SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
TGFIN HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction: $3,000,000
(5) Total fee paid: $600
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration number, or the form
or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
INFORMATION STATEMENT FOR
TGFIN HOLDINGS, INC.
39 Broadway
Suite 740
New York, New York 10006
(212) 363-3900
To the Stockholders of TGFIN Holdings, Inc.:
Pursuant to Delaware General Corporation Law Section 228, notice is
hereby given that the Board of Directors of TGFIN Holdings, Inc. (the
"Company") on January 9, 2003 approved and holders of a majority of the
outstanding common stock of the Company delivered by written consent approval
of the sale of a substantial portion of the assets of the Company's wholly
owned subsidiary, Tradingear.com Incorporated, a Delaware corporation, to
Tradingear Acquisition LLC, a Delaware limited liability company and a wholly
owned subsidiary of the New York Mercantile Exchange, Inc.
By the Order of the Board of Directors,
/s/ Samuel Gaer
Samuel Gaer
President and Chief Executive Officer
New York, New York
March 4, 2003
2
TGFIN HOLDINGS, INC.
INFORMATION STATEMENT
This Information Statement is being mailed on or about March 4, 2003, to
all holders of record at the close of business on February 4, 2003, of the
preferred stock and common stock of TGFIN Holdings, Inc., a Delaware
corporation (the "Company"), in connection with resolutions of the Board of
Directors and the written consent of the holders of greater than 50% of the
Company's common stock providing for the sale of a substantial portion of the
assets of the Company's wholly owned subsidiary, Tradingear.com Incorporated,
a Delaware corporation ("TradinGear") to Tradingear Acquisition LLC, a
Delaware limited liability company and a wholly owned subsidiary of New York
Mercantile Exchange, Inc.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND THE COMPANY A PROXY
The date of this Information Statement is March 4, 2003.
3
SUMMARY OF THE TRANSACTION
The following is a summary of the transaction:
* Tradingear Acquisition LLC ("Buyer"), a Delaware limited liability
company and a wholly owned subsidiary of the New York Mercantile
Exchange, Inc. (the "Exchange"), will acquire TradinGear's TGFIN/X
platform for $3 million of cash (the "Asset Sale") pursuant to an Asset
Purchase Agreement dated as of January 27, 2003 among Buyer, TradinGear
and the Company. The completion of the Asset Sale (the "Closing") is
scheduled to occur on or before March 31, 2003.
* At Closing, several of TradinGear's existing employees will become
employees and/or consultants of the Exchange.
* Of the $3,000,000 proceeds, $100,000 will be placed in escrow for a
period of one year for potential indemnification claims by Buyer. The
remaining amount after payment of expenses of the transaction, estimated
to be approximately $2,800,000, will be used for future investment by
the Company for the benefit of its stockholders, including the
development of existing products by out-licensing or sale ,the
investment in or acquisition of other operating businesses and payment
of outstanding obligations.
* At closing, Sam Gaer, current Chairman and Chief Executive Officer of
the Company, is expected to become the Chief Information Officer of the
Exchange. He intends to resign as the Chairman but remain as a director
of the Company.
* Scott Lybbert, former chief financial officer of the Company, is
expected to replace Mr. Gaer as Chairman of the Board and Chief
Executive Officer of the Company.
* Stockholders will keep their shares of the Company's common stock, which
will continue to be quoted on the OTC Bulletin Board.
_____________
The Company was organized under the laws of the State of Delaware in
March 1985 under the name, Mark, Inc. The Company is a publicly traded
holding company formerly known as Digitran Systems Incorporated, which
acquired TradinGear.com Incorporated ("TradinGear"), through a reverse merger
on September 12, 2002. The Company's principal executive offices are located
at 39 Broadway, Suite 740, New York, New York 10006 and the telephone number
is (212) 363-3900. The Company operates through its wholly owned operating
subsidiary, TradinGear, which was organized under the laws of the State of
Delaware on July 7, 1999.
4
THE ASSET SALE
Background of the Asset Sale
TradinGear was formed in 1999 to develop trading software designed for
the financial services industry. Its software technology is designed to
provide stock exchanges and broker-dealers in the securities industry the
ability to offer to its customers an on-line electronic system for securities
trading. During 2001, TradinGear determined that it would require additional
capital to meet its business plan. Given the capital markets at the time,
TradinGear concluded that it would be beneficial to be a public company to
raise capital on more favorable terms and sought a merger partner. In October
2001, TradinGear entered into an agreement to become public through a reverse
merger with Digitran Systems, Incorporated, a publicly-traded company. This
merger was completed in September 2002.
During the period between the execution of the merger agreement and the
completion of the merger, adverse changes in the capital markets affected and
has continued to affect TradinGear's ability to raise sufficient capital to
meet its business plan. TradinGear's industry suffered severe business
interruption and a significant reduction in investor participation from two
significant events: the struggling U.S. economy and financial markets, and the
September 11 attack upon the financial district in New York City. While
revenues increased during that period, the Company continued to have operating
losses.
During 2002, TradinGear was engaged by the Exchange, which is the
world's largest physical commodity futures exchange, to adapt and license
TradinGear's TGFIN/X platform. Over the several month course of the contract
negotiations and requisite product performance testing, the Exchange became
familiar with TradinGear's intellectual property. The Exchange and
TradinGear entered into an Agreement for Software License, Software
Development and Software Support dated December 13, 2002 ("License
Agreement"). Pursuant to this Agreement, the Exchange was to begin installing
the TGFIN/X platform in December 2002 and in January 2003, the first modules
of the platform became operational. The license agreement provides for
minimum monthly payments of $15,000 plus transaction fees for two years,
$35,000 per month consulting fees for 90 days post-production start and an
option to purchase the product at the end of the term of the License Agreement
for $500,000. Through January 31, 2003, the Company has received
approximately $70,000 under the License Agreement.
Subsequent to the December 2002 execution of the License Agreement,
Exchange management approached Samuel Gaer with respect to the potential
acquisition of the TGFIN/X platform. Senior Exchange management and Mr. Gaer
and Marni Gaer, a director of and counsel to the Company, engaged in
discussions with respect to a potential transaction. In late December 2002,
Vincent Viola, Chairman of the Board of the Exchange, proposed to purchase the
TGFIN/X platform and related intellectual property for $3 million in cash.
Mr. Gaer indicated that the Company's board would not entertain any offers
until the Exchange's board had approved the transaction. The Exchange board
approved the transaction on January 8, 2003.
On January 9, 2003, the Company's Board of Directors met to consider the
offer and various alternatives. After consideration of the factors listed
below, the Board approved the asset sale and authorized Sam and Marni Gaer to
further negotiate the terms of the Asset Purchase Agreement with the Exchange
on its behalf. Mr. Gaer abstained from the board vote and recommendation due
to his potential conflict of interest in becoming an employee of the Exchange.
The Board also authorized management to retain special counsel relating to the
proposed asset sale.
5
On January 27, 2003, TradinGear, TGFIN and TradinGear Acquisition LLC, a
wholly-owned subsidiary of the Exchange entered into the Asset Purchase
Agreement.
Reasons for the Asset Sale and Recommendation of the Board
The Board of Directors determined that the Asset Sale was in the best
interests of the stockholders of the Company after consideration of the
following:
* Several potentially large customers had postponed indefinitely their
planned capital expenditures for technology-based assets.
* Several customers were experiencing difficulty realizing their existing
business plans within the time frame originally projected.
Consequently, the Company began to experience slow payments and defaults
on its accounts receivables.
* The financial markets have not recovered from the down market cycle over
the last two years.
* The Company again experienced an operating loss for the year.
* Any alternatives to the Exchange transaction available to the Company
were either not feasible or not reasonably likely to provide equal or
greater value to its stockholders;
* With a customer base becoming more sluggish, cash flows were expected to
become more strained, operating income less likely and capital
investment more costly and dilutive. In December 2002, the Company had
less than $100,000 of cash on hand and the monthly cash flow from the
License Agreement, which is currently the primary revenue source, was
less than the Company's operating expenses.
* The Company's stockholders would still own their stock in TGFIN, which
would have cash to develop existing products and acquire additional
products and businesses, providing for the opportunity to have future
returns;
The factors described above were not the only factors considered by the
Board. The Board did not find it practicable to quantify or otherwise assign
relative weights to any of the factors considered. However, after taking into
account all of the factors, the Board concluded that this offer would be
preferred over any other alternative available and recommended the transaction
as the best way to secure value to the stockholders. For these reasons, the
Board of Directors has approved the Asset Sale and the Asset Purchase
Agreement, and stockholders owning a majority of the outstanding shares also
approved the Asset Sale and the Asset Purchase Agreement.
6
Other Alternatives Considered by TGFIN
Management explored each of the following alternatives, each of which
produced a projected result less favorable for shareholders than the
Asset Sale:
* Continuing in its current business, attempting to bridge anticipated
losses with additional equity funding while waiting at least a year
for major customers to commit to profitable projects. The terms
presented for a potential equity infusion were highly dilutive to
current shareholders.
* Continuing in its current business, attempting to bridge anticipated
losses with additional debt, convertible debt or preferred stock while
waiting at least a year for major customers to commit to profitable
projects. Because of minimal hard assets and uncertain revenue
streams, the terms presented under this alternative were also highly
dilutive to current shareholders.
* Continuing in its current business while developing additional
products. This alternative required resources that were not available
to the Company in its present condition.
* Continuing in its current business while seeking a merger candidate.
No merger candidates were found or presented that offered the current
shareholders both tangible assets and future prospects equivalent to
those produced by the Asset Sale.
* Continuing with its current business while making no proactive plans
would have, over the next several months, rendered the Company unable
to fulfill its obligations and then unable to continue as a going
concern.
* Completing the Asset Sale and distributing the cash proceeds to
shareholders. Shareholders would have received only between $.07 and
$.10 per share. Only a minority of shareholders, including certain
members of the Company's current management, would have realized a
gain on their investment in the Company's common stock if this
alternative had been selected. All others would have realized a loss
with no hope of future return.
* Marketing the company or its assets for a different price. Although
the Company believes that this asset is unique, the weakened condition
of the securities industry rendered this alternative ill-timed.
* Requesting additional capital from existing shareholders. Management
determined such a request to be unwise without more identified,
revenue opportunities.
Of all the alternatives available to the Company within the relatively short
period of time in which the adverse conditions presented themselves,
management determined that acceptance of the Asset Sale, in combination with
its future plans described below, gave the shareholders the best currently
tangible and prospectively possible return on investment.
Approval of the Asset Sale
The Board of Directors approved, with Sam Gaer abstaining, the Asset
Sale and the Asset Purchase Agreement and determined that the Asset Sale and
the Asset Purchase Agreement are in the best interests of the Company, the
Company's stockholders, and TradinGear.
Section 271 of the Delaware General Corporation Law ("DGCL") permits a
Delaware corporation to sell all or substantially all of its assets if the
sale is approved by stockholders holding a majority of the shares entitled to
vote thereon.
7
As of February 4, 2003, the record date for this transaction, the
Company has outstanding approximately 22,238,732 outstanding shares of Common
Stock, $.01 par value, and 50,500 shares outstanding shares of 8% Cumulative
Convertible Preferred Stock. On January 9, 2003, the holders of more than 50%
of the holders of a majority of outstanding stock gave its written consent
approving and adopting the Asset Sale and the Asset Purchase Agreement. The
following persons executed the written consent:
Name Number of Shares Owned Percentage Owned
---- ---------------------- ----------------
Sam Gaer 6,675,000 30.0%
Marni Gaer 1,800,000 8.1%
Ronald Comerchero 2,000,000 9.0%
Bruce Frank 1,710,584 7.7%
---------- -----
Total 12,185,584 54.8%
As a result, the Asset Sale was approved and adopted by (i) the Company
as sole shareholder of TradinGear and (ii) a majority of the shares of the
Company's voting stock as required by Section 271 of the DGCL. Accordingly,
no vote of any other stockholder is necessary to approve and adopt the Asset
Sale and, therefore, the Company is not soliciting stockholder votes.
Subject to the terms and conditions of the Asset Purchase Agreement, it
is contemplated that the Asset Sale will be consummated 20 days after the
mailing of this Information Statement and following satisfaction or waiver of
the conditions contained in the Asset Purchase Agreement. See "Summary of The
Asset Purchase Agreement Conditions."
Absence of a Fairness Opinion
The Company's Board of Directors has not obtained a fairness opinion
in connection with the Asset Sale. The Board of Directors did not believe
that obtaining such an opinion would be an appropriate use of corporate funds.
Such an opinion is not required by The Delaware General Corporation Law.
However, the Board of Directors believes that the Asset Sale is in the best
interests of the Company's stockholders.
Because of the absence of a fairness opinion, there will be no independent
assurance from an expert that the consummation of the Asset Sale is fair from
a financial point of view to the stockholders of the Company.
Plans After the Asset Sale
Upon the completion of the Asset Sale, after the payment of transaction-
related costs and other outstanding obligations, the Company will have cash
available of approximately $2,500,000, no debt and no revenue producing
business operations. The Company's immediate plan will be to reduce
significantly its monthly overhead so as to best preserve its available cash
while developing revenue generating opportunities. Specifically, management
will reduce its monthly expenses from approximately $175,000 per month
(including noncash expenses) to approximately $20,000 per month by reducing
its employees, relocating its offices, transferring the costs of servicing and
developing its products, and by reducing its dependence upon outside
professionals. The Company will continue to spend limited amounts on salaries,
insurance, rent, communications and other normal general and administrative
expenses.
8
Initially the Company will operate with two part-time employees, Scott
Lybbert, former chief financial officer, will become the president and chief
executive officer and Marni Gaer will remain as corporate secretary and
counsel. Their mandate will be to develop business opportunities for the
Company. This will include the possible pursuit of the development of
TradinGear's other platforms as described below, through outsourcing,
outlicensing or outright sale. In addition, the Company will seek out revenue
generating products and operating businesses for possible investment,
acquisition or merger. While no particular product or business has been
identified at this time, the Company believes that its available cash will
attract a variety of opportunities. The Company also believes that the
judicious investment of its cash combined with low overhead will allow it to
pursue these opportunities for an extended period of time. Management intends
to seek and evaluate numerous operating businesses with the intent to increase
shareholder value as a result of its investment in such operating subsidiaries
or entities.
Use of Proceeds
The Company will pay its recognized debt with the proceeds and will be
investigating and researching new opportunities for the Company while
retaining the net proceeds from the Asset Sale.
Federal Income Tax Consequences of the Asset Sale
It is expected that any gain recognized by TradinGear from the Asset
Sale for federal income tax purposes will be likely offset by current and
prior year net operating losses. The sale of assets will not be a taxable
event to holders of the Company's common or preferred stock.
No Appraisal Rights
Under Delaware law, the corporate actions described in this Information
Statement will not afford to stockholders the opportunity to dissent from the
actions described herein or to receive an agreed or judicially appraised value
for their shares.
Regulatory Approvals
Other than the filing and distribution of this Information Statement, no
regulatory approvals are required for the Asset Sale.
SUMMARY OF THE ASSET PURCHASE AGREEMENT
The following section summarizes the material terms and conditions of the
Asset Purchase Agreement, which is attached to this Information Statement as
Appendix A. The Company recommends that you carefully read the agreement in
its entirety for a complete description of the terms and conditions of the
Asset Sale. The discussion of the Asset Purchase Agreement is qualified in
its entirety by reference to the document.
9
Acquired Assets
TradinGear has agreed to sell to Buyer substantially all of the
TradinGear's assets related to the TGFIN/X platform (the "Acquired Assets").
The Acquired Assets include, among others:
* all tangible assets and intellectual property related to the
TGFIN/X platform;
* goodwill, licenses and sublicenses granted and obtained with
respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions;
* certain assumed contracts;
* certain accounts receivable related to the TGFIN/X platform and the
receivable from Civilian Trading Company;
* all of its transferable franchises, approvals, permits, licenses,
orders, registrations, certificates, variances, authorizations and
similar rights obtained from any government authority relating to
the Acquired Assets;
* manuals for hardware and software, invoices, maintenance
protocols, technicians and support logs and reports, databases,
evaluations, books and records, ledgers, files, documents,
correspondence, lists, plans, drawings, specifications, studies,
reports, and other printed or written materials, whether in hard
copy or computer format related to the Acquired Assets; and
* all of the goodwill attributable to and going-concern value of the
Acquired Assets.
Excluded Assets
All assets not expressly being assumed by the Buyer under the Asset
Purchase Agreement will be excluded from the assets being purchased including:
* cash and accounts receivable due from a customer, E3, prior to
Closing Date;
* accounts receivable due from the Exchange prior to Closing Date;
* all assets encompassing and related to the TGFIN/MM Nasdaq Market
Making System and the related intellectual property;
* all assets encompassing and related to the TGFIN/OMS Hedge Fund
Equity Order Entry System and the related intellectual
property.
Assumed Liabilities
The Buyer agreed to assume the Seller's liabilities and obligations
related to the Acquired Assets after the Closing Date.
Excluded Liabilities
TradinGear is retaining all liabilities other than the Assumed
Liabilities. Excluded Liabilities include TradinGear's office lease.
Purchase Price
The purchase price for the assets being sold pursuant to the Asset Sale
is $3,000,000, payable as follows: (a) $2,900,000 in cash at closing; and (b)
$100,000 to be deposited in escrow for possible indemnification claims for one
year. There are no financing contingencies of Buyer. Buyer has informed
TradinGear that the purchase price will be paid from working capital.
10
Closing
The closing of the Asset Sale will take place on the second business day
following the satisfaction or waiver of the conditions to the obligations of
the parties under the Asset Purchase Agreement, but in any event prior to
March 31, 2003, or on such other date as the parties mutually agree.
Representations and Warranties
The Asset Purchase Agreement contains various representations and
warranties by TradinGear and the Company, including, among others,
representations and warranties regarding the following:
* the corporate existence and qualification of TradinGear and the
Company;
* TradinGear and our authority to enter into the Asset Purchase
Agreement and consummate the Asset Sale;
* no contravention of the Asset Sale with governing documents, laws
and regulations, and required consents and notifications;
* capitalization and ownership of TradinGear and the Company;
* ownership, encumbrances, and sufficiency of the Acquired Assets;
* solvency;
* absence of litigation;
* employee benefit plans;
* lack of equity ownership;
* tax matters;
* lack of ownership of real property;
* TradinGear's ownership and/or licensing of the intellectual property
rights to the Acquired Assets, the right to transfer these rights to
Buyer, the absence of undisclosed infringements upon the
intellectual rights of others, and the absence of undisclosed
litigation or proceedings relating to intellectual property rights
of the Acquired Assets;
* material contracts relating to the Acquired Assets;
* accuracy of certain financial information;
* absence of certain changes since the end of the most recent fiscal
year;
* absence of undisclosed liabilities;
* tangible assets;
* no outstanding power of attorneys; and
* accuracy of information furnished.
The Asset Purchase Agreement also contains representations and
warranties from the Buyer, including, among others, representations and
warranties regarding the following:
* the corporate existence and qualification of the Buyer;
* the Buyer's authority to enter into the Asset Purchase Agreement
and consummate the Asset Sale; and
* no contravention of the Asset Sale with governing documents, laws
and regulations, and required consents and notifications.
11
Covenants
The Company has agreed that until the closing, it will continue to
operate TradinGear and its business in the ordinary course of business and
will use commercially reasonable efforts to, among other things:
* use reasonable best efforts to take all action and to do all
things necessary, proper, or advisable in order to consummate and
make effective the Asset Sale;
* give any notices to third parties, and will use reasonable best
efforts to obtain any necessary consents to effect the Asset Sale;
* keep the Acquired Assets substantially intact, including its
present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and
employees;
* will provide full access to Buyer so as not to interfere with
TradinGear's and the Company's normal business operations, to all
premises, properties, personnel, books, records, contracts, and
documents of or pertaining to TradinGear;
* give prompt notice any material adverse development causing a
breach of any of representations and warranties in the Asset
Purchase Agreement;
* take all necessary action to provide for the payment of all
applicable state sales, transfer or use taxes and to comply with
all applicable bulk transfer and similar laws in connection with
the Asset Sale;
* pay taxes when due;
* not hire any person;
* not increase compensation other than in the ordinary course of
business, consistent with past practices, but in no event greater
than 4% of the base salary of any such person paid during the year
ended December 31, 2002;
* except for certain enumerated exceptions, not enter into or renew
any employment or consulting agreement or other contract or
arrangement with respect to the performance of personal services
for TradinGear;
* except with the Buyer's prior written consent, not enter into,
change, amend, terminate or otherwise modify or agree or commit to
change, amend, terminate or modify any contract relating to any
Acquired Assets in any material respect except for those contracts
that terminate or expire prior to the Closing Date by their own;
* TradinGear shall not, without the prior consent of Buyer, waive or
modify certain accounts receivables;
* TradinGear and the Company will fully comply with all laws,
including federal and state securities laws; and
* maintain the confidentiality of the Asset Sale and protect the
confidential information of both parties.
12
Conditions
TradinGear's and the Company's obligation to complete the Asset Sale is
subject to the satisfaction of the following conditions on or before the
closing of the Asset Sale, unless waived in whole or in party by
TradinGear or the Company:
* all representations and warranties of Buyer contained in the Asset
Purchase Agreement being true and correct in all material respects
at and as of the Closing;
* Buyer performing and complying in all material respects with all
covenants and agreements required by the Asset Purchase Agreement
to be performed or complied with at or prior to the Closing Date;
* there being no law or injunction issued by a court of competent
jurisdiction making illegal or otherwise prohibiting or
restraining the consummation of the transactions contemplated by
the Asset Purchase Agreement;
* Buyer having paid the Purchase Price;
* Buyer delivering an officer's certificate, duly executed by an
authorized officer of Buyer, that certifies that the conditions to
the Asset Sale are fully satisfied;
* Buyer delivering a secretary's or assistant secretary's
certificate, duly executed by such authorized officer, with
corporate and authority documents attached as exhibits to each
certificate;
* there being no law or injunction making illegal or otherwise
prohibiting or restraining the consummation of the transactions
contemplated by the Asset Purchase Agreement;
* Buyer executing and delivering the Assumption Agreement and
Purchase Price Escrow Agreement; and
* all actions, proceedings, instruments and documents required to
carry out the transactions contemplated by the Asset Purchase
Agreement, and all other legal matters required for such
transactions, shall have been reasonably satisfactory the
Company's counsel for prior to Closing Date.
