Exhibit 2.1
KADIRI INC.
- AND -
WORKSTREAM INC.
-AND-
WORKSTREAM ACQUISITION III, INC.
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AGREEMENT AND PLAN OF MERGER
MAY 24, 2004
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▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & FREIDENRICH LLP, COUNSEL FOR THE CORPORATION
▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇, HILL & ▇▇▇▇▇▇▇▇▇ LLP, SOLICITORS FOR THE PURCHASER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of May 24, 2004
BETWEEN:
KADIRI INC., a corporation incorporated pursuant to the laws
of the State of California ("Kadiri" or "the Corporation")
- and -
WORKSTREAM INC., a corporation incorporated pursuant to the
laws of Canada (the "Purchaser")
-and-
WORKSTREAM ACQUISITION III, INC., a corporation incorporated
pursuant to the laws of the State of Delaware ("Merger Sub")
RECITALS:
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law and the California Business
Corporations Act ("Delaware Law"), and the California Corporations Code,
Purchaser, Merger Sub and the Corporation intend to enter into a business
combination transaction pursuant to which Merger Sub will be merged into the
Corporation in a reverse triangular merger, with the Corporation continuing as
the Surviving Corporation of the merger (the "Merger").
B. The Board of Directors of the Corporation (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of Corporation and advisable and fair to, and in the best interests of, the
Corporation and its shareholders, (ii) has approved this Agreement, the Merger
and the other transactions contemplated by this Agreement and (iii) has
determined to recommend that the shareholders of the Corporation adopt and
approve this Agreement and approve the Merger.
C. The Board of Directors of Purchaser (i) has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Purchaser and advisable and fair to, and in the best interests of, Purchaser and
its shareholders and (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Internal
Revenue Code of 1986, as amended.
E. It is also intended by the parties hereto that the Merger shall be
accounted for as a "purchase."
F. The Corporation and each of the Corporation Stockholders entitled to
receive common stock of the Purchaser hereunder will enter into a letter of
transmittal in a form to be mutually agreed among the Corporation, such
stockholders and the Purchaser prior to each of the Corporation Stockholders
receiving Exchange Shares as contemplated hereunder (the "Transmittal Letter"),
which sets forth certain representations, warranties and covenants of such
Corporation Stockholders.
THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINITIONS
Whenever used in this Agreement, the following words and terms shall have the
meanings set out below:
"1933 ACT" means the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder by the SEC;
"1934 ACT" means the U.S. Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder by the SEC;
"CORPORATION STOCKHOLDERS" means those persons holding shares of capital
stock of the Corporation on the Closing Date.
"ACCOUNTS RECEIVABLE" means all accounts receivable, bills receivable,
trade accounts, book debts and insurance claims recorded as receivable in
the Books and Records and any other amount due to the Corporation,
including any refunds and rebates, and the benefit of all security
(including cash deposits), guarantees and other collateral held by the
Corporation;
"AFFILIATE" shall mean, as to any Person, any Person controlling,
controlled by, or under common control with, such Person;
"AGREEMENT" means this Agreement, including all schedules, and all
instruments supplementing or amending or confirming this Agreement, and
references to "ARTICLE" or "SECTION" mean and refer to the specified
Article or Section of this Agreement;
"BALANCE SHEET DATE" means the 28th day of May, 2004;
"BENEFIT PLANS" means all plans, arrangements, agreements, programs,
policies, practices or undertakings, whether oral or written, formal or
informal, funded or unfunded, registered or unregistered to which the
Corporation is or has been a party or by which it is or has been bound or
under which the Corporation has, or will have, any liability or contingent
liability, relating to:
(a) Pension Plans;
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(b) Insurance Plans; or
(c) Compensation Plans,
with respect to any of the Employees or former employees (or any dependants or
beneficiaries of any such Employees or former employees), directors or
shareholders of the Corporation, individuals working on contract with the
Corporation or other individuals providing services to any of them of a kind
normally provided by employees or eligible dependants of such person;
"BOOKS AND RECORDS" means all books and records of the Corporation, including
financial, corporate, operations, sales and purchase books and records, lists of
suppliers and customers, business reports, plans and projections and all other
documents, surveys, plans, files, records, correspondence, and other data and
information, financial or otherwise, including all data and information stored
on computer-related or other electronic media;
"BUSINESS" means the business carried on by the Corporation, and the term
"Business" shall include any part of the businesses held or carried on by the
Corporation;
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which the
principal commercial banks located in Ottawa, Ontario are open for business
during normal banking hours;
"CALIFORNIA LAW" means the California Corporations Code;
"CLAIMS" means any claim, demand, action, assessment or reassessment, suit,
cause of action, damage, loss, charge, judgment, debt, costs, liability or
expense, including reasonable professional fees and all costs incurred in
investigating or pursuing any of the foregoing or any proceeding relating to any
of the foregoing;
"CLOSING" means the closing of the Merger contemplated under this Agreement by
consummation of the Merger;
"CLOSING DATE" means, subject to prior termination of this Agreement as provided
in Article 11, the earlier of (i) May 28th, 2004, or (ii) the second business
day after all closing conditions set forth in Articles 7 and 8 hereof have been
satisfied or duly waived, or such other date as the Parties may agree in writing
as the date upon which the Closing shall take place;
"CLOSING TIME" means 2 o'clock p.m. Ottawa time on the Closing Date, or such
other time on such date as the Parties may agree in writing as the time at which
the Closing shall take place;
"CODE" means the United States Internal Revenue Code of 1986, as amended;
"COMPENSATION PLANS" means all employment benefits relating to bonus, incentive
pay or compensation, performance compensation, deferred compensation, profit
sharing or deferred profit sharing, share purchase, share option, stock
appreciation, phantom stock, vacation or vacation pay, sick pay, severance or
termination pay, employee loans or separation from service benefits, or any
other type of arrangement providing for compensation or benefits additional to
base pay or salary;
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"CONTRACTS" means all contracts, licences, leases, agreements, commitments and
engagements to which the Corporation is a party or by which it is bound and
includes all quotations, orders or tenders for contracts which remain open for
acceptance and any warranties, guarantees or commitments (express or implied);
"CORPORATION SERIES 1 PREFERRED SHARES" means the Corporation's Series 1
Preferred Shares;
"CORPORATION SERIES 2 PREFERRED SHARES" means the Corporation's Series 2
Preferred Shares;
"CORPORATION SERIES 3 PREFERRED SHARES" means the Corporations' Series 3
Preferred Shares"
"EFFECTIVE TIME" means the date and time on which the Merger first becomes
legally effective under Delaware Law as a result of the filing with the Delaware
Secretary of State of the Agreement of Merger pursuant to, and in conformity
with, Delaware Law and other wise in accordance with California Law.
"EMPLOYEES" means all persons employed by the Corporation, including for greater
certainty, those employees on disability leave, parental leave or other absence;
"ENCUMBRANCES" means any pledge, lien, charge, security interest, title
retention agreement, mortgage, restriction, easement, right-of-way, title
defect, option, adverse claim or encumbrance of any kind or character
whatsoever;
"ENVIRONMENT" means the environment or natural environment as defined in any
Environmental Laws and includes air, surface, water, ground water, land surface,
soil, subsurface strata, any sewer system and the environment in the workplace;
"ENVIRONMENTAL APPROVALS" means all approvals, permits, certificates, licences,
authorizations, consents, agreements, instructions or directions having the
force of law, and registrations or approvals issued or required by any
Governmental Authority pursuant to Environmental Laws with respect to the
operations, business or assets of the Corporation;
"ENVIRONMENTAL LAWS" means all Laws relating in full or in part to the
Environment or employee or public health or safety, and includes those
Environmental Laws relating to the storage, generation, use, handling,
manufacture, processing, labelling, advertising, sale, display, transportation,
treatment, Release and disposal of Hazardous Substances;
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"EQUIPMENT CONTRACTS" means all motor vehicle leases, equipment leases,
conditional sales contracts, title retention agreements and other similar
agreements relating to equipment used by the Corporation;
"GOVERNMENTAL AUTHORITY" means any government, regulatory authority,
governmental department, agency, commission, board, tribunal or court or other
law, rule or regulation-making entity having or purporting to have jurisdiction
on behalf of any nation, or any province, state or other geographic or political
subdivision of any nation;
"GOVERNMENTAL AUTHORIZATIONS" means all authorizations, approvals, including
Environmental Approvals, orders, consents, directions, notices, licences,
permits, variances, registration or similar rights issued to or by or required
by any Governmental Authority;
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste of any nature,
hazardous substance, hazardous material, toxic substance, prohibited substance,
dangerous substance or dangerous good as defined or judicially interpreted under
in any Environmental Laws, including any asbestos or asbestos-containing
materials;
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder;
"CORPORATION SHARES" means all of the issued and outstanding shares of capital
stock of the Corporation;
"INSURANCE PLANS" means all employment benefits relating to disability or wage
continuation during period of absence from work (including short term
disability, long term disability and workers compensation), hospitalization,
health, medical or dental treatments or expenses, life insurance, death or
survivor's benefits and supplementary employment insurance, in each case
regardless of whether or not such benefits are insured or self-insured;
"INTELLECTUAL PROPERTY" means registered and unregistered trade-marks (including
the Trade-marks), copyright, and other intellectual property rights and all
rights (proprietary, contractual or otherwise) in or relating to all trade
secrets, confidential and proprietary information, methods, procedures, know-how
and information;
"LAWS" means all applicable laws, statutes, by-laws, rules, regulations, orders,
ordinances, codes, judgments and directions having the force of law of any
Governmental Authority;
"LEASED REAL PROPERTY" means all premises which are leased, subleased, licensed
or otherwise occupied by the Corporation, and the interest of the Corporation in
all plants, buildings, structures, fixtures, erections, improvements, easements,
rights-of-way and other appurtenances situate on or forming part of such
premises, all of which is listed in Schedule 1.1(a) of the Disclosure Schedules;
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"MATERIAL ADVERSE EFFECT" when used with reference to any entity or group of
related entities, means any event, change, circumstance or effect that is,
individually or in the aggregate, materially adverse to the condition (financial
or otherwise), properties, assets (including intangible assets), business,
operations or results of operations of such entity and its subsidiaries, taken
as a whole with its subsidiaries; provided, however, that in no event shall any
event, change, circumstance or effect related to (A) the economy of the United
States, (B) the industry in which such entity or group of related entities
operates, constitute, in and of itself, a Material Adverse Effect.
"MATERIAL CONTRACT" means any currently effective Contract: (i) involving
aggregate payments following the date hereof to or by the Corporation in excess
of $100,000; (ii) involving rights or obligations of the Corporation that may
reasonably extend beyond one year (except for standard non-exclusive licenses
granted to end-user customers in the ordinary course of business); (iii) which
is outside the ordinary course of business; (iv) which does not or cannot be
terminated without penalty on less than six months notice (except for standard
non-exclusive licenses granted to end-user customers in the ordinary course of
business); or (iv) which restricts in whole or in part in any material way the
scope of the business or activities of the Corporation;
"MERGER PRICE PER SHARE" means the average last sale price of Purchaser Common
Stock quoted by the NASD on its automated quotation system for the last five (5)
trading days immediately preceding the Closing Date.
"MERGER SUB" means Workstream Acquisition III, Inc., a Delaware corporation and
a wholly-owned subsidiary of the Purchaser;
"NASD" means the National Association of Securities Dealers, Inc. or one or more
of its subsidiaries, as the context may require, and any successor to any of
them;
"NOTICE" shall have the meaning given in Section 12.3;
"OWNED REAL PROPERTY" means all freehold lands which are owned or purported to
be owned, in fee simple, by the Corporation including all plants, buildings,
structures, fixtures, erections, improvements, easements, rights-of-way and
other appurtenances situate on or forming part of such lands;
"PARTIES" means all of the parties to this Agreement;
"PENSION PLANS" means all benefits relating to retirement or retirement savings
including pension plans, pensions or supplemental pensions, registered
retirement savings plans, registered pension plans and retirement compensation
arrangements;
"PERMITTED ENCUMBRANCES" means (i) the Encumbrances listed in Schedule 1.1(c) of
the Disclosure Schedules, (ii) statutory liens for the payment of taxes that are
not yet due or delinquent, and (iii) liens, encumbrances and security interests
which arise in the ordinary course of business and which do not materially
affect the assets of the relevant Party;
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"PERSON" means any individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust,
corporation, limited liability company, unlimited liability company,
Governmental Authority, and a natural person in such person's capacity as
trustee, executor, administrator or other legal representative;
"PREFERRED STOCK" shall mean the Corporation Series 1 Preferred Shares, the
Corporation Series 2 Preferred Shares and the Corporation Series 3 Preferred
Shares;
"PURCHASER COMMON STOCK" means the common stock, no par value, of the Purchaser.
"REAL PROPERTY" means the Owned Real Property and the Leased Real Property;
"REAL PROPERTY LEASES" means those agreements to lease, leases, subleases or
licences or other occupancy rights pursuant to which the Corporation uses or
occupies the Leased Real Property;
"RELEASE" has the meaning prescribed in any Environmental Laws and includes any
release, spill, leak, pumping, pouring, addition, emission, emptying, discharge,
injection, escape, leaching, disposal, dumping, deposit, spraying, burial,
abandonment, incineration, seepage, or placement;
"REMEDIAL ORDER" means any administrative complaint, direction, order or
sanction issued, filed, imposed or threatened by any Governmental Authority
pursuant to any Environmental Laws and includes any order requiring any
remediation or clean-up of any Hazardous Substance, or requiring that any
Release or any other activity be reduced, modified or eliminated or requiring a
payment to be made to any Governmental Authority;
"REQUIRED APPROVALS" means those Governmental Authorizations, shareholder
approval and third Person approvals, consents and notices referred to in
Schedule 1.2(e), including any consents required by any outstanding contract or
commitment of the Corporation that requires the prior approval of third parties
prior to any change of control of the Corporation resulting from the
consummation of the transactions contemplated by this Agreement;
"SEC" means the Securities and Exchange Commission;
"SECURITIES LAWS" means the 1933 Act, the 1934 Act, the securities or "blue sky"
laws of any state or territory of the United States and the rules and
regulations of the NASD and the comparable laws, rules and regulations in effect
in any relevant other country;
"SUBSIDIARY" of any Person shall mean a corporation, company or other entity (i)
more than 50% of whose outstanding shares or securities (representing the right
to vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, limited liability company, joint venture, or unincorporated
association), but more than 50% of whose ownership interest representing the
right to make decisions for such other entity is, now or hereafter owned or
controlled, directly or indirectly, by such Person.
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"TAX RETURNS" includes all returns, reports, declarations, elections, notices,
filings, information returns and statements filed or required to be filed in
respect of Taxes;
"TAXES" includes all taxes, duties, fees, premiums, assessments, imposts, levies
and other charges of any kind whatsoever imposed by any Governmental Authority,
together with all interest, penalties, fines, additions to tax or other
additional amounts imposed by any Governmental Authority in respect thereof,
including those levied on, or measured by, or in respect of income, gross
receipts, profits, capital, gains, capital gains, transfer, land transfer,
sales, goods and services, harmonized sales, use, value-added, excise, stamp,
withholding, business, franchising, property, employer health, payroll,
employment, health, social services, education and social security taxes, all
surtaxes, all customs duties and import and export taxes, all license, franchise
and registration fees and all employment insurance, health insurance and other
government pension plan premiums or contributions;
"TRADE-MARKS" means all trade-marks, trade names, brands, trade dress, business
names, Uniform Resource Locators ("URL"), domain names, tag lines, designs,
graphics, logos and other commercial symbols and indicia of origin, whether
registered or not, owned by, licensed to or used by the Corporation and any
goodwill associated with any of them, including trade-marks, trade names,
brands, trade dress, business names, URL, domain names, tag lines, designs,
graphics, logos and other commercial symbols and indicia of origin owned by,
licensed to or used by the Corporation listed and described in Schedule 4.21 of
the Disclosure Schedules.
1.2 CERTAIN RULES OF INTERPRETATION
In this Agreement and the schedules:
(A) TIME - time is of the essence in the performance of the Parties'
respective obligations;
(B) CURRENCY - unless otherwise specified, all references to money
amounts are to the lawful currency of the United States of America;
(C) HEADINGS - descriptive headings of Articles and Sections are
inserted solely for convenience of reference and are not intended as
complete or accurate descriptions of the content of such Articles or
Sections;
(D) SINGULAR, ETC. - use of words in the singular or plural, or with a
particular gender, shall not limit the scope or exclude the
application of any provision of this Agreement to such person or
persons or circumstances as the context otherwise permits;
(E) CONSENT - whenever a provision of this Agreement requires an
approval or consent by a Party to this Agreement and notification of
such approval or consent is not delivered within the applicable time
limited, then, unless otherwise specified, the Party whose consent
or approval is required shall be conclusively deemed to have
withheld its approval or consent;
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(F) CALCULATION OF TIME - unless otherwise specified, time periods
within or following which any payment is to be made or act is
to be done shall be calculated by excluding the day on which
the period commences and including the day on which the period
ends and by extending the period to the next Business Day
following if the last day of the period is not a Business Day;
(G) BUSINESS DAY - whenever any payment is to be made or action to
be taken under this Agreement is required to be made or taken
on a day other than a Business Day, such payment shall be made
or action taken on the next Business Day following such day;
and
(H) INCLUSION - where the words "including" or "includes" appear
in this Agreement, they mean "including (or includes) without
limitation".
1.3 KNOWLEDGE
Except as specified otherwise in this Agreement, any reference to the knowledge
of any Person who is an individual shall mean to the best of the knowledge,
information and belief of such Person after reasonable diligence and, with
respect to an entity, means the actual knowledge of all directors and officers
of such Person.
1.4 ENTIRE AGREEMENT
This Agreement, together with the agreements and other documents to be delivered
pursuant to this Agreement, constitute the entire agreement between the Parties
pertaining to the subject matter of this Agreement and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties pertaining to that subject matter, and there are no
warranties, representations or other agreements between the Parties in
connection with the subject matter of this Agreement except as specifically set
forth in this Agreement and any document delivered pursuant to this Agreement.
No supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the Party to be bound thereby.
1.5 APPLICABLE LAW
This Agreement shall be governed and construed in accordance with the laws of
the State of Delaware and the federal laws of the United States of America
applicable in the State of Delaware, and without regard to the conflict of laws
principles applicable in such jurisdiction.
1.6 ACCOUNTING PRINCIPLES
All references to generally accepted accounting principles mean generally
accepted accounting principles in the United States as at the Closing Date,
applied on a consistent basis.
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1.7 SCHEDULES AND EXHIBITS
The schedules and exhibits to this Agreement, are an integral part of this
Agreement. The Schedules shall modify all representations and warranties
contained in this Agreement. Each party has used its best efforts to reference
the correct Schedule, however the failure to properly reference such schedule
shall not be a breach of a representation or warranty if the party to whom the
disclosure is being made could reasonably ascertain the effect of a disclosure
in a Schedule on other applicable representations and warranties.
2. THE MERGER
2.1 THE MERGER. At the Effective Time and subject to and upon the terms and
conditions of this Agreement, the Agreement of Merger and the applicable
provisions of Delaware Law and California Law, Merger Sub shall be merged with
and into the Corporation, the separate corporate existence of Merger Sub shall
cease and the Corporation shall continue as the surviving corporation. The
Corporation as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
2.2 CLOSING. Subject to the provisions of this Agreement, the parties hereto
shall cause the Merger to be consummated by filing an Agreement of Merger, in
such appropriate form as mutually determined by the parties (which agreed form
shall be attached as Exhibit A hereto prior to Closing), with the Secretary of
State of the State of Delaware and the State of California in accordance with
the relevant provisions of Delaware Law and California Law (the "Agreement of
Merger").
2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger shall
be as provided in this Agreement, the Agreement of Merger and the applicable
provisions of Delaware Law and California Law. Without limiting the generality
of the foregoing, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Corporation and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Corporation
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of
Incorporation of the Surviving Corporation; provided however, that
at the Effective Time Article I of the Certificate of Incorporation
of the Surviving Corporation shall be amended to read: "The name of
the corporation is Kadiri Inc."
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended.
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(c) The initial directors of the Surviving Corporation shall be the
directors of Merger Sub immediately prior to the Effective Time,
until their respective successors are duly elected or appointed and
qualified. The initial corporate officers of the Surviving
Corporation shall be the corporate officers of Merger Sub
immediately prior to the Effective Time, until their respective
successors are duly appointed.
2.5 PURCHASE PRICE. In connection with the Merger and pursuant to the provisions
of this Agreement and the Agreement of Merger, subject to adjustment pursuant to
Section 2.6(f) hereof, the Purchaser shall issue an aggregate of 5,400,000 fully
paid and nonassessable shares of Purchaser Common Stock (each share, an
"Exchange Share") in exchange for all Corporation Shares outstanding immediately
prior to the Effective Time (the "Purchase Price").
2.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger and
without any action on the part of Merger Sub, the Corporation or the Corporation
Stockholders:
(a) Each share of Preferred Stock and Common Stock of the Corporation
held by a Corporation Stockholder that is issued and outstanding
immediately prior to the Effective Time will, by virtue of the
Merger, be cancelled and extinguished and automatically converted
into the right to receive that number of Exchange Shares, if any,
determined in accordance with the Corporation's currently effective
Amended and Restated Articles of Incorporation which is attached
hereto as Exhibit B (the "Distribution Mechanism")(Exhibit B is
subject to review and approval by the Purchaser), with the value of
an Exchange Share for this determination being equal to the Merger
Price Per Share, upon surrender of the certificate representing such
Corporation Share in the manner provided herein. The preceding
provisions of this Section 2.6(a) are subject to the provisions of
Section 2.6(e) (regarding the elimination of fractional shares),
Section 2.6(f) (regarding Capital Changes), Section 2.6(g)
(regarding Dissenting Shares (as defined below)) and Section 2.7
(regarding the withholding of Escrow Shares).
(b) Each share of Corporation capital stock held by the Corporation
immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
(d) Each share of common stock, $0.00l par value per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and
nonassessable share of common stock, $0.001 par value per share, of
the Surviving Corporation. Each certificate evidencing ownership of
shares of the common stock of Merger Sub shall evidence ownership of
such shares of capital stock of the Surviving Corporation.
(e) No fractional shares of Purchaser Common Stock will be issued in
connection with the Merger. In lieu of such issuance, each
Corporation Stockholder who would otherwise be entitled to receive a
fraction of a share of Purchaser Common Stock, computing after
aggregating all shares of Purchaser Common Stock to be received by
such holder pursuant to Section 2.6(a), will instead receive from
the Purchaser, upon surrender of such holder's share certificates as
provided herein, an amount of cash (rounded to the nearest whole
cent) equal to the product obtained by multiplying (a) the Merger
Price Per Share, by (b) the fraction of a share of Purchaser Common
Stock that such holder would otherwise have been entitled to
receive.
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(f) Notwithstanding anything to the contrary herein, if the Purchaser
recapitalizes, either through a subdivision (or stock split) of any
of its outstanding shares of Purchaser Common Stock into a greater
number of such shares, or a combination (or reverse stock split) of
any of its outstanding shares of Purchaser Common Stock into a
lesser number of such shares, or reorganizes, reclassifies or
otherwise changes its outstanding shares of Purchaser Common Stock
into the same or a different number of shares of other classes or
series of stock of the Purchaser (other than through a subdivision
or combination of shares provided for in the preceding clause), or
declares a dividend or other distribution on its outstanding shares
payable in shares of Purchaser Common Stock, in shares or securities
convertible into shares of Purchaser Common Stock and/or other
equity securities of the Purchaser (each, a "Capital Change"), at
any time after the date of this Agreement and prior to the Effective
Time, then the Merger Price Per Share and the Purchase Price will be
appropriately adjusted.
