-----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, JywO4F5kPWFWM/+AxhkZ0pT9nZ72l46uONwwS0J1gs1OmmLgPbS4D4+3ioj3f3Uh Z4Hf8HN8+mIbnAzRcfGeEA== 0001052809-99-000001.txt : 19990304 0001052809-99-000001.hdr.sgml : 19990304 ACCESSION NUMBER: 0001052809-99-000001 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 27 FILED AS OF DATE: 19990302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AZTEK INC CENTRAL INDEX KEY: 0001068343 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 880324260 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-61947 FILM NUMBER: 99555772 BUSINESS ADDRESS: STREET 1: 1575 DELUCCNI LANE CITY: RENO STATE: NV ZIP: 89502 MAIL ADDRESS: STREET 1: 1575 DELUCCNI LANE CITY: RENO STATE: NV ZIP: 89502 S-4/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-4/A AMENDMENT #4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AZTEK INC. (Exact Name of Registrant as Specified in its Charter) NEVADA (State or Other Jurisdiction of Incorporation or organization) 7371 (Primary Standard Industrial Classification Code Number) 88 0324260 (I.R.S. Employer Identification Number) 1575 DELUCCHI LANE, SUITE #40, RENO, NEVADA 89502, (702) 827-3639 (Address, including zip code, and telephone number, including area code, or registrant's principal executive offices) COPIES OF ALL COMMUNICATIONS TO: STEVE LARSON-JACKSON, ESQUIRE W. KWAME ANTHONY, ESQUIRE LAW FIRM OF LARSON-JACKSON, P.C. 1275 K STREET, N.W., SUITE 1101 WASHINGTON, D.C. 20005 Tel. (202) 408-8180 Fax. (202) 789-2216 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of the registration statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] CALCULATION OF REGISTRATION FEE
Title of each class of Proposed maximum Proposed maximum Amount of securities to Amount to be offering price aggregate offering registra- be Registered registered(1) per unit(2) price(3) tion fee Common stock, $.001 par value per share 2,051,109 .995 2,040,853 $703.74
(1) Represents the estimated maximum number of shares of common stock, par value $.001 per share, of Aztek, Inc. (the "Company"), expected to be issued in exchange for up to 2,051,109 shares of common stock, no par value per share, of the Aztek Technologies Inc. ("ATI"), upon consummation of the merger of ATI with the Company, described herein. (2) The basis for calculating the fee is Rule 457(f). The market for the securities to be received by Aztek, Inc. on July 31, 1998 was C$1.50. The exchange rate on that date was 1 Canadian dollar = 0.6636 US Dollar. (3) Estimated solely for the purpose of calculating the registration fee. The registration fee has been computed pursuant to Rule 457(f) under the Securities Act of 1933, as amended. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said section 8(a), may determine. AZTEK TECHNOLOGIES INC. 246 LAWRENCE AVENUE, SUITE #5 KELOWNA, BRITISH COLUMBIA, CANADA V1Y 6L3 (250) 762-2333 _____________, 1999 Dear Stockholder: You are invited to attend the Annual and Extraordinary Meeting of stockholders (the "Special Meeting") of Aztek Technologies Inc. ("ATI") to be held on _________, 1999 at the offices of Steven K. Winters at 1010 Burrard Building, 1030 West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at 9:00 a.m. local time. Notice of the Annual and Extraordinary Meeting, a Joint Proxy Statement-Prospectus and a Proxy Card are enclosed. The Special Meeting has been called in connection with the proposed acquisition of ATI by Aztek, Inc. (the "Aztek") through the merger of ATI with Aztek in accordance with the Merger Agreement dated as of July 2, 1998 by and between ATI and Aztek (the "Merger Agreement"). Pursuant to the Merger Agreement, ATI will merge with and into Aztek with Aztek being the surviving corporation and each outstanding share of ATI's common stock will be automatically converted into the right to receive shares of Aztek's Common Stock, based upon an exchange ratio of one-to-one. The transaction is referred to herein as the "Merger." ATI's controlling shareholders are presently the sole shareholders of Aztek's common stock. These affiliates acquired their shares at the nominal amount of US$.05 per share for one million shares and own approximately 100% of Aztek's outstanding shares. Following the Merger, Aztek will operate the business that is presently known as Aztek Technologies Inc. Consummation of the Merger is conditioned upon approval by ATI's stockholders. At the Special Meeting, stockholders of ATI will consider and vote upon approval of the Merger and the Merger Agreement. Your Board of Directors has approved the Merger Agreement, including the Merger, and believes that the Merger and the Merger Agreement are in the best interests of ATI and its stockholders. Accordingly, your Board of Directors unanimously recommends that you vote FOR approval of the Merger and the Merger Agreement. You are urged to read the accompanying Joint Proxy Statement-Prospectus, which provides detailed information concerning the Merger and related matters. Your vote is important, regardless of the number of shares you own. ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE SPECIAL MEETING. This will not prevent you from voting in person but will assure that your vote is counted if you are unable to attend the Special Meeting. Sincerely, Mike Sintichakis President PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME AZTEK TECHNOLOGIES INC. 246 LAWRENCE AVENUE, SUITE #5 KELOWNA, BRITISH COLUMBIA, CANADA V1Y 6L3 (250) 762-2333 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON ____________, 1999 NOTICE IS HEREBY GIVEN that the Extraordinary Meeting of stockholders (the "Special Meeting") of Aztek Technologies Inc. ("ATI") will be held on __________, 1999 at the offices of Steven K Winters at 1010 Burrard Building, 1030 West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at 9:00 a.m. local time, for the following purposes: (1) To approve the acquisition of ATI by Aztek, Inc. ("Aztek") through the merger of ATI with Aztek, with Aztek continuing as the surviving corporation, pursuant to which each outstanding share of ATI Common Stock will be converted into one share of Aztek's common stock, par value US$.001 per share ("Aztek Common Stock"), the Merger Consideration and to approve the Merger Agreement by and between ATI and Aztek, dated as of July 2, 1998 (the "Merger Agreement") which sets forth the terms and conditions of the Merger. NOTE: ATI's controlling shareholders are presently the sole shareholders of Aztek's common stock. These affiliates acquired one million shares at the nominal amount $.05 per share and own 100% of Aztek's outstanding shares. The Board of Directors of ATI is not aware of any other business to come before the Special Meeting. The Board of Directors of ATI has fixed the close of business on _____________, 1999 as the record date for the determination of stockholders entitled to notice of and to vote at the Special Meeting. Only stockholders of record at the close of business on that date will be entitled to notice of and to vote at the Special Meeting. By Order of the Board of Directors, Mike Sintichakis President IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, PLEASE DATE, SIGN AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME JOINT PROXY STATEMENT-PROSPECTUS AZTEK INC. PROSPECTUS 2,051,109 SHARES OF COMMON STOCK PAR VALUE $.001 PER SHARE _______________________ AZTEK TECHNOLOGIES INC. PROXY STATEMENT FOR ANNUAL AND EXTRAORDINARY MEETING OF STOCKHOLDERS TO BE HELD ON ___________, 1999 This Joint Proxy Statement-Prospectus is being furnished to the stockholders of Aztek Technologies Inc. ("ATI") in connection with the solicitation of proxies by ATI's Board of Directors for use at its Extraordinary Meeting of Stockholders to be held on __________, 1999. This Joint Proxy Statement-Prospectus was first mailed to security holders of ATI on or about __________, 1999. At their Meeting, the holders of ATI common stock will be asked to approve the Plan of Merger and the Merger Agreement, dated as of July 2, 1998, providing for a merger pursuant to which Aztek, Inc., a Nevada corporation ("Aztek") will be the surviving corporation and ATI will cease to exist (the transaction is referred to hereinafter as the "Merger"). Aztek will provide without charge to each person who receives a prospectus, upon written or oral request of such person, a copy of the Merger Agreement. Upon consummation of the Merger, each outstanding share of ATI common stock, no par value ("ATI Common Stock"), other than shares held by ATI shareholders who perfect dissenters' rights, will be converted into one share of Aztek's common stock, par value $.001 per share ("Company Common Stock"). The receipt of Aztek Common Stock pursuant to the Merger will be tax-free to U.S. holders of ATI Common Stock. Aztek has filed a Registration Statement on Form S-4 pursuant to the Securities Act of 1933, as amended (the "Securities Act"), for 2,051,109 shares of Aztek Common Stock to be issued in connection with the Merger. This Joint Proxy Statement-Prospectus also constitutes the Prospectus of Aztek filed as part of the Registration Statement. All information concerning Aztek included in this Joint Proxy Statement-Prospectus has been furnished by Aztek and all information concerning ATI has been furnished by ATI. After the merger, the current shareholders of ATI's Common Stock will own approximately 100% of Aztek's shares. ATI shareholders that are not affiliates of ATI will own approximately 36% of Aztek's shares after the merger. Affiliates of ATI will own approximately 64% of Aztek's shares after the Merger. THE SECURITIES ARE SPECULATIVE AND INVOLVE HIGH DEGREE OF RISK. PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER THE SECTION "RISK FACTORS" AT PAGE 3. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE AZTEK COMMON STOCK OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AZTEK OR ATI SINCE THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS. The date of this Joint Proxy Statement-Prospectus is __________, 1999. ii AVAILABLE INFORMATION AND INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE This prospectus incorporates by reference the Merger Agreement between the parties. Thus, the Merger Agreement is not presented herein or delivered herewith. ATI will provide without charge to each person who receives a prospectus, upon written or oral request of such person, a copy of the Merger Agreement (not including exhibits to the Merger Agreement that is incorporated by reference unless the exhibits are themselves specifically incorporated by reference). Such request should be made to Mike Sintichakis, #5-246 Lawrence Avenue, Kelowna, British Columbia, Canada V1Y 6L3, (250) 762-2333. In order to ensure timely delivery of the documents, any request should be made by ________, 1999. Aztek is not subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and therefore does not file proxy statements or any other information with the Securities and Exchange Commission (the "Commission"). ATI is subject to the informational requirements of the Exchange Act and, in accordance therewith, ATI files reports and other information with the Commission. However, no such reports or other information filed with the Commission is incorporated by reference in this Joint Proxy Statement-Prospectus. Reports and other information filed by ATI can be inspected and copied at the Commission's public reference room located at 450 Fifth Street, NW, Washington, DC 20549, and requested at the following public reference facilities in the Commission's regional offices: 7 World Trade Center, Suite 1300, New York, NY 10048; and City Corp. Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies of such material can be obtained at prescribed rates by writing to the Securities and Exchange Commission, Public Reference section, 450 Fifth Street, NW, Washington, D.C. 20549. Though Aztek is not subject to the federal reporting requirements, as a result of the merger with ATI, Aztek will assume ATI's status as being subject to the reporting requirements. This Joint Proxy Statement-Prospectus does not contain all of the information set forth in the Registration Statement on Form S-4 and exhibits thereto (the "Registration Statement") which Aztek has filed with the Commission under the Securities Act and to which reference is hereby made. Aztek's shares are not listed on any U.S. exchange. The public market for ATI's securities in Canada is on the Vancouver Stock Exchange under the symbol "VSE-AZT." The public market for ATI's securities in the United States is on the Over-the-Counter Bulletin Board (the "OTC Bulletin Board") under the symbol "AZTKF." iii TABLE OF CONTENTS Available Information And Incorporation Of Certain Documents By Reference iii Summary 1 Risk Factors 3 The Transaction 9 Terms Of The Transaction 9 Comparative Per Share Data 12 Material Differences With Respect 13 To The Rights Of Securities Holders 13 Other Terms Of The Transaction 20 Pro Forma Combined Condensed Balance Sheets 21 Pro Forma Combined Condensed Statements Of Income 23 Material Contracts With The Company Being Acquired 25 Disclosure Of Commission Position On Indemnification 25 For Securities Act Liabilities 25 Description Of The Business Of The Acquiring Company 25 Description Of Property 26 Legal Proceedings 26 Market For Common Equity And 26 Related Stockholder Matters 26 Holders Of Record 26 Dividends 26 Aztek Management's Plan Of Operation 26 Proposed Acquisitions 27 Year 2000 Issues 29 External Funding 31 Changes In And Disagreements With Accountants 31 On Accounting And Financial Disclosure 31 Information About The Company Being Acquired 31 Description Of Business 31 Competition 32 Customer Base 33 Current Business Status 34 Operating Divisions 35 Current Status Of ATI 36 Description Of Property 38 Legal Proceedings 38 Market For Common Equity And 38 Related Stockholder Matters 38 Holders Of Common Stock 39 Dividends 39 ATI Management's Discussion And Analysis 39 External Funding 47 iv Disagreements With Accountants 47 On Accounting And Financial Disclosure 47 Voting An Management Information 47 Persons Making The Solicitation 49 Interest Of Certain Person In Matters To Be Acted Upon 49 Executive Compensation Of The Directors And 56 Executive Officers Of ATI 56 Long Term Incentive Plan 58 Certain Relationships And Related Transactions 59 Transactions With Promoters 60 Shareholders' Equity 63 v SUMMARY This Joint Proxy Statement-Prospectus is being issued by Aztek, Inc. ("Aztek"), a Nevada Corporation, and Aztek Technologies Inc. ("ATI"), a British Columbia corporation, to effect a merger of the two companies with the Nevada corporation being the surviving entity. Aztek is a dormant corporation that has been in existence for four years. ATI is a company that develops and sells computer software and computer systems and provides support services for its customers. Aztek, Inc. will issue one common share of its stock for each outstanding share of ATI. Aztek's shareholders presently consist of ATI's directors (the "Affiliates") On June 24, 1998, the Affiliates acquired one million shares at US$.05 per share per share. On June 23 and 25, 1998, ATI's shares closed at C$.80 and C$.95 respectively. The following table sets forth the percentage change in ownership that will result from the merger.
No. Of No. Of No. Of Shares Shareholder ATI Shares $(1) Aztek Shares % Held After Merger (%)(1) Total issued & Outstanding 2,051,109 100% 1,000,000 100% 3,051,109 100% Mike Sintichakis 462,190 23 400,000 40 862,190 28 Nick Sintichakis 74,500 4 230,000 23 304,500 10 Daunna Potts 0 0 10,000 1 10,000 0 Eileen Keogh 37,000 2 120,000 12 157,000 5 Edson Ng 104,000 5 240,000 24 344,700 11 Maria Sintichakis 255,928 12 0 0 255,928 8 Tony Pantazopoulos 21,333 1 0 0 21,333 0 Non-affiliates 1,095,458 53 0 0 1,095,458 36 Non-affiliates
(1) Percentages do not equal 100% because of rounding. Aztek issued common shares at US$.05 per share in exchange for cash to pay anticipated legal and corporate expenses and expenses associated with anticipated acquisitions. For more information see "Aztek Management's Plan of Operation" at page 26. In addition to the increased interests of the Affiliates, the net effect of the merger is that the business and operations of Aztek Technologies Inc. will move from being a Canadian company to being a U.S. Company. (Continued on next page.) The primary addresses of the companies that are the parties to the transaction for which the securities described in this Joint Proxy Statement-Prospectus are being issued are as follows: Aztek, Inc. Suite #40 - 1575 Delucchi Lane Reno, Nevada 89502 (702) 827-3639 Aztek Technologies Inc. #5-246 Lawrence Ave. Kelowna, B.C. V1Y 6L3 Canada (250) 762-2333 2 THE COMPANIES Aztek was incorporated as Spectral Innovations (1994) Inc. in 1994. ATI initially formed Aztek as a wholly-owned subsidiary intending to acquire Spectral Innovations, Inc., a California corporation ("Spectral California"). ATI subscribed for 25,000 shares of Aztek at $1.00 per share. The shares were subscribed and Aztek continues to carry the full amount of the purchase price as a subscription receivable due to ATI's lack of funds to pay for the shares in cash. The acquisition of Spectral California did not materialize. Shortly hereafter, ATI's management decided it eventually would merge ATI into Aztek but management declined to effect the merger immediately and therefore, Aztek has remained dormant since its inception. The Merger Agreement described below resulted from the decision to merge and the transaction is the subject of this Joint Proxy Statement-Prospectus. The reasons for the Merger are described below in the subsection, "Reasons for the Transaction" at page 10. ATI was incorporated on July 11, 1979, by filing and registering its articles with the British Columbia Registrar of Companies. Over the last four years, ATI has expanded its business focus and capabilities following acquisitions. On September 30, 1994, ATI acquired all of the issued and outstanding shares of ResponseWare Corporation, a developer of municipal government software including general accounting and payroll systems and specialized systems such as property taxation, utility billing and building permits. This acquisition allowed ATI to further diversify its operations within the computer hardware, software and telecommunications market and to expand the existing forty-five (45) municipal and private sector clients of ResponseWare. ATI continues to support and service the ResponseWare software and client base as its primary source of revenue. On August 21, 1995, ATI acquired the assets and business of Helix Technologies Limited, a consulting and systems integration firm specializing in technology for mobile work force automation. ATI has completed contracted projects from the acquisition and currently has no contracts for work in this area. Mobile work force automation technologies will be incorporated into future ATI products that have yet to be developed. ATI also continues to pursue further project-based contracts in the area of mobile work force automation technologies. ATI's shares are currently trading on the Vancouver Stock Exchange ("VSE") and the Over-The-Counter Bulletin Board ("OTC BB"). ATI announced the Merger on July 2, 1998. The day prior to the announcement, the high was C$1.10, the low was C$1.10 and there had been no trades on the OTC Bulletin Board. RISK FACTORS The securities offered hereby are speculative in nature and involve a high degree of risk. Prospective investors should consider carefully the following factors, among others, prior to making an investment decision. ARBITRARY MERGER EXCHANGE RATIO. The one-for-one exchange offered in this Joint Proxy Statement-Prospectus bears no relationship to the assets, book value, earnings, net worth, or any other recognized criteria of value of ATI. Consequently, the share exchange ratio, which can be deemed an offering price for ATI's securities, was determined arbitrarily and solely by ATI 3 and Aztek's Boards of Directors. ATI's board members who approved the arbitrary exchange ratio are also directors of Aztek. ATI's board members acquired their controlling share ownership in Aztek at a nominal cost. Therefore, they will benefit from the proposed Merger because their percentage interest in ATI's business will increase substantially. In establishing the exchange ratio or offering price, the Boards considered such matters as Aztek and ATI's limited financial resources and the general condition of the securities markets. The exchange ratio of the Merger should not, however, be considered an indication of ATI's actual value. For a detailed description of why the Merger is in the best interest of ATI's shareholders, see "Reasons for the Transaction at page 10. DIMINISHED PERCENTAGE OWNERSHIP Non-affiliates presently own approximately 53% of the outstanding shares of ATI. As a result of the Merger, these same shareholders' percentage interest will move down to 36% of the outstanding shares. Since Aztek presently has no operating business, one net effect of the Merger will be to convey a substantial equity interest in ATI's business to ATI affiliates for nominal consideration. OPERATING HISTORY. Aztek has no operating history. Aztek was incorporated in the State of Nevada in 1994 as Spectral Innovations (1994), Inc., but has been dormant since its inception. On June 8, 1998, Spectral Innovations (1994) Inc. changed its name to Aztek Inc. by filing with the State of Nevada an amendment to its articles of incorporation. Following the merger, Aztek will assume ATI's business activities. CHANGE IN BUSINESS FOCUS. ATI has discontinued sales of its aging software products to businesses and municipalities. After the Merger, Aztek will focus ATI's business operations on developing a new suite of software products using new software that Aztek has licensed from IBM. Aztek will also employ a merger or acquisition strategy to obtain new products and penetrate new markets. DISCONTINUANCE OF PRIMARY PRODUCT. ATI'S products consist solely of computer programs developed by ATI's predecessor, ResponseWare Corporation. ATI discontinued the products because the products cannot take advantage of personal computer environments and were too expensive to maintain. As a result of discontinuing the product, net sales decreased 26% from $459,937 in the fiscal year ending 1997 to $339,784 in the fiscal year ending 1998. Sales decreased 13% from $528,922 in the fiscal year ending in 1996 to $459,934 in 1997. Even though ATI is not selling new ResponseWare products, it continues to earn revenue by servicing, supporting, and developing product enhancements (software upgrades) for the ResponseWare product line. ATI is contractually obligated to provide maintenance services for the products already sold and customers pay an annual fee for the computer system maintenance. For those customers who are not parties to an annual service contract, ATI provides support and receives compensation on a time and material basis. Support and maintenance of ResponseWare products currently generate approximately 90% of ATI's revenues. For more information see "ATI Management's Discussion and Analysis" at page 39. RISKS OF DEVELOPING NEW SOFTWARE. Aztek intends to design and develop an entirely new suite of software products to replace ResponseWare's obsolete products. The new products 4 will be based on software licensed to Aztek by IBM. No guarantee exists as to the viability of the new products. The software is new, untested, and therefore potentially unstable. The products are subject to delays that could result in lost sales to new customers and lost revenues from existing customers that move to other vendors before new products are completed. Acquisitions will also affect new product development. ATI must design products in such a way that they can be integrated with other products including those acquired through acquisitions of companies. For more information on new products, see "ATI Management's Discussion and Analysis" at page 39. EXPECTATION OF LOSSES. Aztek's management and ATI's management believe Aztek and its software and services will be a profitable enterprise in the future. However, Aztek anticipates experiencing future operating losses resulting primarily from marketing and recruitment of Value Added Resellers ("VARs") and associated training costs. ATI has operated at a loss for several years. To limit and reverse anticipated operating losses, Aztek must successfully develop its distribution network of VARs in the United States and Canada. WORKING CAPITAL REQUIREMENTS. After the Merger, Aztek will require a substantial investment in working capital, principally to finance its marketing activities, recruitment of VARs, hardware and software development, and to increase its existing staff. ATI's working capital balance as of December 31, 1998, was C$-475,542. ATI unsuccessfully attempted to raise one million dollars in an offering. Without additional capital generated from the sale of Aztek's stock, or from operations, Aztek will be unable to fund its business, offer its services on an extensive basis, or expand its business. Aztek will require a minimum of nearly $400,000 in working capital over the next twelve months. There can be no assurance that capital from private and public offerings will be available, or if available, can be obtained on terms advantageous to Aztek. If Aztek is successful in effecting a private placement, the capital it raises will be sufficient to meet its expected working capital needs for the following twelve months. If Aztek is unable to raise sufficient capital either externally or from operations it will not be able to sustain its operations. Aztek will have to reduce expenditures to keep in line with existing revenues generated by maintenance and customized service contracts currently in place. For more information on ATI's efforts to raise additional capital, see the subsection "Current Business Status" at page 34. DEPENDENCE ON KEY PERSONNEL. Aztek and ATI are both dependent on the continued services of certain key management personnel, particularly Mike Sintichakis, Chairman of the Board and President of both ATI and Aztek. Aztek's Board of Directors consists solely of ATI's directors and one relative of an ATI director. The loss of Mr. Sintichakis' services could significantly impact Aztek's future operations and profitability. Neither ATI nor Aztek has a key man life insurance policy on Mr. Sintichakis. After the Merger, Aztek's growth and profitability will depend upon its ability to attract and retain skilled managerial, marketing and technical personnel. