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Exhibit 10.1
STOCK PURCHASE AND MERGER AGREEMENT
By and between
PROLOGIC MANAGEMENT SYSTEMS, INC.,
(an Arizona corporation)
and
SUNBURST ACQUISITIONS IV, INC.
(a Colorado corporation)
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE
BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
REGULATION D ("REGULATION D") PROMULGATED UNDER THE ACT AND
SIMILAR STATE EXEMPTIONS. THE SECURITIES MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES
AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
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TABLE OF CONTENTS
Page
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1. Subscription and Closing................................................................................... 1
1.1 Subscription..................................................................................... 1
1.2 Closing.......................................................................................... 1
1.3 Payment of Purchase Price and Delivery of Preferred Shares....................................... 2
2. Representations and Warranties of the Company.............................................................. 2
2.1 Organization, Good Standing, and Qualification................................................... 2
2.2 Authorization.................................................................................... 2
2.3 Enforceability................................................................................... 3
2.4 Capital Stock.................................................................................... 3
2.5 Valid Issuance of Securities..................................................................... 3
2.6 SEC Reports; Financial Statements................................................................ 3
2.7 Current Public Information....................................................................... 4
2.8 No Conflicts..................................................................................... 4
2.9 Compliance with Laws............................................................................. 4
2.10 Litigation....................................................................................... 5
2.11 Disclosures...................................................................................... 5
2.12 Stock Issuances.................................................................................. 5
2.13 Commissions...................................................................................... 5
3. Representations and Warranties of SUNBURST................................................................. 5
3.1 Independent Investigation........................................................................ 5
3.2 Economic Risk.................................................................................... 6
3.3 No Government Recommendation or Approval......................................................... 6
3.4 No Registration.................................................................................. 6
3.5 No Public Solicitation........................................................................... 6
3.6 Investment Intent................................................................................ 6
3.7 Incorporation and Authority...................................................................... 6
3.8 No Reliance on Tax Advice........................................................................ 7
3.9 Independent Legal Advice......................................................................... 7
3.10 SEC Reports; Financial Statements................................................................ 7
4. Legends; Subsequent Transfer of Securities................................................................. 8
4.1 Legends.......................................................................................... 8
5. Covenants of the Company................................................................................... 8
5.1 Accountants...................................................................................... 8
5.2 Corporate Existence and Taxes.................................................................... 8
5.3 Corporate Actions................................................................................ 8
5.4 Copies of Information............................................................................ 8
5.5 Compliance with Laws............................................................................. 8
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5.6 Opinion of Counsel............................................................................... 9
5.7 Use of Proceeds.................................................................................. 9
5.8 Registration Rights.............................................................................. 9
6. Covenants of SUNBURST...................................................................................... 9
6.1 No Sale in Violation of the Act.................................................................. 9
6.2 Voting........................................................................................... 9
6.3 Antidilution Tranche 2 Purchase.................................................................. 9
6.4 SUNBURST Debt.................................................................................... 10
7. The Merger................................................................................................. 10
7.1 The Merger....................................................................................... 10
7.2 Conversion....................................................................................... 10
7.3 Articles of Incorporation and Bylaws of the Surviving Corporation................................ 11
7.4 Surrender and Exchange of Company Stock.......................................................... 11
7.5 Fractional Shares................................................................................ 12
7.6 No Further Transfers............................................................................. 13
8. Conditions to Closing; Deliveries at Closing............................................................... 13
8.1 General Conditions to Each Closing............................................................... 13
8.2 Conditions to SUNBURST's Obligations to Close Tranche 1.......................................... 13
8.3 Conditions to SUNBURST's Obligation to Close Tranche 2........................................... 14
8.4 Conditions to SUNBURST's Obligations to Close the Merger......................................... 15
8.5 Conditions to the Company's Obligation to Sell the Shares........................................ 15
8.6 Conditions to the Company's Obligation to Close the Merger....................................... 16
9. Events of Default.......................................................................................... 17
10. Remedies................................................................................................... 18
11. Miscellaneous.............................................................................................. 18
(a) Governing Law.................................................................................... 18
(b) Entire Agreement; Amendment...................................................................... 18
(c) Notices, Etc..................................................................................... 19
(d) Confidentiality.................................................................................. 19
(e) Counterparts..................................................................................... 19
(f) Severability..................................................................................... 19
(g) Titles and Subtitles............................................................................. 19
(h) Assignment....................................................................................... 19
(i) Survival of Representations...................................................................... 19
(j) Indemnification.................................................................................. 20
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EXHIBITS PAGE
EXHIBIT A Merger Agreement
EXHIBIT B Accredited Investor Definition
EXHIBIT C Voting Trust Agreement
EXHIBIT ▇ ▇▇▇▇ Employment Agreement
SCHEDULES
SCHEDULE 2.4 Capitalization
SCHEDULE 2.6 Material Adverse Financial Changes - Company
SCHEDULE 2.8 Conflicts
SCHEDULE 2.10 Litigation
SCHEDULE 3.10 Material Adverse Financial Changes - SUNBURST
SCHEDULE 2.12 Stock Issuances
SCHEDULE 5.7 Use of Proceeds
SCHEDULE 8.5(f)(1) Shares of SUNBURST and the Company at the Closing of
Tranche 2
SCHEDULE 8.5(f)(2) Shares of SUNBURST after the Merger
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THIS STOCK PURCHASE AND MERGER AGREEMENT (the "Agreement") is executed
by SUNBURST ACQUISITIONS IV, INC., a Colorado corporation ("SUNBURST"), in
connection with the subscription by SUNBURST for Common Stock (the "Stock") of
PROLOGIC MANAGEMENT SYSTEMS, INC., an Arizona corporation (the "Company").
R E C I T A L S
A. The Company is offering (the "Offering") for sale pursuant to
Regulation D ("Regulation D") under the United States Securities Act of 1933, as
amended (the "Act"), a total of up to 5,280,763 shares of Stock (the "Shares"),
in two tranches, as follows:
Purchase
Tranche No. of Shares Price/Share Total Price
------- ------------- ----------- -----------
1 3,459,972 $ 0.2890 $ 1,000,000
2 1,820,791 $ 1.0984 $ 2,000,000*
* Tranche 2 may be separated into two parts pursuant to Section 6.3 of
this Agreement.
B. SUNBURST wishes to subscribe for the Shares, and the Company
wishes to sell the Shares to SUNBURST, in accordance with the terms and
conditions of this Agreement.
C. The proceeds of Tranche 2 shall be used by the Company to make
the acquisition of another company ("Tranche 2 Acquisition"). Except as provided
in Section 6.3, Tranche 2 shall close essentially simultaneously with the
closing of the Tranche 2 Acquisition.
D. As soon as practicable after closing of the Tranche 2
Acquisition, the parties intend that the Company be merged with and into
SUNBURST or a subsidiary of SUNBURST organized for that purpose (the "Merger").
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto covenant and agree as follows:
1. Subscription and Closing.
1.1 Subscription. Subject to the terms and conditions of
this Agreement, SUNBURST hereby subscribes for, and the Company hereby agrees to
issue and sell to SUNBURST, in two tranches, the number of Shares, and at the
prices set forth in Recital A above. Certificates for the Shares will be issued
in the names and denominations as indicated by SUNBURST prior to each closing.
1.2 Closing. The closing of Tranche 1 shall occur at the
offices of ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, within two business days of the approval and
ratification of this Agreement by the board of directors of Prologic, at 9:00
a.m. o'clock, California time, or at such other time and place as the parties
may mutually agree. Except as set forth in Section 6.3, the closing of Tranche 2
shall
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occur at the same location as Tranche 1 not less than 14 days after receipt by
SUNBURST of written notice ("Subscription Call") from the Company that the
Company is prepared to close the debt portion of the financing required for the
Tranche 2 Acquisition. The Subscription Call shall, at a minimum, set forth (i)
the proposed target company; (ii) the total purchase price and terms; (iii) the
total cash required to close the purchase; (iv) the equity portion of such cash
requirement (an amount not to exceed the lesser of 20% of such cash requirement
or $2,000,000) (such amount hereafter referred to as the "Tranche 2 Acquisition
Funding Amount"); (v) the date (not less than 14 days in the future) when
SUNBURST will be required to deliver the Tranche 2 Acquisition Funding Amount;
(vi) evidence that debt financing is available which, together with the Tranche
2 Acquisition Funding Amount, is sufficient to close the Tranche 2 Acquisition;
and (vii) evidence that the proposed acquisition has been approved by the
Company's board of directors.
