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As filed with the Securities and Exchange Commission on November 27, 1996
REGISTRATION NO. 0-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
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TANISYS TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
WYOMING 74-2675493
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12201 TECHNOLOGY BOULEVARD, SUITE 130
AUSTIN, TEXAS 78727 78727
(Address of principal executive offices) (Zip Code)
(512) 335-4440
Registrant's Telephone Number, Including Area Code
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Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class to be registered each class is to be registered
NONE NOT APPLICABLE
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class)
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TANISYS TECHNOLOGY, INC.
FORM 10
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ITEM PAGE
NUMBER NUMBER
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-- Index 2
1. Business 3
2. Financial Information 21
3. Properties 28
4. Security Ownership of Certain Beneficial Owners and Management 29
5. Directors and Executive Officers 32
6. Executive Compensation 36
7. Certain Relationships and Related Transactions 40
8. Legal Proceedings 42
9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters 42
10. Recent Sales of Unregistered Securities 43
11. Description of Registrant's Securities to be Registered 44
12. Indemnification of Directors and Officers 46
13. Financial Statements and Supplementary Date 48
14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 48
15. Financial Statements and Exhibits 49
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ITEM 1. BUSINESS.
The following discussions contain trend information and other
forward-looking statements that involve a number of risks and
uncertainties. The actual results of Tanisys Technology, Inc. (the
"Company") and its wholly owned subsidiaries, 1st Tech Corporation ("1st
Tech") and DarkHorse Systems, Inc. ("DarkHorse") (collectively, the
"Tanisys Group"), could differ materially from its historical results of
operations and those discussed in the forward-looking statements. Factors
that could cause actual results to differ materially include, but are not
limited to, business conditions and growth in the electronics industry and
general economies, both domestic and international; lower than expected
customer orders; delays in receipt of orders or cancellation of orders;
competitive factors, including increased competition; new product
offerings by competitors and price pressures; the availability of parts
and supplies at reasonable prices; changing technologies; acceptance and
inclusion of the Tanisys Group's technologies by original equipment
manufacturers ("OEMs"); changes in product mix; new product development;
the timing of the negotiation of new contracts; significant quarterly
performance fluctuation due to the receipt of a significant portion of
customer orders and product shipments in the last month of each quarter;
and product shipment interruptions due to manufacturing problems. The
forward-looking statements should be read in light of these factors and
the factors identified in "Item 1. Business" and in "Item 2. Financial
Information--Management's Discussion and Analysis of Financial Condition
and Results of Operations." All period references are to the Tanisys
Group's fiscal periods ended September 30, 1996, 1995 or 1994, unless
otherwise indicated.
GENERAL
The Tanisys Group is a technology solutions company that provides
custom design, engineering and manufacturing services, test solutions and
standard and custom module products to leading OEMs in the computer,
networking and telecommunications industries. The Company's recent
acquisitions of 1st Tech and DarkHorse create a technology company with a
diverse product and service line.
The Tanisys Group has products and capabilities in both hardware and
software development, advanced design, manufacture, marketing, sales and
delivery. The Tanisys Group provides quality, sophisticated surface mount
assemblies and quick-response turnkey solutions to OEMs and believes that
its turnkey capabilities provide its customers with shorter production and
delivery cycles, more overall flexibility and quicker turnaround. The
products and services of the Tanisys Group include custom design,
engineering, memory test equipment, standard and custom memory modules,
patented touch technology, manufacturing, testing and logistics services.
The Company was organized under the laws of the Province of British
Columbia, Canada, on January 27, 1984, as Montebello Resources Ltd. to
exploit the mineral, oil and gas exploration business in British Columbia
and Manitoba, Canada. On October 7, 1992, the Company changed its name to
First American Capital Group Inc. The Company was unsuccessful in the oil
and gas business, and in 1992 deemed itself inactive pursuant to the rules
and regulations of the Vancouver Stock Exchange ("VSE"), where its common
stock, no par value per share (the "Common Stock"), had been traded.
During the first two quarters of 1993, the Company was reorganized in
accordance with the rules of the VSE. As part of this reorganization, the
Company acquired certain computer game controller technology, which was
the forerunner of the Company's Tanisys Touch technology. The Company
changed its name to Rosetta Technologies Inc. on May 13, 1993. On June
30, 1993, the Company continued its corporate charter into
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the State of Wyoming and on July 11, 1994, changed its name to Tanisys
Technology, Inc. The Company's Common Stock currently trades on the VSE
under the symbol "TNS.U," quoted in U.S. dollars.
Through its recent acquisitions of 1st Tech and DarkHorse, the Tanisys
Group has become a leading manufacturer of specialty modules, standard and
custom memory modules and memory test systems for a wide variety of
electronic system applications and industries. The Tanisys Group has
extensive design, engineering, manufacturing, logistics and test
expertise, which management believes provides it with significant
competitive advantages, including the ability to respond to its customers'
rapidly changing requirements and minimization of inventory exposures.
The Tanisys Group's principal customers include major electronic OEMs,
semiconductor manufacturers, computer distributors, corporate end users,
government agencies, personal computer catalog retailers, value added
resellers ("VARs") and system integrators. OEM customers include Bay
Networks, Inc., Compaq Computer Corporation, Dell Products LP,
Hewlett-Packard Company, Siemens AG Semiconductors and Toshiba Corporation
RECENT DEVELOPMENTS
On November 20, 1996, the Tanisys Group signed two contracts with
Siemens Components, Inc. ("Siemens") to provide design engineering,
quick-turn manufacturing, warehousing, distributing and testing of memory
modules for Siemens and their customers. Under the terms of the
agreements, Siemens is capitalizing on the quick-turn manufacturing and
logistics services provided by the Tanisys Group in order to better
service their customers and to support them in inventory reduction and
management. The consummation of these agreements is in fulfillment of the
Tanisys Group's strategy and represents an important milestone in
establishing long-term relationships with major customers as the primary
provider of turnkey design, development and manufacturing solutions.
ACQUISITIONS
On April 9, 1996, the Company, its wholly owned subsidiary, Tanisys
Acquisition Corp., 1st Tech and 1st Tech's principal stockholder, Gary W.
Pankonien, entered into an Agreement and Plan of Merger, which agreement
was subsequently amended (as amended, the "1st Tech Agreement"). On May
20, 1996, the stockholders of the Company approved the transactions
contemplated by the 1st Tech Agreement. Upon the effective date of the
1st Tech Agreement, an aggregate of 2,950,000 shares of Common Stock were
exchanged for the outstanding shares of 1st Tech common stock. 1st Tech
merged with and into Tanisys Acquisition Corp., ceasing to exist, with
Tanisys Acquisition Corp. changing its name to 1st Tech Corporation.
Presently, 1st Tech operates as a wholly owned subsidiary of the Company
and provides design, engineering and custom manufacturing services to the
electronics market.
On April 9, 1996, the Company, its wholly owned subsidiary, Tanisys
Acquisition Corp. II, DarkHorse Systems, Inc. and its principal
stockholders, Archer Lawrence, Jack Little and Gary W. Pankonien, entered
into an Agreement and Plan of Merger, which agreement was subsequently
amended (as amended, the "DarkHorse Agreement"). On May 20, 1996, the
stockholders of the Company approved the transactions contemplated by the
DarkHorse Agreement and an aggregate of 1,200,000 shares of Common Stock
were exchanged for the outstanding shares of DarkHorse Systems, Inc.
common stock. DarkHorse
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Systems, Inc. merged with and into Tanisys Acquisition Corp. II, ceasing to
exist, with Tanisys Acquisition Corp. II changing its name to DarkHorse
Systems, Inc. Presently, DarkHorse operates as a wholly owned subsidiary of
the Company and designs and markets tester equipment and technology to a
large and diverse marketplace, including personal computer users and
electronic equipment manufacturers.
INDUSTRY OVERVIEW
The demand for electronic products and components has grown
dramatically over the last several years as a result of expanding unit
sales in a number of industries, including computer, appliance,
telecommunications, consumer electronics and automotive, with expansion
into other industries ongoing. The demand for greater functionality and
product integration has required electronics manufacturers to increase the
number and complexity of electronic devices incorporated into their
products. As a result of this trend, the Tanisys Group believes that the
percentage of total product costs represented by electronic assemblies has
risen steadily over the past few years. Integrated Circuit Engineering
("ICE"), an independent data source, determined that in 1995 the total
worldwide market for semiconductor devices exceeded $120 billion.
Memory integrated circuits encompass several types of devices designed
to perform specific functions within computer and other electronic
systems. The most significant categories of semiconductor memory are
dynamic random access memory ("DRAM"), static random access memory
("SRAM") and non-volatile memory, including Flash, in addition to an
emerging technology known as synchronous DRAM ("SDRAM" or "SyncDRAM").
DRAM provides large capacity "main" memory; SRAM provides specialized high
speed memory; Flash and other non-volatile memory provide low power memory
that retains data after a system is turned off; and SyncDRAM is quickly
becoming the replacement for ("FPM") DRAM. In addition, within each of
these broad categories of memory products, semiconductor manufacturers are
offering an increasing variety of memory devices that are designed for
application specific uses.
The growth in semiconductor memory devices has created an increased
demand for reliable, cost-effective testing solutions. Historically,
memory testing has been the primary responsibility of the memory
semiconductor companies due to the expensive equipment required for the
process. However, as the industry matures, the need for memory test
capability has extended into OEMs, VARs, retail outlets, service centers
and end users. This need for increased testing is being driven by
stringent quality requirements, increased production volume, new complex
memory solutions, loss prevention and customer expectations. Tanisys Group
management estimates the worldwide memory test market for 1997 to be
approximately $29 million in revenue, which represents an estimated 33%
increase over 1996. Management estimates that desktop testers, used by
high volume customers such as OEMs, semiconductor manufacturers and VARs,
represent approximately 52% of the projected market and that portable
testers, used by retailers, third-party service companies and VARs,
represent approximately 48% of the projected market. The increase in
memory complexity and the shear number of products continues to fuel
significant growth in this market.
The proliferation of electronic devices throughout the world has
necessitated new approaches to providing intuitive personal access to the
products and their applications. The Tanisys Touch product line competes
in this area through its capacitive touch technology. Any product that
uses switches or controls is
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a candidate for the application of this
technology, including appliances, personal computers, point-of-sale
terminals, automated teller machines ("ATMs"), gas pumps, multimedia
kiosks, industrial and medical equipment, financial systems,
computer-based training systems, gaming machines and many other electronic
devices used by the public. Consistent across industries manufacturing
these products is the search for low cost, highly reliable, intuitive user
access. In 1996, the personal computer industry is projected to sell 63.7
million units for both desktop and notebook systems according to
Dataquest, Inc., a market research firm. Additionally, the appliance
industry is expected to sell in excess of $3 billion in units worldwide in
1996.
DESIGN, ENGINEERING, MANUFACTURING AND LOGISTICS SERVICES
The increased cost of capital equipment as well as the complexity and
expertise required to set up and operate an electronic manufacturing
operation has resulted in the trend of outsourcing by OEMs. By
outsourcing design, manufacturing and logistics functions, OEMs are able
to focus their resources on their own areas of core competence and
competitive advantage, such as unique technology, system design and
marketing capabilities. OEM outsourcing practices range from contract
manufacturing, in which the OEM may turn to an outside supplier to procure
components and design and manufacture a specific product for the OEM on a
turnkey basis, to consignment, in which the OEM employs the outside
supplier to design, engineer, manufacture, maintain inventory and
distribute a product using components supplied by the OEM.
One of the most significant opportunities is the manufacture of memory
modules. Memory modules are compact circuit board assemblies consisting
of DRAM, SRAM, Flash or other semiconductor memory devices and related
circuitry. The suppliers of memory modules include semiconductor
manufacturers who maintain captive memory module production facilities and
independent memory module manufacturers that source memory devices from a
wide variety of suppliers. Although some semiconductor manufacturers have
the ability to manufacture significant volumes of standard memory modules,
generally these companies are focused on adding value through their
silicon expertise, rather than through their memory module manufacturing
capabilities. Management of the Tanisys Group believes that the business
models of most semiconductor manufacturers may not adequately address
OEMs' changing requirements for a broad range of custom and application
specific products.
Independent manufacturers of memory modules have experience with a
broad range of memory devices and offer substantial expertise in component
selection and module product development. Due to the fact that
independent manufacturers do not produce their own semiconductor devices,
they have the ability to mix and match devices from a variety of
semiconductor suppliers in a single memory module. Independent
manufacturers of memory modules currently address two primary market
segments: the OEM channel and the personal computer reseller channel.
Suppliers to the OEM channel typically offer custom and application
specific modules to the workstation and telecommunications industries, as
well as standard memory modules for use by computer and peripheral OEMs.
Suppliers to the personal computer reseller channel typically offer
standard DRAM memory modules as an upgrade product sold through computer
distributors and retail channels.
MEMORY TEST SYSTEMS
The memory test market is growing rapidly due to the increasing and
ever changing complexities, configurations, densities and technologies of
memory devices. Semiconductor manufacturers are the major
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users of memory test systems on a chip level as well as on modules. In
addition, the market extends into independent manufacturers of modules, OEMs,
retail outlets, service centers and end users. The Tanisys Group believes
that the desire to produce as well as purchase quality memory products is
driving an increased awareness of the need for memory testing.
Memory test systems can be classified into two main areas:
semiconductor chip level testers and memory module testers. Semiconductor
chip level testers are utilized to completely characterize a semiconductor
device to guarantee its performance to a standard set of specifications.
Memory module testers are utilized to characterize an assembly of
semiconductor devices to a desired specification, whether standard or
custom. This characterization and testing is done to insure quality of
performance following a manufacturing process.
Test systems generally are designed as generic testers that must be
programmed and customized by the user to a specific purpose. The testers
may be configured to test personal computer motherboards, controllers or
simply memory modules. The common features these testers provide are
their abilities to manipulate the semiconductors' inputs and outputs in
relation to time at various voltages. The patterns of tests are known as
test algorithms or test vectors.
MEMORY MODULES
Electronic systems increasingly employ memory modules as building
blocks in system design as a result of the many advantages memory modules
offer OEMs and end users. The use of memory modules enables OEMs to offer
a relatively easy path for upgradeability of a personal computer or
workstation, a feature of system design that is increasingly required by
end users. The use of memory modules allows OEMs to increase flexibility
by enabling them to easily configure a system with a variety of different
levels of memory, thus enabling OEMs to address multiple price points or
applications with a single base system design. To achieve this
upgradeability and flexibility, both personal computer and communications
OEMs frequently design their systems to use memory modules as a "daughter
card," reducing the need to include memory devices on the motherboard.
This design structure frees space on the motherboard and enables the OEM
to use a single motherboard as a common central element for a variety of
different systems, resulting in significant cost savings. The use of
memory modules further reduces OEMs' costs by allowing them to add
expensive memory devices to products during the final stages of the
manufacturing process, thereby reducing the need for work-in-process
inventories.
The market for memory modules includes both standard and custom
modules. The high volume standard memory module market includes modules
that can be sourced from many module suppliers and are designed to be
incorporated into a wide variety of equipment. These modules employ
designs meeting widely used industry specifications of the Joint
Electronic Development Engineering Council ("JEDEC"), primarily utilizing
DRAM memory, and are available with a variety of options to address the
needs of multiple OEMs. Standard memory modules typically are used in
desktop personal computers and printers and are both to both OEMs and
through computer resellers directly to end users.
Specialty memory modules include both custom and application specific
modules. The varying requirements of different electronic systems and the
increased number of memory device options have resulted in a market for
custom memory modules that are designed to enhance the performance of a
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particular system or a set of applications. These modules are usually
based on either DRAM, SyncDRAM, SRAM or Flash technologies and may include
additional control circuitry. Custom memory modules typically are sourced
from a limited number of suppliers. Application specific or custom memory
modules generally are used in mobile computers, workstations and
telecommunications devices, such as routers and switches, and are sold
primarily to OEMs.
CAPACITIVE TOUCH TECHNOLOGY
Capacitive touch is input technology that utilizes the sensing of
touch with a high speed microprocessor circuit, replacing mechanical input
devices. There are relatively few companies pursuing this technology, and
to the best knowledge of management of the Tanisys Group, there are no
other companies pursuing off-screen applications other than mouse
replacement applications. Mouse replacement technology involves five to
six layers of board that are relatively expensive to produce. However,
off-screen applications offer a wide range of opportunities for the
technology, such as gas pumps, appliances, ATMs, cellular telephones and
almost any other electronic appliance, and the microchips are relatively
inexpensive to produce.
THE DRAM MARKET
DYNAMIC RANDOM ACCESS MEMORY. A DRAM is a high density, low cost per
bit semiconductor device that stores digital information in the form of
bits and provides high speed storage and retrieval of data. DRAMs are the
most widely used semiconductor memory component in most PC systems. The
development of more powerful personal computers and workstations and the
increasing emphasis on high-throughput networking and telecommunications
products have resulted in the need for higher volumes and greater
varieties of DRAM memory in electronic systems. For example, personal
computers currently based on 486, Pentium-Registered Trademark- and
PowerPC-Registered Trademark- microprocessors frequently employ 8 to 16
megabytes ("Mbytes") of DRAM, which is significantly more memory than that
employed by older generation personal computers. The adoption of Windows
95 and NT and other advanced operating systems is further increasing the
need for DRAM, as 16 Mbytes of DRAM memory are required for higher
performance to support Windows 95 multitasking capabilities.
THE SRAM MARKET
STATIC RANDOM ACCESS MEMORY. A SRAM is a semiconductor device that
performs memory functions much the same as a DRAM, but does not require
its memory cells to be electronically refreshed. In addition, a SRAM can
be designed to operate faster than a DRAM. A SRAM contains more complex
electronic circuitry than a DRAM and consequently has higher per bit
production costs. The market for SRAMs includes the high speed SRAM
segment and the low power SRAM segment. The market for high speed SRAM
devices has grown rapidly over the last few years, driven primarily by the
inability of slower DRAM devices to support the increasing speed
requirements of personal computer and data communications systems. Due to
existing architectural limitations, DRAM speeds have not increased
commensurably with improvements in microprocessor speeds. DRAMs typically
operate at 10 to 20 megahertz ("Mhz"), or 100 to 50 nanoseconds ("ns"),
while microprocessor bus speeds for most Pentium-Registered
Trademark--class personal computers currently sold are 66 MHz (15 ns) or
higher. Operating at 66 MHz or faster, high performance SRAM devices can
be used as "cache" memory, which increases a system's performance. For
example, in a
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personal computer or workstation, L2 cache memory can
increase system performance by acting as an intermediary between fast
microprocessors and slower DRAM main memory. In disk drives, SRAM cache
memories can be used as a high speed buffer to accelerate data throughput
from the drive to the system bus.
The Tanisys Group's SRAM family focuses on the high performance, or
"Very Fast," sector of the SRAM market, supporting cache memory
requirements in computers. Very Fast SRAM provides access times
approximately five times faster than those of a DRAM. The market for Very
Fast SRAM has grown with the number of applications that require a
"buffer" or "cache" of high speed memory between the central processing
unit and the main DRAM-based memory.
High speed SRAMs are experiencing rapid advancements in speed,
architecture, organization, density and operating voltages. These
advancements are primarily necessitated by the increasing speed and
functionality of microprocessors such as the Pentium-Registered
Trademark-, the PowerPC-Registered Trademark-, the Alpha-Registered
Trademark- and the SPARC-Registered Trademark-. High speed SRAMs are
reaching access times below 3 ns. High speed SRAM architecture has
evolved from asynchronous random access to synchronous pipelined burst
mode corresponding with the Pentium-Registered Trademark- architecture,
and synchronous serial access corresponding with reduced instruction set
computing ("RISC") architectures. SRAM devices are available in
organizations ranging from 1 bit to 36 bits wide and densities of up to 4
megabits. In addition, industry trends toward lower voltage
microprocessors, such as the Intel P54C (3.3 volt Pentium-Registered
Trademark-), have created a need for new, low voltage SRAM cache memories.
Low power SRAM devices are used primarily in computing or industrial
applications in which efficient power management is of greatest
importance. Primary applications for low power SRAM devices include mobile
computing and other environments in which electronic systems rely on
battery power or require low power dissipation.
THE FLASH MEMORY MARKET
Flash memory is an application of non-volatile memory used to retain
stored data after a system's power has been turned off. The ability of
Flash devices to be electronically rewritten to update parameters or
system software provides greater flexibility and ease of use than other
non-volatile memory devices, such as older erasable programmable read only
memory ("EPROM") devices. Flash memory is one of the fastest growing
segments of the memory market, as a growing range of applications utilize
Flash memory in the computer, telecommunications, networking, consumer
electronics, automotive, industrial control and instrumentation
industries. For example, Flash memory can be used in communication
devices such as routers, in which Flash memory provides storage of control
programs and system-critical data. Another common application for Flash
memory is in PC cards, which are small form factor devices that are
inserted into notebook and subnotebook computers and consumer electronics
products such as personal digital assistants ("PDAs") and digital cameras
to provide added storage.
Due to the increasing number of Flash suppliers, a variety of Flash
architectures such as NOR, DINOR, NAND and AND have become available.
These devices are offered in an increasing number of operating modes, such
as random access, serial access, synchronous and DRAM-like, and in a range
of operating voltages from 3.3 v. to 12.0v.
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THE SYNCDRAM MARKET
The introduction of the SyncDRAM as a replacement of FPM DRAM, which
is currently occurring, is considered to be a major shift in computing
system architecture creating the requirement to redesign the memory
system control logic. SyncDRAM is unique in that the memory can be
accessed by the processor in a synchronous instead of asynchronous manner,
which is inherently a faster operation. This transition will create the
demand for a total redesign of memory modules and require new testing
equipment to implement its use.
PRODUCTS AND SERVICES
The products and services of the Tanisys Group are divided into three
basic categories based on the areas of product specialization of each of
the three companies that comprise the consolidated group. These products
and services are custom design, engineering, standard and custom memory
modules, manufacturing, testing, logistics services, memory test equipment
and patented touch technology. Memory module products represented
approximately 95%, 97% and 97% of the Tanisys Group's total net sales in
fiscal 1996, 1995 and 1994, respectively, on a pro forma basis, and
semiconductor memory product testing equipment represented substantially
all of the balance of the Tanisys Group's revenue.
RESEARCH, DESIGN ENGINEERING AND PROTOTYPE TECHNOLOGIES SERVICES
The Tanisys Group believes it is proactively responding to the
increasing competition and shorter product life cycles that its customers
are facing in their respective industries. The Tanisys Group's design
engineers work jointly with customers to design products that will exceed
the minimum requirements and specifications for functionality, quality and
reliability. The transition from concept to prototype to a performance
reliable, manufacturable product with planned production requirements is
expertly managed so that the product volume-to-market cycle is as short as
possible, saving both time and expense. This process is aided by the
quick-turn capabilities in the Tanisys Group's manufacturing and surface
mount assembly processes. The Tanisys Group's intent is to position
itself to be the manufacturer of choice due to its intimate knowledge of
the product and the customers' requirements.
SURFACE MOUNT ASSEMBLY SERVICES
The Tanisys Group has a substantial investment in various pieces of
specialized module assembly equipment, including five Quad Systems, Inc.
surface mount technology ("SMT") machines, DarkHorse and Terradyne, Inc.
("Terradyne") testing equipment, reflow soldering machines, a sophisticated
hand-drop assembly line and board washing equipment. The SMT process solders
the leads on integrated circuits and other electronic components to the
surface of the printed circuit board ("PCB"), which replaces older
pin-through-hole technology. The SMT process accommodates substantially
greater density than can be achieved with the older technologies. This
allows for a reduction in the size of the PCB, enhances the performance of
the module and usually reduces the costs of materials and components.
Advanced SMT technologies, including double-sided attachment of components
and fine pitch component placement on the PCBs, have further increased
component density, reduced the PCB size and achieved substantial economies in
the cost of the finished modules. Double-sided placement attaches SMT
components on both sides of the
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PCB, and fine-pitch SMT places components that have tightly spaced
leads. Substantially all of the modules assembled by the Tanisys Group
employ the SMT process, and an increasing percentage utilizes fine-pitch
component placement and/or double-sided component attachment. The Tanisys
Group intends to continue investing in the equipment and technologies
required to develop the resources required to exceed customers'
expectations and requirements.
SEMICONDUCTOR MEMORY TESTING EQUIPMENT
The DarkHorse testers are designed, maintained and enhanced by the
Tanisys Group's professional engineering staff. The current emphasis is
on development of a tester for the new and growing SyncDRAM portion of the
module industry. Phase 1 of this development, which has been completed,
consisted of designing attachments which allow the current models to test
the new SyncDRAM modules. New testers that are designed specifically for
the new SyncDRAMs are now in the development stage.
All of the DarkHorse testers are designed and manufactured by the
Tanisys Group's manufacturing operation, utilizing the SMT process and the
hand-drop line. The Tanisys Group's commitment to continuous quality
improvement in its manufacturing operation has been essential to the
success of this product line. DarkHorse currently offers two testers, the
Sigma 2 and the Sigma LC, which compete in the automatic testing equipment
("ATE") market for the testing of both chips and modules. DarkHorse's
competitors include Terradyne, Terradyne/Megatest Division of Terradyne
("Megatest") and Realm Systems, Inc. ("Realm"), all of which provide
generic test equipment that requires the user to custom program the
equipment for specific applications. The DarkHorse test systems are
pre-programmed and include an extensive set of pre-programmed algorithms
and test programs that are accessed through an intuitive user interface.
SIGMA 2. The Sigma 2 unit is geared toward accurate, extensive and
expedient testing of memory for the manufacturer who needs additional
parametric testing and performs large volume testing, such as
manufacturers of personal computers and other electronic products. The
Sigma 2 has additional tests not available on the Sigma LC, which are
demanded in high-end testing environments.
SIGMA LC. The Sigma LC unit is portable and tests memory in the same
accurate, extensive and expedient manner as Sigma 2, but is geared toward
single in-line memory module ("SIMM") users whose volume is lower and
whose testing needs are slightly less extensive. The market for the Sigma
LC ranges from in-house service technicians to memory manufacturers.
MEMORY MODULES
The Tanisys Group designs and markets over 400 products consisting of
memory modules, which include DRAM, SRAM, SyncDRAM and Flash memory. The
products offered include custom and application specific memory modules,
as well as standard memory modules that comply with industry standards
established by JEDEC. The target market segments for these products
include personal computers, mission critical servers, telecommunications/
data communications, custom electronic assemblies, memory products and
contract manufacturing services to the electronics market. Historically,
the majority of the Tanisys Group's revenues have come from sales of standard
products to the memory
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after-market as well as custom products and custom assembly for the OEM
markets using advanced surface mount technologies and manufacturing processes.
An important aspect of the Tanisys Group manufacturing operations is
its focus on product testing. The Tanisys Group tests 100% of its memory
modules for full functionality. The Tanisys Group believes that it has
established substantial technical expertise in the testing of memory
modules, and its staff of experienced test engineers develop proprietary
testing routines and parameters that enable it to diagnose problems in
system design or memory components, to characterize the performance of new
products and to provide high quality products in volume.
TOUCH TECHNOLOGY
Tanisys Touch is a proprietary technology which is integrated into
electronic products to provide greater ease of use. Tanisys Touch allows
manufacturers to create devices that can be controlled simply by using
your finger. This intuitive characteristic means that users can rely more
on simple touch controls rather than on complex user control interfaces.
Tanisys Touch has the following advantages: no moving parts, lower cost
of implementation, the ability to be mounted under a variety of materials,
expanded ease-of-use functionality, environmentally robust and monolithic
construction that can be mounted directly to the surface of products,
including compound curves. While applicable markets for touch include any
electronic device, the initial focus is on computers and appliances due to
market size and product development cycles.
AVAILABILITY OF RAW MATERIALS
The Tanisys Group's manufacturing operations use numerous suppliers
for electronic components and materials, including DRAM components, used
in its operations. Shortages of certain types of electronic components
have occurred in the past and may occur in the future. The Tanisys
Group's contract manufacturing operations procure materials and components
based on purchase orders received and accepted from customers while
seeking to minimize the overall level of inventory. Component shortages
or price fluctuations could have an adverse effect on the Tanisys Group's
business and results of operations.
CUSTOMERS, SALES AND MARKETING
The Tanisys Group's principal customers include major and second-tier
electronics OEMs, semiconductor manufacturers, computer and electronics
distributors, VARs, system integrators and major consumer electronics
retail outlets.
On a pro forma basis, approximately 95% of the Tanisys Group's sales
are derived from the 1st Tech product and service line, which includes
standard and custom memory modules, custom electronics modules, design,
engineering, manufacturing and logistical inventory control services.
Substantially all of the balance of the Tanisys Group's sales are derived
from the DarkHorse tester product line, which also includes design and
engineering services, maintenance contracts and consumable replacement
parts. In fiscal 1996, the top ten customers of the 1st Tech products
accounted for 48% of Tanisys Group sales on a pro forma basis, and no one
customer accounted for 10% or more of such sales.
12
<PAGE>
The Company believes that it has proven the Tanisys Touch technology
and that the next step is inclusion of this technology by OEMs in the
marketplace. This can occur only if the OEM's product designs include the
technology because the discrete Tanisys Touch technology is not easily
retrofitted into existing products. Since July 1995 and prior to the
acquisitions of 1st Tech and DarkHorse, the Company focused substantially
all of its time and effort in developing and marketing Tanisys Touch to
the personal computer and appliance marketplace through major OEMs.
Currently, the Company is supporting a leading personal computer
manufacturer to introduce a touch-enabled product. In addition, the
Company is working with a leading appliance manufacturer to introduce a
touch-enabled appliance. Although both the personal computer manufacturer
and appliance manufacturer are expending significant resources to develop
the touch-enabled product lines, the Tanisys Group has no assurance that
either of these endeavors will be successful.
The Tanisys Group primarily sells its products and services through
direct sales in the United States, Europe and Asia and also uses a network
of independent sales representatives located throughout the United States
and Europe for certain OEM customers and large retail electronics stores.
Sales outside these areas are made through distributors, which purchase
products for resale outside the United States.
The Tanisys Group's sales and marketing efforts are conducted in an
integrated process involving direct sales people, independent sales
representatives, customer service representatives and senior executives.
An important aspect of the selling cycle is the team approach whereby a
senior executive is combined with marketing, manufacturing, engineering
and sales counterparts to work closely with the major OEM and
semiconductor accounts. Especially important are the related selling
opportunities of product lines. Conceivably, once a relationship is
established with an OEM, there is opportunity to sell all product lines
into the same account.
Relationships with leading semiconductor manufacturers located in the
United States, Japan, South Korea, Taiwan and Europe have been developed
by the Tanisys Group, and many of these vendors are also customers. The
Tanisys Group frequently works jointly with these vendors in bidding for
customer designs to be incorporated into an OEM's system.
The Tanisys Group plans to expand its sales and marketing organization
to increase the sales of its products and services and establish Tanisys
Touch, 1st Tech and DarkHorse brand names worldwide. Current marketing
activities include direct mail solicitations and participation in trade
shows, and future marketing activities also will include advertising in
trade publications targeted at high technology industries.
Sales generally are made pursuant to standard purchase orders. Only
those customer orders for which purchase orders have been accepted and
assigned shipment dates within the next 12 months are included in backlog.
Because the Tanisys Group's current backlog is subject to change in
delivery schedules and is subject to cancellation with only limited or no
penalties, backlog is not necessarily an indication of future net sales.
There can be no assurances that current backlog will necessarily lead to
net sales for any future period. At October 31, 1996, backlog was
$811,009.
13
<PAGE>
TANISYS GROUP STRATEGY
The Tanisys Group's objectives are (i) to continue to develop its
technologies to deliver products and services that provide its customers
with distinct market advantages; (ii) to strengthen its position as a
leading supplier of memory modules and memory test systems in high growth
markets; (iii) to establish and grow long-term relationships with
customers for all product lines by utilizing the combination of creativity
and experience of its personnel to help their customers profitably
differentiate their products by transforming ideas into creative and
manufacturable solutions, recognizing that each customer is different and
has unique needs; (iv) to continue to maintain and continuously improve
its world-class manufacturing capabilities; and (v) to continue to provide
extraordinary customer support. The Tanisys Group has established its
strategy in order to accomplish these goals and to ensure that customers
continually improve time-to-market production in volume. The following
are key elements of the Tanisys Group's strategy:
ESTABLISH THE TANISYS GROUP AS A LEADER IN ENGINEERING AND DESIGN SERVICES
The Tanisys Group's engineering, design and manufacturing staff
delivers value-added services, focusing on research, design, prototype,
development and manufacturing services, and gives the Tanisys Group the
ability to differentiate itself from competitors that primarily
concentrate on the manufacturing aspects of the industry. The Tanisys
Group believes that its professionals have the creative ability and
experience to understand a customer's ideas, analyze the technology and
work with them to create a product design. They can then proceed with the
building of the necessary prototypes to prove, design and develop a
manufacturing model, thereby moving the customer from the concept stage to
a manufacturable product. The Tanisys Group maintains a unique advantage
in the electronics manufacturing services ("EMS") industry through an
obvious depth of understanding of the product gained by its manufacturing
staff from its engineering staff.
EXPAND MANUFACTURING AND LOGISTICS CAPACITY AND EXPERTISE
Further expansion and automation of manufacturing capacity is planned
through investment in advanced manufacturing equipment, while maintaining
responsiveness to OEMs through short design cycle and rapid turnaround.
The Tanisys Group has made and will continue to make investments in
advanced manufacturing process equipment and technologies, and the Tanisys
Group will continue to work closely with customers concerning the
identification and implementation of all advances in process technologies
needed to design and manufacture new and more complex products. The
Tanisys Group believes that it benefits from significant economics of
scale in procurement and equipment utilization due to its high volume
manufacturing of a wide variety of memory module products. An experienced
manufacturing staff is in place, and automated specialized surface mount
lines have been established, enabling the manufacture of products in a
cost effective manner. An important aspect of the Tanisys Group's
manufacturing strategy is to focus extensively on product quality to
address the stringent requirements of leading electronics OEMs worldwide.
In addition, the Tanisys Group believes that it has established particular
expertise in materials management through efficient procurement, inventory
tracking and control and management information systems.
14
<PAGE>
DEVELOP NEW CUSTOMERS FOR EXISTING PRODUCTS AND SERVICES
The Tanisys Group intends to expand the marketing of its products and
services worldwide through the use of its in-house sales organization and
by contracting with independent sales representative organizations that
have existing relationships with potential customers for other products
and services. The intent is to establish long-term relationships with
major OEMs as the primary provider of turnkey design, development and
manufacturing solutions for new and existing products and services.
EXPAND THE SCOPE OF PRODUCTS AND SERVICES
The Tanisys Group intends to expand the scope of products and services
provided to existing customers who are already familiar with the total
quality focus of the Tanisys Group. The intent is to establish long-term
relationships as a primary provider of a complete slate of products and
services with these customers.
CONTINUE TO PROVIDE TOTAL QUALITY MANAGEMENT OF PRODUCTION AND BUSINESS
PROCESSES
The Tanisys Group continuously endeavors to improve production
quality, reduce cycle time and provide innovative solutions for customer
problems. The combination of full-service component and materials
purchasing, inventory and materials management and continuous flow
manufacturing with sophisticated computer-aided design and manufacturing
capabilities shortens the response time for fulfilling customer requests.
The Tanisys Group is International Standards Organization ("ISO") 9002
compliant and is in the process of becoming certified.
EXPAND DEVELOPMENT OF DARKHORSE MEMORY TEST EQUIPMENT PRODUCT LINE
The requirements for reliable and reasonably priced test
instrumentation has grown rapidly as customers' emphasis on quality
control in manufacturing has increased. The transition to dual in-line
memory modules ("DIMMs") and SyncDRAMs and the increasingly smaller sizes
require the design or redesign of sophisticated memory testers. The
electronics manufacturing services industry requires larger, more
automated testers that will work in conjunction with continuous flow
manufacturing lines, and the increasingly competitive nature of the
industry necessitates more economic pricing than this type of tester has
today. The retail industry requires reliable and reasonably priced
portable testers for loss prevention with pass/fail testing and for module
identification purposes.
DEVELOP PRODUCTS USING THE TOUCH TECHNOLOGY
The Tanisys Touch strategy is focused on the computer and appliance
industries due to market size and product development cycles, which
management believes will provide shorter time to revenue than other
potential industry markets. Initial focus is on select major
manufacturers in the computer and appliance industries with license
agreements used for specific new product development. This strategy is
consistent with the overall focus on the high volume OEM type customer as
opposed to the retail channels.
15
<PAGE>
EXPAND MANUFACTURING CAPABILITIES AND SERVICES
The intensely competitive nature of the electronics manufacturing
industry has forced the major competitors to expand the range of products
and value-added services provided to their principal customers in order to
serve as single-source providers of a comprehensive and growing set of
solutions-based products and services. By providing research, design and
prototype capabilities, the Tanisys Group can assist a customer in the
critical development and pre-production planning phase of product
implementation and follow through with the more traditional manufacturing
services. Industry parts suppliers also are customers of the Tanisys
Group, providing it with direct acquisition channels and thereby creating
strategic alliances. This allows a customer to utilize fewer service
providers to streamline the process and achieve better efficiencies in the
development cycle due to fewer transitions from one provider to another.
This type of strategic relationship gives a competitive advantage to both
the electronics manufacturer and to the customer within their respective
industries.
The continuing rapid advances in technology further support customers'
utilization of outsourcing to companies in the electronics industry.
Companies operating in the advanced electronic industries must devote more
and more resources, which ultimately are limited, to the development of
new technologies either for the next generation of an existing product or
the development of new products. Due to continuously reducing sizes and
increasing higher performance expectations and performance standards,
state-of-the-art manufacturing and assembly equipment and processes must
be used in order to meet the volume and time-to-market requirements.
16
<PAGE>
MAINTAIN TECHNOLOGICAL LEADERSHIP IN MEMORY MODULE DESIGN
The Tanisys Group believes it is a leader in the design of both
application specific and standard memory modules. Through its experience
with substantially all types of memory devices supplied by a wide range of
leading semiconductor manufacturers, the Tanisys Group has developed
significant expertise in memory module design and component selection.
Its extensive library of product designs and layouts of memory modules are
used to increase speed and efficiency in introducing new products,
assisting its OEM customers in achieving time-to-market advantages. The
Tanisys Group's strategy is to apply its design expertise to continue to
develop new memory modules that address emerging opportunities utilizing
DRAM, SyncDRAM, SRAM and Flash technologies. In addition, a substantial
base of proprietary testing routines and parameters has been developed,
which enables the diagnosing of problems in system design or memory
components, in order to characterize the performance of new products and
to provide high quality products in volume.
The transition to SyncDRAM should allow the Tanisys Group to continue
to differentiate itself from the competition through its advanced design
capabilities at higher processor speeds. This transition will necessitate
a large number of new designs and the development of new memory test
equipment as well as replacement of older existing test equipment.
INTRODUCE NEXT GENERATION MEMORY TEST EQUIPMENT
The continuing development of new memory technologies and changing
functionality will create the demand for next generation testing equipment
and capabilities. The Tanisys Group believes it is well positioned
through the DarkHorse memory test products to take advantage of these
changes and market expansion. The transition to SyncDRAM will necessitate
the development of new test programs and the replacement of existing test
equipment.
EXPAND OEM RELATIONSHIPS AND DISTRIBUTION CHANNELS
The Tanisys Group's experienced applications engineers continually
work with OEMs to seek and support multiple design opportunities over
numerous product generations. The Tanisys Group plans to continue to
develop relationships with its existing OEM customers and to establish
relationships with new OEM customers both domestically and
internationally. The Tanisys Group is growing its sales force to address
new opportunities with OEM customers and corporate end users worldwide.
The Tanisys Group also plans to broaden its distribution channels by
focusing additional marketing and sales resources on the computer reseller
channel and establishing worldwide recognition of the Tanisys brand name.
EXPAND INTERNATIONAL SALES AND MARKETING
The Tanisys Group is expanding its sales and marketing efforts
internationally with an objective of establishing worldwide recognition of
its products and the Tanisys, 1st Tech and DarkHorse brand names.
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<PAGE>
RESEARCH AND DEVELOPMENT
Tanisys Group management believes that the timely development of new
products and technologies is essential to maintain the Tanisys Group's
competitive position. In the electronics market, the Tanisys Group's
research and development activities are focused primarily on new module
products, the continual improvement in memory test products and solutions,
and the ongoing improvement in manufacturing processes and technologies.
Additionally, the Tanisys Group provides research and development services
for customers either as joint or contracted development. The Tanisys
Group plans to continue to devote substantial research and development
efforts to the design of new module products which address the
requirements of OEM, corporate and retail customers.
Tanisys Group management believes that its Tanisys Touch technology
has been developed to a viable commercial level and that the next step is
introduction of consumer products utilizing Tanisys Touch into the
marketplace by major OEMs. Support continues to be provided to OEMs in
the personal computer and appliance industries toward this end. However,
it is not anticipated that significant additional research and development
efforts will be required for this technology.
The Tanisys Group's research and development expenses in fiscal years
1996, 1995 and 1994, on a pro forma basis, were $1,511,000, $804,000 and
$683,000, respectively.
COMPETITION
The Tanisys Group is a technology solutions company with broad
industry product and service lines and believes that while it faces
different competitors in its three product and service lines, there is no
one company capable of competing in all product and service lines.
Competition in some products, such as 1st Tech's memory manufacturing, is
intense due to the large number of competitors with substantially greater
financial, marketing, technical, distribution and other resources.
However, the DarkHorse and Tanisys Touch lines are characterized by
limited effective competition in the segments of the markets targeted by
the Tanisys Group and its patented technology.
The basic competitive strategy of the Tanisys Group is to utilize the
high end custom engineering design, advanced manufacturing processes,
module test solutions, targeted sales and marketing and advanced
warehousing and distribution capabilities to deliver advanced
technologies, solutions and services packaged in such a way that a
customer is not required to deal with a substantial number of vendors but
can look solely to the Tanisys Group to satisfy all of its needs. The
Tanisys Group will continue to target customers with which a long-term,
primary or sole source relationship can be established in order to provide
broad-based solutions to any technological or manufacturing needs.
The competitors in the 1st Tech product line include module
manufacturers such as SMART Modular Technologies, Micron Electronics and
Celestica, Inc. Additional competition comes from certain suppliers who
may have the ability to manufacture competitive products at lower costs as
a result of their higher levels of integration. In addition, some current
and prospective customers may currently or in the future manufacture
internally.
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<PAGE>
In the memory testing industry, the DarkHorse line competes primarily
with Terradyne, Megatest and Realm, although they provide only generic
test equipment requiring the user to custom program the equipment for each
specific application. The DarkHorse test systems are pre-programmed with
an extensive set of algorithms and test programs that are accessed through
an intuitive user interface.
The Tanisys Group believes that its competition in the
capacitive touch market is limited to a few companies that are pursuing
limited applications of their technology as opposed to the broader market
it has targeted.
INTELLECTUAL PROPERTY
The Company has filed four applications with the U.S. Patent and
Trademark Office for patents to protect its intellectual property rights
for products and technology that have been sold, licensed or are under
development, as follows:
1. Application covering claims for hardware, firmware, software and
methods operations for a broad range of applications for its touch
technology. The patent was granted on April 16, 1996 under
Registration No. 5,508,700. Corresponding international patent
applications have been filed in selected European, Asian and North
American countries. Management of the Company believes that if
competitors decide to pursue the discrete touch market, they could be
in violation of the Company's patent. The Company has no knowledge of
any such infringement to date.
2. Application for "Keyboard Command Operation for Computer System."
This pending application is targeted to protect the Company's
technology that associates multiple commands with different keyswitch
actuations and that is applicable for computer keyboards.
3. Application for "Computer Input Device for Use in Conjunction with a
Mouse Input Device." This pending application is targeted to protect
the Company's technology related to capacitive sensing used in a mouse
pad or other flush-mounted touch device.
4. Application for "Capacitive Sensitive Input Circuit with Common Pad."
This pending application is targeted to protect the Company's touch
technology which could be used in extreme or hostile environments and
can function to improve the reliability of touch sensor operation in
such environments.
There can be no assurance that these pending patent applications will be
approved or approved in the form requested. The Tanisys Group expects to
continue to file patent applications where appropriate to protect its
proprietary technologies; however, the Tanisys Group believes that its
continued success depends primarily on factors such as the technological
skills and innovation of its personnel rather than on patent protection. In
addition, the Tanisys Group attempts to protect its intellectual property
rights through trade secrets and a variety of other measures,including
non-disclosure agreements. There can be no assurance, however, that such
measures will provide adequate protection for the Tanisys Group's trade
secrets or other proprietary information, that disputes with respect to the
ownership of its intellectual property rights will not
19
<PAGE>
arise, that the Tanisys Group's trade secrets or proprietary
technology will not otherwise become known or be independently developed
by competitors or that its intellectual property rights can otherwise be
protected meaningfully. There can be no assurance that patents will issue
from pending or future applications or that, if patents are issued, they
will not be challenged, invalidated or circumvented, or that rights
granted thereunder will provide meaningful protection or other commercial
advantage. Furthermore, there can be no assurance that third parties will
not develop similar products, duplicate the Tanisys Group's products or
design around the patents owned by the Tanisys Group or that third parties
will not assert intellectual property infringement claims against the
Tanisys Group. In addition, there can be no assurance that foreign
intellectual property laws will adequately protect the Tanisys Group's
intellectual property rights abroad. The failure of the Tanisys Group to
protect its proprietary rights could have a material adverse effect on its
business, financial condition and results of operations.
ENVIRONMENTAL REGULATION
The Tanisys Group's operations and manufacturing processes are subject
to certain federal, state, local and foreign environmental protection laws
and regulations. Public attention has increasingly been focused on the
environmental impact of manufacturing operations that use hazardous
materials or generate hazardous wastes, and environmental laws and
regulations may become more stringent over time. There can be no
assurance that failure to comply with either present or future
regulations, or to obtain all necessary permits required under such
regulations, would not subject the Tanisys Group to significant compliance
expenses, production suspensions or delay, restrictions on expansion at
its present or future locations, the acquisition of costly equipment or
other liabilities.
EMPLOYEES
At October 31, 1996, the Tanisys Group had 113 full-time and 2 part-time
employees.
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ITEM 2. FINANCIAL INFORMATION.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the
captions "Consolidated Statement of Income Data" and "Consolidated Balance
Sheet Data" are derived from the consolidated financial statements of the
Company and its subsidiaries, which financial statements have been audited
by Arthur Andersen LLP (fiscal 1996, 1995 and 1994), independent public
accountants, to the extent indicated in its report included elsewhere
herein. On May 20, 1996, the Company acquired 1st Tech and DarkHorse,
which resulted in them becoming wholly owned subsidiaries of the Company.
The acquisitions were accounted for using the purchase method of
accounting. The results for 1st Tech and DarkHorse have been included in
the consolidated financial statements since the date of the acquisitions.
The selected consolidated financial data set forth below is qualified
in its entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
the Consolidated Financial Statements, the notes thereto and the other
financial information included elsewhere in this report.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL YEARS ENDED SEPTEMBER 30,
---------------------------------------------
1996 (2) 1995 1994 1993 1992
(In thousands, except per share data)
CONSOLIDATED INCOME STATEMENT DATA:
Net sales $14,989 $ 359 $ 114 $ - $ -
Cost of goods sold 12,661 110 34 - -
------ ----- ------ ----- ----
Gross profit 2,328 249 80 - -
Operating expenses:
Research and development 1,080 410 409 181 -
Sales and marketing 1,177 1,358 394 117 18
General and administrative 1,977 913 1,029 342 12
Depreciation and amortization 2,474 71 60 28 -
Unusual charge (1) - - 199 - -
------ ----- ------ ----- ----
Total operating expenses 6,708 2,752 2,091 668 30
Income (loss) from operations (4,380) (2,503) (2,011) (668) (30)
Other income (expense), net (30) 58 39 7 (103)
------ ----- ------ ----- ----
Net income (loss) $(4,410) $(2,445) $(1,972) $ (660) (133)
------ ----- ------ ----- ----
------ ----- ------ ----- ----
Net income (loss) per share $ (0.37) $ (0.29) $ (0.30) $(0.27) $ 0.13)
------ ----- ------ ----- ----
------ ----- ------ ----- ----
Weighted average common
shares outstanding 11,766 8,436 6,611 2,861 1,025
AT SEPTEMBER 30,
---------------------------------------------
1996 (2) 1995 1994 1993 1992
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents $ 2,690 $1,317 $1,952 $2,076 $ 48
Working capital 2,803 1,183 1,766 2,155 (83)
Total assets 20,222 1,613 2,295 2,488 48
Short-term debt 3,075 - - - 121
Long-term obligations 123 - - - -
Shareholders' equity 13,110 1,379 1,941 2,457 (83)
- - -------------------------
</TABLE>
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<PAGE>
(1) As of September 30, 1994, the Company determined that it would not
utilize in its current or future product line certain technology
purchased in 1993. Therefore, the remaining goodwill of $198,739
associated with this purchase was charged to expense in the period
ended September 30, 1994.
(2) On May 20, 1996, the Company acquired 1st Tech and DarkHorse as a
result of which 1st Tech and DarkHorse became wholly owned
subsidiaries of the Company in exchange for the issuance of an
aggregate of 4,150,000 shares of Common Stock. The acquisitions were
accounted for using the purchase method of accounting. Under the
purchase method, the excess of purchase price over the estimated fair
value of the net assets acquired ($10,656,998) is classified as
goodwill and amortized against earnings over a two-year period. The
amount of goodwill amortized for the fiscal year ended September 30,
1996 was $2,220,208. The results of operations of 1st Tech and
DarkHorse have been included in the consolidated financial statements
since the date of the acquisitions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was organized under the laws of the Province of British
Columbia, Canada, on January 27, 1984, as Montebello Resources Ltd., and
operated unsuccessfully as an oil and gas exploration company in British
Columbia and Manitoba, Canada. In October 1992, the Company changed its
name to First American Capital Group Inc. The Company then deemed
itself inactive pursuant to the rules and regulations of the VSE, where
its common stock had been traded. During the first two quarters of
1993, the Company was reorganized in accordance with the rules of the
VSE. As part of this reorganization, the Company acquired certain
computer game controller technology. The Company changed its name to
Rosetta Technologies Inc. in May 1993 and to Tanisys Technology, Inc. in
July 1994. Until May 20, 1996, the Company focused on research and
development of highly specialized applications of capacitive touch
sensing technology.
Effective May 20, 1996, the Company acquired, through mergers with
its wholly owned subsidiaries,all of the outstanding common stock of 1st
Tech and DarkHorse and began operations in Austin, Texas as a
consolidated group of companies in the technology industry. In
consideration for the acquisitions of 1st Tech and DarkHorse, the
Company issued 2,950,000 and 1,200,000 shares, respectively, of Common
Stock. Prior but subject to the consummation of the acquisitions of 1st
Tech and DarkHorse by the Company, 1st Tech issued 1,150,000 shares of
its common stock for $2.00 per share in an equity financing, raising a
total of $2.3 million, the proceeds of which were used to reduce
short-term debt and provide working capital for 1st Tech.
The Tanisys Group's net sales and gross profit increased dramatically
over the last three fiscal years and especially in the last fiscal year due
to the acquisitions of 1st Tech and DarkHorse. In fiscal 1996, revenues were
$15.0 million with gross profit of $2.3 million (15.5% of revenue) versus
fiscal 1995 revenues of $.4 million and gross profit of $.2 million (69.4% of
revenue). This is an increase of revenues of $14.6 million, in excess of
4,000%, and in gross profit of $2.1 million, more than 800%. On a pro forma
basis (presented as though the acquisitions had taken place at the beginning
of fiscal 1995), the fiscal 1996 revenues and gross profit were $67.952
million and $5.138 million, respectively, versus fiscal 1995 revenue of
$106.668 million and gross profit of $7 million. This is a decrease in
revenues of $38.716 million, or 36%, and a decrease in gross profit of $1.976
million, or 28%, while gross margin increased by approximately 13.5%. The
decrease in revenues and corresponding decrease in gross profit was caused
22
<PAGE>
primarily by the drastic decline in the price of memory chips,
the major material cost in the manufacture of memory modules, and the
lack of adequate capital to buy inventory in sufficient quantities to
obtain the favorable pricing required in competitive bidding situations
dealing with commodity products. While the price of the memory chip has
currently stabilized and the acquisitions of DarkHorse and 1st Tech by
the Company in May 1996 has infused the required capital into the
business, management believes that revenues and gross profits will
continue to fluctuate due to the foregoing and other factors, including,
changes in pricing by suppliers and competitors and changes in the
proportion of contract manufacturing done--where the customer consigns
the material--versus manufacturing on a turnkey basis--where the Tanisys
Group purchases the necessary materials.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statement of
income data of the Tanisys Group expressed as a percentage of net sales
on a pro forma basis, taking into account the acquisitions of 1st Tech
and DarkHorse as if they had occurred October 1, 1993, with the
exception of the amortization of goodwill, which is from May 20, 1996,
the date of the acquisitions:
PRO FORMA FISCAL YEARS
ENDED SEPTEMBER 30,
----------------------------
1996 1995 1994
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 92.8 93.3 91.8
----- ----- -----
Gross profit 7.2 6.7 8.2
Operating expenses:
Research and development 2.3 0.8 1.6
Sales and marketing 4.3 3.4 4.0
General and administrative 11.0 3.5 5.3
Depreciation and amortization 3.7 .3 .7
Unusual charge 0.0 0.0 0.5
----- ----- -----
Total operating expenses 21.3 7.9 12.1
----- ----- -----
Operating income (loss) (14.1) (1.2) (3.9)
Other income (expense), net (0.5) (0.5) (0.6)
----- ----- -----
Net income (14.6%) (1.7%) (4.5%)
----- ----- -----
----- ----- -----
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<PAGE>
The following table sets forth certain consolidated
statement of income data of the Tanisys Group expressed as a percentage
of sales giving effect to the acquisitions of 1st Tech and DarkHorse on
May 20, 1996:
FISCAL YEARS ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 84.5 30.7 29.8
----- ----- -----
Gross profit 15.5 69.3 70.2
Operating expenses:
Research and development 7.2 114.2 359.6
Sales and marketing 7.9 378.6 346.1
General and administrative 13.2 254.6 897.1
Depreciation and amortization 16.5 19.8 60.2
Unusual charge 0.0 0.0 174.6
----- ----- -----
Total operating expenses 44.8 767.2 1837.6%
----- ----- -----
Operating income (loss) (29.2) (697.9) (1733.0)
Other income (expense), net (0.2) 16.3 34.2
Net income (29.4%) (681.6%) (1733.0%)
----- ----- -----
----- ----- -----
NET SALES
On the historical accounting basis, net sales consist of software
sales, less returns and discounts, and design engineering fees from 1994
to May 20, 1996, the date of the acquisitions of 1st Tech and DarkHorse.
After the May 20, 1996 acquisitions, net sales consist of custom
manufacturing services, custom memory modules, standard memory modules,
design engineering fees, memory module test solutions, advanced
technology services and computer software, less returns and discounts.
Net sales increased from $114 thousand in fiscal 1994 to $359 thousand
in fiscal 1995, a 215% increase, and to $14.989 million in fiscal 1996,
a 4,075% increase. The increase in sales in fiscal 1995 from fiscal
1994 was due primarily to new software products and additional
distributors. The increase in fiscal 1996 is due to the acquisitions of
1st Tech and DarkHorse.
On a pro forma basis, net sales increased from $42.708 million in
fiscal 1994 to $106.668 million in fiscal 1995, a 149.76% increase, and
decreased to $67.952 million in fiscal 1996, a 36.3% decrease. The
increase from fiscal 1994 to fiscal 1995 was due primarily to the steady
increase in the volume of sales of manufactured and purchased memory
modules, test equipment sales, manufacturing services and the addition
of significant new customers. The decrease of sales in fiscal 1996
resulted from the drastic decline in memory prices (the cost of a 4-meg
DRAM fell from approximately $11.25 in January of 1996 to approximately
$1.90 in September of 1996, a decrease of $9.35, or about 83%) and the
inability to obtain memory product and components during this extremely
competitive period due to the lack of available capital.
24
<PAGE>
GROSS PROFIT
Cost of sales includes the costs of all components and materials
purchased for the manufacture of products and the direct labor and
overhead costs associated with manufacturing. On the historical
accounting basis, gross profit increased from $80 thousand in 1994 to
$249 thousand in fiscal 1995, a 211% increase, to $2.328 million in
fiscal 1996, an 835% increase. Gross profit margin declined from 70% in
fiscal 1994 to 69% in fiscal 1995 to 16% in fiscal 1996. The profit
margins in fiscal 1994 and 1995 were primarily attributable to the sale
of software developed in conjunction with research and development on
the capacitive touch technology, which had very little cost of sales
associated with that development. The gross profit margin in fiscal
1996 is primarily from the manufacturing operation subsequent to the
acquisitions and is discussed in the next paragraph.
On a pro forma basis, gross profit increased from $3.411 million in
fiscal 1994 to $7.114 million in fiscal 1995, a 108.56% increase, and
decreased to $5.138 million in fiscal 1996, a decrease of 27.8%. Gross
profit margin declined from 7.99% in fiscal 1994 to 6.67% in fiscal 1995
and increased to 7.56% in fiscal 1996. The Company consistently made
strategic purchasing and pricing decisions during the three-year period
that sacrificed gross profit percentage to establish relationships with
customers and vendors. This practice was the primary cause of the
steady deterioration of gross profit margin through fiscal 1995. In
fiscal 1996, gross profit improved slightly due to the additional
capital made available by the Company's acquisition of 1st Tech and the
addition of a consignment inventory of certain memory components,
shortening the manufacturing response time and making it possible to
compete on the basis of delivery rather than on price alone.
RESEARCH AND DEVELOPMENT
Research and development expenses consist of the costs associated
with the design and testing of new technologies and products. These
costs relate primarily to the costs of materials, personnel, management
and employee compensation and engineering design consulting fees. On
the historical accounting basis, research and development increased from
$409 thousand in fiscal 1994 to $410 thousand in fiscal 1995 and to
$1.080 million in fiscal 1996, a 163% increase. The increases in fiscal
1994 though 1995 were associated with development of the capacitive
touch technology, and the substantial increase in fiscal 1996 was due to
the acquisitions of 1st Tech and DarkHorse.
On a pro forma basis, research and development expenses increased
from $683 thousand in fiscal 1994 to $804 thousand in fiscal 1995, an
18% increase, and to $1.511 million in fiscal 1996, an 87.9% increase.
The steady growth of research and development expense reflects the
commitment to continuing development of new products, including module
products, testing equipment, advanced technology and computer software.
SALES AND MARKETING
Sales and marketing expenses include all compensation of employees
and independent sales personnel, as well as the costs of advertising,
promotions, trade shows, travel, direct support and overhead. On the
historical accounting basis, sales and marketing expenses increased from
$394 thousand in fiscal 1994 to $1.358 million in fiscal 1995, a 245%
increase, and decreased to $1.177 million in fiscal 1996, a
25
<PAGE>
13% decrease. In fiscal years 1994, 1995 and 1996, sales and marketing
expenses expressed as a percent of revenues were 346%, 378% and 8%,
respectively. The increase from fiscal 1994 to fiscal 1995 was connected
with the effort to establish markets for the software products developed by
the Company. The decrease in 1996, after the acquisitions of 1st Tech and
DarkHorse, reflects the decrease in commission expenses due to the decrease
in sales revenue discussed under the paragraph heading "Net Sales" above.
On a pro forma basis, sales and marketing expenses increased from
$1.693 million in fiscal 1994 to $3.608 million in fiscal 1995, a 113%
increase, and decreased to $2.828 million in fiscal 1996, a 21.6%
decrease. The increase from fiscal 1994 to fiscal 1995 was due
primarily to increased commissions paid on the higher sales volumes,
increased numbers of sales and marketing personnel and the increase in
trade shows and other forms of product and corporate image advertising.
The decrease in fiscal year 1996 reflects the decrease in commission
expenses due to the decrease in sales revenue discussed under the
paragraph heading "Net Sales" above. In fiscal years 1994, 1995 and
1996, sales and marketing expenses expressed as a percent of revenues
were 3.96%, 3.38% and 4.16%, respectively. Sales and marketing expenses
are expected to remain approximately the same or to grow slightly when
expressed as a percentage of revenue and to continue to increase
significantly in terms of absolute dollars in future periods as revenues
continue to grow.
GENERAL AND ADMINISTRATIVE
General and administrative costs consist primarily of personnel
costs, including all compensation and employee benefits, and support
costs including utilities, insurance, professional fees and all costs
associated with a reporting company. On the historical accounting
basis, general and administrative expenses decreased from $1.089 million
in fiscal 1994 to $984 thousand in fiscal 1995, a 10% decrease, and
increased to $4.451 million in fiscal 1996, a 352% increase. The
decrease in fiscal 1995 from fiscal 1994 reflects the implementation of
cost saving measures designed to make general and administrative
expenditures more effective. The increase in fiscal 1996 is due to the
acquisitions of 1st Tech and DarkHorse.
On a pro forma basis, general and administrative expenses increased
from $2.569 million in fiscal 1994 to $4.025 million in fiscal 1995, a
57% increase, and increased to $4.541 million in fiscal 1996, a 12.82%
increase. Expressed as a percentage of net sales, general and
administrative expenses were 6%, 4% and 7% in fiscal years 1994, 1995
and 1996, respectively. The increase in expenses in each year was
caused primarily by an increase in personnel to support the Tanisys
Group's increasing business activity. The absolute dollar expenses
associated with the general and administrative area are expected to
increase significantly in future periods due to anticipated continued
growth in business activity and increased costs associated with being a
reporting company. The general and administrative expenses are not
expected to grow significantly in future periods when expressed as a
percentage of sales.
UNUSUAL CHARGE
On the historical accounting basis, other income (expense) increased
from $39 thousand in fiscal 1994 to $59 thousand in fiscal 1995, a 51.3%
increase, and decreased to -$30 thousand in fiscal 1996, a 151.0%
decrease. On a pro forma basis, other income (expense) increased from
- - -$244 thousand in fiscal 1994 to -$517 thousand in fiscal 1995, a 111.9%
increase, and decreased to -$294 thousand in fiscal 1996, a
26
<PAGE>
43.1% decrease. The expense shown in fiscal 1994 relates to the recognition
by the Company that the computer game controller technology acquired in 1993
would not be utilized in the Company's current or future operations.
Therefore, the remaining $199 thousand of goodwill associated with that
purchase was charged as an unusual charge in fiscal 1994. No other goodwill
chargeoffs are currently expected except through amortization charges over
the useful life of the respective assets.
OTHER INCOME (EXPENSE), NET
Other income (expense), net consists primarily of interest income
less interest expense. Interest expense is attributable to borrowings
from a bank credit line. Substantially all of the interest expense in
the three-year pro forma period relates to credit line draws made for
short-term inventory requirements and to fund accounts receivable.
Interest income relates to investment of available cash in short-term
interest bearing accounts and cash equivalent securities. The Company
had limited amounts of available cash until its May 20, 1996
acquisitions of 1st Tech and DarkHorse, and, therefore, all fiscal years
reflect net interest expense. The Tanisys Group expects to continue to
require borrowings to fund growth in inventories and accounts receivable
in the future and therefore expects to continue to reflect net interest
expense.
PROVISION FOR INCOME TAXES
The Company has never paid income taxes and at September 30, 1996
had a net operating loss carryover of $989 thousand. While there can be
no assurance that the Tanisys Group will generate the taxable income
required to use all or any part of the carryover prior to the expiration
of the carryover, the Tanisys Group would be able to incur taxable
income in the carryover period equal to the total loss carryover without
the payment of taxes. The existing carryover expires 15 years after the
year in which it was incurred. Therefore, if the carryover is not used
to offset future taxable income, the $1.785 million net operating loss
carryforward at September 30, 1996 will expire in fiscal years 2007
through 2011.
LIQUIDITY AND CAPITAL RESOURCES
During the five fiscal years presented in this analysis, until the
May 20, 1996 acquisitions of 1st Tech and DarkHorse, the Company
primarily utilized funds generated by equity financings of its Common
Stock and the exercise of warrants issued in certain of those equity
financings to generate the funds required to fund its research and
development activities, acquire capital equipment and pay its general
and administrative expenses.
Since inception and until the May 20, 1996 acquisitions by the
Company, 1st Tech and DarkHorse used funds generated from operations, an
equity financing, capital leases, vendor credit and certain bank
borrowings to support their respective operations, acquire capital
equipment and finance inventory acquisitions and accounts receivable
balances.
Subsequent to the May 20, 1996 acquisitions, the Tanisys Group has
utilized the funds acquired in equity financings of its Common Stock and
the exercise of warrants issued in equity financings of its Common
Stock, capital leases, vendor credit, certain bank borrowings and funds
generated from operations to support its operations, carry on research
and development activities, acquire capital equipment, finance
27
<PAGE>
inventories, finance accounts receivable balances and pay its general
and administrative expenses. At September 30, 1996, the Tanisys Group
had $2.690 million of cash and $2.809 million of working capital.
The Tanisys Group has a $6 million revolving line of credit with The
Chase Manhattan Bank, which is secured by its accounts receivable and
inventories. This line of credit matures June 30, 1998. Amounts
available for borrowing are limited to the lower of the commitment
amount or a borrowing base amount calculated based on certain levels of
accounts receivable. At September 30, 1996, $3.075 million was
outstanding and $2.925 million was available under the line of credit.
The line of credit has certain restrictions concerning, among other
things, the payment of dividends, additional debt and material changes
in management and requires the Tanisys Group to maintain certain minimum
financial ratios including a minimum net worth and minimum current ratio.
Capital expenditures totaled approximately $523,000, $815,000 and
$852,000 in fiscal years 1994, 1995 and 1996, respectively. These
expenditures were primarily for the purchase of manufacturing equipment,
test equipment and the expansion of manufacturing facilities. The
Tanisys Group plans to spend approximately $3 million in fiscal 1997 in
capital expenditures for additional manufacturing capacity.
The Tanisys Group has entered into certain capital lease
arrangements. The outstanding principal on these obligations at
September 30, 1996 was $171 thousand. See Note 6 to the Company's
Consolidated Financial Statements.
The Tanisys Group believes that its existing funds, anticipated cash
flow from operations and amounts available from future vendor credit,
bank borrowings, the exercise of warrants issued in prior equity
financings, and equity financings will be sufficient to meet its working
capital and capital expenditure needs for the next twelve months.
ITEM 3. PROPERTIES.
At September 30, 1996, the Company and its wholly owned
subsidiaries, 1st Tech and DarkHorse, leased and occupied approximately
33,000 square feet of space for their production facility and corporate
and administrative offices at 12201 Technology Boulevard, Suite 130,
Austin, Texas, pursuant to a lease which expires on April 30, 1998. The
lease has certain expansion options, renewal options and rights of first
refusal. The Company currently is paying annual rental of $184,118,
plus a pro rata charge for property taxes, common area maintenance and
insurance. The Company believes that its current facilities are
adequate to meet its current needs.
28
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information known by the
Company regarding the beneficial ownership of Common Stock by persons
owning beneficially more than 5% of the outstanding Common Stock at
October 31, 1996. A total of 15,978,537 shares of the Company's Common
Stock were issued and outstanding at October 31, 1996.
NO. OF SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) OF CLASS (2)
------------------------------------ ------------- ------------
Gary W. Pankonien 1,995,000 12.5%
12201 Technology Boulevard, Suite 130
Austin, Texas 78727
Parris H. Holmes, Jr. 946,315 (3) 5.8%
9311 San Pedro, Suite 400
San Antonio, Texas 78216
James E. Sowell 1,362,648 (4) 8.2%
3131 McKinney Avenue, Suite 200
Dallas, Texas 75204
- - ------------------
(1) Unless otherwise noted, each of the persons named has sole voting and
investment power with respect to the shares reported.
(2) The percentages indicated are based on outstanding stock options,
Class B, Class C and other Common Stock Purchase Warrants (collectively,
the "Warrants") exercisable within 60 days for each individual and
15,978,537 shares of Common Stock issued and outstanding at October 31,
1996.
(3) Includes 85,000 shares that Mr. Holmes has the right to acquire upon
exercise of stock options, exercisable within 60 days, 130,325 shares
that Mr. Holmes has the right to acquire upon the exercise of Warrants,
exercisable within 60 days, and 27,000 shares owned by his four children.
(4) Includes 788,824 shares owned by Jim Sowell Construction Co., Inc., a
private company owned 100% by Mr. Sowell, 558,824 shares that Mr. Sowell
has the right to acquire upon the exercise of Warrants owned by Jim
Sowell Construction Co., Inc., exercisable within 60 days, and 15,000
shares that Mr. Sowell has the right to acquire upon exercise of stock
options, exercisable within 60 days.
The following table sets forth certain information known to the
Company with respect to beneficial ownership of the Company's Common
Stock at October 31, 1996 by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock,
(ii) each of the Company's
29
<PAGE>
directors, (iii) each named executive officer and (iv) all executive officers
and directors as a group. A total of 15,978,537 shares of the Company's
Common Stock were issued and outstanding at October 31, 1996.
<TABLE>
<CAPTION>
<S> <C> <C>
COMMON STOCK
-----------------------------
5% BENEFICIAL OWNERS, DIRECTORS NUMBER
AND NAMED EXECUTIVE OFFICERS OF SHARES(1) PERCENT(2)
------------------------------- ------------ ----------
Mark C. Holliday 307,872 (3) 1.5%
Gary W. Pankonien 1,995,000 12.5%
Joe O. Davis 8,000 *
Chris Efstathiou, Jr. 25,000 *
Guy L. Fielder 0 *
Benjamin S. Marz 71,957 (4) *
Bill A. Nabors 0 *
Donald R. Turner 25,000 *
Parris H. Holmes Jr. 946,315 (5) 5.8%
Gordon H. Matthews 153,400 (6) 1.0%
Alan H. Portnoy 0 *
James E. Sowell 1,362,648 (7) 8.2%
Theodore W. Van Duyn 150,000 (8) *
All executive officers and directors as a group
(13 persons, including the executive officers
and directors listed above) 5,045,192 (9) 29.4%
- - -----------------------
</TABLE>
*Represents less than one percent (1%) of the issued and outstanding shares of
Common Stock.
(1) Unless otherwise noted, each of the persons named has sole voting and
investment power with respect to the shares reported.
(2) The percentages indicated are based on outstanding stock options,
Class B, Class C and other Common Stock Purchase Warrants
(collectively, the "Warrants") exercisable within 60 days for each
individual and 15,978,537 shares of Common Stock issued and outstanding
at October 31, 1996.
(3) Includes 206,666 shares that Mr. Holliday has the right to acquire upon
exercise of stock options, exercisable within 60 days.
(4) Includes 66,667 shares that Mr. Marz has the right to acquire upon
exercise of stock options, exercisable within 60 days.
(5) Includes 85,000 shares that Mr. Holmes has the right to acquire upon
exercise of stock options, exercisable within 60 days, 130,325 shares
that Mr. Holmes has the right to acquire upon the exercise of Warrants,
exercisable within 60 days, and 27,000 shares owned by his four children.
30
<PAGE>
(6) Includes 55,000 shares that Mr. Matthews has the right to acquire upon
exercise of stock options, exercisable within 60 days, and 1,400 shares
owned by his daughter.
(7) Includes 788,824 shares owned by Jim Sowell Construction Co., Inc., a
private company owned 100% by Mr. Sowell, 558,824 shares that Mr. Sowell
has the right to acquire upon the exercise of Warrants owned by Jim
Sowell Construction Co., Inc., exercisable within 60 days, and 15,000
shares that Mr. Sowell has the right to acquire upon exercise of stock
options, exercisable within 60 days.
(8) Includes 50,000 shares that Mr. Van Duyn has the right to acquire upon
exercise of stock options, exercisable within 60 days.
(9) Includes 478,333 shares that 13 directors and executive officers have the
right to acquire upon exercise of stock options, exercisable within 60
days, and 689,149 shares that such directors and executive officers have
the right to acquire upon the exercise of Warrants, exercisable within 60
days.
31
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The Company's directors, executive officers and key employees and their
respective ages and positions as of October 31, 1996 are as follows:
NAME AGE POSITION(S)
Mark C. Holliday 44 Chairman of the Board and Chief Executive
Officer
Gary W. Pankonien 46 President, Chief Operating Officer and Director
Joe O. Davis 53 Senior Vice President, Chief Financial Officer
and Corporate Secretary
Chris Efstathiou, Jr. 37 Vice President of Materials
Guy L. Fielder 43 Vice President of Engineering
Benjamin S. Marz 44 Vice President of Sales and Customer Service
Bill A. Nabors 55 Vice President of Manufacturing
Donald R. Turner 41 Corporate Controller
Parris H. Holmes, Jr. 52 Vice Chairman of the Board (1)(2)(3)
Gordon H. Matthews 59 Director (1)
Alan H. Portnoy 51 Director (1)
James E. Sowell 47 Director (2)(3)
Theodore W. Van Duyn 46 Director (2)(3)
___________________
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Stock Option Committee.
The following are biographies of the Company's executive officers,
directors and key employees for the past five years.
MARK C. HOLLIDAY joined the Company as President, Chief Executive
Officer and a Director in February 1994 and was elected Chairman of the Board
in March 1994. Mr. Holliday has over 20 years of computer industry
experience in large multinational companies as well as new ventures in
computer software development, most recently with BMC Software, Inc., a
software development company, where he served as director of research and
development from March 1988 to February 1994.
GARY W. PANKONIEN was appointed President and Chief Operating Officer of
the Company after the acquisition of 1st Tech and DarkHorse in May 1996 and
elected a Director in July 1996. Prior to 1st Tech's acquisition by the
Company, Mr. Pankonien served as Chairman and Chief Executive Officer of 1st
Tech since its inception in January 1993 and as Chairman and Chief Executive
Officer of DarkHorse since May 1992. He was Chief Operations Officer of
Stratum Technologies, Inc., a memory module manufacturer and reseller located
in Austin, Texas, from January 1992 until August 1992, when he purchased
Stratum and was appointed Chairman of the Board and Chief Executive Officer.
Stratum was dissolved in June 1995. He was employed with Compaq Computer
Corporation, a personal computer manufacturer, from February 1984
32
<PAGE>
until October 1991 as Notebook Computer Design and Operations Manager and
co-developed and currently holds the patent for the first notebook computer.
JOE O. DAVIS joined the Company as Senior Vice President, Chief
Financial Officer and Corporate Secretary in July 1996. Prior to joining the
Company, Mr. Davis served from June 1990 to April 1993 as Chief Financial
Officer of San Marcos Telephone Company, which was acquired by Century
Telephone Enterprises, a long distance telephone company listed on the New
York Stock Exchange and located in Monroe, Louisiana, in April 1993. He
continued his employment with Century Telephone Enterprises as Vice President
of Finance and Planning until July 1996. He has 27 years of experience in
financial management and business planning, both domestically and
internationally, has served as a member of the board of directors of various
public and private companies in the United States and Australia, and was a
partner with Peat Marwick Mitchell & Co., now known as KPMG Peat Marwick, for
three years.
CHRIS EFSTATHIOU, JR., Vice President of Materials, has more than 15
years of experience in the electronics industry in high-tech purchasing. He
joined 1st Tech in December 1994 as Vice President of Materials and the
Company in May 1996 upon its acquisition of 1st Tech. Previously, Mr.
Efstathiou worked from May 1990 to December 1994 as the Director of Strategic
Materials for Dell Computer Corporation, a personal computer manufacturer.
Prior to working with Dell, he was involved for more than 10 years in
high-tech purchasing, including 4 years with Advent Corporation and more than
2 years with Wang Laboratories, Inc.
GUY L. FIELDER, Vice President of Engineering, joined the Company in
November 1996. Mr. Fielder was self-employed as an engineering consultant
from October 1991 to November 1996. He was the 18th employee of Compaq
Computer Corporation, a member of its start-up team and was intimately
involved in the formation of Compaq's organization, structure and culture.
As a senior research and development manager at Compaq, he developed
state-of-the-art portable personal computers that won numerous industry
awards and grossed over $2 billion in sales.
BENJAMIN S. MARZ, Vice President of Sales and Customer Service, joined
the Company in April 1994. Prior to joining the Company, Mr. Marz was Vice
President of Sales and Customer Service of Technology Works, Inc., a memory
manufacturing company, from February 1993 to April 1994 after serving two
years on their board. He was President of Computerland in Austin, Texas from
July 1990 to February 1993 and Executive Vice President of Crown Furniture
and Jewelry from August 1984 to July 1990.
BILL A. NABORS joined the Company as Vice President of Manufacturing
effective upon the acquisition of 1st Tech in May 1996. He had served in the
same capacity with 1st Tech since May 1996. Previously, Mr. Nabors was
President and Chief Operating Officer of Bartco Inc., a printing company
serving small businesses, from December 1992 to February 1994. He was
Director of U.S. Manufacturing for Compaq Computer Corporation from June 1984
to November 1992 and was instrumental in establishing their Houston SMT
operations. His background includes materials management positions with both
Texas Instruments and Rockwell International.
DONALD R. TURNER, CPA, Corporate Controller, joined the Company
effective upon the acquisition of 1st Tech in May 1996. He was a founding
officer and board member of 1st Tech, where he served as Vice
33
<PAGE>
President, Chief Financial Officer and Secretary-Treasurer from January 1993
until the purchase by Tanisys in May 1996. He was Controller of Stratum
Technologies, Inc. from September 1992 to January 1993. Prior to joining
Stratum, he was Controller of Phillips Distribution, a San Antonio, Texas
based packaging distribution company, from March 1984 until September 1992.
PARRIS H. HOLMES, JR. has served as a Director of the Company since
August 1993, having served as Chairman of the Board until March 1994, at
which time he was elected Vice Chairman of the Board. Mr. Holmes is Chairman
and Chief Executive Officer of Billing Information Concepts Corp., a
third-party billing clearinghouse and information management services
business, and Chairman of U.S. Long Distance Corp., a telecommunications
company which he founded in 1985.
GORDON H. MATTHEWS has served as a Director of the Company since
September 1994. Since June 1992, Mr. Matthews has owned and operated
Matthews Voice Mail Management, Inc., which provides voice mailboxes on a
monthly rental basis for specialized applications, and Matthews
Communications Systems, Inc., which tracks the pace of golf course play and
increases efficiency and net profitability of golf courses. In June 1996,
Mr. Matthews started a new company, Matthews Communications Management, Inc.,
which will offer advanced telephone control products. He serves on the Board
of Directors of V-Tel Corporation, an Austin, Texas company specializing in
teleconferencing services.
ALAN H. PORTNOY has served as a Director of the Company since July 1996.
Since January 1994, Mr. Portnoy has served as President of Galactic
Enterprises, Inc., which provides corporate development and strategic
marketing services for high technology start-up companies and multinational
corporations in the semiconductor, computer and communications fields. From
September 1987 to January 1994, he was Executive Vice President and Chief
Operating Officer of Goldstar America, Inc., a subsidiary of the
Lucky-Goldstar Group, a Korean conglomerate.
JAMES E. SOWELL is the founder of Jim Sowell Construction Co., Inc.,
which began in 1972 primarily for single-family home construction. Since
1972, the company has expanded its scope of operations and ownership to
include land development, income property development, financial
institutions, country club and golf course operations and ownership, hotel
and restaurant ownership and operations, as well as interests in major
corporations. Mr. Sowell has served as a Director of the Company since 1995
and also is a Director of Billing Information Concepts Corp. He was Chairman
of the Board of Business Capital Corporation ("BCC"), Arlington Golf Club,
Inc. ("AGC") and Sable Homes, Inc. ("SHI") and a general partner of SBS
Venture ("SBS"). All of these entities filed petitions for relief under the
U.S. Bankruptcy Code--BCC in March 1991 (emerged in January 1992), AGC in
April 1992 (emerged in January 1993), SHI in September 1993 and SBS in
September 1991 (petition withdrawn in December 1991).
THEODORE W. VAN DUYN has served as a Director since March 1994. Mr. Van
Duyn has been Chief Technology Officer for BMC Software, Inc. since February
1993. He joined BMC Software, Inc. in 1985 as Director of Research and
served as Senior Vice President, Research and Development, from 1986 until
assuming his current position.
All directors hold office for their elected term or until their
successors are duly elected and qualified. If a director should be
disqualified or unable to serve as a director, the vacancy so arising may be
filled by the Board of Directors for the unexpired portion of his term. All
officers serve at the discretion of the board
34
<PAGE>
of Directors. There are no family relationships between members of the Board
of Directors or any executive officers of the Company.
COMMITTEES AND BOARD COMPENSATION
The Board of Directors conducts its business through meetings of the
Board of Directors and through its committees. In accordance with the Bylaws
of the Company, the Board of Directors has established a Compensation
Committee, an Audit Committee and a Stock Option Committee. The Board of
Directors does not currently utilize a nominating committee or committee
performing similar functions.
COMPENSATION COMMITTEE
The Compensation Committee reviews and makes recommendations to the
Board of Directors concerning major compensation policies and compensation of
officers and executive employees. This committee is comprised of Directors
Holmes, Sowell and Van Duyn.
AUDIT COMMITTEE
The Audit Committee acts on behalf of the Board of Directors with
respect to the Company's financial statements, record-keeping, auditing
practices and matters relating to the Company's independent public
accountants, including recommending to the Board of Directors the firm to be
engaged as independent public accountants for the next fiscal year; reviewing
with the Company's independent public accountants the scope and results of
the audit and any related management letter; consulting with the independent
public accountants and management with regard to the Company's accounting
methods and the adequacy of its internal accounting controls; approving
professional services by the independent public accountants; and reviewing
the independence of the independent public accountants. The Audit Committee
is comprised of Directors Holmes, Matthews and Portnoy.
DIRECTORS' COMPENSATION
Directors are not paid a fee for attending Board of Director or
committee meetings, but are reimbursed for their travel expenses to and from
the meetings.
Directors are granted stock options under the Company's 1993 Stock
Option Plan at the time of their election or appointment to the Board of
Directors.
ITEM 6. EXECUTIVE COMPENSATION.
The following Summary Compensation Table sets forth information
concerning compensation of the Company's Chief Executive Officer and each of
the two other most highly compensated executive officers of the Company whose
aggregate cash compensation exceeded $100,000 (collectively, the "Named
Executive Officers") for each of the three fiscal years ended September 30,
1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
35
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------------------
FISCAL SECURITIES UNDER
PRINCIPAL POSITION YEAR SALARY($) BONUS OPTIONS/SARS GRANTED(#))
------------------ ---- --------- ------ ------------------------
<S> <C> <C> <C> <C>
Mark C. Holliday 1996 $127,341 $ 0 100,000
Chairman of the Board 1995 125,000 0 110,000
and Chief Executive Officer 1994 62,500 (1) 0 200,000
Gary W. Pankonien 1996 95,336 66,664 150,000
President and 1995 N/A N/A N/A
Chief Operating Officer 1994 N/A N/A N/A
Benjamin S. Marz 1996 103,262 0 0
Vice President of Sales 1995 102,000 0 0
and Customer Service 1994 40,625 (2) 0 100,000
</TABLE>
________________________
(1) Amount shown reflects Mr. Holliday's salary from February 14, 1994, the
beginning date of his employment with the Company, through the end of
fiscal 1994.
(2) Amount shown reflects Mr. Marz's salary from April 18, 1994, the beginning
date of his employment with the Company, through the end of fiscal 1994.
STOCK OPTION GRANTS
The following table provides information related to stock options
granted to the name executive officers during fiscal 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) 1996 ($/SH) DATE 5%($) 10%($)
- - ---------------- ------------- ---------- -------- ---------- ----------------------
<S> <C> <C> <C> <C> <C>
Mark C. Holliday 100,000 12.3% $3.62 3/27/01 $100,014 $221,005
Gary W. Pankonien 150,000 18.5% 3.69 5/09/01 152,922 337,917
Benjamin S. Marz 0 - - - - -
</TABLE>
_______________________
(1) For each named executive officer, the option listed represents a grant
under the Company's Option Plan. See "Executive Compensation - Employee
Benefit Plans." The options granted in 1996 are exercisable one-third
on each of the three anniversaries following the date of grant.
(2) Calculation based on stock option exercise price over period of option
assuming annual compounding. The columns present estimates of potential
values based on certain mathematical assumptions. The actual value,
if any, that an executive officer may realize is dependent upon the market
price on the date of option exercise.
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<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END
OPTION VALUES
The following table provides information related to stock options
exercised by the named executive officers during the 1996 fiscal year and the
number and value of options held at fiscal year end. The Company does not
have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------- NUMBER OF SECURITIES VALUE(1) OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT FY END(#) OPTIONS AT FY END($)
UPON OPTION VALUE -----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ----------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark C. Holliday 0 N/A 169,999 240,001 $329,032 $253,068
Gary W. Pankonien 0 N/A 0 150,000 N/A 39,000
Benjamin S. Marz 0 N/A 66,666 33,334 189,998 95,002
</TABLE>
______________________
(1) Market value of the underlying securities at September 30, 1996 ($3.95),
minus the exercise price.
EMPLOYEE BENEFIT PLANS
401(K) RETIREMENT PLAN
On May 20, 1996, the effective date of the Company's acquisition of 1st
Tech, the Company adopted the 1st Tech 401(k) Plan (the "401(k) Plan").
Participation in the 401(k) Plan is offered to eligible employees of the
Tanisys Group (collectively, the "Participants"). Generally, all employees
of the Tanisys Group who are 21 years of age and who have completed one year
of service during which they worked at least 1,000 hours are eligible for
participation in the 401(k) Plan.
The 401(k) Plan is a form of defined contribution plan that provides
that Participants generally may make voluntary salary deferral contributions,
on a pre-tax basis, of between 1% and 15% of their base compensation in the
form of voluntary payroll deductions up to a maximum amount as indexed for
cost-of-living adjustments ("Voluntary Contributions"). Since its adoption
of the 401(k) Plan, the Company has not made any matching contributions, but
may elect in the future to make matching contributions of up to 100% of the
first 6% of a Participant's compensation contributed as salary deferral.
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<PAGE>
STOCK OPTION PLAN
ADMINISTRATION OF THE PLAN. The Company's 1993 Stock Option Plan (as
thereafter amended, the "Option Plan") is administered by a committee (the
"Stock Option Committee") of three members of the Board of Directors. The
Stock Option Committee currently consists of three non-employee members of
the Board of Directors, Parris H. Holmes, Jr., James E. Sowell and Theodore
W. Van Duyn. The Option Plan grants broad authority to the Stock Option
Committee to grant options to key employees, directors and consultants
selected by the Stock Option Committee; to determine the number of shares
subject to options; the exercise or purchase price per share, subject to VSE
requirements; the appropriate periods and methods of exercise and
requirements regarding the vesting of options; whether each option granted
shall be an incentive stock option ("ISO") or a non-qualified stock option
("NQSO") and whether restrictions such as repurchase options are to be
imposed on shares subject to options and the nature of such restrictions, if
any. In making such determinations, the Stock Option Committee may take into
account the nature and period of service of eligible participants, their
level of compensation, their past, present and potential contributions to the
Company and such other factors as the Stock Option Committee in its
discretion deems relevant.
The Option Plan further directs the Stock Option Committee to set forth
provisions in option agreements regarding the exercise and expiration of
options according to stated criteria. The Stock Option Committee oversees
the methods of exercise of options, with attention being given to compliance
with appropriate securities laws and regulations.
The options have certain anti-dilution provisions and are not assignable
or transferable, other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order. During the
lifetime of an optionee, the options granted under the Option Plan are
exercisable only by the optionee or his or her guardian or legal
representative. The Company or its subsidiaries may not make or guarantee
loans to individuals to finance the exercise of options under the Option
Plan. The duration of options granted under the Option Plan cannot exceed
ten years (five years with respect to a holder of 10% or more of the
Company's shares in the case of an ISO).
GENERAL. The Option Plan was approved by the Company's stockholders on
March 31, 1994 and adopted by the Board of Directors on October 25, 1993.
The purposes of the Option Plan are to advance the best interests of the
Tanisys Group by providing its employees, directors and consultants who have
substantial responsibility for the Tanisys Group's management, success and
growth, with additional incentive and to increase their proprietary interest
in the success of the Tansiys Group, thereby encouraging them to remain in
the Tanisys Group's employ or service.
The Option Plan provides for the grant of ISOs, under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and stock options
that do not qualify under Section 422 of the Code ("NQSOs"). The option
price for ISOs may not be less than 100% of the fair market value of the
Common Stock on the date of grant, or 100% of fair market value with respect
to any ISO issued to a holder of 10% or more of the Company's shares. The
exercise price of NQSOs also is limited to the fair market value of the
Common Stock on the date of grant. Common Stock issued under the Option Plan
may be newly issued or treasury shares. The Option Plan does not permit the
use of already owned
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<PAGE>
Common Stock as payment for the exercise price of options. If any option
granted under the Option Plan terminates, expires or is surrendered, new
options may thereafter be granted covering such shares.
Under the terms of the Option Plan 2,600,000 shares of Common Stock have
been reserved for the granting of options. At October 31, 1996, options to
purchase 2,187,100 shares had been granted under the Option Plan, leaving
412,900 shares available for future grants under the Option Plan. In
addition, at October 31, 1995, options to purchase 155,000 shares
("compensation contract options") had been granted outside the Option Plan,
prior to its adoption.
AMENDMENT AND TERMINATION OF THE OPTION PLAN. The Option Plan
terminates on October 24, 2003. The Stock Option Committee is authorized to
amend or terminate the Option Plan at any time, except that it is not
authorized without stockholder approval (except with regard to adjustments
resulting from changes in capitalization) to (i) increase the aggregate
number of shares which may be issued under options pursuant to the provisions
of the Option Plan; (ii) reduce the option price at which an ISO may be
granted to an amount less than the fair market value per share at the time
such option is granted; (iii) change the class of employees eligible to
receive options; (iv) materially modify the requirements as to affiliate
eligibility for participation in the Option Plan; (v) materially increase the
benefits accruing to participants under the Option Plan; or (vi) effect an
amendment that would cause ISOs issued pursuant to the Option Plan to fail to
meet the requirements of "incentive stock options" as defined in Section 422
of the Code, provided, however, that the Stock Option Committee shall have
the power to make such changes in the Option Plan and in the regulations and
administrative provisions thereunder or in any outstanding option as in the
opinion of counsel for the Company may be necessary or appropriate from time
to time to enable any ISOs granted pursuant to the Plan to continue to
qualify as "incentive stock options" under the Code and the regulations which
may be issued thereunder as in existence from time to time.
EMPLOYMENT AGREEMENTS
Effective February 15, 1994 and April 18, 1994, the Company entered into
employment agreements with Mr. Holliday and Mr. Marz, respectively, with a
term of one year, after which they continue on a month-to-month basis until
terminated by the Company or the employee upon 120 days' notice as provided
therein. Pursuant to the terms of the employment agreements, annual base
salaries are $127,341 for Mr. Holliday and $103,262 for Mr. Marz.
The Company entered into an employment agreement with Gary W. Pankonien
effective May 20, 1996 with a term of two years and automatic annual renewals
if mutually agreed upon by the Company and the employee. The Company or the
employee may terminate the agreement upon giving notice at least 30 days
prior to the expiration of the then current term. Pursuant to the terms of
the employment agreement, Mr. Pankonien's annual base salary is $125,000. In
addition, he will be paid minimum bonuses of $200,000 and $150,000 payable
pro rata on a monthly basis during the first and second years of employment,
respectively. In the event the employment relationship is terminated by the
Company during the initial two-year term, other than for "cause" as defined
therein, the employee is entitled to receive, within 45 days of such
termination, salary, bonus and other benefits which would have been payable
for a 24-month period based on amounts in effect on the termination date, but
in no event less than a total of $300,000. The agreement also provides that
in the event his employment is
39
<PAGE>
terminated, Mr. Pankonien will continue to be a Director of the Company as
long as he beneficially owns at least 1,000,000 shares of Common Stock he
received as consideration for the acquisition by the Company of 1st Tech.
Effective July 11, 1996, the Company entered into an employment
agreement with Joe Davis with a term of one year, after which the agreement
continues on a month-to-month basis until terminated by the Company or the
employee upon 120 days' notice as provided therein. Pursuant to the terms of
the employment agreement, Mr. Davis' annual base salary is $115,000 and he
was granted a stock option under the Option Plan, exercisable over a
five-year period, for the purchase of an aggregate of 120,000 shares of
Common Stock at $3.13 per share. The shares underlying the option vest
one-third on each of the first three anniversaries of the grant date.
The Company entered into an employment agreement with Guy Fielder
effective October 11, 1996. The employment agreement has a one-year term
after which it continues on a month-to-month basis until terminated by the
Company or the employee upon 120 days' notice as provided therein. Pursuant
to the terms of the employment agreement, Mr. Fielder's annual base salary is
$95,000 and he was granted a stock option under the Option Plan, exercisable
over a five-year period, for the purchase of an aggregate of 100,000 shares
of Common Stock at $4.17 per share. The shares underlying the option vest
one-third on each of the first three anniversaries of the grant date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Holmes, Sowell and Van Duyn comprise the Compensation
Committee of the Board of Directors of the Company.
Parris H. Holmes, Jr., Vice Chairman of the Board and a member of the
Audit, Compensation and Stock Option Committees, is Chairman of the Board and
Chief Executive Officer of Billing Information Concepts Corp. and is Chairman
of the Board of U.S. Long Distance Corp.
James E. Sowell, a Director of the Company and a member of the
Compensation and Stock Option Committees, is a Director and serves on the
Audit and Compensation Committees of Billing Information Concepts Corp.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Upon the closing of the acquisitions of 1st Tech and DarkHorse on May
20, 1996, Parris H. Holmes, Jr., Vice Chairman of the Company's Board of
Directors, was paid a consulting bonus fee of 207,500 shares of Common Stock,
representing 5% of the aggregate shares of Common Stock issued in connection
with such acquisitions. These shares were issued in payment for services
rendered in connection with the acquisitions, including consulting and
negotiation strategies. Based on the closing price of the Common Stock on
May 21, 1996, the value of these shares was $871,500.
40
<PAGE>
Upon the acquisitions of 1st Tech and DarkHorse by the Company on May
20, 1996, Gary W. Pankonien, the principal stockholder of 1st Tech and one of
the principal stockholders of DarkHorse, was issued an aggregate of 1,995,000
shares of Common Stock in exchange for shares of 1st Tech and DarkHorse owned
by him. The 1,995,000 shares had a total value of $8,379,000 based on the
closing price of the Common Stock on May 21, 1996. Mr. Pankonien also was
granted a stock option under the Option Plan, exercisable over a five-year
period, for the purchase of an aggregate of 150,000 shares of Common Stock at
$3.69 per share. The shares underlying the option vest one-third on each of
the first three anniversaries of the grant date. In connection with the
acquisitions, Mr. Pankonien was granted the right to designate two
individuals for appointment to the Company's Board of Directors and to name
an advisory director. Mr. Pankonien and Alan Portnoy were appointed
Directors, and Archer Lawrence became an advisor to the Board of Directors,
in July 1996.
On May 20, 1996, 1st Tech purchased a Quad QSP-2 High Speed Fine Pitch
Surface Mount Assembly System from Gary Pankonien for $200,000 in an
arms-length, negotiated transaction. Previously, this equipment had been
leased by Mr. Pankonien. The purchase price represented the fair market
value of the equipment.
Since the May 20, 1996 effective date of the Company's acquisition of
1st Tech, the Tanisys Group has paid $10,000 to 1st Tech Molding, Inc., a
non-affiliated, private company owned 45% by Mr. Pankonien, payment for
plastic packaging products required for various products manufactured by the
Tanisys Group. In addition, the Tanisys Group has paid 1st Tech Molding,
Inc. $25,000 as an advance for product currently being produced for DarkHorse
but not yet invoiced by 1st Tech Molding, Inc. These were negotiated,
arms-length transactions.
The Company paid a fee for consulting services of 45,555 shares of
Common Stock to Parris H. Holmes, Jr. upon the closing of its $1,600,000
equity financing effective December 20, 1995, which shares had a total value
of $91,110 based on the closing price of the Common Stock on December 20,
1995.
On October 3, 1994, the Company has entered into a Consulting Contract
with Mr. Holmes for services outside his responsibility as a member of the
Company's Board of Directors, including assisting with financial planning,
capital structure and development of corporate strategy. The contract was
amended on June 22, 1995. During fiscal year 1996, Mr. Holmes was paid $8,000
per month from October 1995 through May 1996 with a final payment of $3,000
for June 1996. A total of $67,000 was paid to Mr. Holmes under this
Consulting Contract.
Since June 1, 1996, the Tanisys Group has reimbursed Mr. Holmes $49,913
for expenses incurred in connection with issues involving corporate finance,
business operations and business opportunities.
41
<PAGE>
ITEM 8. LEGAL PROCEEDINGS.
At the date hereof, there are no pending, or to the best knowledge of
the Company, threatened matters involving litigation involving the Company.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
Since March 20, 1995, the Common Stock has been traded on the VSE under
the symbol "TNS.U," with prices quoted in U.S. dollars. From July 11, 1994
to March 19, 1995, the Common Stock was traded on the VSE under the symbol
"TNS," with prices quoted in Canadian dollars. From July 7, 1993 to July 10,
1994, the Common Stock was traded under the symbol "RSG," with prices quoted
in Canadian dollars. In January 1993, the Company voluntarily deemed itself
inactive and its Common Stock did not trade until July 7, 1993.
The table below sets forth the high and low closing prices of the Common
Stock from July 7, 1993 through November 22, 1996, as reported by the VSE.
These price quotations reflect interdealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual
transactions.
COMMON STOCK
----------------
QUARTER ENDED HIGH LOW
------------- ----- -----
FISCAL 1995:
-----------
December 31, 1994 (1) $3.54 $2.22
March 31, 1995 (2) 5.24 2.95
June 30, 1995 3.95 2.05
September 30, 1995 3.80 1.85
FISCAL 1996:
-----------
December 31, 1995 $3.00 $1.70
March 31, 1996 4.90 2.45
June 30, 1996 5.20 3.25
September 30, 1996 4.20 2.50
FISCAL 1997:
-----------
October 1 through
November 22, 1996 $6.75 $3.50
_______________
(1) Closing prices were quoted in Canadian dollars during this quarter,
converted at a rate of .73 per $1.00 Cdn. on December 5, 1994 (high
for the quarter) and .74 per $1.00 Cdn. on October 26, 1994 (low for
the quarter).
42
<PAGE>
(2) Closing prices were quoted in Canadian dollars through March 17, 1995,
converted at a rate of .71 per $1.00 Cdn. on February 16, 1995 (high
for the quarter).
HOLDERS
On November 22, 1996, the closing price of the Common Stock on the VSE
was $6.10 per share. At November 22, 1996, there were 234 registered holders
of record of the Common Stock, and the number of beneficial holders was
unknown.
DIVIDENDS
To date, the Company has not declared or paid any dividends with respect
to the Common Stock, and the current policy of the Board of Directors is to
retain earnings, if any, to provide for the growth of the Company's business.
Consequently, no cash dividends are expected to be paid on the Common Stock
in the foreseeable future. Further, there can be no assurance that the
proposed operations of the Company will generate the revenue and cash flow
needed to declare a cash dividend or that the Company will have legally
available funds to pay dividends at any time in the future. In addition, the
Company's bank borrowings prohibit the payment of cash dividends.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The transactions set forth below were deemed exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), by
reason of Section 4(2) of the Securities Act. In connection with each of
these transactions, the shares were sold to a limited number of persons, all
of whom were accredited investors as defined by Item 501 of Regulation D of
the Securities and Exchange Commission (the "Commission"), such persons were
provided access to all relevant information regarding the Company and/or
represented to the Company that they were "sophisticated" investors, and such
persons represented to the Company that the shares were purchased for
investment purposes only and with no view to distribution. Restrictive
legends were placed on all stock certificates.
On August 24, 1994, the Company sold an aggregate of 1,500,000 shares of
Common Stock to 13 accredited investors for cash at an offering price of
$1.00 per share. These purchasers also received nontransferable Class A
Stock Purchase Warrants (the "Class A Warrants") to purchase an aggregate of
1,500,000 shares of Common Stock. Each Class A Warrant entitled the holder
thereof to purchase, at any time until August 31, 1995, one share of Common
Stock at an exercise price of $1.00, subject to adjustment. If the Class A
Warrants were not exercised during such period, each Class A Warrant entitled
the holder thereof to purchase, at any time from September 1, 1995 until
August 31, 1996, one share of Common Stock at an exercise price of $1.25,
subject to adjustment. All of the Class A Warrants were exercised prior to
their expiration date of August 31, 1996.
On May 8, 1995, the Company sold an aggregate of 900,000 shares of
Common Stock to 11 accredited investors for cash at an offering price of
$2.00 per share. The purchasers also received nontransferable Class B Stock
Purchase Warrants (the "Class B Warrants"). Each Class B Warrant
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<PAGE>
entitled the holder thereof to purchase, at any time until May 8, 1996, one
share of Common Stock at an exercise price of $2.00, subject to adjustment.
If the Class B Warrants were not exercised during such period, each Class B
Warrant entitles the holder thereof to purchase, at any time from May 9, 1996
until May 8, 1997, one share of Common Stock at an exercise price of $2.30,
subject to adjustment. Following May 8, 1997, the Class B Warrants will no
longer be exercisable and will have no value. At October 31, 1996, Class B
Warrants have been exercised for the purchase an aggregate of 15,000 shares
of Common Stock.
In October 1995, a warrant granting the right to acquire 34,000 shares
of Common Stock for a period of two years was issued to an unaffiliated party
as payment for legal services rendered. The warrant entitled the holder to
purchase, at any time until October 12, 1996, one share of Common Stock at an
exercise price of $2.00 per share, subject to adjustment, and if not
exercised during such period, entitles the holder to purchase at any time
until October 13, 1997, one share of Common Stock at an exercise price of
$2.25 per share, subject to adjustment. Following October 13, 1997, this
warrant will no longer be exercisable and will have no value. At October 31,
1996, the warrant had not been exercised.
In December 1995, the Company sold an aggregate of 941,177 shares of
Common Stock to 11 accredited investors for cash at an offering price of
$1.70 per share. The purchasers also received nontransferable Class C Stock
Purchase Warrants (the "Class C Warrants"). Each Class C Warrant entitles
the holder to purchase, at any time until December 20, 1996, one share of
Common Stock at an exercise price of $1.70 per share, subject to adjustment.
If the Class C Warrants have not been exercised during such period, each
Class C Warrant entitles the holder to purchase, at any time from December
21, 1996 until December 20, 1997, one share of Common Stock at an exercise
price of $1.95 per share, subject to adjustment. Following December 20,
1997, the Class C Warrants will no longer be exercisable and will have no
value. At October 31, 1996, no Class C Warrants have been exercised.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company currently consists of
50,000,000 shares of no par value Common Stock and 10,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"), which is
subject to designation and issuance by the Board of Directors in the future.
On October 31, 1996, there were 15,978,537 shares of Common Stock outstanding
and held of record by approximately 234 registered stockholders, and the
number of beneficial holders was unknown. There are currently no outstanding
shares of Preferred Stock. At October 31, 1996, there were a total of
4,202,277 shares of Common Stock reserved for issuance upon exercise of
outstanding stock options under the Option Plan, compensation contract
options and the Warrants. See "Management--Employee Benefit Plans" and
"Warrants" below.
The following descriptions of capital stock are qualified in all
respects by reference to the Company's Articles of Continuance, as amended
(the "Articles").
44
<PAGE>
COMMON STOCK
Holders of Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors from funds legally available therefor.
See "Item 9. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters - Dividend Policy." Each share of Common
Stock entitles the holder thereof to one vote upon matters voted upon by the
stockholders. Cumulative voting for the election of directors is not
permitted, which means that the holders of a majority of shares voting for
the election of directors can elect all members of each class of the Board of
Directors. Except as otherwise required by applicable Wyoming law, a
majority vote is sufficient for any action that requires the vote or
concurrence of stockholders, except that a plurality vote is sufficient to
elect directors.
The holders of Common Stock do not have any preemptive, subscription,
redemption or conversion rights or privileges. Upon liquidation or
dissolution of the Company, the holders of Common Stock are entitled to share
ratably in the net assets of the Company remaining after payment of
liabilities and liquidation preferences of any outstanding shares of
Preferred Stock. All shares of Common Stock now outstanding are fully paid
and non-assessable.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors in one or more series, without further stockholder approval or
action, with such designations, powers, limitations, restrictions,
qualification, rights, preferences and privileges as the Board of Directors
may determine.
WARRANTS
The Company currently has outstanding three series of Warrants to
purchase Common Stock. The Class B and Class C Warrants were issued to
investors purchasing shares of Common Stock in equity financings closed
effective August 24, 1994 and December 20, 1995, respectively. In addition,
a warrant was issued in October 1995 to an unaffiliated party in payment of
legal fees. The Class B Warrants, the October 1995 warrant and the Class C
Warrants are referred to herein as the "Warrants."
CLASS B WARRANTS. A total of 900,000 Class B Warrants were issued in
May 1995 in connection with the Company's $1,800,000 equity financing. Each
Class B Warrant entitled the holder thereof to purchase, at any time until
May 8, 1996, one share of Common Stock at an exercise price of $2.00 per
share, subject to adjustment. Class B Warrants not exercised as of May 8,
1996 entitle the holders thereof to purchase, at any time from May 9, 1996
until May 8, 1997, one share of Common Stock at an exercise price of $2.30,
subject to adjustment. Following May 8, 1997, the Class B Warrants will no
longer be exercisable and will have no value. At October 31, 1996, Class B
Warrants have been exercised for the purchase of 15,000 shares of Common
Stock at $2.00 per share.
OCTOBER 1995 WARRANT. In October 1995, a warrant granting the right to
acquire 34,000 shares of Common Stock for a period of two years was issued to
an unaffiliated party in payment for legal services rendered. This warrant
entitled the holder to purchase, at any time until October 12, 1996, one
share of Common Stock at an exercise price of $2.00 per share, subject to
adjustment, and if not
45
<PAGE>
exercised during such period, entitles the holder to purchase at any time
until October 13, 1997, one share of Common Stock at an exercise price of
$2.25 per share, subject to adjustment. Following October 13, 1997, this
warrant will no longer be exercisable and will have no value. At October 31,
1996, this warrant had not been exercised.
CLASS C WARRANTS. A total of 941,177 Class C Warrants were issued as of
December 1995 in connection with the Company's $1,600,000 equity financing.
Each Class C Warrant entitles the holder thereof to purchase, at any time
until December 20, 1996, one share of Common Stock at an exercise price of
$1.70 per share, at any time until December 20, 1996, subject to adjustment.
If the Warrants have not exercised, then for the period December 21, 1996 to
December 20, 1997, each Class C Warrant entitles the holder to purchase one
share of Common Stock at an exercise price of $1.95 per share, subject to
adjustment. At October 31, 1996, no Class C Warrants have been exercised.
The Warrants may be exercised in whole only upon surrender of the
Certificate therefor on or prior to the expiration dates at the offices of
the Company with the Exercise Form attached to the certificate duly completed
and executed, accompanied by payment (in the form of cash or certified or
bank cashier's check payable to the order of the Company) of the full
exercise price.
The Warrants contain provisions that provide for adjustment of the
exercise price in the event the outstanding shares of Common Stock shall be
subdivided into a greater number of shares, a non-cash dividend in Common
Stock shall be paid in respect of Common Stock or the outstanding shares of
Common Stock shall be combined into a smaller number of shares thereof.
The Company is not required to issue fractional shares, and in lieu
thereof, will make a cash payment based upon the current estimated fair
market value of such fractional shares. The registered owner of a Warrant
will not possess any rights as a stockholder of the Company unless and until
the Warrant is exercised. Upon the respective expiration date of the
Warrants, they will no longer be exercisable for shares of Common Stock and
will not have any value.
