<PAGE>
As filed with the Securities and Exchange Commission on July 8, 1999
Registration No. 333-_________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THERMALTEC INTERNATIONAL, CORP.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
Delaware 3313 11-3255619
-------- ---------------------------- ----------
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
68A Lamar Street
West Babylon, New York 11704
(516) 643-2285
--------------
(Address, Including Zip Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
Andrew B. Mazzone
President
Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
(516) 643-2285
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
COPIES TO:
Edward A. Vrooman Deborah A. Hays
Aitken Irvin Lewin Berlin Vrooman & Cohn LLP Archer & Greiner, P.C.
2 Gannett Drive One Centennial Square
White Plains, New York 10604 Haddonfield, New Jersey 08033
(914) 694-1647 (609) 795-2121
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the Registration Statement becomes
effective and the effective time of the merger (the "Merger") of Solar
Communications Group, Inc. ("SCG") with and into the Registrant as described in
the Agreement and Plan of Reorganization, dated as of June 16, 1999.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box, and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
-------------------------------
<TABLE>
<CAPTION>
Title Of Each Class Of Amount To Be Proposed Maximum Proposed Maximum Amount of
Securities To Be Registered Registered Offering Price Per Share Offering Price Registration Fee
- --------------------------- ---------- ------------------------ -------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, par value $.0001 59,500,000(1) $8.625(2) $513,187,500(2) $142,666.13
per share
</TABLE>
- -----------------------------
(1) Based upon an estimate of the maximum number of shares of the common stock,
par value $.0001 per share, of the Registrant ("TTI Common Stock") issuable in
connection with the merger of the Registrant and Solar Communications Group,
Inc. ("SCG") described herein, consisting of shares (the "Registrant Shares")
issuable upon the conversion of outstanding shares of the common stock of SCG,
no par value per share.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Section 6(b) under the Securities Act of 1933, as
amended (the "Securities Act"). The proposed maximum offering price is based on
the average of the high and low sales prices of the TTI Common Stock on the OTC
Bulletin Board operated by NASD, Inc. ("OTC Bulletin Board") on July 6, 1999.
----------------------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
THERMALTEC INTERNATIONAL, CORP.
68A Lamar Street
West Babylon, New York 11704
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST ____, 1999
-------------------------
TO THE STOCKHOLDERS:
A Special Meeting of Stockholders (the "TTI Special Meeting") of Thermaltec
International, Corp., a Delaware corporation ("TTI"), will be held at
___________________________________, at 9:00 A.M., local time, on ________,
August ___, 1999, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Reorganization (the "Merger Agreement"), dated as of June 16,
1999, by and among Solar Communications Group, Inc., a New Jersey
corporation ("SCG"), TTI and Andrew B. Mazzone, pursuant to which, among
other things, (a) SCG will be merged with and into TTI, whereby TTI will
be the surviving corporation (the "Merger"), (b) each outstanding share
of common stock, no par value per share, of SCG will be converted into
the right to receive 10,000 shares of TTI's common stock, par value
$.0001 per share, and (c) TTI's corporate name will be changed to "Solar
Communications Group, Inc."; and
(2) To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
A copy of the Merger Agreement is attached as Annex A to the accompanying
Joint Proxy Statement/Prospectus and is incorporated herein by reference.
STOCKHOLDER APPROVAL AND ADOPTION OF THE MERGER AGREEMENT WILL RESULT IN A
CHANGE IN THE MAJORITY EQUITY OWNERSHIP INTEREST, THE BUSINESS, THE NAME AND THE
MANAGEMENT OF TTI.
The Board of Directors of TTI has fixed the close of business on July ___,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the Special Meeting. The affirmative vote of the holders of a
majority of all outstanding shares of TTI common stock is necessary to approve
and adopt the Merger Agreement.
HOLDERS OF TTI COMMON STOCK ARE ENTITLED TO APPRAISAL RIGHTS UNDER DELAWARE
LAW IN CONNECTION WITH THE MERGER. See "THE MERGER -- Dissenters' Rights for TTI
Stockholders."
The Board of Directors of TTI unanimously recommends that the TTI
stockholders vote in favor of the approval and adoption of the Merger Agreement.
You are cordially invited to attend the Special Meeting. Whether or not you
plan to attend the meeting, please complete, date and sign the enclosed proxy
card and return it promptly in the enclosed envelope. Your proxy may be revoked
at any time prior to the time it is voted.
By Order of the Board of Directors,
----------------------------------------
Andrew B. Mazzone, Secretary
West Babylon, New York
July ____, 1999
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
21 East Main Street
Suite 205
Millville, New Jersey 08332
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST ____, 1999
-------------------------
TO THE STOCKHOLDERS:
A Special Meeting of Stockholders (the "SCG Special Meeting") of Solar
Communications Group, Inc., a New Jersey corporation ("SCG"), will be held at
____________________________, at 9:00 A.M., local time, on ________, August ___,
1999, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Reorganization (the "Merger Agreement"), dated as of June 16,
1999, by and among Thermaltec International, Corp. ("TTI"), SCG and
Andrew B. Mazzone, pursuant to which, among other things, (a) SCG will be
merged with and into TTI, whereby TTI will be the surviving corporation
(the "Merger"), (b) each outstanding share of common stock, no par value
per share, of SCG will be converted into the right to receive 10,000
shares of TTI's common stock, par value $.0001 per share, and (c) TTI's
corporate name will be changed to "Solar Communications Group, Inc."; and
(2) To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
A copy of the Merger Agreement is attached as Annex A to the accompanying
Joint Proxy Statement/Prospectus and is incorporated herein by reference.
The Board of Directors of SCG has fixed the close of business on July ___,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the Special Meeting. The affirmative vote of a majority of the
votes cast by the holders of SCG common stock at the Special Meeting is
necessary to approve and adopt the Merger Agreement.
HOLDERS OF TTI COMMON STOCK ARE ENTITLED TO DISSENTERS' RIGHTS UNDER NEW
JERSEY LAW IN CONNECTION WITH THE MERGER. See "THE MERGER -- Rights of
Dissenting SCG Stockholders."
The Board of Directors of SCG unanimously recommends that the SCG
stockholders vote in favor of the approval and adoption of the Merger Agreement.
You are cordially invited to attend the Special Meeting. Whether or not you
plan to attend the meeting, please complete, date and sign the enclosed proxy
card and return it promptly in the enclosed envelope. Your proxy may be revoked
at any time prior to the time it is voted.
By Order of the Board of Directors,
----------------------------------------
Alisa A. Rossi, Secretary
Millville, New Jersey
July ____, 1999
<PAGE>
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT! The boards of directors of
Thermaltec International, Corp. and Solar Communications Group, Inc. have agreed
on a merger of the two companies. The merger is structured so that SCG will be
merged with and into TTI with TTI being the surviving publicly-traded company.
In preparation for the merger with SCG, TTI has transferred substantially all of
its assets and all of its ongoing business operations and liabilities to a
wholly-owned subsidiary, Panama Industries, Ltd. Following the merger, TTI will
conduct only the business conducted by SCG immediately prior to the merger and
will change its name to "Solar Communications Group, Inc."
In connection with the merger, each outstanding share of SCG common stock will
be exchanged for 10,000 shares of TTI common stock.
TTI stockholders will continue to own their existing shares of TTI common stock.
In addition, immediately prior to the completion of the merger, TTI will
distribute all of the issued and outstanding shares of Panama Industries as a
dividend, on a pro rata basis, to the TTI stockholders of record on May 28,
1999. TTI will issue up to 59,500,000 shares of its common stock to SCG
stockholders (assuming no outstanding options to acquire shares of SCG common
stock are exercised prior to the merger), which will represent approximately
95.8% of the outstanding common stock of TTI after the merger (assuming no
outstanding warrants to acquire shares of TTI common stock are exercised prior
to the merger). Likewise, the shares of TTI common stock held by TTI
stockholders prior to the merger will represent approximately 4.2% of the
outstanding common stock of TTI after the merger.
The merger cannot be completed unless the stockholders of both companies approve
it. We have scheduled special meetings for our stockholders to vote on the
merger. YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend a special meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us. If you sign, date
and mail your proxy card without indicating how you want to vote, your proxy
will be counted as a vote in favor of the merger. If you are a TTI or SCG
stockholder and fail to return your card, the effect in most cases will be a
vote against the merger.
Only stockholders of record of TTI and SCG common stock as of July ___, 1999
are entitled to attend and vote at the special meetings. Both the SCG and TTI
special meetings will take place on August ___, 1999. The times and places of
the meetings are as follows:
For TTI stockholders: 9:00 a.m. at_______________________________
For SCG stockholders: 9:00 a.m. at_______________________________
This joint proxy statement/prospectus provides you with detailed information
about the proposed merger. We encourage you to read this entire document
carefully.
/s/___________________________________ /s/____________________________________
Andrew B. Mazzone, President James M. Rossi, Chairman of the Board
Thermaltec International, Corp. and CEO
Solar Communications Group, Inc.
For a more complete description of the merger, the terms and conditions of the
merger and risk factors associated with the merger, see "The Merger Agreement"
beginning on page 27 and "Risk Factors" beginning on page 6.
The TTI common stock trades on the OTC Bulletin Board under the symbol "THRM."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the proposed merger, or the shares of
TTI common stock to be issued in connection with the merger, or determined if
this joint proxy statement/prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Joint proxy statement/prospectus is dated July _______ , 1999 and is first being
mailed to stockholders of TTI and SCG on or about July ______ , 1999.
<PAGE>
AVAILABLE INFORMATION
TTI has filed with the Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of TTI common stock to be issued in connection with the merger. This
joint proxy statement/prospectus does not contain all of the information set
forth in the Registration Statement. Certain portions of the Registration
Statement are omitted from this joint proxy statement/prospectus in accordance
with the rules and regulations of the SEC. Copies of the Registration Statement,
including the exhibits to the Registration Statement and other material that is
not included herein, may be inspected without charge at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices located
at 7 World Trade Center, Suite 1300, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may also be obtained from the SEC at prescribed rates by
writing to the Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549. In addition, certain of the documents filed by TTI with the SEC are
available through the SEC's Electronic Data Gathering and Data Retrieval System
("EDGAR") on the SEC's worldwide web site at http://www.sec.gov.
Statements contained in this joint proxy statement/prospectus or in any
document incorporated by reference in this joint proxy statement/prospectus as
to the contents of any contract or other document referred to herein or therein
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
This joint proxy statement/prospectus incorporates by reference documents
containing important business and financial information about SCG that are not
included in or delivered with this joint proxy statement/prospectus. Copies of
any of these documents are available without charge to any person to whom this
joint proxy statement/prospectus is delivered, upon written or oral request.
Written requests for these documents should be directed to Raymond J. Romano,
Chief Financial Officer, Solar Communications Group, Inc., 21 East Main Street,
Suite 205, Millville, New Jersey 08332, and telephone requests may be directed
to Mr. Romano at (609) 765-0445. In order to ensure timely delivery of the
documents, any request should be made by August _______ , 1999.
TRADEMARKS
PCRoomLink(TM) is a trademark of SCG.
FORWARD LOOKING STATEMENTS
OTHER THAN STATEMENTS OF HISTORICAL FACT, STATEMENTS MADE IN OR
INCORPORATED BY REFERENCE INTO THIS JOINT PROXY STATEMENT/PROSPECTUS, INCLUDING
STATEMENTS AS TO THE BENEFITS EXPECTED TO RESULT FROM THE MERGER AND AS TO
FUTURE FINANCIAL PERFORMANCE, ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN "RISK FACTORS" BEGINNING ON
PAGE 6 HEREIN, WHICH STOCKHOLDERS OF TTI AND SCG SHOULD CAREFULLY REVIEW.
Neither TTI nor SCG makes any express or implied representation or warranty
as to the attainability of the projected or estimated financial information
referenced or set forth herein or as to the accuracy or completeness of the
assumptions from which such projected or estimated information is derived.
Projections or estimations of TTI's and SCG's future performance are necessarily
subject to a high degree of uncertainty and may vary materially from actual
results. Reference is made to the particular discussions set forth under "Risk
Factors", beginning on page 6 herein, and "Management Discussion and Analysis of
Financial Condition and Results of Operations of SCG," beginning on page 38
herein.
ii
<PAGE>
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE TTI/SCG MERGER ........................... 1
SUMMARY .................................................................. 3
The Companies ......................................................... 3
The Merger ............................................................ 3
Our Reasons for the Merger ............................................ 3
Approval of the Merger ................................................ 4
Our Recommendations to Stockholders ................................... 4
Ownership of TTI Following the Merger ................................. 4
Board of Directors and Management of TTI Following the Merger ......... 4
Conditions to the Merger .............................................. 5
Termination of the Merger Documents ................................... 5
Regulatory Approvals .................................................. 5
Accounting Treatment .................................................. 5
Listing of TTI Common Stock ........................................... 5
Dividends After the Merger ............................................ 5
RISK FACTORS ............................................................. 6
WHERE YOU CAN FIND MORE INFORMATION ...................................... 13
FORWARD-LOOKING STATEMENTS ............................................... 13
COMPARATIVE PER SHARE MARKET PRICE INFORMATION ........................... 13
SPECIAL MEETINGS OF STOCKHOLDERS ......................................... 14
TTI Special Meeting ................................................... 14
SCG Special Meeting ................................................... 15
THE PLAN OF MERGER AND RELATED TRANSACTIONS .............................. 17
Background of the Merger .............................................. 17
Reasons for the Merger ................................................ 17
Certain Federal Income Tax Consequences ............................... 19
Accounting Treatment .................................................. 20
Restrictions on Resale of TTI Common Stock ............................ 20
Nasdaq Listing ........................................................ 20
Government and Regulatory Matters ..................................... 21
Dissenters' Rights for TTI Stockholders ............................... 21
Rights of Dissenting SCG Stockholders ................................. 23
THE MERGER AGREEMENT ..................................................... 26
The Merger ............................................................ 26
Effective Time ........................................................ 26
Conversion of Shares; No Fractional Amounts ........................... 26
Treatment of SCG Stock Options ........................................ 27
Conduct Following the Merger .......................................... 27
Conduct of Business Pending the Merger ................................ 27
Representations and Warranties ........................................ 28
Conditions to the Merger .............................................. 28
Termination of the Merger Documents ................................... 28
Indemnification ....................................................... 28
Ownership of TTI Following the Merger ................................. 29
Management of TTI Upon Consummation of the Merger ..................... 30
iii
<PAGE>
Regulatory Approvals .................................................. 30
Affiliate Agreements .................................................. 30
INFORMATION CONCERNING TTI ............................................... 31
PRINCIPAL STOCKHOLDERS OF TTI ............................................ 31
DESCRIPTION OF TTI's SECURITIES .......................................... 32
TTI Common Stock ...................................................... 32
Shares Available for Future Sale ...................................... 32
Transfer Agent ........................................................ 33
TTI Warrants .......................................................... 33
Price Ranges of TTI Common Stock ...................................... 33
INFORMATION CONCERNING SCG ............................................... 33
Business .............................................................. 33
Competition ........................................................... 36
Employees ............................................................. 38
Properties ............................................................ 38
Legal Proceedings ..................................................... 38
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF SCG ............................. 38
Overview .............................................................. 38
Statement of Operations ............................................... 39
Liquidity and Capital Resources ....................................... 39
Certain Factors that may Affect Future Results ........................ 39
Year 2000 Readiness Disclosure ........................................ 40
MANAGEMENT OF SCG ........................................................ 41
Executive Officers and Directors ...................................... 41
Biographical Information .............................................. 41
Executive Compensation ................................................ 43
Certain Transactions .................................................. 43
SCG COMMON STOCK ......................................................... 43
General ............................................................... 43
Shares Available for Future Sale ...................................... 44
PRINCIPAL STOCKHOLDERS OF SCG ............................................ 44
COMPARISON OF STOCKHOLDERS RIGHTS ........................................ 45
Comparison of DGCL and NJBCA .......................................... 45
Comparison of Certificates of Incorporation and By-Laws of SCG and TTI 48
Legal Matters ............................................................ 49
Experts .................................................................. 49
Index to Financial Statements ............................................ F-1
Annex A -- Agreement and Plan of Reorganization .......................... A-1
Annex B -- Delaware Dissenters' Rights Statute ........................... B-1
Annex C -- New Jersey Dissenters' Rights Statute ......................... C-1
iv
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE TTI/SCG MERGER
Q: What do I need to do now?
A: Just sign your proxy card and mail it to us in the enclosed return
envelope as soon as possible, so that your shares may be represented at your
special meeting. Both the TTI and SCG special meetings will take place on
August ____, 1999.
Q. What if I want to change my vote?
A: Just send in a later-dated, signed proxy card before your special
meeting or attend your special meeting in person and vote.
Q. If I am a TTI stockholder, will I have dissenters' rights?
A: TTI stockholders who do not wish to approve the merger have dissenters'
rights, the right to have the "fair value" of their shares determined by the
Delaware Chancery Court. These dissenters' rights are subject to a number of
restrictions and technical requirements. Generally, in order to exercise
dissenters' rights:
o TTI stockholders must not vote in favor of the merger, and
o TTI stockholders must make a written demand for appraisal before the vote
on the merger.
Merely voting against the merger will not protect a TTI stockholder's right
of appraisal. Annex B attached hereto contains the text of the Delaware
appraisal statute.
Q. If I am an SCG stockholder, will I have dissenters' rights?
SCG stockholders who do not wish to approve the merger have dissenters'
rights, the right to be paid the "fair value" of their shares. These
dissenters' rights are subject to a number of restrictions and technical
requirements. Generally, in order to exercise dissenters' rights:
o SCG stockholders must not vote in favor of the merger, and
o SCG stockholders must file a written notice of dissent with SCG before
the vote on the merger.
Merely voting against the merger will not protect an SCG stockholder's
dissenters' rights. Annex C attached hereto contains the text of the New
Jersey dissenters' rights statute.
Q: When do you expect the merger to be completed?
A: We are working towards completing the merger as quickly as possible, and
expect to complete it immediately following the stockholder meetings.
Q. What will I receive in the merger?
A: As a result of the merger, for each share of SCG common stock they own,
SCG stockholders will receive 10,000 shares of TTI common stock.
No fractional shares of TTI common stock will be issued and no cash will be
paid for fractional shares. Instead, SCG stockholders will receive shares of
TTI common stock rounded off to the nearest whole number of shares of TTI
common stock. SCG stock options will be converted into TTI stock options at
the share exchange ratio for SCG common stock with an adjusted exercise
price. Please refer to page 27 for more information regarding the treatment
of SCG stock options.
In addition, immediately prior to the completion of the merger, TTI will
distribute all of the issued and outstanding shares of its wholly-owned
subsidiary, Panama Industries, Ltd., as a dividend, on a pro rata basis, to
the TTI stockholders of record on May 28, 1999.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, we will send SCG stockholders written
instructions for exchanging their stock certificates. TTI stockholders will
keep their current stock certificates and, in addition, will receive stock
certificates representing their interest in Panama Industries.
1
<PAGE>
Q: When will I receive shares of TTI common stock in the merger?
A: If the merger is completed, TTI will issue, shortly thereafter, shares of
TTI common stock to SCG stockholders who have returned their SCG stock
certificates together with a completed letter of transmittal supplied by TTI
or TTI's exchange agent, Manhattan Transfer Registrar Co.
Q: What are the tax consequences of the merger to me?
A: We have structured the merger so that, as a general matter, neither you,
TTI nor SCG will recognize any gain or loss for federal income tax purposes
in the merger, except for those TTI or SCG stockholders who exercise their
dissenters' rights. We have conditioned the merger on our receipt of legal
opinions that this is the case.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your
tax advisors for a full understanding of the tax consequences of the merger
to you.
2
<PAGE>
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully, and for more complete
descriptions of the legal terms of the merger, you should read carefully this
entire document and the documents to which we have referred you. See "Where You
Can Find More Information" on page 13.
The Companies
Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
(516) 643-2285
TTI has been engaged in the metallurgical coatings business in North America and
Central and South America since 1994. In preparation for the merger with SCG,
TTI has transferred substantially all of its assets and all of its ongoing
business operations and liabilities to a wholly-owned subsidiary, Panama
Industries, Ltd. Shares of Panama Industries will be distributed, on a pro rata
basis, to the TTI stockholders of record on May 28, 1999, immediately prior to
the completion of the merger between TTI and SCG.
Solar Communications Group, Inc.
21 East Main Street
Suite 205
Millville, New Jersey 08332
(877) 341-0000
SCG was formed in 1996 to provide quality communications alternatives to the
business community. The company has developed an Internet access solution, known
as PCRoomLink, for the hospitality industry. PCRoomLink's computer-equipped
rooms permit a hotel patron, with or without a laptop computer, to obtain
high-speed Internet access in the privacy of his/her hotel room.
The Merger
The merger agreement, entitled "Agreement and Plan of Reorganization," is
attached as Annex A to this joint proxy statement/prospectus. We encourage you
to read the merger agreement as it is the legal document that governs the terms
of the merger.
As a result of the merger, SCG will be merged with and into TTI, SCG's
separate corporate existence will cease and SCG common stock will be converted
into TTI common stock as described below.
Following the merger, TTI will change its name to "Solar Communications
Group, Inc." and will conduct only the business conducted by SCG immediately
prior to the merger. In connection with the merger, the officers and directors
of SCG will become the officers and directors of TTI. To avoid confusion, the
corporation which will exist following the merger is, at times, referred to in
this joint proxy statement/prospectus as the "Surviving Company."
Our Reasons for the Merger
After consultation with SCG's management team and advisors, the Board of
Directors of SCG concluded that the merger would further the interests of SCG
and its stockholders through the increased liquidity of shares of the TTI common
stock. While the shares of TTI common stock are thinly traded at the present
time, they are listed on the OTC Bulletin Board and are more liquid than the
shares of SCG common stock. While there can be no assurances, management of SCG
believes that such increased liquidity will make it easier for SCG to raise
additional capital in the future and to acquire other businesses in exchange for
stock.
3
<PAGE>
After consultation with TTI's management team and advisors, the Board of
Directors of TTI concluded that the merger would further the interests of TTI
and its stockholders by giving TTI and its stockholders an opportunity to
participate in the potential growth of the Surviving Company and to expand TTI's
technology base into the telecommunications and Internet industries, while
permitting currently existing TTI stockholders, through ownership of shares in
Panama Industries, to retain their respective pro rata interests in the business
operations conducted by TTI prior to the merger.
To review the reasons for the merger in greater detail, as well as the
risks of the merger, see "Risk Factors," beginning on page 6 and "The Plan of
Merger and Related Transactions -- Reasons for the Merger," beginning on
page 17.
Approval of The Merger
By TTI stockholders:
The affirmative vote of the holders of a majority of the shares of TTI
common stock entitled to vote on the merger is required to approve the merger.
The sole director and officer of TTI, Andrew B. Mazzone, the President of TTI's
wholly-owned subsidiary (Panama Industries), Thomas Klein, and their affiliates,
who collectively hold 60.1% of TTI common stock (assuming no exercise of any
currently outstanding warrants), have indicated that they intend to vote in
favor of the proposed merger.
By SCG stockholders:
The affirmative vote of a majority of the votes cast by the holders of SCG
common stock is required to approve the merger. The directors and executive
officers of SCG, and their affiliates, who collectively hold 66.5% of SCG common
stock, have indicated that they intend to vote in favor of the proposed merger.
Our Recommendations to Stockholders
To TTI stockholders:
The TTI board believes that the merger is in your best interest and
unanimously recommends that you vote FOR the proposal to approve the merger
documents and the issuance of shares of TTI common stock to SCG stockholders in
the merger.
To SCG stockholders:
The SCG board believes that the merger is in your best interest and
unanimously recommends that you vote FOR the proposal to approve the merger
documents.
Ownership of TTI Following the Merger
We anticipate that TTI will issue 59,500,000 shares of TTI common stock to
SCG stockholders in the merger. We also anticipate that TTI will issue,
following the merger, up to an additional 5,000,000 shares of TTI common stock
upon the exercise of options to purchase SCG common stock to be assumed by TTI.
Based on the number of shares of TTI common stock to be issued in the merger,
excluding shares subject to stock options to be assumed by TTI, following the
merger existing TTI stockholders (assuming no outstanding warrants issued by TTI
are exercised prior to the merger) will own approximately 4.2% and former SCG
stockholders will own approximately 95.8% of the outstanding common stock of the
Surviving Company.
Board of Directors and Management of TTI Following the Merger
When the merger is complete, the Surviving Company will be managed by the
current directors and officers of SCG. The current sole officer and director of
TTI, Andrew B. Mazzone, will resign at the time the merger is completed.
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Conditions to the Merger
The completion of the merger depends upon the satisfaction or waiver of a
number of conditions. See page 28 for a more complete description of such
conditions.
Termination of the Merger Documents
We can agree to terminate the merger documents without completing the
merger, and either of us can terminate the merger documents under various
circumstances, including if the merger is not completed by December 31, 1999.
Regulatory Approvals
The merger must satisfy the requirements of federal and certain state
securities laws.
Accounting Treatment
The merger will be treated as a reverse merger whereby, for accounting
purposes, SCG will be treated as the acquirer in the transaction.
Listing of TTI Common Stock
TTI will use its best efforts to cause the shares of TTI common stock to be
issued in connection with the merger, and the shares of TTI common stock to be
reserved for issuance upon the exercise of outstanding SCG stock options assumed
by TTI as part of the merger, to be approved for listing on the OTC Bulletin
Board under the symbol "THRM". In connection with the merger, TTI's corporate
name will be changed to "Solar Communications Group, Inc." and it is anticipated
that its trading symbol will be changed to "SCGI". Management of the Surviving
Company also intends to apply for listing of all outstanding shares of the
Surviving Company's common stock on the Nasdaq National Market. However, there
can be no assurance that such listing will be approved.
Dividends After the Merger
Historically, neither TTI nor SCG has paid any cash dividends and neither
anticipates paying cash dividends on its common stock in the foreseeable future.
Both companies currently intend to retain future earnings to finance their
respective operations and to fund the growth of their business. Any payment of
future dividends by the Surviving Company will be at the discretion of the
Surviving Company's board and will depend upon, among other things, the
Surviving Company's earnings, financial condition, capital requirements, level
of indebtedness, contractual restrictions with respect to the payment of
dividends and other factors that the Surviving Company's board deems relevant.
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RISK FACTORS
In considering whether to approve the merger and whether or not to exercise
your dissenters' rights under Delaware or New Jersey law (as applicable), you
should consider carefully the risks associated with the merger and with
ownership of TTI common stock following the merger. These risks are described in
detail below. The risk factors focus on the Surviving Company and on the
financial status, business plans and management of SCG (since the Surviving
Company will be managed by the current officers and directors of SCG and conduct
only the business conducted by SCG prior to the merger).
SCG is in the development stage and has not generated any operating
revenues.
o SCG was formed in 1996 but has yet to produce any operating revenues or
show a profit in its operations. Accordingly, SCG has a limited operating
history upon which you can evaluate its business and prospects.
o SCG's limited operating history is of limited value in projecting future
operating results.
o SCG's business model is untested. It may take SCG longer than anticipated
to implement its business model, and some components of SCG's business
model may not prove to be feasible or possible.
o SCG's operations are subject to all of the risks inherent in the
development of a new business, including but not limited to, marketing
and staffing difficulties, competition, and unanticipated costs and
expenses. There can be no assurance that unanticipated expenses, problems
or technical difficulties will not occur which would result in material
delays in product commercialization or that SCG's efforts will result in
successful product commercialization.
SCG has incurred net losses since its inception and anticipates continuing
losses.
SCG is in the development stage. To date, SCG has not had any operating
revenues and, therefore, has not shown a profit in its operations. As of March
31, 1999, SCG's accumulated deficit was approximately $627,000. SCG anticipates
that it will continue to incur significant losses until, at the earliest, it
generates sufficient revenues to offset the substantial expenditures and
operating costs associated with developing and commercializing its proposed
products and services.
Although the Surviving Company intends, shortly after the completion of the
merger, to begin full scale marketing of SCG's products and services to
potential end-users and to actually install the PCRoomLink products in its pilot
hotel property, the Surviving Company may not be able to achieve these
objectives. Even if these objectives are achieved, the Surviving Company may
never be able to generate the sufficient end-user interest in its products and
services necessary to make the Surviving Company's operations profitable. If
profitability is achieved, the Surviving Company may not be able to sustain it.
We cannot predict when, or if, profitability might be achieved by the Surviving
Company.
The Surviving Company will require substantial funds and will need to raise
additional capital in the future.
Based on currently proposed plans and assumptions, it is anticipated that
the Surviving Company will have sufficient capital to satisfy its contemplated
cash requirements through October 31, 1999. The Surviving Company will then
require substantial additional funding. To carry out its business plan, as
presently structured, which calls for the Surviving Company to have 1,400 hotels
installed, at an anticipated cost of approximately $440,000 per hotel, within
the next 18 months, the Surviving Company will need additional funding of
approximately $616,000,000, subject to increase or decrease as a result of the
Surviving Company's actual operating cash flows.
Potential sources of funding which have been identified by management
include vendor lines of credit, vendor leasing programs, bank financing and
additional sales of securities by the Surviving Company. We have no current
arrangements with respect to sources of additional financing and, when needed by
the Surviving Company, such additional financing may not be available on
commercially reasonable terms, or at all. The inability to obtain additional
financing, when needed, would have a material negative effect on the Surviving
Company, including possibly requiring it to curtail or cease operations.
If any future financing involves the sale of the Surviving Company's
equity securities, the shares of the Surviving Company's common stock held by
its stockholders would be substantially diluted. If the Surviving
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Company incurs indebtedness or otherwise issues debt securities, it will be
subject to risks associated with indebtedness, including the risk that interest
rates may fluctuate and the possibility that the Surviving Company may not be
able to pay principal and interest on the indebtedness.
Development of PCRoomLink has not been completed and has not been field
tested in any pilot settings.
Although considerable time and financial resources have been expended to
date in the development of the PCRoomLink products and services, development is
not complete and there is only one partially completed pilot site installation.
The Surviving Company will be required to commit considerable time, effort and
resources to finalize such development and to complete the pilot site
installation and testing. There can be absolutely no assurance that the
PCRoomLink products or services will ever be completed or commercially accepted.
PCRoomLink is a new concept and market acceptance, and the Surviving
Company's commercialization strategy, are uncertain.
PCRoomLink represents a new business concept. Demand and market acceptance
for a newly introduced product or service are subject to a high level of
uncertainty. Achieving market acceptance among hotel properties and end-users
for this new concept, by getting hotel properties to agree to have PCRoomLink
rooms available at their property and end-users to agree to become PCRoomLink
members, is critical to the Surviving Company's success and will require
significant efforts and expenditures by the Surviving Company to create
awareness and demand by hotel properties and end-users. Any lack of interest on
the part of hotel properties to have PCRoomLink installed, or lack or lessening
of demand by end-users for the Surviving Company's products or services, or the
failure to register a substantial number of end-users as PCRoomLink members,
would have a material adverse effect on the Surviving Company's business,
financial condition and assets. There can be no assurance that the Surviving
Company's strategy for developing hotel property and end-user awareness and
loyalty for the PCRoomLink products and services, or for recruiting PCRoomLink
members, will result in initial or continued market acceptance for such products
or services.
PCRoomLink services are susceptible to disruptive problems.
Despite implementation of security measures, the hardware and software
components of the PCRoomLink system are vulnerable to computer viruses, physical
or electronic break-ins, theft, vandalism and similar disruptive problems.
Computer viruses, break-ins or other problems caused by third parties could lead
to interruptions, delays or a cessation in service to users of such products and
services. Any of these risks could have a negative effect on the Surviving
Company's business, results of operations and financial condition.
The Surviving Company presently intends to subcontract with reputable third
party organizations to provide service, support and maintenance for the
PCRoomLink hardware and software components. However, there can be no assurance
that the Surviving Company will be able to enter into such service, support or
maintenance arrangements on favorable terms, if at all. The inability of the
Surviving Company to be able to subcontract out all support, service and
maintenance obligations for the PCRoomLink hardware and software components on
favorable terms would have a material adverse effect on the Surviving Company's
business, financial condition and assets.
The Surviving Company will face significant competition.
The Internet connectivity business is highly competitive, and there are no
substantial barriers to entry. We believe that competition will intensify.
Currently, our primary competitors include:
o companies that provide in-room PCs (such as Integrated Network
Technologies, 4th Communications Network, Inc., and Guest-Tek Services);
o companies that provide cable modems (such as On Command Corporation,
Suitesurfer Communications, Inc., MagiNet Corporation and LodgeNet
Entertainment Corporation); and
o companies that provide "plug and play" jacks (such as Wayport, Inc.,
OverVoice by CAIS Internet, Darwin Networks, Viator Networks and ATCOM,
Inc.).
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Many of our current and potential competitors have substantially greater
human and financial resources, name recognition, market presence and operating
experience than SCG. They may also have significant competitive advantages
through other lines of business and existing business relationships. The
Surviving Company's future growth and profitability will depend, in part, upon
consumer and commercial acceptance of its technology, products and services.
However, our competitors may develop products or services that are superior to
ours or achieve greater market acceptance than our products and services.
The Surviving Company must keep pace with rapidly changing technology.
The Internet access market is characterized by rapidly changing technology,
evolving industry standards, changes in user needs and frequent new service and
product introductions. This could result in product obsolescence or short
product life cycles. The Surviving Company's success will depend, in part, on
its ability to use new technologies effectively, to continue to develop its
technical expertise, to enhance its existing products and services and to
develop new products and services to meet changing user needs on a timely and
cost-effective basis. There can be no assurances that the Company will:
o use new technologies effectively or achieve market acceptance of new
technologies;
o develop new products and services to take advantage of new technologies
or secure market acceptance for new products; or
o enhance existing services on a timely basis or achieve market acceptance
for these enhancements.
The Surviving Company's ability to compete successfully also depends upon
the continued compatibility of its products and services with products and
architectures offered by various vendors. Although the Surviving Company intends
to support emerging standards in the market for Internet access, there can be no
assurance that industry standards will be established or, if they become
established, that the Surviving Company will be able to conform to these new
standards in a timely fashion and maintain a competitive position in the market.
In addition, the Surviving Company cannot assure you that services or
technologies developed by others will not render the Surviving Company's
products, services or technology noncompetitive or obsolete.
The Surviving Company is dependent upon the continued growth in the use of
the Internet.
The Surviving Company's future operating results are highly dependent upon
the increased use of the Internet by consumers for information, publication,
distribution and commerce. The PCRoomLink concept relies on demand for access to
the Internet and for products and services related to the Internet. The Internet
has experienced rapid growth in recent years, but demand and market acceptance
for recently introduced Internet-related products and services are subject to a
high level of uncertainty. In addition, critical issues concerning the
commercial use of the Internet remain unresolved and may impact the growth of
Internet use.
If the market for Internet access services fails to develop, develops more
slowly than expected or becomes saturated with competitors, or if the Internet
access and related products and services the Surviving Company plans to offer
are not broadly accepted, the Surviving Company's business, operating results
and financial condition will be negatively affected.
The Surviving Company is dependent on the continued development and
reliability of the Internet infrastructure.
