20
6.2 Meeting of Stockholders; Compliance with
Washington Corporate Law ..................... 21
6.3 No Change.................................... 21
6.4 Access; Confidential Information............. 22
6.5 Obtain Consents .............................. 22
6.6 Exclusivity .................................. 22
ARTICLE VII
INTERIM OPERATING COVENANTS OF XCEL AND SUBSIDIARY
7.1 Operations ................................... 23
7.2 Compliance with Utah Corporate Law............ 23
7.3 No Change..................................... 23
7.4 Access; Confidential Information ............. 24
7.5 Obtain Consents .............................. 25
7.6 Exclusivity ................................... 25
ARTICLE VIII
ADDITIONAL COVENANTS OF THE PARTIES
8.1 Filings; Other Action........................ 25
8.2 Further Action ............................... 25
8.3 Expenses ..................................... 26
8.4 Brokers and Finders Fees...................... 26
8.5 Notices of Certain Events .................... 26
8.6 Completion of Due Diligence .................. 26
8.7 Preparation of Schedules and Exhibits ........ 26
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Conditions to Each Party's Obligations to
Effect this Agreement...................... 27
9.2 Conditions to Obligation of Insynq to
Effect this Agreement ..................... 28
9.3 Conditions to Obligation of Xcel to Effect
this Agreement.......................... 29
ARTICLE X
TERMINATION
10.1 Termination by Mutual Consent................ 30
10.2 Termination by Either Party.................. 30
10.3 Effect of Termination and Abandonment ....... 30
10.4 Extension; Waiver............................ 30
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices.................................... 31
11.2 Assignment, Binding Effect................. 31
11.3 Entire Agreement........................... 32
11.4 Amendment .................................. 32
11.5 Subsequent Actions ......................... 32
11.6 Governing Law .............................. 32
11.7 Counterparts ............................... 32
11.8 Headings .................................. 32
11.9 Interpretation.............................. 32
11.10 Waivers .................................... 33
11.11 Attorneys' Fees ............................ 33
11.12 Survival ................................... 33
11.13 Incorporation of Exhibits................... 33
11.14 Severability ............................... 33
11.15 Enforcement of Agreement ................... 33
11.16 Consent.................................... 34
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
January __, 2000, among Xcel Management, Inc. ("Xcel" or "Buyer"), a Utah
corporation, and Insynq, Inc., a Washington corporation ("Insynq"), upon the
following premises:
RECITALS
A. Xcel is an inactive corporation whose shares are quoted on the
Nasdaq Electronic Bulletin Board under the symbol "XCLL."
B. Insynq is a privately held corporation in the business of
developing and marketing a proprietary data utility services system for use in
the internet industry. Insynq owns certain proprietary technology and other
property and assets, and related tradenames, and trademarks, which are used in
the operation of Insynq's business.
C. This Agreement provides for the sale by Insynq, and the purchase
by Xcel, of all such assets, in exchange for voting shares of Xcel, all of the
terms and conditions as hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and of the
provisions, representations, warranties, covenants and agreements contained
herein and other good and valuable consideration, the parties agree as
follows.
ARTICLE I
DEFINITIONS
"Acquired Assets" means all right, title, and interest in and to all of
the assets of Insynq, including all of its (a) real property, leaseholds and
subleaseholds therein, improvements, fixtures, and fittings thereon, and
easements, rights-of-way, and other appurtenants thereto (such as appurtenant
rights in and to public streets), (b) tangible personal property (such as
machinery, equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions, (d) leases, subleases, and rights
thereunder, (e) agreements, contracts, indentures, mortgages, instruments,
Security Interests, guaranties, other similar arrangements, and rights
thereunder, (f) accounts, notes, and other receivables, (g) securities, (h)
claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set off, and rights of recoupment (including any
such item relating to the payment of Taxes), (i) franchises, approvals,
permits, licenses, orders, registrations, certificates, variances, and similar
rights obtained from governments and governmental agencies, (j) books,
records, ledgers, files, documents, correspondence, lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials, (k) Cash,
and (1) rights in and with respect to the assets associated with any employee
benefit plans; provided, however, that the Acquired Assets shall not include
(i) the corporate charter, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute
books, stock transfer books, blank stock certificates, and other documents
relating to the organization, maintenance, and existence of Insynq as a
corporation or (ii) any of the rights of Insynq under this Agreement (or under
any side agreement between Insynq on the one hand and Xcel on the other hand
entered into on or after the date of this Agreement).
"Affiliated Group" means any affiliated group within the meaning of Code
Sec. 1504(a) (or any similar group defined under a similar provision of state,
local, or foreign law).
"Assumed Liabilities" means (a) all Liabilities of Insynq set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto),
(b) all Liabilities of Insynq which have arisen after the Most Recent Fiscal
Month End in the Ordinary Course of Business (other than any Liability
resulting from, arising out of, relating to, in the nature of, or caused by
any breach of contract, breach of warranty, tort, infringement, or violation
of law), (c) all Liabilities of Insynq for unpaid Taxes with respect to
periods prior to the Closing for which the return is due after the Closing up
to an amount computed in accordance with the past custom and practice of
Insynq and its Subsidiaries in filing their Tax Returns, (d) all obligations
of Insynq under the agreements, contracts, leases, licenses, and other
arrangements referred to in the definition of Acquired Assets either (i) to
furnish goods, services, and other non-Cash benefits to another party after
the Closing or (ii) to pay for goods, services, and other non-Cash benefits
that another party will furnish to it after the Closing, (e) all Liabilities
and obligations of Insynq under any Employee Benefit Plans, (f) all
outstanding options, warrants, and employment agreements of Insynq, and (g)
all other Liabilities and obligations of Insynq set forth in an appendix to
the Insynq Schedule under an express statement to the effect that the
definition of Assumed Liabilities will include the Liabilities and obligations
so disclosed.
"Basis" means any part or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"Closing" has the meaning set forth in Section 2.4 below.
"Closing Date" has the meaning set forth in Section 2.4 below.
"Employee Benefit Plan" means any (a) non-qualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Loss Account" has the meaning set forth in Treas. Reg. Section
1.1502-19.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statement" has the meaning set forth in Section 4.7 below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks, service
marks, trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith, (d)
all mask works and all applications, registrations, and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals), and (h) all
copies and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4.7 below.
"Most Recent Fiscal Month End" means the fiscal quarter ended December
31, 1999.
"Most Recent Fiscal Year End" means the year ended December 31, 1999.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable (or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings), (c) purchase money liens and liens securing rental payments
under capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Insynq Stockholder" means any person who or which holds or will hold,
prior to Closing, any Insynq Shares.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, Xcel agrees to purchase from Insynq, and Insynq
agrees to sell, transfer, convey, and deliver to Xcel, all of the Acquired
Assets at the Closing for the consideration specified below in this Article 2.
2.2 Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Xcel agrees to assume and become responsible for
all the Assumed Liabilities at the Closing. Xcel will not assume or have any
responsibility, however, with respect to any other obligation or Liability of
Insynq not included within the definition of Assumed Liabilities.
2.3 Issuance of Shares. In exchange for the agreement to sale the
Acquired Assets set forth in Section 2.1 above, Xcel agrees to issue to the
Insynq stockholders, a total of 7,604,050 shares of restricted common stock.
2.4 The Closing. The closing of the transaction contemplated by this
Agreement (the "Closing"), shall take place at the offices of Insynq, 709
South 9th Street, Suite 305, Tacoma, Washington, on or before February, ,
2000, commencing at 9:00 a.m. local time on the second business day following
the satisfaction or waiver of all conditions to the obligations of the Parties
to consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself) or
such other date as the Parties may mutually determine (the "Closing Date");
provided, however, that the Closing Date shall be no earlier than February ,
2000.
2.5 Deliveries at the Closing. At the Closing, (i) Insynq will
deliver to Xcel the various certificates, instruments, and documents referred
to in Section 9.2(e) below; (ii) Xcel will deliver to Insynq the various
certificates, instruments, and documents referred to in Section 9.3(e) below;
(iii) Insynq will execute, acknowledge (if appropriate), and deliver to Xcel
(A) assignments (including real property and Intellectual Property transfer
documents) in the forms attached hereto as Exhibit A and (B) such other
instruments of sale, transfer, conveyance, and assignment as Xcel and its
counsel reasonably may request; and (iv) Xcel will execute, acknowledge (if
appropriate), and deliver to Insynq (A) an assumption in the form attached
hereto as Exhibit B and (B) such other instruments of assumption as Insynq and
its counsel reasonably may request.