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The articles of incorporation for both Aztek and ATI indemnify directors and officers of each and allow for Aztek and ATI to secure insurance for the liability of their respective directors and officers. 5 NO PUBLIC MARKET FOR SHARES. At the present time, no public market exists for Aztek's Common Stock and no market will, in fact, develop after completion of the Merger. Although ATI's Common Stock is traded on the Vancouver Stock Exchange, the daily volume is approximately 887 shares. Upon shareholder and regulatory approval of the Merger, ATI will voluntarily seek de-listing from the Vancouver Stock Exchange. Aztek's shares will not be listed on the Vancouver Stock Exchange. ATI's listing on the OTC Bulletin Board is relatively recent, and no reliable historical data exists upon which to project daily trading volume of ATI's Common Stock. After the merger, Aztek will seek to have its shares listed on the OTC Bulletin Board but will not apply to have its shares listed on any exchange. Aztek will implement is acquisition plan described elsewhere in this Joint Proxy Statement-Prospectus. Once Aztek is qualified, it will seek listing on the Nasdaq SmallCap. NO DIVIDENDS. Neither Aztek nor ATI has paid any dividends to date and Aztek has no plans to pay dividends in the foreseeable future. LIMITED FINANCIAL RESOURCES AND NEED FOR ADDITIONAL FINANCING. Other than the proceeds from an anticipated offering and possible future revenues from the sale of Aztek's services, Aztek does not at this time, and may not in the future, have any additional sources of funds such as operating funds or significant credit arrangements, from which to pay the costs of its proposed operations. Aztek cannot assure it will be able to raise additional capital in the future to support its operations, either from operations or from external sources. GENERAL RISKS ASSOCIATED WITH ACQUISITIONS. Aztek will use money raised in its anticipated offering for acquisitions, completion of products under development, financing expenses, marketing and working capital. Moreover, inherent risks associated with the acquisition plan include several factors. Acquisition targets tend to be small privately owned companies for which material information is unavailable prior to the acquisitions. The size of each acquisition is small such that substantial due diligence is cost-prohibitive. Aztek cannot assure that acquired companies will be free of problems with their staffs, products or clients and Aztek can give no assurances that financial projections associated with the acquisitions will be accurate. An additional risk is that clients may not easily make the transition from the acquired companies' products to Aztek's products. These clients may have relationships with the company to be acquired and the clients may choose not to develop new relationships that would come with the change in management associated with the acquisition. Moreover, as new products are developed after such acquisitions, Aztek may cease supporting the older antiquated products such that the acquiree's existing clients may find themselves with obsolete products. In that case, the client might not upgrade to the new products and ultimately stop doing business with Aztek. ATI experienced such problems with its acquisition of Helix Technologies Limited ("Helix"). Helix generated revenues from time and materials in consulting and custom programming. Helix did not have its own proprietary products. Since ATI did not have additional financing, ATI focused its limited resources on servicing contracts assumed in its 6 acquisition of ResponseWare Corp at the expense of sustaining Helix or developing new opportunities for Helix. Thus, Helix's business activities dwindled. For more information on pending acquisitions, see "Aztek Management's Plan of Operation" at page 26. RISK ASSOCIATED WITH PENDING ACQUISITIONS. ATI is presently negotiating to acquire Concord Consultants Ltd., Municipal Hardware Systems Ltd., and Qdata Software Inc. These acquisitions are contingent upon ATI and Aztek completing the Merger and afterwards, Aztek intends to complete the three acquisitions. The target companies are software designers and vendors. The acquisitions are dependent on Aztek 's ability to raise additional money in an offering or offerings after the Merger. ATI's has been unable to raise additional capital in the past year and Aztek cannot guarantee that it will be able to raise money in the near future. Aztek intends to complete due diligence investigations of the three targets prior to completing the acquisitions, but Aztek can give no assurance that the targets will be free of problems with their staffs, products, or customers. To the extent the targets provide financial projections, Aztek can give no assurance the projections will be accurate. Moreover, Aztek can give no assurance that the target companies' clients will migrate from the targets' proprietary products to Aztek's products. DEBT TO AFFILIATES AND DEBT TO THIRD PARTIES. Pursuant to the Merger, Aztek will assume all of ATI's outstanding debt. Trade accounts payable are interest-free, the royalties payable are without interest, and the current liabilities to officers and directors are without interest. ATI currently has long term debt of approximately C$231,036, all due to affiliates interest free. ATI has an accounts payable balance of C$359,552 and total debt of C$820,272. ATI's debt to IBM remains outstanding. The debt is C$100,000 which is substantial relative to ATI's balance of total assets at December 31, 1998, of C$200,266. Payable over ten months, ATI was scheduled to begin repayment in December 1997. ATI is attempting to re-negotiate a revised payment schedule but the risk remains that IBM may collect at some point. IBM has agreed to wait until ATI completes an equity offering to collect royalties due. ATI has a good working relationship with IBM as shown in IBM's willingness to enter into a licensing agreement for new software in July 1998. SUBSTANTIAL COMPETITION. ATI currently competes in a rigorous and demanding business environment. The primary competition comes from small to mid-sized municipal government marketers, regional vendors, specialized departmental solution providers and in-house developed systems. Approximately 100 significant regional software vendors are in the United States and approximately 10 significant regional software vendors are in Canada. Aztek and ATI expect competition to increase in the foreseeable future, which may or may not impact Aztek's profitability after the Merger. Mounting pressure to deliver current technology is increasing at a time when funding for new development is difficult for Aztek to achieve. Aztek's products are designed to take advantage of business intelligence tools and software. Frequently, municipalities create and maintain information and data with limited support staff. For additional information, see 7 "Competition" at page 32. VOTING CONTROL BY INSIDERS. Aztek's articles of incorporation and ATI's articles prohibit cumulative voting in electing directors. Aztek's directors are presently the largest stockholders in ATI and all of ATI's directors presently serve on Aztek's Board of Directors. In this regard, Mr. Mike Sintichakis, president and director, will continue to be the largest single shareholder. CHANGE IN DOMICILE As a result of the change in domicile, shareholders in the surviving Nevada entity will not enjoy certain corporate governance rights that they enjoy as shareholders of ATI as a British Columbia company. Under Nevada law, Aztek will be required to have its annual shareholder meeting at least every eighteen months instead of every thirteen months as British Columbia law requires. The required notice will change from twenty-one days' notice to ten days' notice. Whereas ATI previously had to have its annual meetings in British Columbia, Nevada law will permit the surviving company to have its meetings anywhere allowed by the company's bylaws. Currently under British Columbia law, ATI shareholders owning an aggregate of at least 1/20 of the outstanding shares of ATI may compel the directors to call a shareholders' meeting, but after the merger and under Nevada law, shareholders will have no such right. As a result of the change in domicile, shareholders will no longer have a right to see and copy a register of any debts to officers exceeding $5,000, as they now do under British Columbia law. Under Nevada law, shareholders will no longer have the right to appoint an auditor as they do under British Columbia law. Under British Columbia law, a 3/4 majority vote of the shares outstanding is necessary to sell, lease or otherwise dispose of the business. Under Nevada law, only a majority vote of the shares outstanding at a meeting, called specifically to vote on that issue, is sufficient to sell or dispose of the business. Under British Columbia law, a 3/4 majority vote of the shares outstanding is required to split or consolidate ATI's stock whereas under Nevada law, the directors may split or consolidate the shares without a shareholder vote. Under British Columbia law, 3/4 of the outstanding shares of ATI must vote in favor of an amendment to the company's articles whereas under Nevada law, only a majority vote of the outstanding shares must vote in favor of such an amendment. Under British Columbia law, where a company's shares are held in escrow under and escrow agreement and cancelled, the company cannot return cash, property or other consideration unless 3/4 vote of the shares outstanding approves the action. The concept of escrow shares is a Canadian concept and the Nevada corporate law contains no such provisions. Under British Columbia law, a company is required to obtain a 3/4 majority shareholder vote to create, define, attach, vary or abrogate any special rights to any shares. Under Nevada law, if the articles so provide, the directors may prescribe classes and series. Moreover, the directors may prescribe the voting powers, distinguishing designations, preferences, limitations, restrictions and relative rights of each class or series of stock. Regardless of the articles of incorporation, the directors may take action to protect the interests of the corporation and its stockholders by adopting or executing plans, arrangements or instruments that deny rights, privileges, 8 power or authority to a holder of a specified number of shares or percentage of share ownership or voting power. THE TRANSACTION Aztek has entered into an agreement with ATI whereby each one outstanding share of ATI Common Stock will be exchanged for one common share, par value $.001 of Aztek resulting in all shareholders of ATI becoming shareholders of Aztek. The transaction is subject to regulatory acceptance and the approval of the shareholders of ATI and all regulatory bodies having jurisdiction over Aztek. TERMS OF THE TRANSACTION BACKGROUND OF THE TRANSACTION ATI and Aztek's principal, Mr. Mike Sintichakis, concluded that ATI would be in a better position for growth and expansion if it were a U.S. Company. After conferring on the matter, the board resolved to change ATI's domicile. At Mr. Sintichakis' suggestion, since ATI had already formed a U.S. corporation, the board concluded that it would be appropriate to merge ATI into the dormant corporation. On June 30, 1998, Aztek's Board officially approved the acquisition of ATI in a one-for-one exchange. Although changes in domicile are commonly effected by merging with a wholly-owned subsidiary, ATI's directors resolved to merge ATI with a company in which the directors had already purchased shares. ATI formed Aztek and subscribed for shares but did not purchase any shares because ATI had little cash to purchase any shares. The directors purchased the Aztek shares to provide working capital to Aztek for its initial expenses in effecting the merger. As a result of purchasing the shares, the directors will benefit from the merger by receiving a larger share of the combined company than would have been the case had ATI merged with a wholly-owned subsidiary. For the benefits of operating as a U.S. company, see "Reasons for the Transaction" below. The only agreement to which Aztek and ATI are parties is the Merger Agreement. TERMS OF THE ACQUISITION AGREEMENT The Merger Agreement provides for the acquisition of ATI by Aztek by ATI merging into Aztek with Aztek being the surviving corporation. Each outstanding share of ATI's common stock will be automatically converted into the right to one share of Aztek's Common Stock. This transaction is referred herein as the "Merger." The Merger Agreement calls for Aztek to issue its shares in exchange for each outstanding share of ATI in a one-for-one exchange. The parties have provided that Aztek will issue Escrow Shares such that the holders of ATI escrow shares will receive Escrow Shares in Aztek's Common Stock with the same rights that existed prior to the Merger. All assets and liabilities of ATI will pass to Aztek on the completion of the Merger. Except for Mr. Sintichakis, the directors and officers are required by the Merger Agreement to resign from ATI at the completion date. They have already been duly elected as the directors and 9 officers of ATI. TREATMENT OF STOCK OPTIONS AND ESCROW SHARES At the Effective Date, each option outstanding under ATI's stock option plan shall be converted into an option to purchase the number of shares of Aztek Common Stock equal to the number of shares of ATI Common Stock issuable immediately prior to the Effective Date upon exercise of such option (without regard to restrictions on exercisability). The options shall be upon the same terms and conditions under the relevant option as were applicable immediately prior to the Effective Date. At the Effective Date, each ATI escrow share outstanding shall be converted into the number of escrow shares of Aztek Common Stock equal to the number of escrow shares of ATI Common Stock issuable immediately prior to the Effective Date upon the same terms and conditions under the relevant escrow plan as were applicable immediately prior to the Effective Date. The Escrow Shares are placed in escrow for release upon ATI reaching certain milestones. The Escrow Shares serve as an incentive to Mr. Sintichakis to cause ATI to reach these milestones. ATI currently has stock options outstanding and shares allotted accordingly. Directors or employees may exercise the options for the total shares allotted or a portion of the shares allotted. Directors and employees are not under any obligation to take up and pay for any of the optioned shares. The stock options are non-transferable and become null and void thirty days after the director or employee ceases to be a director or employee of ATI. 185,000 options with an exercise price of $1.82 are outstanding and will expire on March 20, 1999. Of the total shares of ATI Common Stock outstanding, 354,000 shares are escrow shares that will be released to their owners at the rate of 1 share for each $0.31 of cash flow from operations. Shares not released prior to September 17, 2001 will be canceled and treated as authorized but unissued shares. Aztek's Directors owned certain Bonus Shares that were held in escrow but have since been returned to the company and converted to debt. REASONS FOR THE TRANSACTION Aztek and ATI's boards of directors considered many factors in the Merger including the economic, financial, legal and market factors. Although the Merger Agreement provides for an exchange ratio that diminishes the percentage interest held by ATI "non-affiliates," the ATI's board concluded that the Merger is in the best interests of ATI's stockholders. Through the Merger, Aztek will acquire an existing operating entity and move from being a dormant corporation to an active corporation. Aztek will own all of ATI's assets, receive all ATI's revenues but will also assume all of ATI's accrued liabilities, accounts payable and operating expenses. Management believes that additional financing potential is inherent in expansion into the U.S. market. The surviving company will be able to attract more investment capital as it continues to grow. Investors tend to be more cautious with respect to investing in foreign companies partly because they have less access to information and because such foreign 10 companies may be subject to less stringent accounting rules. Though ATI is currently a fully reporting company under the Securities Exchange Act of 1934, investors still tend to perceive that they enjoy less protection when investing in a foreign company. Future investors in Aztek can be confident that they are investing in a company that is subject to U.S. accounting procedures which tend to be more strict than those of non-U.S. domiciles. While the percentage interest of ATI's shareholders will be diluted in the merger, ATI's management believes the Merger will create greater opportunities for the surviving company and benefit ATI's shareholders. Without access to additional capital, management believes ATI will continue to be strangled by a lack of funds for any future growth. The surviving entity's capital structure aligns management's interest with that of the shareholders. Although management purchased shares in Aztek at the nominal rate of $.05 per share, the subscription agreement pursuant to which the shares were purchased contain strict terms such that the shares are held in trust for management's benefit to be released in twenty-four monthly installments. The subscription agreements for those shares contain a provision that in the event the shareholder ceases to be a director, officer or employee of Aztek, or is released for any reason, the shares remaining in trust shall be transferred to a new holder. Management purchased the shares to provide start-up capital to Aztek for basic organizational costs. An additional reason for the transaction is that upon the effective date of the merger, the investors in ATI will benefit from an immediate increase in per share book value of $-0.23 to $-0.10 (a gain of $.13 on the net tangible book value) from the net tangible book value of their ATI Common Stock when compared to the resulting net tangible book value of Aztek's Common Stock after the Merger. Aztek will apply to have its shares traded on the OTC Bulletin Board and ATI's shares will be de-listed from the Vancouver Stock Exchange. As a result of the Merger, Aztek will no longer be subject to different trading rules requirements. Currently, ATI is subject to different trading rules and requirements by virtue of its shares being traded on Canadian exchanges and the OTC Bulletin Board. CONDITIONS TO THE MERGER The obligations of Aztek and ATI to effect the Merger are solely and jointly subject to a number of conditions including, among other things, receipt of ATI stockholder and regulatory approval. REQUIRED REGULATORY APPROVALS ATI's shares are currently listed on the Vancouver Stock Exchange ("VSE") and the Merger is subject VSE approval. If such approval is not granted, ATI will voluntarily seek de-listing and proceed with the Merger. 11 INTERESTS OF CERTAIN PERSONS IN THE MERGER Certain members of ATI's management and Board of Directors have interests in the Merger in addition to their interests as stockholders of ATI generally. Those interests relate to an increase in the directors' and officers' percentage share of ownership in the surviving company relative to their percentage share of ownership in ATI before the Merger. COMPARATIVE PER SHARE DATA The following table sets forth the historical book value, cash dividends declared per share and income or loss per share of Aztek after giving effect to the Merger. The information presented should be read in conjunction with such pro forma combined financial information and notes thereto and the separate historical consolidated financial statements of Aztek and notes thereto appearing elsewhere in this Joint Proxy Statement-Prospectus, and the statements of ATI appearing in its annual report to shareholders.