The Surviving Company's success is dependent, in part, on the reliability,
speed, data capacity, ease of use, accessibility and security of the Internet as
well as its continued development and acceptance for commercial use. The success
of the Surviving Company's services and products depends, in large part, upon
the further development of an infrastructure for providing Internet access and
services. The Internet has experienced, and it is expected to continue to
experience, significant growth in the number of users. The Internet
infrastructure may not be able to support the demands placed on it by this
continued growth in use. The Internet could also lose its viability due to
delays in the development or adoption of new standards and protocols to handle
increased levels of Internet activity, or due to increased governmental
regulation. The infrastructure or complementary services necessary to make the
Internet a viable commercial marketplace may not develop, or the Internet may
not
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become a viable commercial marketplace for services and products such as the
products and services that the Surviving Company currently intends to offer. If
this happens, the Surviving Company's business, results of operations and
financial condition will be negatively affected.
The Surviving Company may be held liable for online content provided by
third parties.
Materials may be downloaded and distributed to others by the on-line or
Internet services offered by the Surviving Company or the Internet service
providers with which it will have a relationship. If this happens, claims may be
made against the Surviving Company for defamation, negligence, copyright or
trademark infringement, or some other reason. These claims or the imposition of
a liability may have a negative effect on the Surviving Company's business,
results of operations and financial condition.
Internet security concerns could hinder e-commerce and the demand for the
Surviving Company's products and services.
A significant barrier to e-commerce and communications over the Internet
has been the need for the secure transmission of confidential information. The
Surviving Company may incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by breaches. Internet usage
and the demand for our services could decline if any well-publicized compromise
of security occurs. Although management is not aware of any attempts by
programmers or "hackers" to penetrate SCG's current security systems, these
actions could occur in the future. A party who is able to penetrate such
security systems could misuse a users' personal information or credit card
information and users might sue the Surviving Company or bring claims against
the Surviving Company. Concerns over the security of Internet transactions and
the privacy of users may also inhibit the growth of the Internet generally,
particularly as a means of conducting commercial transactions. Security breaches
or the inadvertent transmission of computer viruses could expose the Surviving
Company to a risk of loss or litigation and possible liability. The Surviving
Company's business, results of operations, and financial condition could be
negatively affected if contractual provisions attempting to limit its liability
in these areas are not successful or enforceable, or if other parties do not
accept these contractual provisions as part of the Surviving Company's
agreements with them.
The Surviving Company's operations depend on its ability to maintain
favorable relationships with third party suppliers.
The Surviving Company will rely on third-party suppliers for its access to
the Internet through leased telecommunications lines, such as AT&T, Cable and
Wireless USA, Inc. and MCI Worldcom, Inc. Although management believes this
access is available from several alternative suppliers, the Surviving Company
may not be able to substitute services from other providers at reasonable or
comparable prices or in a timely manner. Substantial failure by any of these
third parties to perform could negatively impact the Surviving Company's
business, operations and financial condition.
The Surviving Company's operations depend on its ability to develop and
maintain favorable relationships with targeted hotel properties.
The Surviving Company's business plan calls for PCRoomLink products and
services to be installed in 1,400 hotels (with an average of 126 installed rooms
per hotel property) within the next 18 months. The need to continuously increase
the number of installations increases even more dramatically after the first
full year of the Surviving Company's operations. There can be no assurance that
the Surviving Company will be able to establish relationships with a sufficient
number of targeted hotel properties, or install a sufficient number of rooms at
those properties, to operate at a profit. Even if the required number of
installations is completed in accordance with the Surviving Company's current
business plan, the Surviving Company will have to achieve a minimum 50%
occupancy/use rate for such installed rooms to meet the Surviving Company's
current requirements for profitability. A failure by the Surviving Company to
complete the required number of hotel installations, or to achieve the targeted
occupancy/use rates for installed rooms, would have a material adverse effect on
the Surviving Company's business, results of operation and financial condition.
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The Surviving Company will need to manage its growth effectively.
SCG's growth to date has placed, and the planned growth of the Surviving
Company following the merger will continue to place, a significant strain on its
managerial, operations and financial resources. The Surviving Company will need
to:
o improve its financial and management controls, reporting systems and
procedures;
o expand, train and manage its work force for marketing, sales and support,
product development, site design, and network and equipment repair and
maintenance; and
o manage multiple relationships with various customers, strategic partners
and other third parties.
If the Surviving Company is unable to manage its growth effectively, its
business will be negatively affected.
The Surviving Company will need to continually upgrade its technology to
compete effectively.
The Surviving Company will need to continually expand and upgrade its
infrastructure and systems and ensure high levels of service, speedy operation,
and reliability. In addition, the Surviving Company will have to continuously
measure the performance and commercial success of its different products and
services to better respond to customers' demands and to better determine which
products and services can be developed most profitably. SCG's current and
planned personnel, financial and operating procedures and controls may not be
adequate to support the Surviving Company's future operations. If the Surviving
Company is unable to upgrade its technology effectively, its business will be
negatively affected.
The loss of the services of SCG's chief executive officer, James M. Rossi,
could hurt the Surviving Company's chances for success.
The Surviving Company will be dependent on the continued employment and
performance of SCG's executive officers and key employees, particularly of its
CEO, James M. Rossi. The loss of Mr. Rossi, or his incapacity to perform his
duties, would have a materially negative effect upon the Surviving Company's
activities and prospects. There is no key man life insurance coverage on the
life of Mr. Rossi. The loss of the services of any of SCG's current key
employees or officers could adversely affect the Surviving Company's business,
financial condition and prospects.
Management of SCG will have substantial control over the Surviving Company
and other stockholders of the Surviving Company may have no effective voice in
its management.
Upon completion of the merger, the current directors and executive officers
of SCG (who will be all of the directors and executive officers of the Surviving
Company following the merger), and their affiliates, will own approximately
63.7% of the then outstanding shares of the Surviving Company's common stock
(assuming no exercise of any outstanding options or warrants to acquire shares
of the Surviving Company's common stock). Accordingly, these stockholders will
possess substantial control over its operations. This control may allow them to
amend corporation filings, elect all of the Surviving Company's board of
directors, and substantially control all matters requiring approval by the
Surviving Company's stockholders, including approval of significant corporate
transactions. Management will also have the ability to delay or prevent a change
in control of the Surviving Company and to discourage a potential acquirer of
the Surviving Company or its securities. Other stockholders of the Surviving
Company may have no effective voice in its management.
Unless a public market develops for the Surviving Company's securities, you
may not be able to sell your shares.
Prior to the date of this joint proxy statement/prospectus, there has been
only a limited trading market for TTI's common stock. Although management
intends to apply for listing of TTI's common stock on the Nasdaq National Market
following the merger, there can be no assurance that an active trading market
will develop or be maintained. If Nasdaq refuses to list TTI's common stock on
the Nasdaq National Market, management of the Surviving Company will attempt to
have the TTI common stock listed on the Nasdaq Small Cap Market. If Nasdaq
refuses to list TTI's common stock on the Nasdaq Small Cap Market, management of
the Surviving Company will attempt to have the TTI common stock continue to
trade on the OTC Bulletin Board or in the over-the-counter market on the
so-called "pink sheets". A failure by the Surviving Company to develop or
maintain an active trading market could negatively affect the price of the
Surviving Company's securities, as well as adversely affect your ability to sell
your shares.
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The share exchange ratio in the merger is fixed and, if the market price of
TTI common stock decreases before the merger is completed, the dollar value of
what SCG stockholders will receive in the merger also will decrease.
The share exchange ratio in the merger is fixed. This means that, if the
market price of TTI common stock decreases before the merger is completed, the
dollar value of what SCG stockholders will receive in the merger also will
decrease. Some of the reasons why the market price of TTI common stock may be
volatile are discussed in the next paragraph. SCG stockholders are advised to
obtain recent market quotations for TTI common stock. We cannot assure you as to
the market price of TTI common stock at any time. See "Description of TTI's
Securities - Price Ranges of TTI Common Stock."
The number of shares of TTI's common stock that is traded daily on the OTC
Bulletin Board averages less than 1% of the outstanding TTI common stock. As a
result, the market price of TTI common stock may be volatile.
As a result of TTI's low trading volume, the market price for TTI common
stock may be volatile and may be affected by many factors, including the
following:
o announcements of fluctuations in TTI's or its competitors' operating
results;
o the timing and announcement of acquisitions by TTI or its competitors;
and
o government regulatory action.
In addition, the stock market in recent years has experienced significant
price and volume fluctuations that often have been unrelated or disproportionate
to the operating performance of companies. These broad fluctuations may
materially adversely affect the market price of TTI common stock.
After the merger, approximately 11,452,950 or 18.4% of the Surviving
Company's outstanding shares of common stock will be available for resale in the
public market without restriction. The sale of a large number of these shares
could adversely affect the Surviving Company's stock price and could impair the
Surviving Company's ability to raise capital through the sale of equity
securities or make acquisitions for stock.
Sales of substantial amounts of the Surviving Company's common stock
following the merger could adversely affect the market price of the Surviving
Company's common stock and could impair the Surviving Company's future ability
to raise capital through the sale of equity securities or make acquisitions for
stock. TTI anticipates that it will issue approximately 59,500,000 shares in the
merger. Upon completion of the merger, there will be 62,078,118 shares of TTI
common stock outstanding (assuming no exercise of any currently outstanding
options or warrants). Of these shares, approximately 11,452,950 shares, or 18.4%
of the total outstanding shares, will be available for resale in the public
market without restriction (excluding 48,908,000 shares held by affiliates of
SCG or which are subject to lock-up agreements).
Under the merger documents, each affiliate of SCG must agree that it will
not sell or transfer any of its SCG stock or TTI common stock until TTI
publishes financial results covering at least 30 days of combined operations of
TTI and SCG following the merger. The affiliates of SCG will own 48,908,000
shares of TTI common stock following the merger (assuming no exercise of any
outstanding options or warrants). This represents approximately 78.8% of the
shares of TTI common stock outstanding following the merger (assuming no
exercise of any currently outstanding options or warrants). Following the
expiration of such restricted period, the affiliates of SCG would be permitted
to resell their shares of TTI common stock if permitted by Rule 145 under the
Securities Act or as otherwise permitted under the Securities Act. See "The Plan
of Merger and Related Transactions - Restrictions on Resale of TTI Common
Stock."
In addition, TTI has the authority to issue up to 10,000,000 shares of its
common stock under its 1999 Stock Option Plan. This includes approximately
5,000,000 shares which may be issued upon the exercise of SCG stock options to
be assumed in the merger.
The sale of any of these shares could have an adverse effect on the future
market price of TTI common stock.
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The Surviving Company may experience variations from quarter to quarter in
operating results and net income which could adversely affect the price of its
common stock.
The market price of the Surviving Company's common stock is likely to be as
volatile as the stock market in general, and the market for Internet-related and
technology companies in particular, which have been highly volatile. Volatility
in share price sometimes affects an investor's ability to resell their shares.
The trading prices of many technology and Internet-related companies' stocks
have reached historical highs within the last 52 weeks and have reflected
relative valuations substantially above historical levels. During the same
period, such companies' stocks have also been highly volatile and have recorded
lows well below such historical highs.
There can be no assurance that the Surviving Company's common stock will
trade at the same levels as other Internet stocks or that Internet stocks in
general will sustain their current market prices.
Factors that could cause such volatility may include, among other things:
o actual or anticipated variations in quarterly operating results;
o announcements of technological innovations;
o new sales formats or new products or services;
o changes in financial estimates by securities analysts;
o conditions or trends in the Internet industry;
o changes in the market valuations of other Internet companies;
o announcements by the Surviving Company or its competitors of significant
acquisitions, strategic partnerships or joint ventures; and
o capital commitments.
Failure of the Surviving Company's computer systems and software products
to be Year 2000 compliant could negatively impact its business.
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. As a result, software
that records only the last two digits of the calendar year may not be able to
distinguish whether "00" means 1900 or 2000. This may result in software
failures or the creation of erroneous results. While management believes that
SCG's current products and internal systems are year 2000 compliant, since they
are recent purchases of the most up-to-date systems available, management of SCG
has not done any year 2000 compliance testing with respect to any such product
or system. When purchasing products from third party vendors, management intends
to obtain representations from such third party vendors of their products' year
2000 compliance. The failure of products or systems maintained by third parties
or the Surviving Company's products and systems to be year 2000 compliant could
cause the Surviving Company to incur significant expenses to remedy any
problems, or seriously damage the Surviving Company's business. SCG has not
incurred significant costs for these purposes and does not believe that the
Surviving Company will incur significant costs for these purposes in the
foreseeable future. As of June 30, 1999, SCG has not expended any significant
sums on its Year 2000 compliance efforts.
The Surviving Company will not pay cash dividends for the foreseeable
future.
There can be no assurance that the proposed operations of the Surviving
Company will result in significant revenues or any level of profitability. Any
earnings which may be generated by the Surviving Company would be used, for the
foreseeable future, to finance the growth of the Surviving Company's business.
Accordingly, while the payment of dividends rests within the discretion of the
Surviving Company's Board of Directors, no cash dividends on any of TTI's or
SCG's securities has been declared or paid by to date, and management does not
presently intend to pay cash dividends on the Surviving Company's common stock
for the foreseeable future.
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WHERE YOU CAN FIND MORE INFORMATION
TTI filed a registration statement on Form S-4 to register the shares of
TTI common stock to be issued in the merger under the Securities Act. This joint
proxy statement/prospectus is a part of the registration statement on Form S-4
and constitutes a prospectus of TTI in addition to being a proxy statement of
each of TTI and SCG for their special meetings. As allowed by SEC rules, this
joint proxy statement/prospectus does not contain all the information you can
find in the registration statement on Form S-4 or the exhibits to the
registration statement on Form S-4.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus to vote on the proposed
merger. Neither SCG nor TTI has authorized anyone to provide you with
information that is different from what is contained in this joint proxy
statement/prospectus. This joint proxy statement/prospectus is dated July ____,
1999. You should not assume that the information contained in the joint proxy
statement/prospectus is accurate as of any date other than that date, and
neither the mailing of this joint proxy statement/prospectus nor the issuance of
TTI common stock in the merger will create any implication to the contrary.
FORWARD-LOOKING STATEMENTS
Both SCG and TTI have made forward-looking statements in this document that
are subject to risks and uncertainties. Forward-looking statements include the
information concerning possible or assumed future results of operations of TTI,
SCG or the Surviving Company, including those set forth or referenced in "The
Plan of Merger and Related Transactions - Background of the Merger," "- TTI's
Reasons for the Merger," and "- SCG's Reasons for the Merger". Also, when we use
words such as "believes," "expects," "anticipates" or similar expressions, we
are making forward-looking statements. You should note that many factors, some
of which are discussed below and elsewhere in this document and in the documents
which we incorporate by reference, could affect the future financial results of
TTI and SCG and could cause those results to differ materially from those
expressed or implied in our forward-looking statements contained or incorporated
by reference in this document.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
TTI common stock has been traded on the OTC Bulletin Board of the NASD,
Inc. under the symbol "THRM" since July, 1995. There is only limited trading in
the TTI common stock.
There is no established trading market for the SCG common stock.
The information stated in the table below presents the high and low bid
prices on the OTC Bulletin Board for the TTI common stock on December 11, 1998
and July 6, 1999. December 11, 1998 was the last day on which trading in the TTI
common stock occurred prior to public announcement of the intention of SCG and
TTI to merge. July 6, 1999 was the last practicable trading day for which
information was available prior to the date of this joint proxy
statement/prospectus. The information in the table below also presents the sales
prices for the most recent sale of SCG Common Stock occurring prior to December
11, 1998 and July 6, 1999.
Most Recent
Historical Sale Price
TTI Common Stock SCG Common Stock
------------------------ -----------------
High Low
---------- -----------
December 11, 1998 ......... $ 5.25 $ 2.375 $ 393.00
July 6, 1999 .............. 9.125 8.125 10,000.00
SCG and TTI stockholders are urged to obtain a current market quotation for
TTI common stock. No assurance can be given as to the future prices of, or
markets for, TTI common stock.
On July 2, 1999, there were 58 recordholders of TTI common stock, although
TTI believes that there are other persons who are beneficial owners of shares of
TTI common stock held in street name.
On July 6, 1999, there were 83 recordholders of SCG common stock.
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SPECIAL MEETINGS OF STOCKHOLDERS
We are sending you this in order to provide you with important information
regarding the merger and to solicit your proxy for use at the special meetings
and at any adjournments or postponements of the special meetings. The special
meetings are scheduled to be held at the times and places described below.
TTI Special Meeting
General. The TTI special meeting is scheduled to be held on August ____,
1999 at 9:00 a.m., local time, at _____________________________________________.
At the TTI special meeting, TTI stockholders will have the opportunity to
consider and vote upon the proposed merger.
The TTI board of directors has unanimously approved the proposed merger and
recommends that TTI stockholders vote "for" the proposed merger.
Record Date. The close of business on July ____, 1999 (the "TTI Record
Date"), has been fixed by the TTI board of directors as the TTI record date for
the determination of holders of shares of TTI common stock entitled to notice of
and to vote at the TTI special meeting.
Stock Entitled to Vote. At the close of business on the TTI Record Date,
TTI had ____________ shares of TTI common stock outstanding (held by ____
persons of record). Each holder of TTI common stock will have the right to one
vote with respect to the matters to be acted upon at the TTI special meeting for
each share registered in the holder's name on the books of TTI as of the close
of business on the TTI Record Date.
Quorum; Required Vote. All shares of TTI common stock present in person or
represented by proxy and entitled to vote at the TTI special meeting, no matter
how they are voted or whether they abstain from voting, will be counted in
determining the presence of a quorum. If the TTI special meeting is adjourned
for one or more periods aggregating at least 15 days because of the absence of a
quorum, those stockholders entitled to vote who attend the reconvened TTI
special meeting, if less than a quorum as determined under applicable law, will
nevertheless constitute a quorum for the purpose of acting upon any matter
stated in the Notice of Special Meeting. Under Delaware law, the affirmative
vote of the holders of at least a majority of the outstanding shares of TTI
common stock on the TTI Record Date is required for approval of the proposed
merger.
Stock Ownership. As of the close of business on the TTI Record Date, the
sole director and executive officer of TTI, the President of TTI's wholly-owned
subsidiary, and their affiliates, beneficially owned and had the right to vote,
in the aggregate, 1,550,400 shares of TTI common stock, representing
approximately 60.1% of the total votes entitled to be cast at the TTI special
meeting. It is currently expected that members of the management of TTI and its
subsidiary, and their affiliates, will vote the shares of TTI common stock that
they are entitled to vote in favor of the proposed merger.
Voting and Revocation of Proxies. All shares of TTI common stock
represented by a proxy properly signed and received at or prior to the TTI
special meeting, unless subsequently revoked, will be voted in accordance with
the instructions on the proxy. If a proxy is signed and returned without
indicating any voting instructions, the shares of TTI common stock represented
by the proxy will be voted "for" the proposed merger. You may revoke your proxy
and reclaim your right to vote your shares by giving written notice of
revocation to the Secretary of TTI at any time before it is voted, by submitting
to TTI a duly executed, later-dated proxy or by voting the shares subject to the
proxy by written ballot at the TTI special meeting. All written notices of
revocation and other communications with respect to revocation of TTI proxies
should be addressed to: Thermaltec International, Corp., 68A Lamar Street, West
Babylon, New York 11704, Attention: Andrew B. Mazzone, President. Attendance at
the TTI special meeting will not in and of itself constitute a revocation of a
proxy.
The TTI board of directors is not aware of any business to be acted upon at
the TTI special meeting other than as described in this joint proxy
statement/prospectus. If, however, other matters are brought before the TTI
special meeting, including, among other things, a motion to adjourn or postpone
the TTI special meeting to another time or place for the purpose of soliciting
additional proxies or otherwise, the persons appointed as proxies will have
discretion to vote or act on the matters according to their best judgment.
However, no proxy which is voted against the proposed merger will be voted in
favor of any adjournment or postponement. The grant of a proxy will also confer
discretionary authority on the persons named in the proxy to vote on matters
incident to the conduct of the TTI special meeting.
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Abstentions and "broker non-votes," explained below, will be counted as
shares present for purposes of determining whether a quorum is present but will
not be voted for or against the proposed merger. Abstentions and broker
non-votes also will not be counted as votes cast for purposes of determining
whether sufficient votes have been received to approve the proposed merger.
Accordingly, abstentions and broker non-votes will have no effect on the outcome
of the vote with respect to the proposed merger. Broker non-votes are shares
held in the name of a broker or nominee for which an executed proxy is received,
but are not voted on the proposal because the voting instructions have not been
received from the beneficial owner or persons entitled to vote and the broker or
nominee does not have the discretionary power to vote.
Solicitation of Proxies. Proxies are being solicited on behalf of the TTI
board of directors. The solicitation of proxies may be made by directors,
officers and regular employees of TTI or its subsidiaries in person or by mail,
telephone, facsimile or telegraph without additional compensation payable for
that solicitation. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward proxy soliciting materials to
the beneficial owners of TTI common stock held of record by these persons, and
TTI will reimburse them for reasonable expenses incurred by them in so doing.
The cost of the solicitation will be home by TTI.
Rights of Dissenting TTI Stockholders. Except as otherwise described in
this joint proxy statement/prospectus, each TTI stockholder who delivers to TTI
a written demand for appraisal of the stockholder's shares before the SCG
special meeting and who otherwise complies with the applicable procedures under
Delaware law will be entitled to receive the fair value of his or her shares of
TTI common stock in cash if the merger is completed.
SCG Special Meeting
General. The SCG special meeting is scheduled to be held on August _____,
1999 at 9:00 a.m., local time, at ___________________________. The purpose of
the SCG special meeting is to consider and vote upon the proposed merger.
The SCG board of directors has unanimously approved the proposed merger and
recommends that SCG stockholders vote "for" the proposed merger.
Record Date. The close of business on July ___, 1999 (the "SCG Record
Date") has been fixed by the SCG board of Directors as the SCG record date for
the determination of holders of shares of SCG stock entitled to notice of and to
vote at the SCG special meeting. Only holders of record of SCG common stock as
of the close of business on the SCG Record Date are entitled to notice of, and
to vote at, the SCG special meeting.
Stock Entitled to Vote. As of the close of business on the SCG Record Date,
there were 5,950 shares of SCG Common stock outstanding. Holders of SCG common
stock will be entitled to one vote for each share of SCG common stock that they
held on the SCG Record Date. Accordingly, the holders of SCG common stock are
entitled to cast, in the aggregate, 5,950 votes.
Quorum; Required Vote. The presence in person or by proxy of a majority of
the outstanding shares of SCG common stock will constitute a quorum for purposes
of conducting business at the SCG special meeting. Under New Jersey law and
SCG's charter, the affirmative vote of a majority of the votes cast by the
holders of SCG common stock at the SCG special meeting is necessary to approve
the proposed merger.
Stock Ownership. As of the close of business on the SCG Record Date, the
directors and executive officers of SCG, and their affiliates, collectively held
3,955.3 shares of the outstanding SCG common stock, representing approximately
66.5% of the total votes entitled to be cast at the SCG special meeting. It is
currently expected that members of the management of SCG, and their affiliates,
will vote the shares of SCG common stock that they are entitled to vote in favor
of the proposed merger. Accordingly, the affirmative vote of no other holder of
shares of SCG common stock is required to approve the proposed merger.
Voting and Revocation Proxies. Shares of SCG common stock represented by a
proxy properly signed and received at or prior to the SCG special meeting,
unless subsequently revoked, will be voted in accordance with the instructions
on the proxy. If you sign and return your proxy without indicating any voting
instructions, the shares of SCG common stock represented by the proxy will be
voted "for" the proposed merger. You may revoke
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your proxy and reclaim your right to vote at any time by giving written notice
of revocation to the Secretary of SCG at any time before it is voted, by
submitting to SCG a duly executed, later-dated proxy or by voting the shares
subject to the proxy by written ballot at the SCG special meeting. You should
send all written notices of revocation and other communications with respect to
revocation of SCG proxies to: Solar Communications Group, Inc., 21 East Main
Street, Suite 205, Millville, New Jersey 08332, Attention: Alisa A. Rossi,
Secretary. Attendance at the SCG special meeting will not, in and of itself
constitute a revocation of a proxy. The failure to either return your proxy card
or attend the SCG special meeting in person and vote in favor of the proposed
merger will have the same effect as a vote against the proposed merger.
The SCG board of directors is not aware of any business to be acted upon at
the SCG special meeting other than as described in this joint proxy
statement/prospectus. If, however, other matters are brought before the SCG
special meeting, including, among other things, a motion to adjourn or postpone
the SCG special meeting to another time or place for the purpose of soliciting
additional proxies or otherwise, the persons appointed as proxies will have
discretion to vote or act on the matters according to their best judgment.
However, no proxy which is voted against the proposed merger will be voted in
favor of any adjournment or postponement. The grant of a proxy will also confer
discretionary authority on the persons named in the proxy to vote on matters
incident to the conduct of the SCG special meeting.
Abstentions will be counted as shares present for purposes of determining
whether a quorum is present but will not be voted for or against the proposed
merger. Abstentions effectively will be a vote against the proposed merger.
Similarly, the failure to either return your proxy card or attend the SCG
special meeting in person and vote in favor of the proposed merger will count as
a vote against the proposed merger.
Solicitation of Proxies. The proxies are being solicited on behalf of the
SCG board of directors. The solicitation of proxies may be made by directors,
officers and regular employees of SCG in person or by mail, telephone, facsimile
or telegraph without additional compensation payable for that solicitation. The
cost of the solicitation will be borne by SCG.
Rights of Dissenting SCG Stockholders. Except as otherwise described in
this joint proxy statement/prospectus, each SCG stockholder who delivers to SCG
a written notice of exercise of dissenters' rights before the SCG special
meeting and who otherwise complies with the applicable procedures under New
Jersey law will be entitled to receive the fair value of his or her shares of
SCG common stock in cash if the merger is completed.
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THE PLAN OF MERGER AND RELATED TRANSACTIONS
This section of the joint proxy statement/prospectus describes certain
aspects of the proposed merger. The following description does not purport to be
complete. This discussion of the merger is subject to and qualified in its
entirety by reference to the Agreement and Plan of Reorganization, which is
incorporated by reference and attached to this joint proxy statement/prospectus
as Annex A. You are urged to read the Agreement and Plan of Reorganization
carefully.
Background of the Merger
Late in the summer of 1998, James M. Rossi, Chairman of the Board and CEO
of SCG, and Andrew B. Mazzone, President of TTI, engaged in a series of general
business discussions. The discussions were initiated by Mr. Mazzone, who was
looking for new opportunities to expand his company's existing products and
services. Mr. Mazzone was particularly interested in expanding into the Internet
or telecommunications industries. These discussions continued through November,
1998 and Mr. Rossi assisted Mr. Mazzone in evaluating several available
opportunities in the Internet and telecommunications fields.
In December of 1998, Mr. Rossi and Mr. Mazzone began to seriously explore
the possibility of merging their two companies. They both believed that there
was enough business knowledge and contacts between the management of the two
companies to make SCG a commercially viable enterprise and to introduce its
potential product and service offerings to a wider market. Management of TTI
also hoped to establish a Latin American presence for SCG, based upon TTI's
existing contacts in that area, upon further commercial development of SCG's
PCRoomLink product line.
In mid-December, 1998, Mr. Mazzone and Mr. Rossi executed a Letter of
Intent, which outlined the general terms for the proposed merger of SCG with and
into TTI. Consummation of the merger was made subject to a number of conditions
precedent, including without limitation completion of satisfactory due diligence
by both companies, the receipt of all necessary regulatory and third party
approvals, and execution and delivery of a definitive merger agreement by SCG
and TTI.
From that time, until the definitive merger agreement was signed on June
16, 1999, the parties worked to fulfill the conditions precedent set forth in
the Letter of Intent, to raise additional equity capital for SCG, and to
negotiate the terms and provisions of the definitive merger agreement. During
this time, both Mr. Rossi and Mr. Mazzone continued to explore unrelated
opportunities in the telecommunications and Internet industries.
The definitive merger agreement, known as the Agreement and Plan of
Reorganization, was executed by SCG, TTI and Mr. Mazzone on June 16, 1999.
Reasons for the Merger
Certain statements made in the following paragraphs regarding the potential
benefits that could result from the merger are forward-looking statements based
on current expectations and entail various risks and uncertainties that could
cause actual results to differ materially from those expressed in such
forward-looking statements. The anticipated potential benefits of the merger may
not be realized. Such risks and uncertainties are set forth under "Risk Factors"
and elsewhere in this joint proxy statement/prospectus.
TTI's Reasons for the Merger
The TTI board of directors has unanimously determined that the terms of the
merger documents and the merger are fair to, and in the best interests of, TTI
and its stockholders. In reaching its determination, the TTI board of directors
consulted with TTI's management, as well as its legal counsel, accountants and
financial advisors and gave significant consideration to a number of factors
bearing on its decision. The following are the reasons the TTI board of
directors believes the merger will be beneficial to TTI and its stockholders:
o The merger will provide TTI with an opportunity to expand its current
technology base into the telecommunications and Internet industries;
o The management staff of SCG is much larger and is more experienced in
developing technologies and applications in the telecommunications and
Internet industries than TTI's management;
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o At present, the telecommunications and Internet industries are growing at
a much more rapid rate than metallurgy, TTI's current core business
focus;
o The merger will provide TTI's existing shareholders with an opportunity
to participate in the growing telecommunications and Internet industries
while still retaining their respective pro rata interests in TTI's former
business operations (through their ownership of the capital stock of
Panama Industries);
o Members of TTI's present management team will work with SCG in the future
to promote SCG's PCRoomLink products and services in Latin America, where
SCG does not currently have any established presence; and
o Management of both companies have substantial business and personal
contacts from different industrial and geographic sectors which they will
utilize to maximize potential business opportunities both for the
Surviving Company and for Panama Industries.
In addition to the reasons stated above, in the course of its deliberations
concerning the merger, the TTI board of directors consulted with TTI's
management, legal counsel, accountants and financial advisors and reviewed a
number of other factors relevant to the merger, including:
o Information concerning the business, assets, operations, management
financial condition, operating results, competitive position and
prospects of TTI and SCG;
o The expected tax and accounting treatment of the merger;
o Reports from legal counsel on specific terms of the merger documents; and
o TTI's belief that the management styles and corporate cultures of the two
companies would be complementary.
The TTI board of directors also considered a number of potentially negative
factors in its deliberations concerning the merger, including:
o The possibility of management disruption associated with the merger and
the risk that key technical and management personnel of SCG might not
continue with the Surviving Company following the merger;
o The possibility that the merger might adversely affect SCG's and TTI's
relationship with their respective customers; and
o The risk that the potential benefits of the merger might not be realized.
The TTI board of directors concluded, however, that the benefits of the
transaction to TTI and its stockholders outweighed the risk associated with
these negative factors.
SCG's Reasons for the Merger
The SCG board of directors unanimously believes that the stockholders of
SCG will benefit by becoming stockholders of the combined enterprise on the
basis stated in the merger documents, and that the proposed merger is advisable
and in the best interests of, and that the terms are fair and equitable to, the
SCG stockholders. The terms of the proposed merger, including the amount of TTI
common stock to be received by the SCG stockholders, are the result of arm's
length negotiations between representatives of SCG and TTI.
On December 7, 1998, the SCG board of directors held a meeting at which it
considered the proposed merger and the transactions contemplated by the proposed
merger. During its deliberations with respect to the merits of the proposed
merger, the SCG board of directors considered both business and financial
reasons for pursuing a combination with TTI in contrast to other potential
opportunities as an independent company or in combination with another company.
Among the factors considered were:
o SCG's growth capital needs;
o SCG's need for better name recognition in the United States and abroad;
o SCG's need to have the ability to offer incentive stock options and other
forms of stock-based compensation to attract and retain qualified
employees in a highly competitive market; and
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o SCG's future financing prospects.
In unanimously approving the merger documents and the transactions
contemplated by the merger documents, the SCG board of directors considered a
number of factors, including:
o the fact that the amount of TTI common stock to be paid in the merger to
holders of SCG capital stock represents a value which the SCG board of
directors believes is fair to the SCG stockholders;
o the greater liquidity afforded by the TTI common stock;
o the existing assets, financial condition, results of operations, business
and prospects of SCG on a stand-alone basis, as compared to the ability
after the merger to accelerate growth in SCG's business by taking
advantage of improved access to financing; and
o the fact that the amount of TTI common stock to be paid in the merger was
determined through arms' length negotiations between representatives of
TTI, on the one hand, and SCG, on the other.
The foregoing discussion of the information and factors considered and
given weight by the SCG board of directors in considering the proposed merger
and the transactions contemplated by the proposed merger is not intended to be
exhaustive. In view of the wide variety of factors considered in connection with
its evaluation of the proposed merger, the SCG board of directors did not find
it practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in making its determination nor did it evaluate
whether these factors were of equal weight. In addition, individual members of
the board of directors of SCG may have given different weight to different
factors.
Certain Federal Income Tax Consequences
The following is a summary description of the material United States
federal income tax consequences of the merger to SCG and the SCG stockholders
who receive TTI common stock in the merger or perfect dissenters' rights. This
summary does not address tax considerations which may affect the treatment of
special status taxpayers such as financial institutions, broker-dealers, life
insurance companies, tax-exempt organizations, investment companies and foreign
taxpayers or of SCG stockholders who do not hold their SCG stock as a capital
asset at the date the merger is completed. In addition, no information is
provided in this summary with respect to the tax consequences of the merger
either under applicable foreign, state or local laws or to persons who acquired
SCG common stock under employee stock options or otherwise as compensation.
The following discussion is based on the Internal Revenue Code of 1986, as
in effect on the date of this joint proxy statement/prospectus, without
consideration of the particular facts or circumstances of any particular holder
of SCG stock. SCG and TTI have not sought and will not seek any rulings from the
Internal Revenue Service, with respect to any of the matters discussed in this
summary. It is a condition to the closing that legal counsel to TTI and SCG
render an opinion that the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986. Provided that
the merger qualifies as a statutory merger under applicable state law:
o the merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of
1986;
o no gain or loss will be recognized by TTI upon the exchange of SCG stock
solely in exchange for TTI common stock;
o no gain or loss will be recognized by SCG stockholders upon the exchange
of their SCG stock solely for TTI common stock;
o the basis of TTI common stock received by SCG stockholders in the merger
will be the same as the basis of their SCG stock surrendered in exchange
therefor; and
o for capital gains purposes, the holding period of TTI common stock
received by SCG stockholders in the merger will include the period during
which the SCG stock surrendered in exchange therefor was held, provided
that the SCG stock is held as a capital asset at the date the merger is
completed.
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An SCG stockholder who perfects dissenters' rights with respect to his or
her shares of SCG stock, and who does not withdraw his or her rights, should, in
general, treat the difference between the tax basis of the shares of SCG stock
held by the SCG stockholder with respect to which dissenters' rights are
perfected and the amount received in payment therefor as capital gain or loss.
However, depending on the SCG stockholder's particular circumstances, this
amount might be treated for federal income tax purposes as dividend income.
A TTI stockholder who perfects dissenters' rights with respect to his or
her shares of TTI stock, and who does not withdraw his or her rights, should, in
general, treat the difference between the tax basis of the shares of TTI stock
held by the TTI stockholder with respect to which dissenters' rights are
perfected and the amount received in payment therefor as capital gain or loss.