ARTICLE III
DIRECTORS AND OFFICERS OF XCEL
3.1 Directors. Following the Closing, Xcel shall take such action
as is necessary to expand its board of directors to four (4) members and
appoint John Gorst and M. Carroll Benton as additional directors. The
Directors shall serve, until their successors are duly appointed or elected in
accordance with applicable law. Xcel shall take all actions necessary to
nominate the Directors for election.
3.2 Xcel Officers. At the Closing, Xcel shall take such actions as
are necessary to elect as the officers of Xcel effective immediately following
the Closing Date:
Name Office
- ---------- -----------
John Gorst Chief Executive Officer and Chairman of the Board
Donald L. Manzano, Sr. President and Chief Operating Officer
M. Carroll Benton Secretary/Treasurer
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INSYNQ
Insynq represents and warrants to Xcel as of the date of this Agreement
as follows:
4.1 Existence; Good Standing; Corporate Authority; Compliance with
Law.
(a) Insynq is a corporation duly incorporated, validly
existing, and in good standing (including tax good standing) under the laws of
the State of Washington. Insynq is duly licensed or qualified to do business
as a foreign corporation and is in good standing under the laws of the
jurisdictions listed in Schedule 4.1, which list contains all jurisdictions in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary, in each case
except as would not, individually or in the aggregate, reasonably be expected
to have an adverse effect (as defined in subparagraph (c) below).
(b) Insynq has all requisite corporate power and authority to
own, operate, and lease its properties and carry on its business as presently
conducted and as proposed to be conducted.
(c) Insynq is not in violation of any law, ordinance,
governmental rule or regulation to which it or any of its properties or assets
is subject, except as would not, individually or in the aggregate, reasonably
be expected to have an Insynq Material Adverse Effect, nor is Insynq in
violation of any order, judgment, or decree of any court, governmental
authority, or arbitration board or tribunal. An "Insynq Material Adverse
Effect" means a material adverse change in the business, properties, financial
condition, results of operations, or prospects of Insynq, taken as a whole.
(d) The copies of the Articles of Incorporation and Bylaws of
Insynq, which have been delivered to Xcel, include any and all amendments made
thereto at any time prior to the date of this Agreement and are true, correct,
and complete.
(e) Insynq's corporate minute books are accurate as to their
content and include therein the Articles of Incorporation and Bylaws with any
amendments thereto. The meetings of the directors or stockholders referred to
in the corporate minute books were duly called and held. The signatures
appearing on all documents contained in the corporate minute books are the
true signatures of the persons purporting to have executed the same and no
minutes of meetings or written consents of the directors or stockholders of
Insynq are omitted from such minute books that would contain any resolutions
or other actions that would be inconsistent with any of the representations
and warranties contained in Article IV hereof or prevent or limit any of the
transactions contemplated by this Agreement. Schedule 4.1 sets forth a true
and complete list of the names of all directors of Insynq and the names and
offices held of all officers of Insynq and each subsidiary as the date
hereof.
4.2 Authorization, Validity and Effect of Agreements.
(a) Insynq has the requisite corporate power and authority to
execute and deliver this Agreement and all agreements and documents
contemplated hereby. Subject only to the approval of this Agreement and
transactions contemplated by the stockholders of Insynq, the consummation by
Insynq of the transactions contemplated hereby has been duly authorized by all
requisite corporate action of Insynq. This Agreement has been duly executed
and delivered by Insynq and, assuming the due authorization, execution and
delivery by Xcel, constitutes, and all agreements and documents contemplated
hereby (when executed and delivered pursuant hereto for value received) will
constitute valid and legally binding obligations of Insynq, enforceable
against Insynq in accordance with their respective terms, except to the extent
that enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, or other similar laws relating to creditors' rights and general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law), including, without limitation, possible
unavailability of specific performance, other injunctive relief or other
equitable remedies and an implied covenant of good faith and fair dealing.
(b) The affirmative vote of the holders of two-thirds of the
issued and outstanding shares of Insynq Stock present in person or by proxy at
a duly convened and held meeting of the stockholders of Insynq is necessary to
approve the sale of Insynq Assets pursuant to the terms hereof.
4.3 Other Interests. Insynq does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust, or entity other than investments
in short term investment securities.
4.4 No Violation. Neither the execution or delivery by Insynq of
this Agreement and all agreements or documents contemplated therein nor the
consummation by Insynq of the transactions contemplated therein, will: (i)
conflict with or result in a breach of any provisions of the Articles of
Incorporation or Bylaws of Insynq; (ii) except as set forth in Schedule 4.4,
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other obligations pursuant to, result in
the creation of any lien, security interest, charge or encumbrance upon any of
the properties of Insynq under, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions, or provisions of
any note, bond, mortgage, indenture, loan agreement, deed of trust, or any
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which Insynq is a party, or by which Insynq or any
of its properties is bound or affected; (iii) violate any law, statute, rule,
regulation, judgment, or decree applicable to Insynq; or (iv) other than the
filings provided for in Article I, filings required under the Act, or
applicable state securities and "Blue Sky" laws or filings in connection with
the maintenance of qualification to do business in other jurisdictions
(collectively, the "Regulatory Filings"), require any consent, approval, or
authorization of, or declaration, filing, or registration with, any
governmental or regulatory authority.
4.5 Financial Statements. The audited balance sheet and statement
of operations as of and for ten months ended October 31, 1999, audited by
Rebecca R. Vidrine, C.P.A., attached to Schedule 4.5, are prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved except as otherwise set forth therein
and present fairly the financial condition of Insynq as of such date and the
results of operations of Insynq for the ten months then ended, except that
such financial statements are subject to normal adjustments that are not and
are not expected to be, individually or in the aggregate, material in amount
and do not include certain notes which may be required by GAAP.
4.6 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in Insynq Balance Sheet or set forth in Schedule
4.6 at the date of Insynq Balance Sheet, Insynq did not have any obligation or
liability of any kind whatsoever (whether accrued, absolute, contingent,
unliquidated, civil, criminal, or otherwise and whether due or to become due),
whether or not any such liability or obligation would have been required to be
disclosed on a balance sheet prepared in accordance with GAAP, that,
individually or in the aggregate, could have an Insynq Material Adverse
Effect. Insynq Balance Sheet has accurate accruals of all employee benefit
costs, including, but not limited to, payroll, commissions, bonuses,
retirement benefits and vacation accruals.
4.7 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 4.7, since October 31,
1999, no event or events have occurred, which individually or in the aggregate
have had an Insynq Material Adverse Effect, and there exists no condition or
contingency that could reasonably be expected to result in an Insynq Material
Adverse Effect.
