Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated January 1, 1998, by and among
SYNAPTX WORLDWIDE, INC., a Utah corporation ("Synaptx"), SYNAPTX
CONTROLS, INC., an Illinois corporation and a wholly-owned subsidiary
of Synaptx ("Acquisition Corp."), WG CONTROLS, INC., an Illinois
corporation ("WG Controls"), and James M. Gleason, Shirley Gleason,
Michael Concialdi, and James Gammon (the "WG SHAREHOLDERS"), Illinois
residents.
W I T N E S S E T H :
WHEREAS, Acquisition Corp. is a wholly-owned subsidiary of
Synaptx;
WHEREAS, Synaptx desires to acquire the shares of WG
Controls Common Stock and all the common stock of its wholly-owned
subsidiary, WG Telecom, INC. ("WG TELECOM") Common Stock through the
merger of Acquisition Corp. with and into WG Controls pursuant to the
terms hereinafter set forth (the "Merger");
WHEREAS, the respective Boards of Directors of Synaptx and
Acquisition Corp. deem it advisable and in the best interests of
Synaptx and Acquisition Corp. that Acquisition Corp. be merged with
and into WG Controls upon the terms and conditions hereinafter
specified;
WHEREAS, the respective Board of Directors of WG CONTROLS
deem it advisable and in the best interests of WG Controls that
Acquisition Corp. be merged with and into WG Controls and upon the
terms and conditions hereinafter specified;
WHEREAS, for Federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, the WG SHAREHOLDERS own all the outstanding capital
stock of WG Controls , Inc., an Illinois corporation ("WG CONTROLS")
and WG CONTROLS owns all of the issued and outstanding stock of WG
Telecom, Inc., also an Illinois corporation ("WG TELECOM") Acquisition
Corp. wishes to acquire all of the capital stock of WG CONTROLS and
the WG SHAREHOLDERS wish to own common stock and preferred stock in
SYNAPTX and to continue to conduct WG CONTROLS' businesses as a
subsidiary or subsidiaries of SYNAPTX.
Accordingly, in consideration of the mutual agreements set
forth herein, the parties agree as follows:
ARTICLE 1
ADOPTION OF AGREEMENT AND PLAN OF MERGER
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1.1 The Merger. At the Effective Time (as defined in Section
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1.2 herein), in accordance with this Agreement and the relevant
provisions of the Illinois Business Corporation Act (the "IBCA"), WG
Controls shall be merged with and into Acquisition Corp.. WG Controls
shall be the surviving corporation of the Merger and WG Controls shall
continue, and be deemed to continue, for all purposes after the
Merger, and the existence of Acquisition Corp. shall cease at the
Effective Time.
1.2 Effective Date of the Merger. This Agreement shall be
----------------------------
submitted to the stockholders of WG Controls, and to the sole
stockholder of Acquisition Corp., for approval as soon as practicable
after the execution of this Agreement. Subject to the terms and
conditions hereof, upon the authorization , approval and adoption
hereof by the affirmative vote of the holders of at least a majority
of the outstanding shares of each of WG Controls Common Stock and
Acquisition Corp. Common Stock entitled to vote thereon as provided by
the IBCA, a Certificate of Merger (the "Certificate of Merger")
meeting the requirements of the IBCA shall be executed, verified and
acknowledged as required by the provisions of the IBCA and be
delivered to the Secretary of State of Illinois for filing (the time
of such filing being the "Effective Time" and the date of such filing
being the "Effective Date").
1.3 Surviving Corporation; Certificate of Incorporation of
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Surviving Corporation. Following the Merger, WG Controls and WG
- ---------------------
Telecom shall continue to exist under, and be governed by, the laws of
the State of Illinois. The Certificate of Incorporation of WG
Controls, as in effect on the Closing Date, shall continue in full
force and effect as the Certificate of Incorporation of the Surviving
Corporation. The corporate existence of each of Acquisition Corp. and
WG Telecom shall terminate upon the Effective Time.
1.4 Merger Consideration; Conversion of WG Controls Common
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Stock and Cancellation of Acquisition Corp. Common Stock. (a) At the
- --------------------------------------------------------
Effective Time, by virtue of the Merger and without any action on the
part of Acquisition Corp., WG Controls, WG Telecom or the holders of
any shares of WG Controls Common Stock the total of three thousand
five hundred (3,500) shares of WG Controls Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into the right to receive (i) a total of two hundred eighty-five
thousand seven hundred fifteen (285,715) shares of Synaptx Common
Stock, (ii) one hundred thirty-seven thousand one hundred forty-three
(137,143) shares of Synaptx Preferred Stock,. and (iii) two hundred
seventy thousand dollars ($270,000.00) in cash in accordance with the
terms of Section 1.7, as defined below.
(b) At the Effective Time, each share of Acquisition Corp.
Common Stock issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part
of Synaptx, be cancelled and cease to exist.
