-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V+C1gRCZVh/1L46nnRiLHMLPWEWbQXw00y1s+8aEZWE9UgdhXoiEEr2xqJdYFmgV lRspV1HPWyIG+MLVsjVyUw== 0001015769-99-000075.txt : 19991018 0001015769-99-000075.hdr.sgml : 19991018 ACCESSION NUMBER: 0001015769-99-000075 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19991013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TADEO HOLDINGS INC CENTRAL INDEX KEY: 0000879465 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 954228470 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11568 FILM NUMBER: 99727849 BUSINESS ADDRESS: STREET 1: 42705 GRAND RIVER AVENUE STREET 2: SUITE 101 CITY: NOVI STATE: MI ZIP: 48735 BUSINESS PHONE: 2483449599 MAIL ADDRESS: STREET 1: 42705 GRAND RIVER AVENUE STREET 2: SUITE 101 CITY: NOVI STATE: MI ZIP: 48735 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL SELF CARE INC DATE OF NAME CHANGE: 19950808 10-K 1 10-K U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to __________ COMMISSION FILE NUMBER 1-11568 TADEO HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE 95-4228470 (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 5 HANOVER SQUARE - 24TH Floor New York, New York 10004 (Address of principal executive offices) (Zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 271-8511 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.0001 par value (Title of Class) Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act OF 1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILINGS REQUIREMENTS FOR THE PAST 90 DAYS. YES X No ___ Check if there is no disclosure of delinquent filers in response to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. X The aggregate market value of the voting stock held by non-affiliates for the issuer as of September 15, 1999 was $ 17,483,928. The number of shares outstanding of the issuer's Common Stock, $.0001 par value, as of September 15, 1999 was 15,848,529. Documents incorporated by reference: None PART I ITEM 1. BUSINESS PRIOR OPERATIONS Tadeo Holdings, Inc. ("Tadeo" or the "Company"), incorporated in Delaware on May 27, 1989 as Universal Self Care, Inc. and changed its name to Tadeo Holdings, Inc. on February 2, 1998. Prior to the Company's acquisition of Astratek and the creation of Tadeo E-Commerce, the Company supplied and distributed both prescription and non-prescription medications and durable medical equipment and supplies principally to persons suffering from diabetes. On January 28, 1998, the Company sold its operating assets and the stock of its two principal operating subsidiaries, Diabetes Self Care, Inc. ("Diabetes") and USCI Healthcare Management Solutions, Inc. ("HMS"), to Gainor Medical Management, LLC, a privately held Georgia company ("Gainor"), for a gross purchase price of $34 million in cash, as reduced by $8,725,226 of specified liabilities of the Company, and $17,000,000 by the delivery of a Gainor convertible subordinated promissory note (the "Note"). Out of the cash received at closing, the Company satisfied an aggregate of $4,451,136 in liabilities to permit the required transfer of assets to Gainor free and clear of encumbrances. The Note bore interest at a simple rate of 7% per annum through December 31, 1998 and 8% thereafter until payment in full of the principal balance no later than January 28, 2003. Prior to its maturity, the Note was convertible into equity securities of Gainor, at the election of the Company, upon the successful completion of a public offering of such equity securities by Gainor, subject to certain restrictions. The Company's stockholders approved the sale of its business at their Annual Meeting held on January 26, 1998 in Livonia, Michigan, at which time they also approved an amendment to the Company's certificate of incorporation changing its name to Tadeo Holdings, Inc. The sale of the Company's operating business to Gainor shall hereinafter be referred to as the "Transaction". In addition to offsets for customary indemnification's under the Asset Purchase Agreement among the parties, dated November 14, 1997, the principal amount of the Note was subject to reduction in the event that (i) such principal amount did not equal at least 75% of Gainor's revenues from operation of Diabetes during calendar 1998, in which event the Note would be reduced by the difference between 75% of such revenues and $17,000,000, (ii) Gainor would not able to collect at least $5.75 million from the accounts receivable sold to Gainor as part of the Transaction during the one-year period succeeding the closing, in which event the Note would be reduced by the difference between $5.75 million and the amount of receivables actually collected, and (iii) prior to July 28, 1998 fewer than 3,334 former customers of PCS, Inc. - West will be customers of Gainor, in which event the Note would be reduced by $600 for each former customer of PCS, Inc. - West less than the minimum 3,334 who fails to transfer to Gainor, up to a maximum amount of $2,000,000. Prior to the Note's maturity, in April 1999, the Note was prepaid by Gainor for a cash payment of $9,300,000. GENERAL Tadeo is a holding company which, through its two active subsidiaries, Astratek, Inc. ("Astratek") and Tadeo E - Commerce Corporation ("Tadeo E"), is involved in (i) the development of computer software products and the provisions of computer network related services for the management of distributed client/server networks operating on systems such as Microsoft Windows NT, through Astratek, and (ii) the provision of consulting, technical and related services to clients for the development of electronic commerce business on the Internet, including consulting and development services for the maintenance, design and enhancement of electronic commerce Internet sites through Tadeo E. Products and services provided by Astratek have included software solutions for systems management, Year 2000 compliance, security management and network-wide problem management and resolution. On October 27, 1998, the Company acquired Astratek, Inc., a New York corporation, pursuant to a merger of our wholly-owned subsidiary into Astratek being the surviving corporation and becoming a wholly-owned subsidiary of Tadeo. On May 25, 1999, the Company incorporated Tadeo E - Commerce Corporation in Delaware as a wholly-owned subsidiary of Tadeo to be active in the electronic commerce industry. Tadeo is the parent corporation for the following wholly-owned subsidiaries: Physicians Support Services, Inc., a California corporation ("PSS"); Clinishare Diabetes Centers, Inc. d/b/a SugarFree Centers, Inc. ("SugarFree"), USC-Michigan, Inc. a Michigan corporation and its wholly-owned subsidiary, PCS, Inc.-West (collectively identified as "Patient Care Services"), a Michigan Corporation. Depending upon the context, the term "Company" refers to either Tadeo alone, or Tadeo and one or more of its subsidiaries. The subsidiaries have discontinued operations. INDUSTRY OVERVIEW ASTRATEK, INC. The use of distributed, client/server networks has grown tremendously in the last ten years, with the increase in PC-based Local Area Networks ("LANs") being one of the fastest-growing aspects of the client/server market. These LANs, largely dependent on servers running network operating systems ("NOS") provided by companies such as Microsoft, are enabling a new generation of client/server applications, such as e-mail and group collaboration software such as Microsoft Exchange and Lotus Notes. As a result, LANs which were originally intended to be used as relatively simple workgroup systems, have lost their "local" characteristic and have developed into mission-critical platforms for enterprise-scale applications. As LANs, and the network operating systems that support them, have been used to operate mission-critical applications and services, organizations have become increasingly dependent upon them. Additionally, we believe that the average number of users supported by these LANs has been increasing. As LANs have grown larger and technically more complex, the problems associated with maintaining their security and integrity have increased and become more difficult for Information Technology ("IT") departments to manage. As a result, network security and integrity are increasingly at risk and the Total Cost of Ownership (the initial purchase price and the ongoing cost of upgrades, maintenance and support) for client/server computing has often climbed far beyond management's expectations when the networks were initially installed. Therefore, reducing the Total Cost of Ownership has become a strategic initiative for many IT organizations, which have sought systems management software to manage the operations of these networks, including the diagnosis and remediation of failures in specific applications that may be distributed across networks. The management challenges associated with maintaining the security and integrity of LANs include: SYSTEMS ADMINISTRATION. Systems administrators within IT departments need to resolve a wide range of issues and problems on a daily basis, including managing the configuration of network servers, administering users and groups and managing disk space on critical servers and workstations. Problems such as these may not be solved quickly, placing the availability of the network at risk and the use of mission-critical, client/server applications throughout an enterprise in jeopardy. Additionally, the implementation of new or upgraded NOS will result in increased strain on an organization's IT resources. Microsoft is planning to ship a major new release of its NOS by the end of this year. Each NOS upgrade adds levels of complexity and we believe this will be particularly true of the next major upgrade of Windows NT. SECURITY. Computer security breaches are a pervasive and growing problem. Although many IT organizations have installed firewalls and implemented security management strategies focusing on preventing "hacking in" from outside the organization, these efforts do not address the most serious security-related losses which are the result of unauthorized access by insiders. YEAR 2000 ASSESSMENT. Although many organizations have focused upon the mainframe issues of the Year 2000 exposure, the costs of bringing distributed computing into compliance are now estimated by some sources at as much as nearly half of the total cost to fix mainframe systems. Year 2000 compliance issues on the LAN include problems with PC hardware, firmware and applications. IT departments are faced with conflicting pressures both to: (i) manage increasing complexity and guarantee better service for users who are demanding assurance of high productivity and availability and (ii) reduce the Total Cost of Ownership for client/server computing. Adding to this challenge is a lack of qualified IT personnel. Pressure to reduce the Total Cost of Ownership and the increasing difficulty and expense in locating qualified IT personnel has driven IT management to establish processes and develop or purchase tools to manage IT assets. Historically, IT organizations have addressed LAN system management problems through a combination of manual processes, custom-built tools and third-party software. Manual processes, such as performing a security audit, an inventory of network assets or a Year 2000 project assessment are costly, time-consuming and prone to human error. Many IT organizations custom-build their own systems management tools. However, these custom-built solutions (i) are generally developed by costly and hard-to-find programmers, (ii) take time to develop and thoroughly test, (iii) are frequently designed for a single purpose and cannot be used for other tasks and (iv) often need to be rewritten with new versions of the NOS. Most organizations have purchased at least some third-party software solutions to manage their networks and are budgeting to purchase more. Many third-party tools, including traditional "LAN Suites," focus on management of the desktop, but not on management of the NOS. Most tools that have been designed for the LAN - including point products for security management, disk space management and other systems management tasks - were built for managing single servers or small workgroups, and do not scale to manage efficiently networks as they grow enterprise-wide to thousands or tens of thousands of users. Finally, many third-party products can often alert the IT staff that a problem has occurred but do not provide the diagnostic software to find the root cause of the problem or fix it. As an organization's dependence upon its LAN infrastructure increases, its IT department must be able both proactively and reactively to diagnose and repair its LAN-based computing resources. As networks have grown, so have the challenges of deploying, upgrading, managing and changing the configuration of these networks. Organizations seek software solutions that (i) can quickly and proactively diagnose and fix a wide range of problems, (ii) are comprehensive in scope and can be used effectively by a wide range of the organization's existing IT personnel, (iii) scale to manage large, complex networks, (iv) address the unique aspects of each NOS they support and (v) can be easily deployed and maintained. Astratek's mission is: (i) to provide customized professional services to clients by designing new or altering existing LAN configurations or by developing customized systems management tools that manage the security and integrity of the clients' distributed client/server networks as they increase in size and complexity, and remediate discovered network problems, all of which leads to reduced Total Cost of Ownership for their enterprise computing, as well as (ii) to develop, market (either on its own or through third-party distributors) and support "shrink wrapped" software products that accomplish the same network management goals. TADEO E-COMMERCE CORPORATION The Internet is an increasingly significant global medium for communications. The increasing functionality, accessibility and overall usage of the Internet, and online service providers such as America Online and The Microsoft Network, have made the Internet an attractive commercial medium. The portion of the Internet known as the Web, which has become almost synonymous with the Internet as a whole, has experienced the fastest growth and the most acceptance among ordinary users. Matrix Information and Director Services currently estimates that total world-wide Internet usage is expected to grow from 57 million in 1997 to more than 700 million in 2001. According to a report in ZD Market Intelligence, 53% of all PCs in the United States (workplace and residential) are connected to the Internet, representing a 35% increase in connections during 1998. ZD Market Intelligence further reported that in 1998 Internet penetration increased to 30% of all households in the United States, with a noticeable trend toward longer Internet connection times as more E-commerce activities are conducted. Growth in Internet usage has been fueled by a number of factors, including:
o the availability of a growing number of useful products and services via the Internet; o the large and growing installed base of personal computers in the workplace and home; o advances in the performance and speed of personal computers and modems; o improvements in Internet network infrastructure; o easier and cheaper access to the Internet; and o increased awareness of the Internet among businesses and consumers.
As Internet accessibility, usage and functionality continue to grow, the Internet is increasingly being used as a medium for direct communication among users, such as e-mail and bulletin boards, as well as a rapidly growing sales and marketing channel. A growing number of users has transacted business over the Web, such as trading securities, buying goods, purchasing airline tickets and paying bills. According to Nielsen Media Research, as of October 1998, more than 20% of United States Internet users have made a purchase over the Web. As E-commerce increases, advertisers and direct marketers are increasingly seeking to use the Web to locate customers, advertise and facilitate transactions. In an article published by Cyberatlas, it was reported that online advertising spending will reach $32 billion in 2005. Rapid escalation in online spending through 2000, with online spending for 1999 approaching $2 billion, was further predicted. Moreover, according to the Technology User Profile 1998 Mid-Year Study by ZD Market Intelligence, Internet penetration increases with higher household income and education levels, as almost a third of United States households connected to the Internet has an annual income of $75,000 or greater, and over a quarter has completed post-graduate studies. Given the size of the projected number of Internet transactions and the demographics of existing and projected Internet users, we believe that a large market exists for the provision of services by companies, like Tadeo E-Commerce, that have the capacity to design, maintain and operate a commercial presence on the Internet (through web design, hosting and other arrangements) and to provide further technical and consulting services related to additional aspects of a client's electronic commerce operations on the Internet. CURRENT OPERATIONS ASTRATEK, INC. On October 27, 1998 we acquired Astratek, a New York corporation, pursuant to a merger of our wholly-owned subsidiary into Astratek, with Astratek being the surviving corporation and becoming a wholly-owned subsidiary of Tadeo. Astratek began operations in 1995, developing software and related products for Internet and intranet technology and providing consulting and professional services for several companies. It originally was formed as the Advanced Technology Consulting group at Bankers Trust and split off from Bankers Trust and began operating independently in April 1997. Astratek and Bankers Trust negotiated a transfer of assets whereby the bank obtained rights to certain products which had been developed by Astratek, the most significant of which was Visual LAN Probe. Visual LAN Probe is a diagnostic tool which monitors computer network activity and troubleshoots computer network problems. In turn, Astratek retained the product Visual Audit for Excel, a software product for use principally in analyzing spread sheet and other patterns and remediating discovered problems, including Year 2000 issues. Bankers Trust receives a royalty from Astratek based on a percentage of sales of Visual Audit products, which is capped at $500,000 in the aggregate. To date, Bankers Trust has been paid approximately $62,000 in such royalties. Products Astratek has entered into a Software License Agreement with Viasoft, Inc. ("Viasoft") dated as of November 14, 1997, which has been amended four times, most recently as of January 12, 1999 (as amended, the "Software License Agreement"), whereby Astratek granted exclusive rights to Viasoft to certain Astratek products, principally the Visual Audit product. Beginning in February 1998, Viasoft has promoted, marketed and distributed the Visual Audit products as part of its OnMark 2000 Workbench suite of products. OnMark 2000 Workbench for Excel, which includes Visual Audit for Excel, is a PC-based software program that discovers, analyzes and repairs Year 2000 problems in Microsoft Excel spreadsheet applications. This product has been successfully marketed to Fortune 1000 companies for their desktop PC-based software Year 2000 compliance needs. Astratek's Visual Audit product for Access has also been released by Viasoft as the OnMark 2000 Workbench for Access product. According to the terms of the Software License Agreement, Viasoft pays a royalty fee to Astratek equal to 25% of the gross revenues generated by the sales of Astratek's products which have been licensed to Viasoft (the "Licensed Products"). Astratek is obligated under the terms of the Software License Agreement to provide Viasoft with enhancements to the Licensed Products and is obligated to devote "significant resources" (i.e. man hours) to the development of such enhancements. The Agreement sets an absolute limit for such support to a dollar value, at $100 per man hour, equal to 40% of royalties received by Astratek. Through June 30, 1999, Astratek received $635,000 in prepayments under the Software License Agreement, which amount has already been completely credited against royalties payable to Astratek. As of the end of the fiscal quarter ended June 30, 1999, Astratek was owed by Viasoft approximately $121,000 in additional royalty payments. Under the Software License Agreement, Viasoft has a right of first negotiation such that, if Astratek desires either to sell ownership rights to its technology not already subject to the Software License Agreement or to distribute such technology exclusively through another third-party distributor, Astratek is obligated first to negotiate in good faith exclusively for a period of fifteen days with Viasoft for such sale or distribution. The right of first negotiation does not apply to products Astratek distributes on a non-exclusive basis, except that Astratek is obliged to make available to Viasoft equal terms. Astratek is also obligated to grant what is termed Level 2 support to Viasoft customers who purchase Licensed Products, subject to Viasoft's option to assign to Astratek its maintenance contracts for Level 1 support of Licensed Products under certain circumstances. Level 1 support is defined as initial questions and reports from customers. Level 2 support is more technical, engineering-type support provided after Viasoft has been unable to respond to a customer's immediate needs or questions. Problems requiring Level 2 support usually involve more in-depth review and may require a number of days to resolve. The Software License Agreement with Viasoft terminates on June 30, 2001 and is automatically renewable for successive one-year periods unless either party provides the other with written notice of cancellation at least 90 days prior