However, depending on the TTI stockholder's particular circumstances, this
amount might be treated for federal income tax purposes as dividend income.
The foregoing is a general discussion of the material federal income tax
consequences of the merger for SCG, SCG stockholders and TTI stockholders and is
included for general information only. The foregoing discussion does not take
into account the particular facts and circumstances of each SCG or TTI
stockholder's tax status and attributes. Accordingly, each SCG and TTI
stockholder should consult his or her own tax advisor regarding the specific tax
consequences of the merger, including the application and effect of federal,
state, local and other tax laws and the possible effects of changes in these tax
laws.
Accounting Treatment
The merger will be treated as a reverse merger whereby, for accounting
purposes, SCG will be treated as the acquirer in the transaction.
Restrictions on Resale of TTI Common Stock
The shares of TTI common stock issuable to stockholders of SCG upon
consummation of the merger have been registered under the Securities Act. Unless
restricted by the terms of lock-up agreements entered into between SCG and such
stockholder, such shares may be freely traded without restriction by a former
stockholder of SCG who is not deemed to be an "affiliate" of TTI or SCG, as that
term is defined under the Securities Act.
Shares of TTI common stock received by those stockholders of SCG who are
deemed to be affiliates of SCG or TTI may be resold without registration under
the Securities Act only as permitted under the Securities Act. Each person
deemed to be an affiliate of SCG or TTI has agreed not to offer, sell, pledge,
transfer or otherwise dispose of any shares of TTI common stock distributed to
them pursuant to the merger, except (a) in compliance with Rule 145 under the
Securities Act, (b) in a transaction that is otherwise exempt from the
registration requirements of the Securities Act and provided that an opinion of
counsel, satisfactory to TTI, has been provided to TTI to the effect that no
such registration is required in connection with the proposed transaction, or
(c) in an offering that is registered under the Securities Act. In general, Rule
145, as currently in effect, imposes restrictions on the manner in which
affiliates of SCG may resell TTI common stock received in the merger and the
amount of TTI common stock that such affiliates (including persons with whom the
affiliates act in concert) may sell within any three-month period. These
restrictions will generally apply for at least one year after the merger
(assuming such person is not then an affiliate of TTI).
Nasdaq Listing
The shares of TTI common stock to be issued in connection with the merger
will be listed on the OTC Bulletin Board. The Surviving Company will also use
reasonable efforts to have all of the shares of TTI common stock outstanding
following the merger listed on the Nasdaq National Market. However, there can be
no assurance that such listing will be approved. If Nasdaq refuses to list TTI's
common stock on the Nasdaq National Market, the Surviving Company will attempt
to have the TTI common stock listed on the Nasdaq Small Cap Market. If Nasdaq
refuses to list TTI's common stock on the Nasdaq Small Cap Market, the Surviving
Company will attempt to have the TTI common stock continue to trade on the OTC
Bulletin Board or in the over-the-counter market on the so-called "pink sheets".
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Governmental and Regulatory Matters
The merger must satisfy the requirements of all applicable federal and
state securities laws.
Dissenters' Rights for TTI Stockholders
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the Delaware General Corporation Law, referred to
herein as the "DGCL", and is qualified in its entirety by the full text of
section 262 of the DGCL, which is referred to herein as "Section 262." Section
262 is reprinted in its entirety as Annex B to this joint proxy
statement/prospectus. Any TTI stockholder who desires to exercise his or her
appraisal rights should review carefully Section 262 and is urged to consult a
legal advisor before electing or attempting to exercise their rights. All
references in Section 262 to a "stockholder" and in this summary to a "SCG
stockholder" or a "holder of TTI stock" are to the record holder of shares as to
which appraisal rights are asserted.
Subject to the exceptions stated below, holders of record of TTI common
stock who comply with the applicable procedures summarized below will be
entitled to appraisal rights under Section 262. Voting against, abstaining from
voting or failing to vote on approval and adoption of the proposed merger will
not constitute a demand for appraisal within the meaning of Section 262. A
person having a beneficial interest in TTI stock held of record in the name of
another person, such as a broker or nominee, must act promptly to cause the
record holder to follow the steps summarized below properly and in a timely
manner to perfect appraisal rights.
TTI stockholders electing to exercise appraisal rights under Section 262
must not vote for approval of the proposed merger. A vote by a TTI stockholder
against approval of the proposed merger is not required in order for the TTI
stockholder to exercise appraisal rights. However, if a TTI stockholder returns
a signed proxy but does not specify a vote against approval and adoption of the
proposed merger or a direction to abstain, the proxy, if not revoked, will be
voted for approval of the proposed merger, which will have the effect of waiving
that TTI stockholder's appraisal rights.
Under the DGCL, except as described below, holders of TTI stock who follow
the procedures stated in Section 262 will be entitled to have their shares
appraised by the Court of Chancery of the State of Delaware and to receive
payment in cash of the "fair value" of their shares, exclusive of any element of
value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest, if any, as determined by the court.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days prior the
meeting, most notify each of its stockholders who was a stockholder on the
record date for the meeting with respect to shares for which appraisal rights
are available, that appraisal rights are so available and must include in the
notice a copy of Section 262. This joint proxy statement/prospectus constitutes
the notice to the holders of TTI stock and the applicable statutory provisions
of the DGCL are attached as Annex B to this joint proxy statement/prospectus.
Any TTI stockholder who wishes to exercise his or her appraisal rights or who
wishes to preserve his or her right to do so should review the following
discussion and Annex B carefully because failure to timely and properly comply
with the procedures specified will result in the loss of appraisal rights under
the DGCL.
A holder of TTI stock wishing to exercise his or her appraisal rights must
not vote in favor of approval of the proposed merger. This holder must deliver
to TTI, prior to the vote on the proposed merger at the SCG special meeting, a
written demand for appraisal of his or her TTI stock. The demand must reasonably
inform TTI of the identity of the TTI stockholder and that the TTI stockholder
intends to demand appraisal by this written demand. A proxy or vote against
approval and adoption of the proposed merger does not constitute a demand. A
holder of TTI stock wishing to exercise his or her appraisal rights must be the
record holder of the TTI stock on the date the written demand for appraisal is
made and must continue to hold his or her TTI stock of record until the date the
merger is completed. Accordingly, a holder of TTI stock who is the record holder
of shares on the date the written demand for appraisal is made, but who
thereafter transfers his or her TTI stock prior to the date the merger is
completed, will lose any right to appraisal in respect of his or her TTI stock.
Only a holder of record of TTI stock is entitled to assert appraisal rights
for the TTI stock registered in the holder's name. A demand of appraisal should
be executed by or on behalf of the holder of record, fully and correctly, as the
holder's name appears on the holder's stock certificates. If the TTI stock is
owned of record in a
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fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the TTI stock is owned of
record by more than one person as in a joint tenancy or tenancy in common, the
demand should be executed by or on behalf of all joint owners. An authorized
agent, including an agent for two or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that in executing the
demand, the agent is agent for the owner or owners. A record holder, such as a
broker, who holds TTI stock as nominee for several beneficial owners may
exercise appraisal rights with respect to TTI stock held for one or more
beneficial owners while not exercising the rights with respect to the TTI stock
held for other beneficial owners; in that case, the written demand should state
the number of shares of TTI stock as to which appraisal is sought. Where no
number of shares of TTI stock is expressly mentioned the demand will be presumed
to cover all TTI stock held in the name of the record owner. Stockholders who
hold their TTI stock in brokerage accounts or other nominee forms and who wish
to exercise appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
the nominee.
All written demands for appraisal should be sent or delivered to TTI at:
Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
Attention: Andrew B. Mazzone, President
TTI will, within ten days after the date the merger is completed, notify
each TTI stockholder who has complied with the statutory requirements summarized
above that the merger has become effective. Within 120 days after the date the
merger is completed, but not thereafter, TTI or any TTI stockholder who has
complied with the statutory requirements summarized above may file a petition
with the Court of Chancery demanding a determination of the value of the TTI
stock. TTI is under no obligation to and has no present intention to file a
petition with respect to the appraisal of the fair value of the TTI stock.
Accordingly, it is the obligation of the TTI stockholders to initiate all
necessary action to perfect their appraisal rights within the time prescribed in
Section 262.
Within 120 days after the date the merger is completed, any TTI stockholder
who has complied with the requirements of exercise of appraisal rights will be
entitled, upon written request, to receive from TTI a statement setting forth
the aggregate number of shares of TTI stock not voted in favor of adoption of
the proposed merger and with respect to which demands for appraisal have been
received and the aggregate number of holders of the shares. These statements
must be mailed within ten days after a written request for these statements has
been received by TTI or ten days after expiration of the aforementioned period
for delivery of demands for appraisal, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on the
petition, the Court of Chancery will determine the TTI stockholders entitled to
appraisal rights and will appraise the "fair value" of their TTI stock,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value.
The Court of Chancery will determine the amount of interest, if any, to be
paid upon the amounts to be received by persons whose TTI stock has been
appraised. The costs of the appraisal action may be determined by the Court of
Chancery and taxed upon the parties as the Court of Chancery deems equitable.
The Court of Chancery may also order that all or a portion of the expenses
incurred by any TTI stockholder in connection with an appraisal action,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all the TTI stock entitled to appraisal.
Any holder of TTI stock who has duly demanded an appraisal in compliance
with Section 262 will not, after the date the merger is completed, be entitled
to vote the TTI stock subject to the demand for any purpose or be entitled to
the payment of dividends or other distributions on the TTI stock. That holder
will be entitled, however, to dividends or other distributions payable to
holders of record of TTI stock as of a record date prior to the date the merger
is completed.
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If any TTI stockholder who properly demands appraisal of his or her TTI
stock under Section 262 fails to perfect, or effectively withdraws or loses, his
or her right to appraisal as provided in the DGCL, the stockholder will continue
to own his/her shares of TTI common stock. A TTI stockholder will fail to
perfect, or effectively lose or withdraw, his or her right to appraisal if,
among other things, no petition of appraisal is filed within 120 days after the
date the merger is completed, or if the TTI stockholder delivers to TTI a
written withdrawal of his or her demand for appraisal and acceptance of the
merger. Any attempt to withdraw an appraisal demand more than 60 days after the
date the merger is completed will require the written approval of TTI.
Failure to follow the steps required by Section 262 of perfecting appraisal
rights may result in the loss of appraisal rights.
IN VIEW OF THE COMPLEXITIES OF THE FOREGOING PROVISIONS OF THE DGCL,
STOCKHOLDERS OF TTI WHO ARE CONSIDERING PURSUING THEIR DISSENTERS' RIGHTS MAY
WISH TO CONSULT LEGAL COUNSEL BEFORE ELECTING TO EXERCISE SUCH RIGHTS.
Rights of Dissenting SCG Stockholders
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under the New Jersey Business Corporation Act, as amended,
referred to herein as the "BCA", and is qualified in its entirety by the full
text of Chapter 11 of the BCA, which is referred to herein as "Chapter 11."
Chapter 11 is reprinted in its entirety as Annex C to this joint proxy
statement/prospectus. Any SCG stockholder who desires to exercise his or her
dissenters' rights should review carefully Chapter 11 and is urged to consult a
legal advisor before electing or attempting to exercise their rights. All
references in Chapter 11 to a "shareholder" and in this summary to a "SCG
stockholder" or a "holder of SCG stock" are to the record holder of shares of
SCG common stock as to which dissenters' rights are asserted.
Subject to the exceptions stated below, holders of record of SCG common
stock who comply with the applicable procedures summarized below will be
entitled to payment of the fair value of such shares under Chapter 11. Voting
against, abstaining from voting or failing to vote on approval and adoption of
the proposed merger will not constitute a notice of dissent or a demand for
payment of fair value within the meaning of Chapter 11. A person having a
beneficial interest in SCG stock held of record in the name of another person,
such as a broker or nominee, must act promptly to cause the record holder to
follow the steps summarized below properly and in a timely manner to perfect
dissenters' rights.
SCG stockholders electing to exercise dissenters' rights under Chapter 11
must not vote for approval of the proposed merger. A vote by a SCG stockholder
against approval of the proposed merger is not required in order for SCG
stockholders to exercise dissenters' rights. However, if a SCG stockholder
returns a signed proxy but does not specify a vote against approval and adoption
of the proposed merger or a direction to abstain, the proxy, if not revoked,
will be voted for approval of the proposed merger, which will have the effect of
waiving that SCG stockholder's dissenters' rights.
Under the BCA, except as described below, holders of SCG stock who follow
the procedures stated in Chapter 11 will be entitled to receive payment in cash
of the "fair value" of their shares, exclusive of any element of value arising
from the accomplishment or expectation of the merger. SCG stockholders who
properly perfect their rights will not be entitled to surrender their SCG stock
for the shares of TTI common stock that they would otherwise have received for
their SCG stock in the merger, as otherwise described in this joint proxy
statement/prospectus.
Under Chapter 11, where a proposed merger is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days prior the
meeting, most notify each of its stockholders who was a stockholder on the
record date for the meeting with respect to shares for which dissenters' rights
are available, that such rights are so available and must include in the notice
a copy of Chapter 11. This joint proxy statement/prospectus constitutes the
notice to the holders of SCG stock and the applicable statutory provisions of
the BCA are attached as Annex C to this joint proxy statement/prospectus. Any
SCG stockholder who wishes to exercise his or her dissenters' rights or who
wishes to preserve his or her right to do so should review the following
discussion and Annex C carefully because failure to timely and properly comply
with the procedures specified will result in the loss of dissenters' rights
under the BCA.
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A holder of SCG stock wishing to exercise his or her dissenters' rights
must not vote in favor of approval of the proposed merger. The holder must
deliver to SCG, prior to the vote on the proposed merger at the SCG special
meeting, a written notice of dissent. The notice of dissent must reasonably
inform SCG of the identity of the SCG stockholder and that the SCG stockholder
intends to demand payment of the fair value for all, but not less than all, of
his or her shares. A proxy or vote against approval and adoption of the proposed
merger does not constitute a notice of dissent. A holder of SCG stock wishing to
exercise his or her dissenters' rights must be the record holder of the SCG
stock on the date the written notice of dissent is made.
Only a holder of record of SCG stock is entitled to assert dissenters'
rights for the SCG stock registered in the holder's name. A notice of dissent
should be executed by or on behalf of the holder of record, fully and correctly,
as the holder's name appears on the holder's stock certificates. If the SCG
stock is owned of record in a fiduciary capacity, such as by a trustee, guardian
or custodian, execution of the notice of dissent should be made in that
capacity, and if the SCG stock is owned of record by more than one person as in
a joint tenancy or tenancy in common, the notice should be executed by or on
behalf of all joint owners. An authorized agent, including an agent for two or
more joint owners, may execute a notice of dissent on behalf of a holder of
record; however, the agent must identify the record owner or owners and
expressly disclose the fact that in executing the notice, the agent is agent for
the owner or owners. A record holder, such as a broker, who holds SCG stock as
nominee for several beneficial owners may exercise dissenters' rights with
respect to SCG stock held for one or more beneficial owners while not exercising
the rights with respect to the SCG stock held for other beneficial owners; in
that case, the written notice should state the number of shares of SCG stock as
to which dissenters' rights are asserted. Where no number of shares of SCG stock
is expressly mentioned the notice will be presumed to cover all SCG stock held
in the name of the record owner. Stockholders who hold their SCG stock in
brokerage accounts or other nominee forms and who wish to exercise dissenters'
rights are urged to consult with their brokers to determine the appropriate
procedures for the giving of a notice of dissent by the nominee.
All written notices of dissent should be sent or delivered to SCG at:
Solar Communications Group, Inc.
21 East Main Street
Suite 205
P.O. Box 1217
Millville, New Jersey 08332-8217
Attention: Alisa A. Rossi, Secretary
TTI will, within ten days after the date the merger is completed, notify by
certified mail each SCG stockholder who has complied with the statutory
requirements summarized above that the merger has become effective. Within 20
days after such notice is mailed, any SCG stockholder who has received such
notice and who wishes to dissent must make a written demand on SCG for payment
of the fair value of his shares. Such written demand should be sent to Alisa A.
Rossi at the SCG address listed above.
The dissenting stockholder must deliver his stock certificate(s) to SCG not
later than 20 days after making such demand. SCG shall endorse the
certificate(s) with a legend to the effect that the stockholder has demanded the
fair cash value of the shares represented by the certificate(s) before returning
the certificate(s) to the stockholder. Such dissenting shareholder shall then
immediately cease to have any of the rights of a stockholder except the right to
be paid the fair value of his shares and any other rights of a dissenting
stockholder under Chapter 11.
Within ten days of the expiration of the period within which SCG
stockholders may make written demand to be paid the fair value of their shares,
SCG will mail to each dissenting stockholder, the latest available 12-month
profit and loss statement and a balance sheet and surplus statement of SCG, as
of the close of the 12-month period. The close of the profit and loss statement
and the balance sheet will be as of a date within 12 months prior to the
mailing. SCG may, but need not, accompany the mailing with a written offer to
pay each dissenting stockholder for his shares at a specified price deemed by
SCG to be the fair value thereof.
Unless the dissenting stockholder and SCG agree on the fair cash value per
share of the SCG common stock, within 30 days after the ten day period described
above, the stockholder may serve a written demand on
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SCG to commence an action in the Superior Court of New Jersey for the
determination of the fair value of his SCG shares. The SCG stockholder's demand
to commence an action must be served not later than 30 days after the expiration
of the 30 day period SCG stockholders have in which to agree upon a price with
SCG.
SCG has 30 days after receipt of the SCG stockholder's demand to commence a
proceeding in the Superior Court. If SCG fails to institute such proceeding,
such stockholder may institute the proceeding in the name of SCG within 60 days
after the expiration of SCG's 30 day period.
If the Superior Court finds that the stockholder is entitled to be paid the
fair cash value of SCG common stock, the court may appoint an appraiser to
receive evidence and to recommend a decision on the amount of the fair cash
value. The court will make a finding as to the fair cash value of a share of SCG
common stock and render judgment against SCG for its payment with interest at a
rate the court finds to be equitable, from the date of the dissenting
stockholder's demand for payment to the date of payment. The costs and expenses
of the proceedings shall be assessed or apportioned as the court considers
equitable.
The rights of any dissenting stockholder will terminate if: (a) the
dissenting stockholder has failed to present his certificate(s) for notation
within the time period specified in Chapter 11, unless a court having
jurisdiction, for good and sufficient cause shown, shall otherwise direct; (b)
the dissenting stockholder withdraws his demand for payment with the written
consent of SCG; (c) SCG and the dissenting stockholder have not agreed upon the
fair cash value per share of the SCG common stock and neither has timely filed
or joined in a petition in the Superior Court for a determination of the fair
cash value of the SCG common stock; (d) the Superior Court determines that the
stockholder is not entitled to payment for his shares; (e) SCG abandons or
rescinds the merger agreement; or (f) a court having jurisdiction permanently
enjoins or sets aside the merger.
Failure to follow the steps required by Chapter 11 for perfecting
dissenters' rights may result in the loss of dissenters' rights. In that event a
SCG stockholder will be entitled to receive the number of shares of TTI common
stock receivable with respect to his SCG stock in accordance with the terms of
the proposed merger.
IN VIEW OF THE COMPLEXITIES OF THE FOREGOING PROVISIONS OF THE BCA,
STOCKHOLDERS OF SCG WHO ARE CONSIDERING PURSUING THEIR DISSENTERS' RIGHTS MAY
WISH TO CONSULT LEGAL COUNSEL BEFORE ELECTING TO EXERCISE SUCH RIGHTS.
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THE MERGER AGREEMENT
The following is a brief summary of the material terms of the Agreement and
Plan of Reorganization which will govern the proposed merger between SCG and
TTI. This summary does not purport to be complete and is qualified in its
entirety by reference to the Agreement and Plan of Reorganization, which is
incorporated by reference and attached to this joint proxy statement/prospectus
as Annex A. You are urged to read the Agreement and Plan of Reorganization
carefully.
The Merger
The Agreement and Plan of Reorganization provides that, following the
adoption of the agreement by the stockholders of TTI and SCG and the
satisfaction or waiver of the other conditions to the merger, and subject to the
applicable provisions of Delaware and New Jersey law, SCG will be merged with
and into TTI, with TTI continuing as the surviving corporation under the name of
"Solar Communications Group, Inc." Following the merger, TTI will conduct only
the business conducted by SCG immediately prior to the merger.
Subject to the provisions of the Agreement and Plan of Reorganization, TTI
and SCG will cause the merger to be consummated by the concurrent filing of (i)
a Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware law, and (ii) a Certificate
of Merger with the Department of Revenue of the State of New Jersey in
accordance with the relevant provisions of New Jersey law. The closing of the
merger shall take place at the offices of Archer & Greiner, P.C., at a time and
place to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions to the merger
set forth in the Agreement and Plan of Reorganization, or at such other time,
date and location as TTI and SCG agree in writing (the "Closing"). The Closing
is anticipated to occur on or before August 31, 1999.
Effective Time
If all conditions to the merger are satisfied or waived, the merger will
become effective upon the later of (i) the date and time of the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware, (ii)
the date and time of the filing of a Certificate of Merger with the Department
of Revenue of the State of New Jersey, and (iii) such other date and time as is
agreed to in writing by TTI and SCG (the "Effective Time").
Conversion of Shares; No Fractional Amounts
As a result of the merger, SCG will be merged with and into TTI. At the
Effective Time, each share of SCG common stock, other than shares owned by
stockholders who perfect their dissenters' rights under New Jersey law, will be
converted into 10,000 shares of TTI common stock.
No fractional shares of TTI common stock will be issued in the merger and
no cash will be paid for fractional shares. ln lieu of the issuance of
fractional shares, the number of shares of TTI common stock to be issued to each
SCG stockholder will be rounded off to the nearest whole number of shares of TTI
common stock. TTI will cause the shares of TTI common stock issuable to the SCG
stockholders to be listed on the OTC Electronic Bulletin Board. Following the
merger, TTI also intends to apply for listing of all of the shares of TTI common
stock outstanding after the merger on the Nasdaq National Market. However, there
can be no assurance that such listing application will be approved. If Nasdaq
refuses to list TTI's common stock on the Nasdaq National Market, TTI will
attempt to have the TTI common stock listed on the Nasdaq Small Cap Market. If
Nasdaq refuses to list TTI's common stock on the Nasdaq Small Cap Market, TTI
will use its best efforts to have the TTI common stock continue to trade on the
OTC Bulletin Board or in the over-the-counter market on the so-called "pink
sheets".
At or promptly after the Effective Time, TTI, acting through Manhattan
Transfer Registrar Co. as its exchange agent (the "Exchange Agent"), will
deliver to each SCG stockholder of record as of such date a letter of
transmittal with instructions to be used by such stockholder in surrendering
certificates which, prior to the
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merger, represented shares of SCG common stock and which, pursuant to the
merger, will be exchanged for shares of TTI common stock. CERTIFICATES SHOULD
NOT BE SURRENDERED BY THE HOLDERS OF SCG COMMON STOCK UNTIL SUCH HOLDERS RECEIVE
THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Treatment of SCG Stock Options
Under the Agreement and Plan of Reorganization, all options to acquire
shares of SCG common stock outstanding under SCG's 1999 Stock Option Plan
immediately before the completion of the merger will continue in effect after
the merger as options to purchase TTI common stock outstanding under TTI's 1999
Stock Option Plan, subject to the adjustments stated in the next sentence. At
the Effective Time, each outstanding SCG stock option will be automatically
adjusted to provide that:
o the number of shares of TTI common stock which will be issued upon the
exercise of the SCG option will be that number of shares, rounded off to
the nearest whole number of shares, equal to the number of shares of SCG
common stock which would have been issued upon exercise of the SCG option
immediately before the completion of the merger, multiplied by 10,000;
and
o the exercise price per share of TTI common stock under the SCG option
will be that amount, rounded up to the nearest whole cent, equal to the
exercise price per share of SCG common stock under the SCG option
immediately before the completion of the merger, divided by 10,000.
The terms and provisions of the SCG 1999 Stock Option Plan are identical to
the terms and provisions of the TTI 1999 Stock Option Plan.
Conduct Following the Merger
Once the merger is consummated, SCG will cease to exist as a corporation,
and all of the business, assets, liabilities and obligations of SCG will be
merged into TTI, with TTI remaining as the surviving corporation. Following the
merger, TTI will continue to operate the business conducted by SCG prior to the
merger and will change its corporate name to "Solar Communications Group, Inc."
The stockholders of SCG will become stockholders of TTI, and their rights as
stockholders will be governed by the TTI Certificate of Incorporation and the
laws of the state of Delaware. See "Comparison of Stockholders Rights."
Pursuant to the Agreement and Plan of Reorganization, the Certificate of
Incorporation of TTI in effect immediately prior to the Effective Time will
govern the operations of the Surviving Company (subject to the change in the
name of TTI to "Solar Communications Group, Inc.") and the Bylaws of TTI will be
the Bylaws of the Surviving Company. At the Effective Time, the Board of
Directors of the Surviving Company will consist of the five directors who were
serving as directors of SCG immediately prior to the Effective Time until their
respective successors are duly elected or appointed and qualified. The officers
of SCG immediately prior to the Effective Time will serve as officers of the
Surviving Company, until their successors are duly appointed. At the Effective
Time, the sole director and officer of TTI, Andrew B. Mazzone, will resign.
Conduct of Business Pending the Merger
The Agreement and Plan of Reorganization contains various covenants and
agreements that govern the actions of TTI and SCG until the merger is completed
or the Agreement and Plan of Reorganization is terminated. These covenants and
agreements require each of TTI and SCG to take actions or to refrain from taking
actions with respect to various matters including:
o SCG conducting its business in the ordinary course consistent with past
practices;
o TTI conducting its business in the ordinary course consistent with past
practices; and
o the parties using their reasonable best efforts to complete the merger at
the earliest practicable date.
To completely understand all of the various covenants and agreements
contained in the Agreement and Plan of Reorganization, you should carefully read
the Agreement and Plan of Reorganization which is attached to this document as
Annex A.
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Representations and Warranties
The Agreement and Plan of Reorganization contains statements and promises
made by TTI about itself called representations and warranties. In addition, the
Agreement and Plan of Reorganization contains representations and warranties
made by SCG. You can review the representations and warranties contained in the
Agreement and Plan of Reorganization attached to this joint proxy
statement/prospectus as Annex A.
Conditions to the Merger
The completion of the merger depends upon the satisfaction or waiver of a
number of conditions, including, among other things, that:
o the merger shall have been approved by TTI's and SCG's stockholders;
o no lawsuit, judgment or new law shall exist which seeks to or does
prohibit or restrain the merger or which seeks damages as a result of the
merger;
o SCG shall have received an opinion from its legal counsel regarding the
material federal income tax consequences of the merger;
o TTI shall have received an opinion from its legal counsel regarding the
material federal income tax consequences of the merger;
o the representations and warranties of the parties may not be false or
misleading in any material respect; and
o the absence of any material adverse change or material casualty loss
affecting either TTI or SCG or their respective business, assets or
financial condition.
To review all of the conditions contained in the Agreement and Plan of
Reorganization, you should read the Agreement and Plan of Reorganization which
is attached to this document as Annex A.
Termination of the Merger Documents
At any time before the closing of the merger, whether or not the proposed
merger has been approved by SCG's stockholders or TTI's stockholders, the merger
documents may be terminated and the merger abandoned by:
o the mutual written consent of TTI and SCG, authorized by their respective
boards of directors;
o written notice from TTI to SCG, or from SCG to TTI, if it becomes
certain, for all practical purposes, that any of the conditions to the
closing obligations of the party giving the notice cannot be satisfied on
or before December 31, 1999, for any reason other than the party's
default, and the party is not willing to waive the satisfaction of the
condition; or
o written notice from TTI to SCG, or from SCG to TTI, if the closing does
not occur on or before December 31, 1999 for any reason other than a
breach of the Agreement and Plan of Reorganization by the party giving
the notice.
Indemnification
Under the terms of the Agreement and Plan of Reorganization, neither SCG
nor the Surviving Company will assume, be subject to or otherwise be responsible
for any of the debts, liabilities or obligations of TTI existing or arising at
or prior to the Effective Time. Andrew B. Mazzone ("Mazzone"), as the sole
officer and director and principal shareholder of TTI, has agreed, subject to
certain limitations, to personally indemnify and hold harmless SCG and the
Surviving Company, and their respective officers, directors, shareholders,
employees, agents, representatives, successors and assigns (collectively, the
"Indemnified Persons").
The indemnification being provided by Mazzone covers any loss, cost, damage
or expense (including reasonable attorneys' fees) arising from or related to any
"Covered Claim." "Covered Claim" is defined to include any claim, litigation,
lawsuit or proceeding relating to or arising from (i) any misrepresentation or
breach of any
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covenant, warranty or agreement made by TTI or Mazzone in the Agreement and Plan
of Reorganization or any document delivered in connection with the merger, (ii)
the conduct of TTI's business at or prior to the Effective Time, or (iii) any
debt, liability or obligation of TTI existing or arising at or prior to the
Effective Time.
Mazzone, at or prior to the Effective Time, will provide SCG with
collateral (collectively, the "Collateral"), consisting of (a) either real
estate or marketable securities (other than securities issued by TTI) having a
fair market value of not less than $250,000.00 (after deducting the aggregate
outstanding balance of all indebtedness or other obligations the repayment or
performance of which is secured by a lien on or security interest in such real
estate or marketable securities) and otherwise acceptable to SCG in its sole
discretion, and (b) a pledge of all of the outstanding securities issued by TTI
and owned by Mazzone on the date the Agreement and Plan of Reorganization was
executed (the "Pledged TTI Securities"). The Pledged TTI Securities must consist
of at least 1,425,000 shares of TTI Common Stock. The Collateral will secure the
payment and performance of Mazzone's indemnification obligations with respect to
any Covered Claim for which TTI, SCG or the Surviving Company first receives
notice prior to the second anniversary of the Effective Time (hereinafter, a
"Timely Covered Claim").
Notwithstanding anything to the contrary contained herein, at any time
after the first anniversary of the Effective Time but prior to the second
anniversary of the Effective Time, Mazzone may submit a written request to the
Surviving Company for the release of a portion of the Collateral and, if at the
time such request is submitted the Surviving Company has previously completed a
Public Offering (as such term is defined hereinafter) and there is no Timely
Covered Claim which is then outstanding and unresolved, the Surviving Company
will be obligated to release one-half of the Pledged TTI Securities to Mazzone.
Such released shares will be subject, in all respects, to the terms and
provisions of the Lock-up Agreement required to be delivered by Mazzone pursuant
to the Agreement and Plan of Reorganization. If there is no Timely Covered Claim
outstanding and unresolved on the second anniversary of the Effective Time, all
Pledged TTI Securities then being held pursuant to the provisions of the
Agreement and Plan of Reoganization will be released to Mazzone.
For purposes hereof, the term "Public Offering" means the consummation of
an underwritten public offering of the common stock and/or the preferred stock
of the Surviving Company, registered under the Securities Act, which results in
receipt by the Surviving Company of proceeds of at least $10 million.
Furthermore, notwithstanding anything to the contrary contained herein or
in the Agreement and Plan of Reorganization, the aggregate amount for which
Mazzone is liable with respect to all Covered Claims is $2 million.
Ownership of TTI Following the Merger
As a result of the merger, the holders of SCG common stock, other than
those who exercise their statutory dissenters' rights will become stockholders
of TTI. Upon consummation of the merger, each outstanding share of SCG stock,
except for shares owned by SCG stockholders who perfect their statutory
dissenters' rights, will be converted into the right to receive 10,000 shares of
TTI common stock. TTI will cause the shares of TTI common stock to be issued in
the merger to be listed on the OTC Bulletin Board. Following the merger, TTI
also intends to apply for listing of all of the shares of TTI common stock
outstanding after the merger on the Nasdaq National Market. However, there can
be no assurance that such listing application will be approved. If Nasdaq
refuses to list TTI's common stock on the Nasdaq National Market, TTI will
attempt to have the TTI common stock listed on the Nasdaq Small Cap Market. If
Nasdaq refuses to list TTI's common stock on the Nasdaq Small Cap Market, TTI
will use its best efforts to have the TTI common stock continue to trade on the
OTC Bulletin Board or in the over-the-counter market on the so-called "pink
sheets".
TTI will issue approximately 59,500,000 shares of TTI common stock to SCG
stockholders in connection with the merger. TTI may also issue up to an
additional 5,000,000 shares of TTI common stock upon the exercise of options to
purchase SCG common stock to be assumed by TTI pursuant to the terms and
provisions of the Agreement and Plan of Reorganization. Based upon the number of
shares of TTI common stock issued and outstanding on the TTI record date and the
number of shares of TTI common stock anticipated to be issued in the merger, the
shares of TTI common stock issued to SCG stockholders in the merger will
constitute approximately 95.8% of the outstanding shares of common stock of TTI
after the merger (assuming no exercise of any
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outstanding options or warrants). As previously noted, holders of outstanding
SCG options at the Effective Time will receive options to purchase up to
5,000,000 shares of TTI common stock. Assuming the exercise of all of these TTI
stock options after the merger, SCG stockholders will own approximately 96.2% of
the fully diluted common stock of TTI.
Management of TTI Upon Consummation of the Merger
When the merger is completed, TTI will be managed by the current directors
and officers of SCG. See "Management of SCG." At the Effective Time, the sole
director and officer of TTI, Andrew B. Mazzone, will resign.
Regulatory Approvals
The merger must satisfy the requirements of all applicable federal and
state securities laws.
Affiliate Agreements
It is a condition to the closing obligation of TTI that it receive from
each affiliate of SCG an affiliate agreement stating, among other things, that
the affiliate acknowledges the resale restrictions imposed by Rule 145 under the
Securities Act on the shares of TTI common stock to be received by them in the
merger. See "The Plan of Merger and Related Transactions - Restrictions on
Resale of TTI Common Stock."
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INFORMATION CONCERNING TTI
All information concerning the business, properties, assets or employees of
TTI has been omitted from this joint proxy statement/prospectus since all such
business, properties, assets or employees of TTI will be contributed to Panama
Industries prior to the Effective Time (except for a small amount of cash and
certain net operating loss carry-forwards). Following consummation of the
merger, TTI will only conduct that business which was conducted by SCG prior to
the merger. All information as to the present management of TTI has also been
omitted from this joint proxy statement/prospectus since the sole director and
officer of TTI, Andrew B. Mazzone, will be resigning from his present positions
at the Effective Time. Following the Effective Time, the Surviving Company will
be managed by the current officers and directors of SCG (for whom information is
provided below). See "Management of SCG."
TTI is not a party to any legal proceedings which, if adversely decided,
would reasonably be expected to have a material adverse effect on the financial
condition of TTI.
PRINCIPAL STOCKHOLDERS OF TTI
The following table provides information regarding the beneficial ownership
of TTI's capital stock as of June 30, 1999 by:
o each person who is known by TTI to own beneficially 5% or more of any
class of TTI's capital stock;
o each of TTI's directors;
o TTI's chief executive officer and each of the other four most highly
compensated executive officers; and
o all of TTI's directors and executive officers as a group:
Shares Beneficially Owned
-------------------------------
Name and Address of Beneficial Owner No. Percent
- -------------------------------------- ------------------ ----------
Andrew B. Mazzone, 1,098,500(1) 42.4%
Sole Director and Officer
c/o Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
Thomas Klein 465,300(2) 18.0%
c/o Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
All Directors and Officers 1,098,500(1) 42.4%
as a Group (1 person)
- ------------
(1) Includes 12,000 shares which may be acquired upon the exercise of certain
common stock purchase warrants issued by TTI to Mr. Mazzone.