(b) Since the date of Insynq Balance Sheet and except as set
forth in Schedule 4.7 (b), Insynq has not:
(i) declared, set aside, paid, or made any dividend or
other distribution on or in respect of any shares of its capital stock or
directly or indirectly redeemed, retired, purchased, or otherwise acquired any
such shares or any option, warrant, conversion privilege, preemptive right, or
other right or agreement to acquire the same or any other securities
convertible into or evidencing the right to purchase or otherwise acquire the
same;
(ii) made any amendments to its Articles of Incorporation
or Bylaws:
(iii) made any change in the number of shares of its
capital stock authorized, issued, or outstanding or authorized, issued,
granted, or made any option, warrant, conversion privilege, preemptive right,
or other right or agreement to acquire the same or any other securities
convertible into or evidencing the right to acquire the same;
(iv) incurred any indebtedness or borrowed money other
than as set forth in Schedule 4.7(b)(iv); which borrowings shall not exceed
$5,000 in the aggregate;
(v) incurred any obligation or liability (contingent or
otherwise), outside the Ordinary Course of Business;
(vi) discharged or satisfied any lien or encumbrance or
paid any obligations or liability (fixed or contingent) other than current
liabilities paid to unrelated parties, wages paid to officers and employees
and director's fees paid to directors, each in the Ordinary Course of
Business;
(vii) mortgaged, pledged, or subjected to any lien,
charge, or other encumbrance any of its respective properties or assets
(tangible or intangible) except liens for current property taxes not yet due
and payable;
(viii) sold, assigned, leased, transferred or otherwise
disposed of, or agreed to sell, assign, lease, transfer or otherwise dispose
of, any of its tangible assets other than sales of inventory in the Ordinary
Course of Business;
(ix) entered into any transaction, contract, or
commitment;
(x) made any capital expenditures or any commitment
therefor in excess of $1,000 in the aggregate except as consented to by Xcel;
(xi) adopted or made any change in any executive
compensation plan, bonus plan, incentive compensation plan, deferred
compensation agreement, or other employee benefit plan or arrangement;
(xii) entered into any employment or consulting agreement
or arrangement, or granted or paid any bonus, or made or granted any general
wage or salary increase or any specific increase in the wages or salary of any
employee;
(xiii) suffered any casualty loss or damage, whether or not
such loss or damage shall have been covered by insurance;
(xiv) canceled or compromised any debt or claim except for
adjustments made in the Ordinary Course of Business that, in the aggregate,
are not material, or waived or released any rights that are material;
(xv) terminated, amended, or modified any agreement or
instrument described in Schedule 4.8;
(xvi) entered into any transaction with any stockholder,
officer, director, or key employee of Xcel or any affiliate of any such person
other than the payment of wages and salaries and other benefits under
employee benefit plans in existence prior to December 31, 1998;
(xvii) made any loans or advances to, guaranties for the
benefit of, or investments in, any person;
(xviii) made cash charitable contributions;
(xix) merged or consolidated with, or acquired all or
substantially all of the assets, capital stock, or business of any other
person;
(xx) introduced any material change with respect to its
method of accounting or accounting practice by Insynq; or
(xxi) agreed or committed to do any of the things
described in this Section 4.7.
4.8 No Contracts, Etc. Except as set forth in Schedule 4.8, Insynq
is not a party to or liable under any of the following:
(a) any lease of real property;
(b) any lease of personal property;
(c) any contract for any intellectual property rights, if any;
(d) any employment and consulting agreements covering any
employee of, or consultant to, Insynq;
(e) any deferred compensation agreements, employee stock option
plans, group life, hospitalization or disability insurance, severance policies
and other plans and arrangements providing benefits for employees of Insynq;
(f) any bank accounts and safe deposit boxes of Insynq;
(g) any loan agreements, credit agreements, indentures, and
other documents or instruments relating to the borrowing of money by Insynq
and all promissory notes and other evidences of indebtedness of Insynq,
including without limitation, all such documents and instruments relating to
or evidencing any stockholder loans to Insynq; and
(h) any guaranties of obligations of Insynq under all loan
agreements, leases, and other documents and instruments to which Insynq is a
party or by which it is bound, by any officer or director of Insynq or any
affiliate of any of the foregoing.
4.9 Litigation. Except as set forth in Schedule 4.9, to the
knowledge of Insynq, there are no claims, actions, suits, investigations, or
proceedings (public or private) pending against or affecting Insynq or any of
its properties or assets, at law or in equity, before or by any federal,
state, municipal, or other governmental or non-governmental department,
commission, board, bureau, agency, court, or other instrumentality, or
arbitrator or by any private person or entity. To the knowledge of Insynq,
there are no claims, actions, suits, investigations, or proceedings (public or
private) threatened against or affecting Insynq or any of its properties or
assets, at law or in equity, before or by any federal, state, municipal, or
other governmental or non-governmental department, commission, board, bureau,
agency, court, or other instrumentality, or arbitrator or by any private
person or entity, except for any of the foregoing which would not,
individually or in the aggregate, reasonably be expected to have an Insynq
Material Adverse Effect.
4.10 Authorization. The execution, delivery and performance by
Insynq of this Agreement and the consummation by Insynq of the transactions
contemplated hereby require no consents of any party and no action by or in
respect of, or filing with, any governmental body, agency, official or
authority other than (a) compliance with any applicable requirements of the
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
Blue Sky laws, and (b) any other filings, approvals or authorizations, which,
if not obtained, would not, individually or in the aggregate, have a material
adverse effect on Insynq or materially impair the ability of Insynq to
consummate the transactions contemplated by this Agreement.
4.11 Taxes. All Taxes (as hereinafter defined) required to be filed
by Insynq have been timely filed and are true, correct, and complete in all
material respects, and all Taxes payable pursuant thereto have been timely
paid or appropriate extensions have been filed for such periods. No
deficiency or adjustment in respect of any Taxes that was assessed against
Insynq remain unpaid and no such claim or assessment is pending or, to the
knowledge of Insynq, threatened. Insynq has made all withholding of Taxes
required to be made under all applicable federal, state, and local tax
regulations and such withholdings have either been paid on a timely basis to
the respective governmental agencies or set side in accounts for such purpose
or accrued, reserved against and entered upon the books of Insynq. There are
no outstanding agreements or waivers extending the statutory period of
limitations applicable to any tax return or tax liability of Insynq, and there
is no proposed liability for any Taxes for which there is not an adequate
reserve reflected on Insynq Balance Sheet. Insynq has not filed any consent
with the Internal Revenue Service described in Section 341(f) of the Code.
4.12 Proprietary Rights.
(a) Except as set forth on Schedule 4.12(a):
(i) To Insynq's knowledge, Insynq has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Proprietary Rights of third parties, (ii) Insynq (and its employees with
responsibility for Proprietary Rights matters) has not received any written
charge, complaint, claims, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Insynq
must license or refrain from using any Proprietary Rights of any third party),
(iii) to Insynq's knowledge, there is no basis for any as-yet unasserted
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Insynq
must license or refrain from using any Proprietary Rights of any third party),
or (iv) to Insynq's knowledge, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Proprietary
Rights of Insynq.
4.13 ERISA. Insynq does not contribute to and is not obligated to
contribute to, and has ever maintained or contributed to or been obligated to
contribute to, (i) any Multiemployer Plan, (ii) any a Multiple Employer Plan
or (iii) any other incentive or retirement plan, including but not limited to
a pension plan.
4.14 Fees. Except as set forth in Schedule 4.14 there are no claims
for legal, accounting, financial advisory, or investment bankers' fees,
brokerage commissions, finders' fees, or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement
or agreement made by or on behalf of Insynq.
4.15 Books and Records. Except as set forth in Schedule 4.15 the
financial books, records, and work papers of Insynq are complete and correct
in all material respects, have been maintained in accordance with good
business practice and accurately reflect the bases for the consolidated
financial condition and results of operations of Insynq set forth in the
financial statements referred to in Section 4.5 hereof.
4.16 Disclosure. No representation or warranty by Insynq in this
Agreement and no statement contained in any document, certificate, or other
writing prepared by Insynq or its representatives and furnished by Insynq to
Xcel pursuant to the provisions hereof, affirmatively misstates a material
fact or omits a material fact necessary for such document, certificate, or
writing to be, in good faith, accurately and completely responsive in all
material respects to the purpose identified by Insynq to Xcel for which such
information was furnished by Insynq to Xcel.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF XCEL
Xcel represents and warrants to Insynq and its shareholders as of the
date of this Agreement as follows.
5.1 Existence; Good Standing; Corporate Authority; Compliance with
Law.
(a) Xcel is a corporation duly incorporated, validly existing,
and in good standing (including tax good standing) under the laws of the State
of Utah. Xcel is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of the jurisdictions listed
in Schedule 5.1, which list contains all jurisdictions in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, in each case except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect (as defined below in Section 5.9).
(b) Xcel has all requisite corporate power and authority to
own, operate, and lease its properties and carry on its business as presently
conducted and as proposed to be conducted.
(c) Xcel is not in violation of any law, ordinance,
governmental rule or regulation to which it or any of its properties or assets
is subject, except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, nor is Xcel in violation of any
order, judgment, or decree of any court, governmental authority, or
arbitration board or tribunal.
(d) The copies of Xcel's Articles of Incorporation and Bylaws,
which have been delivered to Insynq and the Principal Shareholders, include
any and all amendments made thereto at any time prior to the date of this
Agreement and are true, correct, and complete.