to the applicable expiration date. PROFESSIONAL SERVICES Astratek provides professional services to clients encompassing all aspects of distributed systems applications, including multi-tier client/servers, Internet-enabled applications, network security, systems management and performance enhancement. Astratek has performed these services for several major software companies and financial institutions and has acted as a development partner for ISVs, including Microsoft, by assisting them in building their computer software products. Astratek has performed the following services for the following companies: o Astratek has helped IBM develop a global single sign-on product allowing a user to log into and open simultaneously heterogeneous computer systems; o AstraTek developed the software Registration Wizard for Microsoft's Windows 2000 and Windows 98 operating systems. The Registration Wizard allows customers to use the Internet to register Windows and other Microsoft products. o AstraTek developed a software testing system called the Test Harness for Microsoft. The Test Harness is an automated framework that controls testing across distributed systems. Its capabilities include multi-threaded test scheduling, unattended installation of software on test clients, and automatic re-creation of testing environments for regression testing. o AstraTek is developing the Stress Harness for Microsoft to improve the quality of its software testing process. The Stress Harness is intended to complement the previously developed Test Harness by monitoring systems under test and collecting log files and other data made available by plug-in diagnostic probes. The collected data will be stored in a repository, to be processed by error analysis tools for generation of statistical data. o AstraTek has developed and enhanced the encryption functionality of the WinFrame product for Citrix. The work leveraged industry standard encryption technologies from RSA Data Security. The enhanced encryption abilities allow WinFrame to be used in secure application markets. Astratek recently entered into a consulting and professional services agreement with 4th Peripheral Technologies, Inc. ("4TH Peripheral"), pursuant to which Astratek is engaged to provide executive advisory consulting services, as requested, and on a fee SCHEDULE TO BE NEGOTIATED AT THE TIME AN ASSIGNMENT IS MADE, INTENDED TO INCREASE 4TH Peripheral's value and strategic position in connection with its business as a developer of cyber extension technology to provide remote access to data from handheld devices. In AN EFFORT TO STRENGTHEN ASTRATEK'S STRATEGIC RELATIONSHIPS WITH 4TH Peripheral, we purchased in a private placement of securities 250,000 SHARES OF 4TH Peripheral Common Stock for $250,000. TADEO E-COMMERCE CORPORATION Tadeo E was established on May 25, 1999. It was formed to provide technical and consulting services to companies in electronic commerce (including Web site design, development, maintenance, enhancement and hosting or operation) and other Internet-based activities, as well as to develop its own proprietary electronic commerce businesses. As part of its operating activities, in order to further strategic alliances generally with companies for which it is providing consulting and technical services, Tadeo may make working capital loans to or equity investments in such partners. To date, Tadeo E has entered into the following two significant contracts for its services: On May 28, 1999, as amended by agreements dated as of June 1, 1999, Tadeo E entered into a Web Design and Consulting Agreement with Azurel, Ltd. ("Azurel"), a public company engaged in the business of manufacturing and distributing cosmetics and other related products (the "Azurel Web Agreement"). Under the terms of the Azurel Web Agreement, based upon the fee schedule to be included in that agreement, Tadeo E agreed to provide all necessary consulting and development services to design, maintain and enhance Azurel's electronic commerce Internet sites and other related electronic commerce marketing vehicles. Tadeo E paid Azurel $500,000 for Azurel's provision of content and marketing consulting services in connection with assistance provided to Tadeo E's electronic commerce development activities for Azurel and other clients. At the same time, to enhance the strategic relationship between Azurel, Tadeo and Tadeo E, Tadeo E lent to Azurel an aggregate of $1,528,166.67 under the terms of a Credit Agreement, as amended, dated as of June 1, 1999 (with part of the aggregate principal reflecting the restructuring of a March 31, 1999 short-term $500,000 promissory note), with interest payable at the rate of 8% per annum, payable monthly, and with all principal and accrued interest due on May 28, 2001 (the "Credit Agreement"). Repayment of amounts outstanding under the Credit Agreement is secured by a pledge of approximately 66.66% of the outstanding shares of certain Azurel operating subsidiaries, under the terms of a Pledge Security Agreement, as amended, by and between Azurel, Tadeo and Tadeo E. In further consideration for its advances to Azurel under the Credit Agreement, Tadeo E received from Azurel warrants to acquire 500,000 shares of Azurel common stock, exercisable at $1.50 per share, with the shares acquired upon exercise of such Warrants being subject to registration rights provided under the terms of Registration Rights Agreement, as amended, dated as of June 1, 1999. On May 12, 1999, Tadeo extended a $500,000 loan to Azurel, due August 1999, bearing interest at 20.8% (the "Note"). The $500,000 Note was later amended on August 12, 1999 to (i) extend the due date to June 2000, (ii) reduce the interest rate to 10%, and (iii) increase the principal of the Note from $500,000 to $550,000 for accrued interest of $26,580 and a premium of $23,420 for extending the maturity date and lowering the interest rate. Under agreements dated as of June 30, 1999, Tadeo E entered into both a Web Design and Consulting Agreement and an Online Hosting Agreement with StyleSite Marketing, Inc. ("Style", formerly Diplomat Direct Marketing Corporation), a public company engaged in the business of distributing women's and children's fashion apparel and related accessories through catalogue sales, including the Lew Magam and Brownstone studios catalogues, and over the Internet ("Style Web Agreements"). Under the terms of the Style Web Agreements, based upon the fee schedules provided in those agreements, Tadeo E is providing all necessary consulting and development services to design, maintain and enhance Style's electronic commerce Internet sites and other related electronic commerce marketing vehicles, as well as to host those sites on behalf of Style. Tadeo E paid Style $500,000 for Style's provision of content and marketing consulting services in connection with assistance provided to Tadeo E's electronic commerce development activities for Style and other clients. In addition to payments by Style for the services provided under the Style Web Agreements, in further consideration for its services to Style under the Web Agreements Tadeo E will receive royalties from Style based upon Style's ongoing electronic commerce businesses (the "Royalties"). The Royalties are equal to 5% of Style's electronic commerce revenues, until $500,000 has been paid to Tadeo E, and thereafter 20% of certain Style electronic commerce net income in perpetuity. Contemporaneously with the above, to enhance the strategic relationship between Style, Tadeo and Tadeo E, Tadeo E (i) purchased, for $1,000,000, 10,000 shares of Style's Series G Convertible Redeemable Preferred Stock (which is redeemable for the $1,000,000 purchase price plus accrued and unpaid dividends out of the proceeds of a secondary offering of Style common stock which has been filed with the Securities and Exchange Commission) (the "Preferred Stock") and (ii) exchanged $1,000,000 approximate market value of its common stock (285,715 shares) for $1,000,000 approximate market value of Style common stock (1,066,098 shares), under the terms of the Securities Purchase Agreement, dated as of June 30, 1999, by and between Tadeo, Tadeo E and Style. The shares of Style common stock acquired upon conversion of the Preferred Stock and the Style shares received in exchange for Tadeo common stock are subject to the terms of a Registration Rights Agreement between Style and Tadeo E dated as of June 30, 1999, and Style's obligations to Tadeo E as a holder of the Preferred Stock (e.g., redemption payments) are secured under the terms of a Pledge Security Agreement, dated as of June 30, 1999, by and between Tadeo-E, Style and the Rubin Family Irrevocable Stock Trust (the "Trust"), with the pledge by the Trust of 300,000 shares of Tadeo common stock held by the Trust (the "Pledge Agreement"). In September 1999, the Company released the Trust's obligation under the Pledge Agreement and substituted the personal guarantee of Robert M. Rubin, the principal settlor of the Trust, as collateral for all of Style's obligations previously secured under the terms of the Pledge Agreement. See Item 13. "Certain Relationships and Related Transactions" for information concerning certain other relationships between Tadeo, Tadeo E, the Trust and Style. Tadeo E recently entered into an agreement with Business Talk Radio.Net, Inc. ("Business Talk") under which, for a payment of $250,000, Tadeo E obtained an assignable credit for the purchase of advertising time on radio programs operated by Business Talk having a value of $1,200,000, and shares of Series C Preferred Stock convertible into 5% of the currently outstanding capital stock of Business Talk. As part of the transaction, Tadeo E obtained an option to acquire an equivalent number of shares of Business Talk capital stock for an exercise price of $250,000, as well as the right to "stream" the content of Business Talk programming on its and its affiliates web sites during the course of a three-year period without an additional payment to Business Talk. Business Talk creates and distributes the content of its business-oriented radio programming for broadcasting on third-party operated radio stations in a variety of markets throughout the United States. OTHER ACTIVITIES We acquired and have retained for investment purposes 543,334 shares, or approximately 4.2%, of ViewCast.com, Inc.'s ("ViewCast", formerly MultiMedia Access Corporation) common stock. The stock was initially acquired on September 24, 1998 as part of a stock-for-stock swap whereby ViewCast acquired 1,240,310 shares of the common stock of Tadeo and Tadeo acquired 1,000,000 shares of ViewCast's common stock. ViewCast is a public company that designs, develops and manufactures video communications systems that provide enterprise-wide solutions for business customers. We view this investment as a way to promote a strategic alliance, as we believe that the convergence of personal computers, video technologies and increased utilization of the Internet and corporate intranets will generate new products and increased use of videocom products and services. COMPETITION The market for our products and services is highly competitive. We anticipate that competition will continue to intensify as the use of computers and the use of the Internet grows. The tremendous potential of the Internet has attracted many companies from start-ups to well-established businesses. Astratek faces competition from providers of security analysis and audit products such as Axent Technologies, Inc. and Security Dynamics Technologies, Inc., and from companies which make desktop management products such Microsoft and Intel Corporation. Astratek also competes with makers of Year 2000 compliance assessment products such as Network Associates, Inc., Computer Associates and Greenwich Mean-Time-UTA, L.C. We expect competition for Astratek's products to grow as new companies enter the market and current competitors expand their line of products and services. ISVs, such as Microsoft, can also enhance existing products to include the systems management and functionality aspects which we currently provide in our own proprietary products and in our services. The markets for Astratek professional services and Tadeo E's electronic commerce services are highly fragmented and are attracting many newer companies, as there are few barriers to entry to the professional services and Internet technology businesses. ISVs such as IBM and Microsoft are competitive in this area, as well as numerous consulting firms. We believe that we will continue to create and offer innovative products and creative professional services, and that we will continue to attract new clients in need of our value-added electronic commerce services. However, there is no assurance that our competitors will not introduce comparable products and services at similar or more attractive prices in the future or that certain companies may not create products which they can integrate directly into their software and NOS. Increased competition could erode the marker for our products and services and have a material adverse affect on our business, financial condition and results of operation. FUTURE STRATEGY To date, we have not actively advertised our products and services but have relied on our reputation and contacts in the financial and computer world for our source of business. We have had significant repeat business from Microsoft and believe that such companies and other large institutions will be a source of revenues in the future. To date, we have preferred to rely on the services of companies like Viasoft and their significant connections, marketing contacts and expertise to promote and distribute our products. We believe that our Web-based and other products and services will give us greater exposure to the marketplace and will help us more efficiently to develop products that meet the needs of and reach a greater corporate and home-user audience in need of our various diagnostic tools and other services. PATENTS AND TRADEMARKS All Astratek employees are required to sign agreements which protect Astratek's rights in its intellectual property, and which assign to Astrtek certain rights to intellectual property developed by such employees. Tadeo is a party to a Software License Agreement with Viasoft through which it is has granted an exclusive license to use the name Visual Audit and AstraTek. Astratek has pending trademarks for the following: Astratek, Datemorphing, Testwatch, Testwatch 2000 and Applications instrumentation wizard. EMPLOYEES As of September 15, 1999, the Company employed 13 full-time employee. Five of whom are members of management. One position consists of corporate accounting and reporting, including: bank relations, year- end audit liaison and other miscellaneous functions. The Company believes that its relationship with the employees are good. In order to permit Astratek to maintain its full-time staff at a minimum level, and to enhance Astratek's ability to generate net income, Astratek has entered into contracts with Professional Access Ltd. and Infinix Corp. for the provision to Astratek of computer professionals acting as independent contractors who are engaged to perform specified assignments for designated professional services and product development projects on an as-needed basis. As of the end of July 1999, Astratek employed 3 contract consultants. INSURANCE COVERAGE The Company maintains general liability insurance, which includes directors and officers liability coverage, in amounts deemed adequate by the Board of Directors. (The remainder of this page has been intentionally left blank) ITEM 2. DESCRIPTION OF PROPERTIES The Company does not own any real property. The following table sets forth information as to the material properties which the Company leases. Expiration Annual Size/Square Purchase LOCATION AND USE DATE RENTAL FEET OPTION 11585 Farmington Road (1) September 2002 $113,928 6,600 Yes Livonia, Michigan 48150 (former executive, sales and administrative offices) 5 HANOVER SQUARE, 24TH Floor November 2002 $126,169 6,729 No New York, New York 10004 (executive, sales and administration offices) (1) On August 1, 1999 the Company subleased 3,400 square feet to a tenant that is paying $3,967 a month in base rent, plus an additional 42.5% of the common area expenses. The sublease ends October 31, 2002. ITEM 3. LEGAL PROCEEDINGS DEPARTMENT OF HEALTH SERVICES Tadeo's wholly-owned subsidiary underwent an audit by the California State Controller's Office, Division of Audits, for the purpose of determining compliance with guidelines of the California Department of Health Services ("Medi-Cal") and the California State Board of Equalization. The Controller's Office issued a report to the effect that the subsidiary owed, and issued a Letter of Demand for, $1.3 million, contending that for the period July 1, 1990 to June 30, 1993, the subsidiary practiced unfair pricing to its customers. Additionally, accrued interest on the amount demanded is also sought by the Controller's Office. The subsidiary has appealed the ruling, which has been upheld. An appeal to the California Court of Appeals is pending. The subsidiary has provided a reserve of $1,400,000. There is no other material litigation against Tadeo or its subsidiaries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS The principal market for trading the Company's securities is the Nasdaq Small Cap Market ("Nasdaq"), although the Company's Common Stock and Class A Warrants are also traded on the Boston Stock Exchange. PRICE RANGE OF OUTSTANDING COMMON STOCK On December 18, 1992, the Common Stock began trading on Nasdaq and has been quoted on Nasdaq at all times since that date. The following table sets forth the high and low bid prices for each fiscal quarter during the fiscal years ended June 30, 1998 and 1999, as reported by Nasdaq. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and do not necessarily represent actual transactions. FISCAL YEAR ENDED JUNE 30, 1998 HIGH BID LOW BID First Quarter ended September 30, 1997 2-7/8 2-1/8 Second Quarter ended December 31, 1997 2-13/16 1-13/32 Third Quarter ended March 31, 1998 2-1/8 1-13/32 Fourth Quarter ended June 30, 1998 1-11/16 7/8 FISCAL YEAR ENDED JUNE 30, 1999 ------------------------------- First Quarter ended September 30, 1998 1-7/16 1-3/8 Second Quarter ended December 31, 1998 1-1/16 1 Third Quarter ended March 31, 1999 1-1/8 1 Fourth Quarter ended June 30, 1999 4 3-13/16 On September 15, 1999, the last trade price for a share of Common Stock was $3-1/2, as reported on Nasdaq, and the Company had 75 shareholders of record of its Common Stock. The Company estimates it has in excess of 300 beneficial holders of its Common Stock. DIVIDEND POLICY The Company has never paid cash dividends on its Common Stock and does not anticipate paying cash dividends in the foreseeable future, but rather intends to retain future earnings, if any, for reinvestment in its future business. Any future determination to pay cash dividends will be in compliance with the Company's contractual obligations, and otherwise at the discretion of the Board of Directors and based upon the Company's financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant. During the fiscal year end June 30, 1999, the Company had outstanding an aggregate of one million (1,000,000) shares of Series B Redeemable Preferred Stock, $.0001 par value per share (the "Series B Preferred Stock"). Subsequent to the end of the fiscal year ended June 30, 1999, all shares of Series B Redeemable Stock were converted into 500,000 shares of Common Stock. See Part III, "Item 10., Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16 (a)", and "Item 12., Security Ownership of Certain Beneficial Owners and Management," for information concerning the redemption of the Company's Series A Preferred Stock in September 1998. ITEM 6. SELECTED FINANCIAL DATA
Tadeo Holdings, Inc. Selected Financial Data Years ended June 30, in (000's) 1999 1998 1997 1996 1995 -------------------------------------------------- Operating revenues ..................... 1,514 997 455 0 0 Income loss from continuing operations (478) (1,153) (608) (1,381) (800) Income loss from continuing operations per share .............................. (0.03) (0.10) (0.06) (0.23) (0.21) Total assets ........................... 16,488 9,913 18,299 18,209 17,132 Long term debt ......................... 18 664 4,628 2,316 1,520 Redeemable preferred stock ............. 0 1,219 1,830 2,246 2,276 Dividends per share common stock ....... 0 0 0 0 0