(g) Holders of shares of capital stock of the Corporation who have
complied with all requirements for perfecting shareholders'
dissenting rights, as set forth in Section 1300 et. seq. under the
California Law shall be entitled to their rights under the
California Law, with respect to such shares ("Dissenting Shares").
(h) Prior to the Closing Date, Purchaser and the Corporation will
calculate and set forth in Schedule 2.6(h) (to be attached hereto at
the Closing) the number of Exchange Shares issuable to each
Corporation Stockholder in accordance with this Section 2.6,
together with such holder's Escrow Shares.
2.7 ESCROW.
(a) At the Closing, the Purchaser will withhold 950,000 of the Exchange
Shares to be issued to each Corporation Stockholder in accordance
with Section 2.6(a) (rounded down to the nearest whole number of
shares to be issued to such Corporation Stockholder) and deliver
such shares (the "Escrow Shares") to ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP (the
"Escrow Agent"), as escrow agent, to be held by Escrow Agent as
collateral for the Corporation's indemnification obligations under
Article 10 and pursuant to the provisions of an escrow agreement
(the "Escrow Agreement") in a form to be mutually agreed by the
parties hereto prior to Closing and, upon such agreement, to be
attached hereto as Exhibit 2.7.
(b) Subject to the terms of the Escrow Agreement, the Escrow Shares will
be held by the Escrow Agent from the Closing until the dates set
forth in the Escrow Agreement (the "Escrow Period"). Any shares of
Purchaser Common Stock or other equity securities issued or
distributed by the Purchaser (including securities issued upon a
Capital Change) with respect to the Escrow Shares in the Escrow
Period shall be added to and considered part of the Escrow Shares.
Cash dividends on the Escrow Shares shall be deposited with the
Escrow Agent until release thereof pursuant to the Escrow Agreement.
The Escrow Shares withheld from each Corporation Stockholder will be
represented by a certificate or certificates issued in the name of
the Escrow Agent. Each Corporation Stockholder shall be shown as the
record owner on the Purchaser's books and records of such number of
Escrow Shares.
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(c) In the event that the Merger is approved by the Corporation
Stockholders as provided herein, the Corporation Stockholders shall,
without any further act of any Corporation Stockholder, be deemed to
have consented to and approved (i) the use of the Escrow Shares as
collateral for the Corporation's indemnification obligations under
Article 10 in the manner set forth in Article 10 and the Escrow
Agreement, (ii) the appointment of ▇▇▇▇ ▇▇▇▇▇▇▇ as the
representative of the Corporation Stockholders (the "Stockholder
Representative") with respect to the matters set forth in Article 10
and under the Escrow Agreement and as the attorney-in-fact and agent
for and on behalf of each Corporation Stockholder (other than
holders of Dissenting Shares), and the taking by the Stockholder
Representative of any and all actions and the making of any
decisions required or permitted to be taken by him under the Escrow
Agreement (including, without limitation, the exercise of the power
to: authorize delivery to the Purchaser of Escrow Shares in
satisfaction of claims by the Purchaser; agree to, negotiate, enter
into settlements and compromises of and demand arbitration and
comply with orders of courts and awards of arbitrators with respect
to such claims; resolve any claim made pursuant to Article 10; and
take all actions necessary in the judgment of the Stockholder
Representative for the accomplishment of the foregoing) and (iii) to
all of the other terms, conditions and limitations in the Escrow
Agreement.
2.8 CORPORATION OPTIONS. At the Effective Time, the Purchaser shall not assume
any outstanding options to purchase shares of capital stock of Corporation (the
"Corporation Options") and shall not substitute any equivalent option or right
for any such Corporation Option. All outstanding Corporation Options shall
remain exercisable for the period determined by the Corporation Board of
Directors (or the Compensation Committee of the Board of Directors) and any
Corporation Option that has not been exercised by the holder thereof prior to
expiration of such period (which shall in any event expire prior to the
Effective Time) shall then terminate at the Effective Time.
2.9 CORPORATION WARRANTS. Corporation agrees to obtain prior to the Effective
Time, a binding written agreement, acceptable to Purchaser, from each holder of
warrants to acquire capital stock of Corporation (not including warrants to
acquire common shares of the Corporation) whereby such holder agrees that if the
warrants held by such holder have not been exercised prior to the Effective
Time, then such warrants shall terminate upon and may not be exercised on or
after the Effective time.
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2.10 SECURITIES LAW COMPLIANCE. The Purchaser shall issue the Exchange Shares to
be issued to the Corporation Stockholders in the Merger as provided in Section
2.6(a) pursuant to an exemption or exemptions from registration under Section
4(2) of the 1933 Act and/or Regulation D promulgated under the 1933 Act and the
exemption from qualification under the laws of the State of California and other
applicable Securities Laws. The Purchaser and the Corporation shall comply with
all applicable provisions of, and rules under, the 1933 Act in connection with
offering and issuance of Exchange Shares in the Merger.
2.11 CERTIFICATE LEGENDS. The Exchange Shares to be issued pursuant to the terms
hereof shall not have been registered and shall be characterized as "restricted
securities" under the federal securities laws, and under such laws such shares
may be resold without registration under the Securities Laws, only in certain
limited circumstances. Each certificate evidencing the Exchange Shares shall
bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, HAVE BEEN TAKEN FOR INVESTMENT AND MAY NOT BE
SOLD OR OFFERED FOR SALE UNLESS A REGISTRATION STATEMENT UNDER THE FEDERAL
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY
APPLICABLE STATE WITH RESPECT TO THESE SHARES, IS THEN IN EFFECT OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR THE APPLICABLE STATE SECURITIES
LAWS ARE THEN IN FACT APPLICABLE TO THE OFFER OR SALE."
2.12 PLACE OF CLOSING. The Closing shall take place at the Closing Time at the
offices of ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP located at ▇▇▇▇▇ ▇▇▇, ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇, or at such other place as may be agreed
upon in writing by the Parties.
2.13 TENDER. Any tender of documents or money under this Agreement may be made
upon the Parties or their respective counsel and money shall be tendered in U.S.
dollars by official bank certified cheque, bank draft or by such other method as
the Parties agree in writing.
2.14 TAX AND ACCOUNTING CONSEQUENCES
(a) 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 Department of the Treasury Income
Tax Regulations ("Treasury Regulations").
(b) It is intended by the parties hereto that the Merger shall be
treated as a "purchase" for accounting purposes.
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3. EXCHANGE OF CERTIFICATES
3.1 SURRENDER PROCEDURES.
(a) Purchaser shall act as its own exchange agent in the Merger (except
for the Escrow Shares).
(b) Each Corporation Stockholder who is entitled to receive Exchange
Shares shall surrender to the Purchaser for cancellation the share
certificates representing the Corporation Shares that are not
Dissenting Shares (the "Certificates"), in each case duly endorsed
in blank for transfer, or accompanied by irrevocable security
transfer powers of attorney duly executed in blank, in either case
by the holders of record (to the extent that such Corporation
Stockholder has not surrendered its Certificates and/or such
executed irrevocable security transfer powers of attorney to the
Purchaser). Each Corporation Stockholder who is entitled to receive
Exchange Shares pursuant to the Distribution Mechanism shall deliver
a duly executed Transmittal Letter together with such holder's
Certificate(s) (or an affidavit of lost certificate as described in
Section 3.1(c) below) to the Purchaser. At the Closing or at any
time thereafter, subject to receipt of such Transmittal Letter and
Certificates (or affidavits of lost certificate), the Purchaser will
issue to each tendering Corporation Stockholder a certificate for
the number of Exchange Shares to which such Corporation Stockholder
is entitled pursuant to Section 2.6(a) hereof, less the Exchange
Shares deposited into escrow pursuant to Section 2.7 hereof, and pay
such Corporation Stockholder any cash payable in lieu of a
fractional share to which such Corporation Stockholder may be
entitled pursuant to Section 2.6(e) hereof.
(c) In the event any Certificates shall have been lost, stolen or
destroyed, the Purchaser shall issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof and the posting of reasonable bond
therefore, such number of Exchange Shares and cash for fractional
shares, if any, as may be required pursuant to Section 2.6 and any
dividends or distributions payable pursuant to Section 3.1(d).
(d) No dividends or distributions payable to holders of record of
Purchaser Common Stock after the Effective Time, or cash payable in
lieu of fractional shares, will be paid to the holder of any
unsurrendered Certificate(s) until the holder of the Certificate(s)
surrenders such Certificate(s). Subject to the effect, if any, of
applicable escheat and other laws, following surrender of any
Certificate, there will be delivered to the person entitled thereto,
without interest, the amount of any dividends and distributions
therefor paid with respect to Purchaser Common Stock so withheld as
of any date subsequent to the Effective Time and prior to such date
of delivery.
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(e) Each of the Corporation Stockholders and the Purchaser shall deliver
such other documents as may be reasonably necessary to complete the
transactions contemplated by this Agreement.
(f) Until certificates representing the Corporation Shares outstanding
prior to the Merger are surrendered pursuant to Section 3.1(a)
above, such certificates will be deemed, for all purposes, to
evidence the right to the Merger consideration payable with respect
to such Corporation Shares as provided in Section 2.6 above.
(g) Anything to the contrary contained herein notwithstanding, if an
executed Transmittal Letter and certificates representing the
Corporation Shares outstanding after the Merger are not surrendered
pursuant to Section 3.1(b) above within six (6) months of the
Closing Date, the Corporate Stockholders who have not delivered said
documents shall no longer be entitled to receive the Exchange Shares
that they would have been entitled to receive pursuant to the
Distribution Mechanism.
3.2 NO FURTHER OWNERSHIP RIGHTS. All Exchange Shares issued in accordance with
the terms hereof (including any cash paid in respect thereof) shall be deemed to
have been issued in full satisfaction of all rights pertaining to the
Corporation Shares and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of capital stock of the
Corporation, which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented for any reason, they will
be cancelled and exchanged as provided in this Article 3.
4. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
Except as otherwise provided in the Disclosure Schedules to be delivered to the
Purchaser by the Corporation prior to the Closing (the "Disclosure Schedules"),
the Corporation hereby represents and warrants to the Purchaser the matters set
out below.
4.1 INCORPORATION AND REGISTRATION
The Corporation is a corporation duly incorporated and validly existing under
the laws of its jurisdiction of incorporation and has all necessary corporate
power, authority and capacity to enter into this Agreement and to carry out its
obligations under this Agreement, to own its property and assets and to carry on
its business as presently conducted. Neither the nature of its business nor the
location or character of the property owned or leased by the Corporation
requires it to be registered, licensed or otherwise qualified as an out-of-state
or foreign corporation in any other jurisdiction other than those listed
opposite its name in Schedule 4.1 of the Disclosure Schedules, where it is duly
registered, licensed or otherwise qualified for such purpose.
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4.2 RIGHT TO SELL
To the Corporation's knowledge, the Corporation Shares are not subject to any
rights of first refusal or other rights to purchase such stock in favor of the
Corporation or restrictions on transfer pursuant to any agreement.
4.3 CAPITALIZATION
(a) The authorized and issued share capital of the Corporation is as set
forth in Schedule 4.3(a) of the Disclosure Schedules. All of the
shares in the capital of the Corporation have been duly and validly
issued and are outstanding as fully paid and non-assessable shares
of the Corporation. Other than as set forth in Schedule 4.3(a), (a)
no options, warrants (not including warrants to acquire common
shares of the Corporation) or other rights to purchase shares or
other securities of the Corporation, and no securities or
obligations convertible into or exchangeable for shares or other
securities of the Corporation, have been authorized or agreed to be
issued or are outstanding; and (b) all such securities referenced in
subsection (a) shall have been exercised in full or terminated at or
prior to the Effective Time.
(b) Set forth in Schedule 4.3(b) of the Disclosure Schedules is a
complete list of all stockholders of the Corporation and the number
of shares of capital stock of the Corporation owned by each such
stockholder.
4.4 TITLE TO ASSETS
The Corporation has good and valid title to all of its assets and interests in
assets, real and personal, including all of the assets used in the Business,
free and clear of all Encumbrances, other than Permitted Encumbrances. In
particular, without limiting the generality of the foregoing, there has been no
assignment, subletting or granting of any licence (of occupation or otherwise)
of or in respect of any of the Leased Real Property assets of the Corporation or
any granting of any agreement or right capable of becoming an agreement or
option for the purchase of any of such assets. Except for co-located assets set
forth in Schedule 4.4 of the Disclosure Schedules, all of the assets of the
Corporation are located on the Leased Real Property.
4.5 DUE AUTHORIZATION AND ENFORCEABILITY
The execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been, or will prior to the
Closing Date be, duly authorized by all necessary corporate action on the part
of the Corporation and the Corporation Stockholders. This Agreement constitutes
a valid and binding obligation of the Corporation enforceable against it in
accordance with its terms, except as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditors' rights generally, and
(ii) the effect of rules of law governing the availability of equitable
remedies.
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4.6 ABSENCE OF CONFLICTING AGREEMENTS
The Corporation is not a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, obligation, instrument, charter or by-law
provision, or, to its knowledge, any Law or Governmental Authorization which
would be violated, contravened, breached by, or under which default would occur
or an Encumbrance would be created as a result of the execution and delivery of
this Agreement or any other documents or agreements to be delivered or entered
into under the terms of this Agreement, or the performance by the Corporation of
its obligations provided for under this Agreement or any other documents or
agreements to be delivered or entered into under this Agreement, except for any
such violation, contravention, breach, default or Encumbrance as would not
individually or in the aggregate have a Material Adverse Effect on the
Corporation.
4.7 APPROVALS
Except as disclosed in Schedule 4.7 of the Disclosure Schedules, no approval,
order or consent of or notice to or filing with any Governmental Authority or
other Person is required on the part of the Corporation in connection with the
execution, delivery and performance of this Agreement or any other documents or
agreements to be delivered under this Agreement or the performance of the
obligations of the Corporation under this Agreement or any other documents or
agreements to be delivered or entered into under this Agreement, except for the
filing of the Agreement of Merger and such qualifications, registrations or
filings under applicable securities laws as may be required in connection with
the Merger and the transactions contemplated by this Agreement.
4.8 FINANCIAL STATEMENTS
The Corporation has delivered to the Purchaser audited financial statements as
of December 31, 2002 and an unaudited balance sheet of the Corporation as of the
31st day of December, 2003, and the related statements of income and retained
earnings for the periods ending on that date (the "Company Financial
Statements"). The Company Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently followed by the
Corporation throughout the period indicated (except for the absence of notes
thereto and normal year-end adjustments and normal quarter-end adjustments), and
fairly present in all material respects the financial position of the
Corporation as of the date of the balance sheet included in the Company
Financial Statements, and the results of its operations for the period
indicated. Except as set forth on Schedule 4.8 of the Disclosure Schedules, as
of the date of this Agreement, the Corporation, to its knowledge, does not have
any material liability or obligation of any nature, except for liabilities or
obligations that are reflected on Company Financial Statements, or in this
Agreement and the Disclosure Schedules and except for liabilities that may have
been incurred after the date of the Company Financial Statements in the ordinary
course of business.
4.9 ABSENCE OF UNDISCLOSED LIABILITIES
Since the Balance Sheet Date, the Corporation has not incurred any material
liabilities or obligations (whether accrued, absolute, contingent or otherwise)
which continue to be outstanding, except those incurred in the ordinary and
usual course of business. The reserves and accrued liabilities disclosed on or
reflected in the Company Financial Statements and the Books and Records have
been calculated in accordance with generally accepted accounting principles.
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4.10 ABSENCE OF CHANGES AND UNUSUAL TRANSACTIONS
Except as described in Schedule 4.10 of the Disclosure Schedules, or except as
consented to in advance in writing by the Purchaser, since the date of the most
recent Balance Sheet Date:
(i) there has not been any damage, destruction, loss or labour
dispute (whether or not covered by insurance) which has had or
is reasonably likely to have a Material Adverse Effect with
respect to the Corporation;
(ii) the Corporation has not transferred, assigned, sold or
otherwise disposed of any of the assets shown or reflected in
the Company Financial Statements or cancelled any debts or
entitlements except, in each case, in the ordinary and usual
course of business;
(iii) the Corporation has not incurred or assumed any obligation or
liability (fixed or contingent) except unsecured current
obligations and liabilities incurred in the ordinary and usual
course of business;
(iv) the Corporation has not discharged or satisfied any
Encumbrance, or paid any obligation or liability (fixed or
contingent) other than liabilities included in the Company
Financial Statements and liabilities incurred since the date
of the Company Financial Statements in the ordinary and usual
course of business;
(v) the Corporation has not suffered any cumulative operating or
extraordinary loss, waived or omitted to take any action in
respect of any rights of substantial value, or entered into
any commitment or transaction not in the ordinary and usual
course of business where such loss, rights, commitment or
transaction is or would be material in relation to the
Corporation, as the case may be;
(vi) the Corporation has not granted any bonuses, whether monetary
or otherwise, or made any general wage, salary or Benefit Plan
increases in respect of its Employees or changed the terms of
employment for any Employee except in the ordinary and usual
course of business and consistent with past practice;
(vii) the Corporation has not hired or dismissed any senior
Employees or hired or dismissed any other Employees other than
in the ordinary and usual course of business;
(viii) the Corporation has not mortgaged, pledged, subjected to
lien, granted a security interest in or otherwise encumbered
any of its assets or property, whether tangible or intangible;
19
(ix) the Corporation has not declared or paid any dividends or
declared or made any other payments or distributions on or in
respect of any of its shares or purchased or otherwise
acquired any of its shares;
(x) the Corporation has not paid any management fees or other
amounts (other than salaries and benefits of employees, the
terms of which are disclosed in Schedule 4.26 of the
Disclosure Schedules) to any of the Corporation Stockholders;
and
(xi) the Corporation has not authorized, agreed or otherwise become
committed to do any of the foregoing.
4.11 NON-ARM'S LENGTH TRANSACTIONS
Except as disclosed in Schedule 4.11 of the Disclosure Schedules, no director or
officer, former director or officer, shareholder or Employee of the Corporation,
or any other person not dealing at arm's length (within the meaning of the Code)
with the Corporation, or any of the Corporation Stockholders, has any
indebtedness, liability or obligation to the Corporation, and the Corporation is
not indebted or otherwise obligated to or a party to any Contract with any such
person, except for employment arrangements with Employees, the terms of which
are disclosed in Schedule 4.26 of the Disclosure Schedules.
4.12 ABSENCE OF GUARANTEES
Except as described in Schedule 4.12 of the Disclosure Schedules, the
Corporation has not given or agreed to give, or is a party to or bound by, any
guarantee, surety or indemnity in respect of any indebtedness or other
obligation of any Person, or any other commitment by which the Corporation is,
or is contingently, responsible for any such indebtedness or other obligation.
4.13 OPERATING BUSINESSES
The Business is carried on exclusively by the Corporation. All assets used in or
necessary to carry on the Business are owned by the Corporation, or leased or
licensed by the Corporation from Persons acting at arm's length from the
Corporation Stockholders and the Corporation.
4.14 MAJOR SUPPLIERS
(a) A comprehensive listing of all suppliers of goods and services to
the Corporation (including suppliers of goods and services to the
Corporation's customers, which are arranged for by the Corporation),
where the value of the goods or services supplied by such supplier
exceeded $25,000, in each case individually or in the aggregate,
during the 12 month period ending on the Balance Sheet Date.
(b) True and complete copies of all Contracts with those suppliers of
goods and services for the Business (or for customers of the
Business) referred to in subsection 4.14(a) have been made available
to the Purchaser. The Corporation has not received any written
communication that any of such Contracts will not be honoured in the
ordinary and usual course of business consistent with the past
experience of the Business.
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(c) Except as disclosed in Schedule 4.14 of the Disclosure
Schedules, the Corporation is not subject to any Contract
under which the Corporation has made any commitment or is
subject to any obligation or would suffer any penalty
(financial or otherwise) as a result of a failure to acquire,
or arrange for the acquisition of, a specified minimum volume
of products or services.
(d) Except as disclosed in Schedule 4.14, the Corporation is not
subject to any Contract involving a commitment of exclusivity
whereby its ability, or the ability of its Affiliates, to
acquire goods or services from any Person would be restricted
in any manner.
(e) To the knowledge of the Corporation, none of the suppliers
included in the list referred to in subsection 4.14(a) has any
intention to change its relationship or the terms upon which
it conducts business with the Corporation, including as a
result of the transactions contemplated by this Agreement.
4.15 CONDITION OF ASSETS
The fixed assets, machinery, equipment, fixtures, furniture, furnishings and
vehicles owned or leased by the Corporation, including any of the foregoing
which are in storage or in transit, and other tangible property and facilities
used by the Corporation, whether located in or on the premises of the
Corporation or elsewhere, are in good condition in all material respects, repair
and (where applicable) proper working order, having regard to their use and age
and such assets have been reasonably maintained.
4.16 ACCOUNTS RECEIVABLE
The Accounts Receivable (a) represent bona fide sales actually made or services
actually performed in the ordinary course of business, (b) are reflected on the
books and records of the Corporation in accordance with generally accepted
accounting principles, and (c) to the knowledge of the Corporation, are not
subject to any defence, counterclaim or set off.
4.17 BUSINESS IN COMPLIANCE WITH LAW
In all material respects, the business and operations of the Corporation have
been and are now conducted in compliance with all Laws of each jurisdiction in
which the Corporation carries on or has carried on business, and the Corporation
has not received any written notice of any alleged violation of any such Laws.
4.18 GOVERNMENTAL AUTHORIZATIONS
Schedule 4.18 of Disclosure Schedules sets forth a complete list of the material
Governmental Authorizations issued to or required by the Corporation to enable
it to carry on business in compliance, in all material respects, with all Laws.
The Governmental Authorizations listed in Schedule 4.18 are, in all material
respects, in full force and effect in accordance with their terms, and there
have been no material violations of such Governmental Authorizations and no
proceedings are pending or, to the knowledge of the Corporation, threatened,
which could result in the revocation or limitation of such Governmental
Authorizations.
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4.19 GOVERNMENTAL ASSISTANCE
Except as disclosed in Schedule 4.19 of the Disclosure Schedules, the
Corporation has not received any grants or other forms of assistance, including
loans with interest below market rates or guarantees of any loans, from any
Governmental Authority that have not been fully repaid or reimbursed and
satisfied, and the Corporation is not a party to any Contract or understanding
with respect to any such grant or form of assistance.
4.20 RESTRICTIVE COVENANTS
Except as disclosed in Schedule 4.20 of the Disclosure Schedules, and as set
forth in license agreements made available to the Purchaser in due diligence,
the Corporation is not party to or bound or affected by any Contract limiting
the freedom of the Corporation to compete in any line of business, acquire goods
and services from any supplier, sell goods and services to any customer, or
transfer or move any of its assets or operations.
4.21 INTELLECTUAL PROPERTY
(a) Schedule 4.21 of the Disclosure Schedules sets forth a complete list
and brief description of all Intellectual Property owned by the
Corporation (including Trade-marks) that have been registered or for
which applications for registration have been filed by or on behalf
of the Corporation (collectively, the "Owned Intellectual Property")
and all Intellectual Property licensed to the Corporation (the
"Licensed Intellectual Property") except for commercially available
software licensed by the Corporation, for which the usage rights are
licensed subject to the terms of the applicable, standard form
license agreements.
(b) Except as disclosed in Schedule 4.21, the Corporation has the right
to use and is the exclusive owner of all right, title and interest
in and to all Owned Intellectual Property. The Owned Intellectual
Property and the Licensed Intellectual Property are all the
Intellectual Property used in or necessary to carry on the Business
as currently conducted. All Licensed Intellectual Property is being
used by the Corporation in accordance with a licence from or the
express consent of the rightful owner of such Licensed Intellectual
Property, and all such licences and consents are in full force and
effect.