(e) Xcel's corporate minute books are accurate as to their
content and include therein the Articles of Incorporation and Bylaws with any
amendments thereto. The meetings of the directors or stockholders referred to
in the corporate minute books were duly called and held. The signatures
appearing on all documents contained in the corporate minute books are the
true signatures of the persons purporting to have executed the same and no
minutes of meetings or written consents of the directors or stockholders of
Xcel are omitted from such minute books that would contain any resolutions or
other actions that would be inconsistent with any of the representations and
warranties contained in Article V hereof or prevent or limit any of the
transactions contemplated by this Agreement. Schedule 5.1 sets forth a true
and complete list of the names of all directors of Xcel and the names and
offices held of all officers of Xcel as the date hereof.
5.2 Authorization, Validity and Effect of Agreements.
(a) Xcel has the requisite corporate power and authority to
execute and deliver this Agreement and all agreements and documents
contemplated hereby and thereby. The consummation by Xcel of the transactions
contemplated hereby has been duly authorized by all requisite corporate action
of Xcel. This Agreement has been duly executed and delivered by Xcel and,
assuming the due authorization, execution and delivery by Insynq and all
agreements and documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of Xcel enforceable in accordance with their respective
terms.
5.3 Capitalization. The authorized capital stock of Xcel consists
of 50,000,000 shares of Common Stock, $.001 par value, and 5,000,000 shares of
preferred stock, $.001 par value, of which approximately 1,800,000 shares of
common stock and no shares of preferred stock are outstanding. There are no
shares of preferred stock issued or outstanding and no commitment exists to
issue any preferred stock. Schedule 5.3 correctly sets forth the name of each
person who holds of record shares of Xcel Stock and the number of shares of
Insynq Stock so held, as of the date of this Agreement. Xcel has no
outstanding bonds, debentures, notes, or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of Xcel on any
matter. All issued and outstanding shares of Xcel Stock are duly authorized,
validly issued, fully paid, nonassessable, free of preemptive or rescission
rights, and were issued in compliance with all applicable federal and state
securities laws. There are not, at the date of this Agreement, any
authorized, issued, or outstanding options, warrants, calls, subscriptions,
convertible securities, conversion privileges, preemptive rights, or other
rights, agreements, or commitments (whether or not presently exercisable) that
obligate Xcel to issue, transfer, or sell any shares of capital stock or other
securities convertible into or evidencing the right to purchase or otherwise
acquire any capital stock of Xcel. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar plans,
contracts, or rights with respect to Xcel that are effective as of the date
hereof or that have been executed or agreed to as of the date hereof with an
effective date after the date hereof. There are no stockholders' agreements,
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of Xcel to which Xcel is a party that are
presently effective or have been executed or agreed to as of the date hereof
or, to the best knowledge of Xcel, to which any officer or director of Xcel or
any stockholder owned or controlled by such officer or director is or will be
a party, except in accordance with the terms hereof. There are no
restrictions upon the sale, voting, or transfer of any shares of Xcel Stock
pursuant to Xcel's Articles of Incorporation, Bylaws, or other governing
instruments (other than restrictions typically applicable to unregistered
stock under the Securities Act).
5.4 Other Interests. Xcel does not own, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust, or entity other than investments
in short term investment securities.
5.5 No Violation. Neither the execution and delivery by Xcel of
this Agreement and all agreements and documents contemplated hereby, nor the
consummation by Xcel of the transactions contemplated hereby or thereby in
accordance with the terms hereof, will: (i) conflict with or result in a
breach of any provisions of the Articles of Incorporation, as amended, or
Bylaws of Xcel; (ii) violate any law, statute, rule, regulation, judgment, or
decree applicable to Xcel; (iii) except as set forth in Schedule 5.5 violate,
conflict with, result in a breach of any provision of, constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, result in the termination or in a right of termination or
cancellation of, accelerate the performance required by, result in the
triggering of any payment or other obligations pursuant to, result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties of Xcel under, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions, or provisions of
any note, bond, mortgage, indenture, loan agreement, deed of trust, or any
license, franchise, permit, lease, contract, agreement or other instrument,
commitment, or obligation to which Xcel is a party, or by which Xcel or any of
its properties is bound or affected; (iv) violate any law, statute, rule,
regulation, judgment, or decree applicable to Xcel; or (v) other than the
Regulatory Filings, require any consent, approval, or authorization of, or
declaration, filing, or registration with, any governmental or regulatory
authority.
5.6 SEC Documents. For the last four fiscal quarters through
November 30, 1999, Xcel has filed all forms, reports, and other documents
(including all exhibits, schedules and annexes thereto) required to be filed
by Xcel with the SEC and Nasdaq ("Xcel Report"). Except to the extent that
information contained in any Xcel Report has been revised or superseded by a
later Xcel Report filed and publicly available prior to the date of this
Agreement, as of their respective dates, Xcel Reports (a) were (and any Xcel
Report filed after the date hereof will be) in all material respects in
accordance with the requirements of the Act or the Exchange Act, as the case
may be, and the rules and regulations promulgated thereunder, and (b) as of
their respective filing dates did not (and any Xcel Report filed after the
date hereof will not) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading. The financial statements of Xcel included in
such reports (or incorporated therein by reference) were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto and subject to normal
year-end adjustments) and fairly present in all material respects the
financial position of Xcel and its consolidated subsidiaries as of the dates
thereof and the periods then ended.
5.7 Financial Statements. The audited consolidated balance sheet and
consolidated statement of operations as of and for the twelve months ended May
31, 1999, accompanied by the audit report of Jones, Jensen & Company, LLC,
independent certified public accountants, which are attached hereto as
Schedule 5.7, were prepared in accordance with GAAP, consistently applied
throughout the periods involved except as otherwise set forth therein and
present fairly the financial condition of Xcel as of such date and the results
of operations of Xcel for the year then ended. The unaudited consolidated
balance sheet of Xcel as of November 30, 1999, and the related consolidated
statement of operations for the three months ended on such date, which are
attached hereto as Schedule 5.7, were prepared in accordance with GAAP
consistently applied except as otherwise set forth therein and of such date
and the results of operations of Xcel for the three months then ended, except
that such interim financial statements are subject to normal year-end
adjustments that are not and are not expected to be, individually or in the
aggregate, material in amount and do not include certain notes which may be
required by GAAP. The balance sheet of Xcel as of November 30, 1999, is
referred to in this Agreement as the "Xcel Balance Sheet."
5.8 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in Xcel Balance Sheet or set forth in Schedule
5.8 at the date of Xcel Balance Sheet, Xcel did not have any obligation or
liability of any kind whatsoever (whether accrued, absolute, contingent,
unliquidated, civil, criminal, or otherwise and whether due or to become due),
whether or not any such liability or obligation would have been required to be
disclosed on a balance sheet prepared in accordance with GAAP, that,
individually or in the aggregate, could have a Material Adverse Effect, as
hereafter defined. Xcel Balance Sheet has accurate accruals of all employee
benefit costs, including, but not limited to, payroll, commissions, bonuses,
retirement benefits and vacation accruals.
5.9 Absence of Certain Changes or Events.
(a) Since November 30, 1999, and except as set forth on
Schedule 5.9, no event or events have occurred, which individually or in the
aggregate have had a Material Adverse Effect, as hereafter defined, and there
exists no condition or contingency that could reasonably be expected to result
in a Material Adverse Effect. A "Material Adverse Effect" means a material
adverse change in the business, properties, financial condition, results of
operations, or prospects of Xcel, taken as a whole.