1.3 Payment of Purchase Price and Delivery of Shares.
Payment of the purchase price for the Shares by SUNBURST shall be made by wire
transfer against delivery of the Shares by the Company. Three business days
prior to each closing, the Company shall provide SUNBURST with complete wire
transfer instructions.
2. Representations and Warranties of the Company. The Company
represents and warrants to SUNBURST as of the date hereof and as of each closing
date described in Section 1 or Section 7 as follows:
2.1 Organization, Good Standing, and Qualification.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Arizona and
has all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on the business or
properties of the Company and its subsidiaries taken, if any, as a whole.
(b) Each subsidiary of the Company is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. Each such subsidiary is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure to so qualify would have
a material adverse effect on the business or properties of such subsidiary.
2.2 Authorization. Except for shareholder authorization
of an amendment to the Company's Articles of Incorporation to increase the
Company's authorized common stock to allow the Company to close Tranche 2 and
shareholder authorization of the Merger contemplated in Section 7 hereof, all
corporate action on the part of the Company, its officers, directors and
shareholders necessary for the authorization, execution and delivery of this
Agreement, and the performance of all obligations of the Company hereunder and
the authorization, issuance (or
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reservation for issuance) and delivery of the Shares of the Company issuable at
the closing of each Tranche have been taken.
2.3 Enforceability. This Agreement constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting creditor's rights generally, or by principles governing the
availability of equitable remedies.
2.4 Capital Stock. The Company has an authorized
capitalization as set forth on Schedule 2.4 as such Schedule 2.4 may be updated
from time to time prior to consummation of the Merger. All outstanding shares of
capital stock of the Company have been duly authorized and are fully paid and
non-assessable. Other than as set forth on Schedule 2.4 or as disclosed in the
SEC Reports (as such term is defined in Section 2.6 below), there are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of capital stock of the Company. A copy
of the List of Warrants and Options and the holders thereof have been attached
hereto and incorporated herein by reference as Schedule 2.4.
2.5 Valid Issuance of Securities. When issued and
delivered in accordance with the terms of this Agreement, the Shares will be
duly and validly issued and outstanding, fully paid and non-assessable, free and
clear of any claims or preemptive rights, and (assuming the representations and
warranties of SUNBURST herein are true and correct in all material respects)
will have been issued in compliance with all applicable U.S. federal and state
securities law.
2.6 SEC Reports; Financial Statements. Except for a proxy
statement in 1998 (no annual meeting was held), and the Company's Form 10-KSB
for 1998 which was filed late, the Company has timely filed all forms, reports
and documents with the Securities and Exchange Commission (the "Commission") for
its fiscal years ended March 31, 1999, 1998 and 1997, required to be filed by it
under the Securities Exchange Act of 1934, as amended (the "1934 Act") through
the date hereof (collectively, the "SEC Reports"). Such SEC Reports, at the time
filed, complied as to form and content in all material respects with the
requirements of the 1934 Act. None of the SEC Reports, including without
limitation any financial statements or schedules included therein, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading. Except as set forth in Schedule 2.6, there have
been no material adverse changes in the Company's business, properties, results
of operations, condition (financial or otherwise) or prospects since the date of
the Company's most recent Report on Form 10-QSB for the quarter ended December
31, 1998, which have not been disclosed to SUNBURST in writing (either directly
by the Company or by delivery by the Company to SUNBURST). The audited and
unaudited consolidated balance sheets of the Company and its subsidiaries
contained in the SEC Reports, and the related consolidated statements of income,
changes in stockholders' equity and changes in cash flows for the periods then
ended (the consolidated balance sheet of the Company and its subsidiaries as of
December 31, 1998 is hereinafter referred to as the "Balance Sheet"), including
the footnotes thereto, except as indicated therein, have been prepared in
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accordance with generally accepted accounting principles consistently followed
through out the periods indicated, except that the unaudited financial
statements do not contain notes and may be subject to normal audit adjustments
and normal annual adjustments. The Balance Sheet fairly presents the financial
condition of the Company and its subsidiaries at the date thereof and, except as
indicated therein, reflects all claims against and all debts and liabilities of
the Company and its subsidiaries, fixed or contingent, as at the date thereof
and the related statements of income, stockholders' equity and changes in cash
flows fairly present the results of the operations of the Company and its
subsidiaries and the changes in their financial position for the period
indicated. Since December 31, 1998 (the "Balance Sheet Date"), except as
disclosed in the SEC Reports and as set forth in Schedule 2.6, there has been
(x) no material adverse change in the assets or liabilities, or in the business
or condition, financial or otherwise, or in the results of operations or
prospects, of the Company and its subsidiaries, whether as a result of any
legislative or regulatory change, revocation of any license or rights to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation, act of God, public force or otherwise and (y) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or prospects,
of the Company and its subsidiaries except in the ordinary course of business;
and no fact or condition exists or is contemplated or threatened which might
cause such a change in the future.
2.7 Current Public Information. The Company's common
stock is registered under Section 12(b) or 12(g) of the 1934 Act. The Company
has delivered to SUNBURST copies of the Company's most recent annual report on
Form 10-KSB (the "Annual Report"), each Quarterly Report on Form 10-QSB since
the date of its Annual Report, the most recent proxy statement for its Annual
Meeting of Shareholders, and each interim report on Form 8-K filed by the
Company since the date of its Annual Report. In addition, the Company has
delivered to SUNBURST a draft of its financial statements for the year ended
March 31, 1999.
2.8 No Conflicts. Except as set forth on Schedule 2.8,
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby does not and will not conflict with or result
in a breach by the Company of any of the terms or provisions of, or constitute a
default under, the Articles of Incorporation or bylaws of the Company, or any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
or any existing applicable decree, judgment or order of any court, Federal or
State regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its properties or assets.
2.9 Compliance with Laws. As of the date hereof, the
conduct of the business of the Company complies in all material respects with
all statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto, except for non-compliance which would not have a material
adverse effect on the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company (a "Material Adverse Effect").
The Company has not received notice of any alleged violation of any statute,
law, regulation, ordinance, rule, judgment, order or decree from any
governmental authority.
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2.10 Litigation. Except as disclosed in the SEC Reports or
on Schedule 2.10 hereof, there is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending or, to
the knowledge of the Company or any subsidiary of the Company, threatened,
against or affecting the Company, or any of its properties, which would result
in any material adverse change in the business, properties, results of
operations, condition (financial or otherwise), or prospects of the Company, or
which would materially and adversely affect the properties or assets of the
Company or which would interfere with the Company's ability to consummate the
transactions contemplated by this Agreement.
2.11 Disclosures. There is no fact known to the Company
(other than general economic conditions known to the public generally) that has
not been disclosed in writing to SUNBURST that (a) would reasonably be expected
to have a Material Adverse Effect or (b) except as disclosed on Schedule 2.8,
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement and the
issuance of the Shares contemplated herein.
2.12 Stock Issuances. Except as set forth in Schedule 2.12
or in the SEC Reports, the Company has not issued any shares of its Common Stock
(or securities convertible into or exercisable for shares of Common Stock). The
offer and sale of the Shares to SUNBURST are exempt from registration under
Section 5 of the Act. Neither the Company nor any person acting on its behalf
has taken or will take any action (including, without limitation, any offering
of any securities of the Company under circumstances which would require the
integration of such offering with the offering of the Shares) which subject the
offering or issuance or sale of the Shares to the registration requirements of
Section 5 of the Act.
2.13 Commissions. The Company is not obligated to pay any
compensation or other fees, costs or related expenditures in cash or securities
to any underwriter, broker, agent or other person in connection with this
Offering except for a fee of eight percent of the gross cash proceeds of the
sale of Shares as contemplated in Sections 1 and 8.6(c) hereof to be paid to
Kann Capital, Ltd. ("KCL").
3. Representations and Warranties of SUNBURST. As of the date
hereof and as of each closing date described in Section 1 and Section 7 hereof,
SUNBURST represents and warrants to the Company as follows:
3.1 Independent Investigation. SUNBURST, in offering to
subscribe for the Shares hereunder, has, prior to the date hereof, been given
access to and the opportunity to examine all books and records of the Company,
and all material contracts and documents of the Company. In making its
investment decision to purchase the Shares and participate in the Merger with
the Company, SUNBURST is not relying on any oral or written representations or
assurances from the Company except as represented, warranted and relied upon by
SUNBURST in this Agreement or any other person or any representation of the
Company or any other person other than as set forth in this Agreement, the SEC
Reports or in a document executed by a duly authorized representative of the
Company making reference to this Agreement. SUNBURST has such experience in
business and financial matters that it is capable of evaluating the risk of its
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investment and determining the suitability of its investment. SUNBURST is a
sophisticated investor, as defined in Rule 506(b)(2)(ii) of Regulation D under
the Act.