1.4.1 Call Option for SYNAPTX Preferred Stock. As described
---------------------------------------
in Section 1.4, above, SYNAPTX will issue SYNAPTX Preferred Stock to
the WG SHAREHOLDERS who will have the right of conversion of said
shares into SYNAPTX Common Stock. Since the rights of ownership of the
SYNAPTX Preferred Stock requires the distribution of dividends which
represent a cash drain to SYNAPTX, it is agreed that SYNAPTX will have
the right to call the SYNAPTX Convertible Preferred Stock upon SYNAPTX
Common Stock achieving a closing price average for a consecutive sixty
(60) day trading period of five dollars and twenty-five cents ($5.25)
(the "Call Option"). Upon election of the Call Option, Synaptx will
require the cancellation of the SYNAPTX Convertible Preferred Stock
which will be replaced with ninety-two thousand three hundred
eighty-one (92,381) shares of SYNAPTX common stock.
1.5 Exchange of Certificates. (a) Prior to the Effective
------------------------
Time, Synaptx shall effectuate the delivery of the Merger
consideration provided for in Section 1.4 to holders of WG Controls
Common Stock upon surrender of their certificates ("Certificates") for
their shares of WG Controls Common Stock.
(b) As of the Effective Time, Synaptx shall provide, or
shall take all steps necessary to provide, the Merger consideration
pursuant to Section 1.4 (a) in exchange for the shares of WG Controls
Common Stock, Synaptx shall make the deliveries of the Merger
consideration required in respect of the Merger.
(c) Upon surrender of a Certificate to Synaptx, duly
executed, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger consideration provided for in Section
1.4 (a), and the Certificate so surrendered shall forthwith be
cancelled. The Merger consideration shall be delivered to such holder
as promptly as practicable and (except as hereinafter provided) in no
event later than twenty (20) days after proper delivery of the
applicable Certificates to Synaptx.
1.6 No Fractional Shares. No certificates or scrip for
--------------------
fractional shares of Synaptx Common Stock or Synaptx Preferred Stock
will be issued and no such fractional share interest shall entitle the
owner thereof to vote or to any rights of or as a stockholder of
Synaptx. In lieu of issuing any such fractional shares to which a
holder of WG Controls Common Stock would otherwise be entitled to
receive, Synaptx shall round up or down to the nearest whole share.
1.7 Cash for WG CONTROLS STOCK. Subject to the terms and
--------------------------
conditions of this Agreement, SYNAPTX agrees to issue to the WG
SHAREHOLDERS in addition to the SYNAPTX STOCK described in Section
1.1, above, cash, as follows:
(a) One Hundred Twenty-five Thousand Dollars ($125,000.00)
on the first anniversary date of Closing, as defined
below,
(b) One Hundred Twenty-five Thousand Dollars ($125,000.00)
on the second anniversary date of Closing, as defined
below, and
(c) Twenty Thousand Dollars ($20,000.00) on the third
anniversary date of Closing, as defined below.
1.8 Contingent Issuance of SYNAPTX Common Stock. Subject to
-------------------------------------------
the terms and conditions of this Agreement, SYNAPTX agrees to issue to
the WG SHAREHOLDERS a maximum value of $1,000,000 worth of SYNAPTX
Common Stock ("Earn-out Bonus") as an incentive to achieve the Level
One Results or Level Two Results (and as hereinafter defined) as
reflected on Exhibit 1.8, to be issued over calendar year ends,
specifically December 31, 1998 and 1999 (the "Earn-out Period" for
each calendar year end or collectively the "Earn-out Periods"), to the
existing WG SHAREHOLDERS who are employed by WG Controls as of the
date ninety (90) days after each of the next two SYNAPTX calendar year
results, specifically, December 31, 1998, and 1999 ("Payout Date" for
each calendar year end or collectively the "Payout Dates"). The Level
One Results and Level Two Results represent threshold levels of
amounts to be realized after the Closing covering the total of
Commission Revenues and the total Earnings before Taxes, both of which
must be achieved, as recorded on the consolidated books and records of
WG CONTROLS for each Earn-out Period in accordance with generally
accepted accounting principles ("Level One Results" and "Level Two
Results", respectively). The Earn-out Bonus as reflected on Exhibit
1.8 represents the dollars payable for the respective Level One
Results and Level Two Results specified on Exhibit 1.8 achieved
("Earn-out Bonus Realized"). Earn-out Bonus Realized is payable in
shares of Synaptx Common Stock based on the number of shares resulting
from the formula of Earn-out Bonus Realized divided by the average
closing price of SYNAPTX Common Stock for every trading day in the
month of January, following the calendar year end, as published for
the stock exchange on which the SYNAPTX Common Stock is traded or as
quoted on the electronic bulletin board if the SYNAPTX Common Stock is
not so traded, rounded up to the next whole share of SYNAPTX Common
Stock.
1.9 Closing. The exchange of SYNAPTX STOCK for WG CONTROLS
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COMMON STOCK shall take place at a closing (the "Closing") at such
place as shall be mutually agreed to by the parties at 10:00 a.m. on
or before January 1, 1998, or as soon as practicable thereafter upon
the satisfaction or waiver of the conditions to Closing set forth in
Article 5 and in Section 7.1.1. The date on which the Closing takes
place is referred to as the "Closing Date." At the Closing, each WG
SHAREHOLDER shall deliver to SYNAPTX stock certificates representing
the WG CONTROLS Stock owned by such WG SHAREHOLDERS, duly endorsed for
transfer or with duly executed stock powers attached, together with
such other documents as SYNAPTX may reasonably request prior to the
Closing. At the Closing, SYNAPTX shall deliver to each WG SHAREHOLDER
a stock certificate representing the SYNAPTX STOCK issued to such WG
SHAREHOLDERS in exchange for his or her WG CONTROLS Stock, together
with such other documents as each WG SHAREHOLDER may reasonably
request prior to the Closing. The parties agree to execute such
additional documents after the Closing as may be necessary or
desirable to carry out the terms of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF WG SHAREHOLDERS
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The WG SHAREHOLDERS, jointly (except where otherwise expressly
indicated to the contrary) and severally, represent and warrant as
follows:
2.1 Organization. To the best of their knowledge, WG
------------
CONTROLS is duly incorporated, validly existing and in good standing
under the laws of the State of its incorporation, is qualified to do
business as a foreign corporation in each other jurisdiction in which
the failure to be so qualified would have a material adverse effect on
the transactions contemplated by this Agreement or on the business,
financial condition or results of operation of WG CONTROLS, and has
full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement.