(b) Since the date of Xcel Balance Sheet and except as set
forth in Schedule 5.9(b), Xcel has not:
(i) declared, set aside, paid, or made any dividend or
other distribution on or in respect of any shares of its capital stock or
directly or indirectly redeemed, retired, purchased, or otherwise acquired any
such shares or any option, warrant, conversion privilege, preemptive right, or
other right or agreement to acquire the same or any other securities
convertible into or evidencing the right to purchase or otherwise acquire the
same;
(ii) made any amendments to its Articles of Incorporation
or Bylaws:
(iii) made any change in the number of shares of its
capital stock authorized, issued, or outstanding or authorized, issued,
granted, or made any option, warrant, conversion privilege, preemptive right,
or other right or agreement to acquire the same or any other securities
convertible into or evidencing the right to acquire the same;
(iv) incurred any indebtedness or borrowed money other
than as set forth in Schedule 5.9(b)(iv); which borrowings shall not exceed
$5,000 in the aggregate;
(v) incurred any obligation or liability (contingent or
otherwise);
(vi) discharged or satisfied any lien or encumbrance or
paid any obligations or liability (fixed or contingent) other than current
liabilities paid to unrelated parties, wages paid to officers and employees
and director's fees paid to directors, each in the Ordinary Course of
Business;
(vii) mortgaged, pledged, or subjected to any lien,
charge, or other encumbrance any of its respective properties or assets
(tangible or intangible) except liens for current property taxes not yet due
and payable;
(viii) sold, assigned, leased, transferred or otherwise
disposed of, or agreed to sell, assign, lease, transfer or otherwise dispose
of, any of its tangible assets other than sales of inventory in the Ordinary
Course of Business;
(ix) entered into any transaction, contract, or
commitment;
(x) made any capital expenditures or any commitment
therefor in excess of $1,000 in the aggregate except as consented to by
Insynq;
(xi) adopted or made any change in any executive
compensation plan, bonus plan, incentive compensation plan, deferred
compensation agreement, or other employee benefit plan or arrangement;
(xii) entered into any employment or consulting agreement
or arrangement, or granted or paid any bonus, or made or granted any general
wage or salary increase or any specific increase in the wages or salary of any
employee;
(xiii) suffered any casualty loss or damage, whether or not
such loss or damage shall have been covered by insurance;
(xiv) canceled or compromised any debt or claim except for
adjustments made in the Ordinary Course of Business that, in the aggregate,
are not material, or waived or released any rights that are material;
(xv) terminated, amended, or modified any agreement or
instrument described in Schedule 5.10;
(xvi) entered into any transaction with any stockholder,
officer, director, or key employee of Xcel or any affiliate of any such person
other than the payment of wages and salaries and other benefits under
employee benefit plans in existence prior to December 31, 1998;
(xvii) made any loans or advances to, guaranties for the
benefit of, or investments in, any person;
(xviii) made cash charitable contributions;
(xix) merged or consolidated with, or acquired all or
substantially all of the assets, capital stock, or business of any other
person;
(xx) introduced any material change with respect to its
method of accounting or accounting practice by Xcel; or
(xxi) agreed or committed to do any of the things
described in this Section 5.9.
5.10 No Contracts, Etc. Xcel is not a party to or liable under any
of the following:
(a) any lease of real property;
(b) any lease of personal property;
(c) any contract for any intellectual property rights, if any;
(d) any employment and consulting agreements covering any
employee of, or consultant to, Xcel;
(e) any deferred compensation agreements, employee stock option
plans, group life, hospitalization or disability insurance, severance policies
and other plans and arrangements providing benefits for employees of Xcel;
(f) any bank accounts and safe deposit boxes of Xcel;
(g) any loan agreements, credit agreements, indentures, and
other documents or instruments relating to the borrowing of money by Xcel and
all promissory notes and other evidences of indebtedness of Xcel, including
without limitation, all such documents and instruments relating to or
evidencing any stockholder loans to Xcel; and
(h) any guaranties of obligations of Xcel under all loan
agreements, leases, and other documents and instruments to which Xcel is a
party or by which it is bound, by any officer or director of Xcel or any
affiliate of any of the foregoing.
5.11 Authorization. The execution, delivery and performance by Xcel
of this Agreement and the consummation by Xcel of the transactions
contemplated hereby require no consents of any party and no action by or in
respect of, or filing with, any governmental body, agency, official or
authority other than (a) compliance with any applicable requirements of the
Act, the Exchange Act, or Blue Sky laws, and (b) any other filings, approvals
or authorizations, which, if not obtained, would not, individually or in the
aggregate, have a material adverse effect on Xcel or materially impair the
ability of Xcel to consummate the transactions contemplated by this Agreement.
5.12 Litigation. There are no claims, actions, suits,
investigations, or proceedings (public or private) pending against or
affecting Xcel, or any of their properties or assets, at law or in equity,
before or by any federal, state, municipal, or other governmental or
non-governmental department, commission, board, bureau, agency, court, or
other instrumentality, or arbitrator or by any private person or entity.
There are no claims, actions, suits, investigations, or proceedings (public or
private) to the knowledge of Xcel or threatened against or affecting Xcel, or
any of their properties or assets, at law or in equity, before or by any
federal, state, municipal, or other governmental or non-governmental
department, commission, board, bureau, agency, court, or other
instrumentality, or arbitrator or by any private person or entity. There are
no existing orders, judgments, settlements, injunctions, or decrees of any
court or governmental agency that apply to Xcel or any of their assets,
properties, business, or operations. No product liability, warranty, or
similar claims have been made against Xcel. Xcel has not entered into any
settlement agreements relating to the compromise or dismissal of any
litigation involving Xcel or any of their properties or assets.
5.13 Taxes. All Taxes (as hereinafter defined) required to be filed
by Xcel, have been, or will be, prior to Closing, timely filed and are true,
correct, and complete in all material respects, and all Taxes payable pursuant
thereto have been timely paid or appropriate extensions have been filed for
such periods. No deficiency or adjustment in respect of any Taxes that was
assessed against Xcel remains unpaid and no such claim or assessment is
pending or, to the knowledge of Xcel, threatened. Xcel has made all
withholding of Taxes required to be made under all applicable federal, state,
and local tax regulations and such withholdings have either been paid on a
timely basis to the respective governmental agencies or set side in accounts
for such purpose or accrued, reserved against and entered upon the books of
Xcel. There are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any tax return or tax liability of Xcel,
and there is no proposed liability for any Taxes for which there is not an
adequate reserve reflected on Xcel Balance Sheet. Xcel has not filed any
consent with the Internal Revenue Service described in Section 341(f) of the
Code.
5.14 Proprietary Rights.
(a) Except as set forth on Schedule 5.14(a):
(i) To Xcel's knowledge, Xcel has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Proprietary Rights of third parties, (ii) Xcel (and its employees with
responsibility for Proprietary Rights matters) has not received any written
charge, complaint, claims, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Xcel
must license or refrain from using any Proprietary Rights of any third party),
(iii) to Xcel's knowledge, there is no basis for any as-yet unasserted charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Xcel
must license or refrain from using any Proprietary Rights of any third party),
or (iv) to Xcel's knowledge, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Proprietary
Rights of Xcel.
5.15 ERISA. Xcel does not contribute to and is not obligated to
contribute to, and has ever maintained or contributed to or been obligated to
contribute to, (i) any Multiemployer Plan, (ii) any a Multiple Employer Plan
or (iii) any other incentive or retirement plan, including but not limited to
a pension plan.
5.16 Fees. Except as set forth in Schedule 5.16, there are no
claims for legal, accounting, financial advisory, or investment bankers' fees,
brokerage commissions, finders' fees, or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement
or agreement made by or on behalf of Xcel.
5.17 Books and Records. Except as set forth in Schedule 5.17, the
financial books, records, and work papers of Xcel are complete and correct in
all material respects, have been maintained in accordance with good business
practice and accurately reflect the bases for the consolidated financial
condition and results of operations of Xcel set forth in the financial
statements referred to in Section 5.7 hereof.
5.18 Disclosure. No representation or warranty by Xcel in this
Agreement and no statement contained in any document, certificate, or other
writing prepared by Xcel or its representatives and furnished by Xcel to
Insynq pursuant to the provisions hereof, affirmatively misstates a material
fact or omits a material fact necessary for such document, certificate, or
writing to be, in good faith, accurately and completely responsive in all
material respects to the purpose identified by Xcel to Insynq for which such
information was furnished by Xcel to Insynq.
5.19 Purchase Accounting Treatment. Xcel intends that this Agreement
be accounted for under the "purchase" method of accounting.
5.20 No Obligations at the Closing. Notwithstanding anything in this
Agreement to the contrary, as of the Closing, Insynq will have no employees,
debts or obligations of any kind or nature, including any payment due or owing
to any employees from the officers or directors of Insynq, any outstanding
invoices or bills and no obligations to issue any shares of stock, pay any
sums of money or fulfill any contractual commitments, whether disclosed or
undisclosed, or for the filing of any document, report, certificate or form
with any governmental body including the Securities and Exchange Commission.