TRANSFER AGENT. The Company's transfer agent and registrar is Montreal
Trust Company of Canada, Vancouver, B.C., Canada.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws provide that the Company shall indemnify any and
all persons who may serve or who have served at any time as directors or
officers, or who at the request of the Board of Directors of the Company may
serve or at any time have served as directors or officers of another
corporation in which the Company at such time owned or may own shares of
stock or of which it was or may be a creditor, and their respective heirs,
administrators, successors and assigns, against any and all expenses,
including amounts paid upon judgments, counsel fees and amounts paid in
settlement (before or after suit is commenced), actually and necessarily
incurred by such persons in connection with the defense or settlement of any
claim, action, suit or proceeding in which they, or any of them, are made
parties, or a party, or which may be asserted against them or any of them, by
reason of being or having been directors or officers or a director or officer
of the Company, or of such other corporation, except
46
<PAGE>
in relation to matters as to which any such director or officer or former
director or officer or person shall be adjudged in any action, suit or
proceeding to be liable for his own negligence or misconduct in the
performance of his duty. Such indemnification shall be in addition to any
other rights to which those indemnified may be entitled under any law,
by-law, amendment, vote of stockholders or otherwise.
LIMITATION OF LIABILITY
Article 12 of the Articles provides that no director shall be personally
liable to the Company or any shareholder for monetary damages for breach of
fiduciary duty as a director, except for any matter in respect of which such
director shall be liable under Section 17-16-834 of the Wyoming Business
Company Act (the "WBCA") or any amendment thereto or successor provision
thereto, or shall be liable by reason that, in addition to any and all other
requirements for such liability, he (i) shall have breached his duty of
loyalty to the Company or its shareholders, (ii) shall not have acted in good
faith or, in failing to act, shall not have acted in good faith, (iii) shall
have acted in a manner involving intentional misconduct or a knowing
violation of law or, in failing to act, shall have acted in a manner
involving intentional misconduct or a knowing violation of law, (iv) shall
have derived an improper personal benefit, or (v) shall have voted for or
assented to a distribution made in violation of Section 17-16-640 of the
WBCA or the Articles of the Company if it is established that he did not
perform his duties in compliance with Section 17-16-830 of the WBCA.
This provision may have the effect of reducing the likelihood of
derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful,
might otherwise have benefited the Company and its stockholders. However,
this provision, together with the provision described above that requires the
Company to indemnify its officers and directors against certain liabilities,
is intended to enable the Company to attract qualified persons to serve as
directors who might otherwise be reluctant to do so.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been
informed that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
CERTAIN PROVISIONS OF THE ARTICLES AND THE BYLAWS
Certain provisions in the Articles and Bylaws and the WBCA could make
more difficult the acquisition of the Company by means of a tender offer, a
proxy contest or otherwise. These provisions are expected to discourage
certain types of coercive takeover practices and inadequate takeover bids and
to encourage persons seeking to acquire control of the Company to first
negotiate with the Company. The Company believes that the benefits of
increased protection of the Company's potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure
the Company outweigh the disadvantages of discouraging such proposals
because, among other things, negotiation of such proposals could result in an
improvement of their terms.
47
<PAGE>
CLASSIFIED BOARD OF DIRECTORS. The Articles and the Bylaws provide that
the Board of Directors is divided into three classes of directors, with the
terms of each class expiring in a different year. The Bylaws provide that
the number of directors will be fixed from time to time exclusively by the
Board of Directors but shall consist of not more than 15 nor less than 3
directors. A majority of the Board of Directors then in office has the sole
authority to fill any vacancies on the Board of Directors.
PREFERRED STOCK. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the company or may
materially affect the rights evidenced by, or amounts payable with respect
to, the shares of Common Stock. The voting and conversion rights of any
class or series of Preferred Stock issued by the Company could adversely
affect, among other things, the voting rights of existing stockholders.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
NONE.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
NONE.
48
<PAGE>
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
TANISYS TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,689,569 $1,317,024
Trade accounts receivable, net of allowance of $84,557 5,087,090 60,454
and $25,000 in 1996 and 1995, respectively
Inventory 1,804,458 15,414
Prepaid expense 217,570 24,735
- - ------------------------------------------------------------------------------------------------
Total current assets 9,798,687 1,417,627
- - ------------------------------------------------------------------------------------------------
Property and equipment, net 1,817,479 118,705
Incorporation costs, net 1,024 2,283
Patents and trademarks, net 84,337 74,468
Goodwill, net 8,436,790 --
Other assets 84,000 --
- - ------------------------------------------------------------------------------------------------
$20,222,317 $1,613,083
- - ------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,985,148 $112,853
Accrued liabilities 929,376 121,315
Revolving credit note 3,075,000 --
- - ------------------------------------------------------------------------------------------------
Total current liabilities 6,989,524 234,168
- - ------------------------------------------------------------------------------------------------
Obligations under capital lease 123,000 --
- - ------------------------------------------------------------------------------------------------
Total liabilities 7,112,524 234,168
- - ------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Share capital-Common stock, no par value, 50,000,000 shares 23,955,136 7,814,341
authorized, 15,978,537 and 9,065,305 shares issued and
outstanding in 1996 and 1995, respectively
Accumulated deficit (10,838,398) (6,428,481)
Accumulated foreign currency translation adjustment (6,945) (6,945)
- - ------------------------------------------------------------------------------------------------
Total shareholders' equity 13,109,793 1,378,915
- - ------------------------------------------------------------------------------------------------
$20,222,317 $1,613,083
- - ------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
49
<PAGE>
TANISYS TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF LOSS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
1996 1995 1994
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $14,988,946 $358,726 $113,786
Cost of goods sold 12,660,900 110,097 33,901
- - --------------------------------------------------------------------------------------
Gross profit 2,328,046 248,629 79,885
- - --------------------------------------------------------------------------------------
Operating expenses:
Research and development 1,079,927 409,805 409,150
Sales and marketing 1,177,214 1,358,032 393,786
General and administrative 1,976,597 913,375 1,028,808
Depreciation and amortization 2,474,313 71,043 60,472
Unusual charge -- -- 198,739
- - --------------------------------------------------------------------------------------
Total operating expenses 6,708,051 2,752,255 2,090,955
- - --------------------------------------------------------------------------------------
Operating loss (4,380,005) (2,503,626) (2,011,070)
- - --------------------------------------------------------------------------------------
Other income (expense):
Foreign exchange gain -- 2,290 --
Interest income 74,238 56,250 39,145
Interest expense (108,332) -- --
Other 4,182 -- --
- - --------------------------------------------------------------------------------------
Net loss ($4,409,917) ($2,445,086) ($1,971,925)
- - --------------------------------------------------------------------------------------
Loss per weighted average common share ($0.37) ($0.29) ($0.30)
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
Weighted average number of common shares 11,765,850 8,436,320 6,610,710
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
50
<PAGE>
TANISYS TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
ACCUMULATED
FOREIGN
SHARE CAPITAL CURRENCY TOTAL
------------------- ACCUMULATED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT DEFICIT ADJUSTMENT EQUITY
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1993 6,495,325 $4,468,700 ($2,011,470) $0 $2,457,230
- - ----------------------------------------------------------------------------------------------------------------------------------
Net loss (1,971,925) (1,971,925)
Private placements 1,500,000 1,462,756 * 1,462,756
Foreign currency translation adjustment (6,945) (6,945)
- - ----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1994 7,995,325 5,931,456 (3,983,395) (6,945) 1,941,116
- - ----------------------------------------------------------------------------------------------------------------------------------
Net loss (2,445,086) (2,445,086)
Private placements 900,000 1,607,232 * 1,607,232
Issued as payment of commission 48,980 120,001 120,001
Exercise of stock options 6,000 12,724 12,724
Issued for retirement of debt 115,000 142,928 142,928
- - ----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1995 9,065,305 7,814,341 (6,428,481) (6,945) 1,378,915
- - ----------------------------------------------------------------------------------------------------------------------------------
Net loss (4,409,917) (4,409,917)
Acquisition of businesses (note 2) 4,150,000 11,786,000 * 11,786,000
Issued as payment of consulting bonus (note 2) 207,500 788,500 788,500
Private placements (note 7) 975,177 1,511,796 * 1,511,796
Issued as payment of commission 45,555 102,499 102,499
Exercise of stock warrants 1,515,000 1,905,000 1,905,000
Issued for retirement of debt 20,000 47,000 47,000
- - ----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1996 15,978,537 $23,955,136 ($10,838,398) ($6,945) $13,109,793
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* net of issuance costs.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
51
<PAGE>
TANISYS TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
1996 1995 1994
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($4,409,917) ($2,445,086) ($1,971,925)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 2,474,313 71,043 60,472
Write-downs 21,927 - -
Unusual charge - - 198,739
Decrease (increase) in accounts receivable (874,576) 84,855 (99,926)
Decrease in investment tax credits receivable - - 57,456
Increase in inventory (156,733) (2,757) (12,657)
Increase in prepaid expense (103,789) (13,810) (3,843)
(Decrease) increase in accounts payable and accrued liabilities (1,323,521) 22,870 323,392
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activites (4,372,296) (2,282,885) (1,448,292)
- - ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of fixed assets (342,882) (48,962) (96,414)
Incorporation costs - - (1,010)
Patents and trademark costs (32,763) (42,776) (38,261)
Acquisition of businesses 2,817,230 - -
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 2,441,585 (91,738) (135,685)
- - ----------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from issuance of common stock 1,614,295 1,727,233 1,462,756
Draws (payments) on revolving credit note, net (195,881) - -
Principal payments on capital lease obligations (20,158) - -
Net proceeds from exercise of stock options - 12,724 -
Net proceeds from exercise of warrants 1,905,000 - -
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3,303,256 1,739,957 1,462,756
- - ----------------------------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash - - (3,169)
- - ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,372,545 (634,666) (124,390)
Cash and cash equivalents, beginning of period 1,317,024 1,951,690 2,076,080
- - ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $2,689,569 $1,317,024 $1,951,690
- - ----------------------------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest paid $108,332 $1,152 $121
Interest received $74,238 $57,402 $35,153
Non-cash activity:
Shares issued to related parties and others to satisfy accrued liabilities $47,000 $142,928 -
Shares issued to purchase businesses $12,574,500 - -
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
52
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Tanisys
Technology, Inc. ("Tanisys") and its wholly-owned subsidiaries, 1st Tech
Corporation ("1st Tech"), DarkHorse Systems, Inc. ("DarkHorse"), Timespan
Communications Corp. ("Timespan") and Rosetta Marketing and Sales Inc.
(collectively, the "Company"). The Company provides custom design, engineering
and manufacturing services, test solutions and standard and custom module
products to leading original equipment manufacturers in the computer, networking
and telecommunications industries. Numerous factors affect the Company's
operating results, including general economic conditions, competition, changing
technologies, component shortages or price fluctuations. A change of any of
these factors could have an adverse effect on the Company's financial position
or results of operations. The Company has experienced losses since inception.
The Company continues to develop additional products, and with the current year
acquisitions (Note 2), the Company has existing salable products. The continued
success of the Company depends upon the Company's ability to generate sufficient
sales from the development of new products or increased sales of existing
products.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States which, as applied
to these financial statements, conform in all material respects with accounting
principles generally accepted in Canada. All significant intercompany balances
and transactions have been eliminated in consolidation.
Tanisys is a Wyoming corporation which was originally organized in British
Columbia, Canada to pursue oil and gas exploration. Unsuccessful in the
exploration business and dormant pursuant to the rules and regulations of the
Vancouver Stock Exchange, several investors gained control of the Company to
raise financing and complete the acquisition of Timespan. Timespan had software
technology and patent applications which, in part, are the foundation of the
Company's development and marketing efforts.
Tanisys changed its name from Rosetta Technologies Inc. on July 11, 1994. Prior
to Rosetta Technologies Inc., the Company had been known as First American
Capital Group Inc. and Montebello Resources Ltd.
Certain reclassifications of amounts related to 1994 and 1995 have been made to
conform with the 1996 presentation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of
three months or less to be classified as cash equivalents. Cash equivalents are
carried at cost, which approximates market. The Company places its cash
investments in high credit quality instruments.
53
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECEIVABLES
The Company grants credit to domestic and international original equipment
manufacturers, distributors and end users. The Company carries a business credit
policy covering certain accounts receivable. The insurance policy provides
protection against losses from uncollectible accounts resulting from insolvency
of specified customers. As of September 30, 1996, the total available coverage
under the policy was $2,050,000.
INVENTORY
Inventory is stated at the lower of cost or market. In the third quarter of
1996, the Company changed its method of accounting for inventories from the
first-in, first-out (FIFO) method to a weighted average cost basis. The change
did not have a significant effect on results of operations for 1996, nor is it
anticipated that it will have a material effect on future periods. Prior to the
change, the Company's inventory costs would not have differed significantly
under the two methods. Costs include direct materials, direct labor and certain
indirect manufacturing overhead expenses.
REVENUE RECOGNITION
Revenues from direct sales and sales to resellers are recognized when the
related products are shipped. The Company warrants products against defects
and has a policy concerning the return of products.
DEPRECIATION AND AMORTIZATION
The Company uses the straight-line method of depreciation. Under the
straight-line method of depreciation, the Company is using the following lives:
Machinery and equipment 3-7
Office and engineering equipment 5
Computer equipment and software 3
Furniture and fixtures 5
Vehicles 5
Leasehold improvements Shorter of useful life or remaining
term of the lease
Incorporation costs are amortized on a straight-line basis over five years. Upon
dissolution of Timespan, the Company wrote-off $747 in unamortized incorporation
costs. Accumulated amortization at September 30, 1996, 1995 and 1994 was $512,
$1,522 and $761, respectively.
54
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Patents and trademarks are amortized on a straight-line basis over 10 years. In
fiscal 1995, the Company wrote-off $12,095 in trademark costs related to the
registration of the name SpinWizard, since the product associated with that
trademark is no longer being sold. Accumulated amortization at September 30,
1996, 1995 and 1994, was $10,799, $6,569 and $0, respectively.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated at the
exchange rate at the balance sheet date. Revenues, costs, and expenses are
translated at average rates of exchange prevailing during the year. Gains and
losses on foreign currency transactions are included in other expenses.
Translation adjustments resulting from this process are charged or credited to
equity.
RESEARCH AND DEVELOPMENT
Under the criteria set forth in Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed," capitalization of software development costs begins upon
the establishment of technological feasibility. The ongoing assessment of the
recoverability of these costs requires considerable judgment by management with
respect to certain external factors, including, but not limited to, anticipated
future gross product revenues, estimated economic life and changes in software
and hardware technology. After considering the above factors, the Company has
determined that software development costs incurred for the years ended
September 30, 1996, 1995 and 1994 were properly expensed.
LOSS PER SHARE
Loss per share is calculated based upon the weighted average number of common
shares outstanding during the year.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" (FAS 121), was issued. Under FAS 121, an impairment loss must be
recognized, for long-lived assets and certain identifiable intangibles to be
held and used by an entity, whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. FAS 121
is effective for financial statements issued for fiscal years beginning after
December 15, 1995, and must be adopted on a prospective basis. Restatement of
previously issued financial statements is not permitted. The Company adopted
FAS 121 effective October 1, 1995. Such adoption did not have a material
effect on the financial condition or results of operations of the Company.
55
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (FAS 123), was issued. FAS 123
defines a fair value based method of accounting for employee stock options or
similar equity instruments and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. Under the fair
value based method, compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period of the award, which
is usually the vesting period. However, FAS 123 also allows entities to continue
to measure compensation costs for employee stock compensation plans using the
intrinsic value method of accounting prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). Entities
electing to remain with the accounting prescribed by APB 25 must make pro forma
disclosures of net income and earnings per share as if the fair value based
method recommended by FAS 123 had been applied. The accounting requirements of
FAS 123 are effective for transactions entered into in fiscal years that begin
after December 15, 1995. The disclosure requirements of FAS 123 are effective
for financial statements for fiscal years beginning after December 15, 1995. The
Company intends to measure compensation costs in accordance with APB 25 and to
provide pro forma disclosures of net income and earnings per share as if the
fair value based method of accounting under FAS 123 had been applied. Therefore,
FAS 123 will not have a material effect on the financial position or results
of operations of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. ACQUISITIONS OF 1ST TECH AND DARKHORSE
On May 20, 1996, the Company acquired 1st Tech and DarkHorse, as a result of
which 1st Tech and DarkHorse became wholly owned subsidiaries of the Company in
exchange for 4,150,000 shares of the Company's common stock. 1st Tech is engaged
primarily in the design, manufacture and sale of standard memory products to the
memory aftermarket and custom memory assemblies to original equipment
manufacturers, and offers engineering design and contract manufacturing
services. DarkHorse designs and markets memory testing equipment primarily to
electronic equipment manufacturers.
At the closing of the acquisitions, the Company granted options for the purchase
of 550,000 common shares to key employees of 1st Tech and DarkHorse, allowed
Mr. Gary W. Pankonien, former owner of 1st Tech and one of the three former
owners of DarkHorse, to appoint two members to the Company's seven-member Board
of Directors, and paid a consulting bonus to a Director of the Company of
207,500 common shares at a deemed price of $3.80 per share.
56
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
2. ACQUISITIONS OF 1ST TECH AND DARKHORSE (CONTINUED)
The acquisitions of 1st Tech and DarkHorse were accounted for using the purchase
method of accounting. Under the purchase method, the excess of the purchase
price over the estimated fair value of the net assets acquired of $10,656,998
is classified as goodwill and amortized against earnings over a two year period.
The amount of goodwill amortized for the year ended September 30, 1996 was
$2,220,208. The results of operations of 1st Tech and DarkHorse have been
included in the consolidated financial statements since the date of the
acquisitions.
3. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
Raw materials $1,343,522 $ ---
Work-in-process 203,017 ---
Finished goods 257,919 15,414
$1,804,458 $15,414
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1996 1995
Accumulated Accumulated
Depreciation & Net Book Depreciation & Net Book
Cost Amortization Value Cost Amortization Value
Manufacturing equipment $1,055,964 $234,159 $ 821,805 $ --- $ --- $ ---
Office equipment 579,117 224,102 355,015 29,084 11,038 18,046
Engineering equipment 253,482 77,807 175,675 17,507 7,022 10,485
Computer equipment 118,696 87,448 31,248 97,829 57,585 40,244
Computer software 223,872 115,821 108,051 21,971 15,114 6,857
Furniture and fixtures 295,585 90,186 205,399 40,170 12,641 27,529
Vehicles 39,445 9,861 29,584 --- --- ---
Leasehold improvements 157,907 67,205 90,702 25,854 10,310 15,544
$2,724,068 $906,589 $1,817,479 $232,415 $113,710 $118,705
</TABLE>
The Company had approximately $266,000 and $0 of property and equipment acquired
under capital lease at September 30, 1996 and 1995, respectively. The
accumulated amortization related to these assets totaled $47,000 and $0 at
September 30, 1996 and 1995, respectively. The related amortization expense
was $16,000 and $0 for the year ended September 30, 1996 and 1995, respectively.
57
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
5. REVOLVING CREDIT NOTE
The Company has a revolving credit note with a financial institution of
$6,000,000 bearing interest at the financial institution's prime rate plus
a percentage between one and three percent (8.25% as of September 30, 1996)
depending upon a ratio. The ratio is computed monthly, combining 1st Tech and
DarkHorse indebtedness to annualized earnings before income taxes, depreciation
and amortization. At September 30, 1996, the Company did not comply with
certain financial covenants. The financial institution has amended and waived
the covenants at September 30, 1996 and for prior periods. Additionally, the
financial institution will issue, when needed, letters of credit up to
$2,000,000. The revolving credit note extends through June 30, 1998 and is
secured by all of the Company's assets. Paydowns on the note are made by
daily collections of accounts receivable. Draws are made as necessary. The
amount outstanding at September 30, 1996 was $3,075,000. The amount available
on the line at September 30, 1996 was $2,925,000 limited by qualified
accounts receivable as defined in the note. At September 30, 1996, there were
no outstanding letters of credit.
6. LEASE COMMITMENTS
The Company leases certain equipment and office space under noncancelable leases
with expiration dates ranging from 1997 through 2000.
Future minimum lease payments under all leases at September 30, 1996 were as
follows:
<TABLE>
<S> <C> <C>
Capital Leases Operating Leases
1997 $ 62,661 $376,804
1998 57,276 219,841
1999 56,481 66,288
2000 27,528 27,620
Total minimum lease payments 203,946 690,553
Amounts representing interest (33,159)
Present value of minimum capital lease payments 170,787
Less: current portion 47,787
Long-term capital lease obligation $123,000
</TABLE>
Rent expense recorded under all operating leases was $118,189, $48,619 and
$34,377 for 1996, 1995 and 1994, respectively.
58
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
7. PRIVATE PLACEMENTS
In January 1996, the Company completed an equity financing of 941,177 common
shares and common stock purchase warrants to purchase 941,177 shares of common
stock at an exercise price of $1.70 in 1997 and $1.95 in 1998. The warrants
expire after 1998. A commission of 45,555 shares at the price of $2.25 per
share was paid to AWL Enterprises Ltd. In November 1995, the Company completed
an equity financing of 34,000 common shares and common stock purchase warrants
to purchase 34,000 shares of common stock at an exercise price of $2.00 in 1996
and $2.25 in 1997. The warrants expire after 1997.
8. RELATED PARTY TRANSACTIONS
The Company and its subsidiaries entered into the following related party
transactions:
Expenses and consulting fees in the amount of $870,000 ($788,500 was paid
in stock), $159,000 and $256,000 were paid to the Company's directors or
companies that they owned for the years ended September 30, 1996, 1995
and 1994, respectively.
Professional fees in the amount of $122,000, $97,000 and $42,000 were paid
to two shareholders of the Company for legal and other services provided
for the years ended September 30, 1996, 1995 and 1994, respectively.
As of September 30, 1996, two former shareholders of DarkHorse are each
owed $32,309 and the third shareholder owed the Company $17,691. Prior to
the acquisition, DarkHorse was an S-corporation. These amount arose at the
date of acquisition, to cover the taxes on earnings passed on to the three
shareholders for the period from January 1, 1996 to the date of
acquisition.
9. SHARE CAPITAL, OPTIONS AND WARRANTS
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock with
$1 par value. There were no preferred shares issued and outstanding at
September 30, 1996 and 1995.
59
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
9. SHARE CAPITAL, OPTIONS AND WARRANTS (CONTINUED)
<TABLE>
<CAPTION>
STOCK OPTIONS
1996 1995
Shares Option Price Shares Option Price
<S> <C> <C> <C> <C>
Outstanding-Beginning of year 1,364,450 $1.10 to 3.32 US 1,003,000 $1.50 to 3.70 CDN
Granted 834,900 3.13 to 3.72 US 958,750 2.02 to 3.32 US
4.00 CDN
Canceled or expired (395,250) 2.02 to 3.72 US (591,300) 2.80 US
2.33 to 4.00 CDN
Exercised --- --- (6,000) 2.40 TO 3.55 CDN
Outstanding-End of year 1,804,100 $1.10 to 3.69 US 1,364,450 $2.02 to 3.32 US
$1.50 TO 4.00 CDN
Exercisable-End of year 555,232 265,001
</TABLE>
In February 1996, the Board of Directors approved a resolution to translate all
option prices currently in CDN$ to US$. The exchange rate used was 1.00 CDN$
to .7353 US$. This was the exchange rate on the date of the board resolution.
WARRANTS
Each warrant entitles the holder to purchase one share of common stock at a
particular price during the first year following the date of issuance and at a
second price in year two. The warrants expire after year two. During 1996,
1,515,000 warrants were exercised and no warrants expired. 975,177 warrants
were issued as part of the Company's two private placements in 1995 and 1996.
The Company has warrants outstanding for the purchase of its common stock in
1996 and 1995 as follows:
<TABLE>
<CAPTION>
NUMBER OF WARRANTS EXERCISE PRICE
ISSUE DATE 1996 1995 YEAR 1 YEAR 2
<S> <C> <C> <C> <C>
August 1994 --- 1,500,000 $1.00 $1.25
May 1995 885,000 900,000 $2.00 $2.30
November 1995 34,000 --- $2.00 $2.25
January 1996 941,177 --- $1.70 $1.95
Total 1,860,177 2,400,000
</TABLE>
10. INCOME TAXES
The Company accounts for deferred income taxes using the liability method.
At September 30, 1996, the Company's Canadian subsidiary, Timespan, had a
non-capital loss carryforward of approximately CDN $127,000 which may be applied
against future taxable income. The loss carryforward results in a deferred tax
asset of CDN $57,000 which expires in 2000. Additionally, at September 30, 1996,
Timespan had deferred tax assets of CDN $43,000 principally relating to
unclaimed investment tax credits.
60
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
10. INCOME TAXES (CONTINUED)
During 1996 and 1995, the Company incurred consolidated net operating losses
for U.S. income tax purposes of approximately $1,785,000 and $2,548,000,
respectively. The loss carryforwards expire in 2011 and 2010, respectively.
During 1996, the Company had temporary differences resulting in future tax
deductions of $693,000 principally representing tax basis in accrued liabilities
and intangible assets. Deferred income tax assets from the loss carryforwards
and asset basis differences aggregate $2,240,000.
For financial reporting purposes, valuation allowances of $2,240,000 and
$1,413,000 have been recorded to offset the deferred tax assets due to the
uncertainty as to whether the benefits will be realized.
The availability of the net operating loss carryforward and future tax
deductions to reduce taxable income is subject to various limitations under
the Internal Revenue Code of 1986, as amended, (the Code) in the event of an
ownership change as defined in Section 382 of the Code.
No federal or state taxes were due or paid in 1996 and 1995.
11. UNUSUAL CHARGE
At September 30, 1994, the Company determined that it would not utilize in its
current or future products, the computer game controller technology purchased
from Timespan. Therefore, the remaining goodwill associated with the Timespan
acquisition of $198,739 was charged to expense as an unusual charge in the
period ended September 30, 1994 (Note 13).
12. EMPLOYEE BENEFITS
Effective January 1, 1995, 1st Tech sponsored an employee benefit plan
(the Plan) which qualifies under Section 401(k) of the Internal Revenue Service
Code for eligible employees. Eligible employees may defer a portion of their
annual compensation under the Plan subject to maximum limitations. The
requirements for eligibility include a minimum age of 21 and a minimum of one
year of service. As of the date of acquisition of 1st Tech, all employees of
the Company joined the Plan.
Under provisions of the Plan, the Company may elect to make matching
contributions to the Plan for the benefit of the participants. No contributions
were made in 1996.
13. COMMITMENTS AND CONTINGENCIES
During fiscal 1993, the Company's subsidiary Timespan entered into a five year
royalty agreement with its former principal shareholders. The agreement provides
for royalties to be paid for the use of the computer game controller technology.
The royalties are to be paid subsequent to Timespan achieving a CDN $3,000,000
net cumulative profit from the sale of devices involving the technology. The
royalties will be calculated as the lesser of CDN $250,000 per annum or 5% of
the gross wholesale receipts, as defined in the agreement, from sales exceeding
the above noted amount. If the amount payable is less than CDN $250,000
61
<PAGE>
TANISYS TECHNOLOGY, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1996, 1995 AND 1994
(EXPRESSED IN U.S. DOLLARS EXCEPT AS INDICATED)
13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
in any particular year, the difference will be carried forward to the following
year to increase the maximum amount payable in that year. The Company is not
currently using the computer game controller technology and the royalty does
not relate to the Company's current products. (note 11)
14. SUBSEQUENT EVENT
In October 1996, the Company granted, subject to regulatory approval, stock
options to key employees for the purchase of 423,000, 110,000 and 5,000 common
shares at a per share price of $4.09, $4.17 and $4.44, respectively. These
options are not considered outstanding until approved by the Vancouver Stock
Exchange.
Timespan, a wholly owned subsidiary of the Company, was dissolved as of
October 23, 1996.
62
<PAGE>
1ST TECH CORPORATION AND
DARKHORSE SYSTEMS, INC.
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995, 1994 AND 1993
TOGETHER WITH AUDITORS' REPORT
63
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To 1st Tech Corporation and
DarkHorse Systems, Inc.:
We have audited the accompanying combined balance sheets of 1st Tech Corporation
and DarkHorse Systems, Inc. (Texas corporations), as of December 31, 1995 and
1994, and the related combined statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Companies' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 1st Tech Corporation and
DarkHorse Systems, Inc., as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
San Antonio, Texas
October 25, 1996
<PAGE>
1ST TECH CORPORATION AND
------------------------
DARKHORSE SYSTEMS, INC.
-----------------------
COMBINED BALANCE SHEETS - - DECEMBER 31, 1995 AND 1994
------------------------------------------------------
<TABLE>
ASSETS 1995 1994
------ ----------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,198,964 $ 251,325
Accounts receivable, net of allowance for doubtful
accounts of $124,500 and $0, respectively 7,438,903 5,184,073
Inventory 3,176,384 1,591,450
Accounts receivable, related parties 199,577 200,000
Prepaid expenses and other 173,333 44,500
----------- ----------
Total current assets 12,187,161 7,271,348
----------- ----------
PROPERTY AND EQUIPMENT, net 1,261,232 632,649
----------- ----------
OTHER LONG-TERM ASSETS 84,000 41,000
----------- ----------
Total assets $ 13,532,393 $ 7,944,997
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
------------------------------------ ------------ -----------
CURRENT LIABILITIES:
Bank overdrafts $ 574,000 $ 698,000
Accounts payable 3,291,738 2,539,134
Accrued expenses 1,057,926 463,253
Income taxes payable 58,000 10,000
Revolving credit note 6,915,000 3,313,000
Notes payable to related parties 509,240 493,000
Current portion of obligations under capital leases 42,000 109,000
----------- ----------
Total current liabilities 12,447,904 7,625,387
----------- ----------
OBLIGATIONS UNDER CAPITAL LEASES 152,000 -
----------- ----------
Total liabilities 12,599,904 7,625,387
----------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Capital stock, no par value
1st Tech, 1,000,000 shares authorized, issued and
outstanding - -
DarkHorse, 100,000,000 shares authorized;
1,155,000 issued and outstanding - -
Contributed capital 10,000 10,000
Retained earnings 989,489 309,610
Due from shareholder (67,000) -
----------- ----------
Total shareholders' equity 932,489 319,610
----------- ----------
Total liabilities and shareholders' equity $ 13,532,393 $7,944,997
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
65
<PAGE>
1ST TECH CORPORATION AND
------------------------
DARKHORSE SYSTEMS, INC.
------------------------
COMBINED STATEMENTS OF INCOME
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
<TABLE>
1995 1994 1993
-------------- ------------- -------------
<S> <C> <C> <C>
NET PRODUCT SALES $ 106,309,491 $ 42,707,651 $ 22,965,821
COST OF SALES 99,443,822 39,263,567 20,424,645
-------------- ------------- -------------
6,865,669 3,444,084 2,541,176
-------------- ------------- -------------
OPERATING EXPENSES:
Sales and marketing 2,249,637 1,299,603 387,266
General and administrative 2,902,629 1,394,211 1,459,527
Research and development 394,338 273,935 90,440
-------------- ------------- -------------
Total operating expenses 5,546,604 2,967,749 1,937,233
-------------- ------------- -------------
INCOME FROM OPERATIONS 1,319,065 476,335 603,943
-------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (728,169) (383,149) (239,171)
Interest income 21,451 425 2,283
Other income (expense) (7,468) 13,122 34,156
-------------- ------------- -------------
(714,186) (369,602) (202,732)
-------------- ------------- -------------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 604,879 106,733 401,211
-------------- ------------- -------------
PROVISION FOR INCOME TAXES 58,000 23,020 142,305
-------------- ------------- -------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 546,879 83,713 258,906
-------------- ------------- -------------
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 133,000 - -
-------------- ------------- -------------
NET INCOME $ 679,879 $ 83,713 $ 258,906
-------------- ------------- -------------
UNAUDITED PRO FORMA DATA (Note 3):
Income before provision for income taxes and cumulative
effect of change in accounting principle $ 604,879 $ 106,733 $ 401,211
Pro forma adjustments to reflect federal and state
income tax 223,805 39,491 148,448
-------------- ------------- -------------
Pro forma income from continuing operations after
provision for income tax and before cumulative effect
of change in accounting principle 381,074 67,242 252,763
-------------- ------------- -------------
Adjustment to reflect change in accounting principle - 91,342 41,469
-------------- ------------- -------------
Pro forma net income $ 381,074 $ 158,584 $ 294,232
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
66
<PAGE>
1ST TECH CORPORATION AND
------------------------
DARKHORSE SYSTEMS, INC.
-----------------------
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
-------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
<TABLE>
Common Stock
--------------------------------------------------------------------
1st Tech Darkhorse
------------------------------ --------------------------------
Shares Shares
Issued and Contributed Issued and Contributed
Outstanding(1) Capital Outstanding(2) Capital
-------------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992 - $ - 360,937 $ 3,000
Net income - - - -
Issuance of stock 1,000,000 1,000 842,188 50,000
-------------- ----------- -------------- -----------
BALANCE, December 31, 1993 1,000,000 1,000 1,203,125 53,000
Net income - - - -
Purchase of treasury stock - - (842,188) (44,000)
Retirement of treasury stock - - - -
Stock split (3.2 for 1) - - 794,063 -
-------------- ----------- -------------- -----------
BALANCE, December 31, 1994 1,000,000 1,000 1,155,000 9,000
Net income - - - -
Distributions - - - -
-------------- ----------- -------------- -----------
BALANCE, December 31, 1995 1,000,000 $ 1,000 1,155,000 $ 9,000
-------------- ----------- -------------- -----------
-------------- ----------- -------------- -----------
</TABLE>
<TABLE>
Total
Treasury Due From Retained Shareholders'
Stock Shareholder Earnings Equity
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992 - $ - $ (2,979) $ 21
Net income - - 258,906 258,906
Issuance of stock - - - 51,000
------------ ----------- ----------- -------------
BALANCE, December 31, 1993 - - 255,927 309,927
Net income - - 83,713 83,713
Purchase of treasury stock 70,000,000 - (30,030) (74,030)
Retirement of treasury stock (70,000,000) - - -
Stock split (3.2 for 1) - - - -
------------ ----------- ----------- -------------
BALANCE, December 31, 1994 - - 309,610 319,610
Net income - - 679,879 679,879
Distributions - (67,000) - (67,000)
------------ ----------- ---------- -------------
BALANCE, December 31, 1995 - $ (67,000) $ 989,489 $ 932,489
------------ ----------- ---------- -------------
------------ ----------- ---------- -------------
(1) Reflects a 10:1 stock split approved by 1st Tech board of directors on May 25, 1995.
(2) Reflects a 1:83 reverse stock split approved by DarkHorse board of directors on April 9, 1996.
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
67
<PAGE>
1ST TECH CORPORATION AND
------------------------
DARKHORSE SYSTEMS, INC.
-----------------------
COMBINED STATEMENTS OF CASH FLOWS
---------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
----------------------------------------------------
<TABLE>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 679,879 $ 83,713 $ 258,906
Adjustments to reconcile net income before
cumulative effect of change in accounting
principle to net cash provided by
(used in) operating activities-
Depreciation and amortization 138,400 232,877 89,239
Changes in operating assets and liabilities-
Increase in accounts receivable (2,254,830) (4,347,867) (836,206)
(Increase) decrease in accounts receivable, related parties 423 (88,156) (2,540)
Increase in inventory (1,584,934) (509,358) (1,068,927)
(Increase) decrease in prepaid expenses and other assets (171,833) 36,970 (122,470)
Increase in accounts payable 752,604 904,895 1,518,126
(Decrease) increase in bank overdrafts (124,000) 698,000 -
Increase in accrued expenses 794,923 231,671 240,782
------------- ------------- -------------
Net cash provided by (used in) operating activities (1,769,368) (2,757,255) 76,910
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (549,678) (446,189) (308,070)
------------- ------------- -------------
Net cash used in investing activities (549,678) (446,189) (308,070)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in revolving credit note 3,602,000 3,113,000 200,000
Principal payments on capital leases (132,305) (86,506) -
Advances to shareholder (67,000) - -
Borrowings (payments) on note payable to shareholders (136,010) (14,696) 492,696
Purchase of stock - (24,030) -
Issuance of stock - - 1,000
------------- ------------- -------------
Net cash provided by financing activities 3,266,685 2,987,768 693,696
------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 947,639 (215,676) 462,536
CASH AND CASH EQUIVALENTS, beginning of year 251,325 467,001 4,465
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 1,198,964 $ 251,325 $ 467,001
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
68
<PAGE>
<TABLE>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for-
Interest $ 571,478 $ 350,549 $ 19,750
---------- ---------- ----------
---------- ---------- ----------
Income taxes $ 14,449 $ 145,700 $ -
---------- ---------- ----------
---------- ---------- ----------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of certain accrued expenses to notes payable
to shareholders (see Note 9) $ 152,250 $ - $ -
---------- ---------- ----------
---------- ---------- ----------
Note issued to shareholder for stock $ - $ 74,000 $ -
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
69
<PAGE>
1ST TECH CORPORATION AND
DARKHORSE SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. BASIS OF PRESENTATION AND ORGANIZATION:
The accompanying combined financial statements include the accounts of 1st
Tech Corporation and DarkHorse Systems, Inc. (collectively referred to as the
Companies). The Companies' financial statements have been combined as both
of these entities are under common ownership. All significant intercompany
accounts and transactions have been eliminated in combination.
1st Tech Corporation (1st Tech) is a privately held S-Corporation that was
incorporated under the laws of the State of Texas on January 20, 1993. 1st
Tech is engaged primarily in the design, manufacture and sale of standard
memory products to the memory aftermarket and custom memory assemblies to
original equipment manufacturers. In addition, 1st Tech offers engineering
design and contract manufacturing services. The principal market for the
Company's products is domestic-based original equipment manufacturers in the
electronics industry, including personal computer manufacturers and
telecommunications service providers.
DarkHorse Systems, Inc. (DarkHorse), is a privately held S-Corporation that
was incorporated under the laws of the State of Texas in 1992. DarkHorse is
engaged in the business of designing and marketing memory testing equipment
primarily to domestic electronic equipment manufacturers.
Effective May 20, 1996, Tanisys Technology, Inc. (Tanisys), acquired all of
the outstanding common stock of the Companies in exchange for 4.15 million
shares of Tanisys' common stock (Note 14).
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
REVENUE RECOGNITION
Revenue is stated net of actual and estimated returns. Sales are recognized
when the related products are shipped. The Company warrants products against
defects and has a policy concerning the return of products.
CASH AND CASH EQUIVALENTS
The Companies consider all highly liquid investments with original maturities
of three months or less to be classified as cash equivalents. Cash
equivalents are carried at cost, which approximates market.
INVENTORY
Inventory is stated at the lower of cost or market, with cost being
determined on a weighted average cost basis. Costs include direct materials,
direct labor and certain indirect manufacturing overhead expenses.
70
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization of
property and equipment has been computed by the straight-line method
beginning January 1, 1995. Depreciation and amortization of property and
equipment in prior years was computed by the double declining balance-method.
The straight-line method of depreciation was adopted in order to provide for
depreciation and amortization expense on a basis more consistent with the
property and equipment's actual utilization and has been applied to
acquisitions of prior years. The effect of the change in 1995 was to
increase income from operations by approximately $95,000. The pro forma
amounts shown on the statement of income have been adjusted for the effect of
retroactive application of depreciation and amortization on the straight-line
basis.
Additionally, the Companies changed the estimated useful lives for its
property and equipment beginning in 1995. The effect of this change did not
have a material impact on income from operations for 1995. Depreciation and
amortization expense are provided over the following estimated useful lives:
Machinery and equipment 3 - 7 years
Office computer equipment and software 3 - 5 years
Furniture and fixtures 5 - 7 years
Leasehold improvements Shorter of useful life or remaining
term of the lease
BANK OVERDRAFTS
Bank overdrafts represent outstanding checks in excess of funds on deposit
where legal right to offset does not exist.
INCOME TAXES
In 1993, 1st Tech elected and was treated for federal and certain state
income tax purposes as a C-Corporation. In 1994, 1st Tech changed its
federal tax status from a C-Corporation to an S-Corporation.
In 1993, DarkHorse elected and was treated for federal and certain state
income tax purposes as a C-Corporation. DarkHorse changed its federal tax
status from a C-Corporation to an S-Corporation in 1995.
In 1995, the Companies have elected and have been treated for federal and
certain state income tax purposes as an S-Corporation under Subchapter S of
the Internal Revenue Code of 1986, as amended. As a result, the income of
the Companies for federal and certain state income tax purposes is included
in the income tax return of the individual shareholders. The accompanying
combined financial statements include recognition of those federal and state
income taxes which are levied on the Companies. (See Note 3 for pro forma
income tax information.)
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" (FAS 121), was issued. Under FAS 121, an impairment loss
must be recognized, for long-lived assets and certain identifiable
intangibles to be held and used by an entity, whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. FAS 121 is effective for financial statements issued for fiscal
years beginning after December 15, 1995, and must be adopted on a prospective
basis. Restatement of previously issued financial statements is not
permitted. The Companies adopted FAS 121 effective January 1, 1996. Such
adoption did not have a material effect on the financial condition or results
of operations of the Companies.
71
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. PRO FORMA INFORMATION (UNAUDITED):
Pro forma net income has been determined assuming that the Companies had been
taxed as C-Corporations for federal and certain state income tax purposes
since January 1, 1993. The pro forma adjustments to reflect federal and
state income tax assume a blended tax rate of 37 percent. Additionally, the
pro forma amounts shown on the statements of income have been adjusted for
the cumulative effect of change in accounting principle. (See Note 2.)
4. INVENTORIES:
Inventories consist of the following:
DECEMBER 31
---------------------------
1995 1994
------------ ----------
Raw materials $ 1,680,101 $ 952,746
Work in process 98,619 17,245
Finished goods 1,397,664 621,459
------------ ----------
Total inventory $ 3,176,384 $1,591,450
------------ ----------
5. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
DECEMBER 31
--------------------------
1995 1994
------------ ----------
Machinery and equipment $ 805,000 $ 518,000
Office computer equipment and software 553,711 295,765
Furniture and fixtures 249,732 78,000
Leasehold improvements 113,305 63,000
1,721,748 954,765
Less- Accumulated depreciation and
amortization 460,516 322,116
Property and equipment, net $1,261,232 $ 632,649
See Note 2 for description of change in method of calculating depreciation
expense which occurred effective January 1, 1995.
72
<PAGE>
The Companies have $440,704 and $195,506 of property and equipment acquired
under capital leases as of December 31, 1995 and 1994, respectively. The
accumulated depreciation related to these assets totaled $81,312 and $30,257
as of December 31, 1995 and 1994, respectively. The related depreciation
expense was $51,055, $27,929 and $2,328 for the years ended 1995, 1994 and
1993, respectively.
6. REVOLVING CREDIT NOTE:
Effective October 1994, 1st Tech obtained a revolving credit note with a
financial institution which provided for maximum borrowings of $5,000,000.
In July 1995, 1st Tech restructured the revolving credit note with the same
financial institution increasing maximum borrowings to $12,000,000. Advances
bear interest at the financial institution's prime rate plus 2 percent (10.50
percent as of December 31, 1995). The borrowings are secured by assets. As a
condition precedent to the restructured note, a $35,000 commitment fee was
paid upon closing. In addition, the revolving credit note contains certain
restrictive covenants. Specifically, 1st Tech must maintain a minimum
tangible net worth as determined by the financial institution, profitability
by quarter as well as compliance with certain financial ratios specified by
the financial institution. 1st Tech is required to report its borrowing
base, determined by eligible accounts receivable, to the financial
institution each week and cannot enter into any additional debt agreements
without prior approval from the financial institution. Indebtedness under
the note was guaranteed by 1st Tech's sole shareholder. As of December 31,
1995 and 1994, advances outstanding under the revolving credit note amounted
to $6,915,000 and $3,313,000, respectively. As of December 31, 1995,
$5,085,000 was available for future borrowings. The revolving credit note is
discretionary and may be modified, suspended or terminated at the election of
the lender at any time.
The carrying amount of the revolving credit note approximates fair value.
As of December 31, 1995, 1st Tech was in violation of certain covenants of
the revolving credit note. 1st Tech obtained a one-time waiver from the
financial institution with respect to these covenant violations. In
addition, as of our report date, the company was not in compliance with
certain debt covenants. A debt waiver has been obtained by the company for
all of the periods.
7. LEASE COMMITMENTS:
The Companies lease certain equipment and office space under noncancelable
leases with expiration dates ranging from 1996 through 2000.
Future minimum principal lease payments under all leases are as follows:
CAPITAL OPERATING
LEASES LEASES
--------- ----------
1996 $ 57,276 $ 461,817
1997 57,276 443,788
1998 57,276 214,436
1999 54,096 66,287
2000 15,594 11,048
--------- ----------
Present value of minimum capital lease payments 241,518 $1,197,376
----------
Less- Amount representing interest 47,518
---------
194,000
Less- Current present value of minimum lease payments 42,000
---------
Long-term capital lease obligations $152,000
---------
73
<PAGE>
Rent expense recorded under all operating leases was approximately $240,000,
$115,000 and $66,000 for 1995, 1994 and 1993, respectively.
8. INCOME TAXES:
Effective January 1, 1994, 1st Tech converted from a C-Corporation to an
S-Corporation.
Effective January 1, 1995, DarkHorse converted from a C-Corporation to an
S-Corporation. Upon conversion, DarkHorse computed its built-in gain,
principally relating to inventory, for federal income tax purposes as
approximately $33,000.
The provision for income taxes for the years ended December 31, 1995, 1994
and 1993, consists of the following:
1995 1994 1993
------- ------- --------
Current-
Federal income tax $ - $11,525 $142,305
Federal built-in gain 33,000 - -
Texas franchise tax 25,000 11,495 -
------- ------- --------
$58,000 $23,020 $142,305
------- ------- --------
9. RELATED-PARTY TRANSACTIONS:
1st Tech's sole shareholder has a one-third interest in DarkHorse. During
1995, 1994 and 1993, the Companies had certain intercompany transactions
which are eliminated in the combined financial statements.
In November 1995, 1st Tech entered into an operating lease for certain
manufacturing equipment with its sole shareholder. The lease extends for a
period of 36 months with monthly payments totaling $6,200. The future
minimum lease payments associated with this lease are included in the amounts
disclosed in Note 7. In conjunction with the acquisition of the Companies,
as described in Note 14, the leased equipment was purchased from the
shareholder in May 1996 for $200,000 and the lease was canceled.
1st Tech made a loan to its sole shareholder during 1994 of approximately
$195,300. Interest on the loan accrues on a monthly basis at 1st Tech's
incremental borrowing rate of prime plus 2 percent (10.50 percent as of
December 31, 1995). Amounts due from the sole shareholder relating to this
loan and other cash advances totaled $199,000 and $148,000 as of December 31,
1995 and 1994, respectively. In conjunction with the acquisition of the
Companies, as described in Note 14, the then outstanding balance of $204,772
was charged to equity as a deemed shareholder distribution.
During 1993, 1st Tech's sole shareholder loaned $443,000 to 1st Tech. The
loan is subordinated to 1st Tech's existing notes payable to bank, and no
principal amounts can be repaid to the sole shareholder as long as amounts
remain outstanding under the bank line of credit. The loan bears interest at
prime plus 2-1/2 percent (11 percent as of December 31, 1995). Interest
payments on the loan are due quarterly and the principal was due December 31,
1995, with a contingency option to extend the due date up to an additional
three years. In conjunction with the acquisition of the Companies, as
described in Note 14, the loan was credited to equity as a deemed shareholder
contribution.
Additionally, as of December 31, 1993, 1st Tech had approximately $331,000
payable to Stratum Technologies, Inc., a separate corporation wholly owned by
the sole shareholder of 1st Tech Corporation. The balance was subsequently
paid during 1994.
74
<PAGE>
In 1994, 1st Tech loaned approximately $40,000 to Granite
Software, Inc., a company 20 percent owned by 1st Tech's sole shareholder.
During 1995, this amount was written off as uncollectible.
During 1994, DarkHorse repurchased certain ownership interests from two
shareholders for amounts totaling approximately $74,000 in exchange for notes
payable bearing interest at 9 percent per annum. Principal payments totaling
approximately $69,000, representing the remaining outstanding balances, were
made during 1995 on these notes payable.
Additionally, as of December 31, 1994, approximately $232,400 of salaries and
bonuses were outstanding to 1st Tech's shareholders. During 1995, $152,400
was converted to notes payable bearing interest at 9 percent per annum; while
the remaining $80,000 was paid in cash. Principal payments totaling
approximately $92,000 were made on these notes payable during 1995. The
remaining amounts outstanding on the notes, including accrued interest, were
paid in full in April 1996.
10. SIGNIFICANT CUSTOMERS:
The Companies sell their products to a variety of domestic-based memory
aftermarkets and original equipment manufacturers in the electronics
industry. The Companies perform ongoing credit evaluations of their
customers' financial condition and, generally, require no collateral from
customers. If the financial condition and operations of these customers
deteriorate, the Companies' operating results could be adversely affected.
For the year ended December 31, 1994, the Companies had one customer that
accounted for approximately 13 percent of its total combined revenue. The
Companies had no customers whose sales accounted for greater than 10 percent
of combined revenue for the years ended December 31, 1995 and 1993.
1st Tech carries a business credit insurance policy covering certain accounts
receivable. The insurance policy provides protection against losses from
uncollectible accounts resulting from insolvency of specified customers. As
of December 31, 1995, the total available coverage under the policy was
approximately $9,925,000.
11. EMPLOYEE BENEFITS:
Effective January 1, 1995, 1st Tech sponsored an employee benefit plan (the
Plan) which qualifies under Section 401(k) of the Internal Revenue Code for
all eligible employees. Eligible employees may defer a portion of their
annual compensation under the Plan subject to maximum limitations. The
requirements for eligibility include a minimum age of 21 and a minimum of one
year of service.
Under the provisions of the Plan, 1st Tech makes a discretionary matching
contribution to the Plan for the benefit of the participants. 1st Tech made
contributions of approximately $41,000 during 1995.
Effective September 1, 1995, DarkHorse established a defined contribution
plan (the DarkHorse Plan) whereby eligible employees are allowed to
contribute up to 10 percent of their gross wages, subject to limitations.
All employees of DarkHorse are eligible to participate in the DarkHorse Plan.
Under the provisions of this plan, DarkHorse may make discretionary matching
contributions to the DarkHorse Plan for the benefit of the participants.
DarkHorse made matching contributions of approximately $33,000 during 1995.
75
<PAGE>
12. COMMITMENTS AND CONTINGENCIES:
On December 13, 1995, 1st Tech Molding, Inc. (Molding), a company 50 percent
owned by the sole shareholder of 1st Tech, entered into an office space lease
agreement. The lease agreement is for five years commencing on February 1,
1996, with total aggregate minimum lease payments of approximately $610,000.
1st Tech served as the guarantor for the Molding office space lease
agreement. In conjunction with the acquisition of the Companies, as
described in Note 14, the guarantee was removed.
Additionally, on February 14, 1996, Molding entered into a five-year loan and
security agreement used to purchase certain equipment totaling approximately
$476,000. 1st Tech served as the guarantor for the Molding loan and security
agreement. In conjunction with the acquisition of the Companies, as
described in Note 14, the guarantee was removed.
13. PREFERRED STOCK:
The Company is authorized to issue 1,000,000 shares of preferred stock.
There are no preferred shares issued and outstanding as of December 31, 1995
and 1994.
14. SUBSEQUENT EVENTS:
Effective May 20, 1996, Tanisys Technology, Inc., acquired all of the
outstanding common stock of the Companies in exchange for 4.15 million shares
of Tanisys' common stock. Prior to the closing of the acquisition and as a
precedent to the acquisition, 1st Tech completed a private placement of
1,150,000 shares of its common stock for gross proceeds of $2,300,000.
Additionally, DarkHorse issued 45,000 shares of its common stock to certain
key employees.
76
<PAGE>
(b) EXHIBITS
The exhibits listed below are filed as part of this report. See the
Index of Exhibits included with the exhibits.
3.1 Articles of Continuance dated June 30, 1993 (filed herewith)
3.2 Articles of Amendment to Articles of Continuance dated
July 11, 1994 (filed herewith)
3.3 Articles of Amendment dated April 28, 1995 (filed herewith)
3.4 Articles of Amendment dated April 15, 1996 (filed herewith)
3.5 Restated Bylaws of the Company (filed herewith)
4.1 Form of Warrant Agreement dated May 17, 1995 (filed herewith)
4.2 Form of Class B Warrant (filed herewith)
4.3 Share Purchase Warrant Certificate dated October 13, 1995
(filed herewith)
4.4 Form of Warrant Agreement dated as of December 20, 1995
(filed herewith)
4.5 Form of Class C Warrant (filed herewith)
4.6 Specimen of Common Stock Certificate (filed herewith)
10.1 Credit Agreement dated as of May 20, 1996, by and between
1st Tech, DarkHorse, the Company and Chemical Bank (now The
Chase Manhattan Bank), as amended (filed herewith)
10.2 Revolving Credit Note dated as of May 20, 1996, by and between
1st Tech, DarkHorse and Chemical Bank (now The
Chase Manhattan Bank (filed herewith)
10.3 Agreement and Plan of Merger dated as of April 9, 1996, by and
between Tanisys Technology, Inc., Tanisys Acquisition Corp.,
1st Tech Corporation and Gary W. Pankonien ("1st Tech Merger
Agreement") (filed herewith)
10.4 Amendment No. 1 dated May 16, 1996, to 1st Tech Merger
Agreement (filed herewith)
10.5 Articles of Merger (Delaware) of 1st Tech with and into
Tanisys Acquisition Corp., dated May 31, 1996 (filed herewith)
10.6 Articles of Merger (Texas) of 1st Tech with and into
Tanisys Acquisition Corp., dated May 31, 1996 (filed herewith)
10.7 Agreement and Plan of Merger dated as of April 9, 1996, by
and between Tanisys Technology, Inc., Tanisys Acquisition
Corp. II, DarkHorse Systems, Inc., Jack Little, Archer
Lawrence and Gary W. Pankonien ("DarkHorse Merger Agreement")
(filed herewith)
77
<PAGE>
10.8 Amendment No. 1 dated May 16, 1996, to DarkHorse
Merger Agreement (filed herewith)
10.9 Articles of Merger (Delaware) of DarkHorse with and into
Tanisys Acquisition Corp. II, dated May 31, 1996
(filed herewith)
10.10 Articles of Merger (Texas) of DarkHorse with and into
Tanisys Acquisition Corp. II, dated May 31, 1996
(filed herewith)
10.11 Employment Agreement dated February 15, 1994 by and between
the Company and Mark C. Holliday (filed herewith)
10.12 Employment Agreement dated April 18, 1994 by and between
the Company and Benjamin S. Marz (filed herewith)
10.13 Consulting Contract dated October 3, 1994 by and between
the Company and Parris H. Holmes, Jr.,
as amended (filed herewith)
10.14 Employment Agreement dated May 20, 1996 by and between
the Company and Gary W. Pankonien (filed herewith)
10.15 Employment Agreement dated July 11, 1996 by and between
the Company and Joe Davis (filed herewith)
10.16 Employment Agreement dated October 11, 1996 by and between
the Company and Guy Fielder (to be filed by amendment)
10.17 1993 Stock Option Plan, as amended through May 20, 1996
(filed herewith)
10.18 Form of Stock Option Agreement (filed herewith)
10.19 401(k) Plan (filed herewith)
10.20 Lease Agreement dated May 18, 1993 by and between
Tanisys Technology, Inc., assumptor of 1st Tech Corporation,
and AEtna Life Insurance Company, as amended (filed herewith)
10.21 Master Lease Agreement dated November 9, 1994 by and
between 1st Tech and Copelco Capital Inc.
(filed herewith)
10.22 Manufacturing Agreement dated as of November 1, 1996 by and
between the Company and Siemens Components, Inc.
(to be filed by amendment)
10.23 Inventory Management Service Agreement dated as of
November 1, 1996 by and between the Company and
Siemens Components, Inc. (to be filed by amendment)
12.1 Statement re Computation of Per Share Earnings
(filed herewith)
21.1 Subsidiaries of the Company (filed herewith)
27.1 Financial Data Schedule (filed herewith)
78
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
TANISYS TECHNOLOGY, INC.
Date: November 27, 1996 By: /S/ MARK C. HOLLIDAY
________________________________
Chairman of the Board and
and Chief Executive Officer
79
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION PAGE
- - ------- ----------- ----
3.1 Articles of Continuance dated June 30, 1993 (filed herewith)
3.2 Articles of Amendment to Articles of Continuance dated July 11, 1994
(filed herewith)
3.3 Articles of Amendment dated April 28, 1995 (filed herewith)
3.4 Articles of Amendment dated April 15, 1996 (filed herewith)
3.5 Restated Bylaws of the Company (filed herewith)
4.1 Form of Warrant Agreement dated May 17, 1995 (filed herewith)
4.2 Form of Class B Warrant (filed herewith)
4.3 Share Purchase Warrant Certificate dated October 13, 1995
(filed herewith)
4.4 Form of Warrant Agreement dated as of December 20, 1995 (filed herewith)
4.5 Form of Class C Warrant (filed herewith)
4.6 Specimen of Common Stock Certificate (filed herewith)
10.1 Credit Agreement dated as of May 20, 1996, by and between 1st Tech,
DarkHorse, the Company and Chemical Bank (now The Chase Manhattan
Bank), as amended (filed herewith)
10.2 Revolving Credit Note dated as of May 20, 1996, by and between 1st Tech,
DarkHorse and Chemical Bank (now The Chase Manhattan Bank (filed
herewith)
10.3 Agreement and Plan of Merger dated as of April 9, 1996, by and between
Tanisys Technology, Inc., Tanisys Acquisition Corp., 1st Tech Corporation
and Gary W. Pankonien ("1st Tech Merger Agreement") (filed herewith)
10.4 Amendment No. 1 dated May 16, 1996, to 1st Tech Merger Agreement (filed
herewith)
10.5 Articles of Merger (Delaware) of 1st Tech with and into
Tanisys Acquisition Corp., dated May 31, 1996 (filed herewith)
10.6 Articles of Merger (Texas) of 1st Tech with and into Tanisys Acquisition
Corp., dated May 31, 1996 (filed herewith)
10.7 Agreement and Plan of Merger dated as of April 9, 1996, by and between
Tanisys Technology, Inc., Tanisys Acquisition Corp. II,
DarkHorse Systems, Inc., Jack Little, Archer Lawrence and
Gary W. Pankonien ("DarkHorse Merger Agreement") (filed herewith)
80
<PAGE>
EXHIBIT
NUMBER DESCRIPTION PAGE
- - ------- ----------- ----
10.8 Amendment No. 1 dated May 16, 1996, to DarkHorse Merger Agreement
(filed herewith)
10.9 Articles of Merger (Delaware) of DarkHorse with and into Tanisys
Acquisition Corp. II, dated May 31, 1996 (filed herewith)
10.10 Articles of Merger (Texas) of DarkHorse with and into
Tanisys Acquisition Corp. II, dated May 31, 1996 (filed herewith)
10.11 Employment Agreement dated February 15, 1994 by and between the
Company and Mark C. Holliday (filed herewith)
10.12 Employment Agreement dated April 18, 1994 by and between the Company
and Benjamin S. Marz (filed herewith)
10.13 Consulting Contract dated October 3, 1994 by and between the Company and
Parris H. Holmes, Jr., as amended (filed herewith)
10.14 Employment Agreement dated May 20, 1996 by and between the Company
and Gary W. Pankonien (filed herewith)
10.15 Employment Agreement dated July 11, 1996 by and between the Company
and Joe Davis (filed herewith)
10.16 Employment Agreement dated October 11, 1996 by and between the
Company and Guy Fielder (to be filed by amendment)
10.17 1993 Stock Option Plan, as amended through May 20, 1996 (filed herewith)
10.18 Form of Stock Option Agreement (filed herewith)
10.19 401(k) Plan (filed herewith)
10.20 Lease Agreement dated May 18, 1993 by and between Tanisys Technology,
Inc., assumptor of 1st Tech Corporation, and AEtna Life
Insurance Company, as amended (filed herewith)
10.21 Master Lease Agreement dated November 9, 1994 by and between 1st Tech
and Copelco Capital Inc. (filed herewith)
10.22 Manufacturing Agreement dated as of November 1, 1996 by and between the
Company and Siemens Components, Inc. (to be filed by amendment)
10.23 Inventory Management Service Agreement dated as of November 1, 1996 by
and between the Company and Siemens Components, Inc. (to be filed by
amendment)
12.1 Statement re Computation of Per Share Earnings (filed herewith)
21.1 Subsidiaries of the Company (filed herewith)
81
<PAGE>
EXHIBIT
NUMBER DESCRIPTION PAGE
- - ------- ----------- ----
27.1 Financial Data Schedule (filed herewith)
82
<PAGE>
Exhibit 3.1
STATE OF WYOMING
[SEAL]
OFFICE OF THE
SECRETARY OF STATE
United States of America,
State of Wyoming ss.
I, KATHY KARPAN, Secretary of State of the State of Wyoming, do hereby certify
. . . . ROSETTA TECHNOLOGIES INC. . . .
a corporation originally organized under the laws of the state or nation of
British Columbia, Canada, did on June 30, 1993 apply for a Certificate of
Registration and filed Articles of Continuance in the office of the Secretary of
State of Wyoming.
I FURTHER CERTIFY that
. . . . ROSETTA TECHNOLOGIES INC. . . .
has renounced its original state of incorporation, and is now incorporated under
the laws of the state of Wyoming, in accordance with W.S. 17-16-1710.
IN TESTIMONY WHEREOF, I have hereunto set my
hand and affixed the Great Seal of the State of Wyoming.
Done at Cheyenne, the Capital, this thirtieth day of June
A.D. 19 93.
Kathy Karpan
-----------------------------------
Secretary of State
By: /s/ Sharon Cochran
------------------------------
[SEAL]
<PAGE>
Secretary of State
State of Wyoming
The Capitol
Cheyenne, WY
82002-0020
STATE OF WYOMING
APPLICATION FOR
CERTIFICATE OF REGISTRATION
AND ARTICLES OF CONTINUANCE
Pursuant to W.S. 17-16-1710 of the Wyoming Business Corporation Act, the
undersigned hereby submits the following Articles of Continuance:
1. The name of the Corporation is:
ROSETTA TECHNOLOGIES INC.
2. It is incorporated under the laws of the Province of British Columbia.
3. The date of its incorporation is January 27, 1984
and the period of its duration is perpetual.
4. The address of its principal office in the state under the laws of which it
is incorporated is:
265 - 25th Street, West Vancouver, B.C., V7V 4H9
5. The mailing address where correspondence and annual reports can be sent is:
12th Floor, 1190 Hornby Street, Vancouver, B.C., V6Z 2L3
6. The physical address of its registered office in Wyoming and name of its
registered agent at that address is:
DRAY MADISON & THOMSON P.C., Attorneys at Law, 204 East 22nd Street,
Cheyenne, Wyoming, 82001 - 3799
(The agent must be an individual who resides in this state. a domestic
corporation or a not-for-profit domestic corporation or a foreign
corporation or not-for-profit foreign corporation authorized to transact
business in this state)
7. The purpose or purposes of the corporation which it proposes to pursue in
the transaction of business in this state.
Developing, manufacturing and marketing computer hardware and software.
<PAGE>
8. The names and respective addresses of its officers and directors are:
OFFICE NAME ADDRESS
Director/CEO GERALD F. BOUDREAU 849 Grenada Lane
President/Chairman Foster City, California
94404-3803
Director MARK NUSSBAUM 6081 Forsyth Crescent
Richmond, B.C.
V7C 2C4
Director THOMAS M. TAYLOR House 4, Brunswick
Beach, North Vancouver,
B.C. V7R 3T1
9. The aggregate number of shares or other ownership units which it has the
authority to issue, itemized by classes, par value of shares, shares
without par value and series, if any, within a class is:
Number of Shares Class Series Par Value per Share
25,000,000 Common Without par value
10. The aggregate number of issued shares or other ownership units itemized by
classes, par value of shares, shares without par value and series, if any,
within a class is:
4,964,325 Common shares without par value
11. The Corporation accepts the Constitution of this state in compliance with
the requirements of article 10, section 5 of the Wyoming constitution.
Dated June 30, 1993.
By: /s/ J. Stephen Barley
------------------------------
Title: Secretary
<PAGE>
PROVINCE OF BRITISH COLUMBIA)
CITY OF VANCOUVER)
I, Gretel MacLaren, Notary Public, do hereby certify that on this 29th day of
June, 1993, personally appeared before me J. Stephen Barley, who, being by me
first duly sworn, declared that he/she signed the foregoing document as
Secretary of the corporation, and that the statements therein contained are
true.
In witness whereof, I have hereunto set my hand and seal this 30th day of June,
1993.
/s/ Gretel MacLaren
-----------------------------------
(Notarial Seal) Notary Public
My Commission Expires: N/A
NOTES:
1. FILING FEE: $90.00.
2. The application shall be executed by the corporation by its president or
other officer, director, trustee, manager or person performing functions
equivalent to those of a president and who is authorized to execute the
application on behalf of the corporation and shall be verified by the
officer signing the corporation.
3. The application shall be accompanied by one (1) exact or conformed copy.
4. The following documents must accompany the application:
The articles of continuance shall be accompanied by a written consent to
appointment manually signed by the registered agent.
*A copy of the Articles of Incorporation and all amendments currently
certified (within the last six (6) months) by the proper officer of the
state or nation of incorporation.
Copy of the corporate resolution authorizing continuance of the corporation
in Wyoming.
<PAGE>
2
CONSENT TO APPOINTMENT BY REGISTERED AGENT
1. DRAY, MADISON & THOMSON, P.C. voluntarily consents to serve as the
registered agent for Rosetta Technologies Inc. on the date shown below;
2. DRAY, MADISON & THOMSON, P.C. knows and understands the duties of a
registered agent as set forth in the 1989 Wyoming Business Corporation Act:
DRAY, MADISON & THOMSON, P.C.
By: /s/ Gregory C. Cyekman
------------------------------
204 East 22nd Street
Cheyenne, WY 82001-3799
Phone: 307/634-8891
Dated: June 30, 1993
<PAGE>
*********
BY-LAWS
*********
ROSETTA TECHNOLOGIES INC.
ARTICLE 1
OFFICES
1.01 The registered office shall be in the City of Cheyenne, State of
Wyoming.
1.02 The corporation may also have offices at such other places both within
and without the State of Wyoming as the board of directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
2.01 All meetings of the stockholders for the election of directors shall
be held at such place as may be fixed from time to time by the board of
directors, either within or without the State of Wyoming as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting. Meetings of the stockholders for any other purpose may be held at such
time and place, within or without the State of Wyoming, as shall be stated in
the notice of meeting or in a duly executed waiver of notice thereof.
2.02 Annual meetings of stockholders, commencing with the year 1994 shall
be held on the third Thursday of March, if not a legal holiday, and if a legal
holiday, then on the next secular day following, at 10:00 a.m., or at such other
date and time as shall be designated from time to time by the board of directors
and stated in the notice of the meeting, at which they shall elect, if a quorum
is present, by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
2.03 Written notice of the annual meeting stating the place, date and hour
of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
the meeting.
2.04 The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list
<PAGE>
2
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
2.05 Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the certificate of incorporation,
may be called by the president and shall be called by the president or secretary
at the request in writing of a majority of the board of directors, or at the
request in writing of stockholders owning a majority in amount of the entire
capital stock of the corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
2.06 Written notice of a special meeting stating the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
2.07 Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
2.08 The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation.
2.09 When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or presented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the certificate of
incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.
2.10 Unless otherwise provided in the certificate of incorporation each
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such stockholder, but no proxy shall be voted after eleven (11) months
from its date, unless the proxy appointment form provides for a longer period.
2.11 Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
<PAGE>
3
meeting by less than unanimous written consent shall be given to those
shareholders who have not consented in writing.
ARTICLE III
DIRECTORS
3.01 The number of directors which shall constitute the whole board shall
not be less than three nor more than fifteen. The first board shall consist of
three directors. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the board of directors or by the
stockholders at the annual meeting. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
3.02 Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled by a majority of the
directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by the Wyoming Business Corporation
Act.
3.03 The business of the corporation shall be managed by or under the
direction of its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or
these by-laws directed or required to be exercised or done by the stockholders.
Meetings of the Board of Directors
3.04 The board of directors of the corporation may hold meetings, both
regular and special, either within or without the State of Wyoming.
3.05 The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.06 Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
<PAGE>
4
3.07 Special meetings of the board may be called by the president on two
days' notice to each director, either personally or by mail or by telegram;
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of two directors unless the board
consists of only one director; in which case special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of the sole director.
3.08 At all meetings of the board a majority of directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the board of directors the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
3.09 Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee,, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.10 Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee designated by the board of directors, may participate in a
meeting of the board of directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Committees of Directors
3.11 The board of directors may, by resolution passed by a majority of the
whole board of directors, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provides,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to
<PAGE>
5
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors.
3.12 Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
Compensation of Directors
3.13 Unless otherwise represented by the certificate of incorporation or
these by-laws, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Removal of Directors
3.14 Unless otherwise restricted by the certificate of incorporation or
these by-laws, any director or the entire board of directors may be removed,
with or without cause, by the holders of a majority of shares entitled to vote
at an election of directors.
ARTICLE IV
NOTICES
4.01 Whenever, under the provisions of the statutes or of the certificate
of incorporation or of these by-laws, notice is required to be given to any
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram..
4.02 Whenever any notice is required to be given under the provisions of
the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
5.01 The officers of the corporation shall be chosen by the board of
directors and shall be a chairman, a president, a vice-president, a secretary
and a treasurer. The board of directors may also choose additional vice-
presidents, and one or more assistant secretaries and assistant treasurers.
<PAGE>
6
Any number of offices may be held by the same person, unless the certificate
of incorporation or these by-laws otherwise provide.
5.02 The board of directors at its first meeting after such annual
meeting of stockholders shall choose a chairman, a president, one or more
vice-presidents, a secretary and treasurer. The chairman and president may
be the same person.
5.03 The board of directors may appoint such other officers and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board.
5.04 The salaries of all officers and agents of the corporation shall be
fixed by the board of directors.
5.05 The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
The Chairman
5.06 The chairman shall be the chief executive officer of the corporation,
shall preside at all meetings of the stockholders and the board of directors,
shall have general and active management of the business of the corporation and
shall see that all orders and resolutions of the board of directors are carried
into effect.
5.07 He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
The President
5.08 The President shall be the chief operating officer of the corporation.
In the absence of the chairman or in the event of his inability or refusal to
act, the president shall perform the duties of the chairman, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
chairman. The president shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
The Vice-President
5.09 In the absence of the president or in the event of his inability or
refusal to act, the vice-president (or in the event there be more than one vice-
president, the vice-presidents in order designated by the directors, or in the
absence of any designation, then in order of their election) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The vice-presidents shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
<PAGE>
7
The Secretary and the Assistant Secretary
5.10 The secretary shall attend all meetings of the board of directors and
all meetings of the stockholders and record all the proceedings of the meetings
of the corporation and of the board of directors in a book to be kept for the
purpose and shall perform like duties for the standing committees when required.
He shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the board of directors and shall perform such other
duties as may be prescribed by the board of directors or president, under whose
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested to
by his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any officer to affix the seal of the
corporation and to attest to the affixing by his signature.
5.11 The assistant secretary, or if there be more than one, the assistant
secretaries in the order determined by the board of directors (or if there be no
such determination, then in the order of their election) shall, in the absence
of the secretary or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
The Treasurer and the Assistant Treasurer
5.12 The treasurer shall be the chief financial officer of the corporation
and shall have the custody of the corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the corporation and shall deposit all monies and other valuable effects in the
name and to the credit of the corporation in such depositories as may be
designated by the board of directors.
5.13 He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, at its regular meeting, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation.
5.14 If required by the board of directors, he shall give the corporation a
bond (which shall be renewed every six years) in such sum and with such surety
or sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
5.15 The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
<PAGE>
8
ARTICLE VI
CERTIFICATES FOR SHARES
6.01 The shares of the corporation shall be represented by a certificate or
shall be uncertified. Certificates shall be signed by, or in the name of the
corporation by, the chairman or vice chairman of the board of directors, or the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation.
6.02 Upon the face or back of each stock certificate issued to represent
any partly paid shares, or upon the books and records of the corporation in the
case of uncertificated partly paid shares, shall be set forth the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. The transfer of any newly issued but less than fully paid shares shall
be restricted pursuant to written agreement between such shareholders and the
corporation, and such restriction shall be stated conspicuously upon the face or
back of each such stock certificate.
6.03 If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative participating option or other special rights of each
class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class of series of stock, provided that, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
6.04 Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to the Wyoming Business Corporation Act or a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
6.05 Any of or all the signatures on a certificate may be facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
<PAGE>
9
Lost Certificates
6.06 The board of directors may direct a new certificate or certificates or
uncertificated shares to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates or uncertificated shares, the board
of directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Transfer of Stock
6.07 Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
Fixing Record Date
6.08 In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof , or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange or stock or for the purpose of any other lawful
action, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the board of directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty nor less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the board of
directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business of the day next preceding the
day of which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held; (2) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting when no
<PAGE>
10
prior action of the board of directors is required by law, shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation in accordance with
applicable law, or, if prior action by the board of directors is required by
law, shall be at the close of business on the day on which the board of
directors adopts the resolution taking such prior action; and (3) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the board of directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Registered Stockholders
6.09 The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends,
and to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notices thereof, except as otherwise provided by the laws of Wyoming.
ARTICLE VII
GENERAL PROVISIONS
Dividends
7.01 Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
7.02 Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conductive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Annual Statement
7.03 The board of directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
<PAGE>
11
Checks
7.04 All checks or demands for money and notes of the corporation shall be
signed by such officer or officers or such other person or persons as the board
of directors may from time to time designate.
Fiscal Year
7.05 The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
Seal
7.06 The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Wyoming". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Indemnification
7.07 The corporation shall indemnify and advance expenses to any and all
persons who may serve or who have served at any time as directors or officers,
or who at the request of the board of directors of the corporation may serve or
at any time have served as directors or officers of another corporation in which
the corporation at such time owned or may own shares of stock or of which it was
or may be a creditor, and their respective heirs, administrators, successors,
and assigns, against any and all expenses, including amounts paid upon
judgments, counsel fees, and amounts paid in settlement (before or after suit is
commenced), actually and necessarily incurred by such persons in connection with
the defense or settlement of any claim, action, suit or proceeding in which
they, or any of them, are made parties, or a party, or which may be asserted
against them or any of them, by reason of being or having been directors or
officers or a director or officer of the corporation, or of such other
corporation, except in relation to matters as to which any such director or
officer or former director or officer or person shall be adjudged in any action,
suit, or proceeding to be liable for his own negligence or misconduct in the
performance of his duty. Such indemnification shall be in addition to any other
rights to which those indemnified may be entitled under any law, by-law,
amendment, vote of stockholders, or otherwise.
ARTICLE VIII
AMENDMENTS
8.01 These by-laws may be altered, amended or repealed or new by-laws may
be adopted by the stockholders or by the board of directors, when such power is
conferred upon the board of directors by the certificate of incorporation at any
regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors if notice of
such alteration, amendment, repeal of or adoption of new by-laws be contained in
the notice of such special meeting. If the power
<PAGE>
12
to adopt, amend or repeal by-laws is conferred upon the board of directors by
the certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
<PAGE>
Exhibit 3.2
[FILED
JUL 11 94 292707
Wyoming
Secretary of State]
ARTICLES OF AMENDMENT TO ARTICLES OF CONTINUANCE
Rosetta Technologies Inc.
Pursuant to W.S. Section 17-16-1710(e) (1994), a corporation's previously
filed Articles of Continuance are deemed to be the articles of incorporation of
the continued corporation. Pursuant to W.S. Section 17-16-1006 (1994), Rosetta
Technologies Inc. submits these Articles of Amendment to its Articles of
Continuance.
I. NAME
The name of the corporation is Rosetta Technologies Inc.
II. TEXT OF AMENDMENT
The resolution approved by the shareholders reads:
"UPON MOTION duly made and seconded, IT WAS RESOLVED THAT the Company's
name be changed from its current name to "TeraLogic, Inc." or to such other
name as may be acceptable to the Vancouver Stock Exchange and the Board of
Directors and the Board of Directors file Articles of Amendment to the
Articles of Continuance with the Secretary of State of Wyoming."
III. SHARES
The amendment does not change the share structure of the corporation.
IV. VOTE
The corporation has a single class of common shares, of which 6,495,325 are
outstanding, and of which 6,495,325 were eligible to vote. 4,221,927
shares voted in favour of the above resolution.
TANISYS TECHNOLOGY, INC.
By:
/s/ Mark C. Holliday
-----------------------------------
Chairman, President and C.E.O.
By: /s/ James English
-----------------------------------
C.F.O.
<PAGE>
Exhibit 3.3
[FILED
APR 28 95 300088
Wyoming
Secretary of State]
ARTICLES OF AMENDMENT
1. The name of the corporation is: Tanisys Technology, Inc.
2. Article 9 is amended as follows ("Amendment No. 1"):
The aggregate number of shares or other ownership units which it has the
authority to issue, itemized by classes, par value of shares, shares
without par value and series, if any, within a class is:
Number of Shares Class Par Value per Share
---------------- ----- -------------------
50,000,000 Common No par value
10,000,000 Preferred $1.00
To the fullest extent permitted by law, the board of directors shall have
the authority, by resolution, to create and issue such series of preferred
stock and to fix with respect to any such series the number of shares of
preferred stock comprising such series and the powers, designations,
preferences and rights (and the qualifications, limitations and
restrictions thereof) of the shares of such series.
3. Article 12 is hereby added as follows ("Amendment No. 2"):
12. No director shall be personally liable to the Corporation or any
shareholder for monetary damages for breach of fiduciary duty as a
director, except for any matter in respect of which such director
shall be liable under Section 17-16-834 of the Wyoming Business
Corporation Act or any amendment thereto or successor provision
thereto or shall be liable by reason that, in addition to any and all
other requirements for such liability, he (i) shall have breached his
duty of loyalty to the Corporation or its shareholders, (ii) shall not
have acted in good faith or, in failing to act, shall not have acted
in good faith, (iii) shall have acted in a manner involving
intentional misconduct or a knowing violation of law or, in failing to
act, shall have acted in a manner involving intentional misconduct or
a knowing violation of law, (iv) shall have derived an improper
personal benefit, or (v) shall have voted for or assented to a
distribution made in violation of Section 17-16-640 of the Wyoming
Business Corporation Act or the articles of incorporation of the
Company
<PAGE>
if it is established that he did not perform his duties in compliance
with Section 17-16-830 of the Wyoming Business Corporation Act.
4. Amendment No. 1 and Amendment No. 2 were adopted on March 28, 1995 by the
shareholders.
5. The designation, number of outstanding shares, number of votes entitled to
be cast by each voting group entitled to vote separately on each of the
amendments were as follows:
Number of Votes Entitled
Designation Outstanding Shares To be Cast
----------- ------------------ --------------
Common 8,113,325 8,113,325
The number of votes of each voting group indisputably represented at the
meeting:
Number of
Shares
Indisputably
Designation Represented
----------- -----------
Common 5,760,915
6. The total number of votes cast for and against each of the amendments by
each voting group entitled to vote separately on each of the amendments:
Designation Votes For Votes Against
----------- --------- -------------
Amendment No. 1 Common 3,771,220 245,928
Amendment No. 2 Common 5,597,716 155,239
7. The number of votes cast for each of the amendments by each voting group
was sufficient for approval by that voting group.
Signed: /s/ Mark C. Holliday
--------------------------
President
Date: 4/27/95
2
<PAGE>
Exhibit 3.4
[FILED
APR 15 96 309459
Wyoming
Secretary of State]
ARTICLES OF AMENDMENT
1. The name of the corporation is: Tanisys Technology, Inc.
2. Article 13 is hereby added as follows:
13. The members of the Board of Directors shall be classified, with
respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, as shall be
provided in the manner specified in the corporation's bylaws, one
class to hold office initially for a term expiring at the Annual
General Meeting of Shareholders to be held in 1997, another to
hold office initially for a term expiring at the Annual General
Meeting of Shareholders to be held in 1998, and another to hold
office initially for a term expiring at the Annual General
Meeting of Shareholders to be held in 1999, with the members of
each new class to hold office until their successors have been
duly elected and have qualified. At each Annual General Meeting
of Shareholders of the corporation, the successors to the class
of directors whose term expires at the meeting shall be elected
to hold office for a term expiring at the Annual General Meeting
held in the third year following the year of their election.
3. This amendment was adopted on March 21, 1996 by the shareholders.
4. The designation, number of outstanding shares, number of votes entitled to
be cast by each voting group entitled to vote separately on the amendment
were as follows:
Number of Votes Entitled
Designation Outstanding Shares To be Cast
------------- -------------------- ----------------
Common 10,106,037 10,106,037
The number of votes of each voting group indisputably represented at the
meeting:
<PAGE>
Number of
Shares
Indisputably
Designation Represented
------------- --------------
Common 8,925,604
5. The total number of votes cast for and against the amendment by each voting
group entitled to vote separately on the amendment:
Designation Votes For Votes Against
------------- ----------- ---------------
Common 6,317,607 100,325
6. The number of votes cast for the amendment by each voting group was
sufficient for approval by that voting group.
Signed: /s/ Mark C. Holliday
------------------------------
President
Date: 4/9/96
2
<PAGE>
Exhibit 3.5
* * * * *
BY-LAWS, AS AMENDED
* * * * *
TANISYS TECHNOLOGY, INC.,
Formerly Known as
ROSETTA TECHNOLOGIES, INC.
ARTICLE I
OFFICES
1.01 The registered office shall be in the City of Cheyenne, State of
Wyoming.
1.02 The corporation may also have offices at such other places both within
and without the State of Wyoming as the board of directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
2.01 All meetings of the stockholders for the election of directors shall
be held at such place as may be fixed from time to time by the board of
directors, either within or without the State of Wyoming, as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting. Meetings of the stockholders for any other purpose may be held at such
time and place, within or without the State of Wyoming, as shall be stated in
the notice of meeting or in a duly executed waiver of notice thereof.
2.02 Annual meetings of stockholders, commencing with the year 1994, shall
be held on the third Thursday of March, if not a legal holiday, and if a legal
holiday, then on the next secular day following, at 10:00 a.m., or at such other
date and time as shall be designated from time to time by the board of directors
and stated in the notice of the meeting, at which they shall elect, if a quorum
is present, by a plurality vote, a board of directors and transact such other
business as may properly be brought before the meeting.
2.03 Written notice of the annual meeting stating the place, date and hour
of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
the meeting.
<PAGE>
2.04 The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present.
2.05 Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the certificate of incorporation,
may be called by the president and shall be called by the president or secretary
at the request in writing of a majority of the board of directors, or at the
request in writing of stockholders owning a majority in amount of the entire
capital stock of the corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
2.06 Written notice of a special meeting, stating the place, date and hour
of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting.
2.07 Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
2.08 The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation.
2.09 When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the statutes or of the certificate of
incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
2.10 Unless otherwise provided in the certificate of incorporation, each
stockholder shall, at every meeting of the stockholders, be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such stockholder, but no proxy shall be voted after eleven (11) months
from its date, unless the proxy appointment form provides for a longer period.
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2.11 Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
shareholders who have not consented in writing.
ARTICLE III
DIRECTORS
3.01 The number of directors which shall constitute the whole board shall
not be less than three nor more than fifteen. The first board shall consist of
three directors. Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the board of directors or by the
stockholders at the annual meeting. The directors shall be classified with
respect to the time for which they shall severally hold office by dividing them
into three classes, each consisting of 33-1/3% of the whole number of the board
of directors, as nearly equal in number as possible, one class to hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1997, another to hold office initially for a term expiring at the annual
meeting of stockholders to be held in 1998 and another to hold office initially
for a time expiring at the annual meeting of stockholders to be held in 1999,
with members of each new class to hold office until their successors have been
duly elected and have qualified. At each annual meeting of the stockholders of
the corporation, the successors to the class of directors whose term expires at
the meeting shall be elected to hold office for a term expiring at the annual
meeting held in the third year following the term of their election. Directors
need not be stockholders.
3.02 When the number of directors is changed, any newly created
directorships or any increase in directorships shall be so apportioned among the
classes as to make all classes as nearly equal in number as possible. When the
number of directors is increased by the board of directors and any newly created
directorships are filled by the board of directors, there shall be no
classification of the additional directors until the next annual meeting of
stockholders. Vacancies in newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by the Wyoming Business Corporation
Act.
3.03 The business of the corporation shall be managed by or under the
direction of its board of directors which may exercise all such powers of the
corporation and do all such lawful
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acts and things as are not by statute or these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
3.04 The board of directors of the corporation may hold meetings, both
regular and special, either within or without the State of Wyoming.
3.05 The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting, and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected board of directors,
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.06 Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.07 Special meetings of the board may be called by the president on two
days' notice to each director, either personally or by mail or by telegram.
Special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of two directors, unless the board
consists of only one director, in which case special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of the sole director.
3.08 At all meetings of the board, a majority of directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
3.09 Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.10 Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the board of directors or any committee designated by
the board of directors may participate in a meeting of the board of directors,
or any committee designated by the board of
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directors, means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
such participation in a meeting shall constitute presence in person at the
meeting.
COMMITTEES OF DIRECTORS
3.11 The board of directors may, by resolution passed by a majority of the
whole board of directors, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and
unless the resolution or the certificate of incorporation expressly so provides,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
3.12 Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
COMPENSATION OF DIRECTORS
3.13 Unless otherwise represented by the certificate of incorporation or
these by-laws, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
3.14 Unless otherwise restricted by the certificate of incorporation or
these by-laws, any director or the entire board of directors may be removed,
with or without cause, by the holders of a majority of shares entitled to vote
at an election of directors.
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ARTICLE IV
NOTICES
4.01 Whenever, under the provisions of the statutes or of the certificate
of incorporation or of these by-laws, notice is required to be given to any
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
4.02 Whenever any notice is required to be given under the provisions of
the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
5.01 The officers of the corporation shall be chosen by the board of
directors and shall be a chairman, a president, a vice-president, a secretary
and a treasurer. The board of directors may also choose additional vice-
presidents, and one or more assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these by-laws otherwise provide.
5.02 The board of directors at its first meeting after such annual meeting
of stockholders shall choose a chairman, a president, one or more vice-
presidents, a secretary and treasurer. The chairman and president may be the
same person.
5.03 The board of directors may appoint such other officers and agents as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the board.
5.04 The salaries of all officers and agents of the corporation shall be
fixed by the board of directors.
5.05 The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
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THE CHAIRMAN
5.06 The chairman shall be the chief executive officer of the corporation,
shall preside at all meetings of the stockholders and the board of directors,
shall have general and active management of the business of the corporation, and
shall see that all orders and resolutions of the board of directors are carried
into effect.
5.07 He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE PRESIDENT
5.08 The President shall be the chief operating officer of the corporation.
In the absence of the chairman or in the event of his inability or refusal to
act, the president shall perform the duties of the chairman and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
chairman. The president shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
THE VICE-PRESIDENT
5.09 In the absence of the president or in the event of his inability or
refusal to act, the vice-president (or in the event there be more than one vice-
president, the vice-presidents in the order designated by the directors; or in
the absence of any designation, then in the order of their election) shall
perform the duties of the president and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The vice-
presidents shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
THE SECRETARY AND THE ASSISTANT SECRETARY
5.10 The secretary shall attend all meetings of the board of directors and
all meetings of the stockholders, record all the proceedings of the meetings of
the corporation and of the board of directors in a book to be kept for the
purpose, and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the board of directors and shall perform
such other duties as may be prescribed by the board of directors or president,
under whose supervision he shall be. He shall have custody of the corporate
seal of the corporation, and he, or an assistant secretary, shall have authority
to affix the same to any instrument requiring it, and when so affixed, it may be
attested to by his signature or by the signature of such assistant secretary.
The board of directors may give general authority to any officer to affix the
seal of the corporation and to attest to the affixing by his signature.
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5.11 The assistant secretary or if there be more than one, the assistant
secretaries in the order determined by the board of directors (or if there be no
such determination, then in the order of their election) shall, in the absence
of the secretary or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE TREASURER AND THE ASSISTANT TREASURER
5.12 The treasurer shall be the chief financial officer of the corporation
and shall have the custody of the corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the corporation and shall deposit all monies and other valuable effects in the
name and to the credit of the corporation in such depositories as may be
designated by the board of directors.
5.13 He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, at its regular meeting, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation.
5.14 If required by the board of directors, he shall give the corporation a
bond (which shall be renewed every six years) in such sum and with such surety
or sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation
5.15 The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
6.01 The shares of the corporation shall be represented by a certificate or
shall be uncertificated. Certificates shall be signed by, or in the name of the
corporation by, the chairman or vice-chairman of the board of directors, or the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation.
6.02 Upon the face or back of each stock certificate issued to represent
any partly paid shares, or upon the books and records of the corporation in the
case of uncertificated partly paid shares, shall be set forth the total amount
of the consideration to be paid therefor, and the amount
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paid thereon shall be stated. The transfer of any newly issued but less than
fully paid shares shall be restricted pursuant to written agreement between such
shareholders and the corporation, and such restriction shall be stated
conspicuously upon the face or back of each such stock certificate.
6.03 If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative participating optional or other special rights of each
class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
6.04 Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to the Wyoming Business Corporation Act or a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
6.05 Any of or all the signatures on a certificate may be facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
LOST CERTIFICATES
6.06 The board of directors may direct a new certificate or certificates or
uncertificated shares to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates or uncertificated shares, the board
of directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
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TRANSFER OF STOCK
6.07 Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares, such uncertificated shares shall be cancelled and
issuance of new equivalent uncertificated shares or certificated shares shall be
made to the person entitled thereto and the transaction shall be recorded upon
the books of the corporation.
FIXING RECORD DATE
6.08 In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange or stock, or for the purpose of any other lawful
action, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the board of directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty nor less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the board of
directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business of the day next preceding the
day of which notice is given, or, if notice is waived, shall be at the close of
business on the day next preceding the day on which the meeting is held; (2) the
record date for determining stockholders entitled to express consent to
corporate action in writing without a meeting when no prior action of the board
of directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation in accordance with applicable law, or, if prior
action by the board of directors is required by law, shall be at the close of
business on the day on which the board of directors adopts the resolution taking
such prior action; and (3) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
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REGISTERED STOCKHOLDERS
6.09 The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notices thereof, except as otherwise provided by the laws of Wyoming.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
7.01 Dividends upon the capital stock of the corporation, subject to the
provisions of the certificate of incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property or in shares of the capital stock, subject to
the provisions of the certificate of incorporation.
7.02 Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conductive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
7.03 The board of directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
7.04 All checks or demands for money and notes of the corporation shall be
signed by such officer or officers or such other person or persons as the board
of directors may from time to time designate.
FISCAL YEAR
7.05 The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
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SEAL
7.06 The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Wyoming." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
7.07 The corporation shall indemnify and advance expenses to any and all
persons who may serve or who have served at any time as directors or officers,
or who at the request of the board of directors of the corporation may serve or
at any time have served as directors or officers of another corporation in which
the corporation at such time owned or may own shares of stock or of which it was
or may be a creditor, and their respective heirs, administrators, successors and
assigns, against any and all expenses, including amounts paid upon judgments,
counsel fees and amounts paid in settlement (before or after suit is commenced),
actually and necessarily incurred by such persons in connection with the defense
or settlement of any claim, action, suit or proceeding in which they, or any of
them, are made parties, or a party, or which may be asserted against them or any
of them, by reason of being or having been directors or officers or a director
or officer of the corporation, or of such other corporation, except in relation
to matters as to which any such director or officer or former director or
officer or person shall be adjudged in any action, suit or proceeding to be
liable for his own negligence or misconduct in the performance of his duty. Such
indemnification shall be in addition to any other rights to which those
indemnified may be entitled under any law, by-law, amendment, vote of
stockholders or otherwise.
ARTICLE VIII
AMENDMENTS
8.01 These by-laws may be altered, amended or repealed or new by-laws may
be adopted by the stockholders or by the board of directors, when such power is
conferred upon the board of directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors, if notice of
such alteration, amendment, repeal of or adoption of new by-laws be contained in
the notice of such special meeting. If the power to adopt, amend or repeal by-
laws is conferred upon the board of directors by the certificate of
incorporation, it shall not divest or limit the power of the stockholders to
adopt, amend or repeal by-laws.
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Exhibit 4.1
TANISYS TECHNOLOGY, INC.
WARRANT AGREEMENT
May 17, 1995
To the Subscribers whose names are set forth on Exhibit B hereto
Gentlemen:
Tanisys Technology, Inc., a Wyoming corporation (the "Company"), hereby
agrees to issue in connection with the private offering of its Common Stock, no
par value ("Common Stock"), Class B Stock Purchase Warrants entitling the
holders to purchase an aggregate of 900,000 shares of the Common Stock, each
Warrant currently being equal to one share of Common Stock of the Company, to be
evidenced by an instrument in the form attached hereto as Exhibit A (hereinafter
referred to as the "Warrant," and the Warrant and all instruments hereafter
issued in replacement, substitution, combination or subdivision thereof being
hereinafter collectively referred to as the "Warrants"). The number and
character of shares of Underlying Securities purchasable upon exercise of the
Warrants are subject to adjustment as provided in Section 6 below. The Warrants
will be exercisable by each Warrantholder as to all Units covered thereby at the
Purchase Price per Unit as defined below, at any time and from time to time
after the date hereof and ending at 5:00 p.m., Austin time, on May 8, 1997.
1. DEFINITIONS.
As used herein, the following terms, unless the context otherwise requires,
shall have for all purposes hereof the following respective meanings:
(a) The term "Act" refers to the Securities Act of 1933, as amended
from time to time.
(b) The term "Commission" refers to the Vancouver Stock Exchange, the
British Columbia Securities Commission or the Securities and Exchange
Commission.
(c) The term "Common Stock" refers to the Company's Common Stock, no
par value.
(d) The term "Other Securities" refers to any securities of the
Company or any other person (corporate or otherwise), any property
(including cash), and any right to receive any securities or property that
the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or
<PAGE>
in addition to Common Stock, or which at any time shall be issuable or
shall have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 6 hereof or otherwise; provided,
however, that Other Securities does not include cash dividends payable upon
Common Stock or Other Securities, which cash dividend was payable to
holders of record prior to the date of exercise of a Warrant.
(e) The term "Purchase Price" means $2.00 per Unit prior to May 8,
1996 and $2.30 thereafter, subject to adjustment as set forth in
Subsection 6(a).
(f) The term "Underlying Securities" refers to the shares of Common
Stock and Other Securities issuable under this Warrant Agreement and the
Warrants pursuant to the exercise of the Warrants; provided, however, that
"underlying Securities" does not include Common Stock or Other Securities,
the right to the purchase of which has been waived pursuant to
Subsection 6(b) hereof.
(g) The term "Warrantholder" refers to the initial recipients of the
Warrants and any transferee or transferees thereof permitted by
Section 3(a) below.
2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to you as follows:
(a) EXISTENCE. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation.
(B) CORPORATE AND OTHER ACTION. The Company has all requisite power
and authority (corporate and other), and has taken all necessary corporate
action, to authorize, execute, deliver and perform this Warrant Agreement;
to execute, issue, sell and deliver the Warrants and a certificate or
certificates evidencing the Warrants; to authorize and reserve for issuance
and, upon payment from time to time of the Purchase Price, to issue, sell
and deliver the shares of the Underlying Securities issuable upon exercise
of the Warrants; and to perform all of its obligations under this Warrant
Agreement and the Warrants. This Warrant Agreement has been duly executed
and delivered by the Company and is a legal, valid and binding agreement of
the Company enforceable in accordance with its terms. No authorization,
approval, consent or other order of any regulatory authority is required
for such authorization, issue or sale.
(c) NO VIOLATION. The execution and delivery of this Warrant
Agreement, the consummation of the transactions herein contemplated, and
the compliance with the terms and provisions of this Warrant Agreement and
of the Warrants will not conflict with, or result in a breach of, or
constitute a default or an event permitting acceleration under, any
statute, the Certificate of Incorporation or Bylaws of the Company, or any
indenture, mortgage, deed of trust, note, bank loan, credit agreement,
franchise, license,
2
<PAGE>
lease, permit or any other agreement, understanding, instrument, judgment,
decree, order, statute, rule or regulation to which the Company is a party
or by which it is bound.
(d) VALIDITY. The Warrant, when delivered to you, will be duly
authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company enforceable in accordance with its terms. The
shares of Underlying Securities of the Company, when delivered to you upon
payment of the Purchase Price, will be duly authorized and validly issued
and outstanding, fully paid and nonassessable, and free of preemptive
rights.
3. COMPLIANCE WITH THE ACT.
(a) PURCHASE FOR INVESTMENT; TRANSFERABILITY. You represent and
warrant to the Company that the Warrants and the shares of Underlying
Securities are being acquired for investment and not with a view to the
distribution or resale thereof. You agree that the Warrants and the
Underlying Securities may not be transferred, sold, assigned or
hypothecated, except pursuant to a registration statement that has become
effective under the Act, setting forth the terms of such offering, the
underwriting discount and commissions and any other pertinent data with
respect thereto, unless you have provided the Company with an opinion of
counsel reasonably acceptable to the Company that such registration is not
required. You acknowledge that holders of the Company's Common Stock
currently are not afforded the use of Rule 144 promulgated under the Act
and that the Company is under no obligation to take the actions necessary
to make such Rule available to you.
(b) LEGEND. Each certificate representing Underlying Securities
shall be imprinted with a legend in substantially the following form:
The securities represented by this certificate were issued
upon exercise of a stock purchase warrant granted effective
May 17, 1995, have not been registered or qualified under
the Securities Act of 1933 or any applicable state
securities laws, and may not be sold or transferred in the
absence of effective registration or qualified under such
laws or an exemption from registration or qualification
thereunder. The transfer of such security also is subject
to the conditions specified in the Warrant Agreement, dated
as of May 17, 1995, between the Corporation and certain
subscribers, and the Corporation reserves the right to
refuse the transfer of such security until such conditions
have been fulfilled with respect to such transfer. Upon
written request, a copy of such agreement will be furnished
by the Corporation to the holder hereof without charge. Any
transferee of the security represented by this certificate
also agrees to be bound by the terms and conditions of such
Warrant Agreement.
3
<PAGE>
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND ANY
SHARES ACQUIRED UPON THE EXERCISE THEREOF ARE SUBJECT TO A
HOLD PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL
THE EXPIRY OF THE HOLD PERIOD EXCEPT AS PERMITTED BY THE
SECURITIES ACT (BRITISH COLUMBIA) AND REGULATIONS MADE UNDER
THE ACT. FOR CANADIAN RESIDENTS, THE HOLD PERIOD EXPIRES ON
MAY 17, 1996; HOWEVER, PURSUANT TO THE POLICIES OF THE
VANCOUVER STOCK EXCHANGE, THE WARRANTS, IF EXERCISABLE FOR A
PERIOD OF MORE THAN ONE YEAR, REMAIN NON-TRANSFERABLE FOR
THE BALANCE OF THE EXERCISE PERIOD.
(c) Unless the content otherwise requires, references in this
Section 3 to "you" or "your" shall mean and include a Warrantholder
or a holder of Underlying Securities, as the case may be.
4. EXERCISE OF WARRANTS.
Warrants may only be exercised in full by the Warrantholder by surrender
of the Warrant, with the form of subscription at the end thereof duly
executed by such Warrantholder, to the Company at its principal executive
offices, accompanied by certified or bank cashier's check payable to the
order of the Company in the full amount obtained by multiplying the number of
Units represented by the respective Warrant or Warrants by the Purchase Price
per Unit.
5. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE.
Any exercise of the Warrants pursuant to Section 4 hereof shall be deemed
to have been effective immediately prior to the close of business on the date on
which the Warrants with the subscription form and the check for the aggregate
Purchase Price shall have been received by the Company; except that the Company
shall not be required to open its stock transfer books in order to effect an
exercise, and the effective time in such event shall be the date the stock
transfer books are reopened. At such time, the person or persons in whose name
or names any certificate or certificates for shares of Underlying Securities
shall be issuable upon such exercise shall be deemed to have become the holder
or holders of record of the shares of Underlying Securities so purchased. As
soon as practicable after the exercise of any Warrant, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of, and delivered to, the purchasing Warrantholder, a
certificate or certificates for the number of fully paid and nonassessable
shares of the Underlying Securities to which such Warrantholder shall be
entitled upon such exercise, plus in lieu of any fractional share to which such
Warrantholder would otherwise be entitled, cash in an amount determined pursuant
to Subsection 7(h) hereof. Such certificate shall contain the legend required
by Subsection 3(b) hereof.
4
<PAGE>
6. ANTI-DILUTION PROVISIONS.
The Warrants are subject to the following terms and conditions during the
term thereof:
(a) STOCK DISTRIBUTIONS, SPLITS AND COMBINATIONS; ADJUSTMENTS. In
case of (i) the outstanding shares of Common Stock (or Other Securities)
shall be subdivided into a greater number of shares, (ii) a non-cash
dividend in Common Stock (or Other Securities) shall be paid in respect of
Common Stock (or Other Securities), or (iii) the outstanding shares of
Common Stock (or Other Securities) shall be combined in to a smaller number
of shares thereof, the number of shares of Underlying Securities per Unit
subsequent to such subdivision or combination or at the record date of such
dividend or distribution shall simultaneously with the effectiveness of
such subdivision or combination or immediately after the record date of
such dividend or distribution be equal to the number of shares of Common
Stock and Other Securities a holder would have owned and had a right to
receive as a result of such subdivision, combination, dividend or
distribution if such holder had actually held of record immediately prior
to the effectiveness of such subdivision or combination or immediately
prior to the record date of such dividend or distribution the number of
shares of Underlying Securities purchasable per Unit immediately prior to
the effectiveness of such subdivision or combination or the record date of
such dividend or distribution.
(b) REORGANIZATIONS AND RECAPITALIZATIONS. In case the Company shall
be reorganized or recapitalized by reclassifying its outstanding Common
Stock (or Other Securities) without par value to stock with par value,
then, as a condition of such reorganization or recapitalization, as the
case may be, immediately after the effective time of such reorganization or
recapitalization, each Warrantholder shall thereafter have the right to
purchase, upon the terms and conditions specified herein, the number of
shares of Underlying Securities per Unit that a holder would have owned and
had the right to receive as a result of such reorganization or
recapitalization if such holder had held of record the number of shares of
Underlying Securities per Unit immediately prior to such reorganization or
recapitalization. If any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets
to another corporation, shall be effected in such a way that holders of
Common Stock and Other Securities shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock and
Other Securities, then, as a condition of such consolidation, merger or
sale, immediately after the effective time of such consolidation, merger or
sale, the Warrantholders shall thereafter, subject to the last sentence of
this Subsection, have the right to purchase and receive upon the basis and
upon the terms and conditions specified in this Warrant Agreement, the
number of shares of Underlying Securities per Unit that a holder would have
owned and had a right to receive as a result of such consolidation, merger
or sale if such holder had actually held of record immediately prior to
such consolidation, merger or sale the number of shares of Underlying
Securities purchasable per Unit immediately prior to such consolidation,
merger or sale. If the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the surviving
corporation or where the
5
<PAGE>
Company will be a wholly owned subsidiary of another corporation
(except where such merger or consolidation is effected merely in order to
recapitalize or reincorporate the Company), or if the Company sells or
otherwise disposes of all or substantially all of its property or assets
to another corporation, all outstanding Warrants may be canceled by the
Board of Directors of the Company as of the effective date of any such
merger, consolidation or sale, provided that (i) written notice of such
cancellation is given to each holder of a Warrant not later than 30 days
prior to such effective date and (ii) each holder of a Warrant shall
have the right to exercise such Warrant in full during the said 30-day
period preceding the effective date of such merger, consolidation or sale.
(c) EFFECT OF DISSOLUTION OR LIQUIDATION. In case the Company shall
dissolve or liquidate all or substantially all of its assets, all rights
under this Warrant Agreement and the Warrants shall terminate as of the
date upon which a certificate of dissolution or liquidation shall be filed
with the Secretary of State of Wyoming (or, if the Company theretofore
shall have been merged or consolidated with a corporation incorporated
under the laws of another state, the state of incorporation on the date
upon which action of equivalent effect shall have been taken); provided,
however, that (i) no dissolution or liquidation shall affect the rights
under Subsection (b) hereof of any Warrantholder and (ii) if the Company's
Board of Directors shall propose to dissolve or liquidate the Company, each
Warrantholder shall be given written notice of such proposal at the earlier
of (i) the time when the Company's shareholders are first given notice of
the proposal or (ii) the time when notice to the Company's shareholders is
first required.
(d) NOTICE OF CHANGE OF UNDERLYING SECURITIES. Whenever the number
of shares of Underlying Securities per Unit or the kind or amount of
securities or assets purchasable pursuant to the Warrants shall be adjusted
pursuant to any of the provisions of this Warrant Agreement, or the number
of shares of Underlying Securities or the kind or amount of securities or
assets receivable upon conversion of Underlying Securities shall be
adjusted pursuant to the terms thereof, the Company shall forthwith
thereafter cause to be sent to each Warrantholder a notice setting forth
such adjustment and also setting forth in detail the facts requiring such
adjustments.
7. FURTHER COVENANTS OF THE COMPANY.
(a) DILUTION OR IMPAIRMENTS. The Company will not, by amendment of
its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrant or of this Warrant
Agreement, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Warrantholders against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company:
6
<PAGE>
(i) shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrants, all shares of
the Underlying Securities from time to time issuable upon the exercise
of the Warrants and shall use its best efforts to ensure that the par
value per share, if any, of the Underlying Securities is at all times
equal to or less than the then effective Purchase Price per share of
Underlying Securities; and
(ii) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock and Other
Securities upon the exercise of the Warrants from time to time
outstanding.
(b) TITLE TO STOCK. All shares of the Underlying Securities
delivered upon the exercise of the Warrants shall be validly issued, fully
paid and nonassessable; each holder of a Warrant shall receive good and
marketable title to the Underlying Securities, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities and claims
whatsoever; and the Company shall have paid all taxes, if any, in respect
of the issuance thereof.
(c) LISTING ON SECURITIES EXCHANGES; REGISTRATION. If the Company at
any time shall list any Common Stock on any national securities exchange,
the Company will, at its expense, simultaneously list on such exchange,
upon official notice of issuance upon the exercise of the Warrants, and
maintain such listing of, all shares of Common Stock included in the
Underlying Securities from time to time issuable upon the exercise of the
Warrants or upon conversion of Underlying Securities, and the Company will
so list on any national securities exchange, will so register, and will
maintain such listing of, any Other Securities if and at the time that any
securities of such class shall be listed on such national securities
exchange by the Company. You shall have no right to require the Company to
register the Warrants. The Company will use its best efforts to register
the shares of Common Stock underlying the Warrants and to keep such
registration statement effective for a period of no less than two years.
(d) REMEDIES. The Company stipulates that the remedies at law of the
Warrantholder or any holder of Underlying Securities in the event of any
default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant Agreement or the Warrants
are not and will not be adequate and that such terms may be specifically
enforced by a decree of the specific performance of any agreement contained
herein or in the Warrants or by an injunction against a violation of any of
the terms hereof or thereof or otherwise.
(e) EXCHANGE OF WARRANTS. Subject to Subsection 3(a) hereof, upon
surrender or exchange of any Warrant to the Company, the Company at its
expense will promptly issue and deliver to or upon the order of the holder
thereof a new Warrant of like tenor, in the name of such holder or as such
holder (upon payment by such Warrantholder of any applicable transfer
taxes) may direct, calling in the aggregate for the purchase of the
7
<PAGE>
number of shares of the Underlying Securities called for on the face or
faces of the Warrant or Warrants so surrendered. The Warrants and all
rights thereunder are transferable in whole or in part upon the books of
the Company by the registered holder thereof subject to the provisions of
Subsection 3(a) hereof, in person or by duly authorized attorney, upon
surrender of the Warrant, duly endorsed, at the principal office of the
Company.