June 30 June 30 June 30 1998 1997 1996 ------- ------- ------- (In U.S. Dollars) Aztek Historical Book Value per Share $0.03 N/A N/A Cash Dividend per Share - - - Income (Loss) per Share, from Continuing Operations - - - Equivalent Book Value per Share 0.01 N/A N/A Cash Dividend per Share - - - Income (Loss) per Share, from Continuing Operations - - - ATI Historical Book Value per Share ($.16) N/A N/A Cash Dividend per Share - - - Income (Loss) per Share, from Continuing Operations (0.16) (0.26) (0.14) Equivalent Book Value per Share (0.08) N/A N/A Cash Dividend per Share - - - Income (Loss) per Share, from Continuing Operations (0.08) (0.13) (0.07) Combined Pro Forma Book Value per Share (0.06) N/A N/A Cash Dividend per Share - - - Income (Loss) per Share, from Continuing Operations (0.06) (0.13) (0.14)
12 DESCRIPTION OF SECURITIES Aztek's authorized capital stock consists of 100,000,000 shares of Common Stock, $.001 par value. 2,051,109 previously unissued shares of Aztek are being registered pursuant to a registration statement on Form S-4 and issued pursuant to this Joint Proxy Statement-Prospectus. Aztek's existing shareholders are not offering their shares as part of the transaction. On December 31, 1998, 1,000,000 shares of Common Stock were outstanding and held of record by six shareholders. Immediately following the Merger and upon the tender of all of ATI's shares, 3,051,109 shares of Common Stock will be outstanding and held of record by approximately three hundred forty-seven shareholders. The holders of Aztek's Common Stock are entitled to one vote per share on all matters to be voted on by the shareholders and to receive ratably dividends when and as declared by the Board of Directors from funds legally available therefor. In the event of a liquidation, dissolution or winding up of Aztek, holders of its Common Stock are entitled to share ratably in all assets available for distribution to stockholders after payment of all liabilities. No preemptive, subscription, or redemption rights relating to the Common Stock exists. No cumulative voting rights in the election of directors exist for Aztek's Common Stock. Aztek has no preferred shares. MATERIAL DIFFERENCES WITH RESPECT TO THE RIGHTS OF SECURITIES HOLDERS ANNUAL MEETINGS Under Nevada law, annual meetings must be held within eighteen-month intervals and the company must notify the shareholders at least ten days but not more than sixty days before the meeting. A company can cease delivering notices of meetings, if notices for the prior two years, and at least two dividend or interest payments for the prior one year have been returned undeliverable. British Columbia law requires a corporation to hold an annual meeting at least once a year and not more than thirteen months after the prior annual meeting. If a corporation fails to hold such a meeting, a shareholder can apply to the court for relief. British Columbia law requires ATI to give notice of a meeting at least 21 days in advance of the meeting, but the record date cannot exceed 49 days before the date on which it will take an action. British Columbia law requires annual meetings to be in British Columbia whereas Nevada law requires the annual meeting to held where specified in the bylaws. Thus after the Merger, Canadian stockholders may be less able to attend annual meetings. Under British Columbia law, shareholders owning an aggregate of at least 1/20 of the outstanding shares of ATI may compel the directors to call a meeting. Nevada law contains no comparable provision. As a reporting company, British Columbia law requires ATI to provide an income statement, a balance sheet and statement of surplus for two years at the annual meeting. ATI must also send financial statements to all shareholders. Nevada law contains no comparable provisions. ATI's annual meetings must be in British Columbia. ATI has specific provisions for the conduct of meetings. If special business will be considered at a meeting, ATI must inform 13 Shareholders that the document describing such special business is available for inspection. ATI's articles do not provide for a record date to determine shareholders entitled to vote or receive a distribution. Pursuant to Aztek's bylaws, annual meetings can be anywhere and notice must comply with the 10 day/60 day statutory rule. Aztek's bylaws have no specific provisions for the meetings. For special actions taken at a shareholder meeting, Aztek must provide a copy of the relevant document in the notice, or provide a summary of the document or action to be taken. A quorum is the majority of outstanding shares represented in person or by proxy. Aztek may set record dates less than seventy days before an action to determine shareholders entitled to vote or receive a distribution. The record dates depend on the action to be taken and are as follow: for an annual or special meeting, the day before the first notice to shareholders; for meetings demanded by shareholders, the date of the first demand; for actions taken without a meeting, the date any shareholder signs a consent; for a distribution, the date the directors authorize the distribution. Aztek's bylaws permit shareholders to take action without a meeting if shareholder consents are signed by one or more shareholders holding a majority of the shares. TRANSACTIONS REQUIRING SHAREHOLDER APPROVAL Under Nevada law, to amend the articles of incorporation, a majority of the voting power must vote in favor of the amendment, unless the articles of incorporation require a greater proportion of votes. Nevada law requires a vote by a majority of the voting power of the shares to renew the company's charter. Stockholders holding at least a majority of the voting power must approve by written consent the execution and filing of a certificate to revive the company's original or amended charter. Under Nevada law, if it has a majority of the voting power at a stockholders' meeting called for that purpose, a company may sell, lease, or exchange all of its property and assets, including its good will and its corporate franchises, however, no vote is necessary to transfer assets by way of mortgage, or in trust or in pledge to secure indebtedness of the corporation. Stockholders entitled to vote must approve a dissolution of the corporation. Under British Columbia law, Shareholders must approve the appointment of an auditor at each annual meeting. Under British Columbia law, a 3/4 majority vote is required for several corporate actions and is referred to as a "special resolution." A company needs a special resolution for the following transactions: to dispose of the company's business, change its articles, change its business purpose or change its name; create, define, attach, vary or abrogate special rights to any shares; return any cash, property, or other consideration paid to it for any shares unless the return of the shares is pursuant to an escrow agreement approved by special resolution before the allotment of the shares; split or consolidate its stock; or to change the par value of its shares. British Columbia law requires a special resolution to approve a business combination agreement and for a compromise or arrangement between a company and its creditors or a company and its shareholders. 14 By the shareholder vote required in its articles, or by a 3/4 majority shareholder vote in the absence of such a provision, a company can increase its authorized capital by creating shares, increasing the number of shares or increasing the shares' par value. A 3/4 majority shareholder vote of a particular class must consent to any interference or prejudice of any right or special right if that right is attached to that class of shares and that right is affected differently from those attached to another series of the same class. A company must have a special resolution to provide any financial assistance to certain persons as permitted under British Columbia law. Under the law, a company can give money to trustees to subscribe for or purchase shares or debt obligations for a bona fide employee's or affiliate's benefit. A company may also provide financial assistance to its bona fide full time employees or affiliates to enable them to purchase or subscribe for shares or debt obligations. As set forth elsewhere in this Joint Proxy Statement-Prospectus, the directors of ATI hold options to purchase shares of ATI Common Stock. Under British Columbia law, the shareholders of ATI Common Stock must approve the directors' exercising their shares. No such provision exists under Nevada law. VOTE REQUIRED FOR SHAREHOLDER ACTIONS Under Nevada law, action by stockholders on a matter other than the election of directors is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action. British Columbia law requires a simple majority vote of outstanding shares in person or by proxy to pass an ordinary resolution. The law also allows shareholder action by consent in lieu of a vote if at least 3/4 of the shares entitled to vote, vote in favor of the resolution. As discussed above under "Transactions Requiring Shareholder Approval," a 3/4 majority vote is required to pass any special resolution. Neither company's governing rules provides for preemptive rights. QUORUM REQUIREMENTS FOR SHAREHOLDERS' AND DIRECTORS' MEETINGS Under Nevada law, a majority of the voting power, including that present in person or by proxy, regardless of whether the proxy has authority to vote on all matters, constitutes a quorum. A majority of the directors then in office at a meeting duly assembled constitute a quorum at a directors' meeting. Under Aztek's bylaws, quorum requirements for shareholders' meetings are the same as under the statute, but a majority of the number of directors fixed by the bylaws constitutes a quorum for directors' meetings. Generally under British Columbia law, two persons at a meeting constitute a quorum, however, as a reporting company, at least one person holding or representing by proxy at least 1/3 of the shares affected constitute a quorum for a meeting. Under ATI's articles, a quorum for transacting business at a general meeting is two persons. British Columbia law has no requirements for a quorum at a directors' meeting. Under ATI's articles, a quorum for a directors' meeting is fixed by the directors and if not so fixed, is a majority of the board. 15 DISSENTERS' RIGHTS OF APPRAISAL NEVADA LAW Under Nevada law, a stockholder may dissent from and obtain the fair value of his shares in the event of any of the following corporate actions: * Consummation of a merger plan if stockholder approval is required and the shareholder is entitled to vote on the merger, or if the company is a subsidiary and is merged with its parent; * Consummation of an exchange plan where the company will be acquired if the shareholder is entitled to vote on the plan; * Any corporate action pursuant to a shareholder vote if the articles, bylaws or a directors' resolution permits stockholders to dissent and obtain payment for their shares. The dissenting stockholder cannot challenge the corporate action unless the action is unlawful or fraudulent. Stockholders have no right of dissent if the shares were listed on a national securities exchange, included in the national market system by the NASD, or if the shares were held by at least 2,000 stockholders of record. An exception exists where the articles provide otherwise. A second exception exists where the stockholders are required to accept for their shares anything except cash or owner's interests in the surviving or acquiring entity, an entity listed on a national securities exchange in the national market system by the NASD, or an entity held of record by at least 2,000 holders, or a combination of these factors. Stockholders of the surviving company in a merger have no dissenting rights if the merger does not require stockholder action. A notice of dissenters' rights must be sent with the notice of the meeting where the vote will take place. For actions taken by consent, the company must send the dissenters' notice and a notice that the action was taken. A dissenting shareholder must notify the company of his or her dissent in writing before the vote is taken and is prohibited from voting in favor of the proposed action. Otherwise the dissenting shareholder is not entitled to payment for his or her shares. If a proposed action creating dissenters' rights is authorized at a stockholders' meeting, the company must deliver a written dissenter's notice to all stockholders who satisfied the requirements to assert those rights within 10 days of effecting the corporation action. The notice must state where the demand for payment must be sent, when and where certificates are to be deposited, and it must inform holders not represented by certificates to what extent the transfer of shares will be restricted after demand for payments is received. The company must supply a form for demanding payment that includes the date of the first announcement to the news media or stockholders of the terms of the proposed action. The form must require that the person asserting the dissenter's rights certify whether or not he or she acquired beneficial ownership before that date. The notice must set a deadline when the corporation must receive the demand for notice. The stockholder must then demand payment, certify whether he or she acquired beneficial 16 ownership of the shares before the date required to be set forth in the dissenter's notice of this certification and deposit his or her certificates, if any, in accordance with terms of the notice. The stockholder who complies retains all other rights of a stockholder until those rights are canceled or modified by the company's taking the proposed action. The stockholder who fails to demand payment or deposit his or certificates where required by the date set forth in the dissenter's notice forfeits his or her payment. The company can restrict the transfer of shares not represented by a certificate from the date the demand for payment is received. The company must pay the dissenter within 30 days the amount the company estimates to be the fair value of the shares plus accrued interest. The company must include with the payment a copy of its balance sheets as of the end of a fiscal year ending not more than 16 months before the payment date, an income statement for that year, a statement of changes in stockholders equity for that year, and the latest available interim financial statements. The company must also provide a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, a statement of dissenter's rights to demand payment and a copy of the Nevada Revised Statute §§ 92A.300 - 92A.500, inclusive. Unless the beneficial shareholder owned the shares before the date set forth in the dissenter's notice as of the date of the first announcement to the news media or to the stockholder of the terms of the proposed action, the corporation may withhold payment from a dissenter. If the company withholds payment, it must estimate the fair value of the shares, plus accrued interest and offer to pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The company must send with its offer a statement of its estimate of the fair value, and explanation of how interest was calculated and a statement of the dissenter's right to demand payment. A dissenter can notify the company of his or her own estimation of the fair market value of the shares and demand payment of this amount less any money already paid if he believes the amount offered by the company is less than the fair value of the shares. The dissenter must do so within 30 days. After receiving such a demand, if the amount remains unsettled, the company must commence a proceeding within 60 days in the district court in the county of its registered agent to determine the value of the shares, or pay the amount the dissenter demands. All parties with unsettled demands become parties to the proceeding, the court appoints an appraiser, and issues a judgment for the amount the court finds to be the fair value of the shares payable to the shareholders. The corporation must pay the court costs unless the dissenters acted arbitrarily, vexatiously or in bad faith and the court may impose fees for counsel and experts in equitable amounts against the respective parties. In some cases, dissenter's counsel fees may come from the funds awarded in the judgment. BRITISH COLUMBIA LAW Under British Columbia law, if a company passes a resolution to which a shareholder may dissent, the company must notify the dissenting shareholder of its intention to act and advise the dissenting member of his or her rights. The dissenting shareholder has the right to compel the company to purchase his or her shares by delivering a notice of dissent within 14 days of the 17 notice of the company's intention to act. The dissenting shareholder may apply to a court to compel the company to purchase the dissenting shareholder's shares. The price of the shares is the fair value the day before the date on which the resolution was passed. CUMULATIVE VOTING Nevada law permits cumulative voting if provided for in the company's articles, but the shareholder must notify the company's president or secretary in writing of his or her intention to vote cumulatively. Aztek's bylaws specifically prohibit cumulative voting. British Columbia law does not contemplate cumulative voting, but ATI's bylaws permit cumulative voting. DIVIDEND PAYMENT Under Nevada law, dividend payments, share redemptions and asset distributions all fall within the definition of a "distribution." A company can make a distribution so long as the distribution does not render the company insolvent. Moreover, the distribution must not cause the sum of the liabilities and the funds necessary to satisfy preferential rights upon dissolution to exceed the assets. Under British Columbia law, dividends, which may be paid by distributing cash, assets paid up shares, bonds or other debt obligations, may be paid out of the company's profits. PROXY REQUIREMENTS British Columbia has specific laws to regulate proxies. Only a shareholder of ATI common stock or his or her attorney may execute a proxy. In Nevada, the stockholder may authorize his officer, director, employee or agent to execute the proxy. British Columbia law provides that a proxy ceases to be valid after one year. Nevada law provides that a proxy expires after six months unless coupled with an interest, or unless the stockholder specifies a length not to exceed seven years. British Columbia. law requires ATI to send a proxy conforming to certain guidelines to each shareholder while Nevada law has no requirements for proxy contents. However, as a result of the merger, Aztek will be a successor to a company with securities registered under Section 12(g), and thus itself will become a reporting Company under Section 12(g). As such, the Company will be subject to the proxy rules under Section 14 of the Securities Exchange Act of 1934. Finally, under British Columbia law, directors may require proxies to be delivered a maximum of 48 hours in advance of a meeting. EXAMINATION OF RECORDS British Columbia. law requires ATI to keep at its office the following registers of the following items: members (shareholders); directors; debenture holders; debentures; indebtedness; allotments; minutes of general meetings; minutes of directors; and several other documents. British Columbia also requires ATI to keep accounting records of all transactions. Directors and former directors may examine the corporate records and take extracts of those records without charge. Shareholders may examine records and take extracts without charge with the exception of directors' minutes, documents approved by the directors in the preceding ten years and 18 mortgages. Under British Columbia law, ATI cannot close its stock ledger to stockholders. As a reporting company, shareholders may take copies of the same records for C$.50 or less, but in some cases C$.50 per page. Moreover, any person can extract the same record as shareholders except minutes of meetings. The cost is C$.50 or less per document and in some cases C$.50 per page. ATI's directors hold options to purchase shares of ATI Common Stock. Under British Columbia law, the shareholders of ATI Common Stock must approve the directors' exercising their shares. No such provision exists under Nevada law. Nevada law only requires Aztek to retain its articles, bylaws and stock ledger at its office. Stockholders may copy the articles, bylaws, amendments and stock ledger if they have been stockholders of record for six months preceding the demand, or are authorized by the shareholders of at least 5% of the outstanding shares. However, Aztek's bylaws provide that at least ten days before a meeting, a list of shareholders entitled to vote must be compiled and made available for inspection. The bylaws also permit a shareholder to inspect and copy resolutions creating different classes of stock, minutes of shareholders' meetings and actions without meetings, communications to shareholders within three preceding years, the names and addresses of current directors, and the most recent annual report. For a proper purpose a shareholder may inspect minutes of directors' meetings, accounting records and the record of shareholders. In Nevada, persons must own at least 15% of the outstanding shares to examine the financial records. The shareholder making the demand bears all costs and must sign an affidavit that such inspection is not desired for any purpose not related to his interest as a stockholder. Under Nevada law, Aztek may impose a reasonable charge. DIRECTORS Under British Columbia law, a majority of directors must be Canadian and at least one director must be a resident of British Columbia. Directors are jointly and severally liable for losses suffered as a result of the corporation losing money by selling shares for less than par value, or for selling shares issued where consideration has not been fully paid. Shareholders have a right to at least 56 days advance notice of an election for directors. Shareholders owning ten percent or more of the outstanding shares have a right to nominate for directors. British Columbia law has a "bad boy" statute that precludes a person from serving as a director if he or she is an undischarged bankrupt, has been convicted in connection to dealings with a corporation, or for fraud. If the company is a reporting company, a person who has had a registration cancelled cannot be a director. British Columbia corporate law also contains a provision that makes insiders liable for acting on confidential information at the expense of the value of the securities. OFFICERS British Columbia law requires a president and secretary and they cannot be the same person. British Columbia law permits but does not require election of officers. However, ATI's bylaws grant the directors the right to appoint the officers. The duties of a secretary to maintain the records of the corporation are set forth under Canadian law. 19 Nevada law requires a president, a secretary and a treasurer, and one person can serve in all offices. Officers are appointed by the directors. Aztek's bylaws provide for a president, secretary and treasurer. ATI's bylaws do not designate specific officers. The Company's president, among other things, presides over meetings of the shareholders. ARTICLES AND BYLAWS The following discussion explains differences in both companies corporate governance documents to the extent they have not been discussed thus far. ATI has authorized 100,000,000 shares no par value. The number of directors is determined by the directors. If the directors fail to determine a number of directors, the number to be elected is the same as the number of directors whose terms expire and directors may appoint additional directors. ATI's articles provide for mandatory indemnification of directors and the secretary, and permissible indemnification for officers other than the secretary. A director may only be removed by other directors and only for an indictable offense and the directors fill any vacancies. ATI's board may appoint an Executive Committee that have the powers vested in the board except to fill vacancies, or change the membership of the Executive Committee. Directors can declare dividends without giving notice to shareholders. Aztek has authorized 100,000,000 shares, par value $.001. It has four directors which may be increased to nine or decreased to one. Directors are elected by the shareholders. Aztek's bylaws prohibit cumulative voting and its articles provide for mandatory indemnification of directors and officers. Shareholders may remove one or more directors. Directors fill any vacancies in the board, except when the vacancy results from an increase in the number of directors in which case the shareholders fill the vacancy. Aztek's board may appoint committees but the bylaws do not specifically provide for an Executive Committee. The directors may amend the bylaws. OTHER TERMS OF THE TRANSACTION ATI will merge with and into Aztek with Aztek being the surviving corporation. ATI, as of the date of the merger, will have 2,051,109 shares issued and outstanding. ATI's shareholders will receive one fully paid and non-assessable share of Aztek's Common Stock in exchange for each share of ATI stock he or she holds. Accounting Treatment. The Merger will be accounted for as a purchase transaction, in accordance with generally accepted accounting principles. The carrying value of ATI's assets and liabilities approximates their fair market value so that there will not be any adjustments to the carrying value of ATI's assets and liabilities reflecting their fair values at the date of the Merger. Federal Income Tax Consequences of the Transaction. The Law Firm of Larson-Jackson has rendered its opinion on the tax consequences of the Merger. In the opinion of tax counsel, 20 the following constitutes the material federal tax consequences of the Merger under U.S. law: (i) the Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code (the "Code"); (ii) no gain or loss will be recognized by ATI or Aztek as a result of the Merger, (iii) no gain or loss will be recognized by a stockholder of ATI who exchanges all of such stockholder's ATI Common Stock solely for shares of Company Common Stock; (iv) the basis of shares of Company Common Stock to be received by a stockholder of ATI will be the same as the basis of the ATI Common Stock surrendered in exchange therefor; and (v) the holding period of the shares of Company Common Stock to be received by a stockholder of ATI will include the period during which the stockholder held the shares of ATI Common Stock surrendered in exchange therefor, provided that such ATI Common Stock is held as a capital asset by such stockholder at the Effective Date. Cash payments made to the U.S. residents who are holders of ATI Common Stock upon the exchange thereof in connection with the Merger for Dissenting Shares (other than certain exempt entities and persons) will be subject to a 31.0% backup withholding tax under federal income tax law unless certain requirements are met. Generally, Aztek will be required to deduct and withhold the tax upon the following events: (i) the stockholder fails to furnish a taxpayer identification number ("TIN") or fails to certify under penalty of perjury that such TIN is correct; (ii) the Internal Revenue Service ("IRS") notifies Aztek that the TIN furnished by the stockholder is incorrect; (iii) the IRS notifies Aztek that the stockholder has failed to report interest, dividends or original issue discount in the past, or (iv) there has been a failure by the stockholder to certify under penalty of perjury that such stockholder is not subject to the 31.0% backup withholding tax. Any amounts withheld in collection of the 31.0% backup withholding tax will reduce the federal income tax liability of the stockholders from whom such tax was withheld. The TIN of an individual stockholder is that stockholder's Social Security number. EACH STOCKHOLDER IS ENCOURAGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISORS AS TO PARTICULAR FACTS AND CIRCUMSTANCES WHICH MAY BE UNIQUE TO SUCH STOCKHOLDER AND NOT COMMON TO STOCKHOLDERS AS A WHOLE AND ALSO AS TO ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES ARISING OUT OF THE MERGER AND/OR ANY SALE THEREAFTER OF AZTEK COMMON STOCK RECEIVED IN THE MERGER. A GENERAL DESCRIPTION OF THE TAX CONSEQUENCES TO CANADIAN SHAREHOLDERS WITHOUT CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH CANADIAN STOCKHOLDER'S SITUATION CAN BE FOUND IN THE OPINION OF THE INDEPENDENT ACCOUNTANTS ATTACHED HERETO. PRO FORMA COMBINED CONDENSED BALANCE SHEETS The following pro forma combined condensed balance sheets give effect to the proposed Merger between Aztek and ATI. This statement combines Aztek and ATI's audited balance sheets of June 30, 1998, and Aztek and ATI's unaudited December 31, 1998, balance sheets and assumes the Merger was accounted for as a purchase. The terms of the Merger call for Aztek to exchange one share of its Common Stock for each ATI common share. The pro forma data does 21 not purport to be indicative of the results that would actually have been reported if the Merger had been in effect or which may be reported in the future. This statement should be read in conjunction with the accompanying note, the pro forma combined condensed statements of income and the respective historical consolidated financial statements and related notes of Aztek and ATI included elsewhere herein. All figures in this pro forma combined balance sheet are in U.S. dollars. ATI's audited balance sheet included in this Joint Proxy-Statement Prospectus is reported in Canadian dollars. The audited financial statements contain a reconciliation to U.S. Generally Accepted Accounting Principles.