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS YEAR 2000 Over the course of the last half of the fiscal year ended June 30, 1999, the Company has been evaluating various acquisitions. This effort has incorporated an analysis of the Year 2000 issues, and that appropriate and timely action will be taken to minimize the negative impact of year 2000 issues on acquisitions by the Company. The year 2000 issue results from the inability of many computer systems and applications to recognize the year 2000 as the year following 1999. This could cause systems to process critical information incorrectly. Currently, the Company is not materially affected by year 2000 issues. The Company plans to implement new systems and technology solutions to these issues in connection with any future acquisitions of operating businesses. The Company plans to work with its future customers, suppliers and third party service providers to identify external weaknesses and to provide solutions which will prevent the disruption of business activities following future acquisitions of operating businesses. The Company does not expect the cost of implementation to have a material adverse effect on its future results of operations, liquidity or capital resources. FORWARD-LOOKING STATEMENTS When used in the Form 10-K and in future filings by the Company with the Securities and Exchange Commission, the words or phrases "will likely result" and "the Company expects," "will continue," "is anticipated," "estimated," "project," or "outlook" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the results of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the relative percentages that certain income and expense items bear to net sales. YEAR ENDED JUNE 30, 1999 1998 Net sales..................................................... 100% 100% COST OF SALES................................................. 46 25 ---- ---- Gross profit.................................................. 54 75 Selling, general & administrative ............................ 224 227 Research and development costs................................ 11 7 PROVISION FOR STATE AUDITS ................................... 46 -- ---- ---- Income (loss) from operations ................................ (182) (161) Interest income .............................................. 39 45 Total income (loss) from discontinued operations ............. 98 303 NET INCOME (LOSS) ............................................ 67 % 187% FISCAL YEARS ENDED JUNE 30, 1999 AND JUNE 30, 1998 Revenues for the year ended June 30, 1999 were $1,514,849, an increase of $518,376, or 52%, from the year ended June 30, 1998. Several factors contributed to this ncrease. Revenue associated with the Visual Audit product that is distributed by Viasoft on behalf of the Company increased by $57,988 for the year ended June 30, 1999, or a 13% increase over the year ended June 30, 1998, and revenue associated with professional services provided to various clients increased by $570,900 for the year ended June 30, 1999, or a 235% increase over the year ended June 30, 1998. Total cost of goods sold for the year ended June 30, 1999 were $700,254, representing costs of approximately 46% of revenues for the period, while total cost of goods sold for the year ended June 30, 1998 were $248,261 or approximately 25% of revenue. This 21% unfavorable variance as a percent of revenue is in part the result of increased utilization of outside consultants in completing time sensitive, single occurrence professional services projects. Selling, general and administrative expenses for the year ended June 30, 1999 increased to $3,387,874 from $2,259,349 for the year ended June 30, 1998. Contributing to the Company's unfavorable variance is $1,250,000 in advertising and marketing expenses associated with services provided by various Internet organizations that the Company has determined beneficial to market its products and services. Net interest income increased for the year ended June 30, 1999 to $590,092 from $452,016 for the year ended June 30, 1998. This increase is primarily due to quarterly interest from the Note (See "Item 1 Prior Operations," Part I for information concerning the Note). Net income decreased to $1,013,412 for the year ended June 30, 1999 from $1,865,288 for the year ended June 30, 1998. This decrease is primarily due to the gain from the sale of the discontinued operations which occurred in the 1998 fiscal year. The sale of marketable securities resulted in $1,689,664 in revenue for the year ended June 30, 1999, a 100% increase over the year ended June 30, 1998. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1999 the Company's existing cash consisted of approximately $7.6 million. See Part I, "Item 1., Business, General," for information concerning the sale of the Company's operating assets to Gainor in the Transaction and the prepayment of the Note. The Company currently receives on average $22,250 a month in interest from its various money market and certificate of deposit accounts. The Company's material ongoing fixed expenses are as follows: 1) monthly rent expense net of sublease of approximately $ 17,000 (See Part I, "Item 2., Description of Property," for information concerning the location and description of the leaseholds), 2) $ 7,633 a month to Mr. Buchholz's under his employment termination agreement, an aggregate of $ 280,209 remaining as of June 30, 1999 (See Part III, "Section 1., Employment and Consulting Agreements," for information concerning the agreement) and 3) approxmately $ 32,000 monthly for employee salaries and benifets. In July 1998, the Company completed a private placement of 136,837 shares of Common Stock at $1.50 per share to an accredited investor, for $205,256. Additionally, in July 1998 the Company was able to terminate its employment agreements with Messrs. Brian Bookmeier, Alan Korby and Matthew B. Gietzen (See Part III, Item 12, "Employment and Consulting Agreements," for information concerning termination agreements) and reduce cash payments of $ 17,307 every two weeks, or $450,000 a year. In connection with such employment terminations, the Company reduced ongoing payments and issued an aggregate of approximately 250,000 shares of Common Stock to Messrs, Korby, Gietzen and Bookmeier. An aggregate sum of 229,950 shares of Series A Redeemable Preferred Stock, $.0001 par value per share (the "Series A Preferred Stock") was redeemed, evidencing all outstanding shares of Series A Preferred Stock, in September 1998. The Company was able to redeem the outstanding Series A Preferred Stock, which otherwise would have obligated the Company to pay $1,149,745 in aggregate redemption payments through March 2001, by converting such Series A Preferred Stock, under the terms of the corporate charter, into 1,363,163 shares of Common Stock. In 1999, all outstanding shares of Series B Preferred Stock were converted into an aggregate 500,000 shares of Common Stock in accordance with the corporate charter and at the request of the holders of such shares. See Part I, Business, "Current Operations,'- Astratek, Inc.' and '-Tadeo E-Commerce Corporation'", for more information concerning additional loans, investments and other cash advances made by Tadeo. CASH FLOW As of June 30, 1999 the Company had working capital of $5,365,143 compared to a working capital of $776,694 at June 30, 1998. The increase in working capital during the year is primarily due to the prepayment of the Note (See "Item 1 Prior Operations," Part I for information concerning the Note). NET OPERATING LOSS CARRY FORWARD During the year ended June 30, 1999, the Company utilized approximately $3,100,000 of available net operating loss carryforwards. Astratek has approximately $1,200,000 of net operating loss carryforwards subject to limitations on annual utilization because there was "equity structure shifts" or "owner shifts" involving 5% stockholders (as these terms are defined in Section 382 of the Internal Revenue Code), which have resulted in a more than 50% change in ownership. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TADEO HOLDINGS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 Page Number -------------- INDEPENDENT AUDITORS' REPORT F-1 CONSOLIDATED BALANCE SHEETS AS OF F-2 JUNE 30, 1999 AND 1998 CONSOLIDATED STATEMENTS OF OPERATIONS F-3 FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997 CONSOLIDATED STATEMENT OF CHANGES IN F-4 STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997 F-5-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7-19
INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors Tadeo Holdings, Inc. We have audited the accompanying consolidated balance sheets of Tadeo Holdings, Inc. and Subsidiaries as of June 30, 1999 and 1998, and the related statements of operations, changes in stockholders' equity and cash flows for the years ended June 30, 1999, 1998 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tadeo Holdings, Inc. and Subsidiaries as of June 30,1999 and 1998 and the results of its operations and its cash flows for the years ended June 30,1999, 1998 and 1997 in conformity with generally accepted accounting principles. /S/ FELDMAN SHERB HOROWITZ & CO., P.C. Feldman Sherb Horowitz & Co., P.C. Certified Public Accountants September 15, 1999 New York, New York F-1
TADEO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, ASSETS 1999 1998 ---------- ----------- CURRENT ASSETS: Cash and cash equivalents ...................................................... $ 7,618,259 $ 2,575,356 Interest receivable ............................................................ 25,521 276,005 Accounts receivable ............................................................ 45,750 11,550 Prepaid expenses and other assets .............................................. 30,000 -- Note receivable - other ........................................................ 500,000 162,627 ---------- ----------- TOTAL CURRENT ASSETS .................................................. 8,219,530 3,025,538 ---------- ----------- LONG-TERM NOTE RECEIVABLE ............................................................ 1,528,167 6,000,000 INVESTMENTS - Marketable Securities .................................................. 5,533,177 -- PROPERTY AND EQUIPMENT, net .......................................................... 71,938 79,966 CAPITALIZED SOFTWARE COSTS, net ...................................................... 1,091,793 696,871 DEFERRED FINANCE COSTS ............................................................... -- 67,079 DEPOSITS AND OTHER ASSETS ............................................................ 43,058 43,058 ---------- ----------- $ 16,487,663 $ 9,912,512 ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ............................................................... $ 421,179 $ 451,106 Accrued expenses ............................................................... 125,000 150,425 Income tax payable ............................................................. 628,000 -- Notes payable - current portion ................................................ -- 163,260 State audit reserves ........................................................... 1,400,000 700,000 Accrued termination costs, short-term .......................................... 280,209 784,053 ---------- ----------- TOTAL CURRENT LIABILITIES ............................................. 2,854,388 2,248,844 ACCRUED TERMINATION COSTS, long-term ................................................. -- 280,209 LONG TERM NOTES PAYABLE, net of current portion ...................................... 17,675 663,853 REDEEMABLE PREFERRED STOCK, Series A ................................................. -- 1,219,141 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, Series B Cumulative Convertible, $.0001 par value, 10,000,000 shares authorized, 1,000,000 shares issued and outstanding ...... 505,000 505,000 Common stock, $.0001 par value, 100,000,000 shares authorized, 15,348,528 shares issued and outstanding as of June 30, 1999 and 12,019,479 issued and outstanding as of June 30, 1998 ........................................................ 1,535 1,202 Additional paid-in capital ..................................................... 18,797,382 14,115,213 Unrealized gain on securities .................................................. 2,446,509 -- Accumulated deficit ............................................................ (8,134,826) (9,120,950) ---------- ----------- TOTAL STOCKHOLDERS' EQUITY ............................................ 13,615,600 5,500,465 ---------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................ $ 16,487,663 $ 9,912,512 ========== =========== See notes to consolidated financial statements. F - 2
TADEO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended June 30, 1999 1998 1997 -------------- -------------- -------------- REVENUES ........................................................................$ 1,514,849 $ 997,433 $ 454,771 COST OF GOODS SOLD .............................................................. 700,254 248,261 73,188 -------------- -------------- -------------- GROSS PROFIT .............................................................. 814,595 749,172 381,583 -------------- -------------- -------------- OPERATING EXPENSES: Selling, general and administrative ....................................... 3,387,874 2,259,349 985,663 Research and development .................................................. 161,709 71,424 5,000 Depreciation and amortization ............................................. 23,279 23,716 1,709 -------------- -------------- -------------- TOTAL OPERATING EXPENSES .................................................. 3,572,862 2,354,489 992,372 -------------- -------------- -------------- LOSS FROM OPERATIONS ............................................................ (2,758,267) (1,605,317) (610,789) GAIN ON SALE OF MARKETABLE SECURITIES ........................................... 1,689,664 -- -- INTEREST INCOME ................................................................. 590,092 452,016 2,673 -------------- -------------- -------------- LOSS FROM CONTINUING OPERATIONS ................................................. (478,511) (1,153,301) (608,116) -------------- -------------- -------------- DISCONTINUED OPERATIONS Loss from discontinued operations ......................................... -- (2,122,296) (1,816,337) Gain from disposal, including operating lossess, through disposal date, of $1,489,272 (less applicable income taxes of $1,104,000) 1,491,923 5,140,885 -- -------------- -------------- -------------- TOTAL INCOME (LOSS) FROM DISCONTINUED OPERATIONS .......................... 1,491,923 3,018,589 (1,816,337) -------------- -------------- -------------- NET INCOME (LOSS) ............................................................... 1,013,412 1,865,288 (2,424,453) PREFERRED STOCK DIVIDENDS ....................................................... (27,288) (186,150) (211,780) -------------- -------------- -------------- NET INCOME (LOSS) APPLICABLE TO COMMON SHARE HOLDERS ......................................................$ 986,124 $ 1,679,138 $ (2,636,233) ============== ============== ============== NET INCOME (LOSS) PER SHARE: Continuing operations .....................................................$ (0.03)$ (0.11)$ (0.08) Discontinued operations ................................................... 0.10 0.25 (0.17) -------------- -------------- -------------- NET INCOME (LOSS) PER SHARE - basic and diluted .................................$ 0.07 $ 0.14 $ (0.25) ============== ============== ============== WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTATION ....................................................... 14,728,969 12,019,479 10,379,178 ============== ============== ============== NET INCOME (LOSS) ...............................................................$ 1,013,412 $ 1,865,288 $ (2,424,453) OTHER COMPREHENSIVE INCOME, NET OF TAX Unrealized gains on available-for-sale securities ......................... 2,446,509 -- -- -------------- -------------- -------------- COMPREHENSIVE INCOME (LOSS) .....................................................$ 3,459,921 $ 1,865,288 $ (2,424,453) ============== ============== ==============
See notes to consolidated financial statements. F- 3
TADEO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Preferred Stock Series B Common Stock Additional Unrealized Total ------------------- ------------------ Paid-In Gain Accumulated Stockholders' Shares Amount Shares Amount Capital On Securities Deficit Equity ----------- ------- ----------- ------ ------------ ---------- ------------ ------------ Balance - June 30, 1996 .................. 1,000,000 $505,000 10,182,906 $ 1,018 10,693,171 $ -- $ (8,163,855)$ 3,035,334 Shares issued in connection with private offering ................................ -- -- 500,000 50 999,950 -- -- 1,000,000 Shares issued in connection with private offering ................................ -- -- 250,000 25 499,975 -- -- 500,000 Debt converted as consideration for exercise of options ..................... -- -- 1,009,415 101 2,018,729 -- -- 2,018,830 Dividends paid on redeemable preferred stock series A -- -- -- -- -- -- (211,780) (211,780) Various expenses associated with private placement ....................... -- -- -- -- (100,004) -- -- (100,004) Various expenses associated with consulting services -- -- 1,700 -- 3,400 -- -- 3,400 Shares issued in connection with expenses associated with debt conversion .......... -- -- 75,458 8 (8) -- -- -- Net loss .................................. -- -- -- -- -- -- (2,424,453) (2,424,453) ----------- -------- ---------- ------- ----------- --------- ---------- ----------- Balance - June 30, 1997 ................... 1,000,000 505,000 12,019,479 1,202 14,115,213 -- (10,800,088) 3,821,327 Dividends paid on redeemable preferred stock series A -- -- -- -- -- -- (186,150) (186,150) Net lncome ................................ -- -- -- -- -- -- 1,865,288 1,865,288 ----------- -------- ---------- ------- ----------- --------- ---------- ---------- Balance - June 30, 1998 ................... 1,000,000 505,000 12,019,479 1,202 14,115,213 -- (9,120,950) 5,500,465 Shares issued upon converting redeemable preferred stock series A ...... -- -- 1,363,163 136 1,149,609 -- -- 1,149,745 Shares issued in connection with private offering ................................. -- -- 136,837 14 205,242 -- -- 205,256 Shares issued to employees in connection with termination of employment agreements . -- -- 168,334 17 168,317 -- -- 168,334 Shares issued to an employee in connection with exercise of stock option ............ -- -- 84,167 8 84,159 -- -- 84,167 Shares issued in connection with Stock Purchase Agreement ....................... -- -- 30,523 3 74,997 -- -- 75,000 Shares of Common Stock exchanged with ViewCast ................................. -- -- 1,240,310 124 1,999,876 -- -- 2,000,000 Changes in unrealized gain on securities available-for-sale ....................... -- -- -- -- -- 2,446,509 -- 2,446,509 Shares issued in connection with repayment of promissary note ....................... -- -- 20,000 2 (2) -- -- -- Shares of common stock exchanged with Diplomat ................................. -- -- 285,715 29 999,971 -- -- 1,000,000 Dividends paid on Preferred Stock Series A -- -- -- -- -- -- (27,288) (27,288) Net lncome ................................ -- -- -- -- -- -- 1,013,412 1,013,412 ========== ======== =========== ======= =========== ========= =========== =========== Balance - June 30, 1999 .................. 1,000,000 $505,000 15,348,528 $1,535 18,797,382 $2,446,509 $ (8,134,826)$13,615,600 ========== ======== =========== ======= =========== ========= =========== ===========
See notes to consolidated financial statements. F - 4
TADEO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended June 30, 1999 1998 1997 ----------- ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ................................................ $ 1,013,412 $ 1,865,288 $ (2,424,453) ----------- ------------ ------------- Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation ........................................... 23,279 244,443 652,860 Amortization of deferred finance costs and debt discount 105,993 84,507 -- Amortization of capitalized software costs ............. 312,966 82,674 20,489 Settlement of employment contracts (non-cash) .......... 327,501 -- -- Gain on sale of marketable securities .................. (1,689,664) -- -- Gain on sale of operations ............................. -- (5,140,885) -- Gain on collection of note ............................. (3,300,000) -- -- Changes in operating assets and liabilities: (Increase) decrease in accounts receivable .................. (34,200) 132,884 (144,434) Decrease (Increase) in interest receivable .................. 250,484 (276,005) -- Additions to capitalize software costs ...................... -- (654,660) -- Increase in prepaid expenses ................................ (30,000) -- -- Increase in deferred finance costs .......................... (108,000) (105,000) -- Increase in other assets .................................... -- (18,224) (15,000) Increase in accounts payable ................................ (29,927) 325,244 84,593 Increase in state audit reserve ............................. 700,000 -- -- (Decrease) increase in accrued expenses ..................... (25,425) 46,628 103,797 Increase in income tax payable .............................. 628,000 -- -- Changes in operating assets and liabilities of discontinued operations ................................................ -- 2,002,440 (2,221,612) Decrease in accrued termination costs ....................... (784,053) -- -- ----------- ------------ ------------- Total adjustments ...................................... (3,653,046) (3,275,954) (1,519,307) ----------- ------------ ------------- NET CASH USED IN OPERATING ACTIVITIES ...................... (2,639,634) (1,410,666) (3,943,760) ----------- ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Cash proceeds from the sale of operation ......................... -- 8,065,336 -- Cash proceeds from the sale of securities ........................ 2,739,996 -- -- Capital expenditures ............................................. (718,425) (730,148) (420,749) Collection on note receivable .................................... 9,300,000 -- -- Purchase of convertible preferred stock ......................... (1,000,000) -- -- Increase in note receivable ...................................... (2,028,167) -- -- ----------- ------------ ------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ......... 8,293,404 7,335,188 (420,749) ----------- ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: (Decrease) increase in notes payable ............................. (163,260) 488,149 -- Repayment/ (issuance) of related party loans ..................... (162,627) -- (60,000) Proceeds from debt financing ..................................... 183,230 658,351 -- Borrowing of revolving credit line ............................... -- -- 4,365,410 Repayment of revolving credit line ............................... -- (4,365,410) -- Net proceeds from (repayment of) long-term debt .................. (646,178) (239,656) 96,927 Issunace of common stock, net of expenses ........................ 205,256 2,005 1,403,499 Dividends paid on Series A Preferred Stock ....................... (27,288) (186,150) (211,780) Redemption of Series A Preferred Stock ........................... -- (610,517) (416,551) ----------- ------------ ------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ......... (610,867) (4,253,228) 5,177,505 ----------- ------------ ------------- NET INCREASE IN CASH ................................................... 5,042,903 1,671,294 812,996 CASH AT BEGINNING OF YEAR .............................................. 2,575,356 904,062 91,066 ----------- ------------ ------------- CASH AT END OF YEAR ....................................................$ 7,618,259 $ 2,575,356 $ 904,062 =========== ============ =============