ARTICLE VI
INTERIM OPERATING COVENANTS OF INSYNQ
6.1 Operations. Between the date of this Agreement and the Closing,
Insynq will:
(a) file on a timely basis all notices, reports or other filings
required to be filed with or reported to any federal, state, municipal or
other governmental department, commission, board, bureau, agency or any
instrumentality of any of the foregoing wherever located with respect to the
continuing operations of Insynq, including, without limitation, the SEC and
Nasdaq Bulletin Board;
(b) maintain material compliance with all Governmental Permits
and all laws, rules, regulations and consent orders;
(c) file on a timely basis all complete and correct applications
or other documents necessary to maintain, renew or extend any site assessment,
permit, license, variance or any other approval required by any governmental
authority necessary and/or required for the continuing operation of Insynq's
business operations, whether or not such approval would expire before or after
the Effective Time; and
(d) advise Xcel promptly in writing of any material change in
any document or Schedule, including without limitation any Schedule, Exhibit
or other information delivered pursuant to this Agreement.
6.2 Meeting of Stockholders; Compliance with Washington Corporate
Law. Insynq will take all action necessary in accordance with applicable law
and their respective charter documents to obtain requisite shareholder
approval of this Agreement and the transactions contemplated hereby, and to
otherwise comply in all respects with Washington Corporate Law in connection
with the transactions contemplated by this Agreement.
6.3 No Change. Between the date of this Agreement and the Effective
Time, Insynq will not, without the prior written consent of Xcel, or except as
described in this Agreement:
(a) authorize, issue, transfer, distribute, or register any of
its securities;
(b) declare or pay any dividend or make any distribution in
respect of its capital stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares of its
capital stock;
(c) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except in the Ordinary
Course of Business;
(d) change or promise to change the compensation payable or to
become payable to any director, officer, employee or agent, or make or promise
to make any bonus payment to any such person;
(e) create, assume or otherwise permit the imposition of any
mortgage, pledge or other lien (except for current property taxes) or
encumbrance upon or grant any option or right of first refusal with respect to
any assets or properties whether now owned or hereafter acquired;
(f) sell, assign, lease or otherwise transfer or dispose of any
property or equipment other than in the Ordinary Course of Business;
(g) merge or consolidate or agree to merge or consolidate with
or into any firm, corporation or other entity;
(h) waive any material rights or claims;
(i) amend or terminate any material agreement or any site
assessment, permit, license or other right;
(j) enter into any other transaction outside the Ordinary
Course of its Business or prohibited hereunder;
(k) take any action or suffer or permit any event to occur that
would cause any representation or warranty in this Agreement to become untrue
as of the Effective Time; or
(l) take or permit any action which would have an adverse effect
on Xcel.
6.4 Access; Confidential Information. Between the date of this
Agreement and the Effective Time, Insynq will afford to the officers and
authorized representatives of Xcel, including, without limitation, its
counsel, independent auditors and investment bankers, access to the
facilities, plants, corporate properties and other properties, books and
records of Insynq and will furnish Xcel with such additional financial and
operating data and other information as to the business and properties of
Insynq as Xcel may from time to time reasonably request. Insynq will
cooperate with Xcel, its representatives and counsel in the preparation of any
documents or other material which may be required by any governmental agency.
Except as necessary to comply with the terms of this Agreement, the rules and
regulations of the Nasdaq Electronic Bulletin Board and the SEC, Xcel will
cause all information obtained from Insynq in connection with the negotiation
and performance of this Agreement to be treated as confidential (except such
information which is in the public domain or which Xcel may be required to
disclose to any governmental agency, or pursuant to any court or regulatory
agency order) and will not use, and will not knowingly permit others to use,
any such confidential information in a manner detrimental to Insynq. Insynq
covenants and agrees not to disclose to any third persons other than its
accountants, brokers, bankers, investment advisers or legal counsel any of the
specific terms or provisions of this Agreement (including financial terms)
prior to or after the date hereof without the prior written consent of Xcel.
6.5 Obtain Consents. Promptly after the execution of this Agreement,
Insynq shall make all filings and take all steps reasonably necessary to
obtain all approvals and consents required to be obtained by Insynq to
consummate the transactions contemplated by this Agreement.
6.6 Exclusivity. Insynq agrees that it will not (and will use their
best efforts to cause Insynq's directors, officers, agents, representatives,
and affiliates, and any other person acting on their behalf not to) enter into
any contract or agreement that has as a purpose a business combination or
merger, an issuance or sale of debt or equity of Insynq (including the capital
stock), a sale of a substantial portion of the assets of Insynq, or a
transaction comparable to or similar to this Agreement (any of the foregoing,
a "Competing Transaction"). Insynq will promptly notify Xcel if it receives
any offer, inquiry or proposal with respect to a Competing Transaction and the
details thereof, and keep Xcel informed with respect to each such offer,
inquiry or proposal. Insynq will provide Xcel with copies of all such offers,
inquiries or proposals which are in writing.
ARTICLE VII
INTERIM OPERATING COVENANTS OF XCEL
7.1 Operations. Between the date of this Agreement and the Effective
Time, each of Xcel will:
(a) file on a timely basis all notices, reports or other filings
required to be filed with or reported to any federal, state, municipal or
other governmental department, commission, board, bureau, agency or any
instrumentality of any of the foregoing wherever located with respect to the
continuing operations of Xcel, including, without limitation, the SEC and
Nasdaq Bulletin Board;
(b) maintain material compliance with all Governmental Permits
and all laws, rules, regulations and consent orders;
(c) file on a timely basis all complete and correct applications
or other documents necessary to maintain, renew or extend any site assessment,
permit, license, variance or any other approval required by any governmental
authority necessary and/or required for the continuing operation of Xcel's
business operations, whether or not such approval would expire before or after
the Closing Date; and
(d) advise Insynq promptly in writing of any material change in
any document or Schedule, including without limitation any Schedule, Exhibit
or other information delivered pursuant to this Agreement.
7.2 Compliance with Utah Corporate Law. Xcel will take all action
necessary in accordance with applicable law and their respective charter
documents to obtain requisite approval of this Agreement and the transactions
contemplated hereby, and to otherwise comply in all respects with Utah
Corporate Law in connection with the transactions contemplated by this
Agreement.
7.3 No Change. Between the date of this Agreement and the Effective
Time, Xcel will not, without the prior written consent of Insynq, or except as
described in this Agreement:
(a) make any change in its Articles of Incorporation or Bylaws;
(b) authorize, issue, transfer, distribute, or register any of
its securities;
(c) declare or pay any dividend or make any distribution in
respect of its capital stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares of its
capital stock;
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures;
(e) change or promise to change the compensation payable or to
become payable to any director, officer, employee or agent, or make or promise
to make any bonus payment to any such person;
(f) create, assume or otherwise permit the imposition of any
mortgage, pledge or other lien (except for current property taxes) or
encumbrance upon or grant any option or right of first refusal with respect to
any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease or otherwise transfer or dispose of any
property or equipment other than in the Ordinary Course of Business;
(h) merge or consolidate or agree to merge or consolidate with
or into any firm, corporation or other entity;
(i) waive any material rights or claims;
(j) amend or terminate any material agreement or any site
assessment, permit, license or other right;
(k) enter into any other transaction outside the Ordinary
Course of its Business or prohibited hereunder;
(l) take any action or suffer or permit any event to occur that
would cause any representation or warranty in this Agreement to become untrue
as of the Closing Date; or
(m) take or permit any action which would have an adverse effect
on Insynq.
7.4 Access; Confidential Information. Between the date of this
Agreement and the Effective Time, Xcel will afford to the officers and
authorized representatives of Insynq, including, without limitation, its
counsel, independent auditors and investment bankers, access to the
facilities, plants, corporate properties and other properties, books and
records of Xcel and will furnish Insynq with such additional financial and
operating data and other information as to the business and properties of Xcel
as Insynq may from time to time reasonably request. Xcel will cooperate with
Insynq, its representatives and counsel in the preparation of any documents or
other material which may be required by any governmental agency. Except as
necessary to comply with the terms of this Agreement, the rules and
regulations of the Nasdaq Electronic Bulletin Board and the SEC, Insynq will
cause all information obtained from Xcel in connection with the negotiation
and performance of this Agreement to be treated as confidential (except such
information which is in the public domain or which Insynq may be required to
disclose to any governmental agency, or pursuant to any court or regulatory
agency order) and will not use, and will not knowingly permit others to use,
any such confidential information in a manner detrimental to Xcel. Xcel
covenants and agrees not to disclose to any third persons other than their
accountants, brokers, bankers, investment advisers or legal counsel any of the
specific terms or provisions of this Agreement (including financial terms)
prior to or after the date hereof without the prior written consent of Insynq.