3.2 Economic Risk. SUNBURST understands and acknowledges
that an investment in the Shares involves a high degree of risk, including a
possible total loss of investment. SUNBURST represents that it is able to bear
the economic risk of an investment in the Shares.
3.3 No Government Recommendation or Approval. SUNBURST
understands that no United States federal or state agency or similar agency of
any other country has passed upon or made any recommendation or endorsement of
the Company, this transaction or the subscription of the Shares.
3.4 No Registration. SUNBURST understands that the Shares
have not been registered under the Act and are being offered and sold pursuant
to an exemption from registration contained in the Act based in part upon the
representations of SUNBURST and the Company contained herein.
3.5 No Public Solicitation. Without conducting any
independent investigation, SUNBURST knows of no public solicitation or
advertisement of an offer in connection with the proposed issuance and sale of
the Shares.
3.6 Investment Intent. SUNBURST is acquiring the Shares
for its own account, for investment and not with a view to the redistribution
thereof. SUNBURST understands that the Company has no present intention of
registering any such sale of the Shares. SUNBURST has made no predetermined
arrangements to sell the Shares.
3.7 Incorporation and Authority. SUNBURST is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on the business or properties of the Company and its subsidiaries taken,
if any, as a whole. SUNBURST has the full power and authority to execute,
deliver and perform this Agreement and to perform its obligations hereunder.
This Agreement has been duly approved by all necessary action of SUNBURST,
including any necessary shareholder approval, has been executed by persons duly
authorized by SUNBURST, and constitutes a valid and legally binding obligation
of SUNBURST, enforceable in accordance with its terms, except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditor's rights
generally, or by principles governing the availability of equitable remedies.
3.8 No Reliance on Tax Advice. SUNBURST has reviewed with
its own tax advisors the federal, state and local tax consequences of this
investment, where applicable, and the transactions contemplated by this
Agreement. SUNBURST is relying solely on such advisors and
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not on any statements or representations of the Company or any of its agents and
understands that it (and not the Company) shall be responsible for the its own
income tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
3.9 Independent Legal Advice. SUNBURST acknowledges that
it has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with its own legal counsel. SUNBURST is relying
solely on such counsel and not on any statements or representations of the
Company or any of its agents for legal advice with respect to this investment or
the transactions contemplated by this Agreement, except for the representations
and warranties of the Company set forth in this Agreement and on the opinion
provided for in Section 5.6 hereof.
3.10 SEC Reports; Financial Statements. SUNBURST has filed
all forms, reports and documents with the Securities and Exchange Commission
(the "Commission") for its fiscal years ended December 31, 1998, 1997 and 1996,
required to be filed by it under the Securities Exchange Act of 1934, as amended
(the "1934 Act") through the date hereof (collectively, the "SEC Reports"). Such
SEC Reports, at the time filed, complied as to form in all material respects
with the requirements of the 1934 Act. None of the SEC Reports, including
without limitation any financial statements or schedules included therein,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. Except as set forth in
Schedule 3.10, there have been no material adverse changes in the SUNBURST's
business, properties, results of operations, condition (financial or otherwise)
or prospects since the date of the Company's most recent Report on Form 10-QSB
for the quarter ended March 31, 1999, which have not been disclosed to the
Company in writing (either directly by the SUNBURST or by delivery by the
SUNBURST to the Company). The audited and unaudited consolidated balance sheets
of SUNBURST and its subsidiaries contained in the SEC Reports, and the related
consolidated statements of income, changes in stockholders' equity and changes
in cash flows for the periods then ended (the consolidated balance sheet of the
SUNBURST and its subsidiaries as of December 31, 1998 is hereinafter referred to
as the "Balance Sheet"), including the footnotes thereto, except as indicated
therein, have been prepared in accordance with generally accepted accounting
principles consistently followed through out the periods indicated, except that
the unaudited financial statements do not contain notes and may be subject to
normal audit adjustments and normal annual adjustments. The Balance Sheet fairly
presents the financial condition of SUNBURST and its subsidiaries at the date
thereof and, except as indicated therein, reflects all claims against and all
debts and liabilities of SUNBURST and its subsidiaries, fixed or contingent, as
at the date thereof and the related statements of income, stockholders' equity
and changes in cash flows fairly present the results of the operations of
SUNBURST and its subsidiaries and the changes in their financial position for
the period indicated. Since December 31, 1998 (the "Balance Sheet Date"), except
as disclosed in the SEC Reports and as set forth in Schedule 3.10, there has
been (x) no material adverse change in the assets or liabilities, or in the
business or condition, financial or otherwise, or in the results of operations
or prospects, of SUNBURST and its subsidiaries, whether as a result of any
legislative or regulatory change, revocation of any license or rights to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation, act of God, public force or
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otherwise and (y) no material adverse change in the assets or liabilities, or in
the business or condition, financial or otherwise, or in the results of
operations or prospects, of SUNBURST and its subsidiaries except in the ordinary
course of business; and no fact or condition exists or is contemplated or
threatened which might cause such a change in the future.
4. Legends; Subsequent Transfer of Securities.
4.1 Legends. The certificate(s) representing the Shares
shall bear a legend substantially as set forth on the cover page of this
Agreement and any other legend, if such legend or legends are reasonably
required to comply with state or federal law.
5. Covenants of the Company.
5.1 Accountants. For as long as any Shares remain
outstanding, the Company shall maintain as its independent auditors an
accounting firm that is authorized to practice before the Commission.
5.2 Corporate Existence and Taxes. For as long as any
Shares remain outstanding, the Company shall maintain its corporate existence in
good standing, and shall pay all its taxes when due except for taxes which the
Company disputes in good faith and for which adequate reserves are established
on the Company's books and records.
5.3 Corporate Actions. On or before the closing of the
sale of Tranche 2, the Company will use its best efforts to cause its
shareholders to approve an amendment to its articles of incorporation increasing
the number of shares of common stock the Company is authorized to issue
50,000,000 shares. In addition, as soon as practicable after the closing of
Tranche 1, the Company will use its best efforts to cause its shareholders to
elect a board of directors of five members, three of which members are nominated
by SUNBURST.
5.4 Copies of Information. The Company undertakes to
furnish SUNBURST with copies of such other information as may be reasonably
requested by SUNBURST prior to each closing contemplated by Section 1 or Section
7 hereof. The Company will provide SUNBURST with copies of all future filings
under the 1934 Act for so long as any Shares are outstanding.
5.5 Compliance with Laws. The Company shall comply with
all applicable Federal and State securities laws with respect to the sale of the
Shares, including but not limited to the filing of all reports required to be
filed in connection therewith with the Commission or any other regulatory
authority.
5.6 Opinion of Counsel. SUNBURST shall, prior to the each
closing contemplated by this Agreement, receive an opinion letter from counsel
to the Company, to the effect that (i) the Company is duly incorporated and
validly existing; (ii) this Agreement and the issuance of the Shares have been
duly approved by all required corporate action, and that the Shares, upon due
issuance, shall be validly issued and outstanding, fully paid and nonassessable;
(iii) the capitalization of the Company is accurately set forth in Section 2.4;
and (iv) this
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Agreement is a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of laws governing
specific performance and other equitable remedies; except that with respect to
the foregoing opinions counsel may add such additional qualifications as are
consistent with firm practice.
5.7 Use of Proceeds. The Company shall use the net
proceeds from the sale of the Shares in the manner described on Schedule 5.7
hereto and shall not use such proceeds to repurchase any securities of the
Company.
5.8 Registration Rights. In the event of a registration
of the Company's shares after the closing of Tranche 1, SUNBURST shall have
customary "piggyback" registration rights with regard to its Shares purchased
pursuant to this Agreement. Said registration is to be paid for by the Company,
but SUNBURST will be responsible for any underwriter's discounts or commissions
charged.
6. Covenants of SUNBURST.
6.1 No Sale in Violation of the Act. SUNBURST covenants
that it will not make any sale, transfer or other disposition of the Shares in
violation of the Act or the rules and regulations of the Commission promulgated
thereunder. SUNBURST acknowledges and agrees that the Shares may and will only
be resold (a) pursuant to a registration statement under the Act; or (b)
pursuant to an exemption from registration under the Act.
6.2 Voting. SUNBURST covenants to vote the Shares it
acquires in Tranche 1 in favor of the corporate action described in Section 5.3
hereof.