(f) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of any Warrant, and in the case of any such loss, theft or destruction,
upon delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or in the case of such mutilation, upon surrender
and cancellation of such Warrant, the Company, at the expense of the
Warrantholder, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.
(g) REPORTING BY THE COMPANY. The Company agrees that during the
term of the Warrants and as long as you hold Underlying Securities, it will
use its best efforts to keep current in the filing of all forms and other
materials, if any, which it may be required to file with the appropriate
regulatory authority pursuant to the Exchange Act and all other forms and
reports required to be filed with any regulatory authority having
jurisdiction over the Company.
(h) FRACTIONAL SHARES. No fractional shares of Underlying Securities
are to be issued upon the exercise of any Warrant, but the Company shall
pay a cash adjustment in respect of any fraction of a share that would
otherwise be issuable in an amount equal to such fraction multiplied by the
closing market price per share of Underlying Securities on the day of
exercise, as determined by the closing bid and asked price regular way on
the principal national securities exchange on which the Underlying
Securities is listed or admitted to trading, or if not listed or admitted
to trading on any national securities exchange, the average of the highest
reported bid and lowest reported asked price over the preceding 30-day
period as furnished by the National Quotation Bureau Incorporated;
provided, however, that if the Underlying Securities are not traded in such
manner that the quotations referred to herein are available, the market
price shall be deemed to be the fair market value of such Underlying
Securities as reasonably determined by the Board of Directors.
8. OTHER WARRANTHOLDERS.
The Warrants are issued upon the following terms, to all of which each
holder or owner thereof by the taking thereof consents and agrees: (a) any
person who shall become a transferee, within the limitations on transfer imposed
by Subsection 3(a) hereof, shall take such Warrant subject to the provisions of
Subsection 3(a) hereof and the other provisions hereof and thereupon shall be
authorized to represent himself as absolute owner thereof and, subject to the
restrictions contained in this Warrant Agreement, shall be empowered to transfer
absolute title by endorsement and delivery thereof to a permitted bonafide
purchaser for value; (b) each prior
8
<PAGE>
taker or owner waives and renounces all of his equities or rights in such
Warrant in favor of each such permitted bonafide purchaser, and each such
permitted bonafide purchaser shall acquire absolute title thereto and to all
rights presented thereby; (c) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the registered
holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary; and (d) all references to the words "you" and "your"
in this Warrant Agreement shall be deemed to apply with equal effect to any
person to whom a Warrant has been transferred in accordance with the terms
hereof, and where appropriate, to any person holding shares of the Underlying
Securities.
9. MISCELLANEOUS.
All notices, certificates, and other communications from or at the request
of the Company to any Warrantholder shall be mailed by first class, registered,
or certified mail, postage prepaid, to the address set forth herein, to such
address as may have been furnished to the Company in writing by such
Warrantholder, or, if no notice of transfer has been received by the Company, to
the address of the last holder of such Warrant. This Warrant Agreement and any
of the terms hereof may be changed, waived, discharged, or terminated only
pursuant to Subsection 6(b) hereof or by an instrument in writing signed by the
Company and the holders of Warrants to purchase in excess of 50% of the
Underlying Securities then subject to purchase pursuant to the Warrants. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the internal laws of the State of Wyoming. The headings in this
Warrant Agreement are for purpose of reference only and shall not limit or
otherwise affect any of the terms hereof. This Warrant Agreement, together with
the forms of instruments annexed hereto as Exhibit A, constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof.
THIS WARRANT AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
WITH RESPECT TO THE WARRANT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed as of the 17th day of May, 1995, with an effective date of December 20,
1995, by its proper corporate officers, thereunto duly authorized.
TANISYS TECHNOLOGY, INC.
By: /s/ Mark C. Holliday
--------------------------------
President
9
<PAGE>
CONFIRMED:
[SUBSCRIBER SIGNATURE]
___________________________________________
SIGNATURE
Printed Name:______________________________
Title (if applicable):_____________________
___________________________________________
SIGNATURE
Printed Name:______________________________
Title (if applicable):_____________________
(Each co-owner or joint owner must sign.)
10
<PAGE>
Exhibit 4.2
NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE PURCHASED PURSUANT TO
THIS WARRANT HAVE BEEN REGISTERED WITH OR APPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES THAT MAY BE
PURCHASED PURSUANT TO THIS WARRANT ARE BEING OFFERED AND SOLD IN RELIANCE
UPON CERTAIN EXEMPTIONS AFFORDED BY SUCH ACTS AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACTS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Warrant No. B-[#]
TANISYS TECHNOLOGY, INC.
CLASS B STOCK PURCHASE WARRANT
-------------------------------
THIS IS TO CERTIFY THAT [NAME], or his/its registered assigns, is entitled
to purchase at any time or from time to time after the date hereof until 5:00
p.m., Austin time, on May 8, 1996, [NUMBER] Units at a Purchase Price of $2.00
per Unit and until 5:00 p.m., Austin time, on May 8, 1997 at a Purchase Price of
$2.30 per Unit. On the date hereof, each Unit is equal to one share of Common
Stock, no par value, of Tanisys Technology, Inc., a Wyoming corporation (the
"Company"), subject to adjustment pursuant to Section 6 of the Warrant Agreement
(defined below). This Warrant is issued pursuant to a Warrant Agreement, dated
as of May 17, 1995 (the "Warrant Agreement"), between the Company and certain
subscribers, and all rights of the holder of this Warrant are subject to the
terms and provisions of the Warrant Agreement, copies of which are available for
inspection at the offices of the Company.
TRANSFER OF THIS WARRANT IS RESTRICTED AS PROVIDED IN THE WARRANT
AGREEMENT. Subject to the provisions and restrictions of the Vancouver Stock
Exchange, the Securities Act of 1933 and the Warrant Agreement, this Warrant and
all rights hereunder are transferable at the principal executive offices of the
Company, by the holder hereof in person or by his or its duly authorized
attorney, upon surrender of this Warrant, together with the Assignment hereof
duly endorsed. Until transfer hereof on the books of the Company, the Company
may treat the registered holder as the owner hereof for all purposes.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND ANY SHARES
ACQUIRED UPON THE EXERCISE THEREOF ARE SUBJECT TO A HOLD PERIOD AND MAY NOT BE
TRADED IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE HOLD PERIOD EXCEPT AS
PERMITTED BY THE SECURITIES ACT (BRITISH COLUMBIA) AND REGULATIONS MADE UNDER
THE ACT. FOR CANADIAN RESIDENTS, THE HOLD PERIOD EXPIRES ON MAY 17, 1996;
HOWEVER, PURSUANT TO THE POLICIES OF THE VANCOUVER STOCK EXCHANGE, THE WARRANTS,
IF EXERCISABLE FOR A PERIOD OF MORE THAN
<PAGE>
ONE YEAR, REMAIN NON-TRANSFERABLE FOR THE BALANCE OF THE EXERCISE PERIOD.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and
its corporate seal to be hereunto affixed in Austin, Texas by its proper
corporate officers thereunto duly authorized on this the _____ day of
______________, 1995.
TANISYS TECHNOLOGY, INC.
By: ___________________________________________
Mark C. Holliday
Chairman and President
2
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Tanisys Technology, Inc.:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________* Units to purchase Underlying Securities of
Tanisys Technology, Inc. and herewith makes payment of $____________ therefor,
and requests that the certificate or certificates for such shares be issued in
the name of and delivered to the undersigned.
Dated:______________
___________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the within Warrant)
________________________________
________________________________
(Address)
_______________
*Insert here the number of Units called for on the face of the Warrant, without
making any adjustment for additional Common Stock, Preferred Stock or any other
stock or other securities or property or cash which, pursuant to the adjustment
provisions of the Warrant Agreement pursuant to which the Warrant was granted,
may be deliverable upon exercise.
3
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto ______________________ the right represented by the within Warrant to
purchase ____________ Units of Underlying Securities of Tanisys Technology, Inc.
to which the within Warrant relates, and appoints _______________________
Attorney to transfer such right on the books of Tanisys Technology, Inc. with
full power of substitution in the premises.
The undersigned represents and warrants that the transfer of the within
Warrant is permitted by the terms of the Warrant Agreement pursuant to which the
within Warrant has been issued, and the Assignee hereof, by his acceptance of
this Assignment, represents and warrants that he is familiar with the terms of
said Warrant Agreement and agrees to be bound by the terms thereof with the same
force and effect as if a signatory thereto. Acceptance of the Warrant by
Assignee shall constitute acceptance of those terms and conditions.
Dated:_________________, 199__
Signed in the presence of: Assignor:
______________________________ __________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the within Warrant)
Assignee:
___________________________________________
Address of Assignee:
___________________________________________
___________________________________________
___________________________________________
Tax ID No.: _______________________________
4
<PAGE>
Exhibit 4.3
34,OOO Share Purchase Void After OCTOBER 13, 1997
Warrants
SHARE PURCHASE WARRANT CERTIFICATE
TANISYS TECHNOLOGY, INC.
(Continued under the laws of Wyoming)
THIS IS TO CERTIFY THAT, for value received, A.W.L. ENTERPRISES LTD. (the
"Warrant Holder") of 12th Floor, 1190 Hornby Street, Vancouver, British
Columbia shall have the right to purchase from TANISYS TECHNOLOGY, INC. (the
"Company"), upon and subject to the terms and conditions hereinafter referred
to, at any time up to 4:00 p.m. (Vancouver time) on October 13, 1997 (the
"Expiry Time") one fully paid and non-assessable common share of the Company
for each warrant represented hereby at the price of U.S. $2.00 per share if
exercised on or before October 12, 1996 and U.S. $2.25 per share if exercised
after such date and on or before October 13, 1997. After the Expiry Time
this warrant certificate and all rights conferred hereby shall be void and of
no value.
The right to purchase common shares of the Company may only be exercised by
the Warrant Holder within the time hereinbefore set out by:
(a) duly completing and executing the subscription form attached hereto,
in the manner therein indicated;
(b) surrendering this warrant certificate to the Company's Registrar and
Transfer Agent, Montreal Trust Company of Canada at its principal
office in Vancouver, British Columbia; and
(c) paying the appropriate purchase price for the common shares of the
Company subscribed for, either in cash or by certified cheque.
Upon surrender and payment, the Company will issue to the Warrant Holder the
number of common shares subscribed for. Within three business days of
surrender and payment the Company will mail to the Warrant Holder a
certificate evidencing the common shares subscribed for. If the Warrant
Holder subscribes for a lesser number of common shares than the. number of
shares permitted by this warrant certificate, the Company shall forthwith
cause to be delivered to the Warrant Holder a further warrant certificate in
respect of the common shares referred to in this warrant certificate but not
subscribed for.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND ANY SHARES ACQUIRED
UPON THE EXERCISE THEREOF ARE SUBJECT TO A HOLD PERIOD AND MAY NOT BE TRADED
IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE HOLD PERIOD EXCEPT AS PERMITTED
BY THE SECURITIES ACT (BRITISH COLUMBIA) AND REGULATIONS MADE UNDER THE ACT.
THE HOLD PERIOD EXPIRES ON OCTOBER 13, 1996, HOWEVER, PURSUANT TO THE
POLICIES OF THE VANCOUVER STOCK EXCHANGE THE WARRANTS, IF EXERCISABLE FOR A
PERIOD OF MORE THAN ONE YEAR, REMAIN NON-TRANSFERABLE FOR THE BALANCE OF THE
EXERCISE PERIOD.
<PAGE>
The exercise price and the number of shares which can be purchased by the
Warrant Holder upon the exercise of this warrant certificate shall be subject
to adjustment in the events and in the manner following:
(1) If and whenever the shares at any time outstanding shall be
subdivided into a greater or consolidated into a lesser number of
shares, the exercise price shall be decreased or increased
proportionately as the case may be; upon any such subdivision or
consolidation, the number of shares which can be purchased upon the
exercise of this warrant certificate shall be increased or decreased
proportionately as the case may be.
(2) In case of any capital reorganization or of any reclassification of
the capital of the Company or in case of the consolidation, merger
or amalgamation of the Company with or into any other company, this
warrant certificate shall after such capital reorganization,
reclassification of capital, consolidation, merger or amalgamation
confer the right to purchase the number of shares or other
securities of the Company or of the Company resulting from such
capital reorganization, reclassification, consolidation, merger
or amalgamation, as the case may be, to which the Warrant Holder
of the shares deliverable at the time of such capital
reorganization, reclassification of capital, consolidation, merger
or amalgamation, upon the exercise of this warrant certificate would
have been entitled. On such capital reorganization,
reclassification, consolidation, merger or amalgamation appropriate
adjustments shal be made in the application of the provisions set
forth herein with respect to the rights and interest thereafter of
the Warrant Holder of this warrant certificate so that the provisions
set forth herein shall thereafter be applicable as nearly as may
reasonably be in relation to any shares or other securities
thereafter deliverable on the exercise of this warrant certificate.
(3) The rights of the Warrant Holder evidenced hereby are to purchase
shares prior to or on the date set out on the face of this warrant
certificate. If there shall, prior to the exercise of any of the
rights evidenced hereby, be any reorganization of the authorized
capital of the Company by way of consolidation, merger, subdivision,
amalgamation or otherwise, or the payment of any stock dividends,
then there shall automatically be an adjustment in either or both of
the number of shares which may be purchased pursuant hereto or the
price at which such shares may be purchased so that the rights
evidenced hereby shall thereafter as reasonably as possible be
equivalent to those originally granted hereby. The Company shall
have the sole and exclusive power to make
(4) The adjustments provided for herein in the subscription rights
represented by this warrant certificate are cumulative.
If at any time while this warrant certificate is outstanding the Company
shall pay any stock dividend upon the common shares of the Company in respect
of which the right to purchase is herein given, the Company shall thereafter
<PAGE>
deliver at the time of purchase of shares hereunder, in addition to the
number of shares in respect of which the right to purchase is then being
exercised, the additional number of shares of the appropriate class as would
have been outstanding on the record date for the payment of the stock
dividend.
The holding of this warrant certificate or the warrants represented hereby
shall not constitute the Warrant Holder a member of the Company.
Time shall be of the essence hereof.
This warrant certificate shall not be valid for any purchase whatever until
it has been countersigned by or on behalf of the Company's Registrar and
Transfer Agent.
IN WITNESS WHEREOF THE COMPANY has caused this warrant certificate to be
issued by its duly authorized signatory.
TANISYS TECHNOLOGY, INC.
By: /s/ MARK C. HOLLIDAY MONTREAL TRUST COMPANY OF CANADA
--------------------
Authorized Signatory
By: [Illegible Signature]
----------------------
Authorized Signatory
DATE: October 13, 1995
<PAGE>
SUBSCRIPTION FORM
Montreal Trust Company of Canada
4th Floor, 510 Burrard Street
Vancouver, B.C. V6C 3B9
Dear Sirs:
The undersigned hereby exercises the right to purchase and hereby subscribes
for _____________________ common shares in the capital stock of TANISYS
TECHNOLOGY, INC. referred to in the warrant certificate surrendered herewith
according to the conditions thereof and herewith makes payment by cash or
certified cheque of the purchase price in full for the said shares.
Please issue a certificate for the shares being purchased as follows in the
name of the undersigned:
NAME: ______________________________________
(please print)
ADDRESS:____________________________________
____________________________________
____________________________________
Please deliver a warrant certificate in respect of the common shares referred
to in the warrant certificate surrendered herewith but not presently
subscribed for, to the undersigned.
DATED this _____ day of _______________, 19____.
___________________________
(signature)
<PAGE>
Exhibit 4.4
TANISYS TECHNOLOGY, INC.
WARRANT AGREEMENT
January 16, 1996
To the Subscribers whose names are set forth on Exhibit B hereto
Gentlemen:
Tanisys Technology, Inc., a Wyoming corporation (the "Company"), hereby
agrees to issue in connection with the private offering of its Common Stock, no
par value ("Common Stock"), Class C Stock Purchase Warrants entitling the
holders to purchase an aggregate of 941,177 shares of the Common Stock, each
Warrant currently being equal to one share of Common Stock of the Company, to be
evidenced by an instrument in the form attached hereto as Exhibit A (hereinafter
referred to as the "Warrant," and the Warrant and all instruments hereafter
issued in replacement, substitution, combination or subdivision thereof being
hereinafter collectively referred to as the "Warrants"). The number and
character of shares of Underlying Securities purchasable upon exercise of the
Warrants are subject to adjustment as provided in Section 6 below. The Warrants
will be exercisable by each Warrantholder as to all Units covered thereby at the
Purchase Price per Unit as defined below, at any time and from time to time
after the date hereof and ending at 5:00 p.m., Austin time, on December 20,
1997.
1. DEFINITIONS.
As used herein, the following terms, unless the context otherwise requires,
shall have for all purposes hereof the following respective meanings:
(a) The term "Act" refers to the Securities Act of 1933, as amended
from time to time.
(b) The term "Commission" refers to the Vancouver Stock Exchange, the
British Columbia Securities Commission or the Securities and Exchange
Commission.
(c) The term "Common Stock" refers to the Company's Common Stock, no
par value.
(d) The term "Other Securities" refers to any securities of the
Company or any other person (corporate or otherwise), any property
(including cash), and any right to receive any securities or property that
the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or
<PAGE>
in addition to Common Stock, or which at any time shall be issuable or
shall have been issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 6 hereof or otherwise; provided,
however, that Other Securities does not include cash dividends payable upon
Common Stock or Other Securities, which cash dividend was payable to
holders of record prior to the date of exercise of a Warrant.
(e) The term "Purchase Price" means $1.70 per Unit prior to
December 20, 1996 and $1.95 thereafter, subject to adjustment as set forth
in Subsection 6(a).
(f) The term "Underlying Securities" refers to the shares of Common
Stock and Other Securities issuable under this Warrant Agreement and the
Warrants pursuant to the exercise of the Warrants; provided, however, that
"underlying Securities" does not include Common Stock or Other Securities,
the right to the purchase of which has been waived pursuant to
Subsection 6(b) hereof.
(g) The term "Warrantholder" refers to the initial recipients of the
Warrants and any transferee or transferees thereof permitted by
Section 3(a) below.
2. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to you as follows:
(a) EXISTENCE. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation.
(B) CORPORATE AND OTHER ACTION. The Company has all requisite power
and authority (corporate and other), and has taken all necessary corporate
action, to authorize, execute, deliver and perform this Warrant Agreement;
to execute, issue, sell and deliver the Warrants and a certificate or
certificates evidencing the Warrants; to authorize and reserve for issuance
and, upon payment from time to time of the Purchase Price, to issue, sell
and deliver the shares of the Underlying Securities issuable upon exercise
of the Warrants; and to perform all of its obligations under this Warrant
Agreement and the Warrants. This Warrant Agreement has been duly executed
and delivered by the Company and is a legal, valid and binding agreement of
the Company enforceable in accordance with its terms. No authorization,
approval, consent or other order of any regulatory authority is required
for such authorization, issue or sale.
(c) NO VIOLATION. The execution and delivery of this Warrant
Agreement, the consummation of the transactions herein contemplated, and
the compliance with the terms and provisions of this Warrant Agreement and
of the Warrants will not conflict with, or result in a breach of, or
constitute a default or an event permitting acceleration under, any
statute, the Certificate of Incorporation or Bylaws of the Company, or any
indenture, mortgage, deed of trust, note, bank loan, credit agreement,
franchise, license,
2
<PAGE>
lease, permit or any other agreement, understanding, instrument, judgment,
decree, order, statute, rule or regulation to which the Company is a party
or by which it is bound.
(d) VALIDITY. The Warrant, when delivered to you, will be duly
authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company enforceable in accordance with its terms. The
shares of Underlying Securities of the Company, when delivered to you upon
payment of the Purchase Price, will be duly authorized and validly issued
and outstanding, fully paid and nonassessable, and free of preemptive
rights.
3. COMPLIANCE WITH THE ACT.
(a) PURCHASE FOR INVESTMENT; TRANSFERABILITY. You represent and
warrant to the Company that the Warrants and the shares of Underlying
Securities are being acquired for investment and not with a view to the
distribution or resale thereof. You agree that the Warrants and the
Underlying Securities may not be transferred, sold, assigned or
hypothecated, except pursuant to a registration statement that has become
effective under the Act, setting forth the terms of such offering, the
underwriting discount and commissions and any other pertinent data with
respect thereto, unless you have provided the Company with an opinion of
counsel reasonably acceptable to the Company that such registration is not
required. You acknowledge that holders of the Company's Common Stock
currently are not afforded the use of Rule 144 promulgated under the Act
and that the Company is under no obligation to take the actions necessary
to make such Rule available to you.
(b) LEGEND. Each certificate representing Underlying Securities
shall be imprinted with a legend in substantially the following form:
The securities represented by this certificate were issued
upon exercise of a stock purchase warrant granted effective
December 20, 1995, have not been registered or qualified
under the Securities Act of 1933 or any applicable state
securities laws, and may not be sold or transferred in the
absence of effective registration or qualified under such
laws or an exemption from registration or qualification
thereunder. The transfer of such security also is subject
to the conditions specified in the Warrant Agreement, dated
as of January 16, 1996, with an effective date of
December 20, 1995, between the Corporation and certain
subscribers, and the Corporation reserves the right to
refuse the transfer of such security until such conditions
have been fulfilled with respect to such transfer. Upon
written request, a copy of such agreement will be furnished
by the Corporation to the holder hereof without charge. Any
transferee of the security represented by this certificate
also agrees to be bound by the terms and conditions of such
Warrant Agreement.
3
<PAGE>
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND ANY
SHARES ACQUIRED UPON THE EXERCISE THEREOF ARE SUBJECT TO A
HOLD PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL
THE EXPIRY OF THE HOLD PERIOD EXCEPT AS PERMITTED BY THE
SECURITIES ACT (BRITISH COLUMBIA) AND REGULATIONS MADE UNDER
THE ACT. FOR CANADIAN RESIDENTS, THE HOLD PERIOD EXPIRES ON
JANUARY 16, 1997; HOWEVER, PURSUANT TO THE POLICIES OF THE
VANCOUVER STOCK EXCHANGE, THE WARRANTS, IF EXERCISABLE FOR A
PERIOD OF MORE THAN ONE YEAR, REMAIN NON-TRANSFERABLE FOR
THE BALANCE OF THE EXERCISE PERIOD.
(c) Unless the content otherwise requires, references in this
Section 3 to "you" or "your" shall mean and include a Warrantholder or a
holder of Underlying Securities, as the case may be.
4. EXERCISE OF WARRANTS.
Warrants may only be exercised in full by the Warrantholder by surrender of
the Warrant, with the form of subscription at the end thereof duly executed by
such Warrantholder, to the Company at its principal executive offices,
accompanied by certified or bank cashier's check payable to the order of the
Company in the full amount obtained by multiplying the number of Units
represented by the respective Warrant or Warrants by the Purchase Price per
Unit.
5. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE.
Any exercise of the Warrants pursuant to Section 4 hereof shall be deemed
to have been effective immediately prior to the close of business on the date on
which the Warrants with the subscription form and the check for the aggregate
Purchase Price shall have been received by the Company; except that the Company
shall not be required to open its stock transfer books in order to effect an
exercise, and the effective time in such event shall be the date the stock
transfer books are reopened. At such time, the person or persons in whose name
or names any certificate or certificates for shares of Underlying Securities
shall be issuable upon such exercise shall be deemed to have become the holder
or holders of record of the shares of Underlying Securities so purchased. As
soon as practicable after the exercise of any Warrant, the Company, at its
expense (including the payment by it of any applicable issue taxes), will cause
to be issued in the name of, and delivered to, the purchasing Warrantholder, a
certificate or certificates for the number of fully paid and nonassessable
shares of the Underlying Securities to which such Warrantholder shall be
entitled upon such exercise, plus in lieu of any fractional share to which such
Warrantholder would otherwise be entitled, cash in an amount determined pursuant
to Subsection 7(h) hereof. Such certificate shall contain the legend required
by Subsection 3(b) hereof.
4
<PAGE>
6. ANTI-DILUTION PROVISIONS.
The Warrants are subject to the following terms and conditions during the
term thereof:
(a) STOCK DISTRIBUTIONS, SPLITS AND COMBINATIONS; ADJUSTMENTS. In
case of (i) the outstanding shares of Common Stock (or Other Securities)
shall be subdivided into a greater number of shares, (ii) a non-cash
dividend in Common Stock (or Other Securities) shall be paid in respect of
Common Stock (or Other Securities), or (iii) the outstanding shares of
Common Stock (or Other Securities) shall be combined in to a smaller number
of shares thereof, the number of shares of Underlying Securities per Unit
subsequent to such subdivision or combination or at the record date of such
dividend or distribution shall simultaneously with the effectiveness of
such subdivision or combination or immediately after the record date of
such dividend or distribution be equal to the number of shares of Common
Stock and Other Securities a holder would have owned and had a right to
receive as a result of such subdivision, combination, dividend or
distribution if such holder had actually held of record immediately prior
to the effectiveness of such subdivision or combination or immediately
prior to the record date of such dividend or distribution the number of
shares of Underlying Securities purchasable per Unit immediately prior to
the effectiveness of such subdivision or combination or the record date of
such dividend or distribution.
(b) REORGANIZATIONS AND RECAPITALIZATIONS. In case the Company shall
be reorganized or recapitalized by reclassifying its outstanding Common
Stock (or Other Securities) without par value to stock with par value,
then, as a condition of such reorganization or recapitalization, as the
case may be, immediately after the effective time of such reorganization or
recapitalization, each Warrantholder shall thereafter have the right to
purchase, upon the terms and conditions specified herein, the number of
shares of Underlying Securities per Unit that a holder would have owned and
had the right to receive as a result of such reorganization or
recapitalization if such holder had held of record the number of shares of
Underlying Securities per Unit immediately prior to such reorganization or
recapitalization. If any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets
to another corporation, shall be effected in such a way that holders of
Common Stock and Other Securities shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock and
Other Securities, then, as a condition of such consolidation, merger or
sale, immediately after the effective time of such consolidation, merger or
sale, the Warrantholders shall thereafter, subject to the last sentence of
this Subsection, have the right to purchase and receive upon the basis and
upon the terms and conditions specified in this Warrant Agreement, the
number of shares of Underlying Securities per Unit that a holder would have
owned and had a right to receive as a result of such consolidation, merger
or sale if such holder had actually held of record immediately prior to
such consolidation, merger or sale the number of shares of Underlying
Securities purchasable per Unit immediately prior to such consolidation,
merger or sale. If the Company is merged into or consolidated with another
corporation
5
<PAGE>
under circumstances where the Company is not the surviving corporation or
where the Company will be a wholly owned subsidiary of another corporation
(except where such merger or consolidation is effected merely in order to
recapitalize or reincorporate the Company), or if the Company sells or
otherwise disposes of all or substantially all of its property or assets to
another corporation, all outstanding Warrants may be canceled by the Board
of Directors of the Company as of the effective date of any such merger,
consolidation or sale, provided that (i) written notice of such
cancellation is given to each holder of a Warrant not later than 30 days
prior to such effective date and (ii) each holder of a Warrant shall have
the right to exercise such Warrant in full during the said 30-day period
preceding the effective date of such merger, consolidation or sale.
(c) EFFECT OF DISSOLUTION OR LIQUIDATION. In case the Company shall
dissolve or liquidate all or substantially all of its assets, all rights
under this Warrant Agreement and the Warrants shall terminate as of the
date upon which a certificate of dissolution or liquidation shall be filed
with the Secretary of State of Wyoming (or, if the Company theretofore
shall have been merged or consolidated with a corporation incorporated
under the laws of another state, the state of incorporation on the date
upon which action of equivalent effect shall have been taken); provided,
however, that (i) no dissolution or liquidation shall affect the rights
under Subsection (b) hereof of any Warrantholder and (ii) if the Company's
Board of Directors shall propose to dissolve or liquidate the Company, each
Warrantholder shall be given written notice of such proposal at the earlier
of (i) the time when the Company's shareholders are first given notice of
the proposal or (ii) the time when notice to the Company's shareholders is
first required.
(d) NOTICE OF CHANGE OF UNDERLYING SECURITIES. Whenever the number
of shares of Underlying Securities per Unit or the kind or amount of
securities or assets purchasable pursuant to the Warrants shall be adjusted
pursuant to any of the provisions of this Warrant Agreement, or the number
of shares of Underlying Securities or the kind or amount of securities or
assets receivable upon conversion of Underlying Securities shall be
adjusted pursuant to the terms thereof, the Company shall forthwith
thereafter cause to be sent to each Warrantholder a notice setting forth
such adjustment and also setting forth in detail the facts requiring such
adjustments.
7. FURTHER COVENANTS OF THE COMPANY.
(a) DILUTION OR IMPAIRMENTS. The Company will not, by amendment of
its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrant or of this Warrant
Agreement, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Warrantholders against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company:
6
<PAGE>
(i) shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrants, all shares of
the Underlying Securities from time to time issuable upon the exercise
of the Warrants and shall use its best efforts to ensure that the par
value per share, if any, of the Underlying Securities is at all times
equal to or less than the then effective Purchase Price per share of
Underlying Securities; and
(ii) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock and Other
Securities upon the exercise of the Warrants from time to time
outstanding.
(b) TITLE TO STOCK. All shares of the Underlying Securities
delivered upon the exercise of the Warrants shall be validly issued, fully
paid and nonassessable; each holder of a Warrant shall receive good and
marketable title to the Underlying Securities, free and clear of all voting
and other trust arrangements, liens, encumbrances, equities and claims
whatsoever; and the Company shall have paid all taxes, if any, in respect
of the issuance thereof.
(c) LISTING ON SECURITIES EXCHANGES; REGISTRATION. If the Company at
any time shall list any Common Stock on any national securities exchange,
the Company will, at its expense, simultaneously list on such exchange,
upon official notice of issuance upon the exercise of the Warrants, and
maintain such listing of, all shares of Common Stock included in the
Underlying Securities from time to time issuable upon the exercise of the
Warrants or upon conversion of Underlying Securities, and the Company will
so list on any national securities exchange, will so register, and will
maintain such listing of, any Other Securities if and at the time that any
securities of such class shall be listed on such national securities
exchange by the Company. You shall have no right to require the Company to
register the Warrants. The Company will use its best efforts to register
the shares of Common Stock underlying the Warrants and to keep such
registration statement effective for a period of no less than two years.
(d) REMEDIES. The Company stipulates that the remedies at law of the
Warrantholder or any holder of Underlying Securities in the event of any
default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant Agreement or the Warrants
are not and will not be adequate and that such terms may be specifically
enforced by a decree of the specific performance of any agreement contained
herein or in the Warrants or by an injunction against a violation of any of
the terms hereof or thereof or otherwise.
(e) EXCHANGE OF WARRANTS. Subject to Subsection 3(a) hereof, upon
surrender or exchange of any Warrant to the Company, the Company at its
expense will promptly issue and deliver to or upon the order of the holder
thereof a new Warrant of like tenor, in the name of such holder or as such
holder (upon payment by such Warrantholder of any applicable transfer
taxes) may direct, calling in the aggregate for the purchase of the
7
<PAGE>
number of shares of the Underlying Securities called for on the face or
faces of the Warrant or Warrants so surrendered. The Warrants and all
rights thereunder are transferable in whole or in part upon the books of
the Company by the registered holder thereof subject to the provisions of
Subsection 3(a) hereof, in person or by duly authorized attorney, upon
surrender of the Warrant, duly endorsed, at the principal office of the
Company.
(f) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of any Warrant, and in the case of any such loss, theft or destruction,
upon delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or in the case of such mutilation, upon surrender
and cancellation of such Warrant, the Company, at the expense of the
Warrantholder, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.
(g) REPORTING BY THE COMPANY. The Company agrees that during the
term of the Warrants and as long as you hold Underlying Securities, it will
use its best efforts to keep current in the filing of all forms and other
materials, if any, which it may be required to file with the appropriate
regulatory authority pursuant to the Exchange Act and all other forms and
reports required to be filed with any regulatory authority having
jurisdiction over the Company.
(h) FRACTIONAL SHARES. No fractional shares of Underlying Securities
are to be issued upon the exercise of any Warrant, but the Company shall
pay a cash adjustment in respect of any fraction of a share that would
otherwise be issuable in an amount equal to such fraction multiplied by the
closing market price per share of Underlying Securities on the day of
exercise, as determined by the closing bid and asked price regular way on
the principal national securities exchange on which the Underlying
Securities is listed or admitted to trading, or if not listed or admitted
to trading on any national securities exchange, the average of the highest
reported bid and lowest reported asked price over the preceding 30-day
period as furnished by the National Quotation Bureau Incorporated;
provided, however, that if the Underlying Securities are not traded in such
manner that the quotations referred to herein are available, the market
price shall be deemed to be the fair market value of such Underlying
Securities as reasonably determined by the Board of Directors.
8. OTHER WARRANTHOLDERS.
The Warrants are issued upon the following terms, to all of which each
holder or owner thereof by the taking thereof consents and agrees: (a) any
person who shall become a transferee, within the limitations on transfer imposed
by Subsection 3(a) hereof, shall take such Warrant subject to the provisions of
Subsection 3(a) hereof and the other provisions hereof and thereupon shall be
authorized to represent himself as absolute owner thereof and, subject to the
restrictions contained in this Warrant Agreement, shall be empowered to transfer
absolute title by endorsement and delivery thereof to a permitted bonafide
purchaser for value; (b) each prior
8
<PAGE>
taker or owner waives and renounces all of his equities or rights in such
Warrant in favor of each such permitted bonafide purchaser, and each such
permitted bonafide purchaser shall acquire absolute title thereto and to all
rights presented thereby; (c) until such time as the respective Warrant is
transferred on the books of the Company, the Company may treat the registered
holder thereof as the absolute owner thereof for all purposes, notwithstanding
any notice to the contrary; and (d) all references to the words "you" and "your"
in this Warrant Agreement shall be deemed to apply with equal effect to any
person to whom a Warrant has been transferred in accordance with the terms
hereof, and where appropriate, to any person holding shares of the Underlying
Securities.
9. MISCELLANEOUS.
All notices, certificates, and other communications from or at the request
of the Company to any Warrantholder shall be mailed by first class, registered,
or certified mail, postage prepaid, to the address set forth herein, to such
address as may have been furnished to the Company in writing by such
Warrantholder, or, if no notice of transfer has been received by the Company, to
the address of the last holder of such Warrant. This Warrant Agreement and any
of the terms hereof may be changed, waived, discharged, or terminated only
pursuant to Subsection 6(b) hereof or by an instrument in writing signed by the
Company and the holders of Warrants to purchase in excess of 50% of the
Underlying Securities then subject to purchase pursuant to the Warrants. This
Warrant Agreement shall be construed and enforced in accordance with and
governed by the internal laws of the State of Wyoming. The headings in this
Warrant Agreement are for purpose of reference only and shall not limit or
otherwise affect any of the terms hereof. This Warrant Agreement, together with
the forms of instruments annexed hereto as Exhibit A, constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof.
THIS WARRANT AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
WITH RESPECT TO THE WARRANT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed as of the 16th day of January, 1996, with an effective date of
December 20, 1995, by its proper corporate officers, thereunto duly authorized.
TANISYS TECHNOLOGY, INC.
By: /s/ Mark C. Holliday
-----------------------------------------
Chairman and President
9
<PAGE>
CONFIRMED:
[SUBSCRIBER SIGNATURE]
--------------------------------------------
SIGNATURE
Printed Name:
-------------------------------
Title (if applicable):
----------------------
--------------------------------------------
SIGNATURE
Printed Name:
-------------------------------
Title (if applicable):
----------------------
(Each co-owner or joint owner must sign.)
10
<PAGE>
Exhibit 4.5
NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE PURCHASED PURSUANT TO THIS
WARRANT HAVE BEEN REGISTERED WITH OR APPROVED BY THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS
OF ANY STATE. THIS WARRANT AND THE SECURITIES THAT MAY BE PURCHASED PURSUANT TO
THIS WARRANT ARE BEING OFFERED AND SOLD IN RELIANCE UPON CERTAIN EXEMPTIONS
AFFORDED BY SUCH ACTS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Warrant No. C-[#]
TANISYS TECHNOLOGY, INC.
CLASS C STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT [NAME], or his/its registered assigns, is entitled
to purchase at any time or from time to time after the date hereof until 5:00
p.m., Austin time, on December 20, 1996, [NUMBER] Units at a Purchase Price of
$1.70 per Unit and until 5:00 p.m., Austin time, on December 20, 1997 at a
Purchase Price of $1.95 per Unit. On the date hereof, each Unit is equal to one
share of Common Stock, no par value, of Tanisys Technology, Inc., a Wyoming
corporation (the "Company"), subject to adjustment pursuant to Section 6 of the
Warrant Agreement (defined below). This Warrant is issued pursuant to a Warrant
Agreement, dated as of January 16, 1996, with an effective date of December 20,
1995 (the "Warrant Agreement"), between the Company and certain subscribers, and
all rights of the holder of this Warrant are subject to the terms and provisions
of the Warrant Agreement, copies of which are available for inspection at the
offices of the Company.
TRANSFER OF THIS WARRANT IS RESTRICTED AS PROVIDED IN THE WARRANT
AGREEMENT. Subject to the provisions and restrictions of the Vancouver Stock
Exchange, the Securities Act of 1933 and the Warrant Agreement, this Warrant and
all rights hereunder are transferable at the principal executive offices of the
Company, by the holder hereof in person or by his or its duly authorized
attorney, upon surrender of this Warrant, together with the Assignment hereof
duly endorsed. Until transfer hereof on the books of the Company, the Company
may treat the registered holder as the owner hereof for all purposes.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND ANY SHARES
ACQUIRED UPON THE EXERCISE THEREOF ARE SUBJECT TO A HOLD PERIOD AND MAY NOT BE
TRADED IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE HOLD PERIOD EXCEPT AS
PERMITTED BY THE SECURITIES ACT (BRITISH COLUMBIA) AND REGULATIONS MADE UNDER
THE ACT. FOR CANADIAN RESIDENTS, THE HOLD PERIOD EXPIRES ON JANUARY 16, 1997;
HOWEVER, PURSUANT TO THE POLICIES OF THE VANCOUVER STOCK EXCHANGE, THE WARRANTS,
IF EXERCISABLE FOR A PERIOD OF MORE THAN
<PAGE>
ONE YEAR, REMAIN NON-TRANSFERABLE FOR THE BALANCE OF THE EXERCISE PERIOD.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and
its corporate seal to be hereunto affixed in Austin, Texas by its proper
corporate officers thereunto duly authorized on this the _____ day of _________,
1996, with an effective date of __________, 199__.
TANISYS TECHNOLOGY, INC.
By:
------------------------------------
Mark C. Holliday
Chairman and President
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<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Tanisys Technology, Inc.:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________* Units to purchase Underlying Securities of
Tanisys Technology, Inc. and herewith makes payment of $____________ therefor,
and requests that the certificate or certificates for such shares be issued in
the name of and delivered to the undersigned.
Dated:______________, 199__
- - --------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the within Warrant)
- - -----------------------------------------
- - -----------------------------------------
(Address)
- - ---------------
*Insert here the number of Units called for on the face of the Warrant, without
making any adjustment for additional Common Stock, Preferred Stock or any other
stock or other securities or property or cash which, pursuant to the adjustment
provisions of the Warrant Agreement pursuant to which the Warrant was granted,
may be deliverable upon exercise.
13
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto ______________________ the right represented by the within Warrant to
purchase ____________ Units of Underlying Securities of Tanisys Technology, Inc.
to which the within Warrant relates, and appoints _______________________
Attorney to transfer such right on the books of Tanisys Technology, Inc. with
full power of substitution in the premises.
The undersigned represents and warrants that the transfer of the within
Warrant is permitted by the terms of the Warrant Agreement pursuant to which the
within Warrant has been issued, and the Assignee hereof, by his acceptance of
this Assignment, represents and warrants that he is familiar with the terms of
said Warrant Agreement and agrees to be bound by the terms thereof with the same
force and effect as if a signatory thereto. Acceptance of the Warrant by
Assignee shall constitute acceptance of those terms and conditions.
Dated:_________________, 199__
Signed in the presence of: Assignor:
- - ------------------------------ --------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the within Warrant)
Assignee:
--------------------------------------------
Address of Assignee:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Tax ID No.:
---------------------------------
14
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - ---------- ----------
NUMBER CONTINUED UNDER THE LAWS OF THE STATE OF WYOMING SHARES
05176 SPECIMEN
- - ---------- ----------
TANISYS TECHNOLOGY, INC.
-----------------
CUSIP 875927 10 5
-----------------
THIS CERTIFIES THAT
SPECIMEN
is the registered holder of
FULLY PAID AND NON-ASSESSABLE COMMON SHARES WITHOUT PAR VALUE
in the Capital of the above named Corporation subject to the Certificate of
Incorporation of the Corporation transferable on the books of the Corporation
by the registered holder in person or by Attorney duly authorized in writing
upon surrender of this Certificate properly endorsed.
This Certificate is not valid unless countersigned by the Transfer Agent and
Registrar of the Corporation.
IN WITNESS WHEREOF the Corporation has caused this Certificate to be signed
on its behalf by the facsimile signatures of its duly authorized officers.
DATED
COUNTERSIGNED AND REGISTERED
/s/ Mark C. Holliday MONTREAL TRUST COMPANY OF CANADA VANCOUVER
- - -------------------- TRANSFER AGENT AND REGISTRAR
President
By SPECIMEN
------------------------------------------
/s/ James D. English Authorized Officer
- - --------------------
Secretary
The Shares represented by this Certificate are transferable at the offices
of Montreal Trust Company of Canada, Vancouver, B.C.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL INSURANCE NUMBER OF TRANSFEREE
__ __ __ __ __ __ __ __ __
|__|__|__| - |__|__|__| - |__|__|__|
- - -------------------------------------------------------------------------------
(Name and address of transferee)
- - -------------------------------------------------------------------------------
- - ------------------------------------------------------------------------ shares
registered in the name of the undersigned on the books of the Corporation
named on the face of this certificate and represented hereby, and irrevocably
constitutes and appoints
- - ------------------------------------------------------------------ the attorney
of the undersigned to transfer the said shares on the register of transfers
and books of the Corporation with full power of substitution hereunder.
DATED:
- - ------------------------------------ --------------------------------------
(Signature of Witness) (Signature of Shareholder)
NOTICE: The signature of this assignment must correspond with the name as
written upon the face of the certificate, in every particular, without
alteration or enlargement, or any change whatsoever, and must be
guaranteed by a bank, trust company or a member of a recognized stock
exchange.
Signature Guaranteed By:
<PAGE>
CREDIT AGREEMENT
(Borrowing Base)
THIS CREDIT AGREEMENT (as amended, restated and supplemented from time to time,
this "AGREEMENT") by and between 1ST TECH CORPORATION ("1st Tech"), a Delaware
corporation, DARKHORSE SYSTEMS, INCORPORATED ("Darkhorse"), a Delaware
corporation (jointly and severally, "Borrowers" and each a "Borrower"); TANISYS
TECHNOLOGY, INC., a Wyoming corporation ("Guarantor") and CHEMICAL BANK, a New
York state bank, ("BANK") is executed June ______, 1996 to be effective as of
May 20, 1996 ("Effective Date").
PRELIMINARY STATEMENT. Texas Commerce Bank National Association ("Texas
Commerce") has made loans to 1st Tech Corporation ("Old 1st Tech"), a Texas
Corporation, governed and evidenced by a Credit Agreement between Old 1st Tech
and Texas Commerce dated July 24, 1995, as amended, and the $12,000,000.00 Note
and other Loan Documents referenced in such agreement. Texas Commerce has made
loans to Darkhorse Systems, Incorporated ("Old Darkhorse"), a Texas Corporation,
governed and evidenced by a $400,000.00 Revolving Promissory Note With Borrowing
Base and Agreement executed by Old Darkhorse and delivered to Texas Commerce
dated January 16, 1996, and the Loan Documents referenced in such note. The
facilities described in this paragraph and all rights, interests and respective
Loan Documents existing in connection therewith are the "Old Facilities."
In connection with the execution of this Agreement, Guarantor has formed 1st
Tech and Darkhorse (originally incorporated under the respective names Tanisys
Acquisition Corp. and Tanisys Acquisition Corp. II) to become successors by
merger to Old 1st Tech and Old Darkhorse respectively, on or about the Effective
Date (the "Merger"). Guarantor has requested and Texas Commerce and Bank have
agreed, subject to all terms and conditions of this Agreement, that Bank shall
extend credit to the Borrowers to payoff and replace the Old Facilities.
Each of the parties expressly acknowledges and agrees (i) that the Old
Facilities are and shall remain obligations of Old 1st Tech and Old Darkhorse,
respectively, and any successors, each in accordance with its terms, until
finally paid in full in accordance therewith; (ii) that the transactions
contemplated in the second paragraph of this Preliminary Statement require,
under the terms of the Old Facilities, the consent of Texas Commerce which
consent shall be deemed given upon the effectiveness of this Agreement after the
satisfaction of the Conditions Precedent to this Agreement Generally below; but,
otherwise, such consent has not been given and Texas Commerce is in no way
obligated to give such consent except upon satisfaction of all such Conditions
Precedent to this Agreement Generally.
CONDITIONS PRECEDENT TO THIS AGREEMENT GENERALLY. This Agreement shall become
effective only upon the occurrence of all the following conditions and events,
all of which must occur on or about the Effective Date, or this Agreement shall
be null and void in all respects:
<PAGE>
1. All representations and warranties made in this Agreement shall be true.
2. All conditions precedent set out in section 2.1 and 2.2 shall be satisfied.
3. All transactions described in the "Pro-forma Consolidation" dated April 18,
1996 provided to Bank and Texas Commerce by Guarantor shall have been
consummated.
4. Without limiting the generality of the preceding condition, the issuance by
1st Tech of stock in exchange for $2,000,000.00 cash shall have been
completed.
5. Borrowing Base Availability after deducting existing balances brought over
from Old Facilities shall be at least $500,000, for both Borrowers
combined.
6. The parties shall execute any further documents, agreements, certificates
and legal opinions reasonably required by Bank or Texas Commerce to fulfill
the intent of this Agreement.
7. Provide 2 year projections of Borrowers and Guarantors Balance Sheet,
Income Statement, and Cash Flows by July 1, 1996.
PRINCIPAL BALANCES PAID OFF AND BECOMING OBLIGATIONS OF THE BORROWERS ON OR
ABOUT THE CLOSING DATE. As of June 14, 1996, Texas Commerce has advanced and
there is outstanding and unpaid principal amounts of $2,867,023.66 in Loans
under the Old 1st Tech Credit Agreement and Note; and $188,600.00 in Loans under
the Old Darkhorse Note; all in addition to any accrued and unpaid interest fees
and any other amounts otherwise payable thereunder.
1. THE LOANS
REVOLVING CREDIT NOTE 1.1. Subject to the terms and conditions hereof, Bank
agrees to make loans ("LOAN" or "LOANS") to Borrowers from time to time before
the Termination Date, not to exceed at any one time outstanding the lesser of
the Borrowing Base or $6,000,000.00 ("COMMITMENT"). Borrowers may borrow, repay
and reborrow upon a Loan Request in Proper Form submitted by either Borrower.
Loans may only be used to (i) pay off amounts payable under the Old Facilities,
and, thereafter, (ii) finance accounts receivable and inventory from Borrowers'
regular business operations. Chapter 15 of the Texas Credit Code will not appy
to this Agreement, the Note or any Loan. The Loans will be evidenced by, and
will bear interest and be payable as provided in, Borrowers' promissory note
dated the Effective Date (together with any and all renewals, extensions,
modifications and replacements thereof and substitutions therefor, the "NOTE").
"TERMINATION DATE" means the earlier of: (a) June 30, 1998; or (b) the date
specified by Bank pursuant to SECTION 6.1 hereof.
LETTERS OF CREDIT 1.1.A Bank in its sole absolute discretion may issue sight
draft commercial and/or standby letters of credit up to the day before the
Termination Date for the account of Borrowers and in favor of such Person or
Persons as may be designated by either Borrower upon an application
substantially in the form of Bank's then current application and agreement
therefor or other application acceptable to Bank ("APPLICATION"), duly completed
and executed by either Borrower in Proper Form not less than two (2) Business
Day(s) prior to the date on which the letter of credit is to be issued. "LETTER
OF CREDIT" means any Letter of Credit issued by Bank upon an Application of
Borrowers. No Letter of Credit shall have an expiry date later than a date
______ months from the Termination Date. Letters of Credit may be commercial or
standby. "L/C OBLIGATIONS" means the sum of (a) the face amount of all
outstanding Letters of Credit less any drawings that have been paid by Borrowers
either with a
2
<PAGE>
Loan or other means acceptable to Bank and (b) any other amounts owing to Bank
under the Applications not already included in (a). Borrowers will pay a fee in
an amount equal to the greater of: (a) (i) for commercial L/Cs, one percent
(1.0%) per quarter or fraction thereof on the face amount of the Letter of
Credit and (ii) for Standby L/Cs, three percent (3.0%) per annum or fraction
thereof on the face amount of the Letter of Credit; and (b) Bank's minimum fee
in effect on the issue date of the Letter of Credit. Bank may at any time, but
is not required to, make a Loan without prior notice to Borrowers to pay any
drawing under a Letter of Credit and to pay any L/C Obligation. Letters of
Credit shall be for the purpose of financing trade credit extended to either
Borrower in its regular course of business. L/C Obligations shall never exceed
$2,000,000.00 ("LETTER OF CREDIT SUBLIMIT").
BORROWING BASE 1.2:
(a) The BORROWING BASE on each Business Day is the "Total Availability on
Accounts Receivable and Inventory" calculated in accordance with the
Borrowing Base Certificate in Exhibit A, the "Accounts Receivable Loan
Administration Procedures" delivered by Bank to Borrower and incorporated
herein by reference as if fully set forth. Each reference to "Chase
Manhattan Bank" in Exhibit A shall be deemed a reference to Bank. The
Borrowing Base shall include only Accounts receivable of 1st Tech.
(b) The calculations, definitions and other criteria set out in Exhibit A shall
be subject to the following definitions and adjustments:
(i) "Other" ineligible Accounts means all Accounts not subject to
Bank's first and prior lien and security interest and such assets
deemed from time to time to be, in the sole judgment of the Bank,
ineligible for purposes of determining the Borrowing Base; Memo A/R and
Evaluation A/R shall be Ineligible Accounts. "'Memo' and 'Evaluation'
A/R" shall include all Accounts of the type typically referred to as
such by Borrower prior to the Effective Date, and any accounts which do
not represent payments finally earned or which result from a sale
subject to product evaluation by the buyer. Outstanding Loans, interest
and fees counted against Total Availability on Accounts Receivable and
Inventory shall use Bank's standard estimation provided by Bank to
Borrower.
(ii) Each Accounts Advance Factor may be increased or decreased by the
Bank at any time and from time to time upon written notice to Borrower,
in the reasonable exercise of Bank's sole underwriting discretion.
Without limiting the generality of the foregoing, Bank shall be deemed
to have exercised reasonable discretion if it reduces the Accounts
Advance Factor in reasonable proportion to increased dilution of
Accounts which Bank believed exceeds 5% of the amount existing at the
Effective Date of the Agreement.
REQUIRED PAYMENT 1.3 If the unpaid amount of the Loans and L/C Obligations on
any Business Day exceeds the Borrowing Base on such day, Borrowers shall make a
payment on the Note in an amount sufficient to reduce the total unpaid principal
balance of the Note to an amount no greater than the Borrowing Base, such
payment due and payable on the date such excess occurs, to accompany timely
delivery of Borrowers' monthly Borrowing Base Report or Daily Collateral
Certificate, as the case may be. If the balance on the Note is zero and the
3
<PAGE>
amount of L/C Obligations still exceeds the Borrowing Base, Borrowers will
promptly deliver cash collateral to Bank in an amount sufficient to eliminate
such excess.
FACILITY FEES 1.4 Borrowers will pay the following fees: (i) a Structuring Fee
of $75,000.00, due and payable upon the execution of this Agreement; and (ii) an
Administration Fee of $50,000 per annum payable in installments due on the
Effective Date of this Agreement and the 1st date of each third month
thereafter. Borrowers authorize Bank in its discretion and without prior notice
to advance against the Commitment and Note to pay these fees when due.
PAST DUE AMOUNTS 1.5 Each amount due to Bank in connection with the Loan
Documents will bear interest from its due date until paid at the Highest Lawful
Rate unless the applicable Loan Document provides otherwise.
2. CONDITIONS PRECEDENT.
ALL LOANS AND L/C OBLIGATIONS 2.1 Bank is not obligated to make any Loan
unless: (a) Bank has received the following, duly executed and in Proper Form:
(1) a Request for Loan substantially in the form of the sample letter set out in
Exhibit A not later than 11 am Central Time on the date (which shall be a
Business Day) of the proposed Loan, or an Application for Letter of Credit as
provided in section 1.1.A, as the case may be; provided however, Bank may accept
and act upon verbal advance requests received from a Borrower's representative
reasonably believed by Bank to be authorized to make such requests, each such
request to be confirmed in writing in Proper Form; (2) a Borrowing Base Report
within the time required by this Agreement; (3) a Lockbox Processing Agreement
in Proper Form; and (4) such other documents as Bank reasonably may require; (b)
no Event of Default exists; and (c) the making of the Loan is not prohibited by,
or subjects Bank to any penalty or onerous condition under any Legal
Requirement.
FIRST LOAN 2.2 In addition to the matters described in the preceding section,
Bank will not be obligated to make the first Loan unless Bank has received all
of the Loan Documents specified on ANNEX I in Proper Form.
REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this Agreement and
to make Loans and create L/C Obligations, each Borrower represents and warrants
as of the Effective Date, the date of each request for a Loan, and each
presentation by any Borrower of any financial information, report, notice and
certificate hereunder, that each of the following statements is and shall remain
true and correct throughout the term of this Agreement:
ORGANIZATION AND STATUS 3.1 Each Borrower and Subsidiary of each Borrower is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; has all power and authority to conduct its
business as presently conducted, and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification desirable. No Borrower has any Subsidiary other
than those listed in ANNEX II and each Subsidiary is owned as set forth on ANNEX
II. If any Borrower is subject to the Texas Revised Partnership Act ("TRPA"),
Borrower agrees that Bank
4
<PAGE>
is not required to comply with Section 3.05(d) of TRPA and agrees that Bank may
proceed directly against one or more partners or their property without first
seeking satisfaction from partnership property.
FINANCIAL STATEMENTS 3.2 All financial statements delivered to Bank are
complete and correct and fairly present, in accordance with generally accepted
accounting principles, consistently applied ("GAAP") (or the other accounting
basis specified herein, if expressly provided for in this Agreement), financial
condition and results of operations as at the dates and for the periods
indicated, on consolidated and consolidating bases. If this Agreement provides
for audited, reviewed or compiled financial statements, such service shall have
been provided by an independent certified public accountant acceptable to Bank,
and if audited statements are provided such statements shall be certified with
an unqualified opinion in accordance with generally acceptable auditing
standards ("GAAS"). No material adverse change has occurred in the assets,
liabilities, financial condition, business or affairs of any Borrower or any
Subsidiary of any Borrower since the dates of such financial statements. No
Borrower or Subsidiary of any Borrower is subject to any instrument or agreement
materially and adversely affecting its financial condition, business or affairs.
ENFORCEABILITY 3.3 The Loan Documents are legal, valid and binding obligations
of the Parties enforceable in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency and other similar laws affecting
creditors' rights generally. The execution, delivery and performance of the
Loan Documents have all been duly authorized by all necessary action; are within
the power and authority of the Parties; do not and will not violate any Legal
Requirement, the Organizational Documents of the Parties or any agreement or
instrument binding or affecting the Parties or any of their respective Property.
COMPLIANCE 3.4 Each Borrower and each Subsidiary of each Borrower has filed all
applicable tax returns and paid all taxes shown thereon to be due, except those
for which extensions have been obtained and those which are being contested in
good faith and for which adequate reserves have been established. Each Borrower
and each Subsidiary of each Borrower is in compliance with all applicable Legal
Requirements and manages and operates (and will continue to manage and operate)
its business in accordance with good industry practices. No Borrower or
Subsidiary of any Borrower is in default in the payment of any other
indebtedness or under any agreement to which it is a party. The Parties have
obtained all consents of and registered with all Governmental Authorities or
other Persons required to execute, deliver and perform the Loan Documents.
LITIGATION 3.5 Except as previously disclosed to Bank in writing, there is no
litigation or administrative proceeding pending or, to the knowledge of any
Borrower, threatened against, nor any outstanding judgment, order or decree
affecting any Borrower or Subsidiary of any Borrower before or by any
Governmental Authority.
TITLE AND RIGHTS 3.5 Each Borrower and Subsidiary of each Borrower has good and
marketable title to its Property, free and clear of any Lien except for Liens
permitted by this Agreement and the other Loan Documents. Except as otherwise
expressly stated in the Loan
5
<PAGE>
Documents or permitted by this Agreement, the Liens of the Loan Documents will
constitute valid and perfected first and prior Liens on the Property described
therein, subject to no other Liens whatsoever. Each Borrower and Subsidiary of
each Borrower possesses all permits, licenses, patents, trademarks and
copyrights required to conduct its business. All easements, rights-of-way and
other rights necessary to maintain and operate each Borrower's Property have
been obtained and are in full force and effect.
REGULATION U; BUSINESS PURPOSE 3.7 None of the proceeds of any Loan will be
used to purchase or carry, directly or indirectly, any margin stock or for any
other purpose which would make this credit a "purpose credit" within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System. All
Loans will be used for business, commercial, investment or other similar purpose
and not primarily for personal, family, or household use or primarily for
agricultural purposes as such terms are used in Chapter One of the Texas Credit
Code.
ENVIRONMENT 3.8 Each Borrower and Subsidiary of each Borrower have complied
with applicable Legal Requirements in each instance in which any of them have
generated, handled, used, stored or disposed of any hazardous or toxic waste or
substance, on or off its premises (whether or not owned by any of them). No
Borrower or Subsidiary of any Borrower has any material contingent liability for
non-compliance with environmental or hazardous waste laws. No Borrower or
Subsidiary of any Borrower has received any notice that it or any of its
Property or operations does not comply with, or that any Governmental Authority
is investigating its compliance with, any environmental or hazardous waste laws.
INVESTMENT COMPANY ACT/PUBLIC UTILITY HOLDING COMPANY ACT 3.9 No Borrower or
Subsidiary of any Borrower is an "investment company" within the meaning of the
Investment Company Act of 1940 or a "holding company" or an "affiliate" of a
"holding company" or a "public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
STATEMENTS BY OTHERS 3.10 All statements made by or on behalf of any Borrower,
Subsidiary of any Borrower or any other Party in connection with any Loan
Document constitute the joint and several representations and warranties of all
Borrowers hereunder.
NOTICE OF ACCOUNT DEBTORS 3.11 Borrower has sent to each Account Debtor written
instructions in the form previously delivered and approved by Bank, to remit all
payments and remittances in respect to the Accounts directly to the Lockbox.
4. AFFIRMATIVE COVENANTS. Each Borrower agrees to do, and if necessary cause
to be done, and cause its Subsidiaries to do, each of the following:
CORPORATE FUNDAMENTALS 4.1 (a) Pay when due all taxes and governmental charges
of every kind, including without limitation those upon franchises, income,
profits or Property, unless and only to the extent that the same shall be
contested in good faith and adequate reserves have been established therefor,
(b) Renew and keep in full force and effect all licenses, permits
6
<PAGE>
and franchises; (c) Do all things necessary to preserve corporate existence and
qualifications and rights in all jurisdictions where such qualification is
necessary or desirable; (d) Comply with all applicable Legal Requirements; and
(e) Protect, maintain and keep in good repair its Property and make all
replacements and additions to Property as may be reasonably necessary to conduct
business properly and efficiently.
INSURANCE 4.2 Maintain insurance with such reputable financially sound
insurers, on such Property and personnel, in such amounts and against such risks
as is customary with similar Persons or as may be reasonably required by Bank,
and furnish Bank satisfactory evidence thereof promptly upon request. These
insurance provisions are cumulative of the insurance provisions of the other
Loan Documents. Bank will be named as a beneficiary, loss payee or additional
insured of such insurance as its interest may appear and Borrowers will provide
Bank with copies of the policies of insurance and a certificate of the insurer
that the insurance required by this section may not be canceled, reduced or
affected in any manner without 30 days' prior written notice to Bank.
FINANCIAL INFORMATION/BORROWING BASE REPORT 4.3 Each Borrower will furnish to
Bank in Proper Form: (a) the scheduled financial information, reports and
certificates set out in EXHIBIT B within the times agreed to therein and
certified by the president or chief financial officer of the reporting entity;
(b) promptly after such request is submitted to the appropriate Governmental
Authority, any request for waiver of funding standards or extension of
amortization periods with respect to any employee benefit plan; (c) copies of
special audits, studies, reports and analyses prepared for the management of
such Borrower by outside parties and (d) such other information relating to the
financial condition and affairs of any Borrower and guarantors and their
Subsidiaries as Bank may request from time to time in its discretion.
MATTERS REQUIRING NOTICE 4.4 Notify Bank immediately, upon acquiring knowledge
of (a) the institution or threatened institution of any lawsuit or
administrative proceeding which, if adversely determined, might adversely affect
any Borrower; (b) any material adverse change in the assets, liabilities,
financial condition, business or affairs or any Borrower, (c) any Event of
Default; or (d) any reportable event or any prohibited transaction in connection
with any employee benefit plan.
INSPECTION 4.5 Permit Bank and its affiliates to inspect and photograph its
Property, to examine and copy its files, books and records, and to discuss its
affairs with its officers and accountants, at such times and intervals and to
such extent as Bank reasonably desires.
ASSURANCES 4.6 Promptly execute and deliver any and all further agreements,
documents, instruments, and other writings that Bank may request to cure any
defect in the execution and delivery of any Loan Document or more fully to
describe particular aspects of the agreements set forth or intended to be set
forth in the Loan Documents.
CERTAIN CHANGES 4.7 Notify Bank at least 30 days prior to the date that any of
the Parties changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books and records or
the location of any of the Collateral.
7
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EXHIBIT B 4.8 Comply with each of the other affirmative covenants set forth in
EXHIBIT B.
LANDLORD'S RESERVE 4.9 Maintain an investment deposit account with Bank in an
amount equal to no less than 4 times the amount of the monthly rental for each
location of Borrower for which Bank does not have a Landlord's waiver in proper
form ("Landlord's Reserve"). The investment time deposit shall not be pledged
to any person and Bank shall have the right to use such amounts to pay any rent
owed by Borrower.
LOCKBOX PROCESSING AGREEMENT/COLLECTION ACCOUNT 4.10 A. (i) Establish a
deposit account maintained by Texas Commerce styled "______[name of
Borrower]______ Borrowing Base Accounts Receivable" ("Collection Account") at
such Borrower's sole expense into which all revenues, money checks and income,
howsoever evidenced, received by such Borrower and its subsidiaries will be
deposited; (ii) Execute and deliver a lockbox processing agreement (which may
take the form of an addendum to the Texas Commerce Treasury Management Services
Agreement) between such Borrower, Bank and Texas Commerce ("Lockbox Processing
Agreement") in Proper Form, provided however that should there be a conflict
between the terms of this Agreement and the Lockbox Processing Agreement or the
Terms and Conditions of the Collection Account, the terms of this Agreement
shall govern; (iii) Deliver, or cause to be delivered, directly to the Bank for
deposit to the Collection Account, all revenues, monies, checks, drafts income
and proceeds of Accounts received by such Borrower or by others on behalf of
such Borrower with such collections on the Accounts accompanied by sufficient
information to identify the invoice to which such collections relate; (iv) Cause
each Account Debtor to make all payments due to such Borrower by check payable
to such Borrower and to mail or deliver the checks to the Lockbox, for deposit
to the Collection Account; (v) Take all action as Bank may request to permit
Bank to have continuous domain and control over the Lockbox and Collection
Account. B. COLLECTION ACCOUNT: Bank shall have full right and authority at any
time to notify and direct any Account Debtor to deliver all payments directly to
Bank for deposit into the Collection Account. Bank shall have the sole right to
make withdrawals from, and to administer the Collection Account. Any
collections on account of any Accounts received directly by such Borrower or any
subsidiary of such Borrower shall be received in trust for the benefit of Bank,
segregated from other funds of such Borrower and paid over to Bank in same form
as received with any endorsement to be held in the Collection Account. Bank
shall be entitled to daily apply all collected deposits in the Collection
Account first to the principal amount of the Loans then to interest on the Loans
then to fees and expenses and other amounts owing to Bank and any excess after
such application shall be maintained in the Collection Account. C. POWER OF
ATTORNEY. Each Borrower hereby appoints Bank as such Borrower's attorney-in-
fact and grants Bank full right and authority: (a) at all times during the term
of this Agreement, to supply any necessary endorsement and/or signature of any
Borrower on checks, drafts and any other form of payment received, including
endorsing such Borrower's name thereon as appropriate and to forward such items
for collection in normal course and deposit the proceeds thereof, and on any
invoice or bill of lading related to any Collateral; (b) after the occurrence of
an Event of Default which is continuing, to notify the U.S. Postal Service and
any other person to change address for delivery of any Borrower's mail to such
address as may be designated by Bank; and (c) to do all such other acts and
things in the name of Borrower
8
<PAGE>
reasonably necessary or convenient to assuring Bank the full benefit of the
provisions of this section 4.10. This power of attorney is irrevocable, shall
survive the dissolution or liquidation of such Borrower, and is deemed coupled
with an interest. This power of attorney shall terminate only at such time as
all Obligations have been paid in full. Termination of the power of attorney
shall not affect the validity of any acts performed by the Bank pursuant to the
power of attorney prior to termination. This power of attorney evidences rights
which are cumulative with all other rights granted in all other Loan Documents,
and is entitled in all respects to the indemnity appearing in section 7.8. D.
GRANT OF SECURITY INTEREST. Each Borrower assigns and pledges to Bank, and
grants to Bank a security interest in, all of such Borrower's right, title and
interest in and to the Collection Account, and all certificates and instruments,
if any, from time to time representing or evidencing the Collection Account; and
all proceeds of any and all of the foregoing. E. OPERATING ACCOUNTS. Each
Borrower shall maintain all of its operating accounts with Bank or Texas
Commerce, except accounts with balances never exceeding $25,000.00 at locations
not served by either such bank.
5. NEGATIVE COVENANTS. Except as expressly permitted on Exhibit B, no
Borrower or Subsidiary of Borrower will:
INDEBTEDNESS 5.1 Create, incur, or permit to exist, or assume or guarantee,
directly or indirectly, or become or remain liable with respect to, any
Indebtedness, contingent or otherwise unless there is a permitted amount set
forth in EXHIBIT B, EXCEPT: (a) Indebtedness to Bank, or secured by Liens
permitted by this Agreement, or otherwise approved in writing by Bank, and
renewals and extensions (but not increases) thereof; and (b) current accounts
payable and unsecured current liabilities, not the result of borrowing, to
vendors, suppliers and Persons providing services, for expenditures for goods
and services normally required by it in the ordinary course of business and on
ordinary trade terms.
LIENS 5.2 Create or permit to exist any Lien upon any of its Property now owned
or hereafter acquired, or acquire any Property upon any conditional sale or
other title retention device or arrangement or any purchase money security
agreement; or in any manner directly or indirectly sell, assign, pledge or
otherwise transfer any of its accounts or other Property, EXCEPT: (a) Liens, not
for borrowed money, arising in the ordinary course of business; (b) Liens for
taxes not delinquent or being contested in good faith by appropriate
proceedings; (c) Liens in effect on the date hereof and disclosed to Bank in
writing, so long as neither the indebtedness secured thereby nor the Property
covered thereby increases; and (d) Liens in favor of Bank, or otherwise
approved in writing by Bank. Notwithstanding anything to the contrary herein,
no Borrower or Subsidiary of Borrower will permit any Lien on any inventory that
secures the Loans and L/C Obligations unless Bank shall provide Borrower with
Bank's prior written consent.
FINANCIAL AND OTHER COVENANTS 5.3 Fail to comply with the required financial
covenants and other covenants described, and calculated as set forth, in EXHIBIT
B. Unless otherwise provided on EXHIBIT B, all such amounts and ratios will be
calculated: (a) on the basis of GAAP; and (b) on a consolidated basis.
Compliance with the requirements of EXHIBIT B will be determined as of the dates
of the financial statements to be provided to Bank.
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CORPORATE CHANGES 5.4 In any single transaction or series of transactions,
directly or indirectly: (a) liquidate or dissolve; (b) be a party to any merger
or consolidation; (c) sell or dispose of any interest in any Subsidiary, or
permit any Subsidiary to issue any additional equity other than to a Borrower,
(d) sell, convey or lease all or any substantial part of its assets, EXCEPT for
sale of inventory in the ordinary course of business; or (e) permit any change
in ownership of any Borrower.
RESTRICTED PAYMENTS 5.5 At any time: (a) redeem, retire or otherwise acquire,
directly or indirectly, any shares of its capital stock or other equity
interest; (b) declare or pay any dividend (EXCEPT stock dividends paid to
another Borrower); or (c) make any other distribution or contribution of any
Property or cash or obligation to owners of an equity interest in their capacity
as such.
NATURE OF BUSINESS; MANAGEMENT 5.6 Change the nature of its business or enter
into any business which is substantially different from the business in which it
is presently engaged, or permit any material change in its management.
AFFILIATE TRANSACTIONS 5.7 Enter into any transaction or agreement with any
Affiliate except upon terms substantially similar to those obtainable from
wholly unrelated sources.
SUBSIDIARIES 5.8 Form, create or acquire any Subsidiary.
LOANS AND INVESTMENTS 5.9 Make any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase, any stock, bonds, notes,
debentures, or other securities of, any Person, except: (a) readily marketable
direct obligations of the United States of America or any agency thereof with
maturities of one year or less from the date of acquisition; (b) fully insured
certificates of deposit with maturities of one year or less from the date of
acquisition issued by any commercial bank operating in the United States of
America having capital and surplus in excess of $50,000,000.00; and (c)
commercial paper of a domestic issuer if at the time of purchase such paper is
rated in one of the two highest rating categories of Standard and Poor's
Corporation or Moody's Investors Service.
CHANGE IN LOCKBOX 5.10 Instruct or otherwise permit any Account Debtor to remit
payments to any account, lockbox or other location other than the Lockbox.
6. EVENTS OF DEFAULT AND REMEDIES.
EVENTS OF DEFAULT 6.1 Each of the following is an "EVENT OF DEFAULT":
Any Obligor fails to pay any principal of or interest on any Note or any other
obligation under any Loan Document as and when due; or
(a)Any Obligor or any Subsidiary of any Borrower fails to pay at maturity, or
within any applicable period of grace, any principal of or interest on any other
borrowed money obligation or fails to observe or perform any term, covenant or
agreement contained in any agreement or obligation by which it is bound; or
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(c)Any representation or warranty made in connection with any Loan Document was
incorrect, false or misleading when made; or
(d)Any Obligor violates any covenant contained in any Loan Document; or
(e)An event of default occurs under any other Loan Document; or
(f)Final judgment for the payment of money is rendered against Obligor or any
Subsidiary of any Borrower and remains undischarged for a period of 30 days
during which execution is not effectively stayed; or
(g)The sale, encumbrance or abandonment (except as otherwise expressly permitted
by this Agreement) of any of the Collateral or the making of any levy, seizure,
garnishment, sequestration or attachment thereof or therein; or the loss, theft,
substantial damage, or destruction of any material portion of such Property; or
(h)Any order is entered in any proceeding against any Borrower or any Subsidiary
of any Borrower decreeing the dissolution, liquidation or split-up thereof, and
such order shall remain in effect for 30 days; or
(i)Any Obligor or any subsidiary of any Borrower makes a general assignment for
the benefit of creditors or shall petition or apply to any tribunal for the
appointment of a trustee, custodian, receiver or liquidator of all or any
substantial part of its business, estate or assets or shall commence any
proceeding under any bankruptcy, insolvency, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect; or any such petition or
application shall be filed or any such proceeding shall be commenced against any
Obligor or any subsidiary of any Borrower and the Obligor or such subsidiary by
any act or omission shall indicate approval thereof, consent thereto or
acquiescence therein, or an order shall be entered appointing a trustee,
custodian, receiver or liquidator of all or any substantial part of the assets
of any Obligor or any subsidiary of any Borrower or granting relief to any
Obligor or any subsidiary of any Borrower or approving the petition in any such
proceeding, and such order shall remain in effect for more than 30 days; or any
Obligor or any subsidiary of any Borrower shall fail generally to pay its debts
as they become due or suffer any writ of attachment or execution or any similar
process to be issued or levied against it or any substantial part of its
property which is not released, stayed, bonded, or vacated within 30 days after
its issue or levy; or
(j)Any Obligor or any Subsidiary of any Borrower conceals or removes any part of
its Property, with intent to hinder, delay or defraud any of its creditors,
makes or permits a transfer of any of its Property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or makes any transfer of
its Property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or
(k)A material adverse change occurs in the assets, liabilities, financial
condition, business or affairs of any Obligor or any Subsidiary of Borrower; or
(l)Any change occurs in the ownership of Borrower; or
(m)Any individual Obligor dies or any Obligor that is not an individual
dissolves.
If any Event of Default occurs, then the Bank may do any or all of the
following: (1) declare the Obligations to be immediately due and payable without
notice of acceleration or of intention to accelerate, presentment and demand or
protest, all of which are hereby expressly waived; (2) without notice to any
Obligor, terminate the Commitment and accelerate the Termination Date; (3) set
off, in any order, against the indebtedness of any Borrower under the Loan
Documents any debt owing by Bank to any Borrower (whether such debt is owed
individually or jointly),
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including, but not limited to, any deposit account, which right is hereby
granted by each Borrower to Bank; and (4) exercise any and all other rights
pursuant to the Loan Documents, at law, in equity or otherwise.
REMEDIES CUMULATIVE 6.2 No remedy, right or power of Bank is exclusive of any
other remedy, right or power now or hereafter existing by contract, at law, in
equity, or otherwise, and all remedies, rights and powers are cumulative.
7. MISCELLANEOUS.
NO WAIVER 7.1 No waiver of any default or Event of Default will be a waiver of
any other default or Event of Default. No failure to exercise or delay in
exercising any right or power under any Loan Document will be a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
further or other exercise thereof or the exercise of any other right or power.
The making of any Loan during either the existence of any default or Event of
Default, or subsequent to the occurrence of an Event of Default will not be a
waiver of any such default or Event of Default. No amendment, modification or
waiver of any Loan Document will be effective unless the same is in writing and
signed by the Person against whom such amendment, modification or waiver is
sought to be enforced. No notice to or demand on any Person shall entitle any
Person to any other or further notice or demand in similar or other
circumstances.
NOTICES 7.2 All notices required under the Loan Documents shall be in writing
and either delivered against receipt therefor, or mailed by registered or
certified mail, return receipt requested, in each case addressed to the address
shown on the signature page hereof or to such other address as a party may
designate. Except for the notices required by SECTION 2.1, which shall be given
only upon actual receipt by Bank, notices shall be deemed to have been given
(whether actually received or not) when delivered (or, if mailed, on the next
Business Day).
GOVERNING LAW AND JURISDICTION 7.3 (a) THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK
(WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES); PROVIDED THAT THE BANK SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS AND THE BANK CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY TO THE NON-EXCLUSIVE JURISDICTION OF WHOSE
COURTS. EACH OF THE BORROWERS AND THE BANK IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. EACH
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BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS THE PRENTICE HALL
CORPORATION SYSTEM, INC., WITH OFFICES ON THE DATE HEREOF AT 15 COLUMBUS CIRCLE,
NEW YORK, NEW YORK 10023 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT
AND ACKNOWLEDGE FOR AND ON ITS BEHALF AND IN RESPECT OF ITS PROPERTY, SERVICE OF
ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN
ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND
AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH BORROWER AGREES TO
DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK ON THE TERMS AND FOR
THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE BANK. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, EACH BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN THE LOAN DOCUMENTS, SUCH
SERVICE TO BECOME EFFECTIVE TEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE ANY PROCEEDINGS OR OTHERWISE PROCEED AGAINST EACH BORROWER IN
ANY OTHER JURISDICTION. EACH BORROWER AND THE BANK EACH WAIVE PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
WAIVER OF JURY TRIAL 7.4 EACH BORROWER AND THE BANK EACH WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH BORROWER AND THE BANK EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SURVIVAL; PARTIES BOUND; TERM OF AGREEMENT 7.5 (a) All representations,
warranties, covenants and agreements made by or on behalf of each Borrower in
connection with
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the Loan Documents will survive the execution and delivery of the Loan
Documents; will not be affected by any investigation made by any Person, and
will bind Borrower and the successors, trustees, receivers and assigns of each
Borrower and will benefit the successors and assigns of Bank; PROVIDED that
Bank's agreement to make Loans to Borrowers will not inure to the benefit of any
successor or assign of any Borrower. Except as otherwise provided herein, the
term of this Agreement will be until the later of the final maturity of the Note
and the full and final payment of all Obligations and all amounts due under the
Loan Documents. (b) Borrowers shall be entitled to terminate the Commitment by
written notice to Bank, which notice shall become effective as to the accrual of
fees payable hereunder upon the happening of the latest of (i) 30 days after
Bank's receipt of such notice; and (ii) repayment in full of all amounts
outstanding under the Note and otherwise under the Agreement.
DOCUMENTARY MATTERS 7.6 This Agreement may be executed in several identical
counterparts, on separate counterparts; each counterpart will constitute an
original instrument, and all separate counterparts will constitute but one and
the same instrument. The headings and captions in the Loan Documents have been
included solely for convenience and should not be considered in construing the
Loan Documents. If any provision of any Loan Document is invalid, illegal or
unenforceable in any respect under any applicable law, the remaining provisions
will remain effective. The Loans and L/C Obligations and all other obligations
and indebtedness of Borrower to Bank are entitled to the benefit of the Loan
Documents.
EXPENSES AND FEES 7.7 Any provision to the contrary notwithstanding, and
whether or not the transactions contemplated by this Agreement are consummated,
Borrowers agree to pay on demand all out-of-pocket expenses (including, without
limitation, the fees and expenses of counsel for Bank) in servicing and
collection of the Loans and L/C Obligations. Borrower agrees to pay Bank's
standard (i) Documentation Preparation and Processing Fee for preparation,
negotiation and handling of this Agreement; (ii) lockbox processing fees as
provided for in the separate agreement therefor; (iii) account maintenance fees
for the Collection Account; (iv) any expenses of collection or other expenses
incurred by Bank in connection with the maintenance of the Collection Account,
shall be reimbursed by Borrowers to Bank at customary fee rates charged by the
Bank for the services. In consideration of Bank's services of collecting the
Accounts hereunder and monitoring and examining the Borrowing Base, Borrowers
agree to pay Bank the Administration Fee provided for in Section 1.4. Bank may
obtain reimbursement by causing other depository accounts of either Borrower at
Bank to be charged from time to time therefor. The obligations of Borrowers
under this and the following section will survive the termination of this
Agreement but the accrual of periodic fees accrued during the existence of the
Commitment shall be subject to the termination provisions in Section 7.4. Each
Borrower authorizes Bank in its discretion and without prior notice to advance
against the Commitment and Note to pay any or all such fees, expenses and other
such Obligations when due.
INDEMNIFICATION 7.8 Each Borrower agrees to indemnify, defend and hold Bank
harmless from and against any and all loss, liability, obligation, damage,
penalty, judgment, claim, deficiency and expense (including interest, penalties,
attorneys' fees and amounts paid in settlement) to which Bank may become subject
arising out of or based upon the Loan Documents, any Loan, or the receipt,
handling, payment and application of the monies received
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in connection with the Collection Account, including that resulting from Bank's
own negligence, EXCEPT and to the extent caused by Bank's gross negligence or
willful misconduct.
USURY NOT INTENDED 7.9 Borrowers and Banks intend to conform strictly to
applicable usury laws. Therefore, the total amount of interest (as defined
under applicable law) contracted for, charged or collected under this Agreement
or any other Loan Document will never exceed the Highest Lawful Rate. If Bank
contracts for, charges or receives any excess interest, it will be deemed a
mistake. Bank will automatically reform the Loan Document or charge to conform
to applicable law, and if excess interest has been received, Bank will either
refund the excess to Borrowers or credit the excess on any unpaid principal
amount of the Note or any other Loan Document. All amounts constituting
interest will be spread throughout the full term of the Loan Document or
applicable Note in determining whether interest exceeds lawful amounts.
RIGHTS OF BORROWER AND BANK 7.10 Bank has not exercised any control, and Bank
shall not exercise any control, over Borrowers in the determination of which of
Borrowers' creditors Borrower will pay or which payments any Borrower will make
in the ordinary course of any Borrower's business. Each Borrower, alone, shall
exercise such judgment and determination. Nothing contained herein, however,
shall, in any manner, affect, limit or impair the rights or remedies of Bank
under this Agreement or any other Loan Documents as otherwise provided by
applicable law, whether with regard to realization on the Collateral, rights of
set off, compensation or otherwise.
PARTICIPATION; SETOFF 7.11 Borrowers and Bank acknowledge and agree that Bank,
in Bank's sole discretion, may assign its interest or sell participation(s) in
the Loans and Note to third parties, including without limitation Texas
Commerce, without consent of or notice to Borrowers. Borrowers and Bank agree
that each such participant shall be treated, to the extent of its pro rata
interest in Borrowers' indebtedness, as if it were a party thereto, and shall be
accorded and is hereby granted the right to setoff against any deposits, credit
balances, or other funds of each Borrower which are or may be in its possession
(without regard to maturity, tenor or other elements of otherwise mutual
indebtedness).
NO COURSE OF DEALING 7.9 NO COURSE OF DEALING BY ANY BORROWER WITH BANK, NO
COURSE OF PERFORMANCE AND NO TRADE PRACTICES OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE MAY BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
AGREEMENT.
8. DEFINITIONS. Unless the context otherwise requires, capitalized terms used
in Loan Documents and not defined elsewhere shall have the meanings provided by
GAAP, except as follows:
ACCOUNTS shall have the meaning assigned to it in the Uniform Commercial Code
applicable to this Agreement.
AFFILIATE means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of
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voting stock of such Person; or (c) five percent (5%) or more of the voting
stock of which is directly or indirectly beneficially owned or held by the
Person in question. The term "control" means to possess, directly or
indirectly, the power to direct the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise. Bank is
not under any circumstances to be deemed an Affiliate of any Borrower or any of
its Subsidiaries.
AUTHORITY DOCUMENTS means certificates of authority to transact business,
certificates of good standing, borrowing resolutions (with secretary's
certificate), secretary's certificates of incumbency, and other documents which
empower and enable any Borrower or its representatives to enter into agreements
evidenced by Loan Documents or evidence such authority.
ACCOUNTS means all accounts as such term is defined in the Uniform Commercial
Code.
ACCOUNT DEBTOR means any person in any way obligated on or in connection with
any Account.
BUSINESS DAY means a day when the main office of Bank is open for the conduct of
commercial lending business.
COLLATERAL means all Property, tangible or intangible, real, personal or mixed,
now or hereafter subject to Security Documents, or intended so to be.
CORPORATION means corporations, partnerships, limited liability companies, joint
ventures, joint stock associations, associations, banks, business trusts and
other business entities.
GOVERNMENT ACCOUNTS means receivables owed by the U.S. government or by the
government of any state, county, municipality, or other political subdivision as
to which Bank's security interest or ability to obtain direct payment of the
proceeds is governed by any federal or state statutory requirements other than
those of the Uniform Commercial Code, including, without limitation, the Federal
Assignment of Claims Act of 1940, as amended.
GOVERNMENTAL AUTHORITY means any foreign governmental authority, the United
States of America, any state of the United States and any political subdivision
of any of the foregoing, and any agency, department, commission, board, bureau,
court or other tribunal having jurisdiction over Bank or any Obligor, or any
Subsidiary of any Borrower or their respective Property.
HIGHEST LAWFUL RATE means the maximum nonusurious rate of interest permitted to
be charged by applicable Federal or state law (whichever permits the higher
lawful rate) from time to time in effect. If (notwithstanding the election of
the parties as to choice of law herein) Chapter One of the Texas Credit Code
establishes the Highest Lawful Rate, the Highest Lawful Rate is the "indicated
rate ceiling" as defined in that Chapter.
INDEBTEDNESS means and include (a) all items which in accordance with GAAP would
be included on the liability side of a balance sheet on the date as of which
Indebtedness is to be determined (excluding capital stock, surplus, surplus
reserves and deferred credits); (b) all guaranties, endorsements and other
contingent obligations in respect of, or any obligations to purchase or
otherwise acquire, Indebtedness of others, and (c) all Indebtedness secured by
any Lien existing on any interest of the Person with respect to which
indebtedness is being determined, in Property owned subject to such Lien,
whether or not the Indebtedness secured thereby has been assumed.
INVENTORY shall have the meaning assigned to it in the Uniform Commercial Code
applicable to this Agreement.
LEGAL REQUIREMENT means any law, ordinance, decree, requirement, order,
judgment, rule regulation (or interpretation of any of the foregoing) of, and
the terms of any license or permit issued by, any Governmental Authority.
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LIEN shall mean any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based on
common law, constitutional provision, statute or contract.
LOAN DOCUMENTS means this Agreement, the agreements, the Notes, Applications,
documents, instruments and other writings contemplated by this Agreement or
listed on Annex I, all other assignments, deeds, guaranties, pledges,
instruments, certificates and agreements now or hereafter executed or delivered
to the Bank pursuant to any of the foregoing, and all amendments, modifications,
renewals, extensions, increases and rearrangements of, and substitutions for,
any of the foregoing.
LOCKBOX means the postal lockbox(s) maintained by Texas Commerce Bank National
Association (Lockbox # _____ and # _____) into which Borrowers directs Account
Debtors to make payment and remittance in respect to Accounts.
OBLIGATIONS means all principal, interest and other amounts which are to become
owing under this Agreement, the Note, any Application or any other Loan
Document.
OBLIGOR means each Borrower and any guarantor, surety, co-signer, general
partner or other person who may now or hereafter be obligated to pay all or any
part of the Obligations.
ORGANIZATIONAL DOCUMENTS means, with respect to a corporation, the certificate
of incorporation, articles of incorporation and bylaws of such corporation; with
respect to a limited liability company, the articles of organization,
regulations and other documents establishing such entity, with respect to a
partnership, joint venture, or trust, the agreement, certificate or instrument
establishing such entity; in each case including all modifications and
supplements thereof as of the date of the Loan Document referring to such
Organizational Document and any and all future modifications thereof which are
consented to by Bank.
PARTIES means all Persons other than Bank executing any Loan Document.
PERSON means any individual, Corporation, trust, unincorporated organization,
Governmental Authority or any other form of entity.
PROPER FORM means in form and substance satisfactory to the Bank.
PROPERTY means any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.
SECURITY DOCUMENTS means those Security Agreements listed on ANNEX I and all
supplements, modifications, amendment, extensions thereof and all other
agreements hereafter executed and delivered to Bank to secure the Loans and L/C
Obligations.
SUBORDINATED DEBT means any Indebtedness subordinated to Indebtedness due Bank
pursuant to a written subordination agreement in Proper Form by and among Bank,
subordinated creditor and the relevant Borrower which at a minimum must
prohibit: (a) any action by subordinated creditor which will result in an
occurrence of an Event of Default or default under this Agreement, the
subordination agreement or the subordinated Indebtedness; and (b) upon the
happening of any Event of Default or default under any Loan Document, the
subordination agreement, or any instrument evidencing the subordinated
Indebtedness (i) any payment of principal and interest on the subordinated
Indebtedness; (ii) any act to compel payment of principal or interest on
subordinated Indebtedness; and (iii) any action to realize upon any Property
securing the subordinated Indebtedness.
SUBSIDIARY means, as to a particular parent Corporation, any Corporation of
which 50% or more of the indicia of equity rights is at the time directly or
indirectly owned by such parent
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Corporation or by one or more Persons controlled by, controlling or under common
control with such parent Corporation.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BANK AND THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF BANK AND THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
BORROWER: 1ST TECH CORPORATION
By: /s/ GARY W. PANKONIEN
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address:
--------------------------------
BORROWER: DARKHORSE SYSTEMS, INCORPORATED
By: /s/ GARY W. PANKONIEN
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address:
--------------------------------
BANK: CHEMICAL BANK
By: /s/ DAVID E. BONHAM
-------------------------------------
Name: David E. Bonham
Title:
----------------------------------
Address:
--------------------------------
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EXHIBITS: ANNEXES:
A ACCOUNTS RECEIVABLE LOAN ADMINISTRATION I LOAN DOCUMENTS
PROCEDURES
B REPORTING REQUIREMENTS, FINANCIAL COVENANTS II SUBSIDIARIES
C LOCKBOX PROCESSING AGREEMENT
19
<PAGE>
EXHIBIT A
[INSERT ACCOUNTS RECEIVABLE LOAN ADMINISTRATION PROCEDURES
INCORPORATED BY REFERENCE]
1
<PAGE>
<TABLE>
EXHIBIT B: 1ST TECH CORPORATION, DARKHORSE SYSTEMS, INCORPORATED, TANISYS TECHNOLOGY, INC.
REPORTING REQUIREMENTS, FINANCIAL COVENANTS AND
COMPLIANCE CERTIFICATE FOR CURRENT REPORTING PERIOD ENDING _____, 199__ ("END DATE")
A. REPORTING PERIOD. Borrowers will provide this Exhibit completed in Proper Form with each financial statement delivered
under the Agreement.
THIS REPORT IS FOR THE / / MONTH / / FISCAL YEAR ("REPORTING PERIOD") ENDING __________, 199_ ("END DATE").
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
B. FINANCIAL REPORTING. The following financial information will be provided within the times indicated COMPLIANCE
- - ------------------------------------------------------------------------------------------------------------------------
WHO WHEN DUE WHAT (Circle):
- - -----------------------------------------------------------------------------------------------------------------------------------
EACH BORROWER (i) Within 90 days of fiscal year end GAAP financial statements (balance sheet, income Yes No
and cash flow statements) audited (with unqualified
opinion) by independent CPAs satisfactory to Bank, with
Compliance Certificate
----------------------------------------------------------------------------------------------------------------
(ii) Within 20 days of each month End Unaudited monthly and YTD financial statements with Yes No
Date including FYE month Compliance Certificate
----------------------------------------------------------------------------------------------------------------
(iii) Within 15 days of each month End Borrowing Base Report with A/R aging and listing, Yes No
Date including FYE month inventory report, and A/P listing (refer to Exhibit A)
& Summary of uninsured A/P
----------------------------------------------------------------------------------------------------------------
(iv) Each Business Day Daily Collateral Certificate (refer to Exhibit A) Yes No
- - -----------------------------------------------------------------------------------------------------------------------------------
GUARANTOR (v) Within 90 days of fiscal year end GAAP financial statements (balance sheet, income and cash Yes No
flow statements) audited (with unqualified opinion) by
independent CPAs satisfactory to Bank
----------------------------------------------------------------------------------------------------------------
(vi) Within 10 days of filing All Forms 10-K, 10-Q and 8-K Yes No
- - -----------------------------------------------------------------------------------------------------------------------------------
EACH BORROWER (vii) Within 90 days of the end of each 2 year forward projections of Borrowers' and Guarantor's Yes No
and GUARANTOR FYE and mid FY quarter end balance sheet, income statement and cash flow statement,
by quarter, prepared on same basis as projections provided
to Lenders prior to execution of this Agreement
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
C. FINANCIAL COVENANTS. Borrowers and Guarantor will comply with the following financial covenants, applying GAAP, COMPLIANCE
the definitions in Section 8, and THE CALCULATIONS AND ADJUSTMENTS FROM THE ACTUAL REPORTED COLUMN BELOW (fiscal
periods refer to Borrower's fiscal periods).
- - ------------------------------------------------------------------------------------------------------------------------
REQUIRED. Each applies at all times and is reported ACTUAL REPORTED. For current Reporting Period or as (Circle):
as indicated: of the End Date, as appropriate:
- - -----------------------------------------------------------------------------------------------------------------------------------
1. 1st Tech shall maintain Tangible Net Worth as adjusted Stockholder's Equity $__________ Yes No
of at least $2,000,000.00, PLUS, as of the end of each Minus: Goodwill $__________
fiscal quarter beginning with the quarter ending 9/30/96, Other Intangible Assets $__________
$75,000 per quarter Loans/Advances to
Equity holders $__________
Please indicate requirement: Loans to Affiliates $__________
$2,000,000 Plus: Subordinated Debt $__________
+ __________ at $75,000/quarter beginning 9/30/96
= __________ Required = Tangible Net Worth as adjusted $__________
- - -----------------------------------------------------------------------------------------------------------------------------------
2. Darkhorse shall maintain Tangible Net Worth as adjusted Stockholder's Equity $__________ Yes No
of at least $500,000.00, PLUS, as of the end of each Minus: Goodwill $__________
fiscal quarter beginning with the quarter ending 9/30/96, Other Intangible Assets $__________
$75,000 per quarter Loans/Advances to
Equity holders $__________
Please indicate requirement: Loans to Affiliates $__________
$500,000 Plus: Subordinated Debt $__________
+ __________ at $75,000/quarter beginning 9/30/96
= __________ Required = Tangible Net Worth as adjusted $__________
- - -----------------------------------------------------------------------------------------------------------------------------------
3. 1st Tech shall maintain a current Ratio of at least $____________ / $____________ = ____________
1.00:1.00. ____________
Current Assets Current Liabilities Current Ratio
- - -----------------------------------------------------------------------------------------------------------------------------------
4. Darkhorse shall maintain a current Ratio of at least $____________ / $____________ = ____________
1.30:1.00. ____________
Current Assets Current Liabilities Current Ratio
- - -----------------------------------------------------------------------------------------------------------------------------------
5. 1st Tech shall have a ratio of EBDITA (Adjusted) Net Income for prior 3 months $__________ Yes No
to interest expense of at least 1.25:1.00, as of the Plus: Tax Expense $__________
end of each month. Interest Expense $__________
Depreciation/Amortization $__________
Minus: Capital expenditures $__________
Nonrecurring Items $__________
Equals: EBDITA (adjusted) $__________
$__________/ $__________ = __________
EBDITA(Adjusted) Interest Expense Ratio
- - -----------------------------------------------------------------------------------------------------------------------------------
6. Darkhorse shall have a ratio of EBDITA (Adjusted) Net Income for prior 3 months $__________ Yes No
to interest expense of at least 1.25:1.00, as of the Plus: Tax Expense $__________
end of each month. Interest Expense $__________
Depreciation/Amortization $__________
Minus: Capital expenditures $__________
Nonrecurring Items $__________
Equals: EBDITA (adjusted) $__________
$__________/ $__________ = __________
EBDITA(Adjusted) Interest Expense Ratio
- - -----------------------------------------------------------------------------------------------------------------------------------
7. No more than $150,000 total Indebtedness (including Indebtedness to 1st Tech: $__________ Yes No
all funded and trade debt) to both Borrowers in the Indebtedness to Darkhorse: $__________
aggregate from Guarantor shall be outstanding at any Total: $__________
time.*
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE SUMMARY REPRESENTS SOME OF THE COVENANTS AND AGREEMENTS CONTAINED
IN THE AGREEMENT AND DOES NOT IN ANY WAY RESTRICT OR MODIFY THE TERMS AND
CONDITIONS OF THE AGREEMENT. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT AND THE
AGREEMENT, THE AGREEMENT SHALL CONTROL. The undersigned hereby certifies that
the above information and computations are true and correct and not
misleading as of the date hereof, and that since the date of the Borrower's
most recent Compliance Certificate (if any):
/ / No default or Event of Default has occurred under the Agreement during
the current Reporting Period, or been discovered from a prior period, and
not reported.
/ / A default or Event of Default (as described below) has occurred during
the current Reporting Period or has been discovered from a prior period
and is being reported for the first time and:
/ / was cured on _____________.
/ / was waived by Bank in writing on _____________.
/ / is continuing.
Description of Event of Default: ___________________________________
<PAGE>
ANNEX I
Loan Documents
"Loan Documents" includes, but is not limited to, the following:
1. Agreement
2. Note
3. Lockbox Processing Agreement
4. Guaranty by Guarantor
5. Pledge of 50% of Guarantor's stock held by Gary Pankonien after merger,
related agreements
6. Borrowing Base Report; Daily Collateral Certificate Compliance Certificate
7. For each Borrower in Proper Form: General Security Agreement (all accounts
and general intangibles; inventory and equipment); Deposit account
(Collection Account) Financing Statements
8. Financing Statements
9. Certified Copies of Organizational and Authority Documents (including
without limitation all documents, agreements, certificates and legal
opinions requested by Bank in connection with transactions described in the
Preliminary Statement)
10. Insurance policies and certificates
11. Financial Statements of Borrower and Guarantor
12. UCC search
Loan Documents - ANNEX I Page 1 of 1
2
<PAGE>
ANNEX II
Subsidiaries
IF NONE AS OF THE EFFECTIVE DATE, CHECK X NONE
-----
Subsidiary Name Sub of which State Where
and Address Borrower Incorporated %Owned
- - ----------- -------- ------------ ------
ANNEX II Page 1 of 1
3
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT ("Amendment" or First Amendment") dated
as of November 14, 1996 ("Effective Date"), is between 1ST TECH CORPORATION
("1st Tech"), a Delaware corporation, DARKHORSE SYSTEMS, INCORPORATED
("Darkhorse"), a Delaware corporation (jointly and severally, "Borrowers" and
each a "Borrower"); TANISYS TECHNOLOGY, INC., a Wyoming corporation
("Guarantor") and THE CHASE MANHATTAN BANK, a New York state bank, successor by
merger of Chemical Bank ("BANK").
PRELIMINARY STATEMENT. Borrowers and Bank entered into a Credit Agreement dated
as of May 20, 1996 (as amended by this and prior amendments, "Credit Agreement"
or "Agreement"). In this Amendment, all capitalized terms defined in the Credit
Agreement and not otherwise defined herein have the same meanings as in the
Credit Agreement, and each Section, Exhibit and similar reference is to the
Credit Agreement as amended. Borrowers and Bank have agreed to amend the Credit
Agreement to the extent set forth herein, and in order to, among other things,
modify certain financial covenants, provide for waivers of certain prior period
defaults, and modify the Borrowing Base to include certain receivables of
Darkhorse.
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, Borrowers and Bank agree as follows:
1. The last sentence of Section 1.2(a) is amended to read: "The Borrowing
Base shall include Accounts of both Borrowers."
2. Exhibit B is replaced with Exhibit B attached to this Amendment. The
Borrowing Base certificate included in Exhibit A is replaced with the Borrowing
Base Certificate attached to this Amendment.
3. Limited Waivers. Borrowers have reported that as of August 31, 1996 and
September 30, 1996 the Tangible Net Worth of 1st Tech is below the amount agreed
to in the Agreement. Borrowers have requested and Bank has agreed to waive the
foregoing prior period default, for the specific instances described for those
prior periods only, subject to the terms of this waiver provision. This waiver
is subject to the conditions and understandings of Borrowers that: (i) no other
waivers are promised by the Bank; (ii) Bank understands the requested waivers to
address all defaults as to covenants, representations and warranties known to
Borrowers as of the Date of this Amendment, Borrowers having represented that in
all other respects no Event of Default has occurred and is continuing; (iii)
Borrowers will not in any way rely upon the any future waiver of any default;
and (iv) any future delay or election not to exercise rights by the Bank shall
not be deemed any waiver of rights. Bank's rights in the event of a default are
set out in the Agreement, Note and the other Loan Documents. This provision is
the only evidence of Bank's waiver.
4. Confirmation of Security Interests. No security interest, lien, or other
interest granted by Borrowers, any guarantor or other person to Bank is released
or limited in connection with the
<PAGE>
execution of this Amendment. Borrowers confirm and ratify each of the liens,
security interests and other interests granted in each and all security
agreements executed in connection with, related to, or securing the Credit
Agreement, each prior amendment and each note and loan heretofore governed by
the Credit Agreement, each in accordance with its stated terms. Borrowers
represent and warrant that each guaranty executed in connection with, related
to, or securing the Credit Agreement, each prior amendment and each note and
loan heretofore governed by the Credit Agreement, each in accordance with its
stated terms. Borrowers represent and warrant that each guaranty executed in
connection with, related to, or securing the Credit Agreement, each prior
amendment and each note and loan heretofore governed by the Credit Agreement,
remains in force as of the Effective Date of this Amendment, in accordance
with its stated terms.
5. Borrowers represent and warrant to Bank that after giving effect to this
Amendment that the representations and warranties set forth in the Credit
Agreement are true and correct on the date hereof as though made on and as of
such date. Each of the other Loan Documents is in all other respects ratified
and confirmed, and all of the rights, powers and privileges created thereby or
thereunder are ratified, extended, carried forward and remain in full force and
effect except as the Credit Agreement is amended by this Amendment.
6 This Amendment shall become effective as of its Effective Date upon
execution and delivery by each of the parties named in the signature lines
below, and "Agreement" and "Credit Agreement" as used in the Credit Agreement
and this Amendment shall refer to the Credit Agreement as amended by this
Amendment. This Amendment shall be included within the definition of "Loan
Documents" as used in the Agreement. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original and all of which
taken together shall constitute but one and the same agreement.
7. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES);
PROVIDED THAT THE BANK SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
THIS WRITTEN AMENDMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE ALL "LOAN
AGREEMENT" AS DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE
CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
effective as of its Effective Date.
BORROWER: 1ST TECH CORPORATION
By: /s/ JOE O. DAVIS
-------------------------------------
Name: Joe O. Davis
Title: Senior V.P. & CFO
BORROWER: DARKHORSE SYSTEMS, INCORPORATED
By: /s/ JOE O. DAVIS
-------------------------------------
Name: Joe O. Davis
Title: Senior V.P. & CFO
BANK: THE CHASE MANHATTAN BANK
successor by merger of Chemical Bank
By: /s/ GEORGE LOUIS MCKINLEY
-------------------------------------
Name: George Louis McKinley
Title: Vice President
3
<PAGE>
<TABLE>
EXHIBIT D: 1ST TECH CORPORATION, DARKHORSE SYSTEMS, INCORPORATED, TANISYS TECHNOLOGY, INC.
REPORTING REQUIREMENTS, FINANCIAL COVENANTS AND
COMPLIANCE CERTIFICATE FOR CURRENT REPORTING PERIOD ENDING _____, 199__ ("END DATE")
A. REPORTING PERIOD. Borrowers will provide this Exhibit completed in Proper Form with each financial statement delivered
under the Agreement.
THIS REPORT IS FOR THE / / MONTH / / FISCAL YEAR ("REPORTING PERIOD") ENDING __________, 199_ ("END DATE").
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
B. FINANCIAL REPORTING. The following financial information will be provided within the times indicated COMPLIANCE
- - ------------------------------------------------------------------------------------------------------------------------
WHO WHEN DUE WHAT (Circle):
- - -----------------------------------------------------------------------------------------------------------------------------------
EACH BORROWER (i) Within 90 days of fiscal year end GAAP financial statements (balance sheet, income Yes No
and cash flow statements) audited (with unqualified
opinion) by independent CPAs satisfactory to Bank, with
Compliance Certificate
----------------------------------------------------------------------------------------------------------------
(ii) Within 20 days of each month End Unaudited monthly and YTD financial statements with Yes No
Date including FYE month Compliance Certificate
----------------------------------------------------------------------------------------------------------------
(iii) Within 15 days of each month End Borrowing Base Report with A/R aging and listing, Yes No
Date including FYE month inventory report, and A/P listing (refer to Exhibit A)
----------------------------------------------------------------------------------------------------------------
(iv) Each Business Day Daily Collateral Certificate (refer to Exhibit A) Yes No
- - -----------------------------------------------------------------------------------------------------------------------------------
GUARANTOR (v) Within 90 days of fiscal year end GAAP financial statements (balance sheet, income and cash Yes No
flow statements) audited (with unqualified opinion) by
independent CPAs satisfactory to Bank
----------------------------------------------------------------------------------------------------------------
(vi) Within 10 days of filing All Forms 10-K, 10-Q and 8-K Yes No
- - -----------------------------------------------------------------------------------------------------------------------------------
EACH BORROWER (vii) Within 90 days of the end of each 2 year forward projections of Borrowers' and Guarantor's Yes No
and GUARANTOR FYE and mid FY quarter end balance sheet, income statement and cash flow statement,
by quarter, prepared on same basis as projections provided
to Lenders prior to execution of this Agreement
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
C. FINANCIAL COVENANTS. Borrowers and Guarantor will comply with the following financial covenants, applying GAAP, COMPLIANCE
the definitions in Section 8, and THE CALCULATIONS AND ADJUSTMENTS FROM THE ACTUAL REPORTED COLUMN BELOW (fiscal
periods refer to Borrower's fiscal periods).
- - ------------------------------------------------------------------------------------------------------------------------
REQUIRED. Each applies at all times and is reported ACTUAL REPORTED. For current Reporting Period or as (Circle):
as indicated: of the End Date, as appropriate:
- - -----------------------------------------------------------------------------------------------------------------------------------
1. Borrowers shall maintain a combined Tangible Net Stockholder's Equity $__________ Yes No
Worth as adjusted of at least $3,000,000.00 as of 9/30/95, Minus: Goodwill $__________
PLUS, as of the end of each fiscal quarter thereafter, Other Intangible Assets $__________
beginning with the quarter ending 12/31/96, $150,000 Loans/Advances to
per quarter Equity holders $__________
Loans to Affiliates $__________
Plus: Subordinated Debt $__________
Please indicate requirements:
= Tangible Net Worth as adjusted $__________
$3,000,000
+ __________ at $150,000/quarter beginning 12/31/96
= __________ Required this quarter end
- - -----------------------------------------------------------------------------------------------------------------------------------
2. Borrowers shall have a combined ratio of EBDITA Net Income for prior 3 months $__________ Yes No
(Adjusted) to interest expense of at least 1.25:1.00, Plus: Tax Expense $__________
as of the end of each month. Interest Expense $__________
Depreciation/Amortization $__________
Minus: Capital expenditures $__________
Nonrecurring Items $__________
Equals: EBDITA (adjusted) $__________
$__________/ $__________ = __________
EBDITA(Adjusted) Interest Expense Ratio
- - -----------------------------------------------------------------------------------------------------------------------------------
3. No more than $150,000 total Indebtedness (including Indebtedness to 1st Tech: $__________ Yes No
all funded and trade debt) to both Borrowers in the Indebtedness to Darkhorse: $__________
aggregate from Guarantor shall be outstanding at any Total: $__________
time.
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE SUMMARY REPRESENTS SOME OF THE COVENANTS AND AGREEMENTS CONTAINED
IN THE AGREEMENT AND DOES NOT IN ANY WAY RESTRICT OR MODIFY THE TERMS AND
CONDITIONS OF THE AGREEMENT. IN CASE OF CONFLICT BETWEEN THIS EXHIBIT AND THE
AGREEMENT, THE AGREEMENT SHALL CONTROL. The undersigned hereby certifies that
the above information and computations are true and correct and not
misleading as of the date hereof, and that since the date of the Borrower's
most recent Compliance Certificate (if any):
/ / No default or Event of Default has occurred under the Agreement during
the current Reporting Period, or been discovered from a prior period, and
not reported.
/ / A default or Event of Default (as described below) has occurred during
the current Reporting Period or has been discovered from a prior period
and is being reported for the first time and:
/ / was cured on _____________.
/ / was waived by Bank in writing on _____________.
/ / is continuing.
Description of Event of Default: ___________________________________
Executed _______________, 19___.