7.5 Obtain Consents. Promptly after the execution of this Agreement,
Xcel shall make all filings and take all steps reasonably necessary to obtain
all approvals and consents required to be obtained by Xcel to consummate the
transactions contemplated by this Agreement.
7.6 Exclusivity. Xcel agrees that it will not enter into any
contract or agreement that has as a purpose a business combination or merger,
an issuance or sale of debt or equity of Xcel, a sale of a substantial portion
of the assets of Xcel, or a transaction comparable to or similar to this
Agreement (any of the foregoing, a "Competing Transaction"). Xcel will
promptly notify Insynq if it receives any offer, inquiry or proposal with
respect to a Competing Transaction and the details thereof, and keep Insynq
informed with respect to each such offer, inquiry or proposal. Xcel will
provide Insynq with copies of all such offers, inquiries or proposals which
are in writing.
ARTICLE VIII
ADDITIONAL COVENANTS OF THE PARTIES
8.1 Filings; Other Action. Subject to the terms and conditions
herein provided, Insynq and Xcel shall cause any appropriate other party to:
(a) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits, or authorizations are required
to be obtained prior to the Effective Time from governmental or regulatory
authorities of the United States, the several states and foreign jurisdictions
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) timely making
all such filings and timely seeking all such consents, approvals, permits, or
authorizations; and (b) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things
necessary, proper, or appropriate to consummate and make effective the
transactions contemplated by this Agreement.
8.2 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions set
forth herein or the waiver thereof, directly or by or through its officers or
directors, perform such further acts and execute such documents whether before
or after the Effective Time as may be reasonably required to effect this
Agreement. In addition, subject to the limitations set forth in this
Agreement, and unless specifically prohibited by applicable law, each party
will use its best efforts to cause all of the conditions to Closing set forth
in this Agreement that are within its control to be satisfied prior to the
Closing Date and will not take any action inconsistent with its obligations
under this Agreement or which could hinder or delay the consummation of the
transactions contemplated by this Agreement or that would cause any
representation, warranty, or covenant made by it in this Agreement or in any
certificate, list, exhibit, or other instrument furnished or to be furnished
pursuant hereto, or in connection with the transaction contemplated hereby, to
be untrue in any material respect as of the Effective Time.
8.3 Expenses. If this Agreement is not consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
8.4 Brokers and Finders Fees. Each party shall pay and be
responsible for any broker's, finder's or financial advisory fee incurred by
such party in connection with the transactions contemplated by this Agreement.
8.5 Notices of Certain Events. Each party shall promptly notify
the other party hereto of:
(a) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving or
otherwise affecting such party that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to this Agreement.
8.6 Completion of Due Diligence. Each party acknowledges that this
Agreement is being executed prior to the completion of necessary due diligence
and prior to the preparation and review of the appropriate Schedules and
Exhibits. Each party shall grant the other and each of their officers,
attorneys, accountants and advisors, complete and unfiltered access to all
information, documentation and personnel of the other. Each party shall
conduct such diligence within 10 days of the date of this Agreement unless
such party notifies the other parties in to the Agreement that they require
further time and information to complete their investigations to their
satisfaction, including information contained or in Schedules or Exhibits to
this Agreement.
8.7 Preparation of Schedules and Exhibits. Each party to this
Agreement shall prepare and attach all necessary Schedules and Exhibits after
the execution of this Agreement, but no later than the Closing Date, which
information shall be true and correct as of the Closing Date, unless otherwise
specified therein.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Conditions to Each Party's Obligations. The respective
obligation of each party to effect the transactions contemplated thereby shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the transactions contemplated hereby
shall have been approved in the manner required by applicable law by the
holders of the issued and outstanding shares of capital stock of Insynq and of
Xcel.
(b) No party to this Agreement shall be subject to any order or
injunction of a court of competent jurisdiction that prohibits the
consummation of the transactions contemplated by this Agreement. In the event
any such order or injunction shall have been issued, each party agrees to use
its reasonable efforts to have any such injunction lifted or order reversed.
(c) No material action, suit, proceeding, or investigation
involving either party shall have been initiated and be continuing, and all
necessary approvals under state securities laws relating to the issuance or
trading of Xcel Stock to be issued in connection with this transaction shall
have been received.
(d) All consents, authorizations, orders, and approvals of (or
filings or registrations with) any governmental commission, board, or other
regulatory body required in connection with the execution, delivery, and
performance of this Agreement shall have been obtained or made, except for
filings required to be filed after the Closing Date.
(e) No action, suit, or proceeding shall be pending or
threatened by or before any court or governmental body in which an unfavorable
judgment, order, or decree would prevent any of the transactions contemplated
hereby or cause any such transaction to be declared unlawful or rescinded or
that could reasonably be expected to cause an Insynq Material Adverse Effect
or a Material Adverse Effect.
(f) All documents and instruments to be delivered by the
parties in connection with the transactions contemplated hereby shall be in
form and substance reasonably satisfactory to the parties and their respective
counsel, and the parties shall have received such other documents and
instruments as they may reasonably request in connection therewith.
(g) Each party to this Agreement shall have completed to its
satisfaction, due diligence investigation on the other, its shareholders, its
business and operations, financial condition, outstanding liabilities,
business prospects and other material information.
(h) Each party to this Agreement shall have provided the
information necessary to complete the Schedules and Exhibits to this Agreement
and the Schedules and Exhibits must be completed and the information contained
therein must be satisfactory to each party to this Agreement, in each such
party's sole discretion.
(i) This Agreement shall be modified and amended to reflect
changes, provisions, terms and conditions agreed upon by the parties hereto
prior to the Closing.
(j) None of these transactions contemplated hereby shall have
been enjoined by the court or by any federal or state governmental branch,
agency, commission or regulatory authority and not suit or other proceeding
challenging the transactions contemplated hereby shall have been threatened or
instituted and no investigative or other demand shall have been made by any
federal or state governmental branch, agency, commission or regulatory
authority.
(k) Xcel shall continue to be listed and shall not have received
any notice of impending delisting or suspension from the Nasdaq Electronic
Bulletin Board.
9.2 Conditions to Obligation of Insynq to Effect this Agreement.
The obligation of Insynq to effect the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) Xcel shall have performed or be in compliance in all
respects with agreements contained in this Agreement required to be performed
on or prior to the Closing Date. The representations and warranties of Xcel
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, and Insynq shall
have received a certificate of the President of Xcel, dated the Closing Date,
certifying to such effect.
(b) There shall have been delivered to Insynq certificates,
dated within five days of the Closing Date, of the Secretary of State of the
State of Utah, with respect to the incorporation, subsistence, and good legal
standing of Xcel.
(c) All approvals and all consents and approvals of any third
parties required in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, shall
have been obtained and delivered to Insynq.
(d) There shall have been delivered to Insynq certificates,
dated as of the Closing Date, of the President and Secretary, respectively, of
Xcel as set forth as Exhibit 9.2(d), (i) to the effect that the Articles of
Incorporation of Xcel have not been amended since the date of this Agreement,
(ii) attaching a true and complete copy of the Bylaws of Xcel as in effect on
the Closing Date, (iii) attaching a true and complete copy of the resolutions
of the Board of Directors of Xcel approving the execution and delivery of this
Agreement and authorizing the consummation of the transactions contemplated
hereby; and (iv) to the effect that each of the provisions of Section 9.2(a)
are true and correct as of the Closing Date.
(e) There shall have been delivered to Insynq certificates,
dated as of the Closing Date, with respect to the incumbency and signatures of
all officers of Xcel signing this Agreement and any other certificate,
agreement, or instrument delivered on behalf of Xcel in connection with this
Agreement.
(f) Since the Closing Date, there shall not have been any
material adverse change in the condition (financial or otherwise), business,
properties or assets of Xcel.