2.2 Authorization. Each WG SHAREHOLDER represents and
-------------
warrants that he or she has full power, capacity and authority to
execute, deliver and perform this Agreement. This Agreement has been
duly executed and delivered by such WG SHAREHOLDER and (assuming the
due execution and delivery by the other parties hereto) constitutes
the legal, valid and binding agreement of such WG SHAREHOLDER
enforceable against such person in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights and remedies generally
and by general principles of equity. The WG SHAREHOLDERS shall, at the
Closing, provide a fully executed resolution of the WG CONTROLS' Board
of Directors indicating that there are no existing conditions that
preclude the transaction as defined in Article 1 and authorizing such
exchange as documented by a Plan of Reorganization that references
those actions to accomplish the tax free result intended by the
parties in this transaction which will be incorporated within this WG
CONTROLS Board of Directors resolution.
2.3 No Consents, Conflicts. Each WG SHAREHOLDER represents
----------------------
and warrants that (a) no consent, approval or other action by any
governmental authority or third party is required in connection with
the execution, delivery and performance of this Agreement by such WG
CONTROLS Shareholder; and (b) neither the execution, delivery or
performance of this Agreement by such WG SHAREHOLDERS will (i)
violate, conflict with or result in a breach of any provision of or
constitute a default or an event which with notice or lapse of time or
both, would constitute a default under WG CONTROLS' articles of
incorporation or by-laws or any agreement or obligation to which WG
CONTROLS or such WG SHAREHOLDERS are a party or by which either of
such persons may be bound or affected where such violation, conflict,
breach or default would have a material adverse effect on the
transactions contemplated by this Agreement, or (ii)violate any order,
writ, injunction, decree, statute, rule or regulation applicable to WG
CONTROLS or such WG SHAREHOLDERS where such violation would have a
material adverse effect on the transactions contemplated by this
Agreement.
2.4 Financial Statements. The WG SHAREHOLDERS have
--------------------
previously delivered to SYNAPTX the balance sheets and related
statements of income, shareholders' equity and cash flows as of and
for the calendar year period ended December 31, 1996 and for the
eleven month period ended November 30, 1997 (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with WG CONTROLS' books and records, present fairly in all
material respects the financial position, results of operations,
shareholders' equity and cash flows for the periods then ended. There
has been no material adverse change in the business, financial
condition, results of operations or prospects of WG CONTROLS since
December 31, 1996. Except as disclosed in the Financial Statements, WG
CONTROLS does not have any liabilities, commitments or obligations
(whether accrued, absolute, contingent or otherwise), other than
obligations incurred since the date of the Financial Statements in the
ordinary course of business and consistent with past practice and none
of which has or will have a material adverse effect, on the business,
financial condition, results of operations or prospects of WG CONTROLS.
2.5 Compliance, No Litigation. To the best of their
-------------------------
knowledge, WG CONTROLS is in material compliance with all applicable
federal, state, local and foreign laws, ordinances, orders, rules and
regulations and with all agreements, commitments or obligations to
which it is a party or by which it or any of its assets may be bound.
To the best of their knowledge, there is no proceeding, investigation
or inquiry pending or threatened against WG CONTROLS, its business or
any of its assets, nor is there any basis for any such proceeding,
investigation or inquiry. Neither WG CONTROLS nor, to the best of
their knowledge, its business or any of its assets is subject to any
judgment, order, writ or injunction of any court, arbitrator or
governmental agents or instrumentality.
2.6 Authorized Capital Stock. The authorized capital stock
------------------------
of WG Controls, Inc. consists of five thousand (5,000) shares of
common stock, of which three thousand five hundred (3,500) shares are
issued and outstanding, all of which are owned by the WG SHAREHOLDERS.
All the outstanding shares of WG CONTROLS Stock have been validly
issued and are fully paid and non assessable. There are no outstanding
options, warrants, rights or other commitments obligating WG CONTROLS
to issue any of its capital stock. The capital stock held by the WG
SHAREHOLDERS are not pledged to any bank or to other lenders to
support loans and debt provided to WG CONTROLS or personally to any
individual or multiple WG SHAREHOLDERS.
2.7 Title to WG CONTROLS Stock. Each of the WG SHAREHOLDERS
--------------------------
owns the WG CONTROLS Stock to be transferred to SYNAPTX at the
Closing, free and clear of all liens, claims and encumbrances, and at
the Closing, SYNAPTX will acquire good and valid title to such WG
CONTROLS Stock, free and clear of all liens, claims and encumbrances.