June 30, 1998 (U.S. Dollars) ASSETS Pro Forma Aztek ATI Combined ________________________________________________________ CURRENT ASSETS: Cash 60,000 1,998 61,998 Receivables and 0 45,739 45,739 prepaid expenses 0 1,286 1,286 Total current ------- ------- ------- Assets 60,000 49,023 109,023 CAPITAL ASSETS 0 71,527 71,527 ------- ------- ------- Total 60,000 120,550 180,550 ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accruals 0 194,031 194,031 Deferred revenue 0 70,264 70,264 Current portion of long-term debt 0 67,568 67,568 Current portion of capital lease 0 22,361 22,361 ------- ------- ------- Total current 0 354,224 354,224 LONG TERM DEBT Deferred revenue and Obligation 0 90,207 90,207 -------- ------- ------- Total liabilities 0 444,431 444,431 SHAREHOLDERS' EQUITY (DEFICIENCY) Share capital 60,000 2,824,001 2,884,001 Deficit 0 (3,147,882) (3,146,882) ------- ----------- ----------- TOTAL EQUITY 60,000 (323,881) (263,881) ------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 60,000 120,550 180,550 ======= =========== ===========
22 BALANCE SHEET AS AT DECEMBER 31, 1998 (U.S. Dollars) ASSETS
Pro Forma Aztek ATI Combined ________________________________________________________ CURRENT ASSETS: Cash 60,000 10,600 70,600 Receivables 0 62,400 62,400 prepaid expenses 0 300 300 ------- ------- ------- Total current 60,000 73,300 133,300 CAPITAL ASSETS 0 55,900 55,900 ------- ------- ------- Total 60,000 129,200 189,200 ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accruals 0 240,700 240,700 Deferred revenue 0 75,000 75,000 Current portion of long-term debt 0 64,500 64,500 Current portion of capital lease 0 0 0 Total current ------- ------- ------- Liabilities 0 380,200 380,200 LONG TERM DEBT Deferred revenue and Obligation under capital Lease 0 0 0 -------- ------- ------- Total liabilities 0 529,200 529,200 SHAREHOLDERS' EQUITY (DEFICIENCY) Share capital 60,000 2,696,500 2,756,500 Deficit 0 (3,096,500) (3,096,500) ------- ----------- ----------- Total Equity 60,000 (400,000) (460,000) ------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 60,000 129,200 189,200 ======= =========== ===========
No material non-recurring charges or credits directly attributed to the merger exist. PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME The following pro forma combined condensed statements of income combine the historical statements of income of ATI and Aztek for the year ended June 30, 1998, and the six months ended December 31, 1998. These pro forma statements assume the Merger was effective as of July 1, 1997, that the Merger was accounted for as a purchase, and that the exchange ratio was 1:1. The pro forma data do not purport to be indicative of the results that would actually have been reported if the Merger had been in effect or which may be reported in the future. This statement should be read in conjunction with the accompanying note, the pro forma combined condensed balance sheet and the respective historical consolidated financial statements and related 23 notes of ATI and Aztek included elsewhere herein.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME For the Year Ended June 30, 1998 (U.S. Dollars) Pro Forma Aztek ATI Combined --------- ------ ----------- REVENUES: Sales 0 229,584 229,584 EXPENSES Selling, general and administrative, depreciation and Other 0 476,694 476,694 Interest and other Income 0 201 201 --------- --------- -------- Income from continuing Operations 0 (246,909) (246,909) INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS Historical income (loss) per share 0.00 (0.16) N/A Pro forma income (loss) Per share N/A N/A (0.14) Number of shares used to Calculate per share data 129,110 1,534,974 1,664,084 PRO FORM BOOK VALUE PER SHARE $0.46 $(0.21) $(0.16)
Nonrecurring charges or credits directly attributable to the Merger do not exist and therefore, were not considered in the pro forma condensed income statement.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME For the Six Months Ended December 31, 1998 (U.S. Dollars) Pro Forma Aztek ATI Combined --------- ------ ----------- REVENUES: Sales 0 117,400 117,400 EXPENSES Selling, general and administrative, depreciation and Other 0 208,100 208,100 Interest and other Income 0 0 0 --------- --------- -------- Income from continuing Operations 0 (90,700) (90,700) INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS Historical income (loss) per share 0.00 (0.05) N/A Pro forma income (loss) Per share N/A N/A (0.02) Number of shares used to Calculate per share data 2,025,000 1,990,677 4,076,109
24 MATERIAL CONTRACTS WITH THE COMPANY BEING ACQUIRED Other than the Merger Agreement, no material contracts exist between Aztek and ATI. However, of the four directors of Aztek, three are directors of ATI and are the only directors of ATI. The common directors are Mike Sintichakis, Edson Ng, and Eileen Keogh. The only remaining director of Aztek is Mr. Nick Sintichakis who is the son of Mike Sintichakis. Moreover, Mike Sintichakis and Edson Ng own a controlling interest in ATI. Aztek has not hired an expert or counsel on a contingent basis in connection with this Joint Proxy Statement-Prospectus or the Merger. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. DESCRIPTION OF THE BUSINESS OF THE ACQUIRING COMPANY Aztek was organized under the laws of the State of Nevada on August 19, 1994 as Spectral Innovations (1994), Inc. and was organized as a closely held corporation. Mike Sintichakis became the President at Aztek's inception, ATI had subscribed for certain shares, but Aztek had no shareholders until 1998. Aztek's directors are Mike Sintichakis, Nick Sintichakis, Edson Ng, and Eileen Keogh. Mike Sintichakis is the President and Nick Sintichakis is the Secretary. On May 28, 1998, the directors and passed a resolution to change the name of Spectral Innovations (1994), Inc. to Aztek Inc. The Amended and Restated Articles of Incorporation effecting the name change were filed with the Secretary of State of the State of Nevada and accepted on June 8, 1998. In addition to effecting the name changes, the Amended and Restated Articles increased the amount of shares authorized from twenty-five thousand shares to one hundred million shares. Aztek has not transacted any business since its inception. It currently has no principal products or services, no competition, no customers and is not subject to any governmental regulations. Aztek's only intellectual property is the IBM San Francisco software license that is described below in Aztek Management's Plan of Operation at page 26. After the Merger and the date its Registration Statement filed on this Form S-4 becomes effective, Aztek will be subject to the state and federal securities laws. Aztek has no employees other than its officers and directors. Currently, the officers and directors receive no salary. 25 DESCRIPTION OF PROPERTY Aztek's headquarters is at 1575 Delucchi Lane, Suite #40, Reno, Nevada 89502. The headquarters consist of approximately 150 square feet of office space. The lease is on a month to month basis and is paid to Meadow Wood Crown Plaza. The office is in a new office building located conveniently to downtown Reno and the local airport. LEGAL PROCEEDINGS Aztek is not aware of any legal proceedings involving any director, director nominee, promoter or control person including criminal convictions, pending crim inal matters, pending or concluded administrative or civil proceedings limiting one's participation in the securities or banking industries, or findings of securities or commodities law violations. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS No public trading market exists for Aztek's securities. Aztek was initially incorporated as a closely held corporation and became a standard corporation in June 1998. Subsequent to the Merger, the shareholders of ATI will be the shareholders of record of Aztek and Aztek will seek to have its shares traded on the OTC Bulletin Board. Aztek's outstanding shares for which there is no established public market cannot be sold except pursuant to Rule 144 under the Securities Act. Aztek has not agreed to register such shares under the Securities Act for sale by security holders. The shares that are currently issued and outstanding are not and have not been proposed to be publicly offered by Aztek and therefore, cannot have a material effect on the market price of Aztek's common equity. HOLDERS OF RECORD On July 22, 1998, there were six holders of record of Aztek's Common Stock. DIVIDENDS Aztek has declared no dividends, cash or otherwise, in the last two fiscal years and does not plan to pay any dividends in the foreseeable future. The payment of dividends will depend upon Aztek's assumption of ATI's debt and short-term and long-term cash availability, working capital needs and other factors as determined by Aztek's Board of Directors. 26 AZTEK MANAGEMENT'S PLAN OF OPERATION THIS JOINT PROXY STATEMENT-PROSPECTUS AND REGISTRATION STATEMENT ON FORM S-4 CONTAINS FORWARD LOOKING REPRESENTATIONS THAT INVOLVE CERTAIN RISKS AND UNCERTAINTIES. AZTEK's ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD LOOKING REPRESENTATIONS. After the Merger, Aztek will assume the obligations of ATI and proceed with the course of business initiated by ATI. Aztek anticipates that after the Merger, sales will increase through the next fiscal period. Aztek's Board of Directors will begin work immediately following the Merger in reviewing the following objectives: completion of new product development initiated by ATI; acquisition of the assets of Qdata Software Inc.; and acquisitions of two small vendors as initiated by ATI. There is no certainty that following the review, any of the current objectives will be pursued or met. Aztek will, however, pursue a market consolidation strategy that has already been initiated by ATI. In addition to acquiring businesses, Aztek will design and develop an entirely new suite of software products to replace ResponseWare's products and appropriate products acquired through future acquisitions. The new products will be based on IBM San Francisco software that IBM has already licensed to Aztek. The San Francisco software provides 40 - 60% of the programming code necessary for new products. Programmers will incorporate desirable features and functions from ResponseWare products and other acquired products. To date, ATI has completed rudimentary data modeling and high level designs for the new software. ATI has completed technical evaluations of several software development platforms including IBM VisualAge, Smalltalk, Progress, Synon Obsydian and IBM VisualAge Java Enterprise. Neither ATI nor Aztek will move forward with further product development until after the Merger. Some product development will require financing to fund the software development team. PROPOSED ACQUISITIONS ATI has had preliminary discussions concerning several acquisitions. Aztek may continue to acquire independent software companies such as ATI did with ResponseWare Corp. The independent software companies develop, market, and support their own proprietary products. Once an acquired company is consolidated, Aztek must execute the former independent company's preexisting contractual obligations. Through consolidation, Aztek will replace the various proprietary products inherited through acquisition with its own new products. By consolidating products, Aztek will centralize product development and secondary support. After acquiring companies, Aztek will focus on new sales, systems implementation, training and primary support within their sales territories. The consolidation strategy also includes centralized marketing programs and administration. 27 Aztek will assume the obligations of two letters of intent signed by ATI to acquire two independent computer software companies, Concord Consultants Limited ("CCL") of Richmond, British Columbia, and Municipal Hardware Systems Ltd. ("MHS") of Edmonton, Alberta. Management believes that acquiring the companies will expand Aztek's business markets and in terms of sales. Ultimately, these acquisitions are part of Aztek's overall plan of expansion through acquisitions. The letters of intent require ATI to complete its financing prior to the acquisitions. Thus, Aztek will have to effect an offering before moving forward. Then, Aztek and the companies to be acquired must complete their respective due diligence and finalize the terms and conditions of the purchase agreements. Copies of the two letters of intent are attached as exhibits to the registration statement on Form S-4 as material contracts. Both companies are closely held non-public Canadian entities and have no audited financial statements. To date, they have only released interim financial statements to ATI's management and will not release any other financial information until ATI demonstrates its ability to acquire the companies for cash and completes the Merger. CCL and MHS' management are aware of ATI's efforts to raise $1 million and Aztek's intent to carry out such an offering. The parties anticipate that at the close of the offering, the parties will be able to proceed with the acquisitions. At that point CCL and MHS will perform their due diligence review of Aztek and Aztek will perform its due diligence review of CCL and MHS. Once Aztek's management is satisfied that the acquisition is in the best interest of the shareholders and if management determines that shareholder approval is required, it will hold a special meeting for the shareholders to approve the acquisitions. A failure to proceed with these acquisitions poses no risk to ATI shareholders. The third anticipated acquisition will be an acquisition of assets from Qdata Software Inc. ("Qdata"), a closely held Barbados corporation. Qdata has acquired the exclusive South American rights for a software program called Multiple Access Remote Control (MARC). MARC allows a single personal computer to simultaneously monitor and control multiple personal computers regardless of location. MARC is packaged under different names depending on its use. Under the name Distant Learner 2.0, MARC is used in education. Instructors can highlight areas on a student's screen where attention needs to be addressed, or the instructor can engage in a direct private conversation with a student. Under the name Call Center Manager 2.0, the software will allow a supervisor in a call center to monitor data entry activities of an operator and allow operators to interact with supervisors. Under the name One-Up, individuals can use MARC to gain access to individual remote computers. Qdata is targeting industries such as banking, airline, computer software and hardware, telecommunications and education. Qdata Information Systems Ltd. ("QIS") owns the source code for MARC, licensed it to Qdata for South American distribution, and provides support for up to 25,000 MARC units. For each sale, Qdata pays QIS 1 British pound in royalties, and 15% of gross revenues on sales which is defined as revenue less direct pretax costs. If QIS fails to produce MARC according to Qdata's needs and specifications, rights to other markets and to the source code pass to Qdata. Qdata has represented to Aztek that it has a distribution agreement with ARKA in Buenos Aires, Argentina. Under the agreement, ARKA distributes the MARC software in 28 Argentina, Uruguay and Brazil. Qdata has represented that Argentina's Ministry of Finance has ordered $160,000 worth of MARC software units, and the University of Belgrando has ordered $32,000 worth of MARC software units. Qdata and Aztek are presently negotiating the terms of the asset acquisition. The assets consist of the license Agreement between Qdata and QIS which runs from March 10, 1998, through March 10, 2003. The assets also include distribution rights for MARC and the associated products, approximately 32,500 units of MARC software licenses to be sold to customers, Qdata's work in progress, and software that can be marketed by Aztek. Aztek will not assume Qdata's liabilities or ongoing expenses. Qdata relies on third party sales agents to service the South and Central American markets. 95% of its sales have come through its sales agent in South America. Therefore, Aztek will inherit a relationship with the sales agent and will initially be dependent on the sales agent. Qdata also relies on the MARC product that is developed by QIS. The acquisition will not cause Aztek to have an equity interest in QIS meaning Aztek will depend on its relationship with QIS to make the acquisition profitable. Qdata has proposed to sell the assets to Aztek in exchange warrants to buy 200,000 Aztek shares with an exercise price of US$2.50 released in biannual installments of 50,000 warrants. As consideration for the license, Qdata has proposed that Aztek will issue a credit of $1 per warrant at the close of the transaction. Qdata is a privately held corporation and has not made financial statements available to Aztek. To date the parties have not agreed on price or structure. Moreover, until Aztek performs a due diligence review, it cannot determine the value of Qdata's assets. At the present time, management does not foresee any risk to Aztek's or ATI's shareholders if Aztek is unable to acquire Qdata's assets. YEAR 2000 ISSUES Aztek presently has no operating business but investors should view Aztek's Year 2000 readiness in its position as ATI's successor. ATI has assessed all of its information technology and non-information technology for Year 2000 readiness. ATI's Year 2000 exposure is limited to its IBM AS/400 computer hardware and software, its ResponseWare software applications, and possible Year 2000 exposure of businesses Aztek plans to acquire. ATI does not rely on imbedded systems in any of its operations. Internally, ATI has addressed its Year 2000 exposure by implementing plans to replace its existing IBM AS/400 operating system with the latest model (Model 170) and latest release of the OS/400 operating system and compilers (Release V4R3). IBM has certified the new systems to be Year 2000 ready. ATI is converting its ResponseWare products. Conversion work with the new systems are approximately 60% complete and should be finished by the end of December 1998. Thus far, ATI has spent approximately C$45,000 in labor costs and expects to spend an additional C$30,000 on conversion and testing. ATI also uses Simply Accounting which is Year 2000 compliant. 29 ATI acquired ResponseWare Corp., the producer of ResponseWare software applications. The ResponseWare software as acquired by ATI was not Year 2000 compliant. Pursuant to software maintenance contracts, ATI continues to service customers that purchased the software. ATI has developed a system to address the Year 2000 issues and therefore does not anticipate any adverse impact on Aztek after the Merger. A key component of the conversion effort is development of a conversion utility program to automate the process. The conversion tool has been completed and is currently in use to convert the ResponseWare applications. After the Merger, Aztek will assume ATI's obligations to supply the Year 2000 compliant products to all ResponseWare customers who are under the software maintenance contracts. ATI began supplying these products in March 1998 and Aztek anticipates that it will fulfill the obligations by June 1999. ATI is modifying its ResponseWare applications at an estimated cost of C$75,000 representing 18 man-months of programming effort. The cost estimate is based on ATI's past experience in projects of a similar nature requiring system wide analysis, code search and replacement, database conversion, and testing. Fees earned from early delivery of the Year 2000 applications and ATI's revenues from operations will fund the Year 2000 compliance. ATI's customers are dependent on ATI to provide Year 2000 compliant ResponseWare accounting, payroll, and other core business software. ATI will convert all ResponseWare software applications for Year 2000 compliance using conversion tools it has developed. The conversion effort is in progress with a target completion date for all of the applications by December 1998. ATI will make the Year 2000 applications available to customers for early delivery at a fee of C$2,000 - C$3,000 per module as completed. After June 1999, the applications will be generally available at no charge. Certain risks exist with ATI's plan to convert and implement Year 2000 compliant versions of the ResponseWare software. ATI is confident it will be successful in converting and testing its base products under its own development and testing environment. However, each customer requires unique product implementation and its own custom applications that work with or replace parts of the ResponseWare applications. Therefore, it will be essential for customers to implement and test the Year 2000 versions as soon as they are available. Delays in implementation and testing at customer sites may result in inadequate time and resources to rectify Year 2000 problems. To address this issue, ATI is keeping all clients aware of its conversion activities and emphasizing the importance of early installation and testing. If additional technical staff is necessary, ATI will hire or contract additional resources. ATI has consulted with Group West Systems about providing Year 2000 conversion services to third parties as an alternative to ATI's own conversion effort. Group West is a consulting and technical services company that specializes in Year 2000 conversion. ATI has three pending acquisitions that are still subject to a due diligence review. Until Aztek, as ATI's successor, performs this review, management cannot assess the acquirees' Year 2000 readiness. Aztek will not be in a position to perform this due diligence review until it completes its financing. For a discussion of these acquisitions, see "Management's Plan of Operation" above at page 26. 30 Potential liability against ATI may result if its products are not Year 2000 compliant. In a worst case scenario, ATI may lose clients to another vendor or face legal action for failing to service customers for Year 2000 requirements. Nevertheless, management believes these scenarios are remote and cannot be quantified. ATI's Year 2000 initiative has greatly impacted its business operations by forcing ATI to assign technical resources to the conversion effort instead of standard customer support, new software development and software maintenance activities. The reassignment of technical employees has resulted in lost revenues of approximately $60,000 in customer billable activities. However, Aztek has offset some of this lost revenue through the collection of approximately $45,000 in fees for early delivery of Year 2000 compliant products and expects to collect an additional $105,000 in fees. EXTERNAL FUNDING Aztek expected to benefit from an ATI offering under Regulation D. In this offering, ATI was seeking to sell 406,504 shares of ATI Common Stock to raise approximately US$1,000,000. To date the funding has not materialized. For More Information, see "Current Business Status" at page 63 Management is currently seeking to effect an offering to replace the offering initiated by ATI. The cash infusion will enhance Aztek's efforts to resolve the deficiency in operating capital that will exist after the Merger, finance the recruitment of VARs, and enhance marketing efforts. The injection of capital will allow Aztek to substantially reduce ATI's existing debt, complete the rewriting of existing software programs, and result in a material improvement in the financial condition of Aztek. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Aztek has not transacted any business since its inception. As such, Aztek first engaged its accounting firm to audit its financial statements for this Joint Proxy Statement-Prospectus and registration on Form S-4. Thus, there has been no change in or disagreement with accountants. INFORMATION ABOUT THE COMPANY BEING ACQUIRED DESCRIPTION OF BUSINESS ATI was incorporated on July 11, 1979, by filing and registering its articles with the British Columbia Registar of Companies. Over the last three years, ATI has expanded its business focus and capabilities following several acquisitions. On September 30, 1994, ATI acquired all of the issued and outstanding shares of ResponseWare Corporation, a developer of municipal government software including general accounting and payroll systems and specialized systems such as property taxation, utility billing and building permits. This acquisition allowed ATI to further diversify its operations within the computer hardware, software and telecommunications 31 market and to expand the existing forty-five (45) municipal and private sector clients of ResponseWare. The software license agreement is the same for all forty-five municipalities and does not differ in any material respects. ATI continues to support and service the ResponseWare software and client base as its primary source of revenue. On August 21, 1995, ATI acquired the assets and business of Helix Technologies Limited, a consulting and systems integration firm specializing in technology for mobile work force automation. ATI has completed contracted projects from the acquisition and currently has no contracts for work in this area. After the Merger, mobile work force automation technologies will be incorporated into future products which have yet to be developed. Aztek also continues to pursue further project-based contracts in the area of work force automation technologies. ATI is a small, Canadian computer software company with its headquarters located in Kelowna, British Columbia, Canada. ATI employs fourteen people on a full time basis. On December 9, 1996, ATI's name changed to Aztek Technologies, Inc. from Consolidated McKinney Resources, Inc. On December 9, 1996, ATI received approval from the Vancouver Stock Exchange to resume trading following a change in business focus. ATI changed it business focus from mining to high technology. ATI develops and markets computer software applications to municipal governments and to a lesser extent, the private sector in Western Canada. In the private sector ATI's focus is primarily human resources and payroll related software, service and maintenance. ATI distributes its products through direct sales. COMPETITION ATI competes primarily in U.S. and Canadian municipalities with populations of 250,000 or fewer. The customer base consists of municipal governments that purchase software applications for financial systems and departmental applications and are expanding into enterprise wide solutions. Some municipalities rely on custom written applications developed and supported either in-house or through contractors. Due to the relatively high licensing and support fees of international vendors, most small and mid-sized municipalities tend to deal with regional software vendors. ATI's primary source of competition comes from small to mid-sized municipal government marketers and regional vendors, specialized departmental solution providers and in-house developed systems. Regional vendors dominate the majority of the market. Regional software providers typically have up to 100 clients within a given market that has a population of less than 250,000 people. Canada has about ten regional vendors, the U.S. has about one hundred regional vendors, and North America as a whole has approximately two hundred regional vendors. Most regional vendors are privately owned. Mounting pressures on these vendors to deliver current technology is increasing at a time when most of them are least able to fund new development. HTE Inc. and American Management Systems are the largest competitors and are 32 dedicated to the government sector with annual sales in excess of US$100 million and US$300 million respectively. These organizations are considered the leading suppliers of government systems in the US. Their products consist of complete suites of integrated modules to address enterprise wide issues for local governments. They have also moved to client/server oriented software development. Product pricing ranges from $5,000 for single modules to over $200,000 for complete systems. Those vendors market through direct channels as well as through strategic alliances with other vendors such as IBM. The primary competitive factors involve differences in principal products and accompanying services, price, service warranty and other product performance. Regional vendors have had success by offering customized software solutions, local services and support, and reasonable prices. Individual applications may work with products from other vendors. However, they communicate to other applications at a lowest common denominator level. Therefore, these products compromise inter-application functionality and subject users to multiple application interfaces. ATI's products are integrated application suites with high functionality between applications, and a consistent user interface scheme. The products that are most successful are comprehensive, integrated financial management systems with a full array of features targeted at entry and mid-level systems. Competitors have prohibitive costs to move current technology since their applications are based on less flexible and proprietary third or fourth generation languages. Competitors have increased burdens from the need to customize applications for each client. Another competitive factor involves servicing products that municipalities have purchased. Vendors have a secure revenue source through client dependency on the vendor for service and support. This dependency breeds client frustration, a frustration that is exacerbated by relatively small vendors' inability to deliver current technology and respond quickly to client demands. Clients who have modified their applications extensively create more difficulties and are costly to support. ATI's products are designed to compete effectively with these solutions in terms of functionality and offer the ability to become a single source supplier for entire enterprises. Its products are designed to take advantage of business intelligence tools for reports and queries. These tools are ideal for municipalities to create and maintain their own queries and reports with minimal support staff. Aztek clients can also develop their own enhancements using the same development tools used to develop the base ATI products if so desired. Frequently, municipalities create and maintain information and data with limited support staff. ATI's software applications can accommodate customer-developed enhancements better than alternative technologies. ATI generates annual support fees at the rate of 10-15% of software license fees. ATI applies these fees to research and development to support a gradual introduction of new technologies for its clients. CUSTOMER BASE ATI's customer base consists of diverse small municipalities in various parts of western 33 Canada. ATI is not dependent on a few customers to generate revenue. ATI intends to expand its customer base beyond its current level. The typical client for ATI is a municipality with 10,000 to 250,000 residents. Even though ATI works with municipal governments, its principal products and services are not subject to governmental approval. The effects of existing or probable existing governmental regulations is not expected to have a material effect. CURRENT BUSINESS STATUS ATI has on-going contracts with municipal vendors that were initially negotiated between ResponseWare and ResponseWare's customers. Following the consolidation between ATI and ResponseWare, ATI incurred the responsibility for performance of the duties of the licensor pursuant to the terms and conditions set forth in the agreements. The contact permits the licensees the nonexclusive use of ATI's software in exchange for payment of fees. The license agreement also addresses delivery of the software, installation and training, warranties, and confidentiality provisions prohibiting the user from disclosing trade secrets to any third parties. ATI's current products consisting solely of computer programs, were developed by ResponseWare. Currently, these products are not being manufactured because they cannot take advantage of personal computer environments; however, ATI continues to provide support and maintenance for the current product line. In addition, ATI's 3-Tier client server architecture is still in the developmental stage. ATI intends to use part of the proceeds of its $1 million offering to install its development team and complete the product. ATI expects to finish developing the products within eighteen months of completing the offering. ATI's products are sold directly to the current customers. After the Merger, Aztek will market and distribute the products through direct sales, value-added resellers, telemarketing and advertising through print media. ATI had been pursuing financing through an agreement with Equitrade Securities Corporation ("Equitrade") for US$1,000,000.00 (One Million Dollars) to be used towards new product development and acquisitions, but has withdrawn the offering. The $1 million offering arose in the Spring of 1997 out of ATI's relationship with Select Capital Advisors ("Select"). ATI intended to effect the offering partially in the United States in a transaction that would have been exempt from registration under Rule 504 of Regulation D. While Select and ATI were working on the offering, ATI voluntarily registered its shares under Section 12 of the Exchange Act. Once the registration statement became effective, ATI had become subject to the reporting requirements of the Exchange Act and was no longer eligible for the Rule 504 exemption. The offering has been delayed for several reasons. The process of becoming a reporting company interrupted ATI's efforts to sell its shares in the exempt transaction. Because Select was not registered as a broker-dealer under the federal securities laws, ATI then entered into an underwriting agreement with Equitrade. However, ATI's fundamentals were not strong and the market for small business offerings has been weak in recent months. To date, the offering has not materialized due to the delays, ATI's fundamentals, and the weak market for small business offerings. After the Merger, Aztek will continue trying to effect an offering for US$1 million. 34 OPERATING DIVISIONS ATI has four operating divisions. Unless otherwise specified, the description of the services and products are explained in the content of their usage in various Canadian municipalities. Although ATI intends to expand to the U.S. markets, its products and services are primarily used by Canadian municipalities. The business activities of each division of ATI are set forth below. BUSINESS SOLUTIONS DIVISION The Business Solutions Division is responsible for development and support of core business software products. Products included are accounting systems, payroll/human resource management systems, and specialized municipal government systems such as utility billing, property taxation, building permits, and tracking the issuance of various items for municipal governments. This division maintains and supports the ResponseWare software since they are all core business applications. The division is also responsible for development of new products to replace ResponseWare products and other proprietary software products that Aztek will inherit through future acquisitions. At present, the Business Solutions Division generates over 90% of ATI's revenue. MOBILE TECHNOLOGIES DIVISION The Mobile Technologies Division is focused on software for workers in field operations such as building code inspectors, parking and bylaws enforcement officers and maintenance crews. Mobile technologies include handheld computers, pen-based computers, bar code devices and wireless communications. The division provides consulting and custom developed software on a time and materials basis. No contracts for these services exist at this time although ATI actively pursues opportunities. ATI intends to develop mobile work force systems in the future to complement the new systems developed by the Business Solutions Division. ATI has no completed products at this time. Funding for these products will come from either cash flow or future investment financing. ELECTRONIC COMMERCE DIVISION ATI has pursued, and continues to pursue opportunities to develop systems for electronic commerce using Internet and Electronic Data Interchange ("EDI") technologies. To date, ATI has not secured contracts in this area. ATI plans to enhance the capabilities of the existing and future products from the Business Solutions Division to include support for electronic commerce. For example, the Parking and Bylaw Enforcement system could be enhanced to allow payments of fines on the Internet. Building permits could be applied for and paid on the Internet. Funding for these products will come from either cash flow or future investment financing. ATI has not finalized the funding requirements. 35 PROFESSIONAL SERVICES DIVISION The Professional Services Division is responsible for general consulting, project management, and custom software development services. ATI markets these services to its own clients that use products from the Business Solutions Division. The division also pursues general consulting and software development opportunities to customers that use products from the Business Solutions Division but are not in ATI's client base. The division also pursues general consulting and software development opportunities outside of its client base. At present, the Professional Services Division generates less than 10% of ATI's revenues. CURRENT STATUS OF ATI On September 30, 1994, ATI acquired all of the issued and outstanding shares of ResponseWare Corp. This acquisition allowed ATI to further diversify its operations with the computer hardware, software and telecommunications market to expand the existing forty-five (45) municipal and private sector clients of ResponseWare. ResponsWare designed its software primarily for use by small to medium-sized municipal governments and corporations to meet their human resources and payroll applications. In January 1995, ATI discontinued sales of existing ResponseWare computer systems due to maintenance costs and the system's inability to take advantage of personal computer environments. ATI is proceeding to rewrite its existing municipal applications using client server and object oriented technologies. ATI has already completed the architectural design of the new software, but still must complete the actual programming. Once the programming is complete, ATI will have a finished product that it can market. Client server technology refers to the relationship between two types of computers - a server computer and a client computer. The server is a high-powered computer that stores both software applications and files. The server can be a mainframe, mini-computer, or a personal computer. The client computer is a personal computer with software that handles functions such as the appearance on the computer screen, sorting data, and performing calculations. In client server technology, the software runs on both the server and client computers. Software on the server allows client computers to access information, and sometimes applications, on the server. The server software manages the client computers' access to information. Multiple client computers can access the server at the same time. Client server technology takes advantage of the power and flexibility of personal computers while providing centralized control of data. The technology also allows a client computer to pass on "heavy duty" computing tasks to the server. Object oriented technology is a computer software programming technique supported by a number of common programming technologies. The most common technology is known as Java. The benefit of object oriented technology is increased productivity through building programs by copying or modifying existing parts and easier software maintenance. ATI's products are based on a 3-Tier client server architecture. The 3-Tier architecture extends the client server concept such that a client computer may access multiple servers 36 simultaneously. A client computer may access certain information from a corporate server, other information from a departmental server, and integrate the information from both sources. Customers use certain mouse and graphical user interface oriented applications. A graphical user interface is a technology that gives software programs a user-friendly appearance on the computer screen. An example of a graphical user interface is the commonly used Windows operating system. A commonly known non-graphical user interface is MS-DOS. The products are designed to operate as independent systems and together as integrated solutions. The products offer ease of use and flexible configuration to meet customer demands and expectations. Configuration refers to a specific combination of software programs contained in a specific software application. The new products are designed to address both public and private sector markets. ATI's products are software applications commonly referred to as computer programs. The software programs are designed to execute tasks described by the name of the program. The names of ATI's computer software programs are as follows: General Accounting & Fund Accounting; Accounts Payable; Purchase Order Control; Payroll; Cash Receipts, Job & Project Accounting; Budgeting; Financial Reporting; Taxation; Personnel Data; Human Resource Management; Property Information System; Street Guide; Geographic Information System Interface; Facilities Booking; Parks and Recreation Management; Utility Customer Information; Inspection Management; Permit Systems; Animal Licenses; Business Licenses; Election Management; Parking Enforcement; Maintenance Management; Request for Service; Voter Registration and Local Improvement. As mentioned above, ATI is rewriting the software and has already finished the architectural design. ATI may sell an individual product, "Payroll" for example, as soon as the programming is complete. (Continued on next page) 37 SELECTED FINANCIAL DATA ($ Canadian)
1994 1995 1996 1997 1998 Net Sales 798,043 344,386 528,922 459,937 340,081 Income (loss) from Operations (868,728) (517,506) (219,474) (564,535) (365,426) Income (Loss) From Operations Per Share (.24) (.09) (.04) (.38) (.18) Total Assets 974,479 566,827 244,179 230,119 178,414 Current Liabilities 927,235 819,823 299,045 547,238 524,252 Long Term Obligations Long Term Debt 8,700 142,428 449,800 33,689 - Capital Leases 20,826 62,588 57,465 33,632 800 Due to Related Parties 74,000 - - - 132,707 Total Liabilities 1,030,761 1,063,375 825,582 614,559 657,759 Share Capital 3,011,330 3,011,330 3,154,130 3,909,000 4,179,522 Deficit (3,067,612) (3,507,878) (3,735,533) (4,293,440) (4,658,867) Cash Dividend per common share - - - - -
DESCRIPTION OF PROPERTY ATI's headquarters is located at 246 Lawrence Avenue, Kelowna, British Columbia V1Y 6L3, Canada. The headquarters consist of approximately 1,500 square feet. The lease is month-to-month and ATI pays rent to a company controlled by the spouse of an ATI director. ATI also leases 4,000 square feet of office space at 6450 Roberts Street, Burnaby, British Columbia V5G 4EI, Canada. LEGAL PROCEEDINGS ATI is not a party to any legal proceedings. 38 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS On September 12, 1980, ATI's Common Stock began trading on the Vancouver Stock Exchange under the symbol CKY. On July 29, 1997, ATI obtained the approval to trade on the OTC Bulletin Board under the symbol AZTKF. Management decided to list ATI on the OTC Bulletin Board because of a combination of the perceived prestige factor, the potential for a greater investor base and the possibility of participation in a new market. The dual listing on the Vancouver Stock Exchange and the OTC Bulletin Board allows investors to trade the securities in Canada and the United States. With respect to the OTC Bulletin Board, there is no established public trading market for ATI's Common Stock notwithstanding limited or sporadic quotes. The following table sets forth the high and low bid prices for each quarter within the last two fiscal years. The prices are depicted in Canadian dollars.