6.3 Antidilution Tranche 2 Purchase. If, by December 15,
1999, either the Tranche 2 Acquisition has not been closed or the Company has
not been merged with SUNBURST, and if the discount-to-market conversion
provision contained in Section 5(d) of the Certificate of Designation for the
Company's Series B Preferred Stock is still in effect, then SUNBURST will
purchase 455,208 shares of Company Common Stock for $500,000 (the "Antidilution
Purchase"). Such Antidilution Purchase shall be a credit against SUNBURST's
contractual obligation to complete the Tranche 2 purchase as set forth pursuant
to the contract referred to in Section 8.6(a)(iv). Subject to compliance with
the closing conditions specified in Section 8 hereof, such purchase will occur
within five business days of December 15, 1999, at the location specified in
Section 1.2 hereof, at a mutually agreeable time, with payment made in
accordance with Section 1.3 hereof.
6.4 SUNBURST Debt. SUNBURST covenants that, as of the
Effective Date of any Merger described in this Agreement, its debt of all kinds
shall not exceed $10,000.
7. The Merger.
7.1 The Merger. Pursuant to the terms and conditions of
this Agreement, on the earlier of the following dates, the Company and SUNBURST
will commence the process to
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cause the Company to be merged with and into SUNBURST or its designated
subsidiary pursuant to Colorado Law: (i) the closing of the Tranche 2
Acquisition ("Section 7.1(i) Merger"); (ii) September 30, 1999, if the Company
has not made a Subscription Call on SUNBURST pursuant to Section 1.2 with regard
to Tranche 2 by September 17, 1999 ("Section 7.1(ii) Merger"); or (iii) on the
71st day (not later than December 10,1999) after a default by SUNBURST in
complying with the terms of a Subscription Call if, prior to such date, the
Company has not repurchased the Shares purchased by SUNBURST pursuant to the
Company's right to do so set forth in Section 10(b) hereof (the "Buy Back
Right") ("Section 7.1(iii) Merger"). The Merger shall take place in the manner
and with the effect set forth herein. Subject to the conditions contained in
Section 8 of this Agreement, an executed Merger Agreement, in substantially the
form attached as Exhibit A hereto, together with any applicable officer's
certificates from the Company, SUNBURST and, if appropriate, SUNBURST's
designated subsidiary, will be filed with the Secretaries of State of the States
of Colorado and Arizona as soon as practical following the time when the last of
the conditions set forth in Section 8 of this Agreement shall have been
fulfilled or waived in writing in accordance with such Section, or such earlier
or later date as may be mutually agreed to by the Company and SUNBURST.
7.2 Conversion.
(a) Conversion of Shares. Upon the filing of the
Articles of Merger with the Secretary of State of the State of Colorado (the
"Effective Date"), each of the issued and outstanding shares of common stock, no
par value per share, and outstanding shares of preferred stock, no par value per
share of the Company (the "Company Common Stock" or "Company Preferred Stock"),
subject to applicable statutory provisions with respect to dissenters' appraisal
rights, any applicable withholding requirements and adjustments as herein
provided, shall be converted into and become a right to receive duly authorized,
validly issued, fully paid and nonassessable shares of common stock or preferred
stock of SUNBURST at an exchange ratio of one-to-one (the "Exchange Ratio"). As
used in this Agreement, "Merger Consideration" shall mean the number of shares
of SUNBURST Common Stock or SUNBURST Preferred Stock exchanged for Company
Common Stock or Company Preferred Stock in the Merger. Each share of Company
Common Stock or Company Preferred Stock held in the treasury of the Company or
by a wholly-owned subsidiary of the Company or by SUNBURST shall be cancelled as
of the Effective Date and no portion of the Merger Consideration shall be
payable with respect thereto.
(b) Adjustment of Merger Consideration. The
Merger Consideration shall be reduced by the amount otherwise payable or
issuable to holders of Company Common Stock or Company Preferred Stock, if any,
who exercise dissenters rights in connection with the Merger based upon such
shareholders' ownership of Company Common Stock or Company Preferred Stock
outstanding on the Effective Date. The Exchange Ratio shall be subject to
appropriate adjustment in the event of a stock split, stock dividend or
recapitalization subsequent to the date of this Agreement applicable to shares
of SUNBURST Common Stock, SUNBURST Preferred Stock or Company Common Stock or
Company Preferred Stock held of record on or before the Effective Date.
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(c) Company Options and Warrants. All
outstanding options and warrants to acquire Company stock that are not exercised
prior to the Effective Date will be automatically converted into an option or
right to purchase a like number of shares from SUNBURST.
7.3 Articles of Incorporation and Bylaws of the Surviving
Corporation. The Articles of Incorporation of SUNBURST as in effect on the
Effective Date of the Merger shall be the Articles of Incorporation of the
surviving corporation until same shall be amended in accordance with law or the
Articles of Incorporation except that as a part of the Merger, the name of the
surviving corporation shall be changed to a name to be agreed upon prior to the
Effective Date of the Merger.
Except for amending SUNBURST's bylaws to change its
fiscal year end to March 31, the Bylaws of SUNBURST as in effect on the
Effective Date of the Merger shall be the Bylaws of the surviving corporation
until same shall thereafter be altered, amended or repealed in accordance with
law, the Articles of Incorporation of the surviving corporation or said Bylaws.
The directors of the surviving corporation at the
Effective Date of the Merger shall be as follows: ▇▇▇▇▇ ▇. ▇▇▇▇, plus four
others to be agreed upon prior to the Effective Date of the Merger. The officers
of the surviving corporation at the Effective Date of the Merger shall be as
follows: President, ▇▇▇▇▇ ▇. ▇▇▇▇; Secretary, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇; Chief Financial
Officer, Secretary and Treasurer, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and such other officers as
shall be agreed upon prior to the Merger.
7.4 Surrender and Exchange of Company Stock.
(a) On the Effective Date, each holder of an
outstanding certificate or certificates theretofore representing shares of
Company Common Stock or Company Preferred Stock (the "Company Certificates")
shall surrender such Company Certificates with irrevocable stock powers with
Medallion Signature Guarantees to SUNBURST or to such agent or agents (the
"Transfer Agent") as may be designated by SUNBURST and shall receive in exchange
therefor, upon satisfaction of customary delivery requirements and subject to
applicable law with respect to the exercise of appraisal rights, certificates
representing the number of whole shares of SUNBURST Common Stock or SUNBURST
Preferred Stock into which shares of Company Common Stock or Company Preferred
Stock have been converted, together with a check representing the cash
adjustments for fractional shares, if any.
(b) If any certificate evidencing shares of
Company Common Stock or Company Preferred Stock is to be issued in a name other
than that in which the Company Certificate surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the Company
Certificate so surrendered shall be properly endorsed and otherwise be in proper
form for transfer and that the person(s) requesting such exchange pay to the
Transfer Agent any transfer or other taxes required by reason of the issuance of
a certificate for shares of SUNBURST Common Stock in any name other than that of
the registered holder of the Company
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Certificate surrendered or establish to the satisfaction of the Transfer Agent
that such tax has been paid or is not payable.
(c) Until so surrendered and exchanged, each
outstanding Company Certificate after the Effective Date shall be deemed for all
corporate purposes (other than voting and the payment of dividends or other
distributions as described below) to evidence the number of whole shares of
SUNBURST Common Stock or SUNBURST Preferred Stock into which the shares of
Company Common Stock or Company Preferred Stock represented by such Company
Certificates are to be converted pursuant to Section 7.2 of this Agreement;
provided, however, that no dividends or other distributions, if any, in respect
to such shares of SUNBURST Common Stock or SUNBURST Preferred Stock, declared
after the Effective Date and payable to holders of record after the Effective
Date, shall be paid to the holders of any unsurrendered Company Certificates
until such Company Certificates are surrendered. Subject to the effect, if any,
of applicable law, after the surrender and exchange of Company Certificates, the
record holders thereof on the date of exchange shall be entitled to receive any
such dividends or other distributions without interest thereon, which
theretofore have become payable with respect to the number of whole shares of
SUNBURST Common Stock or SUNBURST Preferred Stock for which such Company
Certificate was exchangeable. Holders of any unsurrendered Company Certificates
shall not be entitled to vote until such unsurrendered Company Certificates are
exchanged pursuant to this Section 7.4.
(d) SUNBURST may, without notice to any person,
terminate all exchange agencies after thirty (30) days following the Effective
Date of the Merger, and thereafter all exchanges, payments and notices provided
for in this Agreement as being made to or by the Transfer Agent shall be made to
or by SUNBURST or its Transfer Agent.