The obligations of Buyer to consummate the Asset Sale are subject to the
satisfaction or fulfillment at or prior to Closing Date of the following
conditions, any of which may be waived in whole or in part by Buyer in
writing:
* all representations and warranties contained in this Agreement
being true and correct in all material respects at and as of the
Closing;
* performance and compliance in all material respects with all the
covenants, obligations and agreements required by the Asset
Purchase Agreement to be performed or complied with at or prior to
the Closing Date, except that representations and warranties that
are confined to a specific date shall speak only as of such date;
* receipt of any requisite approvals from any applicable
governmental authority (or written waiver thereof), and there
being no law or injunction making illegal or otherwise prohibiting
or restraining the consummation of the transactions contemplated
by the Asset Purchase Agreement;
* TradinGear executing and delivering to Buyer, or causing to be
executed and delivered to Buyer, such bills of sale, leases,
assignments and other instruments of transfer as Buyer may
reasonably require to transfer title to the Acquired Assets free
and clear of all encumbrances;
13
* TradinGear delivering to Buyer an officer's certificate, duly
executed by an authorized officer of TradinGear, that certifies
that the conditions to the Asset Sale are fully satisfied;
* TradinGear delivering a secretary's or assistant secretary's
certificate, duly executed by such authorized officer, with
corporate and authority documents attached as exhibits to each
certificate;
* all required waivers, consents and approvals shall have been
obtained and delivered, each on terms reasonably satisfactory to
Buyer;
* TradinGear and the Company having received the requisite
shareholder approval of this Agreement;
* delivery of the legal opinion by our counsel;
* TradinGear having delivered to Buyer documentary evidence, in form
and substance satisfactory to Buyer, of the termination of a certain
licensing agreement;
* TradinGear delivering consent to and the assignment of agreements
with Computer Associates and Exchange Cubed;
* each of Sam Gaer and other specified employees having executed and
delivered to Buyer employment agreements or comparable consulting
agreements with Nymex, dated as of the Closing Date; and
* all actions, proceedings, instruments and documents required to
carry out the transactions contemplated by the Asset Purchase
Agreement, and all other legal matters required for such
transactions, shall have been reasonably satisfactory to Buyer
prior to Closing Date.
Termination
The Asset Purchase Agreement and the Asset Sale may be terminated at any
time prior to the Closing Date:
* by the mutual written consent of the Parties;
* by Buyer if the Closing has not occurred on or prior to 5:00 p.m.,
Eastern Standard Time, on March 31, 2003 provided, however, that
the right to terminate the Asset Purchase Agreement shall not be
available to Buyer if its action or inaction has resulted in a
willful and material breach of this Agreement;
* by either TradinGear, the Company or Buyer if any governmental
authority issues a final and non-appealable order restraining,
enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement; provided, the party
seeking to so terminate has exercised commercially reasonable
efforts to oppose any such order or to have the order vacated or
made inapplicable to the transactions contemplated by this
Agreement;
* by Buyer, if TradinGear or the Company materially breaches any
representation, warranty, covenant or other agreement to be
performed by it contained in this Agreement, and such breach is
incapable of being cured or is not cured within 10 days after
receipt of written notice from Buyer by TradinGear or the Company;
* by TradinGear or the Company, if Buyer materially breaches any
representation, warranty, covenant or other agreement contained in
this Agreement, and such breach is incapable of being cured or is
not cured within 10 days after Buyer's receipt of written notice
from TradinGear or the Company;
14
* by Buyer, if our Board of Directors authorizes TradinGear to enter
into a written agreement with respect to a competing transaction
that the Board has determined is a superior proposal and followed
certain procedural guidelines;
* by Buyer if the satisfaction of any condition to the obligations
of Buyer under the Asset Purchase Agreement becomes impossible; or
* by TradinGear if the satisfaction of any condition to the
obligations of TradinGear under the Asset Purchase Agreement
becomes impossible.
Indemnification and Escrow
The Company has agreed, subject to limitations, to indemnify the Buyer
for any loss arising from:
* Breaches of our representations, warranties, covenants and
agreements contained in the Asset Purchase Agreement or related;
and
* any liabilities not assumed by Buyer.
Buyer has agreed, subject to limitations, to indemnify TradinGear and
the Company for any loss arising from breaches of its representations,
warranties, covenants and agreements contained in the Asset Purchase
Agreement.
With specified exceptions, the representations and warranties of the
parties will survive for a period of one year following the Closing Date. In
the absence of fraud, and except for non-monetary equitable relief, if the
closing occurs, indemnification pursuant to the Asset Purchase Agreement is
the sole and exclusive remedy of the parties for any breach of any
representation or warranty.
Of the $3,000,000 purchase price, $100,000 will be deposited in escrow
to cover any breaches of our representations and warranties to the Buyer. The
escrow agent will hold the amount in escrow for a period of one year following
the Closing Date. Indemnification claims are not capped by this amount.
Expenses
Each party has agreed to pay its own expenses and costs incurred in
connection with the Asset Sale.
BUSINESS
The following describes the Company's business prior to the completion of the
Asset Sale. Upon the completion of the Asset Sale, after the payment of
transaction-related costs and other outstanding obligations, the Company will
have cash available of approximately $2,500,000, no debt and no revenue
producing business operations. The Company's immediate plan will be to reduce
significantly its monthly overhead so as to best preserve its available cash
while developing revenue generating opportunities.
15
General Description and History
TradinGear is a software development company providing open access
online securities, futures and commodities trading systems, software platforms
for the operation of securities and commodity exchanges and custom order
execution systems. A TradinGear system can accept and send messages from and
to anywhere, and is not limited by any one or several forms or formats.
TradinGear introduced its first generation of software products and generated
initial revenue during the fourth quarter of 1999. TradinGear finished
development of its second generation of over-the-counter ("OTC") exchange
systems, order management systems (which allows customers to keep track of
orders or portfolios), and broker-dealer solutions (helping the broker-dealer
manage its web site, track customer orders, accounts, portfolio information
and related tasks) and began customer installation in June 2001.
TradinGear's revenues are derived from the selling of licenses,
services, and annual software maintenance fees. TradinGear has derived
substantially all of its revenues from the TGFIN/X Exchange Based Platform.
The Company has also incurred net operating losses since its inception.
TGFIN/MM Nasdaq Market Making System
TradinGear has also developed other products for proprietary trading
firms and hedge funds. Because of the highly modular architecture of its
systems, this product is intended for firms wishing to implement customized
trading systems utilizing their own proprietary algorithms and/or strategies.
The TradinGear's Nasdaq (Registered) Market Maker system, or TGFIN/MM, enables
equity market trading firms to manage equity market making and equity market
order flow in an organized, effective environment. The TGFIN/MM is not
burdened by the overhead of maintaining a physical network; but instead the
system utilizes the customer's existing Nasdaq connectivity to form its own
network. TGFIN/MM allows complete order and position tracking for each user,
and uses pop-up notifications and sounds for transaction confirmations. All
transactions, positions and risk can be monitored through the administrator's
terminal, which can add, remove or lockout traders and/or individual
securities/markets, as well as monitor the customer's overall exposure,
positions, orders and order history. TradinGear retains all rights of
ownership to this product.
TGFIN/OMS Hedge Fund Equity Order Entry System
The TGFIN/OMS is a high speed equity market order management system with
a Java and/or ActiveX API that allows hedge funds, program trading desks, or
any equity market order execution firm to construct their own front-end
trading system and programmatically enter orders and direct them to the FIX
destination of their choice. FIX, which stands for Financial Information
eXchange, is an industry standard messaging protocol that allows heterogeneous
trading systems to communicate with each other in a common, pre-defined
message format. TradinGear retains the rights of ownership to this product.
TGFIN/X Exchange Based Platform
The TGFIN/X platform is the product being sold to the Exchange. This
product was targeted to the more traditional securities, futures and
commodities exchanges that were interested in automating and integrating
existing floor-based operations with online operations and/or exchanges.
Online securities, futures and commodities trading systems refer to electronic
trading systems accessible via the internet, intranet or closed proprietary
network. A software platform is another term for a trading system, which
TradinGear sought to provide not only to securities and commodity exchanges,
but also to "built to suit" - (i.e. "customer order"), for example, for a
hedge fund which might have wanted a system capable of matching trades
internally.
16
Properties
TGFIN currently leases approximately 4,000 square feet of office space in
New York, New York pursuant to a lease expiring 2006. The annual rent is
approximately $140,000. The Company intends to terminate this lease and seek
smaller space after the completion of the Asset Sale. The Company has not yet
negotiated the terms of the termination.
Buyer's Business
The Buyer is a wholly owned subsidiary of the Exchange. The Exchange is
the world's largest physical commodity futures exchange and the preeminent
trading forum for energy and precious metals. Transactions executed on the
Exchange reduce the risk of counterparty default because the Exchange
clearinghouse acts as the counterparty to every trade. Trading is conducted
through two divisions, the NYMEX Division, home to the energy, platinum, and
palladium markets; and the COMEX Division, on which all other metals trade.
The Exchange pioneered the development of energy futures and options contracts
nearly 25 years ago as means of bringing price transparency and risk
management to this vital market.
The wide array of trading markets provided by the Exchange include
futures and options contracts for crude oil, gasoline, heating oil, natural
gas, gold, silver, copper, aluminum, and platinum; futures contracts for coal,
propane, electricity and palladium; and options contracts on the price
differentials between crude oil and gasoline, crude oil and heating oil, Brent
and West Texas Intermediate crude oil, and various futures contract months
(calendar spreads) for light, sweet crude; Brent crude; gasoline; heating oil;
and natural gas. The Buyer's principal executive offices are located at One
North End Avenue, World Financial Center, New York, New York 10282. The
Buyer's telephone number is (212) 299-2000.
DESCRIPTION OF THE COMPANY'S SECURITIES
Common Stock
The Company is authorized to issue up to 50,000,000 shares of common
stock, $.01 par value. As of the date of this Information Statement,
22,238,732 shares of common stock were issued and outstanding. The holders of
common stock are entitled to one vote per share on all matters voted on by
stockholders, including elections of directors, and, except as otherwise
required by law, the holders of such shares will exclusively possess all
voting power. There is no cumulative voting for the election of directors.
The holders of common stock are entitled to such dividends as may be declared
from time to time by the Board from funds available therefore and, upon
liquidation, are entitled to receive a pro rata distribution of all assets of
the Company available for distribution to such holders. No holder of common
stock has any preemptive right to subscribe to any securities of the Company
of any kind of class, or any conversion rights, or any liabilities for calls
or assessments. The registrar and transfer agent is Computershare Trust
Company.
17
Preferred Stock
The Company is authorized to issue up to 1,000,000 shares of our Series
1 Class A 8% Cumulative Convertible Preferred Stock with a par value of $0.01
per share. As of the date of this Information Statement, there were 50,500
shares outstanding. Holders of preferred shares are entitled to cumulative
dividends of 8% per annum on the stated value of the stock, designated at $7
per share. Dividends are payable semi-annually on September 15 and March 15.
No dividends have been paid since March 15, 1993, resulting in dividends in
arrears at September 30, 2002 of approximately $280,540 or $5.55 per share.
Dividends are not payable on any other class of stock ranking junior to the
preferred stock until the full cumulative dividend requirements of the
preferred stock have been satisfied. The preferred stock carries a
liquidation preference equal to its stated value plus any unpaid dividends.
Holders of the preferred stock are entitled to one-tenth of a vote for each
share of preferred stock held. The Company may, at its option, redeem at any
time all shares of the preferred stock or some of them upon notice to each
preferred stockholder at a per share price equal to the stated value ($7.00)
plus all accrued and unpaid dividends thereon (whether or not declared) to the
date fixed for redemption, subject to certain other provisions and
requirements. Preferred Shares may be converted into Common Shares on a one
share of Preferred Stock for two shares of Common Stock basis.
Indemnification Of Directors And Executive Officers And Limitation Of
Liability
Section 145 of the Delaware General Corporation Law ("DGCL") authorizes
a corporation's board of directors to grant indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act.
As permitted by the DGCL, the Company's Certificate of Incorporation
includes a provision that eliminates the personal liability of its directors
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders; (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; (iii) under
section 174 of the DGCL (regarding unlawful dividends and stock purchases) or
(iv) for any transaction from which the director derived an improper personal
benefit.
18
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The Company's directors have interests in the merger transaction as
described in this section.
Stock Ownership Of Directors
The ownership of the Class A Common Stock by our directors are set forth
below:
Name and Address of Voting Shares Beneficially Percentage Owned
Beneficial Owner (1) Owned
- -------------------- -------------------------- ----------------
Ronald Comerchero
205 Third Avenue, 7K
New York, NY 10003 2,000,000 9.0%
Marni Gaer (2)
39 Broadway, Suite 740
New York, NY 10006 1,900,000 8.5%
Samuel Gaer
39 Broadway, Suite 740
New York, NY 10006 6,675,000 30.0%
---------- -----
All Directors as a Group 10,575,000 47.6%
___________________
(1) Unless otherwise indicated, each person named in the table exercises sole
voting and investment power with respect to all shares beneficially owned. As
of the date of this Information Statement, there are 22,238,732 shares of
Class A Common Stock outstanding.
(2) Marni Gaer is the wife of Samuel Gaer. Includes 100,000 shares held in
trust for the children of Marni and Samuel Gaer, of which Marni Gaer is the
Trustee.
Other Benefits
Sam Gaer is expected to become the Chief Information Officer of the
Exchange upon completion of the Asset Sale. Although the terms of an
agreement have not been negotiated, it is expected to provide for a higher
salary than his current salary, eligibility for a bonus plan and a three-year
term. Mr. Gaer abstained from the board vote and recommendation due to his
potential conflict of interest in becoming an employee of the Exchange. Marni
Gaer and Scott Lybbert will be the remaining employees of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
TradinGear
The information set forth and discussed below for the three and nine months
ended September 30, 2002 and September 30, 2001 is derived from the
consolidated financial statements included elsewhere herein. The financial
information set forth and discussed below is unaudited but, in the opinion of
management, reflects all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of such information. The
results of operations of the Company for the fiscal quarter ended September
30, 2002 may not be indicative of results expected for the entire fiscal year
ended December 31, 2002.
With its headquarters in downtown New York City, New York, the Company
services exchanges and brokers in the financial services industry. Over the
past year, the Company's industry suffered severe business interruption and a
significant reduction in investor participation from two significant events:
(1) the struggling U.S. economy and financial markets and (2) the September
11, 2001 attack upon the financial district in New York City, New York. Many
of the Company's customers and target customers were forced to retrench and
postpone many of their capital improvements.
Results of Operations
Three and nine months ended September 30, 2002 compared to September 30, 2001
Revenues for the nine months ended September 30, 2002 increased modestly by
$48,406 or approximately 8% over the previous year's nine month period, mostly
influenced by a weak third quarter of the current year, in which revenues were
only $102,147 as compared to $242,032 (a 58% decrease) over the previous
year's third quarter. The results of operations for the third quarter were
also highly influential on those of the nine month period as explained
further, below.
19
General and Administrative costs for the nine month period increased to
$693,377 (from $482,892) reflecting an increase of $210,485 or 44% over the
previous year's nine month period. This category reflects the merger related
costs of $79,914 and inherited liabilities of $24,174 from Digitran. In
accordance with the company's policies, trade receivables aged in excess of 90
days are fully reserved irrespective of their ultimate anticipated
collectibility. In this quarter, the Company charged the accounts with
approximately $65,000 for aged receivables versus no such charge in the
previous year's period. Also, the Company added to its insurance coverage at
an increased cost of $29,000.
Development Costs for the nine month period increased to $452,263 (from
$303,433) reflecting an increase of $148,830 or 49% over the previous years'
nine month period. The increase is due to additional programmer costs,
increased technical support and increased cost for its communication lines.
Consulting Fees for the nine month period increased marginally to $387,075
(from $326,166) reflecting an increase of $60,909 or 19% over the previous
year's nine month period. The Company engaged several consultants in these
early years to help it develop and execute its business plans without long
term commitments. In addition, some of these costs reflect the amortization of
non-cash compensation, previously deferred, of significant officers and
employees.
Net Loss for the nine month period increased significantly to $910,527 (from
$474,251) reflecting an increase of $436,276 or 92% over the previous year's
nine month period. This is due primarily to the following reasons:
* The results of operations for the third quarter of 2002 as a result
of the financial impact of the following:
* The one-time expense, time, distraction and inheritance of
liabilities in connection with the Company's merger with
Digitran Systems, Incorporated. The merger occurred on
September 12, 2002. Costs for the quarter included increased
legal, accounting and other merger related expenses of $79,914
which will not recur. The Company inherited $24,174 of current
liabilities and approximately $280,000 of potential obligations
with respect to the dividends in arrears relative to Digitran
Systems, Incorporated's Preferred Stock shares.
* The unfortunate timing of revenues for the third quarter 2002.
Revenues were $102,147 as compared to $242,032 (a 58% decrease)
over the previous years' third quarter. There was a long
negotiation cycle for the Company's software products with potential
customers. Therefore, revenues within a quarter can lead to highly
volatile results of operations for individual quarters.
20
* The Company's heavy investment in potentially large contracts,
in anticipation of revenues not yet realized. During this quarter,
the Company was in the investment, qualifying and testing
stages of the sales cycle with respect to several customers. In
accordance with its accounting policies, the Company expensed these
costs currently unless the costs meet certain stringent requirements
for deferral.
* In addition to the non-recurring nature of the merger-related
costs, expenditures of approximately $100,000 included in the
nine-month period ended September 30, 2002 were already
eliminated and will not be needed in the future.
* Additional legal, accounting, consulting and compensation expenses
associated with establishing the Company as a viable operating and
reporting entity.
* It is important to note that a significant portion of the Company's
expense for the nine months ended September 30, 2002 is of a non-cash
nature and not expected to continue in significant amounts beyond
2003. These expenses are typical of software companies especially in
the early years. Of the loss of $910,527 for the nine months ended
September 30, 2002 only $601,956 represents cash used in operating
activities, compared to $312,102 for the comparable period of the
previous year.
In summary, the loss for the nine month period ended September 30, 2002
is greater than expected from when management originally established its
business plan several years ago. A vibrant securities trading environment and
a healthy physical condition of the New York financial district were
assumptions in the original business model. Notwithstanding, the Company
properly predicted the need for: (1) a quicker, next generation, and more
cost-efficient trading platform for the financial services industry, and (2) a
significant investment in the design, development and implementation of its
business solution. In other words, although lower revenues were not originally
fully anticipated, the level of investment certainly was. Although much of the
investment expended was of a non-cash nature, such commitment was necessary to
attract, assemble (from around the world), and retain individuals especially
programmers which possess relatively unique capacities and skill sets required
to design, customize, enhance and maintain the Company's products.
Years Ended December 31, 2000 and December 31, 2001
For the year ended December 31, 2001 TradinGear's consolidated revenues
increased to $1,128,836, as compared to $242,778 for the year ended December
31, 2000. This increase is attributable primarily to the sales and initial
delivery of TradinGear's new exchange systems platforms software.
Operating loss from continuing operations decreased significantly to
$436,651 for the year ended December 31, 2001, as compared to a loss of
$1,208,319 for the year ended December 31, 2000. This decrease is due
primarily to the significant increase in revenues, with only a slight increase
in operating costs to $1,565,487 for the year ended December 31, 2001 from
$1,451,097 for the year ended December 31, 2000.
21
Despite the significant increase in revenues, general and administrative
expenses declined by $35,144, to $601,098 for the year ended December 31, 2001
from $636,242 for the year ended December 31, 2000. This decline resulted from
TradinGear's ability to support increased sales and revenues without having to
increase its payroll, which remained constant at 8 employees throughout 2001.
Website costs (essentially, a one-time expense incurred during fiscal 2000)
declined to $4,508 for the year ended December 31, 2001 from $87,629 for the
year ended December 31, 2000. Development costs remained virtually constant
($426,544 for the year ended December 31, 2001 as compared to $418,044 for the
year ended December 31, 2000) as TradinGear refined existing products and
developed new products for the marketplace. The significant increase in
consulting fees (to $496,530 for the year ended December 31, 2001 from
$286,179 for the year ended December 31, 2000) principally reflects consulting
and professional agreements entered into by TradinGear during 2001.
After deductions for Other Expenses (primarily a one-time realized loss
of $79,450 on the sale of securities in fiscal 2000) and a Provision for
Income Tax, TradinGear had a net loss for the year ended December 31, 2001 of
$467,761, down significantly from $1,282,702 for the year ended December 31,
2000, for the reasons set forth above.
TradinGear files Federal Tax Returns, which reflect net operating loss
carry forwards. At December 31, 2001 and March 31, 2002, TradinGear has net
operating loss carry-forwards in excess of $2,000,000. TradinGear has not
recorded any income tax benefit for the year ended December 31, 2001 or the
quarter ended March 31, 2002. The Tax Reform Act of 1986 contains provisions
that may limit the net operating loss carry-forwards available to be used in
any given year in the event of significant changes in ownership. Management
cannot presently determine the probability of any tax benefit being realized
in future periods.
Liquidity and Capital Resources
The Company currently has limited cash to pay its obligations, although it
intends to pay its approximately $300,000 of liabilities from the proceeds of
the Asset Sale. The Company intends to use the proceeds of the Asset Sale to
fund future operations.
As of December 31, 2001, TradinGear had cash and cash equivalents of
$230,360, a positive working capital position of $183,142 and no significant
debt. As of September 30, 2002, TradinGear had cash and cash equivalents of
$227,334, a positive working capital position of $57,703 and no significant
long-term debt. Subsequent to September 30, 2002, $100,000 additional cash
was raised, although $250,000 was committed, through the sale of stock at a
share price of $.75 per share, most of which has been used for operations.