Common Stock Period Low Bid High Bid Fiscal 1998 First Quarter 1.06 2.45 Second Quarter 0.72 1.75 Third Quarter .75 1.26 Fourth Quarter .62 1.80 Fiscal 1997 First Quarter No trading Second Quarter 1.20 1.55 Third Quarter 1.75 2.40 Fourth Quarter 1.25 1.80
ATI's stock was listed on the OTC Bulletin Board on September 30, 1997, at US$1.50. The quotation reflects inter-dealer prices, without retail mark-ups, mark-downs or commissions and may not represent an actual transaction. HOLDERS OF COMMON STOCK On June 30, 1998, there were approximately 347 holders of record of ATI's Common Stock. Some shares are held in trust by broker-dealers for the shareholders of ATI's predecessor, Consolidated McKinney. Following the name change and business reorganization, several shareholders failed to tender their Consolidated McKinney stock certificates in exchange for ATI stock certificates. DIVIDENDS ATI has declared no dividends, cash or otherwise, in the last five years and does not plan to pay any dividends prior to the Merger. 39 ATI MANAGEMENT'S DISCUSSION AND ANALYSIS IN REVIEWING THE MANAGEMENT'S DISCUSSION AND ANALYSIS, REFERENCE SHOULD BE MADE TO ATI'S FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED AS AN EXHIBIT TO THE REGISTRATION STATEMENT ON FORM S-4 AND IN ATI'S ANNUAL REPORT. THE REFERENCES TO MONETARY UNITS OR DOLLARS IN THE INSTANT JOINT PROXY STATEMENT-PROSPECTUS AND SUPPORTING FINANCIAL STATEMENTS SHALL MEAN CANADIAN DOLLARS UNLESS OTHERWISE SPECIFIED. THE FINANCIAL STATEMENTS FOR ATI ARE PREPARED IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. PROVISIONS FOR DIFFERENCES IN REPORTING IN CANADA AND THE UNITED STATES ARE PROVIDED FOR BELOW THE AUDITOR'S REPORT IN THE FINANCIAL STATEMENTS AND IN NOTE 11 TO THE FINANCIAL STATEMENTS. TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD"), COMPARED WITH TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD"). THE 1998 PERIOD IS DEFINED AS THE FISCAL YEAR FOR ATI, WHICH IS JULY 1,1997, TO JUNE 30, 1998. The loss in the 1998 Period decreased to ($365,426) from ($557,906) in the 1997 Period. Loss per share decreased to ($.18) in the 1998 Period from a loss of ($.38) in the 1997 Period. The 1997 period is July 1, 1996, to June 30, 1997. REVENUES ATI licenses software under non-cancelable license agreements, provides maintenance services consisting of product support services and periodic updates, and provides contracted training and consulting services. License fee revenues are generally recognized when a non-cancelable license agreement as been signed, the software product has been shipped, there are no uncertainties surrounding product acceptance, there are no significant vendor obligations, the fees are fixed and determinable, and collection is considered probable. Revenues from maintenance services agreements are recognized ratably over the agreement period, which in most instances is one year. Revenues for training or consulting services are recognized as services are performed. In multiple element arrangements, the revenue or fee is allocate pro-rata to the various elements based upon the fair Net sales decreased $120,153 (26%) to $339,784 in the 1998 Period, from $459,937 in the 1997 Period. In January 1995, ATI discontinued sales of existing ResponseWare computer systems due to maintenance costs and the system's inability to take advantage of personal computer environments. Discontinuance of selling these systems caused the decline in sales. In the 1998 Period, the entire $340,081 in sales was attributed to maintenance and customization services. ATI's cost of sales was $98,784 and the gross profit was $241,297. In the 1997 Period $442,656 were attributed to maintenance and customization services and $22,910 were attributed to new product sales. The 1997 gross margins were $393,249 for maintenance and customization and $2,043 for new product sales. 40 There was a reduction of $102, 575 in revenues generated by maintenance and customization services from fiscal 1997 to fiscal 1998. This revenue reduction resulted from two major factors. First, several clients have decided with the approach of the new millennium to upgrade to new systems and no longer require ATI support services. Second, clients are reluctant to do further customization to systems that are aging and have instead opted to wait for upgrades or new systems designed to take them into the new millennium. Contractors' fees declined significantly due to ATI's discontinuance of selling the ResponseWare software. With no software sales, ATI had no need for employees and contractors to provide installation services. The reduction also caused a decrease in customization services. Fees paid for contractors in the 1998 Period were solely for maintenance services. The maintenance cost is the expense incurred by ATI to support existing ResponseWare Products. Even though ATI is not selling new ResponseWare products, it continues to service, support, and develop product enhancements (software upgrades) for the ResponseWare product line. The ResponseWare products are software applications designed to address various financial and operational needs of municipal governments such as general ledger and funding accounting, accounts payable, purchase order control, payroll, budgeting, human resource management and voter registration in Canada. ATI is contractually obligated to provide maintenance services for the products already sold. Limited support is provided for one-year terms provided customers pay an annual fee for computer system maintenance. Customers may reinstate lapsed support by paying the annual support fee plus an additional charge. Despite the outdated nature of the ResponseWare products, they are reliable and ATI has a stable customer base that continues to pay the annual support fees. For those customers who are not parties to an annual service contract, ATI provides support and is compensated on a time and material basis. In the last three years, ATI has experienced no reduction in the number of licensees that have maintenance contracts. In 1996, 66 2/3 % of outstanding licenses were supported by maintenance contracts. In 1997 and 1998, 69.2% of outstanding licenses were supported by maintenance contracts. The percentage increase resulted from an 11% reduction in the number of outstanding licenses that were not supported by maintenance contracts. Support and maintenance of ResponseWare products presently generate 100% of ATI's revenues. The revenues generated from the maintenance software are substantially less than the revenue formerly generated by the sale of the software. Management's decision to cease the sales of new ResponseWare systems resulted in the loss of 26% or $120,153 of ATI's revenue for the last fiscal year. ATI has purposefully and substantially reduced its efforts to market its current software because new software is under current development. Moreover, the additional expenses of developing the new systems continue to be substantial relative to the current revenue generated by ATI. In the 1998 Period, research and development costs for new product development was $354,069. ATI has budgeted $1 million over the next eighteen months for research and development, of which $500,000 will come from the proceeds of the anticipated offering, and $500,000 will come from future revenues. 41 An inability to produce the new systems could cause a further and substantial decline in revenues. Possible difficulties in hiring and retaining highly qualified software developers could cause delays or prevent ATI from developing a commercially marketable product. Should ATI be unable to rewrite the ResponseWare software, customers may continue paying software maintenance fees for increasingly outdated software, or they may continue using the existing software without maintaining their systems. Customers may also replace the ResponseWare software with products from other vendors. ATI has also incurred additional expenses including but not limited to legal and accounting fees in connection with the listing on the OTC Bulletin Board. As discussed above, Aztek, as the surviving entity of the Merger, anticipates that sales will increase in the 1998-1999 Period once the new product development is completed and after the pending acquisitions of small vendors. OPERATING INCOME ATI experienced a decrease in operating expenses. Advertising and promotion expenses decreased to $4,382 (84%) for the 1998 Period from $27,770 for the 1997 Period. Prior to the 1997 Period, ATI did not advertise in the U.S. markets. Management decided to advertise its services and products in the U.S. print media causing a substantial increase in the advertising expense in the 1997 Period. Subsequently, ATI's operating capital did not allow for continued advertising. In the 1998 Period, ATI discontinued its product advertising in all publications causing the substantial decrease in advertising expense. Filing and transfer fees decreased by $34,285 (82%) for the 1998 Period from $41,641 for the 1997 Period. The 1997 figure was extraordinary due to one-time fees paid to Standard and Poor's and the Vancouver Stock Exchange. Selling and marketing expenses decreased by $60,873 (98%) in the 1998 Period, from $61,914 for the 1997 Period. In 1997, ATI had attempted to market a product called Cognos, an accounting software program, and thereby incurred additional selling and marketing expenses. ATI reduced office and administration expenses by $19,217 (45%) for the 1998 Period, from $42,823 for the 1997 Period. The 1997 figure resulted from a reinstatement of trading on the Vancouver Stock Exchange. Amortization expenses decreased 50% in the 1998 Period as compared to the 1997 Period. Amortization in the 1997 Period was abnormally high due to $24,000 of amortization that ATI should have claimed in prior years. Moreover, the 1997 Period was the final year ATI amortized $8,000 of goodwill. Thus, the decrease reflects a return to normal amortization costs. Management fees increased by $108,467 (119%) to $199,589 during the 1998 Period. The increased management fees resulted from a change in accounting for the work of ATI's managers. Previously, certain managers were on ATI's payroll. The expenses for paying these employees were accounted for as "wages, salaries and benefits." In the 1998 Period, these expenses were transferred to the account for management fees, and were paid to independent contractors. The transfer between accounts caused the increase in management fees and part of the reduction in the "wages, salaries and benefits" account. The total reduction in "wages, salaries and benefits" was 42 $152,147 (51%) from $298,082 during the 1997 Period. The balance of the reduction was from layoffs. When ATI discontinued development of its new systems, some employees were laid off due to a shortage of funds with which to pay those employees. As part of its efforts to make the existence of ATI known to the investing public, ATI paid $32,309 to investor relations firms. These firms undertook to disseminate information about ATI persons and entities in the stock brokerage and investment communities including investment management firms brokers, for the purpose of increasing awareness about ATI. ATI incurred the major portion of the expense during the 1998 Period. The contracts with the investment relations firms expired during the 1998 Period. OTHER INCOME (DEDUCTIONS) AND TAXES The total interest ATI received decreased to $297 (95%) for the 1998 Period, from $5,629 for the 1997 Period. This is the interest charged on the outstanding accounts receivable. ATI was more aggressive in collecting receivables. ATI has losses available for income tax purposes totaling, approximately $1,252,000. The losses can be used to reduce taxable income of future years. The tax losses have not been used for the 1998 Period or the 1997 Period. ASSETS AND LIABILITIES Cash and receivables changes resulted from several transactions. Though ATI ceased selling computer systems, it continues to provide support services for the systems it has already sold. These support services are covered by contracts with the owners of the systems. The contracts run on a renewable one year basis. The renewal dates for all of the support service contracts are dispersed throughout a year and unless modified or canceled continue from year to year. In most cases, the maintenance contracts are invoiced in advance to cover the ensuing year. In some cases, however, the support services are invoiced on a quarterly basis for the ensuing quarter. During the 1998 Period, ATI became more aggressive in terms of collecting on receivables in that it applied strict enforcement of demanding full payment by the first day of the maintenance period. At the request of several cities and municipalities, ATI began delivering invoices two months in advance of the new service periods. Cities and municipalities need approximately two months to get departmental approval to make payments. Advance invoicing provides cities and municipalities the necessary documentation to secure payment approval in time for a new maintenance period. Prior to receiving the payment, ATI carries the amount due on the contract as a receivable due in sixty days. However, the work does not begin until ATI actually receives payment. The change to the sixty-day cycle contributed to the increase in the accounts receivable balance at the end of the 1998 Period. Prepaid expenses included software consultants' fees, insurance premiums, storage, etc. In several cases, ATI prepays expenses by 12 months. ATI's major prepaid expense, insurance, begins in February. 43 The 1,038% increase in accounts payable to officers and directors and the increase in loans to related parties resulted from several transactions. See "Certain Relationships and Related Transactions" at page 67. Since the 1997 Period, ATI's current liability for royalties increased by $30,000 (30%) to $100,000 in the 1998 Period. When ATI acquired ResponseWare, it assumed ResponseWare's debt to International Business Machines ("IBM"). IBM financed the cost of ResponseWare installing new systems. The debt is $100,000 payable over ten months. ATI was scheduled to begin paying the debt in December 1997. As of September 1997 the total amount of the debt was due within one year. At the present time, ATI is in default on repayment and is negotiating a revised payment schedule. Management does not expect the default to have an adverse effect on ATI's financial position or results of future operations. ATI did not incur any additional royalties in the period. Rather, the $30,000 that caused the increase had been carried as a long-term debt in the 1997 Period. ATI is presently in default on repayment and is currently negotiating a revised payment schedule. ATI does not believe the debt will have an adverse effect on ATI's financial position or the results of future operations. IBM has agreed to wait until Aztek completes an equity offering to collect royalties due. ATI has a good working relationship with IBM as shown by IBM's willingness to enter into a licensing agreement for new software in July 1998. ATI's long-term obligation under capital lease was reduced by C$32,832 (98%) to $800 in the 1998 Period. The change came as a result of C$33,095 becoming a current liability for the 1998 Period. ATI reduced its current portion of long-term debt by $136,241 (58%) by repaying its debt to ATI's president's spouse. The principal on the debt was C$150,000. ATI satisfied the debt by issuing 120,465 shares at C$1.38. The Vancouver Stock Exchange approved the transaction on July 30, 1997, and Aztek paid the debt on July 30, 1997. The amount due to related parties increased $129,018 to $132,707 (3,497%) from $3,689 the previous year. The amount due represents loans made by Mr. Mike Sintichakis and members of his family to ATI to maintain levels of working capital sufficient for ATI to continue operating. The loans are not repayable prior to July 1999. For specific information, see "Certain Relationships and Related Transactions" at page 67. LIQUIDITY AND CAPITAL RESOURCES In the 1998 Period, ATI used $212,823 for operating activities. In addition to the net loss in the 1998 Period (365,426), the loss per share decreased to (0.18) from (0.38). In the 1998 Period, the end of year deficit increased to (4,658,867) compared to ($4,293,440) for the 1997 Period. ATI made a commitment to spend $75,000 to $100,000 for capital expenditures in connection with research and development of its new products for the 1998 Period. Actual 44 expenditures totaled $61,235.80. Of this amount, ATI spent $20,533 for development of the Year 2000 tool. These expenditures are accounted for as part of wages, salaries and benefits. The products are expected to be completed and commercially available within 18 months subject to additional financing. ATI plans to operate exclusively through the support and maintenance of its existing software programs. There are 45 municipal and private sector customers using the existing programs. As of June 30, 1998, ATI had a working capital balance of ($451,698). ATI expects to use approximately $400,000 in working capital over the next twelve months. Therefore, ATI has to either raise additional capital in an offering or reduce expenses to keep in line with its current revenues. The first component of the external funding via Equitrade Securities Corp. has not materialized to date, and ATI cannot be certain such funding will become available to ATI in the 1999 Period. ATI estimates the anticipated cost of the acquisitions to be less than $200,000. ATI and the companies to be acquired have agreed, in principal, to the acquisitions. But, the specific terms or purchase price amounts have yet to be negotiated. In the absence of the equity funding through external funding sources, ATI will not be able to complete two of the three acquisitions. TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD"), COMPARED WITH TWELVE MONTHS ENDED JUNE 30, 1996 (THE "1996 PERIOD"). THE 1997 PERIOD IS DEFINED AS THE FISCAL YEAR FOR Aztek, WHICH IS JULY 1,1996, TO JUNE 30, 1997. RESULTS OF OPERATIONS The loss in 1997 Period increased to ($557,906) from ($227,656) in the 1996 Period. Loss per share increased to ($.38) in the 1997 Period from a loss of ($.04) in the 1996 Period. The 1996 Period is defined as July 1, 1995, to June 30, 1996. REVENUES Net sales decreased $68,985 (13%) to $459,937 in the 1997 Period, from $528,922 in the 1996 Period. Sales continued to decline because ATI discontinued the sales of existing ResponseWare computer systems. Even though ATI was not selling new ResponseWare products, it continued to service, support, and develop product enhancements (software upgrades) for the ResponseWare product line. Aztek was contractually obligated to provide maintenance services for the products already sold. Customers pay an annual fee for computer system maintenance. Despite the outdated nature of the ResponseWare products, they are reliable and Aztek has a stable customer base that continued to pay the annual support fees. For those customers who were not parties to an annual service contract, ATI provided support where it was compensated on a time and material basis. Approximately, 90% of ATI's revenue was generated by support and maintenance of the ResponseWare products. Management's decision to cease the sales of new ResponseWare systems resulted in the loss of 13% or $68,895 of ATI's revenue for the last fiscal year. Moreover, the additional expenses of developing the new systems continued 45 to be substantial relative to the revenue generated by ATI at that time. ATI also incurred additional expenses including but not limited to legal and accounting in connection with the listing on the over-the-counter bulletin board. OPERATING INCOME Although the revenues continued to decrease, ATI experienced an increase in operating expenses. Advertising and promotion expenses increased to $27,769 (950%) for the 1997 Period from $1,285 for the 1996 Period. In the past ATI did not advertise in the U.S. markets. Management decided to advertise its services and products in the U.S. print media thereby incurring a substantial increase in advertising expenses. Filing and transfer fees increased by $37,611 (968%) for the 1997 Period from $4,030 for the 1996 Period for fees paid to Standard and Poor's and the Vancouver Stock Exchange. Selling and marketing expenses increased by $55,329 (890%) in the 1997 Period, from $6,585 for the 1996 Period. ATI attempted to market a product called Cognos, an accounting software program, and incurred additional selling and marketing expenses. The product was marketed as a complement to accounting systems to allow users to easily view and analyze budgets and forecasts without the need for custom programming. ATI spent $15,024 on Cognos and only sold the product to two customers. The sales generated revenues of only $10,455.93. ATI discontinued the product. The activities related to the reinstatement of trading on the Vancouver Stock Exchange resulted in an increase in office and administration expenses: $31,998 (75%) for the 1997 Period, from $10,824 for the 1996 Period. Wages, salaries and benefits increased $170,432 (57%) to $298,083 for the 1997 Period, from $127,651 for the 1996 Period. The wages, salaries and benefits increased due to payment of employees in connection with the development of new software programs. OTHER INCOME (DEDUCTIONS) AND TAXES The total interest received by ATI decreased to $5,629 (70%) for the 1997 Period, from $19,079 for the 1996 Period. This is the interest charged on the outstanding accounts and ATI was more aggressive collecting amounts to which it was due. ATI had losses available for income tax purposes totaling, approximately $1,343,000. The losses can be used to reduce taxable income of future years. The tax losses were not used for the 1997 Period or the 1996 Period. LIQUIDITY AND CAPITAL RESOURCES In the 1997 Period, $491,653 was used for operating activities of ATI. (Due to a clerical error, ATI reported in its registration statement on Form SB-10 that $1,024,472 was used during this period.) In addition to the net loss in the 1997 Period ($557,906), the loss per share increased to ($.38) from ($.04). In the 1997 Period, the end of year deficit increased to ($4,293,440) compared to ($3,735,534) for the 1996 Period. Financing activities in the 1997 Period provided cash of $754,870 through the issuance of share capital in the amount of 1,042,130 shares. In the 1997 Period ATI received approval from 46 the Vancouver Stock Exchange to convert the total loan amount of $166,243 into 120,465 shares of ATI's Common Stock. The loan was incurred to provide the necessary capital to acquire a small computer company in Canada. The shares have been issued and the debt has been fully satisfied. ATI did not incur any other long-term debt in the 1997 Period. As of September 30, 1997, ATI's long term debt was $13,196. ATI had also incurred expenses of $105,000 for legal and accounting fees related to registration and the sale of its shares, listing on the OTC Bulletin Board, and other offering costs. EXTERNAL FUNDING Aztek expected to benefit from an ATI offering under Regulation D. The net proceeds from the offering were expected to be $1,000,000. ATI's agreement with Equitrade Securities has expired. ATI derives its capital from maintenance and customization on its existing contracts. Revenues generated by these contracts are sufficient only to cover ATI's immediate operating expenses and do not permit any reduction in accrued long-term liabilities. ATI has continued to meet its cash flow requirements on monthly. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ATI has not had any changes in or disagreements with its accountants. VOTING AN MANAGEMENT INFORMATION DATE, TIME AND PLACE INFORMATION The meeting of security holders of ATI Common Stock will be on _______,1999, in the offices of Stephen K. Winters Law Corporation, 1010 Burrard Building, 1030 West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at 9:00 a.m. The address of ATI is as follows: #5-246 Lawrence Ave., Kelowna, British Columbia, V1Y 6L3. On June 30, 1998, the shareholders and directors of Aztek held their annual and special meetings and unanimously approved the Merger. The approximate date on which the proxy statement and form of proxy are first to be sent or given to security holders is ___________, 1999. Proposals of stockholders intended to be presented at the 1999 annual meeting of Stockholders of Aztek must be received by Aztek no later than May 14, 1999, in order to be included in the proxy statement and form of proxy relating to such annual meeting. After July 28, 1999, a notice of a shareholder proposal submitted to Aztek outside the processes of Rule 14a-8 of the Exchange Act shall be considered untimely. REVOCABILITY OF PROXY If the enclosed Proxy is executed and returned, it will be voted on the proposals as indicated by the shareholder. The Proxy may be revoked by the shareholder at any time prior to its use by notice in writing to the Secretary of ATI, by executing a later dated proxy and delivering it to the ATI prior to the meeting or by voting in person at the meeting. 47 DISSENTERS' RIGHTS OF APPRAISAL Any shareholder of ATI on ___________, 1999, (the record date for purposes of determining who is entitled to notice of and to vote at the Annual and Extraordinary Meeting of Shareholders of Aztek) who objects to the Merger may dissent from the Merger. Any such shareholder may demand in writing prior to the shareholders' meeting that, if the Merger is consummated, ATI pay to him or her in cash the value of his or her present common stock. The dissenting shareholder must deliver the demand to ATI's registered office within 14 days after the date of this Joint Proxy-Statement Prospectus. The dissenting shareholder should deliver the demand to Mr. Mike Sintichakis, Aztek Technologies Inc., Suite #5-246 Lawrence Ave. Kelowna, B.C. V1Y 6L3. On delivery of the notice and the accompanying share certificates, the dissenting shareholder is bound to sell those shares to ATI and ATI will purchase the shares. Once a shareholder dissents, the shareholder must not then vote in favor of the Merger. As described in the section "Voting Procedures" below, failure to return a properly executed proxy card or to vote in person will have the same effect as a vote in favor of the Merger. Such failure will constitute a waiver of dissenters' rights. Moreover, beneficial shareholders whose names are not on Aztek's register of members cannot give a notice of dissent and trigger the appraisal remedy. If the shares are held by a broker, the broker's name being listed on ATI's register of members, the broker may dissent with respect to the shares it holds as the registered owner, if the broker lists such shares on the notice of dissent. The cash value to which such shareholder will be entitled is the value agreed upon or court determined, in the manner set forth below ("Dissenter's Value"). ATI has no obligation to institute any court proceeding to have a court determine the value of the shares. If a shareholder applies to a court to determine the value of the shares, the shareholder will bear his or her owns costs of such application. This statutory dissenter's right to payment of the Dissenter's Value of his or her common stock is mandated by section 207 of the British Columbia Company Act (the "Company Act") a copy of which is attached to this Joint Proxy Statement-Prospectus. A notice of dissent ceases to be effective if the dissenting member consents to or votes in favor of the resolution of Aztek to which the dissent relates, unless the consent or vote is given solely as a proxy holder for a person whose proxy required an affirmative vote. ATI will provide the funds necessary to pay any holders of Common Stock who perfect their statutory dissenter's rights. The price to be paid to dissenting shareholders is the fair value as of the day before the resolution is passed including any appreciation or depreciation in anticipation of the vote, and all dissenting shareholders shall be paid the same price. This method for determining the value of the shares is proscribed by section 207 of the British Columbia Company Act. Any such shareholder who contemplates the exercise of such dissenter's rights is urged to review carefully the provisions of the Company Act, a British Columbia law, particularly the procedural steps required to perfect the right to Dissenter's Value. The rights of dissenting shareholders to Dissenter's Value will be lost if the procedural requirements of the Company Act 48 are not fully and precisely satisfied. If the right to Dissenter's Value is lost, the shareholder will be entitled to receive for each share of ATI Common Stock the number of shares of Aztek's Common Stock as provided in the Merger Agreement. The procedural steps are set forth in the legal opinion of Mr. Steven K. Winters attached hereto as Annex B (to be read in conjunction with the full text of the Company Act and is qualified in its entirety by reference to the statute. PERSONS MAKING THE SOLICITATION This proxy statement is furnished in connection with the solicitation by the Board of Directors of Aztek Technologies Inc. ("ATI") of proxies for use at the Extraordinary Meeting of Stockholders of Aztek to be held on __________ 1998, and any adjournments thereof. There were outstanding at the close of business on __________, 1999, the record date for determination of the stockholders of ATI entitled to notice of and to vote at the Special Meeting, 2,051,109 shares of Common Stock of ATI entitled to one vote per share. Only stockholders of record on __________, 1999, are entitled to notice of and to vote at the meeting. The proxy does not affect the right to vote in person at the meeting, and may be revoked at any time prior to the voting thereof. The presence of two persons entitled to vote will constitute a quorum. The affirmative vote of the holders of shares present or represented by proxy at the meeting must exceed the negative votes cast for the adoption of the proposals described in this Proxy Statement. The Board of Directors knows of no other matters likely to be brought before the Special Meeting other than those mentioned above. However, if any other matters not now known or determined, properly come before the meeting or any adjournments thereof, the persons named in the enclosed form of proxy will vote such proxy in accordance with their best judgment in such matters pursuant to discretionary authority granted in the proxy. Stockholders are urged to sign the accompanying form of proxy, solicited on behalf of the Board of Directors of ATI, and to return it at once in the envelope provided for that purpose. Proxies will be voted in accordance with the stockholders directions. If no direction is given, proxies will be voted in accordance with the recommendations of the Board of Directors set forth in this Proxy Statement. A stockholder who wishes to designate a person or persons to act as his or her proxy at the meeting, other than the proxies designated by the Board of Directors, may strike out the names appearing on the enclosed form of proxy, insert the name of any other such person or person, sign the form and transmit it directly to such other designated person or persons for use at the meeting. The expense of the Board of Directors' proxy solicitation will be borne by ATI. In addition to the solicitation of proxies by use of the mails, some of the officers, directors and regular employees of ATI (none of whom will receive additional compensation therefor) may solicit proxies by telephone, telegraph or personal interview. ATI will, upon request, reimburse nominees, custodians, and fiduciaries for the expenses in forwarding proxy material to their 49 principals. INTEREST OF CERTAIN PERSON IN MATTERS TO BE ACTED UPON Certain members of ATI's management and its Board of Directors may be deemed to have certain interests in the Merger in addition to their interests as stockholders of ATI generally. ATI's Board of Directors was aware of these interests and considered them, among other matters, in unanimously approving the Merger Agreement. OFFICERS AND BOARD OF DIRECTORS. Mike Sintichakis, Edson Ng, and Eileen Keogh constitute the entire Board of Directors of ATI and are also directors of Aztek. The sole remaining director of Aztek is Nick Sintichakis who is the son of Mike Sintichakis. COMMON SHARES. In June 1998, the directors and officers named in the preceding paragraph purchased one million shares of the common stock of Aztek at $.05 per share. The shares are to be distributed in twenty-four monthly installments beginning in June 1998. The total number of shares that will be distributed pursuant to the purchase constitute the total amount of shares that are issued and outstanding. Aztek has no existing business at this time and will begin transacting business when it assumes the operations of ATI upon consummation of the Merger. Since ATI will cease to exist upon completion of the Merger, the net result will be that the above-named directors will each own a larger percentage in the combined company than they previously owned in ATI. INDEMNIFICATION. To the extent permitted by law, the Articles of Incorporation of Aztek and ATI contain an indemnification clause such that Aztek or ATI will indemnify all directors and officers of Aztek or ATI if any such directors or officers are named as a party or parties to a lawsuit as a result of serving as officers or directors of Aztek or ATI. For limitations on indemnification, see "Disclosure of Commission Position on Indemnification for Securities Act Liabilities" at page 25. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF ATI's Shareholders of record at the close of business on __________, 1999 will be entitled to vote on all matters. On the record date ATI had 2,051,109 shares of ATI Common Stock outstanding. The holders of ATI Common Stock are entitled to one vote per share. ATI has no class of voting securities outstanding other than the ATI Common Stock. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (Pre-Merger) SECURITY OWNERSHIP OF ATI SHARES BY CERTAIN BENEFICIAL SHAREHOLDERS The following table discloses the details of shares held by Beneficial Shareholders of ATI prior to the Merger with Aztek.
Title of Name and Address of Amount and Nature Percentage of Class Beneficial Owner of Beneficial Owner Class Voting Mike Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 462,190 23% Voting Maria Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 255,928 12% Voting Tony Pantazopoulos 21,333 1% Common 1807 Lipsetet Court Kelowna, BC V1V 1X3 Voting Edson Ng Common 623 Alpine Court North Vancouver, BC V7R 2L7 104,700 5% Beneficial shareholders as Group 844,151 41%
Mike Sintichakis has the right to acquire 90,000 shares at the exercise price of $1.82 within sixty days. Edson Ng has the right to acquire 40,000 shares at the exercise price of $1.82 within sixty days. Eileen Keogh has the right to acquire 40,000 shares at the exercise price of $1.82 within sixty days. Maria Sintichakis is Mr. Sintichakis' wife. Mr. Sintichakis does not exercise shared voting or dispositive powers with Mrs. Sintichakis. 51 Security Ownership of Aztek Shares By Certain Beneficial Shareholders The following table discloses the details of shares held by Beneficial Shareholders of Aztek prior to the Merger with Aztek.
Title of Name and Address of Amount and Nature Percentage of Class Beneficial Owner of Beneficial Owner Class Voting Mike Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 400,000 44% Voting Nick Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 230,000 23% Voting Eileen Keogh Common 508-2012 Fullerton Ave. Vancouver, BC V7P 3E3 120,000 12% Voting Edson Ng Common 623 Alpine Court North Vancouver, BC V7R 2L7 240,000 24% Beneficial Shareholders as Group 990,000 99%
Under the terms of the subscription agreements, Aztek will place one million outstanding common shares in a trust and distribute the shares in twenty-four monthly installments beginning in June 1998. 52 SECURITY OWNERSHIP OF ATI SHARES BY MANAGEMENT The following table discloses the details of shares held by ATI's management prior to the Merger with Aztek.
Title of Name and Address of Amount and Nature Percentage of Class Beneficial Owner of Beneficial Owner Class Voting Mike Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 462,190 23% Voting Eileen Keogh Common 508-2012 Fullerton Ave. Vancouver, BC V7P 3E3 37,000 2% Voting Edson Ng Common 623 Alpine Court North Vancouver, BC V7R 2L7 104,700 5% Directors and management as a Group 603,890 30%
See notes to Security Ownership of ATI shares of Certain Beneficial Shareholders SECURITY OWNERSHIP OF AZTEK SHARES BY MANAGEMENT The following table discloses the details of shares held by the Aztek's Management and prior to the Merger with ATI.
Title of Name and Address of Amount and Nature Percentage of Class Beneficial Owner of Beneficial Owner Class Voting Mike Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 400,000 44% Voting Nick Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 230,000 23% Voting Eileen Keogh Common 508-2012 Fullerton Ave. Vancouver, BC V7P 3E3 120,000 12% Voting Edson Ng Common 623 Alpine Court North Vancouver, BC V7R 2L7 240,000 24% Beneficial Shareholders as Group 990,000 99%
53 PRO FORMA SECURITY OWNERSHIP OF CERTAIN BENEFICIAL SHAREHOLDERS The following table discloses the details of shares held by Beneficial Shareholders of Aztek following the Merger. This table should be studied in conjunction with the foregoing tables showing the details of shares held by Beneficial Shareholders in both ATI (Aztek to be acquired) and Aztek prior to the Merger.
(1) (2) (3) (4) Title of Name and Address of Amount and Nature Percentage of Class Beneficial Owner of Beneficial Owner Class Voting Mike Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 862,190 28% Voting Maria Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 255,928 8% Voting Nick Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 304,500 10% Voting Eileen Keogh Common 508-2012 Fullerton Ave. Vancouver, BC V7P 3E3 157,000 5% Voting Edson Ng Common 623 Alpine Court North Vancouver, BC V7R 2L7 344,000 11%
Mike Sintichakis has the right to acquire 90,000 shares at the exercise price of $1.82 within sixty days. Edson Ng has the right to acquire 40,000 shares at the exercise price of $1.82 within sixty days. Eileen Keogh has the right to acquire 40,000 shares at the exercise price of $1.82 within sixty days. 54 PRO FORMA SECURITY OWNERSHIP OF MANAGEMENT The following table discloses the details of shares held by Aztek's management following the Merger. This table should be studied in conjunction with the foregoing tables showing the details of shares held by management in both ATI (the company to be acquired) and Aztek prior to the Merger.
(1) (2) (3) (4) Title of Name and Address of Amount and Nature Percentage of Class Beneficial Owner of Beneficial Owner Class Voting Mike Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 862,190 28% Voting Nick Sintichakis Common 1802 Lipsett Crt. Kelowna, BC V1V 1X3 304,500 10% Voting Eileen Keogh Common 508-2012 Fullerton Ave. Vancouver, BC V7P 3E3 157,000 5% Voting Edson Ng Common 623 Alpine Court North Vancouver, BC V7R 2L7 344,000 11% Directors and Management as a Group 1,667,690 55%
See notes to Pro Forma Security Ownership of Certain Beneficial Shareholders. VOTING PROCEDURES Two persons present and entitled to vote constitute a quorum at any general shareholders' meeting. A member may by proxy appoint a proxy holder to vote for him or her on a poll. Every shareholder who is present in person and entitled to vote at that occurrence shall have one vote and on a poll every member present in person or represented by proxy or other proper authority shall have one vote for each share of which he or she is the registered holder. ATI has no class of voting securities outstanding other than its Common Stock. Adoption of the Merger and the Merger Agreement will require that the votes cast favoring the Merger must exceed the votes cast opposing the Merger. The failure to return a properly executed proxy card or to vote in person ("abstention") at the Special Meeting will have the same effect as a vote in favor of the Merger. Similarly, "broker non-votes" (referring to instances where a broker or other nominee physically indicates on the proxy that, because it has not received instructions from beneficial owners, it does not have discretionary authority as to certain shares of ATI's Common Stock to vote on the proposal) will have the same effect as a vote in favor of the Merger. The proxies named in the enclosed proxy card may, at the direction of the Board, vote to adjourn or postpone the Special Meeting to another time or place for the purpose of soliciting additional proxies necessary for approval of a proposal or otherwise. 55 If the accompanying proxy card is properly executed and returned to ATI in time to be voted at the Special Meeting, the shares represented thereby will be voted in accordance with the instructions marked thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER AND THE MERGER AGREEMENT. Except for procedural matters incident to the conduct of the Special Meeting, the Board of Directors of ATI does not know of any matters other than those described in the Notice of Special Meeting that are to come before the Special Meeting. If any other matters are properly brought before the Special Meeting, the persons named in the ATI proxy will vote the shares represented by such proxy on such matters as determined by a majority of ATI's Board of Directors. Directors, Executive Officers, Promoters and Control Persons of the Surviving or Acquiring Entity Directors, Executive Officers, Promoters And Control Persons Of The Surviving Or Acquiring Company
Name Age Position Director Since Mike Sintichakis 60 Director August 1994 President Nick Sintichakis 33 Director July 1994 Secretary Treasurer Edson Ng 34 Director July 1998 Eileen Keogh 51 Director July 1998
Each director serves for a term of one year and is elected at the annual meeting of shareholders. Aztek's officers are appointed by the Board of Directors and hold office at the discretion of the Board. Mike Sintichakis. Mr. Sintichakis has over 27 years of experience as an entrepreneur and professional business manager. He has owned and operated seven corporations and presided as president of three other corporations. He received an Industrial Electrician Diploma from Greece in 1958. He has since specialized in acquiring, restructuring and growing small and mid-sized businesses in the hospitality, consumer services, automotive, leisure and manufacturing industries. He recently managed over 450 employees and consistently guided companies successfully through tremendous revenue growth. He has served as a director and president of ATI since 1991. Mr. Sintichakis has also served as a director and president of Aztek Inc. since its inception in 1994. From 1995 to 1997, he served as a director and president of ATI's wholly-owned subsidiary, ResponseWare Corp. From 1993 to 1994, he served as director and president of ATI's wholly-owned subsidiary Nu-Crest Sportswear Inc., a designer of customer embroidered and silk-screen sportswear. Edson Ng. Mr. Ng has earned a B.Sc. Degree in Mechanical Engineering from the 56 University of Alberta. He is a registered Professional Engineer (P.Eng.) and a Certified Management Consultant. His career includes 7 years of systems engineering, marketing, consulting experience with IBM Canada Ltd., and 4 years as founder and president of Advance Mobility Systems Integration Inc. where he served from 1992 to 1995. Advance Mobility Systems Integration was a consulting and computer integration business. Mr. Ng has been involved with various business ventures throughout his career. He has been with ATI since 1995 and currently serves as a director and vice president of operations. Eileen Keogh. Ms. Keogh received a B.A. degree in Mathematics from Dickinson College, Pennsylvania. She has over 29 years of consulting experience in information systems design, development, and implementation. Throughout her career in the computer industry she has served as Director of Development, Systems Architect, Project Manager, Team Leader, Data and Press Modeler, Methodologies Expert, Technical Designer, Systems and Applications Programmer/analyst, Trainer and Mentor. Ms. Keogh is an expert in client/server and object oriented software design and development on a variety of platforms. She gained seven years of software development experience with IBM Canada Ltd., IBM UK and IBM Corporation in New York. Her consulting projects include working for Prologic Computer Company from 1994 to 1995. Prologic is a designer of senior systems. From 1991 to 1995, she was self-employed as a computer consultant. In that capacity, she provided services to Solutions for Government, Fletcher Challenge, Alcan Canada, Insurance Bureau of Canada, Toronto Stock Exchange and the Bank of Montreal. She has been with ATI since 1995 and she serves as a director. She also is in charge of research and development. Nick Sintichakis. Mr. Nick Sintichakis is the Secretary of Aztek Inc. He presently serves as President of Christopher's Steak & Seafood Restaurant and has held that position for the past nine years. He was also a director of Yamas Taverna Inc., a restaurant in Kelowna, British Columbia for over five years. For ten years he was the manager of Caribou Restaurant. He currently spends about eight to ten hours per week as Secretary of Aztek. EXECUTIVE COMPENSATION OF THE DIRECTORS AND EXECUTIVE OFFICERS OF ATI The members of the Board of Directors of Aztek and the officers of Aztek presently do not receive compensation for serving as directors and officers. Upon consummation of the Merger, Aztek will assume the obligations of ATI for executive compensation. The table below sets forth the compensation of the key executives of ATI.