(2) Includes 1,400 shares which may be acquired upon the exercise of certain
common stock purchase warrants issued by TTI to Mr. Klein.
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DESCRIPTION OF TTI'S SECURITIES
TTI Common Stock
TTI has authorized capital stock consisting of 100,000,000 shares of common
stock, par value $.0001 per share. As of the date of this joint proxy
statement/prospectus, 62,078,118 shares of TTI common stock are issued and
outstanding, and 10,000,000 shares are reserved for issuance pursuant to TTI's
1999 Stock Option Plan. No options have been granted, as of the date hereof,
under the TTI 1999 Stock Option Plan.
The following is a description of the material terms of the TTI common
stock. The rights of the holders of shares of TTI's common stock are established
by TTI's Certificate of Incorporation, TTI's Bylaws and Delaware law. The
following statements do not purport to be complete or give full effect to
statutory or common law, and are subject in all respects to the applicable
provisions of TTI's Certificate of Incorporation, TTI's Bylaws and Delaware law.
The holders of TTI's common stock have no preemptive or subscription rights
in later offerings of TTI common stock and are entitled to share ratably (i) in
such dividends as may be declared by the Board of Directors out of funds legally
available for such purpose, and (ii) upon liquidation, in all assets of TTI
remaining after payment in full of all debts and obligations of TTI and any
preferences granted in the future to any preferred stock.
Holders of TTI common stock are entitled to one vote for each share held
and have no cumulative voting rights. Accordingly, the holders of more than 50%
of the issued and outstanding shares of TTI common stock entitled to vote for
the election of directors can elect all the directors of TTI if they choose to
do so. All shares of TTI common stock now outstanding, including the shares of
TTI common stock to be issued to the SCG stockholders in connection with the
merger, are (or will be upon issuance) fully paid and nonassessable. The Board
of Directors of TTI is authorized to issue additional shares of TTI common stock
within the limits authorized by TTI's Certificate of Incorporation without
shareholder action.
Holders of TTI common stock are entitled to receive such dividends as may
be declared from time to time by the TTI board of directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between TTI and its debtholders. TTI has never declared or paid cash dividends
on its capital stock, expects to retain future earnings, if any, for use in the
operation and expansion of its business, and does not anticipate paying any cash
dividends in the foreseeable future.
Shares Available For Future Sale
TTI currently has 2,578,118 shares of common stock outstanding (up to
2,771,518 shares if all the currently outstanding warrants are exercised). Of
these shares, 860,350 shares are freely tradeable without restriction or further
registration under the Securities Act, except for any shares purchased by an
"affiliate" of TTI (in general, a person who has a control relationship with
TTI) which will be subject to the limitations of Rule 144 adopted under the
Securities Act.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
TTI (or persons whose shares are aggregated with an affiliate of TTI), who has
owned restricted shares of TTI common stock beneficially for at least one year
is entitled to sell within any three-month period, a number of shares that does
not exceed the greater of 1% (a) of the total number of outstanding shares of
the same class (approximately 25,781 shares assuming only the existing shares of
TTI are outstanding), or (b) the average weekly trading volume of TTI's common
stock on all exchanges and/or reported through the automated quotation system of
a registered securities association during the four calendar weeks preceding the
date on which notice of the sale is filed with the SEC. Sales under Rule 144 are
also subject to certain manner of sale provisions, notice requirements and the
availability of public information about TTI. A person who has not been an
affiliate of TTI for at least the three months immediately preceding the sale
and who has beneficially owned his shares of TTI common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
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TTI has also reserved 10,000,000 shares of TTI common stock for issuance
pursuant to the exercise of options granted under the TTI 1999 Stock Option
Plan. No options have been granted, as of the date hereof, pursuant to the TTI
1999 Stock Option Plan. Pursuant to the terms and provisions of the Agreement
and Plan of Reorganization, at the Effective Time, TTI will assume all options
outstanding under the SCG 1999 Stock Option Plan. There are 5,000,000 options
(adjusted to reflect the conversion ratio in the merger) outstanding under the
SCG 1999 Stock Option Plan as of the date hereof.
Transfer Agent
The transfer agent for the TTI common stock is Manhattan Transfer Registrar
Co., 58 Dorchester Road, Lake Ronkonkoma, New York 11779.
TTI Warrants
As of the date of this joint proxy statement/prospectus, there were 193,400
TTI common stock purchase warrants outstanding, held of record by 11 persons
(the "Warrants"). Each Warrant entitles the registered holder thereof to
purchase one share of TTI common stock, at a price of $1.00 per share, subject
to adjustment in certain circumstances, on or before June 2, 2000.
Price Ranges of TTI Common Stock
TTI's common stock is quoted on the OTC Bulletin Board under the symbol
"THRM." The following table sets forth the range of the high and low bid
quotations of the TTI common stock on the OTC Bulletin Board for the periods
indicated:
High Low
---- ---
THREE MONTHS ENDED
December 31, 1996 ................................... $ 1.375 $ 1.375
March 31, 1997 ...................................... .500 .500
June 30, 1997 ....................................... .810 .438
September 30, 1997 .................................. .563 .563
December 31, 1997 ................................... .688 .688
March 31, 1998 ...................................... 1.000 1.000
June 30, 1998 ....................................... .500 .470
September 30, 1998 .................................. .250 .250
December 31, 1998 ................................... 2.875 2.750
March 31, 1999 ...................................... 5.125 4.125
June 30, 1999 ....................................... 10.250 9.125
The above quotations represent prices between dealers and do not include
retail markup, markdown or commission. They do not necessarily represent actual
transactions.
INFORMATION CONCERNING SCG
Business
General. SCG is headquartered in Millville, New Jersey. SCG is a New
Jersey corporation which was organized on October 7, 1996.
SCG has developed a proprietary group of products and services known as
"PCRoomLink." PCRoomLink is a system of personal computers with high-speed
Internet access that will be installed in hotel rooms across the country by SCG.
Targeted primarily at business travelers, in an effort to increase their
productivity and enhance their lifestyle and "workstyle" while on the road,
PCRoomLink allows hotel guests to either use an in-room PC or plug in their own
personal laptop to access the system's high-speed network. Once connected, users
are able to send and receive web-based e-mail, navigate the Internet for
business or personal use, access a variety of specialized services from national
and local businesses, and much more.
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SCG will install PCRoomLink in member hotels free of charge. Guests may
utilize the system's complimentary opening interface to access hotel services
such as room service and virtual concierge, and make purchases or access
specialized services from key national companies who have entered into strategic
partnering agreements with SCG. Guests may also choose to have a daily fee
($17.95 initially) conveniently added to their folio to access popular software
applications, send, receive and check web-based e-mail, and navigate the
Internet via the high-speed PCRoomLink network.
Background. With industry consolidation and globalization being two of the
dominant business themes of the late 1990's, business travel among multiple
sites and clients is becoming more prevalent than ever. While business travel is
obviously critical to the success of so many companies, technology has not kept
pace with the increasing demands of the time-pressed business traveler.
While upwards of two-thirds of all business travelers presently carry
laptop computers, the hotels in which these travelers stay are ill-equipped to
handle their technological needs. Studies show that only 7% of hotels across the
United States have some type of in-room Internet connectivity, mostly in the
form of a rudimentary phone jack. While these jacks offer basic Internet access,
they require the traveler to wrestle with a variety of cords, cables, connectors
and computer configurations and to endure the boredom and frustration associated
with having their data sluggishly navigate through standard PBX lines that were
never designed to perform such a function. Add to that the additional headache
of carrying around the laptop to start with and the risks associated with theft,
loss or damage en route, and it's clear that the current technological options
for the business traveler are less than ideal.
In fact, it is the tedious nature and inconvenience associated with laptops
that is in part driving the computer industry's development of the PDA (Personal
Digital Assistant). Industry insiders predict that as they become more advanced,
PDAs will replace laptops in performing basic mobile computing tasks.
Recognizing the present inconveniences faced by business travelers,
management of SCG believes that providing fully functional personal computers
with high-speed Internet access in hotel rooms is the logical solution. By
creating a national, and eventually international, network of PCRoomLink member
hotels, business travelers will enjoy a convenient solution to their desire to
remain connected and to have computing ability directly in their room or suite
either by plugging in their own laptop or by using the in-room PC. Since this
network bypasses the standard PBX system, sluggish data and slow-loading web
pages are no longer a problem. As PDAs become more accepted and sophisticated, a
full-fledged in-room PC will allow for quick data transfer through connecting
cradles.
PCRoomLink Products and Services. PCRoomLink is an innovative solution to
the problem of Internet access while traveling. PCRoomLink features include:
o Fully functional PCs in the hotel guest's room or suite;
o Popular software applications, including Microsoft Office(R); and
o High-speed Internet access.
Guests have the option of using the PCRoomLink PC to access the Internet,
or the option of plugging in their laptop computer.
Perhaps the most innovative aspect of PCRoomLink is the myriad of services
that are included in the system. Tastefully located in either a custom-made fold
down desk/cabinet unit that is designed to match the decor of the hotel room, or
conveniently placed on the room's desk or work station, the PCRoomLink monitor
is continually on, discreetly highlighting numerous services available to the
guest free of charge.
Included on this screen are on-line hotel services, such as room service
and concierge, as well as links to key national companies that have partnered
with SCG to provide enhanced services to PCRoomLink users. Unlike other services
that simply charge hotels to install jacks in their rooms, PCRoomLink is a
complete system that is provided to the hotel free of charge and is designed to
make business travel easier, more comfortable and more efficient.
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If a guest reserves the use of a PCRoomLink hotel room, he/she is billed
for the service daily whether it is used or not. If a guest does not reserve a
PCRoomLink room but is assigned to one by the hotel, he/she can simply click on
the PCRoomLink logo on their screen. Here, they will be informed of the daily
fee for the service that will be added to their folio if they log on. Once
logged on, guests can use PCRoomLink's Internet connection or e-mail to
conveniently perform a variety of beneficial tasks, such as:
o surfing the web to research a client;
o editing a contract to secure a deal before they leave town;
o e-mailing their family a special message;
o revising a presentation to take advantage of new information; and
o e-mailing their offices with key updates from the road.
Guests do not need to become PCRoomLink members to use the service.
However, by signing up for complimentary PCRoomLink membership, guests are able
to utilize the convenient PCRoomLink services, including sending and receiving
e-mail, from any PC with Internet access by logging on to www.pcroomlink.net. In
addition, members are also able to select other personalized services, such as
the addition of links to their most-used vendors or clients.
Business Strategy. SCG is creating a network of member hotels and end-users
by providing personal computers (PCs) and high-speed Internet access to the
Hospitality industry through its branded product, PCRoomLink. Beginning with its
pilot hotels, scheduled to launch in the third quarter of fiscal 1999, SCG will
furnish dedicated T1 circuit(s) to each of its member hotels. Through use of a
third party technology, SCG will provide high-speed Internet access within its
member hotels via existing copper wiring, allowing the simultaneous transmission
of data and voice traffic while avoiding traffic bottlenecks at the hotel PBX.
In its initial rollout, SCG is equipping rooms with wall or desk mounted
PCs loaded with full application functionality that are interconnected via
on-site servers. This configuration will allow end-users to access web-based
e-mail accounts and work with most document attachments. In addition, SCG will
provide an Ethernet jack in each room for laptop connectivity. It is SCG's
belief that many travelers, once presented with an alternative to bringing their
laptops with them, will elect to leave them at home knowing they will have
access to PCs and the Internet while on the road.
Hotels have been receptive to SCG's proposed business model because
PCRoomLink addresses the desire of the hospitality industry to provide
additional ways to increase revenue. SCG has structured the business model in
such a way as to make PCRoomLink risk free from the hotel's perspective, while
augmenting the hotel's existing revenue streams through commissions and
increased occupancy rates. In addition, the hospitality industry has been
responsive to SCG's products and services because of the additional
opportunities they afford hotels to attract business travelers, a coveted market
segment. One of these opportunities is a customized web interface, allowing for
an attractive and effective presentation of hotel specific information (i.e.
room service menus, convention information, etc.) and local points of interest
(i.e. sight seeing, local events, etc.). As part of its development plans, SCG
also intends to affiliate with a variety of advertisers, both on the national
and local levels, to present on-line games, retailing, business services, gift
products, etc. to travelers.
Toward accomplishing its objectives, SCG has aligned itself with selected
industry leaders. AT&T is SCG's preferred vendor in supplying SCG with the
dedicated T1 circuits which will connect each member hotel to the Internet
backbone. Compaq will supply SCG with the in-room PCs and the servers located
within each hotel for SCG's pilot launch, and will be among the hardware vendors
supplying SCG with PCs and servers in future installations. In addition, Compaq
will undertake the installation and maintenance of these components for the
pilot launch. SCG has signed an exclusive agreement with Proximity Systems Inc.
for the design and manufacture of its customized desks.
During its first year of operations, SCG intends to develop the required
strategies to deploy its services on a global basis, with the intent to extend
its presence globally during the second year of operations.
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Target Market. It is SCG's strategy to focus on three targeted groups: the
Hospitality industry, the end-user, and strategic alliance partners
(advertisers).
o Hospitality Industry: Toward acquiring member hotels, SCG has implemented
two sales channels initially consisting of a direct and agent-based sales
approach. An Internet based sales channel will be supported by the end of
1999.
o End-Users: SCG believes the "push-pull" effect created by effective
end-user oriented promotional campaigns will encourage hotels to
affiliate with PCRoomLink. Key to this effort is SCG's creation of its
frequent user program that provides usage-based rewards and incentives.
o Strategic Alliance Partners: The strategic relationships formed with key
national and regional advertisers will not only bring additional revenue
to SCG, but also enhance the e-commerce options available for PCRoomLink
users and members.
Promotional strategies to these groups include the design of specific
Internet advertising tools to list hot links of member hotels for reservations,
the development of a strategy for hosting and being hosted on various related
web sites and browsers, and the inclusion of advertising banners on SCG's web
site.
Pricing. Research reveals two important characteristics about the
Hospitality industry. The first is a resistance to risk and the second is a
limited capital market. SCG has designed a revenue share pricing program to
respond to these concerns, as outlined below:
o The hotel is offered a share of the revenue generated by PCRoomLink in
exchange for entering into a 72 month agreement with SCG.
o Under the hotel agreement, SCG determines the retail rate, the hotel's
percentage of revenue, and the limits on the amount of charge-backs to
the hotel.
o When the usage rate for the PCRoomLink rooms within a given property hits
a targeted amount, the hotel's share of the PCRoomLink revenue increases.
By raising the hotel's revenue share as the occupancy rate increases, SCG
hopes to encourage hotels to sell PCRoomLink equipped rooms.
Hotels regard this strategy as minimally risky because the hotels do not
pay SCG anything unless they "rent" the equipped rooms and are themselves
realizing revenue from the transaction.
Competition
Within the Hospitality industry, market demand for high-speed Internet
service continues to rapidly escalate. In the past six years, at least 30
companies have offered some type of in-room Internet access to the Hospitality
industry, typically through installing data jacks in guest rooms for laptop
connectivity. Some of these companies have been successful in installing trials
at selected high-profile hotel properties across the country, with such brand
name hotels as Holiday Inn, Hyatt, Marriott, Wingate beginning to consider
in-room, high-speed Internet connectivity more seriously.
SCG has categorized its competitors as (1) direct competitors, (2) indirect
competitors, and (3) international competitors.
o Direct competitors are defined as companies offering comparable
computer-based services to those of SCG. The following three direct
competitors have been identified:
o 4th Communications Network, Inc.: Based in San Jose CA, 4th
Communications Network, Inc. provides Internet and interactive
applications through the in-room PC or TV in hotel lobby areas. With
PC installations in less than five hotel properties to date, 4th
Communications Network's emphasis has been on installing in-room
jacks. The biggest advantage SCG has, when compared to 4th
Communications Network, is SCG's end-user focus and frequent user
program. SCG is designing these vehicles to build a loyal, growing
community of Internet- savvy travelers who will choose PCRoomLink
hotels over 4th Communications Network hotels because of convenience
and the program attributes of SCG's user program. 4th Communications
Network has focused its efforts strictly on its deployment partner,
the hotel.
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o Integrated Network Technologies (IntXX): Locally focused in
Minnesota, IntXX has installations in two hotels.
o Guest-Tek Services: This company was established three years ago as
a division of Guest-Tek Interactive Entertainment Ltd., a Canadian
services company which specializes in providing computer services to
hotels and their guests. Guest-Tek has no installations currently in
the United States, but does have a proven track record with a
well-known Vancouver luxury hotel, the Pan Pacific. Guest-Tek
recently made its American debut at the HITEC show in Atlanta,
Georgia. Guest-Tek currently offers services and equipment that
PCRoomLink does not provide, such as in-room digital cameras and
video conferencing capabilities.
o Indirect competitors are defined as companies that offer Internet access
without associated computer hardware, thereby requiring travelers to use
their own laptops to access the Internet. SCG predicts that travelers,
when presented with a viable alternative, will elect to leave their
laptop computers at home, knowing they will have access to the necessary
hardware and software while on the road. SCG believes this fact, along
with SCG's focus on end-user marketing and retention programs, will
provide an effective means to position it against these indirect
competitors. Toward accomplishing this, SCG expects to commit to a
multimillion dollar advertising campaign on the Internet, on TV and in
publications targeted to the business traveler. Although their
installations are not as complete as those proposed by SCG, indirect
competitors currently have installations with several major chains. These
competitors include:
o LodgeNet Entertainment Corporation, OnCommand Corporation, and
Suitesurfer Communications, Inc. All of these competitors utilize
coaxial cable to deliver their signal to in-room televisions.
Installation and space limitations are the major advantages, as is
the fact that many of these vendors have existing relationships with
hotels. From a competitive perspective, LodgeNet's bandwidth
allocation, customer acceptance and potential loss of revenue
(through non-access to in-room movies by travelers) are detriments
to this method and work to the advantage of SCG.
o ATCOM, Inc., Business Anywhere USA, OverVoice by CAIS Internet,
Wayport, Inc., Darwin Networks, and Viator Networks. Each of these
indirect competitors offers a service that is not as complete as
PCRoomLink, with most providing only in-room "plug and play" jacks.
o International competitors are those who are currently marketing their
services in locations other than in the United States and include Aford
(London, England), Connectotel (London, England), Logic Communications
Ltd. (Bermuda), NetGame Cable (Israel), and SuiteSurfer (Canada).
While recognizing the competitive landscape in which it operates, SCG
believes that its solution is differentiated from those of its competitors in
several key ways, as described below:
o The offering of a complete turnkey solution that includes the necessary
in-room hardware and software in addition to an Ethernet jack connection.
o The creation and maintenance of a growing Internet community of frequent
users who will be offered member benefits.
o The creation of a web interface that is customized and systematically
updated for each member hotel allowing for the communication of hotel and
area specific information.
o The creation of a multi-faceted multimillion dollar marketing program
that targets groups of Internet end-users in addition to member hotels.
To date, SCG's competitors focus their marketing efforts strictly on the
hospitality industry without consideration for creating demand among
travelers.
o The creation of the Local Area Network (LAN) based advantages that a
collection of networked PCs offers hotels and guests including:
o The ability of hotels to communicate hotel-related information to
their guests;
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o The ability of hotel guests to transact with hotel restaurants and
concierge services, among others, via local hotel web sites or
e-mail.
o The ability of guests to obtain site-specific information regarding
local points of interest and events, directions to the airport, and
transportation options; and
o The ability of guests to conduct area specific, as well as
nationally focused, e-commerce transactions for ordering food,
gifts, apparel, and other merchandise.
Employees
As of July 2, 1999, SCG had 63 employees. None of SCG's employees is
represented by a union. Management believes that SCG's relationship with its
employees is good.
Properties
SCG's executive offices are located at 21 East Main Street, Millville, New
Jersey. The lease is month-to-month at a rate of $1,850 per month. Additionally,
SCG leases space at 2nd and Vine Street, Millville, New Jersey, for its
operations and sales staff at a rate of $3,000 per month under a month-to-month
lease.
SCG has recently entered into a lease for 31,609 square feet of executive
office space at 1100 Coombs Road, Millville, New Jersey, effective July 7, 1999.
SCG's lease extends through December 31, 1999 at a monthly rental of $36,219.
The lease provides for occupancy on or about July 7, 1999. SCG intends to
consolidate its other two locations at this location prior to July 31, 1999.
Management of SCG believes that its current facilities are adequate to meet
its needs through the next six months.
Legal Proceedings
SCG is not a party to any legal proceedings which, if adversely decided,
would reasonably be expected to have a material adverse effect on the financial
condition of SCG.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF SCG
The following discussion of the financial condition and results of
operations of SCG should be read in conjunction with the Financial Statements
and the Notes thereto included elsewhere in this joint proxy
statement/prospectus. This joint proxy statement/prospectus contains, in
addition to historical information, forward-looking statements that involve
risks and uncertainties. SCG's actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in this joint proxy statement/prospectus. See "Risk
Factors."
Overview
SCG is a development stage enterprise and accordingly has had no revenues
through March 31, 1999. Since inception, SCG has suffered losses and net cash
outflows from operations.
SCG's product, PCRoomLink, is a system of personal computers with
high-speed Internet access that SCG is planning to install in hotel rooms in the
United States and abroad. Targeted primarily at business travelers in an effort
to increase their productivity and enhance their lifestyle and "workstyle" while
on the road, PCRoomLink allows hotel guests to either use an in-room PC or plug
in their own personal laptop to access the system's high-speed network. Once
connected, users are able to send and receive web-based e-mail, navigate the
Internet for business or personal use, access a variety of specialized services
from national and premier local businesses, and much more.
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SCG will install PCRoomLink in member hotels at no charge to the hotel.
Guests in PCRoomLink equipped rooms may utilize the system's complimentary
opening interface to access hotel services, such as room service and virtual
concierge, and make purchases, or access specialized services, from key national
companies. Guests in PCRoomLink equipped rooms, for a daily fee ($17.95
initially), will have the ability to access popular software applications, send,
receive and check web-based e-mail, and navigate the Internet via the high-speed
PCRoomLink network.
Statement of Operations
SCG had an accumulated deficit of $627,302 through March 31, 1999. Of this
deficit, $553,140 relates to the interim period for the six months ended March
31, 1999. During this period SCG expended significant funds to continue product
development, which resulted in an increase of $487,024 in general and
administrative expenses. The increase in such expenses during this period was
largely attributable to salaries, advertising, and software development expenses
of approximately $202,000, $112,000 and $59,000, respectively.
SCG presently has 63 employees and expects to increase that number to 157
by March of 2000. The increase in employees will be primarily in SCG's 24 hour a
day, 7 days a week, customer help center and in its operations, engineering and
design staff.
Liquidity and Capital Resources
SCG's future capital requirements will relate principally to the
installations of PCRoomLink hardware and related software at member hotels.
SCG's business plan provides for the installation of 380 hotels through March of
2000. SCG will require approximately $167,200,000 in capital to meet its
estimated installations. SCG believes that a portion of the capital will come
from vendor financing and bank financing, with the balance coming from future
equity offerings.
SCG completed a $12,000,000 private placement in July 1999. Based on
currently proposed plans and assumptions, it is anticipated that SCG will have
sufficient capital to satisfy its contemplated cash requirements through October
31, 1999. SCG will then require substantial additional funding. Therefore, SCG's
continuing viability is dependent upon its ability to continue to raise
additional funds.
Potential sources of funding which have been identified by management
include vendor lines of credit, vendor leasing programs, bank financing and
additional sales of securities by SCG. SCG has no current arrangements with
respect to sources of additional financing and, when needed by SCG, such
additional financing may not be available on commercially reasonable terms, or
at all. The inability to obtain additional financing, when needed, would have a
material negative effect on SCG, including possibly requiring it to curtail or
cease operations.
Certain Factors that may Affect Future Results
SCG's future results may be subject to substantial risks and uncertainties.
SCG's future revenue streams will come from daily access fees and local and
strategic advertising. SCG's profitability will be dependent upon the number of
advertisers and the percentage occupancy and utilization of its PCRoomLink
installed rooms.
SCG's quarterly and annual operating results are impacted by a variety of
factors that could materially adversely affect revenues and profitability,
including the percentage occupancy and utilization of its PCRoomLink installed
rooms, or anticipated changes in economic conditions. Because SCG's operating
expenses are relatively fixed, an unanticipated shortfall in revenue in a
quarter may have an adverse impact on SCG's results of operations for that
quarter. As a result of the foregoing and other factors, SCG may experience
material fluctuations in future operating results on a quarterly or annual basis
which could materially and adversely affect its business, financial condition,
operating results and stock price.
39
<PAGE>
Year 2000 Readiness Disclosure
Background. In the past, many computer software programs were written using
two digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the year
1900 rather than the year 2000. This is generally referred to as the Year 2000
issue. If this situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.
Risks Associated with the Year 2000 Problem. SCG utilizes computer systems
in many aspects of its business. Year 2000 problems in SCG's computer systems
could disrupt operations and have a material adverse impact upon SCG's operating
results.
SCG is also exposed to the risk that one or more of its vendors or service
providers could experience Year 2000 problems that adversely impact the ability
of the vendor or service provider to provide goods and services. This is not
considered a significant risk with respect to the suppliers of goods, due to the
availability of alternative suppliers. However, disruption of other services,
such as telephone service, could, depending upon the extent of the disruption,
have a material adverse impact on SCG's operations. To date, SCG is not aware of
any vendor or service provider Year 2000 issue that would have a material
adverse impact on SCG's operations. However, SCG has no means of ensuring that
its vendors or service providers will be Year 2000 compliant. The inability of
vendors or service providers to complete their Year 2000 resolution process in a
timely fashion could have a material adverse impact on SCG. The effect of
non-compliance by vendors or service providers is not determinable at this time.
Widespread disruptions in the national or international economy resulting
from Year 2000 issues, or in specific industries, such as commercial or
investment banks, could also have a material adverse impact on SCG. The
likelihood and effect of these disruptions is not determinable at this time.
Approach. SCG is in the process of coordinating its response to the Year
2000 problem, and of implementing Year 2000 compliance procedures at SCG's
offices and properties consisting of the following:
o compiling information as to the information technology, referred to as
IT, and not-IT systems that may be sensitive to the Year 2000 problem;
o identifying and prioritizing critical systems;
o inquiring of third parties with whom SCG does significant business, i.e.,
vendors, service providers and customers, as to the state of their Year
2000 readiness;
o analyzing critical systems to determine which systems are not Year 2000
compliant and evaluating the costs to repair or replace those systems;
and
o repairing or replacing noncompliant systems and testing those systems for
which representation as to Year 2000 compliance has not been received or
for which representation was received but has not been confirmed.
Status. Based upon the analysis conducted to date, SCG believes its major
critical systems are currently compliant or will be compliant by December 31,
1999.
Costs. Based on internal estimates, as to which it has received no
independent verification, the total cost to SCG of making its systems Year 2000
compliant is estimated to be insignificant.
40
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MANAGEMENT OF SCG
Executive Officers and Directors
The current executive officers and directors of SCG are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
James M. Rossi ............... 47 Chairman of the Board and Chief Executive Officer; Director
Alisa A. Rossi ............... 33 Chief Administrative Officer and Secretary; Director
Monty S. August .............. 55 Director
Domenic J. Romano ............ 59 Director
Raymond T. Brown ............. 51 President and Chief Operating Officer; Director
Raymond J. Romano ............ 48 Vice President, Finance and Chief Financial Officer
Wallace Rogers, Jr. .......... 33 Chief Technical Officer
Daniel P. Finley ............. 34 Vice President, Business Development
Barbara O'Gara ............... 45 Vice President, Sales and Hotel Alliances
Joseph Sandora ............... 39 Vice President, Strategic Partnerships
Susan Schneider .............. 56 Vice President, Marketing
Charles G. Parker ............ 34 Vice President, Local Alliances
Yuriy R. Porytko ............. 30 Vice President, Operations
</TABLE>
Biographical Information
James M. Rossi is a co-founder of SCG and has been a director and Chairman
and Chief Executive Officer of SCG since October, 1996. Mr. Rossi has also
served as a director and Chairman and Chief Executive Officer of JMR Marketing
Corporation, a telecommunication consulting firm, since 1971, as a director and
Chairman and Chief Executive Officer of Cam-Comm, Inc., a data fiber optics
reseller, since 1997, and as President and a director of Camanco, Inc., a
consulting firm, since 1997.
Alisa A. Rossi is a co-founder of SCG and has served as a director and
Secretary and Chief Administrative Officer of SCG since October, 1996. In
addition. Ms. Rossi has served as Vice President and a director of JMR Marketing
Corporation since 1989, as Vice President and a director of Cam-Comm, Inc. since
1997, and as a Vice President and director of Camanco, Inc., since 1997.
Monty S. August has been a member of the Board of Directors of SCG since
October, 1998. Since 1991, he has served as Chief Executive Officer and Chairman
of the Board of UK Paper, PLC, the largest printing and writing paper company in
the United Kingdom.
Domenic J. Romano has been a member of the Board of Directors of SCG since
November, 1998 and has served as the managing partner of Romano, Hearing &
Testa, a Certified Public Accounting firm located in Vineland, New Jersey, since
1967.
Raymond T. Brown has been President and Chief Operating Office of SCG since
May, 1999 and a member of its Board of Directors since November, 1998. Prior to
joining SCG, Mr. Brown served in a number of senior management roles with
PSE&G's nuclear power generation facility in Salem, New Jersey from March, 1994
to January, 1998, including positions as Outage Shift Manager, member of the
Management Oversight Group and Manager of Strategic Planning.
Raymond J. Romano has been Vice President of Finance and Chief Financial
Officer of SCG since May, 1999. Prior to joining SCG, Mr. Romano served from
1990 to 1999 as Vice President of Operations of Lodging Concepts, Inc., a hotel
amenity distributor. Mr. Romano currently serves as Chairman of the Board of
Transpirator Technologies, Inc., a medical device company.
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<PAGE>
Wallace Rogers, Jr. has been Chief Technical Officer of SCG since January,
1999. Prior to joining SCG, Mr. Rogers served as President of Xpress Electronic
Services, Inc., a Vineland, New Jersey-based networking and integration
company, from 1991 to 1998. Mr. Rogers has also served as a member of the Board
of Directors of three additional technology-based companies, including Xpress
Electronic Services, Inc. (from 1998 to present), Express Web Services, Inc.
(from 1997 to present), and Delaware Valley Net Connect, an Internet service
provider (from 1996 to present).
Daniel P. Finley has served as Vice President, Business Development for SCG
since April, 1999. A 1993 graduate of the Wharton School of Business' Executive
MBA program, Mr. Finley's career includes a variety of senior management roles
within General Electric, including that of Vice President of GE LogistiCom, a
satellite and wireless data subsidiary of GE Capital from June, 1996 to March,
1998. Most recently, he served as CFO and VP/Business Development for American
Digital Networks and the Telephone Company of Central Florida from March, 1998
to March, 1999.
Barbara O'Gara joined SCG in June, 1999 as Vice President of Sales and
Hotel Alliances. Prior to joining SCG, Ms. O'Gara spent a year operating her own
company, "Amenity Works," which provides brand name amenities to the high-end
luxury hotel and resort market. From 1996 to 1998, Ms. O'Gara served as a
Marketing Consultant for Bath & Body Works. From 1996 to 1998, she served as
Vice President of Hotel Marketing and Sales for Neutrogena Corporation.
Joseph Sandora has been Vice President, Strategic Partnerships for SCG
since March, 1999. Prior to assuming his current role, Mr. Sandora served as
Vice President of Sales and Corporate Sales Manager of Dupli Envelope and
Graphics of Syracuse, New York from July, 1997 to March, 1999. Prior to that, he
worked as Sales Manager, Fine Papers, for ResourceNet International, a division
of International Paper Corporation, from April, 1996 to May, 1997. From July,
1982 to April, 1996, Mr. Sandora served as a Sales Representative for Alling and
Cory Paper Company.
Susan Schneider joined SCG in April, 1999 as Vice President, Marketing.
Previously, she served in the same capacity for Harrah's Atlanic City, the
flagship property for the nation's largest casino entertainment company, from
1993 to 1999.
Charles G. Parker has been Vice President, Local Alliances for SCG since
June, 1999. Prior to joining SCG, Parker served as Manager, Marketing & Sales
for Allegheny Plastics, from October, 1994 to May, 1999.
Yuriy R. Porytko has served as Vice President of Operations for SCG since
June, 1999. From October, 1998 to June, 1999, Mr. Porytko worked in Business
Development for Network Visions, Inc., a communications transport integration
company. Mr. Porytko was Regional Director with Metromedia International
Telecommunications, Inc. from November, 1997 to October 1998. From January, 1996
to November, 1997, Mr. Porytko served as President and Chief Executive Officer
of Suburban Connect, a paging and wireless messaging company. From May, 1993 to
January, 1996, Mr. Porytko was first General Manager, then Vice President, of
Beyond Beepers Delaware Valley, Inc., a paging and telecommunications reseller.
James M. Rossi and Alisa A. Rossi are married. There are no other family
relationships among the directors and executive officers of SCG.
Members of the Board of Directors of SCG have one year terms. Officers are
appointed by the Board of Directors and serve at the pleasure of the Board.
42
<PAGE>
Executive Compensation
The following table sets forth certain information with respect to
compensation paid by SCG for the year ended September 30, 1998 and for the
period from October 7, 1996 (date of inception) to September 30, 1997 to SCG's
chief executive officer, James M. Rossi:
SUMMARY COMPENSATION TABLE
Annual
Compensation
------------------ All Other
Name and Principal Position Year Salary Bonus Compensation(1)
- ----------------------------- ------ -------- ------- ----------------
James M. Rossi, CEO ......... 1998 -0- -0- -0-
1997 -0- -0- -0-
- ------------
(1) In accordance with the rules of the SEC, other compensation in the form of
perquisites and other personal benefits has been omitted in those instances
where the aggregate amount of such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total of annual
salary and bonuses for the officer for such year.
No stock options have been granted to Mr. Rossi by SCG.
Certain Transactions
James M. and Alisa A. Rossi co-founded SCG in October, 1996. At the time
of incorporation, they were issued 1,000 shares of SCG common stock for an
initial capital contribution of $250. In October, 1998, James M. and Alisa A.
Rossi were issued an additional 3,284.4 shares of SCG common stock for no
additional consideration.
In December, 1998, JMR Marketing Corporation was issued 250 shares of SCG
common stock to satisfy a $98,349 obligation owed by SCG to JMR Marketing
Corporation. James M. and Alisa A. Rossi own 60% of outstanding capital stock of
JMR Marketing Corporation.
SCG COMMON STOCK
General
SCG has authorized capital stock consisting of 10,000 shares of common
stock, no par value per share. As of the date of this joint proxy
statement/prospectus, 5,950 shares of TTI common stock are issued and
outstanding.