For the year ended December 31, 2001 the net cash used in operating
activities was $96,620 ($601,956 for the nine months ended September 30, 2002)
as compared with cash used in operating activities in the year ended December
31, 2000 of $730,571.
During the year ended December 31, 2001, TradinGear's negative cash flow
was funded primarily by the issuance of common stock for $281,125 resulting in
net cash flow from financing activities of $281,125, as compared to no cash
flow from financing activities in the year ended December 31, 2000. During
the nine months ended September 30, 2002, cash flow was funded from the
issuance of $316,500 of convertible notes and $298,000 from the issuance of
common stock.
22
CHANGE IN CONTROL
Reverse Merger
On September 12, 2002, TradinGear.com, Incorporated acquired Digitran
Systems Incorporated ("Digitran"), a publicly held Delaware corporation, in a
reverse merger. The provisions of the Merger included a post-merger name
change in which Digitran became TGFIN Holdings, Inc. Former Digitran common
stock shareholders exchanged their shares for TGFIN Holdings, Inc. common
stock shares on a 21-to-1 reverse split basis; former Digitran common stock
Class B shareholders exchanged their shares for TGFIN Holdings, Inc. common
stock shares on a 20-to-1 reverse split basis; and former TradinGear.com,
Incorporated common stock shareholders exchanged their shares for TGFIN
Holdings, Inc. common stock shares one a 1-to-1 basis.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
Only one copy of this Information Statement is being delivered to
multiple stockholders sharing an address unless the Company has received
contrary instructions from one or more of our stockholders. The Company must
receive a written request at its corporate offices at 39 Broadway, New York,
New York 10006 from a stockholder at a shared address with another stockholder
to receive an additional copy of our this information statement. In addition,
the Company must also receive a written request at its corporate offices at 39
Broadway, New York, New York 10006 from stockholders at a shared address who
are receiving multiple copies of this Information Statement to receive a
single copy of our this Information Statement. These aforementioned requests
can also be made orally by calling the Company at (212) 363-3900.
FORWARD-LOOKING STATEMENTS
This information statement contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Forward-looking statements, by their nature, involve estimates,
projections, goals, forecasts, plans, assumptions, risks and uncertainties
that could cause actual results or outcomes to differ materially from those
expressed in a forward-looking statement. Forward-looking statements often
include words or phrases such as "believes," "expects," "may," "will,"
"should," "anticipates," "estimates," "intends," "plans," or "projects" or
similar expressions. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance and achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited to,
those discussed in this information statement under "Business." These factors
do not include all factors that might affect the Company's business and
financial condition after the Asset Sale and the further development of the
other products and the acquisition of other businesses. The Company cautions
you not to place undue reliance on these forward-looking statements, which
reflect its management's view only as of the date of this information
statement. The Company does not intend, and undertakes no obligation, to
update any forward-looking statement, except to the extent required by law.
23
HISTORICAL AND PRO FORMA FINANCIAL STATEMENTS
The Transaction
The Asset Sale represents a significant disposition of TradinGear.com's,
business, although not all operating assets will be sold. The balance sheet
effect of the transaction is such that TradinGear.com will receive $2,900,000
in cash upon closing. An additional $100,000 will be held in escrow to
reimburse the Buyer for possible claims arising out of the Asset Sale, if any.
To the extent the $100,000 is not required, this amount will be released to
TradinGear.com after one year. Correspondingly, TradinGear.com's equity will
be increased by the amounts of cash received. The Income Statement effect of
the Transaction is to record a gain from discontinued operations equal to the
amount of cash received after payment of expenses.
Pro Forma Financial Statements
The pro forma balance sheet is as of September 30, 2002 and the income
statement for the year ended April 30, 2002 and the nine months ended
September 30, 2002. The unaudited pro forma consolidated results are based on
estimates and assumptions, which have been made solely for the purpose of
developing such pro forma information. The unaudited pro forma consolidated
results are not necessarily indicative of the actual results of operations and
financial condition that would have been achieved had the Asset Sale been
consummated as of January 1, 2002 or September 30, 2002, respectively.
Pro Forma Balance Sheet
The Pro Forma Balance Sheet includes audited historical balance sheets
of TGFIN Holdings, Inc. The Pro Forma adjustments are made to the historical
balance sheet as of September 30, 2002 to show the effect of the Asset Sale
had it occurred on September 30, 2002. All material adjustments required to
reflect the Asset Sale are set forth in the column labeled "Pro Forma
Adjustments", and in the opinion of management, all adjustments have been made
that are necessary to present fairly the pro forma data.
The unaudited pro forma condensed consolidated balance sheet should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial
statements, including the notes thereto, appearing in this Information
Statement. The pro forma data is for informational purposes only and may not
necessarily reflect our financial position or what our financial position
would have been had we consummated the Asset Sale on September 30, 2002.
Pro Forma Income Statements
The Pro Forma Income Statements for TGFIN Holdings, Inc. include an unaudited
historical income statement for the previous fiscal year end, unaudited
results from operations as of September 30, 2002 (its most recent and
available financial statement), Pro Forma adjustments as if the transaction
had occurred at the beginning of the period presented, and Pro Forma results.
The Income Statement for TGFIN Holdings, Inc. for the year ended April 30,
2002 (when it was known as Digitran Systems, Incorporated), in keeping with
the purpose of the Pro Forma Income Statement, is presented with only the
results from continuing operations. Losses from its discontinued operations
and Gains from extraordinary items have been excluded in this Pro Forma Income
24
Statement. Since TradinGear.com, Incorporated was audited at December 31,
2001, and in order to update its financial results for inclusion in the
unaudited consolidated historical Income Statement for TGFIN Holdings, Inc.
for the previous fiscal year ended April 30, 2002, its results from operations
from the quarter ended March 31, 2002 were added, and its results from
operations from the quarter ended March 31, 2001 were subtracted, to arrive at
the twelve months ended March 31, 2002. The result is representative of the
consolidated results from continuing operations for the previous fiscal year.
Consequently, the quarter ended March 31, 2002 is included twice in the Pro
Forma Income Statement: as part of the historical previous fiscal year end,
and as part of the unaudited income statement for the Nine Months Ended
September 30, 2002. The Pro Forma results from these adjustments illustrate
the pro forma costs of continuing operations after the Asset Sale. Since the
purpose of the Pro Forma Income Statement is to illustrate the Pro Forma
effects of the transaction on continuing operations only, the effect of the
Asset Sale and related gain from discontinued operations, are shown
separately.
Book Value
The Pro Forma effect of the transaction is to increase the Book Value of TGFIN
Holdings, Inc. by $.13 per share.
25
TGFIN HOLDINGS, INC
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
Unaudited Pro Forma
Consolidated Adjustments Pro Forma
TGFIN Holdings As if Asset Pro Forma Results after
Inc. as of Sale occurred Effect of effect for
September 30, at September 30, Disposition Disposition
2002 2002 of Assets of Assets
ASSETS ------------- --------------- ----------- -------------
- ------
Current Assets:
Cash and cash
equivalents $ 227,334 $ 0 $ 2,800,000(2)$ 3,027,334
Accounts receivable,
net 63,947 (63,947)(1) 0 0
Prepaid expenses 18,517 (18,517)(1) 0 0
----------- ------------ ----------- -----------
Total Current
Assets 309,798 (82,464) $ 2,800,000 $ 3,027,334
Property and equipment,
net 134,414 (119,414)(1) 0 15,000
Deposits 101,621 (101,621)(1) 100,000(2) 100,000
----------- ------------ ----------- -----------
Total Assets $ 545,883 $ (303,499) $ 2,900,000 $ 3,142,334
=========== ============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 201,407 $ (201,407)(1) $ 0 $ 0
Accrued expenses 50,688 (50,688)(1) 0 0
Notes payable 0 0 0 0
----------- ------------ ----------- -----------
Total Current
Liabilities $ 252,095 $ (252,095) $ 0 $ 0
----------- ------------ ----------- -----------
Stockholders' Equity:
Preferred stock ($.01
par value) 506 0 0 506
Common stock ($.001
par value) 220,639 0 0 220,639
Class B Common stock
($.01 par value) 0 0 0 0
Additional paid-in
capital 3,469,979 0 0 3,469,979
Less: Deferred
Compensation due to
Consultants (251,840) 0 0 (251,840)
Retained earnings
(accumulated deficit)(3,145,546) (51,404)(1) 2,900,000(2) (296,950)
----------- ------------ ---------- -----------
Total Stockholders'
Equity (Deficit) $ 293,738 $ (51,404) $2,900,000 $ 3,142,334
----------- ------------ ---------- -----------
Total Liabilities
and Stockholders'
Equity $ 545,833 $ (303,499) $2,900,000 $ 3,142,334
=========== ============ ========== ===========
Book value per share 0.01 (0.00) 0.13 0.14
Cash Dividends per
share (none) 0.00 0.00 0.00 0.00
Basic and diluted
common shares
outstanding 22,063,935 22,063,935 22,063,935 22,063,935
========== ========== ========== ==========
See accompanying notes to these pro forma financial statements.
26
TGFIN HOLDINGS, INC
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Historical Income Statement
For the most recent Fiscal Year
Ended April 30, 2002
-------------------------------
Unaudited
Audited Consolidated
For the Unaudited For the Most
Year Ended For the Twelve Recent Fiscal
April 30, 2002 Months Ended Year Ended
TGFIN March 31, 2002 TGFIN
Holdings, TradinGear.com Holdings,
Inc. Incorporated Inc.
--------- -------------- ---------
Revenues:
Software license fees $ 0 $ 1,351,405 $1,351,405
--------- ----------- ----------
Costs and Expense:
General and administrative 0 1,048,260 1,048,260
Development costs 0 368,521 368,521
Consulting fees 0 557,210 557,210
Depreciation expense 0 47,581 47,581
--------- ----------- ----------
Total Costs and Expenses 0 $ 2,021,572 $2,021,572
--------- ----------- ----------
Net Income (Loss) from Operations $ 0 $ (670,167) $ (670,167)
--------- ----------- ----------
Net Income (Loss) from continuing
operations 0 $ (670,167) $ (670,167)
Income (Loss) from discontinued
operations - - -
---------- ----------- ----------
Net Income (Loss) before
Provision for Income Tax 0 (670,167) (670,167)
---------- ----------- ----------
Provision for Income Tax 0 5,949 5,949
---------- ----------- ----------
Net Income (Loss) $ 0 $ (664,218) $ (664,218)
========== ========== ==========
Other Comprehensive income (loss)
Dividends on convertible
preferred stock, unpaid (28,280) 0 (28,280)
---------- ---------- ----------
Total other comprehensive income
(loss) $ (28,280) $ (664,218) $ (692,498)
========== ========== ==========
Income (Loss) per Share:
Basic and diluted Income (loss)
per share from:
continuing operations $ 0.00 $ (0.03) $ (0.03)
discontinuing operations 0.00 0.00 0.00
---------- ---------- ----------
Total basic and diluted income
(loss) per share $ 0.00 $ (0.03) $ (0.03)
========== ========== ==========
Basic and diluted common shares
outstanding 23,883,447 22,063,935 22,063,935
========== ========== ==========
[CONTINUED]
TGFIN HOLDINGS, INC
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Pro Forma
Pro Forma Results after
Effect of Effect for
Pro Forma Disposition of Disposition
Adjustments Assets of Assets
----------- -------------- -------------
Revenues:
Software license fees $(1,351,405)(1) $ 0 $ 0.00
--------- ----------- ----------
Costs and Expense:
General and administrative (808,260)(1) 0 240,000
Development costs (368,521)(1) 0 0
Consulting fees (557,210)(1) 0 0
Depreciation expense (43,581)(1) 0 4,000
---------- ----------- ----------
Total Costs and Expenses (1,777,572) $ 0 $ 244,000
---------- ----------- ----------
Net Income (Loss) from Operations $ 426,167 $ 0 $ (244,000)
---------- ----------- ----------
Net Income (Loss) from continuing
operations 426,167 $ 0 $ (244,000)
Income (Loss) from discontinued
operations - $ 2,900,000(2) $2,900,000
----------- ----------- ----------
Net Income (Loss) before
Provision for Income Tax 426,167 2,900,000 2,656,000
----------- ----------- ----------
Provision for Income Tax (5,949)(1) 0 0.00
----------- ----------- ----------
Net Income (Loss) $ 420,218 $ 2,900,000 $2,656,000
=========== =========== ==========
Other Comprehensive income (loss)
Dividends on convertible
preferred stock, unpaid 0 0 (28,280)
----------- ----------- ----------
Total other comprehensive income
(loss) $ 420,218 $ 2,900,000 $2,627,720
=========== =========== ==========
Income (Loss) per Share:
Basic and diluted Income (loss)
per share from:
continuing operations $ 0.02 $ 0.00 $ (0.01)
discontinued operations 0.00 0.13 0.13
----------- ----------- ----------
Total basic and diluted income
(loss) per share $ 0.02 $ 0.13 $ 0.12
=========== =========== ==========
Basic and diluted common shares
outstanding 22,063,935 22,063,935 22,063,935
=========== =========== ==========
See accompanying notes to these pro forma financial statements.
27
TGFIN HOLDINGS, INC
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
For the Nine Months Ended Pro Forma
September 30, 2002 Pro Forma Results after
------------------------------ Effect of Effect for
TGFIN Pro Forma Disposition Disposition
Holdings, Inc. Adjustments of Assets of Assets
-------------- ------------- ------------- --------------
Revenues:
Software
license fees $ 662,342 $ (662,342) $ 0 $ 0
-------------- ----------- ------------- --------------
Costs and Expense:
General and
administrative 693,377 (513,377)(1) 0 180,000
Development costs 452,263 (452,263)(1) 0 0
Consulting fees 387,075 (387,075)(1) 0 0
Depreciation
expense 33,121 (30,121)(1) 0 3,000
-------------- ----------- ---------- --------------
Total Costs
and Expenses $ 1,565,836 $(1,382,836) $ 0 $ 183,000
-------------- ----------- ---------- --------------
Net Income (Loss)
from Operations $ (903,494)$ 720,494 $ 0 $ (183,000)
-------------- ----------- ---------- --------------
Net Income (Loss)
from continuing
operations $ (903,494)$ 720,494 $ 0 $ (183,000)
Net Income (Loss)
from discontinued
operations $2,900,000 (2) $ 2,900,000
-------------- ----------- ---------- --------------
Net Income (Loss)
before Provision
for Income tax (903,494) 720,494 2,900,000 2,717,000
-------------- ----------- ---------- --------------
Provision for
Income Tax 7,033 (7,033)(1) 0 0
-------------- ----------- ---------- --------------
Net Income (Loss) $ (896,461)$ 713,461 $2,900,000 $ 2,717,000
============== =========== ========== ==============
Other Comprehensive
Income (Loss)
Dividends on
convertible
Preferred stock
unpaid (28,280) 0.00 0 (28,280)
-------------- ----------- ---------- --------------
Total other
Comprehensive
Income (Loss) $ (924,741)$ 713,461 $2,900,000 $ 2,688,720
============== =========== ========== ==============
Income (Loss)
per Share:
Basic and diluted
Income (loss)
per share from:
continuing
operations $ (0.04)$ 0.03 $ 0.00 $ (0.01)
Discontinued
operations 0.00 0.00 0.13 0.13
-------------- ----------- ---------- --------------
Total basic and
diluted income
(loss) per
share $ (0.04)$ 0.03 $ 0.13 $ 0.12
============== =========== ========== ==============
Basic and diluted
common shares
outstanding 22,063,935 22,063,935 22,063,935 22,063,935
============== ========== ========== ==============
See accompanying notes to these pro forma financial statements.
28
Notes to Pro Forma Financial Statements
(1) To reflect the elimination of all operating assets, liabilities, revenues
and expenses as of the date indicated, except for operating expenses expected
to continue.
(2) To reflect cash to be received in the Asset Sale as follows: $2,900,000 in
cash, expenses of $100,000 for the Asset Sale and $100,000 to be placed in
escrow for one year for the satisfaction of potential claims, if necessary.
The $2,900,000 net sale price is reflected as a gain from discontinued
operations, even though some product lines will be retained by the company for
further activity.
29
September 30, 2002
TGFIN HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30, December 31,
2002 2001
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 227,334 $ 230,360
Accounts receivable, net 63,947 -
Prepaid expenses 18,517 6,801
Deferred Cost - 59,899
------------ ------------
Total Current Assets 309,798 297,060
Property and equipment, net 134,414 151,964
Deposits 101,621 101,621
------------ ------------
Total Assets $ 545,833 $ 550,645
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 201,407 $ 31,087
Accrued expenses 50,688 42,731
Deferred Revenue 40,000
------------ ------------
Total Current Liabilities 252,095 113,818
------------ ------------
Stockholders' Equity:
Preferred stock ($0.01 par value)
1,000,000 shares authorized,
50,500 shares issued
and outstanding 506 -
Common stock ($.0001 par value),
50,000,000 shares authorized,
22,063,935 issued and
outstanding at September 30,
2002 220,639 188,293
Additional paid-in-capital 3,469,979 2,865,197
Less: Deferred compensation
Relating to stock issued to
consultants (251,840) (381,644)
Retained earnings (deficit) (3,145,546) (2,235,019)
------------ ------------
Total Stockholders' Equity 293,738 436,827
------------ ------------
Total Liabilities and
Stockholders' Equity $ 545,833 $ 550,645
============ ============
These accompanying notes are integral part of these financial statements.
30
TGFIN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
REVENUES $ 102,147 $ 242,032 $ 662,342 $ 613,936
COSTS AND EXPENSES
General & admin. $ 193,512 $ 16,740 $ 693,377 $ 428,892
Development costs 113,708 83,240 452,263 303,433
Consulting fees 194,715 254,196 387,075 326,166
Depreciation expense 11,252 9,158 33,121 26,521
---------- --------- -------- ---------
Total costs and expense 513,187 363,334 1,565,836 1,085,012
Net Income (loss) before
Provision for Income
Taxes $ (411,040)$(121,302) $(903,494)$(471,076)
Provision for
Income taxes $ 1,260 $ 3,175 $ 7,033 $ 3,175
NET INCOME (LOSS) $ (412,300)$(124,477) $(910,527)$(474,251)
BASIC AND DILUTED LOSS
PER SHARES $ (0.02)$ (0.01) $ (0.05)$ (0.03)
Weighted Average number
of shares outstanding 20,092,711 18,674,309 19,573,487 18,674,309
The accompanying notes are an integral part of these consolidated
financial statements.
31
TGFIN HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
September 30,
2002 2001
Cash Flows from Operating
Activities:
Net Income (Loss) $ (910,527) $ (474,251)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
Amortization 33,121 26,521
Amortization of deferred
Compensation 225,004 130,782
Compensation costs of common stock
issued to consultant 14,416 -
Changes in assets and
liabilities, net of effect
from:
Decrease (increase) in
accounts receivable (63,947) 7,213
Increase in prepaid
Expenses (11,716) (2,416)
Increase in deposits - (49,899)
Increase in accounts
Payable and accrued
Expenses 151,693 179,948
Increase (decrease) in
deferred revenue (40,000) (130,000)
---------- ----------
Net cash used in
Operating activities (601,956) (312,102)
---------- ----------
Cash Flows from Investing
Activities:
Purchase of property and
Equipment (15,570) (35,155)
---------- ----------
Net cash provided by
(Used in) investing
Activities (15,570) (35,155)
---------- ----------
Cash Flows from Financing
Activities:
Cash proceeds from issuance
Of convertible Notes 316,500 -
Issuance of common stock 298,000 250,000
---------- ----------
Net Cash provided by
Financing Activities 614,500 250,000
---------- ----------
Net Increase (decrease) in
cash and Cash Equivalents (3,026) (97,257)
Cash and Cash Equivalents,
beginning of period 230,360 97,257
---------- ----------
Cash and Cash Equivalents,
end of period $ 227,334 $ -
========== ==========
These accompanying notes are an integral part of these financial statements.
32
TGFIN HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
2002 2001
Cash paid during the period
for:
Income Taxes $ 3,425 $ -
========== ==========
Interest $ 9,200 $ -
========== ==========
Supplemental Disclosures
of Noncash Investing and
Financing Activities:
Common Stock Issued
in exchange for
Convertible Notes $ 316,500 $ -
========== ==========
Common stock cancelled
In exchange for marketable
Securities $ - $ (755,847)
========== ==========
Common Stock issued in
exchange for accounts
payable $ 17,590 $ 484,125
========== ==========
Common Stock issued for
Services $ 14,416 $ 291,700
========== ==========
Common stock for prepaid
Services $ 95,200 $ -
========== ==========
Cost of Merger $ 79,899 $ -
========== ==========
Net liabilities assumed in Merger
With Digitran Systems, Incorporated $ 24,174 $ -
========== ==========
These accompanying notes are an integral part of these financial statements.
33
TGFIN HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
1. CONDENSED FINANCIAL STATEMENTS TRANSITION PERIOD
The accompanying financial statements have been prepared by the Company
without audit. They include information of TGFIN Holdings, Inc. and its sole
and wholly-owned subsidiary, TradinGear.com, Incorporated. In the opinion of
management, all material adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position at September
30, 2002 and the results of operations and cash flows for the nine month
periods ended September 30, 2002 and 2001 have been made.
The Company has made the transition from an April 30th fiscal year-end to a
December 31st fiscal year-end by including in the results of operations and
cash flows for the period ended September 30, 2002 three months (July 1, 2002
through September 30, 2002) from TradingGear.com Incorporated and two months
(August 1, 2002 through September 30, 2002) from Digitran Systems,
Incorporated. Digitran Systems, Incorporated previously had filed a Form 10-
QSB for the fiscal quarter ended July 31, 2002. During this period August 1,
2002 through September 30, 2002 Digitran Systems, Incorporated incurred merger
related costs of $12,131. These current payables have become payables of TGFIN
Holdings, Inc.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 2001
audited financial statements, filed with the proxy statement in August 2002.
The results of operations for the periods ended September 30, 2002 and 2001
are not necessarily indicative of the operating results for the respective
full years.