7.5 Fractional Shares. No fractional share certificates
of SUNBURST Common Stock or SUNBURST Preferred Stock shall be issued in
connection with the conversion of shares of Company Common Stock in the Merger
nor will any outstanding fractional share interest entitle the owner thereof to
vote, to receive dividends or to exercise any other right of a stockholder of
SUNBURST. In lieu of any such fractional shares, any holder of Company Common
Stock or Company Preferred Stock shall, upon surrender thereof, be paid in cash
the value of each such fraction, which for this purpose (i) for the SUNBURST
Common Stock, shall be the product of such fraction multiplied by the average of
the Bid and Asked prices of SUNBURST Common Stock in the market on which its
stock is most regularly traded on the five previous trading dates before the
date of this Agreement and (ii) for the SUNBURST Preferred Stock, shall be a
price determined in clause (i) above multiplied by the conversion factor for the
applicable series of SUNBURST Preferred Stock, in both cases subject to
appropriate adjustment in the event of a stock split, stock dividend or
recapitalization applicable to shares of SUNBURST Common Stock held of record on
or before the Effective Date to the extent not reflected in such closing price.
7.6 No Further Transfers. On the Effective Date, the
stock transfer books of the Company shall be closed, and no further transfer of
Company Common Stock or Company Preferred Stock shall thereafter be made.
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8. Conditions to Closing; Deliveries at Closing.
8.1 General Conditions to Each Closing. The closing of
each of the transactions contemplated in this Agreement shall be subject to the
fulfillment at the closing or Effective Date of each of the following
conditions:
(a) the approval of this Agreement by Prologic's
board of directors (including any special committee which may be required by
Arizona law);
(b) no court having jurisdiction shall have
issued, to the knowledge of any of the parties, an injunction preventing the
consummation of the transaction that shall not have been stayed or dissolved;
(c) each of the parties shall have filed all
applicable federal and state securities law notices of issuance of Company
Common Stock in connection with the closing of Tranches 1 and 2, and, in the
case of the Merger, the combined registration statement and merger proxy
statement of the parties with respect to the Merger shall have been declared
effective by the Commission;
(d) all actions taken or to be taken in
connection with the transactions contemplated hereby, and all documents incident
thereto shall be reasonably satisfactory in form and substance to the parties
and their counsel, and the parties and their counsel shall have received all
such counterpart originals or certified or other copies of such documents as the
parties or their counsel may reasonably request.
8.2 Conditions to SUNBURST's Obligations to Close Tranche
1. The obligations of SUNBURST to purchase those of the Shares offered in
Tranche 1 hereunder are conditioned on the fulfillment or waiver of the
following:
(a) the execution and delivery of this
Agreement;
(b) all the representations and warranties of
the Company in this Agreement as of the date hereof shall be true and correct at
the closing as if made on such date, and the Company shall have performed all
actions required hereunder;
(c) receipt of the opinion of legal counsel to
the Company to the effect set forth in Section 5.6;
(d) the Company shall have delivered to SUNBURST
an Officer's Certificate, dated the closing date, to the effect that (i) such
officer is familiar with the provisions of this Agreement and (ii) the
conditions specified in Section 8.1 and in paragraph (b) of this Section 8.2
have been satisfied in all material respects;
(e) all material consents, authorizations,
orders or approvals of, and filings or registrations with, and any permits,
licenses or other authorizations required by, any applicable governmental body
that are required for, or in connection with, the execution and
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delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby shall have been obtained or made;
(f) no law or legally binding regulation shall
have been enacted or promulgated that does or would prohibit, restrict or delay
consummation of the transaction contemplated by the applicable closing or any of
the conditions to the consummation of the transaction contemplated by the
applicable closing or that does or would have a material adverse affect on the
Company; and
(g) ▇▇▇▇▇ ▇. ▇▇▇▇ and HFG Properties, Ltd., an
Arizona limited partnership (collectively, "▇▇▇▇") and SUNBURST shall have
entered into a voting trust agreement with respect to the shares of the Company
held by ▇▇▇▇, or over which ▇▇▇▇ holds a proxy or power of attorney, in the form
attached as Exhibit C hereto.
8.3 Conditions to SUNBURST's Obligation to Close Tranche
2. The obligations of SUNBURST to purchase those of the Shares offered in
Tranche 2 hereunder are conditioned upon the fulfillment or waiver of the
following:
(a) Full Purchase Closing.
(i) all conditions to closing set forth
in Sections 8.1 and 8.2 hereof being satisfied on or before the date of the
closing of Tranche 2;
(ii) the amendment of the Company's
Articles of Incorporation to increase its authorized capital as described in
Section 5.3 hereof being completed; and
(iii) the Company shall have provided
SUNBURST with a Subscription Call not less than 14 days prior to the projected
closing date for the Tranche 2 Acquisition.
(b) Partial Purchase Closing.
(i) all conditions to the closing set
forth in Section 8.3(a)(i) and (ii) hereof being satisfied on or before December
15, 1999; and
(ii) either (x) the Company has
commenced or completed the Merger as contemplated in Section 7.1(ii) and Tranche
2 has not been closed in the period between September 1, 1999 and December 15,
1999; or (y) pursuant to Section 7.1(iii), the Company has not exercised its Buy
Back Right, the Merger process contemplated in Section 7.1(iii) has commenced,
and Tranche 2 has not been closed in the period between the lapse of the
Company's Buy Back right and December 15, 1999.
8.4 Conditions to SUNBURST's Obligations to Close the
Merger. The obligations of SUNBURST to close the Merger are conditioned upon the
fulfillment or waiver of the following:
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(a) all conditions to closing set forth in
Sections 8.1, 8.2 and 8.3(a) or (b), as appropriate, hereof being satisfied on
or before the Effective Date of the Merger;
(b) the Company shall have obtained all
necessary and required consents to the Merger or otherwise necessary; and
(c) the holders of not more than ten percent of
the Company's outstanding stock shall have exercised dissenters' rights under
the Arizona Business Corporation Act.
8.5 Conditions to the Company's Obligation to Sell the
Shares. The obligations of the Company to sell the Shares offered hereunder are
conditioned on the fulfillment or waiver of the following:
(a) all conditions to closing set forth in
Section 8.1 hereof being satisfied on or before the date of the applicable
closing;
(b) the execution and delivery of this
Agreement;
(c) all the representations and warranties of
SUNBURST made in this Agreement as of the date hereof shall be true and correct
at the closing as if made on such date, and SUNBURST shall have performed all
actions required hereunder;
(d) SUNBURST shall have delivered to the Company
an Officer's Certificate, dated the closing date, to the effect that (i) such
officer is familiar with the provisions of this Agreement and (ii) the
conditions specified in Section 8.1, paragraph (c) of this Section 8.5 and
Section 6.4 have been satisfied in all material respects;
(e) ▇▇▇▇▇ ▇. ▇▇▇▇ shall have entered into an
employment agreement with the Company in the form attached as Exhibit D hereto;
(f) as to a $2,000,000 Tranche 2 purchase only,
the Company and SUNBURST will have (after the closing of such purchase) the
number of shares of common stock outstanding set forth on Schedule 8.5(f)(1)
attached hereto and incorporated by reference, with the understanding that, if
the Subscription Call requires less than $2,000,000 from SUNBURST to close the
Tranche 2 Acquisition, the number of outstanding shares will be reduced
accordingly; and
(g) as to Tranche 2 only (full purchase or
partial purchase), the employment agreement of ▇▇▇▇▇ ▇. ▇▇▇▇ in the form
attached as Exhibit D is in full force and effect.
8.6 Conditions to the Company's Obligation to Close the
Merger. The obligations of the Company to close the Merger hereunder are
conditioned upon the fulfillment or waiver of the following:
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(a) Section 7.1(i) Merger.
(i) the Tranche 2 Acquisition has been
completed;
(ii) all conditions to closing set forth in
Sections 8.1 and 8.5 hereof being satisfied on or before the date of the
Effective Date;
(iii) the receipt of an opinion letter from
counsel to SUNBURST covering for SUNBURST and any subsidiary designated by
SUNBURST to participate in the Merger the issues covered in the opinion
described in clauses (i), (ii), (iii) and (iv) of Section 5.6, as well as an
opinion that SUNBURST's registration statement for its shares offered in the
Merger has been declared effective by the SEC and applicable state securities
regulators and that no stop order has been issued;
(iv) Century Financial Partners Inc. and Bristol
Capital, LLC, and/or their assignees ("collectively "Century/Bristol"), shall
have entered into a binding contract with SUNBURST in form and substance
satisfactory to the Company to provide, in two tranches, up to $4,000,000 of
additional equity capital to SUNBURST for the purpose of making acquisitions.