The following is a description of the material terms of the SCG common
stock. The rights of the holders of shares of SCG's common stock are established
by SCG's Certificate of Incorporation, SCG's Bylaws and New Jersey law. The
following statements do not purport to be complete or give full effect to
statutory or common law, and are subject in all respects to the applicable
provisions of the SCG Certificate of Incorporation, SCG Bylaws and New Jersey
law.
The holders of SCG's common stock have no preemptive or subscription rights
in later offerings of SCG common stock and are entitled to share ratably (i) in
such dividends as may be declared by the Board of Directors out of funds legally
available for such purpose, and (ii) upon liquidation, in all assets of SCG
remaining after payment in full of all debts and obligations of SCG and any
preferences granted in the future to any preferred stock. SCG has not paid,
prior to the date hereof, any dividends on the SCG common stock.
Holders of SCG common stock are entitled to one vote for each share held
and have no cumulative voting rights. Accordingly, the holders of more than 50%
of the issued and outstanding shares of SCG common stock entitled to vote for
the election of directors can elect all the directors if they choose to do so.
All shares of SCG common stock now outstanding, are fully paid and
nonassessable. The Board of Directors of SCG is authorized to issue additional
shares of SCG common stock within the limits authorized by SCG's Certificate of
Incorporation without shareholder action.
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<PAGE>
Shares Available For Future Sale
SCG currently has 5,950 shares of common stock outstanding (up to 6,450
shares if all the stock options currently outstanding under the SCG 1999 Stock
Option Plan are exercised). Of these shares, 1,000 shares owned by James M.
Rossi and Alisa A. Rossi are freely tradeable without restriction or further
registration under the Securities Act, subject to compliance with the
limitations imposed by Rule 144 adopted under the Securities Act (since both
James M. Rossi and Alisa A. Rossi are affiliates of SCG).
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
SCG (or persons whose shares are aggregated with an affiliate of SCG), who has
owned restricted shares of common stock beneficially for at least one year is
entitled to sell within any three-month period, a number of shares that does not
exceed the greater of 1% of the total number of outstanding shares of the same
class (approximately 59.5 shares, assuming only the existing shares of SCG are
outstanding) or the average weekly trading volume of SCG's common stock on all
exchanges and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the date on
which notice of the sale is filed with the SEC. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of public information about SCG. A person who has not been an
affiliate of SCG for at least the three months immediately preceding the sale
and who has beneficially owned the shares of SCG common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
PRINCIPAL STOCKHOLDERS OF SCG
The following table provides information regarding the beneficial ownership
of SCG's capital stock as of July 2, 1999 by:
o each person who is known by SCG to own beneficially 5% or more of any
class of SCG's capital stock;
o each of SCG's directors;
o SCG's chief executive officer; and
o all of SCG's directors and executive officers as a group:
Shares Beneficially Owned
-------------------------
Name and Address of Beneficial Owner(1) No. Percent
- --------------------------------------- ----------- ----------
James M. Rossi(2) ............................. 2,755 46.3%
Alisa A. Rossi(2) ............................. 2,755 46.3%
Monty S. August(3) ............................ 1,400 23.5%
Raymond T. Brown .............................. 55.3 0.9%
Domenic S. Romano ............................. 30 0.5%
Raymond J. Romano(4) .......................... 17.5 0.3%
Wallace Rogers, Jr. ........................... 37.5 0.6%
Susan Schneider(5) ............................ 10 0.2%
All directors and executive officers as a group
(11 persons)(2)(4)(5) ....................... 3,955.3 66.5%
------- ----
- ------------
(1) The address for all beneficial owners is c/o Solar Communications Group,
Inc., 21 East Main Street, Suite 205, Millville, New Jersey 08332.
(2) Includes (a) 2,100 shares of SCG common stock which James M. Rossi and Alisa
A. Rossi own as joint tenants, (b) 100 shares of SCG common stock owned by
their minor children, (c) 205 shares of SCG common stock owned by Camanco,
Inc., all of the outstanding stock of which is owned by James M. and Alisa
A. Rossi, (d) 100 shares of SCG common stock owned by Cam-Comm, Inc., 38% of
the outstanding stock of which is owned by James M. and Alisa A. Rossi, and
(e) 250 shares of SCG common stock owned by JMR Marketing Corporation, the
60% of the outstanding stock of which is owned by James M. and Alisa A.
Rossi.
(3) Includes (a) 100 shares of SCG common stock owned by Cam-Comm, Inc., 19% of
the outstanding stock of which is owned by Patrixbourne, Inc. (all of the
outstanding stock of which is owned by Mr. August), and (b) 250 shares of
SCG common stock owned by JMR Marketing Corporation, 30% of the outstanding
stock of which is owned by Patrixbourne, Inc.
(4) Includes (a) 15 shares of SCG common stock owned by Mr. Romano's wife as to
which he disclaims beneficial ownership, and (b) 2.5 shares of SCG common
stock owned by SR&L Partners, of which Mr. Romano owns one-third of the
outstanding partnership interests.
(5) Includes 10 shares of SCG common stock owned by Ms. Schneider's husband as
to which she disclaims beneficial ownership.
44
<PAGE>
COMPARISON OF STOCKHOLDERS RIGHTS
The rights of TTI stockholders are governed by TTI's charter, bylaws and
the DGCL. The rights of SCG stockholders are governed by SCG's charter, bylaws
and the BCA. After the date the merger is completed, the rights of SCG
stockholders who become TTI stockholders will be governed by TTI's charter,
bylaws and the DGCL.
The following is a summary of the material differences between the rights
of TTI stockholders and the rights of SCG stockholders. This summary is not
intended to be complete and is qualified in its entirety by reference to
applicable provisions of the DGCL, the BCA, TTI's charter, and bylaws, and SCG's
charter and bylaws.
Comparison of DGCL and NJBCA
Appraisal rights in merger or consolidation. Under New Jersey law, unless
the certificate of incorporation otherwise provides, a dissenting shareholder of
a New Jersey corporation which is a party to a consolidation, or which is not
the surviving corporation in a merger, or which is the surviving corporation in
a merger requiring shareholder approval, has appraisal rights with respect to
any shares other than (1) shares listed on a national securities exchange or
held of record by not less than 1,000 holders and (2) in exchange for which,
pursuant to the plan of merger of consolidation, the shareholder will receive
cash and/or securities which will be listed on a national securities exchange or
held of record by not less than 1,000 holders. The SCG Certificate of
Incorporation does not modify the statutory appraisal rights.
Under Delaware law, shareholders of a Delaware corporation have appraisal
rights in a merger or consolidation, except for certain mergers and
consolidations not requiring any vote by shareholders of the corporation, with
respect to any shares other than shares listed on a national securities exchange
or held of record by more than 2,000 holders. However, even with respect to
shares so listed or held, appraisal rights exist if, pursuant to the plan of
merger, the shareholder is to receive in exchange for his shares anything other
than stock of the surviving corporation listed on a national securities exchange
or held of record by more than 2,000 holders or cash in lieu of fractional
shares.
Appraisal rights on disposition of assets. Under New Jersey law, a
dissenting shareholder in a New Jersey corporation has appraisal rights in the
case of any sale, lease, exchange or other disposition of substantially all of
the assets of the corporation not in the usual or regular course of business as
conducted by the corporation, except with respect to (1) shares listed on a
national securities exchange or held of record by not less than 1,000 holders,
or (2) a transaction pursuant to a plan of dissolution of the corporation which
provides for the distribution of substantially all of its net assets to
shareholders according to their interests within one year, where such
transaction is wholly for cash and/or securities which will be listed on a
national securities exchange or held of record by not less than 1,000 holders,
or (3) a sale pursuant to court order.
The DGCL does not provide for appraisal rights in connection with a
disposition of assets.
Vote required to authorize certain organic changes. In general, under New
Jersey law, in the case of corporations organized after 1969 (such as SCG), a
disposition of all or substantially all of the assets other than in the regular
course of business, a charter amendment or a merger or consolidation must be
authorized by the affirmative vote of a majority of the votes cast, and by such
vote of each class entitled to vote as a class, with respect to any such matter.
In general, under Delaware law, a sale, lease or exchange of all or
substantially all of the assets, a charter amendment or merger or consolidation
must be authorized by the affirmative vote of a majority of the outstanding
shares entitled to vote thereon.
Class voting on merger or consolidation. Under New Jersey law, any class or
series of shares shall be entitled to vote as a class if the plan of merger or
consolidation contains any provision which, if contained in a proposed charter
amendment, would entitle the class or series to vote as a class on the
amendment.
The DGCL does not provide for a class vote on a plan of merger or
consolidation.
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<PAGE>
Source of dividends. Under New Jersey law, dividends may not be paid if,
after giving effect to the dividend, either (1) the corporation would be unable
to pay its debts as they become due in the ordinary course of its business, or
(2) the corporation's total assets would be less than its total liabilities.
Under Delaware law, dividends may be paid out of surplus or, in the absence
thereof, out of the net profits of the current and/or next preceding fiscal
year, except where capital represented by stock enjoying a preference upon the
distribution of assets thereby would be impaired.
Power to adopt, amend or repeal by-laws. Under New Jersey law, the power to
adopt, amend and repeal by-laws of a corporation is vested in the Board of
Directors unless such power is reserved to the stockholders in the certificate
of incorporation, but by-laws made by the Board of Directors may be amended
and/or repealed and new by-laws adopted by the stockholders and the stockholders
may prescribe in such by-laws that the Board may not amend or repeal by-laws
approved by stockholders. The SCG By-laws may be amended by the Board of
Directors or by the stockholders.
Under Delaware law, the power to adopt, amend or repeal by-laws of a
corporation is vested in the corporation's stockholders, although the
corporation's certificate of incorporation may also vest such power in the
corporation's board of directors. The TTI Certificate of Incorporation provides
that the TTI By-Laws may be adopted, amended or repealed by the TTI Board.
Action by stockholders by written consent in lieu of a meeting. Under New
Jersey law, except as otherwise provided in a certificate of incorporation, any
action (other than the election of directors) required or permitted to be taken
at a meeting of the corporation's stockholders, may be taken without a meeting
upon the written consent of stockholders who would have been entitled to cast
the minimum number of votes which would have been necessary to take such action
at a meeting at which all shares entitled to vote thereon were present and voted
(except that the election of directors requires the unanimous written consent of
all stockholders). The corporation must give all stockholders advance notice of
such proposed action if the proposed action involves a merger, consolidation or
sale of substantially all of the assets of a corporation.
Under Delaware law, except as otherwise provided in a corporation
certificate of incorporation, any action required or permitted to be taken at
the meeting of a corporation's stockholders may be taken without a meeting if a
written consent, setting forth the action so taken, is signed by the holders of
outstanding shares having not less than the minimum number of votes that would
have been necessary to take such action at a meeting at which all stockholders
entitled to vote thereon were present and voted.
Removal of directors. Under New Jersey law, one or more or all directors of
a corporation may be removed for cause or, unless otherwise provided in the
certificate of incorporation, without cause by stockholders by the affirmative
vote of the majority of the votes cast by the holders of shares entitled to vote
thereon.
The provisions of the DGCL are similar to those of the NJBCA, except with
respect to corporations with classified boards of directors. If the board of
directors is classified, a director may be removed only for cause unless the
corporation's certificate of incorporation provides otherwise.
Special meetings of stockholders. Under New Jersey law, holders of not less
than 10% of a corporation's voting stock may apply to the New Jersey Superior
Court for an order directing a special meeting of stockholders to be held. The
SCG By-Laws provide that a special meeting of stockholders for any purpose or
purposes may be called by the Board of Directors, Chairman of the Board or
President, and shall be called by the Chairman of the Board, President or
Secretary at the request in writing by stockholders owning not less than a
majority of the entire capital stock of the company issued and outstanding and
entitled to vote.
Under Delaware law, special meetings of stockholders may be called by the
Board of Directors or by such person or persons as may be authorized by a
company's certificate of incorporation or the by-laws. The provisions in the TTI
By-Laws relating to special meetings of the stockholders allow special meetings
to be called at anytime by the President, or the Board of Directors, or
stockholders entitled to cast at least one-fifth of the votes which all
stockholders are entitled to cast at the particular meeting being called.
De facto merger. Under New Jersey law, stockholders have the same voting
and dissent and appraisal rights as if they were stockholders of a surviving
corporation in a merger, if (1) voting shares outstanding or issuable
46
<PAGE>
after the transaction exceed by more than 40% voting shares outstanding before
the transaction or (2) shares entitled to participate without limitation in
distributions outstanding or issuable after the transaction exceed by more than
40% such shares outstanding before the transaction.
The DGCL does not contain a comparable provision.
Guaranty. Under New Jersey law, a corporation may give a guaranty not in
furtherance of its direct or indirect business interests only when authorized at
a meeting of stockholders by the affirmative vote of all of the votes cast by
the holders of each class and series of shares entitled to vote thereon. If
authorized by such a vote, the guaranty may be secured by the corporation's
property.
Under Delaware law, a Delaware corporation may guaranty obligations of a
third party, whether or not in furtherance of a specific corporate purpose,
without stockholder approval.
Shareholders' derivative actions. New Jersey law contains certain
provisions which have the effect of discouraging derivative actions.
Specifically, New Jersey law authorizes the court to award reasonable expenses
and attorneys' fees to the successful defendants in a derivative action upon a
finding that the action was brought without cause. In addition, the corporation
may require the plaintiff or plaintiffs to give security for the reasonable
expenses, including attorneys' fees, that may be incurred by the corporation or
by other named defendants for which the corporation may become legally liable if
the plaintiff of plaintiffs are holders of less than 5% of the outstanding
shares of any class or series of such corporation (or voting trust certificates
therefor) unless the shares or trust certificates so held have a market value in
excess of $25,000.
The DGCL does not contain comparable provisions.
Proxies. Under New Jersey law, a proxy is valid for no longer than eleven
months unless a longer period is specified. In addition, a proxy is revocable at
will unless coupled with an interest. The death or incapacity of a stockholder
does not revoke a proxy and it will continue in force until revocation by the
stockholder's personal representative.
Under Delaware law, a proxy is not valid beyond three years from its date
unless it so provides for a longer period. In addition, for a proxy to be
irrevocable it must so state and be coupled with an interest in the stock itself
or in the corporation generally. In the case of a revocable proxy, death or
incapacity will revoke the proxy.
Inspection of books and records. Under New Jersey law, a stockholder of
record for at least six months immediately preceding his demand, or any holder
(or a person authorized on behalf of such holder) of at least 5% of the
outstanding shares of any class or series, shall have the right to examine for
any proper purpose the corporation's books and records.
Under Delaware law, any stockholder upon written demand under oath stating
the purpose thereof has the right during usual business hours to inspect for any
proper purpose the stock ledger, list of shareholders and other books and
records of the corporation, and to make copies or abstracts therefrom.
Anti-takeover statute. New Jersey has adopted a type of anti-takeover
statute known as a "business combination" statute. Subject to numerous
qualifications and exceptions, the statute prohibits an interested stockholder
of a corporation from effecting a business combination with the corporation for
a period of five years unless the corporation's board approved the transaction
prior to the stockholder becoming an interested stockholder. An "interested
stockholder" is defined to include any beneficial owner of more than 10% of the
voting power of the outstanding voting stock of the corporation and any
affiliate of the corporation who within the prior five year period has at any
time owned10% or more of the voting power. The term "business combination" is
defined broadly to include, inter alia, merger of the corporation with the
interested stockholder or any corporation which after such merger would be an
affiliate of the interested stockholder, and any transfer of 10% or more of the
corporation's assets to the interested stockholder or affiliate thereof. The
effect of the statue is to protect non-tendering post-acquisition minority
stockholders from mergers in which they will be "frozen out" after the merger,
by prohibiting transactions in which an acquirer could favor itself at the
expense of minority stockholders. The New Jersey statute, however, does not
apply to companies which do not have either their principal executive offices or
significant business operations located in New Jersey.
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<PAGE>
Delaware has adopted a business combination type of anti-takeover statute
which operates in a manner similar to the New Jersey statute. Although there are
numerous differences between the Delaware statute and the New Jersey statute,
the most significant include the following: (i) under the Delaware statute, the
moratorium imposed on a business combination with an interested stockholder is
three years, as opposed to five under the New Jersey statute; (ii) the Delaware
statute defines "interested stockholder" using a 15% ownership threshold rather
than the 10% threshold under the New Jersey statute; (iii) the Delaware statute
permits an interested stockholder to avoid the moratorium by acquiring 85% of
the corporation's voting power in the same transaction in which that stockholder
becomes an interested stockholder (the New Jersey statute does not contain a
comparable provision); and (iv) the Delaware statute applies to Delaware
corporations regardless of the locations of their offices and business
operations (the law would therefore apply to TTI).
Comparison of Certificates of Incorporation and By-Laws of TTI and SCG
Authorized shares of capital stock. The SCG Certificate of Incorporation,
as amended, authorizes the issuance of 10,000 shares of SCG common stock, 5,950
shares of which were issued and outstanding as of the SCG Record Date.
The TTI Certificate of Incorporation, as amended, authorizes the issuance
of 100,000,000 shares of TTI Common Stock, 2,578,118 shares of which were issued
and outstanding as of the TTI Record Date.
Meetings. Pursuant to the SCG By-Laws, annual meetings of SCG stockholders
shall be held on the second Tuesday in October if not a legal holiday, or at
such other date and at such other time as the SCG Board may determine. At each
annual meeting, the SCG stockholders entitled to vote shall elect a Board of
Directors, and they may transact such other corporate business as may properly
be brought before the meeting. Special meetings of SCG stockholders may be
called for any purpose by the SCG Board, the Chairman of the Board or the
President. Written notice of any meeting of SCG stockholders shall be mailed not
less than ten nor more than 60 days before such meeting to each SCG stockholder
entitled to vote thereat.
Special meetings of the SCG Board may be called by the President on two
days' notice to each director, or such shorter period of time before the meeting
as will be sufficient for the convenient assembly of the directors so notified.
Special meeting shall be called by any director in like manner and notice on the
written request of two or more directors.
Pursuant to the TTI By-Laws, annual meetings of TTI stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting shall be held at such date as the TTI Board shall determine and
as set forth in the notice of the meeting. At each annual meeting, the TTI
stockholders entitled to vote shall elect a Board of Directors and they may
transact such other corporation business as shall be stated in the notice of the
meeting. Special meetings of TTI stockholders may be called for any purpose by
the President, the Board of Director or by stockholders entitled to cast at
least one-fifth of the votes which all stockholders are entitled to cast at the
particular meeting. Written notice shall be given to each TTI stockholder
entitled to vote thereat not less than ten nor more than 60 days before the date
of the meeting.
Special meetings of the TTI Board may be called by the President or the
Secretary on the written request of the majority of the directors on at least
ten days' notice to each director.
Directors and officers. Pursuant to the SCG By-Laws, the SCG Board may fix
the number of directors, but such number may not be less than one. The SCG Board
has currently fixed the number of directors at five. The officers of SCG shall
be a Chairman of the Board and CEO, a President, a Secretary and a Treasurer and
there may be one or more Vice Presidents, one or more Assistant Secretaries and
one or more Assistant Treasurers as the SCG Board may elect.
Pursuant to the TTI By-Laws, the number of directors comprising the TTI
Board shall not be less than one nor more than seven persons. The TTI Board has
currently fixed the number of directors at one. The officers of TTI shall be a
President, a Treasurer and a Secretary. In addition, the TTI Board may elect a
Chairman, one or more Vice Presidents and such Assistant Secretaries and
Assistant Treasurers as they may deem proper.
48
<PAGE>
LEGAL MATTERS
The validity of the shares of TTI common stock offered hereby will be
passed upon for TTI by Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP.
Edward A. Vrooman, a principal of such firm, is the owner of 20,000
restricted shares of TTI common stock which he received in exchange for legal
services rendered on behalf of TTI prior to March, 1999.
EXPERTS
The financial statements of Solar Communications Group, Inc. -- Delaware
have been audited by Withum, Smith & Brown, independent accountants as set forth
in their report on the financial statements appearing in this prospectus. The
report contains an explanatory paragraph describing conditions that raise doubt
about Solar Communications Group, Inc. -- Delaware's ability to continue as a
going concern as described in Note 2 to the financial statements. The financial
statements are included in reliance upon the report of Withum, Smith & Brown on
the authority of that firm as experts in accounting and auditing.
49
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Independent Auditors' Report ............................................................. F-2
Balance Sheets
September 30, 1998 and 1997 and March 31, 1999 (unaudited) .............................. F-3
Statements of Operations
For the Year Ended September 30, 1998, for the Period October 7, 1996 (Date of
Inception) to September 30, 1997 and for the Six Month Periods ended March 31, 1999
and 1998 (unaudited) and Cumulative from Inception to March 31, 1999 (unaudited) ........ F-4
Statements of Changes in Stockholders' Equity (Deficit)
For the Period October 7, 1996 (Date of Inception) to September 30, 1998 and
for the Six Months ended March 31, 1999 (unaudited) ..................................... F-5
Statements of Cash Flows
For the Year Ended September 30, 1998, for the Period October 7, 1996 (Date of
Inception) to September 30, 1997 and for the Six Month Periods ended March 31, 1999
and 1998 (unaudited) and Cumulative from Inception to March 31, 1999 (unaudited) ........ F-6
Notes to Financial Statements ............................................................ F-7-12
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Solar Communications Group, Inc.:
We have audited the accompanying balance sheets of Solar Communications Group,
Inc. (a development stage enterprise) as of September 30, 1998 and 1997, and the
related statements of operations, changes in stockholders' equity (deficit) and
cash flows for the year ended September 30, 1998 and for the period October 7,
1996 (Date of Inception) to September 30, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our 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 Solar Communications Group,
Inc. as of September 30, 1998 and 1997 and the results of its operations and its
cash flows for the year ended September 30, 1998 and for the period October 7,
1996 (Date of Inception) to September 30, 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage enterprise and has
suffered recurring losses and net cash outflows from operations since inception
that raise substantial doubt about its ability to continue as a going concern.
As such, the Company is dependent upon future capital infusions from existing
and/or new investors to fund operations. Management's plans with regard to these
matters are also described in Note 2. The accompanying financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Withum, Smith & Brown
Red Bank, New Jersey
July 1, 1999, except for the first
paragraph of Notes 1 and 9 as to which
the date is August .........,1999
F-2
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
----------------------- ------------
1998 1997 1999
------------ -------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash ............................................................ $ 250 $ -- $ 2,906
Prepaid expenses ................................................ -- -- 75,595
Due from related parties ........................................ -- -- 33,161
Other current assets ............................................ -- -- 2,277
--------- ------ ----------
Total Current Assets .......................................... 250 -- 113,939
Property and Equipment, Net ...................................... -- -- 222,886
--------- ------ ----------
TOTAL ASSETS .................................................. $ 250 $ -- $ 336,825
========= ====== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable ................................................ $ 400 $ 200 $ 263,342
Due to related parties .......................................... 73,762 -- 14,300
Loans payable ................................................... -- -- 215,500
--------- ------ ----------
Total Current Liabilities ..................................... 74,162 200 493,142
Commitments and Contingencies
Stockholders' Equity (Deficit):
Common stock, no par value; authorized; 10,000,000 shares at
September 30, 1998 and 1997 and 50,000,000 shares at March 31,
1999 (unaudited), issued and outstanding; 10,000,000 shares at
September 30, 1998 and 1997 and 47,184,000 shares at March
31, 1999 (unaudited) .......................................... 250 250 170,985
Common stock subscribed, 300,000 shares at March 31, 1999
(unaudited) ................................................... -- -- 300,000
Stock subscription receivable ................................... -- (250) --
Deficit accumulated during the development stage ................ (74,162) (200) (627,302)
--------- ------ ----------
Total Stockholders' Equity (Deficit) .......................... (73,912) (200) (156,317)
--------- ------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) .................................................... $ 250 $ -- $ 336,825
========= ====== ==========
</TABLE>
The notes to financial statements are an integral part of these statements.
F-3
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
For the October 7, 1996
Year Ended (Date of Inception)
September 30, To September 30,
1998 1997
------------- -------------------
<S> <C> <C>
Revenues .................................... $ -- $ --
Operating Expenses:
General and Administrative Expenses ......... -- 200
General and Administrative
Expenses-Related Parties ................... 73,962 --
----------- ------------
Total Operating Expenses ................. 73,962 200
----------- ------------
Net Loss .................................... $ (73,962) $ (200)
=========== ============
Basic and Diluted Net Loss Per
Common Share ............................... $ (.01) $ --
=========== ============
Weighted Average Number of Shares of
Common Stock and Common Stock
Subscribed Outstanding ..................... 10,000,000 10,000,000
=========== ============
For the Six Months Cumulative From
Ended March 31, Inception to
1999 1998 March 31, 1999
--------------- -------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
Revenues .................................... $ -- $ -- $ --
Operating Expenses:
General and Administrative Expenses ......... 487,024 -- 487,224
General and Administrative
Expenses-Related Parties ................... 66,116 -- 140,078
----------- ------------ -----------
Total Operating Expenses ................. 553,140 -- 627,302
----------- ------------ -----------
Net Loss .................................... $ (553,140) $ -- $ (627,302)
=========== ============ ===========
Basic and Diluted Net Loss Per
Common Share ............................... $ (.01) $ --
=========== ============
Weighted Average Number of Shares of
Common Stock and Common Stock
Subscribed Outstanding ..................... 39,863,451 10,000,000
=========== ============
</TABLE>
The notes to financial statements are an integral part of these statements.
F-4
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD OCTOBER 7, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 1998
AND FOR THE SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
Common Stock Subscribed
Shares Amount Shares Amount
------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Balance, October 7, 1996
(Inception) ......................... -- $ -- -- $ --
Issuance of common stock for stock
subscription receivable, October
8, 1996 ............................. 10,000,000 250 -- --
Net loss ............................. -- -- -- --
---------- --------- ------- ---------
Balance, September 30, 1997 .......... 10,000,000 250 -- --
Collection of stock subscription
receivable .......................... -- -- -- --
Net loss ............................. -- -- -- --
---------- --------- ------- ---------
Balance, September 30, 1998 .......... 10,000,000 250 -- --
Issuance of common stock, October
1998 (unaudited) .................... 32,844,000 -- -- --
Issuance of common stock for
services rendered, December
1998, $.04 per share (unaudited) .... 1,840,000 72,386 -- --
Issuance of common stock for the
conversion of related party debt,
December 1998, $.04 per share
(unaudited) ......................... 2,500,000 98,349 -- --
Common stock subscribed, February
and March 1999, $1.00 per share
(unaudited) ......................... -- -- 300,000 300,000
Net loss (unaudited) ................. -- -- -- --
---------- --------- ------- ---------
Balance, March 31, 1999
(unaudited) ......................... 47,184,000 $ 170,985 300,000 $ 300,000
========== ========= ======= =========
Deficit
Accumulated
Stock During the Total
Subscription Development Stockholders'
Receivable Stage Equity (Deficit)
-------------- --------------- -----------------
Balance, October 7, 1996
(Inception) ......................... $ -- $ -- $ --
Issuance of common stock for stock
subscription receivable, October
8, 1996 ............................. (250) -- --
Net loss ............................. -- (200) (200)
------- ----------- -----------
Balance, September 30, 1997 .......... (250) (200) (200)
Collection of stock subscription
receivable .......................... 250 -- 250
Net loss ............................. -- (73,962) (73,962)
------- ----------- -----------
Balance, September 30, 1998 .......... -- (74,162) (73,912)
Issuance of common stock, October
1998 (unaudited) .................... -- -- --
Issuance of common stock for
services rendered, December
1998, $.04 per share (unaudited) .... -- -- 72,386
Issuance of common stock for the
conversion of related party debt,
December 1998, $.04 per share
(unaudited) ......................... -- -- 98,349
Common stock subscribed, February
and March 1999, $1.00 per share
(unaudited) ......................... -- -- 300,000
Net loss (unaudited) ................. -- (553,140) (553,140)
------- ----------- -----------
Balance, March 31, 1999
(unaudited) ......................... $ -- $ (627,302) $ (156,317)
======= =========== ===========
</TABLE>
The notes to financial statements are an integral part of these statements.
F-5
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
For the October 7, 1996
Year Ended (Date of Inception)
September 30, To September 30,
1998 1997
------------- -------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss ................................ $ (73,962) $ (200)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ........ -- --
Common stock issued for services ..... -- --
Changes in assets and liabilities:
Prepaid expenses .................... -- --
Other current assets ................ -- --
Accounts payable .................... 200 200
---------- -------
Net Cash Used in Operating
Activities ....................... (73,762) --
Cash Flows From Investing Activities:
Purchase of property and
equipment ........................... -- --
Collection of stock subscription
receivable .......................... 250 --
Net change in due from related
parties ............................. -- --
---------- -------
Net Cash Provided by (Used
in) Investing Activities ......... 250 --
Cash Flows From Financing Activities:
Net change in due to related parties 73,762 --
Proceeds from loans payable .......... -- --
Proceeds from common stock
subscribed .......................... -- --
---------- -------
Net Cash Provided By
Financing Activities ............. 73,762 --
---------- -------
Net Increase in Cash .................... 250 --
Cash -- Beginning of Period ............. -- --
---------- -------
Cash -- End of Period ................... $ 250 $ --
========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Six Months Ended Cumulative from
March 31, Inception to
1999 1998 March 31, 1999
--------------- ------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss ................................ $ (553,140) $ -- $ (627,302)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization ........ 2,421 -- 2,421
Common stock issued for services ..... 72,386 -- 72,386
Changes in assets and liabilities:
Prepaid expenses .................... (75,595) -- (75,595)
Other current assets ................ (2,277) -- (2,277)
Accounts payable .................... 262,942 -- 263,342
----------- ---- -----------
Net Cash Used in Operating
Activities ....................... (293,263) -- (367,025)
Cash Flows From Investing Activities:
Purchase of property and
equipment ........................... (225,307) -- (225,307)
Collection of stock subscription
receivable .......................... -- -- 250
Net change in due from related
parties ............................. (33,161) -- (33,161)
----------- ---- -----------
Net Cash Provided by (Used
in) Investing Activities ......... (258,468) -- (258,218)
Cash Flows From Financing Activities:
Net change in due to related parties 38,887 -- 112,649
Proceeds from loans payable .......... 215,500 -- 215,500
Proceeds from common stock
subscribed .......................... 300,000 -- 300,000
----------- ---- -----------
Net Cash Provided By
Financing Activities ............. 554,387 -- 628,149
----------- ---- -----------
Net Increase in Cash .................... 2,656 -- 2,906
Cash -- Beginning of Period ............. 250 -- --
----------- ---- -----------
Cash -- End of Period ................... $ 2,906 $ -- $ 2,906
=========== ==== ===========
</TABLE>
The notes to financial statements are an integral part of these statements.
F-6
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION RELATING TO THE SIX MONTHS ENDED
MARCH 31, 1999 AND MARCH 31, 1998 AND CUMULATIVE FROM INCEPTION
TO MARCH 31, 1999 IS UNAUDITED)
Note 1 -- Organization and Business:
Solar Communications Group, Inc. -- Delaware (the Company) was incorporated
in Delaware in 1994 as Thermaltec International Corp. Since 1994 and prior to
August __, 1999, the Company had been organized for the purpose of selling
thermal sprayed coatings to individual customers in the United States and other
countries. On August __, 1999, the Company acquired all of the outstanding
capital stock of Solar Communications Group, Inc. -- New Jersey, a corporation
involved in the installation and implementation of computer hardware and
software inside rooms of nationwide hotels. Prior to August __, 1999, the
Company had transferred substantially all of its assets and liabilities into a
wholly-owned subsidiary, Panama Industries, Ltd. The shares of Panama
Industries, Ltd. were distributed to the shareholders of Thermaltec
International Corp. immediately prior to the closing date of the merger with
Solar Communications Group, Inc. -- New Jersey. As a result of this acquisition,
the former shareholders of Solar Communications Group, Inc. -- New Jersey
exchanged their stock for approximately 96 percent of the Company's outstanding
stock. Since this transaction is considered to be a reverse merger, Solar
Communications Group, Inc. -- New Jersey is treated as the acquiror in this
transaction for accounting purposes and, accordingly, the historical financial
statements of Solar Communications Group, Inc. -- New Jersey, prior to the
acquisition date are deemed to be the historical financial statements of the
Company.
The Company provides quality communication alternatives to the business
community. The Company has developed an Internet access solution, known as
PCRoomLink(TM), for the hospitality industry. PCRoomLink's computer-equipped
rooms permit a hotel patron, with or without a laptop computer, to obtain
high-speed Internet access in the privacy of his/her hotel room.
The Company is a development stage enterprise, which has a very limited
history of operations and has not generated any revenues from operations. The
Company's business model is untested. It may take the Company longer than
anticipated to implement its business model, and some aspects of the Company's
business model may not prove to be feasible or possible.
Note 2 -- Basis of Preparation:
Since inception, the Company has suffered recurring losses and net cash
outflows from operations. The Company expects to continue to incur substantial
losses to complete the development of its business model and will also incur
substantial marketing and staffing costs in the near future. Since its
inception, the Company has funded operations through debt issuance and, more
recently, private placements of equity in order to meet its strategic
objectives. Management is actively pursuing other financing options, which
include securing additional equity financing, and believes that sufficient
funding will be available to meet its planned business objectives including
anticipated cash needs for working capital, for a reasonable period of time.
However, there can be no assurance that the Company will be able to obtain
sufficient funds to continue the development of, and if successful, to commence
the installation and implementation of its computer systems in the hotels.
As a result of the foregoing, there exists substantial doubt about the
Company's ability to continue as a going concern. These financial statements do
not include any adjustments relating to the recoverability of the carrying
amounts of recorded assets or the amount of liabilities that might result from
the outcome of this uncertainty.
F-7
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
MARCH 31, 1999 AND MARCH 31, 1998 AND CUMULATIVE FROM INCEPTION
TO MARCH 31, 1999 IS UNAUDITED)
Note 3 -- Summary of Significant Accounting Policies:
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
disclosures of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Development Stage Enterprise
The accompanying financial statements have been prepared in accordance with
the provision of Statement of Financial Accounting Standard (SFAS) No. 7,
"Accounting and Reporting by Development Stage Enterprises".
Property and Equipment, Net
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated useful
lives of the assets which range from three to seven years. Gains and losses on
depreciable assets retired or sold are recognized in the statement of operations
in the year of disposal. Repairs and maintenance expenditures are expensed as
incurred.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse. A valuation allowance is provided if it is
more likely than not that some or all of the deferred tax assets will not be
realized.
New Accounting Standards
The Company will adopt Statement of Financial Accounting Standard (FAS) No.
130, "Reporting Comprehensive Income" in fiscal 1999. This statement establishes
standards for reporting and displaying comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. This statement requires the classification of items of
comprehensive income by their nature in a financial statement and the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. The Company believes that adoption of this statement will not have a
material effect on its financial statements.
The Company will also adopt FAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in fiscal 1999. This statement supersedes
FAS No. 14, "Financial Reporting for Segments of a Business Enterprise," but
retains the requirement to report information about major customers. This
statement establishes standards for reporting information about operating
segments in annual financial statements. Operating segments are defined as
components of an enterprise evaluated regularly by the Company's senior
management in deciding how to allocate resources and in assessing performance.
The Company believes that adoption of this statement will not have a material
effect on its financial statements.