The software licensing agreements which are marketed by the Company often sell
at a relatively high price in comparison to the total annual sales of the
Company. This relationship could lead to individual sales having a
disproportionately large effect on total sales, at the current revenue volume.
Therefore, sales within a quarter can lead to highly volatile results of
operations for individual quarters. The results for individual quarters may
not be indicative of annual results. All quarterly information should be
considered in light of the last fiscal year and the current year to date
operations of the Company.
2. REVERSE MERGER
On September 12, 2002, TradinGear.com, Incorporated acquired Digitran Systems
Incorporated ("Digitran"), a publicly held Delaware corporation, in a reverse
merger. The provisions of the Merger included a post-merger name change in
which Digitran became TGFIN Holdings, Inc. Former Digitran common stock
shareholders exchanged their shares for TGFIN Holdings, Inc. common stock
shares on a 21-to-1 reverse split basis; former Digitran common stock Class B
shareholders exchanged their shares for TGFIN Holdings, Inc. common stock
shares on a 20-to-1 reverse split basis; and former TradinGear.com,
Incorporated common stock shareholders exchanged their shares for TGFIN
Holdings, Inc. common stock shares one a 1-to-1 basis. TradinGear.com,
Incorporated continues as the only operating subsidiary of TGFIN Holdings,
Inc., and is wholly-owned.
34
TGFIN HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Continued)
Shareholders voted for the reverse merger in a Special Shareholder's Meeting
held on September 12, 2002 in Springfield, NJ. See also Part II, Item 4:
Submission of Items to Shareholder Vote of Securities Holders, below. The
merger transaction was accounted for as a purchase with the Company being
deemed the acquirer for accounting and financial reporting purposes. However,
since the stockholders of the Company will own approximately 93% of the
outstanding shares of the reorganized TGFIN Holdings, Inc. no step up basis or
goodwill will be recorded by the Company. This accounting treatment is in
accordance with the view of Securities and Exchange Commission staff members
that the acquisition by a public shell of the assets of a business from a
private company should be accounted for at historical cost and accounted for
as a reverse merger.
3. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
The Company consists of TGFIN Holdings, Inc. and its sole and wholly-owned
operating subsidiary, TradinGear.Com, Incorporated (the "Company"). TGFIN was
incorporated under the laws of Delaware in March 1985 (originally as Mark,
Inc.). TradinGear.com, Incorporated was incorporated under the laws of the
State of Delaware on July 7, 1999.
TradinGear.Com, Inc. produces trading software designed for the financial
services industry. The Company's software technology is designed to provide
stock exchanges and broker dealers in the securities industry the ability to
offer to its customers an on-line electronic system for securities trading.
The Company's accounting policies and certain footnote disclosures are
included in this quarterly report, in addition to standard reporting
requirements, because this is the first report of the Company after its
reverse merger with Digitran Systems, Incorporated. Management believes such
disclosure is helpful in understanding and evaluating the nature of its new
operating subsidiary, TradinGear.com, Incorporated.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments, including
cash and cash equivalents, trade receivable, accounts payable and other
accrued liabilities, approximate fair value because of their short maturities.
35
TGFIN HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Continued)
Revenue Recognition
The Company's revenues are derived principally from providing its customers
with software applications that enable them to conduct stock transactions
online. Additional revenue may be derived from post contract support services
such as maintenance/service contracts, hosting upgrades and enhancements.
These revenues are recognized according to the statement of position 97-2 (SOP
97-2), "Software Revenues Recognition," which requires that revenue recognized
from software arrangements be allocated to each element of the arrangement
based on the relative fair values of the elements. Revenue on product sales
is recognized upon completion of each stage of production and acceptance of
the stage by the customer. The Company's post contract support services
revenue is recognized over the period during which the service is expected to
be performed. The software arrangement provides for no right of return on
refunds and are fixed or determinable. Deferred revenue represents amounts
received on uncompleted projects.
Use of Management's Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
The Company accounts for its investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115),
which requires that investments in debt securities and marketable equity
securities be designated as trading, held-to-maturity or available-for-sale.
Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determinations at each balance sheet date. Debt securities for which the
Company does not have the intent or ability to hold to maturity are classified
as available for sale, along with any investments in equity securities.
Securities available for sale are carried at fair value, with unrealized gains
and losses, net of income taxes, reported as a separate component of
Stockholders' Equity.
36
TGFIN HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Continued)
3. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, Plant and Equipment
Property and equipment are recorded at cost and being depreciated for
financial accounting purposes on the straight-line method over their
respective estimated useful lives ranging from three to thirty-nine years.
Upon retirement or other disposition of these assets, the cost and related
accumulated depreciation are removed from the accounts and the resulting gains
or losses are reflected in the results of operations.
Expenditures for maintenance and repairs are charged to operations. Renewals
and betterments are capitalized. Depreciation of leased equipment under
capital leases is included in depreciation.
Product Development
Costs incurred in conjunction with the development of new products are charged
to expense as incurred. Material software development costs subsequent to the
establishment of technological feasibility will be capitalized. Based upon
the Company's product development process, technological feasibility is
established upon the completion of a working model. To date attainment of
technological feasibility and general release to customers have substantially
coincided.
Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". SFAS 121 requires that if facts and circumstances
indicate that the cost of fixed assets or other assets may be impaired, an
evaluation of recoverability would be performed by comparing the estimated
future undiscounted pre-tax cash flows associated with the asset to the
asset's carrying value to determine if a write-down to market value or
discounted pre-tax cash flow value would be required.
Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting on Comprehensive Income". This statement establishes
rules for the reporting of comprehensive income and its components which
require that certain items such as foreign currency translation adjustments,
unrealized gains and losses on certain investments in debt and equity
securities, minimum pension liability adjustments and unearned compensation
expense related to stock issuances to employees be presented as separate
components of stockholders' equity. The adoption of SFAS 130 had no impact on
total shareholders' equity.
Stock-Based Compensation
The Company will follow Accounting Principles Board Opinion No. 25, (APT 25),
"Accounting for Stock Issued to Employees" in accounting for future employee
stock option plans. Under APB 25, when the exercise price of the Company's
employee stock options equals or is above the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123, (FASB
123), "Accounting for Stock Based Compensation" are applied in accordance with
FASB 123 at the fair value of these options.
37
TGFIN HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Continued)
3. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings (Loss) Per Share
The Company will calculate earnings (loss) per share in accordance with SFAS
No. 128, "Computation of Earnings Per Share" and SEC Staff Accounting Bulletin
No. 98. Accordingly, basic earnings per share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the period.
Common equivalent shares consist of the incremental common shares issuable
upon the conversion of the Preferred Stock (using the if-converted method) and
shares issuable upon the exercise of stock options (using the treasury stock
method); common equivalent shares are excluded from the calculation if their
effect is anti-dilutive.
Earnings (loss) per share in these financial statements has been computed as
if the outstanding shares as of December 31, 2001 were outstanding for all
periods.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109, (SFAS
109) "Accounting for Income Taxes". SFAS 109 requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized.
Start-Up Activities
The American Institute of Certified Public Accountants issued Statement of
Position 98-5 (SOP 98-5), "Reporting the Costs of Start-Up Activities". SOP
98-5 requires start-up costs, as defined, to be expensed as incurred and is
effective for financial statements for fiscal years beginning after December
15, 1998. The Company expenses all start-up costs as incurred in accordance
with this statement and therefore the issuance of SOP 98-5 will have no
material impact on the Company's financial statements.
Recent Accounting Pronouncements
In July 2001 the FASB issued Statement of Financial Accounting Standards No.
141, "Business Combinations" (SFAS 141) and Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS
141 requires that all business combinations initiated after June 30, 2001 be
accounted for using the purchase method of accounting and is effective for all
business combinations initiated after June 30, 2001. SFAS 142 requires that
goodwill be tested for impairment under certain circumstances, and written off
when impaired, rather then being amortized as previous standards required.
SFAS 142 is effective for fiscal years beginning after December 15, 2001.
Early application is permitted for entities with fiscal years beginning after
March 15, 2001 provided that the first interim period financial statements
have not been previously issued. The adoption of SFAS 141 had no effect on
the Company's operating results or financial condition. The Company is
currently assessing the impact of SFAS 142 on its operating results and
financial condition.
38
TGFIN HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Continued)
3. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassifications
Certain reclassifications have been made to the prior year balances to conform
to the current year presentation.
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, and their respective useful lives consist of
the following at September 30,
September 30 Estimated
2002 Useful
----------- Lives
Computer equipment $ 210,929 5
Office equipment 10,504 5
Leasehold improvements 7,350 5
----------
228,783
Less: Accumulated improvements (94,369)
----------
$ 134,414
==========
6. PROVISION FOR INCOME TAXES
For the period from inception (July 7, 1999) to September 30, 2002 the Company
had accumulated losses of $3,145,546. No federal tax expense or benefit has
been reported in the financial statements due to the uncertainty of future
operations. The Income taxes provided for are for minimum local income taxes.
39
TGFIN HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Continued)
7. COMMITMENTS AND CONTINGENCIES
Litigation
In the normal course of business, there may be various legal actions and
proceedings pending which could seek damages against the Company. Management
believes that the amount, if any, that may result from these claims, will not
have a material adverse affect on the financial statements.
Leases
The Company leases office equipment and office space under noncancellable
operating leases. Commitments under these leases at December 31, 2001 are as
follows:
2002 $ 139,082
2003 142,855
2004 146,741
2005 150,743
2006 90,725
---------
$ 670,146
=========
Employment Agreements
On December 10, 1999 the Company entered into an employment agreement with
Samuel H. Gaer, the Chief Executive Officer of the Company. The agreement is
for a term of three years commencing January 1, 2000 and provides for a base
annual salary of $120,000 and for bonuses as determined by the Company's Board
of Directors.
401(k) Plan and Profit Sharing Plan
The Company has approved a 401(k) Plan and a Profit Sharing Plan which cover
full-time employees who have attained the age of 21 and have completed at
least one year of service with the Company. Under the 401(k) Plan, an
employee may contribute an amount up to 25% of his compensation to the 401(k)
Plan on a pretax basis not to exceed the current Federal limitation of $10,500
per year (as adjusted for cost of living increase). Amounts contributed to
the 401(k) Plan are nonforfeitable. Under the Profit Sharing Plan, a member
in the plan participates in the Company's contributions to the Plan as of
December 31 in any year, with allocations to individual accounts based on
annual compensation.
An employee does not fully vest in the plan until completion of three years of
employment. The Board of Directors determines the Company's contributions to
the plan on a discretionary basis. The Company has not made any contributions
to date.
40
TGFIN HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Continued)
8. COMMON STOCK
The authorized capital stock of the Company consists of 50,000,000 (after
being increased from 25,000,000 through shareholder vote in conjunction with
the Merger) shares of common stock, par value $.01 per share, of which
22,063,9355 were outstanding as at September 30, 2002. Since the par value
for Digitran Systems, Incorporated, now TGFIN Holdings, Inc. was different
from that of TradinGear.com Incorporated, common stock was increased by
$218,425 and Paid in Capital was decreased by $218,425 as of the date of the
Merger. In this report, the Balance sheet at December 31, 2001 has been
retroactively restated to reflect the change in par value, for comparability.
NOTE 9 PREFERRED STOCK
The Series 1 Class A 8% Cumulative Convertible Preferred Stock has
a par value of $0.01 per share. As of September 30, 2002, there were 50,500
shares outstanding. Holders of preferred shares are entitled to cumulative
dividends of 8% per annum on the stated value of the stock, designated at $7
per share. Dividends are payable semi-annually on September 15 and March 15.
No dividends have been paid since March 15, 1993, resulting in dividends in
arrears at September 30, 2002 of approximately $280,540 or $5.55 per share,
including $14,140 accrued in the current quarter. Dividends are not payable on
any other class of stock ranking junior to the preferred stock until the full
cumulative dividend requirements of the preferred stock have been satisfied.
The preferred stock carries a liquidation preference equal to its stated value
plus any unpaid dividends. Holders of the preferred stock are entitled to one-
tenth of a vote for each share of preferred stock held. The Company may, at
its option, redeem at any time all shares of the preferred stock or some of
them upon notice to each preferred stockholder at a per share price equal to
the stated value ($7.00) plus all accrued and unpaid dividends thereon
(whether or not declared) to the date fixed for redemption, subject to certain
other provisions and requirements. Preferred Shares may be converted into
Common Shares on a one share of Preferred Stock for two shares of Common Stock
basis.
NOTE 10. SUBSEQUENT EVENT
The Company sold 333,333 shares of its common stock for $250,000 ($.75
per share) during November, 2002.
41
TRADINGEAR.COM, INCORPORATED
FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
42
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
TradinGear.Com, Incorporated
New York, New York
We have audited the accompanying balance sheets of TradinGear.Com,
Incorporated as of December 31, 2001 and 2000 and the related
Consolidated statements of operations, stockholders' equity and cash flows for
each of the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of TradinGear.Com,
Incorporated as of December 31, 2001 and 2000, and the results of operations
and cash flows for each of the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/Samuel Klein and Company
SAMUEL KLEIN AND COMPANY
Newark, New Jersey
April 10, 2002
43
TRADINGEAR.COM, INCORPORATED
BALANCE SHEETS
December 31, December 31,
ASSETS 2001 2000
- ------ ------------ -----------
Current Assets:
Cash and cash equivalents $ 230,360 $ 97,257
Accounts receivable, net - 50,300
Investments, available for sale
Securities - 755,847
Prepaid expenses 6,801 -
Deferred costs 59,899 -
----------- ---------
Total Current Assets 297,060 903,404
Property and equipment, net 151,964 137,369
Deposits 101,621 101,621
----------- ---------
Total Assets $ 550,645 $1,142,394
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 31,087 $ 326,918
Accrued expenses 38,431 25,000
Income tax payable 4,300 -
Deferred revenue 40,000 130,000
----------- ---------
Total Current Liabilities 113,818 481,918
----------- ---------
Stockholders' Equity:
Common stock ($.0001 par value,
30,000,000 shares authorized,
18,829,309 and 17,788,987 shares
issued and outstanding at December
31, 2001 and 2000, respectively) 1,883 1,779
Additional paid-in-capital 3,051,607 2,733,143
Less: Deferred compensation relating
To stock issued to consultants (381,644) (307,188)
Retained earnings (deficit) (2,235,019)(1,767,258)
----------- ---------
Total Stockholders' Equity 436,827 660,476
----------- ---------
Total Liabilities and
Stockholders' Equity $ 550,645 $1,142,394
=========== =========
These accompanying notes are integral part of these financial statements.
44
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
2001 2000
Revenues:
Software license fees $ 1,128,836 $ 242,778
Costs and Expense:
General and administrative 601,098 636,242
Website costs 4,508 87,629
Development costs 426,544 418,044
Consulting fees 496,530 286,179
Depreciation expense 36,807 23,003
----------- ---------
Total Costs and Expenses 1,565,487 1,451,097
----------- ---------
Net Loss from Operations (436,651) (1,208,319)
----------- ----------
Other Revenue (Expense)
Realized loss on sale of securities (79,450)
Interest Income 5,445
Miscellaneous revenue 11,737
Finance charges (35,172)
----------- ----------
(23,435) (74,005)
----------- ----------
Net Loss before Provision for
Income Tax (460,086) (1,282,324)
Provision for Income Tax 7,675 378
----------- ----------
Net Loss $ (467,761)$(1,282,702)
=========== ==========
Loss per Share:
Basic and diluted loss per share $ (0.02) $ (0.07)
=========== ==========
Basic and diluted common shares
outstanding 18,829,309 18,829,309
=========== ==========
These accompanying notes are integral part of these financial statements.
45
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Common Stock
Par Value $.0001
- -----------------------------------------------------------------------------
Common Additional
Number Stock Paid-In Deferred
of Shares Amount Capital Compensation
Balances, January 1, 2000 17,788,987 1,779 2,733,143 $(515,063)
Reclassification of
Unrealized Loss on
Available for Sale
Securities - - - -
Amortization of deferred
compensation - - - 207,875
Net Loss for the Year
Ended December 31, 2000 - - - -
---------- ---------- ----------- ---------
Balances December 31, 2000 17,788,987 1,779 2,733,143 (307,188)
Issuance of Common Stock 785,926 79 281,046 -
Common stock issued in
exchange for accounts
payable 1,378,870 138 483,987 -
Common stock issued for
services 881,373 88 309,202 (291,700)
Cancellation of Common
Stock (2,005,847) (201) (755,771) -
Amortization of deferred
compensation - - - 217,244
Net Loss for the Year
Ended December 31, 2001 - - - -
---------- ---------- ----------- ---------
Balances December 31, 2001 18,829,309 $ 1,883 $ 3,051,607 $(381,644)
========== ========== =========== =========
[CONTINUED]
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Unrealized
Retained Gain/(Loss) Total
Earnings Available Stockholders'
(Deficit) For Sale Equity
Balances, January 1, 2000 (484,556) 667,188 2,402,491
Reclassification of Unrealized
Loss on Available for Sale
Securities - (667,188) (667,188)
Amortization of deferred compensation - - 207,875
Net Loss for the Year Ended
December 31, 2000 (1,282,702) - (1,282,702)
--------------- ----------- ------------
Balances December 31, 2000 (1,767,258) - 660,476
Issuance of Common Stock - - 281,125
Common stock issued in exchange
for accounts payable - - 484,125
Common stock issued for services - - 17,590
Cancellation of Common Stock - - (755,972)
Amortization of deferred compensation - - 217,244
Net Loss for the Year Ended
December 31, 2001 (467,761) - (467,761)
--------------- ----------- -----------
Balances, December 31, 2001 $ (2,235,019) $ - $ 436,827
=============== =========== ===========
These accompanying notes are integral part of financial statements.
46
TRADINGEAR.COM, INCORPORATED
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2001 2000
Cash Flows from Operating
Activities:
Net Loss $(467,761) $(1,282,702)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 36,807 23,003
Loss on sale of
investments - 79,450
Amortization of deferred
compensation 217,244 207,875
Compensation costs of common stock
issued to consultant 17,590 -
Changes in assets and
liabilities, net of effect
from:
Decrease (increase) in
accounts receivable 50,300 (50,300)
Increase in prepaid
Expenses (6,801) -
Increase in deferred
Costs (59,899) -
Increase in deposits - (101,621)
Increase in accounts
Payable and accrued
Expenses 205,900 264,378
Increase (decrease) in
deferred revenue (90,000) 130,000
Increase (decrease) in
Accrued tax payable - (654)
---------- -----------
Net cash used in
Operating activities (96,620) (730,571)
---------- -----------
Cash Flows from Investing
Activities:
Purchase of property and
Equipment (51,402) (84,426)
Sale of Investments - 261,800
---------- ----------
Net cash provided by
(Used in) investing
Activities (51,402) 177,374
---------- ----------
Cash Flows from Financing
Activities:
Cash proceeds from officer's loan 28,000 -
Repayment of officer's loan (28,000) -
Issuance of common stock 281,125 -
---------- ----------
Net Cash provided by
Financing Activities 281,125 -
---------- ----------
Net Increase (decrease) in
cash and Cash Equivalents 133,103 (553,197)
Cash and Cash Equivalents,
beginning of period 97,257 650,454
---------- ----------
Cash and Cash Equivalents,
end of period $ 230,360 $ 97,257
Cash paid during the period
for:
Income Taxes $ 3,425 $ -
========== ==========
Interest $ 9,200 $ -
========== ==========
Supplemental Disclosures
of Noncash Investing and
Financing Activities:
Common Stock Issued
(Cancelled) in exchange
for marketable securities $ (755,847) $ -
========== ==========
Common Stock issued in
exchange for accounts
payable $ 484,125 $ -
========== ==========
Common Stock issued for
Services $ 309,290 $ -
========== ==========
These accompanying notes are integral part of these financial statements.
47
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
TradinGear.Com, Incorporated ("TG" or the "Company") was incorporated
Under the laws of the State of Delaware on July 7, 1999. TradinGear.Com,
Inc. produces trading software designed for the financial services industry.
The Company's software technology is designed to provide stock
exchanges and broker dealers in the securities industry the ability to offer
to its customers an on-line electronic system for securities trading.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments,
Including cash and cash equivalents, trade receivable, accounts payable and
other accrued liabilities, approximate fair value because of their short
maturities.
Revenue Recognition
The Company's revenues are derived principally from providing its
Customers with software applications that enable them to conduct stock
Transactions online. Additional revenue may be derived from post contract
support services such as maintenance/service contracts, hosting upgrades and
enhancements. The Company's principle revenues are recognized utilizing the
percentage of completion method of accounting for contract revenues in
conformity with Accounting Research Bulletin 45 (ARB-45) "Long Term
Construction Type Contracts" and the guidance contained within the American
Institute of Certified Public Accountants' Statements of Position ("SOP") 81-2
"Accounting for Performance of Construction-Type and Certain Production-Type
Contracts" and SOP 97-2 " Software Revenue Recognition". Accordingly the
Company recognizes its principle revenues from its software arrangements only
upon the completion and acceptance by the customer of contracted milestones.
The Company's post contract support services revenue is recognized over the
period during which the service is expected to be performed. The software
arrangements provide for no right of return or refunds and are fixed or
determinable. Deferred revenue represents amounts received on uncompleted
project milestones.
Use of Management's Estimates
The preparation of financial statements in conformity with generally
Accepted accounting principles requires management to make estimates and
Assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments
The Company accounts for its investments in debt and equity securities
48
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
(SFAS 115), which requires that investments in debt securities and marketable
equity securities be designated as trading, held-to-maturity or
available-for-sale.
Investments
Management determines the appropriate classification of its investments
In debt and equity securities at the time of purchase and reevaluates such
determinations at each balance sheet date. Debt securities for which
the Company does not have the intent or ability to hold to maturity are
classified as available for sale, along with any investments in equity
securities. Securities available for sale are carried at fair value, with
unrealized gains and losses, net of income taxes, reported as a separate
component of Stockholders' Equity.
Property and Equipment
Property and equipment are recorded at cost and being depreciated for
financial accounting purposes on the straight-line method over their
respective estimated useful lives ranging from three to thirty-nine
years. Upon retirement or other disposition of these assets, the cost and
related accumulated depreciation are removed from the accounts and the
resulting gains or losses are reflected in the results of operations.