9.3 Conditions to Obligation of Xcel to Effect this Agreement. The
obligation of Xcel to effect the transactions contemplated in this Agreement
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(a) Insynq shall have performed or be in compliance in all
respects with agreements contained in this Agreement required to be performed
on or prior to the Closing Date. The representations and warranties of Insynq
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date, and Xcel shall have
received a certificate of the President of Insynq, dated the Closing Date,
certifying to such effect.
(b) There shall have been delivered to Xcel certificates, dated
within five days of the Closing Date, of the Secretary of State of the State
of Washington, with respect to the incorporation, subsistence, and good legal
standing of Insynq.
(c) All approvals of Insynq's shareholders, and all consents
and approvals of any third parties required in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been obtained and delivered to Xcel.
(d) There shall have been delivered to Xcel certificates, dated
as of the Closing Date, of the President and Secretary, respectively, of
Insynq as set forth as Exhibit 9.3(d), (i) to the effect that the Articles of
Incorporation of Insynq have not been amended since the date of this
Agreement, (ii) attaching a true and complete copy of the Bylaws of Insynq as
in effect on the Closing Date, (iii) attaching a true and complete copy of the
resolutions of the Board of Directors and shareholders of Insynq approving the
execution and delivery of this Agreement and authorizing the consummation of
the transactions contemplated hereby; and (iv) to the effect that each of the
provisions of Section 9.2(a) are true and correct as of the Closing Date.
(e) There shall have been delivered to Xcel certificates, dated
as of the Closing Date, with respect to the incumbency and signatures of all
officers of Insynq signing this Agreement and any other certificate,
agreement, or instrument delivered on behalf of Insynq in connection with this
Agreement.
(f) Since the Closing Date, there shall not have been any
material adverse change in the condition (financial or otherwise), business,
properties or assets of Insynq.
ARTICLE X
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing Date, by the mutual consent of
Xcel and Insynq.
10.2 Termination by Either Party. This Agreement may be terminated
by either party under any of the following conditions:
(a) the Closing has not occurred by February10, 2000; provided
that the right to terminate this Agreement pursuant to this clause shall not
be available to any party whose breach of any provision of this Agreement
results in the failure of the transactions contemplated herein to be
consummated by such time unless otherwise agreed in writing;
(b) there shall be any law or regulation that makes consummation
of the transaction contemplated herein illegal or otherwise prohibited or if
any judgment, injunction, order or decree enjoining any party from
consummating the Agreement is entered and such judgment, injunction, order or
decree shall have become final and non-appealable; provided, that the party
seeking to terminate this Agreement pursuant to this clause shall have used
its best efforts to remove such injunction, order or decree.
(c) breach or any inability to fulfill any representation or
warranty or event which would constitute a breach upon the Closing hereof, not
cured to the other parties' satisfaction by February 10, 2000.
10.3 Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of this transaction pursuant
to this Article X, all obligations of the parties hereto shall terminate,
except the obligations of the parties pursuant to this Section 10.3 and
Section 5.12 and except for the provisions of Sections 11.2, 11.3, 11.5, 11.6,
11.7, 11.11, 11.12, and 11.13 and pursuant to any confidentiality agreement
signed by the parties hereto.
10.4 Extension; Waiver. At any time prior to the Closing Date, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, or (c) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by same day
or overnight courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid), addressed as follows:
If to Xcel: Xcel Management, Inc.
781 East 2300 South
Bountiful, Utah 84010
Attn: Steve Rippon
Telephone: (801) 292-4104
If to Insynq: Insynq, Inc.
709 South 9th Street, Suite 305
Tacoma, Washington 98401-1996
Attn: John Gorst, CEO
Facsimile: (253) 404-3842
Telephone: (253) 383-1085
With copies to: Mark Patterson
VANDEBERG, JOHNSON & GANDARA
1201 Pacific Avenue, Suite 1900
P.O. BOX 1315
Tacoma, WA 98401-1315
Facsimile: (253) 383-6377
Telephone: (253) 383-3791
or such other address or fax number as any party may specify by written notice
so given, and such notice shall be deemed to have been delivered as of the
date so telecommunicated, personally delivered, or delivered by courier or 5
days after mailing thereof if received prior to 5:00 p.m. in the place of
receipt and such day is a business day in the place of receipt. Otherwise,
any such notice, request or communication shall be deemed not to have been
received until the next succeeding business day in the place of receipt.
11.2 Assignment, Binding Effect. Neither this Agreement nor any of
the rights, interests, or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns. Nothing in
this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or certain stockholders of Insynq and other
named beneficiaries of covenants or agreements in the Agreement, or their
respective heirs, successors, executors, administrators, and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
11.3 Entire Agreement. This Agreement, the Exhibits, Xcel
Disclosure Schedule, the confidentiality agreements between the parties hereto
and any schedules or agreements delivered in connection with this Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No information previously provided, addition to
or modification of any provision of this Agreement shall be binding upon any
party hereto unless made in writing and signed by all parties hereto.
11.4 Amendment. This Agreement may be amended by the parties
hereto, by action taken by their respective Boards of Directors, at any time,
but no amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
11.5 Subsequent Actions. If, at any time after the Closing Date,
Xcel shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to
continue in, vest, perfect or confirm of record or otherwise in the Xcel's
right, title or interest, in, to or under any of the rights, properties,
privileges, franchises or assets of Insynq acquired or to be acquired by Xcel
as a result of, or in connection with, the Agreement, or otherwise to carry
out the intent of this Agreement, the officers and directors of Insynq agree
to execute and deliver, in the name and on behalf of Insynq all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and
on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any
and all right, title and interest in, to and under such rights, properties,
privileges, franchises or assets in Xcel or otherwise carry out the intent of
this Agreement.
11.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah without regard to
its rules of conflict of laws.
11.7 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto. Executed counterparts transmitted by fax shall be effective as
originals.
11.8 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
11.9 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all
genders and words denoting natural persons shall include corporations and
partnerships and vice versa.
11.10 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver
by any party hereto of a breach of any provision hereunder shall not operate
or be construed as a waiver of any prior or subsequent breach of the same or
any other provision hereunder.
11.11 Attorneys' Fees. If any arbitration, litigation, action, suit
or other proceeding is instituted to remedy, prevent or obtain relief from a
breach of this Agreement, in relation to a breach of this Agreement or
pertaining to a declaration of rights under this Agreement, the prevailing
party will recover all such party's attorneys' fees incurred in each and every
such action, suit or other proceeding, including any and all appeals or
petitions therefrom. As used in this Agreement, attorneys' fees will be
deemed to be the full and actual cost of any legal services actually performed
in connection with the matters involved, including those related to any appeal
or the enforcement of any judgment, calculated on the basis of the usual fee
charged by attorneys performing such services, and will not be limited to
"reasonable attorneys' fees" as defined in any statute or rule of court.
11.12 Survival. All representations and warranties of any party
contained in this Agreement shall survive the execution and delivery of this
Agreement and the Closing until 24 months after the Closing.
11.13 Incorporation of Exhibits. The Schedules and all Exhibits and
schedules attached hereto and referred to herein are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein.
11.14 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction unless the same is material to the terms of this Agreement,
in the judgment of either party to this Agreement, in which case the parties
shall negotiate in good faith to revise the same so as to be valid or
enforceable. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
11.15 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
11.16 Consent. Whenever the consent or approval of a party is
required by the terms of this Agreement, unless otherwise provided, the same
shall not be unreasonably withheld or delayed.
XCEL MANAGEMENT, INC.,
A Utah corporation
By: /s/ Steve Rippon
-----------------------
Steve Rippon, President
INSYNQ, INC.,
A Washington corporation
By: /s/ John Gorst
---------------------------------------
John Gorst, Chief Executive Officer
RESIGNATION
Steve Rippon, pursuant to a Unanimous Consent of the Board of Directors
of Xcel Management, Inc. (the "Company") dated February 18, 2000, hereby
resigns as an officer and director of the Company, effective immediately.
DATED: February 18, 2000 /s/ Steve Rippon
Steve Rippon
<PAGE>
RESIGNATION
Dallin Bagley, pursuant to a Unanimous Consent of the Board of Directors
of Xcel Management, Inc. (the "Company") dated February 18, 2000, hereby
resigns as an officer and director of the Company, effective immediately.
DATED: February 18, 2000 /s/ Dallin Bagley
Dallin Bagley