See notes to consolidated financial statements. F - 5
TADEO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest ......................................................... $ 84,507 $550,201 $ 623,804 ========== ======== ============ Cash paid for income taxes ..................................................... $ 476,269 $ - $ -- ========== ======== ============ SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Convertible notes converted to common stock .................................... $ 20,000 $ - $ 2,018,830 ========== ======== ============ Redeemable series "A" preferred stock converted to common stock ................ $1,149,745 $ - $ -- ========== ======== ============ Private offering of common stock ............................................... $ 205,256 $ - $ -- ========== ======== ============ Issuance of common stock in conjunction with termination of employment contracts $ 168,334 $ - $ -- ========== ======== ============ Issuance of common stock in conjunction with exercise of stock option .......... $ 84,167 $ - $ -- ========== ======== ============ Issuance of common stock in conjunction with retirement of debt ................ $ 75,000 $ - $ -- ========== ======== ============ Exchange of common stock with another company's common stock ................... $2,000,000 $ - $ -- ========== ======== ============ Exchange of common stock with another company's common stock ................... $1,000,000 $ - $ -- ========== ======== ============
See notes to consolidated financial statements. F - 6 TADEO HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 Tadeo Holdings, Inc. ("Tadeo" or the "Company"), incorporated in Delaware on May 27, 1989 as Universal Self Care, Inc. and changed its name to Tadeo Holdings, Inc. on February 2, 1998. Prior to the Company's acquisition of Astratek and the creation of Tadeo E-Commerce, the Company supplied and distributed both prescription and non-prescription medications and durable medical equipment and supplies principally to persons suffering from diabetes On October 27, 1998, the Company acquired Astratek, Inc., a New York corporation, pursuant to a merger of a wholly-owned subsidiary of the Company into Astratek, with Astratek being the surviving corporation and becoming a wholly-owned subsidiary of Tadeo. The accompanying financial statements and footnotes are presented to reflect the acquisition under the pooling of interests method of accounting, which requires the restatement of prior years' financial statements as if the acquisition was consummated at the beginning of all periods presented. On May 25, 1999, the Company incorporated Tadeo E - Commerce Corporation ("Tadeo E") in Delaware as a wholly-owned subsidiary of Tadeo to be active in the electronic commerce industry. Tadeo is the parent corporation for the following wholly-owned subsidiaries: Physicians Support Services, Inc., a California corporation ("PSS"); Clinishare Diabetes Centers, Inc. d/b/a SugarFree Centers, Inc. ("SugarFree"), a California corporation; USC-Michigan, Inc. a Michigan corporation and its wholly-owned subsidiary, PCS, Inc.-West (collectively identified as "Patient Care Services"), a Michigan Corporation. Depending upon the context, the term "Company" refers to either Tadeo alone, or Tadeo and one or more of its subsidiaries. The SugarFree, PSS and Patient Care Services subsidiaries have discontinued operations. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Principles of Consolidation - The financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions have been eliminated. B. Revenue Recognition - The Company licenses software to end users under license agreements. The Company has recognized revenues in accordance with Statement of Position 97-2 entitled "Software Revenue Recognition" ("SOP 97-2), issued by the American Institute of Certified Public Accountants ("AICPA"). F-7 C. Property and Equipment - Property and equipment is stated at cost and is depreciated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized over the term of their respective leases or service lives of the improvements, whichever is shorter. D. Income (loss) per Common Share - Basic earnings per share has been calculated based upon the weighted average number of common shares outstanding. Convertible preferred stock has been excluded as common stock equivalents in the diluted earnings per share because they are either antidilutive, or their effect is not material. E. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect 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. F. Cash and Cash Equivalents - The Company considers all highly liquid temporary cash investments with an original maturity of three months or less when purchased, to be cash equivalents. G. Stock Based Compensation - The Company accounts for employee stock transactions in accordance with APB Opinion No. 25, "Accounting For Stock Issued To Employees." The Company has adopted the proforma disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting For Stock-Based Compensation." H. Fair Value of Financial Instruments - The carrying amounts reported in the balance sheet for cash, trade receivables, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. I. Impairment of Long-Lived Assets - The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. At June 30, 1999, the Company believes that there has been no impairment of its long-lived assets. J. Capitalized Software Costs - The Company accounts for costs of developing computer software for sale in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed", under which costs incurred prior to the establishment of a product's technological feasibility are expensed as research and development and costs incurred from the point of technological feasibility through the point that a product is ready for market are capitalized and amortized in the greater of the relations that revenues earned bear to total expected revenues over the life of the product or straight-line over the life of the product. Capitalized software costs are evaluated periodically and written down to net realizable value when necessary. Amortization of capitalized software costs for the periods ended June 30, 1999, 1998, and 1997 were $312,966, $82,674, and $20,489, respectively. F-8 K. Comprehensive Income - The Company has adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130) "Reporting Comprehensive Income". Comprehensive income is comprised of net income (loss) and all changes to the statements of stockholders' equity, except those due to investments by stockholders, changes in paid-in capital and distribution to stockholders. 2. DISCONTINUED OPERATIONS On January 28, 1998, the Company sold its operating assets and the stock of its two principal operating subsidiaries, Diabetes Self Care, Inc. ("Diabetes") and USCI Healthcare Management Solutions, Inc. ("HMS"), to Gainor Medical Management, LLC, a privately held Georgia company ("Gainor"), for a gross purchase price of $34 million in cash, as reduced by $8,725,226 of specified liabilities of the Company, and $17,000,000 by the delivery of a Gainor convertible subordinated promissory note (the "Note"). Out of the cash received at closing, the Company satisfied an aggregate of $4,451,136 in liabilities to permit the required transfer of assets to Gainor free and clear of encumbrances. The Note bore interest at a simple rate of 7% per annum through December 31, 1998 and 8% thereafter until payment in full of the principal balance no later than January 28, 2003. Prior to its maturity, the Note was convertible into equity securities of Gainor, at the election of the Company, upon the successful completion of a public offering of such equity securities by Gainor, subject to certain restrictions. The Company's stockholders approved the sale of its business at their Annual Meeting held on January 26, 1998 in Livonia, Michigan, at which time they also approved an amendment to the Company's certificate of incorporation changing its name to Tadeo Holdings, Inc. The sale of the Company's operating business to Gainor shall hereinafter be referred to as the "Transaction". In addition to offsets for customary indemnification's under the Asset Purchase Agreement among the parties, dated November 14, 1997, the principal amount of the Note was subject to reduction in the event that (i) such principal amount did not equal at least 75% of Gainor's revenues from operation of Diabetes during calendar 1998, in which event the Note would be reduced by the difference between 75% of such revenues and $17,000,000, (ii) Gainor would not able to collect at least $5.75 million from the accounts receivable sold to Gainor as part of the Transaction during the one-year period succeeding the closing, in which event the Note would be reduced by the difference between $5.75 million and the amount of receivables actually collected, and (iii) prior to July 28, 1998 fewer than 3,334 former customers of PCS, Inc. West will be customers of Gainor, in which event the Note would be reduced by $600 for each former customer of PCS, Inc. West less than the minimum 3,334 who fails to transfer to Gainor, up to a maximum amount of $2,000,000. In September 1998, Gainor notified the Company that the assignment of benefits provision is currently at the maximum adjustment level of $2,000,000. Gainor F-9 made a $559,800 downward adjustment to the Note principal, and granted an extension until November 21, 1998 of the time for a sufficient number of assignments of benefits to be received by Gainor in order to avoid further downward adjustment to the Note principal. Gainor had previously reduced the Note balance by approximately $145,000, for what were claimed to be unrecorded purchase date accruals, as an adjustment to the closing balance sheet under the Asset Purchase Agreement. In addition, Gainor notified the Company that as of August 31, 1998, (i) its collection of receivables purchased from the Company pursuant to the Asset Purchase Agreement were behind schedule that, an annualized basis, would result in collecting more than $5.75 million of such account, and (ii) its generation of revenues from operations of the purchased business was not as anticipated, either of which could result in additional downward adjustments to the Note principal under the terms of the Asset Purchase Agreement. As a result of the aforementioned, the Company reduced the carrying basis of the Note to $6,000,000 at June 30, 1998 based on what management believed would be the value of the Note if it were to be sold to an unrelated third party in an arms-length transaction. Accordingly, the Company reduced the gain on the disposal of the discontinued business by $11,000,000. In April 1999, the Note was prepaid by Gainor in the amount $9,300,000 and the Company recognized a gain of $3,300,000 on the collection of such Note. In connection with the Company's sale of Diabetes, the accompanying financial statements have been restated to present such businesses as discontinued operations. The revenue of the discontinued businesses was $19,136,465 and $34,001,626 for the fiscal years ended June 30, 1998 and 1997, respectively. 3. BUSINESS ACQUISITION On October 27, 1998, the Company completed the acquisition of Astratek, Inc. a New York corporation ("Astratek"). The Company acquired Astratek pursuant to a merger (the "Merger") of Astratek Acquisition Corp. ("AAC"), a wholly-owned subsidiary of the Company, with and into Astratek, with Astratek becoming the wholly-owned subsidiary of the Company, as the surviving corporation of the Merger. The Merger was effected in accordance with the Agreement and Plan of Merger ( the "Merger Agreement"), dated as of October 23, 1998, among the Company, AAC, Astratek, and the shareholders of Astratek. Astratek develops software tools and related products for internet and intranet technology and provides consulting and professional services for several major companies. As per the Merger Agreement delivered to Astratek shareholders, the F-10 Company issued 2,294,900 shares of the Company's common stock in exchange for cancellation of all the issued and outstanding shares of the capital stock of Astratek prior to the Merger and the issuance of 100 shares of Astratek common stock to the Company post-merger. The acquisition is accounted for as a pooling of interests business combination. Accordingly, the Company's prior years' financial statements are restated as if the acquisition was consummated at the beginning of all periods presented. The revenue and net income for Tadeo and Astratek from July 1, 1998 through October 27, 1998, and the fiscal years ended June 30, 1998 and 1997 are as follows:
July 1, 1998 through Year Ended June 30, --------------------------------------------------------------------- October 27, 1998 1998 1997 -------------------------------- -------------------------------- --------------------------------- Tadeo Astratek Tadeo Astratek Tadeo Astratek -------------- ------------- --------------- ------------- ---------------- ------------- Revenue $ - $ 363,594 $ - $ 996,473 $ - $ 454,771 Net income (loss) (461,879) (211,116) 2,394,351 (529,063) (2,653,231) 228,778
4. MARKETABLE SECURITIES On September 24, 1998, the Company completed a Stock Purchase Agreement between ViewCast.com Inc. (VCST) and Tadeo (the "Purchase" Agreement"). VCST purchased $2,000,000 worth of restricted Tadeo common stock valued at $2,000,000 for $2,000,000 worth of VCST common stock. The Company issued 1,240,310 shares of Tadeo common stock at the sale price of $1.6125 per share and received 1,000,000 shares of VCST's common stock for the purchase price of $2.00 per share. In the case of each corporation, the number of shares issued was less than 20% of the outstanding common stock of the issuer on September 24, 1998. On April 23, 1999, the Company sold approximately 460,000 shares of VCST for $6.00 a share in a private transaction. The Company realized a net gain of approximately $1,690,000 after brokerage commissions from this sale. In June 1999, the Company exchanged $1,000,000 market value of its common stock, $.0001 par value, for $1,000,000 market value of shares of common stock, $.0001 par value, of a direct marketing company under the terms of a Securities Purchase Agreement. In addition, the Company purchased 10,000 shares of convertible preferred stock at $100.00 per share from the same direct marketing company. The aforementioned marketable securities have been classified as available for sale securities at June 30, 1999 and accordingly, the unrealized gain resulting from valuing such securities at market value is reflected as a component of stockholders' equity. F-11 5. ASSET PURCHASE AGREEMENT In August 1997, the Company executed an agreement with Bankers Trust, under which the Company acquired the rights to certain software, which was under development by certain principals of the Company in their capacity as employees of Bankers Trust. In connection with the agreement, Bankers Trust is owed $100,000 and an approximate quarterly revenue share amount of $25,000 (which are included in June 30, 1999 year end accruals). The quarterly accrual is related to asset purchase agreement, in which Bankers Trust will receive 10 percent of all revenues associated with the Visual Audit for Excel product until such time as Bankers Trust has received $250,000 and 5 percent of all revenues associated with the Visual Audit for Excel product until such time as Bankers Trust has received $500,000. 6. NOTE RECEIVABLE The Company provided a cosmetic manufacturing and marketing company with $1,528,167 in loan financing through the issuance of one note bearing interest at 8% due in May 2001, and $500,000 through the issuance of a note bearing interest at 20.8% due in August 1999. The $500,000 note was later amended on August 12, 1999 to (i) extend the due date to June 2000, (ii) reduce the interest rate to 10%, and (iii) increase the principal of the note from $500,000 to $550,000 for accrued interest of $26,580 and a premium of $23,420 for for extending the maturity date and lowering the interest rate. In addition, the Company received warrants to acquire 500,000 shares of common stock of such company at an exercise price of $1.50 per share. 7. PROPERTY AND EQUIPMENT Furniture, fixtures and equipment are as follows:
June 30, ----------------------------------------- 1999 1998 ------------------ ------------------ Furniture and fixtures $ 20,906 $ 20,906 Computer software 7,862 6,450 Computer equipment 92,424 75,360 Machinery and equipment - 3,227 ------------------ ------------------ 121,192 105,943 Less: accumulated depreciation (49,254) (25,977) ================== ================== $ 71,938 $ 79,966 ================== ==================
F-12 8. NOTES PAYABLE Notes payable at June 30, 1999 and June 30, 1998 respectively consist of the following: JUNE 30, CREDITOR MATURITY DATE INTEREST RATE 1999 1998 -------- ------------- ------------- ------------------------ Officer (B) None $ 17,675 77,500 Former March 31, 1999(C) 10% $ - 109,021 Owner TRUST (A) JUNE 1, 2000 FLOATING PRIME $ - 640,592 ------------------------ $ 17,675 827,113 LESS: SHORT TERM - 163,260 ------------------------ LONG TERM NOTES $ 17,675 663,853 ======================== (A) Agreement dated June 1, 1997, subsequently assigned to a Trust, the beneficiaries of which are relatives of an officer, shareholder and director, to provide maximum funding of $750,000, collateralized by substantially all of Astratek, Inc.'s assets. The debt went into a default because of the non-payment of interest. On October 22, 1998, Astratek, Inc. obtained a waiver from the holder to forebear any action through November 30, 1998. In exchange, the Company agreed to pay a fee of $10,000 and to convert $350,000 of the principal into 378,829 shares of common stock (B) To be repaid out of future profits, if any, at a maximum aggregate amount of $2,000 per month. (C) Due to a former owner of a subsidiary, unsecured, payable monthly. 9. CONCENTRATION OF CREDIT RISK The Company maintains cash balances at a financial institutions located in New York. Accounts at the institution are insured by Federal Deposit Insurance Corporation up to $100,000. The Company's cash balances exceeded such insured limits. 10. COMMITMENTS, CONTINGENCIES, AND OTHER AGREEMENTS The Company is obligated under two leases for base annual rent of approximately $114,000 (Michigan) and $126,000 (New York City) through September 2002 and November 2002, respectively. A portion of the Michigan location has been subleased for rent of $47,592 annually, plus an allocation of 42.5% of common area expenses under the master lease. F-13 Department of Health Services - One of the Company's discontinued wholly-owned subsidiaries underwent an audit by the California State Controller's Office, Division of Audits, for the purpose of determining compliance with guidelines of the California Department of Health Services ("Medi-Cal") and the California State Board of Equalization. The Controller's Office issued a report to the effect that the subsidiary owed, and issued a Letter of Demand for, $1.3 million, contending that for the period July 1, 1990 to June 30, 1993, the subsidiary practiced unfair pricing to its customers. Additionally, accrued interest on the amount demanded is also sought by the Controller's Office. The subsidiary has appealed the ruling, which has been upheld. An appeal to the California Court of Appeals is pending. The Company has provided a reserve of $1,400,000, $700,000 of which was accrued in the year ended June 30, 1999. There is no other material litigation against Tadeo or its subsidiaries. On May 28, 1999, as amended by agreements dated as of June 1, 1999, Tadeo E entered into a Web Design and Consulting Agreement with Azurel, Ltd. ("Azurel"), a public company engaged in the business of manufacturing and distributing cosmetics and other related products (the "Azurel Web Agreement"). Under the terms of the Azurel Web Agreement, based upon the fee schedule to be included in that agreement, Tadeo E agreed to provide all necessary consulting and development services to design, maintain and enhance Azurel's electronic commerce Internet sites and other related electronic commerce marketing vehicles. Tadeo E paid Azurel $500,000 for Azurel's provision of content and marketing consulting services in connection with assistance provided to Tadeo E's electronic commerce development activities for Azurel and other clients. At the same time, to enhance the strategic relationship between Azurel, Tadeo and Tadeo E, Tadeo E lent to Azurel an aggregate of $1,528,167 under the terms of a Credit Agreement, as amended, dated as of June 1, 1999 (with part of the aggregate principal reflecting the restructuring of a March 31, 1999 short-term $500,000 promissory note), with interest payable at the rate of 8% per annum, payable monthly, and with all principal and accrued interest due on May 28, 2001 (the "Credit Agreement"). Repayment of amounts outstanding under the Credit Agreement is secured by a pledge of approximately 66.66% of the outstanding shares of certain Azurel operating subsidiaries, under the terms of a Pledge Security Agreement, as amended, by and between Azurel, Tadeo and Tadeo E. In further consideration for its advances to Azurel under the Credit Agreement, Tadeo E received from Azurel warrants to acquire 500,000 shares of Azurel common stock, exercisable at $1.50 per share, with the shares acquired upon exercise of such Warrants being subject to registration rights provided under the terms of Registration Rights Agreement, as amended, dated as of June 1, 1999. On May 12, 1999, Tadeo extended a $500,000 loan to Azurel, due August 1999,bearing interest at 20.8% (the "Note"). The $500,000 Note was later amended on August 12, 1999 to (i) extend the due date to June 2000, (ii) reduce the interest rate to 10%, and (iii) increase the principal of the Note from $500,000 to $550,000 for accrued interest of $26,580 and a premium of $23,420 for extending the maturity date and lowering the interest rate. Under agreements dated as of June 30, 1999, Tadeo E entered into both a Web Design and Consulting Agreement and an Online Hosting Agreement with Diplomat Direct Marketing Corporation ("Diplomat"), a public company engaged in the business of distributing women's and children's fashion apparel and related accessories through catalogue sales and over the Internet ("Diplomat Web Agreements"). Under the terms of the Diplomat Web Agreements, based upon the F-14 fee schedules provided in those agreements, Tadeo E is providing all necessary consulting and development services to design, maintain and enhance Diplomat's electronic commerce Internet sites and other related electronic commerce marketing vehicles, as well as to host those sites on behalf of Diplomat. Tadeo E paid Diplomat $500,000 for Diplomat's provision of content and marketing consulting services in connection with assistance provided to Tadeo E's electronic commerce development activities for Diplomat and other clients. In addition to payments by Diplomat for the services provided under the Diplomat Web Agreements, in further consideration for its services to Diplomat under the Web Agreements Tadeo E will receive royalties from Diplomat based upon Diplomat's ongoing electronic commerce businesses (the "Royalties"). The Royalties are equal to 5% of Diplomat's electronic commerce revenues, until $500,000 has been paid to Tadeo E, and thereafter 20% of certain Diplomat electronic commerce net income in perpetuity. On June 30, 1999, Tadeo E entered into an agreement with Business Talk Radio.Net, Inc. ("Business Talk") under which, for a payment of $250,000, Tadeo E obtained an assignable credit for the purchase of advertising time on radio programs operated by Business Talk having an agreed-upon value of $1,200,000, and shares of Series C Preferred Stock convertible into 5% of the currently outstanding capital stock of Business Talk. As part of the transaction, Tadeo E obtained an option to acquire an equivalent number of shares of Business Talk capital stock for an exercise price of $250,000, as well as the right to "stream" the content of Business Talk programming on its and its affiliates web sites during the course of a three-year period without an additional payment to Business Talk. Business Talk creates and distributes the content of its business-oriented radio programming for broadcasting on third party operated radio stations in a variety of markets throughout the United States. 