Expenditures for maintenance and repairs are charged to operations.
Renewals and betterments are capitalized. Depreciation of leased equipment
Under capital leases is included in depreciation.
Product Development
Costs incurred in conjunction with the development of new products are
Charged to expense as incurred. Material software development costs
subsequent to the establishment of technological feasibility will be
capitalized. Based upon the Company's product development process,
technological feasibility is established upon the completion of a working
model. To date attainment of technological feasibility and general release to
customers have substantially coincided.
Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of". SFAS 121 requires that if facts and
Circumstances indicate that the cost of fixed assets or other assets may be
impaired, an evaluation of recoverability would be performed by comparing the
Estimated future undiscounted pre-tax cash flows associated with the asset to
the asset's carrying value to determine if a write-down to market value or
discounted pre-tax cash flow value would be required.
Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No.
130 (SFAS 130), "Reporting on Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its components
which require that certain items such as foreign currency translation
adjustments, unrealized gains and losses on certain investments in debt and
equity securities, minimum pension liability adjustments and unearned
compensation expense related to stock issuances to employees be presented as
separate components of stockholders' equity. The adoption of SFAS 130 had no
impact on total shareholders' equity.
49
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
Stock-Based Compensation
The Company will follow Accounting Principles Board Opinion No. 25,
(APB 25), "Accounting for Stock Issued to Employees" in accounting for future
employee stock option plans. Under APB 25, when the exercise price of the
Company's employee stock options equals or is above the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123,
(FASB 123), "Accounting for Stock Based Compensation" are applied in
accordance with FASB 123 at the fair value of these options.
Earnings (Loss) Per Share
The Company will calculate earnings (loss) per share in accordance with
SFAS No. 128, "Computation of Earnings Per Share" and SEC Staff Accounting
Bulletin No. 98. Basic earnings per share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the period.
Common equivalent shares consist of the incremental common shares
issuable upon the conversion of the Preferred Stock (using the if-converted
method) and shares issuable upon the exercise of stock options (using the
treasury stock method); common equivalent shares are excluded from the
calculation if their effect is anti-dilutive.
Earnings (loss) per share in these financial statements has been
computed as if the outstanding shares as of June 30, 2002 were outstanding for
all periods.
Income Taxes
The Company follows Statement of Financial Accounting Standards No.
109, (SFAS 109) "Accounting for Income Taxes". SFAS 109 requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
Start-Up Activities
The American Institute of Certified Public Accountants issued Statement
of Position 98-5 (SOP 98-5), "Reporting the Costs of Start-Up Activities".
SOP 98-5 requires start-up costs, as defined, to be expensed as incurred
and is effective for financial statements for fiscal years beginning after
December 15, 1998. The Company expenses all start-up costs as incurred in
Accordance with this statement and therefore the issuance of SOP 98-5 will
have no material impact on the Company's financial statements.
50
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
Recent Accounting Pronouncements
In July 2001 the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" (SFAS 141) and Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142). SFAS 141 requires that all business combinations initiated after
June 30, 2001 be accounted for using the purchase method of accounting and is
effective for all business combinations initiated after June 30, 2001. SFAS
142 requires that goodwill be tested for impairment under certain
circumstances, and written off when impaired, rather then being amortized as
previous standards required. SFAS 142 is effective for fiscal years beginning
after December 15, 2001. Early application is permitted for entities with
fiscal years beginning after March 15, 2001 provided that the first interim
period financial statements have not been previously issued. The adoption of
SFAS 141 had no effect on the Company's operating results or financial
condition. The Company is currently assessing the impact of SFAS 142 on its
operating results and financial condition.
Reclassifications
Certain reclassifications have been made to the prior year balances to
conform to the current year presentation.
2. INVESTMENTS
As of December 31, 2001 and 2000 the Company classified their
investments as available for sale securities. Unrealized holding gains
(losses) on available for sale securities which are reported at fair value are
included as a separate component of stockholders' equity.
Investments at December 31, 2000 consist of the following:
Unrealized
Cost Market Gain (Loss)
---- ------ -----------
Available for sale securities:
Marketable Equity Securities $1,097,097 $755,847 $ -
========== ======== ===========
The Company had no investments at June 30, 2002 or December 31, 2001.
3. ACCOUNTS RECEIVABLE
The Company provides an allowance for doubtful accounts equal to the
estimated uncollectible amounts. The Company's estimate is based on
historical collection experience and a review of the current status of trade
accounts receivable. It is reasonably possible that the Company's estimate of
the allowance for doubtful accounts will change. Accounts receivable
consist of the following at:
June 30, December 31,
2002 2001 2000
----------- -------- --------
Accounts Receivable Trade $ 235,552 - $50,300
=========== ======== ========
51
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, and their respective useful lives
consist of the following at:
Estimated
June 30, December 31, Useful
2002 2001 2000 Lives
----------- ---------- ---------- -----
Computer equipment 206,434 $ 198,208 $ 148,580 5
Office equipment 10,504 7,654 5,880 5
Leasehold improvements 7,350 7,350 7,350 5
----------- ---------- ----------
224,288 213,212 161,810
Less: Accumulated
depreciation 83,117 61,248 24,441
----------- ---------- ----------
$ 141,171 $ 151,964 $ 137,369
=========== ========== ==========
5. RELATED PARTY TRANSACTION
On July 10, 2001 Samuel Gaer, the CEO of TradinGear.Com, Incorporated, agreed
to lend the Company $28,000 at a rate of six percent (6%) and due on demand.
At December 31, 2001 the note had been repaid in full.
6. PROVISION FOR INCOME TAXES
For the periods from inception (July 7, 1999) to June 30, 2002 the Company had
accumulated losses of $2,733,635. No federal tax expense or benefit has been
reported in the financial statements due to the uncertainty of future
operations.
7. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is subject from time to time to litigation arising from the normal
course of business. In management's opinion, any such contingencies would be
covered under its existing insurance policies or would not materially affect
the Company's financial position or results of operations.
Norman Fuchs ("Fuchs"), a former director of the Company, and ATH Ventures,
Inc. ("ATH"), a company controlled by Fuchs, have commenced an action against
the Company and against Ausinsoft, Inc., an entity of which Samuel Gaer, the
President, Director and principal shareholder of the Company, is also an
officer, director and shareholder. The action seeks monetary damages and
shares of the Company's common stock. Subsequently, Fuchs and ATH commenced
an action seeking to enjoin the merger as discussed in Note 8 and petitioned
the Court for a Temporary Restraining Order ("TRO"). The Company defended
this action and on January 10, 2002 the TRO expired without action and Fuchs,
ATH and the Company engaged in preliminary settlement discussions which
concluded in a February 14, 2002 settlement agreement and no monetary damages
or obligations to the Company.
52
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
Leases
The Company leases office equipment and office space under noncancellable
operating leases. Commitments under these leases are as follows:
June 30, December 31,
----------- ------------
2002 $ - $ 139,082
2003 140,946 142,855
2004 144,774 146,741
2005 148,717 150,743
2006 152,778 102,663
2007 26,101 -
----------- ------------
$ 613,316 $ 682,084
=========== ============
Employment Agreements
On December 10, 1999 the Company entered into an employment agreement with
Samuel H. Gaer, the Chief Executive Officer of the Company. The agreement is
for a term of three years commencing January 1, 2000 and provides for a base
annual salary of $120,000 and for bonuses as determined by the Company's Board
of Directors.
401(k) Plan and Profit Sharing Plan
The Company has approved a 401(k) Plan and a Profit Sharing Plan which cover
full-time employees who have attained the age of 21 and have completed at
least one year of service with the Company. Under the 401(k) Plan, an
employee may contribute an amount up to 25% of his compensation to the 401(k)
Plan on a pretax basis not to exceed the current Federal limitation of $10,500
per year (as adjusted for cost of living increase). Amounts contributed to
the 401(k) Plan are nonforfeitable. Under the Profit Sharing Plan, a member
in the plan participates in the Company's contributions to the Plan as of
December 31 in any year, with allocations to individual accounts based on
annual compensation.
An employee does not fully vest in the plan until completion of three years of
employment. The Board of Directors determine the Company's contributions to
the plan on a discretionary basis. The Company has not made any contributions
to date.
53
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
8. COMMON STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
common stock, par value $.0001 per share. The Company issued 13,280,000
shares of common stock to the founders of the Company for $.0001 per share,
the par value of the Company's common stock.
During July 1999 the Company issued 1,263,000 shares of common stock to two
consultants for services rendered and a two year agreement which provided the
Company with office space and services through June 2001. The total value of
the services and consulting agreement was estimated to be $661,500.
During October 1999 the Company issued 10,000 shares of its common stock to a
consultant for services valued at $5,000. In addition, during October 1999
the Company issued 500,000 shares of its common stock to professionals for
services rendered valued at $150,000 and for future professional services to
be rendered through December 2002 valued at $100,000.
Also, during the fourth quarter of 1999 the Company sold 1,980,140 shares of
its common stock to four investors for cash of $500,000 and the receipts of
marketable equity securities valued at $341,250 or for a total consideration
of $841,250.
In November 1999 the Company issued 755,847 shares of its common stock valued
at $755,847 in conjunction with the Company entering into a license agreement
to provide its proprietary software suite in exchange for marketable equity
securities of the same value. This agreement and exchange of securities
ultimately became the subject of a dispute in late 2000 which was settled in
2001 with the parties agreeing to cancel the outstanding shares exchanged and
with the Company retaining $110,000 for its software suite that it received
and recorded as revenue during 2000.
As part of this settled dispute the Company, in a separate action, terminated
the employment of one of its officers and the Company was returned 1,250,000
shares of its common stock that it originally issued to this individual for
cancellation.
In April 2001 the Company sold 710,585 shares of its common stock for $250,000
to an investor consultant. The Company also issued 500,000 of its common
stock to this individual in exchange for a two year consulting agreement
valued at $175,950 which expired in April 2002. Also, during April 2001 the
Company issued 1,710,584 shares in satisfaction of amounts owed to a
consultant amounting to $262,500 and for future consulting services valued at
$337,500, or a total of $600,000.
During the fourth quarter of 2001 the Company issued 25,000 shares of its
common stock to an investor for $10,000. In addition, the Company issued to a
consultant 100,000 shares of its common stock for services rendered valued at
$17,585 and $20,000. The Company also issued to this consultant for $1,000 an
option to purchase 50,000 shares of its common stock at $0.40 per share
commencing December 21, 2001 and ending on December 21, 2004. During the first
quarter of 2002 the Company sold 797,500 shares of its Common stock at $ .40
per share of its Common stock to three investors and received net proceeds of
$ 298,000.
54
TRADINGEAR.COM, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
9. PROPOSED MERGER
In September 15, 2001, the Company and Digitran Systems, Inc. (a
publicly held Delaware company together with its subsidiaries herein referred
to as "DSI") entered into an Agreement and Plan of Reorganization ("the
agreement"). The Agreement describes a merger transaction whereby TG will
become a wholly-owned subsidiary of DSI which public company in turn will
change its name to TGFIN Holdings, Inc. ("TGFIN"). The Agreement is subject
to shareholder approval of both companies and is also subject to certain
conditions, including, but not limited to, submission for approval of proxy
material to the Securities and Exchange Commission. The Agreement calls for
the shareholders of TG to receive 19,154,369 shares of the reorganized TGFIN
or one share of TGFIN for each share of TG share held after giving effect to a
reverse stock split of DSI shares and its change in name. The result will be
that the shareholders of TG will own approximately 93% of the outstanding
shares of the reorganized TGFIN.
The merger transaction will be accounted for as a purchase with TG
Being deemed the acquiror for accounting and financial reporting purposes.
However, since the stockholders of TG will own approximately 93% of the
Outstanding shares of the reorganized TGFIN no step up basis or goodwill will
be recorded by TG. This accounting treatment is in accordance with the view
of Securities and Exchange Commission staff members that the acquisition by a
public shell of the assets of a business from a private company should be
accounted for at historical cost and accounted for as a reverse merger.
10. SUBSEQUENT EVENT (UNAUDITED)
On September 12, 2002, the merger as described in note "9"successfully
consummated and the par value on the company's common stock was
recapitalized from $0.0001 to $0.01.In addition the company issued an
additional 1,081,426 shares of common stock, 777,384 for $316,500 of
convertible notes payable which were received and converted during the third
quarter and 304,042 in connection with consulting services agreements.
55
APPENDIX A
ASSET PURCHASE AGREEMENT
by
and
among
Tradingear Acquisition LLC,
Tradingear.com, Inc.
and
TGFIN Holdings, Inc.
Dated: January 27, 2003
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . .1
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2. Other Definitional Provisions. . . . . . . . . . . . . . . . . .8
ARTICLE 2. PURCHASE AND SALE OF ACQUIRED ASSETS. . . . . . . . . . . .8
2.1. Purchase and Sale of Assets. . . . . . . . . . . . . . . . . . .8
2.2. Purchase Price.. . . . . . . . . . . . . . . . . . . . . . . . .9
2.3. Payment of Purchase Price. . . . . . . . . . . . . . . . . . . .9
2.4. Assumption of Liabilities. . . . . . . . . . . . . . . . . . . .9
2.5. The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.6. Deliveries at the Closing. . . . . . . . . . . . . . . . . . . 10
ARTICLE 3. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 10
3.1. Representations and Warranties of the Company and TGFIN. . . . 10
3.2. Representations and Warranties of Buyer. . . . . . . . . . . . 20
ARTICLE 4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1. The Company and TGFIN Pre-Closing Covenants.. . . . . . . . . 21
4.2. Further Covenants. . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . 24
5.1. Conditions to Obligations of Buyer.. . . . . . . . . . . . . . 24
5.2. Conditions to Obligations of the Company.. . . . . . . . . . . 25
ARTICLE 6. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 25
6.1. Survival of Representations and Warranties.. . . . . . . . . . 25
6.2. Indemnification Provisions for Buyer's Benefit.. . . . . . . . 25
6.3. Indemnification Provisions for the Company and TGFIN's Benefit.26
6.4. Indemnification Claim Procedures.. . . . . . . . . . . . . . . 26
6.5. Purchase Price Escrow. . . . . . . . . . . . . . . . . . . . . 27
6.6. Other Indemnification Provisions.. . . . . . . . . . . . . . . 27
ARTICLE 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1. Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . 27
7.2. Cooperation After Closing. . . . . . . . . . . . . . . . . . . 27
ARTICLE 8. ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . 28
8.1. Stockholder Approval.. . . . . . . . . . . . . . . . . . . . . 28
8.2. Preparation of the Information Statement.. . . . . . . . . . . 28
8.3. Cooperation and Exchange of Information. . . . . . . . . . . . 28
ARTICLE 9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 29
9.1. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2. Procedure and Effect of Termination. . . . . . . . . . . . . . 29
i
ARTICLE 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 30
10.1. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 30
10.2. Successors . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.3. Assignments. . . . . . . . . . . . . . . . . . . . . . . . . 30
10.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5. Specific Performance.. . . . . . . . . . . . . . . . . . . . 31
10.6. Time.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.7. Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . 31
10.8. Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.9. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 31
10.10. Amendments and Waivers.. . . . . . . . . . . . . . . . . . . 32
10.11. Severability.. . . . . . . . . . . . . . . . . . . . . . . . 32
10.12. Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.13. Construction.. . . . . . . . . . . . . . . . . . . . . . . . 32
10.14. Incorporation of Exhibits, Annexes, and Schedules. . . . . . 32
10.15. No Third Party Beneficiaries.. . . . . . . . . . . . . . . . 32
ii
ATTACHMENTS
Exhibits
Exhibit A - Assignment Agreement
Exhibit B - Assumption Agreement
Exhibit C - Purchase Price Escrow Agreement
Exhibit D - Agreement Not To Compete
Exhibit E - Company and TGFIN's Counsel's Opinion
Exhibit F - Agreements to be Executed by Developers
Exhibit G(1) - Officer's Certificate
Exhibit G(2) - Secretary's Certificate
Schedules
Schedule 1.1(a) - Accounts Receivable
Schedule 1.1(b) - Assumed Contracts
Schedule 1.1(c) - Excluded Assets
Schedule 3.1(b) - Required Consents
Schedule 3.1(f) - Exceptions to Title
Schedule 3.1(j)(i) - Benefit Plans
Schedule 3.1(j)(iii) - Former Employees Receiving Benefits
Schedule 3.1(k)(i) - Employees/Consultants
Schedule 3.1(k)(ii) - Employee Details
Schedule 3.1(o) - Real Property
Schedule 3.1(p)(i)(A) - Intellectual Property
Schedule 3.1(p)(i)(B) - Developers
Schedule 3.1(p)(i)(C) - Preexisting Intellectual Property
Schedule 3.1(p)(i)(D) - Third Party Interests in Intellectual Property
Schedule 3.1(q)(ii) - Assumed Contracts with Restrictions on Transfer
Schedule 3.1(r) - Financial Statements
Schedule 3.1(s) - Events Subsequent to Most Recent Fiscal Year End
Schedule 3.1 (u) - Tangible Assets
iii
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") dated January 27, 2003,
is by and among (i) Tradingear Acquisition LLC, a Delaware limited liability
company ("Buyer"), (ii) Tradingear.com, Inc., a Delaware corporation (the
"Company"), and (iii) TGFIN Holdings, Inc., a Delaware corporation ("TGFIN").
Buyer, the Company and TGFIN are referred to collectively herein as the
"Parties".
RECITALS:
A. TGFIN owns (beneficially and of record) 100% of the Company's
outstanding capital stock.
B. Buyer desires to purchase from the Company and the Company desires
to sell to Buyer the Acquired Assets (as defined herein) in return for the
Purchase Price (as defined herein), in accordance with this Agreement's terms
and conditions.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants contained herein, the Parties agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. When used in this Agreement, the following terms
shall have the respective meanings set forth below:
"Accounts Receivable" means accounts, notes, and other receivables and
all other rights to receive payments.
"Acquired Assets" means all right, title, and interest in and to all of
the following assets of the Company: (a) all the Tangible Assets; (b) all of
the Intellectual Property set forth in Schedule 3.1(p)(i)(A), goodwill
associated therewith, licenses and sublicenses granted and obtained (to the
extent of its ability under a transferable license or sublicense) with respect
thereto, and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all jurisdictions;
(c) the Assumed Contracts; (d) the Accounts Receivable set forth in Schedule
1.1(a); (e) all of its transferable franchises, approvals, permits, licenses,
orders, registrations, certificates, variances, authorizations and similar
rights obtained from any Government Authority relating to the Acquired Assets;
(f) to the extent necessary to consummate the Transactions, all of its manuals
for hardware and software, invoices, maintenance protocols, technicians and
support logs and reports, databases, evaluations, books, general, financial,
Tax and personnel records (unless prohibited by Law), ledgers, files,
documents, correspondence, lists, plans, drawings, specifications, studies,
reports, and other printed or written materials, whether in hard copy or
computer format related to the Acquired Assets; and (g) all of the goodwill
attributable to and going-concern value of the Acquired Assets; provided,
however, that the Acquired Assets shall not include the Excluded Assets.
1
"Action" means any civil or criminal claim, action or causes of action,
appeal, petition, plea, civil or criminal charge or complaint, suit, demand,
litigation, arbitration, mediation, hearing, assessments or investigation by
or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, a Person that,
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such specified Person.
"Agreement" means this Asset Purchase Agreement as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"Agreement Not To Compete" means the Agreement Not To Compete
substantially in the form attached as Exhibit D, to be executed and delivered
by the Company to Buyer at Closing.
"Agreements to be Executed by Developers" means the Agreements to be
executed by Developers substantially in the form attached as Exhibit F, to be
executed by the Developers and delivered by the Company to Buyer at Closing.
"Assignment Agreement" means the Assignment and Bill of Sale
substantially in the form attached as Exhibit A, to be executed and delivered
by the Company to Buyer at Closing.
"Assumption Agreement" means the Assumption Agreement substantially in
the form attached as Exhibit B, to be executed and delivered by Buyer to the
Company at Closing.
"Assumed Contracts" means the agreements set forth in Schedule 1.1(b).
"Breach" means any failure to perform, failure to comply, default,
violation, acceleration, termination, cancellation, modification, or failure
to provide a required notification.
"Business Day" shall mean any day on which the principal offices of the
Securities and Exchange Commission in Washington D.C. are open to accept
filings, or, in the case of determining a date when payment is due, any day on
which banks are not required or authorized to close in New York City.
"Buyer" has the meaning set forth in the preamble to this Agreement.
"Buyer Indemnitees" means the Company and TGFIN and each of their
officers, directors, employees, agents, representatives, controlling Persons,
stockholders, and their Affiliates.
"CA" means Computer Associates International Inc.
"COBRA" shall mean the obligations and Liabilities arising under the
continuation of coverage requirements of Section 4980B of the Code and Part 6
of Subtitle B of Title I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
2
"Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange
rights, or other Contracts that could require a Person to issue any of its
Equity Interests or to sell any Equity Interests it owns in another Person;
(b) any other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interest of a Person or
owned by a Person; (c) statutory pre-emptive rights or pre-emptive rights
granted under a Person's organizational documents; and (d) stock appreciation
rights, phantom stock, profit participation, or other similar rights with
respect to a Person.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company and TGFIN's Counsel's Opinion" means the Company and TGFIN's
Counsel's Opinion substantially in the form attached as Exhibit E, to be
executed by the Counsel of the Company and TGFIN and delivered by the Company
to Buyer at Closing.
"Company and TGFIN Indemnitees" means Buyer and each of its respective
members, officers, directors, employees, agents, representatives, controlling
Persons, stockholders, and their Affiliates.
"Company Common Stock" has the meaning set forth in Section 3.1(e).