Each tranche will be in an amount equal to the lesser of $2,000,000 or 20% of
the cash equity portion needed to close a proposed acquisition. The first
$2,000,000 tranche shall be at $1.0984 per share and the second tranche shall be
at $2.246 per share. Amounts funded to the Company pursuant to Sections 1.2 and
6.3 hereof shall be deemed credits against Century/Bristol's obligations to
SUNBURST under such contract;
(v) at the Effective Date of the Merger,
SUNBURST will have the number of shares of common stock and preferred stock
outstanding set forth on Schedule 8.5(f)(2) attached hereto and incorporated
herein by reference (with the understanding that, if the Subscription Call
requires less than $2,000,000 from SUNBURST to close the Tranche 2 Acquisition,
the number of outstanding shares will be reduced accordingly), and the former
shareholders of the Company will hold the number of SUNBURST's common shares and
preferred stock set forth on said Schedule 8.5(f)(2);
(vi) SUNBURST shall have approved the terms of
Exhibit D and agreed to be bound by the terms thereof after the Merger; and
(vii) SUNBURST is in compliance with Section 6.4
hereof.
(b) Section 7.1(ii) and 7.1(iii) Mergers.
(i) all conditions to closing set forth in
Section 8.6(a)(ii) through (vii) hereof being satisfied on or before the
Effective Date.
9. Events of Default. If one or more of the following events
shall occur (each such event, following the expiration of any cure period
associated therewith as hereafter described being referred to as an "Event of
Default"), then the Company or SUNBURST, as applicable ("Defaulting Party")
shall be in default of this Agreement:
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(a) any of the representations or warranties made by the
Company or SUNBURST, as applicable, herein shall be false and misleading in any
material respect at the time made;
(b) the Company or SUNBURST, as applicable, shall fail to
perform or observe any covenant, term, provision, condition, agreement or
obligation of the Company or SUNBURST, as applicable, under this Agreement and
such failure shall continue uncured for a period of ten days after written
notice from the non-Defaulting Party of such failure;
(c) the Company or SUNBURST, as applicable, shall (i)
admit in writing its inability to pay its debts as they mature, (ii) make an
assignment of a substantial part of its properties or assets for the benefit or
creditors or commence proceeds for its dissolution; or (iii) apply for or
consent to the appointment of a trustee, liquidator or receiver for it or for a
substantial part of its property or business;
(d) a trustee, liquidator or receiver shall be appointed
for the Company or SUNBURST, as applicable, or for a substantial part of its
property or business without its consent and shall not be discharged within 30
days after such appointment;
(e) any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of
the Company or SUNBURST, as applicable, which shall not be dismissed within 30
days thereafter;
(f) any money judgment, writ or warrant of attachment, or
similar process, except mechanics and materialmen's liens incurred in the
ordinary course of business, in excess of Twenty-Five Thousand Dollars ($25,000)
in the aggregate shall be entered or filed against the Company or SUNBURST, as
applicable, or any of its properties or other assets and shall remain unvacated,
unbonded or unstayed for a period of 45 days or in any event later than five
days prior to the date of any proposed sale thereunder; or
(g) bankruptcy, reorganization, insolvency or liquidation
proceeds or other proceeds for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company or SUNBURST,
as applicable, and, if instituted against the Company or SUNBURST, as
applicable, shall not be dismissed, stayed or bonded within 90 days after such
institution or the Company or SUNBURST, as applicable, shall in any action or
answer approve of, consent to, or acquiesce in any proceedings or admit the
material allegations of, or default in answering a petition filed in any such
proceedings.
10. Remedies.
(a) General. Upon the occurrence of any Event of Default,
SUNBURST or the Company, as applicable, shall be entitled to exercise all
remedies available at law and/or in equity.
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(b) Buy Back Right. If SUNBURST is unable to meet the
requirements of a Subscription Call pursuant to Section 1.2 hereof, then
commencing on the date of such default, for a period ending 70 days from the
date of default, the Company shall have the right to purchase all, but not less
than all, of the Shares issued to SUNBURST (i) in Tranche 1 or (ii) pursuant to
the exercise of any options or warrants which SUNBURST may receive from the
Company, for a per share price equal to 110% of the price paid for such Shares
by SUNBURST. Such right may be exercised by written notice from the Company to
SUNBURST specifying the per share and aggregate purchase price, and the date and
place of closing. At the closing, the Company shall wire transfer the purchase
price to SUNBURST against delivery of duly endorsed (with Medallion Signature
Guarantees) certificates for the number of shares being purchased.
11. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Colorado, applicable
to agreements made in and wholly to be performed in that jurisdiction without
regards to the choice of law rules of such state, except for (i) matters arising
under the Act or the 1934 Act which matters shall be construed and interpreted
in accordance with such laws and (ii) matters involving the filing required to
effect the Merger which shall be governed by Colorado or Arizona law, as
applicable. Any action brought to enforce, or otherwise arising out of, this
Agreement shall be heard and determined in either a Federal or state court
sitting in the County of Los Angeles, State of California.
(b) Entire Agreement; Amendment. This Agreement and the
Merger Agreement and the other documents delivered pursuant hereto constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
(c) Notices, Etc. Any notice, demand or request required
or permitted to be given by either the Company or SUNBURST pursuant to the terms
of this Agreement shall be in writing and shall be deemed given when delivered
personally or by facsimile, with a hard copy to follow by two day courier
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
(d) Confidentiality. SUNBURST will keep confidential all
non-public information regarding SUNBURST and/or the Company that it receives
from SUNBURST and/or the Company unless disclosure of such information is
compelled by a court or other administrative body or otherwise necessary, in the
opinion of SUNBURST's and/or the Company's counsel, to comply with applicable
law. Neither party shall disclose any information regarding any of the
transactions contemplated hereby without the prior consent of the other party,
unless such disclosure is required in filings made with the Commission.
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(e) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one instrument. A facsimile transmission of a signature hereto shall be valid as
if an original and binding on all parties.
(f) Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the benefit of this Agreement to any party.
(g) Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(h) Assignment. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
(i) Survival of Representations. All representations and
warranties of each party hereto shall survive the applicable closing
contemplated herein for a period of one year.
(j) Indemnification
(i) The Company shall indemnify and hold
SUNBURST (and its officers, directors, employees, agents and controlling persons
within the meaning of the Act) harmless from and against, and promptly reimburse
SUNBURST for, any and all loss, expense, damage, deficiency, liability or
obligation, including investigative and settlement costs and attorneys' fees
(collectively, "Claims"), arising out of or in connection with any breach of
representation or warranty of the Company contained in this Agreement or in any
certificate delivered pursuant hereto, regardless of whether SUNBURST relied
upon the truth of such representation or warranty or had any knowledge of any
breach thereof In computing the amount to be paid by the Company under this
clause (i), there shall be deducted an amount equal to any tax benefits actually
received by SUNBURST or any of its subsidiaries, taking into account the income
tax treatment of the receipt of such indemnity payment.
(ii) SUNBURST shall indemnify and hold the
Company (and its officers, directors, employees, agents and controlling persons
within the meaning of the Act) harmless from and against, and promptly reimburse
the Company for, any and all loss, expense, damage, deficiency, liability or
obligation, including investigative and settlement costs and attorneys' fees,
arising out of or in connection with any breach of representation or warranty of
SUNBURST contained in this clause (ii) hereof or in any certificate delivered
pursuant hereto, regardless of whether the Company relied upon the truth of such
representation or warranty or had any knowledge of any breach thereof.
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(iii) Upon receipt by a party entitled to
indemnification hereunder (the "Indemnified Party") of notice of any situation,
event or occurrence that might give rise to a claim for indemnification of such
Indemnified Party against any of another party pursuant to this Section 11(j),
the Indemnified Party shall give prompt written notice thereof to the other
party (an "Indemnifying Party"), indicating with reasonable specificity the
nature and amount of such indemnification. Failure to give any notice provided
under this Section 11(j) shall in no way be deemed a forfeiture of the
Indemnified Party's rights to be indemnified under Section 11(j). A claim for
indemnity may, at the option of the Indemnified Party, be asserted as soon as
any
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situation, event, or occurrence has been noticed by the Indemnified Party,
regardless of whether actual harm has been suffered or out-of-pocket expenses
incurred.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
July 9, 1999.