11. INCOME TAXES The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS No. 109"). SFAS No. 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. SFAS No. 109 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. F-15 The benefit for income taxes from continuing operations differs from the amount computed applying the statutory federal income tax rate to loss before income taxes as follows:
Year Ended June 30, --------------- --- ---------------- ---- ------------------ 1999 1998 1997 --------------- ---------------- ------------------ $ (248,000) $ (392,000) $ (207,000) Income tax benefit computed at statutory rate Income tax benefit not recognized 248,000 392,000 207,000 --------------- ---------------- ------------------ Income tax benefit $ - $ - $ - =============== ================ ==================
During the year ended June 30, 1999, the Company utilized approximately $3,100,000 of available net operating loss carryforwards. Astratek has approximately $1,200,000 of net operating loss carryforwards subject to limitations on annual utilization because there was "equity structure shifts" or "owner shifts" involving 5% stockholders (as these terms are defined in Section 382 of the Internal Revenue Code), which have resulted in a more than 50% change in ownership. The resulted deferred tax asset from such net operating loss carryforwards has been fully reserved for. 12. STOCKHOLDERS' EQUITY A. Preferred Stock - The Certificate of Incorporation of the Company authorizes the issuance of a maximum of 10,000,000 shares of preferred stock. The Company's Board of Directors is vested with the authority to divide the class of preferred shares into series and to fix and determine the relative rights and preferences of shares of any such series to the extent permitted by the laws of the State of Delaware and the Articles of Incorporation. B. Redeemable Preferred Stock Series A - In April 1995, in connection with the acquisition of PCS, Inc. -West, the Company issued 580,000 shares of Series A Redeemable Preferred Stock. The shares contained a liquidation preference of $5 per share and paid no dividends. They are mandatorily redeemable at $5 per share, over a five-year period in equal monthly installments beginning in October 1995. The Company recorded the present value of the required future payments as a liability utilizing a discount rate of 9%. The portion of the monthly redemption installments which are attributed to this discounting factor are accounted for as preferred stock dividends. At June 30, 1998, there were 229,950 shares outstanding. In August 1998, the Company amended the certificate of designation to allow for the conversion of the Series A Preferred Stock and the remaining balance was converted into 1,363,163 shares of Common Stock in September 1998. F-16 C. In April 1995, in connection with the Acquisition of PCS, the Company issued 1,000,000 shares of Series B Cumulative Convertible Preferred Stock. Each share contains a liquidation preference of $1.00 per share. Each share was convertible into common stock at the rate of two shares for one common share and paid a cumulative dividend at the rate of from $.02 per share annually, beginning in September 1996, increasing to $.12 per share through June 30, 2000. However, such dividend only become payable if, in the immediate preceding fiscal year, the Company had pre-tax income of at least $500,000. In August 1999, all Series B Preferred Stock was converted into 500,000 shares of Common Stock in accordance with the Corporate charter and at the request of the holders. D. In connection with its December 1992 public offering, the Company has 1,143,800 Class A warrants outstanding to purchase Common Stock at $3.30 per share which expire in December 1999. 13. STOCK OPTION PLAN A. The Company's 1992 Employee Stock Option Plan (the "1992 Plan") was approved by the Company's Board of Directors and stockholders in June 1992. On July 28, 1993, 210,000 stock options, exercisable at $1.50 per share, for a period of ten years, were issued under the 1992 Plan. Options granted under the 1992 plan may include those qualified as incentive stock options under Section 422A of the Internal Revenue Code of 1986, as amended, as well as non-qualified options. Employees as well as other individuals, such as outside directors, who provide necessary services to the Company are eligible to participate in the 1992 Plan. Non-employees and part-time employees may receive only non-qualified stock options. The maximum number of shares of common stock for which options may be granted under the 1992 Plan is 500,000 shares. B. The Company's Management Non-Qualified Stock Option Plan (the Management Plan") was approved by the Company's Board of Directors in December 1992. On July 28, 1993, 100,000 stock options, exercisable at $1.50 per share, for a period of ten years, were issued under the Management Plan. Management and key employees, as well as outside directors and other individuals who provide necessary services to the Company, are eligible to participate in the Management Plan. Options granted under the Management Plan are nonqualified options. The maximum number of shares of Common Stock for which options may be granted under the Management Plan is 550,000. C. In November 1997, the Company established the 1997 Stock Option Plan for Non-employee Directors, which authorizes the issuance of up to 300,000 options to purchase Common Stock at an exercise price of 100% of the Common Stock's market price. Subsequent to its adoption at the annual meeting in February 1998, 30,000 five-year options were granted under this plan at an exercise price of $1.81 per share. On each of July 1, 1999 and 1998, an additional F-17 30,000 five year options were granted at an exercise price of $3.78 and $.97 per share, respectively. 14. ACCOUNTING FOR STOCK OPTIONS The Company accounts for stock options issued to employees under APB Opinion No. 25, "Accounting for Stock Issued to Employees", under which no compensation expense is recognized if the exercise price equals the stock market value on the measurement date (generally the grant date). The Company has adopted the proforma disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." For disclosure purposes, the fair value of each option is measured at the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions used for stock options granted during the years ended June 30, 1999, 1998 and 1997, respectively; annual dividends of $0.00 for all years; expected volatility of 50% for the year ended June 30, 1999, and 86.3% for the years ended June 30, 1998 and 1997; risk free interest rate of 5.7% for the year ended June 30, 1999, and 7.0% for the years ended June 30, 1998 and 1997, and expected life of five years for all years. If the Company had recognized compensation cost in accordance with SFAS No. 123, the Company's pro forma net loss and net loss per share would have been $3.1 million and $.30 for fiscal 1997. The effect for fiscal 1999 and 1998 would not be material. The following table summarizes the changes in options outstanding and the related price ranges: Weighted Average Range of SHARES EXPECTED PRICE EXERCISE PRICE Outstanding at June 30, 1996 1,081,667 $ 1.33 $1.00 - $1.50 GRANTED 275,999 1.72 1.70 - 1.50 ------- ---- ------------- Balance June 30, 1997 1,357,666 1.41 1.00 - 2.25 GRANTED 55,000 2.15 1.81 - 2.50 ---------- ---- ------------- Balance June 30, 1998 1,412,666 1.44 1.00 - 2.50 Granted 306,167 .99 .94 - 1.00 EXERCISED (84,167) 1.00 1.00 ---------- ---- ------------- BALANCE JUNE 30, 1999 1,634,666 1.27 $ .93 - 2.50 ========= ============= F-18 The following table summarizes information about stock options outstanding at June 30, 1999: Weighted Average Range of Average Remaining Contractual EXERCISE PRICES OUTSTANDING LIFE IN YEARS $.93 - $5.50 1,634,666 4.45 ------------ --------- ---- Options exercisable at June 30, 1999 and 1998 were 1,490,666 and 1,412,666 respectively. 15. NOTE RECEIVABLE - OFFICER On November 25, 1998, Tadeo Holdings, Inc. advanced $70,000 to Brian Bookmeier, Tadeo's President, in exchange for a note receivable, which bore interest at the rate of 10% per annum. This note was paid in full during the fiscal year ended June 30, 1999. 16. TERMINATION AGREEMENTS The Company entered into the following contracts subsequent to the disposal of its business: A. The Company agreed to make severance payments aggregating $708,000 to a former operating officer. An initial payment of $250,000 was paid and the remaining $458,000 was to be paid in sixty equal monthly installments of $7,633 commencing March 1998 and continuing through March 2003. The Company recorded the present value of this contract at $359,265. The balance which was $280,209 at June 30, 1999 is currently payable since the note due from Gainor was prepaid (Note 2). Additionally, Tadeo will continue to pay quarterly premiums on the officer's existing $350,000 life insurance policy through December 31, 1999. B. The Company entered into agreements with three former officers in July 1998, for an aggregate consideration of $862,498, with $385,000 paid in August 1998, $225,000 settled through the issuance of notes payable due in January 2000, bearing interest at 7% per annum and the $252,490 balance settled by exchanging cash severance payments for the direct issuance of 168,334 shares of Common Stock (at $1.00 value per share) and the exercise price of concurrently granted options to acquire 84,167 shares of Common Stock at $1.00 per share. The Company has retired these contracts as of June 30, 1999. F-19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OFFICERS AND DIRECTORS The executive officers and directors of the Company as of September 28, 1999 are as follows: NAME AGE POSITION WITH THE COMPANY Brian D. Bookmeier 41 President of Tadeo Holdings, Inc., Director, Acting Chief Financial Officer and Acting Accounting Officer Alexander Kalpaxis 46 Executive Vice President, Chief Technology Officer And Director James Linesch 45 Director Damon Testaverde 51 Director Set forth below is a brief background of the officers, directors and key employees of the Company, based on information supplied by them. BRIAN D. BOOKMEIER. Mr. Bookmeier is an investor and Vice President of Seven Sons, Inc., d/b/a Las Vegas Golf & Tennis. Seven Sons, Inc. is in the business of franchised retailing of golf and tennis products. Mr. Bookmeier has held this position since August 1997. Mr. Bookmeier has served as President, Chief Executive Officer and a director of the Company since July 1995. From September 1989 until its Merger into the Company Mr. Bookmeier served as Executive Vice President and a Director of Patient Care Services, a home medical equipment supply company that specialized in diabetes management, and the sale of related equipment and supplies. He has been a Director of the American Diabetes Association since June 1995. ALEXANDER KALPAXIS. Since November 1998, Mr. Kalpaxis has been the Company's Chief Technology officer, Executive Vice President and Director. From April 1997 to October 1998, Mr. Kalpaxis was the CEO, President of Astratek, Inc. From October 1984 to April 1997 Mr. Kalapxis was Bankers Trust Chief Technology scientist. Mr. Kalpaxis led projects in infrastructure development, LAN systems, databases and tools, object technology, and engineering. Prior to Bankers Trust, Mr. Kalpaxis was a research electrical engineer for Photonics Laser Institute at the City University of New York. He has received several awards, including the Simon Sokin Medal for Excellence in Experimental Physics. JAMES LINESCH. Since February 1997, Mr. Linesch has served as a Director of the Company. Mr. Linesch is currently the President, Chief Executive Officer and Chief Financial Officer of CompuMed, a public computer company involved with computer assisted diagnosis of medical conditions, which he joined in April 1996 as Vice President and Chief Financial Officer. Mr. Linesch served as a Vice President, Chief Financial Officer and Controller of the Company from August 1991 to April 1996. From May 1988 to August 1991, Mr. Linesch served as the Chief Financial Officer of Science Dynamics Corp., a corporation involved in the development of computer software. DAMON TESTAVERDE. Mr. Testaverde has been a director since January 19, 1998. From May 1991 until June 1995, Mr. Testaverde served as President and Chief Executive Officer of the Company. From 1989 to March 1991, Mr. Testaverde served as the principal stockholder of H. R. Damon & Company, Inc., a former full service securities broker-dealer which ceased operations in March 1991. Since March 1994, Mr. Testaverde has been a registered representative with Network One Financial Services, Inc., a full service securities broker-dealer. From 1980 to 1986, Mr. Testaverde served in the capacity of President of S. D. Cohn & Co., Inc. A full service securities broker-dealer with active investment banking and brokage operations. Mr. Testaverde is also a former director of American Complex Care, Incorporated, a public company formerly engaged in the provision of home health care infusion therapies and as a distributor of Medicare Part B products. In March 1995, American Complex Care, Incorporated's operating subsidiaries made assignments of their assets for the benefit of their creditors, without resort to bankruptcy proceedings. ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE Long-Term Compensation _____________________________________________________________________________ Annual Compensation Awards Payouts ___________________________________ _______________ _______ OTHER Name and ANNUAL RESTRICTED ALL Principal COPEN- Stock OPTIONS/ LTIP OTHER POSITION YEAR SALARY BONUS SATION AWARDS SARS(#) PAYOUTS COMPISATION - -------- ---- ------ ----- ------ ------ ------- ------- ----------- Brian Bookmeier 1997 $116,667 0 $ 9,000 $ 0 $ 0 $ 0 $ 0 President and 1998 $ 87,500 0 $ 1,000 $ 0 $ 0 $ 0 $ 0 Chief Executive 1999 $ 17,308 0 $ 0 $ 0 $ 0 $128,333 $ 0 Officer and Director Alex Kalpaxis 1997 $160,000 0 $ 0 $ 0 $ 0 $ 0 $ 0 Executive V.P. 1998 $160,000 0 $ 0 $ 0 $ 0 $ 0 $ 0 Chief 1999 $160,000 0 $ 0 $ 0 $ 0 $ 0 $ 0 Technology Officer
EMPLOYMENT AND CONSULTING AGREEMENTS Mr. Edward Buchholz entered into a three year employment contract on December 16, 1996, effective on January 1, 1997, the term of which ended on December 31, 1999. Mr. Buchholz's was the President and Chief Executive Officer of Healthcare Management Solution, Inc., a former subsidiary of the Company. Mr. Buchholz's employment agreement provides him with an annual base salary of $ 150,000. In connection with his employment agreement, Mr. Buchholz was granted options to acquire 175,000 shares of common stock at an exercise price of $1.70 per share (fair market value on the date of grant), vested on the date of grant. On January 28, 1998, the Company and Mr, Edward Buchholz entered into a termination agreement with respect to his employment agreement (the "Agreement"). In mutual consideration of the promises contained in the Agreement, the Company agreed to make severance payments aggregating $708,000 to Mr. Buchholz, (i) $250,000 paid by Tadeo Holdings, Inc. as the initial payment and (ii) $458,000 to be paid by Tadeo Holdings, Inc. in sixty equal monthly installments of $7,633.33. Additionally, Tadeo Holdings, Inc. will continue to pay quarterly premiums on Mr. Buchholz's existing $350,000 life insurance policy through December 31, 1999. On July 10, 1998, the Company and each of Messrs. Brian Bookmeier, Alan Korby and Matthew Gietzen, entered into employment termination agreements (the "Termination Agreements"). Messrs Korby and Gietzen are former officers and Directors of the Company. In mutual consideration of the promises contained in the Termination Agreements severance payments were made as follows: (i) $128,333.33 was paid to each and (ii) each received a $75,000 promissory note bearing 7% annual interest with principal payable on January 1, 2000. Messrs. Korby and Gietzen were each issued 84,166 shares of Tadeo Common Stock for the purchase price of $1 per share (which subscription were paid for in exchange for additional severance payments of $84,166 under the Termination Agreements) and (iv) Mr. Bookmeier was granted stock options under the Tadeo Employee Stock Option Plan to purchase 84,167 shares of Common Stock exercisable at $1.00 per share (which options were exercised by Mr. Bookmeier in exchange for an additional $84,167 severance payment under the Termination Agreements). On October 1, 1998, the Company entered into a three year employment contract with Mr. Kalapxis. Mr. Kalpaxis is Executive Vice President and Chief Technology Officer of the Company. Mr. Kalpaxis's employment agreement provides him with an annual base salary of $ 160,000. Additionally, Mr. Kalpaxis will receive a performance bonus based upon the operating results of Astratek, Inc, a wholly-owned subsidiary of Tadeo Hoildings, Inc., in which Earnings Before Taxes Interest Depreciation and Amortization, ("EBITDA") equals or exceed one million dollars. Each director of the Company receives a $25,000 annual directors fees for attendance at Board meetings, as well as reimbursement for the actual expenses incurred in attending such meetings. Officers and key employees of the Company receive employment benefits (e.g., health insurance, automobile allowances) other than cash compensation and interests in the Company's employee stock option plan. In November 1997, the Company established the 1997 Stock Opyion Plan for Non-employee Directors, which authorizes the issuance of up to 300,000 options to purchase Common Stock at an exercise price of 100% of the Common Stock's market price. Subsequent to its adoption at the annual meeting in February 1998, 30,000 five- year options were granted under this plan at an exercise price of $1.81 per share. The following table sets forth information concerning individual grants of stock options made during the last completed fiscal year to each of the executive officers named in the Summery Compensation Table. Potential realizable Number of Percent of Value at assumed Securities Total Options/ Annual rates of Underlying SAR's Granted Exercise or stock price Options/SAR's In Fiscal Base Price appreciation Name Granted (#) Year (S/Sh) for option term (a) (b) (c) (d) 5% 10% - ---------------- ------------- --------------- ------------ -------------------- Brian Bookmeier 84,167 22% 1.00 259,603 271,965 - ---------------- ------------- --------------- ------------ ---------- --------- 10,000 3% .9375 31,500 33,000 - ---------------- ------------- --------------- ------------ ---------- --------- The following table sets forth information concerning options exercised and the number of unexercised options, and the value of such unexercised options, for any persons named in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES - ----------------------- --------------------- -------------------- ----------------------- ---------------------- VALUE OF UNEXERCISED NUMBER OF UNEXERCISED IN-THE-MONEY SHARES ACQUIRED ON VALUE REALIZED OPTIONS/SARS AT OPTIONS/SARS AT NAME EXERCISE (#) ($) FY-END(#) FY-END($) (A) (B) (C) (D) (E) - ----------------------- --------------------- -------------------- ----------------------- ---------------------- EXERCISABLE/ EXERCISABLE/ UNEXECISABLE UNEXERCISABLE Brian Bookmeier 84,167 0 84,167/0 247,240/0