(c) All rights to Owned or Licensed Intellectual Property are in full
force and effect and have not been used, enforced or licensed or
failed to be used, enforced or licensed in a manner that would
result in the abandonment, cancellation or unenforceability of or
any loss of rights in any of such Intellectual Property.
(d) Except as disclosed in Schedule 4.21, the Corporation has no
knowledge of any claim of adverse ownership, invalidity or other
opposition to or conflict with any Owned or Licensed Intellectual
Property nor of any pending or threatened action, litigation,
investigation, claim, opposition, complaint, grievance or proceeding
of any nature or kind against any of them relating to such
Intellectual Property.
22
(e) Except as disclosed in Schedule 4.21, to the knowledge of the
Corporation:
(i) the use of any of the Intellectual Property owned or licensed
by the Corporation;
(ii) any product or service which the Corporation sells, provides,
produces or uses, or has sold, provided, produced or used; and
(iii) any process, method, advertising, or material that the
Corporation employs or has employed in the marketing or sale
of any such product or service,
does not breach, violate, infringe or interfere with any
proprietary, contractual or other rights of any Person relating to
Intellectual Property.
(f) Except as disclosed in Schedule 4.21, the Corporation has no
knowledge of any breach, violation, infringement of, or interference
with, the Intellectual Property owned or licensed by the
Corporation.
4.22 EQUIPMENT CONTRACTS
Schedule 4.22 of the Disclosure Schedules sets forth a complete list of all
Equipment Contracts involving aggregate payments in excess of $25,000 per annum,
together with a description of the assets to which the Equipment Contracts
relate. All of the Equipment Contracts are in full force and effect and no
material default exists on the part of the Corporation, or, to the knowledge of
the Corporation, on the part of any of the other parties thereto. The entire
interest of the Corporation under each of the Equipment Contracts is held by the
Corporation free and clear of any Encumbrances, other than Permitted
Encumbrances, and all payments due under the Equipment Contracts have been duly
and punctually paid.
4.23 OWNED REAL PROPERTY. The Corporation does not have now, and has never
had, any Owned Real Property.
4.24 LEASED REAL PROPERTY
(a) Schedule 4.24 of the Disclosure Schedules sets forth a complete list
of the Leased Real Property (by reference to municipal address) and
Real Property Leases (by reference to all relevant documents
including details of parties to the Real Property Leases and dates
of documents). True copies of all the Real Property Leases have been
provided or made available to the Purchaser. The Real Property
Leases have not been materially altered or amended and are in full
force and effect.
(b) There are no agreements or understandings between the landlord and
tenant, or sublandlord and subtenant, in respect of any Leased Real
Property other than as contained in the Real Property Leases,
pertaining to the rights and obligations of the parties to the Real
Property Leases relating to the use and occupation of the Leased
Real Property.
23
(c) Except for the Real Property Leases listed in Schedule 4.24, the
Corporation is not a party to or bound by any other leases,
subleases, agreements to lease, licenses or occupancy agreements
pertaining to real property.
(d) All interests held by the Corporation as lessee or occupant under
the Real Property Leases are free and clear of all Encumbrances
other than Permitted Encumbrances.
(e) All payments required to be made by the Corporation pursuant to the
Real Property Leases have been duly paid and the Corporation is not
otherwise in material default in meeting any of its obligations
under any of the Real Property Leases.
(f) To the knowledge of the Corporation, none of the other parties under
any of the Real Property Leases is in default in meeting any of its
obligations under such Real Property Leases.
(g) The Corporation does not have any option, right of first refusal or
other contractual right relating to the Leased Real Property which
is not provided under the Real Property Leases.
(h) To the knowledge of the Corporation, no event exists which, but for
the passing of time or the giving of notice, or both, would
constitute a default by any other party to any of the Real Property
Leases and no party to any Real Property Lease is claiming any such
default or taking any action purportedly based upon any such
default.
4.25 ENVIRONMENTAL MATTERS
To the Corporation's knowledge:
(a) There are no Environmental Approvals.
(b) All operations of the Corporation have been, and are now, conducted
in material compliance with all Environmental Laws. There has been
no Release by the Corporation of any Hazardous Substance into the
Environment.
(c) Neither the Corporation nor any of its operations has been or is now
the subject of any Remedial Order, nor does the Corporation have any
knowledge of any investigation or evaluation commenced as to whether
any such Remedial Order is necessary nor, to the knowledge of the
Corporation, has any threat of any such Remedial Order been made
nor, to the knowledge of the Corporation, are there any
circumstances which could reasonably result in the issuance of any
such Remedial Order.
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(d) The Corporation has never been prosecuted for or convicted of any
offence under Environmental Laws, nor has the Corporation been found
liable in any proceeding to pay any fine, penalty, damages, amount
or judgment to any person as a result of any Release or threatened
Release of any Hazardous Substance into the Environment or as the
result of the breach of any Environmental Law and to the knowledge
of the Corporation, there is no basis for any such proceeding or
action.
(e) The Corporation does not have any knowledge of any Hazardous
Substance in, on or under the Leased Real Property, or in any other
assets of the Corporation.
4.26 EMPLOYMENT MATTERS
(a) Schedule 4.26 (Part A) of the Disclosure Schedules sets forth a
complete list of all Employees, whose current wages, salaries or
hourly rates of pay, and bonus (whether monetary or otherwise)
exceed $40,000 U.S., together with their titles, service dates and
material terms of employment including current wages, salaries or
hourly rates of pay, and bonus (whether monetary or otherwise) paid
since the beginning of the most recently completed fiscal year
(including the date of payment if paid since May 31, 2001) or
payable to each such Employee, and the date upon which each such
Employee was first hired by the Corporation. Except as disclosed in
Schedule 4.26, no Employee is on disability leave, pregnancy or
parental leave, extended leave of absence or receiving benefits
pursuant to the Laws.
(b) Except for those written employment contracts with salaried
Employees identified in Schedule 4.26 (Part B) of the Disclosure
Schedules, there are no written contracts of employment entered into
with any Employees or any oral contracts of employment which are not
terminable on the giving of reasonable notice in accordance with
applicable law.
(c) There are no written or oral change of control provisions or
Contracts with any of the Employees which provide for any rights of
Employees contingent upon or affected by a change of control of the
Corporation or the sale of any or all of their assets.
(d) Schedule 4.26 (Part C) of the Disclosure Schedules sets out a
complete list of all independent contractors with whom the
Corporation has entered into any Contract, together with a list of
all Contracts with them.
(e) Except for the Benefit Plans, there are no employment policies or
plans which are binding upon the Corporation.
(f) The Corporation has been and is being operated in compliance in all
material respects with all Laws relating to employees, including
employment standards, occupational health and safety, human rights,
labour relations and pay equity.
(g) There are no Claims or complaints nor, to the knowledge of the
Corporation, are there any threatened Claims or complaints, against
the Corporation pursuant to any Laws relating to employees,
including employment standards, human rights, labour relations,
occupational health and safety, worker's compensation or pay equity.
To the knowledge of the Corporation, nothing has occurred which
might lead to a Claim or complaint against the Corporation under any
such Laws. There are no outstanding decisions or settlements or
pending settlements which place any obligation upon the Corporation
to do or refrain from doing any act.
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(h) All current assessments under workers' compensation legislation in
relation to the Corporation have been paid or accrued and the
Corporation has not been subject to any special or penalty
assessment under such legislation which has not been paid.
4.27 COLLECTIVE AGREEMENTS
(a) The Corporation is not a party, either directly or by operation of
law, to any collective agreement, letters of understanding, letters
of intent or other written communication with any trade union or
association which may qualify as a trade union, which would cover
any of the Employees of the Corporation.
(a) There are no outstanding or, to the knowledge of the Corporation,
threatened labour tribunal proceedings of any kind, including any
proceedings which could result in certification of a trade union as
bargaining agent for Employees of the Corporation, and there have
not been any such proceedings within the last two years.
(b) To the knowledge of the Corporation, there are no threatened or
apparent union organizing activities involving any Employees of the
Corporation.
(c) The Corporation does not have any labour union problems that might
materially affect the value of the Corporation or lead to an
interruption of its operations at any location where the Corporation
carries on its business.
4.28 BENEFIT PLANS
(a) Schedule 4.28 of the Disclosure Schedules sets forth a complete list
of the Benefit Plans.
(b) Current and complete copies of all written Benefit Plans or, where
oral, written summaries of the material terms of them, have been
provided or made available to the Purchaser together with current
and complete copies of all documents relating to the Benefit Plans,
including: all documents establishing, creating or amending any of
the Benefit Plans; all trust agreements, funding agreements;
insurance contracts, and the most recent financial statements and
accounting statements and reports; all booklets, summaries, manuals
and written communications of a general nature distributed or made
available to any Employees or former employees concerning any
Benefit Plans.
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(c) Each Pension Plan has been qualified and administered in compliance
with (i) the terms thereof, and (ii) the Internal Revenue Code of
1986, as amended (the "Code") and the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); and the Corporation has
not received, in the last six years, any notice from any Person
questioning or challenging such compliance (other than in respect of
any claim related solely to that Person).
(d) All obligations to or under the Pension Plans (whether pursuant to
their terms or the Code or ERISA) have been satisfied, and there are
no outstanding defaults or violations under the Pension Plans by the
Corporation nor do the Corporation Stockholders or the Corporation
have any actual knowledge, without further enquiry or investigation,
of any default or violation by any other party to any Pension Plan.
(e) Other than those required by the Code of ERISA, there have been no
improvements, increases or changes to, or promised improvements,
increases or changes to, the benefits provided under any Pension
Plan. None of the Pension Plans provides for benefit increases or
the acceleration of or an increase in funding obligations that are
contingent upon or will be triggered by the entering into of this
Agreement or the completion of the transactions contemplated by this
Agreement, other than the full vested of accrued benefits required
by the Code upon the termination of a Pension Plan qualified under
Section 401(a) of the Code.
(f) All employer or employee payments, contributions or premiums
required to be remitted, paid to or in respect of each Pension Plan
have been paid or remitted in a timely fashion in accordance with
the terms of that Pension Plan and the Code and ERISA, and no Taxes,
penalties or fees are owing or exigible under any Pension Plan, and
to the knowledge of the Corporation there are no liabilities or
contingent liabilities in respect of any Pension Plans that have
been discontinued.
(g) There is no proceeding, action, investigation, suit or claim (other
than routine claims for payment of benefits) pending or, to the
knowledge of the Corporation, threatened involving any Pension Plan
or its assets, and to the knowledge of the Corporation no facts
exist which could reasonably be expected to give rise to any such
proceeding, action, suit or Claim (other than routine claims for
benefits).
(h) No event has occurred respecting any Pension Plan which could
otherwise reasonably be expected to adversely affect the tax
qualified status of any such plan.
(i) The Corporation has not received, or applied for, any payment of
surplus or any payments as a result of the demutualization of the
insurer of any Benefit Plan out of or in respect of any Benefit
Plan.
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(j) The Corporation has not taken any contribution or premium holidays
under any Benefit Plan and there have been no withdrawals or
transfers of assets from any Benefit Plan.
(k) All employee data necessary to administer each Benefit Plan is in
the possession of the Corporation and is substantially complete,
correct and in a form which is sufficient for the proper
administration of the Benefit Plan in accordance with its terms and
all Laws.
(l) None of the Benefit Plans provide benefits beyond retirement or
other termination of service to Employees or former employees, or to
the beneficiaries of such employees, except as required by
applicable laws, including but not limited to the Consolidated
Omnibus Reconciliation Act of 1985.
(m) None of the Benefit Plans require or permit a retroactive increase
in premiums or payments, or require additional payments or premiums
on the termination of any Benefit Plan or insurance contract in
respect thereof other than the normal and reasonable administrative
fees associated with the termination of benefit plans, and the level
of insurance reserves, if any, under any insured Benefit Plan, to
the best of the Corporation's knowledge, is reasonable and
sufficient to provide for all incurred but unreported claims.
4.29 INSURANCE
The Corporation maintains the policies of insurance set forth in Schedule 4.29
of the Disclosure Schedules, copies of which have been made available to the
Purchaser. All such policies of insurance are in full force and effect and the
Corporation is not in default, as to the payment of premium or otherwise, under
the terms of any such policy.
4.30 MATERIAL CONTRACTS
Schedule 4.30 of the Disclosure Schedules sets forth a complete list of the
Material Contracts. The Material Contracts are all in full force and effect and
no material default exists under any of the Material Contracts on the part of
the Corporation or, to the knowledge of the Corporation, on the part of any
other party to such Material Contracts. Current and complete copies of the
Material Contracts have been delivered or made available to the Purchaser and
there are no current or pending negotiations with respect to the renewal,
repudiation or amendment of any such Contract.
4.31 LITIGATION
Except as disclosed in Schedule 4.31 of the Disclosure Schedules, there is no
action, suit, litigation, investigation, claim, complaint, grievance or
proceeding, including appeals and applications for review, pending or, to the
knowledge of the Corporation, threatened in writing against the Corporation
before any court, Governmental Authority, commission, board, bureau, agency or
arbitration panel which, if determined adversely to the Corporation, would,
28
(a) have a Material Adverse Effect on the Corporation;
(b) enjoin, restrict or prohibit the consummation of the Merger or any
of the other transactions contemplated by this Agreement; or
(c) to the knowledge of the Corporation, prevent the Corporation
Stockholders from fulfilling all of their obligations set out in
this Agreement or arising from this Agreement.
and the Corporation has no knowledge of any existing ground on which any such
action, suit, litigation or proceeding might be commenced with any reasonable
likelihood of success. Except as disclosed in such Schedule 4.31, there is not
presently outstanding against the Corporation any judgment, decree, injunction,
rule or order of any court, Governmental Authority, commission, board, bureau,
agency or arbitrator.
4.32 TAX MATTERS
Except as disclosed in Schedule 4.32 of the Disclosure Schedules:
(a) The Corporation is not, and has never been, a member of an
affiliated group, within the meaning of Section 1504(a) of the Code,
and neither the Corporation nor any entity whose liabilities the
Corporation has succeeded has ever filed a consolidated United
States federal income tax return with (or been included in a
consolidated return or) an affiliated group;
(b) The Corporation has filed or caused to be filed all tax returns and
reports required to have been filed by or for them on or before the
Closing Date, and all information set forth in such returns or
reports is accurate and complete in all material respects;
(c) No tax return or report of the Corporation contains any position
which is subject to penalties under the Code Section 6662 or
corresponding provision of state, local or foreign tax law;
(d) The Corporation has paid all taxes due and payable by them;
(e) The Corporation is in material compliance with, and their records
contain all information and documents (including, without
limitation, properly completed United States Internal Revenue
Service Forms W-9) necessary to comply with, all applicable
information tax reporting and tax withholding requirements;
(f) There are no material unpaid taxes, additions to tax, penalties, or
interest payable by the Corporation or any other person that are or
could become a lien on any assets, or otherwise have a Material
Adverse Effect on the Corporation;
(g) The Corporation has collected or withheld all amounts required to be
collected or withheld by them for any taxes, and all such amounts
have been paid to the appropriate governmental agencies or set aside
in appropriate accounts for future payment when due;
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(h) The balance sheet of the Corporation fully and properly reflects, as
of the Closing Date, the liabilities of the Corporation for all
accrued taxes for all periods ending on or before the Closing Date;
(i) The Corporation has not granted (nor is subject to) any waiver
currently in effect of the period of limitations for the assessment
or collection of tax, no unpaid tax deficiency has been asserted
against or with respect to the Corporation by any taxing authority,
and there is no pending examination, administrative or judicial
proceeding, or deficiency or refund litigation with respect to any
taxes or tax returns of the Corporation;
(j) The Corporation has not made or entered into, nor holds any assets
subject to, a consent filed pursuant to Section 341(f) of the Code
and the regulations there under or a "safe harbour lease" subject to
former Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended before the Tax Reform Act of 1984, and the Treasury
Regulations thereunder;
(k) The Corporation is not required to include in income any amount from
an adjustment pursuant to Section 481 of the Code or the Treasury
Regulations thereunder or any similar provision of state law;
(l) The Corporation is not a party to, nor obligated under, any
agreement or other arrangement providing for the payment of any
amount that is or would be non-deductible under Section 280G of the
Code;
(m) The Corporation has not distributed to their stockholders or
security holders stock or securities of a controlled corporation in
a transaction to which Section 355(a) of the Code applies;
(n) There are no outstanding rulings or requests for rulings from any
taxing authority that are, or if issued would be, binding on the
Corporation;
(o) The Corporation is not, nor have they been at any time within the
last five years, a "United States real property holding corporation"
for the purposes of Section 897 of the Code;
(p) The Corporation does not have and has not had any permanent
establishment, nor are otherwise subject to taxation, in any country
other than the United States;
(q) Schedule 4.32 describes all material tax elections, consents, and
agreements made by or affecting the Corporation that would be
effective after the Closing, lists all material types of taxes paid
and tax returns filed by or on behalf of the Corporation, expressly
indicates each tax with respect to which the Corporation is or has
been included in a consolidated, unitary, or combined return and
describes the status of all examinations, administrative or judicial
proceedings, and litigation with respect to taxes of the
30
Corporation.
4.33 BOOKS AND RECORDS
All Books and Records have been made available to the Purchaser. Such Books and
Records, together with the Company Financial Statements, fairly and correctly
set out and disclose in all material respects the financial position of the
Corporation and all financial transactions to which the Corporation is or was a
party have been accurately recorded in all material respects in such Books and
Records.
4.34 CORPORATE RECORDS
(a) The articles of incorporation and by-laws for the Corporation,
including any and all amendments, have been made available to the
Purchaser and such articles of incorporation and by-laws as so
amended are in full force and effect unamended.
(b) The corporate records and minute books for the Corporation have been
made available to the Purchaser. The minute books include minutes
prepared of all meetings of the directors and stockholders of the
Corporation held to date and resolutions passed by the directors or
shareholders on consent. The stock ledger and journal, reflecting
all stock issuances and stock transfers, of the Corporation is
complete and accurate in all material respects.
4.35 MANAGEMENT RECOMMENDATION LETTERS
Copies of all management recommendation letters received by the Corporation or
their boards of directors from any auditor of the Corporation during the last
three years have been made available to the Corporation.
4.36 TRADE ALLOWANCES
The Material Contracts contain all provisions concerning customer and supplier
discounts, allowances, volume rebates, preferential terms, customer credits or
similar reductions in price or other trade terms that have a material effect on
the Corporation.
4.37 BANK ACCOUNTS, ETC.
Schedule 4.37 of the Disclosure Schedules sets forth a complete list of every
financial institution in which the Corporation maintain any depository account,
trust account or safe deposit box, details of all such accounts and safe deposit
boxes and the names of all persons authorized to draw on or who have access to
such accounts or safe deposit boxes.
4.38 NO BROKER
Except as disclosed on Schedule 4.38, neither the Corporation nor, to the
knowledge of the Corporation, any Corporation Stockholder is obligated for the
payment of any fees or expenses of any broker or finder in connection with the
origin, negotiation or execution of this Agreement or in connection with the
transactions contemplated hereby.
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4.39 DISCLOSURE
This Agreement (including all exhibits and schedules hereto) does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein not misleading in light of the
circumstances under which they were made. Except as set forth in this Agreement
(including all exhibits and schedules thereto), there is no fact that the
Corporation has not disclosed to the Purchaser and of which its officers and
directors are aware, that has had or would reasonably be expected to have a
Material Adverse Effect on the Corporation.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND MERGER SUB
The Purchaser and/or Merger Sub hereby represents and warrants to the
Corporation Stockholders the matters set out below.
5.1 INCORPORATION
The Purchaser is a corporation duly incorporated and validly existing under the
laws of Canada and has all necessary corporate power to own its property and
assets and to carry on its business as presently conducted. Merger Sub is a
corporation duly incorporated and validly existing under the laws of Delaware
and has all necessary corporate power to own its property and assets and to
carry on its business as presently conducted.
5.2 DUE AUTHORIZATION
The Purchaser has all necessary corporate power, authority and capacity to enter
into this Agreement and to carry out its obligations under this Agreement. The
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of the Purchaser, including all
necessary approvals by the Purchaser's shareholders. Merger Sub has all
necessary corporate power, authority and capacity to enter into this Agreement
and to carry out its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Merger Sub.
5.3 ENFORCEABILITY OF OBLIGATIONS
This Agreement, and the other agreements and documents to be entered into by
Purchaser and Merger Sub pursuant to this Agreement (the "Purchaser Ancillary
Documents"), constitutes valid and binding obligations of each of the Purchaser
and Merger Sub enforceable against each of them in accordance with their
respective terms, except as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors' rights generally, and (ii) the effect of
rules of law governing the availability of equitable remedies.
32
5.4 SEC DOCUMENTS; PURCHASER FINANCIAL STATEMENTS
Purchaser has furnished the Corporation with its most recent true and complete
copy of each statement, quarterly and other report pursuant to Section 13 or
15(d) of the 1934 Act filed by Purchaser with the SEC since June 1, 2003 ( (the
"Purchaser SEC Documents"), which are all the documents (other than preliminary
material) that Purchaser was required to file with the SEC under the 1934 Act
since such date. As of their respective filing dates, the Purchaser SEC
Documents complied in all materials respects with the requirements of the 1934
Act. The Purchaser SEC Documents and this Agreement (including the exhibits and
schedules hereto), when taken together, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by a
subsequently filed Purchaser SEC Document provided to the Corporation prior to
the Effective Time. The financial statements of Purchaser included in the
Purchaser SEC Documents (the "Purchaser Financial Statements") comply as to form
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present the consolidated financial position of Purchaser and its consolidated
subsidiaries at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring audit adjustments). There has been no
change in Purchaser's accounting policies, methods or practices (including any
change in depreciation or amortization policies or rates) or any material
revaluation by the Purchaser of any of its material assets, except as described
in the notes to the Purchaser Financial Statements. Except as disclosed in the
Purchaser Financial Statements, neither the Purchaser nor any of its
subsidiaries has any liabilities required under generally accepted accounting
principles to be set forth on a balance sheet (absolute, accrued, contingent or
otherwise) which are, individually or in the aggregate, material to the
business, results of operations or financial condition of the Purchaser and its
subsidiaries taken as a whole, except for liabilities incurred since the date of
the most recent balance sheet forming part of such Purchaser Financial
Statements in the ordinary course of business consistent with past practices.
5.5 ABSENCE OF CONFLICTING AGREEMENTS
Neither the Purchaser nor Merger Sub is a party to, bound or affected by or
subject to any indenture, mortgage, lease, agreement, Contract, obligation,
instrument, charter or by-law provision, Law or Governmental Authorization which
would be violated, contravened, breached by, or under which any default would
occur or an Encumbrance would be created as a result of the execution and
delivery by it of this Agreement or the performance by it of any of its
obligations provided for under this Agreement. Neither the Purchaser nor Merger
Sub's entering into this Agreement nor the consummation of the Merger or any
other transaction contemplated by this Agreement or any Parent Ancillary
Document will give rise to, or trigger the application of, any rights of any
third party that would come into effect upon the consummation of the Merger.