PROLOGIC MANAGEMENT SYSTEMS, INC.,
an Arizona corporation
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
By _________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: 520-320-1100
SUNBURST ACQUISITIONS IV, INC.
a Colorado corporation
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By _________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
21
26
Merger Agreement
This Merger Agreement ("Agreement") is entered into this ___ day of
_______________, by and among SUNBURST ACQUISITIONS IV, INC., a Colorado
corporation ("SUNBURST") and PROLOGIC MANAGEMENT SYSTEMS, INC., an Arizona
corporation ("Prologic").
SUNBURST and Prologic hereby agree that on the Effective Date (as
defined in this Agreement), SUNBURST and Prologic shall merge into a single
corporation on the following terms and conditions:
ARTICLE 1
PARTIES
The name, address, jurisdiction of organization and governing law of
each of the entities subject to this merger agreement are as follows:
(1) SUNBURST ACQUISITIONS IV, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SUNBURST is a Colorado corporation, governed by the laws of
the State of Colorado.
(2) Prologic
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Prologic is an Arizona corporation, governed by the laws of
the State of Arizona.
ARTICLE 2
MERGER
On the Effective Date, Prologic shall be merged with and into SUNBURST.
SUNBURST shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation"), and shall remain a Colorado corporation. Prologic
shall be the disappearing corporation (hereinafter sometimes called the
"Disappearing Corporation").
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ARTICLE 3
EFFECTIVE DATE
The Merger provided for in this Agreement shall become effective on the
filing by and in the office of the Colorado Secretary of State an executed copy
of Articles of Merger, as required by Colorado Law. The date and time of such
filing is referred to in this Agreement as the "Effective Date."
ARTICLE 4
ARTICLES OF INCORPORATION; BY-LAWS; BOARD OF DIRECTORS; OFFICERS
4.1 In connection with the Merger, the name of Surviving
Corporation shall be changed to "__________________." Except for the foregoing
name change, the Articles of Incorporation of SUNBURST as in effect immediately
prior to the Effective Date shall remain the Articles of Incorporation of the
Surviving Corporation without change or amendment until altered, amended, or
repealed as provided for in the articles or by-laws
4.2 Except for amending SUNBURST's by-laws to change it fiscal
year end to March 31, which amendment has been approved buy SUNBURST's
shareholders, SUNBURST's by-laws, as in effect immediately prior to the
Effective Date, shall remain the by-laws of the Surviving Corporation without
change or amendment until altered, amended, or repealed as provided for in the
by-laws or by law.
4.3 On the Effective Date, the directors of the Surviving
Corporation shall be as follows: ▇▇▇▇▇ ▇. ▇▇▇▇, _________________________.
4.4 On the Effective Date, the officers of the Surviving
Corporation shall be as follows: President, ▇▇▇▇▇ ▇. ▇▇▇▇; Secretary, Chief
Financial Officer and Treasurer, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
ARTICLE 5
CONVERSION AND EXCHANGE OF SHARES; OPTIONS AND WARRANTS
5.1 Conversion of Shares. On the Effective Date, each of the
issued and outstanding shares of common stock, no par value per share, and
outstanding shares of preferred stock, no par value per share of the
Disappearing Corporation (the "Prologic Common Stock" or "Prologic Preferred
Stock"), subject to applicable statutory provisions with respect to appraisal
rights, any applicable withholding requirements and adjustment as herein
provided, shall be converted into and become a right to receive duly authorized,
validly issued, fully paid and nonassessable shares of common stock or preferred
stock of SUNBURST at an exchange ratio of one-to-one (the "Exchange Ratio") As
used in this Agreement, "Merger Consideration" shall mean the number of shares
of SUNBURST Common Stock or SUNBURST Preferred Stock exchanged for Prologic
Common Stock or Prologic Preferred Stock in the Merger. Each share of Prologic
Common Stock or Prologic Preferred Stock held in the treasury of the Prologic or
by a wholly-owned
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subsidiary of Prologic or by SUNBURST shall be cancelled as of the Effective
Date and no portion of the Merger Consideration shall be payable with respect
thereto.
5.2 Adjustment of Merger Consideration. The Merger Consideration
shall be reduced by the amount otherwise payable or issuable to holders of
Prologic Common Stock or Prologic Preferred Stock, if any, who exercise
dissenters' rights in connection with the Merger based upon such shareholders'
ownership of Prologic Common Stock or Prologic Preferred Stock outstanding on
the Effective Date. The Exchange Ratio shall be subject to appropriate
adjustment in the event of a stock split, stock dividend or recapitalization
subsequent to the date of this Agreement applicable to shares of SUNBURST Common
Stock, SUNBURST Preferred Stock or Prologic Common Stock or Prologic Preferred
Stock held of record on or before the Effective Date.
5.3 Options and Warrants. All outstanding options and warrants to
acquire Prologic stock that are not exercised prior to the Effective Date will
be automatically converted into an option or right to purchase a like number of
shares from SUNBURST.
5.4 No Further Transfers. On the Effective Date, the stock
transfer books of Prologic shall be closed, and no further transfer of Prologic
Common Stock or Prologic Preferred Stock shall thereafter be made.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF MERGER
The consummation of the Merger is conditioned upon the satisfaction by
SUNBURST and Prologic, as the case may be, of the conditions set forth in that
certain Stock Purchase and Merger Agreement dated July __, 1999 by and between
SUNBURST and Prologic.
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ARTICLE 7
COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its duly authorized officers, all as of the day and
year first above written.
PROLOGIC MANAGEMENT SYSTEMS, INC.,
an Arizona corporation
By _________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: 520-320-1100
SUNBURST ACQUISITIONS IV, INC.
a Colorado corporation
By _________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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EXHIBIT B
[Omitted]
B-1
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EXHIBIT C
Voting Trust Agreement
This Agreement is made as of July __, 1999, by and between the
undersigned parties for the purpose of creating a Voting Trust of certain of the
common stock of Prologic Management Systems, Inc. an Arizona corporation,
hereinafter called "Company."
1. Exchange of Shares for Voting Trust Certificate. For valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties hereto, simultaneously with the execution of this Agreement, the
undersigned shareholders, hereafter called "Certificate Holders," hereby assign
and deliver the voting interest in the number of shares of common stock in the
Company ("VT Shares") listed opposite their respective names to the Trustee. The
Trustee is authorized to cause the VT Shares to be transferred to such Trustee
on the books of the Company, and will issue and deliver to each shareholder a
Voting Trust Certificate for the number of VT Shares transferred to the Trustee.
2. Form of Certificate. The Voting Trust Certificate shall be in
substantially the following form:
"No. _____ ________ Shares
PROLOGIC MANAGEMENT SYSTEMS, INC.
VOTING TRUST CERTIFICATE
This is to certify that ___________________________ has
transferred to the undersigned Trustee voting and other rights with
respect to the above-stated number of shares of common stock of
Prologic Management Systems, Inc., an Arizona corporation, or any
successor company, to be held by the Trustee pursuant to the terms of a
Voting Trust Agreement dated as of July ___, 1999, pursuant to Section
10-730 of the Arizona Business Corporation Act, hereafter called
"Voting Trust Agreement," a copy of which has been delivered to the
above-named Certificate Holder, and filed in the office of the
secretary of the corporation at Tucson, Arizona. The Certificate
Holder, or his successor or successors-in-interest, will be entitled to
receive payments equal to all cash dividends collected by the Trustee
upon the above-stated number of shares, and to the delivery of a
certificate or certificates for said number of shares upon the
termination of the Voting Trust Agreement, in accordance with its
provisions.
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The Certificate Holder, by the acceptance of it, agrees to be
bound by all of the provisions of the Voting Trust Agreement as fully
as if the terms of the Voting Trust Agreement were set forth in this
Certificate.
Executed on July __, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ACQUISITIONS IV, INC.
By____________________________
Trustee"
3. Voting by Trustee. During the period of this Voting Trust, the
Trustee shall have the exclusive right to vote the VT Shares or give written
consent, in person or by proxy, at all meetings of the shareholders of the
Company, and in all proceedings in which the vote or written consent of
shareholders may be required or authorized by law.
4. Dividends; Mergers; Proxies. If the Company issues dividends,
or if the Company is merged into another corporation or entity wherein Company
shareholders become entitled to receive shares of another corporation or entity
("Merger Shares") in the merger, the Trustee shall accept and receive such
dividends or Merger Shares. Upon receipt of cash dividends, the same shall be
distributed to the Certificate Holder. In the event that the dividends or Merger
Shares are in the form of share certificates having voting rights, the share
dividends or Merger Shares shall be held by the Trustee and a new Voting Trust
Certificate(s) representing the share dividends or Merger Shares shall be issued
to the Certificate Holder. Such additional shares shall become part of the VT
Shares. If either of the undersigned shareholders receive a proxy or power of
attorney to vote the shares of any other Company shareholder, to the extent
permitted by applicable law, the voting rights so obtained shall be transferred
to the Trustee.