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table identifies each person or entity known to the Company to be the beneficial owner of more than five percent of the Company's common stock on September 15, 1999, each director of the Company and all the directors and officers of the Company as a group, and sets forth the number of shares of the Company's common stock beneficially owned by each such person and such group and the percentage of the shares of the Company's outstanding common stock owned by each such person and such group. In all cases, the named person has sole voting power and sole investment power of the securities, unless otherwise specified. Percentage of Name and Address Number of Shares of Common Outstanding OF BENEFICIAL OWNER STOCK BENEFICIALLY OWNED(1) COMMON STOCK OWNED Brian D. Bookmeier 327,867 2.0% 16223 Ford Road Canton, MI 48187 (2) Estate of Fred Kassner 2,809,455 17.6% 59 Spring Street Ramsey, NJ 07446 (3) Alexander Kalpaxis 773,083 4.9% 8827 82nd Avenue Glendale, NY 11385 (4) James Linesch 166,823 1.0% 3401 Walnut Avenue Manhattan Beach, CA 90266 (5) Damon D. Testaverde 659,189 4.1% 580 Oak Dale Street Staten Island, NY 30312 (3)(5) ViewCast.Com 1,240,310 7.8% 2665 Villa Creek Drive, Suite 200 Dallas, TX 75234 The Rubin Family Irrevocable 1,263,798 7.9% Stock Trust 25 Highland Blvd. Dix Hills, NY 11747 ALL OFFICERS AND DIRECTORS 1,926,962 11.9% --------- ------ as a group (4 persons) (2)(4)(5) (1) As used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) during the next 60 days. Unless otherwise noted, beneficial ownership consists of sole ownership, voting and investment rights. (2) Includes 182,867 shares of Common Stock held by Mr. Bookmeier. Also includes options to purchase 125,000 shares of Common Stock at $1.35 per share, granted in connection with the waiver of certain cash compensation in 1996, options to acquire 10,000 shares of Common Stock granted under the 1992 Employee's Stock Option Plan at $.9375 per share and options to purchase 10,000 shares of Common Stock granted under the Company's 1997 Non-Employee Director's Stock Option Plan at $3.78 per share. 39,179 of the shares of Common Stock issued to Mr . Bookmeier have been pledged to Barbara Milinko to secure a $325,000 note payable to Ms. Milinko by Alan Korby, Mr. Bookmeier and Matthew Gietzen. (3) For the Estate of Mr. Kassner, includes 40 shares of Common Stock underlying the Company's publicly-traded Class A Warrants and 100,000 shares of Common Stock underlying Warrants granted in connection with certain financial accommodations granted by Mr. Kassner related to the release of security interests in Company assets. For Mr. Testaverde, includes the shares underlying 50,000 warrants granted in connection with the waiver of defaults under then existing indebtedness exercisable at $1.00 per share and 100,000 options granted under the 1992 Employee Stock Option Plan exercisable at $1.50 per share. (4) Does not include an aggregate of 530,000 shares of Common Stock transferred by Mr. Kalpaxis to four employees of Astratek, Inc. which shares are held in escrow for varying periods of time and returned to Mr. Kalpaxis under specified circumstances. (5) Includes 30,000 options granted to each of Messrs. Linesch and Testaverde (10,000 exercisable at $1.81 per share of Common Stock,10,000 exercisable at $ .9375 per share of Common Stock and 10,000 exercisable at $ 3.78 per share of Common Stock) under the Company's 1997 Non-Employee Director's Stock Option Plan. Includes 20,000 options granted to Mr. Bookmeier (10,000 exercisable at $3.78 per share of Common Stock and 10,000 exercisable at $ .9375 per share of Common Stock) under the Company's 1997 Non-Employee Director's Stock Option Plan and 1992 Employee Stock Option Plan, respectively. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On November 25, 1998, Tadeo Holdings, Inc. advanced $70,000 to Brian Bookmeier, Tadeo's President, in exchange for a note receivable which bore interest at the rate of 10% per annum. This note was paid in full during the fiscal year ended June 30, 1999. In September 1998, Tadeo acquired and retained for investment purposes approximately 9.2% of the Common Stock of ViewCast.com. In May 1999, as amended as of June 1999, Tadeo E entered into a Web Design and Consulting Agreement with Azurel. In June 1999, Tadeo E entered into both a Web Design and Consulting Agreement and a Online Hosting Agreement with Style. See "Part I, Business-Other Activities", "Current Operations-Astratek, Inc." and "Tadeo E Commerce Corporation" for further information regarding these and other loan transactions. Mr. Testaverde, who is a director of Tadeo, is also a director and officer of Network 1 Financial, Inc. ("Network"), which has acted over the last year and currently acts as a market maker for the common stock of Tadeo, ViewCast.com., Azurel and Style. In July 1998, Tadeo terminated its employment agreement with Mr. Bookmeier. See Item 12, "Employment and Consulting Agreement" of Part III for further information. See Item 6. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for information concerning loans made to the Company by certain members of Company management and by principal stockholders of the Company. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES - SEE, ITEM 8. "FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA." (B) EXHIBITS,
NUMBER DESCRIPTION OF EXHIBIT 3.1(a) Certificate of Incorporation of the Company. (1) 3.1(b) Certificate of Renewal of Charter of the Company. (1) 3.1(c) Certificate of Amendment of Charter of the Company. (3) 3.1(d) Certificate of Amendment of Charter of the Company. 3.1(e) Certificate of Amendment to Certificate of Designations of Charter of the Company. 3.2 By-Laws of the Company. (3) 3.3 Certificate of Designations, Preferences and Relative, Participating, Optional or other special rights of Series A Redeemable Preferred Stock. (9) 3.4 Certificate of Designations, Preferences and Relative, Participating, Optional or other special rights of Series B Convertible Preferred Stock. (9) 4.1(a) Specimen Certificate of the Company's Common Stock. (2) 4.1(b) Specimen of Redeemable Common Stock Purchase Warrant. (4) 4.2 Form of Warrant Agent Agreement between the Company and American Stock Transfer Company. (2) 4.3 Form of Underwriter's Warrant Agreement. (5) 4.4 1992 Employee Incentive Stock Option Plan, including form of Incentive Stock Option Agreement. (2) 4.5 1998 Non-Employee Director Stock Option Plan. (9) 10.1 Warrant Agreement, dated April 28, 1995, by and between the Company and Fred Kassner ("Lender"). (7) 10.2 Registration Rights Agreement, dated April 28, 1995, by and between the Company and Lender. (7) 10.3 Warrant Agreement, dated July 14, 1995, by and between the Company and Lender. (6) 10.4 Registration Rights Agreement, dated July 14, 1995, by and between the Company and Lender. (6) 10.5 Agreement and Plan of Merger between the Company and Gainor Medical Management, LLC, as amended, dated November 14, 1997.(8) 10.6 Closing Agreement dated January 28, 1998. (9) 10.7 Termination Agreement of Edward Buchholz, dated January 28, 1998. (9) 10.8 Employment Termination Agreement, dated July 10, 1998, by and among the Company and Messrs. Alan Korby. (10) 10.9 Employment Termination Agreement, dated July 10, 1998, by and among the Company and Messrs. Matthew Gietzen. (10) 10.10 Employment Termination Agreement, dated July 10, 1998, by and among the Company and Messrs. Brian Bookmeier. (10) 10.11 CONSULTING AND PROFESSIONAL SERVICES AGREEMENT WITH 4TH Peripheral, Inc. 10.12 Form of Web Site Design and Consulting Agreement, dated as of June 1, 1999, by and between Azurel, E Commerce Corp. 10.13 Credit Note, dated May 28, 1999 made by Azurel in favor of Tadeo Holdings, Inc. ("Tadeo") (the "Credit Note").(11) 10.14 First Allonge to Credit Note, made by Azurel in favor of Tadeo E, dated June 1, 1999. (11) 10.15 Credit Agreement, dated May 28, 1999, by and between Tadeo and Azurel. (11) 10.16 Pledge Security Agreement, dated May 28, 1999, by and between Tadeo and Azurel. (11) 10.17 Warrants, to acquire 300,000 shares of Azurel common stock, dated May 28, 1999. (11) 10.18 First Amendment to Credit Agreement, dated June 1, 1999, by and between Tadeo, Tadeo E and Azurel. (11) 10.19 Registration Rights Agreement, dated May 28, 1999, by and between Tadeo and Azurel. (11) 10.20 Warrants, to acquire 200,000 shares of Azurel common stock, dated June 1, 1999. (11) 10.21 Form of On-Line Hosting Agreement, dated as of June 30, 1999, by and between Tadeo E and Style Site Marketing Inc.("Style"). (11) 10.22 Web Site and Consulting Agreement, dated as of June 30, 1999, by and between Tadeo E and Style. (11) 10.23 Security Purchase Agreement, dated June 30, 1999, by and between Tadeo, Tadeo E and Style. (11) 10.24 Registration Rights Agreement, dated June 30, 1999, by and between Tadeo E and Style. (11) 10.25 Pledge Security Agreement, dated June 30, 1999, by and between Tadeo E, The Rubin Family Irrevocable Trust and Style. (11) 10.26 Agreement dated June 30, 1999, between Tadeo and BusinessTalkRadio.Net, Inc. 10.27 Guarantee of Robert M. Rubin for certain liabilities of Style to Tadeo E. 22. Subsidiaries. 27. Financial Data Schedule
- ----------------- 1. Incorporated by reference, filed as an exhibit to the Registrant's Registration Statement on Form S-1 filed on August 3, 1992, SEC File No. 33-50426. 2. Incorporated by reference, filed as an exhibit to Amendment No. 1 to the Registrant's Registration Statement on Form S-1 filed on October 13, 1992. 3. Incorporated by reference, filed as an exhibit to Amendment No. 2 to the Registrant's Registration Statement on Form S-1 filed on November 10, 1992. 4. Incorporated by reference, filed as an exhibit to Amendment No. 4 to the Registrant's Registration Statement on Form S-1 filed on December 4, 1992. 5. Incorporated by reference, filed as an exhibit to Amendment No. 5 to the Registrant's Registration Statement on Form S-1 filed on December 8, 1992. 6. Incorporated by reference, filed as an Exhibit to the Company's Current Report on Form 8-K, filed on July 26, 1995. 7. Incorporated by reference, filed as an exhibit to the Registrant's Registration Statement on Form SB-2, filed on July 31, 1995, SEC File No. 33-95222. 8. Incorporated by reference, filed as an exhibit to the Company's definmitive Proxy Statement, filed on December 24, 1998. 9. Incorporated by reference, filed as an exhibit to the Company's Report on Form 10-Q, filed on December 24, 1998. 10. Incorporated by reference, filed as an Exhibit to the Company's Current Report on Form 10-K, filed on October 13, 1998. 11. Incorporated by reference, filed as an Exhibit to the Company's Current Report on Form 8-K, filed on July 30, 1999. (B) EXHIBITS LIST OF REPORTS ON FORM 8-K There were no reports on Form 8-K filed during the quarter ended June 30, 1999. (The remainder of this page has been intentionally left blank) SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATED: OCTOBER 13, 1999 TADEO HOLDINGS, INC. BY:\S\Brian Bookmeier Brian Bookmeier, President In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated SIGNATURES TITLE DATE __/s/Brian Bookmeier_________ President, Chief October 13, 1999 Brian Bookmeier Executive Officer and Acting Chief Financial and Chief Accounting Officer and Director ____________________________ Executive Vice President, October 13, 1999 Alexander Kalpaxis Chief Technology Officer and Director __/s/Michael F. Niles________ Secretary, Controller October 13, 1999 Michael F. Niles _/s/James Linesch____________ Director October 13, 1999 James Linesch _/s/Damon Testaverde_________ Director October 13, 1999 Damon Testaverde EX-10.11 2 10.11 8/31/99 CONSULTING & PROFESSIONAL SERVICES AGREEMENT THIS CONSULTING & PROFESSIONAL SERVICES AGREEMENT ("Agreement"), dated as of __________ between Astratek a Delaware corporation, (ASTRA) and 4th Peripheral Technologies, Inc, a Delaware corporation (the "Company"). Background The Company is engaged in the creation, development and implementation of certain Internet-Telephony related projects and concepts, and desires to obtain certain services from ASTRA in connection therewith. The Company anticipates that "end-users" will wish to create applications which utilize CTI systems, IVR systems, Auralized WEB content, and Voice-over IP technology and that ASTRA is willing to provide such services to the Company, all on the terms and conditions hereinafter set forth. The parties hereto agree as follows: 1. Consulting Services. 1.1 Services Provided by ASTRA. ASTRA shall provide to the Company, on an independent contractor basis, executive advisory consulting services, as requested, in an effort to increase the value and strategic position of the Company (the "Professional Services"). Examples of the Professional Services relate but are not limited to: telephony switching, legacy to emerging platform integration, middleware, database connectivity, real-time database administration, and include: - Providing software (source code) development talent - Delivering and implementing the code at the end users site - Assist the company in the overall planning and design flow per project - E-Commerce Systems and Fulfillment Strategy and Operations - Deliver data content (financial quotes, stock quotes etc.) - Provide technical support for the products used by the end-user 1.2 Fees for Professional Services. Based on each individual project, it's duration, size, scope, and complexity, the Company and ASTRA will create a "project team". Based on the skills, and talent, of the individual team members, ASTRA and the Company will price each team member's value in terms of an hourly wage, i.e. a time and materials model. Depending on the size of the project ASTRA and the Company may decide to accept a "fixed price" model. Authorization for any project, including the specific terms and conditions for that project, will be evidenced by a project proposal that includes a signature of authorization from the Company and from ASTRA. Each project proposal will be attached as an exhibit to this Agreement and will contain a schedule of milestones and deliverables. All amounts to be paid by the Company to ASTRA pursuant to this paragraph shall be paid in the form of cash, after predetermined and pre-agreed to milestones, as detailed in the accompanying project proposal, are achieved by ASTRA. -2- 1.2 Expenses. The Company shall within 30 days of receipt of an itemized invoice reimburse ASTRA for those reasonable expenses incurred by ASTRA as a result of or in connection with ASTRA's provision of services under this Agreement (including, but not limited to, airfare, lodging, meals, and transportation). Such expenses shall be approved by the Company in advance. The Company, at it's own discretion, shall decide to pay for unauthorized expenses. 2. Finder's Fees for Products & Services. In consideration of ASTRA's provision of potential clients for the Company's products, the Company shall pay to ASTRA a fee (the "Finder's Fee") equal to but not exceed five percent (5%) of revenue generated through introductions by ASTRA or its affiliates. The Finder's Fee shall be payable upon the Company's receipt of the funds. 3. Service Guarantees. While ASTRA will use its commercially reasonable efforts in the provision of the Professional Services described in this Agreement, ASTRA can make no guarantee as to performance, outcome or success, of the products developed by the Company. ASTRA will have liability to the Company for any willful or negligent acts or omissions of ASTRA's employees or agents in any way related to the performance of ASTRA's obligations under this Agreement. 4. Information Flow. Both parties agree to remain in close and constant communication i.e. weekly status meetings etc., with respect to each project. The intent is to provide the highest level of service to the end-user. 5. Non Exclusive Relationship. The Company acknowledges and agrees that the arrangement created by this Agreement is non-exclusive and ASTRA and its affiliates retain the right to provide similar services to other persons and entities. 6. Source Code Ownership Upon the completion of each project ASTRA will deliver the Sourcecode developed during the process of the implementation, to the end-user in the form of magnetic media, hardcopy listing, and shall be complete and fully documented, so that the Company's staff may support and maintain the product. The source code shall become the property of the Company, unless it is a pre-existing piece of code, which may be licensed to the Company and whose ownership rights may reside with ASTRA. The terms and conditions for licensing pre-existing source code will be negotiated separately, and are not within the scope of this Agreement. 7. Maintenance. Depending upon the conditions set forth by the end-user, ASTRA and the Company shall negotiate, on a case, by case basis the sharing of maintenance revenue. In order to satisfactorily maintain and support the client, ASTRA and/or the Company may request the source code, and utilize it upon the expressed permission of the end-user. 8. Co-marketing, Joint Application Development of Products. Where opportunities may arise during the course of the relationship between the parties, both entities may co-develop, co-license, or cross-license on a retail, or OEM basis, existing products, and market these products to their respective sales channels. -3- 9. Term. (a) The term of this Agreement shall begin on the date hereof (the "Effective Date") and shall continue for a period of 12 months thereafter (the "Period") in full force and effect until it is terminated in accordance with this Section 9. (b) The Company or ASTRA, if such party is not in default of the terms of this Agreement, may extend the term of this Agreement for an additional one year ("Additional Period"); provided, the extending party gives the other party at least sixty (60) days advance written notice before the end of the Period. If either party elects to extend the Agreement for the Additional Period, all other terms and conditions of this Agreement shall continue during the Additional Period; and provided further, that any Finder's Fee granted to ASTRA as part of this Agreement shall continue in full force and effect in accordance with its terms notwithstanding any termination of this Agreement by any party hereto pursuant to the terms of this Section 9 or otherwise. (c) ASTRA shall have the right (but not the obligation) to terminate this Agreement and the rights granted to the Company hereunder if: (i) The Company is in material breach of any of its obligations hereunder, which breach is not cured within ten days of receipt of written notice from ASTRA of such breach; (ii) The Company is the subject of a voluntary petition in bankruptcy or any voluntary proceeding relating to insolvency, receivership, liquidation or composition for the benefit of creditors, if such petition or proceeding is not dismissed within 60 days of filing, or becomes the subject of any involuntary petition in bankruptcy or any involuntary proceeding relating to insolvency, receivership, liquidation or composition for the benefit of creditors, if such petition or proceeding is not dismissed within 60 days of filing; (iii) The Company involuntarily dissolves or is dissolved; (iv) The Company is judicially adjudicated insolvent or generally is unable to pay its debts as they mature or makes an assignment for the benefit of its creditors; or (v) Upon ASTRA giving the Company at least sixty (60) days advance written notice of termination of this Agreement. (d) The Company shall have the right (but not the obligation) to terminate this Agreement and the rights granted to ASTRA hereunder if: (i) ASTRA is in material breach of any of its obligations hereunder, which breach is not cured within ten days of receipt of written notice from the Company of such breach; -4- (ii) ASTRA is the subject of a voluntary petition in bankruptcy or any voluntary proceeding relating to insolvency, receivership, liquidation or composition for the benefit of creditors, if such petition or proceeding is not dismissed within 60 days of filing, or becomes the subject of any involuntary proceeding relating to insolvency, receivership, liquidation or composition for the benefit of creditors, if such petition or proceeding is not dismissed within 60 days of filing. (iii) ASTRA involuntarily dissolves or is dissolved; (iv) ASTRA is judicially adjudicated insolvent or generally is unable to pay its debts as they mature or makes an assignment for the benefit of its creditors; or (v) Upon the Company giving ASTRA at least sixty (60) days advance written notice of termination of this Agreement. (e) ASTRA will have the right (but not the obligation) to terminate this Agreement and the rights granted to the Company hereunder, upon 60 days written notice to the Company, following the acquisition of all or substantially all of the assets of the Company by any third party, or the acquisition of the beneficial ownership of at least 20% (the "Threshold") of the voting power represented by the voting securities of the Company, any successor thereto or any person or "group" within the meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act or any successor provision thereof (a "group"). For purposes of this Agreement, (i) the term "beneficial ownership" shall have the meaning set forth in Rule 13d-3 of the Exchange Act or any successor provisions thereof, (ii) the term "voting securities' means the common Stock, par value $.001 per share, of the Company and any other securities issued by the Company having the power to vote generally in the election of directors of the Company and (iii) the term "affiliate" means a person or entity directly or indirectly controlled by, controlling or under common control with another person. For purposes of this Section 3, an acquisition shall not include (A) the acquisition by a person of voting securities of the Company pursuant to an involuntary disposition through foreclosure or similar event, or (B) the acquisition by a person of voting securities of the Company pursuant to a dividend intended to be on a tax-free basis (a "Tax-Free Spin-Off") under the Internal Revenue Code of 1986, as amended from time to time, but shall include a subsequent acquisition of voting securities pursuant to a disposition by the person that acquired the voting securities in such involuntary disposition or such Tax-Free Spin-Off. In the event any person acquires beneficial ownership of voting power in excess of the Threshold as a result of a transaction described in the immediately preceding sentence, the Threshold with respect to such person shall be adjusted to an amount equal to the percentage of beneficial ownership held by such person immediately following such transaction. (f) A party may exercise its right to terminate pursuant to this Section 9 by sending appropriate written notice to the other party. No exercise by a party of its rights under -5- this Section will limit its remedies by reason of the other party's default, the party's rights to exercise any other rights under this Section 9, or any of that party's other rights. 