33
5.6 APPROVALS; RESTRICTIONS
Except for the filings and/or notices required (a) under the HSR Act or the
Securities Laws, (b) under a foreign anti-trust or trade regulation law, (c) to
be made with: (i) the NASD and/or its Nasdaq SmallCap Market, (ii) the Boston
Stock Exchange, and (iii) each state securities or "blue sky" authority which
may have jurisdiction, or (d) to be filed by the Purchaser pursuant to the
Investment Canada Act, and except for the filing of the Agreement of Merger with
the Secretary of State of the State of Delaware and the State of California, no
approval, order or consent of or filing with any Governmental Authority is
required on the part of the Purchaser or Merger Sub in connection with the
execution, delivery and performance of this Agreement or any Purchaser Ancillary
Documents or the performance of the Purchasers' obligations under this Agreement
and the Purchaser Ancillary Documents. Such filings shall be accomplished in a
timely manner, except where failure to accomplish such filing would not
reasonably be expected to have a Material Adverse Effect on the Purchaser or on
the Corporation. The Purchaser Common Stock will be of the same class as is
currently registered under the 1934 Act and the Purchaser will use commercially
reasonable best efforts to ensure that the Purchaser Common Stock is listed for
trading on the Nasdaq SmallCap Market. The Exchange Shares to be issued
hereunder will constitute "restricted securities" within the meaning of the
federal securities laws of the United States and may not be offered, sold,
transferred or otherwise disposed of by any other person except in strict
compliance with all applicable provisions of such laws, the rules and
regulations thereunder and all state and Canadian securities laws, rules and
regulations. There are no other restrictions on the securities being issued
except as provided in the Escrow Agreement.
5.7 CAPITALIZATION.
The authorized capital stock of the Purchaser consists of an unlimited number of
shares of Common Stock, no par value per share, of which 29,598,276 shares are
issued and outstanding. All issued and outstanding shares of Purchaser Common
Stock have been duly authorized and validly issued, and are fully paid and
nonassessable. Other than as listed on Schedule 5.7, there are no stock
appreciation rights, options, warrants, calls, rights, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
or otherwise acquire any of the Purchaser's authorized but unissued capital
stock or any securities or debt convertible into or exchangeable for shares of
the Purchaser's capital stock or obligating the Purchaser to grant, extend or
enter into such option, warrant, call, commitment, conversion privileges or
preemptive or other right or agreement.
5.8 LITIGATION
There is no action, suit, litigation, investigation, claim, complaint, grievance
or proceeding, including appeals and applications for review, in progress or, to
the knowledge of the Purchaser pending or threatened against or relating to the
Purchaser or Merger Sub before any court, Governmental Authority, commission,
board, bureau, agency or arbitration panel, which, if determined adversely to
the Purchaser or Merger Sub would:
(a) prevent the Purchaser from issuing the Purchaser Common Stock to the
Corporation Stockholders in the Merger;
34
(b) enjoin, restrict or prohibit the Merger or the other transactions
contemplated by this Agreement; or
(c) prevent the Purchaser or Merger Sub from fulfilling all of its
obligations set out in this Agreement or arising from this
Agreement, or
(d) that would have or would be reasonably likely to have a Material
Adverse Effect on the Purchaser;
and the Purchaser has no knowledge of any existing ground on which any such
action, suit, litigation or proceeding might be commenced with any reasonable
likelihood of success. There is not presently outstanding against the Purchaser
or Merger Sub any judgment, decree, injunction, rule or order of any court,
Governmental Authority, commission, board, bureau, agency or arbitrator.
5.9 ABSENCE OF CERTAIN CHANGES.
Since the date of the most recent balance sheet of the Purchaser included in the
Purchaser Financial Statements, Purchaser has operated its business in the
ordinary course consistent with past practice and there has not been (a) any
change in the financial condition, properties, assets, liabilities, business or
operations of the Purchaser which change by itself or in conjunction with all
other such changes, whether or not arising in the ordinary course of business,
has had or will have a Material Adverse Effect thereon, (b) any amendment or
change in the Purchaser's charter documents; or (c) any declaration, setting
aside or payment of a dividend on, or the making of any other distribution in
respect of, the capital stock of the Purchaser, or any split, combination or
recapitalization of the capital stock of the Purchaser or any direct or indirect
redemption, purchase or other acquisition of any capital stock of the Purchaser
or any change in any rights, preferences, privileges or restrictions of any
outstanding security of the Purchaser.
5.10 NO BROKER
Except as disclosed on Schedule 5.10, the Purchaser has carried on all
negotiations relating to this Agreement and the transactions contemplated by
this Agreement directly and without the intervention on their behalf of any
other party in such manner as to give rise to any valid claim for a brokerage
commission, finder's fee or other like payment against any of the Corporation
Stockholders and the Purchaser shall be responsible for the Broker fees
disclosed in Schedule 5.10.
5.11 SHARES.
All Purchaser Common Stock to be issued in the Merger will be duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock of the
Purchaser and will be issued in compliance with all applicable Securities Laws.
35
5.12 EXPERIENCE.
The Purchaser has carefully reviewed the representations concerning the
Corporation contained in this Agreement and has made detailed inquiry concerning
the Corporation, its business and its personnel; the officers of the Corporation
have made available to the Purchaser any and all written information which it
has requested and have answered to the Purchaser's satisfaction all inquiries
made by the Purchaser as of the date of this Agreement. The Purchaser has
sufficient knowledge and experience in finance and business that it is capable
of evaluating the risks and merits of this transaction, and the Purchaser is
able financially to bear the risks thereof.
5.12 MERGER SUB.
Merger Sub is a wholly-owned subsidiary of Purchaser and Purchaser shall cause
Merger Sub to perform as provided in this Agreement. Merger Sub was formed
solely for the purpose of consummating the Merger, has not conducted any
operations and has no material assets or liabilities.
6. NON-WAIVER; SURVIVAL
6.1 NON-WAIVER
No investigations made by or on behalf of the Purchaser at any time shall have
the effect of waiving, diminishing the scope of or otherwise affecting any
representation or warranty made by the Corporation. No waiver of any condition
or other provision, in whole or in part, shall constitute a waiver of any other
condition or provision (whether or not similar) nor shall such waiver constitute
a continuing waiver unless otherwise expressly provided.
6.2 NATURE AND SURVIVAL
All representations and warranties contained in this Agreement on the part of
each of the Parties shall terminate at the Closing, provided however, the
Corporation's representations in Section 4.3 and 4.32 shall survive, until
November 30, 2004, unless a bona fide notice of a Claim shall have been given in
writing before the expiry of such period, in which case the representation and
warranty to which such notice relates shall survive in respect of that Claim
until final determination or settlement of such Claim. All covenants of the each
of the Parties shall survive in accordance with their terms.
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7.0 PURCHASER'S CONDITIONS PRECEDENT
The obligation of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction of, or compliance with, at
or before the Closing, each of the following conditions precedent (each of which
is acknowledged to be inserted for the exclusive benefit of the Purchaser and
may be waived by it in whole or in part).
7.1 TRUTH AND ACCURACY OF REPRESENTATIONS OF CORPORATION AT THE CLOSING TIME
All of the representations and warranties of the Corporation made in or pursuant
to this Agreement shall be true and correct in all material respects as at the
Closing Time and with the same effect as if made at and as of the Closing Time
and the Purchaser shall have received a certificate of the Corporation to such
effect signed by the Chief Executive Officer of the Corporation.
7.2 PERFORMANCE OF OBLIGATIONS
The Corporation shall have performed or complied with, in all material respects,
all its obligations and covenants under this Agreement.
7.3 RECEIPT OF CLOSING DOCUMENTATION
All documentation relating to the due authorization and completion of the Merger
shall be satisfactory to the Purchaser, acting reasonably, and the Purchaser
shall have received copies of all such documentation or other evidence as it may
reasonably request in order to establish the consummation of the transactions
contemplated by this Agreement and the taking of all corporate proceedings in
connection with such transactions in compliance with these conditions, in form
(as to certification and otherwise) and substance reasonably satisfactory to the
Purchaser.
7.4 CONSENTS, AUTHORIZATIONS AND REGISTRATIONS
The Required Approvals listed in Schedule 7.4 hereto shall have been obtained at
or before the Closing Time on terms acceptable to the Purchaser, acting
reasonably.
7.5 NO PROCEEDINGS
There shall be no injunction or restraining order issued preventing, and no
claim, action, suit, litigation or proceeding, judicial or administrative, or
investigation against any Party pending by any Person, or pending or threatened
by any Governmental Authority, for the purpose of enjoining or preventing the
consummation of the transactions contemplated by this Agreement or otherwise
claiming that this Agreement or the consummation of those transactions is
improper or would give rise to proceedings under any Laws.
7.6 SUBSTANTIAL DAMAGE
No substantial damage by fire or other hazard to the assets or Business of the
Corporation shall have occurred prior to the Closing Time.
7.7 NO LAWS
No Laws shall have been enacted which would directly have a material adverse
effect on the Business of the Corporation.
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7.8 DIRECTORS AND OFFICERS OF THE CORPORATIONS
There shall have been delivered to the Purchaser on or before the Closing Time,
the resignations of all individuals who are currently directors or officers of
the Corporation (except to the extent that the Corporation has been notified to
the contrary by the Purchaser).
7.9 CONVERSION OF DEBT
Any loans that are convertible into shares of the Corporation shall have been
either converted into equity in full or repaid in full by the Corporation on or
before the Closing Time, to the satisfaction of the Purchaser.
7.10TRANSFER AND DELIVERY OF THE PURCHASED SHARES
The Purchaser shall have received Transmittal Letters from each of Voyager
Capital Fund II, L.P., Voyager Capital Fund II-A, L.P., Voyager Capital Founders
Fund II, L.P., ▇▇▇▇▇▇▇▇ Partners II, L.P., Onset Standby Fund, L.P. and Onset
Enterprise Associates III, L.P..
7.11 MATERIAL ADVERSE CHANGE
There shall not have occurred a Material Adverse Change (as hereinafter defined)
with respect to the Corporation. A "Material Adverse Change" shall have occurred
if the Corporation has incurred debts or other liabilities, outside the ordinary
course of the Corporation's business, consistent with past practice, that are
not reflected in the Company Financial Statements, excluding any such debts or
liabilities that have been incurred with the Purchaser's prior consent.
7.12 SECURITIES LAWS
Purchaser shall have reasonably satisfied itself that all applicable
requirements of any and all applicable Securities Laws relating to the sale and
issuance of the Exchange Shares hereunder pursuant to the Merger have been met.
7.13 CORPORATION STOCKHOLDER APPROVAL
The Corporation Stockholders shall have approved this Agreement in accordance
with the Articles of Incorporation of Corporation and as provided by Delaware
Law and California Law.
7.14 OPINION OF COUNSEL FOR CORPORATION.
The Purchaser shall have received an opinion dated as of the Closing Date from
counsel for the corporation in form and substance acceptable to the Purchaser
and its counsel, acting reasonably.
7.15 DISCLOSURE SCHEDULES
Corporation shall have delivered to the Purchaser Disclosure Schedules that
qualify and set forth matters required by the representations and warranties
contained in Article 4 of this Agreement.
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7.16 BOOKS AND RECORDS REVIEW
Purchaser shall have satisfied itself, acting reasonably, on or before the
Closing Time that the Accounts Receivable and cash of the Corporation exceed the
accounts payable and liabilities of the Corporation.
7.17 ESCROW AGREEMENT AND REGISTRATION RIGHTS AGREEMENT
Purchaser shall have been provided with an executed Escrow Agreement and
Registration Rights Agreement.
7.18 MANAGEMENT BONUS PLANS
The Purchaser shall have received evidence that any management bonus plans of
the Corporation shall have been satisfied as of the Closing Date in form and
substance acceptable to the Purchaser and its counsel, acting reasonably.
The Purchaser may waive compliance with any condition in whole or in part if it
sees fit to do so, without prejudice to its rights of termination pursuant to
Article 11 in the event of non-fulfilment of any other condition, in whole or in
part, or to its rights to recover damages for the breach of any representation,
warranty, covenant or condition contained in this Agreement.
8 CORPORATION'S CONDITIONS PRECEDENT
The obligations of the Corporation to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction of or compliance with, at
or before the Closing, each of the following conditions precedent (each of which
is acknowledged to be inserted for the exclusive benefit of the Corporation and
may be waived by the Corporation, in whole or in part).
8.1 TRUTH AND ACCURACY OF REPRESENTATIONS OF THE PURCHASER AT THE CLOSING
TIME
All of the representations and warranties of the Purchaser made in or pursuant
to this Agreement shall be true and correct in all material respects as at the
Closing Time and with the same effect as if made at and as of the Closing Time
(except to the extent that such representations or warranties address matters as
of a particular date or period, in which case such representations and
warranties shall be true and correct in all material respects as of such date or
period) and the Corporation shall have received a certificate of the Purchaser
to such effect signed by the Chief Executive Officer of the Purchaser.
8.2 PERFORMANCE OF OBLIGATIONS
The Purchaser shall have performed or complied with, in all respects, all its
obligations and covenants under this Agreement.
8.3 RECEIPT OF CLOSING DOCUMENTATION
All documentation relating to the due authorization and completion of the Merger
under this Agreement shall be satisfactory to the Corporation, acting
reasonably, and the Corporation shall have received copies of all extra
documentation or other evidence as it may reasonably request in order to
establish the consummation of the transactions contemplated by this Agreement
and the taking of all corporate proceedings in connection with such transactions
in compliance with these conditions in form (as to certification and otherwise)
and substance reasonably satisfactory to the Corporation.
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8.4 CONSENTS, AUTHORIZATIONS AND REGISTRATIONS
The Required Approvals listed in Schedule 7.4 hereto shall have been obtained at
or before the Closing Time on terms acceptable to the Corporation, acting
reasonably.
8.5 NO PROCEEDINGS
There shall be no injunction or restraining order issued preventing, and no
pending or threatened claim, action, suit, litigation or proceeding, judicial or
administrative, or investigation against any Party by any Person, for the
purpose of enjoining or preventing the consummation of the transactions
contemplated by this Agreement or otherwise claiming that this Agreement or the
consummation of those transactions is improper or would give rise to proceedings
under any Laws.
8.6 SECURITIES LAWS
The Corporation shall have reasonably satisfied itself that all applicable
requirements of any and all applicable Securities Laws relating to the
transaction have been met, including the form and substance of any information
statement or other disclosure document provided to the Corporation Stockholders
in connection with the transactions contemplated by this Agreement.
8.7 CORPORATION STOCKHOLDER APPROVAL
The Corporation Stockholders shall have approved this Agreement in accordance
with the Articles of Incorporation of Corporation and as provided by Delaware
and California.
8.8 REGISTRATION RIGHTS
The Purchaser shall have executed and delivered a Registration Rights Agreement
in a form attached hereto as Exhibit 8.8 with respect to the Purchaser Common
Stock being issued in the Merger.
8.9 DISCLOSURE SCHEDULES
The Purchaser shall have accepted the Disclosure Schedules prepared by the
Corporation to qualify and set forth the matters required by the representations
and warranties contained in Article 4 of this Agreement, in form and substance
reasonably satisfactory to the Corporation.
8.10 ESCROW AGREEMENT
The Purchaser and the Escrow Agent shall have executed and delivered the Escrow
Agreement to the Stockholder Representative.
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8.11 NASDAQ LISTING
The Exchange Shares shall have been listed with The Nasdaq Stock Market, Inc.
8.12 OPINION OF COUNSEL FOR PURCHASER.
The Corporation shall have received an opinion dated as of the Closing Date from
counsel for the Purchaser, ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇, Hill & ▇▇▇▇▇▇▇▇▇ LLP, in form and
substance acceptable to the Corporation and its counsel, acting reasonably.
The Corporation may waive compliance with any condition in whole or in part if
it sees fit to do so, without prejudice to its rights of termination pursuant to
Article 11 in the event of non-fulfilment of any other condition, in whole or in
part, or to its rights to recover damages for the breach of any representation,
warranty, covenant or condition contained in this Agreement.
9 OTHER COVENANTS AND REPRESENTATIONS OF THE PARTIES
9.1 CONDUCT OF BUSINESS PRIOR TO CLOSING
During the period from the date of this Agreement to the Effective Time or the
earlier termination of this Agreement in accordance with Article 11 hereof, the
Corporation will do the following:
(A) CONDUCT BUSINESS IN THE ORDINARY COURSE - Except as otherwise
expressly contemplated under this Agreement or as otherwise approved
by the Purchaser, conduct its business in the ordinary and usual
course, consistent with past practice and regular customer service
and business policies and not, without the prior written consent of
the Purchaser, enter into any transaction or Contract which, if
effected before the date of this Agreement, would constitute a
breach of the representations, warranties or covenants of the
Corporation contained in this Agreement.
(B) MAINTAIN GOOD RELATIONS - Use all reasonable efforts to maintain
good relations with the Employees, its customers and suppliers.
(C) CONTINUE INSURANCE - Continue in force all policies of insurance
maintained by or for the benefit of the Corporation and give all
notices and present claims under all insurance policies in a timely
fashion.
(D) COMPLIANCE WITH LAW - Comply in all material respects with all Laws
affecting the operation of the Corporation.
(E) PREVENT CERTAIN CHANGES - Not, without the prior written consent of
the Purchaser, take any of the actions, do any of the things or
perform any of the acts described in Section 4.10.
(F) APPROVALS - Co-operate with the Purchaser and use all commercially
reasonable efforts and diligently pursue obtaining the Required
Approvals.
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9.2 ACCESS FOR INVESTIGATION
(a) The Corporation shall permit the Purchaser and its representatives,
on reasonable notice to the Corporation, between the date of this
Agreement and the Closing Time, without interference with the
ordinary conduct of the Business, to have reasonable access during
normal business hours to (i) the Real Property; (ii) all other
locations where Books and Records or other material relevant to the
Business are stored; (iii) all the Books and Records; and (iv) the
properties and assets used in the Business. The Corporation shall
furnish to the Purchaser copies of Books and Records (subject to any
confidentiality agreements or covenants relating to any Books and
Records) as the Purchaser shall from time to time request to enable
confirmation of the matters warranted in Article 4. Without limiting
the generality of the foregoing, it is agreed that the accounting
representatives of the Purchaser shall be afforded a reasonable
opportunity to review all aspects of the financial affairs of the
Corporation.
(b) Notwithstanding subsection (a), the Corporation shall not be
required to disclose any information, records, files or other data
to the Purchaser where prohibited by Laws or confidentiality
obligations, or where the information, records, files or other data
would be subject to attorney-client privilege.
9.3 CONFIDENTIALITY
Prior to the Closing and following any termination of this Agreement, the
Purchaser shall keep confidential and not divulge, furnish or make accessible
all information disclosed to it by the Corporation or their agents relating to
the Corporation, except information which:
(a) is or becomes generally available to the public;
(b) the Purchaser received from an independent third Person, who had
obtained the information lawfully and was under no obligation of
secrecy, or
(C) the Purchaser can show was in its possession before receipt of such
information from the Corporation or their agents.
If this Agreement is terminated without completion of the transactions
contemplated by this Agreement, the Purchaser shall (A) promptly return all
documents, work papers and other written material (including all copies)
obtained from the Corporation or their agents in connection with this Agreement
and not previously made public, and shall continue to maintain the confidence of
all such information, and (B) not solicit, offer or otherwise attempt to entice
any Employee to leave the employ of Corporation to work for the Purchaser for a
period of one (1) year from the date of termination of this Agreement. The
provisions of this Section 9.3 are in addition to, and not in substitution for,
the provisions of any separate nondisclosure agreement that may be executed by
the Parties with respect to the transactions contemplated by this Agreement.
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9.4 ACTIONS TO SATISFY CLOSING CONDITIONS
Each of the Parties shall use commercially reasonable efforts to satisfy or
cause to be satisfied all the conditions precedent to the Merger and the
consummation of the transactions contemplated by this Agreement which are set
forth in Articles 7 and 8 and to ensure compliance with each of the covenants
set forth in this Article 9.
9.5 U.S. SECURITIES FILINGS
The Purchaser shall timely complete all filings required under Securities Laws
with respect to the transactions contemplated hereunder.
9.6 NASDAQ LISTING
The Purchaser agrees to authorize for listing on the Nasdaq Small Cap Market and
the Boston Stock Exchange the shares of Purchaser Common Stock issuable to the
Corporation Stockholders in connection with the Merger upon official notice of
issuance.
9.7 STUB PERIOD RETURNS
The Purchaser shall cause to be prepared and filed on a timely basis all Tax
Returns for the Corporation for any period which ends on or before the Closing
Date and for which Tax Returns have not been filed as of such date. The
Purchaser shall also cause to be prepared and filed on a timely basis all Tax
Returns of the Corporation for periods beginning before and ending after the
Closing Date.
9.8 TAX MATTERS
The Purchaser recognizes that in order for the Corporation Stockholders
to receive tax-free treatment in the Merger, the Purchaser must satisfy a number
of requirements under Sections 367 and 368 of the Code and the regulations
promulgated thereunder. Accordingly, the Purchaser covenants and represents as
follows:
(a) the Purchaser has not taken and will not take any actions, or fail
to take any actions, that would prevent the Merger from qualifying as a
reorganization under Section 368(a) or that would trigger gain under Section
367(a);
(b) the Purchaser does not have any knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) or that would trigger gain
under Section 367(a);
(c) the Purchaser shall cooperate reasonably with the Corporation and
the Corporation Stockholders in their reasonable efforts to satisfy all
requirements under Sections 367 and 368 of the Code;
(d) the Purchaser shall cooperate, as reasonably required, with the
Corporation's efforts to satisfy the reporting requirements set forth in
Treasury Regulations Section 1.367(a)-3(c)(6), including reporting of
information reasonably required thereby;
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(e) the Purchaser shall cooperate, as reasonably required, with the
obligations of the Corporation Stockholders that hold five percent (5%) or more
of the outstanding voting capital stock of the Purchaser immediately after the
Merger (the "Five Percent Stockholders") to enter into gain recognition
agreements with the Internal Revenue Service pursuant to Treasury Regulations
Sections 1.367(a)-3(c)(1)(iii)(B) and 1.367(a)-8 and satisfy their continuing
obligations pursuant to such gain recognition agreements, including the
provision of information to the Five Percent Stockholders if the Purchaser makes
a disposition that causes the Five Percent Stockholders to recognize gain
pursuant to such gain recognition agreements; and
(f) the Purchaser shall not dispose of the Corporation's assets, either
through an asset or stock sale, in a transaction that causes the Five Percent
Stockholders to recognize gain pursuant to Treasury Regulations Sections
1.367(a)-3(c)(iii)(B) and 1.367(a)-8.
9.9 NO SHOP.
(a) The Corporation agrees, from the date of execution of this
Agreement until the earlier of the Closing Date or termination of this Agreement
in accordance with its terms, not to solicit, negotiate, participate in
discussions or consider offers relating to any other proposal contemplating (i)
a merger or consolidation involving the Corporation pursuant to which the
stockholders of the Corporation immediately preceding such transaction hold less
than 50% of the equity interest in the surviving or resulting entity of such
transaction, (ii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer), directly or indirectly, of ownership of more
than 50% of the then outstanding shares of capital stock of the Corporation,
(iii) a sale of a majority of the Corporation's outstanding shares or (iv) a
sale of all or substantially all of the assets of the Corporation (each, an
"Acquisition Proposal") nor will the Corporation encourage any third party to
make an unsolicited Acquisition Proposal; provided however that this Section 9.9
shall not prohibit the Corporation from entering into discussions or
negotiations with, furnishing information regarding the Corporation to, and
considering an offer from, any person or group who has submitted to the
Corporation an unsolicited, written, bona fide Acquisition Proposal that the
Board of Directors of the Corporation in good faith concludes (1) may constitute
a Superior Offer (as defined below) (2) that such action is consistent with the
Corporation's Board of Directors' compliance with its fiduciary obligations to
the Corporation's stockholders under applicable law. A "Superior Offer" means
any Acquisition Proposal that the Board of Directors of the Corporation
determines, in its reasonable judgment, to be more favorable to the
Corporation's stockholders than the terms of the Merger.