5. Right to Sell. Commencing on the first anniversary of this
Agreement, each of the Certificate Holders shall have the right to sell the
shares of common stock represented by the Voting Trust Certificates into the
market subject only to the volume limitations, if any, imposed by Rule 144
promulgated by the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended. The Trustee agrees to cooperate with the broker(s) of
the Certificate Holder(s) to effectuate such sales in the most expeditious
manner and to execute such documents (including, without limitation, share
certificates or stock powers) as may be required to complete such sale(s). The
Trustee understands and acknowledges that any shares sold pursuant to this
provision shall be free of the Voting Trust imposed by this Agreement. Upon any
such sale, the Trustee will issue to the Certificate Holder(s) a new Voting
Trust Certificate representing the balance of the shares owned by Certificate
Holder(s) that are subject to this Agreement.
6. Termination of Trust. This Voting Trust shall terminate
entirely on whichever of the following conditions occurs first:
(a) Two (2) years from the date of execution of this
Agreement, or
(b) The mutual agreement of the Trustee and the
Certificate Holder, or
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(c) The termination of the employment of ▇▇▇▇▇ ▇. ▇▇▇▇ as
the President of the Company, or its successor company if the company is
acquired by Sunburst Acquisitions IV, Inc. ("SUNBURST") or a designated
subsidiary of SUNBURST as provided in Sections 4(d) and (e) of the Employment
Agreement of ▇▇▇▇▇ ▇. ▇▇▇▇, dated as of May 27, 1999, with the Company; or
(d) The purchase of all of the Shares back from SUNBURST
pursuant to Section 10(b) of the SPMA; or
(e) the parties to the SPMA mutually agree to terminate
the merger described in the SPMA.
Upon termination of this Agreement, the Certificate Holder
shall surrender his Voting Trust Certificate(s) to the Trustee, and the Trustee
shall deliver to the Certificate Holder shares of the Company properly endorsed
for transfer, equivalent to the amount of shares represented by the Voting Trust
Certificate(s) surrendered. If the Trustee has gone out of business or ceased to
exist without a legal successor, the Secretary of the Company is hereby
authorized to accept the Voting Trust Certificate(s) and to issue (or cause to
be issued) to Certificate Holder(s) the number of shares of common stock of the
Company represented by the Voting Trust Certificate(s).
7. Trustee's Compensation. The Trustee shall serve as Trustee
without compensation or expense reimbursement of any kind.
8. Binding on Successors. This Voting Trust Agreement shall be
binding on the lawful successors and assigns of the Trustee and each Certificate
Holder.
9. Notices from Company. All notices, reports, statements and
other communications directed to the Trustee from the Company or any successor
shall be forwarded forthwith to each Certificate Holder, with the postmarked
date and the date of receipt endorsed on the communication.
10. Copies of Agreement. This Agreement may be executed in
multiple counterparts, but shall not otherwise be separable or divisible. Upon
the execution of this Agreement and the establishment of this Trust, the Trustee
shall cause a duplicate of this Agreement and any extension thereof to be filed
with the Secretary of the Company or any successor, which duplicate(s) shall be
open to inspection by a shareholder, a Certificate Holder or an agent of either,
on the same terms as the record of shareholders of the Company is open to
inspection, and
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in any other manner provided for inspection under the laws of Arizona or the
laws of the jurisdiction in which any successor is organized.
Dated: July __, 1999
Trustee:
SUNBURST ACQUISITIONS IV, INC.
By________________________________
Certificate Holder:
Number of Shares Deposited: 391,740
________________________________
▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇
HFG PROPERTIES, LTD.
an Arizona limited partnership
By________________________________ Number of Shares Deposited: 697,320
▇▇▇▇▇ ▇. ▇▇▇▇, General Partner
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No. 1 391,740 Shares
PROLOGIC MANAGEMENT SYSTEMS, INC.
VOTING TRUST CERTIFICATE
This is to certify that ▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇▇▇▇ have transferred to
the undersigned Trustee voting and other rights with respect to the above-stated
number of shares of common stock of Prologic Management Systems, Inc., an
Arizona corporation, or any successor company, to be held by the Trustee
pursuant to the terms of a Voting Trust Agreement dated as of July __, 1999,
pursuant to Section 10-730 of the Arizona Business Corporation Act, hereafter
called "Voting Trust Agreement," a copy of which has been delivered to the
above-named Certificate Holder, and filed in the office of the secretary of the
corporation at Tucson, Arizona. The Certificate Holder, or his successor or
successors-in-interest, will be entitled to receive payments equal to all cash
dividends collected by the Trustee upon the above-stated number of shares, and
to the delivery of a certificate or certificates for said number of shares upon
the termination of the Voting Trust Agreement, in accordance with its
provisions.
The Certificate Holder, by the acceptance of it, agrees to be bound by
all of the provisions of the Voting Trust Agreement as fully as if the terms of
the Voting Trust Agreement were set forth in this Certificate.
Executed on July __, ▇▇▇▇
▇▇▇▇▇▇▇▇ ACQUISITIONS IV, INC.
By________________________________
Trustee
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No. 2 697,320 Shares
PROLOGIC MANAGEMENT SYSTEMS, INC.
VOTING TRUST CERTIFICATE
This is to certify that HFG Properties, Ltd., an Arizona limited
partnership, has transferred to the undersigned Trustee voting and other rights
with respect to the above-stated number of shares of common stock of Prologic
Management Systems, Inc., an Arizona corporation, or any successor company, to
be held by the Trustee pursuant to the terms of a Voting Trust Agreement dated
as of July ___, 1999, or any extension thereof, pursuant to Section 10-730 of
the Arizona Business Corporation Act, hereafter called "Voting Trust Agreement,"
a copy of which has been delivered to the above-named Certificate Holder, and
filed in the office of the secretary of the corporation at Tucson, Arizona. The
Certificate Holder, or his successor or successors-in-interest, will be entitled
to receive payments equal to all cash dividends collected by the Trustee upon
the above-stated number of shares, and to the delivery of a certificate or
certificates for said number of shares upon the termination of the Voting Trust
Agreement, in accordance with its provisions.
The Certificate Holder, by the acceptance of it, agrees to be bound by
all of the provisions of the Voting Trust Agreement as fully as if the terms of
the Voting Trust Agreement were set forth in this Certificate.
Executed on July __, ▇▇▇▇
▇▇▇▇▇▇▇▇ ACQUISITIONS IV, INC.
By________________________________
Trustee
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SCHEDULE 8.5(f)(1)
Shares of the Company
Outstanding at the Closing of Tranche 2
Company
Authorized Common 50,000,000
Outstanding Common 9,992,112 (1)
Percentage of Common held by SUNBURST 52.85%(2)(3)
Authorized Preferred 5,000,000
Outstanding Preferred
Series A 16,667 (4)
Series B 72,000 (5)
(1) assumes a purchase by SUNBURST of 5,280,763 shares in Tranches
1 and 2. If the Subscription Call for Tranche 2 requires the
purchase of fewer than 1,820,791 shares, this number would be
reduced accordingly.
(2) if Tranche 2 purchase is less than 1,820,791 shares, this
percentage would be reduced accordingly.
(3) before possible dilution by exercise of conversion privileges
contained in preferred stock and outstanding options and
warrants.
(4) convertible into 50,000 common shares.
(5) convertible into 192,000 common shares.
38
SCHEDULE 8.5(f)(2)
Shares of SUNBURST after the Merger
Authorized Common 50,000,000
Outstanding Common 9,992,112 (1)
Percentage of Common held by former
Prologic Shareholders
(exclusive of SUNBURST) 47.15%(2)(3)
Authorized Preferred 5,000,000
Outstanding Preferred
Series A 16,667 (4)
Series B 72,000 (5)
Series C *
(1) assumes a purchase by SUNBURST of 5,280,763 shares in Tranches
1 and 2. If the Subscription Call for Tranches 2 requires the
purchase of fewer than 1,820,791 shares, this number would be
reduced accordingly.
(2) if Tranche 2 purchase is less than 1,820,791 shares, this
percentage would be increased accordingly.
(3) before possible dilution by exercise of conversion privileges
in outstanding convertible securities of SUNBURST.
(4) convertible into 50,000 common shares.
(5) convertible into 192,000 common shares
* to complete the transaction with a target company in a Tranche 2
Acquisition, it is expected that convertible preferred shares, Series
C, of Prologic may be issued which will become convertible preferred
shares, Series C, of SUNBURST after the Merger.