BORROWER: 1ST TECH CORPORATION BORROWER: DARKHORSE SYSTEMS, INCORPORATED
BY: /s/ Joe O. Davis BY: /s/ Joe O. Davis
----------------------------- -------------------------------------
NAME: Joe O. Davis NAME: Joe O. Davis
--------------------------- ------------------------------------
TITLE: Sr. VP & CFO TITLE: Sr. VP & CFO
-------------------------- -----------------------------------
<PAGE>
Exhibit 10.2
REVOLVING CREDIT NOTE
(this "NOTE")
FOR VALUE RECEIVED, ON OR BEFORE the Termination Date (as defined in the
Credit Agreement), 1st TECH CORPORATION and DARKHORSE SYSTEMS, INCORPORATED,
(jointly and severally, "BORROWERS") promise to pay to the order of CHEMICAL
BANK ("Bank") at its office at 633 Third Avenue, New York, NY 10017 or such
other location as Bank may designate, in immediately available funds and
lawful money of the United States of America, the sum of SIX MILLION AND
NO/100THS UNITED STATES DOLLARS (U.S. $6,000,000.00) or the aggregate unpaid
amount of all advances hereunder, whichever is lesser, plus interest on the
unpaid balance outstanding from time to time at a rate per annum equal to the
lesser of (i) the Stated Rate (as hereinafter defined) from time to time in
effect or (ii) the Highest Lawful Rate. If the Stated Rate at any time
exceeds the Highest Lawful Rate, the actual rate of interest to accrue on
the unpaid principal amount of this Note will be limited to the Highest
Lawful Rate, but any subsequent reductions in the Stated Rate due to
reductions in the Prime Rate will not reduce the interest rate payable upon
the unpaid principal amount of this Note below the Highest Lawful Rate until
the total amount of interest accrued on this Note equals the amount of
interest which would have accrued if the Stated Rate had at all times been in
effect.
The "STATED RATE" at any time shall be: (i) from the Credit Agreement
Effective Date through September 30, 1996, a rate equal to the Prime Rate as
it changed plus 3.0%; and (ii) on and after October 1, 1996, the rate
indicated by the following chart:
DETERMINING RATIO STATED RATE
--------------- -----------
Over 3.0X Prime Rate +3.0%
1.5X to 3.0X Prime Rate +2.0%
1.0X top 1.4X Prime Rate +1.5%
Less than 1.0X Prime Rate +1.0%
The "DETERMINING RATIO" on any date shall be the ratio (determined for
both Borrowers combined, as of the end of the most recently ended calendar
month) of (i) Indebtedness to (ii) Annualized EBDITA (Adjusted). Annualized
EBDITA (Adjusted) shall mean (i) for the first 11 months after the Credit
Agreement Effective Date, Borrowers' average combined monthly EBDITA
(Adjusted) (as correctly reported in Borrowers' Compliance Certificates in
the form of Exhibit C of the Credit Agreement) for all months reported to the
date the ratio is determined, times twelve; and (ii) thereafter, the sum of
Borrowers' combined monthly EBDITA (Adjusted) (as correctly reported) for the
12 months preceding the date the ratio is determined.
"PRIME RATE" means that rate as determined from time to time by Bank as
being its prime rate in effect at its principal office in New York City.
Without notice to Borrowers or any other Person, the Prime Rate shall change
automatically from time to time as and in the amount by which said prime rate
shall fluctuate with each such change to be effective as of the date of each
change in such prime rate. THE PRIME RATE IS A REFERENCE RATE AND DOES NOT
NECESSARILY REPRESENT THE LOWEST OR BEST RATE. BANK MAY MAKE LOANS AT RATES
OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE.
<PAGE>
This Note is the Revolving Credit Note described in Section 1.1 of the
Credit Agreement (Borrowing Base) between Borrowers and Bank dated as of May
20, 1996 (as amended, restated and supplemented from time to time, the
"Credit Agreement" and "Agreement") and sometimes referred to therein as the
Note. Capitalized terms used in this Note have the meanings used in the
Agreement.
Accrued and unpaid interest shall be due and payable monthly, beginning
on June 30, 1996, and continuing on the last day of each month thereafter and
at Termination Date when all unpaid principal and accrued and unpaid interest
shall be finally due and payable. Borrowers must make the payments required
by Sections 1.3, 1.4 and 1.5 of the Agreement.
Interest shall be computed on the basis of the actual number of days
elapsed and a year comprised of 360 days, unless such calculation would
result in a usurious interest rate, in which case interest will be calculated
on the basis of a 365 or 266 day year, as applicable.
All past-due principal and, as permitted by applicable law, interest on
this Note, shall, at Bank's option, bear interest at the Highest Lawful Rate,
or if applicable law shall not provide for a maximum nonusurious rate of
interest, at a rate per annum equal to eighteen percent (18%).
The unpaid principal balance of this Note at any time shall be the total
amounts advanced by Bank, less the amount of all payments of principal.
Absent manifest error, the records of Bank shall be conclusive as to amounts
owed. Subject to the terms and conditions of the Agreement, Borrowers may use
all or any part of the credit provided for herein at any time before the
Termination Date.
Time is of the essence. Borrowers may at any time pay the full amount or
any part of this Note without the payment of any premium or fee. At Bank's
sole option, all payments may be applied to accrued interest, to principal,
or to both.
If any Event of Default occurs, then Bank may exercise any and all
rights and remedies under the Loan Documents, at law, in equity or otherwise.
Each and all Obligators severally waive notice, demand, presentment for
payment, notice of nonpayment, notice of intent to accelerate, notice of
acceleration, protest, notice of protest, and the filing of suit and
diligence in collecting this Note and all other demands and notices, and
consent and agree that their liabilities and obligations shall not be
released or discharged by any or all of the following, whether with or
without notice to them or any of them, and whether before or after the stated
maturity hereof: (i) extensions of the time of payment; (ii) renewals; (iii)
acceptances of partial payments; (iv) releases or substitutions of any
collateral or any Obligor; and (v) failure, if any, to perfect or maintain
perfection of any security interest in any collateral. Each Obligor agrees
that acceptance of any partial payment shall not constitute a waiver.
Bank and any subsequent owner or holder hereof reserves the right, in
its sole discretion, without notice to Borrowers, to sell participations or
assign its interest or both, in all or any part of this Note. For purposes of
this Note, any assignee or subsequent holder of this Note will be considered
the "Bank," and each successor to each Borrower will be considered a
"Borrower."
<PAGE>
IN WITNESS WHEREOF, Borrowers have executed this Note effective as of the
Effective Date.
BORROWER: 1st TECH CORPORATION
By: /s/ GARY PANKONIEN
---------------------------------------------
Typed Name:
-------------------------------------
Title:
------------------------------------------
BORROWER: DARKHORSE SYSTEMS, INCORPORATED
By: /s/ GARY PANKONIEN
---------------------------------------------
Typed Name:
-------------------------------------
Title:
------------------------------------------
BANK: CHEMICAL BANK
By: /s/ DAVID BONHAM
---------------------------------------------
Typed Name: David Bonham
-------------------------------------
Title: Vice President
------------------------------------------
<PAGE>
Exhibit 10.3
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
TANISYS TECHNOLOGY, INC.
AND
TANISYS ACQUISITION CORP.
AND
1ST TECH CORPORATION
AND
GARY W. PANKONIEN
Dated as of April 9, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Conversion of Shares . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 Articles of Incorporation and By-Laws of
the Surviving Corporation . . . . . . . . . . . . . . . . . 2
Section 1.4 Surrender and Exchange of Tech Common Stock. . . . . . . . . 2
Section 1.5 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6 No Further Transfers . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
OF TECH AND THE OWNER. . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Organization; Qualification. . . . . . . . . . . . . . . . . 4
Section 2.2 Authority Relative to This Agreement . . . . . . . . . . . . 4
Section 2.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 No Subsidiaries; Absence of Certain Agreements . . . . . . . 5
Section 2.5 Governmental Consents and Approvals. . . . . . . . . . . . . 5
Section 2.6 No Violations. . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.7 Financial Statements . . . . . . . . . . . . . . . . . . . . 6
Section 2.8 Title to and Condition of Assets and Property. . . . . . . . 6
Section 2.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.10 Absence of Changes . . . . . . . . . . . . . . . . . . . . . 7
Section 2.11 Undisclosed Liabilities; Commitments . . . . . . . . . . . . 7
Section 2.12 Environmental Matters. . . . . . . . . . . . . . . . . . . . 7
Section 2.13 Pension Matters. . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.14 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.15 Information for Filings. . . . . . . . . . . . . . . . . . . 9
Section 2.16 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.17 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.18 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . 10
Section 2.19 Surety and Guarantor Obligations . . . . . . . . . . . . . . 11
Section 2.20 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.21 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.22 Compliance with Law; Conduct . . . . . . . . . . . . . . . . 11
Section 2.23 Regulatory Compliance. . . . . . . . . . . . . . . . . . . . 11
Section 2.24 Investment Company Act, Etc. . . . . . . . . . . . . . . . . 11
Section 2.25 Public Utility Holding Company Act . . . . . . . . . . . . . 11
Section 2.26 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.27 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.28 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.29 Items Reflected in Tech's Disclosure Schedule. . . . . . . . 12
Section 2.30 Bank Accounts; Powers of Attorney. . . . . . . . . . . . . . 13
Section 2.31 Product and Service Warranties . . . . . . . . . . . . . . . 13
Section 2.32 Transactions with Affiliates . . . . . . . . . . . . . . . . 13
Section 2.33 Corrupt Practices. . . . . . . . . . . . . . . . . . . . . . 13
Section 2.34 Current Revenue and Net Income . . . . . . . . . . . . . . . 14
Section 2.35 Absence of Bad Debt or Uncollectible Accounts. . . . . . . . 14
Section 2.36 No Default . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.37 Copies of Documents; Accuracy of Information Furnished . . . 14
Section 2.38 Subchapter "S" Election . . . . . . . . . . . . . . . . . . 14
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Page
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF TANISYS. . . . . . . . . . 14
Section 3.1 Organization; Qualification. . . . . . . . . . . . . . . . . 15
Section 3.2 Authority Relative to This Agreement . . . . . . . . . . . . 15
Section 3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.4 Validity of Shares to Be Issued. . . . . . . . . . . . . . . 15
Section 3.5 Governmental Consents and Approvals. . . . . . . . . . . . . 16
Section 3.6 No Violations. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.7 Financial Statements; British Columbia Securities Commission
Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.9 Information for Filings. . . . . . . . . . . . . . . . . . . 17
Section 3.10 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.11 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.12 Copies of Documents; Accuracy of Information Furnished . . . 17
ARTICLE 4 ADDITIONAL REPRESENTATIONS & WARRANTIES OF THE OWNER
[AND ALL FUTURE OWNER(S) PURSUANT TO
SECTIONS 6.1 (f) and (h)]. . . . . . . . . . . . . . . . . . 17
Section 4.1 Title to Shares. . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.2 Authority Relative to This Agreement . . . . . . . . . . . . 18
Section 4.3 Certain Transactions or Arrangements . . . . . . . . . . . . 18
Section 4.4 Representations. . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.5 Copies of Documents; Accuracy Information Furnished. . . . . 19
ARTICLE 5 ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . 19
Section 5.1 Conduct of Business of Tech. . . . . . . . . . . . . . . . . 19
Section 5.2 Forbearances by Tech . . . . . . . . . . . . . . . . . . . . 19
Section 5.3 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.4 Investigation of Business and Properties . . . . . . . . . . 20
Section 5.5 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.6 Public Announcements . . . . . . . . . . . . . . . . . . . . 21
Section 5.7 Agreement to Consummate. . . . . . . . . . . . . . . . . . . 21
Section 5.8 Tech Shareholder's Approval. . . . . . . . . . . . . . . . . 22
Section 5.9 Tanisys Acquisition Shareholder's Approval . . . . . . . . . 22
Section 5.10 Agreement Regarding Brokers. . . . . . . . . . . . . . . . . 22
Section 5.11 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.12 Representations, Warranties and Agreements; Survival . . . . 22
Survival. . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.13 Indemnification by Tech and Owner and Security Escrow. . . . 23
Section 5.14 Indemnification by Tanisys . . . . . . . . . . . . . . . . . 24
Section 5.15 Resale Limitations . . . . . . . . . . . . . . . . . . . . . 24
Section 5.16 Registration Statement . . . . . . . . . . . . . . . . . . . 24
Section 5.17 Appointed Directors. . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 6 CONDITIONS PRECEDENT TO CLOSING. . . . . . . . . . . . . . . 26
Section 6.1 General Conditions . . . . . . . . . . . . . . . . . . . . . 26
Section 6.2 Conditions to Closing in Favor of Tech . . . . . . . . . . . 27
Section 6.3 Conditions to Closing in Favor of Tanisys. . . . . . . . . . 29
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Page
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . 30
Section 7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . 31
Section 7.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 31
Section 8.1 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.2 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . 33
Section 8.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.5 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.9 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
LIST OF EXHIBITS
Exhibit "A" Delaware Articles of Merger
Exhibit "B" Texas Articles of Merger
Exhibit "C" Escrow Agreement
Exhibit "D" Opinions of Counsel for Tanisys
Exhibit "E" Employment Agreement
Exhibit "F" Opinion of Counsel for Tech
Exhibit "G" Restricted Stock Investment Letter
LIST OF SCHEDULES
Schedule "A" Tech's Disclosure Schedule
Schedule "B" Tanisys' Disclosure Schedule
Schedule "C" Owner's Disclosure Schedule
iv
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of April 9,
1996, by and between TANISYS TECHNOLOGY, INC., a Wyoming corporation
("Tanisys"), TANISYS ACQUISITION CORP., a Delaware corporation and wholly-owned
subsidiary of TANISYS ("Tanisys Acquisition" and sometimes referred to as the
"Surviving Corporation"), 1ST TECH CORPORATION, a Texas corporation ("Tech"),
and GARY W. PANKONIEN (the "Owner").
RECITALS OF THE PARTIES:
WHEREAS, the respective Boards of Directors of Tanisys and Tech have
approved the merger (the "Merger") of Tech with and into Tanisys Acquisition in
accordance with the laws of the States of Texas and Delaware and the provisions
of this Agreement; and
WHEREAS, Tanisys, Tech and the Owner desire to make certain
representations, warranties and agreements in connection with, and to establish
various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 THE MERGER. Pursuant to the terms of this Agreement, Tech
will be merged with and into Tanisys Acquisition pursuant to the laws of the
States of Texas and Delaware in the manner and with the effect set forth herein.
Subject to the fulfillment of the conditions precedent contained in Article 6
of this Agreement, an executed Articles of Merger, the form of which is attached
as EXHIBIT "A" hereto, will be filed with the Secretary of State of the State of
Delaware and an executed Articles of Merger, the form of which is attached as
EXHIBIT "B" hereto, will be filed with the Secretary of State of the State of
Texas as soon as practical following the time when the last of the conditions
precedent set forth in Article 6 of this Agreement shall have been fulfilled or
waived in writing in accordance with such Article, or such earlier or later date
as may be mutually agreeable to Tanisys and Tech.
Section 1.2 CONVERSION OF SHARES. Upon the latter of the issuance of a
Certificate of Merger by the Secretary of State of the State of Delaware or the
issuance of a Certificate of Merger by the Secretary of State of the State of
Texas (the "Effective Date"), the issued and outstanding shares of common stock,
no par value per share, of Tech (the "Tech Common Stock"), subject to the
fulfillment of the conditions precedent set forth under Article 6 herein, and
the applicable statutory provisions with respect to appraisal rights, any
applicable withholding requirements and adjustment as herein provided, shall be
converted into and become, and there shall be paid and
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issued, in exchange for the Tech Common Stock an aggregate of 3,100,000 shares
of Tanisys common stock, no par value per share (the "Tanisys Common Stock"),
such that each share of Tech Common Stock outstanding on the Effective Date, not
to exceed 3,100,000 shares of Tech Common Stock in the aggregate, is exchanged
for one (1) share (the "Exchange Ratio") of Tanisys Common Stock, with any
excess shares of Tech Common Stock resulting in a reduction in the per-share
Exchange Ratio. As used in this Agreement, "Merger Consideration" shall mean
the aggregate of 3,100,000 shares of Tanisys Common Stock exchanged for Tech
Common Stock in the Merger at the Exchange Ratio. Each share of Tech Common
Stock held in the treasury of Tech or by a wholly-owned subsidiary of Tech shall
be cancelled as of the Effective Date and no portion of the Merger Consideration
shall be payable with respect thereto. The Merger Consideration shall be
reduced by the amount otherwise payable or issuable to holders of Tech who
exercise dissenters' rights, if any, in connection with the Merger based upon
such shareholder's ownership of Tech Common Stock outstanding on the Effective
Date. The Exchange Ratio shall be subject to appropriate adjustment in the
event of a stock split, stock dividend or recapitalization subsequent to the
date of this Agreement applicable to shares of Tech Common Stock or Tanisys
Common Stock held of record on or before the Effective Date.
Section 1.3 ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION. The Certificate of Incorporation of Tanisys Acquisition as in
effect on the Effective Date of the Merger shall be the Certificate of
Incorporation of the Surviving Corporation until same shall be amended in
accordance with law and the Certificate of Incorporation, except that after the
Merger the Surviving Corporation shall operate as 1st Tech Corporation.
The By-Laws of Tanisys Acquisition as in effect on the Effective Date of
the Merger shall be the By-Laws of the Surviving Corporation until same shall
thereafter be altered, amended or repealed in accordance with law, the
Certificate of Incorporation of the Surviving Corporation or said By-Laws.
The directors of the Surviving Corporation at the Effective Date of the
Merger shall be as follows: Mark C. Holliday and Gary W. Pankonien. The
officers of the Surviving Corporation at the Effective Date of the Merger shall
be as follows: President, _______________; Vice President, _______________;
Secretary, _______________; and Treasurer, _______________.
Section 1.4 SURRENDER AND EXCHANGE OF TECH COMMON STOCK.
(a) After the Effective Date, each holder of an outstanding certificate or
certificates theretofore representing shares of Tech Common Stock (the
"Tech Certificates") shall surrender such Tech Certificates to Tanisys
or to such agent or agents (the "Exchange Agent") as may be designated
by Tanisys and shall receive in exchange therefor, upon satisfaction
of customary delivery requirements and subject to applicable law with
respect to the exercise of appraisal rights, certificates representing
the number of whole shares of Tanisys Common Stock into which shares
of Tech Common Stock have been converted, together with a check
representing the cash adjustments for fractional shares, if any.
2
<PAGE>
(b) If any certificate evidencing shares of Tanisys Common Stock is to be
issued in a name other than that in which the Tech Certificate
surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Tech Certificate so
surrendered shall be properly endorsed and otherwise be in proper form
for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other taxes required by reason of the
issuance of a certificate for shares of Tanisys Common Stock in any
name other than that of the registered holder of the Tech Certificate
surrendered or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(c) Until so surrendered and exchanged, each outstanding Tech Certificate
after the Effective Date shall be deemed for all corporate purposes
(other than voting and the payment of dividends or other distributions
as described below) to evidence the number of whole shares of Tanisys
Common Stock into which the shares of Tech Common Stock represented by
such Tech Certificates are to be converted pursuant to Section 1.2 of
this Agreement; provided, however, that no dividends or other
distributions, if any, in respect to such shares of Tanisys Common
Stock, declared after the Effective Date and payable to holders of
record after the Effective Date, shall be paid to the holders of any
unsurrendered Tech Certificates until such Tech Certificates are
surrendered. Subject to the effect, if any, of applicable law, after
the surrender and exchange of the Tech Certificates, the record
holders thereof on the date of exchange shall be entitled to receive
any such dividends or other distributions without interest thereon,
which theretofore have become payable with respect to the number of
whole shares of Tanisys Common Stock for which such Tech Certificate
was exchangeable. Holders of any unsurrendered Tech Certificates
shall not be entitled to vote until such unsurrendered Tech
Certificates are exchanged pursuant to this Section 1.4. Holders of
Tech Common Stock who exercise appraisal rights in accordance with the
provisions of the Texas Business Corporation Act (the "Texas Act")
shall only be entitled to receive the fair value of their shares of
Tech Common Stock in accordance with Texas Act. Such holders shall
not be entitled to any dividends or other distributions payable on
and after the Effective Date to holders of Tanisys Common Stock with
respect to the shares involved regardless of whether such holders have
received payment for their shares.
(d) Tanisys may, without notice to any person, terminate all exchange
agencies after thirty (30) days following the Effective Date of the
Merger, and thereafter all exchanges, payments and notices provided
for in this Agreement as being made to or by the Exchange Agent shall
be made to or by Tanisys or its transfer agent.
Section 1.5 FRACTIONAL SHARES. No fractional share certificates of
Tanisys Common Stock shall be issued in connection with the conversion of shares
of Tech Common Stock in the Merger, nor will any outstanding fractional share
interest entitle the owner thereof to vote, to receive dividends or to exercise
any other right of a shareholder of Tanisys. In lieu of any such fractional
shares, any holder of Tech Common Stock shall, upon surrender thereof, be paid
in cash the value of each such fraction, which for this purpose shall be the
product of such fraction multiplied by the
3
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average of the per-share closing prices of Tanisys Common Stock on the Vancouver
Stock Exchange (the "VSE") for the twenty (20) trading days immediately
preceding the date that is ten (10) days prior to the Effective Date, subject to
appropriate adjustment in the event of a stock split, stock dividend or
recapitalization applicable to shares of Tanisys Common Stock held of record on
or before the Effective Date to the extent not reflected in such sale prices.
Section 1.6 NO FURTHER TRANSFERS. On the Effective Date, the stock
transfer books of Tech shall be closed, and no further transfer of Tech Common
Stock shall thereafter be made.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
TECH AND THE OWNER
Except as expressly set forth in the Disclosure Schedule, which is attached
hereto as SCHEDULE "A," delivered to Tanisys by Tech and the Owner and
contemporaneously with the execution hereof ("Tech's Disclosure Schedule"), Tech
hereby represents and warrants to Tanisys, and Owner, to his best knowledge and
belief, hereby represents and warrants to Tanisys as follows, regardless of what
investigations, if any, Tanisys shall have made prior hereto (for the purpose of
this Article 2, "Material" or "Material Adverse Effect" shall mean an adverse
effect in an amount in excess of $10,000):
Section 2.1 ORGANIZATION; QUALIFICATION. Tech is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Tech has full corporate power and authority to own and lease all of the
properties and assets it now owns and leases and to carry on its business as now
being conducted. Tech is duly qualified as a foreign corporation and is in good
standing to do business in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure so to qualify would not have a
Material Adverse Effect on the condition (financial or otherwise), business,
assets, liabilities, capitalization, financial position, operations, results of
operations or prospects of Tech. Tech has heretofore delivered to Tanisys
complete and correct copies of its Articles of Incorporation and By-Laws as such
are currently in effect.
Section 2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Tech has full corporate
power and authority to execute, deliver and perform this Agreement and, subject
to shareholder approval, to consummate the transactions contemplated hereby.
The execution and delivery by Tech of this Agreement, and the consummation of
the transactions contemplated hereby, have been duly and validly authorized by
the Board of Directors of Tech and, except for approval of the Merger by the
shareholder(s) of Tech, no other corporate proceedings on the part of Tech are
necessary with respect thereto. This Agreement has been duly and validly
executed and delivered by Tech and, subject to shareholder approval, constitutes
a legal, valid and binding obligation of Tech, enforceable against it in
accordance with its terms.
4
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Section 2.3 CAPITALIZATION. The authorized capital stock of Tech consists
of 10,000,000 shares of Tech Common Stock, no par value, of which, as of the
date hereof, 2,100,000 shares of Tech Common Stock are validly issued and
outstanding, fully paid and nonassessable, and upon the Effective Date, there
will be no more than 3,100,000 Tech Common Stock validly issued and outstanding,
fully paid and nonassessable. As of the date of this Agreement, there are no
shares of Tech Common Stock held in the treasury of Tech and there are no other
shares of the capital stock of Tech. As of the date hereof, except as disclosed
in Tech's Disclosure Schedule, there are no outstanding options, warrants,
rights or other commitments to issue or sell any shares of capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to acquire from Tech, any shares of its capital stock. No
shares of Tech's capital stock have been issued in violation of any preemptive
rights or applicable federal or state securities laws. Except pursuant to the
Texas Act, there are no restrictions, including but not limited to self-imposed
restrictions, on the retained earnings of Tech or on the ability of Tech to
declare and pay dividends. There are no outstanding obligations of Tech to
repurchase, redeem or otherwise acquire any capital stock or other securities of
Tech.
Section 2.4 NO SUBSIDIARIES; ABSENCE OF CERTAIN AGREEMENTS. Except as
disclosed in Tech's Disclosure Schedule, Tech does not have any Subsidiaries.
As used in this Agreement, "Subsidiary" or "Subsidiaries" with respect to any
corporation shall mean any other corporation of which at least a majority of the
securities having by their terms ordinary voting power to elect a majority of
the board of directors of such other corporation is at the time directly or
indirectly owned or controlled by such first corporation, or by such first
corporation and one or more of its Subsidiaries. Tech does not own or hold any
securities of, or any interest in, any other person or entity, nor is Tech
subject to any joint venture, partnership or other arrangement that is created
as a partnership for federal income tax purposes. Except as set forth in Tech's
Disclosure Schedule, there are no voting trusts or other agreements by and
between or among Tech, or any or all of its shareholders, whether or not Tech is
a party thereto, imposing any restrictions upon the transfer or voting of or
otherwise pertaining to the securities of Tech (including but not limited to the
Tech Common Stock) or the ownership thereof. Any and all such restrictions set
forth in Tech's Disclosure Schedule shall be duly complied with or effectively
waived as of the Effective Date.
Section 2.5 GOVERNMENTAL CONSENTS AND APPROVALS. Except as disclosed in
Tech's Disclosure Schedule, the execution, delivery and performance by Tech of
this Agreement and the consummation of the transactions contemplated hereby by
Tech require no consent, approval, order or authorization of, action by or in
respect of, or registration or filing with, any federal, state, municipal or
other governmental department, commission, board, bureau, agency,
instrumentality, court, or authority ("Governmental Body"), other than (a) the
filing of the Articles of Merger with respect to the Merger with the Secretary
of State of the States of Texas and Delaware; (b) any applicable filings with
and consents and/or approvals of state security commissions under state
securities laws or similar laws; and (c) such other consents, approvals,
permits, authorizations, notifications or filings, the failure of which to
obtain or make would not have a Material Adverse Effect on Tech or materially
adversely affect the ability of Tech to perform its obligations set forth herein
or to consummate the transactions contemplated hereby.
5
<PAGE>
Section 2.6 NO VIOLATIONS. Except as disclosed in Tech's Disclosure
Schedule, the execution, delivery and performance of this Agreement by Tech, the
consummation by Tech of the transactions contemplated hereby or compliance by
Tech with any of the provisions hereof does not and will not (a) conflict with
or result in any breach or violation of any provision of the Articles of
Incorporation or By-Laws of Tech; (b) result in a default, or give rise to any
right of termination, cancellation or acceleration or loss of any material
benefit (with or without the giving of notice or lapse of time or both), or
require the consent, approval, waiver or other action by any person under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, trust (constructive or otherwise), agreement, lease (of real or
personal property) or other instrument or obligation to which Tech is a party or
by which Tech may be bound; (c) result in the creation or imposition of any
claim, lien, pledge, security interest, obligation, restriction or other
encumbrance on any of the property of Tech; or (d) violate any judgment, order,
writ, injunction, decree, statute, rule or regulation applicable to Tech.
Section 2.7 FINANCIAL STATEMENTS. The financial statements, financial
statement schedules and notes to such financial statements and schedules of Tech
(the "Tech Financial Statements") for the year ended December 31, 1995, and the
two (2) months ended February 29, 1996, are materially complete and correct and
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis except as noted in Tech's Disclosure Schedule, and
fairly present the information purported to be shown therein. All such the Tech
Financial Statements have been prepared from the books and records of Tech,
which accurately and fairly reflect the transactions and dispositions of the
assets of Tech. Tech does not have any liabilities, contingent or otherwise,
whether due or to become due, known or unknown, other than as indicated on the
latest balance sheet included in the Tech Financial Statements. Tech has
adequately funded all accrued employee benefit costs, and such funding is
reflected in the balance sheets included in the Tech Financial Statements.
Section 2.8 TITLE TO AND CONDITION OF ASSETS AND PROPERTY. Tech has good
and marketable title to any and all assets reflected in the Tech Financial
Statements currently owned and used in the operation of its business, and such
assets are free and clear of all liens, claims, charges, security interests,
options, or other title defects or encumbrances, except as set forth in the Tech
Financial Statements or in Tech's Disclosure Schedule. Tech's Disclosure
Schedule further sets forth a description of all real and personal property
currently leased or otherwise occupied or used but not owned by Tech, true,
correct and complete copies of which leases and other agreements, including all
amendments and modifications thereto, have previously been made available to
Tanisys. Each of the leases is a valid and binding obligation of the parties
thereto, and neither Tech nor the lessor thereunder is in default under, and no
condition exists that with notice or lapse of time or both would constitute a
default under, any such lease. Tech enjoys peaceful and undisturbed possession
of its interests under all such leases. Except as set forth in Tech's
Disclosure Schedule, Tech does not own any real property or any interest
therein. All personal property set forth in Tech's Disclosure Schedule and
reflected in the Tech Financial Statements is owned by Tech and, except as set
forth in Tech's Disclosure Schedule, all property owned or leased by Tech and
reflected in the Tech Financial Statements or located on the premises of Tech,
is in good operating condition and repair, ordinary wear and tear excepted, is
suitable for the use to which the same is customarily put, is free from defects
other than minor defects that do not interfere with or detract from the use or
6
<PAGE>
value thereof and is merchantable and not obsolete and is of a quality and
quantity presently usable in the ordinary course of the operation of the
business of Tech and is all of the assets currently used or needed in said
business. The buildings, structures, improvements, assets and operations of
Tech materially conform with all applicable restrictive covenants, deeds,
leases, and restrictions and all applicable federal, state and local laws,
ordinances, rules and regulations, including, but not limited to, those relating
to zoning and working conditions.
Section 2.9 LITIGATION. Except as disclosed in Tech's Disclosure
Schedule, there is no action, order, claim, suit, proceeding, litigation,
investigation, inquiry, review or notice ("Proceeding") pending or threatened
against, relating to or affecting Tech, or any of its properties or assets or
any officer or director of Tech, relating to Tech, at law or in equity, before
any Governmental Body, nor to the best of Tech's knowledge is there any basis
for asserting the foregoing. Neither Tech nor any of its properties or assets
is specifically by name subject to any currently existing order, judgment, writ,
decree or injunction. Except as disclosed in Tech's Disclosure Schedule, Tech
is not subject to any currently existing Proceeding by any Governmental Body.
Section 2.10 ABSENCE OF CHANGES. Since February 29, 1996, except as
disclosed in Tech's Disclosure Schedule, the business of Tech has been operated
in the ordinary course consistent with past practice, and there has not been (a)
any material adverse change in the business, operations, properties, condition
(financial or otherwise), prospects, assets or liabilities of Tech (contingent
or otherwise, whether due or to become due, known or unknown); (b) any dividend
declared or paid or distribution made on the capital stock of Tech, or any
capital stock of Tech redeemed or repurchased; (c) any occurrence of long-term
debt by Tech; (d) any salary, bonus or compensation increases to any officers,
employees or agents of Tech; (e) any pending or threatened litigation or
disputes affecting Tech; nor (f) any other change in the nature of, or the
manner of conducting, the business of Tech, other than changes that neither have
had, nor reasonably may be expected to have, a Material Adverse Effect on the
business of Tech.
Section 2.11 UNDISCLOSED LIABILITIES; COMMITMENTS. Except as disclosed in
the Tech Financial Statements or in Tech's Disclosure Schedule, Tech does not
have any debts, guaranties, liabilities or obligations, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, and there
is no basis for the assertion against Tech of any such debt, guaranty, liability
or obligation (a) that was not accrued or reserved against in the Tech Financial
Statements; (b) that was incurred after February 29, 1996, other than in the
ordinary course of business; or (c) that in the aggregate has or can reasonably
be expected to have a Material Adverse Effect on Tech. Tech has in all material
respects performed all contracts, agreements and commitments to which it is a
party, and there is not under any such contracts, agreements or commitments any
existing default or event of default or event which with notice or lapse of time
or both would constitute a default.
Section 2.12 ENVIRONMENTAL MATTERS. Tech has duly complied with, and its
business, operations, assets, equipment, leaseholds and other facilities are in
compliance with, the provisions of all federal, state and local environmental,
health and safety laws, codes and ordinances and all rules and regulations
promulgated thereunder, governing (a) air emissions, (b) discharges to surface
water or ground water, (c) solid or liquid waste disposal, (d) the use, storage,
generation, handling,
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transport, discharge, release, or disposal of toxic or hazardous substances or
wastes, or (e) other environmental, health or safety matters, including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act of 1980, 42 U.S.C. Sections 601 ET SEQ., as amended, the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 ET SEQ., as amended, the
Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 ET SEQ., as
amended, the Clean Air Act, 42 U.S.C. Sections 7401 ET SEQ., as amended, the
Occupational Safety and Health Act of 1970, as amended ("OSHA"), the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, and other
environmental conservation or protection laws. There is no Proceeding pending
or threatened against Tech relating to the environment nor is there a basis for
the assertion against Tech of any Proceeding. Except as disclosed in Tech's
Disclosure Schedule, Tech has not received notice of, and does not know of, any
past, present or future events, conditions, facts, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance or that might constitute a violation of any
federal, state or local environmental, health or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder, which relate to
the use, ownership or occupancy of the property or the operation of the business
of Tech.
Section 2.13 PENSION MATTERS. During the past five years, neither Tech
nor any of its former Subsidiaries has maintained or contributed to any defined
benefit pension plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any multiemployer plans
(as defined in Section 3(37)(A) of ERISA). Each employee benefit plan (as
defined in Section 3(3) of ERISA) (each, an "Employee Benefit Plan" or "Plan")
maintained for employees of Tech or any of its former Subsidiaries to which Tech
or any of its former Subsidiaries have contributed and any related trust
agreement, annuity contract or any other funding or implementing instrument
complies currently and has complied in the past, as to form, operation and
administration, with the provisions of ERISA, as amended, and all other
applicable laws, rules and regulations and with the Internal Revenue Code of
1986, as amended (the "Code"), where required in order to be tax-qualified under
Section 401(a) or 403(a) and 501(a) of the Code, and no event has occurred that
is reasonably likely to give rise to disqualification of any such Plan under
said Sections. All necessary governmental approvals for the Employee Benefit
Plans have been obtained; each Employee Benefit Plan that is subject thereto
meets and has met at all times the minimum funding standards of Section 302 of
ERISA, Section 412 of the Code and any other applicable law, and no accumulated
funding deficiency, whether or not waived, exists with respect to any such Plan;
each Employee Benefit Plan that is an employee pension benefit plan (as defined
in Section 3(2)(A) of ERISA) has been duly authorized by the Board of Directors
of Tech and a favorable determination as to the qualification under the Code of
each such employee pension benefit plan has been made by the Internal Revenue
Service.
Section 2.14 LABOR MATTERS. Except as set forth on Tech's Disclosure
Schedule, Tech does not have any obligations, contingent or otherwise, under any
employment or consulting agreement, or collective bargaining agreement or other
contract with a labor union or other labor or employee group. There are no
efforts presently being made or threatened by or on behalf of any labor union
with respect to the employees of Tech. Tech is in material compliance with all
federal, state or other applicable laws, domestic or foreign, regarding
employment and employment practices, terms and conditions of employment and
wages and hours, and has not and is not engaged in any unfair
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labor practice. No unfair labor practice complaint against Tech is pending or
threatened before the National Labor Relations Board. There is no labor strike,
dispute, slowdown or stoppage pending or threatened against or involving Tech.
No representation question exists respecting the employees of Tech. No
employment-related grievance or internal or informal complaint or liability with
respect to the termination of any employee, consultant or agent exists. No
arbitration proceeding arising out of or under any collective bargaining
agreement is pending, and no claim therefor has been asserted. No collective
bargaining agreement is currently being negotiated by Tech, and Tech has not
experienced any material labor difficulty. There has not been, and there will
not be, any adverse change in relations with employees of Tech as a result of
any announcement or consummation of the transactions contemplated by this
Agreement. No employee of Tech is in violation of any term of any employment
contract, or any other contract or agreement with or any restrictive covenant or
any other common law obligation to a former employer relating to the right of
any such employee to be employed by Tech because of the nature of the business
conducted or to be conducted by Tech or to the use of trade secrets or
proprietary information of others, and the employment of Tech's employees does
not subject Tech to liability in connection with such covenants or agreements.
There is neither pending nor threatened Proceedings with respect to any
contract, agreement, covenant or obligation referred to above, nor is there any
basis for asserting the foregoing.
Section 2.15 INFORMATION FOR FILINGS. None of the information supplied or
to be supplied by Tech for inclusion, or included, in any documents to be filed
with any regulatory authority in connection with the transactions contemplated
hereby will, at the respective times such documents are filed with any such
regulatory authority, be false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the information
therein not misleading.
Section 2.16 TAXES. All taxes, assessments and other governmental charges
that are due and payable, other than those presently payable without penalty or
interest, have been timely paid, and Tech has timely filed (and, through the
Effective Date, will timely file) all federal, state and other tax returns
required by law to be filed by it. All such tax reports or returns are true,
complete and correct in all respects with regard to Tech for the periods covered
thereby. Tech is not delinquent in the payment of any material tax, assessment
or governmental charge, there is no tax deficiency asserted against Tech, and,
except as provided above, there is no unpaid assessment, deficiency or
delinquency in the payment of any of the taxes of Tech or, to the best knowledge
of Tech, any proposal for additional taxes or any violation of any federal,
state, local or foreign tax law that could be asserted by any taxing authority,
nor is there any basis for asserting such authority. There are no tax liens
upon any properties or assets of Tech. Except as disclosed in Tech's Disclosure
Schedule, no Internal Revenue Service, state or local, audit, investigation or
Proceeding of Tech is pending or threatened, and the results of any completed
audits are properly reflected in the Tech Financial Statements. Tech has not
granted any extension to any taxing authority of the limitation period during
which any tax liability may be asserted. Tech has not committed any material
violation of any federal, state, local or foreign tax laws. All monies required
for the payment of taxes not yet due and payable with respect to the operations
of Tech through and including the Merger date have been approved, reserved
against and entered upon the books and the Tech Financial Statements. All
monies required to be withheld by Tech from employees or collected from
customers for income taxes, social security and unemployment
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insurance taxes and sales, excise and use taxes, and the portion of any such
taxes to be paid by Tech to governmental agencies or set aside in accounts for
such purpose have been approved, reserved against and entered upon the books and
the Tech Financial Statements.
Section 2.17 INVENTORY. Except as disclosed on Tech's Disclosure
Schedule, the amount of inventory, as reflected in the Tech Financial
Statements, is stated at the lower of cost or market with appropriate reserves
taken for slow moving and obsolete items. No item included in the inventories,
materials or supplies of Tech is pledged as collateral or held on consignment
from others. All such inventory items are standard quality goods saleable in
the ordinary course of business.
Section 2.18 PROPRIETARY RIGHTS. Tech owns or validly licenses the right
to use all technology, proprietary information, know-how, ideas (patented or
unpatented), data, licenses, customer lists, processes, formulas, trade secrets,
telephone numbers, computer software, computer programs, designs, inventions,
trademarks, trademark registrations and applications therefor, registered and
common law copyrights, and registered copyright applications, trade names
(whether or not registered or registrable), service marks, service mark
registrations and applications therefor (collectively, the "Proprietary Rights")
necessary to conduct the business of Tech as the business is presently being
conducted. Tech's Disclosure Schedule sets forth a complete and correct list
(including, where applicable, registration numbers and dates of filing, renewal
and termination) of all Proprietary Rights. Tanisys and each of its
Subsidiaries shall have at all times after the Effective Date the exclusive
right to use the Proprietary Rights necessary to continue to conduct the
business of Tech as the business is presently being conducted. No consent of
any third party will be required for the use of the Proprietary Rights by
Tanisys or any of its Subsidiaries after the Effective Date. No claim or
opposition has been asserted by any person or entity to the ownership of or
Tech's right to use any of the Proprietary Rights or challenging or questioning
the validity or effect of any license or agreement relating thereto, and there
is no valid basis for any such claim or assertion. Tech has ownership of, or
valid licenses to use all of, the Proprietary Rights. Each of the Proprietary
Rights is valid and subsisting, has not been cancelled, abandoned or otherwise
terminated and, if applicable, has been duly asserted, registered and filed.
The Proprietary Rights owned by Tech are owned free and clear of all liens,
charges or encumbrances. Tech has taken all reasonable steps to establish and
preserve its ownership of all Proprietary Rights. Use by Tanisys or any of its
Subsidiaries of the Proprietary Rights will not, and the conduct of the business
as presently conducted does not, infringe on or violate the rights of any other
person or entity. No Proceedings have been instituted, are pending or are
threatened that challenge or oppose the rights of Tech with respect to any of
the Proprietary Rights. Tech has not received any notice or inquiry from any
person or entity of any alleged infringement by Tech. Tech has not given and is
not bound by any agreement of indemnification in connection with any Proprietary
Rights or product or service sold or performed by Tech. Tech is not aware of
any infringement by others of its Proprietary Rights. Set forth in Tech's
Disclosure Schedule is a list of all confidentiality agreements entered into by
Tech relating to the Proprietary Rights and all such contracts are in full force
and effect.
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Section 2.19 SURETY AND GUARANTOR OBLIGATIONS. Except as set forth in
Tech's Disclosure Schedule, Tech is not obligated as surety, indemnitor nor
guarantor under any surety or similar bond or other contract issued and has not
entered into any agreement to assure payment, performance or completion of
performance of any undertaking or obligation of any person or entity.
Section 2.20 NO BROKERS. Except as set forth in Tech's Disclosure
Schedule, Tech has not employed any broker, agent or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
Section 2.21 RECORDS. The respective minute books, books of account,
stock record books and other records of Tech, all of which have been or will be
made available to Tanisys, contain accurate and complete records of all
corporate actions of the shareholder(s) and Board of Directors (and committees
thereof) during the periods of time in which such minute books were maintained.
Section 2.22 COMPLIANCE WITH LAW; CONDUCT. Tech has not violated or
failed to comply with any statute, law, ordinance, regulation, rule or order of
any foreign, federal, state or local government or agency or any other
Governmental Body, or any judgment, order, writ, injunction or decree of any
court or agency, applicable to its business or operation, except where such
violations or failure to comply would not have a Material Adverse Effect on
Tech. Tech's business is in material conformity with all federal, state and
local energy, public utility, health and OSHA requirements and all other
federal, state and local governmental and regulatory requirements. Tech has all
permits, licenses, authorizations, consents, approvals and franchises from
governmental agencies required to conduct its business as now being conducted.
Section 2.23 REGULATORY COMPLIANCE. Tech complies in all material
respects with all state and federal rules and regulations governing its
business, including, but not limited to, the terms and conditions within each
order granting jurisdictional authority and all related tariffs.
Section 2.24 INVESTMENT COMPANY ACT, ETC. Tech is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or an "investment adviser"
within the meaning of the Investment Advisers Act of 1940, as amended.
Section 2.25 PUBLIC UTILITY HOLDING COMPANY ACT. Tech is not a "public
utility," a "holding company," an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or a "public utility" within
the meaning of the Federal Power Act, as amended.
Section 2.26 INSURANCE. Contained in Tech's Disclosure Schedule is a
complete and accurate description of all insurance maintained by Tech with
respect to the assets, properties and business of Tech. All of the insurable
properties of Tech are insured for their benefit under valid and enforceable
policies, issued by insurers rated AA or better by A.M. Best Company. The
insurance maintained by Tech is in amounts and of a nature as is customarily
maintained by persons conducting operations similar to those of Tech.
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Section 2.27 RECEIVABLES. Tech's Disclosure Schedule contains a complete
and accurate list of all Tech's receivables (including accounts receivables,
loan receivables and advances) at February 29, 1996, including all liens and
encumbrances attached to Tech's Disclosure Schedule, showing the name of each
account debtor and the amount due from each by invoice number and date. All of
such accounts receivable and all accounts receivable since the date thereof have
arisen in the ordinary course of business for products delivered or services
rendered. Tech is not aware of any event or condition with respect to a
specific customer that causes it to believe that any such receivable will not be
collected in full in due course without resort to litigation and will not be
subject to counterclaim or setoff. The reserves for doubtful accounts reflected
in the Tech Financial Statements have been determined in accordance with
generally accepted accounting principles and past practice consistently applied
and adequately provide for all uncollectible receivables.
Section 2.28 ACCOUNTS PAYABLE. Tech's Disclosure Schedule contains a
complete and accurate list of all Tech's accounts payable at February 29, 1996,
showing the name of each account creditor and the amount due to each by invoice
number and date.
Section 2.29 ITEMS REFLECTED IN TECH'S DISCLOSURE SCHEDULE. Tech's
Disclosure Schedule contains a complete and accurate list or brief description
of (a) all current or pending contracts, commitments and leases (of real or
personal property), written or otherwise, between Tech and any party that
involve, in the aggregate, the payment or receipt by Tech of more than $10,000,
which cannot be cancelled without penalty upon thirty (30) days' notice, or
which otherwise are material to Tech; (b) all of the Proprietary Rights; (c) all
employee benefit programs (including but not limited to medical, profit-sharing
or pension plans), employee bonus and incentive compensation arrangements and
accrued and unused vacation time as of December 31, 1995, of Tech; (d) any
compensation, noncompetition, severance, consulting, or confidentiality
agreements between Tech and any of Tech's executive officers for the last two
fiscal years and at present; (e) the number and job category of all current
employees of Tech, including with respect to key employees, their names, date of
employment, current compensation (including sales commissions) and date and
amount of last increase in compensation; (f) all capital assets of Tech with a
book value greater than $10,000, setting forth any liens or restrictions
thereon; (g) federal and state income tax returns for the last three fiscal
years; (h) a list of all leases, contracts or agreements for which consents of
any private persons or public authorities would be required (citing the
section(s) thereof requiring such consents) for the consummation of the
transactions contemplated hereby, or for the preventing of any termination of
any material right, privilege, license or agreement of, or any loss or
disadvantage to, Tech or Tanisys upon consummation of the transactions
contemplated hereby; (i) all governmental licenses and permits relating to any
of Tech's operations; (j) any arrangements or agreements of Tech with its
competitors; and (k) the twenty largest customers of Tech and the twenty largest
suppliers to Tech for the fiscal year ended December 31, 1995, and for the
period from January 1, 1996, to February 29, 1996. Tech has not received notice
of and does not have any knowledge or reason to believe that any customer listed
in Tech's Disclosure Schedule is seeking or presently intends to seek to
terminate its agreement with Tech or that any such customer will not renew its
existing agreement with Tech on the expiration date thereof on terms at least as
favorable to Tech as those currently in effect.
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Section 2.30 BANK ACCOUNTS; POWERS OF ATTORNEY. Tech's Disclosure
Schedule completely and accurately lists the name of each bank, brokerage firm
or other financial institution in which Tech has an account or possesses a safe
deposit box and sets forth the amount and nature of all cash and cash
equivalents contained therein at February 29, 1996. Tech's Disclosure Schedule
also lists the names of all persons authorized to draw thereon, or to have
access thereto or to authorize transactions therein, and the names of all
parties, if any, holding powers of attorney from Tech with respect thereto or
with respect to any other matter, and the account number of any such account.
Tech does not maintain any securities or commodity trading account or other
brokerage account.
Section 2.31 PRODUCT AND SERVICE WARRANTIES. Except as disclosed on
Tech's Disclosure Schedule, there is no claim against or liability of Tech on
account of product or service warranties or with respect to the manufacture,
sale or lease of products or performance of services, and there is no basis for
any such claim on account of products heretofore manufactured, sold or leased or
services performed that has not been accrued or reserved against in Tech's
Financial Statements in accordance with generally accepted accounting
principles.
Section 2.32 TRANSACTIONS WITH AFFILIATES. Except as set forth in Tech's
Disclosure Schedule, Tech has not engaged in any loans, leases, contracts or
other transactions with any director, officer or key employee of Tech, or any
member of any such individual's immediate family or any other Affiliate of Tech.
As used in this Agreement, "Affiliate" shall mean, with respect to any person or
entity, any other person or entity directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such person or
entity. A person or entity shall be deemed to control another person or entity
if such person or entity possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of such other person or
entity, whether through the ownership of voting securities, by contract or
otherwise. Immediately prior to the Effective Date, all advances or loans made
by Tech to any shareholder, officer, director, employee, Affiliate or agent of
Tech will have been repaid in full, with accrued interest to the date of
repayment.
Section 2.33 CORRUPT PRACTICES. Since the inception of Tech, there have
been no violations of the Foreign Corrupt Practices Act or any similar state or
federal statute relating to bribery or similar offenses by Tech or any of its
Subsidiaries or former Subsidiaries or any of their agents. Neither Tech, its
Subsidiaries or former Subsidiaries, nor any officer, director, employee or
agent of Tech or any Subsidiary or former Subsidiary (or any person acting on
behalf of any of the foregoing) has since the date of Tech's incorporation,
given or agreed to give any gift or similar benefit of more than nominal value
to any customer, supplier, governmental employee or official, or any other
person or entity who is or may be in a position to help or hinder Tech or any of
such Subsidiaries or assist Tech or any of such Subsidiaries in connection with
any actual or proposed transaction, which gift or similar benefit, if not given
in the past, would have a Material Adverse Effect, or which would subject Tech
or any of such Subsidiaries to material penalty in any private or governmental
Proceeding.
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Section 2.34 CURRENT REVENUE AND NET INCOME. Tech's gross revenues and
net income calculated in accordance with generally accepted accounting
principles, applied on a consistent basis (except as noted in Section 2.7 of
Tech's Disclosure Schedule), for the twelve (12)-month period ended December 31,
1995, was at least $104,642,000 and $81,000, respectively, and the gross revenue
and net income for the two (2)-month period ending February 29, 1996, was at
least $9,750,100 and ($260,400), respectively.
Section 2.35 ABSENCE OF BAD DEBT OR UNCOLLECTIBLE ACCOUNTS. At February
29, 1996, except as disclosed in the Tech Financial Statements, Tech had no bad
debt or uncollectible account accrual, and there were no facts existing on such
date that would provide any reason for the establishment of such an accrual.
Section 2.36 NO DEFAULT. Except as disclosed on Tech's Disclosure
Schedule, Tech is not in default under, and no condition exists that with notice
or lapse of time or both would constitute a default under (a) its Articles of
Incorporation or By-Laws; (b) any mortgage, loan, agreement, contract,
arrangement, lease, lease purchase, indenture or other evidences of indebtedness
for borrowed money or other instrument to which Tech is now a party or by which
Tech or any of the assets of Tech is bound; or (c) any judgment, order, writ,
injunction or decree, of any court, arbitrator, agency, official, authority or
other Governmental Body.
Section 2.37 COPIES OF DOCUMENTS; ACCURACY OF INFORMATION FURNISHED. Tech
has delivered or made available to Tanisys complete and accurate copies of all
documents listed on Tech's Disclosure Schedule. All of the Exhibits and
Schedules provided by Tech are true, correct and complete in all material
respects, and no written representation, warranty or statement made by Tech in
or pursuant to this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
such representation, warranty or statement not misleading to Tanisys, who is
seeking complete and accurate information with respect to Tech.
Section 2.38 SUBCHAPTER "S" ELECTION. Tech and Owner hereby represent and
warrant that Tech is a reporting Subchapter "S" corporation with the Internal
Revenue Service; that Tech is treated, from a tax reporting standpoint under the
rules and regulations, as a Subchapter "S" corporation of the Internal Revenue
Code; and that the Owner shall be responsible for any prior year or existing
taxes.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TANISYS
Except as set forth in the Disclosure Schedule, which is attached hereto as
SCHEDULE "B," delivered to Tech by Tanisys contemporaneously with the execution
hereof ("Tanisys' Disclosure Schedule"), Tanisys hereby represents and warrants
to Tech as follows, regardless of what investigations, if any, Tech shall have
made prior hereto (for the purpose of this Article 3, "Material" or "Material
Adverse Effect" shall mean an adverse effect in an amount in excess of $10,000):
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Section 3.1 ORGANIZATION; QUALIFICATION. Tanisys is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wyoming. Tanisys has full corporate power and authority to own and lease all of
the properties and assets it now owns and leases and to carry on its business as
now being conducted. Tanisys is duly qualified as a foreign corporation and is
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure so to qualify would
not have a Material Adverse Effect on Tanisys and its Subsidiaries taken as a
whole. Tanisys has previously delivered and made available to Tech a true and
correct copy of its Articles of Continuance and By-Laws.
Section 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Tanisys has full
corporate power and authority to execute, deliver and perform this Agreement
and, subject to approval by the shareholders of Tanisys and Tanisys Acquisition,
to consummate the transactions contemplated hereby. The execution and delivery
by Tanisys of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by the Board of
Directors of Tanisys and, except for the approval of the Merger by the
shareholders of Tanisys and Tanisys Acquisition, no other corporate proceedings
on the part of Tanisys are necessary with respect thereto. Tanisys Acquisition
will take or cause to be taken all corporate action that is necessary for
Tanisys Acquisition to execute and file the Articles of Merger with the
Secretary of State of Texas, to execute and file the Articles of Merger with the
Secretary of State of Delaware and to complete the transactions to be completed
by Tanisys Acquisition pursuant to this Agreement. This Agreement has been duly
and validly executed and delivered by Tanisys and constitutes a legal, valid and
binding obligation of Tanisys, enforceable against it in accordance with its
terms.
Section 3.3 CAPITALIZATION. The authorized capital stock of Tanisys
consists of 50,000,000 shares of Tanisys Common Stock, no par value, and
10,000,000 shares of preferred stock, par value $1.00 per share, of which, as of
the date hereof, 10,256,037 shares of Tanisys Common Stock and no shares of
Tanisys Preferred Stock are validly issued and outstanding, fully paid and
nonassessable. No shares of Tanisys' capital stock have been issued in
violation of any preemptive rights. Except as set forth on Tanisys' Disclosure
Schedule, there are no outstanding obligations of Tanisys to repurchase, redeem
or otherwise acquire any capital stock or other securities of Tanisys. There are
no voting trusts or other agreements, including shareholder agreements or other
understandings, to which Tanisys or any of its Subsidiaries is a party with
respect to the voting of the capital stock of Tanisys or any of its
Subsidiaries. In addition to the outstanding shares of Tanisys Common Stock as
noted above, there are outstanding options to purchase 1,441,700 shares of
Tanisys Common Stock at exercise prices ranging from $1.10 to $3.72 and
outstanding warrants to purchase 3,225,177 shares of Tanisys Common Stock at
exercise prices ranging from $1.25 to $2.30.
Section 3.4 VALIDITY OF SHARES TO BE ISSUED. The shares of Tanisys Common
Stock to be issued to the shareholder(s) of Tech as a result of the Merger have
been duly authorized and, upon delivery thereof pursuant to the provisions of
this Agreement, will be validly issued and outstanding, fully paid and
non-assessable, not subject to any preemptive rights, and issued in compliance
with applicable securities laws. Such shares will be "restricted securities"
and will not
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be registered with the VSE or the Securities and Exchange Commission under the
Securities Act of 1933, as amended or qualified for resale pursuant to the
Securities Act (British Columbia).
Section 3.5 GOVERNMENTAL CONSENTS AND APPROVALS. Except as set forth on
Tanisys' Disclosure Schedule, the execution, delivery and performance by Tanisys
of this Agreement and the consummation of the transactions contemplated hereby
by Tanisys or its Subsidiaries require no consent, approval, order or
authorization of, action by or in respect of, or registration or filing with,
any Governmental Body, court, agency, or authority, other than (a) the filing of
the Articles of Merger with the Secretary of the States of Texas and Delaware
with respect to the Merger; (b) any applicable filings with the VSE and consents
and/or approvals with the VSE or state securities commissions under state
securities laws or similar laws; (c) the consent of Tanisys and Tanisys
Acquisition shareholders; and (d) consents, permits, authorizations,
notifications or filings the failure of which to obtain or make would not, when
considered together, have a Material Adverse Effect on Tanisys and its
Subsidiaries taken as a whole or materially adversely affect the ability of
Tanisys to perform its obligations set forth herein or to consummate the
transactions contemplated hereby.
Section 3.6 NO VIOLATIONS. Except as set forth on Tanisys' Disclosure
Schedule, the execution, delivery and performance of this Agreement by Tanisys,
the consummation by Tanisys of the transactions contemplated hereby or
compliance by Tanisys with any of the provisions hereof does not and will not
(a) conflict with or result in any breach or violation of any provision of the
Articles of Incorporation or By-Laws of Tanisys or any of its Subsidiaries; (b)
result in a default, or give rise to any right of termination, cancellation or
acceleration, or loss of any material benefit (with or without the giving of
notice or lapse of time or both), or require the consent, approval, waiver or
other action of any person, under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, trust (constructive or otherwise),
agreement, lease or other instrument or obligation to which Tanisys or any of
its Subsidiaries is a party or by which Tanisys or any of its Subsidiaries may
be bound other than that which has been or will be obtained; (c) result in the
creation or imposition of any claim, lien, pledge, security interest,
obligation, restriction or other encumbrance on any of the property of Tanisys
or any of its Subsidiaries; or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Tanisys or any of its Subsidiaries.
The transactions contemplated by this Agreement will not conflict with the VSE
rules and regulations.
Section 3.7 FINANCIAL STATEMENTS; BRITISH COLUMBIA SECURITIES COMMISSION
REPORTS. The financial statements and notes to such financial statements of
Tanisys (the "Tanisys Financial Statements") contained in Tanisys' quarterly
Form 61 Report for the fiscal year ended September 30, 1995 and each quarter
thereafter filed with the British Columbia Securities Commission are complete
and correct and were prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as noted therein, and fairly
present the information purported to be shown therein. All Tanisys Financial
Statements have been prepared from the books and records of Tanisys and its
Subsidiaries, which accurately and fairly reflect the transactions and
dispositions of the assets of Tanisys and its Subsidiaries. Neither Tanisys nor
any of its Subsidiaries had any liabilities, contingent or otherwise, whether
due or to become due, known or unknown, other than as indicated on the latest
balance sheets included in the Tanisys
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Financial Statements. Tanisys has adequately funded all accrued employee
benefit costs, and such funding is reflected in the balance sheets included in
the Tanisys Financial Statements.
Section 3.8 LITIGATION. Except as disclosed in Tanisys' Disclosure
Schedule, there is no Proceeding pending or, to the knowledge of Tanisys,
threatened against, relating to or affecting Tanisys or any officer or director
of Tanisys or its Subsidiaries relating to Tanisys or its Subsidiaries, at law
or in equity, before any Governmental Body nor, to the knowledge of Tanisys, is
there any basis for asserting the foregoing. Neither Tanisys, any of its
Subsidiaries nor any of their respective properties or assets is specifically by
name subject to any currently existing order, judgment, writ, decree or
injunction.
Section 3.9 INFORMATION FOR FILINGS. None of the information supplied or
to be supplied by Tanisys and its Subsidiaries for inclusion or included in any
documents to be filed with any regulatory authority in connection with the
transactions contemplated hereby will, at the respective time such documents are
filed with such regulatory authority, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein in light of the circumstances under which they were made, not
misleading.
Section 3.10 NO BROKERS. Except as disclosed in Tanisys' Disclosure
Schedule, Tanisys has not employed any broker, agent or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
Section 3.11 RECORDS. The respective minute books, books of account,
stock record books and other records of Tanisys and each of its Subsidiaries,
all of which have been or will be made available to Tech, contain materially
accurate and complete records of all corporate actions of the respective
shareholders and Boards of Directors (and committees thereof) during the periods
of time in which such minute books were maintained.
Section 3.12 COPIES OF DOCUMENTS; ACCURACY OF INFORMATION FURNISHED.
Tanisys has delivered or made available to Tech complete and accurate copies of
all documents listed in Tanisys' Disclosure Schedule. All of the Exhibits and
Schedules provided by Tanisys are true, correct and complete in all material
respects, and no written representation, warranty or statement made by Tanisys
in or pursuant to this Agreement contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary to
make such representation, warranty or statement not misleading to Tech, who is
seeking complete and accurate information with respect to Tanisys and its
Subsidiaries.
ARTICLE 4
ADDITIONAL REPRESENTATIONS & WARRANTIES OF THE OWNER
[AND ALL FUTURE OWNER(S), PURSUANT TO SECTIONS 6.1(f) AND (h)]
Except as set forth in the Disclosure Schedule, which is attached hereto as
SCHEDULE "C," delivered to Tanisys and Tech by the Owner contemporaneously with
the execution hereof and by future Owner(s) as defined in Sections 6.1(f) and
(h) herein (the "Owner's Disclosure Schedule"),
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the Owner hereby represents and warrants to Tanisys and Tech as follows, which
representations and warranties are made as of the date hereof and as of the
Effective Date and shall survive the Closing (as defined in Section 8.9 below)
regardless of what investigations, if any, Tanisys or Tech shall have made
thereof prior thereto:
Section 4.1 TITLE TO SHARES. Immediately prior to the Closing, the
Owner(s) shall be the lawful Owner(s) and holder of an aggregate of no more than
3,100,000 shares of Tech Common Stock and, on the Effective Date, shall hold
all such shares free and clear of any encumbrances or liens.
Section 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has been
duly and validly executed and delivered by the Owner and constitutes the legal,
valid and binding obligation of the Owner, enforceable in accordance with its
terms, except as enforcement hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, moratorium or other similar laws affecting enforcement of
creditors' rights generally. The execution, delivery and performance by the
Owner of this Agreement and the consummation of the transactions contemplated
hereby will not violate any provision of any law to which the Owner is subject
nor result in a breach or violation by the Owner of any of the terms or
provisions of, or constitute a default by the Owner under any note, bond,
mortgage, indenture, license, trust (constructive or other), agreement, lease,
or other instrument or obligation to which the Owner is a party or by which the
Owner is bound. The Owner is not a party to, or subject to, or bound by, any
currently existing order, judgment, injunction, writ or decree of any court or
governmental authority, or any arbitration award that would restrict performance
by each Owner of this Agreement or such other documents or instruments to be
executed or delivered by the Owner in conjunction herewith.
Section 4.3 CERTAIN TRANSACTIONS OR ARRANGEMENTS. Except for agreements
and transactions entered into in connection with this Agreement and except as
set forth in the Owner's Disclosure Schedule, the Owner is not presently,
directly or indirectly, a party to any transaction with Tech, including without
limitation (a) any contract, agreement, understanding or commitment or other
arrangement providing for the furnishing of services by, rental of real or
personal property from or otherwise requiring payments to the Owner or any
Affiliate of the Owner; (b) any contract, agreement, understanding, commitment
or other arrangement relating to the employment of the Owner by the Company, or
any bonus, deferred compensation, pension, profit sharing, stock option,
employee stock purchase, retirement or other employee benefit plan; or (c) any
loans or advances to or from Tech.
Section 4.4 REPRESENTATIONS. The Owner has reviewed the representations,
warranties and statements made by Tech in this Agreement and Tech's Disclosure
Schedule, and, to the best knowledge and belief of the Owner, such
representations and warranties do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make any such
representation, warranty or statement not misleading. (The term "best knowledge
and belief" as used herein shall mean that information actually known to the
Owner and specifically excludes constructive knowledge and any duty to inquire
about relevant information.)
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Section 4.5 COPIES OF DOCUMENTS; ACCURACY OF INFORMATION FURNISHED. The
Owner has delivered or made available to Tanisys and Tech complete and accurate
copies of all documents listed in the Owner's Disclosure Schedule. All the
Exhibits and Schedules provided by the Owner are true, correct and complete in
all material respects, and no written representation, warranty or statement made
by the Owner in or pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make such representation, warranty or statement not misleading
to Tanisys or Tech, who are seeking complete and accurate information with
respect to Tech and the Owner.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 CONDUCT OF BUSINESS OF TECH. After the date hereof and prior
to the Effective Date, Tech shall conduct its operations according to its normal
course of business to preserve intact its business organization, keep available
the services of its officers and employees, preserve and maintain satisfactory
relationships and goodwill with licensors, suppliers, dealers, customers and all
others having business relationships with it, pay the suppliers, vendors and
taxing authorities of Tech in accordance with its usual business practices and
in a timely fashion and continue to service and maintain all of its assets in a
manner consistent with past practice.
Section 5.2 FORBEARANCES BY TECH. Except as contemplated by this
Agreement, Tech shall not, after the date hereof and prior to the Effective
Date, without the prior written consent of Tanisys:
(a) Issue additional capital stock or any additional securities or
obligations convertible into or exchangeable for, or giving any person
any right to acquire, capital stock;
(b) Acquire any shares of its capital stock;
(c) Declare or pay any dividend, except a cash distribution to cover the
individual tax liabilities of the Owner for the year 1995 and for that
period from January 1, 1996 through the closing;
(d) Issue any stock options, stock appreciation rights, warrants or any
other rights relating to the securities of Tech;
(e) Sell any assets not in the ordinary course of business;
(f) Issue or incur additional debt for borrowed money other than pursuant
to existing credit agreements;
(g) Mortgage, pledge or otherwise encumber any of its properties or
assets;
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(h) Make any investment in third parties or assets of a capital nature
either by purchasing stock, securities or assets, contributing to
capital, transferring property or otherwise making any investment;
(i) Make any commitments for capital expenditures or other commitment or
transaction other than in the ordinary course of business;
(j) Increase in any manner, whether by bonus or otherwise, the
compensation of any of its officers or employees;
(k) Amend its Articles of Incorporation or By-Laws except as may be
necessary to facilitate the consummation of the transactions
contemplated by this Agreement;
(l) Undertake any action that will reduce Tech's working capital, as
determined by generally accepted accounting principles, to an amount
lower than the working capital of Tech at February 29, 1996, and
previously furnished to Tanisys except as provided for under Section
5.2(c); or
(m) Enter into any agreement to do any of the things described in clauses
(a) through (l) above.
Section 5.3 NO SOLICITATION. Tech, its officers and directors, and the
Owner will not, nor permit any of their respective officers, employees, agents
or representatives (including, without limitation, investment bankers, attorneys
and accountants) to, directly or indirectly (a) solicit, initiate or encourage
submission of proposals or offers by, or (b) furnish any information with
respect to or otherwise cooperate in any way with, or participate in any
discussions or negotiations with, any corporation, partnership, person or other
entity or group ("Person") with respect to any proposal regarding the
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in, Tech, or any business combination with Tech. Tech and/or
the Owner shall promptly notify Tanisys if any such proposal or offer, or any
inquiry or contact with any Person with respect thereto, is made and shall, in
any such notice, indicate in reasonable detail the identity of the offeror and
the terms and conditions of any such proposal.
Section 5.4 INVESTIGATION OF BUSINESS AND PROPERTIES. Each party hereto
may make or cause to be made such investigation of the business and properties
of the other parties and of their financial and legal condition as such party
deems appropriate or advisable to familiarize himself/itself therewith, provided
such investigation shall not unreasonably interfere with the normal operations
of the other parties. Tanisys and Tech agree to permit the other party and its
accountants, counsel and other representatives to have reasonable access to the
premises, books and records of the first party. Tanisys and Tech will furnish
the other party with such financial and operating data and other information
with respect to the business and properties of the other party as the requesting
party shall from time to time reasonably request in accordance with this
Section.
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Section 5.5 CONFIDENTIALITY. Each party agrees with respect to all
technical, commercial and other information that is furnished or disclosed by
the other parties, including, but not limited to, information regarding such
party's (and its Subsidiaries' and Affiliates') organization, personnel,
business activities, customers, subscribers, policies, assets, finances, costs,
sales, revenues, technology, rights, obligations, liabilities and strategies
(the "Information"), that, unless and until the transactions contemplated hereby
shall have been consummated, (a) such Information is confidential and/or
proprietary to the furnishing/disclosing party and entitled to and shall receive
treatment as such by the receiving party; (b) the receiving party will hold in
confidence and not disclose or use (except in respect of the transactions
contemplated hereby) any such Information, treating such Information with the
same degree of care and confidentiality as it accords its own confidential and
proprietary information; provided, however, that the receiving party shall not
have any restrictive obligation with respect to any Information that (i) is
contained in a printed publication available to the general public, (ii) is or
becomes publicly known through no wrongful act or omission of the receiving
party, or (iii) is known by the receiving party without any proprietary
restrictions by the furnishing/disclosing party at the time of receipt of such
Information; and (c) all such Information furnished to a party by another,
unless otherwise specified in writing, shall remain the property of the
furnishing/disclosing party and, in the event this Agreement is terminated,
shall be returned to it, together with any and all copies made thereof, upon
written request for such return by it (except for documents submitted to a
governmental agency with the consent of the furnishing/disclosing party or upon
subpoena and that cannot be retrieved with reasonable effort), and each party
shall confirm in writing to the others compliance with any such request. Each
party hereto acknowledges that the remedy at law for any breach by a party of
its obligations under this section is inadequate and that the other parties
shall be entitled to equitable remedies, including injunctive relief, in the
event of breach by any other party.
Section 5.6 PUBLIC ANNOUNCEMENTS. Tanisys and Tech shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Merger, this Agreement or transactions
contemplated hereby, shall not issue any such press release or make any such
public statement prior to such consultation, and shall consult with each other
as to form and substance of other public disclosures related thereto; provided
however, that nothing contained herein shall prohibit either party from making
any disclosure that is required by law.
Section 5.7 AGREEMENT TO CONSUMMATE. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use reasonable efforts to
do all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, as soon as reasonably practicable,
the transactions contemplated by this Agreement, including, but not limited to,
the obtaining of all consents, authorizations, orders and approvals of any
governmental commission, board or other regulatory body required in connection
therewith and initiating or defending any legal action that is necessary or
appropriate to permit the transactions contemplated hereby to be consummated.
Without limiting the foregoing, the Owner shall not take any action to exercise
any statutory appraisal rights that he may have with respect to the Merger. At
any time after the Effective Date, if any further action is necessary, proper or
advisable to carry out the purposes of this Agreement, then, as soon as is
reasonably practicable, each party to this Agreement shall take, or cause its
proper officers to take, such action. No party to this Agreement shall take or
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cause to be taken any action that would cause the representations or warranties
expressed herein to be untrue or incorrect on the Effective Date.
Section 5.8 TECH SHAREHOLDER'S APPROVAL. Tech shall call a meeting of its
shareholder to be held as soon as practicable, but not later than April 15,
1996, for the purpose of voting upon the Merger. In connection with such
meeting, Tech shall mail all required notices and other materials to its
shareholder, and the Board of Directors of Tech shall recommend approval of the
matters related to the Merger to be voted upon at such shareholder meeting and
shall use its best efforts to obtain such shareholder approval. In lieu of such
meeting, such approval may be effected by the unanimous written consent of the
shareholder of Tech.
Section 5.9 TANISYS ACQUISITION SHAREHOLDER'S APPROVAL. Tanisys
Acquisition shall call a meeting of its shareholder to be held as soon as
practicable, but not later than May 20, 1996, for the purpose of voting upon the
Merger. In connection with such meeting, Tanisys Acquisition shall mail all
required notices and other material to its shareholder, and the Board of
Directors of Tanisys Acquisition shall recommend approval of the matters related
to the Merger to be voted upon at such shareholder meeting and shall use its
best efforts to obtain such shareholder approval. In lieu of such meeting, such
approval may be affected by the unanimous written consent of the shareholder of
Tanisys Acquisition.
. Section 5.10 AGREEMENT REGARDING BROKERS. Each party agrees that it or he
will pay or dispute, and indemnify and hold the other parties harmless from, any
claims of brokers or others for finders' or brokerage fees asserted as a result
of representations by such party to such brokers or others, regardless of
whether the existence of such brokers or others are disclosed herein.
Section 5.11 NOTICE. Tech shall promptly give notice to Tanisys and the
Owner upon becoming aware of the occurrence or failure to occur, or the
impending or threatened occurrence or failure to occur, of any event that would
cause or constitute, any of Tech's representations or warranties being or
becoming untrue. Tanisys will promptly give notice to Tech and the Owner upon
becoming aware of the occurrence or failure to occur, of any event that would
cause or constitute, any of Tanisys' representations or warranties being or
becoming untrue. The Owner will promptly give notice to Tanisys and Tech upon
becoming aware of the occurrence or failure to occur, or the impending or
threatened occurrence or failure to occur, of any event that would cause or
constitute, any of the Owner's representations or warranties being or becoming
untrue.
Section 5.12 REPRESENTATIONS, WARRANTIES AND AGREEMENTS; SURVIVAL. The
representations, warranties and indemnities of Tech, Tanisys and the Owner,
contained in this Agreement and any related documents, shall survive for a
period of six (6) months after the Effective Date. At the end of the survival
period of the representations and warranties of Tech and the Owner, Tanisys
shall, without further action, be deemed to have fully released Tech and the
Owner from any and all responsibility with respect to a breach of such
representations and warranties (including any obligation under the
indemnification provisions contained in Section 5.13) unless during such
survival period Tanisys shall have given Tech and the Owner notice of the nature
and reasonable particulars under the then existing circumstances of any claimed
breach by Tech and/or the Owner. At the end of the survival period of
representations and warranties of Tanisys, the Owner shall,
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without further action, be deemed to have fully released Tanisys from any and
all responsibility with respect to a breach of such representations and
warranties unless during such survival period the Owner shall have given Tanisys
notice of the nature and reasonable particulars under the then existing
circumstances of any claimed breach by Tanisys and the basis therefor. The
obligations, covenants and agreements of Tech, the Owner and Tanisys contained
in this Agreement and any related documents shall survive the Closing. The
representations, warranties, obligations, covenants, indemnities and agreements
shall not be affected by, and shall remain in full force and effect
notwithstanding, any investigation at any time made by or on behalf of any party
hereto or any information any party may have with respect thereto.
Section 5.13 INDEMNIFICATION BY TECH AND OWNER AND SECURITY ESCROW.
(a) Tech and the Owner shall severally indemnify and hold Tanisys harmless
from and against, and promptly reimburse Tanisys for any and all loss,
expense, damage, deficiency, liability or obligation, including
investigative and settlement costs and attorneys' fees arising out of
or in connection with any breach of representation or warranty of Tech
or the Owner contained in Article 2 or Article 4 hereof or in any
certificate delivered pursuant hereto, regardless of whether Tanisys
relied upon the truth of such representation or warranty or had any
knowledge of any breach thereof. On the Effective Date, fifteen
percent (15%) of the Merger Consideration of Gary W. Pankonien will be
escrowed (the "Escrow") with U. S. Trust Company of Texas, N.A. (the
"Escrow Agent") to secure and satisfy Tanisys' right to
indemnification hereunder.
(b) The Escrow shall be further defined in the Escrow Agreement attached
hereto as EXHIBIT "C" and shall remain in effect for a period of six
(6) months from the date of the closing of the Merger Agreement (such
date, the "Escrow Termination Date"). The Escrow may be maintained
past the Escrow Termination Date only in the event of litigation
concerning the Escrow.
(c) Upon receipt by Tanisys (the "Indemnified Party") of notice of any
situation, event or occurrence that might give rise to a claim for
indemnification of such Indemnified Party against Tech and/or the
Owner pursuant to this Section 5.13, the Indemnified Party shall give
prompt written notice thereof to Tech and the Owner (each such party,
an "Indemnifying Party"), indicating the nature of such
indemnification. Failure to give any notice provided under this
Section 5.13(c) shall in no way be deemed a forfeiture of the
Indemnified Party's rights to be indemnified under Section 5.13
provided that such notice is given prior to the Escrow Termination
Date. A claim for indemnity may, at the option of the Indemnified
Party, be asserted as soon as any situation, event or occurrence has
been noticed by the Indemnified Party, regardless of whether actual
harm has been suffered or out-of-pocket expenses incurred.
(d) Tech's and the Owner's indemnification will be limited to situations,
events and/or occurrences of which Tanisys provides notice to the
Owner prior to the Escrow
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Termination Date and to the amount of, and only from shares
comprising, the Escrow. Tanisys will not be eligible to obtain any
indemnification from the Escrow until the aggregate amount of all
losses, expenses, damages, deficiencies, liabilities and other
obligations arising out of or in connection with any breach of
representation or warranty of Tech or the Owner exceeds $10,000 in the
aggregate and then only for the amount of such excess. Shares
released from the Escrow after such time will be returned to the Owner
in accordance with the terms of the Escrow Agreement.
Section 5.14 INDEMNIFICATION BY TANISYS.
(a) Tanisys shall indemnify and hold the Owner harmless from and against,
and promptly reimburse the Owner for, any and all loss, expense,
damage, deficiency, liability or obligation, including investigative
and settlement costs and attorneys' fees, arising out of or in
connection with any breach of representation or warranty of Tanisys
contained in Article 3 hereof, or in any certificate delivered
pursuant hereto, regardless of whether the Owner relied upon the truth
of such representation or warranty or had any knowledge of any breach
thereof.
(b) Upon receipt by the Owner (the "Indemnified Party") of notice of any
situation, event or occurrence that might give rise to a claim for
indemnification of such Indemnified Party against Tanisys pursuant to
this Section, the Indemnified Party shall give prompt written notice
thereof to Tanisys indicating the nature of such indemnification. A
claim for indemnity may, at the option of the Indemnified Party, be
asserted as soon as any situation, event or occurrence has been
noticed by the Indemnified Party regardless of whether actual harm has
been suffered or out-of-pocket expenses incurred.
Section 5.15 RESALE LIMITATIONS. Tech and the Owner (and future Owners)
agree to certain resale restrictions and further agree to advise future Owner(s)
of the resale restrictions imposed by the VSE and federal securities laws on
shares of Tanisys Common Stock received by them pursuant to the Merger, and will
sign, and will cause each future owner to sign, a Restricted Stock Investment
Letter stating that such Affiliate is aware of such restrictions and as set
forth in Section 6.3(h) herein.
Section 5.16 REGISTRATION STATEMENT. In the event Tanisys elects to file
a Registration Statement on Form S-1 or S-3 with the Securities and Exchange
Commission ("SEC") and is requested to do so by Gary W. Pankonien ("Pankonien"),
Tanisys agrees to register for sale up to 100,000 shares of the Merger
Consideration for Pankonien and to cause such Registration Statement to become
effective as promptly as practical thereafter and to maintain the effectiveness
of such Registration Statement until the earlier of the sale of the shares
registered thereby or the second anniversary of the Effective Date. Tanisys
shall be permitted to include on any such Registration Statement shares of the
Tanisys Common Stock to be issued (i) by the company or by stockholders with
registration rights directly to the public and/or to institutional investors for
cash, or (ii) by stockholders receiving registration rights in connection with
any acquisitions to be
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completed by Tanisys prior to, simultaneously with, or subsequent to, completion
of the Merger. Tanisys shall also take any action required to be taken under
any applicable state blue sky or securities laws in connection with the issuance
of the shares of the Tanisys Common Stock to be issued as set forth in this
Agreement or the listing of such shares of the Tanisys Common Stock on the
NASDAQ National Market System, subject to official notice of issuance. Pankonien
shall furnish to Tanisys, in writing, all information and covenants concerning
Tech, the other holders of the Tech Common Stock and the proposed methods of
sale or other disposition of the registered shares as Tanisys, any underwriter,
the SEC and/or any state or other regulatory authority may request in connection
with the registration of any shares or any action required by Tanisys.
Pankonien will cooperate with Tanisys and use reasonable efforts to assist
Tanisys in, and Tanisys will bear all costs and expenses (including its legal,
accounting and printing costs and filing fees payable to the SEC and other
governmental bodies) related to, the preparation and filing of the Registration
Statement and all other necessary documentation and to obtain all permits,
consents, approvals and authorizations of all third parties and governmental
bodies necessary to effect the registration of the 100,000 shares of the Merger
consideration on the Registration Statement. Pankonien agrees to execute,
deliver and/or file with or supply to Tanisys, any underwriter, the SEC and/or
any state or other regulatory authority such information as is necessary to
carry out the provisions of this Section or to effect the registration or
qualification of the shares under applicable securities laws and regulations of
any jurisdiction and such information as Tanisys may reasonably require to
ensure that the transfer or disposition of the registered shares is not in
violation of any applicable securities laws. The parties shall also enter into
an agreement to provide reciprocal indemnities to the other party for
representations made in such Registration Statement and related documents.
Pankonien further agrees to furnish to Tanisys not later than every thirty (30)
days after the date of effectiveness of the Registration Statement a report of
the number of registered shares sold during such thirty (30)-day period and to
cancel any orders to sell and/or to reverse any sales of registered shares which
orders and/or sales, in Tanisys' opinion, based upon the opinion of legal
counsel experienced in securities law matters were effected in violation of
applicable federal or state securities laws. At its expense, Tanisys will
furnish to Pankonien such number of copies of such Registration Statement and of
each amendment and supplement thereto (in each case, including all Exhibits) and
such number of copies of the prospectus included in such Registration Statement
as Pankonien shall request. Tanisys will notify Pankonien of any shares covered
by such Registration Statement (i) at any time when a prospectus relating
thereto is required to be delivered under applicable securities laws, (ii) of
the happening of any event as a result of which the prospectus included in such
Registration Statement as then in effect includes an untrue statement of
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, or (iii) of any other occurrence which, under
applicable securities laws, requires the prospectus to be revised or updated
(and upon receipt of such notice and until a supplemented or amended prospectus
is available, Pankonien will cease to offer or to sell any shares covered by
the Registration Statement and will return all copies of the prospectus to
Tanisys if requested to do so by Tanisys and will not sell any of the shares
until provided with a current prospectus and notice from Tanisys that it may
resume its selling efforts). Upon the occurrence of any of the events described
in clauses (ii) or (iii) of the preceding sentence, Tanisys agrees to use its
best efforts to take all necessary actions to revise or update the prospectus as
promptly as practical to the extent necessary for selling efforts to resume.
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Section 5.17 APPOINTED DIRECTORS. The Owner has the right to nominate or
appoint two (2) positions on Tanisys' seven (7)-member Board of Directors, to
include one (1) of the two positions for himself and, in addition, one (1)
Advisory Director position.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING
Section 6.1 GENERAL CONDITIONS. Consummation of the Merger shall be
subject to the fulfillment at the Effective Date of each of the following
conditions:
(a) NO INJUNCTION. No court having jurisdiction shall have issued, to the
knowledge of Tanisys, Tech or the Owner, an injunction preventing the
consummation of the Merger that shall not have been stayed or
dissolved at the Effective Date.
(b) SECURITIES LAW. Tanisys shall have received all VSE, state securities
law authorizations or obtained applicable exemptions necessary to
consummate the transactions contemplated hereby, provided Tanisys
shall use reasonable efforts to obtain the same.
(c) VANCOUVER STOCK EXCHANGE. Tanisys shall have received notification
that the VSE has approved the issuance of and the listing of the
shares of Tanisys Common Stock.
(d) PROCEEDINGS. All proceedings taken or to be taken in connection with
the transactions contemplated hereby, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to the
parties and their counsel, and the parties and their counsel shall
have received all such counterpart originals or certified or other
copies of such documents as the parties or their counsel may
reasonably request.
(e) SIMULTANEOUS CLOSING WITH DARKHORSE SYSTEMS, INC. Simultaneously with
the closing as called for herein, Tanisys shall close its Agreement
and Plan of Merger by and between Tanisys Technology, Inc. and Tanisys
Technology Acquisition Corp. II and Dark Horse Systems, Inc., and Gary
W. Pankonien, Archer Lawrence and Jack Little.
(f) TECH'S EQUITY INFUSION. Prior to the Closing as called for herein,
Tech shall have caused to be sold that number of shares of the Tech
Common Stock that would comply with the Exchange Ratio of Section 1.2
herein for no less than $2,000,000 cash. Such purchasers of equity
shall execute all documents deemed necessary by counsel of Tanisys at
or prior to the Closing, including but not limited to those
representations and warranties as set forth in Article 4 and
restrictions as set forth in Section 5.15.
26
<PAGE>
(g) APPRAISAL OF ASSETS OF TECH. The appraisal of BDO Dunwoody Charter
Accountants and Consultants upon the assets of Tech shall have been
accepted and approved by Tanisys and the VSE prior to the Closing.
(h) TECH'S ISSUANCE OF COMPENSATION SHARES. Prior to the Closing, Tech
contemplates issuing no more than 150,000 shares of the Tech Common
Stock to certain key employees of Tech ("Key Shares"). Tech shall
cause the number of Key Shares to be issued which will comply with the
Exchange Ratio of Section 1.2 herein. Upon issuance, such Key Shares
shall have been deemed fully paid and nonassessable shares. Further,
the recipients of such Key Shares shall execute any and all documents
deemed necessary by counsel for Tanisys at the Closing, including but
not limited to those representations and warranties set forth in
Section 4 and restrictions set forth in Section 5.15.
(i) DUE DILIGENCE. It is expressly understood and agreed that the
obligations of Tanisys hereunder are expressly subject to and
conditioned upon Tanisys having a period of twenty-one (21) days from
the date this Agreement is fully executed ("Due Diligence Period") to
conduct such Due Diligence examination of Tech's Financial Statements,
facilities, books, records and other matters considered pertinent by
Tanisys, at such time which is acceptable to both parties, and Tech
further agrees to provide such other data or information reasonably
requested by Tanisys. Should such Due Diligence deem to be
unfavorable in Tanisys' sole discretion, Tanisys may on or before the
conclusion of the Due Diligence Period cancel the Agreement by written
notice to Tech.
(j) APPROVAL OF TANISYS' SHAREHOLDERS. The transactions contemplated by
this Agreement are subject to the approval of a majority of the
outstanding shares of the Common Stock of Tanisys Technology, Inc.
(k) RELEASE OF TECH'S GUARANTIES. Tech shall have been released as a
Guarantor of that Lease Agreement dated December 13, 1995, by and
between Security Capital Industrial Trust and 1st Tech Molding, Inc.,
covering approximately 20,000 square feet at Corridor Park Building,
Austin, Texas. In addition, Tech shall have been released as a
Guarantor of that Certain Loan and Security Agreement dated February
14, 1996, between Wentworth Capital Corporation as Lender and 1st Tech
Molding, Inc. as Borrower.
Section 6.2 CONDITIONS TO CLOSING IN FAVOR OF TECH. Consummation of the
Merger shall be subject to the fulfillment, to the satisfaction of Tech, or
written waiver, at or before the Effective Date, of each of the following
conditions:
(a) COPIES OF RESOLUTIONS OF TANISYS AND TANISYS ACQUISITION. Tanisys
shall have furnished Tech with copies of resolutions duly adopted by
the Board of Directors and shareholders of Tanisys
27
<PAGE>
and the Board of Directors and shareholder of Tanisys Acquisition
approving the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby, certified as of
the Closing Date by the Secretary or an Assistant Secretary of Tanisys
and the Secretary or Assistant Secretary of Tanisys Acquisition.
(b) OPINION OF COUNSEL FOR TANISYS. Tanisys shall have furnished Tech
with an opinion dated the Closing Date from J. Stephen Barley and W.
Audie Long, counsel for Tanisys, in the form attached hereto as
EXHIBIT "D".
(c) REPRESENTATIONS AND WARRANTIES OF TANISYS. The representations,
warranties and statements of Tanisys contained in this Agreement, the
Exhibits hereto and Tanisys' Disclosure Schedule, shall be complete
and accurate as of the date of this Agreement and shall also be
complete and accurate at and as of the Closing Date, except for
changes contemplated by this Agreement, as if made on the Closing
Date; and Tanisys shall have performed or complied with all agreements
and covenants required by this Agreement to be performed or complied
with by it at or prior to the Closing Date.
(d) TANISYS OFFICERS' CERTIFICATE. Tanisys shall have delivered to Tech a
certificate, dated the Closing Date, of the President and Secretary of
Tanisys to the effect that (i) they are familiar with the provisions
of this Agreement, and (ii) the conditions specified in Section 6.1
and in paragraph (c) of this Section 6.2 have been satisfied in all
material respects.
(e) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations
with, and any permits, licenses or other authorizations required by,
any applicable Governmental Body that are required for, or in
connection with, the execution and delivery of this Agreement by Tech
and the consummation by Tech of the transactions contemplated hereby
shall have been obtained or made.
(f) LEGISLATION. No law or legally binding regulation shall have been
enacted that does or would prohibit, restrict or delay consummation of
the Merger or any of the conditions to the consummation of the Merger
or that does or would have a Material Adverse Effect on Tanisys or any
of its Subsidiaries.
(g) TECH SHAREHOLDER APPROVAL. The holders of at least a majority of the
shares of outstanding Tech Common Stock shall have voted in favor of
the Merger.
(h) CONSENTS. On or before the Effective Date, Tanisys shall have
obtained all necessary or required consents to the transactions
contemplated by this Agreement. In addition, on or before the Closing
Date, Tech shall have obtained all necessary or required consents to
the transactions contemplated by this Agreement, including, without
limitation, the consents required by Tech's lenders, on terms and
conditions reasonably satisfactory to Tech.
28
<PAGE>
(i) EMPLOYMENT AGREEMENT. Tanisys shall have executed an Employment
Agreement with Gary W. Pankonien on the terms and conditions of the
Employment Agreement attached hereto as EXHIBIT "E."
(j) RELEASE OF PERSONAL GUARANTIES. On or before the Effective Date,
Tanisys shall have caused the Owner to be released from any and all
personal guaranties concerning Tech.
(k) OPTION SHARES. Pankonien shall have received a letter from the
Committee of the Board of Directors of Tanisys administering its Stock
Option Plans that Pankonien may propose stock option grants for the
purchase of no less than 200,000 shares of Tanisys Common Stock for
key employees of 1st Tech Corporation and DarkHorse Systems, Inc.
Section 6.3 CONDITIONS TO CLOSING IN FAVOR OF TANISYS. Consummation of
the Merger shall be subject to the fulfillment, to the satisfaction of Tanisys,
or written waiver, at or before the Effective Date of the following conditions:
(a) COPIES OF RESOLUTIONS OF TECH. Tech shall have furnished Tanisys with
copies of resolutions duly adopted by the Board of Directors and
shareholder of Tech approving the execution and delivery of this
Agreement, and the consummation of the transactions contemplated
hereby, certified as of the Closing Date by the Secretary or an
Assistant Secretary of Tech.
(b) OPINION OF COUNSEL FOR TECH. Tech shall have furnished Tanisys with
an opinion dated the Closing Date from Small, Craig & Werkenthin,
P.C., counsel for Tech, in the form attached hereto as EXHIBIT "F."
(c) REPRESENTATIONS AND WARRANTIES OF TECH AND THE OWNER. The
representations, warranties and statements of Tech and the Owner
contained in this Agreement, the Exhibits hereto, Tech's Disclosure
Schedule and the Owner's Disclosure Schedule shall be complete and
accurate as of the date of this Agreement and shall also be complete
and accurate at and as of the Closing Date, except for changes
contemplated by this Agreement, as if made at and as of the Closing
Date; and Tech and the Owner shall have performed or complied with all
agreements and covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date.
(d) TECH OFFICERS' AND THE OWNER'S CERTIFICATES. Tech shall have
delivered to Tanisys a certificate, dated the Closing Date, of the
President and Secretary of Tech to the effect that (i) they are
familiar with the provisions of this Agreement, and (ii) the
conditions specified in Section 6.1 and in paragraph (c) of this
Section 6.3 have been fully satisfied. The Owner shall have delivered
to Tanisys a Certificate, dated the Closing Date, to the effect that
(i) he is familiar with the provisions of the
29
<PAGE>
Agreement, and (ii) the conditions specified in Section 6.1 and in
Paragraph (c) of this Section 6.3 have been fully satisfied.
(e) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations
with, and any permits, licenses or other authorizations required by,
any applicable Governmental Body that are required for or in
connection with, the execution and delivery of this Agreement by
Tanisys and the consummation by Tanisys of the transactions
contemplated hereby shall have been obtained or made.
(f) LEGISLATION. No law or legally binding regulation shall have been
enacted that does or would prohibit, restrict or delay consummation of
the Merger or any of the conditions to the consummation of the Merger
or that does or would have a Material Adverse Effect on Tech.
(g) CONSENTS. On or before the Effective Date, Tech shall have obtained
all necessary or required consents to the transactions contemplated by
this Agreement, including, without limitation, the consents required
by Tech's lenders, on terms and conditions reasonably satisfactory to
Tanisys. In addition, on or before the Closing Date, Tanisys shall
have obtained all necessary or required consents to the transactions
contemplated by this Agreement, including, without limitation, the
consents required by Tanisys' lenders, on terms and conditions
reasonably satisfactory to Tanisys.
(h) RESTRICTED STOCK INVESTMENT LETTER. Owner and future Owner(s) as
determined in accordance with Sections 6.1(f) and (h) shall have
entered into a Restricted Stock Investment Letter with Tanisys in the
form attached hereto as EXHIBIT "G."
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Date, whether or not shareholder approval has been
received:
(a) By mutual consent of the Boards of Directors of Tanisys and Tech;
(b) By Tech if any representation or warranty of Tanisys or by Tanisys if
any representation or warranty of Tech or the Owner contained herein
shall have been incorrect or breached in any material respect, as to
which notice shall have been given to such party, and shall not have
been cured or otherwise resolved to the reasonable satisfaction of the
other party on or before the Effective Date;
30
<PAGE>
(c) By either Tanisys or Tech if any permanent injunction or other order
of a court or other competent authority preventing the consummation of
the Merger shall have become final and non-appealable;
(d) By Tanisys or Tech if the Merger has not become effective by July 15,
1996; or
(e) By either Tanisys or Tech if the last trade of the Tanisys Common
Stock on the VSE is less than Two Dollars ($2.00) for five (5)
consecutive business days.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided herein, this Agreement shall become wholly void and
have no further force and effect except as hereinafter provided; and there shall
be no liability on the part of Tanisys or Tech (or their respective officers of
directors) except to comply with the confidentiality provisions of Section 5.5
hereof, and except as otherwise provided herein. Nothing contained herein shall
relieve any party from liability for its breach of this Agreement.
Section 7.3 AMENDMENT. This Agreement and the Exhibits and Schedules
hereto may be amended by the parties hereto at any time prior to the Effective
Date; provided, however, that any amendment must be by an instrument or
instruments in writing signed and delivered on behalf of each of the parties
hereto.
Section 7.4 EXTENSION; WAIVER. At any time prior to the Effective Date,
any corporate party hereto that is entitled to the benefits hereof, by action
taken by its Board of Directors or a duly authorized officer, may (a) extend the
time for the performance of any of the obligations or other acts of any of the
other parties hereto; (b) in whole or in part, waive any inaccuracy in the
representations and warranties of any of the other parties hereto contained
herein or in any Exhibit or Schedule hereto or in any document delivered
pursuant hereto; and (c) in whole or in part, waive compliance with any of the
agreements of any of the other parties hereto or conditions contained herein.
Any agreement on the part of any party hereto to any such extension or waiver
shall be valid as set forth in an instrument in writing signed and delivered on
behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1 EXCLUSIVE REMEDY. Any controversy or claim between or among
the parties hereto including but not limited to those arising out of Sections
5.4 and 5.13 of this Agreement or any related instruments, including any claim
based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the rules of practice and procedure for the
arbitration of commercial disputes of Chapter 171 of the Texas Civil Practice
and Remedies Code (the "Texas Arbitration Act") and the rules set forth herein.
Such remedy shall be the exclusive remedy for any such controversy or claim.
Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this Agreement may bring an action, including a
summary or expedited proceeding to compel arbitration of any controversy or
claim to which this Agreement applies in any court having jurisdiction over such
action. The arbitration shall be
31
<PAGE>
conducted in the City of Austin, Texas, and administered in accordance with the
Texas Arbitration Act. The parties shall attempt to agree on one person to
serve as the arbitrator for any controversy or claim hereunder. In the event
the parties are unable to agree on a single arbitrator, each of the parties to
this Agreement shall appoint one person as a arbitrator to hear and determine
the dispute and the two arbitrators so chosen shall select a third impartial
arbitrator whose decision shall be final and conclusive as to all matters
subject to arbitration hereunder. If for any reason a third arbitrator cannot
be named under the previous provisions, any state district judge sitting in
Travis County, Texas, upon application by one of the parties hereto, shall have
the power to appoint one or more arbitrators to resolve disputes hereunder. All
arbitration hearings will be commenced within ninety (90) days of the demand for
arbitration; further, the arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing for an additional sixty
(60) days.
Section 8.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if and when delivered personally or
transmitted by telex, telecopy or telegram, mailed by registered or certified
mail (return receipt requested) or sent by a recognized next business day
courier to the persons at the following addresses (or at such other address for
a party as shall be specified by like notice):
If to Tanisys:
Mark C. Holiday
Chairman and Chief Executive Officer
Tanisys Technology, Inc.
1310 RR 620 South, Suite B195
Austin, Texas 78734-6342
Telephone: (512) 263-1700
Facsimile: (512) 263-1683
with a copy to:
W. Audie Long
Attorney at Law
9311 San Pedro, Suite 100
San Antonio, Texas 78216
Telephone: (210) 525-6211
Facsimile: (210) 366-2437
If to Tech:
1st Tech Corporation
12201 Technology Blvd., Suite 130
Austin, Texas 78727-6101
Telephone: (512) 258-3570
Facsimile : (512) 258-3689
32
<PAGE>
with a copy to:
Brandon C. Janes
Small, Craig & Werkenthin, P.C.
100 Congress Avenue, Suite 1100
Austin, Texas 78701-4099
Telephone: (512) 472-8355
Facsimile: (512) 320-9734
If to the Owner:
Gary W. Pankonien
Chairman and Chief Executive Officer
1st Tech Corporation
12201 Technology Blvd., Suite 130
Austin, Texas 78727-6101
Telephone: (512) 258-3570
Facsimile : (512) 258-3689
with a copy to:
Brandon C. Janes
Small, Craig & Werkenthin, P.C.
100 Congress Avenue, Suite 1100
Austin, Texas 78701-4099
Telephone: (512) 472-8355
Facsimile: (512) 320-9734
Section 8.3 FEES AND EXPENSES. Tanisys and Tech shall each bear its own
expenses in negotiating, executing and delivering this Agreement and any related
documents and in preparing for the Closing (as defined below).
Section 8.4 INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement. Terms such as "herein," "hereof" and "hereinafter" refer to
this Agreement as a whole and not to the particular sentence or paragraph where
they appear, unless the context otherwise requires. Terms used in the plural
include the singular, and vice versa, unless the context otherwise requires.
Section 8.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.6 MISCELLANEOUS. This Agreement, including the Exhibits and
Schedules hereto, (a) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof;
33
<PAGE>
(b) is not intended to and shall not confer upon any other person any rights or
remedies hereunder or otherwise with respect to the subject matter hereof,
except for rights that may expressly arise as a consequence of the Merger; (c)
shall not be assigned by operation of law or otherwise; (d) has been drafted by
all of the parties to this Agreement and should not be construed against any of
the parties hereto; and (e) shall be governed in all respects, including
validity, interpretation and effect by the substantive laws of the State of
Texas without regard to conflict of law provisions.
Section 8.7 SURVIVAL. No investigation by the parties hereto made
heretofore or hereafter shall affect the representations and warranties of the
parties that are contained herein, and each such representation and warranty
shall survive such investigation for a period of six (6) months from the
Closing.
Section 8.8 GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereto has a reasonable relation to and shall be governed,
construed and enforced in accordance with the laws of the State of Texas. The
parties agree that any litigation relating directly or indirectly to this
Agreement must be brought before and determined by a court of competent
jurisdiction within Travis County, Texas.
Section 8.9 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at such time and place as Tanisys and
Tech shall mutually agree (the "Closing Date"). Unless otherwise agreed by
Tanisys and Tech, the Closing shall occur on the Effective Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or have
caused this Agreement to be executed by their duly authorized officers.
Tanisys Technology, Inc.
By: /s/ MARK C. HOLLIDAY
--------------------------------
Chairman of the Board and
Chief Executive Officer
Tanisys Acquisition Corp.
By: /s/ MARK C. HOLLIDAY
--------------------------------
Chairman of the Board and
Chief Executive Officer
1st Tech Corporation
By: /s/ GARY W. PANKONIEN
--------------------------------
Chairman of the Board and
Chief Executive Officer
34
<PAGE>
/s/ GARY W. PANKONIEN
-------------------------------------
Gary W. Pankonien, Individually
35
<PAGE>
Exhibit 10.4
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 amends that certain Agreement and Plan of Merger dated
April 9, 1996 (the "Agreement"), by and among Tanisys Technology, Inc.
("Tanisys"), Tanisys Acquisition Corp. ("Tanisys Acquisition"), 1st Tech
Corporation ("Tech") and Gary W. Pankonien (the "Owner"), as follows:
1. Section 1.2, CONVERSION OF SHARES, is hereby amended in its entirety
to read as follows:
"Section 1.2 CONVERSION OF SHARES. Upon the latter of the
issuance of a Certificate of Merger by the Secretary of State of the
State of Delaware or the issuance of a Certificate of Merger by the
Secretary of State of the State of Texas (the "Effective Date"), the
issued and outstanding shares of common stock, no par value per share,
of Tech (the "Tech Common Stock"), subject to the fulfillment of the
conditions precedent set forth under Article 6 herein, and the
applicable statutory provisions with respect to appraisal rights, any
applicable withholding requirements and adjustment as herein provided,
shall be converted into and become, and there shall be paid and
issued, in exchange for the Tech Common Stock an aggregate of
2,950,000 shares of Tanisys common stock, no par value per share (the
"Tanisys Common Stock"), such that each share of Tech Common Stock
outstanding on the Effective Date, not to exceed 2,950,000 shares of
Tech Common Stock in the aggregate, is exchanged for one (1) share
(the "Exchange Ratio") of Tanisys Common Stock, with any excess shares
of Tech Common Stock resulting in a reduction in the per-share
Exchange Ratio. As used in this Agreement, "Merger Consideration"
shall mean the aggregate of 2,950,000 shares of Tanisys Common Stock
exchanged for Tech Common Stock in the Merger at the Exchange Ratio.
Each share of Tech Common Stock held in the treasury of Tech or by a
wholly-owned subsidiary of Tech shall be cancelled as of the Effective
Date and no portion of the Merger Consideration shall be payable with
respect thereto. The Merger Consideration shall be reduced by the
amount otherwise payable or issuable to holders of Tech who exercise
dissenters' rights, if any, in connection with the Merger based upon
such shareholders' ownership of Tech Common Stock outstanding on the
Effective Date. The Exchange Ratio shall be subject to appropriate
adjustment in the event of a stock split, stock dividend or
recapitalization subsequent to the date of this Agreement applicable
to shares of Tech Common Stock or Tanisys Common Stock held of record
on or before the Effective Date."
2. Section 2.3, CAPITALIZATION, is hereby amended in its entirety to read
as follows:
"Section 2.3 CAPITALIZATION. The authorized capital stock of
Tech consists of 10,000,000 shares of Tech Common Stock, no par value,
of which, as of the date hereof, 1,650,000 shares of Tech Common Stock
are validly issued and outstanding,
<PAGE>
fully paid and nonassessable, and upon the Effective Date, there will
be no more than 2,950,000 shares of Tech Common Stock validly issued
and outstanding, fully paid and nonassessable. As of the date of this
Agreement, there are no shares of Tech Common Stock held in the treasury
of Tech and there are no other shares of the capital stock of Tech. As of
the date hereof, except as disclosed in Tech's Disclosure Schedule, there
are no outstanding options, warrants, rights or other commitments to issue
or sell any shares of capital stock or any securities or obligations
convertible into or exchangeable for, or giving any person any right
to acquire from Tech, any shares of its capital stock. No shares of
Tech's capital stock have been issued in violation of any preemptive
rights or applicable federal or state securities laws. Except
pursuant to the Texas Act, there are no restrictions, including but
not limited to self-imposed restrictions, on the retained earnings of
Tech or on the ability of Tech to declare and pay dividends. There
are no outstanding obligations of Tech to repurchase, redeem or
otherwise acquire any capital stock or other securities of Tech."
3. Section 4.1, TITLE TO SHARES, is hereby amended in its entirety to
read as follows:
"Section 4.1 TITLE TO SHARES. Immediately prior to the
Closing, the Owner(s) shall be the lawful Owner(s) and holder(s) of an
aggregate of no more than 2,950,000 shares of Tech Common Stock and,
on the Effective Date, shall hold all such shares free and clear of
any encumbrances or liens."
4. Section 6.1(f), TECH'S EQUITY INFUSION, is hereby amended in its
entirety to ready as follows:
"(f) TECH'S EQUITY INFUSION. Prior to the Closing as called for
herein, Tech shall have caused to be sold that number of shares of the
Tech Common Stock that would comply with the Exchange Ratio of Section
1.2 herein for no less than $2,300,000 cash. Such purchasers of
equity shall execute all documents deemed necessary by counsel of
Tanisys at or prior to the Closing, including but not limited to those
representations and warranties as set forth in Article 4 and
restrictions as set forth in Section 5.15."
5. All references to "3,100,000" shares of Tech Common Stock or Tanisys
Common Stock in documents relating to the Agreement, including but not limited
to the exhibits and schedules attached to the Agreement, are hereby changed to
"2,950,000."
6. All undefined capitalized terms used in this Amendment shall have the
meanings set forth in the Agreement.
7. All terms and conditions of the Agreement and related documents not
specifically modified herein are hereby ratified and confirmed in their
entirety.
-2-
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 1 to the Agreement has been duly
executed by each of the parties to the Agreement as of the 16th day of May,
1996.
Tanisys Technology, Inc. Tanisys Acquisition Corp.
By: /s/ MARK C. HOLLIDAY By: /s/ MARK C. HOLLIDAY
------------------------ -------------------------
Chairman of the Board and Chairman of the Board and
Chief Executive Officer Chief Executive Officer
1st Tech Corporation
By: /s/ GARY W. PANKONIEN /s/ GARY W. PANKONIEN
------------------------ -----------------------
Chairman of the Board and Gary W. Pankonien, Individually
Chief Executive Officer
-3-
<PAGE>
Exhibit 10.5
[STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 05/31/1996
960157937 - 2603083]
ARTICLES OF MERGER
OF
1ST TECH CORPORATION
(a Texas corporation)
WITH AND INTO
TANISYS ACQUISITION CORP.
(a Delaware corporation)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Pursuant to the provisions of Article 262 of the Delaware Corporation Act
(the "Delaware Act"), the undersigned domestic corporation and foreign
corporation adopt the following Articles of Merger ("Articles of Merger"), this
31st day of May, 1996, for the purpose of effecting a merger between TANISYS
ACQUISITION CORP., a Delaware corporation ("Tanisys Acquisition"), and 1ST TECH
CORPORATION, a Texas corporation ("Tech"), in accordance with the provisions of
Article 251 of the Delaware Act. Tanisys Acquisition and Tech are sometimes
referred to herein as the "Constituent Corporations."
RECITALS
Tanisys Acquisition is a corporation duly organized and existing under the
laws of the State of Delaware with authorized capital of 10,000 shares of common
stock, par value $.01 per share (the "Tanisys Acquisition Common Stock"), of
which no shares are held in treasury and 10,000 shares of Tanisys Acquisition
Common Stock are issued and outstanding.
Tech is a corporation validly existing under the laws of the State of Texas
with authorized capital consisting of 10,000,000 shares of common stock, no par
value per share (the "Tech Common Stock"), of which no shares are held in the
treasury and 2,950,000 shares are issued and outstanding.
Tanisys Technology, Inc., a Wyoming corporation and holder of all of the
issued and outstanding shares of Tanisys Acquisition Common Stock ("Tanisys"),
and Tech, among others, have entered into an Agreement and Plan of Merger, dated
as of April 9, 1996 (the "Agreement"), which contemplates the merger of Tech
with and into Tanisys Acquisition (the "Merger"), with Tanisys Acquisition
becoming the surviving corporation in accordance with the Agreement and these
Articles of Merger.