F-8
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
MARCH 31, 1999 AND MARCH 31, 1998 AND CUMULATIVE FROM INCEPTION
TO MARCH 31, 1999 IS UNAUDITED)
Note 3 -- Summary of Significant Accounting Policies: -- (Continued)
In 1998, the FASB issued Statement of Financial Accounting Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). SFAS No. 133 modifies the accounting for derivative and hedging
activities and is effective for fiscal years beginning after December 15, 1999.
The Company believes that the adoption of SFAS No. 133 will not have a material
impact on the Company's financial statements.
Concentration of Credit Risk
The Company maintains cash balances, at times, with financial institutions
in excess of amounts insured by the Federal Deposit Insurance Corporation.
Management monitors the soundness of these institutions and considers the
Company's risk negligible.
Advertising Costs
All advertising costs are expensed the first time the advertising takes
place. Advertising costs were approximately $112,000 for the six months ended
March 31, 1999.
Financial Instruments
The carrying values of accounts payable and accrued expenses approximate
their fair values. The fair value of the Company's loans payable is assumed to
approximate its book value.
Net Loss Per Common Share
The Company has adopted SFAS No. 128, "Earnings per Share" ("FAS 128"),
which requires presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("Diluted EPS") by all entities that have publicly
traded common stock or potential common stock (options, warrants, convertible
securities or contingent stock arrangements). FAS 128 also requires presentation
of earnings per share by an entity that has made a filing or is in the process
of filing with a regulatory agency in preparation for the sale of securities in
a public market.
Basic EPS is computed by dividing income (loss) available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted EPS gives effect to all dilutive potential common shares
outstanding during the period. The computation of Diluted EPS does not assume
conversion, exercise or contingent exercise of securities that would have an
antidilutive effect on earnings. Refer to Note 11 for the Company's methodology
for determining net loss per share.
Interim Financial Information
The financial information presented for the six months ended March 31, 1999
and 1998 and the cumulative amounts from the date of inception is unaudited but,
in the opinion of management, reflects all adjustments (which consist of normal
accruals) necessary for a fair presentation of such financial statements. The
results of operations for the six months ended March 31, 1999 are not
necessarily indicative of the operating results to be expected for the year
ended September 30, 1999.
F-9
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
MARCH 31, 1999 AND MARCH 31, 1998 AND CUMULATIVE FROM INCEPTION
TO MARCH 31, 1999 IS UNAUDITED)
Note 4 -- Property and Equipment, Net:
Property and equipment consist of the following:
September 30,
--------------- March 31,
1998 1997 1999
------ ------ ------------
(Unaudited)
Office equipment ........................ $ -- $ -- $ 24,207
Hotel installations in progress ......... -- -- 201,100
---- ---- --------
-- -- 225,307
Less accumulated depreciation ........... -- -- 2,421
---- ---- --------
Property and Equipment, Net ............. $ -- $ -- $222,886
==== ==== ========
Depreciation expense amounted to $2,421 for the six months ended March 31,
1999.
Hotel installations in progress primarily relates to purchased software
licenses which will be utilized in the various hotels.
Note 5 -- Income Taxes:
The Company has incurred losses since inception which have generated net
operating loss carryforwards of approximately $74,000 at September 30, 1998,
which expire beginning in the year 2017. Due to the uncertainty of their
realization, no income tax benefits have been recorded by the Company for these
net operating loss carryforwards as valuation allowances have been established
for any such benefits. The use of these net operating loss carryforwards may be
subject to limitations under section 382 of the Internal Revenue Code pertaining
to changes in stock ownership.
The increase in the valuation allowance amounted to $29,600 for the year
ended September 30, 1998.
Deferred tax assets for federal and state income taxes consist of the
following:
September 30,
1998 1997
--------- -------
Net operating loss carryforwards ......... $ 29,600 $ --
Valuation allowance ...................... (29,600) --
--------- ----
Net deferred tax assets .................. $ -- $ --
========= ====
Note 6 -- Loans Payable:
The Company has various loans from individuals. These loans are
non-interest bearing and contain no terms of repayment. As permitted by their
terms, the loans can be converted into shares of common stock of the Company at
$1.00 per share.
Note 7 -- Related Party Transactions:
Since its inception, the Company has had transactions with two related
parties (Cam-Comm, Inc. and JMR Marketing Corporation). Each of these related
parties is owned in whole or in part by the Company's Chairman and Chief
Executive Officer. The Company has obtained goods and services from these
related entities, due to their inability to obtain such goods and services on
commercially viable terms.
F-10
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
MARCH 31, 1999 AND MARCH 31, 1998 AND CUMULATIVE FROM INCEPTION
TO MARCH 31, 1999 IS UNAUDITED)
Note 7 -- Related Party Transactions: -- (Continued)
The amounts due from (to) related parties are as follows:
<TABLE>
<CAPTION>
Due From Due to
Related Parties Related Parties
----------------- ----------------
<S> <C> <C>
Balance, October 7, 1996 (date of inception) ......... $ -- $ --
Company expenses paid by related party ............... -- --
-------- ---------
Ending balance, September 30, 1997 ................... -- --
Company expenses paid by a related party ............. -- 73,762
-------- ---------
Ending balance, September 30, 1998 ................... -- 73,762
Company advances to a related party .................. 33,161 --
Company expenses paid by a related party ............. -- 38,887
Conversion of related party debt through the issuance
of common stock ..................................... -- (98,349)
-------- ---------
Ending balance, March 31, 1999 (Unaudited) ........... $ 33,161 $ 14,300
======== =========
</TABLE>
The above balances are non-interest bearing. There are no fixed terms of
repayment. However, repayment is expected to occur within the next year.
Note 8 -- Commitments:
Leases
The Company leases office space, telephone and computer equipment from
related parties (Cam Comm, Inc. and JMR Marketing Corporation) on a month to
month basis. These leases are classified as operating leases. The lease expense
for the six months ended March 31, 1999 was $34,111.
Note 9 -- Stockholders' Equity:
Reverse Merger
On August __, 1999, the Company issued ___________ shares of common stock
to acquire Solar Communications Group, Inc. -- New Jersey (see Note 1). For
accounting purposes, the acquisition of Solar Communications Group, Inc. -- New
Jersey by the Company has been treated as a reverse merger. Accordingly, the
___________ shares issued to acquire Solar Communications Group, Inc. -- New
Jersey have been treated as outstanding from October 7, 1996 (as adjusted for
the historical issuance of Solar Communications Group, Inc. -- New Jersey common
stock during the period from October 7, 1996 to August __, 1999) and the
previously outstanding ___________ shares have been treated as issued on the
acquisition date.
Common Stock Subscribed
The Company has entered into common stock purchase and subscription
agreements which provide for the issuance of 300,000 shares of common stock at
$1.00 per share. These stock company's subscription agreements are part of the
Company's overall $12,000,000 private placement equity funding (see Note 13).
The actual stock issuance will be completed when, among other things, final
authorization from the State of New Jersey is received.
F-11
<PAGE>
SOLAR COMMUNICATIONS GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
MARCH 31, 1999 AND MARCH 31, 1998 AND CUMULATIVE FROM INCEPTION
TO MARCH 31, 1999 IS UNAUDITED)
Note 10 -- Stock Based Compensation:
The Company intends to apply Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for options as allowed by Statement of Financial Accounting Standards
No. 123 "Accounting for Stock Based Compensation." During the year ended
September 30, 1998 and for the period October 7, 1996 (date of inception) to
September 30, 1997 and for the six months ended March 31, 1999 and 1998, the
Company did not grant options; thus no compensation expense was recorded in
these periods.
Note 11 -- Net Loss Per Share:
Basic EPS and Diluted EPS for the year ended September 30, 1998, for the
period October 7, 1996 (Date of Inception) to September 30, 1997 and for the six
month periods ended March 31, 1999 and 1998 have been computed by dividing the
net loss for each respective period by the weighted average shares outstanding
(including the shares to be issued under the common stock subscription
agreements) during that period. During all such periods, there were no
potentially diluted securities outstanding, or the effect of such securities
would be antidilutive. Hence, Basic EPS and Diluted EPS are the same.
Note 12 -- Supplemental Disclosure of Cash Flow Information:
<TABLE>
<CAPTION>
For the Period
For the October 7, 1996 For the Six
Year Ended (Date of Inception) Months Ended Cumulative from
September 30, To September 30 March 31, Inception to
1998 1997 1999 1998 March 31, 1999
--------------- --------------------- ------------- ------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash paid during the year for:
Interest ..................... $ -- $ -- $ -- $ -- $ --
Income taxes ................. $ -- $ -- $500 $ -- $500
</TABLE>
Disclosure of non-cash investing and financing activities:
In December 1998, the Company issued shares of common stock to satisfy a
related party obligation in the amount of $98,349.
During the period October 7, 1996 (date of inception) to September 30,
1997, the Company issued shares of common stock for a stock subscription
receivable of $250.
Note 13 -- Subsequent Events:
Subsequent events occurring after March 31, 1999, other than the
consummation of the Company's merger with Solar Communications Group, Inc. --
New Jersey (See Notes 1 and 9), consist of the following:
On May 21, 1999, the Board of Directors of Solar Communications Group, Inc.
- -- New Jersey approved the 1999 Stock Option Plan (the Plan), subject to
shareholder approval of the Plan, and reserved 10,000,000 shares of common stock
for issuance relating to options granted under the Plan. As part of the plan,
since March 31, 1999, options to purchase approximately 4,299,000 shares of
Solar Communications, Inc. -- New Jersey's common stock at $1.00 per share have
been granted to employees.
The Board of Directors of Solar Communication Group, Inc. -- New Jersey has
approved an amendment to the Certificate of Incorporation of the Company which
would authorize an increase in the number of authorized shares of common stock
from 50,000,000 to 100,000,000.
Subsequent to March 31, 1999, the Solar Communications Group, Inc. -- New
Jersey obtained private placement equity funding from investors of approximately
$12,000,000 in the form of additional common stock subscribed. The stock is
being subscribed to at $1.00 per share.
F-12
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of June 16, 1999, by and
between SOLAR COMMUNICATIONS GROUP, INC., a New Jersey corporation ("SCG"),
THERMALTEC INTERNATIONAL, CORP., a Delaware corporation ("TTI"), and ANDREW B.
MAZZONE, the principal stockholder of TTI ("Mazzone").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of SCG and TTI deem it advisable and
in the best interests of their respective stockholders to consummate, and have
approved, the transaction provided for herein in which SCG would merge with and
into TTI, with TTI being the surviving corporation (the "Merger"); and
WHEREAS, the parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 Effective Time of the Merger. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date (as defined
in Section 1.02), (i) a certificate of merger (the "DE Certificate of Merger")
shall be duly prepared and executed by TTI (and, if required, executed by SCG)
and thereafter delivered to the Secretary of State of the State of Delaware for
filing, as provided in the Delaware General Corporation Law, as amended (the
"GCL"), and (ii) a certificate of merger (the "NJ Certificate of Merger") shall
be duly prepared and executed by SCG (and, if required, executed by TTI) and
thereafter delivered to the Department of Revenue of the State of New Jersey for
filing, as provided in the New Jersey Business Corporation Act (the "BCA"). The
Merger shall become effective upon the filing of the DE Certificate of Merger
with the Secretary of State of the State of Delaware and the filing of the NJ
Certificate of Merger with the Department of Revenue of the State of New Jersey
or at such later time as may be agreed to in writing by TTI and SCG (the
"Effective Time"). The DE Certificate of Merger and the NJ Certificate of Merger
are, at times, collectively referred to herein as the "Merger Filings."
<PAGE>
SECTION 1.02 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 AM, Philadelphia local time, on a date to be specified by
the parties, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Sections
7.01, 7.02 (other than the delivery of the officers' certificate referred to
therein) and 7.03 (other than the delivery of the officers' certificate referred
to therein) (the "Closing Date"), at the offices of Archer & Greiner, A
Professional Corporation, One Centennial Square, Haddonfield, NJ 08033, unless
another date or place is agreed to in writing by the parties hereto.
SECTION 1.03 Effects of the Merger.
(a) At the Effective Time (i) the separate corporate
existence of SCG shall cease and SCG shall be merged with and
into TTI (SCG and TTI are sometimes referred to herein as the
"Constituent Corporations" and TTI, as the surviving
corporation after the Merger, is sometimes referred to herein
as the "Surviving Corporation"), (ii) the Certificate of
Incorporation of SCG as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of
the Surviving Corporation, until thereafter amended, and (iii)
the Bylaws of SCG as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving
Corporation, until thereafter amended.
(b) At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable
provisions of the GCL and the BCA. Without limiting the
generality of the foregoing and subject thereto, at and after
the Effective Time, the Surviving Corporation shall possess
all the rights, privileges, powers and franchises and be
subject to all the restrictions, disabilities and duties of
each of the Constituent Corporations; and all rights,
privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and
all debts due to either of the Constituent Corporations on
whatever account, as well as for stock subscriptions and all
other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation,
and all property, rights, privileges, powers and franchises,
and all and every other interest shall be thereafter as
effectively the property of the Surviving Corporation as they
were of the Constituent Corporations, and 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; but all rights of creditors and all liens upon any
property of either of the Constituent Corporations existing as
of the Effective Time shall be preserved unimpaired, and all
debts, liabilities and duties of the Constituent Corporations
existing as of the Effective Time shall thenceforth attach to
the Surviving Corporation, and may be enforced against it to
the same extent as if said debts and liabilities had been
incurred by it.
SECTION 1.04 Directors and Officers of the Surviving Corporation. The
directors and officers of SCG at the Effective Time shall, from and after the
Effective Time, be the directors and officers of the Surviving Corporation,
2
<PAGE>
until their respective successors have been duly elected or appointed (as
applicable) and qualified, or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
shares of the Common Stock, no par value per share, of SCG (the "SCG Common
Stock"):
(a) Exchange Ratio for Existing SCG Common Stock.
Subject to Section 2.02(d), each issued and outstanding share
of SCG Common Stock (other than shares to be canceled in
accordance with Section 2.01(b) and any Dissenting Shares (as
defined and to the extent provided in Section 2.04)) shall be
converted into the right to receive, from TTI, that number
(the "Conversion Number") of fully paid and nonassessable
shares of the Common Stock, par value $.0001 per share, of TTI
(the "TTI Common Stock") obtained by dividing (i) 64,500,000
by (ii) the sum of (A) the difference between (1) the number
of shares of SCG Common Stock then outstanding and (2) the
aggregate number of shares to be canceled pursuant to Section
2.01(b) hereof and Dissenting Shares, plus (B) the number of
shares of SCG Common Stock then reserved for issuance pursuant
to options issued and then outstanding under the 1999 Option
Plan (as such term is defined in Section 2.03 hereof). The
shares of TTI Common Stock to be issued in the Merger are
sometimes hereinafter referred to as the "Conversion Shares."
All such shares of SCG Common Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive
the Conversion Shares.
(b) Cancellation of Treasury Stock and TTI-Owned
Stock. All shares of SCG Common Stock that are owned by SCG as
treasury stock and any shares of SCG Common Stock owned by
TTI, or any direct or indirect wholly-owned subsidiary of TTI
or SCG, immediately prior to the Effective Time shall be
canceled and retired and shall cease to exist and no stock of
TTI or other consideration shall be delivered in exchange
therefor.
SECTION 2.02 Exchange of Certificates.
(a) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, TTI shall mail to each
holder of record of a certificate or certificates which
3
<PAGE>
immediately prior to the Effective Time represented
outstanding shares of SCG Common Stock (the "Certificates")
whose shares were converted pursuant to Section 2.01 into the
right to receive shares of TTI Common Stock from the Surviving
Corporation (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the
Certificates to TTI and shall be in such form and have such
other provisions as SCG and TTI may reasonably specify) and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the
Conversion Shares. Upon surrender of a Certificate for
cancellation to TTI or to such other agent or agents as may be
appointed by TTI, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate
representing that number of whole shares of TTI Common Stock
representing the Conversion Shares which such holder has the
right to receive pursuant to the provisions of this Article
II, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of SCG
Common Stock which is not registered in the transfer records
of SCG, a certificate representing the proper number of shares
of TTI Common Stock may be issued to a transferee if the
Certificate representing such SCG Common Stock is presented to
TTI, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only
the right to receive upon such surrender a certificate
representing the appropriate number of Conversion Shares.
(b) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions declared or made after the
Effective Time with respect to TTI Common Stock with a record
date after the Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the Conversion
Shares represented thereby. Subject to the effect of
applicable abandoned property, escheat or similar laws,
following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing
whole Conversion Shares issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole
Conversion Shares, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record
date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to
such whole Conversion Shares.
(c) No Further Ownership Rights in SCG Common Stock.
All Conversion Shares issued upon the surrender for exchange
of shares of SCG Common Stock, all in accordance with the
terms hereof (together with any dividends or distributions
paid pursuant to Section 2.02(b)), shall be deemed to have
4
<PAGE>
been issued and conferred in full satisfaction of all rights
pertaining to such shares of SCG Common Stock, and there shall
be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of SCG Common
Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article
II.
(d) No Fractional Conversion Shares. No certificate
or script representing fractional Conversion Shares of TTI
Common Stock shall be issued upon the surrender for exchange
of Certificates. Fractional Conversion Shares of TTI Common
Stock issuable upon the surrender for exchange of Certificates
shall be rounded to the nearest whole number.
SECTION 2.03 Stock Options. At the Effective Time, all options to
purchase SCG Common Stock then outstanding under SCG's 1999 Stock Option Plan
(the "1999 Option Plan") shall be assumed by TTI in accordance with Section 6.14
hereof (each an "SCG Option" and, collectively, the "SCG Options").
SECTION 2.04 SCG Appraisal Rights.
(a) Notwithstanding any provision of this Agreement
to the contrary, any shares of SCG Common Stock held by a
holder who has demanded and perfected appraisal rights for
such shares in accordance with the BCA and who, as of the
Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares"), shall not be converted
into or represent a right to receive TTI Common Stock pursuant
to Section 2.01, but the holder thereof shall only be entitled
to such rights as are granted by the BCA.
(b) Notwithstanding the provisions of subsection (a),
if any holder of shares of SCG Common Stock who demands
appraisal of such shares under the BCA shall effectively
withdraw or lose (through failure to perfect or otherwise) the
right to appraisal, then, as of the later of the Effective
Time or the occurrence of such event, such holder's shares of
SCG Common Stock shall automatically be converted into and
represent only the right to receive, upon surrender of the
certificate representing such shares of SCG Common Stock,
shares of TTI Common Stock issuable pursuant to Section 2.01
in exchange for such outstanding shares of SCG Common Stock
and any dividends or other distributions pursuant to Section
2.02(b).
(c) SCG shall give TTI (i) prompt notice of any
written demands for appraisal of any shares of SCG Common
Stock, withdrawals of such demands, and any other instruments
served pursuant to the BCA and received by SCG and (ii) the
opportunity to participate in all negotiations and proceedings
with respect to demands for appraisal under the BCA. SCG shall
not, except with the prior written consent of TTI, voluntarily
make any payment with respect to any demands for appraisal of
SCG Common Stock or offer to settle or settle any such
demands.
5
<PAGE>
SECTION 2.05 TTI Appraisal Rights.
(a) Notwithstanding any provision of this Agreement
to the contrary, any shares of TTI Common Stock held by a
holder who has demanded and perfected appraisal rights for
such shares in accordance with the GCL and who, as of the
Effective Time, has not effectively withdrawn or lost such
appraisal rights ("TTI Dissenting Shares"), shall entitle the
holder thereof only to such rights as are granted by the GCL.
(b) Notwithstanding the provisions of subsection (a),
if any holder of shares of TTI Common Stock who demands
appraisal of such shares under the GCL shall effectively
withdraw or lose (through failure to perfect or otherwise) the
right to appraisal, then, as of the later of the Effective
Time or the occurrence of such event, such holder's shares of
GCL Common Stock shall remain outstanding.
(c) TTI shall give SCG (i) prompt notice of any
written demands for appraisal of any shares of TTI Common
Stock, withdrawals of such demands, and any other instruments
served pursuant to the GCL and received by TTI and (ii) the
opportunity to participate in all negotiations and proceedings
with respect to demands for appraisal under the GCL. TTI shall
not, except with the prior written consent of SCG, voluntarily
make any payment with respect to any demands for appraisal of
TTI Common Stock or offer to settle or settle any such
demands.
SECTION 2.06 Tax Consequences. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368- 3(a) of the
United States Income Tax regulations.
SECTION 2.07 Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Constituent Corporations, the officers
and directors of the Constituent Corporations are fully authorized in the names
of their respective corporations to take, and will take, all such lawful and
necessary action.
6
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TTI AND MAZZONE
As used in this Agreement, any reference to any event, change or effect
being material or having a material adverse effect on or with respect to TTI or
SCG, means such event, change or effect is materially adverse to the
consolidated condition (financial or otherwise), properties, assets (including
intangible assets), liabilities (including contingent liabilities), businesses
or results of operations of TTI or SCG, as the case may be, and its Subsidiaries
taken as a whole. As used in this Agreement, the word "Subsidiary" or
"Subsidiaries" means, with respect to any party, any corporation(s) or other
organization(s), whether incorporated or unincorporated, in which such party,
directly or indirectly, holds an equity, partnership or other ownership
interest.
TTI and Mazzone hereby jointly and severally represent and warrant to
SCG that, except as set forth in this Agreement:
SECTION 3.01 Organization; Subsidiaries.
(a) TTI is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and corporate
authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business
as now being conducted. TTI is duly qualified or licensed to
do business and in good standing 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 or
licensing necessary.
(b) TTI does not have any Subsidiaries, other than
Panama Industries, Ltd., a Delaware corporation. All of the
stock of Panama Industries Ltd. owned by TTI will be
transferred to TTI's shareholders, as a dividend, on or before
the Effective Time.
(c) TTI has made available to SCG a true and correct
copy of its Certificate of Incorporation and Bylaws, each as
amended to date, and each such instrument is in full force and
effect. TTI is not in violation of any provision of its
Certificate of Incorporation or Bylaws or other governing
instrument.
SECTION 3.02 Capitalization.
(a) As of the date hereof, the authorized capital
stock of TTI consists of 10,000,000 shares of TTI Common
Stock. The Board of Directors of TTI has approved an amendment
to the Certificate of Incorporation of TTI (the "Proposed TTI
Amendment") which would authorize an increase in the number of
authorized shares of TTI Common Stock from 10,000,000 to
100,000,000 and is currently seeking shareholder approval of
7
<PAGE>
such Proposed TTI Amendment. As of the date hereof, 2,578,118
shares of TTI Common Stock are issued and outstanding. All the
outstanding shares of TTI Common Stock are duly authorized,
validly issued, fully paid and non-assessable and free of any
preemptive rights in respect thereto. No bonds, debentures,
notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) ("Voting
Debt") of TTI is issued or outstanding. Other than as
described in this Section 3.02, as of the date hereof, there
are no existing options, warrants, calls, subscriptions or
other rights or other agreements or commitments of any
character relating to the issued or unissued capital stock or
Voting Debt of TTI or obligating TTI to issue, transfer or
sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interests in,
TTI or securities convertible into or exchangeable for such
shares or equity interests or obligating TTI to grant, extend
or enter into any such option, warrant, call, subscription or
other right, agreement or commitment. There are no outstanding
contractual obligations of TTI to repurchase, redeem or
otherwise acquire any shares of capital stock of TTI.
(b) As of the date hereof, TTI has issued and
outstanding warrants to purchase a total of 193,400 shares of
TTI Common Stock (collectively, the "Warrants"). The
certificates for the Warrants, in the form attached hereto as
Exhibit 3.02, constitute the entire agreement between TTI and
the holders of the Warrants with respect to the Warrants, and
there has been no change in or modification or alteration of
such terms, nor has there been any amendment, modification or
entering into of any other agreement which would affect the
terms of the Warrants or the related rights and obligations of
the holders of the Warrants or the Company. Among other terms,
the Warrants are currently exercisable at a price of $1.00 per
share and currently expire on June 2, 2000. The issuance of
the Warrants and/or the issue and sale of shares of TTI Common
Stock upon exercise thereof complied or will comply with all
applicable federal and state securities laws.
(c) All outstanding shares of TTI Common Stock, all
outstanding securities exchangeable or convertible into or
exerciseable for TTI Common Stock, and any other outstanding
securities of TTI were issued in compliance with all
applicable state and federal securities laws.
(d) As of the date of this Agreement, no person or
entity holds the right to require the registration or
qualification under applicable securities laws of any
securities of TTI, and there is no voting trust, proxy, rights
plan, antitakeover plan, or other agreement or understanding
to which TTI is a party or by which it is bound with respect
to any class of equity security of TTI.
(e) The TTI Common Stock to be issued pursuant to the
Merger has been duly authorized and will, when issued and
delivered in accordance with this Agreement, be validly
8
<PAGE>
issued, fully paid and non-assessable and will not be subject
to any restrictions on resale under the Securities Act of
1933, as amended (the "Securities Act").
SECTION 3.03 Authority. TTI has all requisite corporate power and
corporate authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the Merger and of the other transactions
contemplated hereby (including authorization by the Board of Directors to
solicit stockholder vote on such transactions) have been duly authorized by all
necessary corporate action on the part of TTI and no other corporate proceedings
on the part of TTI are necessary to authorize this Agreement or to consummate
the transactions so contemplated (other than, with respect to the Merger, the
approval and adoption of this Agreement and the Merger by the holders of TTI
Common Stock pursuant to the GCL). The vote required by TTI's stockholders to
approve and adopt this Agreement and approve the Merger is a majority of the
outstanding shares of TTI Common Stock. TTI's Board of Directors has unanimously
approved this Agreement and the Merger. This Agreement has been duly executed
and delivered by TTI and constitutes a valid and binding obligation of TTI,
enforceable against TTI in accordance with its terms.
SECTION 3.04 Consents and Approvals; No Violations.
(a) Neither the execution, delivery or performance of
this Agreement by TTI nor the consummation by TTI of the
transactions contemplated hereby nor compliance by TTI with
any of the provisions hereof will (i) conflict with or result
in any breach of any provision of the Certificate of
Incorporation or Bylaws of TTI, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which TTI is a party or by
which it or any of its properties or assets may be bound, or
(iii) violate any order, writ, injunction, judgment, decree,
statute, rule or regulation applicable to TTI or any of its
properties or assets.
(b) No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with,
any court, administrative agency or commission or other
federal, state, county, local, or foreign governmental
authority or instrumentality ("Governmental Entity") or any
third party, is required to be obtained or made by TTI in
connection with the execution and delivery of this Agreement
or the consummation of the Merger, except for (i) the Merger
Filings with the Secretary of State of the State of Delaware
and the Department of Revenue of the State of New Jersey; (ii)
the filing of the Proxy Statement/Prospectus (as defined in
Section 3.19) with the Securities and Exchange Commission (the
"SEC") in accordance with the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), if required by the terms and
provisions of the Exchange Act; (iii) the filing of a
Registration Statement (the "Registration Statement") on Form
S-4 (or any similar successor form thereto) with the SEC in
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accordance with the Securities Act; and (iv) such consents,
approvals, orders, authorizations, registrations,
declarations, and filings as may be required under applicable
federal, foreign, and state securities (or related) laws, and
the securities or antitrust laws of any foreign country.
SECTION 3.05 Financial Statements. TTI has delivered to SCG a true and
complete copy of TTI's audited financial statements as of and for the periods
ended September 30, 1998 (the "Balance Sheet Date") and September 30, 1997,
including the notes thereto, and TTI's unaudited financial statements as of and
for the period ended March 31, 1999, including the notes thereto (such audited
and unaudited financial statements are referred to collectively herein as the
"TTI Documents"). The TTI Documents, at the time delivered, did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The TTI
Documents have been prepared on a consistent basis during the periods involved
and fairly present the financial position of TTI as at the dates thereof and the
results of its operations and cash flows for the periods then ended.
SECTION 3.06 Absence of Certain Changes. Since the Balance Sheet Date,
except as expressly contemplated herein, there has been no adverse change in the
business, operations, condition (financial or otherwise), results of operations,
assets or liabilities of TTI. Since the Balance Sheet Date, except as expressly
contemplated herein or with respect to the transactions contemplated hereby, TTI
has conducted its business consistent with past practices and TTI has not (a)
incurred loss of, or significant injury to, any assets of TTI as a result of any
fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident,
act of God or public enemy or armed forces, or other occurrence; (b) issued or
committed to issue any capital stock, bonds or other corporate securities or
debt instruments, or granted any options, warrants or other rights calling for
the issuance thereof; (c) borrowed any funds; (d) incurred or, to TTI's
knowledge, become subject to, any obligation or liability (absolute or
contingent, matured or unmatured); (e) declared or made payment of, or set aside
for payment, any dividends or distributions of any assets, or purchased,
redeemed or otherwise acquired any of its capital stock, any securities
convertible into capital stock, or any other securities; (f) mortgaged, pledged
or subjected to any liens, mortgages, security interests or encumbrances of any
kind, other than for taxes not yet due and payable, any of its assets; (g) sold,
exchanged, transferred or otherwise disposed of any of its assets, or canceled
any debts or claims, except in each case in the ordinary course of business; (h)
acquired any assets except in the ordinary course of business; (i) written down
the value of any assets or written off as uncollectible any notes or accounts
receivables, except write-downs and write-offs in the ordinary course of
business, none of which, individually or in the aggregate, are material; (j)
entered into any transactions other than in the ordinary course of business; (k)
increased the rate of compensation payable, or to become payable, by it to any
of its officers, employees, agents, or independent contractors over the rate
being paid to them on the Balance Sheet Date, except for increases in the
ordinary course of business consistent with past practices; (l) made or
permitted any amendment or termination of any agreement to which it is a party;
(m) through negotiation or otherwise, made any commitment or incurred any
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liability to any labor organization; (n) made any accrual or arrangement for or
payment of bonuses or special compensation of any kind to any director, officer
or employee; (o) made any material change in any method of accounting or
accounting practice; or (p) entered into any binding obligation to do any of the
foregoing.
SECTION 3.07 No Liabilities. As of the Closing Date, TTI shall not have
any liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, that would be required by generally accepted accounting principles
to be reflected on a consolidated balance sheet of TTI (including the notes
thereto).
SECTION 3.08 Assets. As of the Closing Date, TTI will not own any
assets of any nature, except for those assets required to be retained by TTI
pursuant to Section 6.12 hereof.
SECTION 3.09 Employee Benefit Plans.
(a) Definitions. For purposes of this Section 3.09,
the following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any person or
entity under common control with TTI within the
meaning of Section 414(b), (c), (m) or (o) of the
Code and the regulations issued thereunder;
(ii) "COBRA" shall mean the Consolidated
Omnibus Budget Reconciliation Act of 1985, as
amended;
(iii) "DOL" shall mean the United States
Department of Labor;
(iv) "Employee" shall mean any current,
former, or retired employee, officer, or director of
TTI or any Affiliate;
(v) "Employee Agreement" shall mean each
management, employment, severance, consulting,
relocation, repatriation, expatriation, visas, work
permit or similar agreement or contract between TTI
or any Affiliate and any Employee or consultant;
(vi) "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended;
(vii) "FMLA" shall mean the Family Medical
Leave Act of 1993, as amended;
(viii) "International Employee Plan" shall
mean each TTI Employee Plan that has been adopted or
maintained by TTI, whether informally or formally,
for the benefit of Employees outside the United
States;
(ix) "IRS" shall mean the Internal Revenue
Service;
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(x) "Multiemployer Plan" shall mean any
"Pension Plan" (as defined below) which is a
"multiemployer plan," as defined in Section 3(37) of
ERISA;
(xi) "PBGC" shall mean the Pension Benefit
Guaranty Corporation;
(xii) "Pension Plan" shall mean each TTI
Employee Plan which is an "employee pension benefit
plan," within the meaning of Section 3(2) of ERISA;
and
(xiii) "TTI Employee Plan" shall mean any
plan, program, policy, practice, contract, agreement
or other arrangement providing for compensation,
severance, termination pay, performance awards, stock
or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind,
whether written or unwritten or otherwise, funded or
unfunded, including without limitation, each
"employee benefit plan," within the meaning of
Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be
contributed to, by TTI or any Affiliate for the
benefit of any Employee;
(b) Schedule. Schedule 3.09 attached hereto contains
an accurate and complete list of each TTI Employee Plan and
each Employee Agreement. Except as expressly provided herein,
TTI does not have any plan or commitment to establish any new
TTI Employee Plan, to modify any TTI Employee Plan or Employee
Agreement, or to enter into any TTI Employee Plan or Employee
Agreement, nor does it have any intention or commitment to do
any of the foregoing.
(c) Documents. TTI has provided to SCG (i) correct
and complete copies of all documents embodying each TTI
Employee Plan and each Employee Agreement, including all
amendments thereto and written interpretations thereof; (ii)
the most recent annual actuarial valuations, if any, prepared
for each TTI Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under
ERISA or the Code in connection with each TTI Employee Plan or
related trust; (iv) if the TTI Employee Plan is funded, the
most recent annual and periodic accounting of TTI Employee
Plan assets; (v) the most recent summary plan description
together with the summary of material modifications thereto,
if any, required under ERISA with respect to each TTI Employee
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Plan; (vi) all IRS determination, opinion, notification and
advisory letters, and rulings relating to TTI Employee Plans
and copies of all applications and correspondence to or from
the IRS or the DOL with respect to any TTI Employee Plan;
(vii) all material written agreements and contracts relating
to each TTI Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and
group insurance contracts; (viii) all communications material
to any Employee or Employees relating to any TTI Employee Plan
and any proposed TTI Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material
liability to TTI; (ix) all COBRA forms and related notices;
and (x) all registration statements and prospectuses prepared
in connection with each TTI Employee Plan.
(d) Employee Plan Compliance. (i) TTI has performed
all obligations required to be performed by it under, is not
in default or violation of, and has no knowledge of any
default or violation by any other party to each TTI Employee
Plan, and each TTI Employee Plan has been established and
maintained in accordance with its terms and in compliance with
all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA and the Code; (ii) each TTI
Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a)
of the Code has either received a favorable determination
letter from the IRS with respect to each such Plan as to its
qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which
to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination;
(iii) no "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and
not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any TTI Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of TTI,
threatened or reasonably anticipated (other than routine
claims for benefits) against any TTI Employee Plan or against
the assets of any TTI Employee Plan; (v) each TTI Employee
Plan can be amended, terminated or otherwise discontinued
after the Effective Time in accordance with its terms, without
liability to SCG, TTI or any of its Affiliates (other than
ordinary administration expenses typically incurred in a
termination event); (vi) there are no audits, inquiries or
proceedings pending or, to the knowledge of TTI or any
Affiliates, threatened by the IRS or DOL with respect to any
TTI Employee Plan; and (vii) neither TTI nor any Affiliate is
subject to any penalty or tax with respect to any TTI Employee
Plan under Section 402(i) of ERISA or Sections 4975 through
4980 of the Code.
(e) Pension Plans. TTI does not now, nor has it ever,
maintained, established, sponsored, participated in, or
contributed to, any Pension Plan which is subject to Title IV
of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any
Multiemployer Plan.
(g) No Post-Employment Obligations. No TTI Employee
Plan provides, or has any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare
benefits to any person for any reason, except as may be
required by COBRA or other applicable statutes, and TTI has
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never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to
Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree
life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute.