2.8 Investment Representations. Each WG SHAREHOLDER
--------------------------
represents and warrants that he or she has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the SYNAPTX STOCK
in exchange for the WG CONTROLS Stock owned by such WG SHAREHOLDERS,
and has been given the opportunity to examine all documents and ask
questions of, and receive answers from representatives of SYNAPTX
concerning the terms and conditions of such exchange and the financial
condition, business and prospects of SYNAPTX, and to obtain such
additional information as he or she deemed necessary in connection
with the transaction contemplated by this agreement. The SYNAPTX STOCK
to be acquired by such WG SHAREHOLDERS pursuant to this agreement is
for such person's own account for investment and not with a view to
the public distribution thereof, and such WG SHAREHOLDERS will not
effect any transfer of such SYNAPTX STOCK except pursuant to an
effective registration statement under the Securities Act of 1933 or
exemptions from registration thereunder and in compliance with all
applicable state securities laws. Each WG SHAREHOLDER understands that
the SYNAPTX STOCK to be received by such person at the Closing will
bear appropriate restrictive legends referred to the foregoing
transfer restrictions.
2.9 Reliance on Own Tax Advisors. The WG SHAREHOLDERS are
----------------------------
relying on their own tax advisors in connection with determining the
tax consequences to them of the transactions contemplated by this
Agreement and is not relying on SYNAPTX or SYNAPTX' attorneys,
accountants officers or advisors for any such advice.
2.10 Brokers and Finders. Neither WG CONTROLS nor any of its
-------------------
shareholders, officers, directors or agents are liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
2.11 No Misrepresentations. Neither this Agreement nor any
---------------------
document executed or to be executed by any WG SHAREHOLDER in
connection with the transactions contemplated hereby contains or will
contain when executed any untrue statement of a material fact or omits
or will omit when executed to state a material fact necessary in order
to make the statements made, in the light of the circumstances under
which they were made, not misleading.
ARTICLE 2A
REPRESENTATIONS AND WARRANTIES OF WG SHAREHOLDERS
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The WG SHAREHOLDERS, jointly (except where otherwise expressly
indicated to the contrary) and severally, represent and warrant as
follows:
2A.1 Organization. To the best of their knowledge, WG
------------
TELECOM is duly incorporated, validly existing and in good standing
under the laws of the State of its incorporation, is qualified to do
business as a foreign corporation in each other jurisdiction in which
the failure to be so qualified would have a material adverse effect on
the transactions contemplated by this Agreement or on the business,
financial condition or results of operation of WG TELECOM, and has
full corporate power and authority to conduct its business as
presently conducted and to enter into and perform this Agreement.
2A.2 Authorization. Each WG SHAREHOLDER represents and
-------------
warrants that he or she has full power, capacity and authority to
execute, deliver and perform this Agreement. This Agreement has been
duly executed and delivered by such WG SHAREHOLDER and (assuming the
due execution and delivery by the other parties hereto) constitutes
the legal, valid and binding agreement of such WG SHAREHOLDER
enforceable against such person in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights and remedies generally
and by general principles of equity. The WG SHAREHOLDERS shall, at the
Closing, provide a fully executed resolution of the WG TELECOM Board
of Directors indicating that there are no existing conditions that
preclude the transaction as defined in Article 1 and authorizing such
exchange as documented by a Plan of Reorganization that references
those actions to accomplish the tax free result intended by the
parties in this transaction which will be incorporated within this WG
TELECOM's Board of Directors resolution.
2A.3 No Consents, Conflicts. Each WG SHAREHOLDER represents
----------------------
and warrants that (a) no consent, approval or other action by any
governmental authority or third party is required in connection with
the execution, delivery and performance of this Agreement by such WG
TELECOM Shareholder; and (b) neither the execution, delivery or
performance of this Agreement by such WG TELECOM's sole shareholder
will (i) violate, conflict with or result in a breach of any provision
of or constitute a default or an event which with notice or lapse of
time or both, would constitute a default under WG TELECOM's articles
of incorporation or by-laws or any agreement or obligation to which WG
TELECOM or such WG SHAREHOLDERS are a party or by which either of such
persons may be bound or affected where such violation, conflict,
breach or default would have a material adverse effect on the
transactions contemplated by this Agreement, or (ii)violate any order,
writ, injunction, decree, statute, rule or regulation applicable to WG
TELECOM or such WG SHAREHOLDERS where such violation would have a
material adverse effect on the transactions contemplated by this
Agreement.
2A.4 Financial Statements. The WG SHAREHOLDERS have
--------------------
previously delivered to SYNAPTX the balance sheets and related
statements of income, shareholders' equity and cash flows as of and
for the calendar year period ended December 31, 1996 and for the
eleven month period ended November 30, 1997 (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with WG TELECOM's books and records, present fairly in all
material respects the financial position, results of operations,
shareholders' equity and cash flows for the periods then ended. There
has been no material adverse change in the business, financial
condition, results of operations or prospects of WG TELECOM since
December 31, 1996. Except as disclosed in the Financial Statements, WG
TELECOM does not have any liabilities, commitments or obligations
(whether accrued, absolute, contingent or otherwise), other than
obligations incurred since the date of the Financial Statements in the
ordinary course of business and consistent with past practice and none
of which has or will have a material adverse effect, on the business,
financial condition, results of operations or prospects of WG TELECOM.