The respective Boards of Directors of Tanisys Acquisition and Tech deem it
advisable and in the best interests of each such corporation and their
respective shareholders that Tech
<PAGE>
be merged with and into Tanisys Acquisition as provided herein and in the
Agreement, and they have accordingly adopted resolutions approving the
Agreement and these Articles of Merger, and the Agreement and these Articles
of Merger have been approved by the required vote of the shareholders of each
Constituent Corporation.
Therefore, in consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree to the
following Plan of Merger:
ARTICLE 1.
The Merger
On the Effective Date of the Merger (as defined in Article 6 hereof), Tech
shall be merged with and into Tanisys Acquisition, which as the surviving
corporation is sometimes referred to herein as the "Surviving Corporation." The
separate existence and corporate organization of Tech shall cease upon the
Effective Date of the Merger, and thereafter Tanisys Acquisition shall continue
as the Surviving Corporation under the laws of the State of Delaware under the
name "Tanisys Acquisition Corp." The Merger shall be pursuant to the provisions
of and with the effect provided in the Delaware Act and the Texas Business
Corporation Act (the "Texas Act").
ARTICLE 2.
Articles of Incorporation and Bylaws
2.1. On the Effective Date of the Merger, the Articles of Incorporation of
Tanisys Acquisition, as in effect immediately prior to the Effective Date of the
Merger, shall be the Articles of Incorporation of the Surviving Corporation,
until duly amended in accordance with law and such Articles of Incorporation.
2.2. On the Effective Date of the Merger, the Bylaws of Tanisys
Acquisition, as in effect immediately prior to the Effective Date of the Merger,
shall be the Bylaws of the Surviving Corporation, until the same shall
thereafter be altered, amended or repealed in accordance with law, the Articles
of Incorporation of the Surviving Corporation and such Bylaws.
ARTICLE 3.
Directors and Officers
3.1. The number of directors comprising the Board of Directors of the
Surviving Corporation shall be one (1), and such director, who shall serve until
his successor has been
2
<PAGE>
duly elected and qualified or until his resignation, death or removal, in
accordance with law, the Articles of Incorporation and the Bylaws of the
Corporation, shall be Mark C. Holliday.
3.2. The officers of the Surviving Corporation after the Effective Date of
the Merger, who shall serve in the capacity listed opposite their respective
names until their successors have been duly elected and qualified or until their
resignation, death or removal, in accordance with law, the Articles of
Incorporation and Bylaws of the Surviving Corporation, shall be as follows:
Mark C. Holliday President
Keith D. Thatcher Vice President, Chief Financial Officer
and Corporate Treasurer
Lynne Reilly Corporate Secretary
ARTICLE 4.
Manner and Basis of Converting Shares
4.1. On the Effective Date of the Merger, subject to Section 4.7 hereof,
each share of Tanisys Acquisition Common Stock issued and outstanding
immediately prior to the Effective Date of the Merger (other than Tanisys
Acquisition Appraisal Shares (as hereinafter defined), all of which shall be
cancelled) shall continue to remain outstanding and unchanged. "Tanisys
Acquisition Appraisal Shares" are those shares of Tanisys Acquisition Common
Stock as to which shareholders of Tanisys Acquisition have properly exercised
and perfected their right to dissent and receive the fair value thereof in
accordance with Article 262 of the Delaware Act. Also on the Effective Date of
the Merger, subject to Sections 4.3 and 4.7 hereof and adjustment as provided
herein, each share of Tech Common Stock issued and outstanding immediately prior
to the Effective Date of the Merger (other than Tech Appraisal Shares (as
hereinafter defined), all of which shares shall be cancelled), not to exceed
2,950,000 shares of Tech Common Stock in the aggregate, shall, by virtue of the
Merger and without any action on the part of the holder thereof, thereupon be
converted into and become, in exchange for each share of Tech Common Stock, one
(1) share (the "Exchange Ratio") of Tanisys common stock, no par value per share
(the "Tanisys Common Stock"), with any excess shares of Tech Common Stock
resulting in a reduction in the per-share Exchange Ratio. In the event that
Tech has less than 2,950,000 shares of Tech Common Stock outstanding on the
Effective Date of the Merger, the Exchange Ratio shall be proportionally
increased. Each share of Tech Common Stock held in the treasury of Tech or by a
wholly-owned subsidiary of Tech shall be cancelled as of the Effective Date of
the Merger, and no portion of the Merger Consideration (as hereinafter defined)
shall be payable with respect thereto. As used in these Articles of Merger,
"Merger Consideration" shall mean the aggregate of 2,950,000 shares of Tanisys
Common Stock exchanged for Tech Common Stock in the Merger at the Exchange
Ratio. The Merger Consideration shall be reduced by the amount otherwise
payable or issuable to holders of Tech who exercise dissenters' rights in
connection with the Merger based upon such shareholders' ownership of Tech
Common
3
<PAGE>
Stock outstanding on the Effective Date of the Merger. The Exchange Ratio
shall be subject to appropriate adjustment in the event of a stock split,
stock dividend or recapitalization subsequent to the date of the Agreement
applicable to shares of Tech Common Stock or Tanisys Common Stock held of
record on or before the Effective Date of the Merger. "Tech Appraisal
Shares" are those shares of Tech Common Stock as to which shareholders have
properly exercised and perfected their right to dissent and to receive the
fair value thereof in accordance with Articles 5.11, 5.12 and 5.13 of the
Texas Act.
4.2. After the Effective Date of the Merger, each holder of record of an
outstanding certificate or certificates representing shares of Tech Common
Stock shall surrender such certificate or certificates to Tanisys or to such
agent or agents as shall be appointed by Tanisys (the "Exchange Agent") and
shall be entitled to receive in exchange therefor (except to the extent such
certificate or certificates represent Tech Appraisal Shares) a certificate or
certificates representing the number of whole shares of Tanisys Common Stock
into which the shares of Tech Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been converted,
together with a check representing the cash adjustments for fractional
shares, if any. Except as otherwise provided herein, each share of Tech
Common Stock issued and outstanding immediately prior to the Effective Date
of the Merger shall on and after the Effective Date of the Merger be deemed
for all corporate purposes to evidence ownership of the number of shares of
Tanisys Common Stock into which such shares have been converted. Until
certificates representing shares of Tech Common Stock shall be surrendered
and exchanged for certificates representing shares of Tanisys Common Stock,
no dividend or other distributions, if any, payable to holders of record of
Tanisys Common Stock as of any date subsequent to the Effective Date of the
Merger shall be paid to the holders of such outstanding certificates of Tech
Common Stock. Holders of unsurrendered certificates for shares of Tech
Common Stock shall not be entitled to vote until such unsurrendered
certificates for shares of Tech Common Stock are exchanged pursuant to this
Section 4.2. Upon surrender and exchange of such outstanding certificates of
Tech Common Stock and subject to the effect, if any, of applicable law, there
shall be paid to the record holders of the certificates issued in exchange
therefor, the amount, without interest thereon, of dividends and other
distributions, if any, which has become payable after the Effective Date of
the Merger with respect to the number of whole shares of Tanisys Common Stock
represented thereby. Immediately prior to the Effective Date of the Merger,
all outstanding stock options or rights to purchase Tech Common Stock, if
any, shall be surrendered by the respective holders thereof and shall
terminate and be cancelled and shall have no further force and effect
whatsoever.
4.3. Tanisys shall not be required to issue, and no certificates shall be
issued, for a fraction of a share of Tanisys Common Stock to any shareholder of
Tanisys in respect of fractional interests, but in lieu thereof each such holder
of shares of Tanisys Common Stock who would otherwise have been entitled to a
fraction of a share of Tanisys Common Stock, upon compliance with Section 4.2
hereof, shall be paid cash equal to such fraction multiplied by the average of
the per-share closing prices of Tanisys Common Stock on the Vancouver Stock
Exchange for the twenty (20) trading days immediately preceding the date that is
ten (10) days prior to the Effective Date of the Merger, subject to appropriate
adjustment in the
4
<PAGE>
event of a stock split, stock dividend or recapitalization applicable to
shares of Tanisys Common Stock held of record on or before the Effective Date
of the Merger to the extent not reflected in such sales prices.
4.4. If any certificate evidencing shares of Tanisys Common Stock is to be
issued in a name other than that in which the Tech certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange pay to
Tanisys or the Exchange Agent any transfer or other taxes required by reason of
the issuance of a certificate for shares of Tanisys Common Stock in any name
other than that of the registered holder of the certificate surrendered or
establish to the satisfaction of Tanisys or the Exchange Agent that such tax has
been paid or is not payable.
4.5. Tanisys may, without notice to any person, terminate all exchange
agencies after thirty (30) days following the Effective Date of the Merger, and
thereafter all exchanges, payments and notices provided for in these Articles of
Merger as being made to or by the Exchange Agent shall be made to or by Tanisys
or its transfer agent.
4.6. The holder of a certificate or certificates representing shares of
Tech Common Stock issued and outstanding immediately prior to the Effective Date
of the Merger shall have no rights with respect to such shares other than to
exercise and perfect their right to dissent to the Merger and to receive the
fair value of such shares in the manner provided by Articles 5.11, 5.12 and 5.13
of the Texas Act or surrender such certificate or certificates pursuant to
Section 4.2 hereof. The holder of a certificate or certificates representing
shares of the Tanisys Acquisition Common Stock issued and outstanding prior to
the Effective Date of the Merger shall have no rights with respect to such
shares other than to exercise and perfect their right to dissent to the Merger
and to receive the fair value of such shares in the manner provided by Article
262 of the Delaware Act.
4.7. If the holder of any shares of Tech Common Stock issued and
outstanding immediately prior to the Effective Date of the Merger shall become
entitled to receive payment for such shares in accordance with the applicable
provisions of Articles 5.11, 5.12 and 5.13 of the Texas Act, then such payment
shall be in lieu of the conversion provided in Section 4.1 hereof and shall be
made by the Surviving Corporation. Tech shall give Tanisys Acquisition and
Tanisys prompt notice upon receipt of any written objections to the Merger or
claims of appraisal rights and shall not without prior written consent of
Tanisys Acquisition and Tanisys make any payment with respect to, or settle or
offer to settle, any such objection or claim. If the holder of any shares of
Tanisys Common Stock issued and outstanding immediately prior to the Effective
Date of the Merger shall become entitled to receive payment for such shares in
accordance with the applicable provisions of Article 262 of the Delaware Act,
then such payment shall be made by the Surviving Corporation.
5
<PAGE>
ARTICLE 5.
Rights and Duties of Tanisys Acquisition as the Surviving Corporation
5.1. On the Effective Date of the Merger, the separate existence of Tech
shall cease for all purposes, and Tech shall be merged with and into Tanisys
Acquisition, which, as the Surviving Corporation, shall thereupon and thereafter
possess all of the rights, privileges, immunities, powers and franchises of a
public as well as of a private nature, and shall be subject to all the
restrictions, liabilities, obligations, disabilities and duties of each of the
Constituent Corporations so merged; and all and singular, the rights,
privileges, immunities, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed and all debts due to
any of the Constituent Corporations on whatever account, including stock
subscriptions and all other choses in action, and all and every other interest
of or belonging to or due to each of such Constituent Corporations shall be
taken and deemed to be transferred to and vested in the Surviving Corporation
without further act or deed. The title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, shall not revert or be in
any way impaired by reason of the Merger.
5.2. On the Effective Date of the Merger, the Surviving Corporation shall
also be responsible and liable and subject to all restrictions, liabilities,
obligations, disabilities and duties of each Constituent Corporation; and any
claim existing or action or proceeding pending by or against any of the
Constituent Corporations may be prosecuted as if the Merger had not taken place
or the Surviving Corporation had been substituted in its place. Neither the
rights of creditors nor any liens upon the property of any of the Constituent
Corporations shall be impaired by the Merger, and such rights and liens shall
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if the Merger had not taken place. If at any time the Surviving
Corporation shall consider or be advised that any further assignment or
assurances in law or any things are necessary or desirable to vest in the
Surviving Corporation, according to the terms hereof, the title of any property
or rights of Tech, the last acting officers and directors of Tech, as the case
may be, or the corresponding officers and directors of the Surviving Corporation
shall and will execute and make all such proper assignments and assurances and
do all things necessary or proper to vest title in such property or rights in
the Surviving Corporation, and otherwise to carry out the purposes of the
Agreement and these Articles of Merger.
ARTICLE 6.
Effective Date
As used in these Articles of Merger, the term "Effective Date of the
Merger" shall mean the latter of the issuance of a Certificate of Merger by the
Secretary of State of the State of Texas or the issuance of a Certificate of
Merger by the Secretary of State of the State of Delaware in accordance with the
Delaware Act and Texas Act, respectively.
6
<PAGE>
ARTICLE 7.
Counterparts
These Articles of Merger may be executed in any number of counterparts,
each of which shall be deemed an original, and all of such counterparts together
shall constitute one and the same instrument.
ARTICLE 8.
Amendment
Subject to applicable law, these Articles of Merger may be amended,
modified or supplemented only by written agreement of Tanisys Acquisition and
Tech, duly authorized by each of their respective Boards of Directors, at any
time prior to the Effective Date of the Merger; provided, however, that, after
the adoption of the Agreement and these Articles of Merger by the shareholders
of Tanisys Acquisition and Tech, no such amendment, modification or supplement
shall reduce the amount or change the form of the consideration to be paid to
the shareholders of Tech in accordance with Article 4 hereof.
ARTICLE 9.
Voting
The common stock of each Constituent Corporation is the only class of
shares entitled to vote on the proposed Merger. As to each Constituent
Corporation, the approval of whose shareholders is required, the designation and
total number of shares outstanding and entitled to vote for or against the
Merger, and the number of shares of each Constituent Corporation voted for or
against the Merger, respectively, are as follows:
Number of Shares
Number of ---------------------
Name of Designation of Common Total Total
Constituent Class Entitled Shares Out- Voted Voted
Corporation to Vote standing For Against
- - ----------- -------------- ----------- --------- -------
Tanisys Acquisition
Corp. Common Stock 10,000 10,000 -0-
1st Tech
Corporation Common Stock 2,950,000 2,950,000 -0-
7
<PAGE>
ARTICLE 10.
Authorization of Merger
The Agreement and these Articles of Merger and the performance of their
terms were duly authorized by all action required by the laws under which each
of Tanisys Acquisition, Tech and Tanisys are incorporated and by their
respective constituent documents.
TANISYS ACQUISITION CORP.
a Delaware corporation
ATTEST:
By: /s/ KEITH D. THATCHER
-------------------------------
/s/ LYNNE A. REILLY Name: Keith D. Thatcher
- - ------------------------------- -----------------------------
Secretary Title: Vice Preident and CFO
----------------------------
DARKHORSE SYSTEMS, INC.
a Texas corporation
ATTEST:
By: /s/ GARY W. PANKONIEN
-------------------------------
/s/ DONALD R. TURNER Name: Gary W. Pankonien
- - ------------------------------ -----------------------------
Secretary Title: Chairman and CEO
----------------------------
TANISYS TECHNOLOGY, INC.
a Wyoming corporation
ATTEST:
By: /s/ KEITH D. THATCHER
-------------------------------
/s/ LYNNE A. REILLY Name: Keith D. Thatcher
- - ------------------------------ -----------------------------
Assistant Secretary Title: Vice President and CFO
----------------------------
8
<PAGE>
Exhibit 10.6
[FILED
in the Office of the
Secretary of State of Texas
MAY 31 1996
Corporations Section]
ARTICLES OF MERGER
OF
1ST TECH CORPORATION
(a Texas corporation)
WITH AND INTO
TANISYS ACQUISITION CORP.
(a Delaware corporation)
_______________________________________________________________________________
_______________________________________________________________________________
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act (the "Texas Act"), the undersigned domestic corporation and
foreign corporation adopt the following Articles of Merger ("Articles of
Merger"), this 31st day of May, 1996, for the purpose of effecting a merger
between TANISYS ACQUISITION CORP., a Delaware corporation ("Tanisys
Acquisition"), and 1ST TECH CORPORATION, a Texas corporation ("Tech"), in
accordance with the provisions of Article 5.01 of the Texas Act. Tanisys
Acquisition and Tech are sometimes referred to herein as the "Constituent
Corporations."
RECITALS
Tanisys Acquisition is a corporation duly organized and existing under the
laws of the State of Delaware with authorized capital of 10,000 shares of common
stock, par value $.01 per share (the "Tanisys Acquisition Common Stock"), of
which no shares are held in treasury and 10,000 shares of Tanisys Acquisition
Common Stock are issued and outstanding.
Tech is a corporation validly existing under the laws of the State of Texas
with authorized capital consisting of 10,000,000 shares of common stock, no par
value per share (the "Tech Common Stock"), of which no shares are held in the
treasury and 2,950,000 shares are issued and outstanding.
Tanisys Technology, Inc., a Wyoming corporation and holder of all of the
issued and outstanding shares of Tanisys Acquisition Common Stock ("Tanisys"),
and Tech, among others, have entered into an Agreement and Plan of Merger, dated
as of April 9, 1996 (the "Agreement"), which contemplates the merger of Tech
with and into Tanisys Acquisition (the "Merger"), with Tanisys Acquisition
becoming the surviving corporation in accordance with the Agreement and these
Articles of Merger.
The respective Boards of Directors of Tanisys Acquisition and Tech deem it
advisable and in the best interests of each such corporation and their
respective shareholders that Tech
<PAGE>
be merged with and into Tanisys Acquisition as provided herein and in the
Agreement, and they have accordingly adopted resolutions approving the
Agreement and these Articles of Merger, and the Agreement and these Articles
of Merger have been approved by the required vote of the shareholders of each
Constituent Corporation.
Therefore, in consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree to the
following Plan of Merger:
ARTICLE 1.
The Merger
On the Effective Date of the Merger (as defined in Article 6 hereof), Tech
shall be merged with and into Tanisys Acquisition, which as the surviving
corporation is sometimes referred to herein as the "Surviving Corporation." The
separate existence and corporate organization of Tech shall cease upon the
Effective Date of the Merger, and thereafter Tanisys Acquisition shall continue
as the Surviving Corporation under the laws of the State of Delaware under the
name "Tanisys Acquisition Corp., d/b/a 1st Tech." The Merger shall be pursuant
to the provisions of and with the effect provided in the Texas Act and the
Delaware Corporation Act (the "Delaware Act").
ARTICLE 2.
Articles of Incorporation and Bylaws
2.1. On the Effective Date of the Merger, the Articles of Incorporation of
Tanisys Acquisition, as in effect immediately prior to the Effective Date of the
Merger, shall be the Articles of Incorporation of the Surviving Corporation,
until duly amended in accordance with law and such Articles of Incorporation.
2.2. On the Effective Date of the Merger, the Bylaws of Tanisys
Acquisition, as in effect immediately prior to the Effective Date of the Merger,
shall be the Bylaws of the Surviving Corporation, until the same shall
thereafter be altered, amended or repealed in accordance with law, the Articles
of Incorporation of the Surviving Corporation and such Bylaws.
ARTICLE 3.
Directors and Officers
3.1. The number of directors comprising the Board of Directors of the
Surviving Corporation shall be one (1), and such director, who shall serve until
his successor has been
2
<PAGE>
duly elected and qualified or until his resignation, death or removal, in
accordance with law, the Articles of Incorporation and the Bylaws of the
Corporation, shall be Mark C. Holliday.
3.2. The officers of the Surviving Corporation after the Effective Date of
the Merger, who shall serve in the capacity listed opposite their respective
names until their successors have been duly elected and qualified or until their
resignation, death or removal, in accordance with law, the Articles of
Incorporation and Bylaws of the Surviving Corporation, shall be as follows:
Mark C. Holliday President
Keith D. Thatcher Vice President, Chief Financial Officer
and Corporate Treasurer
Lynne Reilly Corporate Secretary
ARTICLE 4.
Manner and Basis of Converting Shares
4.1. On the Effective Date of the Merger, subject to Section 4.7 hereof,
each share of Tanisys Acquisition Common Stock issued and outstanding
immediately prior to the Effective Date of the Merger (other than Tanisys
Acquisition Appraisal Shares (as hereinafter defined), all of which shall be
cancelled) shall continue to remain outstanding and unchanged. "Tanisys
Acquisition Appraisal Shares" are those shares of Tanisys Acquisition Common
Stock as to which shareholders of Tanisys Acquisition have properly exercised
and perfected their right to dissent and receive the fair value thereof in
accordance with Article 262 of the Delaware Act. Also on the Effective Date of
the Merger, subject to Sections 4.3 and 4.7 hereof and adjustment as provided
herein, each share of Tech Common Stock issued and outstanding immediately prior
to the Effective Date of the Merger (other than Tech Appraisal Shares (as
hereinafter defined), all of which shares shall be cancelled), not to exceed
2,950,000 shares of Tech Common Stock in the aggregate, shall, by virtue of the
Merger and without any action on the part of the holder thereof, thereupon be
converted into and become, in exchange for each share of Tech Common Stock, one
(1) share (the "Exchange Ratio") of Tanisys common stock, no par value per share
(the "Tanisys Common Stock"), with any excess shares of Tech Common Stock
resulting in a reduction in the per-share Exchange Ratio. In the event that
Tech has less than 2,950,000 shares of Tech Common Stock outstanding on the
Effective Date of the Merger, the Exchange Ratio shall be proportionally
increased. Each share of Tech Common Stock held in the treasury of Tech or by a
wholly-owned subsidiary of Tech shall be cancelled as of the Effective Date of
the Merger, and no portion of the Merger Consideration (as hereinafter defined)
shall be payable with respect thereto. As used in these Articles of Merger,
"Merger Consideration" shall mean the aggregate of 2,950,000 shares of Tanisys
Common Stock exchanged for Tech Common Stock in the Merger at the Exchange
Ratio. The Merger Consideration shall be reduced by the amount otherwise
payable or issuable to holders of Tech who exercise dissenters' rights in
connection with the Merger based upon such shareholders' ownership of Tech
Common
3
<PAGE>
Stock outstanding on the Effective Date of the Merger. The Exchange
Ratio shall be subject to appropriate adjustment in the event of a stock split,
stock dividend or recapitalization subsequent to the date of the Agreement
applicable to shares of Tech Common Stock or Tanisys Common Stock held of record
on or before the Effective Date of the Merger. "Tech Appraisal Shares" are
those shares of Tech Common Stock as to which shareholders have properly
exercised and perfected their right to dissent and to receive the fair value
thereof in accordance with Articles 5.11, 5.12 and 5.13 of the Texas Act.
4.2. After the Effective Date of the Merger, each holder of record of an
outstanding certificate or certificates representing shares of Tech Common Stock
shall surrender such certificate or certificates to Tanisys or to such agent or
agents as shall be appointed by Tanisys (the "Exchange Agent") and shall be
entitled to receive in exchange therefor (except to the extent such certificate
or certificates represent Tech Appraisal Shares) a certificate or certificates
representing the number of whole shares of Tanisys Common Stock into which the
shares of Tech Common Stock theretofore represented by the certificate or
certificates so surrendered shall have been converted, together with a check
representing the cash adjustments for fractional shares, if any. Except as
otherwise provided herein, each share of Tech Common Stock issued and
outstanding immediately prior to the Effective Date of the Merger shall on and
after the Effective Date of the Merger be deemed for all corporate purposes to
evidence ownership of the number of shares of Tanisys Common Stock into which
such shares have been converted. Until certificates representing shares of Tech
Common Stock shall be surrendered and exchanged for certificates representing
shares of Tanisys Common Stock, no dividend or other distributions, if any,
payable to holders of record of Tanisys Common Stock as of any date subsequent
to the Effective Date of the Merger shall be paid to the holders of such
outstanding certificates of Tech Common Stock. Holders of unsurrendered
certificates for shares of Tech Common Stock shall not be entitled to vote until
such unsurrendered certificates for shares of Tech Common Stock are exchanged
pursuant to this Section 4.2. Upon surrender and exchange of such outstanding
certificates of Tech Common Stock and subject to the effect, if any, of
applicable law, there shall be paid to the record holders of the certificates
issued in exchange therefor, the amount, without interest thereon, of dividends
and other distributions, if any, which has become payable after the Effective
Date of the Merger with respect to the number of whole shares of Tanisys Common
Stock represented thereby. Immediately prior to the Effective Date of the
Merger, all outstanding stock options or rights to purchase Tech Common Stock,
if any, shall be surrendered by the respective holders thereof and shall
terminate and be cancelled and shall have no further force and effect
whatsoever.
4.3. Tanisys shall not be required to issue, and no certificates shall be
issued, for a fraction of a share of Tanisys Common Stock to any shareholder of
Tanisys in respect of fractional interests, but in lieu thereof each such holder
of shares of Tanisys Common Stock who would otherwise have been entitled to a
fraction of a share of Tanisys Common Stock, upon compliance with Section 4.2
hereof, shall be paid cash equal to such fraction multiplied by the average of
the per-share closing prices of Tanisys Common Stock on the Vancouver Stock
Exchange for the twenty (20) trading days immediately preceding the date that is
ten (10) days prior to the Effective Date of the Merger, subject to appropriate
adjustment in the
4
<PAGE>
event of a stock split, stock dividend or recapitalization applicable to
shares of Tanisys Common Stock held of record on or before the Effective Date
of the Merger to the extent not reflected in such sales prices.
4.4. If any certificate evidencing shares of Tanisys Common Stock is to be
issued in a name other than that in which the Tech certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange pay to
Tanisys or the Exchange Agent any transfer or other taxes required by reason of
the issuance of a certificate for shares of Tanisys Common Stock in any name
other than that of the registered holder of the certificate surrendered or
establish to the satisfaction of Tanisys or the Exchange Agent that such tax has
been paid or is not payable.
4.5. Tanisys may, without notice to any person, terminate all exchange
agencies after thirty (30) days following the Effective Date of the Merger, and
thereafter all exchanges, payments and notices provided for in these Articles of
Merger as being made to or by the Exchange Agent shall be made to or by Tanisys
or its transfer agent.
4.6. The holder of a certificate or certificates representing shares of
Tech Common Stock issued and outstanding immediately prior to the Effective Date
of the Merger shall have no rights with respect to such shares other than to
exercise and perfect their right to dissent to the Merger and to receive the
fair value of such shares in the manner provided by Articles 5.11, 5.12 and 5.13
of the Texas Act or surrender such certificate or certificates pursuant to
Section 4.2 hereof. The holder of a certificate or certificates representing
shares of the Tanisys Acquisition Common Stock issued and outstanding prior to
the Effective Date of the Merger shall have no rights with respect to such
shares other than to exercise and perfect their right to dissent to the Merger
and to receive the fair value of such shares in the manner provided by Article
262 of the Delaware Act.
4.7. If the holder of any shares of Tech Common Stock issued and
outstanding immediately prior to the Effective Date of the Merger shall become
entitled to receive payment for such shares in accordance with the applicable
provisions of Articles 5.11, 5.12 and 5.13 of the Texas Act, then such payment
shall be in lieu of the conversion provided in Section 4.1 hereof and shall be
made by the Surviving Corporation. Tech shall give Tanisys Acquisition and
Tanisys prompt notice upon receipt of any written objections to the Merger or
claims of appraisal rights and shall not without prior written consent of
Tanisys Acquisition and Tanisys make any payment with respect to, or settle or
offer to settle, any such objection or claim. If the holder of any shares of
Tanisys Common Stock issued and outstanding immediately prior to the Effective
Date of the Merger shall become entitled to receive payment for such shares in
accordance with the applicable provisions of Article 262 of the Delaware Act,
then such payment shall be made by the Surviving Corporation.
5
<PAGE>
ARTICLE 5.
Rights and Duties of Tanisys Acquisition as the Surviving Corporation
5.1. On the Effective Date of the Merger, the separate existence of Tech
shall cease for all purposes, and Tech shall be merged with and into Tanisys
Acquisition, which, as the Surviving Corporation, shall thereupon and thereafter
possess all of the rights, privileges, immunities, powers and franchises of a
public as well as of a private nature, and shall be subject to all the
restrictions, liabilities, obligations, disabilities and duties of each of the
Constituent Corporations so merged; and all and singular, the rights,
privileges, immunities, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed and all debts due to
any of the Constituent Corporations on whatever account, including stock
subscriptions and all other choses in action, and all and every other interest
of or belonging to or due to each of such Constituent Corporations shall be
taken and deemed to be transferred to and vested in the Surviving Corporation
without further act or deed. The title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, shall not revert or be in
any way impaired by reason of the Merger.
5.2. On the Effective Date of the Merger, the Surviving Corporation shall
also be responsible and liable and subject to all restrictions, liabilities,
obligations, disabilities and duties of each Constituent Corporation; and any
claim existing or action or proceeding pending by or against any of the
Constituent Corporations may be prosecuted as if the Merger had not taken place
or the Surviving Corporation had been substituted in its place. Neither the
rights of creditors nor any liens upon the property of any of the Constituent
Corporations shall be impaired by the Merger, and such rights and liens shall
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if the Merger had not taken place. If at any time the Surviving
Corporation shall consider or be advised that any further assignment or
assurances in law or any things are necessary or desirable to vest in the
Surviving Corporation, according to the terms hereof, the title of any property
or rights of Tech, the last acting officers and directors of Tech, as the case
may be, or the corresponding officers and directors of the Surviving Corporation
shall and will execute and make all such proper assignments and assurances and
do all things necessary or proper to vest title in such property or rights in
the Surviving Corporation, and otherwise to carry out the purposes of the
Agreement and these Articles of Merger.
ARTICLE 6.
Effective Date
As used in these Articles of Merger, the term "Effective Date of the
Merger" shall mean the latter of the issuance of a Certificate of Merger by the
Secretary of State of the State of Texas or the issuance of a Certificate of
Merger by the Secretary of State of the State of Delaware in accordance with the
Texas Act and Delaware Act, respectively.
6
<PAGE>
ARTICLE 7.
Counterparts
These Articles of Merger may be executed in any number of counterparts,
each of which shall be deemed an original, and all of such counterparts together
shall constitute one and the same instrument.
ARTICLE 8.
Amendment
Subject to applicable law, these Articles of Merger may be amended,
modified or supplemented only by written agreement of Tanisys Acquisition and
Tech, duly authorized by each of their respective Boards of Directors, at any
time prior to the Effective Date of the Merger; provided, however, that, after
the adoption of the Agreement and these Articles of Merger by the shareholders
of Tanisys Acquisition and Tech, no such amendment, modification or supplement
shall reduce the amount or change the form of the consideration to be paid to
the shareholders of Tech in accordance with Article 4 hereof.
ARTICLE 9.
Voting
The common stock of each Constituent Corporation is the only class of
shares entitled to vote on the proposed Merger. As to each Constituent
Corporation, the approval of whose shareholders is required, the designation and
total number of shares outstanding and entitled to vote for or against the
Merger, and the number of shares of each Constituent Corporation voted for or
against the Merger, respectively, are as follows:
<TABLE>
<CAPTION>
Number of Shares
Number of ----------------
Name of Designation of Common Total Total
Constituent Class Entitled Shares Out- Voted Voted
Corporation to Vote standing For Against
- - ----------- -------------- ----------- ----- -------
<S> <C> <C> <C> <C>
Tanisys Acquisition
Corp. Common Stock 10,000 10,000 -0-
1st Tech
Corporation Common Stock 2,950,000 2,950,000 -0-
</TABLE>
7
<PAGE>
ARTICLE 10.
Authorization of Merger
The Agreement and these Articles of Merger and the performance of their
terms were duly authorized by all action required by the laws under which each
of Tanisys Acquisition, Tech and Tanisys are incorporated and by their
respective constituent documents.
TANISYS ACQUISITION CORP.
a Delaware corporation
ATTEST:
By: /s/ KEITH D. THATCHER
---------------------------
/s/ LYNNE A. REILLY Name: Keith D. Thatcher
- - ------------------------ -------------------------
Secretary Title: Vice Preident and CFO
------------------------
DARKHORSE SYSTEMS, INC.
a Texas corporation
ATTEST:
By: /s/ GARY W. PANKONIEN
---------------------------
/s/ DONALD R. TURNER Name: Gary W. Pankonien
- - ------------------------- -------------------------
Secretary Title: Chairman and CEO
------------------------
TANISYS TECHNOLOGY, INC.
a Wyoming corporation
ATTEST:
By: /s/ KEITH D. THATCHER
---------------------------
/s/ LYNNE A. REILLY Name: Keith D. Thatcher
- - ------------------------ -------------------------
Assistant Secretary Title: Vice President and CFO
------------------------
8
<PAGE>
EXHIBIT 10.7
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
TANISYS TECHNOLOGY, INC.
AND
TANISYS ACQUISITION CORP. II
AND
DARKHORSE SYSTEMS, INC.
AND
GARY W. PANKONIEN,
ARCHER LAWRENCE AND
JACK LITTLE
Dated as of April 9, 1996
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
ARTICLE 1 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 Articles of Incorporation and By-Laws of the Surviving Corporation. . . . . . . . . . 2
Section 1.4 Surrender and Exchange of DarkHorse Common Stock. . . . . . . . . . . . . . . . . . . 2
Section 1.5 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.6 No Further Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF
DARKHORSE AND THE OWNERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Organization; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Authority Relative to This Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 No Subsidiaries; Absence of Certain Agreements. . . . . . . . . . . . . . . . . . . . 5
Section 2.5 Governmental Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.6 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.8 Title to and Condition of Assets and Property . . . . . . . . . . . . . . . . . . . . 6
Section 2.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.10 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.11 Undisclosed Liabilities; Commitments. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.13 Pension Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.14 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.15 Information for Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.17 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.18 Proprietary Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.19 Surety and Guarantor Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.20 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.21 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.22 Compliance with Law; Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.23 Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.24 Investment Company Act, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.25 Public Utility Holding Company Act. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.26 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.27 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.28 Accounts Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.29 Items Reflected in DarkHorse's Disclosure Schedule. . . . . . . . . . . . . . . . . . 12
Section 2.30 Bank Accounts; Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.31 Product and Service Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.32 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.33 Corrupt Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.34 Current Revenue and Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.35 Absence of Bad Debt or Uncollectible Accounts . . . . . . . . . . . . . . . . . . . . 14
Section 2.36 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.37 Copies of Documents; Accuracy of Information Furnished. . . . . . . . . . . . . . . . 14
Section 2.38 Subchapter "S" Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ii
<PAGE>
Page
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF TANISYS . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Organization; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.2 Authority Relative to This Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.4 Validity of Shares to Be Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.5 Governmental Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.6 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.7 Financial Statements; British Columbia Securities Commission Reports. . . . . . . . . 17
Section 3.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.9 Information for Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.10 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.11 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.12 Copies of Documents; Accuracy of Information Furnished. . . . . . . . . . . . . . . . 18
ARTICLE 4 ADDITIONAL REPRESENTATIONS & WARRANTIES OF THE OWNERS
[AND ALL FUTURE OWNER(S), PURSUANT TO SECTION 6.1(g)]. . . . . . . . . . . . . . . . 18
Section 4.1 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.2 Authority Relative to This Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.3 Certain Transactions or Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.4 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.5 Copies of Documents; Accuracy Information Furnished . . . . . . . . . . . . . . . . . 19
ARTICLE 5 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.1 Conduct of Business of DarkHorse. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2 Forbearances by DarkHorse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.3 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.4 Investigation of Business and Properties. . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.6 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.7 Agreement to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.8 DarkHorse Shareholders' Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.9 Tanisys Acquisition II Shareholder's Approval . . . . . . . . . . . . . . . . . . . . 22
Section 5.10 Agreement Regarding Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.11 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.12 Representations, Warranties and Agreements; Survival . . . . . . . . . . . . . . . . 23
Section 5.13 Indemnification by DarkHorse and Owners and Security Agreement. . . . . . . . . . . . 23
Section 5.14 Indemnification by Tanisys. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.15 Resale Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 6 CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.1 General Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.2 Conditions to Closing in Favor of DarkHorse . . . . . . . . . . . . . . . . . . . . . 26
Section 6.3 Conditions to Closing in Favor of Tanisys . . . . . . . . . . . . . . . . . . . . . . 27
iii
<PAGE>
Page
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.1 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.4 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.6 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.7 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.9 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
LIST OF EXHIBITS
Exhibit "A" Delaware Articles of Merger
Exhibit "B" Texas Articles of Merger
Exhibit "C" Escrow Agreement
Exhibit "D" Opinions of Counsel for Tanisys
Exhibit "E" Opinion of Counsel for DarkHorse
Exhibit "F" Restricted Stock Investment Letters
LIST OF SCHEDULES
Schedule "A" DarkHorse's Disclosure Schedule
Schedule "B" Tanisys' Disclosure Schedule
Schedule "C" Owners' Disclosure Schedule
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of April 9,
1996, by and between TANISYS TECHNOLOGY, INC., a Wyoming corporation
("Tanisys"), TANISYS ACQUISITION CORP. II, a Delaware corporation and wholly-
owned subsidiary of Tanisys ("Tanisys Acquisition II" and sometimes referred to
as the "Surviving Corporation"), DARKHORSE SYSTEMS, INC., a Texas corporation
("DarkHorse"), and GARY W. PANKONIEN, ARCHER LAWRENCE AND JACK LITTLE
(collectively, the "Owners").
RECITALS OF THE PARTIES:
WHEREAS, the respective Boards of Directors of Tanisys and DarkHorse have
approved the merger (the "Merger") of DarkHorse with and into Tanisys
Acquisition II in accordance with the laws of the States of Texas and Delaware
and the provisions of this Agreement; and
WHEREAS, Tanisys, DarkHorse and the Owners desire to make certain
representations, warranties and agreements in connection with, and to establish
various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 THE MERGER. Pursuant to the terms of this Agreement,
DarkHorse will be merged with and into Tanisys Acquisition II pursuant to the
laws of the States of Texas and Delaware in the manner and with the effect set
forth herein. Subject to the fulfillment of the conditions precedent contained
in Article 6 of this Agreement, an executed Articles of Merger, the form of
which is attached as EXHIBIT "A" hereto, will be filed with the Secretary of
State of the State of Delaware and an executed Articles of Merger, the form of
which is attached as EXHIBIT "B" hereto, will be filed with the Secretary of
State of the State of Texas as soon as practical following the time when the
last of the conditions precedent set forth in Article 6 of this Agreement shall
have been fulfilled or waived in writing in accordance with such Article, or
such earlier or later date as may be mutually agreeable to Tanisys and
DarkHorse.
Section 1.2 CONVERSION OF SHARES. Upon the latter of the issuance of a
Certificate of Merger by the Secretary of State of the State of Delaware or the
issuance of a Certificate of Merger by the Secretary of State of the State of
Texas (the "Effective Date"), the issued and outstanding shares of common stock,
no par value per share, of DarkHorse (the "DarkHorse Common Stock"), subject to
the fulfillment of the conditions precedent as set forth in Article 6, including
the simultaneous closing of that certain Agreement and Plan of Merger dated
April 9, 1996, by and between Tanisys Technology, Inc., Tanisys Acquisition
Corp. and 1st Tech Corporation and Gary W. Pankonien and the applicable
statutory provisions with respect to appraisal rights, any
<PAGE>
applicable withholding requirements and adjustment as herein provided, shall
be converted into and become, and there shall be paid and issued, in exchange
for the DarkHorse Common Stock an aggregate of 1,500,000 shares of Tanisys
common stock, no par value per share (the "Tanisys Common Stock"), such that
each share of DarkHorse Common Stock outstanding on the Effective Date, not
to exceed 1,500,000 shares of DarkHorse Common Stock in the aggregate, is
exchanged for one (1) share (the "Exchange Ratio") of Tanisys Common Stock,
with any excess shares of DarkHorse Common Stock resulting in a reduction in
the per-share Exchange Ratio. As used in this Agreement, "Merger
Consideration" shall mean the aggregate of 1,500,000 shares of Tanisys Common
Stock exchanged for DarkHorse Common Stock in the Merger at the Exchange
Ratio. Each share of DarkHorse Common Stock held in the treasury of DarkHorse
or by a wholly-owned subsidiary of DarkHorse shall be cancelled as of the
Effective Date and no portion of the Merger Consideration shall be payable
with respect thereto. The Merger Consideration shall be reduced by the
amount otherwise payable or issuable to holders of DarkHorse who exercise
dissenters' rights, if any, in connection with the Merger based upon such
shareholders' ownership of DarkHorse Common Stock outstanding on the
Effective Date. The Exchange Ratio shall be subject to appropriate
adjustment in the event of a stock split, stock dividend or recapitalization
subsequent to the date of this Agreement applicable to shares of DarkHorse
Common Stock or Tanisys Common Stock held of record on or before the
Effective Date.
Section 1.3 ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION. The Certificate of Incorporation of Tanisys Acquisition II as in
effect on the Effective Date of the Merger shall be the Certificate of
Incorporation of the Surviving Corporation until same shall be amended in
accordance with law and the Certificate of Incorporation, except that after the
Merger the Surviving Corporation shall operate as DarkHorse Systems, Inc.
The By-Laws of Tanisys Acquisition II as in effect on the Effective Date of
the Merger shall be the By-Laws of the Surviving Corporation until same shall
thereafter be altered, amended or repealed in accordance with law, the
Certificate of Incorporation of the Surviving Corporation or said By-Laws.
The directors of the Surviving Corporation at the Effective Date of the
Merger shall be as follows: Mark C. Holliday and Gary W. Pankonien. The
officers of the Surviving Corporation at the Effective Date of the Merger shall
be as follows: President, ; Vice President, ;
Secretary, ; and Treasurer, .
Section 1.4 SURRENDER AND EXCHANGE OF DARKHORSE COMMON STOCK
(a) After the Effective Date, each holder of an outstanding certificate or
certificates theretofore representing shares of DarkHorse Common Stock
(the "DarkHorse Certificates") shall surrender such DarkHorse
Certificates to Tanisys or to such agent or agents (the "Exchange
Agent") as may be designated by Tanisys and shall receive in exchange
therefor, upon satisfaction of customary delivery requirements and
subject to applicable law with respect to the exercise of appraisal
rights, certificates representing the number of whole shares of
Tanisys Common Stock into
2
<PAGE>
which shares of DarkHorse Common Stock have been converted, together
with a check representing the cash adjustments for fractional shares,
if any.
(b) If any certificate evidencing shares of Tanisys Common Stock is to be
issued in a name other than that in which the DarkHorse Certificate
surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the DarkHorse Certificate so
surrendered shall be properly endorsed and otherwise be in proper form
for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other taxes required by reason of the
issuance of a certificate for shares of Tanisys Common Stock in any
name other than that of the registered holder of the DarkHorse
Certificate surrendered or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(c) Until so surrendered and exchanged, each outstanding DarkHorse
Certificate after the Effective Date shall be deemed for all corporate
purposes (other than voting and the payment of dividends or other
distributions as described below) to evidence the number of whole
shares of Tanisys Common Stock into which the shares of DarkHorse
Common Stock represented by such DarkHorse Certificates are to be
converted pursuant to Section 1.2 of this Agreement; provided,
however, that no dividends or other distributions, if any, in respect
to such shares of Tanisys Common Stock, declared after the Effective
Date and payable to holders of record after the Effective Date, shall
be paid to the holders of any unsurrendered DarkHorse Certificates
until such DarkHorse Certificates are surrendered. Subject to the
effect, if any, of applicable law, after the surrender and exchange of
the DarkHorse Certificates, the record holders thereof on the date of
exchange shall be entitled to receive any such dividends or other
distributions without interest thereon, which theretofore have become
payable with respect to the number of whole shares of Tanisys Common
Stock for which such DarkHorse Certificate was exchangeable. Holders
of any unsurrendered DarkHorse Certificates shall not be entitled to
vote until such unsurrendered DarkHorse Certificates are exchanged
pursuant to this Section 1.4. Holders of DarkHorse Common Stock who
exercise appraisal rights in accordance with the provisions of the
Texas Business Corporation Act (the "Texas Act") shall only be
entitled to receive the fair value of their shares of DarkHorse Common
Stock in accordance with Texas Act. Such holders shall not be
entitled to any dividends or other distributions payable on and after
the Effective Date to holders of Tanisys Common Stock with respect to
the shares involved regardless of whether such holders have received
payment for their shares.
(d) Tanisys may, without notice to any person, terminate all exchange
agencies after thirty (30) days following the Effective Date of the
Merger, and thereafter all exchanges, payments and notices provided
for in this Agreement as being made to or by the Exchange Agent shall
be made to or by Tanisys or its transfer agent.
3
<PAGE>
Section 1.5 FRACTIONAL SHARES. No fractional share certificates of
Tanisys Common Stock shall be issued in connection with the conversion of shares
of DarkHorse Common Stock in the Merger, nor will any outstanding fractional
share interest entitle the Owners thereof to vote, to receive dividends or to
exercise any other right of a shareholder of Tanisys. In lieu of any such
fractional shares, any holder of DarkHorse Common Stock shall, upon surrender
thereof, be paid in cash the value of each such fraction, which for this purpose
shall be the product of such fraction multiplied by the average of the per-share
closing prices of Tanisys Common Stock on the Vancouver Stock Exchange (the
"VSE") for the twenty (20) trading days immediately preceding the date that is
ten (10) days prior to the Effective Date, subject to appropriate adjustment in
the event of a stock split, stock dividend or recapitalization applicable to
shares of Tanisys Common Stock held of record on or before the Effective Date to
the extent not reflected in such sale prices.
Section 1.6 NO FURTHER TRANSFERS. On the Effective Date, the stock
transfer books of DarkHorse shall be closed, and no further transfer of
DarkHorse Common Stock shall thereafter be made.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
DARKHORSE AND THE OWNERS
Except as expressly set forth in the Disclosure Schedule, which is attached
hereto as SCHEDULE "A," delivered to Tanisys by DarkHorse and the Owners,
severally, and contemporaneously with the execution hereof ("DarkHorse's
Disclosure Schedule"), DarkHorse hereby represents and warrants to Tanisys, and
the Owners, to their best knowledge and belief hereby represent and warrant to
Tanisys as follows, regardless of what investigations, if any, Tanisys shall
have made prior hereto (for the purpose of this Article 2, "Material" or
"Material Adverse Effect" shall mean an adverse effect in an amount in excess of
$10,000):
Section 2.1 ORGANIZATION; QUALIFICATION. DarkHorse is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. DarkHorse has full corporate power and authority to own and lease all of
the properties and assets it now owns and leases and to carry on its business as
now being conducted. DarkHorse is duly qualified as a foreign corporation and
is in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure so to qualify would
not have a Material Adverse Effect on the condition (financial or otherwise),
business, assets, liabilities, capitalization, financial position, operations,
results of operations or prospects of DarkHorse. DarkHorse has heretofore
delivered to Tanisys complete and correct copies of its Articles of
Incorporation and By-Laws as such are currently in effect.
Section 2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. DarkHorse has full
corporate power and authority to execute, deliver and perform this Agreement
and, subject to shareholder approval, to consummate the transactions
contemplated hereby. The execution and delivery by DarkHorse of this Agreement,
and the consummation of the transactions contemplated hereby, have been duly
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and validly authorized by the Board of Directors of DarkHorse and, except for
approval of the Merger by the shareholders of DarkHorse, no other corporate
proceedings on the part of DarkHorse are necessary with respect thereto. This
Agreement has been duly and validly executed and delivered by DarkHorse and,
subject to shareholder approval, constitutes a legal, valid and binding
obligation of DarkHorse, enforceable against it in accordance with its terms.
Section 2.3 CAPITALIZATION. The authorized capital stock of DarkHorse
consists of 100,000,000 shares of DarkHorse Common Stock, no par value, of
which, as of the date hereof, 1,455,000 shares of DarkHorse Common Stock are
validly issued and outstanding, fully paid and nonassessable. As of the date of
this Agreement, there are no shares of DarkHorse Common Stock held in the
treasury of DarkHorse and there are no other shares of the capital stock of
DarkHorse. As of the date hereof, except as disclosed in DarkHorse's Disclosure
Schedule, there are no outstanding options, warrants, rights or other
commitments to issue or sell any shares of capital stock or any securities or
obligations convertible into or exchangeable for, or giving any person any right
to acquire from DarkHorse, any shares of its capital stock. No shares of
DarkHorse's capital stock have been issued in violation of any preemptive rights
or applicable federal or state securities laws. Except pursuant to the Texas
Act, there are no restrictions, including but not limited to self-imposed
restrictions, on the retained earnings of DarkHorse or on the ability of
DarkHorse to declare and pay dividends. There are no outstanding obligations of
DarkHorse to repurchase, redeem or otherwise acquire any capital stock or other
securities of DarkHorse.
Section 2.4 NO SUBSIDIARIES; ABSENCE OF CERTAIN AGREEMENTS. Except as
disclosed in DarkHorse's Disclosure Schedule, DarkHorse does not have any
Subsidiaries. As used in this Agreement, "Subsidiary" or "Subsidiaries" with
respect to any corporation shall mean any other corporation of which at least a
majority of the securities having by their terms ordinary voting power to elect
a majority of the board of directors of such other corporation is at the time
directly or indirectly owned or controlled by such first corporation, or by such
first corporation and one or more of its Subsidiaries. DarkHorse does not own
or hold any securities of, or any interest in, any other person or entity, nor
is DarkHorse subject to any joint venture, partnership or other arrangement that
is created as a partnership for federal income tax purposes. Except as set
forth in DarkHorse's Disclosure Schedule, there are no voting trusts or other
agreements by and between or among DarkHorse, or any or all of its shareholders,
whether or not DarkHorse is a party thereto, imposing any restrictions upon the
transfer or voting of or otherwise pertaining to the securities of DarkHorse
(including but not limited to the DarkHorse Common Stock) or the ownership
thereof. Any and all such restrictions set forth in DarkHorse's Disclosure
Schedule shall be duly complied with or effectively waived as of the Effective
Date.
Section 2.5 GOVERNMENTAL CONSENTS AND APPROVALS. Except as disclosed in
DarkHorse's Disclosure Schedule, the execution, delivery and performance by
DarkHorse of this Agreement and the consummation of the transactions
contemplated hereby by DarkHorse require no consent, approval, order or
authorization of, action by or in respect of, or registration or filing with,
any federal, state, municipal or other governmental department, commission,
board, bureau, agency, instrumentality, court, or authority ("Governmental
Body"), other than (a) the filing of the Articles of Merger with respect to the
Merger with the Secretary of State of the States of Texas and Delaware; (b) any
applicable filings with and consents and/or approvals of state security
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commissions under state securities laws or similar laws; and (c) such other
consents, approvals, permits, authorizations, notifications or filings, the
failure of which to obtain or make would not have a Material Adverse Effect on
DarkHorse or materially adversely affect the ability of DarkHorse to perform its
obligations set forth herein or to consummate the transactions contemplated
hereby.
Section 2.6 NO VIOLATIONS. Except as disclosed in DarkHorse's Disclosure
Schedule, the execution, delivery and performance of this Agreement by
DarkHorse, the consummation by DarkHorse of the transactions contemplated hereby
or compliance by DarkHorse with any of the provisions hereof does not and will
not (a) conflict with or result in any breach or violation of any provision of
the Articles of Incorporation or By-Laws of DarkHorse; (b) result in a default,
or give rise to any right of termination, cancellation or acceleration or loss
of any material benefit (with or without the giving of notice or lapse of time
or both), or require the consent, approval, waiver or other action by any person
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, trust (constructive or otherwise), agreement, lease (of real
or personal property) or other instrument or obligation to which DarkHorse is a
party or by which DarkHorse may be bound; (c) result in the creation or
imposition of any claim, lien, pledge, security interest, obligation,
restriction or other encumbrance on any of the property of DarkHorse; or (d)
violate any judgment, order, writ, injunction, decree, statute, rule or
regulation applicable to DarkHorse.
Section 2.7 FINANCIAL STATEMENTS. The financial statements, financial
statement schedules and notes to such financial statements and schedules of
DarkHorse ("the DarkHorse Financial Statements") for the year ended December 31,
1995, and the two (2) months ended February 29, 1996, are materially complete
and correct and were prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as noted in DarkHorse's
Disclosure Schedule, and fairly present the information purported to be shown
therein. All such the DarkHorse Financial Statements have been prepared from
the books and records of DarkHorse, which accurately and fairly reflect the
transactions and dispositions of the assets of DarkHorse. DarkHorse does not
have any liabilities, contingent or otherwise, whether due or to become due,
known or unknown, other than as indicated on the latest balance sheet included
in the DarkHorse Financial Statements. DarkHorse has adequately funded all
accrued employee benefit costs, and such funding is reflected in the balance
sheets included in the DarkHorse Financial Statements.
Section 2.8 TITLE TO AND CONDITION OF ASSETS AND PROPERTY. DarkHorse has
good and marketable title to any and all assets reflected in the DarkHorse
Financial Statements currently owned and used in the operation of its business,
and such assets are free and clear of all liens, claims, charges, security
interests, options, or other title defects or encumbrances, except as set forth
in the DarkHorse Financial Statements or in DarkHorse's Disclosure Schedule.
DarkHorse's Disclosure Schedule further sets forth a description of all real and
personal property currently leased or otherwise occupied or used but not owned
by DarkHorse, true, correct and complete copies of which leases and other
agreements, including all amendments and modifications thereto, have previously
been made available to Tanisys. Each of the leases is a valid and binding
obligation of the parties thereto, and neither DarkHorse nor the lessor
thereunder is in default under, and no condition exists that with notice or
lapse of time or both would constitute a default under, any such lease.
DarkHorse enjoys peaceful and undisturbed possession of its interests under all
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such leases. Except as set forth in DarkHorse's Disclosure Schedule, DarkHorse
does not own any real property or any interest therein. All personal property
set forth in DarkHorse's Disclosure Schedule and reflected on the DarkHorse
Financial Statements is owned by DarkHorse and, except as set forth in the
DarkHorse's Disclosure Schedule, all property owned or leased by DarkHorse and
reflected on the DarkHorse Financial Statements or located on the premises of
DarkHorse, is in good operating condition and repair, ordinary wear and tear
excepted, is suitable for the use to which the same is customarily put, is free
from defects other than minor defects that do not interfere with or detract from
the use or value thereof and is merchantable and not obsolete and is of a
quality and quantity presently usable in the ordinary course of the operation of
the business of DarkHorse and is all of the assets currently used or needed in
said business. The buildings, structures, improvements, assets and operations
of DarkHorse materially conform with all applicable restrictive covenants,
deeds, leases, and restrictions and all applicable federal, state and local
laws, ordinances, rules and regulations, including, but not limited to, those
relating to zoning and working conditions.
Section 2.9 LITIGATION. Except as disclosed in DarkHorse's Disclosure
Schedule, there is no action, order, claim, suit, proceeding, litigation,
investigation, inquiry, review or notice ("Proceeding") pending or threatened
against, relating to or affecting DarkHorse, or any of its properties or assets
or any officer or director of DarkHorse, relating to DarkHorse, at law or in
equity, before any Governmental Body, nor to the best of DarkHorse's knowledge
is there any basis for asserting the foregoing. Neither DarkHorse nor any of
its properties or assets is specifically by name subject to any currently
existing order, judgment, writ, decree or injunction. Except as disclosed in
DarkHorse's Disclosure Schedule, DarkHorse is not subject to any currently
existing Proceeding by any Governmental Body.
Section 2.10 ABSENCE OF CHANGES. Since February 29, 1996, except as
disclosed in DarkHorse's Disclosure Schedule, the business of DarkHorse has been
operated in the ordinary course consistent with past practice and there has not
been (a) any Material Adverse change in the business, operations, properties,
condition (financial or otherwise), prospects, assets or liabilities of
DarkHorse (contingent or otherwise, whether due or to become due, known or
unknown); (b) any dividend declared or paid or distribution made on the capital
stock of DarkHorse, or any capital stock of DarkHorse redeemed or repurchased;
(c) any occurrence of long-term debt by DarkHorse; (d) any salary, bonus or
compensation increases to any officers, employees or agents of DarkHorse; (e)
any pending or threatened litigation or disputes affecting DarkHorse; nor (f)
any other change in the nature of, or the manner of conducting, the business of
DarkHorse, other than changes that neither have had, nor reasonably may be
expected to have, a Material Adverse Effect on the business of DarkHorse.
Section 2.11 UNDISCLOSED LIABILITIES; COMMITMENTS. Except as disclosed in
the DarkHorse Financial Statements or in DarkHorse's Disclosure Schedule,
DarkHorse does not have any debts, guaranties, liabilities or obligations,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, and there is no basis for the assertion against DarkHorse of any such debt,
guaranty, liability or obligation (a) that was not accrued or reserved against
in the DarkHorse Financial Statements; (b) that was incurred after February 29,
1996, other than in the ordinary course of business; or (c) that in the
aggregate has or can reasonably be expected to have a Material
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Adverse Effect on DarkHorse. DarkHorse has in all material respects
performed all contracts, agreements and commitments to which it is a party,
and there is not under any such contracts, agreements or commitments any
existing default or event of default or event which with notice or lapse of
time or both would constitute a default.
Section 2.12 ENVIRONMENTAL MATTERS. DarkHorse has duly complied with, and
its business, operations, assets, equipment, leaseholds and other facilities are
in compliance with, the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, governing (a) air emissions, (b) discharges
to surface water or ground water, (c) solid or liquid waste disposal, (d) the
use, storage, generation, handling, transport, discharge, release, or disposal
of toxic or hazardous substances or wastes, or (e) other environmental, health
or safety matters, including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42 U.S.C.
Sections 601 ET SEQ., as amended, the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 ET SEQ., as amended, the Federal Water Pollution Control
Act, 33 U.S.C. Sections 1251 ET SEQ., as amended, the Clean Air Act, 42 U.S.C.
Sections 7401 ET SEQ., as amended, the Occupational Safety and Health Act of
1970, as amended ("OSHA"), the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, and other environmental conservation or protection
laws. There is no Proceeding pending or threatened against DarkHorse relating
to the environment nor is there a basis for the assertion against DarkHorse of
any Proceeding. Except as disclosed in DarkHorse's Disclosure Schedule,
DarkHorse has not received notice of, and does not know of, any past, present or
future events, conditions, facts, circumstances, activities, practices,
incidents, actions or plans that may interfere with or prevent compliance or
continued compliance or that might constitute a violation of any federal, state
or local environmental, health or safety laws, codes or ordinances, and any
rules or regulations promulgated thereunder, which relate to the use, ownership
or occupancy of the property or the operation of the business of DarkHorse.
Section 2.13 PENSION MATTERS. During the past five years, neither
DarkHorse nor any of its former Subsidiaries has maintained or contributed to
any defined benefit pension plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) or any
multiemployer plans (as defined in Section 3(37)(A) of ERISA). Each employee
benefit plan (as defined in Section 3(3) of ERISA) (each, an "Employee Benefit
Plan" or "Plan") maintained for employees of DarkHorse or any of its former
Subsidiaries to which DarkHorse or any of its former Subsidiaries have
contributed and any related trust agreement, annuity contract or any other
funding or implementing instrument complies currently and has complied in the
past, as to form, operation and administration, with the provisions of ERISA, as
amended, and all other applicable laws, rules and regulations and with the
Internal Revenue Code of 1986, as amended (the "Code"), where required in order
to be tax-qualified under Section 401(a) or 403(a) and 501(a) of the Code, and
no event has occurred that is reasonably likely to give rise to disqualification
of any such Plan under said Sections. All necessary governmental approvals for
the Employee Benefit Plans have been obtained; each Employee Benefit Plan that
is subject thereto meets and has met at all times the minimum funding standards
of Section 302 of ERISA, Section 412 of the Code and any other applicable law,
and no accumulated funding deficiency, whether or not waived, exists with
respect to any such Plan; each Employee Benefit Plan that is an employee pension
benefit plan
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(as defined in Section 3(2)(A) of ERISA) has been duly authorized by the
Board of Directors of DarkHorse and a favorable determination as to the
qualification under the Code of each such employee pension benefit plan has
been made by the Internal Revenue Service.
Section 2.14 LABOR MATTERS. Except as set forth in DarkHorse's Disclosure
Schedule, DarkHorse does not have any obligations, contingent or otherwise,
under any employment or consulting agreement, or collective bargaining agreement
or other contract with a labor union or other labor or employee group. There
are no efforts presently being made or threatened by or on behalf of any labor
union with respect to the employees of DarkHorse. DarkHorse is in material
compliance with all federal, state or other applicable laws, domestic or
foreign, regarding employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice. No unfair labor practice complaint against DarkHorse is pending
or threatened before the National Labor Relations Board. There is no labor
strike, dispute, slowdown or stoppage pending or threatened against or involving
DarkHorse. No representation question exists respecting the employees of
DarkHorse. No employment-related grievance or internal or informal complaint or
liability with respect to the termination of any employee, consultant or agent
exists. No arbitration proceeding arising out of or under any collective
bargaining agreement is pending, and no claim therefor has been asserted. No
collective bargaining agreement is currently being negotiated by DarkHorse, and
DarkHorse has not experienced any material labor difficulty. There has not
been, and there will not be, any adverse change in relations with employees of
DarkHorse as a result of any announcement or consummation of the transactions
contemplated by this Agreement. No employee of DarkHorse is in violation of any
term of any employment contract, or any other contract or agreement with or any
restrictive covenant or any other common law obligation to a former employer
relating to the right of any such employee to be employed by DarkHorse because
of the nature of the business conducted or to be conducted by DarkHorse or to
the use of trade secrets or proprietary information of others, and the
employment of DarkHorse's employees does not subject DarkHorse to liability in
connection with such covenants or agreements. There is neither pending nor
threatened Proceedings with respect to any contract, agreement, covenant or
obligation referred to above, nor is there any basis for asserting the
foregoing.
Section 2.15 INFORMATION FOR FILINGS. None of the information supplied or
to be supplied by DarkHorse for inclusion, or included, in any documents to be
filed with any regulatory authority in connection with the transactions
contemplated hereby will, at the respective times such documents are filed with
any such regulatory authority, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
information therein not misleading.
Section 2.16 TAXES. All taxes, assessments and other governmental charges
that are due and payable, other than those presently payable without penalty or
interest, have been timely paid, and DarkHorse has timely filed (and, through
the Effective Date, will timely file) all federal, state and other tax returns
required by law to be filed by it. All such tax reports or returns are true,
complete and correct in all respects with regard to DarkHorse for the periods
covered thereby. DarkHorse is not delinquent in the payment of any material
tax, assessment or governmental charge, there is no tax deficiency asserted
against DarkHorse, and, except as provided above, there
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is no unpaid assessment, deficiency or delinquency in the payment of any of
the taxes of DarkHorse or, to the best knowledge of DarkHorse, any proposal
for additional taxes or any violation of any federal, state, local or foreign
tax law that could be asserted by any taxing authority, nor is there any
basis for asserting such authority. There are no tax liens upon any
properties or assets of DarkHorse. Except as disclosed in DarkHorse's
Disclosure Schedule, no Internal Revenue Service, state or local, audit,
investigation or Proceeding of DarkHorse is pending or threatened, and the
results of any completed audits are properly reflected in the DarkHorse
Financial Statements. DarkHorse has not granted any extension to any taxing
authority of the limitation period during which any tax liability may be
asserted. DarkHorse has not committed any material violation of any federal,
state, local or foreign tax laws. All monies required for the payment of
taxes not yet due and payable with respect to the operations of DarkHorse
through and including the Merger date have been approved, reserved against
and entered upon the books and the DarkHorse Financial Statements. All
monies required to be withheld by DarkHorse from employees or collected from
customers for income taxes, social security and unemployment insurance taxes
and sales, excise and use taxes, and the portion of any such taxes to be paid
by DarkHorse to governmental agencies or set aside in accounts for such
purpose have been approved, reserved against and entered upon the books and
the DarkHorse Financial Statements.
Section 2.17 INVENTORY. Except as disclosed in DarkHorse's Disclosure
Schedule, the amount of inventory, as reflected in the DarkHorse Financial
Statements, is stated at the lower of cost or market with appropriate reserves
taken for slow moving and obsolete items. No item included in the inventories,
materials or supplies of DarkHorse is pledged as collateral or held on
consignment from others. All such inventory items are standard quality goods
saleable in the ordinary course of business.
Section 2.18 PROPRIETARY RIGHTS. DarkHorse owns or validly licenses the
right to use all technology, proprietary information, know-how, ideas (patented
or unpatented), data, licenses, customer lists, processes, formulas, trade
secrets, telephone numbers, computer software, computer programs, designs,
inventions, trademarks, trademark registrations and applications therefor,
registered and common law copyrights, and registered copyright applications,
trade names (whether or not registered or registrable), service marks, service
mark registrations and applications therefor (collectively, the "Proprietary
Rights") necessary to conduct the business of DarkHorse as the business is
presently being conducted. DarkHorse's Disclosure Schedule sets forth a
complete and correct list (including, where applicable, registration numbers and
dates of filing, renewal and termination) of all Proprietary Rights. Tanisys
and each of its Subsidiaries shall have at all times after the Effective Date
the exclusive right to use the Proprietary Rights necessary to continue to
conduct the business of DarkHorse as the business is presently being conducted.
No consent of any third party will be required for the use of the Proprietary
Rights by Tanisys or any of its Subsidiaries after the Effective Date. No claim
or opposition has been asserted by any person or entity to the ownership of or
DarkHorse's right to use any of the Proprietary Rights or challenging or
questioning the validity or effect of any license or agreement relating thereto,
and there is no valid basis for any such claim or assertion. DarkHorse has
ownership of, or valid licenses to use all of, the Proprietary Rights. Each of
the Proprietary Rights is valid and subsisting, has not been cancelled,
abandoned or otherwise terminated and, if applicable, has been duly asserted,
registered and filed. The Proprietary Rights owned by DarkHorse are owned free
and clear of all liens,
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charges or encumbrances. DarkHorse has taken all reasonable steps to
establish and preserve its ownership of all Proprietary Rights. Use by
Tanisys or any of its Subsidiaries of the Proprietary Rights will not, and
the conduct of the business as presently conducted does not, infringe on or
violate the rights of any other person or entity. No Proceedings have been
instituted, are pending or are threatened that challenge or oppose the rights
of DarkHorse with respect to any of the Proprietary Rights. DarkHorse has
not received any notice or inquiry from any person or entity of any alleged
infringement by DarkHorse. DarkHorse has not given and is not bound by any
agreement of indemnification in connection with any Proprietary Rights or
product or service sold or performed by DarkHorse. DarkHorse is not aware of
any infringement by others of its Proprietary Rights. Set forth in
DarkHorse's Disclosure Schedule is a list of all confidentiality agreements
entered into by DarkHorse relating to the Proprietary Rights and all such
contracts are in full force and effect.
Section 2.19 SURETY AND GUARANTOR OBLIGATIONS. Except as set forth in
DarkHorse's Disclosure Schedule, DarkHorse is not obligated as surety,
indemnitor nor guarantor under any surety or similar bond or other contract
issued and has not entered into any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any person or
entity.
Section 2.20 NO BROKERS. Except as set forth in DarkHorse's Disclosure
Schedule, DarkHorse has not employed any broker, agent or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
Section 2.21 RECORDS. The respective minute books, books of account,
stock record books and other records of DarkHorse, all of which have been or
will be made available to Tanisys, contain accurate and complete records of all
corporate actions of the shareholders and Board of Directors (and committees
thereof) during the periods of time in which such minute books were maintained.
Section 2.22 COMPLIANCE WITH LAW; CONDUCT. DarkHorse has not violated or
failed to comply with any statute, law, ordinance, regulation, rule or order of
any foreign, federal, state or local government or agency or any other
Governmental Body, or any judgment, order, writ, injunction or decree of any
court or agency, applicable to its business or operation, except where such
violations or failure to comply would not have a Material Adverse Effect on
DarkHorse. DarkHorse's business is in material conformity with all federal,
state and local energy, public utility, health and OSHA requirements and all
other federal, state and local governmental and regulatory requirements.
DarkHorse has all permits, licenses, authorizations, consents, approvals and
franchises from governmental agencies required to conduct its business as now
being conducted.
Section 2.23 REGULATORY COMPLIANCE. DarkHorse complies in all material
respects with all state and federal rules and regulations governing its
business, including, but not limited to, the terms and conditions within each
order granting jurisdictional authority and all related tariffs.
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Section 2.24 INVESTMENT COMPANY ACT, ETC. DarkHorse is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or an "investment adviser"
within the meaning of the Investment Advisers Act of 1940, as amended.
Section 2.25 PUBLIC UTILITY HOLDING COMPANY ACT. DarkHorse is not a
"public utility," a "holding company," an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or a "public utility" within
the meaning of the Federal Power Act, as amended.
Section 2.26 INSURANCE. Contained in DarkHorse's Disclosure Schedule is a
complete and accurate description of all insurance maintained by DarkHorse with
respect to the assets, properties and business of DarkHorse. All of the
insurable properties of DarkHorse are insured for their benefit under valid and
enforceable policies, issued by insurers rated AA or better by A.M. Best
Company. The insurance maintained by DarkHorse is in amounts and of a nature as
is customarily maintained by persons conducting operations similar to those of
DarkHorse.
Section 2.27 RECEIVABLES. DarkHorse's Disclosure Schedule contains a
complete and accurate list of all DarkHorse's receivables (including accounts
receivables, loan receivables and advances) at February 29, 1996, including all
liens and encumbrances attached to DarkHorse's Disclosure Schedule, showing the
name of each account debtor and the amount due from each by invoice number and
date. All of such accounts receivable and all accounts receivable since the
date thereof have arisen in the ordinary course of business for products
delivered or services rendered. DarkHorse is not aware of any event or
condition with respect to a specific customer that causes it to believe that any
such receivable will not be collected in full in due course without resort to
litigation and will not be subject to counterclaim or setoff. The reserves for
doubtful accounts reflected on the DarkHorse Financial Statements have been
determined in accordance with generally accepted accounting principles and past
practice consistently applied and adequately provide for all uncollectible
receivables.
Section 2.28 ACCOUNTS PAYABLE. DarkHorse's Disclosure Schedule contains a
complete and accurate list of all DarkHorse's accounts payable at February 29,
1996, showing the name of each account creditor and the amount due to each by
invoice number and date.
Section 2.29 ITEMS REFLECTED IN DARKHORSE'S DISCLOSURE SCHEDULE.
DarkHorse's Disclosure Schedule contains a complete and accurate list or brief
description of (a) all current or pending contracts, commitments and leases (of
real or personal property), written or otherwise, between DarkHorse and any
party that involve, in the aggregate, the payment or receipt by DarkHorse of
more than $10,000, which cannot be cancelled without penalty upon thirty (30)
days' notice, or which otherwise are material to DarkHorse; (b) all of the
Proprietary Rights; (c) all employee benefit programs (including but not limited
to medical, profit-sharing or pension plans), employee bonus and incentive
compensation arrangements and accrued and unused vacation time as of December
31, 1995, of DarkHorse; (d) any compensation, noncompetition, severance,
consulting, or confidentiality agreements between DarkHorse and any of
DarkHorse's executive officers for the last two fiscal years and at present; (e)
the number and job category of all current
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employees of DarkHorse, including with respect to key employees, their names,
date of employment, current compensation (including sales commissions) and
date and amount of last increase in compensation; (f) all capital assets of
DarkHorse with a book value greater than $10,000, setting forth any liens or
restrictions thereon; (g) federal and state income tax returns for the last
three fiscal years; (h) a list of all leases, contracts or agreements for
which consents of any private persons or public authorities would be required
(citing the section(s) thereof requiring such consents) for the consummation
of the transactions contemplated hereby, or for the preventing of any
termination of any material right, privilege, license or agreement of, or any
loss or disadvantage to, DarkHorse or Tanisys upon consummation of the
transactions contemplated hereby; (i) all governmental licenses and permits
relating to any of DarkHorse's operations; (j) any arrangements or agreements
of DarkHorse with its competitors; and (k) the twenty largest customers of
DarkHorse and the twenty largest suppliers to DarkHorse for the fiscal year
ended December 31, 1995, and for the period from January 1, 1996, to February
29, 1996. DarkHorse has not received notice of and does not have any
knowledge or reason to believe that any customer listed in DarkHorse's
Disclosure Schedule is seeking or presently intends to seek to terminate its
agreement with DarkHorse or that any such customer will not renew its
existing agreement with DarkHorse on the expiration date thereof on terms at
least as favorable to DarkHorse as those currently in effect.
Section 2.30 BANK ACCOUNTS; POWERS OF ATTORNEY. DarkHorse's Disclosure
Schedule completely and accurately lists the name of each bank, brokerage firm
or other financial institution in which DarkHorse has an account or possesses a
safe deposit box and sets forth the amount and nature of all cash and cash
equivalents contained therein at February 29, 1996. DarkHorse's Disclosure
Schedule also lists the names of all persons authorized to draw thereon, or to
have access thereto or to authorize transactions therein, and the names of all
parties, if any, holding powers of attorney from DarkHorse with respect thereto
or with respect to any other matter, and the account number of any such account.
DarkHorse does not maintain any securities or commodity trading account or other
brokerage account.
Section 2.31 PRODUCT AND SERVICE WARRANTIES. Except as disclosed in
DarkHorse's Disclosure Schedule, there is no claim against or liability of
DarkHorse on account of product or service warranties or with respect to the
manufacture, sale or lease of products or performance of services, and there is
no basis for any such claim on account of products heretofore manufactured, sold
or leased or services performed that has not been accrued or reserved against on
Tech's Financial Statements in accordance with the generally accepted accounting
principles.
Section 2.32 TRANSACTIONS WITH AFFILIATES. Except as set forth in
DarkHorse's Disclosure Schedule, DarkHorse has not engaged in any loans, leases,
contracts or other transactions with any director, officer or key employee of
DarkHorse, or any member of any such individual's immediate family or any other
Affiliate of DarkHorse. As used in this Agreement, "Affiliate" shall mean, with
respect to any person or entity, any other person or entity directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such person or entity. A person or entity shall be deemed to
control another person or entity if such person or entity possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other person or entity, whether through the ownership of voting
securities, by contract or otherwise. Immediately prior to the Effective Date,
all advances or loans made by DarkHorse to any
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shareholder, officer, director, employee, Affiliate or agent of DarkHorse
will have been repaid in full, with accrued interest to the date of repayment.
Section 2.33 CORRUPT PRACTICES. Since the inception of DarkHorse, there
have been no violations of the Foreign Corrupt Practices Act or any similar
state or federal statute relating to bribery or similar offenses by DarkHorse or
any of its Subsidiaries or former Subsidiaries or any of their agents. Neither
DarkHorse, its Subsidiaries or former Subsidiaries, nor any officer, director,
employee or agent of DarkHorse or any Subsidiaries or former Subsidiary (or any
person acting on behalf of any of the foregoing) has since the date of
DarkHorse's incorporation, given or agreed to give any gift or similar benefit
of more than nominal value to any customer, supplier, governmental employee or
official, or any other person or entity who is or may be in a position to help
or hinder DarkHorse or any of such Subsidiaries or assist DarkHorse or any of
such Subsidiaries in connection with any actual or proposed transaction, which
gift or similar benefit, if not given in the past, would have a Material Adverse
Effect, or which would subject DarkHorse or any of such Subsidiaries to material
penalty in any private or governmental Proceeding.
Section 2.34 CURRENT REVENUE AND NET INCOME. DarkHorse's gross revenues
and net income calculated in accordance with generally accepted accounting
principles, applied on a consistent basis (except as noted in Section 2.7 of
DarkHorse's Disclosure Schedule), for the twelve (12)-month period ended
December 31, 1995, was at least $3,047,700 and $500,600, respectively, and the
gross revenue and net income for the two (2)-month period ending February 29,
1996, was at least $647,399 and $180,773, respectively. Revenues and net income
are exclusive of any benefit from the delivery of evaluation units. Evaluation
units are those units delivered on a trial basis where the buyer is not
obligated to pay the sale amount.
Section 2.35 ABSENCE OF BAD DEBT OR UNCOLLECTIBLE ACCOUNTS. At February
29, 1996, except as disclosed in the DarkHorse Financial Statements, DarkHorse
had no bad debt or uncollectible account accrual, and there were no facts
existing on such date that would provide any reason for the establishment of
such an accrual.
Section 2.36 NO DEFAULT. Except as disclosed on DarkHorse's Disclosure
Schedule, DarkHorse is not in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under (a) its
Articles of Incorporation or By-Laws; (b) any mortgage, loan, agreement,
contract, arrangement, lease, lease purchase, indenture or other evidences of
indebtedness for borrowed money or other instrument to which DarkHorse is now a
party or by which DarkHorse or any of the assets of DarkHorse is bound; or (c)
any judgment, order, writ, injunction or decree, of any court, arbitrator,
agency, official, authority or other Governmental Body.
Section 2.37 COPIES OF DOCUMENTS; ACCURACY OF INFORMATION FURNISHED.
DarkHorse has delivered or made available to Tanisys complete and accurate
copies of all documents listed in DarkHorse's Disclosure Schedule. All of the
Exhibits and Schedules provided by DarkHorse are true, correct and complete in
all material respects, and no written representation, warranty or statement made
by DarkHorse in or pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make such
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representation, warranty or statement not misleading to Tanisys, who is
seeking complete and accurate information with respect to DarkHorse.
Section 2.38 SUBCHAPTER "S" ELECTION. DarkHorse and the Owners hereby
represent and warrant that DarkHorse is a reporting Subchapter "S" corporation
with the Internal Revenue Service, and that DarkHorse is treated, from a tax
reporting standpoint under the rules and regulations, as a Subchapter "S"
corporation of the Internal Revenue Code, and that the Owners shall be
responsible for any prior year or existing taxes.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TANISYS
Except as set forth in the Disclosure Schedule, which is attached hereto as
SCHEDULE "B," delivered to DarkHorse by Tanisys contemporaneously with the
execution hereof ("Tanisys' Disclosure Schedule"), Tanisys hereby represents and
warrants to DarkHorse as follows, regardless of what investigations, if any,
DarkHorse shall have made prior hereto (for the purpose of this Article 3,
"Material" or "Material Adverse Effect" shall mean an adverse effect in an
amount in excess of $10,000):
Section 3.1 ORGANIZATION; QUALIFICATION. Tanisys is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wyoming. Tanisys has full corporate power and authority to own and lease all of
the properties and assets it now owns and leases and to carry on its business as
now being conducted. Tanisys is duly qualified as a foreign corporation and is
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure so to qualify would
not have a Material Adverse Effect on Tanisys and its Subsidiaries taken as a
whole. Tanisys has previously delivered and made available to DarkHorse a true
and correct copy of its Articles of Continuance and By-Laws.
Section 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Tanisys has full
corporate power and authority to execute, deliver and perform this Agreement
and, subject to approval by the shareholders of Tanisys and Tanisys Acquisition,
to consummate the transactions contemplated hereby. The execution and delivery
by Tanisys of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by the Board of
Directors of Tanisys and, except for the approval of the Merger by the
shareholders of Tanisys and Tanisys Acquisition, no other corporate proceedings
on the part of Tanisys are necessary with respect thereto. Tanisys Acquisition
II will take or cause to be taken all corporate action that is necessary for
Tanisys Acquisition II to execute and file the Articles of Merger with the
Secretary of State of Texas, to execute and file the Articles of Merger with the
Secretary of State of Delaware and to complete the transactions to be completed
by Tanisys Acquisition II pursuant to this Agreement. This Agreement has been
duly and validly executed and delivered by Tanisys and constitutes a legal,
valid and binding obligation of Tanisys, enforceable against it in accordance
with its terms.
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Section 3.3 CAPITALIZATION. The authorized capital stock of Tanisys
consists of 50,000,000 shares of Tanisys Common Stock, no par value, and
10,000,000 shares of preferred stock, par value $1.00 per share, of which, as of
the date hereof, 10,256,037 shares of Tanisys Common Stock and no shares of
Tanisys Preferred Stock are validly issued and outstanding, fully paid and
nonassessable. No shares of Tanisys' Capital Stock have been issued in
violation of any preemptive rights. Except as set forth in Tanisys' Disclosure
Schedule, there are no outstanding obligations of Tanisys to repurchase, redeem
or otherwise acquire any capital stock or other securities of Tanisys. There are
no voting trusts or other agreements, including shareholder agreements or other
understandings, to which Tanisys or any of its Subsidiaries is a party with
respect to the voting of the capital stock of Tanisys or any of its
Subsidiaries. In addition to the outstanding shares of Tanisys Common Stock as
noted above, there are outstanding options to purchase 1,441,700 shares of
Tanisys Common Stock at exercise prices ranging from $1.10 to $3.72 and
outstanding warrants to purchase 3,225,177 shares of Tanisys Common Stock at
exercise prices ranging from $1.25 to $2.30.
Section 3.4 VALIDITY OF SHARES TO BE ISSUED. The shares of Tanisys Common
Stock to be issued to the shareholders of DarkHorse as a result of the Merger
have been duly authorized and, upon delivery thereof pursuant to the provisions
of this Agreement, will be validly issued and outstanding, fully paid and non-
assessable, not subject to any preemptive rights, and issued in compliance with
applicable securities laws. Such shares will be "restricted securities" and
will not be registered with the VSE or the Securities & Exchange Commission
under the Securities Act of 1933, as amended or qualified for resale pursuant to
the Securities Act (British Columbia).
Section 3.5 GOVERNMENTAL CONSENTS AND APPROVALS. Except as set forth in
Tanisys' Disclosure Schedule, the execution, delivery and performance by Tanisys
of this Agreement and the consummation of the transactions contemplated hereby
by Tanisys or its Subsidiaries require no consent, approval, order or
authorization of, action by or in respect of, or registration or filing with,
any Governmental Body, court, agency, or authority, other than (a) the filing of
the Articles of Merger with the Secretary of the States of Texas and Delaware
with respect to the Merger; (b) any applicable filings with the VSE and consents
and/or approvals with the VSE or state securities commissions under state
securities laws or similar laws; (c) the consent of Tanisys and Tanisys
Acquisition II shareholders; and (d) consents, permits, authorizations,
notifications or filings the failure of which to obtain or make would not, when
considered together, have a Material Adverse Effect on Tanisys and its
Subsidiaries taken as a whole or materially adversely affect the ability of
Tanisys to perform its obligations set forth herein or to consummate the
transactions contemplated hereby.
Section 3.6 NO VIOLATIONS. Except as set forth in Tanisys' Disclosure
Schedule, the execution, delivery and performance of this Agreement by Tanisys,
the consummation by Tanisys of the transactions contemplated hereby or
compliance by Tanisys with any of the provisions hereof does not and will not
(a) conflict with or result in any breach or violation of any provision of the
Articles of Incorporation or By-Laws of Tanisys or any of its Subsidiaries; (b)
result in a default, or give rise to any right of termination, cancellation or
acceleration, or loss of any material benefit (with or without the giving of
notice or lapse of time or both), or require the consent, approval, waiver or
other action of any person, under any of the terms, conditions or provisions of
any note,
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bond, mortgage, indenture, license, trust (constructive or otherwise),
agreement, lease or other instrument or obligation to which Tanisys or any of
its Subsidiaries is a party or by which Tanisys or any of its Subsidiaries may
be bound other than that which has been or will be obtained; (c) result in the
creation or imposition of any claim, lien, pledge, security interest,
obligation, restriction or other encumbrance on any of the property of Tanisys
or any of its Subsidiaries; or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Tanisys or any of its Subsidiaries.
The transactions contemplated by this Agreement will not conflict with the VSE
rules and regulations.
Section 3.7 FINANCIAL STATEMENTS; BRITISH COLUMBIA SECURITIES COMMISSION
REPORTS. The financial statements and notes to such financial statements of
Tanisys (the "Tanisys Financial Statements") contained in Tanisys' quarterly
Form 61 Report for the fiscal year ended September 30, 1995 and each quarter
thereafter filed with the British Columbia Securities Commission are complete
and correct and were prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as noted therein, and fairly
present the information purported to be shown therein. All Tanisys Financial
Statements have been prepared from the books and records of Tanisys and its
Subsidiaries, which accurately and fairly reflect the transactions and
dispositions of the assets of Tanisys and its Subsidiaries. Neither Tanisys nor
any of its Subsidiaries had any liabilities, contingent or otherwise, whether
due or to become due, known or unknown, other than as indicated on the latest
balance sheets included in The Tanisys Financial Statements. Tanisys has
adequately funded all accrued employee benefit costs, and such funding is
reflected in the balance sheets included in The Tanisys Financial Statements.
Section 3.8 LITIGATION. Except as disclosed in Tanisys' Disclosure
Schedule, there is no Proceeding pending or, to the knowledge of Tanisys,
threatened against, relating to or affecting Tanisys or any officer or director
of Tanisys or its Subsidiaries relating to Tanisys or its Subsidiaries, at law
or in equity, before any Governmental Body nor, to the knowledge of Tanisys, is
there any basis for asserting the foregoing. Neither Tanisys, any of its
Subsidiaries nor any of their respective properties or assets is specifically by
name subject to any currently existing order, judgment, writ, decree or
injunction.
Section 3.9 INFORMATION FOR FILINGS. None of the information supplied or
to be supplied by Tanisys and its Subsidiaries for inclusion or included in any
documents to be filed with any regulatory authority in connection with the
transactions contemplated hereby will, at the respective time such documents are
filed with such regulatory authority, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein in light of the circumstances under which they were made, not
misleading.
Section 3.10 NO BROKERS. Except as disclosed on Tanisys' Disclosure
Schedule, Tanisys has not employed any broker, agent or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
Section 3.11 RECORDS. The respective minute books, books of account,
stock record books and other records of Tanisys and each of its Subsidiaries,
all of which have been or will be made available to DarkHorse, contain
materially accurate and complete records of all corporate actions of
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the respective shareholders and Boards of Directors (and committees thereof)
during the periods of time in which such minute books were maintained.
Section 3.12 COPIES OF DOCUMENTS; ACCURACY OF INFORMATION FURNISHED.
Tanisys has delivered or made available to DarkHorse complete and accurate
copies of all documents listed in Tanisys' Disclosure Schedule. All of the
Exhibits and Schedules provided by Tanisys are true, correct and complete in all
material respects, and no written representation, warranty or statement made by
Tanisys in or pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make such representation, warranty or statement not misleading to
DarkHorse, who is seeking complete and accurate information with respect to
Tanisys and its Subsidiaries.
ARTICLE 4
ADDITIONAL REPRESENTATIONS & WARRANTIES OF THE OWNERS
[AND ALL FUTURE OWNER(S) PURSUANT TO SECTION 6.1(g)]
Except as set forth in the Disclosure Schedule, which is attached hereto as
SCHEDULE "C," delivered to Tanisys and DarkHorse by the Owners contemporaneously
with the execution hereof and by future Owner(s) as defined in Section 6.1(g)
herein, (the "Owners' Disclosure Schedule"), the Owners hereby represents and
warrants to Tanisys and DarkHorse as follows, which representations and
warranties are made as of the date hereof and as of the Effective Date and shall
survive the Closing (as defined in Section 8.7 below) regardless of what
investigations, if any, Tanisys or DarkHorse shall have made thereof prior
thereto:
Section 4.1 TITLE TO SHARES. Immediately prior to the Closing, the Owners
shall be the lawful Owners and holder of an aggregate of no more than 1,500,000
shares of DarkHorse Common Stock, and, on the Effective Date, shall hold all
such shares free and clear of any encumbrances or liens.
Section 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has been
duly and validly executed and delivered by the Owners and constitutes the legal,
valid and binding obligation of the Owners, enforceable in accordance with its
terms, except as enforcement hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, moratorium or other similar laws affecting enforcement of
creditors' rights generally. The execution, delivery and performance by the
Owners of this Agreement and the consummation of the transactions contemplated
hereby will not violate any provision of any law to which the Owners is subject
nor result in a breach or violation by the Owners of any of the terms or
provisions of, or constitute a default by the Owners under any note, bond,
mortgage, indenture, license, trust (constructive or other), agreement, lease,
or other instrument or obligation to which the Owners is a party or by which the
Owners is bound. The Owners is not a party to, or subject to, or bound by, any
currently existing order, judgment, injunction, writ or decree of any court or
governmental authority, or any arbitration award that would restrict performance
by each Owners of this Agreement or such other documents or instruments to be
executed or delivered by the Owners in conjunction herewith.
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Section 4.3 CERTAIN TRANSACTIONS OR ARRANGEMENTS. Except for agreements
and transactions entered into in connection with this Agreement and except as
set forth in the Owners' Disclosure Schedule, the Owners is not presently,
directly or indirectly, a party to any transaction with DarkHorse, including
without limitation (a) any contract, agreement, understanding or commitment or
other arrangement providing for the furnishing of services by, rental of real or
personal property from or otherwise requiring payments to the Owners or any
Affiliate of the Owners; (b) any contract, agreement, understanding, commitment
or other arrangement relating to the employment of the Owners by the Company, or
any bonus, deferred compensation, pension, profit sharing, stock option,
employee stock purchase, retirement or other employee benefit plan; or (c) any
loans or advances to or from DarkHorse.
Section 4.4 REPRESENTATIONS. The Owners has reviewed the representations,
warranties and statements made by DarkHorse in this Agreement and DarkHorse's
Disclosure Schedule, and, to the best knowledge and belief of the Owners, such
representations and warranties do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make any such
representation, warranty or statement not misleading. (The term "best knowledge
and belief" as used herein shall mean that information actually known to the
Owners and specifically excludes constructive knowledge and any duty to inquire
about relevant information.)
Section 4.5 COPIES OF DOCUMENTS; ACCURACY OF INFORMATION FURNISHED. The
Owners has delivered or made available to Tanisys and DarkHorse complete and
accurate copies of all documents listed in the Owners' Disclosure Schedule. All
the Exhibits and Schedules provided by the Owners are true, correct and complete
in all material respects, and no written representation, warranty or statement
made by the Owners in or pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make such representation, warranty or statement not misleading
to Tanisys or DarkHorse, who are seeking complete and accurate information with
respect to DarkHorse and the Owners.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 CONDUCT OF BUSINESS OF DARKHORSE. After the date hereof and
prior to the Effective Date, DarkHorse shall conduct its operations according to
its normal course of business to preserve intact its business organization, keep
available the services of its officers and employees, preserve and maintain
satisfactory relationships and goodwill with licensors, suppliers, dealers,
customers and all others having business relationships with it, pay the
suppliers, vendors and taxing authorities of DarkHorse in accordance with its
usual business practices and in a timely fashion and continue to service and
maintain all of its assets in a manner consistent with past practice.
Section 5.2 FORBEARANCES BY DARKHORSE. Except as contemplated by this
Agreement, DarkHorse shall not, after the date hereof and prior to the Effective
Date, without the prior written consent of Tanisys:
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(a) Issue additional capital stock or any additional securities or
obligations convertible into or exchangeable for, or giving any person
any right to acquire, capital stock;
(b) Acquire any shares of its capital stock;
(c) Declare or pay any dividend, except a cash distribution to cover the
individual tax liabilities of the Owners for the year 1995 and for
that period from January 1, 1996 through the closing;
(d) Issue any stock options, stock appreciation rights, warrants or any
other rights relating to the securities of DarkHorse;
(e) Sell any assets not in the ordinary course of business;
(f) Issue or incur additional debt for borrowed money other than pursuant
to existing credit agreements;
(g) Mortgage, pledge or otherwise encumber any of its properties or
assets;
(h) Make any investment in third parties or assets of a capital nature
either by purchasing stock, securities or assets, contributing to
capital, transferring property or otherwise making any investment;
(i) Make any commitments for capital expenditures or other commitment or
transaction other than in the ordinary course of business;
(j) Increase in any manner, whether by bonus or otherwise, the
compensation of any of its officers or employees;
(k) Amend its Articles of Incorporation or By-Laws except as may be
necessary to facilitate the consummation of the transactions
contemplated by this Agreement;
(l) Undertake any action that will reduce DarkHorse's working capital, as
determined by generally accepted accounting principles, to an amount
lower than the working capital of DarkHorse at February 29, 1996, and
previously furnished to Tanisys except as provided for under Section
5.2(c); or
(m) Enter into any agreement to do any of the things described in clauses
(a) through (l) above.
Section 5.3 NO SOLICITATION. DarkHorse, its officers and directors, and
the Owners will not, nor permit any of their respective officers, employees,
agents or representatives (including, without limitation, investment bankers,
attorneys and accountants) to, directly or indirectly, (a) solicit, initiate or
encourage submission of proposals or offers by, or (b) furnish any information
with respect to or otherwise cooperate in any way with, or participate in any
discussions or negotiations
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with, any corporation, partnership, person or other entity or group ("Person")
with respect to any proposal regarding the acquisition or purchase of all or a
material portion of the assets of, or any equity interest in, DarkHorse, or any
business combination with DarkHorse. DarkHorse and/or the Owners shall promptly
notify Tanisys if any such proposal or offer, or any inquiry or contact with any
Person with respect thereto, is made and shall, in any such notice, indicate in
reasonable detail the identity of the offeror and the terms and conditions of
any such proposal.
Section 5.4 INVESTIGATION OF BUSINESS AND PROPERTIES. Each party hereto
may make or cause to be made such investigation of the business and properties
of the other parties and of their financial and legal condition as such party
deems appropriate or advisable to familiarize himself/itself therewith, provided
such investigation shall not unreasonably interfere with the normal operations
of the other parties. Tanisys and DarkHorse agree to permit the other party and
its accountants, counsel and other representatives to have reasonable access to
the premises, books and records of the first party. Tanisys and DarkHorse will
furnish the other party with such financial and operating data and other
information with respect to the business and properties of the other party as
the requesting party shall from time to time reasonably request in accordance
with this Section.
Section 5.5 CONFIDENTIALITY. Each party agrees with respect to all
technical, commercial and other information that is furnished or disclosed by
the other parties, including, but not limited to, information regarding such
party's (and its Subsidiaries' and Affiliates') organization, personnel,
business activities, customers, subscribers, policies, assets, finances, costs,
sales, revenues, technology, rights, obligations, liabilities and strategies
(the "Information"), that, unless and until the transactions contemplated hereby
shall have been consummated, (a) such Information is confidential and/or
proprietary to the furnishing/disclosing party and entitled to and shall receive
treatment as such by the receiving party; (b) the receiving party will hold in
confidence and not disclose or use (except in respect of the transactions
contemplated hereby) any such Information, treating such Information with the
same degree of care and confidentiality as it accords its own confidential and
proprietary information; provided, however, that the receiving party shall not
have any restrictive obligation with respect to any Information that (i) is
contained in a printed publication available to the general public, (ii) is or
becomes publicly known through no wrongful act or omission of the receiving
party, or (iii) is known by the receiving party without any proprietary
restrictions by the furnishing/disclosing party at the time of receipt of such
Information; and (c) all such Information furnished to a party by another,
unless otherwise specified in writing, shall remain the property of the
furnishing/disclosing party and, in the event this Agreement is terminated,
shall be returned to it, together with any and all copies made thereof, upon
written request for such return by it (except for documents submitted to a
governmental agency with the consent of the furnishing/disclosing party or upon
subpoena and that cannot be retrieved with reasonable effort), and each party
shall confirm in writing to the others compliance with any such request. Each
party hereto acknowledges that the remedy at law for any breach by a party of
its obligations under this section is inadequate and that the other parties
shall be entitled to equitable remedies, including injunctive relief, in the
event of breach by any other party.
Section 5.6 PUBLIC ANNOUNCEMENTS. Tanisys and DarkHorse shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the
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Merger, this Agreement or transactions contemplated hereby, shall not issue
any such press release or make any such public statement prior to such
consultation, and shall consult with each other as to form and substance of
other public disclosures related thereto; provided however, that nothing
contained herein shall prohibit either party from making any disclosure that
is required by law.
Section 5.7 AGREEMENT TO CONSUMMATE. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use reasonable efforts to
do all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective, as soon as reasonably practicable,
the transactions contemplated by this Agreement, including, but not limited to,
the obtaining of all consents, authorizations, orders and approvals of any
governmental commission, board or other regulatory body required in connection
therewith and initiating or defending any legal action that is necessary or
appropriate to permit the transactions contemplated hereby to be consummated.
Without limiting the foregoing, the Owners shall not take any action to exercise
any statutory appraisal rights that they may have with respect to the Merger.
At any time after the Effective Date, if any further action is necessary, proper
or advisable to carry out the purposes of this Agreement, then, as soon as is
reasonably practicable, each party to this Agreement shall take, or cause its
proper officers to take, such action. No party to this Agreement shall take or
cause to be taken any action that would cause the representations or warranties
expressed herein to be untrue or incorrect on the Effective Date.
Section 5.8 DARKHORSE SHAREHOLDERS' APPROVAL. DarkHorse shall call a
meeting of its shareholders to be held as soon as practicable, but not later
than April 15, 1996, for the purpose of voting upon the Merger. In connection
with such meeting, DarkHorse shall mail all required notices and other materials
to its shareholders, and the Board of Directors of DarkHorse shall recommend
approval of the matters related to the Merger to be voted upon at such
shareholder meeting and shall use its best efforts to obtain such shareholder
approval. In lieu of such meeting, such approval may be effected by the
unanimous written consent of the shareholders of DarkHorse.
Section 5.9 TANISYS ACQUISITION II SHAREHOLDER'S APPROVAL. Tanisys
Acquisition II shall call a meeting of its shareholder to be held as soon as
practicable, but not later than May 20, 1996, for the purpose of voting upon the
Merger. In connection with such meeting, Tanisys Acquisition II shall mail all
required notices and other material to its shareholder, and the Board of
Directors of Tanisys Acquisition II shall recommend approval of the matters
related to the Merger to be voted on at such shareholder meeting and shall use
its best efforts to obtain such shareholder approval. In lieu of such meeting,
such approval may be affected by the unanimous written consent of the
shareholder of Tanisys Acquisition.
. Section 5.10 AGREEMENT REGARDING BROKERS. Each party agrees that it or he
will pay or dispute, and indemnify and hold the other parties harmless from, any
claims of brokers or others for finders' or brokerage fees asserted as a result
of representations by such party to such brokers or others, regardless of
whether the existence of such brokers or others are disclosed herein.
Section 5.11 NOTICE. DarkHorse shall promptly give notice to Tanisys and
the Owners upon becoming aware of the occurrence or failure to occur, or the
impending or threatened occurrence or failure to occur, of any event that would
cause or constitute, any of DarkHorse's
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representations or warranties being or becoming untrue. Tanisys will
promptly give notice to DarkHorse and the Owners upon becoming aware of the
occurrence or failure to occur, of any event that would cause or constitute,
any of Tanisys' representations or warranties being or becoming untrue. The
Owners will promptly give notice to Tanisys and DarkHorse upon becoming aware
of the occurrence or failure to occur, or the impending or threatened
occurrence or failure to occur, of any event that would cause or constitute,
any of the Owners' representations or warranties being or becoming untrue.
Section 5.12 REPRESENTATION, WARRANTIES AND AGREEMENTS; SURVIVAL. The
representations, warranties and indemnities of DarkHorse, Tanisys and the
Owners, contained in this Agreement and any related documents, shall survive for
a period of six (6) months after the Effective Date. At the end of the survival
period of the representations and warranties of DarkHorse and the Owners,
Tanisys shall, without further action, be deemed to have fully released
DarkHorse and the Owners from any and all responsibility with respect to a
breach of such representations and warranties (including any obligation under
the indemnification provisions contained in Section 5.13) unless during such
survival period Tanisys shall have given DarkHorse and the Owners notice of the
nature and reasonable particulars under the then existing circumstances of any
claimed breach by DarkHorse and/or the Owners. At the end of the survival
period of representations and warranties of Tanisys, the Owners shall, without
further action, be deemed to have fully released Tanisys from any and all
responsibility with respect to a breach of such representations and warranties
unless during such survival period the Owners shall have given Tanisys notice of
the nature and reasonable particulars under the then existing circumstances of
any claimed breach by Tanisys and the basis therefor. The obligations,
covenants and agreements of DarkHorse, the Owners and Tanisys contained in this
Agreement and any related documents shall survive the Closing. The
representations, warranties, obligations, covenants, indemnities and agreements
shall not be affected by, and shall remain in full force and effect
notwithstanding, any investigation at any time made by or on behalf of any party
hereto or any information any party may have with respect thereto.
Section 5.13 INDEMNIFICATION BY DARKHORSE AND OWNERS AND SECURITY
AGREEMENT.
(a) DarkHorse and Owners shall severally indemnify and hold Tanisys
harmless from and against, and promptly reimburse Tanisys for any and
all loss, expense, damage, deficiency, liability or obligation,
including investigative and settlement costs and attorneys' fees
arising out of or in connection with any breach of representation or
warranty of DarkHorse or Owners contained in Article 2 or Article 4
hereof or in any certificate delivered pursuant hereto, regardless of
whether Tanisys relied upon the truth of such representation or
warranty or had any knowledge of any breach thereof. On the Effective
Date, fifteen percent (15%) of the Merger Consideration of Gary W.
Pankonien, Archer Lawrence and Jack Little will be escrowed (the
"Escrow") with U. S. Trust Company of Texas, N.A. (the "Escrow Agent")
to secure and satisfy Tanisys' right to indemnification hereunder.
(b) The Escrow shall be further defined in the Escrow Agreement attached
hereto as EXHIBIT "C" and shall remain in effect for a period of six
(6) months from the date of
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closing of the Merger Agreement (such date, the "Escrow Termination
Date"). The Escrow may be maintained past the Escrow Termination Date
only in the event of litigation concerning the Escrow.
(c) Upon receipt by Tanisys (the "Indemnified Party") of notice of any
situation, event or occurrence that might give rise to a claim for
indemnification of such Indemnified Party against DarkHorse and/or the
Owners pursuant to this Section 5.13, the Indemnified Party shall give
prompt written notice thereof to DarkHorse and the Owners (each such
party, an "Indemnifying Party"), indicating the nature of such
indemnification. Failure to give any notice provided under this
Section 5.13(b) shall in no way be deemed a forfeiture of the
Indemnified Party's rights to be indemnified under Section 5.13
provided that such notice is given prior to the Escrow Termination
Date. A claim for indemnity may, at the option of the Indemnified
Party, be asserted as soon as any situation, event or occurrence has
been noticed by the Indemnified Party, regardless of whether actual
harm has been suffered or out-of-pocket expenses incurred.
(d) DarkHorse's and the Owners' indemnification will be limited to
situations, events and/or occurrences of which Tanisys provides notice
to the Owners prior to the Escrow Termination Date and to the amount
of, and only from shares comprising, the Escrow. Tanisys will not be
eligible to obtain any indemnification from the Escrow until the
aggregate amount of all losses, expenses, damages, deficiencies,
liabilities and other obligations arising out of or in connection with
any breach of representation or warranty of DarkHorse or the Owners
exceeds $10,000 in the aggregate and then only for the amount of such
excess. Shares released from the Escrow after such time will be
returned to the Owners in accordance with the terms of the Escrow
Agreement.
Section 5.14 INDEMNIFICATION BY TANISYS.
(a) Tanisys shall indemnify and hold Owner harmless from and against, and
promptly reimburse Owner for, any and all loss, expense, damage,
deficiency, liability or obligation, including investigative and
settlement costs and attorneys' fees, arising out of or in connection
with any breach of representation or warranty of Tanisys contained in
Article 3 hereof, or in any certificate delivered pursuant hereto,
regardless of whether Owner relied upon the truth of such
representation or warranty or had any knowledge of any breach thereof.
(b) Upon receipt by Owner (the "Indemnified Party") of notice of any
situation, event or occurrence that might give rise to a claim for
indemnification of such Indemnified Party against Tanisys pursuant to
this Section, the Indemnified Party shall give prompt written notice
thereof to Tanisys indicating the nature of such indemnification. A
claim for indemnity may, at the option of the Indemnified Party, be
asserted as soon as any situation, event or occurrence has been
noticed by the
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<PAGE>
Indemnified Party regardless of whether actual harm has been suffered
or out-of-pocket expenses incurred.
Section 5.15 RESALE LIMITATIONS. DarkHorse and the Owners agree to
certain resale restrictions and further agree to advise its Affiliates and
future Owners of the resale restrictions imposed by the VSE and federal
securities laws on shares of Tanisys Common Stock received by them pursuant to
the Merger, and will cause each Affiliate to sign the Restricted Stock
Investment Letter stating that such Affiliate and future Owners are aware of
such restrictions and as set forth in Section 6.3(h) herein.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING
Section 6.1 GENERAL CONDITIONS. Consummation of the Merger shall be
subject to the fulfillment at the Effective Date of each of the following
conditions:
(a) NO INJUNCTION. No court having jurisdiction shall have issued, to the
knowledge of Tanisys, DarkHorse or the Owners, an injunction
preventing the consummation of the Merger that shall not have been
stayed or dissolved at the Effective Date.
(b) SECURITIES LAW. Tanisys shall have received all VSE, state securities
law authorizations or obtained applicable exemptions necessary to
consummate the transactions contemplated hereby, provided Tanisys
shall use reasonable efforts to obtain the same.
(c) VANCOUVER STOCK EXCHANGE. Tanisys shall have received notification
that the VSE has approved the issuance of and the listing of the
shares of Tanisys Common Stock.
.
(d) PROCEEDINGS. All proceedings taken or to be taken in connection with
the transactions contemplated hereby, and all documents incident
thereto shall be reasonably satisfactory in form and substance to the
parties and their counsel, and the parties and their counsel shall
have received all such counterpart originals or certified or other
copies of such documents as the parties or their counsel may
reasonably request.
(e) SIMULTANEOUS CLOSING. The issuance of the Merger Consideration is
subject to the simultaneous closing of the certain Agreement and Plan
of Merger dated April 9, 1996, by and between Tanisys, Tanisys
Acquisition and 1st Tech Corporation and Gary W. Pankonien.
(f) APPRAISAL OF ASSETS OF DARKHORSE. The appraisal of BDO Dunwoody
Charter Accountants and Consultants upon the assets of DarkHorse shall
have been accepted and approved by Tanisys and the VSE prior to the
Closing.
25
<PAGE>
(g) DARKHORSE'S ISSUANCE OF COMPENSATION SHARES. Prior to the Closing,
DarkHorse contemplates issuing no more than 45,000 shares of DarkHorse
Common Stock to certain key employees of DarkHorse ("Key Shares").
DarkHorse shall cause the number of Key Shares to be issued which will
comply with the Exchange Ratio of Section 1.2 herein. Upon issuance,
such Key Shares shall have been deemed fully paid and nonassessable
shares. Further, the recipients of such Key Shares shall execute any
and all documents deemed necessary by counsel for Tanisys at the
Closing, including but not limited to those representations and
warranties set forth in Section 4 and restrictions set forth in
Section 5.15.
(h) DUE DILIGENCE. It is expressly understood and agreed that the
obligations of Tanisys hereunder are expressly subject to and
conditioned upon Tanisys having a period of twenty-one (21) days from
the date this Agreement is fully executed ("Due Diligence Period") to
conduct such Due Diligence examination of DarkHorse's Financial
Statements, facilities, books, records and other matters considered
pertinent by Tanisys, at such time which is acceptable to both
parties, and DarkHorse further agrees to provide such other data or
information reasonably requested by Tanisys. Should such Due
Diligence deem to be unfavorable in Tanisys' sole discretion, Tanisys
may on or before the conclusion of the Due Diligence Period cancel the
Agreement by written notice to DarkHorse.
(i) APPROVAL OF TANISYS' SHAREHOLDERS. The transactions contemplated by
this Agreement are subject to the approval of a majority of the
outstanding shares of the Common Stock of Tanisys Technology, Inc.
Section 6.2 CONDITIONS TO CLOSING IN FAVOR OF DARKHORSE. Consummation of
the Merger shall be subject to the fulfillment, to the satisfaction of
DarkHorse, or written waiver, at or before the Effective Date, of each of the
following conditions:
(a) COPIES OF RESOLUTIONS OF TANISYS AND TANISYS ACQUISITION. Tanisys
shall have furnished DarkHorse with copies of resolutions duly adopted
by the Board of Directors and shareholders of Tanisys and the Board of
Directors and shareholder of Tanisys Acquisition II approving the
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby, certified as of the Closing Date by
the Secretary or an Assistant Secretary of Tanisys and the Secretary
or Assistant Secretary of Tanisys Acquisition.