Long Term Compensation - ------------------------------------------------------------------------------ Annual Compensation Awards - ------------------------------------------------------------------------------ Securities Underlying Name and Principal Position Year Salary(1) Bonus Options/SARs(#) - ------------------------------------------------------------------------------ Mike Sintichakis, 1998 $70,872 0 0 President, Director 1997 $30,000 0 90,000 options Edson Ng 1998 $59,169 0 0 Vice Pres. President of 1997 $60,000 0 40,000 options Operations Eileen Keogh(2) 1998 $20,750 0 0 Director, R&D 1997 $60,000 0 40,000 options
(1) The salary is reflected in Canadian dollars and was paid in Canadian dollars. (2) Compensation paid to Ms. Keogh was paid to her through her company as an independent contractor. Retirement plan. ATI does not have a retirement plan at present, but Aztek intends to implement one after the Merger once Aztek becomes profitable. Employment contracts, Termination of Employment and Change in Control Agreements. At present, ATI has no employment contract with any of its employees. Compensation Committee, Interlocks and Insider Participation. Neither ATI or Aztek has a compensation committee; rather the Boards of Directors perform the functions that would otherwise be performed by a compensation committee. 58 EXECUTIVE COMPENSATION OF THE DIRECTORS AND EXECUTIVE OFFICERS OF AZTEK The members of the Board of Directors of Aztek and the officers of Aztek presently do not receive compensation for serving as directors and officers. Upon consummation of the Merger, Aztek will assume the obligations of ATI for executive compensation. The table below sets forth the compensation of the key executives of Aztek. Summary Compensation Table for Aztek
- ------------------------------------------------------------------------------ Annual Compensation - ------------------------------------------------------------------------------ Name and Principal Position Year Salary Bonus - ------------------------------------------------------------------------------ Mike Sintichakis, CEO 1998 $0 $0 1997 $0 $0 Edson Ng, Director 1998 * 1997 * Eileen Keogh, Director 1998 * 1998 * Nick Sintichakis 1998 $0 $0 1997 $0 $0
*Edson Ng and Eileen Keogh were first elected to the Board of Directors on June 30, 1998, to serve as directors for the ensuing year. Aztek has not paid any compensation to its officers or directors since Aztek's inception. 59 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Securities Underlying Unexercised Options/SARs at FY-End (#) Name Exercisable/Unexercisable Mike Sintichakis 90,000 Edson Ng 40,000 Eileen Keogh 40,000
Long Term Incentive Plans
Name Number of Shares Performance Units or Other Or Other Period Rights (#) Until Maturation Threshold Maximum Or Payout ($ or #) ($ or #) Mike Sintichakis 354,000 109,740 1 354,000
Mr. Mike Sintichakis currently has 354,000 shares of ATI Common Stock in escrow to be released as ATI generates positive cash flow from operations. The shares will be released to Mr. Sintichakis at the rate of one share for every C$.31 of cash flow generated by ATI. Mr. Sintichakis purchased the shares for C$.01 per share. Mr. Sintichakis enjoys full voting rights attributable to the shares. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Nick Sintichakis, a director of Aztek, is the son of Mike Sintichakis, the president and a director of Aztek. No other family relationships exist among directors, executive officers or persons nominated or chosen by Aztek to become officers or executive officers and no such relationships exist among the directors and officers of ATI. ATI engaged in several transactions with its directors and a director's immediate family member causing an increase in current liabilities. The directors and an individual director's family member had a material interest. These changes caused the increase in accounts payable to directors and loans to related parties. Mike Sintichakis has not received his full salary for the 1998 Period. ATI accrued Mr. Sintichakis' salary as an accounts payable in the amount of $45,871.29 and actually paid Mr. Sintichakis $6,270.97. Messrs. Sintichakis and Edson Ng, and Ms. Eileen Keogh have made several payments on ATI's behalf totaling approximately $39,353.59. ATI has repaid $14,914.41. These transactions caused the entire increase in accounts payable to directors from the 1997 Period to the 1998 Period. The increase in long term debt to related parties resulted from a series of transactions. ATI leases space from Mike Sintichakis' wife, Maria Sintichakis. To date, ATI has accrued its rental payments totaling $13,500. For more information see "Description of Property" at page 38. 60 Mrs. Sintichakis has also made several payments to vendors on ATI's behalf and she has loaned money directly to ATI so that it could meet its expenses. The total amount due to Mrs. Sintichakis is $62,171.50. Mike Sintichakis is due $5,607.13 for similar types of advances to ATI. Christopher's Restaurant ("Christopher's") is an establishment owned by Mrs. Maria Sintichakis. From November 1997 to May 1998, Christopher's loaned ATI approximately $21,682.50 so that ATI could meet its working capital needs. Mike Sintichakis' son-in-law, Tony Pantazopoulus loaned ATI $42,998.74 from November 1997 to May 1998 so that ATI could meet its working capital requirements. ATI issues interest free demand notes for the loans it receives from the Affiliates. However, the notes provide that no payments are due prior to July 1999. With respect to ATI, in 1995 the spouse of the president of ATI loaned approximately $150,000 (plus interest of $16,241) for a sum total of $166,241 to ATI. ATI used the loan proceeds to acquire a small Canadian computer vendor. ATI sought the approval of the Vancouver Stock Exchange to issue 120,465 shares of common stock at $1.38 CND to satisfy the then existing debt. The Vancouver Stock Exchange granted approval on July 30, 1997 and the debt was satisfied on July 30, 1997. TRANSACTIONS WITH PROMOTERS The promoters of Aztek are Mike Sintichakis, Nick Sintichakis, Daunna Potts, Eileen Keogh and Edson Ng. The following table sets forth the amounts received by the promoters and Aztek.
Name and address of Amount of Of Promoter Shares - ----------------------- --------- Mike Sintichakis 1802 Lipsett Crt. Kelowna, BC V1V 1X3 400,000 Nick Sintichakis 1802 Lipsett Crt. Kelowna, BC V1V 1X3 230,000 Dauna Potts 882 Toovey Rd. Kelowna, BC 10,000 Eileen Keogh 508-2012 Fullerton Ave. Vancouver, BC V7P 3E3 120,000 Edson Ng 623 Alpine Court North Vancouver, BC V7R 2L7 240,000
The promoters purchased the Common Shares, par value $.001, at $.05 per share. The directors set the price at Mike Sintichakis's suggestion, which he determined arbitrarily, and issued the shares to cover anticipated expenses such as legal fees and accounting fees. Should the market value of the shares rise, the holder stand to gain a substantial profit by selling the shares. Though the shares were fully paid for in advance, they are subject to a restriction by which the shares are placed into a trust to be released in twenty-four monthly installments. Each promoter is serving as a director or officer. If a promoter leaves for any reason including termination, any undistributed shares can be distributed to another employee, director or officer at Aztek's will. The recipient in such a transfer must pay the prior shareholder US$.05 per share plus six percent interest per annum effective on the day of transfer. 62 AZTEK, INC. Financial Statements For the Years Ended June 30, 1996, 1997 and 1998 Contents - ------------------------------------------------------------------------------ Auditors' Report 64 Financial Statements Balance Sheet 65 Statements of Cash Flow 66 Notes to Financial Statements 67 63 [Letterhead of BDO Dunwoody] Auditors' Report To the Shareholders of Aztek, Inc. We have audited the balance sheets of Aztek, Inc. as at June 30, 1998, 1997 and 1996 and the statements of changes in financial position for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We have conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 1998, 1997 and 1996 and the results of its operations and changes in its financial position for the years the ended in accordance with generally accepted accounting principles. /s/BDO Dunwoody - ---------------------------- Chartered Accountants Penticton, British Columbia July 23, 1998 64
Aztek, Inc. Balance Sheet (U.S. Dollars) June 30 1998 1997 1996 Assets Current Cash $ 60,000 $ - $ - ------ ------ ---- $ 60,000 $ 0 $ 0 ----------- ------ ---- Shareholders' Equity Share capital (Note 2)
Approved on behalf of the Board: " " ___________________ Director " " ___________________ Director 65
Aztek, Inc. Statements of Cash Flow (U.S. Dollars) For the year ended June 30 1998 1997 1996 Cash provided by (used in) Financing activities Issuance of share capital $ 60,000 $ - - ------ ---- ----- Increase in cash 60,000 - - Cash, beginning of year - - - ------ ---- ----- Cash, end of year $ 60,000 $ - $ ====== ==== =====
66 Aztek, Inc. Notes to Financial Statements (U.S. Dollars) June 30, 1998, 1997 and 1996 - ----------------------------------------------------------------------------- 1. Nature of Business The company was incorporated under the laws of the state of Nevada on August 19, 1994, and has not carried on any business activities since incorporation. - ---------------------------------------------------------------------------- 2. Share Capital Authorized 100,000,000 common shares with a par value of $0.001. During the year ended June 30, 1998 the articles of incorporation were amended to increase the authorized share capital to 100,000,000 common shares from 25,000 common shares.
1998 1997 1996 Number of Amount Number of Amount Number of Amount Shares Shares Shares - ----------------------------------------------------------------------------- Issued and fully paid Balance, Beginning Of year - $ - - $ - - $ - Issued for cash Private Placement 2,000,000 60,000 - - - - Balance End of year 2,000,000 $ 60,000 - $ - - $ - Subscribed and unpaid Private Placement 25,000 25,000 25,000 25,000 25,000 25,000 --------- ------ ------ ------ ------ ------ 2,025,000 85,000 25,000 25,000 25,000 25,000 Share subscriptions receivable 25,000 25,000 25,000 25,000 25,000 25,000 --------- ------ ------ ------ ------ ------ 2,000,000 $ 60,000 0 $ 0 0 $ 0
67 2. Share Capital - Continued (a) Escrow Shares - The Issued share capital includes 1,000,000 escrow shares (1997 and 1996 - nil). These shares will be released from escrow to a maximum number of 20% per year of the original number at the rate of 1 share for the following accumulated working capital, as defined in the agreement; Year one $0.05 per share of working capital Year two $0.10 per share of working capital Year three $0.20 per share of working capital Year four $0.30 per share of working capital Year five $0.40 per share of working capital These escrow shares are due to expire June 12, 2003 and any shares remaining in escrow at that date will be cancelled. 68 AZTEK TECHNOLOGIES INC. Consolidated Financial Statements For the years ended June 30, 1998 and 1997 Contents - --------------------------------------------------------------------- Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . 70 Consolidated Financial Statements Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 71 Consolidated Statements of Operations and Deficit . . . . . . 72 Consolidated Statements of Cash Flow. . . . . . . . . . . . 74 Summary of Significant Accounting Policies. . . . . . . . . . 75 Notes to Consolidated Financial Statements. . . . . . . . . .77 69 [Letterhead of BDO Dunwoody Chartered Accountants] - ------------------------------------------------------------------------------ Auditor's Report - ------------------------------------------------------------------------------ To the Shareholders of Aztek Technologies Inc. We have audited the consolidated balance sheets of Aztek Technologies Inc. as at June 30, 1998 and 1997 and the consolidated statements of operations and deficit and changes in financial position for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 1998 and 1997 and the results of its operations and the changes in its financial position for the years then ended in accordance with generally accepted accounting principles. As required by the British Columbia Companies Act we report that, in our opinion, these principles have been applied on a consistent basis. "BDO Dunwoody " Chartered Accountants Penticton, British Columbia July 10, 1998 ______________________________________________________________________________ Canada - United States Reporting Differences ______________________________________________________________________________ In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the company's ability to continue as a going concern, such as those described in Note 1 to the financial statements. Our report to the shareholders dated July 10, 1998 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditor's report when these are adequately disclosed in the financial statements. "BDO Dunwoody " Chartered Accountants Penticton, British Columbia July 10, 1998 70
- ------------------------------------------------------------------------------ Aztek Technologies Inc. Consolidated Balance Sheets June 30 1998 1997 - ------------------------------------------------------------------------------ Assets Current Cash $ 2,957 $ 20,232 Accounts receivable 67,693 56,642 Prepaid expenses 1,904 1,536 ---------- ---------- 72,554 78,410 Capital Assets (Note 2) 105,860 151,292 Goodwill (Note 3) - 417 ---------- ---------- $ 178,414 $ 230,119 ========== ========== Liabilities and Shareholders' Deficiency Current Accounts payable and accrued liabilities - trade $ 222,326 $ 122,971 Accounts payable and accrued liabilities - officers and directors 64,840 5,693 Deferred revenue 103,991 138,781 Current portion of amounts due to related parties - 166,241 Current portion of royalties payable 100,000 70,000 Current portion of obligation under capital lease 33,095 43,553 ---------- ---------- 524,252 547,239 Due to related parties (Note 4) 132,707 3,689 Royalties payable (Note 5) - 30,000 Obligation under capital lease (Note 6) 800 33,632 ---------- ---------- 657,759 614,560 Shareholders' deficiency Share capital (Note 7) Authorized 100,000,000 common shares without par value Issued 2,051,109 common shares (1997 - 1,904,244) 4,179,522 3,909,000 Deficit (4,658,867) (4,293,441) ---------- - ---------- (479,345) (384,441) ----------- ---------- $ 178,414 $ 230,119 =========== ==========
Approved on behalf of the Board: "Mike Sintichakis" Director " Director 71
- ------------------------------------------------------------------------------ Aztek Technologies Inc. Consolidated Statements of Operations and Deficit For the years ended June 30 1998 1997 - ------------------------------------------------------------------------------ Revenue Maintenance and customization services $ 340,081 $ 442,656 Product Sales - $ 22,910 ---------- ---------- 340,081 465,566 ----------- ---------- Cost of Revenue Contractor fees 13,935 49,407 Product - 20,867 Telephone 4,673 10,133 Travel - 4,618 Wages, salaries and benefits 80,176 99,301 ---------- ---------- 98,784 184,326 ---------- ---------- Gross profit 241,297 281,240 ---------- ---------- Selling and administration expenses Advertising and promotion 4,382 27,770 Amortization 40,310 81,160 Contractors fees 43,485 102,145 Equipment leases 12,213 11,609 Filing and transfer fees 7,356 41,641 Interest on long-term debt 28,307 34,493 Investor relations 32,309 6,000 Management fees 199,589 91,122 Office and administration 23,606 42,823 Professional fees 48,004 60,835 Rent and property taxes 53,055 52,277 Selling and marketing 1,041 41,047 Telephone 19,031 23,928 Travel 5,227 3,541 Utilities 23,049 20,975 Wages, salaries and benefits 65,759 198,781 ---------- ---------- 606,723 840,147 Loss from operations (365,426) (558,907) Deferred income taxes (recovery) - (1,000) ---------- ---------- Net loss for the year (365,426) (557,907) Deficit, beginning of year (4,293,441) (3,735,534) ---------- ---------- Deficit, end of year $ (4,658,867)$ (4,293,441) ========== ========== Weighted average number of shares outstanding 1,534,974 1,468,176 ========== ========== Loss per share, basic $ (0.18)$ (0.38) ========== ==========
72
- ------------------------------------------------------------------------------ Aztek Technologies Inc. Consolidated Statements of Cash Flow For the years ended June 30 1998 1997 - ------------------------------------------------------------------------------ Cash provided by (used in) Operating activities Net loss for the year $ (365,426)$ (557,907) Items not involving cash Amortization 40,310 81,160 Deferred income taxes (recovery) - (1,000) ---------- ---------- (325,116) (477,747) Decrease in deferred revenue - non-current - (19,272) Changes in non-cash working capital balances Accounts receivable (11,051) (2,130) Prepaid expenses (368) (96) Accounts payable 99,355 (8,733) Due to officer 59,147 5,332 Deferred revenue (34,790) 16,129 ---------- ---------- (212,823) (491,853) Financing activities Advances from related parties 222,098 - Repayments to related parties (259,321) (184,539) Capital lease repayments (43,290) (34,290) Increase in capital lease obligation - 20,682 Issuance of share capital 270,522 754,870 ---------- ---------- 190,009 556,723 ---------- ---------- Investing activities Acquisition of capital assets (866) (57,271) Proceeds on disposal of capital assets 6,405 - ---------- ---------- 5,539 (57,271) Increase (decrease) in cash (17,275) 7,599 Cash, beginning of year 20,232 12,633 ---------- ---------- Cash, end of year $ 2,957 $ 20,232 ========== ==========
73 - ------------------------------------------------------------------------------ Aztek Technologies Inc. Summary of Significant Accounting Policies June 30, 1998 and 1997 - ------------------------------------------------------------------------------ Basis of Consolidation These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, S.T.A. North America Technologies Inc. and Responseware Corp. Use of Estimates The consolidated financial statements of the corporation have been prepared by management in accordance with generally accepted accounting principals in Canada. The preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The financial statements have, in management's opinion, been properly prepared using careful judgment within reasonable limits of materiality and within the framework of the accounting policies summarized below. Capital Assets and Capital assets are recorded at cost. Amortization amortization based on their estimated useful lives is as follows: Computer hardware - 30% diminishing balance basis Purchased Computer software - 30% diminishing balance basis Furniture and equipment - 20% diminishing balance basis Software license - 33% straight-line basis Leasehold improvements are recorded at cost and are amortized using the straight-line method over a period of five years. Assets under Capital Assets under capital lease are recorded at cost. Lease Amortization based on the estimated useful life of the asset is as follows: Computer hardware - 20% straight-line basis Goodwill Goodwill is recorded at cost. Amortization is provided as follows: Goodwill - 50% straight-line basis Financial Instruments The Company's financial instruments consist of cash, accounts receivable, accounts payable and accrued liabilities, amounts due to related parties, royalties payable, and obligation under capital leases. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximate their carrying values, unless otherwise noted. 74 - ------------------------------------------------------------------------------ Aztek Technologies Inc. Summary of Significant Accounting Policies June 30, 1998 - ------------------------------------------------------------------------------ Capitalized Software Costs for developing computer software are Costs Costs capitalized when technological feasibility has been established for the computer software product. Capitalization of computer software costs is discontinued when the products is available for general release to customers and such costs are amortized on a product-by-product basis over the estimated lives of the products. There are no capitalized costs in the accompanying financial statements. Purchased computer software, which includes programs used for company management and software development are capitalized and amortized as disclosed in the capital assets and amortization significant accounting policy note. Revenue Recognition The Company's revenue is derived from the following sources: 1) Licenses software under non-cancelable license agreements; 2) provides maintenance services (consisting of product support services and periodic updates); and 3) provides contracted training and consulting services. License fee revenues are recognized when a noncancellabel license agreement has been signed, the software product has been shipped, there are no uncertainties surrounding product acceptance, there are no significant vendor obligations, the fees are fixed and determinable, and collection is considered probable. Revenues from maintenance service agreements are recognized ratably over the agreement period, which in most instances is one year. Revenues for training and consulting services are recognized as services are performed. In multiple-element arrangements, the revenue or fee is allocated pro-rata to the various elements based upon the fair value of each of the individual elements. Deferred Revenue Deferred revenue is comprised of deferrals for license fees, maintenance and other services. Deferred Income Taxes Deferred income taxes arise from the difference between amortization for accounting purposes and capital cost allowance for income tax purposes. Per Share Data Share amounts for all periods presented reflect restatement for the five-for-one stock split in December 1996. Basic loss per share is computed using the weighted average number of common shares outstanding during the respective years. Diluted loss per share has not been calculated due to the anti-dilutive effect. 76 - ------------------------------------------------------------------------------ Aztek Technologies Inc. Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ June 30, 1998 and 1997 - ------------------------------------------------------------------------------ 1. Operations The Company has continued to incur operating losses and continues to have a working capital deficiency as at June 30, 1998. The future ability of the Company to realize its assets at the recorded amounts and discharge its liabilities in the normal course of business will depend upon its ability to obtain further financing and to attain profitable operations. It is not possible at this time to predict with assurance the outcome of these matters. Management intends to raise equity that would allow the Company to proceed with its business plan. The company's primary business is that of developing and selling computer software and computer systems and providing support services for the company's computer software. - ------------------------------------------------------------------------------ 2. Capital Assets
1998 1997 -------------------------------------------------- Accumulated Accumulated Cost Amortization Cost Amortization Computer hardware $ 93,884 $ 78,845 $ 93,017 $ 72,771 Purchased Computer software 102,601 62,557 105,081 45,357 Leasehold improvements 19,972 17,242 23,898 14,028 Furniture and equipment 42,916 32,631 42,916 30,060 Software license 16,000 16,000 16,000 14,666 Equipment under capital lease - Computer hardware 159,958 122,196 159,958 112,696 ------- ------- ------- ------- $ 435,331 $ 329,471 $ 440,870 $ 289,578 ------- ------- ------- ------- Net book value $ 105,860 $ 151,292 ======= =======
- ------------------------------------------------------------------------------ 3. Goodwill
1998 1997 --------------------------------------------------------- Accumulated Accumulated Cost Amortization Cost Amortization Goodwill $ 191,660 $ 191,660 $ 191,660 $ 191,243 ------- ------- ------- - ------- Net book value $ - $ 417 ======= ======= ======= =======
76 - ------------------------------------------------------------------------------ Aztek Technologies Inc. Notes to Consolidated Financial Statements June 30, 1998 and 1997 - ------------------------------------------------------------------------------ 4. Due to Related Parties
1998 1997 Loans payable, without interest, and specific repayment terms. Principal is not repayable prior to July 1, 1999. It was not practical to determine the fair value of this debt. $ 132,707 $ 3,689 Note payable, repayable $1,507 monthly including interest at 9% per annum and collateralized by a general security agreement. During the year a shares for debt settlement agreement was entered into and submitted to regulatory authorities for their approval. - 166,241 ------- ------- 132,707 169,930 Less current portion - 166,241 ------- ------- $ 132,707 $ 3,689 ======= =======
- ------------------------------------------------------------------------------ 5. Royalties Payable
1998 1997 Royalties payable, royalties incurred in a prior year's operations are repayable $10,000 monthly, without interest, commencing December 9, 1997. $ 100,000 $ 100,000 Less current portion 100,000 70,000 ------- ------- $ - $ 30,000 ------- -------
As at June 30, 1998 the Company is in default on repayment and is negotiating a revised payment schedule. It is anticipated that this will not have an adverse effect on the Company's financial position or results of future operations. - ------------------------------------------------------------------------------ 6. Obligation Under Capital Lease
1998 1997 Total minimum lease payments $ 36,433 $ 89,694 Less imputed interest 2,538 12,509 ------ ------ Lease obligation 33,895 77,185 Less current portion 33,095 43,553 ------ ------ $ 800 $ 33,632 ====== ======
Minimum lease payments on the capital lease obligations are 1999 - $35,620, 2000 - $813. During the year interest expense of $10,252 (1997 - $18,240) was incurred on the obligation under capital lease. 77 - ------------------------------------------------------------------------------ Aztek Technologies Inc. Notes to Consolidated Financial Statements June 30, 1998 and 1997 - ------------------------------------------------------------------------------ 7. Share Capital Authorized 100,000,000 common shares without par value
1998 1997 Number of Number of Shares Amount Shares Amount Issued and fully paid Balance, beginning of year 1,904,244 $ 3,909,000 1,001,932 $ 3,055,330 Issued for cash Private placement - - 400,000 620,000 Exercise of warrants 47,400 104,280 28,600 65,560 For escrow shares - - 354,000 3,540 Issued for acquisition - - 30,000 30,000 Issued for debt settlement 120,465 166,242 89,712 134,570 Cancelled due to expiry of escrow agreement (21,000) - - - --------- --------- --------- --------- Balance, end of year 2,051,109 $ 4,179,522 1,904,244 $ 3,909,000 ========= ========= ========= =========
a) Escrow Shares - The issued share capital includes 354,000 escrow shares (1997 - 375,000). These shares will be released from escrow at the rate of 1 share for each $0.31 of cash flow from operations, as defined in the agreement. Any shares not released prior to September 17, 2001 will be cancelled and returned to treasury. During the year ended June 30, 1998 21,000 shares, subject to a separate escrow agreement that expired October 27, 1997, were cancelled and returned to treasury. b) Share Purchase Options - See Note 11 for additional information