2A.5 Compliance, No Litigation. To the best of their
-------------------------
knowledge, WG TELECOM is in material compliance with all applicable
federal, state, local and foreign laws, ordinances, orders, rules and
regulations and with all agreements, commitments or obligations to
which it is a party or by which it or any of its assets may be bound.
To the best of their knowledge, there is no proceeding, investigation
or inquiry pending or threatened against WG TELECOM, its business or
any of its assets, nor is there any basis for any such proceeding,
investigation or inquiry. Neither WG TELECOM nor, to the best of their
knowledge, its business or any of its assets is subject to any
judgment, order, writ or injunction of any court, arbitrator or
governmental agents or instrumentality.
2A.6 Authorized Capital Stock. The authorized capital stock
------------------------
of WG Telecom, Inc. consists of five thousand (5,000) shares of common
stock, of which one thousand five hundred (1,500) shares are issued
and outstanding all of which are owned by WG CONTROLS. All the
outstanding shares of WG TELECOM Stock have been validly issued and
are fully paid and non assessable. There are no outstanding options,
warrants, rights or other commitments obligating WG TELECOM to issue
any of its capital stock. The capital stock held by WG CONTROLS is not
pledged to any bank or to other lenders to support loans and debt
provided to WG TELECOM or personally to any individual or multiple WG
SHAREHOLDERS.
2A.7 Title to WG TELECOM Stock. Each of the WG SHAREHOLDERS
-------------------------
owns the WG TELECOM Stock to be transferred to SYNAPTX at the Closing,
free and clear of all liens, claims and encumbrances, and at the
Closing, SYNAPTX will acquire good and valid title to such WG TELECOM
Stock, free and clear of all liens, claims and encumbrances.
2A.8 Investment Representations. Each WG SHAREHOLDER
--------------------------
represents and warrants that he or she has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the SYNAPTX STOCK
in exchange for the WG CONTROLS Stock owned by such WG SHAREHOLDERS,
and has been given the opportunity to examine all documents and ask
questions of, and receive answers from representatives of SYNAPTX
concerning the terms and conditions of such exchange and the financial
condition, business and prospects of SYNAPTX, and to obtain such
additional information as he or she deemed necessary in connection
with the transaction contemplated by this agreement. The SYNAPTX STOCK
to be acquired by such WG SHAREHOLDERS pursuant to this agreement is
being acquired for such person's own account for investment and not
with a view to the public distribution thereof, and such WG
SHAREHOLDERS will not effect any transfer of such SYNAPTX STOCK except
pursuant to an effective registration statement under the Securities
Act of 1933 or exemptions from registration thereunder and in
compliance with all applicable state securities laws. Each WG
SHAREHOLDER understands that the SYNAPTX STOCK to be received by such
person at the Closing will bear appropriate restrictive legends
referred to the foregoing transfer restrictions.
2A.9 Reliance on Own Tax Advisors. The WG SHAREHOLDERS are\
----------------------------
relying on their own tax advisors in connection with determining the
tax consequences to them of the transactions contemplated by this
Agreement and is not relying on SYNAPTX or SYNAPTX' attorneys,
accountants officers or advisors for any such advice.
2A.10 Brokers and Finders. Neither WG TELECOM nor any of its
-------------------
shareholders, officers, directors or agents are liable for any
brokers' or finders' fees or expenses in connection with this
Agreement or the transactions contemplated hereby.
2A.11 No Misrepresentations. Neither this Agreement nor any
---------------------
document executed or to be executed by any WG SHAREHOLDER in
connection with the transactions contemplated hereby contains or will
contain when executed any untrue statement of a material fact or omits
or will omit when executed to state a material fact necessary in order
to make the statements made, in the light of the circumstances under
which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SYNAPTX
- -----------------------------------------
SYNAPTX represents and warrants as follows:
3.1 Organization. SYNAPTX is duly incorporated, validly
------------
existing and in good standing under the laws of the State of its
incorporation, is qualified to do business as a foreign corporation in
each other jurisdiction in which the failure to be so qualified would
have a material adverse effect on the transactions contemplated by
this Agreement or on the business, financial condition or results of
operations of SYNAPTX, and has full corporate power and authority to
conduct its business as presently conducted and to enter into and
perform this Agreement.
3.2 Authorization. SYNAPTX has full power, capacity and
-------------
authority to execute, deliver and perform this Agreement. This
Agreement has been duly executed and delivered by SYNAPTX and
(assuming the due execution and delivery by the other parties hereto)
constitutes the legal, valid and binding agreement of SYNAPTX
enforceable against SYNAPTX in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights and remedies generally
and by general principles of equity. SYNAPTX shall, at the Closing,
provide a fully executed resolution of the SYNAPTX Board of Directors
indicating that there are no existing conditions that preclude the
transaction as defined in Section 1.1 and authorizing such exchange as
documented by a Plan of Reorganization that references those actions
to accomplish the tax free result intended by the parties in this
transaction which will be incorporated within this SYNAPTX Board of
Directors resolution.