(b) OPINION OF COUNSEL FOR TANISYS. Tanisys shall have furnished
DarkHorse with an opinion dated the Closing Date from J. Stephen
Barley and W. Audie Long, counsel for Tanisys, in the form attached
hereto as EXHIBIT "D."
(c) REPRESENTATIONS AND WARRANTIES OF TANISYS. The representations,
warranties and statements of Tanisys contained in this Agreement, the
Exhibits hereto and Tanisys' Disclosure Schedule, shall be complete
and accurate as of the date of this
26
<PAGE>
Agreement and shall also be complete and accurate at and as of the
Closing Date, except for changes contemplated by this Agreement, as if
made on the Closing Date; and Tanisys shall have performed or complied
with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing Date.
(d) TANISYS OFFICERS' CERTIFICATE. Tanisys shall have delivered to
DarkHorse a certificate, dated the Closing Date, of the President and
Secretary of Tanisys to the effect that (i) they are familiar with the
provisions of this Agreement, and (ii) the conditions specified in
Section 6.1 and in paragraph (c) of this Section 6.2 have been
satisfied in all material respects.
(e) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations
with, and any permits, licenses or other authorizations required by,
any applicable Governmental Body that are required for, or in
connection with, the execution and delivery of this Agreement by
DarkHorse and the consummation by DarkHorse of the transactions
contemplated hereby shall have been obtained or made.
(f) LEGISLATION. No law or legally binding regulation shall have been
enacted that does or would prohibit, restrict or delay consummation of
the Merger or any of the conditions to the consummation of the Merger
or that does or would have a Material Adverse Effect on Tanisys or any
of its Subsidiaries.
(g) DARKHORSE SHAREHOLDER APPROVAL. The holders of at least a majority of
the shares of outstanding DarkHorse Common Stock shall have voted in
favor of the Merger.
(h) CONSENTS. On or before the Effective Date, Tanisys shall have
obtained all necessary or required consents to the transactions
contemplated by this Agreement. In addition, on or before the Closing
Date, DarkHorse shall have obtained all necessary or required consents
to the transactions contemplated by this Agreement, including, without
limitation, the consents required by DarkHorse's lenders, on terms and
conditions reasonably satisfactory to DarkHorse.
(i) RELEASE OF PERSONAL GUARANTIES. On or before the Effective Date,
Tanisys shall have caused the Owners to be released from any and all
personal guaranties concerning DarkHorse.
Section 6.3 CONDITIONS TO CLOSING IN FAVOR OF TANISYS. Consummation of
the Merger shall be subject to the fulfillment, to the satisfaction of Tanisys,
or written waiver, at or before the Effective Date of the following conditions:
(a) COPIES OF RESOLUTIONS OF DARKHORSE. DarkHorse shall have furnished
Tanisys with copies of resolutions duly adopted by the Board of
Directors and shareholders of DarkHorse approving the execution and
delivery of this Agreement, and the
27
<PAGE>
consummation of the transactions contemplated hereby, certified as of
the Closing Date by the Secretary or an Assistant Secretary of
DarkHorse.
(b) OPINION OF COUNSEL FOR DARKHORSE. DarkHorse shall have furnished
Tanisys with an opinion dated the Closing Date from Small, Craig &
Werkenthin, P.C., counsel for DarkHorse, in the form attached hereto
as EXHIBIT "F."
(c) REPRESENTATIONS AND WARRANTIES OF DARKHORSE AND THE OWNERS. The
representations, warranties and statements of DarkHorse and the Owners
contained in this Agreement, the Exhibits hereto, DarkHorse's
Disclosure Schedule and the Owners' Disclosure Schedule shall be
complete and accurate as of the date of this Agreement and shall also
be complete and accurate at and as of the Closing Date, except for
changes contemplated by this Agreement, as if made at and as of the
Closing Date; and DarkHorse and the Owners shall have performed or
complied with all agreements and covenants required by this Agreement
to be performed or complied with by it at or prior to the Closing
Date.
(d) DARKHORSE OFFICERS' AND THE OWNERS' CERTIFICATES. DarkHorse shall
have delivered to Tanisys a certificate, dated the Closing Date, of
the President and Secretary of DarkHorse to the effect that (i) they
are familiar with the provisions of this Agreement, and (ii) the
conditions specified in Section 6.1 and in paragraph (c) of this
Section 6.3 have been fully satisfied. The Owners shall have
delivered to Tanisys a Certificate, dated the Closing Date, to the
effect that (i) they are familiar with the provisions of the
Agreement, and (ii) the conditions specified in Section 6.1 and in
Paragraph (c) of this Section 6.3 have been fully satisfied.
(e) GOVERNMENTAL CONSENTS, AUTHORIZATIONS, ETC. All material consents,
authorizations, orders or approvals of, and filings or registrations
with, and any permits, licenses or other authorizations required by,
any applicable Governmental Body that are required for or in
connection with, the execution and delivery of this Agreement by
Tanisys and the consummation by Tanisys of the transactions
contemplated hereby shall have been obtained or made.
(f) LEGISLATION. No law or legally binding regulation shall have been
enacted that does or would prohibit, restrict or delay consummation of
the Merger or any of the conditions to the consummation of the Merger
or that does or would have a Material Adverse Effect on DarkHorse.
(g) CONSENTS. On or before the Effective Date, DarkHorse shall have
obtained all necessary or required consents to the transactions
contemplated by this Agreement, including, without limitation, the
consents required by DarkHorse's lenders, on terms and conditions
reasonably satisfactory to Tanisys. In addition, on or before the
Closing Date, Tanisys shall have obtained all necessary or required
consents to the transactions contemplated by this Agreement,
including, without limitation, the
28
<PAGE>
consents required by Tanisys' lenders, on terms and conditions
reasonably satisfactory to Tanisys.
(h) RESTRICTED STOCK INVESTMENT LETTERS. Gary W. Pankonien, Archer
Lawrence, Jack Little and future Owner(s) as determined in accordance
with Section 6.1(g) shall have entered into Restricted Stock
Investment Letters with Tanisys in the form attached hereto as
EXHIBIT "G."
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Date, whether or not shareholder approval has been
received:
(a) By mutual consent of the Boards of Directors of Tanisys and DarkHorse;
(b) By DarkHorse if any representation or warranty of Tanisys or by
Tanisys if any representation or warranty of DarkHorse or the Owners
contained herein shall have been incorrect or breached in any material
respect, as to which notice shall have been given to such party, and
shall not have been cured or otherwise resolved to the reasonable
satisfaction of the other party on or before the Effective Date;
(c) By either Tanisys or DarkHorse if any permanent injunction or other
order of a court or other competent authority preventing the
consummation of the Merger shall have become final and non-appealable;
(d) By Tanisys or DarkHorse if the Merger has not become effective by July
15, 1996; provided, however, that no party shall be permitted to
terminate hereunder if such party is in violation of this Agreement;
or
(e) By either Tanisys or DarkHorse if the last trade of Tanisys' Common
Stock on the VSE is less than Two Dollars ($2.00) for five (5)
consecutive business days.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided herein, this Agreement shall become wholly void and
have no further force and effect except as hereinafter provided; and there shall
be no liability on the part of Tanisys or DarkHorse (or their respective
officers of directors) except to comply with the confidentiality provisions of
Section 5.5 hereof, and except as otherwise provided herein. Nothing contained
herein shall relieve any party from liability for its breach of this Agreement.
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<PAGE>
Section 7.3 AMENDMENT. This Agreement and the Exhibits and Schedules
hereto may be amended by the parties hereto at any time prior to the Effective
Date; provided, however, that any amendment must be by an instrument or
instruments in writing signed and delivered on behalf of each of the parties
hereto.
Section 7.4 EXTENSION; WAIVER. At any time prior to the Effective Date,
any corporate party hereto that is entitled to the benefits hereof, by action
taken by its Board of Directors or a duly authorized officer, may (a) extend the
time for the performance of any of the obligations or other acts of any of the
other parties hereto; (b) in whole or in part, waive any inaccuracy in the
representations and warranties of any of the other parties hereto contained
herein or in any Exhibit or Schedule hereto or in any document delivered
pursuant hereto; and (c) in whole or in part, waive compliance with any of the
agreements of any of the other parties hereto or conditions contained herein.
Any agreement on the part of any party hereto to any such extension or waiver
shall be valid as set forth in an instrument in writing signed and delivered on
behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1 EXCLUSIVE REMEDY. Any controversy or claim between or among
the parties hereto including but not limited to those arising out of Sections
5.13 and 5.14 of this Agreement or any related instruments, including any claim
based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the rules of practice and procedure for the
arbitration of commercial disputes of Chapter 171 of the Texas Civil Practice
and Remedies Code (the "Texas Arbitration Act") and the rules set forth herein.
Such remedy shall be the exclusive remedy for any such controversy or claim.
Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this Agreement may bring an action, including a
summary or expedited proceeding to compel arbitration of any controversy or
claim to which this Agreement applies in any court having jurisdiction over such
action. The arbitration shall be conducted in the City of Austin, Texas, and
administered in accordance with the Texas Arbitration Act. The parties shall
attempt to agree on one person to serve as the arbitrator for any controversy or
claim hereunder. In the event the parties are unable to agree on a single
arbitrator, each of the parties to this Agreement shall appoint one person as a
arbitrator to hear and determine the dispute and the two arbitrators so chosen
shall select a third impartial arbitrator whose decision shall be final and
conclusive as to all matters subject to arbitration hereunder. If for any
reason a third arbitrator cannot be named under the previous provisions, any
state district judge sitting in Travis County, Texas, upon application by one of
the parties hereto, shall have the power to appoint one or more arbitrators to
resolve disputes hereunder. All arbitration hearings will be commenced within
ninety (90) days of the demand for arbitration; further, the arbitrator shall
only, upon a showing of cause, be permitted to extend the commencement of such
hearing for an additional sixty (60) days.
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Section 8.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if and when delivered personally or
transmitted by telex, telecopy or telegram, mailed by registered or certified
mail (return receipt requested) or sent by a recognized next business day
courier to the persons at the following addresses (or at such other address for
a party as shall be specified by like notice):
If to Tanisys:
Mark C. Holiday
Chairman and Chief Executive Officer
Tanisys Technology, Inc.
1310 RR 620 South, Suite B195
Austin, Texas 78734-6342
Telephone: (512) 263-1700
Facsimile: (512) 263-1683
with a copy to:
W. Audie Long
Attorney at Law
9311 San Pedro, Suite 100
San Antonio, Texas 78216
Telephone: (210) 525-6211
Facsimile: (210) 366-2437
If to DarkHorse:
DarkHorse Systems, Inc.
12201 Technology Blvd., Suite 130
Austin, Texas 78727-6101
Telephone: (512) 258-3570
Facsimile : (512) 258-3689
with a copy to:
Brandon C. Janes
Small, Craig & Werkenthin, P.C.
100 Congress Avenue, Suite 1100
Austin, Texas 78701-4099
Telephone: (512) 472-8355
Facsimile: (512) 320-9734
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<PAGE>
If to the Owners:
Gary W. Pankonien
Chairman and Chief Executive Officer
DarkHorse Systems, Inc.
12201 Technology Blvd., Suite 130
Austin, Texas 78727-6101
Telephone: (512) 258-3570
Facsimile : (512) 258-3689
Archer Lawrence
DarkHorse Systems, Inc.
12201 Technology Blvd., Suite 130
Austin, Texas 78727-6101
Telephone: (512) 258-3570
Facsimile: (512) 258-3689
Jack Little
DarkHorse Systems, Inc.
12201 Technology Blvd., Suite 130
Austin, Texas 78727-6101
Telephone: (512) 258-3570
Facsimile : (512) 258-3689
with a copy to:
Brandon C. Janes
Small, Craig & Werkenthin, P.C.
100 Congress Avenue, Suite 1100
Austin, Texas 78701-4099
Telephone: (512) 472-8355
Facsimile: (512) 320-9734
Section 8.3 FEES AND EXPENSES. Tanisys and DarkHorse shall each bear its
own expenses in negotiating, executing and delivering this Agreement and any
related documents and in preparing for the Closing (as defined below).
Section 8.4 INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement. Terms such as "herein," "hereof" and "hereinafter" refer to
this Agreement as a whole and not to the particular sentence or paragraph where
they appear, unless the context otherwise requires. Terms used in the plural
include the singular, and vice versa, unless the context otherwise requires.
Section 8.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
Section 8.6 MISCELLANEOUS. This Agreement, including the Exhibits and
Schedules hereto, (a) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof; (b) is not intended
to and shall not confer upon any other person any rights or remedies hereunder
or otherwise with respect to the subject matter hereof, except for rights that
may expressly arise as a consequence of the Merger; (c) shall not be assigned by
operation of law or otherwise; (d) has been drafted by all of the parties to
this Agreement and should not be construed against any of the parties hereto;
and (e) shall be governed in all respects, including validity, interpretation
and effect by the substantive laws of the State of Texas without regard to
conflict of law provisions.
Section 8.7 SURVIVAL. No investigation by the parties hereto made
heretofore or hereafter shall affect the representations and warranties of the
parties that are contained herein, and each such representation and warranty
shall survive such investigation for a period of six (6) months from the
Closing.
Section 8.8 GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereto has a reasonable relation to and shall be governed,
construed and enforced in accordance with the laws of the State of Texas. The
parties agree that any litigation relating directly or indirectly to this
Agreement must be brought before and determined by a court of competent
jurisdiction within Travis County, Texas.
Section 8.9 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at such time and place as Tanisys and
DarkHorse shall mutually agree (the "Closing Date"). Unless otherwise agreed by
Tanisys and DarkHorse, the Closing shall occur on the Effective Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or have
caused this Agreement to be executed by their duly authorized officers.
TANISYS TECHNOLOGY, INC.
By: MARK C. HOLLIDAY
----------------------------
Chairman of the Board and
Chief Executive Officer
TANISYS ACQUISITION CORP. II
By: /s/ MARK C. HOLLIDAY
----------------------------
Chairman of the Board and
Chief Executive Officer
33
<PAGE>
DARKHORSE SYSTEMS, INC.
By: /s/ GARY W. PANKONIEN
----------------------------
Chairman of the Board and
Chief Executive Officer
/s/ GARY W. PANKONIEN
----------------------------
GARY W. PANKONIEN, Individually
/s/ ARCHER LAWRENCE
----------------------------
ARCHER LAWRENCE, Individually
/s/ JACK LITTLE
----------------------------
JACK LITTLE, Individually
34
<PAGE>
Exhibit 10.8
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 amends that certain Agreement and Plan of Merger
dated April 9, 1996 (the "Agreement"), by and among Tanisys Technology, Inc.
("Tanisys"), Tanisys Acquisition Corp. II ("Tanisys Acquisition"), DarkHorse
Systems, Inc. ("DarkHorse"), Gary W. Pankonien, Archer Lawrence and Jack
Little (collectively, the "Owners") as follows:
1. Section 1.2, CONVERSION OF SHARES, is hereby amended in its entirety
to read as follows:
"Section 1.2 CONVERSION OF SHARES. Upon the latter of the
issuance of a Certificate of Merger by the Secretary of State of the
State of Delaware or the issuance of a Certificate of Merger by the
Secretary of State of the State of Texas (the "Effective Date"), the
issued and outstanding shares of common stock, no par value per share,
of DarkHorse (the "DarkHorse Common Stock"), subject to the
fulfillment of the conditions precedent set forth under Article 6,
including the simultaneous closing of that certain Agreement and Plan
of Merger dated April 9, 1996, by and between Tanisys Technology,
Inc., Tanisys Acquisition Corp. and 1st Tech Corporation and Gary W.
Pankonien and the applicable statutory provisions with respect to
appraisal rights, any applicable withholding requirements and
adjustment as herein provided, shall be converted into and become, and
there shall be paid and issued, in exchange for the DarkHorse Common
Stock an aggregate of 1,200,000 shares of Tanisys common stock, no par
value per share (the "Tanisys Common Stock"), such that each share of
DarkHorse Common Stock outstanding on the Effective Date, not to
exceed 1,200,000 shares of DarkHorse Common Stock in the aggregate, is
exchanged for one (1) share (the "Exchange Ratio") of Tanisys Common
Stock, with any excess shares of DarkHorse Common Stock resulting in a
reduction in the per-share Exchange Ratio. As used in this Agreement,
"Merger Consideration" shall mean the aggregate of 1,200,000 shares of
Tanisys Common Stock exchanged for DarkHorse Common Stock in the
Merger at the Exchange Ratio. Each share of DarkHorse Common Stock
held in the treasury of DarkHorse or by a wholly owned subsidiary of
DarkHorse shall be cancelled as of the Effective Date and no portion
of the Merger Consideration shall be payable with respect thereto.
The Merger Consideration shall be reduced by the amount otherwise
payable or issuable to holders of DarkHorse who exercise dissenters'
rights, if any, in connection with the Merger based upon such
shareholders' ownership of DarkHorse Common Stock outstanding on the
Effective Date. The Exchange Ratio shall be subject to appropriate
adjustment in the event of a stock split, stock dividend or
recapitalization subsequent to the date of this Agreement applicable
to shares of DarkHorse Common Stock or Tanisys Common Stock held of
record on or before the Effective Date."
<PAGE>
2. Section 2.3, CAPITALIZATION, is hereby amended in its entirety to read
as follows:
"Section 2.3 CAPITALIZATION. The authorized capital stock of
DarkHorse consists of 100,000,000 shares of DarkHorse Common Stock, no
par value, of which, as of the date hereof, 1,155,000 shares of
DarkHorse Common Stock are validly issued and outstanding, fully paid
and nonassessable, and upon the Effective Date, there will be no more
than 1,200,000 shares of DarkHorse Common Stock validly issued and
outstanding, fully paid and nonassessable. As of the date of this
Agreement, there are no shares of DarkHorse Common Stock held in the
treasury of DarkHorse and there are no other shares of the capital
stock of DarkHorse. As of the date hereof, except as disclosed in
DarkHorse's Disclosure Schedule, there are no outstanding options,
warrants, rights or other commitments to issue or sell any shares of
capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to acquire from
DarkHorse, any shares of its capital stock. No shares of DarkHorse's
capital stock have been issued in violation of any preemptive rights
or applicable federal or state securities laws. Except pursuant to
the Texas Act, there are no restrictions, including but not limited to
self-imposed restrictions, on the retained earnings of DarkHorse or on
the ability of DarkHorse to declare and pay dividends. There are no
outstanding obligations of DarkHorse to repurchase, redeem or
otherwise acquire any capital stock or other securities of DarkHorse."
3. Section 4.1, TITLE TO SHARES, is hereby amended in its entirety to
read as follows:
"Section 4.1 TITLE TO SHARES. Immediately prior to the
Closing, the Owners shall be the lawful Owners and holders of an
aggregate of no more than 1,200,000 shares of DarkHorse Common Stock
and, on the Effective Date, shall hold all such shares free and clear
of any encumbrances or liens."
5. All references to "1,500,000" shares of DarkHorse Common Stock or
Tanisys Common Stock in documents relating to the Agreement, including but not
limited to the exhibits and schedules attached to the Agreement, are hereby
changed to "1,200,000."
6. Section 5.16, REGISTRATION STATEMENT, is hereby added to the
Agreement, as follows:
"Section 5.16 REGISTRATION STATEMENT. In the event Tanisys
elects to file a Registration Statement on Form S-1 or S-3 with the
Securities and Exchange Commission ("SEC") and is requested to do so
by the Owners, Tanisys agrees to register for sale up to 20,000 shares
of the Merger Consideration for the Owners and to cause such
Registration Statement to become effective as promptly as practical
thereafter and to maintain the effectiveness of such Registration
Statement until the earlier of the sale of the shares registered
thereby or the second anniversary of the Effective Date. Tanisys
shall be permitted to include on any such Registration Statement
shares of the Tanisys Common Stock to be issued (i) by the company or
by stockholders with registration rights directly to the public and/or
to institutional
-2-
<PAGE>
investors for cash, or (ii) by stockholders receiving registration rights
in connection with any acquisitions to be completed by Tanisys prior to,
simultaneously with, or subsequent to, completion of the Merger. Tanisys
shall also take any action required to be taken under any applicable state
blue sky or securities laws in connection with the issuance of the shares
of the Tanisys Common Stock to be issued as set forth in this Agreement or
the listing of such shares of the Tanisys Common Stock on the NASDAQ
National Market System, subject to official notice of issuance. The Owners
shall furnish to Tanisys, in writing, all information and covenants
concerning DarkHorse, the other holders of the DarkHorse Common Stock and
the proposed methods of sale or other disposition of the registered shares
as Tanisys, any underwriter, the SEC and/or any state or other regulatory
authority may request in connection with the registration of any shares or
any action required by Tanisys. The Owners will cooperate with Tanisys and
use reasonable efforts to assist Tanisys in, and Tanisys will bear all
costs and expenses (including its legal, accounting and printing costs and
filing fees payable to the SEC and other governmental bodies) related to,
the preparation and filing of the Registration Statement and all other
necessary documentation and to obtain all permits, consents, approvals
and authorizations of all third parties and governmental bodies necessary
to effect the registration of the 20,000 shares of the Merger Consideration
on the Registration Statement. The Owners agree to execute, deliver and/or
file with or supply to Tanisys, any underwriter, the SEC and/or any state
or other regulatory authority such information as is necessary to carry out
the provisions of this Section or to effect the registration or
qualification of the shares under applicable securities laws and
regulations of any jurisdiction and such information as Tanisys may
reasonably require to ensure that the transfer or disposition of the
registered shares is not in violation of any applicable securities laws.
The parties shall also enter into an agreement to provide reciprocal
indemnities to the other party for representations made in such
Registration Statement and related documents. Each of the Owners further
agrees to furnish to Tanisys not later than every thirty (30) days after
the date of effectiveness of the Registration Statement a report of the
number of registered shares sold during such thirty (30)-day period and to
cancel any orders to sell and/or to reverse any sales of registered
shares which orders and/or sales, in Tanisys' opinion, based upon the
opinion of legal counsel experienced in securities law matters were
effected in violation of applicable federal or state securities laws.
At its expense, Tanisys will furnish to each of the Owners such number
of copies of such Registration Statement and of each amendment and
supplement thereto (in each case, including all Exhibits) and such
number of copies of the prospectus included in such Registration
Statement as they shall request. Tanisys will notify the Owners of
any shares covered by such Registration Statement (i) at any time when
a prospectus relating thereto is required to be delivered under
applicable securities laws, (ii) of the happening of any event as a
result of which the prospectus included in such Registration Statement
as then in effect includes an untrue statement of material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing, or (iii) of any other occurrence
which, under applicable
-3-
<PAGE>
securities laws, requires the prospectus to be revised or updated (and
upon receipt of such notice and until a supplemented or amended prospectus
is available, each of the Owners will cease to offer or to sell any shares
covered by the Registration Statement and will return all copies of the
prospectus to Tanisys if requested to do so by Tanisys and will not sell
any of the shares until provided with a current prospectus and notice
from Tanisys that they may resume their selling efforts). Upon the
occurrence of any of the events described in clauses (ii) or (iii) of the
preceding sentence, Tanisys agrees to use its best efforts to take all
necessary actions to revise or update the prospectus as promptly as
practical to the extent necessary for selling efforts to resume."
7. All undefined capitalized terms used in this Amendment shall have the
meanings set forth in the Agreement.
8. All terms and conditions of the Agreement and related documents not
specifically modified herein are hereby ratified and confirmed in their
entirety.
IN WITNESS WHEREOF, this Amendment No. 1 to the Agreement has been duly
executed by each of the parties to the Agreement as of the 16th day of May,
1996.
Tanisys Technology, Inc. Tanisys Acquisition Corp.
By: /s/ MARK C. HOLLIDAY By: /s/ MARK C. HOLLIDAY
-------------------------- --------------------------
Chairman of the Board and Chairman of the Board and
Chief Executive Officer Chief Executive Officer
DarkHorse Systems, Inc.
By: /s/ GARY W. PANKONIEN /s/ GARY W. PANKONIEN
--------------------------- -------------------------------
Chairman of the Board and Gary W. Pankonien, Individually
Chief Executive Officer
/s/ ARCHER LAWRENCE /s/ JACK LITTLE
- - ----------------------------- --------------------------------
Archer Lawrence, Individually Jack Little, Individually
-4-
<PAGE>
Exhibit 10.9
[STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 05/31/1996
960157927 - 2603092]
ARTICLES OF MERGER
OF
DARKHORSE SYSTEMS, INC.
(a Texas corporation)
WITH AND INTO
TANISYS ACQUISITION CORP. II
(a Delaware corporation)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Pursuant to the provisions of Article 262 of the Delaware Corporation Act
(the "Delaware Act"), the undersigned domestic corporation and foreign
corporation adopt the following Articles of Merger ("Articles of Merger"), this
31st day of May, 1996, for the purpose of effecting a merger between TANISYS
ACQUISITION CORP. II, a Delaware corporation ("Tanisys Acquisition"), and
DARKHORSE SYSTEMS, INC., a Texas corporation ("DarkHorse"), in accordance with
the provisions of Article 251 of the Delaware Act. Tanisys Acquisition II and
DarkHorse are sometimes referred to herein as the "Constituent Corporations."
RECITALS
Tanisys Acquisition II is a corporation duly organized and existing under
the laws of the State of Delaware with authorized capital of 10,000 shares of
common stock, par value $.01 per share (the "Tanisys Acquisition II Common
Stock"), of which no shares are held in treasury and 10,000 shares of Tanisys
Acquisition II Common Stock are issued and outstanding.
DarkHorse is a corporation validly existing under the laws of the State of
Texas with authorized capital consisting of 100,000,000 shares of common stock,
no par value per share (the "DarkHorse Common Stock"), of which no shares are
held in the treasury and 1,200,000 shares are issued and outstanding.
Tanisys Technology, Inc., a Wyoming corporation and holder of all of the
issued and outstanding shares of Tanisys Acquisition II Common Stock
("Tanisys"), and DarkHorse, among others, have entered into an Agreement and
Plan of Merger, dated as of April 9, 1996 (the "Agreement"), which contemplates
the merger of DarkHorse with and into Tanisys Acquisition II (the "Merger"),
with Tanisys Acquisition II becoming the surviving corporation in accordance
with the Agreement and these Articles of Merger.
<PAGE>
The respective Boards of Directors of Tanisys Acquisition II and DarkHorse
deem it advisable and in the best interests of each such corporation and their
respective shareholders that DarkHorse be merged with and into Tanisys
Acquisition II as provided herein and in the Agreement, and they have
accordingly adopted resolutions approving the Agreement and these Articles of
Merger, and the Agreement and these Articles of Merger have been approved by the
required vote of the shareholders of each Constituent Corporation.
Therefore, in consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree to the
following Plan of Merger:
ARTICLE 1.
The Merger
On the Effective Date of the Merger (as defined in Article 6 hereof),
DarkHorse shall be merged with and into Tanisys Acquisition II, which as the
surviving corporation is sometimes referred to herein as the "Surviving
Corporation." The separate existence and corporate organization of DarkHorse
shall cease upon the Effective Date of the Merger, and thereafter Tanisys
Acquisition II shall continue as the Surviving Corporation under the laws of the
State of Delaware under the name "Tanisys Acquisition Corp. II." The Merger
shall be pursuant to the provisions of and with the effect provided in the
Delaware Act and the Texas Business Corporation Act (the "Texas Act").
ARTICLE 2.
Articles of Incorporation and Bylaws
2.1. On the Effective Date of the Merger, the Articles of Incorporation of
Tanisys Acquisition II, as in effect immediately prior to the Effective Date of
the Merger, shall be the Articles of Incorporation of the Surviving Corporation,
until duly amended in accordance with law and such Articles of Incorporation.
2.2. On the Effective Date of the Merger, the Bylaws of Tanisys Acquisition
II, as in effect immediately prior to the Effective Date of the Merger, shall be
the Bylaws of the Surviving Corporation, until the same shall thereafter be
altered, amended or repealed in accordance with law, the Articles of
Incorporation of the Surviving Corporation and such Bylaws.
2
<PAGE>
ARTICLE 3.
Directors and Officers
3.1. The number of directors comprising the Board of Directors of the
Surviving Corporation shall be one (1), and such director, who shall serve until
his successor has been duly elected and qualified or until his resignation,
death or removal, in accordance with law, the Articles of Incorporation and the
Bylaws of the Corporation, shall be Mark C. Holliday.
3.2. The officers of the Surviving Corporation after the Effective Date of
the Merger, who shall serve in the capacity listed opposite their respective
names until their successors have been duly elected and qualified or until their
resignation, death or removal, in accordance with law, the Articles of
Incorporation and Bylaws of the Surviving Corporation, shall be as follows:
Mark C. Holliday President
Keith D. Thatcher Vice President, Chief Financial Officer
and Corporate Treasurer
Lynne Reilly Corporate Secretary
ARTICLE 4.
Manner and Basis of Converting Shares
4.1. On the Effective Date of the Merger, subject to Section 4.7 hereof,
each share of Tanisys Acquisition II Common Stock issued and outstanding
immediately prior to the Effective Date of the Merger (other than Tanisys
Acquisition II Appraisal Shares (as hereinafter defined), all of which shall be
cancelled) shall continue to remain outstanding and unchanged. "Tanisys
Acquisition II Appraisal Shares" are those shares of Tanisys Acquisition II
Common Stock as to which shareholders of Tanisys Acquisition II have properly
exercised and perfected their right to dissent and receive the fair value
thereof in accordance with Article 262 of the Delaware Act. Also on the
Effective Date of the Merger, subject to Sections 4.3 and 4.7 hereof and
adjustment as provided herein, each share of DarkHorse Common Stock issued and
outstanding immediately prior to the Effective Date of the Merger (other than
DarkHorse Appraisal Shares (as hereinafter defined), all of which shares shall
be cancelled), not to exceed 1,200,000 shares of DarkHorse Common Stock in the
aggregate, shall, by virtue of the Merger and without any action on the part of
the holder thereof, thereupon be converted into and become, in exchange for each
share of DarkHorse Common Stock, one (1) share (the "Exchange Ratio") of Tanisys
common stock, no par value per share (the "Tanisys Common Stock"), with any
excess shares of DarkHorse Common Stock resulting in a reduction in the per-
share Exchange Ratio. In the event that DarkHorse has less than 1,200,000
shares of DarkHorse Common Stock outstanding on the Effective Date of the
Merger, the Exchange Ratio shall be proportionally increased. Each share of
DarkHorse Common Stock held in the treasury of DarkHorse or by a wholly-owned
subsidiary
3
<PAGE>
of DarkHorse shall be cancelled as of the Effective Date of the Merger, and
no portion of the Merger Consideration (as hereinafter defined) shall be
payable with respect thereto. As used in these Articles of Merger, "Merger
Consideration" shall mean the aggregate of 1,200,000 shares of Tanisys Common
Stock exchanged for DarkHorse Common Stock in the Merger at the Exchange
Ratio. The Merger Consideration shall be reduced by the amount otherwise
payable or issuable to holders of DarkHorse who exercise dissenters' rights
in connection with the Merger based upon such shareholders' ownership of
DarkHorse Common Stock outstanding on the Effective Date of the Merger. The
Exchange Ratio shall be subject to appropriate adjustment in the event of a
stock split, stock dividend or recapitalization subsequent to the date of the
Agreement applicable to shares of DarkHorse Common Stock or Tanisys Common
Stock held of record on or before the Effective Date of the Merger.
"DarkHorse Appraisal Shares" are those shares of DarkHorse Common Stock as to
which shareholders have properly exercised and perfected their right to
dissent and to receive the fair value thereof in accordance with Articles
5.11, 5.12 and 5.13 of the Texas Act.
4.2. After the Effective Date of the Merger, each holder of record of an
outstanding certificate or certificates representing shares of DarkHorse Common
Stock shall surrender such certificate or certificates to Tanisys or to such
agent or agents as shall be appointed by Tanisys (the "Exchange Agent") and
shall be entitled to receive in exchange therefor (except to the extent such
certificate or certificates represent DarkHorse Appraisal Shares) a certificate
or certificates representing the number of whole shares of Tanisys Common Stock
into which the shares of DarkHorse Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been converted, together
with a check representing the cash adjustments for fractional shares, if any.
Except as otherwise provided herein, each share of DarkHorse Common Stock issued
and outstanding immediately prior to the Effective Date of the Merger shall on
and after the Effective Date of the Merger be deemed for all corporate purposes
to evidence ownership of the number of shares of Tanisys Common Stock into which
such shares have been converted. Until certificates representing shares of
DarkHorse Common Stock shall be surrendered and exchanged for certificates
representing shares of Tanisys Common Stock, no dividend or other distributions,
if any, payable to holders of record of Tanisys Common Stock as of any date
subsequent to the Effective Date of the Merger shall be paid to the holders of
such outstanding certificates of DarkHorse Common Stock. Holders of
unsurrendered certificates for shares of DarkHorse Common Stock shall not be
entitled to vote until such unsurrendered certificates for shares of DarkHorse
Common Stock are exchanged pursuant to this Section 4.2. Upon surrender and
exchange of such outstanding certificates of DarkHorse Common Stock and subject
to the effect, if any, of applicable law, there shall be paid to the record
holders of the certificates issued in exchange therefor, the amount, without
interest thereon, of dividends and other distributions, if any, which has become
payable after the Effective Date of the Merger with respect to the number of
whole shares of Tanisys Common Stock represented thereby. Immediately prior to
the Effective Date of the Merger, all outstanding stock options or rights to
purchase DarkHorse Common Stock, if any, shall be surrendered by the respective
holders thereof and shall terminate and be cancelled and shall have no further
force and effect whatsoever.
4
<PAGE>
4.3. Tanisys shall not be required to issue, and no certificates shall be
issued, for a fraction of a share of Tanisys Common Stock to any shareholder of
Tanisys in respect of fractional interests, but in lieu thereof each such holder
of shares of Tanisys Common Stock who would otherwise have been entitled to a
fraction of a share of Tanisys Common Stock, upon compliance with Section 4.2
hereof, shall be paid cash equal to such fraction multiplied by the average of
the per-share closing prices of Tanisys Common Stock on the Vancouver Stock
Exchange for the twenty (20) trading days immediately preceding the date that is
ten (10) days prior to the Effective Date of the Merger, subject to appropriate
adjustment in the event of a stock split, stock dividend or recapitalization
applicable to shares of Tanisys Common Stock held of record on or before the
Effective Date of the Merger to the extent not reflected in such sales prices.
4.4. If any certificate evidencing shares of Tanisys Common Stock is to be
issued in a name other than that in which the DarkHorse certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange pay to Tanisys or the Exchange Agent any transfer or other taxes
required by reason of the issuance of a certificate for shares of Tanisys Common
Stock in any name other than that of the registered holder of the certificate
surrendered or establish to the satisfaction of Tanisys or the Exchange Agent
that such tax has been paid or is not payable.
4.5. Tanisys may, without notice to any person, terminate all exchange
agencies after thirty (30) days following the Effective Date of the Merger, and
thereafter all exchanges, payments and notices provided for in these Articles of
Merger as being made to or by the Exchange Agent shall be made to or by Tanisys
or its transfer agent.
4.6. The holder of a certificate or certificates representing shares of
DarkHorse Common Stock issued and outstanding immediately prior to the Effective
Date of the Merger shall have no rights with respect to such shares other than
to exercise and perfect their right to dissent to the Merger and to receive the
fair value of such shares in the manner provided by Articles 5.11, 5.12 and 5.13
of the Texas Act or surrender such certificate or certificates pursuant to
Section 4.2 hereof. The holder of a certificate or certificates representing
shares of the Tanisys Acquisition II Common Stock issued and outstanding prior
to the Effective Date of the Merger shall have no rights with respect to such
shares other than to exercise and perfect their right to dissent to the Merger
and to receive the fair value of such shares in the manner provided by Article
262 of the Delaware Act.
4.7. If the holder of any shares of DarkHorse Common Stock issued and
outstanding immediately prior to the Effective Date of the Merger shall become
entitled to receive payment for such shares in accordance with the applicable
provisions of Articles 5.11, 5.12 and 5.13 of the Texas Act, then such payment
shall be in lieu of the conversion provided in Section 4.1 hereof and shall be
made by the Surviving Corporation. DarkHorse shall give Tanisys Acquisition II
5
<PAGE>
and Tanisys prompt notice upon receipt of any written objections to the Merger
or claims of appraisal rights and shall not without prior written consent of
Tanisys Acquisition II and Tanisys make any payment with respect to, or settle
or offer to settle, any such objection or claim. If the holder of any shares of
Tanisys Common Stock issued and outstanding immediately prior to the Effective
Date of the Merger shall become entitled to receive payment for such shares in
accordance with the applicable provisions of Article 262 of the Delaware Act,
then such payment shall be made by the Surviving Corporation.
ARTICLE 5.
Rights and Duties of Tanisys Acquisition II as the Surviving Corporation
5.1. On the Effective Date of the Merger, the separate existence of
DarkHorse shall cease for all purposes, and DarkHorse shall be merged with and
into Tanisys Acquisition II, which, as the Surviving Corporation, shall
thereupon and thereafter possess all of the rights, privileges, immunities,
powers and franchises of a public as well as of a private nature, and shall be
subject to all the restrictions, liabilities, obligations, disabilities and
duties of each of the Constituent Corporations so merged; and all and singular,
the rights, privileges, immunities, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed and all
debts due to any of the Constituent Corporations on whatever account, including
stock subscriptions and all other choses in action, and all and every other
interest of or belonging to or due to each of such Constituent Corporations
shall be taken and deemed to be transferred to and vested in the Surviving
Corporation without further act or deed. The title to any real estate vested by
deed or otherwise, in either of the Constituent Corporations, shall not revert
or be in any way impaired by reason of the Merger.
5.2. On the Effective Date of the Merger, the Surviving Corporation shall
also be responsible and liable and subject to all restrictions, liabilities,
obligations, disabilities and duties of each Constituent Corporation; and any
claim existing or action or proceeding pending by or against any of the
Constituent Corporations may be prosecuted as if the Merger had not taken place
or the Surviving Corporation had been substituted in its place. Neither the
rights of creditors nor any liens upon the property of any of the Constituent
Corporations shall be impaired by the Merger, and such rights and liens shall
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if the Merger had not taken place. If at any time the Surviving
Corporation shall consider or be advised that any further assignment or
assurances in law or any things are necessary or desirable to vest in the
Surviving Corporation, according to the terms hereof, the title of any property
or rights of DarkHorse, the last acting officers and directors of DarkHorse, as
the case may be, or the corresponding officers and directors of the Surviving
Corporation shall and will execute and make all such proper assignments and
assurances and do all things necessary or proper to vest title in such property
or rights in the Surviving Corporation, and otherwise to carry out the purposes
of the Agreement and these Articles of Merger.
6
<PAGE>
ARTICLE 6.
Effective Date
As used in these Articles of Merger, the term "Effective Date of the
Merger" shall mean the latter of the issuance of a Certificate of Merger by the
Secretary of State of the State of Texas or the issuance of a Certificate of
Merger by the Secretary of State of the State of Delaware in accordance with the
Delaware Act and Texas Act, respectively.
ARTICLE 7.
Counterparts
These Articles of Merger may be executed in any number of counterparts,
each of which shall be deemed an original, and all of such counterparts together
shall constitute one and the same instrument.
ARTICLE 8.
Amendment
Subject to applicable law, these Articles of Merger may be amended,
modified or supplemented only by written agreement of Tanisys Acquisition II and
DarkHorse, duly authorized by each of their respective Boards of Directors, at
any time prior to the Effective Date of the Merger; provided, however, that,
after the adoption of the Agreement and these Articles of Merger by the
shareholders of Tanisys Acquisition II and DarkHorse, no such amendment,
modification or supplement shall reduce the amount or change the form of the
consideration to be paid to the shareholders of DarkHorse in accordance with
Article 4 hereof.
ARTICLE 9.
Voting
The common stock of each Constituent Corporation is the only class of
shares entitled to vote on the proposed Merger. As to each Constituent
Corporation, the approval of whose shareholders is required, the designation and
total number of shares outstanding and entitled to vote for or against the
Merger, and the number of shares of each Constituent Corporation voted for or
against the Merger, respectively, are as follows:
7
<PAGE>
Number of Shares
Number of ------------------
Name of Designation of Common Total Total
Constituent Class Entitled Shares Out- Voted Voted
Corporation to Vote standing For Against
- - ----------- -------------- ----------- ----- -------
Tanisys Acquisition
Corp. II Common Stock 10,000 10,000 -0-
DarkHorse
Systems, Inc. Common Stock 1,200,000 1,200,000 -0-
ARTICLE 10.
Authorization of Merger
The Agreement and these Articles of Merger and the performance of their
terms were duly authorized by all action required by the laws under which each
of Tanisys Acquisition II, DarkHorse and Tanisys are incorporated and by their
respective constituent documents.
TANISYS ACQUISITION CORP. II
a Delaware corporation
ATTEST:
By: /s/ KEITH D. THATCHER
--------------------------------
/s/ LYNNE REILLY Name: Keith D. Thatcher
- - -------------------------------- ------------------------------
Secretary Title: Vice Preident and CFO
-----------------------------
DARKHORSE SYSTEMS, INC.
a Texas corporation
ATTEST:
By: /s/ GARY W. PANKONIEN
--------------------------------
/s/ ARCHER LAWRENCE Name: Gary W. Pankonien
- - -------------------------------- ------------------------------
Secretary Title: Chairman and CEO
-----------------------------
8
<PAGE>
TANISYS TECHNOLOGY, INC.
a Wyoming corporation
ATTEST:
By: /s/ KEITH D. THATCHER
--------------------------------
/s/ LYNNE REILLY Name: Keith D. Thatcher
- - -------------------------------- ------------------------------
Assistant Secretary Title: Vice President and CFO
-----------------------------
9
<PAGE>
EXHIBIT 10.10
[FILED
in the Office of the
Secretary of State of Texas
MAY 31 1996
Corporations Section]
ARTICLES OF MERGER
OF
DARKHORSE SYSTEMS, INC.
(a Texas corporation)
WITH AND INTO
TANISYS ACQUISITION CORP. II
(a Delaware corporation)
________________________________________________________________________________
________________________________________________________________________________
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act (the "Texas Act"), the undersigned domestic corporation and
foreign corporation adopt the following Articles of Merger ("Articles of
Merger"), this 31st day of May, 1996, for the purpose of effecting a merger
between TANISYS ACQUISITION CORP. II, a Delaware corporation ("Tanisys
Acquisition II"), and DARKHORSE SYSTEMS, INC., a Texas corporation
("DarkHorse"), in accordance with the provisions of Article 5.01 of the Texas
Act. Tanisys Acquisition II and DarkHorse are sometimes referred to herein
as the "Constituent Corporations."
RECITALS
Tanisys Acquisition II is a corporation duly organized and existing under
the laws of the State of Delaware with authorized capital of 10,000 shares of
common stock, par value $.01 per share (the "Tanisys Acquisition II Common
Stock"), of which no shares are held in treasury and 10,000 shares of Tanisys
Acquisition II Common Stock are issued and outstanding.
DarkHorse is a corporation validly existing under the laws of the State of
Texas with authorized capital consisting of 100,000,000 shares of common stock,
no par value per share (the "DarkHorse Common Stock"), of which no shares are
held in the treasury and 1,200,000 shares are issued and outstanding.
Tanisys Technology, Inc., a Wyoming corporation and holder of all of the
issued and outstanding shares of Tanisys Acquisition II Common Stock
("Tanisys"), and DarkHorse, among others, have entered into an Agreement and
Plan of Merger, dated as of April 9, 1996 (the "Agreement"), which contemplates
the merger of DarkHorse with and into Tanisys Acquisition II (the "Merger"),
with Tanisys Acquisition II becoming the surviving corporation in accordance
with the Agreement and these Articles of Merger.
The respective Boards of Directors of Tanisys Acquisition II and DarkHorse
deem it advisable and in the best interests of each such corporation and their
respective shareholders that
<PAGE>
DarkHorse be merged with and into Tanisys Acquisition II as provided herein
and in the Agreement, and they have accordingly adopted resolutions approving
the Agreement and these Articles of Merger, and the Agreement and these
Articles of Merger have been approved by the required vote of the
shareholders of each Constituent Corporation.
Therefore, in consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree to the
following Plan of Merger:
ARTICLE 1.
The Merger
On the Effective Date of the Merger (as defined in Article 6 hereof),
DarkHorse shall be merged with and into Tanisys Acquisition II, which as the
surviving corporation is sometimes referred to herein as the "Surviving
Corporation." The separate existence and corporate organization of DarkHorse
shall cease upon the Effective Date of the Merger, and thereafter Tanisys
Acquisition II shall continue as the Surviving Corporation under the laws of the
State of Delaware under the name "Tanisys Acquisition Corp. II, d/b/a DarkHorse
Systems, Inc." The Merger shall be pursuant to the provisions of and with the
effect provided in the Texas Act and the Delaware Corporation Act (the "Delaware
Act").
ARTICLE 2.
Articles of Incorporation and Bylaws
2.1. On the Effective Date of the Merger, the Articles of Incorporation of
Tanisys Acquisition II, as in effect immediately prior to the Effective Date of
the Merger, shall be the Articles of Incorporation of the Surviving Corporation,
until duly amended in accordance with law and such Articles of Incorporation.
2.2. On the Effective Date of the Merger, the Bylaws of Tanisys Acquisition
II, as in effect immediately prior to the Effective Date of the Merger, shall be
the Bylaws of the Surviving Corporation, until the same shall thereafter be
altered, amended or repealed in accordance with law, the Articles of
Incorporation of the Surviving Corporation and such Bylaws.
ARTICLE 3.
Directors and Officers
3.1. The number of directors comprising the Board of Directors of the
Surviving Corporation shall be one (1), and such director, who shall serve until
his successor has been duly
2
<PAGE>
elected and qualified or until his resignation, death or removal, in
accordance with law, the Articles of Incorporation and the Bylaws of the
Corporation, shall be Mark C. Holliday.
3.2. The officers of the Surviving Corporation after the Effective Date of
the Merger, who shall serve in the capacity listed opposite their respective
names until their successors have been duly elected and qualified or until their
resignation, death or removal, in accordance with law, the Articles of
Incorporation and Bylaws of the Surviving Corporation, shall be as follows:
Mark C. Holliday President
Keith D. Thatcher Vice President, Chief Financial Officer
and Corporate Treasurer
Lynne Reilly Corporate Secretary
ARTICLE 4.
Manner and Basis of Converting Shares
4.1. On the Effective Date of the Merger, subject to Section 4.7 hereof,
each share of Tanisys Acquisition II Common Stock issued and outstanding
immediately prior to the Effective Date of the Merger (other than Tanisys
Acquisition II Appraisal Shares (as hereinafter defined), all of which shall be
cancelled) shall continue to remain outstanding and unchanged. "Tanisys
Acquisition II Appraisal Shares" are those shares of Tanisys Acquisition II
Common Stock as to which shareholders of Tanisys Acquisition II have properly
exercised and perfected their right to dissent and receive the fair value
thereof in accordance with Article 262 of the Delaware Act. Also on the
Effective Date of the Merger, subject to Sections 4.3 and 4.7 hereof and
adjustment as provided herein, each share of DarkHorse Common Stock issued and
outstanding immediately prior to the Effective Date of the Merger (other than
DarkHorse Appraisal Shares (as hereinafter defined), all of which shares shall
be cancelled), not to exceed 1,200,000 shares of DarkHorse Common Stock in the
aggregate, shall, by virtue of the Merger and without any action on the part of
the holder thereof, thereupon be converted into and become, in exchange for each
share of DarkHorse Common Stock, one (1) share (the "Exchange Ratio") of Tanisys
common stock, no par value per share (the "Tanisys Common Stock"), with any
excess shares of DarkHorse Common Stock resulting in a reduction in the per-
share Exchange Ratio. In the event that DarkHorse has less than 1,200,000
shares of DarkHorse Common Stock outstanding on the Effective Date of the
Merger, the Exchange Ratio shall be proportionally increased. Each share of
DarkHorse Common Stock held in the treasury of DarkHorse or by a wholly-owned
subsidiary of DarkHorse shall be cancelled as of the Effective Date of the
Merger, and no portion of the Merger Consideration (as hereinafter defined)
shall be payable with respect thereto. As used in these Articles of Merger,
"Merger Consideration" shall mean the aggregate of 1,200,000 shares of Tanisys
Common Stock exchanged for DarkHorse Common Stock in the Merger at the Exchange
Ratio. The Merger Consideration shall be reduced by the amount otherwise
payable or issuable to holders of DarkHorse who exercise dissenters' rights in
connection with the Merger based upon such shareholders' ownership of DarkHorse
Common Stock outstanding on the Effective Date of the Merger. The Exchange
Ratio shall be subject to appropriate adjustment in
3
<PAGE>
the event of a stock split, stock dividend or recapitalization subsequent to
the date of the Agreement applicable to shares of DarkHorse Common Stock or
Tanisys Common Stock held of record on or before the Effective Date of the
Merger. "DarkHorse Appraisal Shares" are those shares of DarkHorse Common
Stock as to which shareholders have properly exercised and perfected their
right to dissent and to receive the fair value thereof in accordance with
Articles 5.11, 5.12 and 5.13 of the Texas Act.
4.2. After the Effective Date of the Merger, each holder of record of an
outstanding certificate or certificates representing shares of DarkHorse Common
Stock shall surrender such certificate or certificates to Tanisys or to such
agent or agents as shall be appointed by Tanisys (the "Exchange Agent") and
shall be entitled to receive in exchange therefor (except to the extent such
certificate or certificates represent DarkHorse Appraisal Shares) a certificate
or certificates representing the number of whole shares of Tanisys Common Stock
into which the shares of DarkHorse Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been converted, together
with a check representing the cash adjustments for fractional shares, if any.
Except as otherwise provided herein, each share of DarkHorse Common Stock issued
and outstanding immediately prior to the Effective Date of the Merger shall on
and after the Effective Date of the Merger be deemed for all corporate purposes
to evidence ownership of the number of shares of Tanisys Common Stock into which
such shares have been converted. Until certificates representing shares of
DarkHorse Common Stock shall be surrendered and exchanged for certificates
representing shares of Tanisys Common Stock, no dividend or other distributions,
if any, payable to holders of record of Tanisys Common Stock as of any date
subsequent to the Effective Date of the Merger shall be paid to the holders of
such outstanding certificates of DarkHorse Common Stock. Holders of
unsurrendered certificates for shares of DarkHorse Common Stock shall not be
entitled to vote until such unsurrendered certificates for shares of DarkHorse
Common Stock are exchanged pursuant to this Section 4.2. Upon surrender and
exchange of such outstanding certificates of DarkHorse Common Stock and subject
to the effect, if any, of applicable law, there shall be paid to the record
holders of the certificates issued in exchange therefor, the amount, without
interest thereon, of dividends and other distributions, if any, which has become
payable after the Effective Date of the Merger with respect to the number of
whole shares of Tanisys Common Stock represented thereby. Immediately prior to
the Effective Date of the Merger, all outstanding stock options or rights to
purchase DarkHorse Common Stock, if any, shall be surrendered by the respective
holders thereof and shall terminate and be cancelled and shall have no further
force and effect whatsoever.
4.3. Tanisys shall not be required to issue, and no certificates shall be
issued, for a fraction of a share of Tanisys Common Stock to any shareholder of
Tanisys in respect of fractional interests, but in lieu thereof each such holder
of shares of Tanisys Common Stock who would otherwise have been entitled to a
fraction of a share of Tanisys Common Stock, upon compliance with Section 4.2
hereof, shall be paid cash equal to such fraction multiplied by the average of
the per-share closing prices of Tanisys Common Stock on the Vancouver Stock
Exchange for the twenty (20) trading days immediately preceding the date that is
ten (10) days prior to the Effective Date of the Merger, subject to appropriate
adjustment in the event of a stock split, stock dividend or recapitalization
applicable to shares of Tanisys Common Stock held
4
<PAGE>
of record on or before the Effective Date of the Merger to the extent not
reflected in such sales prices.
4.4. If any certificate evidencing shares of Tanisys Common Stock is to be
issued in a name other than that in which the DarkHorse certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange pay to Tanisys or the Exchange Agent any transfer or other taxes
required by reason of the issuance of a certificate for shares of Tanisys Common
Stock in any name other than that of the registered holder of the certificate
surrendered or establish to the satisfaction of Tanisys or the Exchange Agent
that such tax has been paid or is not payable.
4.5. Tanisys may, without notice to any person, terminate all exchange
agencies after thirty (30) days following the Effective Date of the Merger, and
thereafter all exchanges, payments and notices provided for in these Articles of
Merger as being made to or by the Exchange Agent shall be made to or by Tanisys
or its transfer agent.
4.6. The holder of a certificate or certificates representing shares of
DarkHorse Common Stock issued and outstanding immediately prior to the Effective
Date of the Merger shall have no rights with respect to such shares other than
to exercise and perfect their right to dissent to the Merger and to receive the
fair value of such shares in the manner provided by Articles 5.11, 5.12 and 5.13
of the Texas Act or surrender such certificate or certificates pursuant to
Section 4.2 hereof. The holder of a certificate or certificates representing
shares of the Tanisys Acquisition II Common Stock issued and outstanding prior
to the Effective Date of the Merger shall have no rights with respect to such
shares other than to exercise and perfect their right to dissent to the Merger
and to receive the fair value of such shares in the manner provided by Article
262 of the Delaware Act.
4.7. If the holder of any shares of DarkHorse Common Stock issued and
outstanding immediately prior to the Effective Date of the Merger shall become
entitled to receive payment for such shares in accordance with the applicable
provisions of Articles 5.11, 5.12 and 5.13 of the Texas Act, then such payment
shall be in lieu of the conversion provided in Section 4.1 hereof and shall be
made by the Surviving Corporation. DarkHorse shall give Tanisys Acquisition II
and Tanisys prompt notice upon receipt of any written objections to the Merger
or claims of appraisal rights and shall not without prior written consent of
Tanisys Acquisition II and Tanisys make any payment with respect to, or settle
or offer to settle, any such objection or claim. If the holder of any shares of
Tanisys Common Stock issued and outstanding immediately prior to the Effective
Date of the Merger shall become entitled to receive payment for such shares in
accordance with the applicable provisions of Article 262 of the Delaware Act,
then such payment shall be made by the Surviving Corporation.
5
<PAGE>
ARTICLE 5.
Rights and Duties of Tanisys Acquisition II as the Surviving Corporation
5.1. On the Effective Date of the Merger, the separate existence of
DarkHorse shall cease for all purposes, and DarkHorse shall be merged with and
into Tanisys Acquisition II, which, as the Surviving Corporation, shall
thereupon and thereafter possess all of the rights, privileges, immunities,
powers and franchises of a public as well as of a private nature, and shall be
subject to all the restrictions, liabilities, obligations, disabilities and
duties of each of the Constituent Corporations so merged; and all and singular,
the rights, privileges, immunities, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed and all
debts due to any of the Constituent Corporations on whatever account, including
stock subscriptions and all other choses in action, and all and every other
interest of or belonging to or due to each of such Constituent Corporations
shall be taken and deemed to be transferred to and vested in the Surviving
Corporation without further act or deed. The title to any real estate vested by
deed or otherwise, in either of the Constituent Corporations, shall not revert
or be in any way impaired by reason of the Merger.
5.2. On the Effective Date of the Merger, the Surviving Corporation shall
also be responsible and liable and subject to all restrictions, liabilities,
obligations, disabilities and duties of each Constituent Corporation; and any
claim existing or action or proceeding pending by or against any of the
Constituent Corporations may be prosecuted as if the Merger had not taken place
or the Surviving Corporation had been substituted in its place. Neither the
rights of creditors nor any liens upon the property of any of the Constituent
Corporations shall be impaired by the Merger, and such rights and liens shall
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if the Merger had not taken place. If at any time the Surviving
Corporation shall consider or be advised that any further assignment or
assurances in law or any things are necessary or desirable to vest in the
Surviving Corporation, according to the terms hereof, the title of any property
or rights of DarkHorse, the last acting officers and directors of DarkHorse, as
the case may be, or the corresponding officers and directors of the Surviving
Corporation shall and will execute and make all such proper assignments and
assurances and do all things necessary or proper to vest title in such property
or rights in the Surviving Corporation, and otherwise to carry out the purposes
of the Agreement and these Articles of Merger.
ARTICLE 6.
Effective Date
As used in these Articles of Merger, the term "Effective Date of the
Merger" shall mean the latter of the issuance of a Certificate of Merger by the
Secretary of State of the State of Texas or the issuance of a Certificate of
Merger by the Secretary of State of the State of Delaware in accordance with the
Texas Act and Delaware Act, respectively.
6
<PAGE>
ARTICLE 7.
Counterparts
These Articles of Merger may be executed in any number of counterparts,
each of which shall be deemed an original, and all of such counterparts together
shall constitute one and the same instrument.
ARTICLE 8.
Amendment
Subject to applicable law, these Articles of Merger may be amended,
modified or supplemented only by written agreement of Tanisys Acquisition II and
DarkHorse, duly authorized by each of their respective Boards of Directors, at
any time prior to the Effective Date of the Merger; provided, however, that,
after the adoption of the Agreement and these Articles of Merger by the
shareholders of Tanisys Acquisition II and DarkHorse, no such amendment,
modification or supplement shall reduce the amount or change the form of the
consideration to be paid to the shareholders of DarkHorse in accordance with
Article 4 hereof.
ARTICLE 9.
Voting
The common stock of each Constituent Corporation is the only class of
shares entitled to vote on the proposed Merger. As to each Constituent
Corporation, the approval of whose shareholders is required, the designation and
total number of shares outstanding and entitled to vote for or against the
Merger, and the number of shares of each Constituent Corporation voted for or
against the Merger, respectively, are as follows:
Number of Shares
Number of ------------------
Name of Designation of Common Total Total
Constituent Class Entitled Shares Out- Voted Voted
Corporation to Vote standing For Against
- - ----------- -------------- ----------- -------- -------
Tanisys Acquisition
Corp. II Common Stock 10,000 10,000 -0-
DarkHorse
Systems, Inc. Common Stock 1,200,000 1,200,000 -0-
7
<PAGE>
ARTICLE 10.
Authorization of Merger
The Agreement and these Articles of Merger and the performance of their
terms were duly authorized by all action required by the laws under which each
of Tanisys Acquisition II, DarkHorse and Tanisys are incorporated and by their
respective constituent documents.
TANISYS ACQUISITION CORP. II
a Delaware corporation
ATTEST:
By: /s/ KEITH D. THATCHER
--------------------------------
/s/ LYNNE REILLY Name: Keith D. Thatcher
- - ---------------------------- ------------------------------
Secretary Title: Vice Preident and CFO
-----------------------------
DARKHORSE SYSTEMS, INC.
a Texas corporation
ATTEST:
By: /s/ GARY W. PANKONIEN
--------------------------------
/s/ ARCHER LAWRENCE Name: Gary W. Pankonien
- - ---------------------------- ------------------------------
Secretary Title: Chairman and CEO
-----------------------------
TANISYS TECHNOLOGY, INC.
a Wyoming corporation
ATTEST:
By: /s/ KEITH D. THATCHER
--------------------------------
/s/ LYNNE REILLY Name: Keith D. Thatcher
- - ---------------------------- ------------------------------
Assistant Secretary Title: Vice President and CFO
-----------------------------
8
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective the 15th day of February, 1994,
by and between ROSETTA TECHNOLOGIES INC., a Wyoming corporation, with principal
offices located at 1310 Ranch Road 620 South, Suite B195, Austin, Texas
78734-6342 (hereinafter referred to as the "Employer"), and MARK C. HOLLIDAY, a
resident of Austin, Texas (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Employer desires to employ the Employee, and the Employee and
Employer desire to enter into an agreement relating to such employment,
outlining the duties and obligations of each:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, it is agreed as follows:
1. EMPLOYMENT. The Employer agrees to employ the Employee, and the
Employee agrees to be employed by the Employer, subject to the terms and
conditions set forth herein.
2. TERM. Subject to the provisions hereof, the term of the Employee's
employment by the Employer under this Agreement shall expire on February 14,
1995; provided that such term of employment shall continue thereafter unless
and until terminated by either the Employer or the Employee upon no less than
one hundred twenty (120) days' prior written notice to the other of the
desire to terminate such employment. The term of the Employee's employment
hereunder, including any continuation of the original term, is hereinafter
referred to as the "Employment Period."
3. POSITION AND DUTIES. During the Employment Period, the Employee shall
serve as President and Chief Executive Officer of the Employer with such
assignments, powers and duties as are assigned or delegated to him by the Board
of Directors of the Employer. Such assignments, powers and duties may, from
time to time, be modified by the Employer, as the
<PAGE>
Employer's needs may require. The Employee shall also, at the request of the
Employer, perform similar services for any Affiliate (as hereinafter defined)
of the Employer without additional compensation. The Employee agrees to
devote all of his business time, skill, attention and best efforts to the
business of the Employer and its Affiliates in the advancement of the best
interests of the Employer and its Affiliates. As used in this Agreement, the
term "Affiliate" of the Employer means any person or corporation that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under the control of the Employer.
4. COMPENSATION.
A. For all services rendered by the Employee to the Employer during
the Employment Period, the Employer shall pay the Employee a salary at the
rate of One Hundred Thousand Dollars ($100,000) annually. The compensation
is to be payable, subject to such withholdings as are required by law, in
installments in accordance with the Employer's customary payroll practices.
B. The Employer will grant to the Employee an option to purchase Two
Hundred Thousand (200,000) shares of its common stock (the "Option") at an
option price determined by the policies, guidelines, rules and regulations of
the Vancouver Stock Exchange. One third of the Option shall vest on each of
the first, second and third anniversaries of the date of grant and shall
expire five (5) years from the date of grant. In the event of a "change of
control" (defined as ownership of more than 40% of the combined voting power
of the Employer's then outstanding securities by a "Person," as used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
of the Employer, the Option shall become fully vested and exercisable.
C. On approximately September 1, 1994, the Chairman of the Board of
Directors of the Employer will review the Employer's operations and the
Employee's performance since February 15, 1994 and from such review will
determine the Employee's eligibility for a bonus of up to Twenty Thousand
Dollars ($20,000) and additional stock options for up to One Hundred
2
<PAGE>
Thousand (100,000) shares of the Employer's common stock. The awarding and
amount of the bonus and the granting of additional stock options shall be
subject to approval of the Board of Directors of the Employer and the
Vancouver Stock Exchange.
5. OFFICE FACILITIES. During the Employment Period, the Employer will
furnish the Employee, without charge, suitable office facilities for the
purpose of performing his duties hereunder, which facilities shall include
secretarial, telephone, clerical and support personnel and services and shall
be similar to those furnished to employees of the Employer having comparable
positions.
6. FRINGE BENEFITS; VACATIONS. During the Employment Period, the
Employee shall be entitled to participate in or receive benefits under such
pension, medical and life insurance and other employee benefit plans of the
Employer which may be in effect from time to time, to the extent he is
eligible under the terms of those plans, on the same basis as other employees
of the Employer having comparable positions. The Employee shall be entitled
to vacations with pay in accordance with the policies of the Employer in
effect from time to time.
7. EXPENSES. Subject to such policies regarding expenses and expense
reimbursement as may be adopted from time to time by the Employer and
compliance therewith by the Employee, the Employee is authorized to incur
reasonable expenses in the performance of his duties hereunder, and the
Employer will reimburse Employee for such reasonable out-of-pocket expenses
upon the presentation by the Employee of an itemized account and receipts
satisfactory to the Employer.
8. TERMINATION.
A. If the Employee dies or becomes disabled during the Employment
Period, the Employee's salary and other rights under this Agreement or as an
employee of the Employer (except for salary and other rights accrued prior
thereto) shall terminate at the end of the month during which death or
disability occurs. For purposes of this Agreement, the Employee shall be
deemed to be "disabled" if, at any time during the Employment Period, the
Employee shall have
3
<PAGE>
been unable to perform the duties of his employment hereunder due to physical
or mental incapacity for a period of ninety (90) days or any ninety (90) days
in a period of two hundred seventy (270) days.
B. If the Employee fails to perform his duties hereunder or to
comply with any of the provisions hereof or commits any act of misconduct,
malfeasance, gross negligence or disloyalty, the Employment Period and the
Employee's salary and other rights under this Agreement as an employee of the
Employer, subject to 8C below, shall terminate upon written notice from the
Employer to the Employee, but such termination shall not affect the liability
of the Employee by reason of his misconduct, malfeasance, gross negligence or
disloyalty.
C. If it is determined that the Employer has terminated the Employee
without cause as determined in accordance with Section 8B above, the Employee
will not be subject to the provisions of Section 10, COVENANT NOT TO COMPETE,
herein.
9. COVENANTS NOT TO DISCLOSE. The Employee covenants and agrees that he
will not, at any time during or after the termination of his employment by
the Employer, communicate or disclose to any person, or use for his own
account, or advise, discuss with, or in any way assist any other person or
firm in obtaining or learning about, without the prior written consent of the
Employer, information concerning any inventions, processes, programs,
systems, flow charts or equipment used in, or any secret or confidential
information (including, without limitation, any customer lists or trade
secrets) concerning, the business and affairs of the Employer or any of its
Affiliates acquired by the Employee during the term of his employment by the
Employer. The Employee further covenants and agrees that he shall retain all
such knowledge and information concerning the foregoing in trust for the sole
benefit of the Employer and its Affiliates and their respective successors
and assigns.
10. COVENANT NOT TO COMPETE. The Employee covenants and agrees that,
during the Employment Period and for a period of one (1) year after the
voluntary resignation of the Employee or termination for cause as outlined in
8B herein, he will not directly render services
4
<PAGE>
or advice to, or be engaged in a business during such one-year period which
is in competition with the business of the Employer except in the course of
his employment hereunder or except upon the written consent of the Employer.
11. ESSENTIAL NATURE OF COVENANTS. The covenants of the Employee
contained in Sections 9 and 10 shall be construed as independent of any other
provision of this Agreement; and the existence of any claim or cause of
action of the Employee against the Employer or any of its subsidiaries,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Employer of said covenants. The Employee
understands that the covenants contained in Sections 9 and 10 are essential
elements of the transactions contemplated by this Agreement and, but for the
agreement of the Employee to Sections 9 and 10, the Employer would not have
agreed to enter into such transactions.
12. REMEDIES. In the event of a breach or threatened breach by the
Employee of Section 9 or 10, the Employer shall be entitled to a temporary
restraining order and an injunction restraining the Employee from the
commission of such breach. Nothing herein contained shall be construed as
prohibiting the Employer from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of money damages.
13. WAIVER OF BREACH. The waiver by one party of a breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
14. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors,
assigns, heirs and legal representatives. Insofar as the Employee is
concerned, this Agreement, being personal, cannot be assigned.
15. SEVERABILITY. The invalidity of all or any part of any section of
this Agreement shall not render invalid the remainder of this Agreement or
the remainder of such section. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only
so broad as is enforceable.
5
<PAGE>
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall, when executed, be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
17. GOVERNING LAW. This Agreement shall be construed (both as to validity
and performance) and enforced in accordance with and governed by the laws of
the State of Texas.
18. NOTICE. All Notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given
when delivered in person or three (3) days after being mailed by registered
or certified first-class mail, postage prepaid, return receipt requested, if
to the Employee at 722 Bermuda, Austin, Texas 78734, or if to the Employer,
at the address listed above, or to such other address as such party shall
have specified by notice to the other party hereto as provided in this
section.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and date first above written.
ROSETTA TECHNOLOGIES INC.
By: /s/ PARRIS H. HOLMES, JR.
____________________________
Parris H. Holmes, Jr.
Chairman
/s/ MARK C. HOLLIDAY
________________________________
MARK C. HOLLIDAY
6
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective the 18th day of April, 1994, by
and between ROSETTA TECHNOLOGIES INC., a Wyoming corporation, with principal
offices located at 1310 Ranch Road 620 South, Suite B195, Austin, Texas
78734-6342 (hereinafter referred to as the "Employer"), and BENJAMIN S. MARZ, a
resident of Austin, Texas (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Employer desires to employ the Employee, and the Employee and
Employer desire to enter into an agreement relating to such employment,
outlining the duties and obligations of each:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, it is agreed as follows:
1. EMPLOYMENT. The Employer agrees to employ the Employee, and the
Employee agrees to be employed by the Employer, subject to the terms and
conditions set forth herein.
2. TERM. Subject to the provisions hereof, the term of the Employee's
employment by the Employer under this Agreement shall expire May 9, 1995;
provided that such term of employment shall continue thereafter unless and until
terminated by either the Employer or the Employee upon no less than one hundred
twenty (120) days' prior written notice to the other of the desire to terminate
such employment. The Employee is entitled to severance equal to the average
monthly cash compensation (base salary and commissions) for the 120-day period.
The term of the Employee's employment hereunder, including any continuation of
the original term, is hereinafter referred to as the "Employment Period."
3. POSITION AND DUTIES. During the Employment Period, the Employee shall
serve as Vice President of Sales of the Employer with such assignments, powers
and duties as are assigned or delegated to him by the President of the Employer.
Such assignments, powers and duties may, from time to time, be modified by the
Employer, as the Employer's needs may
<PAGE>
require. The Employee shall also, at the request of the Employer, perform
similar services for any Affiliate (as hereinafter defined) of the Employer
without additional compensation. The Employee agrees to devote all of his
business time, skill, attention and best efforts to the business of the
Employer and its Affiliates in the advancement of the best interests of the
Employer and its Affiliates. As used in this Agreement, the term "Affiliate"
of the Employer means any person or corporation that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
the control of the Employer.
4. COMPENSATION.
A. For all services rendered by the Employee to the Employer during
the Employment Period, the Employer shall pay the Employee a salary at the rate
of Fifty-one Thousand Dollars ($51,000) per year. The compensation is to be
payable, subject to such withholdings as are required by law, in installments in
accordance with the Employer's customary payroll practices. Additionally, non-
refundable sales draws will be extended for six months equal to $4,250 per
month. After the initial six months, as new product is introduced, a mutually
agreeable commission structure will be established using the first 6 months as a
basis for the new plan, but without regard to minimum commission income if
adequate salable product exists.
B. The Employer will grant to the Employee an option to purchase
100,000 shares of its common stock at an option price determined by the
policies, guidelines, rules and regulations of the Vancouver Stock Exchange.
One fourth of such option shall vest on each of the four anniversaries of the
date of grant and shall expire seven (7) years from the date of grant. Given
40% or more of the company changes hands to one entity, all options vest at the
time of acquisition.
5. OFFICE FACILITIES. During the Employment Period, the Employer will
furnish the Employee, without charge, suitable office facilities for the purpose
of performing his duties hereunder, which facilities shall include secretarial,
telephone, clerical and support personnel and
2
<PAGE>
services and shall be similar to those furnished to employees of the Employer
having comparable positions.
6. FRINGE BENEFITS; VACATIONS. During the Employment Period, the
Employee shall be entitled to participate in or receive benefits under such
pension, medical and life insurance and other employee benefit plans of the
Employer which may be in effect from time to time, to the extent he is eligible
under the terms of those plans, on the same basis as other employees of the
Employer having comparable positions. The Employee shall be entitled to
vacations with pay in accordance with the policies of the Employer in effect
from time to time.
7. EXPENSES. Subject to such policies regarding expenses and expense
reimbursement as may be adopted from time to time by the Employer and compliance
therewith by the Employee, the Employee is authorized to incur reasonable
expenses in the performance of his duties hereunder, and the Employer will
reimburse the Employee for such reasonable out-of-pocket expenses upon the
presentation by the Employee of an itemized account and receipts satisfactory to
the Employer.
8. TERMINATION.
A. If the Employee dies or becomes disabled during the Employment
Period, the Employee's salary and other rights under this Agreement or as an
employee of the Employer (except for salary and other rights accrued prior
thereto) shall terminate within 120 days from the end of the month during which
death or disability occurs. For purposes of this Agreement, the Employee shall
be deemed to be "disabled" if, at any time during the Employment Period, the
Employee shall have been unable to perform the duties of his employment
hereunder due to physical or mental incapacity for a period of ninety (90) days
or any ninety (90) days in a period of two hundred seventy (270) days.
B. If the Employee fails to perform his duties hereunder or to
comply with any of the provisions hereof or commits any act of malfeasance,
convicted felony, theft, gross negligence or violation of any company policy,
the Employment Period and the Employee's salary and other rights under this
Agreement as an employee of the Employer, subject to 8C
3
<PAGE>
below, shall terminate upon written notice from the Employer to the Employee,
but such termination shall not affect the liability of the Employee by reason
of his misconduct, malfeasance, gross negligence or disloyalty.
C. If it is determined that the Employer has terminated the Employee
without cause as determined in accordance with Section 8B above, the Employee
will not be subject to the provisions of Section 10, COVENANT NOT TO COMPETE,
herein.
9. COVENANTS NOT TO DISCLOSE. The Employee covenants and agrees that he
will not, at any time during or after the termination of his employment by the
Employer, communicate or disclose to any person, or use for his own account, or
advise, discuss with, or in any way assist any other person or firm in obtaining
or learning about, without the prior written consent of the Employer,
information concerning any inventions, processes, programs, systems, flow charts
or equipment used in, or any secret or confidential information (including,
without limitation, any customer lists or trade secrets) concerning, the
business and affairs of the Employer or any of its Affiliates acquired by the
Employee during the term of his employment by the Employer. The Employee
further covenants and agrees that he shall retain all such knowledge and
information concerning the foregoing in trust for the sole benefit of the
Employer and its Affiliates and their respective successors and assigns.
10. COVENANT NOT TO COMPETE. The Employee covenants and agrees that,
during the Employment Period and for a period of one (1) year after the
voluntary resignation of the Employee or termination for cause as outlined in 8B
herein, he will not directly render services or advice to, or be engaged in a
business during such one-year period, where said business's primary products are
in direct competition with the primary products or services of the Employer,
except in the course of his employment hereunder or except upon the written
consent of the Employer.
11. ESSENTIAL NATURE OF COVENANTS. The covenants of the Employee
contained in Sections 9 and 10 shall be construed as independent of any other
provision of this Agreement; and the existence of any claim or cause of action
of the Employee against the Employer or any of
4
<PAGE>
its subsidiaries, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Employer of said covenants. The
Employee understands that the covenants contained in Sections 9 and 10 are
essential elements of the transactions contemplated by this Agreement and, but
for the agreement of the Employee to Sections 9 and 10, the Employer would not
have agreed to enter into such transactions.
12. REMEDIES. In the event of a breach or threatened breach by the
Employee of Section 9 or 10, the Employer shall be entitled to a temporary
restraining order and an injunction restraining the Employee from the commission
of such breach. Nothing herein contained shall be construed as prohibiting the
Employer from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of money damages.
13. WAIVER OF BREACH. The waiver by one party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by the other party.
14. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors,
assigns, heirs and legal representatives. Insofar as the Employee is concerned,
this Agreement, being personal, cannot be assigned.
15. SEVERABILITY. The invalidity of all or any part of any section of
this Agreement shall not render invalid the remainder of this Agreement or the
remainder of such section. If any provision of this Agreement is so broad as to
be unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall, when executed, be deemed to be an original,
but all of which together shall constitute one and the same instrument.
17. GOVERNING LAW. This Agreement shall be construed (both as to validity
and performance) and enforced in accordance with and governed by the laws of the
State of Texas.
18. NOTICE. All Notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered in person or
5
<PAGE>
three (3) days after being mailed by registered or certified first-class mail,
postage prepaid, return receipt requested, if to the Employee at 4801 Greystone
Drive, Austin, Texas 78731, or if to the Employer, at the address listed above,
or to such other address as such party shall have specified by notice to the
other party hereto as provided in this section.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and date first above written.
ROSETTA TECHNOLOGIES INC.
By: /S/ MARK C. HOLLIDAY
--------------------------------
Name:
------------------------------
Title:
-----------------------------
/s/ BENJAMIN S. MARZ
- - -----------------------------------
BENJAMIN S. MARZ
6
<PAGE>
Exhibit 10.13
AMENDMENT NO. 1
TO CONSULTING CONTRACT
THIS AMENDMENT NO. 1 is made to that Consulting Contract dated the 3rd
day of October, 1994, by and between TANISYS TECHNOLOGY, INC., of
1310 RR 620 South, Suite B195, Austin, Texas 78734 (the "Company"), and
PARRIS H. HOLMES, JR., of 9311 San Pedro, Suite 300, San Antonio, Texas 78216
(the "Consultant"). The Consulting Contract is hereby amended by substituting
the following paragraph for 3.1:
3.1 The Company shall pay to the Consultant Eight Thousand
and No/100 Dollars ($8,000) per month during the term
of this Contract with the first $8,00000 payment due
and payable July 1, 1995 and continuing each month
thereafter until May 1, 1996, at which time the monthly
payments shall be reduced to Three Thousand and No/100
Dollars ($3,000.00) per month with the final payment
being June 1, 1996.
All of the terms and conditions of the Consulting Contract are hereby
ratified in their entirety.
IN WITNESS WHEREOF, the parties have executed this Amendment NO. 1 to the
Consulting Contract on this 22nd day of June, 1995.
TANISYS TECHNOLOGY, INC.
By: /s/ MARK C. HOLLIDAY
---------------------------
Chairman and CEO
/s/ PARRIS H. HOLMES, JR.
------------------------------
PARRIS H. HOLMES, JR.
<PAGE>
CONSULTING CONTRACT
THIS AGREEMENT is made as of the 3rd day of October, 1994.
BETWEEN:
TANISYS TECHNOLOGY, INC., of 1310 RR620 South,
Suite B195, Austin, Texas 78734;
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
PARRIS H. HOLMES, JR., of 9311 San Pedro, Suite 300, San Antonio,
Texas 78216.
(hereinafter referred to as the "Consultant")
OF THE SECOND PART
WHEREAS:
A. The Company wishes to contract for the services of the Consultant; and
B. The Consultant has agreed to accept such contract for services upon the
terms and conditions as hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the mutual
covenants herein contained, the parties agree as follows:
1. ENGAGEMENT
1.1 Appointment: The Company hereby contracts for the services of the
Consultant and the Consultant hereby agrees to perform services for the Company
in accordance with the terms and conditions of this Agreement.
1.2 SCOPE OF DUTIES: The Consultant shall have the following
responsibilities and duties:
(a) to generally assist and report to the President of the Company in
regard to financial planning, capital structure and generally
developing corporate strategy.
<PAGE>
1.3 BEST EFFORTS: The Consultant shall at all times use his best efforts
to advance the interest of the Company and shall faithfully, industriously and
to the best of his abilities, perform the responsibilities and duties described
above.
2. TERM
2.1 INITIAL TERM: This Agreement shall commence on the date first written
above, continuing until March 31, 1996 and subject to earlier termination as
hereinafter provided.
3. REMUNERATION
3.1 The Company shall pay to the Consultant five thousand dollars ($5,000) per
month during the term of this Agreement within the first payment due and payable
October 1, 1994 and continuing each month thereafter.
3.2 The parties agree that the payment provided for in paragraph 3.1 hereof
does not include reimbursement for all expenses incurred by the Consultant in
connection with his duties hereunder, and the Company shall pay the cost of his
expenses, including any reasonable travel expenses and other specific expenses
incurred by the Consultant which shall be reimbursed by the Company within
fifteen (15) days of its receipt of an invoice from the Consultant
4. CONFIDENTIALITY
4.1 NON-DISCLOSURE: The Consultant shall not, either during the course of
his engagement hereunder or at any time thereafter, disclose to any person,
other than the Directors of the Company or the Company's professional advisors,
any confidential information concerning the business or affairs of the Company,
or its subsidiaries, which the Consultant may have acquired in the course of or
incidental to his appointment hereunder or otherwise, and the Consultant shall
not directly or indirectly use (whether for his own benefit or the detriment or
intended detriment of the Company) any confidential information he may acquire
with respect to the business and affairs of the Company, or its subsidiaries.
5. TERMINATION
5.1 TERMINATION BY THE COMPANY FOR CAUSE: The Company may terminate this
Agreement at any time for just cause, provided that a reasonable written notice
of three business days shall have been first given by the Company to the
Consultant.
5.2 TERMINATION BY THE CONSULTANT: The Consultant may terminate this
Agreement for just cause at any time without notice to the Company, or without
just cause by provide 30 day's notice in writing to the Company.
5.3 DEFINITION OF JUST CAUSE: In this Agreement, in addition to any cause
permitted by law, "just cause" includes:
3
<PAGE>
(a) the Consultant's or the Company's gross default, misconduct, breach of
non-observance of any stipulation contained herein;
(b) the dissolution, insolvency or the bankruptcy of the Consultant or the
Company.
For the purposes of this Agreement, a bankruptcy of the Consultant shall be
deemed to occur when the Consultant files a petition on the Company in
bankruptcy, or voluntarily takes advantage of any bankruptcy or insolvency law,
or is adjudicated a bankrupt, or if a petition is filed proposed the
adjudication of the Consultant as a bankrupt and the Consultant either consents
to the filing thereof or such petition is not discharged or denied prior to the
expiration of 60 days from the date of such filing. For the purposes of this
Agreement, the insolvency of the Consultant shall be deemed to occur when such
Consultant's assets are insufficient to pay any of his liabilities as they come
due and the Consultant shall so admit by action or notice to the Company.
6. OTHER PROVISIONS
6.1 GOVERNING LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas. Notwithstanding the foregoing,
it is agreed that the Consultant may commence an action in respect of the
enforcement of his rights hereunder in any jurisdiction in which the Company
carries on business, has an office or has assets.
6.2 NOTICE: Any notice required or permitted to be given under this
Agreement shall be in writing and may be delivered personally or by telex or
telecopier, or by prepaid registered post addressed to the parties at the above-
mentioned addresses or at such other address of which notice may be given by
either of such parties. Any notice shall be deemed to have been received, if
personally delivered or by telex or telecopier, on the date of delivery and, if
mailed as aforesaid, then on the seventh business day after and excluding the
day of mailing.
6.3 INDEMNITY: The Consultant shall indemnify the Company and save it
harmless from and against any and all claims, actions, damages, liabilities and
expenses arising out of or in connection with a breach of any kind by the
Consultant of any provisions, covenants, conditions and warranties contained in
this Agreement, or any other matter arising whatsoever out of this Agreement.
6.4 This Agreement supersedes any previous agreement, arrangement or
understanding, whether written or oral between the parties hereto.
6.5 The Consultant is an independent contractor, and notwithstanding anything
contained herein to the contrary, this Agreement does not create and is not
intended to create a relation of master-servant between the parties hereto.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.
4
<PAGE>
TANISYS TECHNOLOGY, INC.
By: /s/ MARK C. HOLLIDAY
--------------------------------------
Chairman & Chief Executive Officer
By: /s/ PARRIS H. HOLMES, JR.
--------------------------------------
9311 San Pedro, Suite 300
San Antonio, Texas 78216
5
<PAGE>
Exhibit 10-14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective the 20th day of May, 1996, by
and between TANISYS TECHNOLOGY, INC., a Wyoming corporation, with principal
offices located at 1310 Ranch Road 620 South, Suite B195, Austin, Texas 78734-
6342 (hereinafter referred to as the "Employer"), and GARY W. PANKONIEN, a
resident of Austin, Texas (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has been employed by 1st Tech Corporation, a Texas
corporation which has been merged with and into the Employer, and the Employee
and Employer desire to enter into an agreement relating to future employment of
the Employee, outlining the duties and obligations of each:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, it is agreed as follows:
1. EMPLOYMENT. The Employer agrees to employ the Employee, and the
Employee agrees to be employed by the Employer, subject to the terms and
conditions set forth herein.
2. TERM. Subject to the provisions hereof, the term of the Employee's
employment by the Employer under this Agreement shall be for a period of two (2)
years commencing on the date hereof. Subject to the mutual consent of the
Employer and the Employee, the term of this Agreement shall be automatically
extended on each anniversary of this Agreement for an additional one (1)-year
term unless, at least thirty (30) days prior to the end of the then effective
term, either party shall give the other party written notice of its/his election
to terminate this Agreement as of the end of the then effective term. The term
of the Employee's employment hereunder, including any renewal of the original
term, is hereinafter referred to as the "Employment Period."
3. POSITION AND DUTIES. During the Employment Period, the Employee shall
serve as President, Chief Operating Officer and a member of the Board of
Directors of the Employer, with
<PAGE>
such assignments, powers and duties as are assigned or delegated to him by the
Chief Executive Officer of the Employer (which is presently Mark C. Holliday).
Employee, or his Designee, will continue to serve as a member of the Board of
Directors notwithstanding that he may cease being an Employee of Employer as
long as he or his immediate family are the owners of no less than one million
(1,000,000) shares of the Common Stock of Employer of that amount of Common
Stock of Employer distributed to Employee at the closing of that Agreement and
Plan of Merger by and between Employer, Employee and 1st Tech Corporation. Such
assignments, powers and duties may, from time to time, be reasonably modified by
the Employer, as the Employer's needs may require. The Employee shall also, at
the request of the Employer, perform similar services for any Affiliate (as
hereinafter defined) of the Employer without additional compensation. The
Employee agrees to devote substantially all of his business time, skill,
attention and best efforts to the business of the Employer and its Affiliates in
the advancement of the best interests of the Employer and its Affiliates. As
used in this Agreement, the term "Affiliate" of the Employer means any person or
corporation that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under the control of the Employer. Employee
will primarily perform his duties in Austin, Texas, and will not be relocated by
Employer.
4. COMPENSATION.
A. For all services rendered by the Employee to the Employer during
the Employment Period, the Employer shall pay the Employee a salary at the rate
of One Hundred Twenty-five Thousand Dollars ($125,000) annually. The
compensation is to be payable, subject to such withholdings as are required by
law, in installments in accordance with the Employer's customary payroll
practices.
B. The Employee, in addition to the annual salary, will receive a
minimum bonus of Two Hundred Thousand Dollars ($200,000) payable pro rata on a
monthly basis during the first year of employment under this Agreement.
2
<PAGE>
C. The Employee will receive, in addition to the annual salary, a
minimum bonus of One Hundred Fifty Thousand Dollars ($150,000) payable pro rata
on a monthly basis during the second year of employment under this Agreement.
D. For subsequent years, Employer and Employee agree, in good faith,
to renegotiate salary, annual bonus and benefit options which shall be at a
minimum equal to those received by employees holding a similar position with
similar duties in comparable companies located in Texas.
E. In addition to the above bonus payments, Employee will be
entitled to receive other benefits awarded to officers and directors of Employer
such as, but not limited to, incentive or stock option programs, money purchase
pension plans, profit-sharing plans or other similar benefits.
5. OFFICE FACILITIES. During the Employment Period, the Employer will
furnish the Employee, without charge, suitable office facilities for the purpose
of performing his duties hereunder, which facilities shall include secretarial,
telephone, clerical and support personnel and services and shall be similar to
those furnished to employees of the Employer having comparable positions.
6. FRINGE BENEFITS; VACATIONS. During the Employment Period, the
Employee and Employee's family members shall be entitled to participate in or
receive benefits under such pension, medical and life insurance and other
employee benefit plans of the Employer which may be in effect from time to time,
to the extent he is eligible under the terms of those plans, on the same basis
as other employees of the Employer having comparable positions. The Employee
shall be entitled to three (3) weeks of vacation with pay annually and to all
holidays provided under Employer's regular holiday schedule. In addition, the
Employer will purchase and maintain in force during the term of this Agreement a
Two Million Dollar ($2,000,000) key-man term life insurance policy covering the
Employee, with the Employer as beneficiary. The Employer agrees to maintain in
force director and officer liability insurance during the term of this Agreement
in the amount of $1,000,000.
3
<PAGE>
7. EXPENSES. Subject to such policies regarding expenses and expense
reimbursement as may be adopted from time to time by the Employer and compliance
therewith by the Employee, the Employee is authorized to incur reasonable
expenses, including entertainment, travel, etc., in the performance of his
duties hereunder, and the Employer will reimburse Employee monthly for such
reasonable out-of-pocket expenses upon the presentation by the Employee of an
itemized account and receipts satisfactory to the Employer.
8. TERMINATION.
A. If the Employee dies or becomes disabled during the Employment
Period, the Employee's salary and other rights under this Agreement or as an
employee of the Employer (except for salary and other rights accrued prior
thereto; and except in the event of death or disability, Employer shall pay to
the estate or legal representative of Employee the salary and bonus salary, at
the annual rate then in effect, until the last to occur of the then scheduled
expiration of the term of this Agreement or the expiration of a period of one
hundred twenty (120) days following termination by death or disability) shall
terminate at the end of the month during which death or disability occurs. For
purposes of this Agreement, the Employee shall be deemed to be "disabled" if, at
any time during the Employment Period, the Employee shall have been unable to
perform the duties of his employment hereunder due to physical or mental
incapacity for a period of ninety (90) days or any ninety (90) days in a period
of two hundred seventy (270) days.
B. If the Employee fails to perform his duties hereunder or to
comply with any of the provisions hereof because he is guilty of willful and
gross neglect; gross negligence; committed an act evidencing dishonesty or fraud
or involving moral turpitude; committed an act or course of conduct which
constitutes a felony conviction under state or federal law; or is grossly
inattentive to the duties required in this Agreement, the Employment Period and
the Employee's salary and other rights under this Agreement as an employee of
the Employer, subject to 8D below, shall terminate for cause upon written notice
from the Employer to the Employee, but such termination shall not affect the
liability of the Employee by reason of these
4
<PAGE>
defined actions. Notwithstanding the above, Employer must give Employee written
notice of being grossly inattentive to the duties required under this Agreement
in sufficient detail to allow Employee the opportunity to cure the item of
default within five (5) working days or to initiate satisfactory curative action
within five (5) working days of receipt of the written notice if the curative
action will take more than five (5) days to implement.
C. If, during the initial two (20)-year employment period, the
employment relationship is terminated by Employer other than for "cause" as
defined above, Employee shall be entitled to his salary, bonus salary and other
benefits calculated for a twenty-four (24)-month period beginning with the first
day of the calendar month immediately following the month in which the
employment relationship was terminated, but to be no less than Three Hundred
Thousand Dollars ($300,000), and such amount shall be payable to Employee within
forty-five (45) days after termination date in cash or wired funds.
D. If it is determined that the Employer has terminated the Employee
without cause as determined in accordance with Section 8C above, the Employee
will not be subject to the provisions of Section 10, COVENANT NOT TO COMPETE,
herein.
9. COVENANTS NOT TO DISCLOSE. The Employee covenants and agrees that he
will not, other than in the ordinary course of business, at any time during or
for one (1) year after the termination of his employment by the Employer,
communicate or disclose to any person, or use for his own account, or advise,
discuss with, or in any way assist any other person or firm in obtaining or
learning about, without the prior written consent of the Employer, information
concerning any inventions, processes, programs, systems, flow charts or
equipment used in, or any secret or confidential information (including, without
limitation, any customer lists or trade secrets) concerning, the business and
affairs of the Employer or any of its Affiliates acquired by the Employee during
the term of his employment by the Employer. The Employee further covenants and
agrees that he shall retain all such knowledge and information concerning the
foregoing in trust for the sole benefit of the Employer and its Affiliates and
their respective successors and assigns.
5
<PAGE>
10. COVENANT NOT TO COMPETE. The Employee covenants and agrees that,
during the Employment Period and for a period of one (1) year after the
voluntary resignation of the Employee or termination for cause as outlined in 8B
herein, he will not directly render services or advice to, or be engaged in a
business during such one-year period which is in competition with the business
of the Employer in the geographic area of Employer's business, except in the
course of his employment hereunder or except upon the written consent of the
Employer.
11. ESSENTIAL NATURE OF COVENANTS. The covenants of the Employee
contained in Sections 9 and 10 shall be construed as independent of any other
provision of this Agreement; and the existence of any claim or cause of action
of the Employee against the Employer or any of its subsidiaries, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Employer of said covenants. The Employee understands that
the covenants contained in Sections 9 and 10 are essential elements of the
transactions contemplated by this Agreement and, but for the agreement of the
Employee to Sections 9 and 10, the Employer would not have agreed to enter into
such transactions.
12. REMEDIES. In the event of a breach or threatened breach by the
Employee of Section 9 or 10, the Employer shall be entitled to a temporary
restraining order and an injunction restraining the Employee from the commission
of such breach. Nothing herein contained shall be construed as prohibiting the
Employer from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of money damages.
13. WAIVER OF BREACH. The waiver by one party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by the other party.
14. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors,
assigns, heirs and legal representatives. Insofar as the Employee is concerned,
this Agreement, being personal, cannot be assigned.
15. SEVERABILITY. The invalidity of all or any part of any section of
this Agreement shall not render invalid the remainder of this Agreement or the
remainder of such section. If any
6
<PAGE>
provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall, when executed, be deemed to be an original,
but all of which together shall constitute one and the same instrument.
17. GOVERNING LAW. This Agreement shall be construed (both as to validity
and performance) and enforced in accordance with and governed by the laws of the
State of Texas.
18. NOTICE. All Notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered in person or three (3) days after being mailed by registered or
certified first-class mail, postage prepaid, return receipt requested, if to the
Employee at 3107 Toro Ring, Austin, Texas 78746, or if to the Employer, at the
address listed above, or to such other address as such party shall have
specified by notice to the other party hereto as provided in this section.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and date first above written.
TANISYS TECHNOLOGY, INC.
By: /s/ KEITH D. THATCHER
-----------------------------------------
Vice President and CFO
/s/ GARY W. PANKONIEN
-----------------------------------------
GARY W. PANKONIEN
7
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made effective the 11th day of July, 1996,
by and between TANISYS TECHNOLOGY, INC., a Wyoming corporation, with
principal offices located at 12201 Technology Boulevard, Suite l30, Austin,
Texas 78727 (hereinafter referred to as the "Employer"), and Joe Davis, a
resident of Monroe, Louisiana (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Employer desires to continue to employ the Employee, and the
Employee and Employer desire to enter into an agreement relating to such
employment, outlining the duties and obligations of each:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, it is agreed as follows:
1. EMPLOYMENT. The Employer agrees to employ the Employee, and the
Employee agrees to be employed by the Employer, subject to the terms and
conditions set forth herein.
2. TERM. Subject to the provisions hereof, the term of the Employee's
employment by the Employer under this Agreement shall expire July 11, 1997;
provided that such term of employment shall continue thereafter unless and until
terminated by either the Employer or the Employee upon no less than one hundred
twenty (120) days' prior written notice to the other of the desire to terminate
such employment. The term of the Employee's employment hereunder, including any
continuation of the original term, is hereinafter referred to as the "Employment
Period."
3. POSITION AND DUTIES. During the Employment Period, the Employee shall
serve as Chief Financial Officer of the Employer with such assignments, powers
and duties as are assigned or delegated to him by the President of the Employer.
Such assignments, powers and duties may, from time to time, be modified by the
Employer, as the Employer's needs may require. The Employee shall also, at the
request of the Employer, perform similar services for
<PAGE>
any Affiliate (as hereinafter defined) of the Employer without additional
compensation. The Employee agrees to devote all of his business time, skill,
attention and best efforts to the business of the Employer and its Affiliates
in the advancement of the best interests of the Employer and its Affiliates.
As used in this Agreement, the term "Affiliate" of the Employer means any
person or corporation that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under the control of the
Employer.
4. COMPENSATION.
A. For all services rendered by the Employee to the Employer during
the Employment Period, the Employer shall pay the Employee a salary at the rate
of $115,000 per year. The compensation is to be payable, subject to such
withholdings as are required by law, in installments in accordance with the
Employer's customary payroll practices.
B. The Employer will grant to the Employee an option to purchase
120,000 shares of its common stock at an option price determined by the
policies, guidelines, rules and regulations of the Vancouver Stock Exchange.
One third of such option shall vest on each of the first, second and third
anniversaries of the date of grant and shall expire five (5) years from the date
of grant.
5. OFFICE FACILITIES. During the Employment Period, the Employer will
furnish the Employee, without charge, suitable office facilities for the purpose
of performing his duties hereunder, which facilities shall include secretarial,
telephone, clerical and support personnel and services and shall be similar to
those furnished to employees of the Employer having comparable positions.
6. FRINGE BENEFITS; VACATIONS. During the Employment Period, the
Employee shall be entitled to participate in or receive benefits under such
pension, medical and life insurance and other employee benefit plans of the
Employer which may be in effect from time to time, to the extent he is eligible
under the terms of those plans, on the same basis as other employees of the
Employer having comparable positions.
7. EXPENSES.
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A. Subject to such policies regarding expenses and expense
reimbursement as may be adopted from time to time by the Employer and compliance
therewith by the Employee, the Employee is authorized to incur reasonable
expenses in the performance of his duties hereunder, and the Employer will
reimburse the Employee for such reasonable out-of-pocket expenses upon the
presentation by the Employee of an itemized account and receipts satisfactory to
the Employer.
B. The Employee will be reimbursed for the normal and reasonable
costs of moving personal effects from his current place of residence to the
Austin area.
C. The Employee will be reimbursed for the normal and reasonable
cost of selling his existing home in Monroe, Louisiana. Such reimbursement to
include closing costs including real estate brokerage fees. However, if the
Employee voluntarily resigns prior to 12 months of employment, the Employee will
be responsible for returning all or part of the reimbursement described in 7C as
follows:
% OF REIMBURSEMENT RETURNED
BY EMPLOYEE:
Voluntary resignation in less than 6 months 100%
Voluntary resignation in less than 9 months 75%
Voluntary resignation in less than 12 months 50%
8. TERMINATION.
A. If the Employee dies or becomes disabled during the Employment
Period, the Employee's salary and other rights under this Agreement or as an
employee of the Employer (except for salary and other rights accrued prior
thereto) shall terminate at the end of the month during which death or
disability occurs. For purposes of this Agreement, the Employee shall be deemed
to be "disabled" if, at any time during the Employment Period, the Employee
shall have been unable to perform the duties of his employment hereunder due to
physical or mental incapacity for a period of ninety (90) days or any ninety
(90) days in a period of two hundred seventy (270) days.
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B. If the Employee fails to perform his duties hereunder or to
comply with any of the provisions hereof or commits any act of misconduct,
malfeasance, gross negligence or disloyalty, the Employment Period and the
Employee's salary and other rights under this Agreement as an employee of the
Employer, subject to 8C below, shall terminate upon written notice from the
Employer to the Employee, but such termination shall not affect the liability of
the Employee by reason of his misconduct, malfeasance, gross negligence or
disloyalty.
C. If it is determined that the Employer has terminated the Employee
without cause as determined in accordance with Section 8B above, the Employee
will not be subject to the provisions of Section 10, COVENANT NOT TO COMPETE,
herein.
9. COVENANTS NOT TO DISCLOSE. The Employee covenants and agrees that he
will not, at any time during or after the termination of his employment by the
Employer, communicate or disclose to any person, or use for his own account, or
advise, discuss with, or in any way assist any other person or firm in obtaining
or learning about, without the prior written consent of the Employer,
information concerning any inventions, processes, programs, systems, flow charts
or equipment used in, or any secret or confidential information (including,
without limitation, any customer lists or trade secrets) concerning, the
business and affairs of the Employer or any of its Affiliates acquired by the
Employee during the term of his employment by the Employer. The Employee
further covenants and agrees that he shall retain all such knowledge and
information concerning the foregoing in trust for the sole benefit of the
Employer and its Affiliates and their respective successors and assigns.
10. COVENANT NOT TO COMPETE. The Employee covenants and agrees that,
during the Employment Period and for a period of one (1) year after the
voluntary resignation of the Employee or termination for cause as outlined in 8B
herein, he will not directly render services or advice to, or be engaged in a
business during such one-year period, where said business' primary products or
services are in direct competition with the primary products or services of the
Employer except in the course of his employment hereunder or except upon the
written consent of the Employer.
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11. ESSENTIAL NATURE OF COVENANTS. The covenants of the Employee
contained in Sections 9 and 10 shall be construed as independent of any other
provision of this Agreement; and the existence of any claim or cause of action
of the Employee against the Employer or any of its subsidiaries, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Employer of said covenants. The Employee understands that
the covenants contained in Sections 9 and 10 are essential elements of the
transactions contemplated by this Agreement and, but for the agreement of the
Employee to Sections 9 and 10, the Employer would not have agreed to enter into
such transactions.
12. REMEDIES. In the event of a breach or threatened breach by the
Employee of Section 9 or 10, the Employer shall be entitled to a temporary
restraining order and an injunction restraining the Employee from the commission
of such breach. Nothing herein contained shall be construed as prohibiting the
Employer from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of money damages.
13. WAIVER OF BREACH. The waiver by one party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by the other party.
14. BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors,
assigns, heirs and legal representatives. Insofar as the Employee is concerned,
this Agreement, being personal, cannot be assigned.
15. SEVERABILITY. The invalidity of all or any part of any section of
this Agreement shall not render invalid the remainder of this Agreement or the
remainder of such section. If any provision of this Agreement is so broad as to
be unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall, when executed, be deemed to be an original,
but all of which together shall constitute one and the same instrument.
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17. GOVERNING LAW. This Agreement shall be construed (both as to validity
and performance) and enforced in accordance with and governed by the laws of the
State of Texas.
18. NOTICE. All Notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered in person or three (3) days after being mailed by registered or
certified first-class mail, postage prepaid, return receipt requested, if to the
Employee at 303 Auburn Avenue, Monroe, Louisiana 71201, or if to the Employer,
at the address listed above, or to such other address as such party shall have
specified by notice to the other party hereto as provided in this section.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and date first above written.
TANISYS TECHNOLOGY, INC.
By: /S/ MARK C. HOLLIDAY
------------------------------------
Chief Executive Officer
/s/ JOE DAVIS
------------------------------------
JOE DAVIS
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Exhibit 10.17
TANISYS TECHNOLOGY INC.
1993 Stock Option Plan
(As Amended through May 20, 1996)
1. PURPOSE. This 1993 Stock Option Plan (the "Plan") of Tanisys
Technology, Inc., a Wyoming corporation (the "Company"), for key employees,
directors and consultants of the Company, is intended to advance the best
interest of the Company by providing such persons, who have substantial
responsibility for its management, success, and growth, with additional
incentive and by increasing their proprietary interest in the success of the
Company -- thereby encouraging them to remain in its employ or service.
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (the "Board") or a committee to be appointed by the
Board (such committee or the Board acting as such committee is herein referred
to as the "Committee"); and all questions of interpretation and application of
the Plan, or of options granted hereunder (the "Options"), shall be subject to
the determination, which shall be final and binding, of a majority of the whole
Committee. The Committee shall consist of not less than two members of the
Board of Directors. Meetings shall be held at such times and places as shall be
determined by the Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of those members present at any meeting shall decide any questions brought
before that meeting. In addition, the Committee may take any action otherwise
proper under the Plan by the unanimous written consent of its members. No
member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his or her own part,
including but not limited to the exercise of any power or discretion given to
him or her under the Plan, except those resulting from his or her own gross
negligence or willful misconduct.
3. OPTION SHARES. The shares subject to the Options and other provisions
of the Plan shall be shares of the Company's Common Stock, no par value (the
"Common Stock"). The total amount of the Common Stock with respect to which
Options may be granted shall not exceed in the aggregate 2,600,000 shares;
provided, however, that such aggregate number of shares shall be subject to
adjustment in accordance with the provisions of Paragraph 16 hereof. Such
shares may be treasury shares or authorized but unissued shares. In the event
that any outstanding Option granted under the Plan shall expire or terminate,
the shares of Common Stock allocable to the unexercised portion of such Option
may again be subject to an Option under the Plan.
4. AUTHORITY TO GRANT OPTIONS. The Committee may grant the following
Options from time to time as it shall from time to time determine:
(a) "Incentive" Stock Options. The Committee may grant to an
eligible person an Option or Options to buy a stated number of shares of
Common Stock under the terms and conditions of the Plan, so that the Option
or Options will be an "incentive stock option" within the meaning of the
Internal Revenue Code of 1986 (the "Code").
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(b) "Nonqualified" Stock Options. The Committee may grant to an
eligible person an Option or Options to buy a stated number of shares of
Common Stock under the terms and conditions of the Plan, even though such
Option or Options would not constitute an "incentive stock option" within
the meaning of the Code.
Subject only to any applicable limitations set forth in the Plan, the number of
shares of Common Stock to be covered by any Option shall be as determined by the
Committee; provided, however, that no individual may hold options to purchase a
number of shares of Common Stock in excess of five percent (5%) of the number of
issued and outstanding shares of Common Stock on the date of grant. No tandem
Options may be issued, that is, no Option may be granted the exercise of which
would affect the exercisability of any other outstanding Option held by the
optionee. The Committee shall, at its discretion, be entitled to grant multiple
or a series of options to a qualified recipient pursuant to this Plan.
5. ELIGIBILITY. The individuals who shall be eligible to participate in
the Plan shall be the key employees, directors and consultants of the Company,
or of any wholly owned subsidiary; provided, however, that no employee of the
Company who would be ineligible to receive an incentive stock Option by reason
of the provisions of Section 422(b)(6) of the Code (relating to ownership of
more than 10% of the total combined voting power of all classes of the Company's
stock) shall be eligible to receive an incentive stock Option under the Plan
unless it complies with Paragraphs 7 and 8 hereof.
6. GRANTS TO EMPLOYEES AND AFFILIATES. All key employees, directors and
consultants of the Company shall be eligible to participate in the Plan and
shall be granted Options as determined by unanimous vote or consent of the
Committee. In determining the number of shares to be purchasable pursuant to an
Option, the Committee shall consider the following factors: an equitable
distribution of available Options having regard to the number of employees,
directors and consultants, the frequency of optionee turnover, the size of
allocations to existing employees, directors and consultants, and the duties and
qualifications of the optionee.
7. OPTION PRICE. The price at which shares may be purchased pursuant to
Options shall be set at the discretion of the Committee, but in no event shall
be less than fair market value; provided, further, that an individual who owns
more than 10% of the total combined voting power of all classes of the stock of
the Company or of its parent or its subsidiaries shall not be eligible to
receive an incentive stock Option unless, on the date such Option is granted,
the Option price is at least 110% of the fair market value of a share of Common
Stock.
The term "fair market value" on any day shall mean such amount last
determined in good faith by the Board of Directors of the Company or, in absence
of a determination by the Board, by the Committee; provided, however, that
during such time as the Common Stock is listed on the Vancouver Stock Exchange
("VSE"), the fair market value per share shall be the average closing price of
the Common Stock as quoted on the VSE for the previous two weeks; and provided
further that, if the Common Stock is no longer traded on the VSE and is traded
on the NASDAQ quotation system or is listed on an established U.S. stock
exchange or exchanges, such fair market value shall be deemed to be the closing
price of the Common Stock as reported for
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that day in THE WALL STREET JOURNAL listing of composite transactions for
such stock exchange or exchanges, or if no sale of Common Stock shall have
been made on any stock exchange on that day, on the preceding day on which
there was a sale of such stock as reported.
8. DURATION OF OPTIONS. No Option shall be exercisable after the
expiration of ten years from the date such Option is granted, and the Committee
in its discretion may provide that an Option shall be exercisable during such
ten-year period or any lesser period of time; provided, however, that an
individual who owns more than 10% of the total combined voting power of all
classes of the stock of the Company or of its parent or subsidiaries shall not
be eligible to receive an incentive stock Option unless it is not exercisable
after the expiration of five years from the date such Option is granted.
9. AMOUNT EXERCISABLE.
(a) Each Option may be exercised, so long as it is valid and
outstanding, from time to time in part or as a whole, and subject to
Paragraph 8 hereof and to such other conditions as the Committee in its
discretion may provide. Except in extraordinary circumstances approved by
the VSE, all Options shall vest on an equal basis over a period not less
than three years from the date of grant.
(b) The foregoing provision notwithstanding, an individual may not be
granted incentive stock Options so that the aggregate fair market value
(determined at the time of grant) of the stock with respect to which
incentive stock Options are exercisable for the first time by such
individual during any calendar year under all plans of the Company and its
parent and subsidiary corporations exceeds $100,000.