(b) Nothing in this Agreement shall prevent the Board of Directors of
the Corporation from withholding, withdrawing, amending or modifying any
recommendation of the Board of Directors in favor of the Merger if (i) a
Superior Offer (as defined above) is made to the Corporation and is not
withdrawn, and (ii) the Corporation shall have provided written notice to the
Purchaser advising the Purchaser that the Corporation has received a Superior
Offer, within one business day of receiving such Superior Offer, specifying all
of the material terms and conditions of such Superior Offer and identifying the
person or entity making such Superior Offer.
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9.10 ADDITIONAL INDEMNITY
The Corporation and the Corporation Stockholders agree to
indemnify the Purchaser pursuant to Article 10 hereof, and subject to all of the
limitations of said Article 10, for any Claims arising from any fraudulent or
willful misrepresentations made to the Purchaser prior to the Closing by the
Corporation or any of its directors, officers or employees, provided such Claims
arise during the three year period following the Closing Date and the Purchaser
claims indemnification with respect thereto under Article 10 prior to the
expiration of such three year period.
10 INDEMNIFICATION
10.1 MUTUAL INDEMNIFICATION FOR BREACHES OF COVENANTS AND WARRANTY, ETC.
The Corporation covenants and agrees with the Purchaser, and the Purchaser
covenants and agrees with the Corporation Stockholders (the Party or Parties so
covenanting and agreeing to indemnify another Party being referred to as the
"Indemnifying Party" and the Party so to be indemnified being referred to as the
"Indemnified Party") to indemnify and save harmless, on an after-tax basis, the
Indemnified Party effective as and from the Closing Time, from and against all
Claims that may be made or brought against the Indemnified Party, or that it may
suffer or incur, directly or indirectly as a result of or in connection with any
non-fulfilment of any covenant or agreement on the part of the Indemnifying
Party under this Agreement or any incorrectness in or breach of any
representation or warranty (in the case of the Corporation only for any
incorrectness in or breach of Sections 4.3 and 4.32) of the Indemnifying Party
contained in this Agreement (including any exhibits and schedules thereto):
(a) In case an Indemnifying Party shall object in writing to any claim
or claims for indemnification, the Indemnified Party and the
Indemnifying Party shall attempt in good faith for fifteen (15) days
to agree upon the rights of the respective parties with respect to
each of such claims.
(b) if no agreement can be reached after good faith negotiation during
such fifteen (15) day period, either the Indemnified Party or the
Indemnifying Party may, by written notice to the other party, demand
submission of the matter to arbitration or to some other
mutually-agreeable form of alternative dispute resolution (together
or in the alternative, "ADR") to take place in Chicago, Illinois,
United States. Unless the parties mutually agree in writing to some
---- alternative form of ADR, arbitration of the matter shall be
conducted in accordance with the commercial rules then in effect of
the American Arbitration Association using an arbitrator who is an
experienced commercial litigator and admitted before the bar of
California, Illinois or New York. The dispute shall be determined by
one (1) arbitrator acceptable to both parties, which arbitrator
shall be selected within twenty (20) days of filing by a party of
notice of intention to arbitrate. If, by the end of said twenty (20)
day period, the parties have not agreed on one (1) arbitrator to be
acceptable, then either party may request the American Arbitration
Association to appoint the arbitrator pursuant to this Section 10.1
and the commercial rules then in effect of the American Arbitration
Association. Arbitrators shall be compensated for their services at
the standard hourly rate charged in their private professional
activities. The parties acknowledge that the federal and state
45
courts situated in Illinois shall have jurisdiction and venue over
the parties for the purpose of enforcing this Section 10.1. The
United States Federal Rules of Civil Procedure shall apply with
respect to any arbitration hereunder, and to the extent practicable
any hearing with respect to a single matter shall be held on
consecutive hearing days. The arbitrator(s) shall follow substantive
rules of law and shall make its award in strict conformity with this
Agreement. All parties agree to be bound by the results of this
arbitration; judgement upon the award so rendered may be entered and
enforced in any court of competent jurisdiction.
(c) the foregoing indemnity shall be subject to the requirement that the
Indemnifying Party shall, in respect of any Claim made by any third person, be
afforded an opportunity at its sole expense to resist, defend and compromise
such Claim;
(d) the foregoing indemnity shall be subject to the limitation that, for any
Claims made hereunder, the Indemnifying Party shall not be required to pay any
such amount until the aggregate amount of such Claims exceeds $100,000 and then
the Indemnifying Party shall be required to pay the full amount;
(e) the foregoing indemnity shall be subject to the limitation that, for Claims
made in connection with the indemnity described in Section 9.10 hereof, the
Indemnifying Party shall not be required to pay any amount in excess of the
value of the Exchange Shares based on the Merger Price Per Share;
(f) the foregoing indemnity shall be subject to the limitation that, for Claims
made in connection with the representations or warranties in Sections 4.3 and
4.32, the Indemnifying Party shall not, absent fraud, be required to pay any
amount in excess of the value of the Escrow Shares based on the Merger Price Per
Share;
(g) the indemnification rights set forth in this Article 10 shall be the sole
and exclusive remedy of the Indemnified Party, and are in lieu of any
other claim or right that the Indemnified Party may otherwise have under
applicable law or otherwise and the liability of any Corporation
Stockholder for indemnification claims hereunder shall be several and not
joint;
(h) in no event shall any Corporation Stockholder who has not received any
Exchange Shares pursuant to the Distribution Mechanism as described in
Section 2.6 be liable for any indemnification claims hereunder; and
(i) for all purposes of this Article 10, the Stockholder Representative shall
act on behalf of the Corporation Stockholders in administering Claims by
the Purchaser, including, without limitation, for purposes of determining
whether to dispute that the Corporation Stockholders are in fact liable
under this Article 10 for a Claim asserted by the Purchaser, determining
whether to assume the defense of third party claims, and administering the
Escrow Agreement for the benefit of the Corporation Stockholders.
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10.2 INDEMNIFICATION PROCEDURES FOR THIRD PERSON CLAIMS
(a) In the case of Claims made by a third Person with respect to which
indemnification is sought, the Party seeking indemnification shall
give Notice promptly, and in any event within 20 days, to the other
Party of any such Claims made upon it. In the event of a failure to
give such notice, such failure shall not preclude the Party seeking
indemnification from obtaining such indemnification but its right to
indemnification may be reduced to the extent that such delay
prejudiced the defence of the Claim or increased the amount of
liability or cost of defence and provided that, notwithstanding
anything else contained in this Agreement, no Claim for indemnity in
respect of the breach of any representation or warranty contained in
this Agreement may be made unless Notice of such Claim has been
given prior to the expiry of the survival period applicable to such
representation and warranty pursuant to Section 6.2. The provisions
of Sections 10.1(a) and 10.1(b) shall also apply to any third person
Claims such that the Indemnifying Party shall have an opportunity to
object to the defense of any third person Claim in accordance with
such provisions.
(b) The Indemnifying Party shall have the right, by Notice to the
Indemnified Party given not later than 30 days after receipt of the
Notice described in subsection (a), to assume the control of the
defence, compromise or settlement of the Claim, provided that such
assumption shall, by its terms, be without cost to the Indemnified
Party.
(c) Upon the assumption of control of any Claim by the Indemnifying
Party as set out in subsection (b), the Indemnifying Party shall
diligently proceed with the defence, compromise or settlement of the
Claim at its sole expense, including if necessary, employment of
counsel reasonably satisfactory to the Indemnified Party and, in
connection therewith, the Indemnified Party shall co-operate fully,
to make available to the Indemnifying Party all pertinent
information and witnesses under the Indemnified Party's control,
make such assignments and take such other steps as the Indemnifying
Party determines, with the advice of counsel, are reasonably
necessary to enable the Indemnifying Party to conduct such defence.
Any compromise or settlement of the Claim by the Indemnifying Party
shall be subject to the consent of the Indemnified Party, such
consent not to be unreasonably withheld. The Indemnified Party shall
also have the right to participate in the negotiation, settlement or
defence of any Claim at its own expense.
(d) The final determination of any Claim pursuant to this Section,
including all related costs and expenses, will be binding and
conclusive upon the parties as to the validity or invalidity, as the
case may be, of such Claim against the Indemnifying Party.
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(e) If the Indemnifying Party does not assume control of a Claim as
permitted in subsection 10.2(b), the Indemnified Party shall be
entitled to make settlement of the Claim subject to obtaining the
prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed, and any such settlement or
any other final determination of the Claim shall be binding upon the
Indemnifying Party.
10.3 RECOVERY FOR INDEMNIFICATION CLAIMS
In the event that Purchaser is entitled to indemnification from the Corporation
Stockholders pursuant to the terms of this Agreement for breaches of the
Corporation's representations and warranties contained in Sections 4.3 and 4.32,
such indemnification may be recovered by deducting the amount of such Claims
from the Escrow Shares described in Section 2(c) of the Escrow Agreement by
instructing the Escrow Agent to return a number of Escrow Shares to the
Purchaser equal to the value of such Claim based on a trailing 5-day average
prior to the date the Claim is paid.
10.4 INSURANCE PROCEEDS
The amount which an Indemnifying Party is or may be required to indemnify the
Indemnified Party pursuant to this Article 10 shall be reduced (including
retroactively) by (i) any amounts received by such Indemnified Party from an
insurance carrier or paid and resolved by an insurance carrier on behalf of the
insured ("Insurance Proceeds") and (ii) other amounts actually recovered by or
on behalf of such Indemnified Party in reduction of the related Claims. If an
Indemnified Party receives the payment required by this Agreement from the
Indemnifying Party in respect of any Claims and subsequently actually receives
Insurance Proceeds, or other amounts in respect of such Claims as specified
above, then such Indemnified Party shall pay to the Indemnifying Party a sum
equal to the amount of any such double recovery actually received. The parties
agree that any indemnification provided by this Agreement is not to be deemed
insurance (whether primary, excess, or otherwise) for purposes of seeking
reimbursement from the applicable insurance coverage.
ARTICLE 11 TERMINATION
11.1 TERMINATION
(a) This Agreement may be terminated as follows:
1. The Parties may terminate this Agreement by their mutual
written consent at any time prior to the Closing;
2. The Purchaser may terminate this Agreement by giving written
notice to the Corporation at any time prior to the Closing (A)
in the event the Corporation has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Purchaser has notified
the Corporation of the breach, and the breach has continued
without cure for a period of 10 days after the notice of
breach, or (B) if the Closing shall not have occurred on or
before the Closing Date, by reason of the failure of any
condition precedent of Purchaser (unless the failure results
primarily from Purchaser itself breaching any representation,
warranty, or covenant contained in this Agreement);
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3. The Corporation may terminate this Agreement by giving written
notice to Purchaser at any time prior to the Closing (A) in
the event Purchaser has breached any material representation,
warranty, or covenant contained in this Agreement in any
material respect, the Corporation or the Corporation
Stockholders have notified the Purchaser of the breach, and
the breach has continued without cure for a period of 10 days
after the notice of breach or (B) if the Closing shall not
have occurred on or before the Closing Date, by reason of the
failure of any condition precedent of the Corporation hereof
(unless the failure results primarily from the Corporation
breaching any representation, warranty, or covenant contained
in this Agreement);
4. Either Party may, by giving written notice to the other,
terminate this Agreement if a court of competent jurisdiction
or other governmental Authority shall have issued a
nonappealable final order, decree or ruling or taken any other
action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger;
and
5. By either Party, if the approval and adoption of this
Agreement, and the approval of the Merger, by the Corporation
Stockholders shall not have been obtained by reason of the
failure to obtain the required vote at a meeting of the
Corporation Stockholders duly convened therefore or at any
adjournment thereof or pursuant to a written consent of the
Corporation Stockholders.
(b) Effect of Termination. If any Party properly terminates this Agreement
pursuant to Section 11.1(a) hereof, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to
any other Party (except for any liability of any Party then in wilful
breach of this Agreement). The provisions of Section 9.3, Article 11 and
Article 12 shall survive any termination of this Agreement.
ARTICLE 12
GENERAL
12.1 PUBLIC NOTICES
All public notices to third Persons and all other publicity concerning the
transactions contemplated by this Agreement shall be jointly planned and
co-ordinated by the Corporation, on the one hand, and the Purchaser, on the
other hand, and no Party shall act unilaterally in this regard without the prior
approval of the other Party, such approval not to be unreasonably withheld,
except where required to do so by Law or any stock exchange in circumstances
where prior consultation with the other Parties is not practicable.
49
12.2 EXPENSES
Each Party shall be responsible for and pay their own respective legal,
accounting, and other professional advisory fees, costs and expenses incurred in
connection with the Merger and the preparation, execution and delivery of this
Agreement and all documents and instruments executed pursuant to this Agreement
and any other costs and expenses incurred.
Further, the Corporation agrees that all of its legal fees and expenses incurred
in connection with the Merger shall be funded by additional capital infusions
into the Corporation, to the extent necessary. If cash is not adequate to pay
such legal fees and expenses then Voyager Capital Fund II, L.P., Voyager Capital
Fund II-A, L.P., Voyager Capital Founders Fund II, L.P., ▇▇▇▇▇▇▇▇ Partners II,
L.P., Onset Standby Fund, L.P. and Onset Enterprise Associates III, L.P. agrees
to advance sufficient funds under the existing bridge loan facility of the
Corporation in an amount not to exceed $100,000.
Notwithstanding the foregoing, upon the closing of the transactions contemplated
herein, the Purchaser shall directly pay, on behalf of the Corporation, up to
Five Hundred and Fifty Thousand Dollars to Broadview International, the
Corporation's financial advisor.
12.3 NOTICES
Any notice or other writing required or permitted to be given under this
Agreement or for the purposes of this Agreement (a "Notice") shall be in writing
and shall be sufficiently given if delivered, or if sent by prepaid registered
mail or if transmitted by facsimile or other form of recorded communication
tested prior to transmission to such Party:
(a) in the case of a Notice to the Corporation:
KADIRI INC.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & FREIDENRICH LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇. Esq.
Facsimile: ▇▇▇ ▇▇▇ ▇▇▇▇
50
(b) in the case of a Notice to the Purchaser.:
WORKSTREAM INC.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇ ▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇, Hill & ▇▇▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
(C) in the case of a Notice to the Stockholder Representative:
▇▇▇▇ ▇▇▇▇▇▇▇
c/o Voyager Capital
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
or at such other address as the Party to whom such Notice is to be given shall
have last notified the Party giving the Notice in the manner provided in this
Section. Any Notice delivered to the Party to whom it is addressed as provided
above shall be deemed to have been given and received on the day it is so
delivered at such address, provided that if such day is not a Business Day then
the Notice shall be deemed to have been given and received on the next Business
Day. Any Notice sent by prepaid registered mail shall be deemed to have been
given and received on the fifth Business Day following the date of its mailing.
Any Notice transmitted by facsimile or other form of recorded communication
shall be deemed to have been given and received on the first Business Day after
its transmission. Any Notice sent by commercial overnight courier shall be
deemed to have been given and received within one Business Day following the
date of deposit thereof with such courier.
12.4 ASSIGNMENT
Neither party may assign this Agreement without the prior written consent of the
other party.
12.5 FURTHER ASSURANCES
The Parties shall, with reasonable diligence, do all such things and provide all
such reasonable assurances as may be required to consummate the Merger
contemplated by this Agreement, and each Party shall provide such further
documents or instruments required by any other Party as may be reasonably
necessary or desirable to effect the purpose of this Agreement and carry out its
provisions, whether before or after the Closing.
51
12.6 COUNTERPARTS
This Agreement may be executed by the Parties in separate counterparts each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.
12.7 ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties
hereto and their respective successors and permitted assigns.
12.8 AMENDMENT OF AGREEMENT
This Agreement may be altered, amended or annulled at any time by the mutual
consent in writing of the parties hereto.
12.9 WAIVERS
No amendment, waiver or termination of this Agreement will be binding unless
executed in writing by the parties to be bound hereby. No waiver of any
provision of this Agreement will be deemed or will constitute a waiver of any
other provision, nor will any such waiver constitute a continuing waiver unless
expressly provided.
12.10 STOCKHOLDER REPRESENTATIVE
(a) The Stockholder Representative shall be constituted and appointed as agent
for and on behalf of the Corporation Stockholders to give and receive
notices and communications, to enter into any ancillary documents to give
effect to the transactions described herein, to enter into the
Registration Rights Agreement, to authorize delivery of the Escrow Shares
or other property in satisfaction of Claims, to object to such deliveries,
to make Claims on behalf of the Corporation Stockholders to agree to,
negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators
with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Stockholder Representative for the
accomplishment of the foregoing. Such agency may be changed by the holders
of a majority in interest of the Escrow Shares from time to time upon not
less than 10 days' prior written notice to the Purchaser and the Escrow
Agent. No bond shall be required of the Stockholder Representative, and
the Stockholder Representative shall receive no compensation for his
services. Notices or communications to or from the Stockholder
Representative shall constitute notice to or from each of the Corporation
Stockholders.
52
(b) The Stockholder Representative shall not be liable for any act done or
omitted hereunder as Stockholder Representative while acting in good faith
and in the exercise of reasonable judgment and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Corporation Stockholders shall severally indemnify and hold the
Stockholder Representative harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the
Stockholder Representative and arising out of or in connection with the
acceptance or administration of his duties hereunder.
(c) The Stockholder Representative shall treat confidentially and not disclose
any nonpublic information from or about the Purchaser or the Corporation to
anyone (except on a need to know basis to individuals who agree to treat
such information confidentially).
(d) Purchaser and Escrow Agent acknowledges that the Stockholder Representative
may have a conflict of interest with respect to his duties as Stockholder
Representative, and in such regard the Stockholder Representative has
informed Purchaser and Escrow Agent that he will act in the best interests
of the Corporation Stockholders.
12.11 ACTIONS OF THE STOCKHOLDER REPRESENTATIVE.
A decision, act, consent or instruction of the Stockholder Representative shall
constitute a decision of all Corporation Stockholders for whom Escrow Shares
shares otherwise issuable to them are deposited into escrow and shall be final,
binding and conclusive upon each of the Corporation Stockholders, and the Escrow
Agent and Purchaser may rely upon any decision, act, consent or instruction of
the Stockholder Representative as being the decision, act, consent or
instruction of each and every one of the Corporation Stockholders. The Escrow
Agent and Purchaser are hereby relieved from any liability to any person for any
acts done by them in accordance with such decision, act, consent or instruction
of the Stockholder Representative.
12.12 ▇▇▇▇▇▇▇▇▇ STOP-TRANSFER
Any proposed public registration or private sale prior to December 31, 2004 of
more than 250,000 shares of Purchaser Common Stock owned by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
shall require the consent of the Stockholder Representative.
13. PREPARATION OF SOLICITATION STATEMENT
As soon as practicable after the execution of this Agreement, the Corporation
shall prepare, with the cooperation of the Purchaser, a solicitation statement
for the solicitation of approval of the shareholders of the Corporation
describing this Agreement, the Agreement of Merger and the transactions
contemplated hereby and thereby. The Purchaser shall provide such information
about the Purchaser as the Corporation shall reasonably request. The information
supplied by the Corporation for inclusion in the solicitation statement to be
sent to the shareholders of the Corporation shall not, on the date the
solicitation statement is first mailed to the Corporation's shareholders or at
the Effective Time, contain any statement that, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made 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 that has become false or misleading. Notwithstanding the
foregoing, the Corporation makes no representation, warranty or covenant with
respect to any information supplied by the Purchaser or Merger Sub that is
contained in any of the foregoing documents. The information supplied by the
53
Purchaser or Merger Sub for inclusion in the solicitation statement shall not,
on the date the solicitation statement is first mailed to the Corporation's
shareholders or at the Effective Time, contain any statement that, at such time,
is false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading, or omit to
state any material fact necessary to correct any statement in an earlier
communication that has become false or misleading. Notwithstanding the
foregoing, the Purchaser and Merger Sub make no representation, warranty or
covenant with respect to any information supplied by the Corporation that is
contained in any of the foregoing documents.
The solicitation statement shall constitute a disclosure document for the offer
and issuance of shares of Purchaser Common Stock to be received by the
Corporation Stockholders in the Merger. The Purchaser and the Corporation shall
each use reasonable commercial efforts to cuase the solicitation statement to
comply with applicable federal and state securities laws requirements. Each of
the Purchaser and the Corporation agrees to provide promptly to the other such
information concerning its business and financial statements and affairs as, n
the reasonable judgement of the providing party or its counsel, may be required
or appropriate for inclusion in the solicitation statement or in any amendments
or supplements thereto, and to cause its counsel and auditors to cooperate with
the other's counsel and auditors in the preparation of the solicitation
statement in order to make the statements contained or incorporated by reference
therein not misleading or to comply with applicable law. The solicitation
statement shall contain the recommendation of the Board of Directors of the
Corporation that the Corporation Stockholders approve the Merger and this
Agreement and the conclusion of the Board of Directors that the terms and
conditions of the Merger are fair and reasonable to the Corporation
Stockholders. Anything to the contrary contained herein notwithstanding, the
Corporation shall not include in the solicitation statement any information with
respect to the Purchaser or its affiliates or associates, the form and content
of which information shall not have been approved by the Purchaser prior to such
inclusion.
[Signature Page Follows]
54
IN WITNESS OF WHICH the Parties have duly executed this Agreement as of the date
first set forth above.
SIGNED & DELIVERED
KADIRI INC.
PER: /S/ ▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
NAME: ▇▇▇ ▇▇▇▇▇▇▇▇
TITLE: CEO
WORKSTREAM INC.
PER: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
TITLE: CEO
WORKSTREAM ACQUISITION III, INC.
PER: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
TITLE:
/S/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ /S/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------ ---------------------------------
WITNESS ▇▇▇▇ ▇▇▇▇▇▇▇,
AS STOCKHOLDER REPRESENTATIVE
____________________________________ /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
WITNESS ---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
SOLELY FOR THE PURPOSES OF SECTION
12.12 HEREOF
55
The undersigned consent to the execution of this Agreement by Kadiri Inc. and to
be bound by the terms of Section 12.2 hereof.
VOYAGER CAPITAL FUND II, L.P.
PER: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TITLE: MANAGING PARTNER OF GP., VOYAGER CAPITAL
MANAGEMENT II, LLC
VOYAGER CAPITAL FUND II-A, L.P.
PER:/S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TITLE: MANAGING PARTNER OF GP., VOYAGER CAPITAL
MANAGEMENT II, LLC
VOYAGER CAPITAL FOUNDERS FUND II, L.P.
PER:/S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TITLE: MANAGING PARTNER OF GP., VOYAGER CAPITAL
MANAGEMENT II, LLC
▇▇▇▇▇▇▇▇ PARTNERS II, L.P.
PER: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
NAME: ▇▇▇▇▇ ▇▇▇▇▇▇
TITLE GENERAL PARTNER
ONSET STANDBY FUND, L.P.
BY: ONSET Standby Management, LLC
its General Partner
PER: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ , ▇▇.
---------------------------------------
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
TITLE: MANAGING DIRECTOR
ONSET ENTERPRISE ASSOCIATES III, L.P.
PER: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ , ▇▇.
---------------------------------------
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
TITLE: MANAGING DIRECTOR
▇▇ ▇▇▇▇ ONSET STANDBY FUND, LP
By: ONSET Standby Management, LLC
its General Partner
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------------
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
TITLE: MANAGING DIRECTOR
▇▇ ▇▇▇▇ OFFSHORE ONSET STANDBY FUND, LP
By: ONSET STANDBY MANAGEMENT, LLC
its General Partner
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------------
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
TITLE: MANAGING DIRECTOR
56
Schedule A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Merger Agreement") is made and entered
into as of May 28, 2004 by and between Kadiri Inc., a California corporation
("Target" or the "Surviving Corporation"), and Workstream Acquisition III, Inc.,
a Delaware corporation ("Merger Sub"). Target and Merger Sub are sometimes
jointly referred to herein as the "Constituent Corporations".