3.3 No Consents, Conflicts. No consent, approval or other
----------------------
action by any governmental authority or third party is required in
connection with the execution, delivery and performance of this
Agreement by SYNAPTX and neither the execution, delivery or
performance of this Agreement by SYNAPTX will (i) violate, conflict
with or result in a breach of any provision of, or constitute a
default or an event which with notice or lapse of time or both, would
constitute a default under SYNAPTX' articles of incorporation or by-
laws or any agreement or obligation to which SYNAPTX is a party or by
which it may be bound or affected where such violation, conflict,
breach or default would have a material adverse effect on the
transactions contemplated by this Agreement, or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to SYNAPTX where such violation would have a material
adverse effect on the transactions contemplated by this Agreement.
3.4 Business of SYNAPTX. SYNAPTX has previously delivered to
-------------------
the WG SHAREHOLDERS the balance sheets and related statements of
income, shareholders' equity and cash flows as of and for the fiscal
year period ended August 31, 1997 and the condensed financial
statement information included in the fiscal year end and first
quarter 1997-1998 Investor Quarterly Update (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with the SYNAPTX books and records, present fairly in all
material respects the financial position, results of operations,
shareholders' equity and cash flows for the periods then ended. There
has been no material adverse change in the business, financial
condition, results of operations or prospects of SYNAPTX since the
date of SYNAPTX Financial Statements referred to above. Except as
disclosed in such balance sheet and as otherwise herein specifically
noted, SYNAPTX does not have any liabilities, commitments or
obligations (whether accrued, absolute, contingent or otherwise),
other than obligations incurred since the date of the Financial
Statements in the ordinary course of business and consistent with past
practice and none of which has or will have a material adverse effect,
on the business, financial conditions, results of operations or
prospects of SYNAPTX. SYNAPTX is contemplating and plans to close an
acquisition of Primus Marketing Associates, Inc. ("Primus"), a sales
representative organization of whom WG SHAREHOLDERS are familiar with
the plan that Primus will operate in and provide sales representative
services for product service companies in the Northwestern United
States.
3.5 Compliance, No Litigation. SYNAPTX is in material
-------------------------
compliance with all applicable federal, state, local and foreign laws,
ordinances, orders, rules and regulations and with all agreements,
commitments or obligations to which it is a party or by which it or
any of its assets may be bound. There is no proceeding, investigation
or inquiry pending or threatened against SYNAPTX, its business or any
of its assets, nor is there any basis for any such proceeding,
investigation or inquiry. Neither SYNAPTX nor its business or any of
its assets is subject to any judgment, order, writ or injunction of
any court, arbitrator or governmental agency or instrumentality.
3.6 Authorized Capital Stock. The authorized capital stock
------------------------
of the Company is 35,000,000 shares, consisting of 10,000,000 shares
of Preferred Stock, $.001 par value per share, none of which are
issued or outstanding and 25,000,000 shares of Common Stock, $.001 par
value per share, of which 5,208,660 shares have been validly issued
and are outstanding as of December 30, 1997.
3.7 Title to SYNAPTX Stock. The SYNAPTX STOCK to be issued
----------------------
to each WG SHAREHOLDER will be duly and validly issued, fully paid and
non assessable, and each WG SHAREHOLDER will acquire title to the
SYNAPTX STOCK to be issued to such person hereunder free and clear of
all liens, claims and encumbrances. Additionally, the SYNAPTX Board of
Directors and a majority of the then Synaptx shareholders have
approved a stock option plan providing for the issuance of 1,450,000
shares of SYNAPTX Common Stock of which options representing the right
to purchase 636,371 shares of SYNAPTX Common Stock are issued with
exercise prices ranging from $0.091 to $3.70 per share. Also, the
SYNAPTX Board of Directors has approved the issuance of stock warrants
representing the right to purchase 200,006 shares of SYNAPTX Common
Stock with an exercise price from $0.454 to $1.36 per share.
3.8 Investment Representations. SYNAPTX represents and
--------------------------
warrants that it has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks
of an investment in the WG CONTROLS Stock in exchange for the SYNAPTX
STOCK, and has been given the opportunity to examine all documents and
ask questions of and receive answers from representatives of WG
CONTROLS concerning the terms and conditions of such exchange and the
financial condition, business and prospects of WG CONTROLS, and to
obtain such additional information as it deems necessary in connection
with the transactions contemplated by this Agreement the WG CONTROLS
Stock to be acquired by SYNAPTX pursuant to this Agreement is being
acquired for SYNAPTX' own account for investment and not with a view
to the public distribution thereof, and SYNAPTX will not effect any
transfer of such WG CONTROLS Stock except pursuant to an effective
registration statement under the Securities Act of 1933 or exemptions
from registration thereunder and in compliance with all applicable
state securities laws. SYNAPTX understands that the WG CONTROLS Common
Stock to be received by SYNAPTX at the Closing will bear appropriate
restrictive legends referred to the foregoing transfer restrictions.
SYNAPTX agrees to comply with Blue Sky Laws in the State of Illinois.
3.9 Reliance on Own Tax Advisers. SYNAPTX is relying on
----------------------------
their own tax advisors in connection with determining the tax
consequences to them of the transactions contemplated by this
Agreement and are not relying on WG CONTROLS or WG CONTROLS'
attorneys, accountants, officers or advisors for any such advice.
3.10 Brokers and Finders. Neither SYNAPTX nor any of its
-------------------
shareholders, officers, director or agents is liable for any brokers'
or finders' fees or expenses in connection with this Agreement or the
transactions contemplated hereby.