(c) Without limiting the authority of the Committee under Paragraph
9(a), if there is a change in the control of the Company while any Option
remains outstanding under the Plan, then the Committee may waive any
limitations set forth in or imposed pursuant to Paragraph 9(a) hereof so
that any or all Options shall be exercisable in full. For the purposes of
the Plan, a "change in control" of the Company shall mean a change in
control of a nature that is reportable in response to Item 5(f) of Schedule
14A of Regulation 14A promulgated under the Securities Exchange Act of 1934
(the "Exchange Act") as in effect on the date hereof, provided that,
without limitation, such a change in control shall be deemed to have
occurred if: (i) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) that does not own, directly or indirectly,
any shares of the Company's capital stock on the date of adoption of this
Plan is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities; or (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company cease for any
reason to constitute at least a majority thereof.
10. EXERCISE OF OPTIONS. Options shall be exercised by the delivery of
written notice to the Company setting forth the number of shares with respect to
which the Option is to be
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exercised and specifying the address to which the certificates for such
shares are to be mailed, together with full payment of the Option price of
such shares and such other items as may be required pursuant to Paragraph 13
hereof. "Full payment" shall mean the full exercise price in cash, certified
check, bank draft, or postal or express money order payable to the order of
the Company. As promptly as practicable after receipt of such written
notification and payment, the Company shall deliver to the optionee
certificates for the number of shares with respect to which such Option has
been so exercised, issued in the optionee's name; provided, that such
delivery shall be deemed effected for all purposes when a stock transfer
agent of the Company shall have deposited such certificates in the United
States mail, addressed to the optionee, at the address specified pursuant to
this Paragraph 10. The delivery of certificates upon the exercise of Options
may, in the discretion of the Committee, be conditioned upon payment to the
Company by the person exercising such Option of the amount, determined by the
Company, of any tax liability resulting from such exercise, including, but
not limited to, employment taxes required to be withheld.
11. TRANSFERABILITY OF OPTIONS; STOCK TRANSFER RESTRICTIONS. Options
shall not be transferable by the optionee otherwise than by will or under the
laws of descent and distribution and shall be exercisable, during his or her
lifetime, only by him or her.
12. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE. Except as may be
otherwise expressly provided herein, Options shall terminate on the earlier of
the date specified pursuant to Paragraph 8 hereof or no later than thirty (30)
days following severance of the employment relationship or termination of
affiliation between the Company and the optionee for any reason, for or without
cause, other than death or disability. Whether authorized leave of absence or
absence on military or government service constitute severance of the employment
relationship or termination of affiliation between the Company and the optionee
shall be determined by the Committee at the time thereof. In the event of
termination because of the death or disability of the holder of an Option before
the date of expiration of such Option, such Option shall terminate on the
earlier of such date of expiration or one year following the date of such death.
In the event of such termination, the optionee shall have the right, prior to
the termination of such Option, to exercise the Option to the extent to which he
or she was entitled to exercise such Option immediately prior to such severance
of the employment relationship or termination of affiliation. After the death
of the optionee, his or her executors, administrators, or any person or persons
to whom his or her Option may be transferred, by will or by the laws of descent
and distribution, shall have the right at any time prior to such termination to
exercise the Option, in whole or in part (without regard to any limitations set
forth in or imposed pursuant to Paragraph 9(a) hereof). In the event that the
Committee grants an Option designating it as an incentive stock Option, and the
optionee's employment status changes, but such person continues as a director or
consultant of the Company, then the Company in its discretion may, upon request
of the optionee, elect that the Option previously granted shall continue in full
force and effect as a nonqualified stock Option. In the event that the
Committee grants an Option designating it as a nonqualified stock Option, and
the person's status with the Company or its subsidiary corporations changes, but
such person continues as a key employee, director or consultant of the Company,
then the Option previously granted shall continue in full force and effect,
unless the Committee in its discretion may elect to terminate or modify the
Option. The Committee shall be permitted, in its discretion,
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to grant to any employee an Option which is an incentive stock Option or a
nonqualified stock Option with a provision that the Option shall continue in
full force and effect as a non-qualified stock Option if the person's status
with the Company or its subsidiary changes, but such person continues as a
director or consultant of the Company. For the purpose of determining the
employment relationship between the Company and the optionee, employment by a
wholly owned subsidiary shall be considered employment by the Company.
13. REQUIREMENTS OF LAW.
(a) The Company shall not be required to sell or issue any shares
pursuant to any Option if the issuance of such shares shall constitute a
violation by the optionee or the Company of any provisions of any law or
regulation of any governmental authority. If a registration statement
under the Securities Act of 1933 and any applicable state securities or
Blue Sky laws (the "Securities Laws") is not in effect with respect to the
shares of Common Stock issuable pursuant to any Option, the Company may
require the optionee to make certain representations and may require an
opinion of counsel satisfactory to the Company to the effect that such
registration is not required. Any determination in this connection by the
Committee shall be final, binding, and conclusive.
(b) Upon exercise of any Option, the Company shall not be required to
issue such shares unless the Committee has received evidence satisfactory
to it to the effect that the holder of such Option will not transfer such
shares except pursuant to a registration statement in effect under the
Securities Laws or unless an opinion of counsel satisfactory to the Company
has been received by the Company to the effect that such registration is
not required. Any determination in this connection by the Committee shall
be final, binding, and conclusive.
(c) In the event the shares issuable upon exercise of an Option are
not registered under the Securities Laws, the Company may imprint the
following legend or any other legend that counsel for the Company considers
necessary or advisable to comply with the Securities Laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER THE FEDERAL SECURITIES ACT OF
1933 (THE "1933 ACT") OR THE APPLICABLE STATE SECURITIES
LAWS AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF
RULE 144 PROMULGATED UNDER THE 1933 ACT. THE SECURITIES MAY
NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144,
IN THE ABSENCE OF EFFECTIVE REGISTRATION UNDER THE 1933 ACT
OR OTHER COMPLIANCE UNDER THE 1933 ACT AND APPLICABLE STATE
SECURITIES LAWS.
Such legend shall not be required if the shares issued upon exercise of an
Option are not subject to the Securities Laws.
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(d) The Company may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Laws, and in the
event any shares are so registered, the Company may remove any legend on
certificates representing such shares. The Company shall not be obligated
to take any other affirmative action in order to cause the exercise of an
Option or the issuance of shares pursuant thereto to comply with any law or
regulation of any governmental authority.
14. NO RIGHTS AS STOCKHOLDER. No optionee shall have rights as a
stockholder with respect to shares covered by his or her Option until the date
of issuance of a stock certificate for such shares; no adjustment for dividends
(other than stock dividends under Paragraph 16) or otherwise shall be made if
the record date therefor is prior to the date of issuance of such certificate.
15. EMPLOYMENT OBLIGATIONS. The granting of any Option shall not impose
upon the Company any obligation to employ or continue to employ any optionee,
and the right of the Company to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an
Option has been granted to him or her.
16. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred, or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding whether of a
similar character or otherwise.
If, while there are outstanding Options, the Company shall effect a
subdivision or consolidation of shares or other capital readjustment, the
payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding without receiving compensation therefor
in money, services, or property, then: (i) in the event of an increase in the
number of shares outstanding, the number of shares of Common Stock then subject
to Options hereunder shall be proportionately increased, and the cash
consideration payable per share shall be proportionately reduced; (ii) in the
event of a reduction in the number of such shares outstanding, the number of
shares of Common Stock then subject to Options hereunder shall be
proportionately reduced, and the cash consideration payable per share shall be
proportionately increased; and (iii) the number of shares then available for
Options hereunder shall be proportionately increased or decreased, as the case
may be.
After a merger of one or more corporations into the Company, each holder of
an outstanding Option shall, at no additional cost, be entitled upon exercise of
such Option to receive (subject to any required action by stockholders) in lieu
of the number of shares as to which such Option shall then be so exercisable,
the number and class of shares of stock or other securities to which such holder
would have been entitled pursuant to the terms of the agreement
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<PAGE>
of merger if, immediately prior to such merger, such holder had been the
holder of record of a number of shares of Common Stock equal to the number of
shares as to which such Option shall be so exercised.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation or where
the Company will be a wholly owned subsidiary of another corporation, or if the
Company sells or otherwise disposes of all or substantially all of its property
or assets to another corporation while unexercised Options remain outstanding
under the Plan, then: (i) subject to the provisions of clause (ii) below, after
the effective date of such merger, consolidation, or sale, as the case may be,
each holder of an outstanding Option shall be entitled, upon exercise of such
Option, to receive, in lieu of shares of Common Stock, the number and class of
shares of such stock, other securities, cash, and other property or rights as
the holders of shares of Common Stock received pursuant to the terms of the
merger, consolidation, or sale and to which he or she would have been entitled
if, immediately prior to such merger, consolidation, or sale, he or she had been
the holder of record of a number of shares of Common Stock equal to the number
of shares as to which such Option shall be so exercised; and (ii) all
outstanding Options may be canceled by the Board of Directors of the Company as
of the effective date of any such merger, consolidation, or sale, provided that
(x) written notice of such cancellation is given to each holder of an Option not
later than 30 days prior to such effective date and (y) each holder of an Option
shall have the right to exercise such Option in full (without regard to any
limitations set forth in or imposed pursuant to Paragraph 9(a) hereof) during
the said 30-day period preceding the effective date of such merger,
consolidation, or sale.
No adjustment provided for in this Paragraph 16 shall be made if such
adjustment would result in a modification of any incentive stock Option or cause
such incentive stock Option to fail to qualify as an "incentive stock option"
under the Code.
Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding Options.
17. SUBSTITUTE OPTIONS. Incentive stock Options may be granted under this
Plan from time to time in substitution for incentive stock options held by
employees of other corporations who are about to become employees of the Company
as the result of a merger or consolidation of the employing corporation with the
Company, or the acquisition by the Company of substantially all the assets of
the employing corporation, or the acquisition by the Company of the issued and
outstanding stock of the employing corporation as the result of which it becomes
a wholly owned subsidiary of the Company. The terms and conditions of the
substitute incentive stock Options so granted may vary from the terms and
conditions set forth in this Plan to such extent as the Board of Directors of
the Company at the time of grant may deem appropriate to conform,
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in whole or in part, to the provisions of the incentive stock options in
substitution for which they are granted, but no such variation shall be such
as to affect the status of any such substitute Option as an "incentive stock
option" under the Code.
18. AMENDMENT OR TERMINATION OF PLAN. The Board of Directors may modify,
revise, or terminate this Plan at any time and from time to time; provided,
however, that without the further approval both of the holders of at least a
majority of the outstanding shares of Common Stock and of a majority of the
outstanding shares of Common Stock held by the disinterested shareholders of the
Company (as defined by the VSE), the Board may not: (i) increase the aggregate
number of shares which may be issued under Options and pursuant to the
provisions of the Plan; (ii) reduce the Option price at which an incentive stock
Option may be granted to an amount less than the fair market value per share at
the time such Option is granted; (iii) change the class of employees eligible to
receive Options; (iv) materially modify the requirements as to affiliate
eligibility for participation in the Plan; (v) materially increase the benefits
accruing to participants under the Plan; or (vi) effect an amendment that would
cause incentive stock Options issued pursuant to the Plan to fail to meet the
requirements of "incentive stock options" as defined in Section 422 of the Code;
provided, however, that the Board shall have the power to make such changes in
the Plan and in the regulations and administrative provisions hereunder or in
any outstanding Option as in the opinion of counsel for the Company may be
necessary or appropriate from time to time to enable any incentive stock Options
granted pursuant to the Plan to continue to qualify as "incentive stock options"
under the Code and the regulations which may be issued thereunder as in
existence from time to time.
19. WRITTEN AGREEMENT. Each Option granted hereunder shall be embodied in
a written option agreement that shall be subject to the terms and conditions
prescribed above, and shall be signed by the optionee and by the Chairman of the
Board, the President or any Vice President of the Company for and in the name
and on behalf of the Company. Such an option agreement shall contain such other
provisions as the Committee in its discretion shall deem advisable.
20. INDEMNIFICATION OF COMMITTEE. The Company shall indemnify each
present and future member of the Committee against, and each member of the
Committee shall be entitled without further act on his or her part to indemnity
from the Company for, all expenses (including the amount of judgments and the
amount of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably incurred
by him or her in connection with or arising out of any action, suit, or
proceeding in which he or she may be involved by reason of his or her being or
having been a member of the Committee, whether or not he or she continues to be
such member of the Committee at the time of incurring such expenses; provided,
however, that such indemnity shall not include any expenses incurred by any such
member of the Committee (i) in respect of matters as to which he or she shall be
finally adjudged in any such action, suit, or proceeding to have been guilty of
gross negligence or willful misconduct in the performance of his or her duty as
such member of the Committee or (ii) in respect of any matter in which any
settlement is effected, to an amount in excess of the amount approved by the
Company on the advice of its legal counsel; and provided further, that no right
of indemnification under the provisions set forth herein shall be available to
- 8 -
<PAGE>
or enforceable by any such member of the Committee unless, within sixty (60)
days after institution of any such action, suit, or proceeding, he or she
shall have offered the Company, in writing, the opportunity to handle and
defend same at its own expense. The foregoing right of indemnification shall
inure to the benefit of the heirs, executors, or administrators of each such
member of the Committee and shall be in addition to all other rights to which
such member of the Committee may be entitled as a matter of law, contract, or
otherwise.
21. EFFECTIVE DATE OF PLAN. The Plan shall become effective and shall be
deemed to have been adopted October 25, 1993 if, within one year of that date,
it shall have been approved by the holders of at least a majority of the
outstanding Common Stock. No Option shall be granted pursuant to the Plan after
October 24, 2003.
- 9 -
<PAGE>
EXHIBIT 10.18
[DATE]
[OPTIONEE]
[ADDRESS 1]
[ADDRESS 2]
Dear [FIRST NAME]:
Under the terms and conditions of the 1993 Stock Option Plan (the "Plan")
of Tanisys Technology, Inc., a Wyoming corporation (the "Company"), a copy of
which is attached hereto and incorporated herein by reference, the Company
hereby grants to you the option to purchase [NO. OF SHARES] shares of the
Company's Common Stock, no par value, at the price of U.S. $[PRICE] per share,
subject to adjustment as provided in the Plan. This option shall constitute a
"nonqualified" option within the meaning of Paragraph 4(b) of the Plan.
This option may be exercised only in the manner prescribed by Paragraph 10
of the Plan as follows:
1. [1/3 OF SHARES] shares subject to option hereunder are
exercisable after one year from the date hereof;
2. [1/3 OF SHARES] shares subject to option hereunder are
exercisable after two years from the date hereof; and
3. [1/3 OF SHARES] shares subject to option hereunder are
exercisable after three years from the date hereof,
provided to the extent not exercised, such installments shall accumulate and be
exercisable, in whole or in part, in any subsequent period, subject to
termination of this option.
This option shall be for a term commencing on the date hereof and ending
[EXPIRATION DATE], provided that this option shall terminate on the earlier of
such expiration date or upon termination of employment or other relationship
with the Company as set forth in Paragraph 12 of the Plan. This option is not
assignable or transferable otherwise than by will or under the laws of descent
and distribution.
<PAGE>
The optionee hereby accepts and agrees to be bound by all the terms and
conditions of the Plan. The optionee hereby represents that he or she is a(n)
[DIRECTOR, EMPLOYEE, CONSULTANT] of the Company.
Notwithstanding anything to the contrary herein, this option shall not be
exercisable and the Company shall not be required to issue any shares hereunder
unless (a) a registration statement under the Securities Act of 1933 and any
applicable state securities or "blue sky" laws is in effect with respect to the
shares of common stock covered by this option, or (b) unless in the opinion of
counsel for the Company such registration is not then required.
This letter agreement and the Plan constitute and express the entire
agreement of the parties with respect to the option. This option shall be
subject to and shall comply with the rules and regulations of the Vancouver
Stock Exchange, the Securities Act of British Columbia, and its securities
regulatory authorities as long as the common stock of the Company is listed on
the Vancouver Stock Exchange.
Very truly yours,
TANISYS TECHNOLOGY, INC.
By:
-----------------------------------------
Mark C. Holliday, Chairman and CEO
ACCEPTED:
- - -------------------------
[OPTIONEE]
Date:
---------------------
<PAGE>
EXHIBIT 10.19
TANISYS TECHNOLOGY, INC. 401(K) PLAN
SUMMARY PLAN DESCRIPTION
<PAGE>
SUMMARY PLAN DESCRIPTION
TABLE OF CONTENTS
-----------------
PAGE
----
I INTRODUCTION 1
------------
II PLAN DATA
Agent for Service Of Legal Process 1
Effective Date 1
Employer 1
Plan Administrator 1
Plan Year 1
Trustee 1
Type of Administration 1
Type of Plan 1
III DEFINITIONS
Allocation Date(s) 1
Break In Service 2
Compensation 2
Disability 2
Early Retirement 2
Effective Date 2
Elective Deferral 2
Entry Date 2
Family Member 2
Highly Compensated Employee 3
Hour Of Service 3
Maternity/Paternity Leave 3
Normal Retirement Age 3
Spouse 3
Taxable Wage Base 3
Year Of Service 4
IV ELIGIBILITY REQUIREMENTS AND PARTICIPATION 4
V EMPLOYEE CONTRIBUTIONS 4
Elective Deferrals 4
Rollover And Transfer Contributions 5
VI EMPLOYER CONTRIBUTIONS 5
Contribution Formula 5
Eligibility For Allocation 6
VII GOVERNMENT REGULATIONS 7
<PAGE>
VIII PARTICIPANT ACCOUNTS 7
IX VESTING 7
Determining Vested Benefit 7
Payment of Vested Benefit 8
Loss Of Benefits 8
Reallocation of Forfeiture 8
Reemployment 9
X TOP-HEAVY RULES 10
XI RETIREMENT BENEFITS AND DISTRIBUTIONS 10
Retirement Benefits 10
Distributions During Employment 11
Hardship Withdrawals 11
Beneficiary 12
Death Benefits 12
Form Of Payment 12
Rollover of Payment 12
Time Of Payment 13
XII INVESTMENTS 13
Alternative Investments/Investment Direction Under A Trust Fund 13
Investment Responsibility 13
Employee Investment Direction 14
Participant Loans 14
XIII ADMINISTRATION 14
Plan Administrator 14
Trustee 15
Recordkeeper 15
XIV AMENDMENT AND TERMINATION 16
XV LEGAL PROVISIONS 16
Rights Of Participants 16
Fiduciary Responsibility 17
Employment Rights 17
Benefit Insurance 17
Claims Procedure 17
Assignment 18
Questions 18
Conflicts With Plan 18
3
<PAGE>
INTRODUCTION
Your Employer has established a retirement plan to help supplement your
retirement income. Under the program, the Employer makes contributions to
a Trust Fund which will pay you a benefit at retirement. Details about how
the Plan works are contained in this summary. While the summary describes
the principal provisions of the Plan, it does not include every limitation
or detail. If there is a discrepancy between this booklet and the official
Plan document, the Plan document shall govern. You may obtain a copy of
the Plan document from the Plan Administrator. The Plan Administrator may
charge a reasonable fee for providing you with the copy.
II PLAN DATA
A. AGENT FOR SERVICE OF LEGAL PROCESS: The Employer or Trustee.
B. EFFECTIVE DATE: January 1, 1995
C. EMPLOYER: Tanisys Technology, Inc.
Address: 12201 Technology Blvd., #130
Austin, TX 78727
Telephone No.: (512) 258-3570
Tax I.D. No.: 74-2656846
Plan No.: 002
D. PLAN ADMINISTRATOR: The Employer has been designated to serve as Plan
Administrator.
E. PLAN YEAR: The 12-month period beginning on January 1 and ending on
December 31.
F. TRUSTEE: Capital Guardian Trust Company
Address: P.O. Box 2226
Brea, CA 92622-2226
Telephone No.: (714) 671-7000
G. TYPE OF ADMINISTRATION: Trust Fund
H. TYPE OF PLAN: Cash or Deferred [401(k)] Plan
III DEFINITIONS
A. ALLOCATION DATE(S). The date(s) on which a Participant's account is
adjusted to reflect increases and decreases in the value. This Plan
will use monthly Allocation Dates.
<PAGE>
B. BREAK IN SERVICE. A Plan Year during which you are not credited with
or are not paid for more than 500 hours. If you go into the military
service of the United States, you are considered terminated as long as
you return to work within the time required by law. If you separate
from employment and incur a Break in Service, all contributions to
your various accounts are suspended. [See special rules relating to
maternity and paternity leave below. Also see Section VI(B) to
determine your eligibility to share in the Employer's Contribution if
you separate from employment, but do not incur a Break in Service.]
If a Break in Service occurs and you return to full time employment
with the Employer, your rights are explained in the section entitled
"Vesting".
C. COMPENSATION. Your total salary, pay, or earned income from the
Employer, as reflected on tax Form W-2, which is subject to
withholding when earned. Compensation will include amounts received
by you during the Plan Year. Compensation shall be limited to
$150,000 as adjusted for inflation.
Compensation shall include amounts deferred under 401(k) plans,
Section 125 cafeteria plans and certain other plans of deferred
compensation. Compensation shall be limited to Compensation earned
while a Participant.
D. DISABILITY. A potentially permanent illness or injury, as certified
to by a physician who is approved by the Employer, which prevents you
from engaging in work for which you are qualified for a period of at
least 12 months.
E. EARLY RETIREMENT. You may retire early upon reaching age 55 and
completion of 0 Years of Service. If you terminate employment after
completing the required number of Years of Service, but before
attaining the required age, you may elect Early Retirement after
attaining the required age.
F. EFFECTIVE DATE. The date on which the Plan starts or an amendment is
effective.
G. ELECTIVE DEFERRAL. Employer contributions made to the Plan at your
election, instead of being given to you in cash as part of your
salary. You can elect to defer a portion of your salary, instead of
receiving it in cash, and your Employer will contribute it to the Plan
on your behalf.
H. ENTRY DATE. The date on which you enter the Plan. Your Entry Date
will be the earlier of the first day of the Plan Year or the first day
of the seventh month of the Plan Year coinciding with or following the
date on which you satisfy the eligibility requirements.
I. FAMILY MEMBER. The Spouse or lineal ascendant or descendant (or
Spouse thereof) of either a more than 5% owner of the Employer or one
of the ten highest compensated Highly Compensated Employees of the
Employer.
2
<PAGE>
J. HIGHLY COMPENSATED EMPLOYEE. Any Employee who during the current or
prior Plan Year (1) was a more than 5% owner, (2) received more than
$75,000 in Compensation as adjusted for inflation (3) received more
than $50,000 in Compensation as adjusted for inflation and was in the
top 20% of Employees when ranked by Compensation, or (4) was an
officer receiving more than $45,000 in Compensation as adjusted for
inflation. Family Members of any 5% owner, or Highly Compensated
Employee in the group of the ten Employees with the greatest
Compensation, will be combined as if they were one person for purposes
of Compensation and contributions. If you are not currently or never
were Highly Compensated, or a Family Member of a Highly Compensated
Employee, you are a non-Highly Compensated Employee.
K. HOUR OF SERVICE. You will receive credit for each hour you are (1)
paid for being on your job, (2) paid even if you are not at work
(vacation, sickness, leave of absence, or Disability), or (3) paid for
back pay if hours were not already counted. A maximum of 501 hours
will be credited in any year for periods during which you are not at
work but are paid. Hours of Service will be calculated based on
actual hours.
L. MATERNITY/PATERNITY LEAVE. You may be eligible for additional Hours
of Service if you leave employment, even if temporarily, due to
childbirth or adoption. If this is the case, you will be credited
with enough hours (up to 501) of service to prevent a Break in
Service, either in the year you leave employment or the following
year. For example, if you have 750 Hours of Service in the year that
your child is born, you would not get any more hours credited for that
Plan Year since you do not have a Break in Service. Therefore, if you
do not return to employment the following year, you will get 501 Hours
of Service so you will not have a Break in Service in that year.
Alternatively, if you do return the following year, but work only 300
hours, you will receive an additional 201 hours in order to prevent a
break. These Hours of Service for maternity or paternity leave must
all be used in one Plan Year. They are used only to prevent a Break
in Service and not for calculating your Years of Service for
eligibility, vesting or benefits.
M. NORMAL RETIREMENT AGE. The attainment of age 65.
N. SPOUSE. The person to whom you are or were legally married, or your
common law spouse if common law marriage is recognized by the state in
which you live. In order for your Spouse to receive a benefit under
this Plan, he or she may not predecease you. A former spouse may be
treated as a "Spouse" under this definition if recognized as such
under a Qualified Domestic Relations Order as explained at Section
XV(F) of this Summary Plan Description.
O. TAXABLE WAGE BASE. The amount of your Compensation subject to FICA
tax on the first day of each Plan Year.
3
<PAGE>
P. YEAR OF SERVICE.
ELIGIBILITY
For purposes of determining your eligibility to participate in the
Plan, a Year of Service is a 12-consecutive-month period beginning on
your date of hire during which you are credited with at least 1000
Hours of Service.
CONTRIBUTION
For purposes of determining whether or not you are entitled to have a
contribution allocated to your account, a Year of Service is a
12-consecutive-month period, which is the same as the Plan Year,
during which you are credited with at least 1000 Hours of Service.
VESTING
For purposes of determining the extent to which you are vested in your
account balance, a Year of Service is a 12-consecutive-month period,
which is the same as your employment year, during which you are
credited with 1000 Hours of Service.
IV ELIGIBILITY REQUIREMENTS AND PARTICIPATION
You are eligible to participate in this Plan upon completing 1 Year of
Service and attaining age 21.
Your participation in the Plan will begin on the Entry Date defined at
Section III. If you are employed on the Plan's Effective Date, you do not
have to satisfy the age and Service requirements specified above.
V EMPLOYEE CONTRIBUTIONS
A. ELECTIVE DEFERRALS
You, as an eligible Employee, may authorize the Employer to withhold
from 0% up to 15% of your Compensation, not to exceed $7,000 as
adjusted for inflation, and to deposit such amount in the Plan trust.
If you participate in a similar plan of an unrelated employer and your
Elective Deferrals under this Plan and the other plan exceed the
$7,000 limit, for a given year you must designate one of the Plans as
receiving an excess amount. If you choose this Plan as the one
receiving the excess, you must notify the Plan Administrator by March
1 of the following year so that the excess and any income thereon may
be returned to you by April 15. You may increase, decrease, or
terminate your Elective Deferral percentage on the first day of each
month of the Plan Year.
4
<PAGE>
If you stop your contributions, you may not start deferring again for
a period of 1 months. The Employer may also reduce or terminate your
withholdings if required to maintain the Plan's qualified status.
B. ROLLOVER AND TRANSFER CONTRIBUTIONS
Rollover and Transfer contributions are permitted. You may make a
Rollover or Transfer Contribution prior to becoming a Participant. An
Employer can refuse to allow Transfer Contributions to its
profit-sharing Plan if the transfer will affect the Plan's ability to
offer lump sum distributions as the normal form of distribution.
A rollover or transfer of your retirement benefits may originate from
another qualified retirement plan or special individual retirement
arrangement (known as a "conduit" IRA) to this Plan. If you have
already received a lump-sum payment from another qualified retirement
plan, or if you received payment from another qualified plan and
placed it in a separate "conduit" IRA, you may be eligible to
redeposit that payment to this Plan. The last day you may make a
Rollover Contribution to this Plan is the 60th day after you receive
the distribution from the other plan or IRA. A transfer occurs when
the trustee of the old plan transfers your assets to this Plan. If
you believe you qualify for a transfer or rollover, see the Plan
Administrator for more details.
VI EMPLOYER CONTRIBUTIONS
A. CONTRIBUTION FORMULA
ELECTIVE DEFERRALS:
The Employer will contribute all Compensation which you elect to defer
to the Plan within the limits outlined in Section V(A).
MATCHING CONTRIBUTIONS:
The Employer may make a Matching Contribution to each Participant
based on his or her Elective Deferrals in a percentage set by the
Employer prior to the end of each Plan Year. The Employer shall not
match your Elective Deferrals that are in excess of 6% of your
Compensation.
The time period which will be used for determining the amount of
Matching Contributions owed shall be annually.
The Employer has the right to designate all or a portion of the
Matching Contributions as "Qualified." To the extent Matching
Contributions are so
5
<PAGE>
designated, they are nonforfeitable and may not be withdrawn from the
Plan prior to separation from Service or attainment of age 59-1/2.
Employer Matching Contributions will only be made on Elective
Deferrals made to the Plan. Elective Deferrals withdrawn prior to the
end of the Plan Year will not receive Matching Contributions.
QUALIFIED NON-ELECTIVE CONTRIBUTIONS:
The Employer may also contribute an additional amount determined in
its sole judgment. This additional contribution, if any, will be
allocated to only non-Highly Compensated Participants, in proportion
to each eligible Employee's Compensation as a ratio of all eligible
Employees' Compensation. These Contributions will be nonforfeitable
and subject to withdrawal restrictions.
DISCRETIONARY:
The Employer may also contribute an additional amount determined in
its sole judgment. Such additional contribution, if any, shall be
allocated to each Participant in proportion to his or her Compensation
for the Plan Year earned while a Participant. A Participant will also
receive an allocation with respect to his or her Compensation in
excess of the Taxable Wage Base.
B. ELIGIBILITY FOR ALLOCATION
The Employer's Contribution will be made to all Participants who are
employed at the end of the Plan Year provided that the Participant has
completed a Year of Service during the Plan Year. The Employer shall
also make matching and other related contributions as indicated below
to Employees who terminate during the Plan Year as a result of:
Matching Other
X X (i) Retirement.
X X (ii) Disability.
X X (iii) Death.
(iv) Other termination of employment provided
that the Participant has completed 1000
Hours of Service.
(v) Other termination of employment without
regard to the number of Hours of Service
the Participant has completed.
(vi) Termination of employment (for any
reason) provided that the Participant has
completed 1000 Hours of Service.
6
<PAGE>
VII GOVERNMENT REGULATIONS
The federal government sets certain limitations on the level of
contributions which may be made to a Plan such as this. There is also a
"percentage" limitation which means that the percentage of Compensation
which you may contribute (both Elective Deferrals and, if applicable,
Voluntary Contributions) depends on the average percentage of Compensation
that the other Participants are contributing. Simply stated, all
Participants are divided into 2 categories. Highly Compensated and
non-Highly Compensated. The average contribution for each group is
calculated and compared. If a Highly Compensated Participant is
contributing more than he or she is allowed, the excess plus or minus any
gain or loss will be returned. Keep in mind that if you are a 5% owner of
the business or one of the ten highest paid Highly Compensated employees,
you will be combined with your Family Members for the purpose of
calculating such percentages.
VIII PARTICIPANT ACCOUNTS
The Employer will set up a recordkeeping account in your name to show the
value of your retirement benefit. The Employer will make the following
additions to your account:
A. your allocated share of the Employer's Contribution (including your
Elective Deferrals).
B. the amount of your Transfer Contributions and Rollover Contributions,
if any, and
C. your share of investment earnings and appreciation in the value of
investments.
The Employer will make the following subtractions from your account:
D. any withdrawals or distributions made to you, and
E. your share of investment losses and depreciation in the value of
investments.
F. your share of administrative fees and expenses paid out of the Plan,
if applicable.
The Employer will value your account daily and will provide you with a
statement of account activity at least once annually.
IX VESTING
A. DETERMINING VESTED BENEFIT
Vesting refers to your earning or acquiring a nonforfeitable right to
the full amount of your account. Any Elective Deferrals, Qualified
Non-Elective Contributions, Qualified Matching Contributions, Rollover
Contributions,
7
<PAGE>
Transfer Contributions, plus or minus any earnings or losses, are
always 100% vested and cannot be forfeited for any reason. Any
contribution not listed in the previous sentence, and the earnings or
losses thereon, will vest in accordance with the following table:
YEARS OF SERVICE
----------------------------------------------------------------
1 2 3 4 5 6 7
---- ---- ---- ---- ---- ---- ----
10% 20% 40% 60% 100%
You are considered to have completed 1 Year of Service for purposes of
vesting upon the completion of 1000 Hours of Service at any time
during a Plan Year.
You automatically become fully vested, regardless of the vesting
table, upon attainment of Normal Retirement Age, Early Retirement Age,
upon retirement due to Disability, upon death, and upon termination of
the Plan.
B. PAYMENT OF VESTED BENEFIT
If you separate from Service before your retirement, death or
Disability, you may request early payment of your vested benefit by
submitting a written request to the Plan Administrator. If you vested
account balance at the time of termination or at the time of any prior
distributions exceeds or exceeded $3,500, you may defer the payment of
your benefit until April 1 of the calendar year following the calendar
year during which you attain age 70-1/2. The Employer will
immediately pay any vested benefit not in excess of $3,500. The
portion of your account balance to which you are not vested is called
a "forfeiture" and remains in the Plan to reduce the Employer's
Contribution for the year.
C. LOSS OF BENEFITS
There are only two events which can cause the loss of all or a portion
of your account. One is termination of employment before your are
100% vested according to the vesting provisions described at IX(A) and
the other is a decrease in the value of your account from investment
losses or administrative expenses and other costs of maintaining the
Plan.
D. REALLOCATION OF FORFEITURE
If you receive the vested portion of your account upon separation from
service, the Employer will forfeit and reallocate the nonvested
portion of your account. If you have not received a distribution of
your vested balance, your nonvested portion will be forfeited at the
end of the Plan Year during which you incur your fifth consecutive
1-year Break in Service.
8
<PAGE>
E. REEMPLOYMENT
If you terminate service with your Employer, then later become
reemployed, you will become a Participant as of the next Entry Date
[see Section III] upon returning to employment. If you are not a
member of an eligible class and later become a member of the eligible
class, you shall participate immediately if you have satisfied the
minimum age and service requirements. Should you become ineligible to
participate because you are no longer a member of an eligible class,
you shall participate upon your return to an eligible class. All
years of prior Service will be counted when calculating your vested
percentage in your new account balance. The following rules apply in
connection with reemployed Participants.
(a) TERMINATED PARTIALLY VESTED PARTICIPANTS. If you terminate
employment and receive payment of your partially vested interest
and are reemployed prior to incurring five consecutive one-year
Breaks in Service, you have the right to buy back the non vested
portion of your account if it was forfeited. If your non vested
balance was not forfeited it will still be part of your account
and the buy back is not necessary. If a buy back is necessary to
regain the forfeiture, you must redeposit the amount paid to you
without interest within five years of your date of reemployment.
If you do not repay the amount you received, the nonvested
portion of your Employer account will be permanently forfeited.
Whether you repay or not, your prior Service will count toward
vesting service for future Employer contributions.
FOR EXAMPLE, assume that you quit your job with your current
Employer. At the time of termination you had completed four
Years of Service and had accrued a total benefit of $10,000 under
the retirement play. Although this amount had been allocated to
your account, you were only 40% vested in that amount when you
left. You decided to take a distribution of your vested account
balance (40% of $10,000, or $4,000) when you quit. The nonvested
balance of your account ($6,000) was forfeited. Three years
later, you became reemployed by the same Employer. Since you
were reemployed within 5 years, you have the right to repay the
$4,000 distribution you received when you quit. You would have
to repay the $4,000 within 5 years of being rehired. If you do
so, the nonvested portion of your account ($6,000) which was
forfeited when you left will be restored to your account. After
restoration, you will be vested in 40% of this account, but your
vested percentage will increase based on your Years of Service
after your reemployment. Your prior Service will ALWAYS count
towards vesting of Employer Contributions which you will receive
after reemployment, whether or not you decide to repay and
restore your prior account.
9
<PAGE>
(b) Terminated Non-Vested Participants. If you were not vested
in any portion of your Employer Contribution account prior
to your separation from service and are reemployed before
incurring five consecutive one-year Breaks in Service, you
will be credited for vesting with all pre-break and
post-break service. Your prior account balance will
automatically be restored and will continue to vest in that
account. If you are reemployed after incurring five
consecutive one-year Breaks in Service, you will lose your
prior account balance, but your pre-break Years of Service
will count towards vesting, in your new account balance.
X. TOP HEAVY RULES
A "top-heavy" plan is one in which more than 60% of the contributions or
benefits are attributable to certain "key employees," such as owners,
officers and stockholders. The Plan Administrator is responsible for
determining each year if the Plan is "top-heavy." If the Plan becomes
top-heavy, special rules apply to the allocation of the Employer's
contribution. These special rules require that only Participants who are
not key employees will generally receive an allocation of the Employer's
contribution equal to 3% of Compensation, or if less, the greatest
percentage allocated to the account of any key employee. All participants
are entitled to receive a minimum allocation upon completing at least one
Hour of Service in the top-heavy Plan Year provided they are employed on
the last day of the Plan Year. The Employer's minimum contribution can be
satisfied by another Employer sponsored retirement plan, if so elected by
the Employer. The following vesting schedule shall apply for the Plan Year
the Plan becomes top-heavy, for any type of Employer Contribution, unless
the Employer has already elected a faster schedule:
YEARS OF SERVICE
1 2 3 4 5 6
---- ---- ---- ---- ---- ----
0% 20% 40% 60% 80% 100%
XI RETIREMENT BENEFITS AND DISTRIBUTIONS
A. RETIREMENT BENEFITS
The full value of your account balance is payable at your Normal
Retirement Age, even if you continue to work, or you may defer payment
until April 1 following the year you reach age 70-1/2. If you work
beyond your Normal Retirement Age, you will continue to fully
participate in the Plan.
10
<PAGE>
B. DISTRIBUTIONS DURING EMPLOYMENT
Upon the completion of five Years of Service, benefits attributable to
Employer contributions, allocated to your account(s), are available
for withdrawal.
If applicable, benefits attributable to your Voluntary contributions
under the Plan plus any rollovers are available for withdrawal upon
request to the Plan Administrator. Transfers Contributions may be
withdrawn only if they originate from plans meeting certain safe
harbor provisions.
C. HARDSHIP WITHDRAWALS
You may file a written request for a hardship withdrawal of the
portion of your account balance attributable to Elective Deferrals and
certain Employer Contributions to the extent vested. You must
generally have your Spouse's written consent for a hardship withdrawal
unless you are advised otherwise by the Plan Administrator. Prior to
receiving a hardship distribution, you must take any other
distribution and borrow the maximum non-taxable loan amount allowed
under this and other plans of the Employer. Note, however, that if
the effect of the loan would be to increase the amount of your
financial need, you are not required to take the loan. For example,
if you needs funds to purchase a principal residence, and a plan loan
would disqualify you from obtaining other necessary financing, you do
not have to take the loan. Hardship withdrawals may be authorized by
the Employer for the following reasons:
(a) to assist you in purchasing a personal residence which is your
primary place of residence (not including mortgage payments),
(b) to assist you in paying tuition expenses for you, your Spouse, or
your dependents, for the next twelve months of post-secondary
education,
(c) to assist you in paying certain expenses incurred or necessary on
behalf of you, your Spouse, or your dependents for
hospitalization, doctor or surgery expenses which are not covered
by insurance, or
(d) to prevent your eviction from or foreclosure on your principal
residence.
Any hardship distribution is limited to the amount needed to meet the
financial need. Hardship withdrawals must be approved by the Employer
and will be administered in a non-discriminatory manner. Such
withdrawals will not affect your eligibility to continue to
participate in Employer Contributions to the Plan. Your right to make
Voluntary Contributions and Elective Deferrals will be suspended for
twelve months. Any withdrawals you receive under these rules may not
be recontributed to the Plan and may be subject to taxation, as well
as an additional 10% penalty tax if the withdrawal is received before
you reach age 59-
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1/2. These payments shall also be subject to a mandatory 20%
withholding for income tax purposes.
D. BENEFICIARY
Every Participant or former Participant with benefits may designate a
person or persons who are to receive benefits under the Plan in the
event of his or her death. The designation must be made on a form
provided by and returned to the Plan Administrator. You may change
your designation at any time. If you are married, your beneficiary
will automatically be your Spouse. If you and your Spouse wish to
waive this automatic designation, you must complete a beneficiary
designation form. The form must be signed by you and, if applicable,
your Spouse in front of a Plan representative or a Notary Public.
E. DEATH BENEFITS
In the event of your death, the full value of your account is payable
to your beneficiary in a lump sum.
F. FORM OF PAYMENT
When benefits become due, you or your representative should apply to
the Employer requesting payment of your account and specifying the
manner of payment. The normal or automatic form of payment is a lump
sum.
G. ROLLOVER OF PAYMENT
If your benefits qualify as eligible rollovers, you have the option of
having them paid directly to you, when they become due, or having them
directly rolled over to another qualified plan or an IRA. If you do
not choose to have the benefits directly rolled over, the Plan is
required to automatically withhold 20% of your payment for tax
purposes. If you do choose to have the payment made to you, you still
have the option of rolling over the payment yourself to a qualified
plan or an IRA within sixty days (first check with a tax advisor to
make sure it is an eligible rollover). However, 20% of your payment
will still be withheld. The following example illustrates how this
works:
For example, if you have $100,000 in your vested account balance and
choose to have the payment of your benefits made directly to an IRA or
another qualified play, the entire $100,000 will be transferred to the
trustee of the other plan or the IRA, and you will treat the entire
amount as a rollover on your tax return so that you will not pay taxes
on the entire amount. If you choose not to have the account
transferred directly to an IRA or qualified plan, 20% or $20,000 will
automatically be withheld from your payment. Thus, you will receive
only $80,000 as a distribution of your benefits. In order to roll the
entire amount over
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into your IRA, you would have to come up with $20,000 out of your own
pocket to make up the difference. If this is done, the $20,000 which
was withheld may be returned when you file your taxes at the end of
the year. However, if you are unable to produce the extra cash, the
rollover amount will only be $80,000, and the other $20,000 which was
withheld will be treated as taxable income to you. If you are under
age 59-1/2 when you receive your benefit payment, the withheld amount
will also be subject to the 10% early distribution penalty.
Certain benefit payments are not eligible for rollover and therefore
will also not be subject to the 20% mandatory withholding. They are
as follows:
1. installments paid over life;
2. installments for a period of at least 10 years; and
3. minimum required distributions at age 70-1/2.
There are also several operational exceptions and a "de minimis"
exception for payments of less than $200. Also Employee Voluntary
contributions are not eligible for rollover.
H. TIME OF PAYMENT
If you retire, become disabled, or die, payments will start as soon as
administratively feasible following the date on which a distribution
is requested by you or is otherwise payable.
If you terminate for a reason other than death, Disability, or
retirement, payments will start as soon as administratively feasible
following the date on which a distribution is requested by you or is
otherwise payable.
XII INVESTMENTS
A. ALTERNATIVE INVESTMENTS/INVESTMENT DIRECTION UNDER A TRUST FUND
The monies contributed to the Plan may be invested in any security or
form of property considered prudent for a retirement plan. Such
investments include common and preferred stocks, exchange traded put
and call options, bonds, money market instruments, mutual funds,
savings accounts, certificates of deposit, Treasury bills, or
insurance contracts. An institutional Trustee may invest in its own
deposits or those of affiliates which bear a reasonable interest rate,
or in a group of collective trust maintained by such Trustee.
B. INVESTMENT RESPONSIBILITY
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The Plan's assets are held by the Trustee who is identified in Section
II of this Summary. The Trustee is responsible for the safekeeping of
plan assets and the investment of such assets at the direction of the
Plan Administrator.
C. EMPLOYEE INVESTMENT DIRECTION
Participants may direct the investments of their accounts among
alternative investment funds provided under the Plan. The investment
funds available to you and the procedures for making an election are
shown in a separate Investment Election Form which can be obtained
from the Plan Administrator. You may change your investment selection
and move monies from one fund to another in accordance with the rules
established by the Plan Administrator.
D. PARTICIPANT LOANS
Participant loans are permitted under the Plan. In order to get a
loan from the Plan, you must make application to the Plan
Administrator. Loans must be approved by the Plan Administrator and
are subject to a strict set of rules established by law. The rules
are covered in a separate Loan Application Form and Promissory Note
Form. These Forms are available from the Plan Administrator.
XIII ADMINISTRATION
The Plan will be administered by the following parties:
A. PLAN ADMINISTRATOR
The Employer is the party who has established the Plan and who has
overall control and authority over administration of the Plan. The
Employer's duties as Plan Administrator include:
(a) appointing the Plan's professional advisors needed to administer
the Plan including, but not limited to, an accountant, attorney,
actuary, or administrator,
(b) directing the Trustee or Recordkeeper with respect to payments
from the Fund,
(c) communicating with Employees regarding their participation and
benefits under the Plan, including the administration of all
claims procedures and domestic relations orders,
(d) filing any returns and reports with the Internal Revenue Service,
Department of Labor, or any other government agency,
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<PAGE>
(e) reviewing and approving any financial reports, investment
reviews, or other reports prepared by any party appointed by the
Employer,
(f) ensuring that all Plan Loans are in compliance with legal
requirements,
(g) obtaining a legal determination of the qualified status of all
qualified domestic relations orders and complying with all legal
requirements,
(h) establishing a funding policy and investment objectives
consistent with the purposes of the Plan and the Employee
Retirement Income Security Act of 1974, and
(i) construing and resolving any question of Plan interpretation.
The Plan Administrator's interpretation and application thereof
is final.
B. TRUSTEE
The Trustee shall be responsible for the administration of investments
held in the Trust Fund. These duties shall include:
(a) receiving contributions under the terms of the Plan,
(b) safekeeping of plan assets and the investment of such assets at
the direction of the Plan Administrator,
(c) making distributions from the Fund in accordance with written
instructions received from the Plan Administrator, Recordkeeper
or another authorized Employer representative,
(d) keeping accounts and records of the financial transactions of the
Trust Fund, and
(e) rendering an annual report of the Trust Fund showing the
financial transactions for the Plan Year.
C. RECORDKEEPER
The Recordkeeper shall be responsible for maintaining Plan records.
These duties shall include:
(a) transmit Employer directives to the Trustee,
(b) keep accurate records regarding the Trust Fund administration,
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<PAGE>
(c) account for any Participant Loans, and
(d) any other duties necessary and as agreed upon.
XIV AMENDMENT AND TERMINATION
The Employer may amend the Plan at any time, provided that no amendment
will divert any part of the Plan's assets to any purpose other than for the
exclusive benefit of you and the other Participants in the Plan or
eliminate an optional form of distribution. The Employer may also
terminate the Plan. In the event of an actual Plan termination, all
amounts credited to your account will be fully vested and will be paid to
you. Depending on the facts and circumstances, a partial termination may
be found to occur where a significant number of Employees are terminated by
the Employer or excluded from Plan participation. In case of a partial
termination, only those affected will become 100% vested.
XV LEGAL PROVISIONS
A. RIGHTS OF PARTICIPANTS
As a Plan Participant, you have certain rights and protection under
the Employee Retirement Income Security Act of 1974 (ERISA). The law
says that you are entitled to:
(a) Examine, without charge, all documents relating to the operation
of the Plan and any documents filed with the U.S. Department of
Labor. These documents are available for review in the
Employer's offices during regular business hours.
(b) Obtain copies of all Plan documents and the other Plan
information upon written request to the Employer. The Employer
may make a reasonable charge for producing the copies.
(c) Receive from the Employer at least once each year a summary of
the Plan's annual financial report.
(d) Obtain, at least once a year, a statement of the total benefits
accrued for you, and your nonforfeitable (vested) benefits, if
any. The Plan provides that you will receive this statement
automatically. If you are not vested, you may request a
statement showing the date when you will begin to vest in your
account.
(e) File suit in a federal court, if any materials requested are not
received within 30 days of your request, unless the materials
were not sent because of matters beyond the control of the
Employer. If you are improperly
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<PAGE>
denied access to information you are entitled to receive, the
Employer may be required to pay up to $100 for each day's delay
until the information is provided to you.
B. FIDUCIARY RESPONSIBILITY
ERISA also imposes obligations upon the persons who are responsible
for the operation of the Plan. These persons are referred to as
"fiduciaries." Fiduciaries must act solely in you interest as a Plan
Participant and they must exercise prudence in the performance of
their duties. Fiduciaries who violate ERISA may be removed and
required to reimburse any losses they have caused you or other
Participants in the Plan.
C. EMPLOYMENT RIGHTS
Participation in the Plan is not a guarantee of employment. However,
the Employer may not fire you or discriminate against you to prevent
you from becoming eligible for the Plan or from obtaining a benefit or
exercising your rights under ERISA.
D. BENEFIT INSURANCE
Your benefits under this Plan are not insured by the Person Benefit
Guaranty Corporation since the law does not require plan termination
insurance for this type of plan.
E. CLAIMS PROCEDURE
If you feel you are entitled to a benefit under the Plan, mail or
deliver your written claim to the Plan Administrator. The Plan
administrator will notify you, your beneficiary, or authorized
representative of the action taken within 60 days of receipt of the
claim. If you believe that you are being improperly denied a benefit
in full or in part, the Employer must give you a written explanation
of the reason for the denial. If the Employer denies your claim, you
may, within 60 days after receiving the denial, submit a written
request asking the Employer to review your claim for benefits. Any
such request should be accompanied by documents or records in support
of your appeal. You, your beneficiary, or your authorized
representative may review pertinent documents and submit issues and
comments in writing. If you get no satisfaction from the Employer,
you have the right to request assistance from the U.S. Department of
Labor or you can file suit in a state or federal court. Service of
legal process may be made upon the Plan Trustee or the Plan
Administrator. If you are successful in your lawsuit, the court may
require the Employer to pay your legal costs, including your
attorney's fees. If you lose, and the court finds that your claim is
frivolous, you may be required to pay the Employer's legal fees.
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<PAGE>
F. ASSIGNMENT
Your rights and benefits under this Plan cannot be assigned, sold,
transferred or pledged by you or reached by your creditors or anyone
else except under a qualified domestic relations order (QDRO) is a
court order issued under state domestic relations law relating to
divorce, legal separation, custody, or support proceedings. The QDRO
recognizes the right of someone other than you to receive your Plan
benefits. You will be notified if a QDRO relating to your Plan
benefits is received. Receipt of a qualified domestic relations order
shall allow for an earlier than normal distribution to the person(s)
other than the Participant listed in the order.
G. QUESTIONS
If you have any questions about this statement of your rights under
ERISA, please contact the Employer or the nearest Area Office of the
U.S. Labor-Management Service Administration, Department of Labor.
H. CONFLICTS WITH PLAN
This booklet is not the Plan document, but only a Summary Plan
Description of its principal provisions and not every limitation or
detail of the Plan is included. Every attempt has been made to
provide concise and accurate information. However, if there is a
discrepancy between this booklet and the official Plan document, the
Plan document shall prevail.
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LEASE AGREEMENT
Between
AEtna Life Insurance Company
as Landlord,
and
1st Tech Corporation,
as Tenant,
Covering approximately 6,180 gross square feet
of the Building known (or to be known) as
McNeil 3
located at
12201 Technology Boulevard, Suite 130
Austin, Texas, 78727
<PAGE>
STANDARD INDUSTRIAL LEASE AGREEMENT
TRAMMEL CROW COMPANY - (AUS/91)
Approximately 6,180 gross square feet
12201 Technology Boulevard, Suite 130
Austin, Texas 78727
McNeil 3
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between AEtna Life
Insurance Company, hereinafter referred to as "Landlord", and 1st Tech
Corporation, hereinafter referred to as "Tenant."
1. PREMISES AND TERM. In consideration of the mutual obligations of Landlord
and Tenant set forth herein, Landlord leases to Tenant, and Tenant hereby takes
from Landlord, certain leased premises situated within the County of Travis,
State of Texas, as more particularly described on EXHIBIT "A" attached hereto
and incorporated herein by reference (the "Premises"), to have and to hold,
subject to the terms, covenants and conditions in this Lease. The term of this
Lease shall commence on the Commencement Date hereinafter set forth and shall
end on the last day of the month that is Sixty (60) months after the
Commencement Date.
A. EXISTING BUILDING AND IMPROVEMENTS. If no material improvements are
to be constructed to the Premises, the "Commencement Date" shall be April 26,
1993. In such event, Tenant acknowledges that (i) it has inspected and accepts
the Premises in its "as is" condition, (ii) the buildings and improvements
comprising the same are suitable for the purpose for which the Premises are
leased, (iii) the Premises are in good and satisfactory condition, and (iv) no
representations as to the repair of the Premises nor promises to alter, remodel
or improve the Premises have been made by Landlord ( unless otherwise expressly
set forth in this Lease).
2. BASE RENT, SECURITY DEPOSIT AND ESCROW DEPOSITS.
A. BASE RENT. Tenant agrees to pay Landlord rent for the Premises, in
advance, without demand, deduction or set off, at the rate of SEE MONTHLY RENTAL
ON EXHIBIT "C" and /100 Dollars ($) per month during the term hereof. One such
monthly installment, plus the other monthly charges set forth in Paragraph 2C
below, shall be due and payable on the date hereof, and like monthly installment
shall be due and payable on or before the first day of each calendar month
succeeding the Commencement Date, except that all payments due hereunder for any
fractional calendar month shall be prorated.
B. SECURITY DEPOSIT. In addition, Tenant agrees to deposit with Landlord
on the date hereof the sum of Four Thousand Seven Hundred Seventy-three and
60/100 Dollars ($4,773.60), which shall be held by Landlord, without obligation
for interest, as security for the performance of Tenant's obligations under this
Lease (the "Security Deposit"), it being expressly understood and agreed that
the Security Deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon occurrence of an Event of Default,
Landlord may use
<PAGE>
all or part of the Security Deposit to pay past due rent or other payments due
Landlord under this Lease or the cost of any other damage, injury, expense or
liability caused by such Event of Default, without prejudice to any other remedy
provided herein or provided by law. On demand, Tenant shall pay Landlord the
amount that will restore the Security Deposit to its original amount. The
Security Deposit shall be deemed the property of Landlord, but any remaining
balance of the Security Deposit shall be returned by Landlord to Tenant when all
of Tenant's present and future obligations under this Lease have been fulfilled.
C. ESCROW DEPOSITS. Without limiting in any way Tenant's other
obligations under this Lease, Tenant agrees to pay to Landlord its Proportionate
Share (as defined in this Paragraph 2C below) of (i) Taxes (hereinafter defined)
payable by Landlord pursuant to Paragraph 3A below, (ii) the cost of utilities
payable by Landlord pursuant to Paragraph 8 below, (iii) Landlord's cost of
maintaining insurance pursuant to Paragraph 9A below, and (iv) Landlord's cost
of maintaining the Premises pursuant to paragraph 5E below and any common area
charges payable by Tenant in accordance with Paragraph 4B below (collectively,
the "Tenant Costs"). During each month of the term of this Lease, on the same
day that rent is due hereunder, Tenant shall deposit in escrow with Landlord an
amount equal to one-twelfth (1/12) of the estimated amount of Tenant's
Proportionate Share of the Tenant Costs. Tenant authorizes Landlord to use the
funds deposited with Landlord under this Paragraph 2C to pay such Tenant Costs.
The initial monthly escrow payments are based upon the estimated amounts for the
year in question and shall be increased or decreased annually to reflect the
projected actual amount of all Tenant Costs. If the Tenant's total escrow
deposits for any calendar year are less than Tenant's actual Proportionate Share
of the Tenant Costs for such calendar year, Tenant shall pay the difference to
Landlord within ten (10) days after demand. If the total escrow deposits of
Tenant for any calendar year are more than Tenant's actual Proportionate Share
of the Tenant Costs for such calendar year, Landlord shall retain such excess
and credit it against Tenant's escrow deposits next maturing after such
determination. In the event the Premises constitute a portion of a multiple
occupancy building (the "Building"), Tenant's "Proportionate Share" with respect
to the Building, as used in this Lease, shall mean a fraction, the numerator of
which is the gross rentable area contained in the Premises and the denominator
of which is the gross rentable area contained in the entire Building. In the
event the Premises or the Building is part of a project or business park owned,
managed or leased by Landlord or an affiliate of Landlord (the "Project"),
Tenant's "Proportionate Share" of the Project, as used in this Lease, shall mean
a fraction, the numerator of which is the gross rentable area contained in the
Premises and the denominator of which is the gross rentable area contained in
all of the buildings (including the Building) within the project.
3. TAXES
A. REAL PROPERTY TAXES. Subject to reimbursement under Paragraph 2C
herein, Landlord agrees to pay all taxes, assessments and governmental charges
of any kind and nature (collectively referred to herein as "Taxes") that accrue
against the Premises, the Building and/or the land of which the Premises or the
Building are a part. If at any time during the term of this Lease there shall
be levied, assessed or imposed on Landlord a capital levy or other tax directly
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<PAGE>
on the rents received therefrom and/or a franchise tax, assessment, levy or
charge measured by or based, in whole or in part, upon such rents from the
Premises and/or the land and improvements of which the Premises are a part, then
all such taxes, assessments, levies or charges, or the part thereof so measured
or based shall be deemed to be included within the term "Taxes" for the purposes
hereof. The Landlord shall have the right to employ a tax consulting firm to
attempt to assure a fair tax burden on the real property within the applicable
taxing jurisdiction. Tenant agrees to pay its Proportionate Share of the cost
to such consultant.
B. PERSONAL PROPERTY TAXES. Tenant shall be liable for all taxes levied
or assessed against any personal property or fixtures placed in or on the
Premises. If any such taxes are levied or assessed against Landlord or
Landlord's property and (i) Landlord pays the same or (ii) the assessed value of
Landlord's property is increased by inclusion of such personal property and
fixtures and Landlord pay the increased taxes, then Tenant shall pay to
Landlord, upon demand, the amount of such taxes.
4. LANDLORD'S REPAIRS AND MAINTENANCE
A. STRUCTURAL REPAIRS. Landlord, at its own cost and expense, shall
maintain the roof, foundation and the structural soundness of the exterior walls
of the Building in good repair, reasonable wear and tear excluded. The term
"walls" as used herein shall not include windows, glass or plate glass, any
doors, special store fronts or office entries, and the term "foundation" as used
herein shall not include loading docks. Tenant shall immediately give Landlord
written notice of defect or need for repairs, after which Landlord shall have
reasonable opportunity to effect such repairs or cure such defect.
B. TENANT'S SHARE OF COMMON AREA CHARGES. Tenant agrees to pay its
Proportionate Share of the cost of (i) maintenance and/or landscaping (including
both maintenance and replacement of landscaping) of any property that is a part
of the Building and/or the Project ; (ii) operating, maintaining and repairing
any property, facilities or services (including without limitation utilities and
insurance therefor) provided for the use of benefit of Tenant or the common use
or benefit of Tenant and other lessees of the Project or the Building; and (iii)
an administrative fee of fifteen percent (15%) of all common area maintenance
charges.
5. TENANT'S REPAIRS.
A. MAINTENANCE OF PREMISES AND APPURTENANCES. Tenant, at its own cost
and expense, shall (i) maintain all parts of the Premises and promptly make all
necessary repairs and replacements to the Premises (except those for which
Landlord is expressly responsible hereunder), and (ii) keep the parking areas,
driveways and alleys surrounding the Premises in a clean and sanitary condition.
Tenant's obligation to maintain, repair and make replacements to the Premises
shall cover, but not be limited to, pest control (including termites), trash
removal and the maintenance, repair and replacement of all HVAC, electrical,
plumbing, sprinkler and other systems.
4
<PAGE>
B. RAILROAD SPUR. Tenant agrees to maintain any spur track servicing the
Premises and to sign a joint maintenance agreement with the railroad company
servicing the Premises if requested by the railroad company. Landlord shall
have the right to coordinate all repairs and maintenance of any rail tracks
serving or intended to serve the Premises and, if Tenant uses such rail tracks,
Tenant shall reimburse Landlord from time to time, upon demand, for its
Proportionate Share of the costs of such repairs and maintenance and any other
sums specified in any agreement respecting such tracks to which Landlord is a
party.
C. PARKING. Tenant and its employees, customers and licenses shall have
the right to use only its Proportionate Share of any parking areas that have
been designated for such use by Landlord in writing, subject to (i) all rules
and regulations promulgated by Landlord, and (ii) rights of ingress and egress
of other lessees. Landlord shall not be responsible for enforcing Tenant's
parking rights against any third parties, and Tenant expressly does not have the
right to tow or obstruct improperly parked vehicles. Tenant agrees not to park
on any public streets or private roadways adjacent to or in the vicinity of the
Premises.
D. SYSTEM MAINTENANCE. Tenant, at its own cost and expense, shall enter
into a regularly scheduled preventative maintenance/service contract with a
maintenance contractor approved by Landlord for servicing all hot water, heating
and air conditioning systems and equipment within the Premises. The service
contract must include all services suggested by the equipment manufacturer in
its operations/maintenance manual and must become effective within thirty (30)
days of the date Tenant takes possession of the Premises.
E. OPTION TO MAINTAIN PREMISES. Landlord reserves the right to perform,
in whole or in part and without notice to Tenant, maintenance, repairs and
replacements to the Premises, paving, common area, landscape, exterior painting,
common sewage line plumbing and any other items that are otherwise Tenant's
obligations under this Paragraph 5, in which event, Tenant shall be liable for
its Proportionate Share of the cost and expense of such repair, replacement,
maintenance and other such items.
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior written consent of Landlord.
Tenant, at its own cost and expense, may erect such shelves, bins, machinery and
trade fixtures as it desires, provided that (i) such items do not alter the
basic character of the Premises or the Building, (ii) such items do not overload
or damage same, (iii) such items may be removed without injury to the Premises,
and (iv) the construction, erection or installation thereof complies with all
applicable governmental laws, ordinances, regulations and with Landlord's
specifications and requirements. Tenant shall be responsible for compliance
with the Americans With Disabilities Act of 1990. Without implying any consent
of Landlord thereto, all alterations, additions, improvements and partitions
erected by Tenant shall be and remain the property of Tenant during the term of
this Lease. All shelves, bins, machinery and trade fixtures installed by Tenant
shall be removed on or before the earlier to occur of the day of termination or
expiration of this Lease or vacating the Premises, at which time Tenant shall
restore the Premises to their original condition. All alterations,
installations, removals and restorations shall be performed in a good and
workmanlike manner so
5
<PAGE>
as not to damage or alter the primary structure or structural qualities of the
Building or other improvements situated on the Premises or of which the
Premises are a part.
7. SIGNS. Any signage Tenant desires for the Premises shall be subject to
Landlord's written approval and shall be submitted to Landlord prior to the
Commencement Date of this Lease. Tenant shall repair, paint and/or replace the
Building fascia surface to which its signs are attached upon Tenant's vacating
the Premises or the removal or alteration of its signage. Tenant shall not,
without Landlord's prior written consent, (i) make any changes to the exterior
of the Premises, such as painting; (ii) install any exterior lights,
decorations, balloons, flags, pennants or banners; or (iii) erect or install any
signs, windows or door lettering, placards, decorations or advertising media of
any type which can be viewed from the exterior of the Premises. All signs,
decorations, advertising media, blinds, draperies and other window treatment or
bars or other security installations visible from outside the Premises shall
conform in all respects to the criteria established by Landlord or shall be
otherwise subject to Landlord's prior written consent.
8. UTILITIES. Landlord agrees to provide normal water and electricity service
to the Premises. Tenant shall pay for all water, gas, heat, light, power,
telephone, sewer, sprinkler charges and other utilities and services used on or
at the Premises, together with any taxes, penalties, surcharges or the like
pertaining to the Tenant's use of the Premises and any maintenance charges for
utilities. Landlord shall have the right to cause any of said services to be
separately metered to Tenant, at Tenant's expense. Tenant shall pay its pro
rata share, as reasonably determined by Landlord, of all charges for jointly
metered utilities. Landlord shall not be liable for any interruption or failure
of utility service on the Premises, and Tenant shall have no rights or claims as
a result of any such failure. In the event water is not separately metered to
Tenant, Tenant agrees that it will not use water and sewer capacity for uses
other than normal domestic restroom and kitchen usage, and Tenant further agrees
to reimburse Landlord for the entire amount of common water and sewer costs as
additional rental if, in fact, Tenant uses water or sewer capacity for uses
other than normal domestic restroom and kitchen uses without first obtaining
Landlord's written permission, including but not limited to the cost for
acquiring additional sewer capacity to service Tenant's excess sewer use.
Furthermore, Tenant agrees in such event to install at its own expense a
submeter to determine Tenant's usage.
9. INSURANCE
A. LANDLORD'S INSURANCE. Subject to reimbursement under Paragraph 2C
herein, Landlord shall maintain insurance covering the Building in an amount not
less than eighty percent (80%) of the "replacement cost" thereof, insuring
against the perils of fire, lightning, extended coverage, vandalism and
malicious mischief.
B. TENANT'S INSURANCE. Tenant, at its own expense, shall maintain during
the term of this Lease a policy or policies of workers' compensation and
comprehensive general liability insurance, including personal injury and
property damage, with contractual liability endorsement, in the amount of Five
Hundred Thousand Dollars ($500,000.00) for property damage and One Million
Dollars ($1,000,000.00) per occurrence and One Million Dollars ($1,000,000.00)
in the
6
<PAGE>
aggregate for personal injuries or deaths of persons occurring in or about the
Premises. Tenant, at its own expense, shall also maintain during the term of
this Lease fire and extended coverage insurance covering the replacement cost of
(i) all alterations, additions, partitions and improvements installed or placed
on the Premises by Tenant or by Landlord on behalf of Tenant; and (ii) all of
Tenant's personal property contained within the Premises. Said policies shall
(i) name the Landlord as an additional insured and insure Landlord's contingent
liability under or in connection with this Lease (except for the workers'
compensation policy, which instead shall include a waiver of subrogation
endorsement in favor of Landlord); (ii) be issued by an insurance company which
is acceptable to Landlord; and (iii) provide that said insurance shall not be
cancelled unless thirty (30) days' prior written notice has been given to
Landlord. Said policy or policies or certificates thereof shall be delivered to
Landlord by Tenant on or before the Commencement Date and upon each renewal of
said insurance.
C. PROHIBITED USES. Tenant will not permit the Premises to be used for
and purposes or in any manner that would (i) void the insurance thereon, (ii)
increase the insurance risk or cost thereof, or (iii) cause the disallowance of
any sprinkler credits; including without limitation, use of the Premises for the
receipt, storage or handling of any product, material or merchandise that is
explosive or highly inflammable. If any increase in the cost of any insurance
on the Premises or the Building is caused by Tenant's use of the Premises or
because Tenant vacates the Premises, then Tenant shall pay the amount of such
increase to Landlord upon demand therefor.
10. FIRE AND CASUALTY DAMAGE.
A. TOTAL OR SUBSTANTIAL DAMAGE AND DESTRUCTION. If the Premises or the
Building should be damaged or destroyed by fire or other peril, Tenant shall
immediately give written notice to Landlord of such damage or destruction. If
the Premises or the Building should be totally destroyed by any peril covered by
the insurance to be provided by Landlord under Paragraph 9A above, or if they
should be so damaged thereby that, in Landlord's estimation, rebuilding or
repairs cannot be completed within one hundred eighty (180) days after the date
of such damage or after such completion there would not be enough time remaining
under the terms of this Lease to fully amortize such rebuilding or repairs, then
this Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease, effective upon the date of the occurrence of such damage.
B. PARTIAL DAMAGE OR DESTRUCTION. If the Premises or the Building should
be damaged by any peril covered by the insurance to be provided by Landlord
under Paragraph 9A above and, in Landlord's estimation, rebuilding or repairs
can be substantially completed within one hundred eighty (180) days after the
date of such damage, then this Lease shall not terminate and Landlord shall
substantially restore the Premises to its previous condition, except that
Landlord shall not be required to rebuild, repair or replace any part of the
partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in or about the Premises for the benefit of,
by or for Tenant.
C. LIENHOLDERS' RIGHTS IN PROCEEDS. Notwithstanding anything herein to
the contrary, in the event the holder of any indebtedness secured by a mortgage
or deed of trust
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covering the Premises requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made known to Landlord by any such holder, whereupon
all rights and obligations hereunder shall cease and terminate.
D. WAIVER OF SUBROGATION. Notwithstanding anything in this Lease to the
contrary, Landlord and Tenant hereby waive and release each other of and from
any and all rights of recovery, claims, actions or causes of action against each
other, or their respective agents, officers and employees, for any loss or
damage that may occur to the Premises, improvements to the Building or personal
property (Building contents) within the Building and/or Premises, for any reason
regardless of cause or origin. Each party to this Lease agrees immediately
after execution of this Lease to give written notice of the terms of the mutual
waivers contained in this subparagraph to each insurance company that has issued
to such party policies of fire and extended coverage insurance and to have the
insurance policies properly endorsed to provide that the carriers of such
policies waive all rights of recovery under subrogation or otherwise against the
other party.
11. LIABILITY AND INDEMNIFICATION. Except for any claims, rights of recovery
and causes of action that Landlord has released, Tenant shall hold Landlord
harmless from and defend Landlord against any and all claims or liability for
any injury or damage (i) to any person or property whatsoever occurring in, on
or about the Premises or any part thereof, the Building and/or other common
areas, the use of which Tenant may have in accordance with this Lease, if (and
only if) such injury or damage shall be caused in whole or in part by the act,
neglect, fault or omission of any duty by Tenant, its agents, servants,
employees or invitees; (ii) arising from the conduct or management of any work
done by the Tenant in or about the Premises; (iii) arising from transactions of
the Tenant; and (iv) all costs, counsel fees, expenses and liabilities incurred
in connection with any such claim or action or proceeding brought thereon. The
provisions of this Paragraph 11 shall survive the expiration or termination of
this Lease. Landlord shall not be liable in any event for personal injury or
loss of Tenant's property caused by fire, flood, water leaks, rain, hail, ice,
snow, smoke, lightning, wind, explosion, interruption of utilities or other
occurrences. Landlord strongly recommends that Tenant secure Tenant's own
insurance in excess of the amounts required elsewhere in this Lease to protect
against the above occurrences if Tenant desires additional coverage for such
risks. Tenant shall give prompt notice to Landlord of any significant accidents
involving injury to persons or property. Furthermore, Landlord shall not be
responsible for lost or stolen personal property, equipment, money or jewelry
from the Premises or from the public areas of the Building or the Project,
regardless of whether such loss occurs when the area is locked against entry.
Landlord shall not be liable to Tenant or Tenant's employees, customers or
invitees for any damages or losses to persons or property caused by any lessees
in the Building or the Project, or for any damages or losses caused by theft,
burglary, assault, vandalism or other crimes. Landlord strongly recommends that
Tenant provide its own security systems and services and secure tenant's own
insurance in excess of the amounts required elsewhere in this Lease to protect
against the above occurrences if Tenant desires additional protection or
coverage for such risks. Tenant shall give Landlord prompt notice of any
criminal or suspicious conduct within or about the Premises, the Building or the
Project and/or
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any personal injury or property damage caused thereby. Landlord may, but is not
obligated to, enter into agreements with third parties for the provision,
monitoring, maintenance and repair of any courtesy patrols or similar services
or fire protective systems and equipment and, to the extent same is provided at
Landlord's sole discretion, Landlord shall not be liable to Tenant for any
damages, costs or expenses which occur for any reason in the event any such
system or equipment is not properly installed, monitored or maintained or any
such services are not properly provided. Landlord shall use reasonable
diligence in the maintenance of existing lighting, if any, in the parking garage
or parking areas servicing the Premises, and Landlord shall not be responsible
for additional lighting or any security measures in the Project, the Premises,
the parking garage or other parking areas.
12. USE. The Premises shall be used only for the purpose of receiving,
storing, shipping and selling (other than retail) products, materials and
merchandise made and/or distributed by Tenant and for such other lawful purposes
as may be directly incidental thereto. Outside storage, including without
limitation storage of trucks and other vehicles, is prohibited without
Landlord's prior written consent. Tenant shall comply with all governmental
laws, ordinances and regulations applicable to the use of the Premises and shall
promptly comply with all governmental orders and directives for the correction,
prevention and abatement of nuisances in, upon or connected with the Premises,
all at Tenant's sole expense. Tenant shall not permit any objectionable or
unpleasant odors, smoke, dust, gas, noise or vibrations to emanate from the
Premises, nor take any other action that would constitute a nuisance or would
disturb, unreasonably interfere with or endanger Landlord or any other lessees
of the Building or the Project.
13. HAZARDOUS WASTE. The term "Hazardous Substances", as used in this Lease,
shall mean pollutants, contaminants, toxic or hazardous wastes, radioactive
materials or any other substances, the use and/or the removal of which is
required or the use of which is restricted, prohibited or penalized by any
"Environmental Law", which term shall mean any federal, state or local statute,
ordinance, regulation or other law of a governmental or quasi-governmental
authority relating to pollution or protection of the environment or the
regulation of the storage or handling of Hazardous Substances. Tenant hereby
agrees that: (i) no activity will be conducted on the Premises that will
produce any Hazardous Substances, except for such activities that are part of
the ordinary course of Tenant's business activities (the "Permitted
Activities"), provided said Permitted Activities are conducted in accordance
with all Environmental Laws and, in connection therewith, Tenant shall be
responsible for obtaining any required permits or authorizations and paying any
fees and providing any testing required by any governmental agency; (ii) the
Premises will not be used in any manner for the storage of any Hazardous
Substances, except for the temporary storage of such materials that are used in
the ordinary course of Tenant's business (the "Permitted Materials"), provided
such Permitted Materials are properly stored in a manner and location meeting
all Environmental Laws and, in connection therewith, Tenant shall be responsible
for obtaining any required permits or authorizations and paying any fees and
providing any testing required by any governmental agency; (iii) no portion of
the Premises will be used as a landfill or a dump; (iv) Tenant will not install
any underground tanks of any type; (v) Tenant will not allow any surface or
subsurface conditions to exist or come
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into existence that constitute, or with the passage of time may constitute, a
public or private nuisance; and (vi) Tenant will not permit any Hazardous
Substances to be brought onto the Premises, except for the Permitted Materials,
and if so brought or found located thereon, the same shall be immediately
removed, with proper disposal, and all required clean-up procedures shall be
diligently undertaken by Tenant at its sole cost pursuant to all Environmental
Laws. Landlord and Landlord's representatives shall have the right but not the
obligation to enter the Premises for the purpose of inspecting the storage, use
and disposal of any Permitted Materials to ensure compliance with all
Environmental Laws. Should it be determined, in Landlord's sole opinion, that
any Permitted Materials are being improperly stored, used or disposed of, then
Tenant shall immediately take such corrective action as requested by Landlord.
Should Tenant fail to take such corrective action within twenty four (24) hours,
Landlord shall have the right to perform such work and Tenant shall reimburse
Landlord, on demand, for any and all costs associated with said work. If at any
time during or after the term of this Lease, the Premises is found to be
contaminated with Hazardous Substances, Tenant shall diligently institute proper
and thorough clean-up procedures, at Tenant's sole cost. Tenant agrees to
indemnify and hold Landlord harmless from all claims, demands, actions,
liabilities, costs, expenses, damages, penalties and obligations of any nature
arising from or as a result of any contamination of the Premises with Hazardous
Substances, or otherwise arising from the use of the Premises by Tenant. The
foregoing indemnification and the responsibilities of Tenant shall survive the
termination or expiration of this Lease.
14. INSPECTION. Landlord's agents and representatives shall have the right to
enter the Premises at any reasonable time during business hours (or at any time
in case of emergency) (i) to inspect the Premises, (ii) to make such repairs as
may be required or permitted pursuant to this Lease, and/or (iii) during the
last six (6) months of the Lease term, for the purpose of showing the Premises.
In addition, Landlord shall have the right to erect a suitable sign on the
Premises stating the Premises are available for lease. Tenant shall notify
Landlord in writing at least thirty (30) days prior to vacating the Premises and
shall arrange to meet with Landlord for a joint inspection of the Premises prior
to vacating. If Tenant fails to give such notice or to arrange for such
inspection, then Landlord's inspection of the Premises shall be deemed correct
for the purpose of determining Tenant's responsibility for repairs and
restoration of the Premises.
15. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to sublet,
assign or otherwise transfer or encumber this Lease, or any interest therein,
without the prior written consent of Landlord. Any attempted assignment,
subletting, transfer or encumbrance by Tenant in violation of the terms and
covenants of this paragraph shall be void. Any assignee, sublessee or
transferee of Tenant's interest in this Lease (all such assignees, sublessees
and transferees being hereinafter referred to as "Transferees"), by assuming
Tenant's obligations hereunder, shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such Transferees to which
Landlord is entitled or is otherwise in contravention of this Paragraph 15. No
assignment, subletting or other transfer, whether or not consented to by
Landlord or permitted hereunder, shall relieve Tenant of its liability under
this Lease. If an Event of Default occurs while the Premises or any part
thereof are assigned or sublet, then Landlord, in addition to any other remedies
herein provided or provided by law, may collect directly from such Transferee
all
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rents payable to the Tenant and apply such rent against any sums due Landlord
hereunder. No such collection shall be construed to constitute a novation or a
release of Tenant from the further performance of Tenant's obligations
hereunder. If Landlord consents to any subletting or assignment by Tenant as
hereinabove provided and any category of rent subsequently received by Tenant
under any such sublease is in excess of the same category of rent payable under
this Lease, or any additional consideration is paid to Tenant by the assignee
under any such assignment, then Landlord may, at its option, declare such excess
rents under any sublease or such additional consideration for any assignment to
be due and payable by Tenant to Landlord as additional rent hereunder. The
following shall additionally constitute an assignment of this Lease by Tenant
for the purposes of this Paragraph 15: (i) if Tenant is a corporation, any
merger, consolidation, dissolution or liquidation, or any change in ownership or
power to vote of thirty percent (30%) or more of Tenant's outstanding voting
stock; (ii) if Tenant is a partnership, joint venture or other entity, any
liquidation, dissolution or transfer of ownership of any interests totaling
thirty percent (30%) or more of the total interests in such entity; (iii) the
sale, transfer, exchange, liquidation or other distribution of more than thirty
percent (30%) of Tenant's assets, other than this Lease; or (iv) the mortgage,
pledge, hypothecation or other encumbrance of or grant of a security interest by
Tenant in this Lease, or of any of Tenant's rights hereunder.
16. CONDEMNATION. If more than eighty percent (80%) of the Premises are taken
for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain or private purchase in lieu thereof,
and the taking prevents or materially interferes with the use of the remainder
of the Premises for the purpose for which they were leased to Tenant, then this
Lease shall terminate and the rent shall be abated during the unexpired portion
of this Lease, effective on the date of such taking. If less than eighty
percent (80%) of the Premises are taken for any public or quasi-public use under
any governmental law, ordinance or regulation, or by right of eminent domain or
private purchase in lieu thereof, or if the taking does not prevent or
materially interfere with the use of the remainder of the Premises for the
purpose for which they were leased to Tenant, then this Lease shall not
terminate, but the rent payable hereunder during the unexpired portion of this
Lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances. All compensation awarded in connection with or as a result
of any of the foregoing proceedings shall be the property of Landlord, and
Tenant hereby assigns any interest in any such award to Landlord; provided,
however, Landlord shall have no interest in any award made to Tenant for loss of
business or goodwill or for the taking of Tenant's trade fixtures and personal
property, if a separate award for such items is made to Tenant.
17. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Tenant shall immediately deliver possession of the Premises to
Landlord with all repairs and maintenance required herein to be performed by
Tenant completed. If, for any reason, Tenant retains possession of the Premises
after the expiration or termination of this Lease, unless the parties hereto
otherwise agree in writing, such possession shall be deemed to be a tenancy at
will only, and all of the other terms and provisions of this Lease shall be
applicable during such period, except that Tenant shall pay Landlord from time
to time, upon demand, as rental for the period of such possession, an amount
equal to one and one-half (1 1/2) times the rent if in effect
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on the date of such termination of this Lease, computed on a daily basis for
each day of such period. No holding over by Tenant, whether with or without
consent of Landlord, shall operate to extend this Lease except as otherwise
expressly provided. The preceding provisions of this Paragraph 17 shall not be
construed as consent for Tenant to retain possession of the Premises in the
absence of written consent thereto by Landlord.
18. QUIET ENJOYMENT. Landlord represents that it has the authority to enter
into this Lease and that, so long as Tenant pays all amounts due hereunder and
performs all other covenants and agreements herein set forth, Tenant shall
peaceably and quietly have, hold and enjoy the Premises for the term hereof
without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease.
19. EVENTS OF DEFAULT The following events (herein individually referred to as
an "Event of Default") each shall be deemed to be a default in or breach of
Tenant's obligations under this Lease:
A. Tenant shall fail to pay an installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due, and such failure shall continue for a period of five (5) days from the date
such payment was due.
B. Tenant shall (i) vacate or abandon all or a substantial portion of the
Premises or (ii) fail to continuously operate its business at the Premises for
the permitted use set forth herein, in either event whether or not Tenant is in
default of the rental payments due under this Lease.
C. Tenant shall fail to discharge any lien placed upon the Premises in
violation of Paragraph 22 hereof within twenty (20) days after any such lien or
encumbrance is filed against the Premises.
D. Tenant shall default in the performance of any of its obligations
under any other lease to Tenant from Landlord, or from any person or entity
affiliated with or related to Landlord, and same shall remain uncured after the
lapsing from any applicable cure periods provided for under such other lease.
E. Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than those listed above in this paragraph) and shall not cure
such failure within twenty (20) days after written notice thereof from Landlord.
20. REMEDIES. Upon each occurrence of an Event of Default, Landlord shall have
the option to pursue any one or more of the following remedies without any
notice or demand:
(a) Terminate this Lease;
(b) Enter upon and take possession of the Premises without terminating
this Lease;
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(c) Make such payments and/or take such action and pay and/or perform
whatever Tenant is obligated to pay or perform under the terms of this Lease,
and Tenant agrees that Landlord shall not be liable for any damages resulting to
Tenant from such action; and/or
(d) Alter all locks and other security devices at the Premises, with or
without terminating this Lease, and pursue, at Landlord's option, one or more
remedies pursuant to this Lease, and Tenant hereby expressly agrees that
Landlord shall not be required to provide to Tenant the new key to the Premises,
regardless of hour, including Tenant's regular business hours;
and in any such event Tenant shall immediately vacate the Premises, and if
Tenant fails to do so, Landlord, without waiving any other remedy it may have,
may enter upon and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying such Premises or any part thereof,
without being liable for prosecution or any claim of damages therefore. In the
event of any violation of Section 93.002 of the Texas Property Code by Landlord
or by any agent or employee of Landlord, Tenant hereby expressly waives any and
all rights Tenant may have under Paragraph (g) of such Section 93.002.
A. DAMAGES UPON TERMINATION. If Landlord terminates this Lease at
Landlord's option, Tenant shall be liable for and shall pay to Landlord the sum
of all rental and other payments owed to Landlord hereunder accrued to the date
of such termination, plus, as liquidated damages, an amount equal to (i) the
present value of the total rental and other payments owed hereunder for the
remaining portion of the Lease term, calculated as if such term expired on the
date set forth in Paragraph 1, less (ii) the present value of the then fair
market rental for the Premises for such period, provided that, because of the
difficulty of ascertaining such value and in order to achieve a reasonable
estimate of liquidated damages hereunder, Landlord and Tenant stipulate and
agree, for the purposes hereof, that such fair market rental shall in no event
exceed seventy-five percent (75%) of the rental amount for such period set forth
in Paragraph 2 above.
B. DAMAGES UPON REPOSSESSION. If Landlord repossesses the Premises
without terminating this Lease, Tenant, at Landlord's option, shall be liable
for and shall pay Landlord on demand all rental and other payments owed to
Landlord hereunder, accrued to the date of such repossession, plus all amounts
required to be paid by Tenant to Landlord until the date of expiration of the
term as stated in Paragraph 1, diminished by all amounts actually received by
Landlord through reletting the Premises during such remaining term (but only to
the extent of the rent herein reserved). Actions to collect amounts due by
Tenant to Landlord under this paragraph may be brought from time to time, on one
or more occasions, without the necessity of Landlord's waiting until expiration
of the Lease term.
C. COSTS OF RELETTING, REMOVING, REPAIRS AND ENFORCEMENT. Upon an Event
of Default, in addition to any sum provided to be paid under this Paragraph 20,
Tenant also shall be liable for and shall pay to Landlord (i) brokers' fees and
all other costs and expenses incurred by Landlord in connection with reletting
the whole or any part of the Premises; (ii) the costs of removing, storing or
disposing of Tenant's or any other occupant's property; (iii) the costs of
repairing, altering, remodeling or otherwise putting the Premises into condition
acceptable to a
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new tenant or tenants; (iv) any and all costs and expenses incurred by Landlord
in effecting compliance with Tenant's obligation under this Lease; and (v) all
reasonable expenses incurred by Landlord in enforcing or defending Landlord's
rights and/or remedies hereunder, including without limitation all reasonable
attorneys' fees and all court costs incurred in connection with such enforcement
or defense.
D. LATE CHARGE. In the event Tenant fails to make any payment due
hereunder within five (5) days after such payment is due, including without
limitation any rental or escrow payment, in order to help defray the additional
cost to Landlord for processing such late payments and not as interest, Tenant
shall pay to Landlord on demand a late charge in an amount equal to five percent
(5%) of such payment. The provision for such late charge shall be in addition
to all of Landlord's other rights and remedies hereunder or at law, and shall
not be construed as liquidated damages or as limiting Landlord's remedies in any
manner.
E. INTEREST ON PAST DUE AMOUNTS. If Tenant fails to pay any sum which at
any time becomes due to Landlord under any provision of this Lease as and when
the same becomes due hereunder, and such failure continues for ten (10) days
after the due date for such payment, then Tenant shall pay to Landlord interest
on such overdue amounts from the date due until paid at an annual rate which
equals the lesser of (i) eighteen percent (18%) or (ii) the highest rate then
permitted by law.
F. NO IMPLIED ACCEPTANCES OR WAIVERS. Exercise by Landlord of any one or
more remedies hereunder granted or otherwise available shall not be deemed to be
an acceptance by Landlord of Tenant's surrender of the Premises, it being
understood that such surrender can be effected only by the written agreement of
Landlord. Tenant and Landlord further agree that forbearance by Landlord to
enforce any of its rights under this Lease or at law or in equity shall not be a
waiver of Landlord's right to enforce any one or more of its rights, including
any right previously forborne, in connection with any existing or subsequent
default. No re-entry or taking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease, unless a written
notice of such intention is given to Tenant, and notwithstanding any such
reletting or re-entry or taking possession of the Premises, Landlord may at any
time thereafter elect to terminate this Lease for a previous default. Pursuit
of any remedies hereunder shall not preclude the pursuit of any other remedy
herein provided or any other remedies provided by law, nor shall pursuit of any
remedy herein provided constitute a forfeiture or waiver of any rent due to
Landlord hereunder or of any damages occurring to Landlord by reason of the
violation of any of the terms, provisions and covenants contained in this Lease.
Landlord's acceptance of any rent following an Event of Default hereunder shall
not be construed as Landlord's waiver of such Event of Default. No waiver by
Landlord of any violation or breach of any of the terms, provisions and
covenants of this Lease shall be deemed or construed to constitute a waiver of
any other violation or default.
G. RELETTING OF PREMISES. In the event of any termination of this Lease
and/or repossession of the Premises for an Event of Default, Landlord shall use
reasonable efforts to relet the Premises and to collect rental after reletting,
with no obligation to accept any lessee that
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Landlord deems undesirable or to expend any funds in connection with such
reletting or collection of rents therefrom. Tenant shall not be entitled to
credit for or reimbursement of any proceeds of such reletting in excess of the
rental owed hereunder for the period of such reletting. Landlord may relet the
whole or any portion of the Premises, for any period, to any tenant and for any
use or purpose.
H. LANDLORD'S DEFAULT. If Landlord fails to perform any of its
obligations hereunder within thirty (30) days after written notice from Tenant
specifying such failure, Tenant's exclusive remedy shall be an action for
damages. Unless and until Landlord fails to so cure any default after such
notice, Tenant shall not have any remedy or cause of action by reason thereof.
All obligations of Landlord hereunder will be construed as covenants, not
conditions; and all such obligations will be binding upon Landlord only during
the period of its possession of the premises and not thereafter. The term
"Landlord" shall mean only the owner, for the time being, of the Premises and,
in the event of the transfer by such owner of its interest in the Premises, such
owner shall thereupon be released and discharged from all covenants and
obligations of the Landlord thereafter accruing, provided that such covenants
and obligations shall be binding during the Lease term upon each new owner for
the duration of such owner's ownership. Notwithstanding any other provision of
this Lease, Landlord shall not have any personal liability hereunder. In the
event of any breach or default by Landlord in any term or provision of this
Lease, Tenant agrees to look solely to the equity or interest then owned by
Landlord in the Premises or the Building; however in no event shall any
deficiency judgment or any money judgment of any kind be sought or obtained
against any Landlord.
I. TENANT'S PERSONAL PROPERTY. If Landlord repossesses the Premises
pursuant to the authority herein granted, or if Tenant vacates or abandons all
or any part of the Premises, then, in addition to Landlord's rights under
Paragraph 27 hereof, Landlord shall have the right to (i) keep in place and use,
or (ii) remove and store, all of the furniture, fixtures and equipment at the
Premises, including that which is owned by or leased to Tenant, at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon. In addition to the
Landlord's other rights hereunder, Landlord may dispose of the stored property
if Tenant does not claim the property within ten (10) days after the date the
property is stored. Landlord shall give Tenant at least ten (10) days' prior
written notice of such intended disposition. Landlord shall also have the right
to relinquish possession of all or any portion of such furniture, fixtures,
equipment and other property to any person ("Claimant") who presents to Landlord
a copy of any instrument represented by Claimant to have been executed by Tenant
(or any predecessor of Tenant) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or other
property, without the necessity on the part of Landlord to inquire into the
authenticity or legality of said instrument. The rights of Landlord herein
stated shall be in addition to any and all other rights that Landlord has or may
hereafter have at law or in equity, and Tenant stipulates and agrees that the
rights granted Landlord under this paragraph are commercially reasonable.
21. MORTGAGES. Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises
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or the improvements situated thereon or the Building, provided, however, that if
the mortgagee, trustee or holder of any such mortgage or deed of trust elects to
have Tenant's interest in this Lease superior to any such instrument, then by
notice to Tenant from such mortgagee, trustee or holder, this Lease shall be
deemed superior to such lien, whether this Lease was executed before or after
said mortgage or deed of trust. Tenant, at any time hereafter on demand, shall
execute any instruments, releases or other documents that may be required by any
mortgagee, trustee or holder for the purpose of subjecting and subordinating
this Lease to the lien of any such mortgage. Tenant shall not terminate this
Lease or pursue any other remedy available to Tenant hereunder for any default
on the part of Landlord without first giving written notice by certified or
registered mail, return receipt requested, to any mortgagee, trustee or holder
of any such mortgage or deed of trust, the name and post office address of which
Tenant has received written notice, specifying the default in reasonable detail
and affording such mortgagee, trustee or holder a reasonable opportunity (but in
no event less than thirty (30) days) to make performance, at its election, for
and on behalf of Landlord.
22. MECHANIC'S LIENS. Tenant has no authority, express or implied, to create
or place any lien or encumbrance of any kind or nature whatsoever upon, or in
any manner to bind, the interest of Landlord or Tenant in the Premises. Tenant
will save and hold Landlord harmless from any and all loss, cost or expense,
including without limitation attorneys' fees, based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Landlord in the Premises or under the terms of this
Lease.
23. MISCELLANEOUS.
A. INTERPRETATION. The captions inserted in this Lease are for
convenience only and in no way define, limit or otherwise describe the scope or
intent of this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease. Any reference in this Lease to rentable area
shall mean the gross rentable area as determined by the roofline of the building
in question.
B. BINDING EFFECT. Except as otherwise herein expressly provided, the
terms, provisions and covenants and conditions in this Lease shall apply to,
inure to the benefit of and be binding upon the parties hereto and upon their
respective heirs, executors, personal representatives, legal representatives,
successors and assigns. Landlord shall have the right to transfer and assign,
in whole or in part, its rights and obligations in the Premises and in the
Building and other property that are the subject of this Lease.
C. EVIDENCE OF AUTHORITY. Tenant agrees to furnish to Landlord, promptly
upon demand, a corporate resolution, proof of due authorization by partners or
other appropriate documentation evidencing the due authorization of such party
to enter into this Lease.
D. FORCE MAJEURE. Landlord shall not be held responsible for delays in
the performance of its obligations hereunder when caused by material shortages,
acts of God, labor disputes or other events beyond the control of Landlord.
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E. PAYMENTS CONSTITUTE RENT. Notwithstanding anything in this Lease to
the contrary, all amounts payable by Tenant to or on behalf of Landlord under
this Lease, whether or not expressly denominated as rent, shall constitute rent.
F. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time, within ten
(10) days after request of Landlord to deliver to Landlord, or Landlord's
designee, an estoppel certificate stating that this Lease is in full force and
effect, the date to which rent has been paid, the unexpired term of this Lease,
any defaults existing under this Lease (or the absence thereof) and such other
factual or legal matters pertaining to this Lease as may be requested by
Landlord. It is understood and agreed that Tenant's obligation to furnish such
estoppel certificates in a timely fashion is a material inducement or Landlord's
execution of this Lease.
G. ENTIRE AGREEMENT. This lease constitutes the entire understanding and
agreement of Landlord and Tenant with respect to the subject matter of this
Lease, and contains all of the covenants and agreements of Landlord and Tenant
with respect thereto. Landlord and Tenant each acknowledge that no
representations, inducements, promises or agreements, oral or written, have been
made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant,
which are not contained herein, and any prior agreements, promises, negotiations
or representations not expressly set forth in this Lease are of no force or
effect. EXCEPT AS SPECIFICALLY PROVIDED IN THIS LEASE, TENANT HEREBY WAIVES THE
BENEFIT OF ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE
FOR ANY PARTICULAR PURPOSE. Landlord's agents and employees do not and will not
have authority to make exceptions, changes or amendments to this Lease, or
factual representations not expressly contained in this Lease. Under no
circumstances shall Landlord or Tenant be considered an agent of the other.
This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.
H. SURVIVAL OF OBLIGATIONS. All obligations of Tenant hereunder not
fully performed as of the expiration or earlier termination of the term of this
Lease shall survive the expiration or earlier termination of the term hereof,
including without limitation all payment obligations with respect to taxes and
insurance and all obligations concerning the condition and repair of the
Premises. Upon the expiration or earlier termination of the term hereof, and
prior to Tenant vacating the Premises, Tenant shall pay to Landlord any amount
reasonably estimated by Landlord as necessary to put the Premises in good
condition and repair, reasonable wear and tear excluded, including without
limitation the cost of repairs to and replacements of all heating and air
conditioning systems and equipment therein. Tenant shall also, prior to
vacating the Premises, pay to Landlord the amount, as estimated by Landlord, of
Tenant's obligation hereunder for real estate taxes and insurance premiums for
the year in which the Lease expires or terminates. All such amounts shall be
used and held by Landlord for payment of such obligations of Tenant hereunder,
with Tenant being liable for any additional costs therefore upon demand by
Landlord, or with any excess to be returned to Tenant after all such obligations
have been determined and satisfied, as the case may be. Any Security Deposit
held by Landlord may,
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at Landlord's option, be credited against any amounts due from Tenant under this
Paragraph 23H.
I. SEVERABILITY OF TERMS. If any clause or provision of this Lease is
illegal, invalid or unenforceable under present or future laws effective during
the term of this Lease, then, in such event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby, and it is
also the intention of the parties to this Lease that in lieu of each clause or
provision of this Lease that is illegal, invalid or unenforceable, there be
added, as a part of this Lease, a clause or provision as similar in terms to
such illegal, invalid or unenforceable clause or provision as may be possible
and be legal, valid and enforceable.
J. EFFECTIVE DATE. All references in this Lease to "the date hereof" or
similar references shall be deemed to refer to the last date, in point of time,
on which all parties hereto have executed this Lease.
K. BROKERS' COMMISSION. Tenant represents and warrants that it has dealt
with and will deal with no broker, agent or other person in connection with this
transaction or future related transactions and that no broker, agent or other
person brought about this transaction, and Tenant agrees to indemnify and hold
Landlord harmless from and against any claims by any broker, agent or other
person claiming a commission or other form of compensation by virtue of having
dealt with Tenant with regard to this leasing transaction.
L. AMBIGUITY. Landlord and Tenant hereby agree and acknowledge that this
Lease has been fully reviewed and negotiated by both Landlord and Tenant, and
that Landlord and Tenant have each had the opportunity to have this Lease
reviewed by their respective legal counsel, and, accordingly, in the event of
any ambiguity herein, Tenant does hereby waive the rule of construction that
such ambiguity shall be resolved against the party who prepared this Lease.
M. JOINT SEVERAL LIABILITY. If there be more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several. If there
be a guarantor of Tenant's obligations hereunder, the obligations hereunder
imposed upon Tenant shall be joint and several obligations of Tenant and such
guarantor, and Landlord need not first proceed against Tenant before proceeding
against such guarantor, nor shall any such guarantor be released from its
guaranty for any reason whatsoever, including, without limitation, in case of
any amendments hereto, waivers hereof or failure to give such guarantor any
notices hereunder.
N. THIRD PARTY RIGHTS. Nothing herein expressed or implied is intended,
or shall be construed, to confer upon or give to any person or entity, other
than the parties hereto, any right or remedy under or by reason of this Lease.
O. EXHIBITS AND ATTACHMENTS. All exhibits, attachments, riders and
addenda referred to in this Lease, and the exhibits listed herein below and
attached hereto, are incorporated into this Lease and made a part hereof for all
intents and purposes as if fully set out herein. All
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capitalized terms used in such documents shall, unless otherwise defined
therein, have the same meanings as are set forth herein.
P. APPLICABLE LAW. This Lease has been executed in the State of Texas
and shall be governed in all respects by the laws of the State of Texas. It is
the intent of Landlord and Tenant to conform strictly to all applicable State
and federal usury laws. All agreements between Landlord and Tenant, whether now
existing or hereafter arising and whether written or oral, are hereby expressly
limited so that in no contingency or event whatsoever shall the amount
contracted for, charged or received by Landlord for the use, forbearance or
retention of money hereunder or otherwise exceed the maximum amount which
Landlord is legally entitled to contract for, charge or collect under the
applicable state or federal law. If, from any circumstance whatsoever,
fulfillment of any provision hereof at the time performance of such provision
shall be due shall involve transcending the limit of validity prescribed by law,
then the obligation to be fulfilled shall be automatically reduced to the limit
of such validity, and if from any such circumstance Landlord shall ever receive
as interest or otherwise an amount in excess of the maximum that can be legally
collected, then such amount which would be excessive interest shall be applied
to the reduction of rent hereunder, can be legally collected, then such amount
which would be excessive interest shall be applied to the reduction of rent
hereunder, and if such amount which would be excessive interest exceeds such
rent, then such additional amount shall be refunded to Tenant.
24. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivering of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
(i) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address for Landlord set
forth below or at such other address as Landlord may specify from time to time
by written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this Lease shall not
be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
(ii) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address set forth below, or at such other
address within the continental United States as Tenant may specify from time to
time by written notice delivered in accordance herewith.
(iii) Except as expressly provided herein, any written notice, document
or payment required or permitted to be delivered hereunder shall be deemed to be
delivered when received or, whether actually received or not, when deposited in
the United States Mail, postage prepaid, Certified or Registered Mail, addressed
to the parties hereto at the respective addresses set out below, or at such
other address as they have theretofore specified by written notice delivered in
accordance herewith.
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25. ADDITIONAL PROVISIONS. See EXHIBIT "C" attached hereto and incorporated
herein by reference.
26. GUARANTY OF LEASE. Gary Pankonien shall execute and deliver to Landlord,
upon execution of this Lease, a Guaranty of Lease in the form of EXHIBIT "D"
attached hereto.
EXECUTED BY LANDLORD, this 18 day of May, 1993.
AETNA LIFE INSURANCE COMPANY
By: /s/ JAMES G. HUGHES
Attest/Witness Title: Director
Address: c/o Trammel Crow Central Texas Inc.
- - ------------------------- 301 Congress Ave., Suite 1300, Austin, TX 78701
Title:
- - -------------------------
EXECUTED BY TENANT, this __________ day of ____________, 19___.
1ST TECH CORPORATION
By: /s/ GARY PANKONIEN
Attest/Witness Title: CEO
/s/ DONALD R. TURNER Address: 12201 Technology Boulevard, Suite 130
- - -------------------- Austin, Texas 78727
Title: CFO
EXHIBIT "A" - Description of Premises
EXHIBIT "C" - Additional Provisions
EXHIBIT "D" - Guaranty of Lease
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EXHIBIT "A"
BUILDING: McNeil #3
LEGAL DESCRIPTION: Lot 4, McNeil Road Commercial Subdivision,
Section 2, acres 4.7429
ADDRESS: 12201 Technology Boulevard, Suite 130
Austin, Texas 78727
[Drawing of Premises, showing Leased Space, Expansion Space and
Right of First Refusal Space]
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EXHIBIT "C"
ADDITIONAL PROVISIONS
MORTGAGEE PROTECTION CLAUSE
Tenant agrees to give any Mortgagees and/or Trust Deed Holders, by Registered
Mail, a copy of any Notice of Default served upon the Landlord, provided that
prior to such notice Tenant has been notified, in writing (by way of Notice of
Assignment of Rents and Leases, or otherwise), of the address of such Mortgagees
and/or Trust Deed Holders. Tenant further agrees that if Landlord shall have
failed to cure such default within the time provided for in this Lease, then the
Mortgagees and/or Trust Deed Holders shall have an additional thirty (30) days
within which to cure such default or if such default cannot be cured within that
time, then such additional time as may be necessary if within such thirty (30)
days, any Mortgagee and/or Trust Deed Holder has commenced and is diligently
pursuing the remedies necessary to cure such default (including but not limited
to commencement of foreclosure proceedings, if necessary to effect such cure),
in which event this Lease shall not be terminated while such remedies are being
so diligently pursued.
TOXIC WASTE
Tenant covenants not to introduce any form of hazardous or toxic materials onto
the Premises without complying with all applicable Federal, State and local laws
or ordinances pertaining to the transportation, storage, use or disposal of such
material, including but not limited to obtaining proper permits.
If Tenant's transportation, storage, use or disposal of hazardous or toxic
materials on the Premises results in: 1) contamination of the soil or surface
or ground water; or 2) loss or damage to person(s) or property, then Tenant
agrees to respond in accordance with the following paragraph.
Tenant agrees: (i) to notify Landlord immediately of any contamination, claim
of contamination, loss or damage; (ii) after consultation and approval by
Landlord, to clean up the contamination in full compliance with all applicable
statues, regulations and standards; and (iii) to indemnify claims, suits, causes
of action, costs and fees, including attorneys' fees, arising from or connected
with any such contamination, claim of contamination, loss or damage. These
provisions shall survive termination of this Lease.
EXPANSION CLAUSE
Tenant shall expand into an additional 6,000 square feet on 9/1/93 contiguous to
Tenants' existing space a rental rate as described below.*
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EXHIBIT "C"
ADDITIONAL PROVISIONS
CONTINUED
MONTHLY BASE RENTAL
The monthly base shall be as follows plus property taxes, common area
maintenance, and insurance as provided in the Lease:
Rental Period Original Expansion Per Total Monthly
Space Space Square Base Rent
6,180 s.f. 6,000 s.f. Foot 12,180 s.f.
4/26/93 - 8/31/93 $3,213.60 ---- 0.52 $3,213.60
9/1/93 - 4/25/95 $3,213.60 $3,120.00 0.52 $6,333.60
4/26/95- 4/25/97 $3,275.40 $3,180.00 0.53 $6,455.40
4/26/97- 4/30/98 $3,399.00 $3,300.00 0.55 $6,699.00
TENANT FINISH ALLOWANCE
Landlord shall provide a tenant finish allowance of $60,000.00 to be
applied toward interior improvements for the expansion space of 6,000 square
feet. Such construction shall commence by August 1, 1993, Tenant shall
reimburse Landlord for the amount of tenant improvements provided by Landlord in
excess of the finish-out allowance of $60,000.00. This amount shall be due and
payable within fifteen (15) days from receipt of invoice. In the event any such
amount is not paid within fifteen (15) days, the unpaid amount shall bear
interest at the rate of fifteen (15%) percent per annum from the due date until
payment is made by Tenant.
All improvements must comply with Landlords STANDARDS AND SPECIFICATIONS FOR
OFFICE/WAREHOUSE BUILDINGS and all applicable governmental regulations. Prior
to beginning construction of any improvements, Tenant shall submit architectural
drawings of the proposed improvements to Landlord and shall obtain Landlord's
written consent to begin construction.
RIGHT OF FIRST REFUSAL
Landlord is the owner of the herein demised premised and "expansion space," as
well as the adjacent 3,000 square feet of space, It is agreed that Tenant shall
have the right of first refusal to
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EXHIBIT "C"
ADDITIONAL PROVISIONS
CONTINUED
lease the adjacent space from the Landlord subject to the existing leases in
place. In the event a prospective tenant desires to lease this space from
Landlord, Landlord shall notify Tenant thereof in the manner provided herein for
notice, whereupon Tenant shall have five (5) days after receipt of such notice
in which to elect to exercise Tenant's right of first refusal. In the event
Tenant fails to give Landlord written notice of Tenant's election to lease the
adjacent space within said five (5) day period, Tenant shall have no further
right, title or interest in the adjacent space and this right of first refusal
shall terminate and be of no further force and effect. If, on the other hand,
Tenant exercises its right of first refusal in the manner provided above, the
lease of the adjacent property shall be consummated at a fair market rental
rate.
RENEWAL OPTION
Tenant shall have the right and option to renew this Lease for one (1)
additional five (5) year term by delivering written notice thereof to Landlord
at least One Hundred Eighty (180) days prior to the expiration date of the lease
term, provided that at the time of such notice and at the end of the lease term,
Tenant is not in default hereunder. Upon the delivery of said notice and
subject to the conditions set forth in the preceding sentence, this Lease shall
be extended upon the same terms, covenants and conditions as provided in this
Lease, except that the rental payable during said extended term shall be the
prevailing market rental rate for space of comparable size, quality and location
at the commencement of such extended term. If a conflict arises in the
determination of such a FMV rental rate, a three-member committee, selected from
the Austin Board of Realtors, shall determine the FMV rental rate. The first
two members of such committee shall be selected by Landlord and Tenant
respectively, which two members shall select the third. In no event shall the
rate decrease below the rate Tenant is currently paying.
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EXHIBIT "D"
GUARANTY OF LEASE
THIS GUARANTY given by Gary Pankonien (hereinafter called the "Guarantors,"
whether one or more) to AEtna Life Insurance Company (hereinafter called the
"Landlord"):
WITNESSETH:
In order to induce the Landlord to lease to 1st Tech Corporation (hereinafter
with its successors and assigns referred to as the "Tenant") certain premises in
the Landlord's building to be (or which has been) constructed on land situated
at 12191 Technology Boulevard, in Austin, Texas, and being described in and
pursuant to a certain Lease Agreement dated March 8, 1990 (which lease, together
with any and all present and future modifications, amendments, renewals and
extensions thereof, is hereinafter referred to as the "Lease"), the Guarantors
agree as follows:
1. The Guarantors do hereby jointly and severally unconditionally, irrevocably
and absolutely guarantee to the Landlord the full, prompt and complete payment
by the Tenant of the rent and all other sums which may now or hereafter be
payable by the Tenant under or by reason of the Lease, and the full, prompt and
complete performance by the Tenant of all and singular the terms, covenants,
conditions and provisions in the Lease required to be performed by the Tenant,
without regard to any forbearance, delay, neglect or failure on the part of the
Landlord in enforcing same up to a maximum amount of Sixty thousand and 00/100
($60,000.00). This Guarantee of Lease shall expire on April 30, 1994.