"Competing Transaction" means any of the following (other than the
transactions contemplated by this Agreement) involving the Company or any of
its Subsidiaries: (i) any merger, consolidation, share exchange, exchange
offer, business combination, recapitalization, liquidation, dissolution or
other similar transaction involving the Company or any of its Subsidiaries;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of Acquired Assets representing substantially all of the Acquired
Assets of the Company; (iii) any tender offer for a majority of 50% or more of
the outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith;
(iv) any person or group other than Sam Gaer having acquired beneficial
ownership of 25% or more or such person or group having increased its
beneficial ownership beyond 25% of the outstanding shares of capital stock of
TGFIN; or (v) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
"Confidential Information" means any plans or information, including
information of a technological or business nature and all copies, extracts, or
summaries thereof (including all Trade Secrets, Technology, Intellectual
Property, data, marketing plans, summaries, reports, or mailing lists, whether
written or oral or otherwise expressed or stored in any electronic, magnetic,
graphic, optical or other medium) related to the Acquired Assets and/or the
business of the Company or TGFIN prior to the date hereof that is marked
confidential, or bears the marking of like import, or that Company or TGFIN
states to be confidential, or that would reasonably be considered confidential
except to the extent such information: (a) is publicly available other than as
the result of an unauthorized disclosure by Buyer; (b) Buyer can demonstrate
was rightfully known or in a third Person's possession without obligation to
maintain its confidentiality prior to disclosure by the Company or TGFIN to
the third Person, as evidenced by written records made prior to such
disclosure; or (c) is independently developed by a third Person, without the
use of any Confidential Information or other assistance provided by the Buyer.
3
"Consent" means any consent, approval, or waiver.
"Contract" means any contract, agreement, commitment, letter of intent,
memorandum of understanding, promise, obligation, instrument, or document,
whether written or oral.
"Copyrights" means all copyrights in both published works and
unpublished works.
"Damages" means all damages (including incidental and consequential
damages), amounts paid in settlement, losses, obligations, fines, penalties,
costs, expenses (including reasonable fees, disbursements and expenses of
outside attorneys) in connection with any Action.
"Disclosure Schedules" has the meaning set forth in Section 3.1.
"Equity Interest" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership/limited liability company
interests, and any Commitments with respect thereto, and (c) any other direct
or indirect equity ownership or participation in a Person.
"Encumbrance" means any Order, Security Interest, easement, covenant,
community property interest, equitable interest, right of first refusal, or
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Enforceable" means, with respect to a Contract, that it is the legal,
valid, and binding obligation of the applicable Person enforceable against
such Person in accordance with its terms, except as such enforceability may be
subject to the effects of bankruptcy, insolvency, reorganization, moratorium,
or other Laws relating to or affecting the rights of creditors, and general
principles of equity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets" means all assets of the Company which are not
expressly assumed under this Agreement, including the assets and Contracts set
forth in Schedule 1.1(c).
"Excluded Liabilities" means any Liability other than those expressly
assumed under this Agreement.
"Financial Statements" has the meaning set forth in Section 3.1(r).
"Governmental Authority" means any United States (federal state or
local) or any foreign government or governmental regulatory or administrative
authority agency or other instrumentality thereof or any commission, court,
tribunal or judicial or arbitral body.
"Indemnification Claim" has the meaning set forth in Section 6.4.
"Indemnitees" means, individually and as a group, the Buyer Indemnitees
and the Company and TGFIN Indemnitees.
4
"Indemnitor" means any Party having any Liability to any Indemnitee
under this Agreement.
"Information Effective Date" means 20 days after the Information
Statement is first mailed to stockholders of TGFIN.
"Information Statement" has the meaning set forth in Section 8.2.
"Intellectual Property" means: (a) all Technology and inventions
(whether patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions, and reexaminations thereof; (b) all copyrightable
works, all Copyrights, and all applications, registrations, and renewals in
connection therewith; (c) all mask works and all applications, registrations,
and renewals in connection therewith; (d) all domain names; (e) all Trade
Secrets and Confidential Information relating to the Acquired Assets
(including ideas, research and development, Know-How, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information, and business and marketing plans and proposals); (f) all
Software (including data and related documentation); (g) all other proprietary
rights; and (h) all copies and tangible embodiments thereof (in whatever form
or medium).
"Know-How" means any and all technical, industrial, commercial,
scientific, confidential or proprietary information, business opportunities,
specifications, test results, analyses and data, inventions, methods,
discoveries, improvements, processes, formulae, mixtures, compositions,
delivery systems, designs, plans, engineering, technical and shop drawings,
techniques, applications, ideas or concepts, whether or not reduced to
practice, including, but not limited to, technology that is or could be the
subject matter of a foreign or domestic patent or patent application, whether
or not reduced to writing in a patent application and all goodwill associated
with any of the foregoing.
"Knowledge" means, with respect to: (a) an individual, that such
individual has Knowledge of a particular fact or other matter if: (i) such
individual is actually aware of such fact or other matter; or (ii) a
reasonably prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonable investigation concerning the existence of such fact or other
matter; and (b) a Person other than an individual, that such Person has
Knowledge of a particular fact or other matter if (i) any individual who is
serving, or who has at any time served, as a director, or officer of such
Person (or in any similar capacity) or (ii) any employee, officer or director
who is charged with or who has at any time been charged with, responsibility
for a particular area of the Company's or TGFIN's operations (e.g. an employee
in the environmental section with respect to knowledge of environmental
matters), has, or at any time had, Knowledge of such fact or other matter.
"Law" means any law (statutory, common, or otherwise), constitution,
treaty, convention, ordinance, equitable principle, code, rule, regulation,
executive order, or other similar authority enacted, adopted, promulgated, or
applied by any Governmental Authority, each as amended and now in effect.
5
"Liability" means any liability or obligation, whether absolute or
contingent, matured or unmatured, conditional or unconditional, accrued or
unaccrued, liquidated or unliquidated, or due or to become due.
"Material and Adverse Effect" shall mean a material adverse effect
resulting in more than $25,000 in aggregate Liabilities.
"Most Recent Financial Statement" has the meaning set forth in Section
3.1(r).
"Most Recent Fiscal Month End" has the meaning set forth in Section
3.1(r).
"Most Recent Fiscal Year End" has the meaning set forth in Section
3.1(r).
"Nymex" means New York Mercantile Exchange, Inc., a Delaware corporation.
"Nymex Contract" means the Agreement for Software License, Software
Development and Software Support between the Company and Nymex dated December
13, 2002.
"Object Code" means the machine-readable form of any Software.
"Officer's Certificate" means the Officer's Certificate in the form
attached as Exhibit G(1) to be executed by a duly authorized officer of the
Company and delivered by the Company to Buyer at Closing.
"Order" means any order, ruling, decision, verdict, decree, writ,
subpoena, mandate, precept, command, directive, consent, approval, award,
judgment, injunction, or other similar determination or finding by, before or
under any Governmental Authority, arbitrator, or mediator.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Parties" has the meaning set forth in the preamble to this Agreement.
"Permit" means any permit, license, certificate, approval, consent,
notice, waiver, franchise, registration, filing, accreditation, or other
similar authorization required by any Law, Governmental Authority, or
Contract.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a Governmental Authority (or any department,
agency, or political subdivision thereof).
"Purchase Price" has the meaning set forth in Section 2.2 below.
"Purchase Price Escrow Amount" means the amount set forth in Section
2.3(a).
"Purchase Price Escrow Agent" means the agent appointed pursuant to the
Purchase Price Escrow Agreement.
6
"Purchase Price Escrow Agreement" means the agreement between the
Company, Buyer and the Escrow Agent, substantially in the form attached as
Exhibit C, to be executed and delivered by the parties thereto and delivered
at Closing.
"Secretary's Certificate" means the Secretary's Certificate in the form
attached as Exhibit G(2) to be executed by the Secretary of the Company and
delivered by the Company to Buyer at Closing.
"Security Interest" means with respect to any property or asset, any
mortgage, deed of trust, pledge, hypothecation, security interest,
encumbrance, easement, right of way, encroachment, claim, lien, lease
(including any capitalized lease), charge or other security interest of any
kind, whether voluntarily incurred or arising by operation of Law or
otherwise, including any agreement to give or grant any of the foregoing, any
conditional sale or other title retention agreement and the filing of, or
agreement to give, any financing statement with respect to any assets or
property under the Uniform Commercial Code of any state or comparable Law.
"Software" means computer software or middleware consisting of Object
Code or Source Code. If not otherwise specified in this Agreement, Software
shall include both Object Code and Source Code.
"Source Code" means the human readable form of Software and related
system documentation, including all comments and any procedural code such as
job control language which, when compiled or assembled, becomes the Object
Code of a software program and including all logic diagrams, flow charts and
developer comments and other work product that may be prepared by a developer
concerning the relevant Software.
"Superior Proposal" means any bona fide written proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or
securities, all of the shares of TGFIN Common Stock then outstanding or all or
substantially all of the Acquired Assets of the Company or TGFIN and the
assumption of the Liabilities and obligations of the Company to be followed by
a pro rata distribution of the sale proceeds to stockholders of the Company,
that: (i) provides holders of TGFIN Common Stock with per share consideration
that the Independent Committee determines in good faith, after receipt of
advice of its financial advisor, is more favorable from a financial point of
view than the consideration to be received by holders of TGFIN Common Stock in
the Transaction; (ii) is determined by the TGFIN Board of Directors in its
good faith judgment, after receipt of advice of its advisors and outside legal
counsel, to be likely of being completed (taking into account all legal,
financial, regulatory and other aspects of the proposal, the Person making the
proposal and the expected timing to complete the proposal); (iii) does not, in
the definitive agreement, contain any "due diligence" conditions; and (iv) has
not been obtained by or on behalf of the Company in violation of this
Agreement.
"Tangible Assets" means all tangible personal property set forth in
Schedule 3.1(u).
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs, ad valorem, duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, gains,
7
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not, including, without limitation, any tax imposed under Treasury
Regulations Section 1.1502-6, or any similar provision of state, local or
foreign law or any liability for Taxes as a transferee or successor, by
contract or otherwise.
"Tax Return" means any return, declaration, election, estimate, notice,
report, claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
"Technology" means any form of knowledge, discoveries, developments,
devices or inventions, whether or not capable of expression in a tangible
medium, and including, without limitation, all algorithms, concepts, data,
designs, documentation, Know-How, methods, techniques, Object Code, Source
Code, procedures, programs, graphics, text, websites, computer hardware,
multimedia files, tools, skills, architecture, flow charts, flow diagrams,
electronic data interfaces, database structures, forms, engines, and mask
works.
"TGFIN/X Business" means the business of the Company with respect to
trading systems software development and support services for facility-based
trading of energy and metals derivatives.
"Threatened" means a demand or statement has been made (orally or in
writing) or a notice has been given (orally or in writing).
"Trade Secrets" means any information, including, but not limited to,
technical or nontechnical data, formulae, patterns, compilations, Software,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans, or lists of actual or potential customers or suppliers
that: (a) have economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other
persons who can obtain economic value from their disclosure or use; and (b)
are the subject of efforts that are reasonable under the circumstances to
maintain their secrecy.
"Transaction Documents" means this Agreement, the Assignment Agreement,
the Assumption Agreement, the Purchase Price Escrow Agreement, the Agreement
Not To Compete and the Agreements to be Executed by Developers.
"Transactions" means the transactions contemplated by the Transaction
Documents.
1.2. Other Definitional Provisions. The word "including" and similar
words when used in this Agreement shall mean "including, without limitation"
unless otherwise specified.
ARTICLE 2.
PURCHASE AND SALE OF ACQUIRED ASSETS
2.1. Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Company,
and the Company agrees to sell, transfer, convey, and deliver to the Buyer,
all of the Acquired Assets at the Closing for the consideration specified
below.
8
2.2. Purchase Price. For and in consideration of the conveyances and
assignments described herein and in addition to the assumption of Liabilities
as set forth in Section 2.4, Buyer agrees to pay to the Company, and the
Company agrees to accept, a total purchase price (the "Purchase Price") equal
to three million dollars ($3,000,000) subject to the terms of this Agreement.
The Purchase Price shall be payable as described in Section 2.3. Buyer and
the Company and TGFIN agree to allocate the Purchase Price in accordance with
Code Section 1060 and shall agree on the contents of the Form 8594 to be filed
by Buyer, the Company and TGFIN in connection with the Transaction
contemplated by this Agreement. For all Tax purposes, Buyer, the Company and
TGFIN agree to report the Transaction contemplated in this Agreement in a
manner consistent with the terms of this Agreement, and neither of them will
take any position inconsistent therewith in any Tax Return, in any refund
claim, Tax related proceeding or otherwise.
2.3. Payment of Purchase Price. The Purchase Price shall be payable to
the Company at the Closing as follows:
(a) Buyer shall deliver the amount of one hundred thousand dollars
($100,000) (the "Purchase Price Escrow Amount") to the Purchase Price
Escrow Agent by wire transfer of immediately available funds to an
account identified in writing by the Purchase Price Escrow Agent to
Buyer not less than three Business Days prior to the Closing Date, said
amount to be held by the Purchase Price Escrow Agent for a period of one
(1) year after the Closing Date in accordance with the terms and
conditions of the Purchase Price Escrow Agreement.
(b) The balance of the Purchase Price in the amount of two million
nine hundred thousand dollars ($2,900,000), shall be delivered by Buyer
by wire transfer of immediately available funds to an account which will
be identified by the Company to Buyer not less than three Business Days
prior to the Closing Date.
2.4. Assumption of Liabilities. At the Closing, Buyer shall assume only
the Liabilities and obligations of the Company with respect to the Acquired
Assets arising from and accruing exclusively with respect to the period after
the Closing Date. Without limiting the generality of the foregoing, Buyer
shall not assume, and the Company shall continue to bear sole responsibility
for, any and all actions, causes of actions and claims to recover under any
one or more of Sections 544 through 550 and 553 of the United States
Bankruptcy Code or under any corresponding provision of state law.
2.5. The Closing. The closing of the Transactions (the "Closing") shall
take place at the offices of Buyer on the second Business Day following the
satisfaction or waiver of all conditions set forth in Article 5, but in any
event prior to March 31, 2003, unless another time, date or place is mutually
agreed upon in writing by the Company and Buyer. The date of the Closing is
referred to as the "Closing Date".
9
2.6. Deliveries at the Closing. At the Closing, (i) the Company will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 5.2 below; (ii) the Buyer will deliver to the Company
the various certificates, instruments, and documents referred to in Section
5.1 below; (iii) the Company will execute and deliver to the Buyer the
following documents, the form of which the parties agree to negotiate in good
faith, including the Assignment Agreement, the Purchase Price Escrow
Agreement, the Agreement Not To Compete (executed by TGFIN and the Company),
and will deliver to Buyer executed copies of the Company and TGFIN's Counsel's
Opinion, the Agreements to be Executed by Developers, the Officer's
Certificate and the Secretary's Certificate and such other instruments of
sale, transfer, conveyance, and assignment as the Buyer and its counsel
reasonably request; (iv) the Buyer will execute and deliver to the Company the
following documents, the form of which the parties agree to negotiate in good
faith, including the Assumption Agreement and the Purchase Price Escrow
Agreement (executed by the Escrow Agent and Buyer) and such other instruments
of assumption as the Company and its counsel reasonably request; and (v) the
Buyer will deliver to the Company the consideration specified in Section
2.3(b) above.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company and TGFIN. The
Company and TGFIN represent and warrant to Buyer that the statements
contained in this Section 3.1 are correct and complete as of the date of this
Agreement, except as set forth in the disclosure schedules to this Agreement
("Disclosure Schedules").
(a) Status of the Company. The Company is a corporation duly
created, formed or organized, validly existing, and in good standing
under the Laws of the jurisdiction of its creation, formation, or
organization. There is no pending or, to the Company and TGFIN's
Knowledge, Threatened, Action for the dissolution, liquidation,
insolvency, or reorganization of the Company.
(b) Power and Authority; Enforceability. The Company has full
corporate and other power and authority to execute and deliver each
Transaction Document, to perform its obligations thereunder and to
consummate the Transactions. TGFIN has full corporate power and other
authority to execute and deliver each Transaction Document to which it
is a party, perform its obligations thereunder and consummate the
Transactions. The execution, delivery and performance of this Agreement
and of the other Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action of the respective boards of directors
of the Company and TGFIN and by any other necessary corporate or
shareholder actions of the Company and TGFIN (none of which actions has
been modified or rescinded and all of which actions are in full force
and effect); provided that as to TGFIN, such action will not be
effective until the Information Effective Date. This Agreement
constitutes, and upon execution and delivery each other Transaction
Document will constitute, a valid and binding agreement and obligation
of the Company and TGFIN, enforceable in accordance with its respective
terms. Except as specified in Schedule 3.1(b), the execution, delivery
and performance by the Company and TGFIN of this Agreement and of the
10
other Transaction Documents will not require the Consent, approval or
authorization of any Person or Governmental Authority.
(c) No Violation. The execution and the delivery of the
Transaction Documents by the Company and, where applicable, TGFIN, and
the performance and consummation of the Transactions by the Company and,
where applicable, TGFIN will not: (i) Breach any Law or Order to which
the Company or TGFIN is subject or any provision of their respective
organizational documents; (ii) Breach any Contract, Order, or Permit to
which the Company or TGFIN is a party or by which the Company or TGFIN
is bound or to which any of such Acquired Assets is subject; or (iii)
require any Consent; except for the mailing of the Information Statement
and the consummation of the Transactions cannot occur until the
Information Effective Date, except where such Breach or failure to
obtain such Consent will not have a Material Adverse Effect on the
Acquired Assets, the Company or the business of the Company as currently
conducted and will not prevent or delay the consummation of the
Transactions or restrict the use by Buyer of the Acquired Assets as
contemplated thereby. To its Knowledge, the Company has not Breached
any Contract by which any of the Acquired Assets are subject except
where such Breach of Contract will not have a Material Adverse Effect on
the Acquired Assets, the Company or the business of the Company as
currently conducted and will not prevent or delay the consummation of
the Transactions or restrict the use by Buyer of the Acquired Assets as
contemplated thereby.
(d) Brokers' Fees. Neither the Company nor TGFIN has any Liability
to pay any compensation to any broker, finder, or agent with respect to
the Transactions for which Buyer could become directly or indirectly
Liable.
(e) Shares; Shareholder Information. The Company's authorized
capital stock consists of one thousand (1,000) shares of common stock,
.002 par value per share ("Company Common Stock"), of which one thousand
(1,000) shares are issued and outstanding. TGFIN owns (beneficially and
of record) all shares of Company Common Stock.
(f) Title to Acquired Assets. Except as set forth in Schedule
3.1(f), the Company has good, marketable, and indefeasible title to, or
a valid leasehold interest in the Acquired Assets, free and clear of all
Encumbrances and restrictions on transfer or assignment.
(g) Sufficiency of Acquired Assets. The Acquired Assets include
all assets necessary for or used in the operation of the TGFIN/X
Business of the Company.
(h) Solvency. The Company is not rendered insolvent by the
execution and performance of this Agreement. In addition, after
execution and delivery of this Agreement, the Company will be able to
pay its debts as they become due, the Company's property does not and
will not constitute unreasonably small capital and will not have
insufficient capital with which to conduct its present or proposed
business and, taking into account pending and Threatened Actions, final
judgments against the Company are not reasonably anticipated to be
rendered at a time when, or in amounts such that, the Company will be
11
unable to satisfy any such judgments promptly in accordance with their
terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such
judgments might be rendered). The cash available to the Company, after
taking into account all other anticipated uses of its cash, will be
sufficient to pay all such known or reasonably anticipated Orders
promptly in accordance with their terms. As used in this Section,
"insolvent" means that the present fair saleable value of the Company's
assets does not and will not exceed its debts and other Liabilities to
the Knowledge of the Company and TGFIN.
(i) Litigation. Neither the Company, TGFIN nor any shareholders,
directors or employees of either the Company or TGFIN are subject to any
outstanding Order related to the Acquired Assets and none of the
Acquired Assets are subject to any outstanding Order. Neither the
Company nor TGFIN nor any shareholders, directors or employees is a
party to any Action with respect to the Acquired Assets and, to the
Company and TGFIN's Knowledge, no Action is Threatened with respect to
the Acquired Assets.
(j) Benefit Plans.
(i) Except as set forth on Schedule 3.1(j)(i), the Company
does not maintain (or ever has maintained), contribute to (or ever
has contributed to), or ever has had any obligation to contribute
to, any employee benefit plan (as defined in Section 3(3) of
ERISA), fringe benefit plan or other bonus, incentive-
compensation, deferred-compensation, stock-option, stock-
appreciation-right, stock-bonus, severance, retirement, pension,
health, insurance, or other similar plan, policy, program,
agreement or arrangement of any nature, whether formal or
informal, written or unwritten.
(ii) Prior to the Closing Date the requirements of COBRA
and New York State law (with regard to conversion and continuation
of benefits, including, but not limited to Section 3221 of New
York State Insurance Law) have been met with respect to each such
employee benefit plan of the Company which is an employee welfare
benefit plan (as defined in Section 3(1) of ERISA).
(iii) The Company has provided the Buyer with a complete
list, as set forth on Schedule 3.1(j)(iii), of all former
employees of the Company who are currently receiving, or eligible
to receive, any benefits under COBRA or New York State law (with
regard to conversion and continuation of benefits, including, but
not limited to Section 3221 of New York State Insurance Law).
(iv) The Company does not maintain (or ever has
maintained), contribute to (or ever has contributed to), or ever
has been required to contribute to any employee welfare benefit
plan (as defined in Section 3(1) of ERISA), policy, program,
agreement or arrangement of any nature, whether formal or
informal, written or unwritten, providing medical, health, or life
insurance or other welfare type benefits for current or future
retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B).
12
(v) The Company does not contribute to, ever has
contributed to, or ever has been required to contribute to any
multiemployer plan (as that term is defined in Section 3(37) of
ERISA) or has any liability (including withdrawal liability as
defined in ERISA Section 4201) under any multiemployer plan (as that
term is defined in Section 3(37) of ERISA)
(vi) The Company shall, with respect to employees or former
employees, as appropriate, listed on Schedules 3.1(j)(iii),
3.1(k)(i) and 3.1(k)(ii), be responsible after the Closing Date
for welfare benefits or claims (whether submitted before or after
the Closing Date), which will, by reason of events which took
place prior to the Closing Date, become payable on or after the
Closing Date, under any life insurance policy, accidental death
and dismemberment policy or health program (including medical and
dental benefits). In the case of health benefits, the event
referred to in the immediately preceding sentence is the provision
of the service for which the reimbursement or payment is sought by
the Employee.