RECITALS
WHEREAS, Workstream Inc., a Canada corporation ("Acquiror"), Target, and
Merger Sub and ▇▇▇▇ ▇▇▇▇▇▇▇, as Stockholders' Representative, have entered into
an Agreement and Plan of Merger dated as of May 24, 2004, as amended by the
Amendment to Agreement and Plan of Merger dated as of May 26, 2004 (the "Plan of
Merger"); and
WHEREAS, all of the shares of common stock of Target, no par value
("Target Common Stock"), and preferred stock of Target, no par value ("Target
Preferred Stock"), outstanding immediately prior to the Effective Time (as
defined in Section 1.1(b) below) will convert into the right to receive Merger
Consideration (as defined in Section 4.1 below) as set forth in Section 4.1
hereof.
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and
material covenants and agreements contained herein, the Constituent Corporations
hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 MERGER OF MERGER SUB WITH AND INTO TARGET.
(a) AGREEMENT TO ACQUIRE TARGET. Subject to the terms of this Merger
Agreement, Target shall be acquired by Acquiror through a merger of
Merger Sub (a wholly-owned subsidiary of Acquiror) with and into
Target (the "Merger").
(b) EFFECTIVE TIME OF THE MERGER. The Merger shall become effective on
such date (the "Effective Time") as this Merger Agreement and
Officers' Certificates of each Constituent Corporation are filed
with the Secretary of State of the State of California pursuant to
Section 1103 of the California General Corporation Law ("California
Law").
(c) SURVIVING CORPORATION. At the Effective Time of the Merger, Merger
Sub shall be merged with and into Target and the separate corporate
existence of Merger Sub shall cease. Target shall be the Surviving
Corporation in the Merger.
57
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
Section 1107 of the California Law.
1.3 FURTHER ACTION. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Merger
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of Target and Merger Sub, the officers and directors of Target
and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and
necessary action, so long as such action is not inconsistent with this
Merger Agreement.
ARTICLE 2
THE CONSTITUENT CORPORATIONS
2.1 ORGANIZATION OF TARGET.
(a) INCORPORATION. Target is a California corporation duly incorporated
and existing under the laws of the State of California.
(b) AUTHORIZED STOCK. Target is authorized to issue an aggregate of
58,235,596 shares, of which 44,750,000 shares are Target Common
Stock and 13,485,596 shares are Target Preferred Stock, 1,431,428
shares of which have been designated "Series 1 Preferred Stock", no
par value, 6,054,168 shares of which have been designated "Series 2
Preferred Stock", no par value, and 6,000,000 shares of which have
been designated "Series 3 Preferred Stock", no par value. As used
herein, the term "Target Capital Stock" shall mean Target Common
Stock and Target Preferred Stock.
(c) OUTSTANDING STOCK. As of the record date for purposes of voting on
the Merger, 4,335,637 shares of Target Common Stock were
outstanding, 1,431,428 shares of Series 1 Preferred Stock were
outstanding, 5,331,376 shares of Series 2 Preferred Stock were
outstanding, and no shares of Series 3 Preferred Stock were
outstanding. Immediately prior to the Merger, an additional 67,361
shares of Series 2 Preferred Stock will be outstanding as a result
of the exercise of certain outstanding warrants to purchase such
stock, and 2,870,357 shares of Series 3 Preferred Stock will be
outstanding as a result of the conversion of outstanding convertible
promissory notes into such stock.
2.2 ORGANIZATION OF MERGER SUB.
(a) INCORPORATION. Merger Sub is a Delaware corporation duly
incorporated and existing under the laws of the State of Delaware.
(b) AUTHORIZED STOCK. Merger Sub is authorized to issue an aggregate of
1000 shares of Common Stock, par value $0.001 per share ("Subsidiary
Stock").
58
(c) OUTSTANDING STOCK. On the date hereof, an aggregate of 50 shares of
Subsidiary Stock are outstanding.
ARTICLE 3
ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION
3.1 AMENDMENT OF TARGET'S ARTICLES OF INCORPORATION. At the Effective Time,
the Articles of Incorporation of the Surviving Corporation shall be
amended and restated in their entirety to read as set forth in Exhibit A
hereto.
ARTICLE 4
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
4.1 MERGER CONSIDERATION; CONVERSION OF SHARES.
(a) MERGER CONSIDERATION. Subject to the amounts to be deposited into
escrow pursuant to Section 4.1(c) below, the aggregate consideration
to be provided by Acquiror in exchange for the acquisition by
Acquiror of all outstanding Target Capital Stock shall consist of
5,400,000 shares of Common Shares of Acquiror (the "Merger
Consideration"). The Merger Consideration delivered upon the
surrender for exchange of shares of Target Capital Stock in
accordance with the terms hereof shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of
Target Capital Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of
Target Capital Stock which were outstanding immediately prior to the
Effective Time.
(b) CONVERSION OF SHARES OF TARGET CAPITAL STOCK. Other than Dissenting
Shares (as defined in Section 4.3 below), each share of Target
Capital Stock issued and outstanding immediately prior to the
Effective Time shall be converted and exchanged as follows upon
surrender of the certificate representing such share of Target
Capital Stock:
(i) Each share of Series 3 Preferred Stock outstanding immediately
prior to the Effective Time shall be converted into the right
to receive approximately .349404 of an Acquiror Common Share;
provided, however, that cash shall be issued in lieu of
fractional shares of Acquiror Common Shares, and the total
number of Acquiror Common Shares to be issued to holders of
Series 3 Preferred Stock shall not exceed 1,002,913.
(ii) Each share of Series 2 Preferred Stock outstanding immediately
prior to the Effective Time shall be converted into the right
to receive approximately .814466 of an Acquiror Common Share;
provided, however, that cash shall be issued in lieu of
fractional shares of Acquiror Common Shares and the total
number of Acquiror Common Shares to be issued to the holders
of Series 3 Preferred Stock shall not exceed 4,397,087.
59
(iii) All shares of Common Stock, and Series 1 Preferred Stock of
Target outstanding immediately prior to the Effective Time
shall be cancelled and extinguished, and no cash or other
consideration shall be delivered in exchange therefor. No
surrender of the stock certificate representing such shares of
Common Stock or Series 1 Preferred Stock shall be required to
effect the cancellation and extinguishment of such shares of
Common Stock or Series 1 Preferred Stock of Target.
(c) ESCROW. As soon as practicable after the Effective Time, Acquiror
shall cause to be deposited with ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, as
escrow agent, a portion of the Merger Consideration equal to 950,000
of Acquiror Common Shares (the "Escrow Fund") to be available for
distribution to shareholders of Target or to Acquiror, as the case
may be, upon the achievement of certain milestones and the
occurrence of certain events set forth in greater detail in Section
2.7 of the Plan of Merger and Sections 2 and 3 of the Escrow
Agreement dated May 28, 2004, among Target, Merger Sub, Acquiror,
▇▇▇▇ ▇▇▇▇▇▇▇ as Stockholder Representative, and ▇▇▇▇▇▇ ▇▇▇▇▇▇
Gervais LLP, as escrow agent. Such 950,000 Acquiror Common Shares
shall be deducted from the Merger Consideration from the aggregate
Merger Consideration deliverable to the holders of Target Capital
Stock on a pro rata basis. A holder of Target Capital Stock's "pro
rata" share of each holder of Target Capital Stock equal to the
proportion that the Merger Consideration that such holder is
entitled to receive bears to the aggregate Merger Consideration that
all holders are entitled to receive.
(d) OPTIONS AND WARRANTS. At the Effective Time, all options and
warrants to purchase Target Capital Stock then outstanding shall be
terminated and cancelled.
(e) CONSIDERATION OF SHARES OF MERGER SUB CAPITAL STOCK. By virtue of
the merger and without any action on the part of the holder of any
shares of capital stock of Merger Sub, each issued and outstanding
share of the capital stock of Merger Sub shall be converted into and
become one fully paid and nonassessable share of Common Stock, no
par value of the Surviving Corporation.
4.2 EXCHANGE OF CERTIFICATES.
(a) MECHANICS OF EXCHANGE. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates (the "Certificates") that
immediately prior to the Effective Time represented
outstanding shares of Target Capital Stock, whose shares were
converted into the right to receive a portion of the Merger
Consideration pursuant to Section 4.1, (i) a letter of transmittal;
(ii) such other customary documents as may be required pursuant to
such instructions; and (iii) instructions for use in effecting the
surrender of the Certificates in exchange for its respective portion
of the Merger Consideration. Upon surrender of a Certificate for
cancellation to Acquiror or to such other agent or agents as may be
appointed by Acquiror, together with such letter of transmittal and
other documents, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall
be entitled to receive in exchange therefore the number of Acquiror
60
Common Shares representing such holder's respective portion of the
Merger Consideration as provided in Section 4.1, and the Certificate
so surrendered shall forthwith be cancelled. Until so surrendered,
each outstanding Certificate that prior to the Effective Time
represented shares of Target Capital Stock will be deemed from and
after the Effective Time, for all corporate purposes, to evidence
the ownership of the right to receive that amount of Acquiror Common
Shares equal to the Merger Consideration into which such shares of
Target Capital Stock shall have been so converted in accordance with
Section 4.1.
(b) CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer
books of Target shall be closed, and there shall be no further
registration of transfers of Target Capital Stock thereafter on the
records of Target.
4.3 DISSENTING SHARES.
(A) Notwithstanding any provision of this Merger Agreement to the
contrary, any shares of Target Capital Stock held by a holder who
has demanded and perfected such holder's right for appraisal of such
shares in accordance with California Law and who, as of the
Effective Time, has not effectively withdrawn or lost such right to
appraisal ("Dissenting Shares"), if any, shall not be converted into
the Merger Consideration but shall instead be converted into the
right to receive such consideration as may be determined to be due
with respect to such Dissenting Shares pursuant to California Law.
(B) Each holder of Dissenting Shares who, pursuant to the provisions of
California Law, becomes entitled to payment of the fair value for
shares of Target Capital Stock shall receive payment therefore (but
only after the value therefore shall have been agreed upon or
finally determined pursuant to such provisions). If, after the
Effective Time, any Dissenting Shares shall lose their status as
Dissenting Shares, Acquiror shall issue and deliver, upon surrender
by such shareholder of a Certificate or Certificates representing
shares of Target Capital Stock, the portion of the Merger
Consideration, if any, to which such shareholder would otherwise be
entitled under Section 4.1 hereof, less the portion of the Merger
Consideration allocable to such shareholder that has been deposited
in the Escrow Fund in respect of such shares of Target Capital
Stock.
61
ARTICLE 5
TERMINATION
5.1 TERMINATION BY MUTUAL AGREEMENT. Notwithstanding the approval of this
Merger Agreement by the shareholders of Target, this Merger Agreement may
be terminated at any time prior to the Effective Time by mutual agreement
of the Boards of Directors of the Constituent Corporations.
5.2 TERMINATION OF MERGER AGREEMENT. Notwithstanding the approval of this
Merger Agreement by the shareholders of Target, this Merger Agreement
shall terminate forthwith if the Plan of Merger is terminated at any time
prior to the Effective Time as provided therein.
5.3 EFFECTS OF TERMINATION. In the event of the termination of this Merger
Agreement, this Merger Agreement shall become void and there shall be no
liability on the part of either Target or Merger Sub or their respective
officers or directors, except as otherwise provided in the Plan of Merger.
ARTICLE 6
GENERAL PROVISIONS
6.1 AMENDMENT. This Merger Agreement may be amended by the parties hereto any
time prior to the Effective Time, before or after approval hereof by the
shareholders of Target, but after such approval, no amendment shall be
made that by law requires the further approval of such shareholders
without obtaining such approval. This Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
6.2 COUNTERPARTS. This Merger Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one agreement.
6.3 GOVERNING LAW. This Merger Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California.
62
IN WITNESS WHEREOF, the parties have duly executed this Merger Agreement
as of the date first written above.
KADIRI INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
By: /s/ ▇▇▇▇▇ ▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Secretary
WORKSTREAM ACQUISITION III, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Secretary
63
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF KADIRI, INC.
ARTICLE I
The name of the Corporation is Kadiri Inc. (the "Corporation").
ARTICLE II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated under the California
Corporations Code.
ARTICLE III
The aggregate number of shares which this Corporation shall have the
authority to issue is One Thousand (1,000) and such shares shall be designated
as Common Stock, par value $.001 per share.
ARTICLE IV
1. Limitation of Directors' Liability. The liability of the directors of this
Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. Indemnification of Corporate Agents. This Corporation is authorized to
provide indemnification of agents (as defined in Section 317 of the
California Corporation Code) through bylaw provisions, agreements with
agents, votes of shareholders or disinterested directors or otherwise, in
excess of the indemnification otherwise permitted by Section 317 of the
California Corporations Code, subject only to the applicable limits set
forth in Section 204 of the California Corporations Code with respect to
actions for breach of duty to this Corporation and its shareholders.
3. Amendment, Repeal or Modification. Any amendment, repeal or modification
of the foregoing provisions of this ARTICLE IV shall not adversely affect
any right of limitation of liability for the directors of this Corporation
and indemnification of agents of the Corporation relating to acts or
omissions occurring prior to such amendment, repeal or modification.
64
CERTIFICATE OF APPROVAL OF AGREEMENT OF MERGER
OF
WORKSTREAM ACQUISITION III, INC.
INTO
KADIRI INC.
The undersigned, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ certify that:
1. They are the President and the Secretary, respectively, of Kadiri Inc., a
California corporation (the "Corporation").
2. The Agreement of Merger in the form attached was duly approved by the board
of directors of the Corporation.
3. The Agreement of Merger has been duly approved by the required vote of the
shareholders of the Corporation entitled to vote in accordance with the Articles
of Incorporation of the Corporation and the California Corporations Code. The
total number of shares entitled to vote with respect to the foregoing Agreement
of Merger was 4,335,637 shares of Common Stock, 1,431,428 shares of Series 1
Preferred Stock, and 5,331,376 shares of Series 2 Preferred Stock. The number of
shares voting in favor of the Agreement of Merger equaled or exceeded the vote
required. The percentage vote required was a majority of the outstanding shares
of Common Stock, voting separately as a class, a majority of the outstanding
Preferred Stock voting separately as a class, and two-thirds of the outstanding
shares of Series 2 Preferred Stock, voting as a separate series.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
DATE: ______________________
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇ ▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Secretary
65
CERTIFICATE OF APPROVAL OF AGREEMENT OF MERGER
OF
WORKSTREAM ACQUISITION III, INC.
INTO
KADIRI INC.
THE UNDERSIGNED, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ CERTIFIES THAT:
1. He is the President and the Secretary of Workstream Acquisition
III, Inc., a Delaware corporation (the "Corporation").
The Agreement of Merger in the form attached was duly approved by the board of
directors of the Corporation.
The Agreement of Merger has been duly approved by the required vote of the
shareholders of the Corporation entitled to vote in accordance with the
Certificate of Incorporation of the Corporation and the Delaware General
Corporation Law. The total number of shares entitled to vote with respect to the
foregoing Agreement of Merger was 50 shares of Common Stock. The number of
shares voting in favor of the Agreement of Merger equaled or exceeded the vote
required. The percentage vote required was the holders of a majority of the
outstanding shares of Common Stock.
No vote of the shareholders of Workstream Inc., a parent of the Corporation, was
required to issue the equity securities of Workstream Inc. pursuant to the
Agreement of Merger.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
DATE: ______________________
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
66
EXHIBIT B: DISTRIBUTION Mechanism For Merger CONSIDERAT ON
-------------
X EXCHANGE $$ FOR
---------- -----------
SERIES 3 RATIO OF WSTM SHARES FRACTION OF
--------- ---------- ----------- -----------
SERIES 3 SHAREHOLDER SHARES .349404 FROM SERIES 3 WSTM SHARE
-------------------- ------ ------- ------------- -----------
Voyager Capital Fund II, LP 171,513 59,927 $1.93
Voyager Capital Fund II-A, LP 928,083 324,277 $2.23
Voyager Capital Founders Fund II, LP 71,615 25,022 $2.04
ONSET Enterprise Associates III, L.P. 114,269 39,926 $0.79
ONSET Standby Fund, L.P. 304,716 106,469 $1.72
GS PEP I ONSET Standby Fund, L.P. 102,933 35,965 $1.17
GS PEP I Offshore ONSET Standby Fund,
L.P. 49,427 17,270 $0.26
▇▇▇▇▇▇▇▇ Partners II Annex Fund, L.P. 526,939 184,115 $1.87
▇▇▇▇▇▇▇ Revocable Trust 272,392 95,175 $1.15
▇▇▇▇▇▇▇ Investment Partners 72,103 25,193 $0.63
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust 28,040 9,797 $0.99
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust 28,040 9,797 $0.99
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 50,072 17,495 $1.31
F&K Delepine Trust 8,011 2,799 $0.26
▇▇▇▇▇▇ ▇. ▇▇▇▇ 40,057 13,996 $0.45
▇▇▇▇▇▇▇ ▇▇▇▇ 102,147 35,690 $2.22
TOTAL 2,870,357 1,002,913 $19.99
TOTAL
ESCROWED
PORTION TOTAL
(INCLUDING WSTM
SERIES 2 SHARES TOTAL X EXCHANGE $$ FOR WSTM SHARES SHARES
SHARES FROM NET SERIES 2 RATIO OF WSTM FRACTION OF FROM SERIES 2 DELIVERABLE
OUTSTANDING EXERCISE SHARES 0 .760748 SHARES WSTM SHARE AND 3) AT CLOSING
------------ -------- --------- ---------- ------- ----------- ------------- -----------
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ 421 421 320 $0.79 59 261
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,278 1,278 972 $0.67 180 792
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust 8,416 897 9,313 7,084 $2.41 3,138 13,743
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust 8,416 897 9,313 7,084 $2.41 3,138 13,743
▇▇▇▇▇▇▇ Revocable Trust 42,077 8,719 50,796 38,642 $2.70 24,878 108,939
▇▇▇▇▇▇▇ Investment Partners 25,247 2,308 27,555 20,962 $1.16 8,580 37,575
▇▇▇▇▇▇ Darien 4,245 4,245 3,229 $1.07 600 2,629
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 37,025 1,602 38,627 29,385 $1.15 8,715 38,165
▇▇▇▇▇ ▇. ▇▇▇▇▇
Revocable Family Trust 8,416 8,416 6,402 $1.30 1,190 5,212
▇▇▇▇▇ ▇. ▇▇▇▇ Living Trust dated
August 11, 1989 20,834 20,834 15,849 $1.20 2,946 12,903
F&K Delepine Trust 256 256 194 $2.15 556 2,437
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
Freidenrich Partners I 1,214 1,214 923 $1.57 171 752
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ &
Freidenrich Partners II 396 396 301 $0.73 55 246
▇▇▇▇▇▇▇▇ Family Trust,
u/d/t dated May 20, 2002 1,599 1,599 1,216 $1.25 226 990
▇▇▇▇▇▇ ▇. ▇▇▇▇ 20,000 1,282 21,282 16,190 $0.67 5,611 24,575
Lazy P Investors, L.P. 10,663 10,663 8,111 $2.44 1,507 6,604
Meltold Associates 2,084 2,084 1,585 $1.14 294 1,291
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 3,334 3,334 2,536 $0.95 471 2,065
Onset Enterprise
Associates III, L.P. 191,534 2,423 193,957 147,552 $1.00 34,854 152,624
ONSET Standby Fund, L.P. 510,758 6,462 517,220 393,473 $2.72 92,944 406,998
GS PEP I ONSET Standby Fund, L.P. 172,532 2,183 174,715 132,914 $0.12 31,396 137,483
GS PEP I Offshore
ONSET Standby Fund, L.P. 82,847 1,048 83,895 63,822 $2.67 15,075 66,017
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇,
Trustees of the ▇▇▇▇▇▇▇▇ Family
Trust dated May 5, 1982 6,164 6,164 4,689 $0.71 871 3,818
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 1,599 1,599 1,216 $1.25 226 990
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 5,383 5,383 4,095 $0.30 761 3,334
Towers, Perrin,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Inc. 197,979 197,979 150,612 $0.22 28,000 122,612
Voyager Capital Fund II, LP 441,971 3,637 445,608 338,995 $0.80 74,163 324,759
Voyager Capital Fund II-A, LP 2,469,734 19,684 2,489,418 1,893,819 $0.37 412,368 1,805,728
Voyager Capital
Founders Fund II, LP 185,158 1,518 186,676 142,013 $0.99 31,053 135,982
▇▇▇▇▇▇▇ ▇▇▇▇ 3,269 3,269 2,486 $2.53 7,097 31,079
▇▇▇▇▇▇▇▇ Partners
II Annex Fund, L.P. 11,176 11,176 8,502 $0.33 35,809 156,808
▇▇▇▇▇▇▇▇ Partners II, L.P. 841,539 841,539 640,198 $2.57 119,019 521,179
Woodland Partners 28,513 28,513 21,691 $0.57 4,032 17,659
SERIES 2 TOTAL 5,331,376 67,361 5,398,737 4,107,062 $42.93
EMPLOYEE CARVEOUT 290,010
-----------------------------------------------------------------------------------------------------------------------------
TOTAL 5,399,985 $62.92 949,983 4,159,992
=============================================================================================================================
68
KADIRI INC.
DISCLOSURE SCHEDULES
These Disclosure Schedules are made as of May 24, 2004 and given pursuant to
Section 4 of the Agreement and Plan of Merger between Kadiri Inc. (the
"Corporation"), Workstream Inc. (the "Purchaser") and Workstream Acquisition
III, Inc. (the "Merger Sub"), dated as of May 24, 2004 (the "Agreement"). All
capitalized terms used but not defined herein shall have the meanings as defined
in the Agreement, unless otherwise provided. Any information disclosed under any
section in these Disclosure Schedules is deemed disclosed and incorporated in
any other section of these Disclosure Schedules except where such disclosure
would be appropriate.
SCHEDULE 4.1 INCORPORATION AND REGISTRATION.
State of California
SCHEDULE 4.3 CAPITALIZATION:
(A) AUTHORIZED AND ISSUED SECURITIES OF THE CORPORATION.
Common Stock and Preferred Stock. The authorized and issued capital
stock of the Corporation consists solely of 14,750,000 shares of Common Stock
authorized, 4,335,637 of which are issued and outstanding; and 7,485,596 shares
of preferred stock authorized, of which 6,762,804 are issued and outstanding,
which preferred stock is allocated among series as follows, and which series are
convertible into shares of Common Stock of the Corporation in the following
ratios:
SERIES SHARES DESIGNATED SHARES ISSUED AND CURRENT
OUTSTANDING CONVERSION
RATIO
----------------------------------------- ------------------- ----------------------- ----------------
Series 1 Preferred Stock 1,431,428 1,431,428 1:1
----------------------------------------- ------------------- ----------------------- ----------------
Series 2 Preferred Stock 6,054,168 5,331,376 1:1
----------------------------------------- ------------------- ----------------------- ----------------
TOTAL 7,485,596
----------------------------------------- ------------------- ----------------------- ----------------
Stock Options. The Corporation has reserved an aggregate of 2,698,964
shares of Common Stock for issuance to directors, officers, employees and
consultants of the Corporation pursuant to the Corporation's 1994 Stock Option
Plan and 1998 Stock Option Plan (the "PLANS"), under which Plans 2,272,819
options are outstanding, 269,441 shares of Common Stock have been issued upon
exercise of options and 88,409 shares remain available under the Plans for the
grant of additional options.