10. Records and Accounts. The Company will maintain accurate books, records and accounts of all transactions relating to the Finder's Fee owed by it to ASTRA pursuant to this Agreement. ASTRA may, at its own expense, examine and copy those books and records as provided in this Section 10. Such books, records and accounts will be maintained in a manner that allows ASTRA to separate these matters from those relating to the Company's other operations. Such books, records and accounts will reflect such information as would normally be examined by an independent accountant in performing an audit pursuant to United States generally accepted auditing standards for the purpose of certifying financial statements, and to permit verification thereof by governmental agencies. ASTRA may make examinations pursuant hereto during the Company's usual business hours, and at the place in the continental United States where the Company regularly keeps these books and records. 11. Independent Contractors. The Company and ASTRA are independent contractors. There is no relationship of partnership, joint venture, employment, franchise or agency between the Company and ASTRA. Neither the Company nor ASTRA shall have the power to bind the other or incur obligations on the other's behalf without the other's prior written consent. When ASTRA's employees act under the terms of this Agreement, they shall be deemed at all times to be under the supervision and responsibility of ASTRA and no person employed by ASTRA and acting under the terms of this Agreement shall be deemed to be acting as agent or employee of the Company or any customer of the Company for any purpose whatsoever. 12. Confidentiality. ASTRA and the Company each agree to hold in strict confidence, and to use reasonable efforts to cause each of their employees and representatives to hold in strict confidence, all confidential information concerning ASTRA or the Company, as the case may be, furnished to or obtained by the other party, in the course of performing the obligations provided for under this Agreement except to the extent that (a) such information has been in the public domain or was held by such other party prior to the date of this Agreement, in either case with such result occurring through no fault of ASTRA or the Company, as the case may be, (b) disclosure or release is compelled by judicial or administrative process, or (c) in the opinion of counsel to ASTRA or the Company, as the as may be, disclosure or release is necessary pursuant to requirements of law or the requirements of any governmental entity including, without limitation, disclosure requirements under the securities laws of the United States or similar laws of other jurisdictions applicable to ASTRA or the Company, as the case may be. -6- 13. Company Content. (a) The Company assumes sole responsibility for (i) acquiring any authorization(s) necessary for the use of proprietary information to be supplied by the Company to ASTRA (not including ASTRA's own proprietary information) for use in connection with ASTRA's performance of the Professional Services (the "Company Material"), and (iii) ensuring that the Company Material does not infringe or violate any right of any third party. 14. Warranties. (a) ASTRA represents and warrants that ASTRA has the power and authority to enter into and perform its obligations under this Agreement. (b) The Company represents and warrants that: (i) the Company has the power and authority to enter into and perform its obligations under this Agreement; and (ii) the Company Material does not and shall not contain any materials that infringe on or violate any applicable law, regulation or right of a third party, including, without limitation, export laws, or any proprietary, contract, moral, or privacy right or any other third party right, and that the Company owns the Company Material or otherwise has the right to use and provide the Company Material to ASTRA for use in connection with its provision of the Professional Services. (c) EXCEPT FOR THE LIMITED WARRANTY SET FORTH IN SECTION 6(a) ABOVE AND IN THE SECTION OF THIS AGREEMENT ENTITLED "SERVICES GUARANTEES" ABOVE, ASTRA MAKES NO WARRANTIES HEREUNDER, AND ASTRA EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 15. Indemnification. (a) The Company agrees to indemnify, defend, and hold harmless ASTRA, its directors, officers, employees and agents, and defend any action brought against same with respect to any claim, demand, cause of action, debt or liability, including reasonable attorneys' fees, to the extent that such action is based upon a claim that: (i) if true, would constitute a breach of any of the Company's representations, warranties, or agreements hereunder; (ii) arises out of the gross negligence or willful misconduct of the Company; or (iii) any of the Company Material to be provided by the Company hereunder infringes or violates any rights of third parties, including without limitation, rights of publicity, rights of privacy, patents, copyrights, trademarks, trade secrets, and/or licenses. (b) ASTRA agrees to indemnify, defend, and hold harmless the Company, its directors, officers, employees and agents, and defend any action brought against same with respect to any claim, demand, cause of action, debt or liability, including reasonable attorneys' -7- fees, to the extent that such action arises out of the gross negligence or willful misconduct of ASTRA in connection with ASTRA's performance under this Agreement. 16. Limitation of Liability. ASTRA SHALL HAVE NO LIABILITY FOR UNAUTHORIZED ACCESS TO, OR ALTERATION, THEFT OR DESTRUCTION OF THE COMPANY'S DATA FILES, PROGRAMS OR INFORMATION THROUGH ACCIDENT, FRAUDULENT MEANS OR DEVICES. ASTRA SHALL HAVE NO LIABILITY WITH RESPECT TO ASTRA'S OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES EVEN IF ASTRA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN ANY EVENT, THE LIABILITY OF ASTRA TO THE COMPANY FOR ANY REASON AND UPON ANY CAUSE OF ACTION SHALL BE LIMITED TO THE AMOUNT ACTUALLY PAID BY THE COMPANY UNDER THIS AGREEMENT DURING THE TWELVE (12) MONTHS IMMEDIATELY PRECEDING THE DATE ON WHICH SUCH CLAIM ACCRUED. THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION IN THE AGGREGATE, INCLUDING, WITHOUT LIMITATION, TO BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATIONS, AND OTHER TORTS. 17. Dispute Resolution. (a) In the event that any party to this Agreement has any claim, right or cause of action against any other party to this Agreement, which the parties shall be unable to settle by agreement between themselves, such claim, right or cause of action, to the extent that the relief sought by such party is for monetary damages or awards, shall be determined by arbitration in accordance with the Rules of the American Arbitration Association ("AAA"), through the adjudication by a single arbitrator, in New York, New York, with the decision of such arbitrator to be final and binding upon all parties. The prevailing party's fees, costs and and expenses of such arbitration, as submitted by the AAA, as well as the reasonable fees, costs and expenses of the prevailing party's own counsel, accountants and other representatives incurred in connection with the prosecution of such arbitration, shall be reimbursed by the other party. The parameters of the AAA proceedings undertaken in accordance with this Section 17 shall be prescribed such that a decision shall be rendered within sixty (60) days following the initial written reference of the related dispute to AAA arbitration. (b) Notwithstanding any other provisions of this Section 17, in the event that a party against whom any claim, right or cause of action is asserted commences, or has commenced against it, bankruptcy, insolvency or similar proceedings, the party or parties asserting such claim, right or cause of action shall have no obligations under this Section 17 and may assert such claim, right or cause of action in the manner and forum it deems appropriate, subject to applicable laws. No determination or decision by the arbitrators pursuant to this Section 9 shall limit or restrict the ability of any party hereto to obtain or seek in any appropriate forum, any relief or remedy that is not a monetary award or money damages. -8- 18. Miscellaneous. (a) Neither party any assign this Agreement, or their respective rights and obligations hereunder, in whole or in part, without the other party's prior written consent; provided, however, that ASTRA shall be entitled to assign all of its rights and obligations hereunder to any subsidiary or affiliated entity without the consent of the Company. Any attempt to assign this Agreement without such consent (if required) shall be void and of no effect ab initio. Notwithstanding the immediately preceding sentence, either party may assign this Agreement or all, but not less than all, of its rights and obligations hereunder to any entity that acquires it by purchase of stock or by merger or otherwise, or by obtaining all or substantially all of its assets (a "Permitted Assignee"); provided, that any such Permitted Assignee thereafter succeeds to all of the rights and is subject to all of the obligations of the assignor under this Agreement; and provided, however, that the provisions of this Section 18 (a) shall in no way modify the provisions of Section 9 (e). (b) This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. Each party shall comply in all respects with all laws and regulations applicable to its activities under this Agreement. (c) Notwithstanding the provisions of Section 16, each party hereto irrevocably submits to the exclusive jurisdiction of (a) the courts of the State of New York, New York County, or (b) the United States District Court for the southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby or thereby. Each of the Company and ASTRA agrees to commence any such action, suit or proceeding either in the Untied States District Court for the Southern District of New York, or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the courts of the State of New York County. Each of the Company and ASTRA further agrees that service of any process, summons, notice or documents by U.S. registered mail to such party's respective address set forth below shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 18(c). Each of the Company and ASTRA irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby and thereby in (i) the courts of the State of New York County, or (ii) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. (d) If any provisions of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the -9- remaining portion thereof) or the application of such provision to any other persons or circumstances. (e) All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand, by facsimile (with confirmation back), or sent, postage prepaid, by registered, certified or express mail or nationally recognized overnight courier service and shall be deemed given when so delivered by hand, by facsimile (with confirmation back), or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows: (i) if to ASTRA, at: 5 Hanover Square New York, New York 10004 Attention: Alexander Kalpaxis, President (ii) if to the Company, at: 39159 Paseo Padre Parkway, Suite 303 Fremont, CA 94538 Attention: Neil Mehta, President (f) The provisions of Sections 9 through 18 hereof shall survive any termination of this Agreement. (g) No failure to either party to exercise or enforce any of its rights under this Agreement shall act as a waiver of such right. (h) This Agreement, along with the Exhibits which may be appended hereto in accordance with the terms hereof, contain the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. Neither party shall be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter expect as specifically set forth herein. (i) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to each of the other parties. (j) This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. -10- (k) This Agreement is for the sole benefit of the parties hereto and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto any legal or equitable rights hereunder. (l) The headings contained in this Agreement or in any Exhibit hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit but not otherwise defined therein, shall have the meaning as defined in this Agreement. When a reference is made in this Agreement to a Section or an Exhibit, such reference shall be to a Section of, or an Exhibit to, this Agreement unless otherwise indicated. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ASTRATEK Name: Alex Kalpaxis Title: President/CEO 4TH PERIPHERAL TECHNOLOGIES, INC Name: Neil Mehta Title: Chairman/CEO EX-10.26 3 10.26 AGREEMENT THIS AGREEMENT is made this 30th day of June, 1999 between BusinessTalkradio.Net, Inc. ("BTR"), a Pennsylvania corporation with its principal office at 10 Fawn Lane, Haverford, PA 19041, and Tadeo Holdings, Inc. ("Tadeo"), a Delaware corporation with its principal office at 5 Hanover Square, New York, NY 10004 (together, the "Parties"). BACKGROUND BTR is in the business of producing and syndicating radio programming for broadcast by its affiliated radio station network. Tadeo is a holding company, which through its subsidiaries is engaged in the development and/or operation of certain commercial web sites on the Internet. In late May of 1999, Tadeo contacted BTR concerning possible strategic alliances between the two companies. In this context, the Parties have reached an agreement which the terms set forth below describe in detail. TERMS OF AGREEMENT THEREFORE, in light of the foregoing and in consideration of the promises and the representations and covenants given and made by the respective parties hereto, the Parties, intending to be legally bound by this Agreement, agree as follows: 1. Cash. Immediately following execution of this Agreement, Tadeo will deliver Two Hundred and Fifty Thousand Dollars ($250,000) to the account designated by BTR. 2. Advertising Credit. BTR shall issue to Tadeo an advertising credit (the "Credit") in the amount of Two Hundred Thousand Dollars ($200,000) to be used according to the Terms of the Tadeo Advertising Credit set forth in Appendix 1 to this Agreement. 3. Shares of Common Stock. Immediately following execution of this Agreement, BTR shall issue to Tadeo a number of shares of its Series C Preferred Stock, par value $.0001, which, upon issuance, shall represent a 5% voting interest in the affairs of BTR and a preference of $250,000 for a period and then $125,000 for a subsequent period under the designations governing the classes of BTR's preferred stock described in Schedule 1 to this Agreement (the "Shares"). 4. Stock Purchase Option. Tadeo shall have the right to purchase a number of shares equal to and of the same class as the Shares (the "Option Shares") any time prior to the first anniversary of this Agreement for an aggregate exercise price of $250,000 (the "Option"); provided that Tadeo must exercise the Option in its entirety if at all. 5. Early Termination of Option. The Option may be terminated by BTR any time after six months from the date of this Agreement if not exercised before the eleventh business day following written notice from BTR that it has generated revenue of $500,000 or more for any Tadeo Holdings, Inc. Agreement Page 2 of 14 three month period during the term of the Option and that revenue in each of the three months exceeded $125,000. (Revenues shall be determined on an accrual basis and according to Generally Accepted Accounting Principals, including a provision for doubtful accounts.) 6. Adjustment of Option Shares. In the event of any stock split, reverse stock split or stock dividend occurring prior to Tadeo's exercising the Option, the number of Option Shares shall be adjusted to preserve the proportionate ownership interest represented by the Option Shares immediately prior to the occurrence of such event. For so long as the Option remains unexercised and has not been terminated, BTR shall give Tadeo 15 days notice prior to the earlier of the record date or effectiveness date of any event which requires such an adjustment. BTR shall additionally provide Tadeo with 15 days notice prior to the earlier of the record date or the effectiveness date should BTR (1) declare a dividend of cash, evidences of indebtedness, or warrants or other rights of subscription for the purchase of securities or evidences of indebtedness, or (2) resolve to reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation, or sell, transfer or otherwise dispose of all or substantially all its property, assets or business. 7. Reservation of Shares. BTR shall reserve and keep available for issue upon the exercise of the Option the securities representing the Option Shares, which when issued upon full payment of the exercise price of the Option shall be duly and validly issued and fully paid and nonassessable. 8. Piggy-Back Registration. In the event BTR proposes to register any of its securities under the Securities Act of 1933 other than pursuant to a registration statement on Forms S-4 or S-8 or any successor to such forms, Tadeo may elect to have included in such registration statement all or a portion of the Shares and the Option Shares, when and if acquired by Tadeo, subject to any lock-up, hold-back or cut-back requirements made by the underwriter, if any, of the related offering and provided that no other selling shareholder may be treated proportionately more favorably than Tadeo(the "Piggy-Back Registration Right"). At least 21 days prior to the filing with the Securities and Exchange Commission of the registration statement covering such securities, BTR shall mail or deliver to Tadeo a written notice of its intention to register such securities as well as all other relevant information. In the event Tadeo chooses to have included in such registration such number of securities as it is entitled to include pursuant to this paragraph, Tadeo shall mail or deliver to BTR not more than 10 days after the date of delivery to Tadeo of the registration notice from BTR a written notice specifying the securities to be registered. 9. Blue Sky Registration. To the extent Tadeo elects to have any of its Shares or Option Shares registered pursuant to the Piggy-Back Registration Right, BTR shall additionally take such steps as are reasonably necessary and feasible to cause such securities to additionally be registered under such other securities or "blue sky" laws as shall be reasonably requested by Tadeo. Tadeo Holdings, Inc. Agreement Page 3 of 14 10. Board Participation. Tadeo shall have the right to receive notice of and to have a designee attend as an ex officio member any and all meetings of the Board of Directors of BTR for the life of the Option. Furthermore, upon exercising the Option, Tadeo shall have the right either to appoint one director to the board of BTR for a period of three years from the date of this Agreement or to continue to designate an ex officio member of the BTR board for the same three year period. 11. Web Page Advertising For a period of three years from the date of this Agreement, BTR will, at the request of Tadeo, provide a banner ad on its web page which includes a hyperlink to the web page of Tadeo Holdings, Inc. or such web page as Tadeo Holdings, Inc. directs for a fee equal to the lowest fee paid for similar advertising by any of BTR's advertising clients, where such fee may be paid as a charge against the Credit. 12. Audio Streaming For a period of three years from the date of this Agreement, Tadeo shall have the right to stream BTR's live audio feed and to archive and stream such portions of BTR's programming as it desires on its own web page and the web pages of any of its Subsidiaries or such other subsidiaries or affiliates to which BTR does not object based on reasonable business concerns over propriety, competition, product integrity, corporate image or the like. 13. Rights to Programming. Notwithstanding the right to use BTR's programming granted in the preceding paragraph, BTR retains all rights to its programming. REPRESENTATIONS AND COVENANTS OF BTR 14. Organization and Standing. BTR is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and is duly qualified as a foreign corporation in all jurisdictions in which the failure to so qualify would have a material adverse effect on the business, properties, prospects, condition (financial or otherwise) or results of operations of BTR or on the consummation of any of the transactions contemplated by this Agreement. A copy of BTR's Articles of Incorporation and bylaws appear as Appendix 2 to this Agreement. 