2. The Guarantors do hereby waive notice of acceptance hereof and any and all
other notices which by law or under the terms and provisions of the Lease are
required to be given to the Tenant, and also waive any demand for or notice of
default of the payment of rent and other sums which may be payable by the Tenant
under the Lease and the performance of all and singular the terms, covenants,
conditions and provisions in the Lease required to be performed by the Tenant;
and the Guarantors do further expressly hereby waive an legal obligation, duty
or necessity for the Landlord to proceed first against the Tenant or to exhaust
any remedy the Landlord may have against the Tenant, it being agreed that, in
the event of a default or Event of Default by or with respect to the Tenant
under the Lease, the Landlord may proceed and have right of action solely
against either the Guarantors (or any of them) or the Tenant or jointly against
the Guarantors (or any of them) and the Tenant.
3. If the Tenant shall become insolvent, shall be adjudicated bankrupt or
shall file a petition for reorganization, arrangement or similar relief under
any present or future provision of any federal or state bankruptcy or similar
law, or if any such petition filed by creditors of the Tenant shall be approved
by a court, or if the Tenant shall seek a judicial readjustment of the rights of
its creditors under any present or future federal or state law, or if a receiver
of all or part of its property and assets is appointed by any state or federal
court, then, in any of such events, the Guarantors' liability under this
Guaranty shall not be affected in any way thereby and, if in any
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such proceeding the Lease shall be terminated or rejected or the obligations of
the Tenant thereunder shall be modified, then, at the option of Landlord, the
Guarantors shall immediately pay to the Landlord (a) an amount equal to all
fixed, contingent and additional rent and other payments which have accrued and
remain unpaid as of and including the date of such termination, rejection or
modification, plus (b) an amount equal to the then cash value of the fixed,
contingent and additional rent and other payments which would have been payable
under the Lease for the unexpired portion of the term thereby demised, less the
then cash rental value of the leased premises for such unexpired portion of the
term, together with interest on the amounts designated in clauses (a) and (b)
above at the highest rate of interest permitted by law from the date of such
termination, rejection or modification to the date of payment.
4. The Guarantors shall not be entitled to make any defense against any claim
asserted by the Landlord in any suit or action instituted by the Landlord to
enforce this Guaranty or the Lease or to be excused from any liability hereunder
which the Tenant could not make or invoke, and the Guarantors hereby expressly
waive any defense in law or in equity which is not or would not be available to
the Tenant, it being the intent hereof that the liability of the Guarantors
hereunder is primary and unconditional.
5. The Guarantors hereby agree that the covenants and provisions contained in
the Lease may be altered, extended, changed, modified, renewed, released or
canceled by the Landlord and/or the Tenant with or without release of the Tenant
from liability or obligation, all without the consent of the Guarantors, and the
Guarantors agree that this Guaranty and the liability of the Guarantors
hereunder shall in no way be affected, diminished or released thereby.
6. It is fully understood that until each and every one of the covenants and
agreements of this Guaranty is fully performed, the Guarantors' obligations
hereunder shall not be released, in whole or in part, by any action or thing
which might, but for this provision of this instrument, be deemed a legal or
equitable discharge of a surety or guarantor, or by reason of any waiver,
extension, renewal, modification, forbearance or delay or other act or omission
of the Landlord, or its failure to proceed promptly or otherwise or by reason of
any action taken or omitted by the Landlord, whether or not such action or
failure to act varies or increases the risk of or, affects the rights or
remedies of, the Guarantors, and the Guarantors hereby expressly waive and
surrender any defense to the Guarantors' liability hereunder based upon any of
the foregoing acts, omissions, things, agreements or waivers of any of them, it
being the purpose and intent of the parties hereto that the covenants,
agreements and all obligations of the Guarantors hereunder are absolute,
unconditional and irrevocable.
7. In the event is shall be asserted that the Tenant's obligations are void or
voidable due to illegal or unauthorized acts by the Tenant in the execution of
the Lease, the Guarantors shall nevertheless be liable hereunder to the same
extent as the Guarantors would have been if the obligations of the Tenant had
been enforceable against the Tenant.
8. On or before March 1st during the term of the Lease, the Guarantors shall
deliver to Landlord the Guarantor's financial statements for the immediately
preceding calendar year and, within
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thirty (30) days of written request of Landlord, the Guarantors agree to deliver
to Landlord financial statements for the Guarantors dated not more than sixty
(60) days prior to the date of such request.
9. In the even suit or action be brought upon and in connection with the
enforcement of the Guaranty, the Guarantors shall pay reasonable attorneys' fees
and all court costs incurred by the Landlord.
10. This Guaranty shall be binding upon the heirs, legal representatives,
successors and assigns of the Guarantors, and shall inure to the benefit of the
heirs, legal representatives, successors and assigns of the Landlord.
11. If any of the Guarantors is a corporation, then the undersigned office of
each such corporation personally represents and warrants that the Board of
Directors of each such corporation, in a duly held meeting, has approved this
Guaranty and has determined that his Guaranty may reasonably be expected to
benefit said corporation.
12. The Guarantors agree that this contract is performable in Travis County,
Texas, and waive the right to be sued elsewhere.
EXECUTED THIS THE 9 day of April, 1993.
GUARANATORS:
/s/ GARY PANKONIEN
- - ----------------------------------
ADDRESS:
- - ----------------------------------
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FIRST AMENDMENT TO LEASE AGREEMENT BETWEEN AETNA LIFE INSURANCE
COMPANY, AS LANDLORD, AND
1ST TECH CORPORATION, AS TENANT
WHEREAS, AEtna Life Insurance Company ("Landlord"), and 1st Tech
Corporation ("Tenant") entered into a Lease made the 18th day of May, 1993
(which together with any amendments, modifications and extensions thereof, is
hereinafter called the Lease), covering a total of 6,180 square feet and located
at 12201 Technology Boulevard, Austin, Texas, know as McNeil 3; for a period of
five years commencing April 26, 1993 and ending April 30, 1998, and
WHEREAS, Tenant needs additional space for its business purposes and
Landlord has available an area adjacent hereto;
NOW, THEREFORE, in consideration of the premises, Landlord and Tenant
covenant and agree as follows:
1. Effective September 1, 1993, the demised premises shall contain, in
addition to the approximately 6,180 square feet originally demised, and the
6,000 square feet called the "expansion space", a second additional area,
hereinafter called the "second expansion space", containing approximately 3,000
square feet adjacent thereto (see Exhibit "A" attached hereto), thus making the
aggregate area of the demised premises approximately 15,180 square feet.
Landlord shall provide a tenant finish allowance of $10.00 per square foot
($30,000.00) toward interior improvements for the "second expansion space" of
3,000 square feet. All improvements must comply with Landlord's STANDARDS AND
SPECIFICATIONS FOR OFFICE/WAREHOUSE BUILDINGS.
2. Effective September 1, 1993, through August 31, 1998, the monthly base
rental for the "second expansion space" shall be $.55 per square foot
($1,650.00/month) plus property taxes, common area maintenance, and insurance as
provided in the Lease, payable on the first day of each month during the balance
of the term.
3. Except as herein and hereby modified and amended the Agreement of
Lease shall remain in full force and effect and all the terms, provisions,
covenants and conditions thereof and hereby ratified and confirmed.
<PAGE>
DATED AS OF THE 5 DAY OF August, 1993.
WITNESS: AETNA LIFE INSURANCE COMPANY:
/s/ JAMES G. HUGHES
- - ------------------------------ ------------------------------
By: James G. Hughes
Title: Director
WITNESS: 1ST TECH CORPORATION
/s/ DONALD R. TURNER /s/ GARY PANKONIEN
- - ------------------------------ ------------------------------
By: Gary Pankonien
Title: CEO
<PAGE>
SECOND AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD, AND
1ST TECH CORPORATION, AS TENANT
To be attached to and form a part of Lease made the 18th day
of May, 1995 (which together with any amendments,
modifications and extensions thereof, is herein called the
Lease), between Landlord and Tenant, covering a total of 12,
180 square feet and located at 12201 Technology Boulevard,
Austin, Texas, know as McNeil 3.
WITNESSETH that the Lease is hereby extended and renewed for a further term
of twenty-three and one half (23.5) months to commerce on September 1, 1998 and
to end on August 15, 2000 on condition and Landlord and Tenant comply with all
terms, covenants and conditions contained in the Lease, and monthly base rental
shall be as follows plus property taxes, common area maintenance, and insurance
as provided in the Lease:
Rental Period Original Space Third Expansion Total Monthly
and Expansions Space 11,135 s.f. Base Rent
15,180 s.f. 26,315 s.f.
4/26/95 - 8/14/95 $8,105.40 - $ 8,105.40
8/15/95 - 4/25/97 $8,105.40 $7,237.75 $15,343.15
4/26/97 - 8/15/2000 $8,349.00 $7,237.75 $15,586.75
The Tenant shall accept the original space in its current "as is" condition.
Effective 8/15/95 through 8/15/2000, the demised premises shall contain, in
addition to the approximately 15,180 square feet, a "third expansion space"
containing approximately 11,135 square feet (see Exhibit "A" attached hereto)
thus making the aggregate area of the demised premises approximately 26,315
square feet. Landlord shall provide a Tenant Finish Allowance of $22.07 p.s.f.
($245,749,45) toward interior improvements of the "third expansion space" of
11,135 square feet. All improvements must comply with Landlord's STANDARD AND
SPECIFICATION FOR OFFICE/WAREHOUSE BUILDING.
TERMINATION RIGHT:
Providing Tenant is not in default under any terms of the lease, Tenant shall
have the right to terminate this lease effective any time after 8/31/98 upon
sixty (60) days advance written notice
<PAGE>
to Landlord (notice can be given to Landlord no earlier than 6/30/98) and only
upon payment of all unamortized tenant finish allowance and brokerage
commissions remaining through the lease expiration of 8/15/2000. The
amortization rate for the Tenant Finish Allowance and Brokerage Commissions
shall be 11% per annum Simple Interest.
Except as herein and hereby modified and amended the Agreement of Lease
shall remain in full force and effect and all the terms, provisions, covenants
and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 27 DAY OF JUNE, 1995.
WITNESS AETNA LIFE INSURANCE COMPANY:
/s/ DONALD R. TURNER /s/ JAMES G. HUGHES
- - ------------------------------ ------------------------------
Donald R. Turner By: James G. Hughes
Title: Director
WITNESS: 1ST TECH CORPORATION
/s/ KIM HOUSE /s/ GARY PANKONIEN
- - ------------------------------ ------------------------------
By: Gary Pankonien
Title: CEO
<PAGE>
THIRD AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD, AND
1ST TECH CORPORATION , AS TENANT
To be attached to and from a part of Lease made the 18th day
of May, 1995 (which together with any amendments,
modifications and extensions thereof, is herein called
Lease), between Landlord and Tenant, covering a total of
26,315 square feet an located at 12201 Technology Boulevard,
Austin, Texas, known as McNeil 3.
WITNESSETH that the Lease is hereby modified and amended as follows:
RIGHT OF FIRST REFUSAL
Landlord is the owner of the herein demised premises, as well as the adjacent
7,423 square feet of space. It is agreed that Tenant shall have the right of
first refusal to lease the adjacent space from the Landlord subject to the
existing leases in place. In the event a prospective tenant desires to lease
this space from Landlord, Landlord shall notify Tenant thereof in the manner
provided herein for notice, whereupon Tenant shall have five (5) days after
receipt to such notice in which to elect to exercise Tenant's right of, title or
interest in the adjacent space and this right of first refusal shall terminate
and be of no further force and effect. If, on the other hand, Tenant exercise
it right of first refusal in the manner provided above, the lease of the
adjacent property shall be consummated at a fair market rental rate.
Except as herein and hereby modified and amended the Agreement of Lease
shall remain in full force and effect and all the terms, provisions, covenants
and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 28 DAY OF JUNE, 1995.
WITNESS: AETNA LIFE INSURANCE COMPANY:
Allegis Realty
/s/ DONALD R. TURNER /s/ JAMES G. HUGHES
- - ------------------------------ ------------------------------
Donald R. Turner By: James G. Hughes
Title: Director
WITNESS: 1ST TECH CORPORATION
/s/ KIM HOUSE /s/ GARY PANKONIEN
- - ------------------------------ ------------------------------
By: Gary Pankonien
Title: CEO
<PAGE>
FOURTH AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD, AND
1ST TECH CORPORATION, AS TENANT
To be attached to and form a part of Lease made the 18th day
of May, 1995 (which together with any amendments,
modifications and extensions thereof, is hereinafter called
the Lease), between Landlord and Tenant, covering a total of
26,315 square feet and located at 12201 Technology
Boulevard, Austin, Texas, known as McNeil 3.
WITNESSETH, THAT WHEREAS, by Agreement of Lease dated May 18, 1995,
Landlord leased to Tenant certain space containing approximately 26,314 square
feet in the building located at 12201 Technology Boulevard, Austin, Texas, and
WHEREAS, Tenant needs additional space for its business purposes and
Landlord has available an area adjacent hereto.
NOW, THEREFORE, in consideration of the premises, Landlord and Tenant
covenant and agree as follows:
1. Effective May 27, 1996, the demised premises shall contain, in
addition to the approximately 26,315 square feet originally demised, an
additional area, hereinafter called the "new space", containing approximately
3,150 square feet adjacent thereto (see Exhibit "A" attached hereto), thus
making the aggregate area of the demised premises approximately 29,464 square
feet. Tenant shall accept the "new space" in its current "as is" condition and
all improvements must comply with Landlord's STANDARDS AND SPECIFICATIONS FOR
OFFICE/WAREHOUSE BUILDINGS.
2. Effective May 27, 1996, the monthly base rental shall be as follows:
Term Monthly Monthly Monthly Monthly Total
- - ---- Base Rental Base Rental Base Rental Base Monthly
Rate PSF Rate Rate PSF Rental Base
Existing Existing New Space Rate New Rental
Space Space ---------- Space Rate
----- ----- ----- -----
5/27/96-4/25/97 $0.58 $15,343.15 $0.55 $1,732.50 $17,075.65
4/26/97-5/22/97 $0.59 $15,586.75 $0.55 $1,732.50 $17,319.25
5/23/97- $0.59 $15,586.75 $0.60 $1,890.00 $17,476.75
8/15/2000
These amounts shall be in addition to property taxes, common area maintenance,
and insurance as provided in the Lease, payable on the first day of each month
during the balance of the term.
3. Paragraph 9.B.(i) of the Lease Agreement is hereby amended to name the
Management Company as an additional insured on all Tenant's Liability Insurance
Policies in connection with this Lease (except for the workers' compensation
policy as stated in Paragraph 9.B.(i)).
<PAGE>
4. Except as herein and hereby modified and amended the Agreement of
Lease shall remain in full force and effect and all the terms, provisions,
covenants and conditions thereof are hereby ratified and confirmed.
EXECUTED BY LANDLORD, this 21 DAY OF JUNE, 1996.
AETNA LIFE INSURANCE COMPANY
By: AEtna Realty Investor, Inc., Its Agent:
Attest/Witness By: /s/ JAMES G. HUGHES
- - ------------------------------ ------------------------------
Title: Vice President
EXECUTED BY TENANT, this __________ day of _____________________, 19__.
1ST TECH CORPORATION:
/s/ GARY PANKONIEN
------------------------------
Attest/Witness By: Gary Pankonien
Title: CEO
- - ------------------------------
<PAGE>
FIFTH AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD, AND
1ST TECH CORPORATION, AS TENANT
To be attached to and form a part of Lease made the 18th day
of May, 1995 (which together with any amendments,
modifications and extensions thereof, is hereinafter called
the Lease), between Landlord and Tenant, covering a total of
29,464 square feet and located at 12201 Technology
Boulevard, Austin, Texas, known as McNeil #3.
WITNESSETH, THAT:
WHEREAS, by Agreement of Lease dated May 18, 1995, Landlord leased to
Tenant certain space containing approximately 29,464 square feet in the building
located at 12201 Technology Boulevard, Austin, Texas, and
WHEREAS, Tenant needs additional space for its business purposes and
Landlord has available an area adjacent hereto.
NOW, THEREFORE, in consideration of the premises, Landlord and Tenant
covenant and agree as follows:
1. Effective August 15, 1996, the demised premises shall contain, in
addition to the approximately 29,464 square feet originally demised, an
additional area, hereinafter called the "new space", containing approximately
3,712 square feet adjacent thereto (see Exhibit "A" attached hereto), thus
making the aggregate area of the demised premises approximately 33,174 square
feet. Tenant shall accept the "new space" in its current "as is" condition and
all improvements must comply with Landlord's STANDARDS AND SPECIFICATIONS FOR
OFFICE/WAREHOUSE BUILDINGS.
2. Tenant agrees to provide its own interior finish out, subject to
Landlord's approval, and shall include one hundred percent (100%) HVAC as well
as carpet and/or tile throughout the "new space".
3. Tenant shall terminate occupancy of the "new space" on August 31,
1998.
4. Effective August 15, 1996, the monthly base rental shall be as
follows:
Term Monthly Monthly Base Monthly Total
- - ---- Base Rental Rental Rate Base Rental Monthly Base
Rate PSF New Rate Rental Rate
Existing Space Space New Space ------------
-------------- ----- ---------
8/15/96-4/25/97 $17,075.65 $0.00 $0.00 $17,075.65
4/26/97-5/22/97 $17,319.25 $0.00 $0.00 $17,319.25
5/23/97-8/31/98 $17,476.75 $0.00 $0.00 $17,476.75
9/1/98- $17,476.75 N/A N/A $17,476.75
8/15/2000
<PAGE>
These amounts shall be in addition to common area maintenance, property tax and
insurance for tenant's pro rata share of the building including the "new space".
5. The Lease expressly refers to Tenant as 1st Tech Corporation. The
Tenant's name has been changed to Tanisys Technology. The Lease and all related
documents are hereby amended such that all references to "Tenant" or "1st Tech
Corporation" will translate to mean "Tanisys Technology".
6. Except as herein and hereby modified and amended the Agreement of
Lease shall remain in full force and effect and all the terms, provisions,
covenants and conditions thereof are hereby ratified and confirmed.
EXECUTED BY LANDLORD, this 9 day of August, 1996.
AETNA LIFE INSURANCE COMPANY
By: Allegis Realty Investor, L.L.C.,
Its Investment Advisor and Agent
Attest/Witness /s/ JAMES G. HUGHES
- - ------------------------------ ------------------------------
By: James G. Hughes
------------------------------
Title: Title: Vice President
- - ------------------------------ ------------------------------
EXECUTED BY TENANT, this _____ day of _____________, 19_____.
TANISYS TECHNOLOGY, INC.
Attest/Witness /s/ JOE DAVIS
- - ------------------------------ ------------------------------
By: Joe Davis
------------------------------
Title: Title: CFO
- - ------------------------------ ------------------------------
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
----------------------------------
This Assignment and Assumption of Lease (the "Agreement") is made as of the
21 day of June, 1996 by and between Aetna Life Insurance Company ("Lessor"), 1st
Tech Corporation ("Assignor"), and Tanisys Technology, INCORPORATED, A WYOMING
CORPORATION ("Assignee").
WHEREAS:
Lessor, Assignor and Assignee mutually agree and acknowledge that on or
about April 26, 1993, Lessor, and Assignor, as Lessee, executed a Lease for the
premises located at 12201 Technology Blvd., Suite 130, Austin, Texas 78727, a
correct copy of which is attached hereto as Exhibit "A: and which is expressly
incorporated herein by this reference;
Lessor, Assignor and Assignee mutually agree and acknowledge that Assignor
desires to assign, and Assignee desires to acquire, Assignor's entire interest
in the Lease; and;
Lessor, Assignor and Assignee mutually agree and acknowledge that the Lease
prohibits and assignment of the Lease without Lessor's consent;
NOW, THEREFORE, in consideration of the sum One Dollar ($1.00) by each
party to the other, in hand paid, and other good and valuable consideration,
including without limitation, the mutual promises contained in this Agreement,
the receipt and sufficiency of which are hereby mutually acknowledged, Lessor,
Assignor and Assignee agree as follows:
1. Assignor assigns to Assignee, as of the date of this Agreement, all
Assignor's rights, title and interest in and to the Lease, together
with Assignor's interest in the security deposit previously paid by
Assignor to Lessor in the amount of $4,773.60.
2. Assignee hereby assumes the Lease and agrees to perform and observe
all covenants and conditions contained in the Lease on Assignor's part
to be performed and observed, with the same force and effect as if
Assignee was originally named in the Lease as Lessee.
3. Lessor hereby consents to the aforesaid assignment and assumption by
Assignor to Assignee, upon the express condition that no further
assignment, sublease or transfer of the Lease shall hereafter be made
without the prior written consent of Lessor.
4. Notwithstanding anything contained in this Agreement to the contrary,
Assignor shall not be released of any liability or other obligations
of the Tenant under the Lease, and Assignor hereby confirms that it
will remain responsible and liable for and will assure the payment and
performance of each and every covenant or other obligation of the
Tenant under the Lease.
<PAGE>
5. This Agreement may not be changed, modified, discharged or terminated
except by a further agreement in writing signed by the parties hereto
or their respective successors and assigns.
IN WITNESS HEREOF, the parties hereto execute this Agreement as of the date
written above.
LESSOR: AETNA LIFE INSURANCE COMPANY
By: Allegis Realty Investors, LLC, Its Investment
Advisor and Agent
By: /s/ JAMES G. HUGHES
------------------------------------------
Printed Name: James G. Hughes
Title: Vice President
ASSIGNOR
AND LESSEE: 1ST TECH CORPORATION
By: /s/ GARY PANKONIEN
------------------------------------------
Printed Name:
--------------------------------
Title:
---------------------------------------
ASSIGNEE: TANISYS TECHNOLOGY, INCORPORATED
A WYOMING CORPORATION
By: /s/ Joe Davis
------------------------------------------
Printed Name: Joe Davis
Title: CFO
<PAGE>
Master Lease No. 0-59882
MASTER LEASE AGREEMENT
LESSOR: COPELCO CAPITAL INC.
LESSEE: 1ST TECH CORPORATION
TERMS AND CONDITIONS OF LEASE
I. LEASE OF EQUIPMENT.
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
equipment described in one or more equipment schedules (the "Equipment
Schedule") substantially in the form of Exhibit A attached hereto, that may
hereafter be executed by Lessor and Lessee (the equipment, together with all
replacement parts, repairs, additions, substitutions and accessories shall be
referred to as the "Equipment") on the terms and conditions contained in this
Lease ("Lease") and in any Equipment Schedule. This Lease and each of the
terms, covenants, conditions, provisions and agreements herein contained will be
incorporated into each Equipment Schedule in full to the same extent as if each
of the terms, covenants, conditions, provisions and agreements had been repeated
and set forth in full therein, and this Master Lease Agreement shall control and
be effective as to all such Schedules except to the extent that the Master Lease
Agreement may be inconsistent with the terms and provisions of such Equipment
Schedule, in which event the terms and provisions of such Equipment Schedule
shall prevail. Each Equipment Schedule shall constitute a separate lease and a
distinct and independent obligation of the Lessee. The parties intend this
Lease to be a "Finance Lease" under Article 2A of the Uniform Commercial Code.
II. ORDER AND DELIVERY OF EQUIPMENT; LESSOR'S RIGHT TO TERMINATE.
Lessee hereby requests Lessor to order the Equipment from the Vendor named on
the Equipment Schedule and to arrange for delivery of the Equipment to Lessee at
Lessee's expense, and to lease the Equipment to Lessee. If the Equipment is not
delivered to and accepted by Lessee in form satisfactory to Lessor, within
ninety (90) days from the date Lessor orders the Equipment, Lessor may terminate
the applicable Equipment Schedule and its obligations thereunder. Lessee waives
any requirement of Lessor to furnish Lessee a copy of Lessor's purchase order
for the Equipment.
III. ACCEPTANCE.
Lessee shall, as Lessor's agent, immediately inspect the Equipment after it is
delivered and installed. Lessee agrees that on the date the Equipment is
available for first use (the "Acceptance Date"), it shall execute and deliver to
Lessor a Delivery and Acceptance Certificate substantially in the form of
Exhibit B attached. Notwithstanding the foregoing, unless Lessee shall notify
Lessor in writing otherwise within five (5) days after the Acceptance Date,
Lessee shall be deemed to have irrevocably accepted the Equipment. This Lease
and all Equipment Schedules are non-cancelable, and Lessee agrees to pay the
total rent for the term, which shall be the total amount of all rental
<PAGE>
payments stated in any Equipment Schedule (the "Rent" or "Rental Payment"), plus
any other sums provided for herein.
IV. TERM AND RENT.
(A) The initial term ("Initial Term") of any Equipment Schedule to which this
Lease relates shall commence on the Acceptance Date and shall be of such
duration as is prescribed in such Equipment Schedule plus the Interim Term (as
hereinafter defined). Advance Rent and any Security Deposit as provided in any
Equipment Schedule shall be payable upon the execution of the applicable
Equipment Schedule and shall not be refundable if the Initial Term for any
reason does not commence or if this Lease or the applicable Equipment Schedule
is duly terminated by Lessor. Rental Payments shall commence (the "Commencement
Date") on the first day of the month following the Acceptance Date unless the
Acceptance Date is the first day of the applicable period, in which case the
Commencement Date shall be the first day of the applicable period. Interim Rent
shall be payable upon demand for the period between the Acceptance Date and the
first day of the month following the Acceptance Date ("Interim Term") at a daily
rate equal to the periodic rental provided in any Equipment Schedule divided by
the number of days in the period. Subsequent rental payments shall be due
periodically in advance on the first day of each successive period thereafter
until all Rent and other sums chargeable to the Lessee hereunder are paid in
full. Lessee's obligation to pay Rent and Lessee's other monetary obligations
hereunder are absolute and unconditional and are not subject to any abatement,
set-off, defense or counterclaim for any reason whatsoever. Any Security
Deposit shall secure all obligations of Lessee hereunder and may be applied at
Lessor's discretion to any past due obligation of Lessee and to the extent not
applied shall be returned to Lessee, without interest, at the expiration of the
applicable Equipment Schedule. All payments of Rent shall be made to Lessor at
the address Lessor shall designate in writing.
(B) Whenever any payment is not made by Lessee within five (5) days of when
due hereunder, Lessee agrees to pay to Lessor, as additional rent, interest on
all monies due Lessor from and after the date same is due at the rate of one and
one-quarter (1-1/4%) percent per month until paid, but as to each of the
foregoing in no event more than the maximum rate permitted by law.
(C) As used herein, "Actual Cost" means the cost to Lessor of purchasing and
delivering the Equipment to Lessee, including taxes, transportation and other
charges. The amount of each Rental Payment and the Security Deposit set forth
in the Equipment Schedule are based on the total cost set forth in Lessor's
purchase order for the Equipment ("Estimated Cost"), which is an estimate, and
shall be adjusted proportionately if the actual cost of the Equipment is greater
than said estimate. Lessee hereby authorizes Lessor to adjust the amounts set
forth in the Equipment Schedule when the Actual Cost is known and to add to the
amount of each Rental Payment any sales, use or leasing tax that may be imposed
on or measured by the Rental Payments. Lessor will inform Lessee of the
adjustments necessary to reflect Actual Cost. If the Actual Cost of the
Equipment on any Equipment Schedule exceeds the Estimated Cost by more than ten
(10%) percent thereof (exclusive of taxes), Lessor shall, if it desires to, add
to the Estimated Cost an amount in excess of 10% of Estimated Cost, so notify
Lessee in writing. In such instance, within fifteen (15) days thereafter,
Lessee at its option may terminate the relevant Equipment Schedule by giving
notice to Lessor of its intention to do so, effective the day of such notice,
subject however to the provisions of Section IV(A) hereof.
<PAGE>
V. NO WARRANTIES BY LESSOR, DISCLAIMER OF IMPLIED WARRANTIES AND WAIVER OF
DEFENSES.
LESSOR IS NOT THE MANUFACTURER OR SUPPLIER OF OR A DEALER IN THE EQUIPMENT, AND
MAKES NO WARRANTY, EXPRESSED OR IMPLIED, TO ANYONE, AS TO THE SUITABILITY,
DURABILITY, DESIGN, CONDITION, CAPACITY, PERFORMANCE OR ANY OTHER ASPECT OF THE
EQUIPMENT OR ITS MATERIAL OR WORKMANSHIP INCLUDING THE WARRANTY OF
MERCHANTABILITY AND FITNESS FOR USE OR PURPOSE. AS TO LESSOR AND ITS ASSIGNS,
LESSEE LEASES THE EQUIPMENT "AS IS." LESSEE REPRESENTS THAT IT HAS SELECTED THE
EQUIPMENT AND THE SUPPLIER AND ACKNOWLEDGES THAT LESSOR HAS NOT RECOMMENDED THE
SUPPLIER. LESSOR SHALL HAVE NO OBLIGATION TO INSTALL, MAINTAIN, ERECT, TEST,
ADJUST, OR SERVICE THE EQUIPMENT, ALL OF WHICH LESSEE SHALL PERFORM, OR CAUSE
THE SAME TO BE PERFORMED BY QUALIFIED THIRD PARTIES. LESSOR AND LESSOR'S
ASSIGNEE SHALL NOT BE LIABLE TO LESSEE OR OTHERS FOR ANY LOSS, DAMAGE OR EXPENSE
OF ANY KIND OR NATURE CAUSED DIRECTLY OR INDIRECTLY BY ANY EQUIPMENT HOWEVER
ARISING, OR THE USE OR MAINTENANCE THEREOF OR THE FAILURE OF OPERATION THEREOF,
OR THE REPAIRS, SERVICE OR ADJUSTMENT THERETO. NO REPRESENTATION OR WARRANTY AS
TO THE EQUIPMENT OR ANY OTHER MATTER BY THE SUPPLIER OR OTHERS SHALL BE BINDING
ON LESSOR NOR SHALL THE BREACH OF SUCH RELIEVE LESSEE OF, OR IN ANY WAY AFFECT,
ANY OF LESSEE'S OBLIGATIONS TO LESSOR HEREIN. IF THE EQUIPMENT IS
UNSATISFACTORY FOR ANY REASON, LESSEE SHALL MAKE CLAIM ON ACCOUNT THEREOF SOLELY
AGAINST SUPPLIER, AND ANY OF SUPPLIER'S VENDORS, AND SHALL NEVERTHELESS PAY
LESSOR ALL RENT AND OTHER SUMS PAYABLE UNDER THIS LEASE. LESSOR HEREBY ASSIGNS
TO LESSEE, SOLELY FOR THE PURPOSE OF PROSECUTING SUCH A CLAIM, ALL (IF ANY) OF
THE RIGHTS WHICH LESSOR MAY HAVE AGAINST SUPPLIER AND SUPPLIER'S VENDORS FOR
BREACH OF WARRANTY OR OTHER REPRESENTATIONS RESPECTING THE EQUPIMENT.
REGARDLESS OF CAUSE, LESSEE WILL NOT ASSERT ANY CLAIM WHATSOEVER AGAINST LESSOR
FOR LOSS OF ANTICIPATORY PROFITS OR ANY OTHER INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES, NOR SHALL LESSOR BE RESPONSIBLE FOR ANY DAMAGES OR COSTS WHICH MAY BE
ASSESSED AGAINST LESSEE IN ANY ACTION FOR INFRINGEMENT OF ANY UNITED STATES
LETTERS PATENT. LESSOR MAKES NO WARRANTY AS TO THE TREATMENT OF THIS LEASE FOR
TAX OR ACCOUNTING PURPOSES. NOTHWITHSTANDING ANY FEES WHICH MAY BE PAID BY
LESSOR TO SUPPLIER OR ANY AGENT OF SUPPLIER, LESSEE UNDERSTANDS AND AGREES THAT
NEITHER SUPPLIER NOR ANY AGENT OF SUPPLIER IS AN AGENT OF LESSOR OR IS
AUTHORIZED TO WAIVE OR ALTER ANY TERM OR CONDITION OF THIS LEASE.
VI. TITLE; PERSONAL PROPERTY.
The equipment is, and shall at all times be owned by Lessor and Lessee shall
have no interest in the Equipment except that of a lessee. The Lessee shall
have no right to purchase or otherwise acquire title to or ownership of any of
the Equipment. If Lessor supplies Lessee with labels indicating that the
Equipment is owned by Lessor, Lessee shall affix such labels to and keep them in
a prominent place on the Equipment. Lessee hereby authorizes Lessor to insert
in any Equipment Schedule the serial numbers and other identification data of
Equipment when determined by Lessor. To protect Lessor's rights in the
Equipment in the event this Lease is determined to be a security agreement,
Lessee hereby grants to Lessor a security interest in the Equipment, and all
proceeds, products, rents or profits from the sale, casualty loss or other
disposition thereof. Lessee hereby authorizes Lessor, at Lessee's expense, to
cause this Lease, or any statement or other instrument in respect of this Lease
showing the interest of Lessor in the Equipment,
3
<PAGE>
including Uniform Commercial Code financing statements, to be filed or
recorded and re-filed and re-recorded, and grants Lessor the right to execute
Lessee's name thereto. Lessee agrees to execute, deliver and file any
statement or instrument requested by Lessor for such purpose, and if
certificates of title are issued or outstanding with respect to any of the
Equipment, Lessee will cause the interest of Lessor to be properly noted
thereon, and agrees to pay or reimburse Lessor for any reasonable searches,
filings, recordings, stamp fees or taxes related to the filing or recording
of any such instrument or statement, plus Lessor's handling charges. Lessee
shall, at its expense, protect and defend Lessor's title against all persons
claiming limitation liens, attachments, levies and executions, and shall give
Lessor immediate written notice thereof and shall indemnify Lessor from any
loss waivers and such further instruments and assurances as Lessor deems
necessary or advisable for the confirmation or perfection of Lessor's rights
hereunder. The Equipment is, and shall at all times be and remain, personal
property notwithstanding that the Equipment or any part thereof may now be or
hereafter become, in any manner, affixed or attached to real property or any
improvements thereon.
VII. MAINTENANCE, USE AND LOCATION.
Lessee shall, at its own cost and expense, maintain the Equipment in good
operating condition and repair and protect the Equipment from deterioration
other than normal wear and tear; shall use the Equipment in the regular course
of its business, within its normal operating capacity, without abuse; shall
comply with all laws, ordinances, regulations, requirements and rules with
respect to the use, maintenance and operation of the Equipment; shall not make
any modification, alteration or addition to the Equipment without the prior
written consent of Lessor, which shall not be unreasonably withheld, except for
engineering changes recommended by and made by the manufacturer; shall install
on the Equipment all engineering changes offered by the manufacturer without
charge which enhance the safety of the Equipment; shall not so affix the
Equipment to realty as to change its nature to real property or a fixture; and
shall keep the Equipment at the location shown herein, and shall not remove the
Equipment without prior written consent of Lessor. Lessee will grant access to
the Equipment to Lessor and Lessor's designee during normal working hours for
inspection, repair, preventative maintenance, installation of engineering
changes and for any other reasonable purpose. Lessee shall, during the term of
this Lease, at its own expense, enter into and maintain in force a contract with
the manufacturer or other acceptable maintenance company covering the
maintenance of the Equipment and furnish a copy thereof to Lessor upon request.
If Lessor incurs any costs or expenses to bring the Equipment up to good working
order and appearance, Lessee shall immediately reimburse Lessor for all such
costs or expenses.
VIII. RETURN OF EQUIPMENT; END OF LEASE OPTION.
After the end of the Initial Term and each renewal term thereafter, this Lease
shall be automatically renewed and shall continue until such time as the Lessee
shall give the Lessor written notice of termination, not less than one hundred
twenty (120) days and not more than one hundred eighty (180) days prior to the
end of the then current term. Unless Lessee purchase the Equipment or the term
of an Equipment Schedule is renewed, within ten (10) days of the expiration or
earlier termination of the then current term, the
4
<PAGE>
Lessee shall, at its expense, de-install, inspect, test and pack the Equipment
and return the Equipment (including all cable, wiring, connectors, accessories
and attachments thereto), freight and insurance prepaid, to such location as
designated by Lessor in writing, in good repair, condition and working order
ordinary wear and tear resulting from proper use thereof only excepted.
Further, the Equipment shall conform to any additional specifications set forth
in the applicable Equipment Schedule. Lessee shall have the Equipment certified
by the manufacturer as acceptable for the manufacturer's standard maintenance
contract and such certification shall be presented to Lessor at least fourteen
(14) days prior to re-delivery to Lessor. If Lessee fails to return the
Equipment as provided herein, Lessee shall pay Lessor a sum equal to six (6)
months rent as liquidated damages to compensate Lessor for the economic loss
suffered by Lessor as a result of its inability to realize the residual value of
the Equipment when anticipated. In addition, for the use of the Equipment,
Lessee agrees to pay Lessor periodic Rental equal to one hundred ten (110%)
percent of the average annual Rental Payment (adjusted, if necessary, to the
period indicated on the applicable Equipment Schedule) provided herein. Nothing
contained herein is intended to relieve Lessee of its obligations to return the
Equipment to Lessor as provided herein or restrict Lessor's right to recover the
Equipment in the event of the failure of Lessee to so return the Equipment at
the expiration or termination of the applicable Equipment Schedule.
IX. RISK OF LOSS.
Lessee shall bear all risks of loss or damage to the Equipment ("Loss") from any
cause whatsoever, from the date of the shipment of the Equipment to Lessee until
its return to Lessor. Lessee shall promptly notify Lessor of any Loss and no
Loss shall relieve the Lessee of the obligation to pay Rent or of any other
obligation under this Lease and any Equipment Schedule. In the event of a Loss,
Lessee, at the option of Lessor, shall either (a) repair the Equipment so as to
place it in as good condition as prior to the Loss, (b) replace the Equipment
with substantially identical Equipment in good condition and working order with
documentation creating clear title thereto in Lessor; or (c) pay to Lessor upon
demand the sum of the following amounts: (i) the aggregate Rent and other sums
then due and owing under the Equipment Schedule to which the Equipment is
subject plus (ii) the applicable stipulated loss value attached to the Equipment
Schedule and made part thereof (the "Stipulated Loss Values") opposite the Rent
payment number preceding the date of the Loss, or, if no Stipulated Loss Values
are attached to the Equipment Schedule, then the present value of all unpaid
Rent and other sums due during the unexpired term of the Equipment Schedule
discounted at four (4%) percent per annum simple interest or the lowest rate
permitted by law plus Lessor's anticipated value of the Equipment at the end of
the Initial Term or applicable renewal term. Upon Lessor's receipt of
replacement Equipment or payment as provided in (b) or (c) hereof, Lessee and/or
Lessee's insurer shall be entitled to Lessor's interest in said item for salvage
purposes, in its then condition and location, without warranty, express or
implied.
X. INSURANCE.
Lessee shall keep the Equipment insured against all risks of loss or damage from
every cause whatsoever for not less than the full replacement value thereof or
the amount stated in Section IX(c) herein, whichever is greater,
5
<PAGE>
and shall carry public liability and property damage insurance covering the
Equipment and its use in amounts customary for such Equipment. All such
insurance shall be in form and amount and with companies acceptable to Lessor
and name Lessor and its assignee as loss payee, as their interests may appear,
with respect to property damage coverage and as additional insured, with respect
to public liability coverage. Lessee shall pay the premiums therefor and
deliver said policies, or duplicates thereof or certificates of coverage
therefor to Lessor, with long form Lender's Loss Payable endorsement upon the
policy or policies or by independent instrument, that provides Lessor a right to
thirty (30) days' written notice before the policy can be altered or canceled
and the right without obligation to payment of premium. Should Lessee fail to
provide such coverage, Lessor may obtain such coverage for its benefit or for
the benefit of Lessee and charge Lessee therefor. Lessee hereby appoints Lessor
as Lessee's attorney-in-fact to make claim for, receive payment of, and execute
and endorse all documents, checks, or drafts for loss or damage under any said
insurance policies and to apply the proceeds in furtherance of the exercise of
Lessor's options as provided herein.
XI. TAXES AND CHARGES.
This Lease is intended to be a net lease, and all payments hereunder are
intended to be net to Lessor to the extent permitted by applicable law. Lessee
shall pay directly (or, at Lessor's option, reimburse Lessor for) all license
fees, assessments and other government charges, and all sales, use, excise,
franchise, personal property and any other similar tax or taxes (herein
collectively called "Charges") now or hereafter imposed, levied or assessed by
any state, federal or local government or agency upon any of the Equipment or
upon the leasing, purchase, ownership, use, possession, financing or operation
thereof, or upon the receipt of rental payments therefor, even if Lessee's
status provides for its exemption from the Charges (excluding income taxes on
Rental Payments, except any such tax on Rental Payments which is substitution
for, or relieves Lessee from, the payment of taxes which Lessee would otherwise
be obligated to pay or reimburse Lessor as herein provided) before the same
shall become in default or subject to the payment of any penalty or interest.
Lessee shall supply Lessor with receipts or other evidence of payment of all
Charges as may reasonably be requested by Lessor. Lessee shall further comply
with all state and local laws requiring the filing of ad valorem or other tax
returns relating to any Charges. Lessee shall notify the Lessor of the
imposition of, or, to Lessee's knowledge, the proposed imposition of, any
Charges by supplying to Lessor (within in five (5) days after receipt thereof by
Lessee) a copy of the invoice or other documents respecting such Charges.
Unless otherwise directed by Lessor in writing, Lessor shall pay all personal
property taxes with respect to the Equipment and Lessee shall reimburse Lessor
therefor upon demand.
XII. LEASE IRREVOCABILITY AND OTHER COVENANTS AND REPRESENTATIONS OF LESSEE.
Lessee agrees that this Lease and each Equipment Schedule are irrevocable for
the full term hereof and thereof and Lessee's obligations under this Lease and
each Equipment Schedule are absolute and shall continue without abatement and
regardless of any disability of Lessee to use the Equipment or any part thereof
because of any reason including, but not limited to war, act of God,
governmental regulations, strike, loss, damage, destruction, obsolescence,
failure of or delay in delivery, failure of the Equipment to operate properly,
6
<PAGE>
termination by operation of law, or any other cause. Lessee represents that:
it is duly organized, validly existing and in good standing under the laws of
the jurisdiction in which the activities of Lessee require such qualification;
this Lease has been and each Equipment Schedule will be duly authorized by all
necessary action on its part, is a valid, binding and legally enforceable
obligation of Lessee in accordance with its terms and is not in any respect
inconsistent with or in violation of Lessee's Certificate or Articles of
Incorporation or by-laws or any law, regulation, order or agreement binding upon
Lessee; the Equipment shall be used by Lessee solely for business purposes; and
that all financial and other information submitted to Lessor was and will be
true and correct.
XIII. FINANCIAL STATEMENTS.
Lessee agrees to deliver to Lessor annual financial statements and such
quarterly financial statements, as Lessor requests.
XIV. DEFAULT AND REMEDIES.
(A) The occurrence of any one or more of the following shall be deemed to be
an "Event of Default": (a) Lessee fails to pay any Rent or any other amount
hereunder when due; or (b) Lessee is in default under any other agreement
between Lessee and Lessor or upon an event of default under any other agreement
entered into by guarantors, the vendor of the Equipment, principals of Lessee or
others, which agreement(s) was or were executed to induce Lessor to enter into
this Lease or the applicable Equipment Schedule; or (c) Lessee fails to perform
or observe any of the terms, covenants or conditions contained in this Lease,
any Equipment Schedule or other lease or other agreement between Lessor and
Lessee, other than as provided above, and Lessee fails to cure any such breach
within ten (10) days after notice thereof or (d) any representation of Lessee
contained in this Lease or any other agreement between Lessor and Lessee, or in
any credit or other information submitted to Lessor in connection with this
transaction is untrue or incorrect; or (e) Lessee sells substantially all of its
assets out of the ordinary course of business, merges or consolidates with any
other person, or sustains a change in the ownership of more than 20% of its
equity; or (f) Lessee becomes insolvent or makes an assignment for the benefit
of creditors; or (g) a receiver, trustee, conservator or liquidator of Lessee or
of all or a substantial part of its assets is appointed with our without the
application or consent of Lessee; or (h) a petition is filed by or against
Lessee under the Bankruptcy Code or any amendment thereto, or under any other
insolvency law or laws, providing for the relief to debtors.
(B) Upon an Event of Default, the Lessor may, to the extent permitted by
applicable law, exercise any one or more of the following remedies:
(i) Terminate this Lease with respect to all or any part of the
Equipment;
(ii) Recover from Lessee all Rent and other amounts then due as they
shall thereafter become due hereunder and under the Equipment Schedules;
7
<PAGE>
(iii) Take possession of any or all items of Equipment, wherever the
same may be located, without demand or notice, without any court order or
other process of law and without liability to Lessee for any damages
occasioned by such taking of possession, and any such taking of
possession shall not constitute a termination of this Lease;
(iv) Declare the entire unpaid balance of Rent and other amounts for the
unexpired term of each Equipment Schedule immediately due and payable and
recover from Lessee, with respect to any and all items of Equipment (with
or without repossessing same), the Stipulated Loss Value attached to each
Equipment Schedule opposite the Rent Payment number preceding the date of
such Event of Default or, if no Stipulated Loss Values are attached to
the applicable Equipment Schedule, then the present value of all unpaid
Rent and other sums due during the unexpired term of that Equipment
Schedule discounted at four (4%) percent per annum simple interest (or
the lowest discount rate permitted by law), plus Lessor's anticipated
value of the Equipment at the end of the Initial Term or any applicable
renewal term of the Equipment Schedule.
(v) Upon repossession or surrender of any Equipment, Lessor shall sell,
lease or otherwise dispose of such Equipment in a commercially reasonable
manner, with or without notice and on public or private bid, and apply
the net proceeds thereof (after deducting all expenses, including
attorneys' fees incurred in connection therewith), to the sum of (iv)
above;
(vi) Declare any other Equipment Schedules and leases between Lessor and
Lessee in default and exercise any of the remedies provided for herein;
and
(vii) Pursue any other remedy available at law or in equity, including
but not limited to seeking damages or specific performance and/or
obtaining an injunction.
(C) Lessee shall be liable and shall pay to Lessor all expenses incurred
by Lessor in connection with the enforcement of any of Lessor's remedies,
including all expenses of repossessing, storing, shipping, repairing, and
selling the Equipment, and Lessor's reasonable attorney's fees. Lessor and
Lessee acknowledge the difficulty in establishing a value for the unexpired
lease term and owing to such difficulty agree that the provisions of this
Section XIV represent an agreed measure of damages and are not to be deemed a
forfeiture or penalty.
(D) All remedies of Lessor hereunder are cumulative, are in addition to any
other remedies provided for by law, and may, to the extent permitted by law, be
exercised concurrently or separately. The exercise of any one remedy shall not
be deemed to be an election of such remedy or to preclude the exercise of any
other remedy. No failure on the part of Lessor to exercise and no delay in
exercising any right or remedy shall operate as a waiver thereof or modify the
terms of this Lease or any Equipment Schedule. A waiver of default shall not be
a waiver of any other or subsequent default. If this Lease is determined to be
subject to any laws limiting the amount chargeable or
8
<PAGE>
collectible by Lessor then Lessor's recovery shall in no event exceed the
maximum amounts permitted by law.
9
<PAGE>
XV. INDEMNITY.
Lessee shall indemnify and hold Lessor, its agents, employees, successors and
assigns, harmless from and against any and all claims, actions, suits,
proceedings, costs, expenses, damages and liabilities, including attorney's
fees, arising out of, connected with, or resulting from the Equipment, any
Equipment Schedule or this Lease, including without limitation, the manufacture,
selection, delivery, possession, use, lease, operation, removal or return of the
Equipment.
XVI. REPRODUCTION OF DOCUMENTS.
This Lease, any Equipment Schedule and all related documents, including (a)
amendments, addendums, consents, waivers and modifications which may be executed
contemporaneously or subsequently herewith, (b) documents received by the Lessor
from the Lessee, and (c) financial statements, certificates and other
information previously or subsequently furnished to the Lessor, may be
reproduced by the Lessor by any photographic, photostatic, microfilm, micro-
card, miniature photographic, compact disk reproduction or other similar process
and the Lessor may destroy any original document so reproduced. The Lessee
agrees and stipulates that any such reproduction shall, to the extent permitted
by applicable law, be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not the reproduction was made by the Lessor in the
regular course of business) and that any enlargement, facsimile or further
reproduction of the reproduction shall likewise be admissible in evidence.
XVII. ASSIGNMENT; WAIVER OF DEFENSES; QUIET ENJOYMENT.
LESSEE SHALL NOT ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE, OR OTHERWISE DISPOSE OF,
ENCUMBER OR PERMIT A LIEN UPON OR AGAINST ANY INTEREST IN THIS LEASE, ANY
EQUIPMENT SCHEDULE OR THE EQUIPMENT OR PERMIT THE EQUIPMENT TO BE USED BY ANYONE
OTHER THAN LESSEE OR LESSEE'S EMPLOYEES WITHOUT LESSOR'S PRIOR WRITTEN CONSENT.
Lessor may, without consent or notice to Lessee, assign or transfer this Lease
or any Equipment Schedule or grant a security interest in any Equipment, any
Rental Payments, or any other sums due to become due hereunder, and in such
event Lessor's assignee, transferee or grantee shall have all the rights,
powers, privileges, and remedies of Lessor hereunder. Lessor agrees that no
assignee of Lessor shall be bound to perform any duty, covenant, condition or
warranty attributable to Lessor, and Lessee further agrees not to raise any
claim or defense arising out of this Lease or otherwise which it may have
against Lessor as a defense, counterclaim, or offset to any action by an
assignee or secured party hereunder. Upon Lessor's request, Lessee will execute
a consent and acknowledgment of Lessor's assignment to its assignee. Nothing
contained herein is intended to relieve Lessor of any of its obligations.
Provided Lessee is not in default hereunder, Lessee shall quietly use and enjoy
the Equipment, subject to the terms hereof.
XVIII. PERFORMANCE BY LESSOR OF LESSEE'S OBLIGATIONS.
In the event Lessee fails to comply with any provisions of this Lease, Lessor
shall have the right, but shall not be obligated, to effect such compliance on
behalf of Lessee upon ten (10) days prior written notice to Lessee. In such
event, all monies expended by, and all expenses of Lessor in effecting such
10
<PAGE>
compliance shall be deemed to be additional rent, and shall be paid by Lessee to
Lessor at the time of the next payment, together with interest at the rate of
one and one-quarter (1-1/4%) percent per month but in no event more than the
maximum permitted by law.
XIX. GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF TRIAL BY JURY AND RIGHTS
AND REMEDIES UNDER THE UNIFORM COMMERCIAL CODE.
This Lease shall be governed by the laws of the State of New Jersey, provided,
however, in the event this Lease or any provision hereof is not enforceable
under the laws of the State of New Jersey, then the laws of the state where
Equipment is located shall govern. LESSEE CONSENTS TO THE PERSONAL JURISDICTION
OF THE FEDERAL AND STATE COURTS OF THE STATE OF NEW JERSEY WITH RESPECT TO ANY
ACTION ARISING OUT OF THIS LEASE, ANY EQUIPMENT SCHEDULE OR THE EQUIPMENT,
PROVIDED, HOWEVER, LESSOR MAY IN ITS SOLE DISCRETION, ENFORCE THIS LEASE AND ANY
EQUIPMENT SCHEDULE IN ANY COURT HAVING LAWFUL JURISDICTION THEREOF. THIS MEANS
ANY LEGAL ACTION ARISING OUT OF THIS LEASE MAY BE FILED IN NEW JERSEY, AND
LESSEE MAY BE REQUIRED TO DEFEND AND LITIGATE ANY SUCH ACTION IN NEW JERSEY.
LESSEE AGREES THAT SERVICE OF PROCESS IN ANY SUIT MAY BE MADE BY CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, ADDRESSED TO LESSEE AT THE ADDRESS SET FORTH HEREIN.
TO THE EXTENT PERMITTED BY LAW, LESSEE WAIVES TRIAL BY JURY IN ANY ACTION BY OR
AGAINST LESSOR HEREUNDER AND WAIVES ANY AND ALL RIGHTS AND REMEDIES GRANTED TO
LESSEE BY ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE AND ANY RIGHTS NOW OR
HEREAFTER GRANTED BY STATUTE OR OTHERWISE THAT MAY LIMIT OR MODIFY LESSOR'S
RIGHTS AS DESCRIBED IN THIS LEASE OR THE EQUIPMENT SCHEDULES.
XX. GENERAL.
This Lease shall inure to the benefit of and is binding upon the heirs,
legatees, personal representatives, successors and permitted assigns of the
parties hereto. Time is of the essence of this Lease. This Lease and any
Equipment Schedule shall be effective when accepted by Lessor. This Lease and
the Equipment Schedules contain the entire agreement between Lessor and Lessee
with respect to the subject matter hereof, and all negotiations and
understandings have been merged herein. No modification of this Lease shall be
effective unless in writing and executed by both Lessor and Lessee. All
covenants and obligations of Lessee to be performed pursuant to this Lease,
including all payments to be made by Lessee hereunder, shall survive the
expiration or the earlier termination of this Lease. If more than one Lessee is
named in this Lease, the liability of each shall be joint and several. In the
event any provision of this Lease shall be unenforceable, then such provision
shall be deemed deleted, however, all other provisions hereof shall remain in
full force and effect. Service of all notices under this Lease shall be
sufficient if given personally, mailed to the party intended at its address set
forth herein, or at such other addresses said party may provide in writing from
time to time by certified mail, or overnight mail service, or sent via facsimile
transmission. Any such notice mailed to said address shall be deemed effective
three (3) days after it is deposited in the United States mail, duly addressed
and with postage prepaid; all notices sent by other means shall be deemed
effective when received.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease this 9th day of
November 1994.
LESSEE: 1ST TECH CORPORATION
BY: /s/ GARY W. PANKONIEN
---------------------------------
Gary W. Pankonien, Chairman & CEO
------------------------------------
(PRINT OR TYPE NAME AND TITLE OF ABOVE
SIGNATURE)
ATTEST: /s/ DONALD R. TURNER
----------------------------
TITLE: Secretary
LESSOR: COPELCO CAPITAL, INC.
BY: /s/ H. KROLLFEIFER, JR.
-----------------------------
H. Krollfeifer, Jr., Sr. VP
---------------------------------
(PRINT OR TYPE NAME AND TITLE OF ABOVE
SIGNATURE)
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COPELCO Lease No. 0-53842-0
LEASING CORPORATION ---------
Schedule No ________
Rentals Commence 01-28-94
--------
C69
<TABLE>
<CAPTION>
FULL LEGAL NAME AND ADDRESS OF LESSEE NAME AND ADDRESS OF EQUIPMENT SUPPLIER
1ST TECH CORPORATION QUAD SYSTEMS CORPORATION
12201 TECHNOLOGY BLVD. TWO ELECTRONIC DRIVE
AUSTIN, TEXAS 78727 HORSHAM, PA 19044
<S> <C>
SCHEDULE NO. 1 OF EQUIPMENT LEASE
QTY. DESCRIPTION (MODEL NO.) (SERIAL NO.)
(Indicate if Used
Equipment)
SEE ADDENDUM "A" ATTACHED HERETO AND FORMING A PART HEREOF.
EQUIPMENT LOCATION,
IF DIFFERENT THAN ABOVE: STREET ADDRESS COUNTY CITY STATE ZIP
INITIAL TERM RENTAL TOTAL NO. AND DVANCE RENTAL SECURITY
OF LEASE PAYMENTS AMOUNT OF EACH PAYMENTS TO BE DEPOSIT
PERIODICALLY RENTAL PAYMENT APPLIED TO
24 MONTHS AS FOLLOWS DURING INITIAL
TERM OF LEASE
THE FIRST 1
MONTHLY 24 RENTAL MONTH(S) AND $0.00
PAYMENTS OF
$9,127.13 EA. THE LAST 1
MONTH(S) RENTAL
$18,254.26
PAYMENTS TOTALING
(ADVANCE PAYMENTS
MUST ACCOMPANY
LEASE APPLICATION)
</TABLE>
TERMS AND CONDITIONS OF LEASE
1. LEASE OF EQUIPMENT.
A. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
equipment described above and on any schedule made a part hereof (the
"Schedule") (the equipment with all replacement parts, repairs, additions,
substitutions and accessories called the "Equipment") on the terms and
conditions on the face and reverse side hereof and on any Schedule hereto
(collectively the "Lease" or "Leases" unless the context indicates otherwise).
Lessee authorizes Lessor to insert in the Lease or any Schedule, the
Commencement Date, the serial numbers and other identification data of the
Equipment and other omitted factual matters when determined by Lessor.
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<PAGE>
B. Acceptance by Lessor shall occur only as set forth in this Section 1 and
shall continue in force with respect to all items of Equipment for the Initial
Term specified in each Schedule. Lessee agrees promptly to date, execute and
deliver to Lessor, upon delivery to Lessee of the first item of Equipment listed
on a Schedule a confirmation of delivery on Lessor's Delivery and Acceptance
Receipt form ("Receipt"). If Lessee does not, for any reason, date, execute and
deliver to Lessor the Receipt, within ten days after delivery of such item of
Equipment, Lessee hereby irrevocably authorizes the Lessor as its attorney-in-
fact to execute the Receipt on Lessee's behalf and to insert the date that the
Equipment was delivered to Lessee.
2. ORDER AND DELIVERY OF EQUIPMENT; LESSOR'S RIGHT TO TERMINATE. Lessee hereby
requests Lessor to order the Equipment from the Supplier named above and to
arrange for delivery of the Equipment to Lessee at Lessee's expense, and lease
the Equipment to Lessee. If the Equipment is not delivered to and accepted by
Lessee in form satisfactory to Lessor, within ninety (90)days from the date
Lessor orders the Equipment, Lessor may terminate this Lease and its obligations
hereunder to Lessee. Lessee waives any requirement of Lessor to furnish Lessee
a copy of Lessor's purchase order for the Equipment.
3. TERM AND RENT.
A. The initial term ("Initial Term") of any Schedule to which this Lease
relates shall commence on the day the first item of Equipment listed on such
Schedule is delivered to Lessee or Lessee's representative (the "Commencement
Date") and shall be of such duration as is prescribed in such Schedule. Advance
Rent and any Security Deposit as provided in any Schedule shall be payable upon
the execution of this Lease or the applicable Schedule and shall not be
refundable if the lease term for any reason does not commence or if this Lease
is duly terminated by Lessor. Interim rent shall be payable for the period
between the Commencement Date and the first day of the month following the
Commencement Date at a daily rate equal to the periodic rental provided in any
Schedule divided by the number of days in the period and subsequent payments
shall be due periodically in advance on the first day of each successive period
thereafter until all rent and other sums chargeable to Lessee hereunder are paid
in full. Lessee's obligation to pay rent and Lessee's other monetary
obligations hereunder are absolute and unconditional and are not subject to any
abatements, set-off, defense or counterclaim for any reason whatsoever. Any
Security Deposit shall secure all obligations of Lessee hereunder and may be
applied at Lessor's discretion to any past due obligation of Lessee and to the
extent not applied shall be returned to Lessee, without interest, at the
expiration of this Lease or the applicable Schedule. All payment of rent shall
be made to Lessor at the address set forth herein or such other address as
Lessor shall designate in writing.
B. Whenever any payment is not made by Lessee when due hereunder, Lessee agrees
to pay to Lessor, not later than one month thereafter interest on all monies
due Lessor from and after the date same is due at the rate of one and one-half
(1-1/2%) percent per month until paid, but as to each of the foregoing in no
event more than the maximum rate permitted by law.
C. As used herein, "Actual Cost" means the cost to Lessor of purchasing and
delivering the Equipment to Lessee, including taxes, transportation and other
charges. The amount of each Rental Payment and the Security Deposit set forth
in the Schedule are based on the total cost set forth in Lessor's purchase order
for the Equipment ("Equipment Cost"), which is an estimate, and shall be
adjusted proportionately if the actual cost of the Equipment is greater than
14
<PAGE>
said estimate. Lessee hereby authorizes Lessor to adjust upward the amounts set
forth in the Schedule when the actual cost is known and to add to the amount of
each Rental Payment any sales, use or leasing tax that may be imposed on or
measured by the Rental Payments. Lessor will inform Lessee of the adjustments
necessary to reflect Actual Cost. If the Actual Cost of the Equipment on any
Schedule exceeds the Estimated Cost by more than ten (10%) percent thereof
(exclusive of taxes), Lessor shall, if it desires to add to the Estimated Cost
an amount in excess of 10% of Estimated Cost, so notify Lessee in writing.
Within fifteen days (15) days thereafter, Lessee at its option may terminate the
relevant Schedule by giving notice to Lessor of its intention to do so,
effective the day of such notice, subject however to the provisions of Section
3.A hereof.
If, at any time prior to acceptance of the Equipment leased hereunder, Lessor
makes a general pricing increase with respect to new leases (including increases
reflecting increases in financing cost or operating expenses) and desires that
such increase be reflected in the Rental Payments to be charged to Lessee under
the Schedule relating to such Equipment, then Lessor shall promptly notify
Lessee of such increase ("Increase Notification"). If such increase is in
excess of ten (10%) percent of the amount of the Rental Payment, Lessee at its
option may terminate the relevant Schedule; provided, however, the Lessor must
be notified, within fifteen (15) days after the date of Increase Notification,
of Lessee's intentions to do so, effective the day of such notice to Lessor. If
any increase under this Section 3.D is not in excess of ten (10%) of the Rental
Payment, or if Lessor is not notified of Lessee's intentions to terminate the
relevant Schedule within the fifteen (15) day period set forth herein, the
relevant Schedule shall be automatically adjusted to the new higher Rental
Payment.
4. NO WARRANTIES BY LESSOR, DISCLAIMER OF IMPLIED WARRANTIES AND WAIVER OF
DEFENSES. LESSOR IS NOT THE MANUFACTURER OR SUPPLIER OF OR A DEALER IN THE
EQUIPMENT, AND MAKES NO WARRANTY, EXPRESSED OR IMPLIED, TO ANYONE, AS TO THE
SUITABILITY, DURABILITY, DESIGN, CONDITION, CAPACITY, PERFORMANCE OR ANY
OTHER ASPECT OF THE EQUIPMENT OR ITS MATERIAL OR WORKMANSHIP. LESSOR FURTHER
DISCLAIMS ANY IMPLIED WARRANTIES OF ANY KIND WITH RESPECT TO THE EQUIPMENT
INCLUDING THE WARRANTY OF MERCHANTABILITY AND FITNESS FOR USE OR PURPOSE. AS
TO LESSOR AND ITS ASSIGNS, LESSEE LEASES THE EQUIPMENT "AS 1S." LESSEE
REPRESENTS THAT IT HAS SELECTED THE EQUIPMENT AND THE SUPPLIER AND
ACKNOWLEDGES THAT LESSOR HAS NOT RECOMMENDED THE SUPPLIER. LESSOR SHALL HAVE
NO OBLIGATION TO INSTALL, MAINTAIN, ERECT, TEST, ADJUST, OR SERVICE THE
EQUIPMENT, ALL OF WHICH LESSEE SHALL PERFORM, OR CAUSE THE SAME TO BE
PERFORMED BY QUALIFIED THIRD PARTIES. LESSOR AND LESSOR'S ASSIGNEE SHALL NOT
BE LIABLE TO LESSEE OR OTHERS FOR ANY LOSS, DAMAGE OR EXPENSE OF ANY KIND OR
NATURE CAUSED DIRECTLY OR INDIRECTLY BY ANY EQUIPMENT HOWEVER ARISING, OR THE
USE OR MAINTENANCE THEREOF OR THE FAILURE OF OPERATION THEREOF, OR THE
REPAIRS, SERVICE OR ADJUSTMENT THERETO. NO REPRESENTATION OR WARRANTY AS TO
THE EQUIPMENT OR ANY OTHER MATTER BY THE SUPPLIER OR OTHERS SHALL BE BINDING
ON THE LESSOR NOR SHALL THE BREACH OF SUCH RELIEVE LESSEE OF, OR IN ANY WAY
AFFECT, ANY OF LESSEE'S OBLIGATIONS TO LESSOR HEREIN. IF THE EQUIPMENT IS
UNSATISFACTORY FOR ANY REASON LESSEE SHALL MAKE CLAIM ON ACCOUNT THEREOF
SOLELY AGAINST SUPPLIER, AND ANY OF SUPPLIER'S VENDORS, AND SHALL
NEVERTHELESS PAY LESSOR ALL RENT AND OTHER SUMS PAYABLE UNDER THIS LEASE.
LESSOR HEREBY ASSIGNS TO LESSEE, SOLELY FOR THE PURPOSE OF PROSECUTING SUCH A
CLAIM, ALL (IF ANY) OF THE RIGHTS WHICH LESSOR MAY HAVE AGAINST SUPPLIER AND
SUPPLIER'S
15
<PAGE>
VENDORS FOR BREACH OF WARRANTY OR OTHER REPRESENTATIONS RESPECTING THE
EQUIPMENT.
REGARDLESS OF CAUSE, LESSEE WILL NOT ASSERT ANY CLAIM WHATSOEVER AGAINST LESSOR
FOR LOSS OF ANTICIPATORY PROFITS OR ANY OTHER INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES, NOR SHALL LESSOR BE RESPONSIBLE FOR ANY DAMAGES OR COSTS WHICH MAY BE
ASSESSED AGAINST LESSEE IN ANY ACTION FOR INFRINGEMENT OF ANY UNITED STATES
LETTERS PATENT. LESSOR MAKES NO WARRANTY AS TO THE TREATMENT OF THIS LEASE FOR
TAX OR ACCOUNTING PURPOSES.
NOTWITHSTANDING ANY FEES WHICH MAY BE PAID BY LESSOR TO SUPPLIER OR ANY AGENT OF
SUPPLIER, LESSEE UNDERSTANDS AND AGREES THAT NEITHER SUPPLIER NOR ANY AGENT OF
SUPPLIER IS AN AGENT OF LESSOR OR IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OR
CONDITION OF THIS LEASE.
5. JURISDICTION AND VENUE. LESSEE CONSENTS TO THE PERSONAL JURISDICTION OF THE
FEDERAL AND STATE COURTS OF THE STATE OF NEW JERSEY WITH RESPECT TO ANY ACTION
ARISING OUT OF THIS LEASE OR THE EQUIPMENT PROVIDED HOWEVER LESSOR MAY IN ITS
SOLE DISCRETION ENFORCE THIS LEASE IN ANY COURT HAVING LAWFUL JURISDICTION
THEREOF. THIS MEANS ANY LEGAL ACTION ARISING OUT OF THIS LEASE MAY BE FILED IN
NEW JERSEY, AND LESSEE MAY BE REQUIRED TO DEFEND AND LITIGATE ANY SUCH ACTION IN
NEW JERSEY. LESSEE AGREES THAT SERVICE OF PROCESS IN ANY SUIT MAY BE MADE BY
CERTIFIED MAIL. RETURN RECEIPT REQUESTED ADDRESSED TO THE LESSEE AT THE ADDRESS
SET FORTH HEREIN. TO THE EXTENT PERMITTED BY LAW, LESSEE WAIVES TRIAL BY JURY IN
ANY ACTION BY OR AGAINST LESSOR HEREUNDER.
6. TITLE; PERSONAL PROPERTY. The Equipment is, and shall at all times be owned
by Lessor and Lessee shall have no interest in the Equipment except that of
Lessee and Lessee shall have no right to purchase or otherwise acquire title to
or ownership of any of the Equipment. If Lessor supplies Lessee with labels
indicating that the Equipment is owned by Lessor, Lessee shall affix such labels
to and keep them in a prominent place on the Equipment. Lessee hereby
authorizes Lessor to insert in this Lease the serial numbers, and other
identification data of Equipment when determined by Lessor. To protect Lessor's
rights in the Equipment in the event this Lease is determined to be a security
agreement, Lessee hereby grants to Lessor a security interest in the Equipment
and all proceeds, rents or profits therefrom. Lessee authorizes Lessors, at
Lessee's expense, to cause this Lease or any statement or other instrument in
respect of this Lease showing the interest of Lessor in the Equipment, including
Uniform Commercial Code financing statements, to be filed or recorded and
refiled and re-recorded, and grants Lessor the right to execute Lessee's name
thereto. Lesseee agrees to execute, deliver and file any statement or
instrument requested by Lessor for such purpose, and if certificates of title
are issued or outstanding with respect to any of the Equipment, Lessee will
cause the interest of Lessor to be properly noted thereon, and agrees to pay or
reimburse Lessor for any searches, filings, recordings, stamp fees or taxes
related to the filing or recording of any such instrument or statement, plus
Lessor's handling charges. Lessee shall, at its expense, protect and defend
Lessor's title against all persons claiming against or through Lessee, at all
times keeping the Equipment free from any legal process or encumbrance
whatsoever including but not limited to liens, attachments, levies and
executions, and shall give Lessor immediate written notice thereof and shall
indemnify Lessor from any loss caused thereby, Lessee shall, upon Lessor's
request execute or obtain from third parties and deliver
16
<PAGE>
to Lessor such estoppel certificates, landlord's waivers and such further
instruments and assurances as Lessor deems necessary or advisable for the
confirmation or perfection of Lessor's rights hereunder. The Equipment is, and
shall at all times be and remain, personal property notwithstanding that the
Equipment or any part thereof may now be or hereafter become, in any manner,
affixed or attached to real property or any improvements thereon.
7. MAINTENANCE, USE AND LOCATION. Lessee shall, at it own cost and expense,
maintain the Equipment in good operating condition and repair and protect the
Equipment from deterioration other than normal wear and tear; shall use the
Equipment in the regular course of its business, within its normal operating
capacity, without abuse; shall comply with all laws, ordinances, regulations,
requirements and rules with respect to the use, maintenance and operation of the
Equipment; shall not make any modification, alteration or addition to the
Equipment without the prior written consent of Lessor, which shall not be
unreasonably withheld, except for engineering changes recommended by and made by
the manufacturer; shall install on the Equipment all engineering changes offered
by the manufacturer without charge which enhance the safety of the Equipment;
shall not so affix the Equipment to realty as to change its nature to real
property or a fixture; and shall deep the Equipment at the location shown
herein, and shall not remove the Equipment without prior consent of Lessor.
Lessee will grant access to the Equipment to Lessor, Lessor's designee, and the
manufacturer during normal working hours for inspection, repair, preventative
maintenance, installation of engineering changes and for any other reasonable
purpose. Lessee shall during the term of this Lease, at its own expense, enter
into and maintain in force a contract with the manufacturer or other acceptable
maintenance company covering the maintenance of the Equipment and furnish a copy
thereof to Lessor upon request. If Lessor incurs any cost or expenses to bring
the Equipment up to good working order and appearance, Lessee shall immediately
reimburse Lessor for all such costs or expenses.
8. REDELIVERY; RENTAL TERM. After the Initial Term, and after each renewal term
thereafter, this Lease shall be automatically renewed for a term of six months,
unless Lessee shall give written notice of termination at least one hundred
eighty (180) days before the expiration of the then current term. Within (10)
days of Expiration or earlier termination of this lease, Lessee shall return the
Equipment and all cable, wirng, connectors, accessories and attachments thereto,
freight and insurance prepaid, to Lessor in good repair, condition and working
order, ordinary wear and tear resulting from proper use thereof only excepted.
Lessee shall have the Equipment certified as acceptable for the manufacturer's
standard maintenance contract and such certification shall be presented to
Lessor at least fourteen (14) days prior to redelivery to Lessor. Lessor shall
have the right, by notice to Lessee, and at Lessee's cost, to make all
arrangements for the discontinuance, disassembly, packing and transportation of
each item of Equipment and to designate a redelivery location. If Lessee fail to
return the Equipment as provided herein, Lessee shall pay Lessor a sum equal to
one (1) year's rent as liquidated damages to compensate Lessor for the economic
loss suffered by Lessor as a result of its inability to realize the residual
value of the Equipment when anticipated. In addition, for the use of the
Equipment, Lessee agrees to pay Lessor monthly rent equal to 110% of the average
annual Rental Payment (adjusted, if necessary, to a monthly period) provided
herein. Nothing contained herein is intended to relieve Lessee of its
obligation to
17
<PAGE>
return the Equipment to Lessor as provided herein or restrict Lessor's right to
recover the Equipment in the event of the failure of Lessee to so return the
Equipment at the expiration or termination of this Lease. If requested by
Lessor, Lessee shall store the Equipment at Lessee's premises for a period of up
to ninety (90) days at no cost to Lessor.
9. RISK OF LOSS. Lessee shall bear all risks of loss or damage to Equipment
from any cause from the date of the shipment of the Equipment to Lessee until
its return to Lessor. The occurrence of any such loss or damage shall not
relieve Lessee of any obligation hereunder. Lessee shall notify Lessor of any
damage to or destruction of the Equipment. In the event of loss or damage,
Lessee, at Lessor's sole option shall: (a) repair the damaged Equipment; or (b)
replace lost or unrepairable Equipment in good condition and working order with
documentation creating clear title thereto in Lessor; or (c) pay to Lessor the
present value of the unpaid balance of the aggregate rent reserved under this
Lease plus Lessor's anticipated residual value of the Equipment at the scheduled
expiration of this Lease discounted at six (6%) percent per annum to the date of
loss. Upon Lessor's receipt of replacement Equipment or payment as provided in
(b) or (c) hereof, Lessee and/or Lessee's insurer shall be entitled to Lessor's
interest in said item for salvage purposes, in its then condition and location,
without warranty, express or implied.
10. INSURANCE. Lessee shall keep the Equipment insured against all risks of
loss or damage from every cause whatsoever for not less than the full
replacement value thereof, and shall carry public liability and property damage
insurance covering the Equipment and its use in amounts customary for such
Equipment. All such insurance shall be in form and amount and with companies
acceptable to Lessor and name Lessor and its assignee as Loss Payee, as their
interest may appear with respect to property damage coverage and as Additional
Insured with respect to public liability coverage. Lessee shall pay the
premiums therefor and deliver said polices, or duplicates thereof or
certificates of coverage therefor to Lessor with long form Lender's Loss Payable
endorsement upon the policy or policies or by independent instrument, that
provides Lessor a right to thirty (30) days' written notice before the policy
can be altered or canceled and the right without obligation to payment of
premium. Should Lessee fail to provide such insurance coverage, Lessor may
obtain such coverage for its benefit or for the benefit of Lessee and charge
Lessee therefor. Lessee hereby appoint Lessor as Lessee's attorney-in-fact to
make claim for, receive payment of and execute and endorse all documents,
checks, or drafts for loss or damage under any said insurance polices and to
apply the proceeds in furtherance of the exercise of Lessor's options as
provided herein.
11. TAXES AND CHARGES. This Lease is intended to be a net lease, and all
payments hereunder are intended to be net to Lessor to the extent permitted by
applicable law. Lessee shall pay directly (or, at Lessor's option, reimburse
Lessor for) all license fees, assessments and other government charges, and all
sales, use, excise, franchise, personal property and any other similar tax or
taxes (herein collectively called "Charges") now or hereafter imposed, levied or
assessed by any state, federal or local government or agency upon any of the
Equipment or upon the leasing, purchase, ownership, use, possession, financing
or operation thereof, or upon the receipt of rental payments therefor, even if
Lessee's status provides for its exemption from the Charges (excluding income
and gross receipt taxes on the rental payments,
18
<PAGE>
except any such tax on rental payments which is substitution for, or relieves
Lessor from, the payment of taxes which Lessee would otherwise be obligated to
pay or reimburse Lessor as herein provided) before the same shall become in
default or subject to the payment of any penalty or interest. Lessee shall
supply Lessor with receipts or other evidence of payment of all Charges as may
reasonably be requested by Lessor. Lessee shall further comply with all state
and local laws requiring the filing of ad valorem or other tax returns relating
to any Charges. Lessee shall notify the Lessor of the imposition of, or, to
Lessee's knowledge, the proposed imposition of, any charges by supplying to
Lessor (within five (5) days after receipt thereof by Lessee) a copy of the
invoice or other documents respecting such Charges. Unless otherwise directed
by Lessor in writing, Lessor shall pay all personal property taxes with respect
to the Equipment and Lessee shall reimburse Lessor therefor upon demand.
12. LEASE IRREVOCABILITY AND OTHER COVENANTS AND REPRESENTATIONS OF LESSEE.
Lessee agrees that this Lease is irrevocable for the full term hereof and the
Lessee's obligations under this Lease are absolute and shall continue with out
abatement and regardless of any disability of Lessee to use Equipment or any
part thereof because of any reason including, but not limited to war, act of
God, governmental regulations strike, loss, damage, destruction, obsolescence,
failure or delay in delivery, failure of the Equipment to operate properly,
termination by operation of law, or any other cause. Lessee agrees to deliver
to Lessor annual financial statements and such interim statements, as Lessor
requests. Lessee represents that this Lease has been duly authorized by all
necessary action on its part, is a valid, binding and legally enforceable
obligation of Lessee in accordance with its terms and is not in any respect
inconsistent with Lessee's Charter or By-Laws, regulation, order or agreement
binding upon Lessee; and the Equipment shall be used by Lessee solely for
business purposes and that all financial and other information submitted to
Lessor was and will be true and correct.
13. INDEMNITY. Lessee shall indemnify and hold Lessor harmless from and
against any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including attorney's fees, arising out of, in
connection with, or resulting from the Equipment or this Lease, including
without limitation, the manufacture, selection, delivery, possession, use,
lease, operation, removal or return of the Equipment.
14. DEFAULT AND REMEDIES.
A. If any one of the following events shall occur: (a) Lessee fails to pay any
rent or any other payment hereunder when due; or (b) Lessee fails to pay, when
due, any indebtedness to Lessor arising independently of this Lease, including
but not limited to, any other leases between Lessor and Lessee, and such default
shall continue for five (5) days; or (c) Lessee fails to perform any of the
terms, covenants or conditions of this Lease or any other lease between Lessor
and Lessee, other than as provided above, after ten (10) days written notice; or
(d) any representation of Lessee contained in this Lease or any other related
agreement, or in any credit or other information submitted to Lessor in
connection with this transaction is untrue or incorrect; or (e) Lessee sells
substantially all of its assets out of the ordinary course of business, merges
or consolidates with any other person, or, if a corporation, sustains a change
in the ownership of more than 20% in the aggregate of its issued and outstanding
stock of any class; or (f) Lessee becomes insolvent or
19
<PAGE>
makes an assignment for the benefit of creditors; or (g) a receiver, trustee,
conservator or liquidator of Lessee or of all or a substantial part of its
assets is appointed with or without the application or consent of Lessee; or (h)
a petition is filed by or against Lessee under the Bankruptcy Code or any
amendment thereto, or under any other insolvency law or laws, providing for the
relief to debtors, Lessor may, to the extent permitted by applicable law
exercise any one or more of the following remedies:
(i) Terminate this Lease with respect to all or any part of Equipment.
(ii) Recover from Lessee all rent and other amounts then due and as they
shall thereafter become due hereunder;
(iii) Take possession of any or all items of Equipment, wherever the same
may be located, and any such taking of possession shall not
constitute a termination of this Lease;
(iv) Declare the entire unpaid balance of rent and other amounts for the
unexpired term of this Lease immediately due and payable and recover
from Lessee, with respect to any and all items of Equipment and with
or without repossessing the Equipment the sum of:
1. The unpaid balance of all rent and other amounts due for the
balance of the term of this Lease, discounted at six (6%)
percent per annum simple interest;
2. The "reversionary value" of the Equipment as of the end of the
Initial Term, which Lessee for this purpose agrees shall be ten
(10%) percent of the total cost of the Equipment to Lessor,
discounted at six (6%) percent per annum simple interest;
provided, however, that upon repossession or surrender of
Equipment, Lessor shall sell, lease or otherwise dispose of
Equipment in a commercially reasonable manner, with or without
notice and on public or private bid, and apply the net proceeds
thereof (after deducting all expenses, including attorneys' fees
incurred in connection therewith), to the sum of (1) and (2)
above;
(v) Declare any other leases between Lessor and Lessee in default and
exercise with respect to such leases any of the remedies provided for
herein;
(vi) Pursue any other remedy available at law or in equity, including but
not limited to seeking damages or specific performance and/or
obtaining an injunction.
B. Lessee shall be liable and shall pay to Lessor all expenses incurred by
Lessor in connection with the enforcement of any of the Lessor's remedies,
including all expenses of repossessing, storing, shipping, repairing, and
selling the Equipment, and Lessor's reasonable attorney's fees. Lessor and
Lessee acknowledge the difficulty in establishing a value for the Equipment
lease term and owing to such difficulty agree that the provisions of this
paragraph 14 represent an agreed measure of damages and are not to be deemed a
forfeiture or penalty.
C. All remedies of Lessor hereunder are cumulative, are in addition to any other
remedies provided for by law, and may, to the extent permitted by law, be
exercised concurrently or separately. The exercise of any one remedy shall not
be deemed to be an election of such remedy or to preclude the exercise of any
other remedy. No failure on the part of the Lessor to exercise and no
20
<PAGE>
delay in exercising any right or remedy shall operate as a waiver thereof or
modify the terms of this Lease. A waiver of default shall not be a waiver of
any other or subsequent default. If this Lease is determined to be subject to
any laws limiting the amount chargeable or collectible by Lessor's recovery
shall in no event exceed the maximum amounts permitted by law.
D. Upon default by Lessee in any of the terms and conditions of this Lease, to
the extent and if permitted by applicable law, Lessee authorizes and empowers
the Prothonotary or Clerk of Court or any attorney of any court of record to
appear for Lessee and enter a judgment by confession or in a amicable action in
any court of competent jurisdiction under this provision in favor of Lessor or
its assignee, with or without averment or declaration filed, for possession of
the Equipment and/or for such sum or sums as may be payable by reason of the
terms of this Lease, including any sums as may be past due at the time of
repossession on acceleration, and such additional sums as may be incurred by
reasonable attorney's fees. The authority to confess judgment either for
possession of the Equipment or any money due hereunder shall not be exhausted by
one exercise, but judgments may be confessed from time to time, as often as may
be necessary.
15. ASSIGNMENT; WAIVER OF DEFENSES; QUIET ENJOYMENT. LESSEE SHALL NOT ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE, OR OTHERWISE DISPOSE OF THIS LEASE OR ANY
INTERESTS HEREUNDER NOR SUBLET OR LEND EQUIPMENT OR PERMIT IT TO BE USED BY
ANYONE OTHER THAN LESSEE OR LESSEE'S EMPLOYEES WITHOUT LESSOR'S PRIOR WRITTEN
CONSENT. Lessor may, without consent, assign or transfer this Lease or grant a
security interest in any Equipment, any rentals, or any other sums due or to
become due hereunder, and in such event Lessor's assignee, transferee or grantee
shall have all rights, power, privileges, and remedies of Lessor hereunder.
Lessee agrees that, following its receipt of notice of any assignment by Lessor
of this Lease or the Rental Payments payable hereunder, it will pay the Rental
Payments due hereunder directly to the assignee (or to whomever the assignee
shall designate). Lessee agrees that no assignee of Lessor shall be bound to
perform any duty, covenant, condition or warranty attributable to Lessor, and
Lessee further agrees not to raise any claim or defense arising out of this
Lease or otherwise which it may have against Lessor as a defense, counterclaim,
or offset to any action by an assignee or secured party hereunder. Upon
Lessor's request, Lessee will acknowledge to any assignee receipt of Lessor's
notice of assignment. Nothing contained herein is intended to relieve Lessor of
any of its obligations. Provided Lessee is not in default hereunder, Lessee
shall quietly use and enjoy the Equipment, subject to the terms hereof.
16. PERFORMANCE BY LESSOR OF LESSEE'S OBLIGATIONS. In the event Lessee fails to
comply with any provisions of this Lease, Lessor shall have the right, but shall
not be obligated, to effect such compliance on behalf of Lessee upon ten (10)
days prior written notice to Lessee. In such event, all monies expended by, and
all expenses of Lessor in effecting such compliance shall be deemed to be
additional rent, and shall be paid by Lessee at the time of the next rent
payment, together with interest at the rate of one and one-half (1-1/2%) percent
per month but in no event more than that maximum permitted by law.
17. GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF TRIAL BY JURY AND RIGHTS
AND REMEDIES UNDER THE UNIFORM COMMERCIAL CODE. The Lease shall be governed by
the laws of the State of New Jersey, provided however, in the event this
21
<PAGE>
Lease or any provision hereof is not enforceable under the laws of the State of
New Jersey then the laws of the state where the Equipment is located shall
govern. To the extent permitted by law, Lessee waives trial by jury in any
action by or against Lessor hereunder. Lessee hereby waives any and all rights
and remedies granted Lessee by Section 2A-508 through 2A-522 of the Uniform
Commercial Code including, by way of example only and not as a limitation, the
right to repudiate this Lease and reject the Equipment; the right to cancel this
Lease; to revoke acceptance of the Equipment; granting a security interest in
the Equipment in Lessee's possession and control for any reason; recover damages
thereunder for any breach of warranty or for any other reason deduct all or any
part of the claimed damages resulting from Lessor's default, if any, under this
Lease; accept partial delivery of the Equipment; "cover" by making any purchase
or lease of or contract to purchase or lease equipment in substitution for those
due from Lessor; recover any general, special, incidental or consequential
damages, for any reason whatsoever; and specific performance, replevin, detinue,
sequestration, claim and delivery and the like for the Equipment identified to
this lease.
18. GENERAL. This Lease shall insure to the benefit of and is binding upon the
heirs, legatees, personal representatives, successors and assigns of the parties
hereto. Time is of the essence of this Lease. This Lease and any Schedule
shall be effective when accepted in writing by Lessor at its principal offices
in New Jersey by its President or any Vice President. This Lease and any
Schedule contains the entire agreement between Lessor and Lessee with respect to
the subject matter hereof, and all negotiations and understandings have been
merged herein. No modification of this Lease shall be effective unless in
writing and executed by any executive officer of Lessor. All covenants and
obligations of Lessee to be performed pursuant to this Lease, including all
payments to be made by Lessee hereunder, shall survive the expiration or earlier
termination of this Lease. If more than one Lessee is named in this Lease, the
liability of each shall be joint and several. In the event any provision of
this Lease shall be unenforceable, then such provision shall be deemed deleted,
however, all other provisions hereof shall remain in full force and effect.
Service of all notices under this Lease shall be sufficient if given personally,
mailed to the party intended at its address set forth herein, or at such other
addresses said party may provide in writing from time to time by certified mail,
or overnight mail service, or sent via facsimile transmission. Any such notice
mailed to said address shall be effective when deposited in the United States
mail, duly addressed and with postage prepaid.
19. MASTER LEASE. This Lease may be used as a Master Lease between Lessor and
Lessee, and shall govern any Schedules now or hereafter executed by Lessor and
Lessee, which refer to this Lease.
IN WITNESS WHEREOF, Lessor and Lessee have dated this Lease the 17th day of
December, 1993.
LESSOR: COPELCO LEASING CORPORATION Lessee: 1ST TECH CORPORATION
Accepted on: 01-28-94
By: /s/ H. KROLLFEIFER, JR. By: /s/ GARY W. PANKONIEN
--------------------------------- -----------------------------
Authorized Signature Gary W. Pankonien
Title: Vice President Chairman & CEO
22
<PAGE>
ATTEST or WITNESS:
/s/ DONALD R. TURNER
--------------------------------
23
<PAGE>
ADDENDUM "A" ANNEXED TO AND MADE A PART HEREOF LEASE AGREEMENT
NO. 0538420 DATED 12-17-93 BY AND BETWEEN 1ST TECH CORPORATION
- - --------------------------------------------------------------------------------
("LESSEE") AND COPELCO LEASING CORPORATION ("LESSOR")
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Whereas, Lessor and Lessee are party to the above-described Lease Agreement
(the "Lease Agreement"); and desire to make certain changes, amendments and
additions to the Lease Agreement as hereinafter set forth.
Now therefore, it is hereby agreed that the Lease Agreement shall be
amended in the following respects:
The following equipment shall be deleted from the Schedule 1A of Lease
Agreement:
1 - DUAL CAMERA WITH VISION PROCESSOR
The following equipment shall be added to Schedule 1A of Lease Agreement:
2 - 12MM TAPE FEEDRS
Monthly rental payments will be changed from $9127.13 to $8,749.39 per month.
All else remains the same.
No other provisions of the Lease Agreement shall be altered, amended or
affected by the Addendum. No charge or modification of the Addendum shall be
valid unless agreed to by both parties and signed by officers of both. All
other term and conditions of the Lease Agreement shall remain in full force and
effect.
By execution hereof, the signers hereby certify that they have read the
Addendum and that they are duly authorized corporate officers, partners, or
proprietors of the below-named Lessee and Lessor and are duly authorized to
execute this Addendum on behalf of Lessee and Lessor.
1ST TECH CORPORATION COPELCO LEASING CORPORATION
BY: /s/ DONALD R. TURNER BY: /s/ H. KROLLFEIFER, JR.
--------------------------- ---------------------------
Donald R. Turner, CFO H. Krollfeifer, Jr., Vice President
PRINT OR TYPE NAME AND TITLE PRINT OR TYPE NAME AND TITLE OF
OF ABOVE SIGNATURE ABOVE SIGNATURE
DATED: 1/7/94 DATED: 01-28-94
24
<PAGE>
SCHEDULE NO. 1A TO LEASE AGREEMENT NO. 0-53842-0 DATED 12-17-93
BY AND BETWEEN 1ST TECH CORPORATION ("LESSEE") AND
COPELCO LEASING CORPORATION ("LESSOR")
QTY DESCRIPTION
- - --- -----------
1 QUAD IVC/68 STD. CONFIG. INCLUDES: CENTRAL CONTROL
1 TOUCHLESS LASER CENTERING; HAND-HELD TERMINAL
1 NOZZLE CHANGER; 7 SPARE NOZZLES; VACUUM PUMP
1 QUADVU3 OFFSET CORRECTION & IMAGE REJECT VISION
1 QUADVU4 FOR FINE PITCH LEAD PITCH INSPECT. & ALIGN.
1 TAPE FEEDER BAS; AUTOPROGRAM S/W PACKAGE
1 PROGRAMMABLE TRANSPORT; INTEGRATED PC PKG.
1 INSTALLATION; TRAINING; OPERATORS MANUAL
4 SETS TOPPLING POSTS
1 ELECTRONIC TAPE FEEDER BASE
20 8MM ELECTRONIC TAPE FEEDER
6 24MM ELECTRONIC TAPE FEEDER
1 VIBRATORY TUBE FEEDER BASE
1 VMP-20S SEMI AUTO. SCREEN PRINTER INCLUDES:
1 VERTICAL MOTION PROFILE BOARD; SNAP OFF SPEED CONTR.
1 MICRO CONTROLLER SETUP; 30 PRINT PARAMETER STORE &
1 RECALL; DUAL SQUEEGEE; DIAGNOSTIC CONTROLS
1 STORAGE STAND; SCREEN/STENCIL UP TO 20 X 20" I.D.
1 PRINT AREA: CONTACT 15.7 X 17.7, OFF CONTACT 16.5 X 17.7
1 UPGRADABLE DESIGN; VENTURI VACUUM PUMP
1 ADJUSTABLE SYSTEM TOOLING; MAGNETIC/VACUUM CUP
1 DOUBLE SIDED BOARDS;
1 DUAL CAMERA WITH VISION PROCESSOR
1ST TECH CORPORATION COPELCO LEASING CORPORATION
BY: /s/ GARY W. PANKONIEN BY: /s/ H. KROLLFEIFER, JR.
-------------------------------- --------------------------------
Gary W. Pankonien, Chairman & CEO H. Krollfeifer, Jr., Vice President
- - ----------------------------------- -----------------------------------
PRINT NAME AND TITLE OF ABOVE PRINT NAME AND TITLE OF ABOVE
SIGNATURE SIGNATURE
DATE: 12-17-93 DATE: 01-28-94
25
<PAGE>
COPELCO CAPITAL, INC.
EQUIPMENT SCHEDULE NO. 0-59882-0
This Equipment Schedule ("Equipment Schedule") to that certain Master Lease
Agreement Number 0-59882-M (hereinafter called the "Master Lease") between
Lessor and the Lessee whose name appears below, together with the Master Lease
constitutes a lease of the Equipment described below (hereinafter, collectively,
this "Lease"). All the terms and conditions of the Master Lease are
incorporated herein as if all said terms and conditions were fully set forth
herein shall have the meanings given such terms in the Master Lease. It is the
intend of the parties that this Equipment Schedule be separately enforceable as
a complete and independent lease, independent of all other Equipment Schedules
to the Master Lease.
LESSEE: SUPPLIER:
1ST TECH CORPORATION QUAD SYSTEMS CORPORATION
12201 TECHNOLOGY BLVD. TWO ELECTRONIC DRIVE
AUSTIN, TEXAS 78727 HORSHAM, PA 19044
QTY Description of Equipment
1 Quad IIc Laser Center Assembler
1 Quad IIc Demo Laser Centering Assembler
1 Quad Vu4 to Vu6 Ivc Vision Upgrade
2 Vibratory Tube Feeder Base
1 Assy Tray Carrier
6 8mm Electronic Tape Feeder (.800" wide)
2 12mm Electronic Tap Feeder (1.00" wide)
See Addendum attached hereto and forming a part hereof.
EQUIPMENT LOCATION IF DIFFERENT THAN ABOVE:
<TABLE>
<CAPTION>
INITIAL TERM RENTAL TOTAL NO. AND ADVANCE RENTAL PAYMENTS TO SECURITY
OF LEASE PAYMENTS AMOUNT OF EACH BE APPLIED TO DEPOSIT
PERIODICALLY RENTAL PAYMENT
36 MONTHS AS FOLLOWS DURING INITIAL
TERM OF LEASE
<S> <C> <C> <C> <C>
THE FIRST 1
MONTHLY 36 RENTAL MONTH(S) AND $0.00
PAYMENTS OF
$5,094.55 EA. THE LAST 1
MONTH(S) RENTAL
PAYMENTS TOTALING
$10,189.10
</TABLE>
26
<PAGE>
(ADVANCE PAYMENTS
MUST ACCOMPNY
LEASE APPLICATION)
Monthly Rent: The first payment of monthly rent is due and payable on the
Commencement Date. Subsequent payments of monthly rent are due and payable on
the first day of each succeeding month.
Chattel Paper: To the extent this Lease may be considers "chattel paper" as
defined in the Uniform Commercial Code, only Counterpart Number One of any of
the manually executed counterparts of this Equipment Schedule incorporating the
terms of the Master Leas Agreement, shall constitute the original of this Lease,
and no interest in this Lease may be created or transferred except by transfer
of possession of that counterpart.
Rental Payments: the parties agree that the Rental Payments are predicated on
the yield of like term Treasury Notes, as quoted in The Wall Street Journal of
7.14% as of November 2, 1994. Any increase in the yield of like term Treasury
Notes prior to the Commencement Date of increase the effective lease rate basis
for basis point.
EQUIPMENT SCHEDULE ACCEPTED BY:
1ST TECH CORPORATION COPELCO CAPITAL, INC.
By: /s/ GARY W. PANKONIEN By: /s/ H. KROLLFEIFER, JR.
-------------------------------- --------------------------------
Gary Pankonien, Chairman & CEO H. Krollfeifer, Jr., Sr. VP
- - ----------------------------------- ------------------------------------
(PRINT OR TYPE NAME & TITLE OF (PRINT OR TYPE NAME & TITLE OF ABOVE
ABOVE SIGNATURE) SIGNATURE)
EQUIPMENT SCHEDULE COUNTERPART NO. 1 OF 1
27
<PAGE>
COPELCO CAPITAL, INC.
EQUIPMENT SCHEDULE NO. 0598821
This Equipment Schedule ("Equipment Schedule") to that certain Master Lease
Agreement Number 0-59882-M (hereinafter called the "Master Lease") between
Lessor and the Lessee whose name appears below, together with the Master Lease
constitutes a lease of the Equipment described below (hereinafter, collectively,
this "Lease"). All the terms and conditions of the Master Lease are
incorporated herein as if all said terms and conditions were fully set forth
herein shall have the meanings given such terms in the Master Lease. It is the
intend of the parties that this Equipment Schedule be separately enforceable as
a complete and independent lease, independent of all other Equipment Schedules
to the Master Lease.
LESSEE: SUPPLIER:
1ST TECH CORPORATION CONCEPTRONIC, INC.
12201 TECHNOLOGY BLVD. 6 POST ROAD
AUSTIN, TEXAS 78727 PORTSMOUTH, NH 03801
QTY DESCRIPTION OF EQUIPMENT (MODEL NO.) (SERIAL NO.)
1 CONCEPT J60A 220 V REFLOW OVEN SYSTEM J6022
INCLUDING ALL ATTACHMENTS, REPLACEMENTS, SUBSTITUTIONS,
ACCESSORIES, AND ALL PROCEEDS THEREOF.
1 HVN70 220V REFLOW OVEN SYSTEM HVN70
INCLUDING ALL ATTACHMENTS, REPLACEMENT, SUBSTITUTIONS,
ACCESSORIES, AND ALL PROCEEDS THEREOF.
EQUIPMENT LOCATION IF DIFFERENT THAN ABOVE:
<TABLE>
<CAPTION>
INITIAL TERM OF RENTAL PAYMENTS TOTAL NO. AND ADVANCE RENTAL SECURITY DEPOSIT
LEASE PERIODICALLY AS AMOUNT OF EACH PAYMENTS TO BE
FOLLOWS RENTAL PAYMENT APPLIED TO
60 MONTHS DURING INITIAL
TERM OF LEASE
<S> <C> <C> <C> <C>
THE FIRST 1
MONTHLY 60 RENTAL MONTH(S) AND $0.00
PAYMENTS OF
$1,885.92 EA. THE LAST 1
MONTH(S) RENTAL
PAYMENTS TOTALING
$3,771.84
(ADVANCE PAYMENTS
MUST ACCOMPANY
</TABLE>
28
<PAGE>
LEASE APPLICATION)
Monthly Rent: The first payment of monthly rent is due and payable on the
Commencement Date. Subsequent payments of monthly rent are due and payable on
the first day of each succeeding month.
Chattel Paper: To the extent this Lease may be considers "chattel paper" as
defined in the Uniform Commercial Code, only Counterpart Number One of any of
the manually executed counterparts of this Equipment Schedule incorporating the
terms of the Master Leas Agreement, shall constitute the original of this Lease,
and no interest in this Lease may be created or transferred except by transfer
of possession of that counterpart.
Rental Payments: the parties agree that the Rental Payments are predicated on
the yield of like term Treasury Notes, as quoted in The Wall Street Journal of
7.19% as of February 23,1995. Any increase in the yield of like term Treasury
Notes prior to the Commencement Date of increase the effective lease rate basis
for basis point.
EQUIPMENT SCHEDULE ACCEPTED BY:
1ST TECH CORPORATION COPELCO CAPITAL, INC.
By: /s/ DONALD R. TURNER By: /s/ H. KROLLFEIFER, JR.
-------------------------------- --------------------------------
Donald R. Turner, CFO H. Krollfeifer, Jr., Sr. VP
- - ----------------------------------- -----------------------------------
(PRINT OR TYPE NAME & TITLE OF (PRINT OR TYPE NAME & TITLE OF ABOVE
ABOVE SIGNATURE) SIGNATURE)
29
<PAGE>
COPELCO CAPITAL, INC.
EQUIPMENT SCHEDULE NO. 0598822
This Equipment Schedule ("Equipment Schedule") to that certain Master Lease
Agreement Number 0-59882-M (hereinafter called the "Master Lease") between
Lessor and the Lessee whose name appears below, together with the Master Lease
constitutes a lease of the Equipment described below (hereinafter, collectively,
this "Lease"). All the terms and conditions of the Master Lease are
incorporated herein as if all said terms and conditions were fully set forth
herein shall have the meanings given such terms in the Master Lease. It is the
intend of the parties that this Equipment Schedule be separately enforceable as
a complete and independent lease, independent of all other Equipment Schedules
to the Master Lease.
LESSEE: SUPPLIER:
1ST TECH CORPORATION QUAD SYSTEMS
12201 TECHNOLOGY BLVD. SUITE 130 2 ELECTRONIC DRIVE
AUSTIN, TEXAS 78727 HORSHAM, PA 19044
QTY DESCRIPTION OF EQUIPMENT (MODEL NO.) (SERIAL NO.)
1 VMP-20S SEMI AUTOMATIC SCREEN PRINTER INCLUDING ALL ATTACHMENTS,
REPLACEMENTS, SUBSTITUTIONS, ACCESSORIES AND ALL PROCEEDS THEREOF.
1 QUAD QSP-2HIGH SPEED SURFACE MOUNT ASSEMBLY SYSTEMS INCLUDING ALL
ATTACHMENTS, REPLACEMENTS, SUBSTITUTIONS, ACCESSORIES AND PROCEEDS
THEREOF.
EQUIPMENT LOCATION IF DIFFERENT THAN ABOVE:
<TABLE>
<CAPTION>
INITIAL TERM OF RENTAL PAYMENTS TOTAL NO. AND ADVANCE RENTAL SECURITY
LEASE PERIODICALLY AS AMOUNT OF EACH PAYMENTS TO BE DEPOSIT
FOLLOWS RENTAL PAYMENT APPLIED TO
60 MONTHS DURING INITIAL
TERM OF LEASE
<S> <C> <C> <C> <C>
THE 1 FIRST
MONTHLY 60 RENTAL MONTH(S) AND $0.00
PAYMENTS OF
$5,523.89 EA. THE 1 LAST
MONTH(S) RENTAL
PAYMENTS TOTALING
$11,047.78
MUST ACCOMPANY
LEASE APPLICATION)
</TABLE>
30
<PAGE>
Monthly Rent: The first payment of monthly rent is due and payable on the
Commencement Date. Subsequent payments of monthly rent are due and payable on
the first day of each succeeding month.
Chattel Paper: To the extent this Lease may be considers "chattel paper" as
defined in the Uniform Commercial Code, only Counterpart Number One of any of
the manually executed counterparts of this Equipment Schedule incorporating the
terms of the Master Leas Agreement, shall constitute the original of this Lease,
and no interest in this Lease may be created or transferred except by transfer
of possession of that counterpart.
Rental Payments: the parties agree that the Rental Payments are predicated on
the yield of like term Treasury Notes, as quoted in The Wall Street Journal of
7.19% as of February 23,1995. Any increase in the yield of like term Treasury
Notes prior to the Commencement Date of increase the effective lease rate basis
for basis point.
EQUIPMENT SCHEDULE ACCEPTED BY:
1ST TECH CORPORATION COPELCO CAPITAL, INC.
By: /s/ DONALD R. TURNER By: /s/ H. KROLLFEIFER, JR.
-------------------------------- --------------------------------
Donald R. Turner, CFO H. Krollfeifer, Jr., Sr. VP
- - ----------------------------------- -----------------------------------
(PRINT OR TYPE NAME & TITLE OF (PRINT OR TYPE NAME & TITLE OF ABOVE
ABOVE SIGNATURE) SIGNATURE)
31
<PAGE>
COPELCO CAPITAL, INC.
EQUIPMENT SCHEDULE NO. 0598823
This Equipment Schedule ("Equipment Schedule") to that certain Master Lease
Agreement Number 0-59882-M (hereinafter called the "Master Lease") between
Lessor and the Lessee whose name appears below, together with the Master Lease
constitutes a lease of the Equipment described below (hereinafter, collectively,
this "Lease"). All the terms and conditions of the Master Lease are
incorporated herein as if all said terms and conditions were fully set forth
herein shall have the meanings given such terms in the Master Lease. It is the
intend of the parties that this Equipment Schedule be separately enforceable as
a complete and independent lease, independent of all other Equipment Schedules
to the Master Lease.
LESSEE: SUPPLIER:
1ST TECH CORPORATION QUAD SYSTEMS
12201 TECHNOLOGY BLVD. SUITE 130 2 ELECTRONIC DRIVE
AUSTIN, TEXAS 78727 HORSHAM, PA 19044
QTY DESCRIPTION OF EQUIPMENT (MODEL NO.) (SERIAL NO.)
1 QUAD PLACEMENT MACHINE
AS WELL AS ATTACHMENTS, REPLACEMENTS, SUBSTITUTIONS AND
ACCESSORIES
EQUIPMENT LOCATION IF DIFFERENT THAN ABOVE:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INITIAL TERM OF RENTAL PAYMENTS TOTAL NO. AND ADVANCE RENTAL SECURITY Initial Lease
LEASE PERIODICALLY AS AMOUNT OF EACH PAYMENTS TO BE DEPOSIT
FOLLOWS RENTAL PAYMENT APPLIED TO 30 months
30 MONTHS DURING INITIAL
TERM OF LEASE
THE FIRST 1
MONTHLY 30 RENTAL MONTH(S) AND $0.00
PAYMENTS OF
$2,396.05 EA. THE LAST 1
MONTH(S)
RENTAL
PAYMENTS
TOTALING
$11,047.78
(ADVANCE
PAYMENTS MUST
ACCOMPANY
LEASE
</TABLE>
32
<PAGE>
APPLICATION)
Monthly Rent: The first payment of monthly rent is due and payable on the
Commencement Date. Subsequent payments of monthly rent are due and payable on
the first day of each succeeding month.
Chattel Paper: To the extent this Lease may be considers "chattel paper" as
defined in the Uniform Commercial Code, only Counterpart Number One of any of
the manually executed counterparts of this Equipment Schedule incorporating the
terms of the Master Leas Agreement, shall constitute the original of this Lease,
and no interest in this Lease may be created or transferred except by transfer
of possession of that counterpart.
Rental Payments: the parties agree that the Rental Payments are predicated on
the yield of like term Treasury Notes, as quoted in The Wall Street Journal of
5.70% as of October 9,1995. Any increase in the yield of like term Treasury
Notes prior to the Commencement Date of increase the effective lease rate basis
for basis point.
EQUIPMENT SCHEDULE ACCEPTED BY:
1ST TECH CORPORATION COPELCO CAPITAL, INC.
By: /s/ DONALD R. TURNER By: /s/ H. KROLKFEIFER, JR.
-------------------------------- --------------------------------
Donald R. Turner, CFO H. Krollfeifer, Jr., Sr. VP
- - ----------------------------------- -----------------------------------
(PRINT OR TYPE NAME & TITLE OF (PRINT OR TYPE NAME & TITLE OF ABOVE
ABOVE SIGNATURE) SIGNATURE)
33
<PAGE>
EXHIBIT 12.1
TANISYS TECHNOLOGY, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
Month Shares Outstanding at Month End
- - ----- -------------------------------
Sept 95 9,065,305
Oct 95 9,085,305
Nov 95 9,119,305
Dec 95 9,119,305
Jan 96 10,106,037
Feb 96 10,106,037
Mar 96 10,256,037
Apr 96 10,256,037
May 96 14,628,537
Jun 96 14,628,537
Jul 96 14,628,537
Aug 96 15,978,537
Sept 96 15,978,537
-----------
13 month total 152,956,053
Weighted
Average Shares 11,765,850
Net Loss (4,409,917)
Loss per Weighted
Average Shares (.37)
<PAGE>
Exhibit 21.1
jbh:11/17/96
SUBSIDIARIES OF TANISYS TECHNOLOGY, INC.
----------------------------------------
1st Tech Corporation (a Delaware corporation)
DarkHorse Systems, Inc. (a Delaware corporation)
Rosetta Marketing and Sales, Inc. (a Texas corporation) - Inactive
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FISCAL 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 2,689,569
<SECURITIES> 0
<RECEIVABLES> 5,087,090
<ALLOWANCES> 84,557
<INVENTORY> 1,804,458
<CURRENT-ASSETS> 9,798,687
<PP&E> 1,817,479
<DEPRECIATION> 906,589
<TOTAL-ASSETS> 20,222,317
<CURRENT-LIABILITIES> 6,989,524
<BONDS> 0
0
0
<COMMON> 23,955,136
<OTHER-SE> (10,845,343)
<TOTAL-LIABILITY-AND-EQUITY> 20,222,317
<SALES> 14,947,471
<TOTAL-REVENUES> 14,988,946
<CGS> 12,660,900
<TOTAL-COSTS> 12,660,900
<OTHER-EXPENSES> 6,708,051
<LOSS-PROVISION> 10,507
<INTEREST-EXPENSE> 108,332
<INCOME-PRETAX> (4,409,917)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,409,917)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,409,917)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