Convertible Notes and Preferred Warrants. Pursuant to the Secured
Convertible Note and Warrant Purchase Agreement between the Corporation and the
persons and entities listed on the Schedule of Purchasers attached as Exhibit A
thereto (the "Bridge Investors"), dated March 29, 2004, the Corporation issued
Secured Convertible Promissory Notes (the "Notes") and Warrants to Purchase
Series 2 Preferred Stock (the "Warrants") to Bridge Investors on the Initial
Closing Date of March 29, 2004 and the Subsequent Closing Date of May 17, 2004.
69
The Warrants issued on the Initial Closing Date provided for warrant coverage of
twenty percent (20%) and the Warrants issued on the Subsequent Closing Date
provided for warrant coverage of thirty percent (30%). The Warrants provide that
the price per share of Series 2 Preferred Stock issuable pursuant to the
Warrants is the lower of the price per share of the securities sold in the next
equity financing of the Corporation or $1.485372 per share.
Below is the list of Bridge Investors who participated in the Initial
Closing and the Subsequent Closing, including the principal amount of the Note
and the number of shares of Series 2 Preferred Stock issuable pursuant to the
Warrant (assuming an exercise price per share of $1.485372) issued to each
Bridge Investor.
SHARES OF SERIES 2
PRINCIPAL AMOUNT PREFERRED ISSUABLE
NAME OF BRIDGE INVESTOR OF NOTES UNDER WARRANT
----------------------- ---------------- ------------------
MARCH 29, 2004 INITIAL CLOSING:
VOYAGER CAPITAL FUND II, LP $85,019.94 11,447
VOYAGER CAPITAL FUND II-A, LP $460,054.77 61,944
VOYAGER CAPITAL FOUNDERS FUND II, LP $35,500.29 4,779
ONSET ENTERPRISE ASSOCIATES III, L.P. $56,643.80 7,626
ONSET STANDBY FUND, L.P. $151,049.19 20,338
GS PEP I ONSET STANDBY FUND, L.P. $51,024.74 6,870
GS PEP I OFFSHORE ONSET STANDBY FUND, L.P. $24,501.28 3,299
▇▇▇▇▇▇▇▇ PARTNERS II, L.P. $261,206 35,170
------------------------------------------- ---------- -------
FIRST CLOSING TOTAL $1,125,000 151,473
------------------------------------------- ---------- -------
MAY 17, 2004 SUBSEQUENT CLOSING:
▇▇▇▇▇▇▇ REVOCABLE TRUST $135,864.14 27,440
▇▇▇▇▇▇▇ INVESTMENT PARTNERS $35,964.04 7,263
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ TRUST $13,986.01 2,824
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ TRUST $13,986.01 2,824
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $24,975.02 5,044
F&K DELEPINE TRUST,
DATED APRIL 29, 1998 $3,996.00 807
▇▇▇▇▇▇ ▇. ▇▇▇▇ $19,980.02 4,035
▇▇▇▇▇▇▇ ▇▇▇▇ $50,949.05 10,290
------------------------------------------- ---------- -------
SUBSEQUENT CLOSING TOTAL $299.70.29 60,527
------------------------------------------- ---------- -------
$1,424,700.29 212,000
INITIAL & SUBSEQUENT CLOSING TOTAL
Immediately preceding the Closing, the Notes and all interest thereon will
convert into shares of Series 3 Preferred Stock. The exact number of shares of
Series 3 Preferred Stock into which the Notes will convert will be determined
immediately prior to the Closing.
70
LIST OF STOCKHOLDERS OF THE CORPORATION (ATTACHED)
KADIRI INC. SHAREHOLDER LIST PAGE 1
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------------------------------------ ---------
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ 0112 CMN 2,000
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ---------
total 2,421
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 0149 ###-##-#### CMN 1,317
▇ ▇▇▇▇▇▇ ▇▇. ▇.▇. ---------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ total 1,317
▇▇▇ ▇▇▇
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ 4,167
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇. ---------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 4,167
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ 0004 CMN 17,792
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ total 17,792
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇ 0054 ###-##-#### CMN 81
c/o Western Technology Investments ---------
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ total 81
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇-▇▇▇▇▇▇▇ Birthclmer 0016 ###-##-#### CMN 1,789
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ---------
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ total 1,789
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 0151 ###-##-#### CMN 1,250
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ---------
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,250
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ 0118 CMN 2,084
---------
▇▇▇▇▇▇▇▇▇▇ total 2,084
▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ 0082 ###-##-#### CMN 249
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇. ---------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ 249
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ 0155 CMN 1,111
858 14 3/4 Avenue ---------
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,111
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 0012 CMN 5,901
▇/▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ---------
▇▇▇▇▇▇▇▇ Plaza, ▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇ total 5,901
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ 0073 ###-##-#### CMN 339
799 Humboldt Road ---------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 339
71
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
-------------------------------------------------------------------------------- ----------
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ CMN 3,076
1811 ▇▇ ▇▇▇▇▇▇ ▇ 1,278
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------
total 4,354
----------------------------------------------------------------------------------------------------------
▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ CMN 2,084
1811 E1 Camino ----------
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 2,084
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ 0177 CMN 5,048
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total 5,048
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 0013 CMN 18,860
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ----------
Model Farm Road total 18,860
Cork, IRELAND
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Coryocakis 0171 ###-##-#### CMN 3,077
▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 3,077
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0043 CMN 1,217
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,217
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0044 CMN 1,217
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,217
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trust 0116 CMN 2,484
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. 2 8,416
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------
total 10,900
----------------------------------------------------------------------------------------------------------
The ▇▇▇▇▇▇▇ Revocable Trust 0143 CMN 71,002
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. 2 42,077
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------
total 113,079
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Investment Partners 0144 CMN 5,368
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇. ▇ ▇▇,▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------
total 30,615
----------------------------------------------------------------------------------------------------------
72
KADIRI INC. SHAREHOLDER LIST PAGE 3
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------ ----------
▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ 0028 CMN 5,034
▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇ ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 5,034
--------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ 0083 CMN 667
c/▇ ▇▇▇▇▇ & Co. ----------
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ total ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇ 0148 ###-##-#### CMN 67
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ----------
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 67
--------------------------------------------------------------------------------------
Cranston Investment Company 0120 CMN 41,667
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ----------
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total 41,667
--------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0029 CMN 3,164
One Post Street ----------
Suite 2500 total 3,164
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------
▇▇▇▇ D'Alencon 0124 CMN 8,751
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 8,751
--------------------------------------------------------------------------------------
▇▇▇▇▇▇ Darien 0106 CMN 10,216
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 2 4,245
Suite 2500 ----------
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 14,461
--------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 0173 ###-##-#### CMN 2,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 2,000
--------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 0022 CMN 1,030
▇.▇.▇▇▇ ▇▇▇▇ ----------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,030
--------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ 0030 CMN 10,169
▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇ ----------
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 10,169
--------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 0154 CMN 3,890
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 3,890
--------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 0168 CMN 2,604
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 2,604
--------------------------------------------------------------------------------------
73
KADIRI INC. SHAREHOLDER LIST PAGE 4
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------------ ----------
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ 0065 CMN 54
▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 54
--------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0100 CMN 34,262
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇ ▇▇,▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------
total 71,287
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇ El-Carbi 0091 CMN 2,000
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ----------
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 2,000
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ Revocable Family 0110 CMN 19,151
Trust
7/21/1993 2 8,416
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ----------
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 27,567
--------------------------------------------------------------------------------------------
▇▇▇ Faith 0058 ###-##-#### CMN 255
10408 N.E. 190th. Street ----------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 255
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 0088 CMN 174,051
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 174,051
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. Fair Living Trust dated 0002 CMN 93,751
11-Aug-89 2 20,834
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. #▇▇▇ ----------
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 114,585
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. Fair 0049 CMN 16,689
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. #▇▇▇ ----------
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 16,689
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 0111 CMN 10,417
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 10,417
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 0125 CMN 19,684
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇ ----------
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 19,684
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ & Associates 0135 CMN 1,300
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, #▇▇▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,300
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0121 CMN 1,266
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ----------
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,266
--------------------------------------------------------------------------------------------
74
KADIRI INC. SHAREHOLDER LIST PAGE 5
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
---------------------------------------------------------------------------------- ----------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0015 CMN 10,688
▇▇▇▇-▇▇▇▇▇. ▇▇▇▇▇▇ ▇▇ ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 10,688
---------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ 7,306
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 7,306
---------------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ & ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, TTEES 0062 CMN 413
U/A dtd 10/27/97 PBO ▇▇▇▇ ▇. ▇▇▇▇▇▇ & ----------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ total 413
11535 Norae
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0069 ###-##-#### CMN 253
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 253
---------------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0020 CMN 5,964
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ----------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 5,964
---------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 0084 CMN 400
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 400
---------------------------------------------------------------------------------------------------
▇▇▇ Grandaaert 0150 ###-##-#### CMN 3,334
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 3,334
---------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich Partners I 0032 CMN 2,922
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 2 1,214
East ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ----------
total 4,136
---------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich Partners II 0161 CMN 952
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 2 ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ----------
total 1,348
---------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 0080 ###-##-#### CMN 59
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇. #▇▇▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 59
---------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ 0136 ###-##-#### CMN 2,366
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ----------
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total 2,366
---------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ Family Trust u/d/t dated 0162 CMN 3,847
20-May-02 2 1,599
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ----------
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total 5,446
75
KADIRI INC. SHAREHOLDER LIST PAGE 6
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------------------------ ----------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 0087 CMN 1,299
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ----------
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,299
--------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0056 CMN 1,286
▇.▇.▇▇▇ ▇▇▇ ----------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,286
--------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ 0156 ###-##-#### CMN 21,545
----------
7725 K/2nd. SE total 21,545
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0008 CMN 25,592
----------
▇ ▇▇▇▇▇▇ ▇▇▇▇ total 25,592
Hanover, NH 03755-1701
--------------------------------------------------------------------------------------------------------
High Tech Ventures 0139 CMN 11,707
----------
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ total 11,707
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------------
G. Mormer Partnership 0163 #▇▇-▇▇▇▇▇▇▇ CMN 10,125
----------
total 10,125
--------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Homme 0169 CMN 1,037
▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇.▇. ----------
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 1,037
--------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 0089 CMN 18,625
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ----------
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total 18,625
--------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 0067 CMN 92
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 92
--------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ JTWROS 0096 CMN 600
▇▇▇ ▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇ ----------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 600
--------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ 0170 CMN 45,315
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇▇▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 45,315
--------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇ 0093 CMN 45,121
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 2 20,000
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------
total 65,121
--------------------------------------------------------------------------------------------------------
76
KADIRI INC. SHAREHOLDER LIST PAGE 7
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
-----------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0003 CMN 53,047
▇▇▇▇▇ ▇▇ ▇▇▇▇. ▇▇▇▇▇▇ ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 53,047
-----------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0033 CMN 5,532
▇▇▇▇▇ ▇▇ ▇▇▇▇. ▇▇▇▇▇▇ ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 5,532
-----------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0034 CMN 6,698
----------
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ total 6,698
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ 0126 CMN 625
----------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇. Floor total 625
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III 0101 CMN 12,415
----------
c/o USC total 12,415
▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
Lazy P Investors, LP 0134 CMN 25,659
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ 2 10,663
----------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ total 36,322
-----------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ 0086 CMN 5,064
----------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ total 5,064
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇ 0025 CMN 81
----------
c/o ▇▇▇▇ ▇▇▇. ▇▇▇▇▇▇ ▇▇▇. #▇ total 81
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ 1,667
----------
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ total 1,667
▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 0147 ###-##-#### CMN 834
----------
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇ 0153 550-92-647 CMN 584
----------
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 0176 CMN 28,610
----------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇., ▇▇▇. ▇ total 28,610
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------------------------------------------
77
KADIRI INC. SHAREHOLDER LIST PAGE 8
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------------ ----------
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Family Living Trust 0035 CMN 22,507
15355 Via Colina ----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 22,507
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ 50,488
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇. ▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 50,488
--------------------------------------------------------------------------------------------
▇▇ ▇▇▇▇▇▇▇ 0175 CMN 50,488
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total 50,488
--------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ 0059 CMN 932
1200 Francisco # 5 ----------
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 932
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇ ▇▇▇▇ 0068 CMN 168
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 168
--------------------------------------------------------------------------------------------
▇. ▇▇▇▇▇▇▇ 0141 CMN 243
▇▇ ▇▇▇▇ ▇▇▇▇ ----------
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ total 243
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ 0119 CMN 10,417
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ----------
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total 10,417
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇. #▇▇▇ 0172 ###-##-#### CMN 208
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------
total 208
--------------------------------------------------------------------------------------------
Meltold Associates 0105 CMN 7,917
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ 2 2,084
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ ----------
total 10,001
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0021 CMN 8,669
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 8,669
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ 0066 CMN 2
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ----------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 2
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 0051 CMN 4,501
TTEES
----------
or Succ TTEES as TTEES of the ▇▇▇▇▇▇ total 4,501
Family Trust dtd 8/7/96
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
78
KADIRI INC. SHAREHOLDER LIST PAGE 9
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------------------ -----------
--------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 0046 ###-##-#### CMN 87
-----------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ total 87
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 0090 CMN 15,167
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 2 3,334
-----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 18,501
--------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ 0097 CMN 1,337
-----------
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ total 1,337
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 0037 CMN 7,382
-----------
c/o Deloitte & Touche total 7,382
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
ONSET Enterprises Associates III, LP 0074 CMN 1,085,753
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇ ▇▇▇,▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 2 191,534
-----------
total1,830,342
--------------------------------------------------------------------------------------------------
ONSET Standby Fund, LP 0165 2 510,758
-----------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ total 510,758
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
GS PEP I ONSET Standby Fund, LP 0166 2 172,532
-----------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ total 172,532
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
GS PEP I Offshore ONSET Standby Fund, LP 0167 2 82,847
-----------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ total 82,847
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇ 0057 CMN 161
-----------
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 77083
--------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 0127 CMN 6,634
-----------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ total 6,634
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ 0164 CMN 8,852
-----------
▇▇▇▇▇▇▇, Trustees of the ▇▇▇▇▇▇▇ Family total 8,852
Trust dated January 18, 2000
▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
79
KADIRI INC. SHAREHOLDER LIST PAGE 10
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------------- ----------
--------------------------------------------------------------------------------------------
Petaluma/Palm Partnership 0077 CMN 163
----------
c/o ▇▇▇ ▇▇▇▇▇ / Petaluma Palm total 163
Partners
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 0055 ###-##-#### CMN 9
----------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ 0108 CMN 14,832
▇▇▇▇▇▇▇▇, Trustees of the ▇▇▇▇▇▇▇▇ 2 6,164
----------
Family Trust dated May 5, 1982 total 20,996
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 0017 CMN 483
----------
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0092 CMN 5,000
----------
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇. total 5,000
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ 0027 CMN 5,173
----------
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates total 5,173
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ 0070 ###-##-#### CMN 71
----------
783 Spring Willow Bay total 71
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 0064 CMN 21
----------
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 0076 CMN 1,407
----------
c/o Woodland Partners total 1,407
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇ 0095 CMN 12,949
----------
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. total 12,949
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ 0081 ###-##-#### CMN 1,914
----------
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇ total 1,914
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------
KADIRI INC. SHAREHOLDER LIST PAGE 11
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
-------------------------------------------------------------------------------- ----------
----------------------------------------------------------------------------------------------
Saybrook Graduate School 0139 CMN 2,500
----------
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ total 2,500
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇ 0042 CMN 713
----------
19967 Twilight Court total 713
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ 0152 ###-##-#### CMN 1,823
----------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ total 1,823
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ & ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0052 CMN 1,031
----------
Co-Trustees of the ▇▇▇▇▇▇▇ Living total 1,031
Trust
dtd 10/1/82, as amended
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 0063 ###-##-#### CMN 81
----------
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ total 81
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 0117 CMN 3,847
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 2 1,599
----------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ total 5,446
----------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ###-##-#### CMN 1,206
----------
▇▇▇ ▇. ▇▇▇▇. ▇▇▇▇▇▇ total 1,206
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 0048 ###-##-#### CMN 12,953
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 2 5,383
----------
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total 18,336
----------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0014 CMN 4,181
----------
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇ total 4,181
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ 0045 ###-##-#### CMN 1,077
----------
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ total 1,077
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ 17,027
----------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇. total 17,027
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ 0040 CMN 41
----------
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------
80
KADIRI INC. SHAREHOLDER LIST PAGE 12
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------------------ -----------
--------------------------------------------------------------------------------------------------
Towers, Perrin, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Inc 0131 CMN 839,867
Att: ▇▇▇ ▇▇▇▇▇▇ 1 326,604
One ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇. 2 197,979
-----------
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ total1,364,450
--------------------------------------------------------------------------------------------------
Voyager Capital Fund Il, LP 0157 2 441,971
-----------
▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ total 441,971
▇▇▇▇▇▇▇ , ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
Voyager Capital Fund Il-A, LP 0158 2 2,469,734
-----------
▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ total2,469,734
▇▇▇▇▇▇▇ , ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
Voyager Capital Founders Fund II, LP 0159 2 185,158
-----------
▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ total 185,158
▇▇▇▇▇▇▇ , ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ 0122 CMN 2,914
-----------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ total 2,914
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ 0078 CMN 92
-----------
c/o Power Presentations total 92
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇ 0024 CMN 1,306
-----------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ total 1,306
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ 0061 CMN 1,535
-----------
▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ total 1,535
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ 0129 CMN 81,989
-----------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ total 81,989
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Partners II, LP 0099 CMN 958,980
▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ 1 551,769
Suite 311 2 841,539
-----------
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ total2,352,288
--------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0041 CMN 8
-----------
8630 Starlight total 8
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------------------
KADIRI INC. SHAREHOLDER LIST PAGE 13
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ AS OF 05/19/04 FORM: 10A
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ DATE: 05/19/10
TIME: 11:43:53
REGISTRATION ACCOUNT NO. TAXPAYER ID SERIES SHARES
------------------------------------------------------------------------- ----------
--------------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 0133 CMN 64,634
----------
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ total 64,634
Half ▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 0107 CMN 8,852
----------
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ total 8,852
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. Wisnewaski 0098 CMN 2,500
----------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇. total 2,500
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------
Woodland Partners 0009 CMN 24,745
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 2 28,513
----------
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ total 53,258
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------------
81
SCHEDULE 4.14A
Suppliers of good services over $25K
April 2003 - March 2004
Name Invoice
------------------------------------------------------------------
BEA Systems, Inc 250,132
------------------------------------------------------------------
BLANC-OTUS 121,599
------------------------------------------------------------------
Blue Shield 289,013
------------------------------------------------------------------
Calco Insurance 26,909
------------------------------------------------------------------
CDW Direct, LLC 27,012
------------------------------------------------------------------
Channel Source Direct 28,000
------------------------------------------------------------------
Connect Direct 85,514
------------------------------------------------------------------
ConnectSix, LLC 72,031
------------------------------------------------------------------
Dell Marketing L.P. 64,362
------------------------------------------------------------------
Equity Office Properties 343,822
------------------------------------------------------------------
Fireman's Fund Insurance 42,737
------------------------------------------------------------------
First Bank Card 47,591
------------------------------------------------------------------
Fusionstorm 30,668
------------------------------------------------------------------
Gartner 27,225
------------------------------------------------------------------
Go Ahead Solutions, LLC 176,029
------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich 129,839
------------------------------------------------------------------
▇▇.▇▇▇, Inc. 29,875
------------------------------------------------------------------
HRchitect, Inc. 108,619
------------------------------------------------------------------
Hyperion Solutions Corp. 83,292
------------------------------------------------------------------
IBM 98,568
------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ - Attorneys at Law 25,865
------------------------------------------------------------------
Kaiser - Health coverage 41,897
------------------------------------------------------------------
Marathon International Inc. 114,284
------------------------------------------------------------------
Oak Technology Partners, LLC 66,911
------------------------------------------------------------------
One Bay Plaza, L.L.C. 31,059
------------------------------------------------------------------
PlaceWare Inc. 46,263
------------------------------------------------------------------
Premier Access 43,520
------------------------------------------------------------------
Price WaterhouseCoopers LLP 69,250
------------------------------------------------------------------
Raindance Communications, Inc. 42,696
------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. 26,526
------------------------------------------------------------------
SBC for Pacific ▇▇▇▇ -960-755-27003-555 27,598
------------------------------------------------------------------
SQATest, Inc. 33,198
------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 154,372
------------------------------------------------------------------
Talbot Consulting 27,466
------------------------------------------------------------------
Towers ▇▇▇▇▇▇ Working Concepts. 242,656
------------------------------------------------------------------
▇▇▇▇▇▇▇ Techwriters 33,966
------------------------------------------------------------------
WESTT, Inc. 176,338
------------------------------------------------------------------
82
SCHEDULE 4.4 TITLE TO ASSETS:
Leased Equipment:
Phone System
Copiers (2)
The Corporation has licenses to Third Party Software used in delivering its
product from companies including BEA and Brio.
On April 22, 2004 the Corporation acquired substantially all of the assets of
Trimbus, Inc. ("Trimbus") Under certain circumstances, as more fully described
in Section 7.2 ("Seller Option to Repurchase Assets") of the Asset Purchase
Agreement dated April 22, 2004 between the Corporation, Trimbus and the Trimbus
selling shareholders, Trimbus has the right to repurchase the Trimbus assets for
$1.00.
SCHEDULE 4.6 ABSENCE OF CONFLICTING AGREEMENTS:
The Landlord for The Corporation's corporate office has the right to approve any
transfer of the lease via merger with another company. This approval shall not
be unreasonably withheld. The Corporation does not believe there will be any
issues in obtaining such authorization prior.
SCHEDULE 4.7 APPROVALS:
See Schedule 4.6
SCHEDULE 4.8 FINANCIAL STATEMENTS:
An audited balance sheet as of 12/31/2002 has been delivered. Unaudited income
statements and balance sheets for the fiscal year ended 12/31/2003 and the
quarter ended 3/31/2004 have been delivered.
SCHEDULE 4.9 ABSENCE OF UNDISCLOSED LIABILITIES:
Since the issue of the March 31, 2004 Balance Sheet, The Corporation has issued
convertible notes to its principal institutional investors as well as to
accredited investors. The first closing in April totaled $1,125,000.00 and the
second in May, $300,000.00.
On March 31, 2004, The Corporation entered an agreement with Broadview
International LLC to solicit and review acquisition offers. The arrangement
included issuing a fairness opinion if requested to do so by the Corporation.
The Corporation is obligated to pay $50,000 plus expenses. A success fee of
$550,000.00 is due only upon the closing of a merger transaction.
SCHEDULE 4.10 ABSENCE OF CHANGES AND UNUSUAL TRANSACTIONS:
(ii) The Corporation has offered to discharge Bank of America from an obligation
to pay for future maintenance of approximately $632,000 for early payment in the
amount of $395,000. Also, as part of the settlement, Bank of America must
release The Corporation from a possible repayment obligation of approximately
$1,032,000. Bank of America has indicated it will be accepting this proposal.
(iv) See (ii)
83
(vi) The Corporation approved a bonus pool totaling approximately $12,900 as an
incentive for members of the services group to work overtime. Some payments have
been made from this pool. The affected employees have the choice to receive
additional vacation instead. This is in the normal course of business.
(viii) Since the issue of the March 31, 2004 Balance Sheet, The Corporation has
issued convertible notes to its principal institutional investors as well as to
accredited investors. The first closing in April totaled $1,125,000.00 and the
second in May, $300,000.00.
SCHEDULE 4.16 ACCOUNTS RECEIVABLE:
Except as reserved for under general AR reserve.
SCHEDULE 4.18 GOVERNMENTAL AUTHORIZATIONS:
The Corporation does not have a current business license with the City of
Burlingame, the location of its corporate headquarters.
SECTION 4.21 INTELLECTUAL PROPERTY:
PATENTS
Title Date Issued Patent No.
----- ----------- ----------
Automated Process Guidance System July 31, 2001 6,269,355
and Method US
PATENT APPLICATIONS
Title Application Date Application No.