15. Authority; Validity and Enforceability. The execution of this Agreement as well as the performance of the obligations imposed by this Agreement have been duly and validly authorized by BTR and upon execution this Agreement shall be valid and binding upon BTR and enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally. 16. Non-contravention. The execution and delivery by BTR of this Agreement and the performance by BTR of the obligations imposed by this Agreement do not and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default (or an event which, with notice, lapse of time or both, would constitute a default) under (i) the articles of incorporation or by-laws of the Company [a copy of each or which has been Tadeo Holdings, Inc. Agreement Page 4 of 14 provided as Appendix 2 of this Agreement] or (ii) any indenture, mortgage, deed of trust or other material agreement or instrument to which BTR is a party or by which its properties or assets are bound, or any law, rule, regulation, decree, judgment or order of any court or public or governmental authority having jurisdiction over BTR or any of the BTR's properties or assets. 17. Capitalization. The authorized capital stock of BTR consists of 20,000,000 shares of Common Stock, $.0001 par value (the "Company Common Stock"), and 5,000,000 shares of preferred stock, par value $.0001. The number of outstanding shares of BTR's preferred and common stock are set forth in Schedule 1 to this Agreement. All of the issued and outstanding shares of preferred stock and common stock have been duly authorized and validly issued and are fully paid and non-assessable. As of the date hereof, BTR has no outstanding stock options or warrants to purchase shares of Common Stock except as specified in Schedule 2 of this Agreement. The Shares have been duly and validly authorized and reserved for issuance by BTR, and when issued pursuant to the terms of this Agreement will be duly and validly issued, fully paid and non-assessable and will not subject the holder thereof to personal liability by reason of being such holder. No preemptive, subscription, "call" or similar rights to acquire either preferred or common stock of BTR have been issued or granted to any person. 18. Senior Classes of Preferred Stock. BTR shall not, prior to December 31, 1999, issue any shares of its Preferred Stock where such shares have been designated to have a preference which is senior in priority to the preference of BTR's Class C Preferred Stock. REPRESENTATIONS OF TADEO 19. Organization and Standing. Tadeo is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified as a foreign corporation in all jurisdictions in which the failure to so qualify would have a material adverse effect on the business, properties, prospects, condition (financial or otherwise) or results of operations of BTR or on the consummation of any of the transactions contemplated by this Agreement. 20. Authority; Validity and Enforceability. The execution of this Agreement as well as the performance of the obligations imposed by this Agreement have been duly and validly authorized by Tadeo and upon execution this Agreement shall be valid and binding upon Tadeo and enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally. 21. Non-contravention. The execution and delivery by Tadeo of this Agreement and the performance by Tadeo of the obligations imposed by this Agreement do not and will not conflict with or result in a breach by Tadeo of any of the terms or provisions of, or constitute a default (or an event which, with notice, lapse of time or both, would constitute a default) under (i) the articles of incorporation or by-laws of the Company or (ii) any indenture, Tadeo Holdings, Inc. Agreement Page 5 of 14 mortgage, deed of trust or other material agreement or instrument to which the Company is a party or by which its properties or assets are bound, or any law, rule, regulation, decree, judgment or order of any court or public or governmental authority having jurisdiction over the Company or any of the Company's properties or assets. 22. Investment Intent. Tadeo is purchasing the Shares and the Option Shares, if Tadeo exercises the Option, for its own account, for investment purposes only and not with a view towards or in connection with the public sale or distribution thereof in violation of the Securities Act of 1933. 23. Investor Sophistication. Tadeo is (i) experienced in making investments of the kind contemplated by this Agreement, (ii) capable, by reason of its business and financial experience, of evaluating the merits and risks of an investment in the Shares and the Option Shares, and (iii) able to afford the loss of its investment in the Shares and the Option Shares. 24. Not a Public Offering or Sale. Tadeo understands that the Shares are being sold by BTR in reliance on section 4(2) of the Securities Act of 1933, as amended, and that the Company is relying upon the accuracy of, and Tadeo's compliance with, each of Tadeo's representations, warranties and covenants, respectively and severally, as set forth in this Agreement to determine the applicability of referenced section 4(2) for Tadeo's purchase of the Shares. 25. Access to Information. Tadeo acknowledges that it has been furnished with or provided access to all materials relating to the business, financial position and results of operations of BTR, and all other materials requested by Tadeo, respectively, to enable it to make an informed investment decision with respect to the Shares and that in making its decision to purchase the Shares it has been given an opportunity to ask questions of and to receive answers from BTR's executive officers, directors and management personnel concerning the terms and conditions of the Agreement and the operations and financial condition of BTR. CERTAIN COVENANTS AND ACKNOWLEDGMENTS 26. Restrictive Legend. Tadeo acknowledges and agrees that, upon issuance pursuant to this Agreement, the Shares and the Option Shares shall bear a legend in substantially the following form (and a stop-transfer order may be placed against transfer of such securities): THESESECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS. Tadeo Holdings, Inc. Agreement Page 6 of 14 MISCELLANEOUS 27. Notices. Except as otherwise provided herein, any notice or other communication or delivery required or permitted hereunder shall be in writing and shall be delivered personally or sent by certified mail, postage prepaid, or by a nationally recognized overnight courier service, and shall be deemed given when so delivered personally or by overnight courier service, or, if mailed, three (3) days after the date of deposit in the United States mails, as follows: if to Tadeo, to: Tadeo Holdings, Inc. Hanover Square New York, NY 10004 Attention: Alexander Kalpaxis, Executive Vice-President with a copy to: Nixon Peabody, LLP Madison Avenue New York, New York 10022-7001 Attention: Peter W. Rothberg, Esq. if to BTR, to: BusinessTalkradio.Net, Inc. Fawn Lane Haverford, PA 19041 Attention: Michael B. Pisani, CEO 28. Assignment. This Agreement shall be assignable by either of the Parties only with the prior written consent of the other party which may be withheld only where such assignment could cause material detriment to the business purpose of the party solicited for consent, and any attempted assignment contrary to the provisions hereby shall be null and void, except that Tadeo need not obtain BTR's written consent to assignments of the rights under this Agreement to any of its wholly owned subsidiaries listed on Schedule 3 to this Agreement. 29. Severability. The provisions of this Agreement shall be severable, and if any part of any provision shall be held invalid or unenforceable, or any separate covenant contained in any provision is held to be unduly restrictive and void by a final decision of any court or other tribunal of competent jurisdiction, such part, covenant or provision shall be construed or limited in scope to give maximum lawful validity, and the remaining provisions of this Agreement shall nonetheless remain in full force and affect. 30. Entire Agreement. This Agreement contains the entire agreement of the Parties relating to the subject matter hereof, superseding and terminating all prior agreements or understandings, whether oral or written, between the Parties relative to the subject matter Tadeo Holdings, Inc. Agreement Page 7 of 14 hereof, and this Agreement may not be extended, amended, modified or supplemented without the prior written consent of the Parties. 31. Waivers. Any waiver of the performance of the terms or provisions of this Agreement shall be effective only if in writing and signed by the party against whom such waiver is to be enforced. The failure of either party to exercise any of his or its rights under this Agreement or to require the performance of any term or provision of this Agreement, or the waiver of any subsequent breach of the same or any other term or provision of this Agreement, shall not prevent a subsequent exercise or enforcement of such rights or be deemed a waiver of any subsequent breach of the same or any other term or provision of this Agreement. 32. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania. 33. Choice of Forum and Limitations. Any action to resolve any dispute under this Agreement may be brought only in a court of competent jurisdiction in the Commonwealth of Pennsylvania. No action arising from a dispute based on this Agreement may be brought more than one (1) year after the cause of action has accrued. 34. Counterparts. This Agreement and any amendment or modification hereof may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. 35. Facsimile Signatures. A copy of this Agreement bearing a facsimile signature shall be deemed to bear an original signature in all states which may have jurisdiction over this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Tadeo Holdings, Inc. Agreement Page 8 of 14 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement on the date first above written. BUSINESSTALKRADIO.NET, INC. By: ______________________________ Name: Michael B. Pisani Title: Chief Executive Officer TADEO HOLDINGS, INC. By: ______________________________ Name: Alexander Kalpaxis Title: Executive Vice President Tadeo Holdings, Inc. Agreement Page 9 of 14 APPENDIX 1 TERMS OF USE OF THE TADEO ADVERTISING CREDIT 1. Tadeo may utilize the Credit for advertising time to be broadcast any time prior to 12:00 a.m. EST on the third anniversary of this agreement, subject to availability and to BTR's right to preempt such advertising as limited by paragraph 5, below; provided that, to the extent at least one third of the Credit is not utilized by the second anniversary of this agreement, that portion of the Credit will expire and further provided that, BTR may refuse to provide advertising time representing a conversion of more than one tenth of the original Credit in a single calendar month. 2. The Credit shall convert to advertising time at 16% of the rates specified in BTR's Advertising Rate Card. (A copy of BTR's Advertising Rate Card is attached to this Agreement as Appendix 2.) 3. In the event BTR's Advertising Rate Card changes, Tadeo shall be entitled to purchase advertising time according to the replaced Advertising Rate Card for a period of 120 days subsequent to BTR's notice to Corporation of such change. 4. BTR may preempt advertising scheduled pursuant to the terms of the Credit in favor of cash sales of advertising at or above 50% of the rates specified for such spot in BTR's Advertising Rate Card. 5. Tadeo may guarantee any of the spots it schedules and thereby exempt its scheduled spot from BTR's right of preemption by paying 64% of the rate specified for such spot by the Advertising Rate Card. 6. Tadeo's right to guarantee its scheduled spots is limited such that Tadeo's guaranteed spots may not constitute more than 10% of BTR's scheduled advertising spots during the programming hours 6 a.m. to 9 p.m., Monday through Friday. 7. The Credit shall be assignable by Tadeo only with the prior written consent of BTR where such consent may be withheld only where such assignment could cause material detriment to the business purpose of the party solicited for consent, and any attempted assignment contrary to the provisions hereby shall be null and void, except that Tadeo need not obtain BTR's written consent to assignments of the Credit to any of its wholly owned subsidiaries listed on Schedule 3 to this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Tadeo Holdings, Inc. Agreement Page 10 of 14 SCHEDULE 1 CAPITALIZATION OF BUSINESSTALKRADIO.NET, INC. PRO FORMA OUTSTANDING AFTER TADEO PURCHASE OUTSTANDING - -------------------------------------------------------------------------------- LONG TERM DEBT 0 0 PREFERRED STOCK, PAR VALUE $.0001. 5,000,000 SHARES AUTHORIZED. CLASS A 1,043,743 1,043,743 CLASS B 2,977,882 2,977,882 CLASS C 564,056 COMMON STOCK, PAR VALUE $.0001 5,588,334 5,588,334 20,000,000 SHARES AUTHORIZED. * The shares to be issued to Tadeo were calculated on a fully diluted basis. * BTR has made three designations within its authorized preferred stock - Class A, Class B, and Class C. The distinctions among these three classes of preferred stock lapse on December 31, 2000 at which time all preferred and common stock shall have identical rights. At that time BTR shall exchange the preferred stock certificates of each class for common stock certificates representing a same number of respective shares. Until that time, the distinction between any two classes will relate to the occurrence of a Fundamental Transaction which shall mean any sale, liquidation, filing by BTR for protection from its creditors under the Bankruptcy Code, or similar event involving the exchange or modification of BTR's outstanding common stock for value. Class B and Class C preferred stock share on a pari passu basis a liquidation preference relative to Class A preferred stock and common stock. Each share of Class C preferred stock shall have a liquidation preference of $.4432 until January 1, 2000, at which time the Class C preferred stock preference shall become $ .2217 per share. The Class B preferred stock has a per share liquidation preference of $ .10. Any distribution according to the preferences of the Class C and Class B preferred stock shall be made on a pro rata basis derived from the respective preference amounts at the time the Fundamental Event occurs. Following fulfillment of the liquidation preferences for Classes B and C preferred stock, Class A preferred stock shall have a $1.00 preference relative to the common stock and the further participation of the Classes B and C of the preferred stock. Once the Class A preferred stock liquidation preference has been fulfilled, the common stock shares and the Class B and Class C preferred stock shares will share Tadeo Holdings, Inc. Agreement Page 11 of 14 equally in the remaining proceeds of the Fundamental Event with no further participation by the Class A preferred stock. * 1.1 million shares of BTR's Preferred Stock have been designated Class A shares of the Preferred Stock. * 3 million shares of BTR's preferred stock have been designated Class B shares of the Preferred Stock. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Tadeo Holdings, Inc. Agreement Page 12 of 14 SCHEDULE 2 OUTSTANDING OPTIONS AND WARRANTS HOLDER NO. OF SHARES EXERCISE PRICE TERM - -------------------------------------------------------------------------------- Diane Cridland 564,056 $.05 3yrs [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Tadeo Holdings, Inc. Agreement Page 13 of 14 SCHEDULE 3 WHOLLY-OWNED SUBSIDIARIES OF TADEO HOLDINGS, INC. 1. Tadeo-E Commerce Corp. 2. Astratek, Inc. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] Tadeo Holdings, Inc. Agreement Page 14 of 14 APPENDIX 2 1. Articles of Incorporation 2. Articles of Amendment 3. By-Laws EX-10.27 4 10.27 GUARANTEE September 29, 1999 Tadeo E-Commerce Corp. 5 Hanover Square New York, New York 10004 Gentlemen: For value received, the undersigned, ROBERT M. RUBIN, having an address at 25 Highland Blvd., Dix Hills, NY 11746 (the "Guarantor") hereby guarantees to you, TADEO E-COMMERCE CORP., a Delaware corporation ("Lender"), your successors and assigns, the payment when due by acceleration or otherwise by Style-Site Marketing, Inc. (formerly Diplomat Direct Marketing Corporation), a Delaware corporation ("Debtor"), of all debts, liabilities and obligations of Debtor to Lender, or to Lender's successor(s), as a holder of the Preferred Stock (as hereinafter defined), pursuant to and under the Securities Agreement (as hereinafter defined), including but not limited to obligations for redemption and payment of cumulative dividends, which obligations are specified under the terms of the Securities Agreement and the Certificate (as hereinafter defined) and otherwise pursuant to the Certificate with respect to the Preferred Stock, and all amendments to either, and any extensions and renewals thereof or a part thereof, together with interest, fees, charges, expenses and costs of collection (including but not limited to reasonable attorneys' fees), the payment of any amounts received by you from Debtor which are recovered from you in any bankruptcy or insolvency proceeding (whether by court order or by any agreement), and the performance by Debtor of all its other obligations to be performed under any of the Preferred Stock, the Securities Agreement and the Certificate with respect to you (the "Liabilities). For purposes of this Guarantee, the "Preferred Stock" means the 10,000 shares of Series G Preferred Stock, $.01 par value, of Debtor that was issued to Lender under the terms of the Securities Agreement. For purposes of this Guarantee, the "Securities Agreement" is the Securities Purchase Agreement, dated as of June 30, 1999, between Lender, Debtor and Tadeo Holdings, Inc. For purposes of this Guarantee, the "Certificate" means the Certificate of Designation, as filed by Debtor with the Secretary of State of the State of Delaware on June 11, 1999, which certificate sets forth the terms and conditions of the Preferred Stock. This Guarantee is an absolute, unconditional and irrevocable guarantee of payment and performance and is not a guarantee of collection. The Guarantor waives all rules of suretyship law, all notices to which he may be entitled, and any other law whatsoever which is legally permitted to be waived by him and which would, if not waived, impair your enforcement of or release the Debtor from the Liabilities and/or the Guarantor from this Guarantee. By way of example, and not by way of limitation, we agree that the Liabilities shall not be impaired or released by reason of any changes whatsoever made, with or without notice to the Guarantor, to the Debtor's debts, liabilities or obligations to you, including, but not limited to the Liabilities, any failure to perfect or enforce any security for the payment of the Liabilities, any release or other impairment of such security, or any release of or settlement with any person liable for payment of the Liabilities. Without limitation, you do not have to give to the Guarantor notice of acceptance of this Guarantee, the creation of any Liabilities, any action you take or do not take regarding Debtor or any other person or any collateral securing the Liabilities, or give us any demand or notice before you enforce this Guarantee against the Guarantor. In addition, the Guarantor will not assert against you, your successors and assigns, any defense, claim, counterclaim or setoff which the Guarantor or the Debtor may have against you. The Guarantor's liability hereunder is in addition to any other liability which he has incurred or assumed, or may hereafter incur or assume, by way of endorsement, separate guarantee agreement, or in any other manner, with respect to all or any part of the Liabilities. This Guarantee contains the entire agreement between you and the Guarantor and cannot be changed orally. Any omissions or delay by you in exercising any right hereunder shall not operate as a waiver, and the single or partial exercise of any such right or rights shall not preclude any other or further exercise thereof. This Guarantee shall be construed under the laws of the State of New York without regard to any choice of law rule. The Guarantor consents to the personal jurisdiction of the state and federal courts in New York County, New York in any and all actions pertaining hereto, and the Guarantor agrees that such jurisdiction shall be exclusive in such courts. The Guarantor waives all rights to trial by jury in all actions pertaining to this Guarantee. The Guarantor consents to service of process by certified or registered mail sent to his address set forth above or to any changed address of which he shall have given you written notice. Very truly yours, Robert M. Rubin STATE OF __________ ) COUNTY OF _________ ) SS.: On __________________, 1999 before me personally came Robert M. Rubin to me known, who, being duly sworn, did depose and say that he resides in _____________________; that he is the individual that executed the above instrument, and that he signed his name thereto in the presence of the undersigned. Notary Public EX-22 5 22. EXHIBIT 22. USC Michigan, Inc. PCS,Inc. - West Physician Support Services, Inc. Clinishare Diabetes Centers, Inc. Tadeo E-Commerce Corporation Astratek, Inc. EX-27 6 FDS --
5 (Replace this text with the legend) 0000879465 TADEO HOLDINGS, INC. 1 U.S.DOLLARS 12-MOS JUN-30-1999 JUL-01-1998 JUN-30-1999 1 7,618,259 5,533,177 45,750 0 0 8,219,530 121,192 49,254 16,487,663 2,854,388 0 0 505,000 1,535 13,109,065 16,487,663 1,514,849 1,514,849 700,254 700,254 3,572,862 0 0 (478,511) 0 (478,511) 1,491,923 0 0 1,013,412 0.07 0.07
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