3.11 No Misrepresentations. Neither this Agreement nor any
---------------------
document executed or to be executed by SYNAPTX in connection with the
transactions contemplated hereby contains or will contain when
executed any untrue statement of a material fact or omits or will omit
when executed 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.
ARTICLE 4
ACTIONS PRIOR TO CLOSING
- ------------------------
4.1 Ordinary Course. From the date hereof until the Closing,
---------------
each WG SHAREHOLDER agrees to use reasonable best efforts to cause WG
CONTROLS to conduct its business only in the ordinary course,
consistent with past practice.
4.2 Best Efforts. Each party agrees to use reasonable best
------------
efforts to cause the fulfillment at the earliest practicable date of
all the conditions to the Closing.
4.3 Access. During the period prior to Closing, SYNAPTX
------
shall give each WG CONTROLS Shareholder, and the WG SHAREHOLDERS shall
cause WG CONTROLS to give SYNAPTX, and their respective
representatives reasonable access during normal business hours to all
of its books and records, and to cause to be furnished to each other
and their representatives all information with respect to their
respective businesses and affairs as the other may reasonably request.
4.4 Plan of Reorganization. WG CONTROLS and SYNAPTX will
----------------------
effect a Plan of Reorganization that documents the actions it is
taking to accomplish transactions in accordance with tax free intent
of the parties, including the WG SHAREHOLDERS, WG CONTROLS and
SYNAPTX, as defined in Section 1.1 above.
ARTICLE 5
CONDITIONS TO CLOSING
- ---------------------
5.1 WG CONTROLS Shareholder' Obligations to Close. Each and
---------------------------------------------
every obligation of each WG SHAREHOLDER to be performed on the Closing
Date shall be subject to the satisfaction or waiver of each of the
following conditions:
5.1.1 Representations, Warranties and Covenants. The
-----------------------------------------
representations and warranties of SYNAPTX set forth in this Agreement
shall be true and correct in all material respects when made and as of
the Closing Date as though such representations and warranties were
made on and as of the Closing Date, and SYNAPTX shall have performed
all obligations required to be performed by it under this Agreement on
or before the Closing Date.
5.1.2 Tax Consequences. The WG SHAREHOLDERS shall have
----------------
determined, in consultation with their own tax advisors, that the
transactions to be consummated at the Closing will not result in
taxable income to them (the parties agree to use reasonable best
efforts to restructure the transactions contemplated hereby in the
event that the WG SHAREHOLDERS are unable to make such a
determination, so that the foregoing condition can be satisfied).
5.1.3 Employment Agreements. SYNAPTX shall have caused to
---------------------
enter into an employment agreement with each WG CONTROLS key employee
in substantially the form set forth for each such WG SHAREHOLDER in
Exhibit 5.1.3.
5.1.4 Non-Competition Agreements. SYNAPTX shall have caused
--------------------------
each WG SHAREHOLDER to enter into a non-competition agreement with
each WG CONTROLS key employee in substantially the form set forth for
each such WG SHAREHOLDER in Exhibit 5.1.4.
5.1.5 WG CONTROLS Shareholder Approval. The Merger shall be
--------------------------------
approved by the requisite number of shareholders or amount of voting
common stock of WG CONTROLS as required under Illinois law.
5.2 SYNAPTX' Obligations to Close. Each and every obligation
-----------------------------
of SYNAPTX to be performed on the Closing Date shall be subject to the
satisfaction or waiver of each of the following conditions:
5.2.1 Representations, Warranties and Covenants. The
-----------------------------------------
representations and warranties of each WG SHAREHOLDER set forth in
this Agreement shall be true and correct in all material respects when
made and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date, and each WG
SHAREHOLDER shall have performed all obligations required to be
performed by such person under this Agreement on or before the Closing
Date.
5.2.2 Tax Consequences. SYNAPTX shall have determined, in
----------------
consultation with their own tax advisors, that the transactions to be
consummated at the Closing will not result in taxable income to them
(the parties agree to use reasonable best efforts to restructure the
transactions contemplated hereby in the event that SYNAPTX is unable
to make such a determination, so that the foregoing condition can be
satisfied).
5.2.3 Employment Agreements. Each of the WG CONTROLS and WG
---------------------
TELECOM key employees shall have entered into the Employment
Agreements referred to in Section 5.1.3.
5.2.4 Non-Competition Agreements. Each of the WG CONTROLS
--------------------------
and WG TELECOM key employees shall have entered into the
non-competition Agreements referred to in Section 5.1.4.
5.2.5 Simultaneous Closing. Each and all of the WG
--------------------
Shareholders shall consummate this Agreement and all associated
agreements contemplated hereby on or before the Closing date.
5.2.6 WG CONTROLS Shareholder Approval. The Merger shall be
--------------------------------
approved by the requisite number of shareholders or amount of voting
common stock of WG CONTROLS as required under Illinois law.
ARTICLE 6
TERMINATION
- -----------
6.1 Termination by Either Party. This Agreement may be
---------------------------
terminated, without liability, by SYNAPTX or by the WG SHAREHOLDERS if
the terminating party is not itself in default hereunder by written
notice of such election to the other if the closing has not occurred
by January 31, 1998.