(vii) The Company shall, with respect to former employees of
the Company listed on Schedule 3.1(j)(iii), be responsible after
the Closing Date for Liabilities and obligations arising under
COBRA or New York State law (with regard to conversion and
continuation of benefits, including, but not limited to Section
3221 of New York State Insurance Law) with respect to any employee
or "qualified beneficiary" who has had a "qualifying event"
(within the meaning of COBRA) or is otherwise subject to a
termination of group coverage (within the meaning of New York
State law, including, but not limited to, Section 3221 of New York
State Insurance Law) on or before the Closing Date, and has
previously elected to (or is eligible to elect to) receive COBRA
coverage, or any other continuation of benefits coverage or
conversion privilege (within the meaning of New York State law,
including, but not limited to, Section 3221 of New York State
Insurance Law) as of the Closing Date. The Company shall provide
the Buyer with documentation sufficient to establish its
compliance with the provisions of COBRA or New York State law
(with regard to conversion and continuation of benefits,
including, but not limited to Section 3221 of New York State
Insurance Law).
(k) Employees.
(i) As of the date of this Agreement, the Company has no
employees other than as set forth on Schedule 3.1(k)(i).
(ii) Schedule 3.1(k)(ii) sets forth each employee Buyer has
advised the Company it intends to offer employment or a consulting
arrangement as of the Closing Date.
(iii) Intentionally Omitted.
13
(iv) To the Knowledge of the Company, no executive, key
employee, or group of employees has any plans to terminate
employment with the Company. The Company is not a party to or
bound by any collective bargaining agreement, nor has either of
them experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. The Company
has not committed any unfair labor practice. The Company has no
Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to
employees of the Company.
(l) No Subsidiaries. The Company does not own an Equity Interest
in any Person.
(m) Legal Compliance. The Company, its predecessors and each of
its employees have, to the Knowledge of the Company and TGFIN, complied
with all Laws applicable to the Acquired Assets, and no Action is
pending or Threatened against the Company alleging any failure to so
comply.
(n) Tax Matters. The Company has timely filed all Tax Returns
required to be filed, and has paid in full all Taxes (regardless of
whether disclosed on a Tax Return), which have become due. All such Tax
Returns are true, correct and complete, and the Company is not required
to pay any other Taxes except as shown on such Tax Returns. The amount
established as a liability for income and other Taxes in the Financial
Statements is sufficient for all accrued and unpaid Taxes of the
Company, whether or not disputed, during or applicable to the periods
ended on the date of such Financial Statements and all years and periods
prior thereto for which the Company may be liable, and the Company will
continue to make adequate provision for such Taxes on the Company's
books and records prior to the Closing Date. The Federal income tax
returns of the Company has not been examined by the Internal Revenue
Service. The Company is not a party to any pending action or
proceeding, and there is no action or proceeding threatened by any
Governmental Authority against the Company, for assessment or collection
of Taxes; and no unresolved claim for assessment or collection of Taxes
has been asserted against the Company. The Company shall pay all Tax
assessments or other Tax Liabilities when due with respect to the
ownership, business or operations of the Acquired Assets prior to the
Closing Date. There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any Tax Return of the
Company for any period. The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid
and owing to any employee, independent contractor, creditor,
stockholder, or other third party. There are no liens on any of the
Acquired Assets that arose in connection with any failure (or alleged
failure) to pay any Tax.
(o) Real Property. The Company does not own any real property.
Schedule 3.1(o) lists and describes briefly all real property leased or
subleased by the Company and the Company has delivered to Buyer correct
and complete copies of the leases and subleases listed therein.
14
(p) Intellectual Property.
(i) Schedule 3(p)(i)(A) contains a complete and accurate
list of all Intellectual Property: (A) which forms part of the
Acquired Assets; and (B) includes all Intellectual Property
currently licensed or otherwise provided to Buyer pursuant to the
Nymex Contract as of the date of this Agreement and required for
Buyer to continue to use such Intellectual Property after the
consummation of the Transactions. Schedule 3.1(p)(i)(B) lists all
originators, developers or programmers, contractors or agents, who
have written any portion of or otherwise contributed to the
development of any Intellectual Property constituting part of the
Acquired Assets (collectively, the "Developers"), each of whom
have executed, or will execute prior to Closing, Agreements to be
Executed by Developers, Confidential Information, Invention
Assignment and Non-Competition Agreements in the form attached
hereto as Exhibit F (executed copies of which have been supplied
to Buyer), and none of whom have retained any right, title or
interest in and to such Intellectual Property. Schedule
3.1(p)(i)(C) contains a complete and accurate list of all
Intellectual Property that is proprietary to any third Person and
that constitutes part of the Acquired Assets (the "Preexisting
IP"). Schedule 3.1(p)(i)(D) contains a complete and accurate list
of all such Preexisting IP that has been incorporated into any
Intellectual Property that constitutes part of the Acquired Assets
and indicates what ownership interest, if any, any third Person
proprietor of such Preexisting IP has in and to such Intellectual
Property. The Acquired Assets include the right by Buyer to use
the Preexisting IP as currently utilized by Buyer pursuant to the
Nymex Contract after the consummation of the Transactions, and to
sublicense to others the right to use, any such Preexisting IP as
incorporated into Intellectual Property constituting part of the
Acquired Assets.
(ii) With respect to each Trade Secret or element of Know-
How constituting part of the Acquired Assets, if the documentation
relating to such Trade Secret or element of Know-How is not
current, accurate, or sufficient in detail and content to identify
it or explain it or to allow its full use without reliance on the
knowledge or memory of any individual, Company has taken all
necessary steps to update, correct, or supplement the
documentation to allow such full use, including making available,
at Company's expense, any individuals or documents necessary for
such purpose. With respect to each Trade Secret or element of
Know-How constituting part of the Acquired Assets, the Company has
taken reasonable precautions to protect the secrecy of such Trade
Secret or Know-How, and its confidentiality and value. No such
Trade Secret or element of Know-How is part of the public
knowledge or literature, or has been used, divulged, or
appropriated either for the benefit of any third Person or to the
Company's detriment. No such Trade Secret or Know-How is subject
to any adverse claim nor has any adverse claim been Threatened
with respect to any such Trade Secret or Know-How.
(iii) The Acquired Assets include the right to use pursuant
to a valid Assumed Contract all Intellectual Property proprietary
to any third Person that is necessary for the operation and use of
the Acquired Assets as currently utilized by Buyer pursuant to the
Nymex Contract after the consummation of the Transactions. Each
15
item of Intellectual Property constituting part of the Acquired
Assets will be owned or available for use by Buyer on terms and
conditions identical to those applicable to the Company (excluding
terms and conditions that vary with the number of users of the
relevant item and similar variances) immediately subsequent to the
date hereof. The Company has taken all reasonably prudent action
necessary to maintain and protect each item of Intellectual
Property constituting part of the Acquired Assets.
(iv) The Company has delivered to Buyer correct and
complete copies of all written documentation evidencing ownership
of each item of Intellectual Property constituting part of the
Acquired Assets.
(v) With respect to each item of Intellectual Property
constituting part of the Acquired Assets:
(A) pursuant to the Transaction Documents Buyer is
acquiring all right, title, and interest in and to the item,
free and clear of any Encumbrance;
(B) the item is not subject to any outstanding Order;
(C) no Action is pending or, to the Company's
Knowledge, Threatened which challenges the Enforceability,
use, or ownership of the item;
(D) neither the Company nor any predecessor in interest
has ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other
conflict with respect to the item.
(vi) The Company's use of the Acquired Assets has not
interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any other Person's rights in and to any
Intellectual Property. The Company has never received any notice
alleging that its use of the Assets infringed, misappropriated, or
violated any other Person's rights in and to any Intellectual
Property (for example, any claim that the Company or TGFIN must
license or refrain from using any other Person's Intellectual
Property). After the date hereof, neither the Company nor TGFIN
will have any right, title or interest in or to any Intellectual
Property that interferes or would be likely to interfere with
Buyer's use of any of the Intellectual Property constituting part
of the Acquired Assets and Buyer will not interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of the Company or TGFIN after the
date hereof as a result of the use of the Acquired Assets. To the
Company or TGFIN's Knowledge, no other Person has interfered with,
infringed upon, misappropriated, or otherwise come into conflict
with the Company's right in and to any Intellectual Property
constituting part of the Acquired Assets.
(vii) The Company has no Knowledge of any new products,
inventions, procedures, or methods of manufacturing or processing
that any competitors or other Person have developed which
16
reasonably could be expected to supersede or make obsolete any
Intellectual Property constituting part of the Acquired Assets.
(q) Assumed Contracts. Schedule 1.1(b) lists all Assumed Contracts
and with respect to each such Assumed Contract:
(i) to the Knowledge of the Company and TGFIN, the Assumed
Contracts are Enforceable;
(ii) to the Knowledge of the Company and TGFIN, the Assumed
Contracts will continue to be Enforceable on identical terms
(other than with respect to terms that vary with the number of
users or similar variances) following the execution and delivery
of this Agreement (except that certain Assumed Contracts contain
express limits on assignability, which Assumed Contracts are
specifically identified on Schedule 3.1(q)(ii));
(iii) no party is in Breach, and no event has occurred
which, with notice or lapse of time, would constitute a Breach
under an Assumed Contract; no party to the Assumed Contracts has
repudiated, revoked, cancelled or limited any provision of the
Assumed Contracts;
(iv) the Company has provided to Buyer a correct and
complete copy of each Assumed Contract (and all modifications and
amendments thereto) prior to the execution of this Agreement; and
(v) the Assumed Contracts are all of the contracts,
agreements, leases, Commitments, arrangements and understandings
(both written and oral) relating to the Acquired Assets or the
TGFIN/X Business.
(r) Financial Statements. Attached hereto as Schedule 3.1(r) are
the following financial statements (collectively the "Financial
Statements"): (i) audited consolidated and unaudited consolidating
balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31,
2000, and December 31, 2001 (the "Most Recent Fiscal Year End") for
TGFIN and the Company; and (ii) unaudited consolidated balance sheets
and statements of income, changes in stockholders' equity, and cash flow
(the "Most Recent Financial Statements") as of and for the nine months
ended September 30, 2002 (the "Most Recent Fiscal Month End") for TGFIN
and the Company. The Financial Statements (including the notes thereto)
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, present fairly the financial
condition of TGFIN and the Company as of such dates and the results of
operations of TGFIN and the Company for such periods, are correct and
complete, and are consistent with the books and records of TGFIN and the
Company (which books and records are correct and complete in all
material respects); provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
17
(s) Events Subsequent to Most Recent Fiscal Year End. Since the
Most Recent Fiscal Year End, there has not been any material adverse
change in the business, financial condition, operations, results of
operations, or future prospects of any of the Company. Without limiting
the generality of the foregoing, since that date (except as provided in
Schedule 3.1(s)):
(i) the Company has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for
a fair consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than
$25,000 or outside the Ordinary Course of Business;
(iii) no party (including the Company) has accelerated,
terminated, modified, or cancelled any agreement, contract, lease,
or license (or series of related agreements, contracts, leases,
and licenses) involving more than $25,000 to which the Company is
a party or is bound;
(iv) no Security Interest has been placed upon any of the
Company's assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than
$25,000 or outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of,
any other Person (or series of related capital investments, loans,
and acquisitions) either involving more than $10,000 or outside
the Ordinary Course of Business;
(vii) the Company has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation
either involving more than $10,000 singly or $15,000 in the
aggregate;
(viii) the Company has not delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(ix) the Company has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and
claims) either involving more than $10,000 or outside the Ordinary
Course of Business;
(x) the Company has not granted any exclusive license or
sublicense of any rights under or with respect to any Intellectual
Property;
(xi) there has been no change made or authorized in the
charter or bylaws of the Company;
18
(xii) the Company has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(xiii) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xiv) the Company has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(xv) the Company has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xvi) the Company has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement
outside the Ordinary Course of Business;
(xvii) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xviii) there has not been any other material
occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving the
Company; and
(xix) the Company has not committed to any of the
foregoing.
(t) Undisclosed Liabilities. The Company has no Liability (and
there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any
of them giving rise to any Liability), except for: (i) Liabilities set
forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto); and (ii) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
(u) Tangible Assets. Schedule 3.1(u) sets forth a list of all of
the tangible personal property of the Company to be acquired by Buyer
pursuant to this Agreement. Each such Tangible Asset is free from
defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for
which it presently is used and presently is proposed to be used.
(v) Intentionally Omitted.
19
(w) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
(x) Accuracy of Information Furnished; Reliance on Representations
and Warranties. No representation, statement, or information contained
in this Agreement (including the Exhibits hereto), or any Contract or
document executed in connection herewith or delivered pursuant hereto or
thereto or made available or furnished to Buyer or its representatives
by the Company contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary to make
the information contained therein not misleading. The Company has
provided Buyer with correct and complete copies of all documents listed
or described in the Exhibits and Schedules hereto.
3.2. Representations and Warranties of Buyer. Buyer represents and
warrants to the Company that the statements contained in this Section 3.2 are
correct and complete as of the date of this Agreement.
(a) Status of Buyer. Buyer is a limited liability company duly
organized, validly existing and in good standing under the Laws of the
state of Delaware. There is no pending or, to Buyer's Knowledge,
Threatened, Action for the dissolution, liquidation, insolvency, or
rehabilitation of Buyer.
(b) Power and Authority; Enforceability. Buyer has full corporate
and other power and authority to execute and deliver each Transaction
Document to which it is party, to perform its obligations thereunder and
consummate the Transactions. The execution, delivery and performance of
this Agreement and of the other Transaction Documents to which it is a
party, and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action of
Buyer by any other necessary corporate or member action (none of which
actions has been modified or rescinded and all of which actions are in
full force and effect). This Agreement constitutes, and upon execution
and delivery each other Transaction Document will constitute, a valid
and binding agreement and obligation of Buyer, enforceable in accordance
with its respective terms.
(c) No Violation. The execution and delivery of the Transaction
Documents to which Buyer is a party by Buyer and the performance and
consummation of the Transactions by Buyer will not: (i) Breach any Law
or Order to which Buyer is subject or any provision of its
organizational documents; (ii) Breach any Contract, Order, or Permit to
which Buyer is a party or by which it is bound or to which any of its
Acquired Assets is subject; or (iii) require any Consent.
(d) Brokers' Fees. Buyer has no Liability to pay any compensation
to any broker, finder, or agent with respect to the Transactions for
which either the Company or TGFIN could become Liable.
20
ARTICLE 4.
COVENANTS
4.1. The Company and TGFIN Pre-Closing Covenants. The Company and
TGFIN agree that, except as otherwise agreed in writing by Buyer, between the
execution of this Agreement and the Closing:
(a) General. The Company and TGFIN will use reasonable best
efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the Transactions
(including satisfaction, but not waiver, of the closing conditions set
forth in Article 5 below).
(b) Notices and Consents. The Company and TGFIN will give any
notices to third parties, and the Company and TGFIN will use reasonable
best efforts to obtain any necessary Consents to effect the
Transactions.
(c) Operation of Business. The Company will not engage in any
practice, take any action, or enter into any transaction outside the
Ordinary Course of Business.
(d) Preservation of Acquired Assets. Unless otherwise agreed by
Buyer, the Company will keep the Acquired Assets and its business
substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.
(e) Full Access. The Company will permit representatives of the
Buyer to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Company to
all premises, properties, personnel, books, records (including Tax
records), contracts, and documents of or pertaining to the Company.
(f) Notice of Developments. The Company and TGFIN will give prompt
written notice to Buyer of any material adverse development causing a
breach of any of its own representations and warranties in this
Agreement. No disclosure by the Company or TGFIN pursuant to this
Section 4.1.(f), however, shall be deemed to amend or supplement any
disclosure schedules hereto or to prevent or cure any material
misrepresentation, breach of warranty, or breach of covenant.
(g) Bulk Sales. Take all necessary action to provide for the
payment of any applicable state sales, transfer or use taxes and to
comply with all applicable bulk transfer and similar laws in connection
with the Transactions.
(h) Hiring. The Company shall (i) not hire any Person; (ii) not
increase or otherwise change the rate or nature of the compensation
(including wages, salaries and bonuses) that is paid or payable to any
Person employed by the Company, except in the Ordinary Course of
Business consistent with past practices, but in no event may any such
increase exceed 4% of the base salary of any such Person paid during the
year ended December 31, 2002; (iii) not enter into or renew any
employment or consulting agreement or other contract or arrangement with
respect to the performance of personal services for the Company or (iv)
agree or commit to do any of the foregoing;
21
(i) New Contracts. Except with Buyer's prior written consent, such
consent not to be unreasonably withheld or delayed, the Company shall
not enter into, change, amend, terminate or otherwise modify or agree or
commit to change, amend, terminate or modify any Contract relating to
any Acquired Assets in any material respect except for those Contracts
that terminate or expire prior to the Closing Date by their own terms.
(j) Approval of Transaction. TGFIN as sole shareholder of the
Company, shall duly authorize and vote its shares to approve the
Transaction.
(k) Accounts Receivable. The Company shall not, without the prior
consent of Buyer, waive or modify any Accounts Receivable set forth on
Schedule 1.1(a).
(l) Compliance with Laws. The Company and TGFIN will fully comply
with all Laws, including Federal and State securities laws.
4.2. Further Covenants. The Company, TGFIN and Buyer further agree as
follows with respect to the period following the date hereof:
(a) General. In case at any time after the date hereof any further
action is necessary (in Buyer's reasonable good faith opinion) to carry
out the purposes of this Agreement, each Party will take such further
action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the
requesting Party's sole cost and expense (unless the requesting Party is
entitled to indemnification therefor under Article 6). The Company
acknowledges and agrees that after the Closing Buyer will be entitled to
possession of all documents, books, records, agreements, and financial
data of any sort relating to the Acquired Assets.
(b) Confidentiality. The Buyer will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver
promptly to Company or TGFIN or destroy, at the request and option of
Company or TGFIN, all tangible embodiments (and all copies) of the
Confidential Information which are in the possession of the Buyer. If
the Buyer is requested or required (by oral question or request for
information or documents in any Action) to disclose any Confidential
Information, that the Buyer will notify Company or TGFIN promptly of the
request or requirement so that Company or TGFIN may seek an appropriate
protective Order or waive compliance with this Section. If, in the
absence of a protective Order or the receipt of a waiver hereunder, the
Buyer is, on the written advice of counsel, compelled to disclose any
Confidential Information to any Governmental Authority, arbitrator, or
mediator or else stand Liable for contempt, the Buyer, as applicable may
disclose the Confidential Information to the Governmental Authority,
arbitrator, or mediator; provided, however; that the Buyer so disclosing
will use its best efforts to obtain, at the reasonable request of
Company or TGFIN and at Company's or TGFIN's expense, an Order or other
assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as Company or
TGFIN will designate.
22
(c) Intellectual Property Matters. If Buyer shall desire to file
any document, whether related to a patent, Copyright or other similar
application necessary or desirable to perfect the title in and to any
Acquired Assets, the Company will, at any time upon request, execute and
deliver any and all papers, make all rightful oaths and do all lawful
acts requisite for the filing of such patent, Copyrights or other
similar application, including divisions, continuations, reexaminations,
and reissues thereof, without further compensation, but at Buyer's
expense. The Company will, at any time upon request, communicate to
Buyer all facts relating to the Acquired Assets, including any patents,
Copyrights or the file history thereof, as may be known to the Company,
and testify as to the same in any interference or other litigation when
requested so to do, without further compensation but at Buyer's expense.
(d) Taxes. The Company and TGFIN shall be liable for and shall
hold Buyer harmless against any applicable real property transfer or
gains, sales, use, transfer, value added, stock transfer, and stamp
taxes, any transfer, recording, registration, and other fees, and any
similar Taxes which become payable in connection with the Transaction
contemplated by this Agreement. The Company and TGFIN, after review and
consent by Buyer, shall file such applications and documents as shall
permit any such Tax to be assessed and paid on or prior to the Closing
Date in accordance with any pre-sale filing procedure. Buyer shall
execute and deliver all instruments and certificates necessary to enable
the Company and TGFIN to comply with the foregoing. Buyer agrees to
file, and Company and TGFIN agree to cooperate in filing, any applicable
notices or other documents necessary to comply timely with the
provisions of Section 1141(c) of the New York State Tax Law and the
regulations issued thereunder, including, but not limited to, any
applicable provisions relating to notification of the New York State Tax
Commission prior to a bulk sale of business assets.
(e) Competing Transactions. Nothing contained in this Agreement
shall prohibit the Company from, prior to the Information Effective
Date: (a) furnishing information to, or entering into discussions or
negotiations with, any person that makes an unsolicited written, bona
fide proposal to the Company with respect to a Competing Transaction
which could reasonably be expected to result in a Superior Proposal, if:
(i) the failure to take such action would be inconsistent with the
Board's fiduciary duties to the Company's stockholders under applicable
law; and (ii) prior to furnishing such information to, or entering into
discussions or negotiations with, such person, the Company (x) provides
reasonable notice to Buyer to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such
person and (y) receives from such person a fully executed
confidentiality agreement; (b) complying with Rule 14d-9 or Rule 14e-2
promulgated under the Securities Exchange Act of 1934 with regard to a
tender or exchange offer; or (c) failing to make or withdrawing or
modifying its approval or recommending an unsolicited, bona fide
proposal with respect to a Competing Transaction which could reasonably
be expected to result in a Superior Proposal, following the receipt of
such a proposal, if the failure to take such action would be
inconsistent with the Board's fiduciary duties to the Company's
stockholders under applicable law.
23
(f) No Action. The Company and TGFIN will not bring any Action
claiming any use by Buyer of the Acquired Assets as contemplated by the
Transactions infringes or violates any of the Intellectual Property
comprised within the Excluded Assets.
ARTICLE 5.