----- ----------------- ---------------
Automated Process Guidance System March 13, 2001 09/805,646
Method and US
Automated Process Guidance System April 14, 2000 2,371,953
and Method Canada
Automated Process Guidance System April 14, 2000 00922267.0
and Method Europe
TRADEMARKS
▇▇▇▇ Registration Date Registration No.
---- ----------------- ----------------
SEE KADIRI TRADEMARK PORTFOLIO AS
ATTACHED AS EXHIBIT 4.21-A
TRADEMARK APPLICATIONS
▇▇▇▇ Application Date Application No.
---- ---------------- ---------------
SEE KADIRI TRADEMARK PORTFOLIO AS
ATTACHED AS EXHIBIT 4.21-A
84
EXHIBIT 4.21-A
KADIRI TRADEMARK REPORT
Country: CANADA
▇▇▇▇ CLASSES STATUS APP. # APP. DT REG. # REG. DT
------------------------------------------------------------------------------
KADIRI Registered 1087143 12/20/2000 TMA578293 03/26/2003
KADIRI TOTALCOMP Registered 1087144 12/20/2000 TMA596938 12/09/2003
Country: EUROPEAN UNION
▇▇▇▇ CLASSES STATUS APP. # APP. DT REG. # REG. DT
--------------------------------------------------------------------------------------------
DECISIS 9, 16, 38, 41, 42 Registered 128520 04/01/1996 128520 04/06/1999
KADIRI 9, 35, 42 Registered 2016533 12/22/2000 2016533 05/13/2002
KADIRI TOTALCOM 9, 35, 42 Registered 2019826 12/22/2000 2019826 09/27/2002
MISC. DESIGN
(DECISIS LOGO) 9, 16, 37, 38, 41, 42 Registered 521344 04/24/1997 521344 07/12/1999
Country: MEXICO
▇▇▇▇ CLASSES STATUS APP. # APP. DT REG. # REG. DT
---------------------------------------------------------------------------------------
KADIRI 35 Registered 464825 01/08/2001 708609 07/30/2001
KADIRI 9 Registered 464830 01/08/2001 708610 07/30/2001
KADIRI TOTALCOMP 9 Registered 464829 01/08/2001 725578 11/30/2001
Country: UNITED STATES
▇▇▇▇ CLASSES STATUS APP. # APP. DT REG. # REG. DT
-----------------------------------------------------------------------------------------------
DECISIS 9 Registered 74/260134 03/27/1992 1833684 05/03/1994
KADIRI 9 Registered 75/938896 03/08/2000 2625863 09/24/2002
KADIRI 9 Registered 76/383860 03/14/2002 2812204 02/10/2004
KADIRI TOTALCOMP 9 Registered 76/122380 09/05/2000 2643944 10/29/2002
KADIRI TOTALCOMP 9 Registered 76/383859 03/14/2002 2741250 07/29/2003
85
The following is a list of licenses of patents, trademarks, copyrights or
maskworks (other than non-exclusive licenses to end-users).
Inbound Licenses:
o WebLogic 5.1 (under license from BEA Systems)
o Brio (sold under a reseller agreement and not part of Kadiri TotalComp).
Certain portion of the Brio product contain open source software code and
the Corporation is in the process of determining whether the use of that
code in the manner intended by the Corporation is permitted under
applicable open sources licenses. If it is determined that the appropriate
licenses have not been obtained by the licensor of the Brio product, then
the Corporation may seek a refund for amounts paid to date to the licensor
and cancellation of future obligations.
o Jasper Reports (will be part of Release 5.0 in the May 31, 2004 release) -
commercial license with no fees;
o INetSoft Java class for pdf (source code acquired, no license required -
this will be obsoleted by Jasper Reports in Release 5.0)
o Various Java jar files and XML utilities as follows:
o GifEncoder (ACME Labs) full rights to distribute, must include
copyright file (which we do - this has been in our product since
4.0)
o JAXP (Sun Java) no license required
o JDOM (Sun Java) no license required
o XALAN (Sun Apache) full rights to distribute, must show copyright o
XERCESIMPL (Sun Apache) same as XALAN
o XML-apis.jar (Sun Apache) same as XALAN
o TableLayout.jar (▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇▇) no license required
Outbound Licensed: Software and services agreement exists between
International Business Machines Corporation and the Corporation which
establishes the basis for a multinational procurement relationship under which
the Corporation will provide IBM the deliverables and services described in
SOW's issued under this agreement.
The Corporation owns all rights in an to its website located at ▇▇▇.▇▇▇▇▇▇.▇▇▇.
SCHEDULE 4.22 EQUIPMENT CONTRACTS:
None
SCHEDULE 4.24 LEASED REAL PROPERTY
Corporate Office: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Single office: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE 4.26 EMPLOYMENT MATTERS:
86
(a) See separate schedule
--------------------------------------------------------------------------------------------------------------------------
4.26 A EMPLOYEES 1/2003-5/2003 5.17.04
--------------------------------------------------------------------------------------------------------------------------
TOTAL
COMP
ANNUAL YEAR END
START DATE TERM DATE TITLE DEPT NAME SALARY 2003
--------------------------------------------------------------------------------------------------------------------------
11/11/2002 Senior Software Engineer Eng ▇▇▇▇▇▇,▇▇▇▇▇ 108,000.0 108,550.0
11/15/2003 Senior Software Engineer Eng ▇▇▇▇▇▇▇, ▇▇▇▇ 125,000.0 45,265.02
10/22/2001 9/7/2003 Application Consultant Sales Amber, Yasha 81,450.00 74,219.48
11/27/2000 Human Resource Manager Admin Antosik, 82,500.00 85,250.00
▇▇▇▇▇▇▇
5/3/2004 Inside Sales Rep Sales Au-▇▇▇▇▇ 2,115.38 2004 hire
6/12/2000 Inside Sales Rep Manager Sales ▇▇▇▇▇, ▇▇▇▇ 65,000.00 82,049.46
11/26/2002 Director National Account Admin ▇▇▇▇, ▇▇▇▇▇ 135,000.00 135,917.00
Engagement
3/3/2003 Senior Software Engineer Eng ▇▇▇▇▇▇▇▇▇▇▇, 120,000.00 100,000.00
▇▇▇▇▇▇
3/30/2000 12/16/2003 QA Eng ▇▇▇▇▇▇, ▇▇▇▇ 127,843.60
120,000.00
9/7/1999 2/10/2004 Operations Manager Admin ▇▇▇▇▇▇▇, 91,000.00 74,399.82
▇▇▇▇▇▇▇▇
09/28/00 Senior Staff Engineer Eng ▇▇▇▇▇, ▇▇▇▇ 112,250.00 114,827.92
3/13/2000 10/15/2003 QA Engineer Eng Caryotakis, 91,000.00 76,602.56
▇▇▇▇▇
4/5/2004 Sales Rep Sales Catapanpo, 18,705.12
▇▇▇▇▇ 2004 hire
11/10/2003 Vice President Sales Sales Christoffers, 200,000.00 58,846.17
▇▇▇▇▇
10/1/2003 Compensation Consultant Sales Churdnovsky, 34,166.66
Alex
8/28/2002 8/29/2003 CFO Finance Delepine, 165,000.00 114,627.15
Francois
1/29/2001 Director of Professional Services PSG ▇▇▇▇, ▇▇▇▇ 145,000.00 150,156.08
21/1/2003 Product Support PSG ▇▇▇▇▇▇, S 28,125.00
8/7/2002 VP, Marketing Mkt ▇▇▇▇▇, ▇▇▇▇▇ 163,207.84
160,000.00
11/9/2002 8/1/2003 Senior Software Engineer Eng ▇▇▇▇▇▇▇, 108,000.06 7,565.38
▇▇▇▇▇▇▇
7/16/1997 Application Architect Eng ▇▇▇▇▇▇▇, 130,000.00 130,000.08
▇▇▇▇▇▇▇
1/1/2004 5/19/2004 Director of Business Dev Mkt ▇▇▇▇▇▇▇, ▇▇▇▇ 4,833.32
7/24/1998 President & CEO Admin ▇▇▇▇▇▇▇▇, ▇▇▇ 200,000.00 220,624.92
4/29/2002 2/10/2004 Project Manager PSG ▇▇▇▇▇▇, ▇▇▇▇▇ 105,000.00 106,985.00
11/21/96 Director Software Development Eng ▇▇▇▇▇▇▇▇, ▇▇▇▇ 150,000.00 155,156.00
11/11/2002 10/101/03 Compensation Consultant Sales ▇▇▇▇▇▇▇, ▇▇▇ 85,000.00 78,009.61
12/27/2002 1/15/2004 New England Regional Sales Manager Sales ▇▇▇▇▇▇▇▇▇. 90,000.00 119,365.39
▇▇▇▇
10/28/2002 Director of Marketing Mkt ▇▇▇▇▇, ▇▇▇▇▇ 120,458.00
Communications 120,000.00
4/30/2003 4/30/2004 Western Regional Sales Manager Sales ▇▇▇▇▇▇▇, 90,000.00 117,951.15
▇▇▇▇▇▇
1/12/2004 Sales Rep Sales ▇▇▇▇▇, ▇▇▇▇▇ 53,128.18
7/29/2002 Senior System Analyst CSG ▇▇▇▇▇▇▇, ▇▇▇ 73,850.00 66,020.99
4/2/1997 VP, Product Development Eng ▇▇▇▇, ▇▇▇ 171,500.00 180,093.92
8/1/2000 4/8/2004 Project Manager PSG Kneafsey, 91,000.00 92,578.09
▇▇▇▇▇▇
01/13/03 Staff Engineer Eng ▇▇▇▇▇, ▇▇▇▇▇▇ 100,000.00 96,602.64
5/21/2001 6/30/2003 Western Region Sales Manager Sales Ludlow, 80,000.00 46,893.19
▇▇▇▇▇▇▇
1/17/2000 Senior Project Manager PSG ▇▇▇▇▇▇▇, ▇▇▇▇ 118,000.00 135,500.00
4/19/2004 Senior Software Engineer Eng ▇▇▇▇▇▇, ▇▇▇▇▇ 7,307.69 2004 hire
4/19/2004 Senior Software Engineer Eng ▇▇▇▇▇▇▇, ▇▇ 7,916.66 2004 hire
4/17/2004 Director Product Marketing Mkt ▇▇▇▇▇▇▇, ▇▇▇▇▇ 8,829.96 2004 hire
9/5/2000 Director, Client Relations Sales ▇▇▇▇▇, ▇▇▇▇▇▇ 92,000.00 102,312.92 terms 5.31.04
3/15/2004 5/18/2004 Compensation Consultant Sales ▇▇▇▇▇▇, Fabia 17,051.26 2004 hire
1/12/2004 Sales Rep Sales ▇▇▇▇▇▇▇▇, 53,128.18
▇▇▇▇▇ 2004 hire
12/18/2002 12/10/2003 Sales Operations Sales ▇▇▇▇▇▇▇, ▇▇▇▇▇ 90,000.00 89,546.67
2/24/2003 Customer Operations Manager CSG ▇▇▇▇▇▇▇▇, 120,000.00 102,307.69
▇▇▇▇▇
1/7/2004 Director, Product Marketing Mkt ▇▇▇▇▇▇, ▇▇▇▇ 43,230.00 2004 hire
4/13/1998 Senior Staff Engineer Eng ▇▇▇▇▇▇▇▇▇▇, 146,000.00 152,874.92
▇▇▇
1/3/2000 Senior Software Engineer Eng ▇▇▇▇▇▇, ▇▇▇▇ 114,500.00 117,077.92
1/4/1999 Senior Application Architect Eng ▇▇▇▇▇▇▇▇, ▇▇▇▇ 145,000.00 150,156.08 on leave
5/17-9/7/04
4/1/2004 Compensation Consultant Sales ▇▇▇▇▇, ▇▇▇▇▇ 124,999.98 2004 hire
11/1/2002 Senior OA Engineeer Eng Novitskaya, 85,000.00 85,458.08
▇▇▇▇▇
10/1/2003 Senior Field Engineer PSG ▇▇▇▇▇▇, ▇▇▇▇ 41,250
3/4/2003 3/19/2004 South Western Regional Sales Sales ▇▇▇▇, ▇▇▇▇ 90,000.00 109,365.38
Manager
5/22/2002 7/4/2003 Southeast Regional Sales Manager Sales ▇▇▇▇▇▇, ▇▇▇ 90,000.00 50,278.85
3/13/2000 Northeast Regional Sales Manager Sales ▇▇▇▇▇▇▇▇, 85,601.00 245,221.04
▇▇▇▇▇▇
8/27/2001 Central Regional Sales Manager Sales ▇▇▇▇▇, ▇▇▇▇▇▇ 80,000.00 172,987.85
1/4/2000 4/8/2004 Senior Accountant Finance ▇▇▇▇▇, ▇▇▇▇▇▇ 60,320.00 42,977.56
7/27/2000 Project Manager PSG ▇▇▇▇, ▇▇▇▇ 91,050.00 92,769.00
7/1/1999 Director Training PSG ▇▇▇▇, ▇▇▇▇▇ 120,000.00 125,156.00
7/6/2000 Senior System Administator IT ▇▇▇▇▇▇▇▇, ▇▇▇ 85,000.00 84,708.40
1/20/2003 Director of Product Support CSG ▇▇▇▇▇▇▇, ▇▇▇ 135,000.00 128,942.31
12/6/1999 Director of Compensation Sales Simovsky, 155,561.42
Consulting ▇▇▇▇▇ 140,000.00
4/19/2004 Sales Rep Sales ▇▇▇▇▇, ▇▇▇▇ 12,612.18 2004 hire
1/1/2004 Q A Engineer Eng ▇▇▇▇▇▇▇▇, ▇▇▇▇ 30,000.00 2004 hire
10/7/2002 7/25/2003 Director, Business Development Mkt ▇▇▇▇▇▇▇▇, ▇▇▇▇ 110,000.00 73,918.11
1/2/2004 Director, Channel Sales Sales ▇▇▇▇▇▇, Art 50,000.00 2004 hire
1/15/2003 1/8/2004 Director of Western Regional Sales Sales ▇▇▇▇, ▇▇▇▇ 135,000.00 216,526.63
8/24/1998 Senior Staff Engineer Eng ▇▇▇▇▇▇▇▇, Bill1 15,300.00 117,363.08
4/19/2004 Director of Client Relations Sales Vereceles, 9,166.67
▇▇▇▇▇▇▇ 2004 hire
7/10/2000 Staff Engineer Eng ▇▇▇▇, ▇▇▇▇ 117,600.00 120,006.00
05/19/03 Driector of Product Marketing Mkt ▇▇▇▇▇, 145,000.00 87,039.93 on leave
▇▇▇▇▇▇▇ 3/4-7/30/04
11/6/2000 Inside Sales Rep Sales ▇▇▇▇▇▇▇, 55,000.00 69,800.08
▇▇▇▇▇▇
11/01/99 Director of Consulting Services CSG ▇▇▇▇▇, ▇▇▇▇▇▇▇ 145,000.00 151,875.08 25% as of May
10, 2004
2/24/1999 5/19/2003 VP, Worldwide Sales and Business Sales ▇▇▇▇▇▇▇▇, 170,000.00 146,504.07
Development ▇▇▇▇▇
1/8/2001 Project Manager PSG ▇▇▇▇▇, ▇▇▇▇▇▇▇ 89,400.00 89,052.37
1/14/2002 Senior Software Engineer Eng ▇▇▇▇, ▇▇▇▇▇ 112,000.00 111,719.08 hrly basis
after 5.18.04
11/4/2002 Controller Finance ▇▇▇▇, ▇▇▇▇▇ 115,000.00 115,917.0
9/23/2002 11/7/2003 Senior Software Engineer Eng ▇▇▇▇▇, ▇▇▇▇▇▇ 105,000.00 93,387.52
2/18/2002 QA, Manager Eng ▇▇▇▇▇▇▇▇▇▇▇, 115,000.00 117,979.0
▇▇▇▇▇▇▇
* 2004 hire denotes salary to date
87
------------------------------------------------------------------------------------------------------------------------
4.28 BENEFITS PLANS PROVIDER PLAN POLICY NUMBER POLICY PERIOD
------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ 2/1/04-1/31/05
Medical Blue Shield PPO 250 930880 2/1/04-1/31/05
Medical Blue Shield PPO 500 931155 2/1/04-1/31/05
Medical ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ 2/1/04-1/31/05
Dental Jefferson Pilot 1D0010483 2/1/04-1/31/05
Vision VSP 12159286 1/1/03-6/30/05
Short Term Disability Jefferson Pilot 10046039 2/1/04-1/31/05
Long Tern Disability Jefferson Pilot 10046038 2/1/04-1/31/05
Life/AD&D Jefferson Pilot 10046037 2/1/04-1/31/05
Flexible Spending Account EBS Kadiri 2/1/04-1/31/05
------------------------------------------------------------------------------------------------------------------------
4.29
COVERAGE TYPE BROKER VENDOR POLICY NUMBER POLICY PERIOD PREMIUM LIMIT
-----------------------------------------------------------------------------------------------------------------------------------
Worker's Comp Calco Firemans Fund WZP 80912234 12/31/03-12/31/04 43,461.00 $ 1,000,000
Errors & Omissions Calco Calco GUO450351 12/31/03-12/31/04 18,965.63 $ 1,000,000
Fiduciary Dishonesty Calco Calco 81518373 5/31/03-5/31/04 431.52 $ 50,000
Fiduciary Liability Calco Calco 81385290 5/31/03-5/31/04 1,428.00 $ 1,000,000
Third Party Fidelity Calco Calco 103924758 9/20/03-9/20/04 5,895.00 $ 1,000,000
Umbrella Calco Chubb 79754375 5/31/03-5/31/04 5,027.50 $ 2,000,000
Business Auto Calco Chubb 7498-90-30 5/31/03-5/31/04 1,386.00 $ 1,000,000
Property & liabilty package Calco Chubb 35347972 5/31/03-5/31/04 15,658.00
D&O Calco Calco/AICCO 63369902 9/30/03-9/30/04 21,145.76 3M
D&O Calco Calco/AICCO 190233-102 9/30/03-9/30/04 15,810.00 2M
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL $129,208.41
-----------------------------------------------------------------------------------------------------------------------------------
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(a) See separate schedule
(b) Change of Control Severance Agreements
▇▇▇ ▇▇▇▇▇▇▇▇, CEO
` ▇▇▇▇▇ ▇▇▇▇▇, VP Marketing
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, VP Sales
▇▇▇ ▇▇▇▇, VP Development
(c)
▇▇▇▇ ▇▇▇▇▇▇ Agreement 1/26/04
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Agreement 4/7/04
▇▇▇▇▇ ▇▇▇▇ Agreement 5/18/04
▇▇▇▇ ▇▇▇▇▇▇ Agreement 10/4/03
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Agreement 2/17/04
▇▇▇▇ ▇▇▇▇▇▇▇▇ Agreement 10/27/03
Talbot Consulting Agreement 12/10/03
(g) The Corporation terminated a sales representative due to
performance and behavior issues in January of 2004. The former employee retained
council and has communicated in a letter threatening litigation unless the
Corporation settles. The Corporation believes the threatened litigation is
without merit and has no plans to settle. If there is litigation, the
Corporation has an insurance policy with deductibles.
SCHEDULE 4.28 BENEFIT PLANS:
(f) 401k-employee contributions are paid to the 401k provider by the
Corporation. Dependent on the timing of the closing, it is possible that the
remittance from the most recent payroll will not have been delivered to Securian
Retirement Services.
SCHEDULE 4.30 MATERIAL CONTRACTS:
The following contract was signed after 3/31/04 involving payments to the
Corporation in excess of $100k: Dupont (software, implementation, and
maintenance for Kadiri HR console, Interface Manager, and Advance Variable Pay.
The following contract(s) have corporate obligations that extend beyond one
year:
SBC T1 Agreement - 2-year agreement ending August 2005. Early termination fees
apply. Agreement included with Due Diligence materials. IBM e-business Hosting
Agreement - 3-year agreement ending December 2005. Early termination charge
applies. Agreement included with Due Diligence materials.
The following contract(s) cannot be terminated without penalty on less than 6
months notice:
Lease for ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ and 570 remains in affect until 4/17/05.
Agreement included with Due Diligence materials.
The Strategic Partnership Agreement with Towers ▇▇▇▇▇▇ has expired by its terms.
The Corporation and Towers have discussed an extension of the Agreement and
Towers has advised the Corporation that they are planning to extend the
Agreement and have directed their lawyers to assist in this effort. In any
renewal, Towers will have the right to cancel the renewed agreement if the
Corporation is acquired and if Towers chooses.
89
Kadiri customers, Sovereign and Cendant, have demanded certain software and
services free of charge in connection with ongoing negotiations between such
customers and the Corporation.
SCHEDULE 4.31 LITIGATION:
The Corporation terminated a sales representative due to performance and
behavior issues in January of 2004. The former employee retained council and has
communicated in a letter threatening litigation unless the Corporation settles.
The Corporation believes the threatened litigation is without merit and has no
plans to settle. If there is litigation, the Corporation has an insurance policy
with deductibles.
SCHEDULE 4.32 TAX MATTERS:
(b) The following returns have not been filed for 2003: Federal tax return
CA and NC tax return
Extensions have been filed for Federal and California 2003 returns.
(d) Property tax return for 2003 has been filed but assessment not determined.
Sales tax for Arizona needs to be determined for software purchased by
Swift Transportation.
(g) The Corporation has collected, to the best of its knowledge, all amounts
required to be collected or withheld except as noted in 4.32 (d) for Swift
Transportation wherein applicable sales has not been collected or paid.
(h) An accrual exists on the balance sheet as of April 30, 2004 in the amount of
$90,915 for potential sales tax liabilities. The Corporation believes this is an
adequate reserve.
SCHEDULE 4.37 BANK ACCOUNTS, ETC.
Bank Accounts:
Comerica
▇▇▇▇▇ ▇▇▇▇▇▇
Silicon Valley Bank
Venture Banking Group
Authorized Check Signers:
▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE 4.38 NO BROKER:
Broadview International LLC
90
SCHEDULE 5.7
STOCK OPTION PLAN
Authorized to issue 3,000,000 common shares under the Stock Option Plan. There
are currently 2,063,937 options outstanding.
WARRANTS
---------------------------------------- -------------------------------------- --------------------------------------
NUMBER OF WARRANTS
WARRANT HOLDER DATE OF GRANT FOR COMMON SHARES
---------------------------------------- -------------------------------------- --------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇ December 1999 245,000
---------------------------------------- -------------------------------------- --------------------------------------
Whale Securities December 1999 244,812
---------------------------------------- -------------------------------------- --------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ March 2001 245,000*
---------------------------------------- -------------------------------------- --------------------------------------
Sands Brothers & Co. Ltd. April 2002 400,000
---------------------------------------- -------------------------------------- --------------------------------------
Crestview Capital May 2002 312,179
---------------------------------------- -------------------------------------- --------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ May 2003 133,333
---------------------------------------- -------------------------------------- --------------------------------------
Platinum Value Arbitrage Fund, LP May 2003 333,334 **
---------------------------------------- -------------------------------------- --------------------------------------
Standard Securities Capital Corporation December 2003 250,000
---------------------------------------- -------------------------------------- --------------------------------------
▇▇▇▇▇▇ Low December 2003 62,500
---------------------------------------- -------------------------------------- --------------------------------------
Legend Merchant Group December 2003 100,000
---------------------------------------- -------------------------------------- --------------------------------------
Peopleview, Inc. March 2004 50,000
---------------------------------------- -------------------------------------- --------------------------------------
* 50,000 warrants have been exercised
** 299,031 warrants have been exercised
91