(h) FMLA. Neither TTI nor any Affiliate has, prior to
the Effective Time violated any of the health care
continuation requirements of COBRA, the requirements of FMLA
or any similar provisions of state law applicable to its
Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the
consummation of the transactions contemplated hereby
will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event
under any TTI Employee Plan, Employee Agreement,
trust or loan that will or may result in any payment
(whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(ii) No payment or benefit which will or may
be made by TTI or its Affiliates with respect to any
Employee as a result of the transactions contemplated
by this Agreement will be characterized as an "excess
parachute payment," within the meaning of Section
28OG(b)(1) of the Code.
(j) Employment Matters. TTI (i) is in compliance in
all material respects with all applicable foreign, federal,
state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of
wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any payment
to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or
obligations for Employees. There are no pending, threatened or
reasonably anticipated claims or actions against TTI under any
worker's compensation policy or long-term disability policy.
To TTI's knowledge, no employee of TTI has violated any
employment contract, nondisclosure agreement or noncompetition
agreement by which such employee is bound due to such employee
being employed by TTI and disclosing to TTI or using trade
secrets or proprietary information of any other person or
entity.
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(k) Labor. No work stoppage or labor strike against
TTI is pending, threatened or reasonably anticipated. TTI does
not know of any activities or proceedings of any labor union
to organize any Employees. There are no actions, suits,
claims, labor disputes or grievances pending, or, to the
knowledge of TTI, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters
involving any Employee, including, without limitation, charges
of unfair labor practices or discrimination complaints, which,
if adversely determined, would, individually or in the
aggregate, result in any liability to TTI. TTI has not engaged
in any unfair labor practices within the meaning of the
National Labor Relations Act. TTI is not presently, nor has it
been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to
Employees, and no collective bargaining agreement is being
negotiated by TTI.
(l) International Employee Plans. Each International
Employee Plan has been established, maintained and
administered in material compliance with its terms and
conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such
International Employee Plan. Furthermore, no International
Employee Plan has unfunded liabilities, that as of the
Effective Time, will not be offset by insurance or fully
accrued. Except as required by law, no condition exists that
would prevent SCG or TTI from terminating or amending any
International Employee Plan at any time for any reason.
SECTION 3.10 Litigation. There is no suit, claim, action, proceeding,
claim, arbitration, or investigation pending or, to the best knowledge of TTI,
threatened against, TTI (or any of its officers, directors or employees in their
capacity as such) before any Governmental Entity. TTI is not aware of any basis
for any such action, suit, proceeding, claim, arbitration or investigation. TTI
has never been subject to an audit, compliance review, investigation, or like
contract review by the GSA office of the Inspector General or other Governmental
Entity or agent thereof in connection with any government contract (a
"Government Audit"). To the best of TTI's knowledge, no Government Audit is
threatened or reasonably anticipated, and in the event of such Government Audit,
to the best of TTI's knowledge, no basis would exist for a finding of
noncompliance with any provision of any government contract or a refund of any
amounts paid or owed by any Governmental Entity pursuant to such government
contract. TTI is not subject to any outstanding order, writ, judgment,
injunction or decree.
SECTION 3.11 Compliance with Applicable Law. TTI currently holds, and
at all relevant times has held, all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of its business (the "TTI Permits"). TTI has complied, and currently is
in compliance, with all the terms of each TTI Permit. The business of TTI is not
being, and has never been, conducted in violation of any law, ordinance or
regulation of any Governmental Entity. As of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to TTI is
pending or, to the best knowledge of TTI, threatened, nor has any Governmental
Entity indicated an intention to conduct the same.
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SECTION 3.12 Proprietary Information of Third Parties. To the best of
TTI's knowledge, no third party has claimed that any person employed by TTI has
(a) violated or may be violating any of the terms or conditions of his or her
employment, non-competition or non-disclosure agreement or utilized or may be
utilizing any trade secret or proprietary information or documentation of such
third party, or (b) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from TTI which suggests that
such a claim might be contemplated. To the best of TTI's knowledge, (i) no
person employed by TTI has employed or proposes to employ any trade secret or
any information or documentation proprietary to any former employer, (ii) no
person employed by TTI has violated any confidential relationship which such
person may have had with any third party, in connection with the development,
manufacture or sale of any product or proposed product or the development or
sale of any service or proposed service of TTI, and (iii) there is no reason to
believe there will be any such employment or violation.
SECTION 3.13 Title to Properties. TTI has good, clear and marketable
title to all of its properties and assets, and all such properties and assets
are free and clear of mortgages, pledges, security interests, liens, charges,
claims, restrictions and other encumbrances (including without limitation,
easements and licenses), except for liens for or current taxes not yet due and
payable. To the best of TTI's knowledge, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would adversely affect the use or
operation of any of such properties and assets for SCG's intended uses and
purposes, or the value of such properties, and TTI has not received notice of
any special assessment proceedings which would affect such properties and
assets.
SECTION 3.14 Leasehold Interests. TTI is not a lessee of any property,
real or personal.
SECTION 3.15 Taxes. TTI has filed all tax returns, Federal, state,
county and local, required to be filed by it, those returns accurately and
completely reflect TTI's tax obligations with respect to the periods covered
thereby, and TTI has paid all taxes shown to be due by such returns as well as
all other taxes, interest, penalties, assessments and other amounts asserted to
be due or payable by any taxing authority, including without limitation all
taxes which TTI is obligated to withhold from amounts paid or owing to
employees, creditors and third parties. Adequate reserves have been established
by TTI for all taxes accrued but not yet payable. The tax returns of TTI have
never been audited by the Internal Revenue Service or any other taxing
authority. No deficiency assessment with respect to, or proposed adjustment of,
TTI's Federal, state, county or local taxes is pending or, to the best of TTI's
knowledge, threatened. There is no tax lien, whether imposed by any Federal,
state, county or local taxing authority, outstanding against any assets,
properties or business of TTI.
SECTION 3.16 Other Agreements. TTI is not a party to or otherwise bound
by any written or oral contract or instrument or other restriction. TTI is not a
party to or otherwise bound by any written or oral:
(a) distribution, joint marketing, dealer,
manufacturer's representative or sales agency contract or
agreement;
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(b) sales contract which entitles any customer to a
rebate or right of set-off, to return any product to TTI after
acceptance thereof or to delay the acceptance thereof;
(c) development agreement;
(d) contract or other commitment with any supplier;
(e) contract for the future purchase of fixed assets
or for the future purchase of materials, supplies or
equipment;
(f) agreement or indenture relating to the borrowing
of money or to the mortgaging or pledging of, or otherwise
placing a lien or security interest on, any asset of TTI;
(g) any agreement of indemnification or guaranty;
(h) voting trust or agreement, stockholders'
agreement, pledge agreement, buy-sell agreement or first
refusal or preemptive rights agreement relating to any
securities of TTI;
(i) agreement, or group of related agreements with
the same party or any group of affiliated parties, under which
TTI has advanced or agreed to advance money or has agreed to
lease any property as lessee or lessor;
(j) agreement or obligation (contingent or otherwise)
to issue, sell or otherwise distribute or to repurchase or
otherwise acquire or retire any share of TTI capital stock or
any of TTI's other equity securities (other than pursuant to
an exercise of the Warrants in accordance with the terms
thereof);
(k) assignment, license or other agreement with
respect to any form of intangible property;
(l) agreement under which it has granted any person
any registration rights;
(m) agreement under which it has limited or
restricted TTI's right to compete with any person in any
respect;
(n) other contract or group of related contracts with
the same party involving more than $500; or
(o) other contract, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed
with the SEC as an exhibit to a registration statement on Form
S-1 if TTI were registering securities under the Securities
Act.
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TTI, and to the best of TTI's knowledge, each other party thereto have in all
material respects performed all the obligations required to be performed by them
to date, have received no notice of default and are not in material default
(with due notice or lapse of time or both) under any agreement, contract,
instrument or commitment to which TTI is or was a party. TTI has no present
expectation or intention of not fully performing all its obligations under each
current agreement, contract, instrument or commitment to which it is a party,
and TTI has no knowledge of any breach or anticipated breach by the other party
to any such agreement, contract, instrument or commitment. TTI is in full
compliance with all of the terms and provisions of its Articles of Incorporation
and Bylaws, as amended.
SECTION 3.17 SEC Filings. TTI has filed all forms, reports, and
documents required to be filed by TTI with the SEC and has made available to SCG
such forms, reports, and documents in the form filed with the SEC. All such
required forms, reports and documents (including those that TTI may file
subsequent to the date hereof) are referred to herein as the "TTI SEC Reports."
As of their respective filing dates, the TTI SEC Reports (a) complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such TTI SEC Reports and (b) did not at the time they were filed
(or if amended or superceded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
SECTION 3.18 Change of Control Payments. TTI is not a party to any plan
or agreement pursuant to which any amounts may become payable (whether currently
or in the future) to any person, including without limitation any current or
former officer or director of TTI, as a result of or in connection with the
Merger.
SECTION 3.19 Statements; Proxy Statement/Prospectus. The information
supplied by TTI for inclusion in the Registration Statement (as defined in
Section 3.04) shall not at the time the Registration Statement is filed with the
SEC and at the time it becomes effective under the Securities Act contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not false or misleading.
The information supplied by TTI for inclusion in the proxy statement/prospectus
(such proxy statement/prospectus as amended or supplemented being referred to
herein as the "Proxy Statement/Prospectus") to be sent to (a) the stockholders
of TTI in connection with the meeting of TTI's stockholders to consider the
approval and adoption of this Agreement and the approval of the Merger (the "TTI
Stockholders' Meeting") and (b) to the stockholders of SCG in connection with
the meeting of SCG's stockholders to consider the approval and adoption of this
Agreement and the approval of the Merger (the "SCG Stockholders' Meeting") shall
not, on the date the Proxy Statement/Prospectus is first mailed to SCG's
stockholders or TTI's stockholders or at the time of the TTI Stockholders'
Meeting or SCG Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
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with respect to the solicitation of proxies for the TTI Stockholders' Meeting or
the SCG Stockholders' Meeting which has become false or misleading. The Proxy
Statement/Prospectus will, to the extent required by applicable law, comply as
to form in all material respects with the provisions of the Securities Act, the
Exchange Act, and the rules and regulations thereunder. If, at any time prior to
the Effective Time, any event relating to TTI or any of its affiliates,
officers, or directors should be discovered by TTI which is required to be set
forth in an amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, TTI shall promptly inform SCG.
SECTION 3.20 Environmental Matters. TTI has not caused or allowed, or
contracted with any party for, the generation, use, transportation, treatment,
storage or disposal of any Hazardous Substances (as defined below) in connection
with the operation of its business or otherwise. TTI, the operation of its
business, and any real property that TTI owns, and to the best of TTI's
knowledge, any real property which TTI leases or otherwise occupies or uses
(collectively, the "Premises") are in compliance in all material respects with
all applicable Environmental Laws (as defined below) and orders or directives of
any governmental authorities having jurisdiction under such Environmental Laws,
including, without limitation, any Environmental Laws or orders or directives
with respect to any cleanup or remediation of any release or threat of release
of Hazardous Substances. TTI has not received any citation, directive, letter or
other communication, written or oral, or any notice of any proceeding, claim or
lawsuit, from any person arising out of the ownership or occupation of the
Premises, or the conduct of its operations, and TTI is not aware of any basis
therefor. TTI has obtained and is maintaining in full force and effect all
necessary permits, licenses and approvals required by all Environmental Laws
applicable to the Premises and the business operations conducted thereon
(including operations conducted by tenants on the Premises), and is in
compliance in all respects with all such permits, licenses and approvals. TTI
has not caused or allowed a release, or a threat of release, of any Hazardous
Substance unto, at or near the Premises, and, to the best of TTI's knowledge,
neither the Premises nor any property at or near the Premises has ever been
subject to a release, or a threat of release, of any Hazardous Substance. For
the purposes of this Agreement, the term "Environmental Laws" shall mean any
Federal, state or local law or ordinance or regulation pertaining to the
protection of human health or the environment, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601, et seq.,the Emergency Planning and Community Right-to-Know Act,
42 U.S.C. Sections 11001, et seq., and the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq. For purposes of this Agreement, the term
"Hazardous Substances" shall include oil and petroleum products, asbestos,
polychlorinated biphenyls, urea formaldehyde and any other materials classified
as hazardous or toxic under any Environmental Laws.
SECTION 3.21 Foreign Corrupt Practices Act. TTI has not taken any
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules and regulations thereunder. To the best of
TTI's knowledge, there is not now, and there has never been, any employment by
TTI of, or beneficial ownership in TTI by, any governmental or political
official in any country in the world.
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SECTION 3.22 Products. TTI has no knowledge of any defects in the
design of, or technology embodied in, any product which TTI currently markets or
has marketed in the past that impairs or is likely to impair the stated use of
the product or, in connection with such stated use, is reasonably likely to
injure any consumer of the product or any third party.
SECTION 3.23 Intellectual Property. TTI owns all right, title and
interest in or has license rights to all patents, trademarks, service marks,
trade names, mask works, copyrights, trade secrets, know-how, technology and
other intellectual property and proprietary rights material to the conduct of
its business as presently and previously conducted (the "TTI Intellectual
Property"). TTI is not aware of any infringement of the TTI Intellectual
Property by any third party. TTI has not received any claim or notice stating
that it has infringed upon or violated any of the patents, trademarks, service
marks, trade names, mask works, copyrights, trade secrets, proprietary rights or
other intellectual property of any other person. TTI has taken all reasonable
measures to protect the secrecy, confidentiality, and value of the TTI
Intellectual Property.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCG
The representations and warranties of SCG in this Article IV, together
with the information contained in the SCG Disclosure Schedule, are being made
and given as of the date hereof.
SCG represents and warrants to TTI that, except as set forth in this
Agreement:
SECTION 4.01 Organization. SCG is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey and has
all requisite corporate power and corporate authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have a material adverse effect on SCG. SCG is
duly qualified or licensed to do business and in good standing 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 or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not in the aggregate have a material adverse effect on SCG. SCG
does not have any Subsidiaries.
SECTION 4.02 Capitalization. As of the date hereof, the authorized
capital stock of SCG consists of 5,000 shares of SCG Common Stock of which
4,532.65 shares are issued and outstanding. The Board of Directors of SCG has
approved an amendment to the Certificate of Incorporation of SCG (the "Proposed
Amendment") which would authorize an increase in the number of authorized shares
of SCG Common Stock from 5,000 to 10,000 and is currently seeking shareholder
approval of such Proposed Amendment. As of the date hereof, 1,000 shares of SCG
Common Stock are reserved for issuance under the 1999 Option Plan, of which
options to purchase 426.5 shares of Common Stock are outstanding. All the
outstanding shares of SCG's capital stock are, and all shares of SCG Common
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Stock which may be issued pursuant to the 1999 Option Plan will be, when issued
in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable and free of any preemptive rights in
respect thereto. As of the date hereof, no Voting Debt of SCG is issued or
outstanding.
Except as set forth above, the issuance of options or shares of SCG
Common Stock pursuant to the 1999 Option Plan, and the planned issuance by SCG
of up to 1,417.35 additional shares of SCG Common Stock prior to the Merger, and
except for this Agreement, as of the date hereof, there are no existing options,
warrants, calls, subscriptions or other rights or other agreements or
commitments of any character relating to the issued or unissued capital stock or
Voting Debt of SCG or obligating SCG to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interests in, SCG, or securities convertible into or exchangeable
for such shares or equity interests or obligating SCG to grant, extend or enter
into any such option, warrant, call, subscription or other right, agreement or
commitment. There are no outstanding contractual obligations of SCG to
repurchase, redeem or otherwise acquire any shares of capital stock of SCG.
SECTION 4.03 Authority. SCG has the requisite corporate power and
corporate authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of SCG and no other corporate proceedings on the part of SCG are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (except for the approval of SCG's stockholders required pursuant to
the provisions of the BCA). This Agreement has been duly executed and delivered
by SCG, and, assuming this Agreement constitutes a valid and binding obligation
of TTI and Mazzone, constitutes a valid and binding obligation of SCG,
enforceable against it in accordance with its respective terms.
SECTION 4.04 Consents and Approvals; No Violations.
(a) Except as contemplated by this Agreement, neither
the execution, delivery or performance of this Agreement by
SCG nor the consummation by SCG of the transactions
contemplated hereby nor compliance by SCG with any of the
provisions hereof will (i) conflict with or result in any
breach of any provision of the certificate of incorporation or
by-laws of SCG, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage,
indenture, license, lease, contract, agreement or other
instrument or obligation to which SCG is a party or by which
it or any of its properties or assets may be bound, or (iii)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to SCG or any of its properties or
assets, except in the case of (ii) and (iii) for violations,
breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on SCG
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(b) No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with
any Governmental Entity or any third party, is required to be
obtained or made by SCG in connection with the execution and
delivery of this Agreement or the consummation of the Merger,
except for (i) the Merger Filings with the Secretary of State
of the State of Delaware and the Department of Revenue of the
State of New Jersey; and (ii) such other consents,
authorizations, filings, approvals, and registrations which if
not obtained or made would not be material to SCG or TTI or
adversely effect the ability of the parties hereto to
consummate the Merger.
SECTION 4.05 Absence of Certain Changes. Since September 30, 1998 (the
"Reference Date"), there has been no material adverse change in the business,
operations, condition (financial or otherwise), results of operations, assets or
liabilities of SCG Since the Reference Date, except as described herein or with
respect to the transactions contemplated hereby, SCG has conducted its business
consistent with past practices and there has been no material change other than
in the ordinary course of business, and SCG has not (a) as of the date hereof,
incurred loss of, or significant injury to, any assets of SCG as a result of any
fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident,
act of God or public enemy or armed forces, or other occurrence materially
adversely affecting the property or business of SCG; (b) issued any capital
stock, bonds or other corporate securities or debt instruments, or granted any
options, warrants or other rights calling for the issuance thereof (other than
as disclosed in Section 4.02 hereof); (c) other than in the ordinary course of
business, borrowed any funds in an aggregate amount exceeding $50,000; (d)
incurred or, to SCG's knowledge, become subject to, any material obligation or
liability (absolute or contingent, matured or unmatured), except for current
liabilities incurred in the ordinary course of business; (e) declared or made
payment of, or set aside for payment, any dividends or distributions of any
assets, or purchased, redeemed or otherwise acquired any of SCG capital stock,
any securities convertible into capital stock, or any other securities; (f)
mortgaged, pledged or subjected to any material liens, mortgages, security
interests or encumbrances of any kind, other than for taxes not yet due and
payable or liens or encumbrances that are not material to SCG, any of its
assets; (g) sold, exchanged, transferred or otherwise disposed of any of its
material assets, or canceled any material debts or claims, except in each case
in the ordinary course of business; (h) acquired a material amount of assets
except in the ordinary course of business; (i) written down the value of any
assets or written off as uncollectible any notes or accounts receivables, except
write-downs and write-offs in the ordinary course of business, none of which,
individually or in the aggregate, are material; (j) entered into any material
transactions other than in the ordinary course of business; (k) increased the
rate of compensation payable, or to become payable, by it to any of its
officers, employees, agents, or independent contractors over the rate being paid
to them on the Reference Date, except for increases in the ordinary course of
business consistent with past practices; (l) made or permitted any material
amendment or termination of any material agreement to which it is a party; (m)
through negotiation or otherwise, made any commitment or incurred any liability
to any labor organization; (n) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind to any director, officer or
employee; (o) made any material change in any method of accounting or accounting
practice; or (p) entered into any binding obligation to do any of the foregoing.
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SECTION 4.06 No Undisclosed Liabilities. Except as and to the extent
set forth in SCG's audited financial statements as of, and for the two (2) years
ended September 30, 1998, SCG did not have any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by generally accepted accounting principles to be reflected on a consolidated
balance sheet of SCG (including the notes thereto). Since the Reference Date,
SCG has not incurred any liabilities outside of the ordinary course of business
of any nature, whether or not accrued, contingent or otherwise, which would
have, individually or in the aggregate, a material adverse effect on SCG
SECTION 4.07 Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the best knowledge of SCG, threatened against SCG
before any Governmental Entity which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on SCG or a material adverse
effect on the ability of SCG to consummate the transactions contemplated by this
Agreement. SCG is not subject to any outstanding order, writ, injunction or
decree which, insofar as can be reasonably foreseen, individually or in the
aggregate, in the future would have a material adverse effect on SCG or a
material adverse effect on the ability of SCG to consummate the transactions
contemplated hereby.
SECTION 4.08 Compliance with Applicable Law. SCG holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of SCG business (the "SCG Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which would not, individually or in the aggregate, have a
material adverse effect on SCG SCG is in compliance with the terms of the SCG
Permits, except where the failure so to comply would not have a material adverse
effect on SCG. The business of SCG is not being conducted in violation of any
law, ordinance or regulation of any Governmental Entity, except for possible
violations which individually or in the aggregate do not, and, insofar as
reasonably can be foreseen, in the future will not, have a material adverse
effect on SCG. As of the date of this Agreement, no investigation or review by
any Governmental Entity with respect to SCG is pending or, to the best knowledge
of SCG, threatened, nor has any Governmental Entity indicated an intention to
conduct the same.
SECTION 4.09 Vote Required. The affirmative vote of the Board of
Directors of SCG and a majority of the outstanding shares of the SCG Common
Stock are the only votes by SCG necessary to approve the transactions
contemplated hereby.
SECTION 4.10 Taxes. SCG has filed all tax returns, Federal, state,
county and local, required to be filed by it, those returns accurately and
completely reflect SCG's tax obligations with respect to the periods covered
thereby, and SCG has paid all taxes shown to be due by such returns as well as
all other taxes, interest, penalties, assessments and other amounts asserted to
be due or payable by any taxing authority, including without limitation all
taxes which SCG is obligated to withhold from amounts paid or owing to
employees, creditors and third parties. Adequate reserves have been established
by SCG for all taxes accrued but not yet payable. The tax returns of SCG have
never been audited by the Internal Revenue Service or any other taxing
authority. No deficiency assessment with respect to or proposed adjustment of
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SCG's Federal, state, county or local taxes is pending or, to the best of SCG's
knowledge, threatened. There is no tax lien, whether imposed by any Federal,
state, county or local taxing authority, outstanding against the assets,
properties or business of SCG.
SECTION 4.11 No Reliance on Forecasts. In the negotiation and
consideration of the transactions contemplated by this Agreement, TTI and TTI's
Board of Directors have not relied on any information or documents concerning
SCG and its business or financial results except: (a) representations and
warranties made by SCG in this Agreement, and (b) disclosure of financial
results made pursuant to this Agreement. In the course of negotiations, SCG and
TTI exchanged information concerning hypothetical situations, based on various
assumptions, of the results of operations of the combined companies and possible
market prices for the TTI Common Stock following the Effective Time. SCG makes
no representation or warranty regarding any such hypothetical situations
provided by it, including those that may contain forecasts or projections of
SCG's future operating results, and TTI disclaims reliance on any such
hypothetical situations provided by SCG or third parties.
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ARTICLE V
COVENANTS
Section 5.01 Covenants of TTI and SCG. During the period from the date
of this Agreement and continuing until the Effective Time, TTI and SCG each
agree (except as expressly contemplated or permitted by this Agreement, or to
the extent that the other party shall otherwise consent in writing):
(a) Ordinary Course. Except as contemplated by this
Agreement, each party shall carry on their respective
businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use
commercially reasonable efforts to preserve intact their
present business organizations, keep available the services of
their present officers and employees and preserve their
relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and
ongoing business shall not be impaired in any material respect
at the Effective Time.
(b) Dividends; Changes in Stock. No party shall, nor
shall any party propose to, (i) declare or pay any dividends
on or make other distributions in respect of any of its
capital stock, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii)
repurchase, redeem or otherwise acquire any shares of capital
stock of such party. Notwithstanding anything to the contrary
contained herein, TTI shall prior to the Effective Time, as
contemplated by Section 6.12 hereof, declare and pay a
dividend to the TTI shareholders of record (with an adequate
reserve to be established pursuant to the terms and provisions
of the Warrants) of all of the outstanding stock of the entity
which is the transferee of TTI's assets and liabilities
pursuant to Section 6.12 hereof.
(c) Issuance of Securities. Except for the issuance
of shares of TTI Common Stock pursuant to the exercise of a
Warrant, TTI shall not issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its
capital stock of any class, any Voting Debt or any securities
convertible into, or any rights, warrants, calls,
subscriptions or options to acquire, any such shares, Voting
Debt or convertible securities.
(d) Governing Documents. Except for the Proposed
Amendment and the Proposed TTI Amendment, neither TTI nor SCG
shall amend or propose to amend its Certificate of
Incorporation or By-laws.
(e) No Dispositions. Other than transactions in the
ordinary course of business consistent with prior practice, no
party shall sell, lease, license, encumber or otherwise
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dispose of, or agree to sell, lease, license, encumber or
otherwise dispose of, any of its assets which are material,
individually or in the aggregate, to TTI or to SCG.
(f) Indebtedness. No party shall incur any
indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants
or rights to acquire any debt securities of such party or
guarantee any debt securities of others, other than in each
case in the ordinary course of business consistent with prior
practice.
(g) Other Actions. Notwithstanding the fact that such
action might otherwise be permitted pursuant to this Section
5.01, no party shall take any action, or by inaction permit an
event to occur, which would or is reasonably likely to result
in any of its representations and warranties set forth in this
Agreement being untrue or in any of the conditions to the
Merger set forth in Article VII not being satisfied. SCG or
TTI, as the case may be, shall promptly give written notice to
the other party upon becoming aware of any fact which, if
known on the date hereof would have been required to be set
forth or disclosed pursuant to this Agreement, and any
impending or threatened breach in any material respect of any
of the representations and warranties contained in this
Agreement and with respect to the latter shall use all
reasonable efforts to remedy the same.
(h) Advice on Changes; Filings. Each of SCG and TTI
shall confer on a regular and frequent basis with the other,
report on operational matters and promptly advise the other
orally and in writing of any change or event having, or which,
insofar as can reasonably be foreseen, could have, a material
adverse effect on such party. Each of SCG and TTI shall
promptly provide the other (or its counsel) copies of all
filings made by such party with any Federal, state or foreign
Governmental Entity in connection with this Agreement or the
transactions contemplated hereby.
(i) Benefit Plans; Employment Arrangements. Except as
contemplated by this Agreement, TTI shall not enter into,
adopt, amend (except as may be required by law) or terminate
any TTI Benefit Plan, or other employee benefit plan or any
compensatory or benefit agreement, arrangement, plan or policy
between TTI and one or more of its directors or officers. TTI
shall not, except for normal increases in the ordinary course
of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense, increase in any manner the compensation
or fringe benefits of any director, officer, employee or
consultant or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including,
without limitation, the granting of stock appreciation rights
or performance units) or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
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(j) No Solicitations. No party shall nor shall any
party authorize or permit any of their respective officers,
directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained
by them to solicit, initiate or encourage submission of
proposals or offers from any person relating to any
acquisition or purchase of all or a substantial portion of the
assets of, or any material equity interest in, such party or
any merger, consolidation, amalgamation or other business
combination with such party.
Section 5.02. Additional Covenants of TTI. During the period from the
date of this Agreement and continuing until the Effective Time, TTI agrees that
it will not, without the prior written consent of SCG, acquire or agree to
acquire, in consideration for the payment of any TTI Common Stock or other
capital stock of TTI, by merger or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or agree to
acquire any assets, in each case which are material, individually or in the
aggregate, to TTI.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Access to Information. Upon reasonable notice and subject
to restrictions contained in confidentiality agreements to which such party is
subject (from which such party shall use reasonable efforts to be released), TTI
and SCG shall each afford to the officers, employees, accountants, counsel and
other representatives of the other, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each of TTI and SCG shall
furnish promptly to the other (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws, if applicable, and (ii) all
other information concerning its business, properties and personnel as such
other party may reasonably request. Unless otherwise required by law, the
parties will hold any such information which is nonpublic in confidence until
such time as such information otherwise becomes publicly available through no
wrongful act of either party, and in the event of termination of this Agreement
for any reason each party shall promptly return all nonpublic documents obtained
from any other party, and any copies made of such documents, to such other
party.
SECTION 6.02 TTI Stockholders Meeting. As soon as reasonably
practicable following the date of this Agreement, TTI shall take all action
reasonably necessary in accordance with the GCL, its Certificate of
Incorporation and By-laws, to cause its stockholders, by resolution, a meeting
or otherwise, to approve and adopt this Agreement and the Merger.
SECTION 6.03 SCG Stockholders Meeting. As soon as reasonably
practicable following the date of this Agreement, SCG shall take all action
reasonably necessary in accordance with the BCA, its Certificate of
Incorporation and By-laws, to cause its stockholders, by resolution, a meeting
or otherwise, to approve and adopt this Agreement and the Merger.
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SECTION 6.04 Legal Conditions to Merger. Each of TTI and SCG will take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to the Merger (which actions shall
include, without limitation, approvals or filings with any Governmental Entity)
and will promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon either of them in connection
with the Merger. Each of TTI and SCG will promptly take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained by SCG and TTI in connection with the Merger or the taking of any
action contemplated thereby or by this Agreement.
SECTION 6.05 Affiliates. SCG will advise all persons who are, at the
time this Agreement is submitted for approval to the stockholders of SCG,
"affiliates" of SCG for purposes of Rule 145 under the Securities Act ("Rule
145") of resale restrictions imposed by the federal securities laws, including
Rule 145, on shares of TTI Common Stock received by them pursuant to the Merger.
SCG shall obtain from each such person a letter stating that such persons are
aware of such restrictions.
SECTION 6.06 Employee Benefit Plans. TTI shall, as soon as reasonably
practicable following the date of this Agreement, terminate each of its Employee
Benefit Plans.
SECTION 6.07 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
SECTION 6.08 Brokers or Finders. Each of SCG and TTI represents, as to
itself and its affiliates, that no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any brokers' or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, and each of SCG and TTI agree
to indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other fees, commissions or
expenses asserted by any person on the basis of any act or statement alleged to
have been made by such party or its affiliate.
SECTION 6.09 Indemnification. From and after the Effective Time,
neither SCG nor the Surviving Corporation shall assume, be subject to or
otherwise responsible for any of the debts, liabilities or obligations of TTI
existing or arising at or prior to the Effective Time. Mazzone, as the chief
executive officer and principal shareholder of TTI, hereby agrees to personally
indemnify and hold harmless SCG and the Surviving Corporation, and their
respective officers, directors, shareholders, employees, agents,
representatives, successors and assigns (collectively, the "Indemnified
Persons"), from and against, any loss, cost, damage or expense (including
reasonable attorneys' fees) arising from or related to any Covered Claim. For
purposes of this Agreement, the term "Covered Claim" shall mean any claim,
litigation, lawsuit or proceeding relating to or arising from (i) any
misrepresentation or breach of any covenant, warranty or agreement made by TTI
or Mazzone in this Agreement or any document delivered in connection with the
Merger, (ii) the conduct of TTI's business at or prior to the Effective Time, or
(iii) any debt, liability or obligation of TTI existing or arising at or prior
to the Effective Time.
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Mazzone shall, at or prior to the Effective Time, provide SCG with
collateral (collectively, the "Collateral"), consisting of (a) either real
estate or marketable securities (other than securities issued by TTI) having a
fair market value of not less than $250,000.00 (after deducting the aggregate
outstanding balance of all indebtedness or other obligations the repayment or
performance of which is secured by a lien on or security interest in such real
estate or marketable securities) and otherwise acceptable to SCG in its sole
discretion, pursuant to the terms and provisions of a mortgage and security
agreement or pledge and security agreement, as appropriate, in form and
substance acceptable to SCG in its sole discretion (the "Security Documents"),
and (b) a pledge of all of the outstanding securities issued by TTI and owned by
Mazzone on the date hereof (the "Pledged TTI Securities"), pursuant to the terms
and provisions of a pledge and security agreement in form and substance
acceptable to SCG in its sole discretion (the "Pledge Agreement"). The Pledged
TTI Securities shall consist of at least 1,425,000 shares of TI Common Stock.
The Collateral shall secure the payment and performance of Mazzone's
indemnification obligations hereunder with respect to any Covered Claim for
which TTI, SCG or the Surviving Corporation first receives notice prior to the
second anniversary of the Effective Time (hereinafter, a "Timely Covered
Claim").
Notwithstanding anything to the contrary contained herein, at any time
after the first anniversary of the Effective Time but prior to the second
anniversary of the Effective Time, Mazzone may submit a written request to the
Surviving Corporation for the release of a portion of the Collateral and, if at
the time such request is submitted the Surviving Corporation has previously
completed a Public Offering (as such term is defined hereinafter) and there is
no Timely Covered Claim which is then outstanding and unresolved, the Surviving
Corporation shall be obligated to release one-half of the Pledged TTI Securities
to Mazzone. Such released shares shall be subject, in all respects, to the terms
and provisions of the Lock-up Agreement required to be delivered by Mazzone
pursuant to Section 7.02(p) hereof. If there is no Timely Covered Claim
outstanding and unresolved on the second anniversary of the Effective Date, all
Pledged TTI Securities then being held pursuant to the provisions of this
Agreement shall be released to Mazzone.
For purposes of this Agreement, the term "Public Offering" shall mean
the consummation of an underwritten public offering of the common stock and/or
the preferred stock of the Surviving Corporation, registered under the
Securities Act, which results in receipt by the Surviving Corporation of
proceeds of at least Ten Million Dollars ($10,000,000.00).
Furthermore, notwithstanding anything to the contrary contained
herein, the aggregate amount for which Mazzone shall be liable with respect to
all Covered Claims is Two Million Dollars ($2,000,000.00).
SECTION 6.10 Further Assurances. SCG and TTI agree to execute and
deliver all such other instruments and take all such other action as any party
may reasonably request from time to time, before the Effective Time and without
payment of further consideration, in order to effectuate the transactions
provided for in this Agreement. The parties shall cooperate fully with each
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other and with their respective counsel and accountants in connection with any
steps required to be taken as part of their respective obligations under this
Agreement.
SECTION 6.11 Additional Agreements; Best Efforts. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of the stockholders of TTI and
SCG described herein.
SECTION 6.12 Transfer of Assets and Liabilities. Prior to the Effective
Time, TTI shall take all necessary steps to transfer all of its assets and
liabilities to another entity, except for (a) cash in an amount of not less than
$100.00 plus an amount equal to (i) $1.00, multiplied by (ii) the difference
between 251,600 and the number of Warrants outstanding at the Effective Time,
and (b) certain net operating loss tax carryforwards in an amount of not less
than $800,000.00. It is the intention of the parties that, at the Effective
Time, TTI shall be a corporate shell only, with no assets (other than the cash
and net operating loss tax carryforwards described in the immediately preceding
sentence) and no liabilities.