6.2 Breach. In the event of any breach by one or more WG
------
SHAREHOLDER hereunder, including a breach of representations and
warranties, prior to the Closing, SYNAPTX shall have the option to (i)
terminate this Agreement, (ii) close the transactions contemplated
hereby notwithstanding such breach, or (iii) seek specific performance
of this Agreement. In the event of a breach by SYNAPTX hereunder,
including a breach of representations and warranties, prior to the
Closing, the WG SHAREHOLDERS shall have the options to (i) terminate
this Agreement, (ii) close the transactions contemplated hereby
notwithstanding such breach, or (iii) seek specific performance of
this Agreement.
ARTICLE 7
POST-CLOSING COVENANTS
- ----------------------
7.1 Post-Closing Covenants of SYNAPTX. SYNAPTX covenants
---------------------------------
from and after the Closing as follows:
7.1.1 Stock Plans. SYNAPTX agrees to use reasonable best
-----------
efforts to implement within one hundred twenty (120) days after the
Closing Date a stock purchase program for the executives of WG
CONTROLS.
7.2 Operation of WG CONTROLS and WG TELECOM Business
------------------------------------------------
Following the Closing. The parties agree as follows with respect to
- ---------------------
the operation of WG CONTROLS and WG TELECOM business following the
Closing:
7.2.1 Location. WG CONTROLS and WG TELECOM shall continue to
--------
conduct its business at its present facilities in Arlington Heights,
Illinois and Milwaukee, Wisconsin until such time as the SYNAPTX Board
and the SYNAPTX Board of Directors mutually agree that a change would
be beneficial to the business of SYNAPTX and its subsidiaries taken as
a whole.
ARTICLE 8
OTHER
- -----
8.1 Survival. The representations and warranties set forth
--------
in Articles 2, 2A and 3 shall survive the Closing for a period of six
(6) months. WG CONTROLS and each WG SHAREHOLDER agrees to defend,
indemnify and hold harmless SYNAPTX and SYNAPTX agrees to defend,
indemnify and hold harmless each WG SHAREHOLDER for any damages,
losses, liabilities or claims incurred by the other as a result of the
breach by the other of such representations and warranties made by it
herein.
8.2 Miscellaneous. This Agreement may be amended only in
-------------
writing signed by the party against whom enforcement is sought. This
Agreement may not be assigned by any party hereto without the prior
written consent of the other parties. This Agreement shall be governed
and construed in accordance with the laws of the State of Illinois,
without regard to principles of conflicts of law. This Agreement may
be executed in two or more counterparts, each of which shall be deemed
an original. The headings contained in this Agreement are only for
convenience and shall not affect the meaning or interpretation of this
Agreement. The invalidity or unenforceability of any provision of this
Agreement shall not affect any other provisions of this Agreement,
which shall remain in full force and effect. Each party agrees that
the others would be irreparably harmed in the event of any breach of
this Agreement. Accordingly, the parties agree that each shall be
entitled to specific performance of this Agreement and to injunctive
relief to prevent any breach of this Agreement. In the event of any
litigation arising out of or relating to this Agreement, the
prevailing party shall be entitled to reasonable attorney's and
expenses from the losing party.
COMPANY SIGNATURE NAME AND TITLE
------- --------- --------------
Synaptx Worldwide, Inc.
- -----------------------
Richard E. Hanik,
/s/ Richard E. Hanik Secretary
----------------------
(Corporate Seal)
WG Controls, Inc.
- -----------------
James M. Gleason,
/s/ James M. Gleason Shareholder
----------------------
Shirley Gleason,
/s/ Shirley Gleason Shareholder
----------------------
Michael Concialdi,
/s/ Michael Concialdi Shareholder
----------------------
James Gammon,
/s/ James Gammon Shareholder
----------------------
(Corporate Seal)
Exhibit 1.4
-----------
Exchange of WG CONTROLS STOCK for SYNAPTX STOCK
-----------------------------------------------
- ----------------------------------------------------------------------
WG SHAREHOLDERS WG CONTROLS SYNAPTX SYNAPTX
--------------- ----------- ------- -------
Shares Common Stock Preferred
------ ------------ ---------
Stock
-----
- ----------------------------------------------------------------------
James M. Gleason, 2,450 199,999 96,001
Shareholder
- ----------------------------------------------------------------------
Shirley Gleason, 350 28,572 13,714
Shareholder
- ----------------------------------------------------------------------
Michael Concialdi, 350 28,572 13,714
Shareholder
- ----------------------------------------------------------------------
James Gammon, 350 28,572 13,714
Shareholder
- ----------------------------------------------------------------------
Totals 3,500 285,715 137,143
- ----------------------------------------------------------------------
Exhibit 1.8
-----------
Contingent Issuance of SYNAPTX STOCK
------------------------------------
COMMISSION EARNINGS EARN-OUT BONUS
---------- -------- --------------
EARN--OUT PERIOD REVENUES BEFORE TAXES AMOUNT
---------------- -------- ------------ ------
Period starting with Closing
Date and Ending December 31,
1998:
Level One Results $1,900,000 $700,000 $300,000
Level Two Results $2,400,000 $900,000 $500,000
Twelve Month Period Ending
December 31, 1999:
Level One Results $2,100,000 $800,000 $300,000
Level Two Results $2,800,000 $1,000,000 $500,000