CONDITIONS TO CLOSING
5.1. Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the Transactions are subject to the satisfaction or fulfillment at
or prior to Closing of the following conditions, any of which may be waived in
whole or in part by Buyer in writing: (i) all representations and warranties
of the Company contained in this Agreement being true and correct in all
material respects at and as of the Closing; (ii) the Company performing and
complying in all material respects with all the covenants, obligations and
agreements required by this Agreement to be performed or complied with at or
prior to the Closing, except that representations and warranties that are
confined to a specific date shall speak only as of such date; (iii) receipt of
any requisite approvals from any applicable Governmental Authority (or written
waiver thereof), and there being no Law or injunction making illegal or
otherwise prohibiting or restraining the consummation of the transactions
contemplated by this Agreement; (iv) the Company executing and delivering to
Buyer, or causing to be executed and delivered to Buyer, such bills of sale,
leases, assignments and other instruments of transfer as Buyer may reasonably
require to transfer title to the Acquired Assets free and clear of all
Encumbrances, together with all Transaction Documents; (v) the Company
delivering to Buyer the Officer's Certificate, executed by a duly authorized
officer of the Company, that certifies that the conditions set forth in
Section 5.1 are fully satisfied as of Closing; (vi) the Company delivering to
Buyer the Secretary's Certificate, executed by a duly authorized secretary or
assistant secretary of the Company, with corporate and authority documents
attached as exhibits to each certificate; (vii) all required waivers, Consents
and approvals shall have been obtained and delivered, each on terms reasonably
satisfactory to Buyer, including: (A) receipt by Buyer of satisfactory written
evidence from CA that either: (x) CA has consented to the assignment of the
Independent Software Vendor Agreement between CA and the Company, dated March
18, 2002 ("CA Agreement") to Buyer; or (y) that CA shall provide the services
and rights theretofore provided to the Company under the CA Agreement to Buyer
or Nymex on such terms as shall be satisfactory to Buyer, from and after
Closing; and (B) written consent to the assignment of the Software License,
Development and Service Agreement between the Company and Exchange Cubed LLC
dated as of December 13, 2001; in form and substance satisfactory to Buyer;
(viii) the Company and TGFIN having received the requisite shareholder
approval of this Agreement; (ix) the Buyer shall have received from the
Counsel to the Company and TGFIN the Company and TGFIN's Counsel's Opinion,
addressed to Buyer and dated as of the Closing Date; (x) the Company having
delivered to Buyer documentary evidence, in form and substance satisfactory to
Buyer, of the termination of: (A) the License Agreement between the Company
and Vortex Trading LLC dated as of February 28, 2001; and (B) the License
Agreement between the Company and Civilian Trading Company Inc. dated as of
October 18, 2002; and (C); (xi) each of Sam Gaer, Longmei Shentu, Michael
Barkan, Edward Baginski and Ian Wall (collectively, "Retained Employees")
having executed and delivered to Buyer employment agreements or comparable
consulting agreements with Nymex, dated as of the Closing Date, each in a form
24
reasonably agreed between the Retained Employees and Nymex; and (xii) all
actions, proceedings, instruments and documents required to carry out the
transactions contemplated by this Agreement, and all other legal matters
required for such transactions, shall have been reasonably satisfactory to
Buyer prior to Closing.
5.2. Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction or fulfillment at or prior to the Closing of the
following conditions, any of which may be waived in whole or in part by the
Company in writing: (i) all representations and warranties of Buyer contained
in this Agreement being true and correct in all material respects at and as of
the Closing; (ii) Buyer performing and complying in all material respects with
all covenants and agreements required by this Agreement to be performed or
complied with at or prior to the Closing; (iii) there being no Law or
injunction issued by a court of competent jurisdiction making illegal or
otherwise prohibiting or restraining the consummation of the transactions
contemplated by this Agreement; (iv) Buyer having paid the Purchase Price in
accordance with Article 2 hereof; (v) Buyer delivering to the Company an
officer's certificate, duly executed by an authorized officer of Buyer, that
certifies that the conditions set forth in Section 5.2 are fully satisfied;
(vi) Buyer delivering to the Company a secretary's or assistant secretary's
certificate, duly executed by such authorized officer, with corporate and
authority documents attached as exhibits to each certificate; (vii) there
being no Law or injunction making illegal or otherwise prohibiting or
restraining the consummation of the transactions contemplated by this
Agreement; (viii) Buyer executing and delivering the Assumption Agreement and
Purchase Price Escrow Agreement; and (ix) all actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement, and all other legal matters required for such transactions,
shall have been reasonably satisfactory to counsel for the Company prior to
Closing.
ARTICLE 6.
INDEMNIFICATION
6.1. Survival of Representations and Warranties. Each representation,
warranty, covenant and obligation in this Agreement will survive the date
hereof for a period of one (1) year and Buyer on the one hand and the Company
and TGFIN jointly and severally on the other, will be Liable for any Damages
resulting from any Breaches thereof; provided, however, that the
representations and warranties contained in: (i) Section 3.1(n) (Tax Matters)
shall survive until one hundred and twenty (120) days beyond the lapse of the
applicable statute of limitations (including any extensions thereof); and (ii)
Section 3.1(f) (Title to Acquired Assets) will survive the date hereof for a
period of six (6) years.
6.2. Indemnification Provisions for Buyer's Benefit.The Company and
TGFIN, jointly and severally, will defend, indemnify and hold the Company and
TGFIN Indemnitees harmless from, against and with respect to any and all
Actions and Damages (whether absolute, accrued, contingent or otherwise and
whether a contractual, tax or any other type of Liability, obligation or
claim) asserted against, imposed upon or incurred by Buyer, directly or
indirectly, by reason of or resulting from, relating to, arising out of, or
attributable to:
25
(a) any misrepresentation or Breach of any representation or
warranty the Company or TGFIN has made in this Agreement, or any other
certificate or document the Company or TGFIN has delivered pursuant to
this Agreement;
(b) any Breach by the Company or TGFIN of any covenant or
obligation of the Company or TGFIN contained in or made pursuant to this
Agreement or any other Transaction Document; or
(c) any Excluded Liabilities.
6.3. Indemnification Provisions for the Company and TGFIN's Benefit.
Buyer will defend, indemnify and hold the Buyer Indemnitees harmless from,
against and with respect to any and all Actions and Damages (whether absolute,
accrued, contingent or otherwise and whether a contractual, tax or any other
type of Liability, obligation or claim) asserted against, imposed upon or
incurred by the Company or TGFIN directly or indirectly, by reason of or
resulting from, relating to, arising out of, or attributable to:
(a) any misrepresentation or Breach of any representation or
warranty Buyer has made in this Agreement or any other certificate or
document Buyer has delivered by Buyer pursuant to this Agreement; and
(b) any Breach by Buyer of any covenant or obligation of Buyer
contained in or made pursuant to this Agreement or any other Transaction
Document in this Agreement.
6.4. Indemnification Claim Procedures.
(a) If any Action is commenced in which any Indemnitee is a party
which may give rise to a claim for indemnification against any
Indemnitor pursuant to this Section 6 ("Indemnification Claim") then
such Indemnitee will promptly give notice to the Indemnitor. Failure to
promptly notify the Indemnitor will not relieve the Indemnitor of any
Liability that it may have to the Indemnitee, except to the extent that
the Indemnitor shall have suffered actual Damages by reason of such
failure.
(b) The Indemnitor shall have the right to undertake, by counsel or
other representatives reasonably satisfactory to the Indemnitee, the
defense of such Indemnification Claim at the Indemnitor's risk and
expense.
(c) In the event that the Indemnitor shall elect not to undertake
such defense, or within a reasonable time after notice of any such
Indemnification Claim from the Indemnitee shall fail to defend, the
Indemnitee (upon further written notice to the Indemnitor) shall have
the right to undertake the defense, compromise or settlement of such
Indemnification Claim, by counsel or other representatives of its own
choosing, on behalf of and for the account and risk of the Indemnitor
(subject to the right of the Indemnitor to assume defense of such
Indemnification Claim at any time prior to settlement, compromise or
final determination thereof with counsel reasonably satisfactory to the
Indemnitee). In such event, the Indemnitor shall pay to the Indemnitee,
in addition to the other sums required to be paid hereunder, the costs
26
and expenses incurred by the Indemnitee in connection with such defense,
compromise or settlement as and when such costs and expenses are so
incurred.
(d) Anything in this Section 6.4 to the contrary notwithstanding,
if there is a reasonable probability that an Indemnification Claim may
materially and adversely affect the Indemnitee, (i) the Indemnitee shall
have the right, at its own cost and expense, to participate in the
defense, compromise or settlement of the Indemnification Claim, (ii) the
Indemnitor shall not, without the Indemnitee's written consent, settle
or compromise any Indemnification Claim or consent to entry of any
judgment which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnitee of a release
from all liability in respect of such Indemnification Claim in form and
substance satisfactory to the Indemnitee, (iii) in the event that the
Indemnitor undertakes defense of any Indemnification Claim, the
Indemnitee, by counsel or other representative of its own choosing and
at its sole cost and expense, shall have the right to consult with the
Indemnitor and its counsel or other representatives concerning such
Indemnification Claim and the Indemnitor and the Indemnitee and their
respective counsel or other representatives shall cooperate with respect
to such Indemnification Claim, and (iv) in the event that the Indemnitor
undertakes defense of any Indemnification Claim, the Indemnitor shall
have an obligation to keep the Indemnitee informed of the status of the
defense of such Indemnification Claim and to furnish the Indemnitee with
all documents, instruments and information that the Indemnitee shall
reasonably request in connection therewith.
6.5. Purchase Price Escrow. On the Closing Date, Buyer shall deposit
the Purchase Price Escrow Amount in cash in an escrow account with the
Purchase Price Escrow Agent for the purpose of satisfying: (i) any
unascertained claims Buyer may have under this Section 6 after the Closing
Date; and (ii) any amounts otherwise payable by the Company to Buyer after the
Closing Date. Such amount shall be held by the Purchase Price Escrow Agent
for a period of one (1) year after the Closing Date in accordance with the
terms and conditions of the Purchase Price Escrow Agreement. Buyer's right to
recover any funds held pursuant to the Purchase Price Escrow Agreement shall
be in addition to and not in limitation of any other rights or remedies of
Buyer at law or in equity.
6.6. Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any remedy at Law or
in equity that any Party may have with respect to the Transactions.
Indemnitee's rights and remedies set forth in this Agreement will survive the
date hereof and will not be deemed waived by consummation of the Transactions.
ARTICLE 7.
ACCOUNTS RECEIVABLE
7.1. Intentionally Omitted.
7.2. Cooperation After Closing. From time to time after Closing, upon
the reasonable request and expense of Buyer, the Company and TGFIN shall
promptly execute and deliver, or cause to be executed or delivered, such
further instruments of conveyance, assignment or transfer and take such
27
further action as Buyer may reasonably request, to facilitate Buyer's
collection of any outstanding Accounts Receivable set forth in Schedule 1.1(a)
in accordance herewith.
ARTICLE 8.
ADDITIONAL AGREEMENTS
8.1. Stockholder Approval.Promptly after execution of this Agreement,
the Company shall take all appropriate steps to have Sam Gaer, Marni Gaer,
Ronald Comerchero and up to six other stockholders having in the aggregate a
majority of the outstanding TGFIN Common Stock approve the Agreement and
Transaction.
8.2. Preparation of the Information Statement. The Company shall as
promptly as practicable prepare and file an information statement relating to
the Transaction (together with all amendments, supplements and exhibits
thereto, the "Information Statement") with the SEC and will diligently respond
to any comments of the SEC or its staff and cause the Information Statement to
be mailed to the Company's stockholders at the earliest practical time;
provided, however, that the Company shall (i) furnish to Buyer a copy of the
Information Statement and allow Buyer a reasonable opportunity to comment
thereon prior to the filing of the Information Statement with the SEC; and
(ii) furnish to Buyer a copy of any applicable proxy or related information
provided to stockholders with respect to the Information Statement and allow
Buyer five (5) business days to comment thereon prior to dispatch to the
Company stockholders. The Company will notify Buyer promptly of the receipt
of any comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Information Statement or for
additional information and will supply Buyer with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the
SEC or its staff, on the other hand, with respect to the Information Statement
or the Transaction. If at any time prior to the Information Effective Date
there shall occur any event that the Company determines must or should be set
forth in an amendment or supplement to the Information Statement, the Company
will promptly prepare and mail to its stockholders such an amendment or
supplement with a copy to Buyer. The Company shall perform all its
obligations pursuant to this Section 8.2 at its own expense.
8.3. Cooperation and Exchange of Information.The Company, TGFIN and
Buyer will provide each other with such cooperation and information as either
of them reasonably may request of the other in filing any Tax Return, amended
Tax Return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes, or conducting any audit or other proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying
schedules, related work papers and documents relating to rulings or
determinations by Tax authorities. The Company, TGFIN and Buyer each shall
make its employees available to the other on a basis mutually convenient to
both parties to provide explanations of any documents or information provided
hereunder. Each of the Company, TGFIN and Buyer shall retain all Tax Returns,
schedules and work papers, records and other documents in its possession
relating to Tax matter of the Company and TGFIN and the Acquired Assets for
each taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (i) the expiration of the statute of
28
limitations of the taxable periods to which such Tax Returns and other
documents relate, or (ii) six years following the due date for such Tax
Returns. Any information obtained under this Section 8.3 shall be kept
confidential except as may be otherwise necessary in connection with the
filing of Tax Returns or claims for refund or in conducting an audit or other
proceeding.
ARTICLE 9.
TERMINATION
9.1. Termination. This Agreement and the transactions contemplated by
this Agreement may be terminated at any time prior to the Closing: (i) by the
mutual written consent of the Parties; (ii) by Buyer if the Closing has not
occurred on or prior to 5:00 p.m., Eastern Standard Time, on March 31, 2003;
provided, however, that the right to terminate this Agreement under this
Section 9.1(ii) shall not be available to Buyer if its action or inaction has
resulted in a willful and material breach of this Agreement; (iii) by either
the Company and TGFIN or Buyer if any Governmental Authority issues a final
and non-appealable Order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement; provided, the
party seeking to so terminate has exercised commercially reasonable efforts to
oppose any such Order or to have the Order vacated or made inapplicable to the
transactions contemplated by this Agreement; (iv) by Buyer, if the Company or
TGFIN materially breaches any representation, warranty, covenant or other
agreement to be performed by it contained in this Agreement, and such breach
is incapable of being cured or is not cured within ten (10) days after receipt
of written notice from Buyer by the Company or TGFIN; (v) by the Company and
TGFIN, if Buyer materially breaches any representation, warranty, covenant or
other agreement contained in this Agreement, and such breach is incapable of
being cured or is not cured within ten (10) days after Buyer's receipt of
written notice from the Company; (vi) by Buyer, if the TGFIN Board of
Directors authorizes the Company to enter into a written agreement with
respect to a Competing Transaction that the Board has determined is a Superior
Proposal; provided, however, that the Company shall not terminate this
Agreement pursuant to this Section 9.1(i) and enter into an agreement for such
a Competing Transaction until the expiration of five business days following
Buyer's receipt of a written notice advising Buyer that the Company has
received a Superior Proposal specifying the material terms and conditions of
such Superior Proposal (and including a copy thereof with all accompanying
written documentation) and identifying the Person making such Superior
Proposal. After providing such notice, the Company shall provide a reasonable
opportunity to Buyer during such five business day period to make such
adjustments in the terms and conditions of this Agreement as would enable the
Company to proceed with the Transaction on such adjusted terms; (vii) by Buyer
if the satisfaction of any condition to the obligations of Buyer set forth in
Section 5.1 becomes impossible; or (viii) by the Company if the satisfaction
of any condition to the obligations of the Company set forth in Section
5.2becomes impossible.
9.2. Procedure and Effect of Termination. If either party terminates
this Agreement pursuant to Section 9.1, this Agreement, other than the
obligations of the parties under Sections 4.2(Confidentiality), Section 9.2
(Procedure and Effect of Termination), and Section 10 (Miscellaneous) (each of
which shall survive termination), shall forthwith become void and have no
effect, without any liability on the part of any terminating party or its
officers, directors or shareholders. In the event of termination of this
Agreement pursuant to Section 9.1, written notice of the termination must be
given by the terminating party at least three (3) Business Days prior to the
29
date of termination. If this Agreement is properly terminated, all filings,
applications and other submissions made pursuant to this Agreement, to the
extent practicable, shall be withdrawn from the agency or other person to
which they were made.
ARTICLE 10.
MISCELLANEOUS
10.1. Entire Agreement. This Agreement, together with the Exhibits
and Schedules hereto, the other Transaction Documents and the certificates,
documents, instruments and writings that are delivered pursuant hereto,
constitutes the entire agreement and understanding of the Parties in respect
of its subject matters and supersedes all prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
relate in any way to the subject matter hereof or the Transactions.
10.2. Successors. All of the terms, agreements, covenants,
representations, warranties, and conditions of this Agreement are binding
upon, and inure to the benefit of and are enforceable by, the Parties and
their respective successors and permitted assigns.
10.3. Assignments.No Party may assign either this Agreement or any
of its rights, interests, or obligations hereunder without the prior written
approval of the Company and TGFIN or Buyer, as applicable; provided, however,
that Buyer may: (a) assign any or all of its rights and interests hereunder to
one or more of its Affiliates; and (b) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases Buyer
nonetheless will remain responsible for the performance of all of its
obligations hereunder).
10.4. Notices. All notices, requests, demands, and claims hereunder
will be in writing. Any notice, request, demand, claim or other communication
hereunder will be deemed duly given if (and then three business days after) it
is sent by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to Buyer:
New York Mercantile Exchange, Inc.
One North End Avenue
New York, New York 10282
Attention: General Counsel
Facsimile: (212) 299-2298
With a copy to:
Hogan & Hartson L.L.P.
875 Third Avenue, 26th Floor
New York, NY 10022
Attention: Jeffrey W. Rubin, Esq.
Facsimile: (212) 918-3100
30
If to the Company or TGFIN:
TGFIN Holdings, Inc.
39 Broadway
New York, New York 10006
Attention: Sam Gaer, President
Facsimile:
With a copy to:
Michael D. Karsch, Esq.
Sachs Sax Klein
301 Yamato Road
Boca Raton, Florida 33431
Facsimile: (561) 994-4985
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication will be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
10.5. Specific Performance. Each Party acknowledges and agrees that
the other Parties would be damaged irreparably if any provision of this
Agreement is not performed in accordance with its specific terms or is
otherwise Breached. Accordingly, each Party agrees that the other Parties
will be entitled to an injunction or injunctions to prevent Breaches of the
provisions of this Agreement and to enforce specifically this Agreement and
its terms and provisions in any Action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the
matter, subject to the following Sections, in addition to any other remedy to
which they may be entitled, at Law or in equity.
10.6. Time. Time is of the essence in the performance of this
Agreement.
10.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
10.8. Headings. The article and section headings contained in this
Agreement are inserted for convenience only and will not affect in any way the
meaning or interpretation of this Agreement.
10.9. Governing Law. This Agreement and the performance of the
Transactions and obligations of the Parties hereunder will be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any choice of Law principles.
31
10.10. Amendments and Waivers. No amendment, modification,
replacement, termination or cancellation of any provision of this Agreement
will be valid, unless the same will be in writing and signed by Buyer, The
Company and TGFIN. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, may
be deemed to extend to any prior or subsequent default, misrepresentation, or
Breach of warranty or covenant hereunder or affect in any way any rights
arising because of any prior or subsequent such occurrence.
10.11. Severability. The provisions of this Agreement will be deemed
severable and the invalidity or unenforceability of any provision will not
affect the validity or enforceability of the other provisions hereof; provided
that if any provision of this Agreement, as applied to any Party or to any
circumstance, is adjudged by a Governmental Authority, arbitrator, or mediator
not to be enforceable in accordance with its terms, the Parties agree that the
Governmental Authority, arbitrator, or mediator making such determination will
have the power to modify the provision in a manner consistent with its
objectives such that it is enforceable, and/or to delete specific words or
phrases, and in its reduced form, such provision will then be enforceable and
will be enforced.
10.12. Expenses. Except as otherwise expressly provided in this
Agreement, each Party will bear its own costs and expenses incurred in
connection with the preparation, execution and performance of this Agreement
and the Transactions including all fees and expenses of agents,
representatives, financial advisors, legal counsel and accountants, whether or
not the Transactions are consummated.
10.13. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if
drafted jointly by the Parties and no presumption or burden of proof will
arise favoring or disfavoring any Party because of the authorship of any
provision of this Agreement. Any reference to any federal, state, local, or
foreign Law will be deemed also to refer to Law as amended and all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
Parties intend that each representation, warranty, and covenant contained
herein will have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant relating
to the same subject matter (regardless of the relative levels of specificity)
which the Party has not breached will not detract from or mitigate the fact
that the Party is in breach of the first representation, warranty, or
covenant. The words "herein," "hereof" and words of similar import refer to
this Agreement as a whole and not to any particular Article or Section.
10.14. Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
10.15. No Third Party Beneficiaries. Neither this Agreement nor any
provision hereof, nor any Exhibit, Annex or Schedule hereto or document
executed or delivered herewith, shall create any right in favor of or impose
any obligation upon any Person or entity other than the Parties hereto and
their respective successors and permitted assigns.
[The remainder of this page is intentionally left blank.]
32
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date
first above written.
TRADINGEAR.COM, INC.
By:/s/Samuel Gaer
Name: Samuel Gaer
Title: President
TGFIN HOLDINGS, INC.
By:/s/Samuel Gaer
Name: Samuel Gaer
Title: President
TRADINGEAR ACQUISITION LLC
By:/s/J. Robert Collins, Jr.
Name: J. Robert Collins, Jr.
Title: President
Subject to the terms and conditions of this
Agreement, the undersigned hereby
guarantees the due and punctual performance
of Buyer's obligation to pay the Purchase
Price at Closing pursuant to Section 2.2 of
this Agreement.
NEW YORK MERCANTILE EXCHANGE, INC.
By:/s/J. Robert Collins, Jr.
Name: J. Robert Collins, Jr.
Title: President
33