SECTION 6.13 Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations. As promptly as practicable after the execution
of this Agreement, SCG and TTI will prepare, and file with the SEC (if required
by the provisions of the Securities Act), the Proxy Statement/Prospectus, and
SCG and TTI will prepare and file with the SEC the Registration Statement in
which the Proxy Statement/Prospectus will be included as a prospectus (if
required by the provisions of the Securities Act). Each of SCG and TTI will
respond to any comments of the SEC, will use its respective commercially
reasonable efforts to have the Registration Statement declared effective under
the Securities Act as promptly as practicable after such filing, and each of TTI
and SCG will cause, if required by the provisions of the Securities Act, the
Proxy Statement/Prospectus to be mailed to its stockholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC. As promptly as practicable after the date of this Agreement, each of SCG
and TTI will prepare and file any other filings required to be filed by it under
the Exchange Act, the Securities Act or any other federal, foreign or Blue Sky
or related laws relating to the Merger and the transactions contemplated by this
Agreement (the "Other Filings"). Each of SCG and TTI will notify the other
promptly upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Proxy Statement/Prospectus, or any Other Filing or for additional
information and will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the SEC, or its
staff or any other government officials, on the other hand, with respect to the
Registration Statement, the Proxy Statement/Prospectus, the Merger or any Other
Filing. Each of SCG and TTI will cause all documents that it is responsible for
filing with the SEC or other regulatory authorities under this Section 6.13 to
comply in all material respects with all applicable requirements of law and the
rules and regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy
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Statement/Prospectus, the Registration Statement or any Other Filing, SCG or
TTI, as the case may be, will promptly inform the other of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to stockholders of TTI and/or SCG, such amendment or supplement.
SECTION 6.14 Stock Options and Employee Benefits.
(a) At the Effective Time, the Surviving Corporation
will assume the 1999 Option Plan, including without
limitation, to the extent required by the Board of Directors
of SCG, any options reserved for future issuance thereunder.
At the Effective Time, each option outstanding under the 1999
Option Plan (the "SCG Options"), whether or not exercisable,
will be assumed by the Surviving Corporation. Each SCG Option
so assumed by the Surviving Corporation under this Agreement
will continue to have, and be subject to, the same terms and
conditions set forth in the 1999 Option Plan immediately prior
to the Effective Time (including, without limitation, any
repurchase rights or vesting provisions), except that (i) each
SCG Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of
TTI Common Stock equal to the product of the number of shares
of SCG Common Stock that were issuable upon exercise of such
SCG Option immediately prior to the Effective Time multiplied
by the Exchange Ratio, rounded down to the nearest whole
number of shares of TTI Common Stock and (ii) the per share
exercise price for the shares of TTI Common Stock issuable
upon exercise of such assumed SCG Option will be equal to the
quotient determined by dividing the exercise price per share
of SCG Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent.
(b) It is intended that each SCG Option assumed by
the Surviving Corporation shall qualify following the
Effective Time as an incentive stock option, as defined in
Section 422 of the Code, to the extent such SCG Option
qualified as an incentive stock option immediately prior to
the Effective Time, and the provisions of this Section 6.14
shall be applied consistent with such intent.
(c) Notwithstanding anything to the contrary in this
Section 6.14, in lieu of assuming outstanding options under
the 1999 Option Plan, the Surviving Corporation may, at its
election, cause such outstanding options to be replaced by
issuing substantially equivalent replacement stock options
therefor.
SECTION 6.15 SCG Affiliate Agreement. SCG will use its commercially
reasonable efforts to deliver or cause to be delivered to TTI, prior to the
Effective Time, from each person who may be deemed to be, in SCG's reasonable
judgement, affiliates of SCG with the meaning of Rule 145 promulgated under the
Securities Act (each an "SCG Affiliate") an executed affiliate agreement in form
acceptable to SCG and TTI in their reasonable discretion (the "Affiliate
Agreements"), each of which will be in full force and effect as of the Effective
Time. TTI will be entitled to place appropriate legends on the certificates
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evidencing any TTI Common Stock to be received by an SCG Affiliate pursuant to
the terms of this Agreement, and to issue appropriate stop transfer instructions
to the transfer agent for the TTI Common Stock, consistent with the terms of the
Affiliate Agreements.
SECTION 6.16 Tax-free Reorganization. No party shall take any action
either prior to or after the Effective Time that could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code.
ARTICLE VII
CONDITIONS
SECTION 7.01 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have
been approved and adopted by the stockholders of TTI in
accordance with the applicable provisions of the GCL and by
the stockholders of SCG in accordance with the applicable
provisions of the BCA.
(b) Other Approvals. Other than the Merger Filings,
all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity required to
consummate the Merger shall have been filed, occurred or been
obtained or shall have been waived.
(c) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; there shall not
be pending any action, proceeding or investigation before any
court or administrative agency by any Governmental Entity and
any other person which has a reasonable likelihood of success,
challenging or seeking material damages in connection with, or
material changes in the terms of, the Merger.
(d) Registration Statement. The SEC shall have
declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for
that purpose, and no similar proceeding in respect of the
Proxy Statement/Prospectus, shall have been initiated or
threatened by the SEC.
(e) Tax Opinions. SCG shall have received from Archer
& Greiner, P.C., and TTI shall have received from Aitken,
Irvin, Lewin, Berlin, Vrooman & Cohn, LLP, written opinions to
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the effect that the Merger will constitute a reorganization
within the meaning of Section 368 of the Code. In rendering
such opinions, counsel may rely on (and to the extent
reasonably required, the parties shall make) reasonable
representations related thereto.
SECTION 7.02 Conditions of Obligations of SCG. The obligations of SCG
to effect the Merger are subject to the satisfaction of the following conditions
unless waived by SCG:
(a) Representations and Warranties. The
representations and warranties of TTI and Mazzone set forth in
this Agreement shall be true and correct in all material
respects as of the date hereof and (except to the extent such
representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing
Date, and SCG shall have received a certificate signed on
behalf of TTI by the chief executive officer and the chief
financial officer of TTI, and by Mazzone, to such effect.
(b) Performance of Obligations of TTI. TTI shall have
performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the
Closing Date, and SCG shall have received a certificate signed
on behalf of TTI by the chief executive officer and the chief
financial officer of TTI to such effect.
(c) No Amendments to Resolutions. Neither the Board
of Directors of TTI nor any committee thereof shall have
amended, modified, rescinded or repealed the resolutions
adopted by such Board on May 19, 1999 (accurate and complete
copies of which have been provided to SCG) and shall not have
adopted any other resolutions in connection with this
Agreement and the transactions contemplated hereby
inconsistent with such resolutions.
(d) Opinion of Counsel. SCG shall have received the
opinion of Aitken, Irvin, Lewin, Berlin, Vrooman & Cohn, LLP,
counsel to TTI, dated the Closing Date, with respect to such
matters as SCG may reasonably request.
(e) Material Adverse Change. Except as expressly
contemplated by this Agreement, no material adverse change
shall have occurred subsequent to the Balance Sheet Date in
the financial position, results of operations, assets,
liabilities or prospects of TTI, nor shall any event or
circumstance have occurred which would result in a material
adverse change in the financial position, results of
operations, assets, liabilities or aspects of TTI.
(f) Uniform Commercial Code Searches. TTI shall have
delivered to SCG certified copies of Requests for Information
or Copies (Form UCC-11) or equivalent reports, federal and
state tax lien searches, judgment searches and pending suit
searches from such jurisdictions as may be requested by SCG,
listing all effective financing statements, judgments, tax
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liens, judgments and pending suits which name TTI (under its
present name or any previous name or any trade name) as
debtor, together with copies of such financing statements,
judgments, tax liens, etc. Such searches shall indicate the
existence of no liens, claims, judgments or security
interests, or pending suits.
(g) Closing Balance Sheet. SCG shall have received a
balance sheet (the "Closing Balance Sheet")from TTI, dated as
of the date of Closing, and certified as being true, complete
and accurate in all respects by the chief financial officer of
TTI, which shows that the total liabilities of TTI do not
exceed $-0- in the aggregate.
(h) Completion of Due Diligence. SCG shall
satisfactorily complete a due diligence audit of the business,
financial condition and affairs of TTI, including without
limitation confirmation that the September 30, 1998 year-end
results of TTI previously provided by TTI to SCG are true and
correct in all material respects.
(i) Audited Financial Statements. SCG shall receive
audited financial statements for the last two (2) fiscal years
of TTI, prepared by Caprarao, Centofranchi, Kramer & Co. P.C.,
at TTI's sole cost and expense, in accordance with generally
accepted accounting principles and otherwise in form and
substance acceptable to SCG in its reasonable discretion.
(j) TTI Common Stock. The shares of TTI Common Stock
to be issued to holders of SCG Common Stock in the Merger
shall be validly issued, fully paid, nonassessable, free of
preemptive rights and free and clear of any liens, claims,
encumbrances, security interests, equities, charges and
options of any nature whatsoever.
(k) Capitalization. At the Closing Date, TTI shall
have (i) not more than 2,578,118 shares of TTI Common Stock
issued and outstanding (plus any shares of TTI Common Stock
issued pursuant to an exercise of the Warrants between the
date hereof and the Effective Date), and (ii) not granted any
options or warrants to purchase, or issued any other
securities convertible into, or entered into any agreements
(other than this Agreement and the certificates evidencing the
Warrants) to issue, any of its securities, other than as
disclosed or provided in this Agreement. TTI shall immediately
notify SCG in writing of the exercise of any Warrant occurring
between the date hereof and the Effective Date.
(l) Security Documents. SCG shall receive a fully
executed copy of each Security Document.
(m) Pledge Agreement. SCG shall receive a fully
executed copy of the Pledge Agreement, together with all
instruments required to be delivered to SCG pursuant to the
terms and provisions of the Pledge Agreement.
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(n) Reporting Company Status. TTI shall have taken
all steps necessary to become a "reporting company" within the
meaning of the Exchange Act.
(o) Equity Contributions. SCG shall have received
equity contributions of at least Two Million Dollars
($2,000,000) from or through TTI and/or Mazzone, or their
respective affiliates, in form and substance satisfactory to
SCG in its reasonable discretion.
(p) Lock-Up Agreements. Mazzone, and such of his
affiliates or affiliates of TTI as may be designated by SCG,
prior to the Effective Time, shall have executed and delivered
to SCG a Lock-Up Agreement, in form and substance satisfactory
to SCG in its reasonable discretion, whereby Mazzone and each
such affiliate agrees not to sell, encumber or otherwise
transfer (i) more than twenty percent (20%), in the aggregate,
of the shares of common stock or other securities of TTI owned
by Mazzone or such affiliate at the Effective Time prior to
the first anniversary of the Effective Time, or (ii) more than
twenty percent (20%) in the aggregate, of the shares of common
stock or other securities of TTI owned by Mazzone or such
affiliate at the Effective Time at any time after the first
anniversary of the Effective Time but prior to the second
anniversary of the Effective Time. Any transfer permitted
under the terms of any such Lock-Up Agreement shall only be
made in compliance with all applicable securities laws.
(q) Completion of Other Filings. SCG shall have
received evidence of the completion of all recordings and
filings of the Security Documents as may be necessary or, in
the opinion of SCG, desirable to perfect the security
interests and liens created or to be created by the Security
Documents. SCG shall have also received evidence of all other
actions necessary or, in the opinion of SCG, desirable to
create, perfect and protect the security interests and liens
intended to be created by the Security Documents.
SECTION 7.03 Conditions of Obligations of TTI. The obligation of TTI to
effect the Merger is subject to the satisfaction of the following conditions
unless waived by TTI:
(a) Representations and Warranties. The
representations and warranties of SCG set forth in this
Agreement shall be true and correct in all material respects
as of the date hereof and (except to the extent such
representations speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and TTI
shall have received a certificate signed on behalf of SCG by
its chief executive officers and chief financial officers to
such effect.
(b) Performance of Obligations of SCG. SCG shall have
performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the
Closing Date, and TTI shall have received a certificate signed
on behalf of SCG by its chief executive officers and chief
financial officers to such effect.
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(c) No Amendments to Resolutions. Neither the Board
of Directors of SCG nor any committee thereof shall have
amended, modified, rescinded or repealed the resolutions
adopted by such Board by unanimous written consent dated May
21, 1999 (accurate and complete copies of which have been
provided to TTI), and shall not have adopted any other
resolutions in connection with this Agreement and the
transactions contemplated hereby which are inconsistent with
such resolutions.
(d) Capitalization. At the Closing Date, SCG shall
have (i) (including any shares issuable pursuant to the
exercise of options issued under the 1999 Option Plan) not
more than 6,450 shares of SCG Common Stock issued and
outstanding, and (ii) not granted any options or warrants to
purchase, or issued any other securities convertible into, or
entered into any agreements (other than this Agreement) to
issue, any of its securities, other than as disclosed or
provided in this Agreement.
(e) Material Adverse Change. No material adverse
change shall have occurred subsequent to the Reference Date in
the financial position, results of operations, assets,
liabilities or prospects of SCG, nor shall any event or
circumstance have occurred which would result in a material
adverse change in the financial position, results of
operations, assets, liabilities or aspects of SCG.
(f) Opinion of Counsel. TTI shall have received the
opinion of Archer & Greiner, A Professional Corporation,
counsel to SCG, dated the Closing Date, with respect to such
matters as TTI may reasonably request.
(g) Equity Contributions. SCG shall have received
commitments for equity contributions of at least Three Million
Dollars ($3,000,000), which commitments shall be subject only
to consummation of the Merger and otherwise in form and
substance satisfactory to TTI in its reasonable discretion.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of TTI or SCG:
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(a) by mutual consent of the Boards of Directors of
SCG and TTI; or
(b) (i) by either SCG or TTI if there shall have been
a material breach of any representation, warranty, covenant or
agreement on the part of the other set forth in this Agreement
which breach shall not have been cured, in the case of a
representation or warranty, prior to the Closing or, in the
case of a covenant or agreement, within two (2) business days
following receipt by the breaching party of notice of such
breach, or (ii) by either SCG or TTI 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; or
(c) by either SCG or TTI if the Merger shall not have
been consummated before December 31, 1999, other than as a
result of a breach by the party attempting to terminate this
Agreement; or
(d) by either party if any required approval of the
stockholders of TTI or SCG shall not have been obtained by
reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders or otherwise or at
any adjournment of such meeting; or
(e) by SCG if any of the conditions specified in
Sections 7.01 or 7.02 has not been met or waived at such time
as such conditions can no longer be satisfied; or
(f) by TTI if any of the conditions specified in
Sections 7.01 or 7.03 has not been met or waived at such time
as such conditions can no longer be satisfied.
SECTION 8.02 Effect of Termination. In the event of a termination of
this Agreement by either TTI or SCG as provided in Section 8.01, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of SCG or TTI or their respective officers or directors, except (i) with
respect to the last sentence of Section 6.01, and Sections 6.07 and 6.08 and
(ii) to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
SECTION 8.03 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of TTI or of SCG, but, after any such approval,
no amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. Notwithstanding the foregoing, and except as otherwise provided by law,
any amendment, waiver, consent or approval contemplated by this Agreement to be
granted or delivered by SCG or TTI, shall be deemed to have been so granted or
delivered if given or approved by the President or Chief Executive Officer of
such party.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
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the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties. Except as
otherwise specifically provided herein, the representations and warranties
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time.
SECTION 9.02 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
personally delivered, or on the day specified for delivery when deposited with a
courier service such as Federal Express for delivery to the intended addressee,
or two days following the day when deposited in the United States mails, by
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
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(a) if to SCG, to
Solar Communications Group, Inc.
21 East Main Street
Suite 205
Millville, New Jersey 08332
Attention: James M. Rossi, President
Telecopy No.: (609) 825-5959
with a copy to:
Deborah A. Hays, Esquire
Archer & Greiner, A Professional Corporation
One Centennial Square
Haddonfield, New Jersey 08033
Telecopy No.: (609) 795-0574
and
(b) if to TTI or Mazzone, to
Thermaltec International, Corp.
68A Lamar Street
West Babylon, New York 11704
Attention: Andrew B. Mazzone, President
Telecopy No.: (516) 643-2514
with a copy to
Edward A. Vrooman, Esquire
Aitken, Irvin, Lewin, Berlin, Vrooman & Cohn, LLP
2 Gannett Drive
White Plains, New York 10604
Telecopy No.: (914) 694-1647
or to such other address as may be designated by a party to the other parties
hereto in accordance with the notice provisions of this Section 9.02.
SECTION 9.03 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
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followed by the words "without limitation." The phrases, "the date of this
Agreement," "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date set forth in the first
paragraph of this Agreement.
SECTION 9.04 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 9.05 Schedules and Exhibits. All Schedules and Exhibits
referred to herein or attached hereto constitute a part of this Agreement.
Disclosure on any Schedule shall be deemed to satisfy the disclosure
requirements of any other Schedule to which such information may also be
applicable, without any necessity to reference such Schedule in any other
Schedule.
SECTION 9.06 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, are not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
SECTION 9.07 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof; provided that issues involving the corporate governance of any of
the parties hereto shall be governed by their respective jurisdictions of
incorporation. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any state or federal court within the District of New Jersey, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served upon
them in any manner authorized by the laws of the State of New Jersey for such
persons, and waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction and such process.
SECTION 9.08 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 9.09 Publicity. Except as otherwise required by law or the
rules of the SEC or the NASD, for so long as this Agreement is in effect,
neither TTI nor SCG shall issue or cause the publication of any press release or
other public announcement with respect to the transactions contemplated by this
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Agreement without the consent of the other party. Any such press release or
public announcement shall be subject to the prior review of the other party,
which shall not be unreasonably delayed.
SECTION 9.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 9.11 Waiver of Jury Trial. Each of TTI, SCG and Mazzone hereby
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this agreement or the actions of TTI, SCG or Mazzone in the
negotiation, administration, performance and enforcement hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, SCG, TTI and Mazzone have caused this Agreement to
be duly executed as of the date first written above.
Attest: SOLAR COMMUNICATIONS GROUP, INC.
By
- ------------------------- ---------------------------------
Name: Name:
Title: Secretary Title:
Attest: THERMALTEC INTERNATIONAL, CORP.
By
- ------------------------- ---------------------------------
Name: Name:
Title: Secretary Title:
Witness:
- ------------------------- ----------------------------------
Name: ANDREW B. MAZZONE
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SCHEDULE 3.09
TTI EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS
----------------------------------------------------
None.
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ANNEX B
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
Section 262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss. 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock"
and"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 251 (other than a merger effected pursuant to ss.
251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to ss.ss. 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to ss. 228 or
ss. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constitutent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled
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to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
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(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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ANNEX C
NEW JERSEY STATUTES
TITLE 14A. CORPORATIONS, GENERAL
CHAPTER 11. RIGHTS OF DISSENTING SHAREHOLDERS
14A:11-1. Right of shareholders to dissent
(1) Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions
(a) Any plan of merger or consolidation to which the corporation is a
party, provided that, unless the certificate of incorporation otherwise provides
(i) a shareholder shall not have the right to dissent from any plan of
merger or consolidation with respect to shares
(A) of a class or series which is listed on a national securities exchange
or is held of record by not less than 1,000 holders on the record date fixed to
determine the shareholders entitled to vote upon the plan of merger or
consolidation; or
(B) for which, pursuant to the plan of merger or consolidation, he will
receive (x) cash, (y) shares, obligations or other securities which, upon
consummation of the merger or consolidation, will either be listed on a national
securities exchange or held of record by not less than 1,000 holders, or (z)
cash and such securities;
(ii) a shareholder of a surviving corporation shall not have the right to
dissent from a plan of merger, if the merger did not require for its approval
the vote of such shareholders as provided in section 14A:10-5.1 or in subsection
14A:10-3(4), 14A:10-7(2) or 14A:10-7(4); or
(b) Any sale, lease, exchange or other disposition of all or substantially
all of the assets of a corporation not in the usual or regular course of
business as conducted by such corporation, other than a transfer pursuant to
subsection (4) of N.J.S. 14A:10-11, provided that, unless the certificate of
incorporation otherwise provides, the shareholder shall not have the right to
dissent
(i) with respect to shares of a class or series which, at the record date
fixed to determine the shareholders entitled to vote upon such transaction, is
listed on a national securities exchange or is held of record by not less than
1,000 holders; or
(ii) from a transaction pursuant to a plan of dissolution of the
corporation which provides for distribution of substantially all of its net
assets to shareholders in accordance with their respective interests within one
year after the date of such transaction, where such transaction is wholly for
(A) cash; or
(B) shares, obligations or other securities which, upon consummation of the
plan of dissolution will either be listed on a national securities exchange or
held of record by not less than 1,000 holders; or
(C) cash and such securities; or
(iii) from a sale pursuant to an order of a court having jurisdiction.
(2) Any shareholder of a domestic corporation shall have the right to
dissent with respect to any shares owned by him which are to be acquired
pursuant to section 14A:10-9.
(3) A shareholder may not dissent as to less than all of the shares owned
beneficially by him and with respect to which a right of dissent exists. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all of the shares of such owner with respect to which the right of
dissent exists.
(4) A corporation may provide in its certificate of incorporation that
holders of all its shares, or of a particular class or series thereof, shall
have the right to dissent from specified corporate actions in addition to those
enumerated in subsection 14A:11-1(1), in which case the exercise of such right
of dissent shall be governed by the provisions of this Chapter.
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14A:11-2. Notice of dissent; demand for payment; endorsement of certificates
(1) Whenever a vote is to be taken, either at a meeting of shareholders or
upon written consents in lieu of a meeting pursuant to section 14A:5-6, upon a
proposed corporate action from which a shareholder may dissent under section
14A:11-1, any shareholder electing to dissent from such action shall file with
the corporation before the taking of the vote of the shareholders on such
corporate action, or within the time specified in paragraph 14A:5-6(2)(b) or
14A:5-6(2)(c), as the case may be, if no meeting of shareholders is to be held,
a written notice of such dissent stating that he intends to demand payment for
his shares if the action is taken.
(2) Within 10 days after the date on which such corporate action takes
effect, the corporation, or, in the case of a merger or consolidation, the
surviving or new corporation, shall give written notice of the effective date of
such corporate action, by certified mail to each shareholder who filed written
notice of dissent pursuant to subsection 14A:11-2(1), except any who voted for
or consented in writing to the proposed action.
(3) Within 20 days after the mailing of such notice, any shareholder to
whom the corporation was required to give such notice and who has filed a
written notice of dissent pursuant to this section may make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, for the payment of the fair value of his shares.
(4) Whenever a corporation is to be merged pursuant to section 14A:10-5.1
or subsection 14A:10-7(4) and shareholder approval is not required under
subsections 14A:10-5.1(5) and 14A:10-5.1(6), a shareholder who has the right to
dissent pursuant to section 14A:11-1 may, not later than 20 days after a copy or
summary of the plan of such merger and the statement required by subsection
14A:10-5.1(2) is mailed to such shareholder, make written demand on the
corporation or on the surviving corporation, for the payment of the fair value
of his shares.
(5) Whenever all the shares, or all the shares of a class or series, are to
be acquired by another corporation pursuant to section 14A:10-9, a shareholder
of the corporation whose shares are to be acquired may, not later than 20 days
after the mailing of notice by the acquiring corporation pursuant to paragraph
14A:10-9(3)(b), make written demand on the acquiring corporation for the payment
of the fair value of his shares.
(6) Not later than 20 days after demanding payment for his shares pursuant
to this section, the shareholder shall submit the certificate or certificates
representing his shares to the corporation upon which such demand has been made
for notation thereon that such demand has been made, whereupon such certificate
or certificates shall be returned to him. If shares represented by a certificate
on which notation has been made shall be transferred, each new certificate
issued therefor shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares shall
acquire by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making a demand for payment of the
fair value thereof.
(7) Every notice or other communication required to be given or made by a
corporation to any shareholder pursuant to this Chapter shall inform such
shareholder of all dates prior to which action must be taken by such shareholder
in order to perfect his rights as a dissenting shareholder under this Chapter.
14A:11-3. "Dissenting shareholder" defined; date for determination of fair
value
(1) A shareholder who has made demand for the payment of his shares in the
manner prescribed by subsection 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) is
hereafter in this Chapter referred to as a "dissenting shareholder."
(2) Upon making such demand, the dissenting shareholder shall cease to have
any of the rights of a shareholder except the right to be paid the fair value of
his shares and any other rights of a dissenting shareholder under this Chapter.
(3) "Fair value" as used in this Chapter shall be determined
(a) As of the day prior to the day of the meeting of shareholders at which
the proposed action was approved or as of the day prior to the day specified by
the corporation for the tabulation of consents to such action if no meeting of
shareholders was held; or
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(b) In the case of a merger pursuant to section 14A:10-5.1 or subsection
14A:10-7(4) in which shareholder approval is not required, as of the day prior
to the day on which the board of directors approved the plan of merger; or
(c) In the case of an acquisition of all the shares or all the shares of a
class or series by another corporation pursuant to section 14A:10-9, as of the
day prior to the day on which the board of directors of the acquiring
corporation authorized the acquisition, or, if a shareholder vote was taken
pursuant to section 14A:10-12, as of the day provided in paragraph 14A:11-
3(3)(a).
In all cases, "fair value" shall exclude any appreciation or depreciation
resulting from the proposed action.
14A:11-4. Termination of right of shareholder to be paid the fair value of his
shares
(1) The right of a dissenting shareholder to be paid the fair value of his
shares under this Chapter shall cease if
(a) he has failed to present his certificates for notation as provided by
subsection 14A:11-2(6), unless a court having jurisdiction, for good and
sufficient cause shown, shall otherwise direct;
(b) his demand for payment is withdrawn with the written consent of the
corporation;
(c) the fair value of the shares is not agreed upon as provided in this
Chapter and no action for the determination of fair value by the Superior Court
is commenced within the time provided in this Chapter;
(d) the Superior Court determines that the shareholder is not entitled to
payment for his shares;
(e) the proposed corporate action is abandoned or rescinded; or
(f) a court having jurisdiction permanently enjoins or sets aside the
corporate action.
(2) In any case provided for in subsection 14A:11-4(1), the rights of the
dissenting shareholder as a shareholder shall be reinstated as of the date of
the making of a demand for payment pursuant to subsections 14A:11-2(3), 14A:11-
2(4) or 14A:11-2(5) without prejudice to any corporate action which has taken
place during the interim period. In such event, he shall be entitled to any
intervening preemptive rights and the right to payment of any intervening
dividend or other distribution, or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu thereof,
at the election of the board, the fair value thereof in cash as of the time of
such expiration or completion.
14A:11-5. Rights of dissenting shareholder
(1) A dissenting shareholder may not withdraw his demand for payment of the
fair value of his shares without the written consent of the corporation.
(2) The enforcement by a dissenting shareholder of his right to receive
payment for his shares shall exclude the enforcement by such dissenting
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in subsection 14A:11-4(2) and except that
this subsection shall not exclude the right of such dissenting shareholder to
bring or maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is ultra vires, unlawful or fraudulent as to such
dissenting shareholder.
14A:11-6. Determination of fair value by agreement
(1) Not later than 10 days after the expiration of the period within which
shareholders may make written demand to be paid the fair value of their shares,
the corporation upon which such demand has been made pursuant to subsections
14A:11-2(3), 14A:11- 2(4) or 14A:11-2(5) shall mail to each dissenting
shareholder the balance sheet and the surplus statement of the corporation whose
shares he holds, as of the latest available date which shall not be earlier than
12 months prior to the making of such offer and a profit and loss statement or
statements for not less than a 12- month period ended on the date of such
balance sheet or, if the corporation was not in existence for such 12- month
period, for the portion thereof during which it was in existence. The
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corporation may accompany such mailing with a written offer to pay each
dissenting shareholder for his shares at a specified price deemed by such
corporation to be the fair value thereof. Such offer shall be made at the same
price per share to all dissenting shareholders of the same class, or, if divided
into series, of the same series.
(2) If, not later than 30 days after the expiration of the 10-day period
limited by subsection 14A:11-6(1), the fair value of the shares is agreed upon
between any dissenting shareholder and the corporation, payment therefor shall
be made upon surrender of the certificate or certificates representing such
shares.
14A:11-7. Procedure on failure to agree upon fair value; commencement of action
to determine fair value
(1) If the fair value of the shares is not agreed upon within the 30-day
period limited by subsection 14A:11-6(2), the dissenting shareholder may serve
upon the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) a written demand that it
commence an action in the Superior Court for the determination of the fair value
of the shares. Such demand shall be served not later than 30 days after the
expiration of the 30-day period so limited and such action shall be commenced by
the corporation not later than 30 days after receipt by the corporation of such
demand, but nothing herein shall prevent the corporation from commencing such
action at any earlier time.
(2) If a corporation fails to commence the action as provided in subsection
14A:11-7(1), a dissenting shareholder may do so in the name of the corporation,
not later than 60 days after the expiration of the time limited by subsection
14A:11-7(1) in which the corporation may commence such an action.
14A:11-8. Action to determine fair value; jurisdiction of court; appointment of
appraiser
In any action to determine the fair value of shares pursuant to this
Chapter:
(a) The Superior Court shall have jurisdiction and may proceed in the
action in a summary manner or otherwise;
(b) All dissenting shareholders, wherever residing, except those who have
agreed with the corporation upon the price to be paid for their shares, shall be
made parties thereto as an action against their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to receive
evidence and report to the court on the question of fair value, who shall have
such power and authority as shall be specified in the order of his appointment;
and
(d) The court shall render judgment against the corporation and in favor of
each shareholder who is a party to the action for the amount of the fair value
of his shares.
14A:11-9. Judgment in action to determine fair value
(1) A judgment for the payment of the fair value of shares shall be payable
upon surrender to the corporation of the certificate or certificates
representing such shares.
(2) The judgment shall include an allowance for interest at such rate as
the court finds to be equitable, from the date of the dissenting shareholder's
demand for payment under subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) to
the day of payment. If the court finds that the refusal of any dissenting
shareholder to accept any offer of payment, made by the corporation under
section 14A:11-6, was arbitrary, vexatious or otherwise not in good faith, no
interest shall be allowed to him.
14A:11-10. Costs and expenses of action
The costs and expenses of bringing an action pursuant to section 14A:11-8
shall be determined by the court and shall be apportioned and assessed as the
court may find equitable upon the parties or any of them. Such expenses shall
include reasonable compensation for and reasonable expenses of the appraiser, if
any, but shall exclude the fees and expenses of counsel for and experts employed
by any party; but if the court finds that the
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offer of payment made by the corporation under section 14A:11-6 was not made in
good faith, or if no such offer was made, the court in its discretion may award
to any dissenting shareholder who is a party to the action reasonable fees and
expenses of his counsel and of any experts employed by the dissenting
shareholder.
14A:11-11. Disposition of shares acquired by corporation
(1) The shares of a dissenting shareholder in a transaction described in
subsection 14A:11-1(1) shall become reacquired by the corporation which issued
them or by the surviving corporation, as the case may be, upon the payment of
the fair value of shares.
(2) (Deleted by amendment, P.L.1995, c. 279.)
(3) In an acquisition of shares pursuant to section 14A:10-9 or section
14A:10-13, the shares of a dissenting shareholder shall become the property of
the acquiring corporation upon the payment by the acquiring corporation of the
fair value of such shares. Such payment may be made, with the consent of the
acquiring corporation, by the corporation which issued the shares, in which case
the shares so paid for shall become reacquired by the corporation which issued
them and shall be cancelled.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
For information regarding provisions under which a director or officer of
the Registrant may be insured or indemnified in any manner against any liability
which such person may incur in such person's capacity as such, reference is made
to the Registrant's Certificate of Incorporation and Bylaws, copies of which are
incorporated herein by reference, which provide in general that the Registrant
shall indemnify its officers and directors to the fullest extent authorized by
law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated June 16, 1999 among Solar Communications
Group, Inc., Thermaltec International, Corp., and Andrew B. Mazzone., filed herewith as
Annex A to the joint proxy statement/prospectus
3.1* Certificate of Incorporation, as amended
3.2* Bylaws, as amended
4.1* Specimen Stock Certificate
4.2* Specimen Warrant Certificate
5.1* Opinion of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP concerning legality of shares
8.1* Opinion of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP concerning tax matters
8.2* Opinion of Archer & Greiner, P.C. concerning tax matters
10.1* TTI 1999 Stock Option Plan
21.1 Subsidiaries of Thermaltec International, Corp.
23.1 Consent of Withum, Smith & Brown
23.2* Consent of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP (included in Exhibit 5.1)
23.3* Consent of Archer & Greiner, P.C. (included in Exhibit 8.2)
27.1 Financial Data Schedule for Solar Communications Group, Inc.
99.1* TTI Proxy Card
99.2* SCG Proxy Card
</TABLE>
- ------------
*To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being made, a
post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
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(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any other material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person
or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect
to reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (b)(1) immediately preceding or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933, as
amended, and is used in connection with an offering of securities subject to
Rule 415, will be filed as part of an amendment to the registration
statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act of 1933,
as amended, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one (1) business day of
receipt of such request, and to send the incorporated documents by
first-class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
II-2
<PAGE>
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duty caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in West Babylon, New York, as of July 8,
1999.
THERMALTEC INTERNATIONAL, CORP.
By: /s/ Andrew B. Mazzone
------------------------------------
Andrew B. Mazzone, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons as of July 8,
1999 in the capacities indicated:
Signatures Title
---------- -----
/s/ Andrew B. Mazzone President and Sole Director
----------------------------- (CEO and CFO)
ANDREW B. MAZZONE
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated June 16, 1999 among Solar Communications
Group, Inc., Thermaltec International, Corp., and Andrew B. Mazzone., filed herewith as
Annex A to the joint proxy statement/prospectus
3.1* Certificate of Incorporation, as amended
3.2* Bylaws, as amended
4.1* Specimen Stock Certificate
4.2* Specimen Warrant Certificate
5.1* Opinion of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP concerning legality of shares
8.1* Opinion of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP concerning tax matters
8.2* Opinion of Archer & Greiner, P.C. concerning tax matters
10.1* TTI 1999 Stock Option Plan
21.1 Subsidiaries of Thermaltec International, Corp.
23.1 Consent of Withum, Smith & Brown
23.2* Consent of Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP (included in Exhibit 5.1)
23.3* Consent of Archer & Greiner, P.C. (included in Exhibit 8.2)
27.1 Financial Data Schedule for Solar Communications Group, Inc.
99.1* TTI Proxy Card
99.2* SCG Proxy Card
</TABLE>
- ------------
*To be filed by amendment.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THERMALTEC
INTERNATIONAL, CORP.
Panama Industries, Ltd.
<PAGE>
CONSENT OF INDEPENDENT
AUDITORS
We hereby consent to the use in the Registration Statement of Thermaltec
International Corp. on Form S-4 of our report dated July 1, 1999, except for the
first paragraph of Notes 1 and 9 as to which the date is August __, 1999 on the
financial statements of Solar Communications Group, Inc. - Delaware as of
September 30, 1998 and 1997 and for the year ended September 30, 1998 and for
the period October 7, 1996 (date of inception) to September 30, 1997, which
financial statements appear in the Registration Statement. We also consent to
the references to us under the headings "Experts" in such prospectus.
Withum, Smith & Brown
Red Bank, New Jersey
July 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000943110
<NAME> Solar Communications Group, Inc.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 2,906
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 113,939
<PP&E> 225,307
<DEPRECIATION> (2,421)
<TOTAL-ASSETS> 336,825
<CURRENT-LIABILITIES> 493,142
<BONDS> 0
0
0
<COMMON> 170,985
<OTHER-SE> (327,302)
<TOTAL-LIABILITY-AND-EQUITY> 336,825
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (553,140)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (553,140)
<INCOME-TAX> 0
<INCOME-CONTINUING> (553,140)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (553,140)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