1998 1997 Number of share purchase options, beginning of year 185,000 - Number granted during the year 40,000 185,000 ------- - ------- Number of share purchase options, end of year 225,000 185,000
Options outstanding at June 30, 1998 are exercisable: 185,000 at $1.82 per share, expiring March 20, 1999 40,000 at $0.85 per share, expiring September 22, 1998 78 - ------------------------------------------------------------------------------ Aztek Technologies Inc. Notes to Consolidated Financial Statements June 30, 1998 and 1997 - ------------------------------------------------------------------------------ 8. Related Party Transactions 1998 1997 a. Accounts payable and amounts due to related parties include the following: Due to officers and directors-accounts payable $ 64,040 $ 6,552 Due to officers and directors- due to related parties 5,607 - Due to a director's family members- accounts payable 800 169,071 Due to a director's family members- due to related parties 127,100 - Amounts due to officers and directors, or their family members that are recorded in accounts payable arose as a result of those parties providing services to the company. These transactions are in the normal course of operations and are measured at the exchange value which is the amount of consideration established and agreed to by the related parties at amounts that approximate the value of services purchased from arms-length parties. b. Selling and administration expenses include the following: Interest paid to the spouse of a director 1,099 12,313 Rent paid to a company controlled by the spouse of a director 13,500 13,500 These transactions are in the normal course of operations and are measured at the exchange value which is the amount of consideration established and agreed to by the related parties. c. Issuance of shares to President's wife in settlement of debt. During the year the company issued 120,465 common shares in settlement of a loan from the wife of the President of the company. The debt arose during the fiscal year ended June 30, 1996. At that time the company was unable to arrange debt financing from commercial lenders and therefore entered into a loan agreement with the wife of the President. The loan was provided on normal commercial terms. The loan was repayable $1,507 monthly, including interest at 9%. From July 1997 to the date of settlement, the company was unable to make payments for either interest or principal. The company and the President's wife agreed to settle the full amount of the debt in exchange for issuance of common shares of the company. The shares were deemed issued at $1.38 per share, the average of the trading price of the shares for the ten days prior to the date of the agreement. - ------------------------------------------------------------------------------ 9. Income Taxes The company has losses available for income tax purposes totaling approximately $1,577,000. This amount can be used to reduce taxable income of future years and has not been recognized in the financial statements. The right to claim these losses expire as follows: 1999 - $89,000; 2000 - $76,000; 2001 - $376,000; 2002 - $131,000; 2003 - $101,000; 2004 - $479,000; 2005 - $325,000. 79 10. Lease Commitments The company has lease commitments for its premises and certain equipment which require minimum annual lease payments payable as follows: Year Amount 1999 $ 45,442 2000 27,504 2001 10,158 ----------- $ 83,104 =========== - ------------------------------------------------------------------------------ 11. Differences Between Canadian and United States Generally Accepted Accounting Principles STOCK BASED COMPENSATION As at June 30, 1998, the Company has a issued non-plan options which are described below. During the year one-year non-plan option to purchase 40,000 shares at $1.40 were granted to an employee. These options were fully vested at the date of grant. In connection with this grant, there was no difference between the market price of the stock and the exercise price of the options on the date that the options were granted. In preparing financial statements in accordance with United States Generally Accepted Accounting principles the Company is required to apply the disclosure requirements contained in U.S. Financial Accounting Standards board SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires the Company to include in the financial statements compensation costs for the fair value of stock options issued. In calculating the benefit included in the following reconciliation, the Company has estimated the fair value of each stock option at the grant date by using the black-Scholes option-pricing model with the following weighted-average assumptions for grants in the year ended June 30,1998: no dividend yield percent; expected volatility of 142%; risk-free interest rate of 5.8%; and expected life of 1 year. Under the accounting provisions of SFAS No. 123, the Company's net loss and loss per share would have been increased to the amounts indicated below. 80 - ------------------------------------------------------------------------------ Aztek Technologies Inc. Notes to Consolidated Financial Statements June 30, 1998 and 1997 - ------------------------------------------------------------------------------ 11. Differences Between Canadian and United States Generally Accepted Accounting Principles-Continued. Stock Based Compensation - Continued
1998 1997 ------------------------------------- NET INCOME Net loss for the year-based on Canadian GAAP $ (365,426) $ (557,907) Charge to operations representing the difference between the market price of the stock options and the exercise price of the options (30,000) (40,700) ---------- -------- Net loss for the year-based on U.S. GAAP $ (395,426) $ (598,607) ========== ======== LOSS PER SHARE Net loss per common share - based on U.S. GAAP $ (0.19) $ (0.41) ========== ======== RETAINED EARNINGS The cumulative effect of the application of U.S. GAAP on the deficit of the company would be: Deficit beginning of year - based on Canadian GAAP $ (4,293,441) $ (3,735,534) Charge to operations representing the difference between the market price of the stock options and the exercise price of the stock options for previous years (40,700) - Deficit beginning of year - based on U.S. GAAP (4,334,141) (3,735,354) Net loss for the year-based on US GAAP (395,426) (598,607) ---------- ----------- Deficit end of year-based on US GAAP $ (4,729,567) $ (4,334,141) ========== ==========
SFAS No. 123 requires disclosure of a summary of the status of the Company's options as of June 30, 1998, and changes during the year ended on that date. That additional disclosure is presented below:
Weighted- Average June 30, 1998 Shares Exercise Price - ------------------------------------------------------------------------------ Outstanding at beginning of year 185,000 $ 1.82 Granted during the year 40,000 1.40 Exercised - - Cancelled - - ------- ---- Outstanding at end of year 225,000 $ 1.75 ======= ==== Options exercisable at end of year 225,000 $ 1.75
Weighted-average fair value of options granted during the year: Below market $ - At market $ 1.40 Above market $ - 81 - ------------------------------------------------------------------------------ Aztek Technologies Inc. Notes to Consolidated Financial Statements June 30, 1998 and 1997 - ------------------------------------------------------------------------------ 11. Differences Between Canadian and United States Generally Accepted Accounting Principles-Continued Stock Based Compensation-Continued The following table summarizes information about non-plan options outstanding at June 30, 1998.
Options Outstanding Options Exercisable Weighted Number Average Weighted Number Weighted Range of Outstanding Remaining Average Exercisable Average Exercise at June 30, Contractual Exercise at June 30, Exercise Prices 1998 Life Price 1998 Price - ------------------------------------------------------------------------------ $ 1.82 185,000 0.70 years $ 1.82 185,000 $ 1.82 $ 1.40 40,000 0.20 years $ 1.40 40,000 $ 1.40
82 ANNEX A DISSENTERS' RIGHTS STATUTE The following is the selected statute, Section 207 of the British Columbia Company Act, relating to dissenters' rights. Division 2 - Dissent Proceedings Dissent procedure 207 (1) If, (a) being entitled to give notice of dissent to a resolution as provided in section 37, 103, 126, 222, 244, 249 or 289, a member of a company (in this Act called a "dissenting member") gives notice of dissent, (b) the resolution referred to in paragraph (a) is passed, and (c) The Company or its liquidator proposes to act on the authority of the resolution referred to in paragraph (a),The Company or the liquidator must first give to the dissenting member notice of the intention to act and advise the dissenting member of the rights of dissenting members under this section. (2) On receiving a notice of intention to act in accordance with subsection (1), a dissenting member is entitled to require the Company to purchase all of the dissenting member's shares in respect of which the notice of dissent was given. (3) The dissenting member must exercise the right given by subsection (2) by delivering to the registered office of The Company, within 14 days after The Company, or the liquidator, gives the notice of intention to act. (a) a notice that the dissenting member requires the Company to purchase all of the dissenting member's shares referred to in subsection (2), and (b) the share certificates representing all of those shares, and on delivery of that notice and those share certificates, the dissenting member is bound to sell those shares to The Company and The Company is bound to purchase them. (4) A dissenting member who has complied with subsection (3), the company, or, if there has been an amalgamation, the amalgamated company, may apply to the court, and the court may (a) require the dissenting member to sell, and The Company or the amalgamated company to purchase, the shares in respect of which the notice of dissent has been given, 83 (b) set the price and terms of the purchase and sale, or order that the price and terms be established by arbitration, in either case having due regard for the rights of creditors, (c) joint in the application any other dissenting member who has complied with subsection (3), and (d) make consequential orders and give directions it considers appropriate. (5) The price that must be paid to a dissenting member for the shares referred to in subsection (2) is their fair value as of the day before the date on which the resolution referred to in subsection (1) was passed, including any appreciation or depreciation in anticipation of the vote on the resolution, and every dissenting member who has complied with subsection (3) must be paid the same price. (6) The amalgamation or winding up of The Company, or any change in its capital. Assets or liabilities resulting from The Company acting on the authority of the resolution referred to in subsection (1), does not affect the right of the dissenting member and The Company under this section or the price to be paid for the shares. (7) Every dissenting member who has complied with subsection (3) (a) may not vote, or exercise or assert any rights of a member, in respect of the shares for which notice of dissent has been given, other than under this section, (b) may not withdraw the requirement to purchase the shares, unless the Company consents, and (c) until the dissenting member is paid in full, may exercise and assert all the rights of a creditor company. (8) If the court determines that a person is not a dissenting member, or is not otherwise entitled to the right provided by subsection (2), the court, without prejudice to any acts or proceedings that The Company, its members, or any class of members may have taken during the intervening period, may make the order it considers appropriate to remove the limitations imposed on the person by subsection (7). (9) The relief provided by this section is not available if, subsequent to giving notice of dissent, the dissenting member acts inconsistently with the dissent, but a request to withdraw the requirement to purchase the dissenting member's shares is not an act in consistent with the dissent. (10) A notice of dissent ceases to be effective if the dissenting member consents to or votes in favour of the resolution of The Company to which the dissent relates unless the consent or vote is given solely as a proxy holder for a person whose proxy required an affirmative vote. 84 ANNEX B Opinion Letter of Steve Winters in Reference to Dissenters' Rights. [LETTERHEAD OF STEPHEN K WINTERS LAW CORPORATION] August 5, 1998 Board of Directors Aztek Technologies Inc. #5 - 246 Lawrence Ave. Kelowna, B.C. V1Y 6L3 Re: Joint Policy Statement - Prospectus on Form S-4 and Dissenters' Rights We are rendering this opinion to you at your request and in our capacity as Canadian Counsel to Aztek Technologies Inc. ("ATI") in connection with the Joint Proxy Statement - Prospectus pursuant to which ATI is issuing the proxy statement to its shareholders for approval of the proposed merger between ATI and Aztek, Inc. wherein ATI will cease to exist and Aztek, Inc. will be the surviving corporation. If the merger is approved, Aztek, Inc. will issue one share of its common stock in exchange for each share of ATI common stock (the "Merger"). We are rendering this opinion to provide you with a description of the dissent provisions of the British Columbia Company Act (the "Act") which apply to the Merger. Any holder of common shares of Aztek ("Aztek Shares") is entitled to be paid the fair market value of such shares in accordance with the section 207 of the British Columbia Company Act (the "Act") if the shareholder dissents to the special resolution authorizing the Amalgamation, and if the Amalgamation becomes effective. A holder of Aztek Shares is not entitled to object with respect to his shares if he votes any of such shares in favour of the special resolution authorizing the Merger. The dissenting shareholder is required to send a written objection to the special resolution to be received within two days prior to the meeting. A vote against a special resolution or an abstention does not constitute a written objection. Within fourteen days after the special resolution is adopted by the shareholders, the dissenting shareholder is required to send to the corporation a written notice containing his name and address, the number of shares in respect of which he dissents and demand payment of the fair value of such shares, and the appropriate share certificate or certificates. The dissenting shareholder is bound to sell these shares to the corporation and the corporation is bound to purchase them. The price to be paid is the fair value as of the day before the resolution was passed including any appreciation or depreciation in anticipation of the vote, and all dissenting shareholders shall be paid the same price. Either party may apply to the court to fix the fair value of the shares. There is no obligation on the corporation to apply to the court. If the application is made by either party, the dissenting shareholder will be entitled to be paid the amount fixed by the court which may be 85 greater or less than the value of the shares which the shareholder would otherwise consent to by the corporation. A dissenting shareholder loses his rights of dissent if he votes in favour of the resolution (unless he is doing so as a proxyholder) or otherwise acts inconsistent with his dissent (a request to withdraw a notice of dissent is not acting inconsistent with a dissent). Yours truly, STEPHEN K. WINTERS LAW CORPORATION /s/ Stephen K. Winters - ----------------------- Per: Stephen K. Winters 86 PROSPECTUS 2,051,109 Shares Aztek, Inc. Common Stock UNTIL ____________, 1999 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS ANDWITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. PART II INFORMATION NOT REQUIRED IN PROSPECTUS INDEMNIFICATION OF DIRECTORS AND OFFICERS Aztek Officers and Directors are indemnified and held harmless by Aztek to the fullest extent authorized by the Nevada General Corporation Law against expense liability and loss where named a party or threatened to be named a party to any type of action or proceeding. The officer or directors who make such claim must be reimbursed by Aztek within ninety days. Failure by Aztek to make such payment entitles the officer or director to bring suit against Aztek and if a judgment is rendered in favor of the officer or director, Aztek will be responsible for such costs. Aztek may claim as a defense that the officer of director did not meet the standards of conduct which makes indemnification permissible under the Nevada General Corporation Law but the burden of proving such a defense rests with Aztek. Nevada General Corporation Law Section 78.7502 provides that a corporation may indemnify a director or an officer against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with the action. The director or officer must have acted in good faith or believed his or her actions were not unlawful. The corporation cannot indemnify the officer or director where the officer or director has been adjudged to be liable to the corporation. If the director or officer is successful on the merits or in defense of either of the aforementioned types of action, the corporation must indemnify that officer of director. ATI Subject to the provisions of the Companies Act, British Columbia's corporate law, ATI must indemnify its directors and former directors, and may indemnify the directors of companies in which ATI is a shareholder, if the director is named as a party in an action as a result of being a director. ATI's board of directors may cause ATI to indemnify its officers or officers of companies in which ATI is a shareholder, who are named as a party or as parties in an action as result of serving as an officer or ATI. The articles of incorporation also provide for mandatory indemnification of the Secretary or Assistant Secretary if he or she is not a full time employee of ATI. Failure of the directors or officers to comply with the Companies Act or the articles of incorporation does not invalidate the indemnity clause. ITEM 601. Exhibits 1. Underwriting Agreement Between ATI and Equitrade Securities Corporation 2.1 Directors' Minutes Approving the Merger 2.2 Plan of Reorganization through Merger 3(i).1 Articles of Incorporation of Aztek, Inc. 3(i).2 Amended And Restated Articles Of Incorporation Of Aztek, Inc. 3(ii). By-Laws Of Aztek Inc. 4.1 Minutes Approving Issuance Of Shares And Bonus Shares 4.2 Standard Subscription Agreement for Bonus Shares 4.3 Standard Subscription Agreement for Common Shares 5. Opinion re: legality 8. Opinion re: tax matters 10.1 Escrow Agreement 10.2 Option Agreement 10.3 Demand Notes 10.4 San Francisco License 10.5 Settlement Agreement with IBM 23.1 Consent Of Independent Accountants 23.2 Consent of Stephen K. Winters 24.1 Directors' Resolution of Signature by Power of Attorney 24.2 Power of attorney (The power of attorney covers amendments and is included in Amendment #3 to the registration statement and not as an exhibit.) 27. Financial Data Schedule 99.1 Merger Agreement 99.2 Letter Of Intent For ATI To Acquire Harrison Muirhead Systems Inc. and Q-Data Smart Investments Inc. 99.3 Letter of Intent for ATI to acquire Concord Consultants 99.4 Minutes Of Shareholders Of Aztek Inc. To Approve Merger 99.5 Schedule II Valuation and Qualifying Accounts 99.6 Opinion Letter of Independent Accountants in Reference to Canadian Tax Consequences 99.7 Proxy ITEM 22. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to: (i) include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; (iii) Include any material information on the plan of distribution. (2) that for determining liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement of the securities offered, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unexchanged at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Kelowna, Province of British Columbia, on March 2, 1999 Aztek, Inc. By /s/Mike Sintichakis -------------------------- Mike Sintichakis President EX-1 2 EXHIBIT 1. Underwriting Agreement between ATI and Equitrade Securities Corporation. UNDERWRITING AGREEMENT 406,504 Common Stock July 2, 1998 Mr. Kim Carroll Compliance Officer Equitrade Securities Corporation 23736 Birtcher Drive Lake Forest, California 92630 Dear Mr. Kim Carroll: 1. Introduction. AZTEK Technologies, Inc., a Vancouver, British Columbia corporation (the "Company"), has an authorized capitalization of 100,000,000 shares of Common Stock, no par value. The Company has issued and outstanding 2,072,109 shares of Common Stock. This Agreement contemplates that you will use your best efforts to sell, for the account of the Company, 406,504 Common Shares at a price of $ 2.46 per Common Share. The term "Shares," as used herein, includes as many of the Common Shares as are issued and sold pursuant to the terms hereof unless the context indicates otherwise. The Company hereby agrees with you as follows: 2. Representations, Warranties and Agreements of the Company. The Company represents and warrants to, and agrees with, you that: (a) The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") a Registration Statement (File No. 0-29540) on Form 10-SB and prepared and filed one or more amendments thereto covering the registration of the Shares under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) The Registration Statement (and any post effective amendment thereto) will fully comply with the applicable provisions of the Exchange Act and the Rules and Regulations thereunder, and that Registration Statement does not contain any untrue statement of a material fact and does not omit to state any material fact required to be stated therein or necessary in order to make the statement therein not misleading, and at all subsequent times thereto up to and including the Closing Date. The Registration Statement (and the Offering Circular as amended or supplemented) complies with the provisions of the Exchange Act and the Rules and Regulations thereunder and does not contain any untrue statement of a material fact and does not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Vancouver, British Columbia and the Company has full power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Circular and as being conducted, and is in compliance in all material respects with the laws requiring its qualification to do business as a foreign corporation in all other jurisdictions in which it owns or leases substantial properties or in which the conduct of its business requires such qualification. (d) The Shares have been duly authorized, and when issued and delivered as contemplated by this Agreement, will have been validly issued and will be fully paid and nonassessable, and conform to the description thereof contained in the Offering Circular. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Shares as contemplated herein. (e) This Agreement has been duly authorized, executed and delivered by the Company and this Agreement constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms and is in all respects in full compliance with all applicable provisions of the securities laws. (f) The execution and delivery of this Agreement, and the performance by the Company hereunder and thereunder will not conflict with, result in a breach or violation of or constitute a default under any agreement or instrument to which the Company is a party or the corporate charter or by-laws of the Company or any law, order, rule, regulation, decree or injunction of any jurisdiction, court or governmental agency or body, and no consent, approval, authorization or order of, or filing with any governmental agency or body is required for the performance by the Company of this Agreement, with the exception of the filing with the Vancouver Stock Exchange. (g) The Registration Statement, as originally filed or as amended and supplemented, if the Company shall have filed with the Commission any amendment thereof or supplement thereto complies with the applicable provisions of the Securities Exchange Act and the Rules and Regulations thereunder and does not contain any untrue statement of a material fact and does not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (h) The Company has not given any information or made any representations in connection with the offering of the Shares, written or oral, other than as contained in the Offering Circular or the Registration Statement. 3. Offering and Sale of the Shares. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company appoints you as its exclusive agent to effect sales of the Shares for the account of the Company at the offering price of $2.46 per Share and upon the other terms and conditions set forth herein and in the Offering Circular, and you agree to use your best efforts as such agent to sell the Shares during the term of this Agreement upon the terms and conditions set forth herein and in the Offering Circular. As compensation for your services hereunder, the Company will, at the Closing (as hereinafter defined), pay Equitrade commissions of $0.1476 per Share (i.e., 6% percent of the gross proceeds of the offering) resulting from the sale of Shares pursuant to the offering contemplated herein. Your appointment shall commence upon the date of the execution of this Agreement, and shall continue for a period (such period, including any extension thereof as hereinafter provided, being herein called the "Offering Period") of 30 days (and for a period of up to 30 additional days if extended by agreement of the Company and you), unless all of the Shares have previously been subscribed for. The parties hereto specifically acknowledge the past role of a company called Select Capital Advisors ("Select"). In a prior offering circular, as well as the initial filing of the Form 10-SB with the U. S. Securities Exchange Commission ("Commission"), the original agreement between the issuer and Select was disclosed as a material agreement. The Commission raised substantial concerns about the role of Select because the company is not an NASD member firm, nor is the company registered with the Commission as a broker-dealer/ underwriter and, as such, it is not authorized to sale securities in the United States. The prior agreement between Aztek and Select is null and void. The issuer herein recognizes and acknowledges Select has extended considerable time, effort and funds on its behalf. Aztek agrees reimburse Select for expenses in an amount not to exceed $40,000.00 (Forty Thousand Dollars). Said reimbursement shall be paid from current or future revenues of the Company and not from the proceeds of the instant offering. Under no circumstances shall Select execute any trades or sales of the Company's securities in connection with the instant offering. The issuer believes the investors will be comprised of natural persons or corporate entities that were initially identified by Select during the existence of the former agreement, which is now null and void. The purchasers of the shares must represent that they are "accredited investors" as that term is understood pursuant to the federal securities laws (and set forth at 17 C.F.R. § 230.501 (a)(1998)). Any and all sales or trades shall be conducted and consummated by Equitrade The parties hereto expressly agree Select is not an underwriter and shall not engage in conduct relative to the instant offering that may cause one to consider its activities to be consistent with those of an underwriter. All checks received by you from applicants to purchase shall be made payable to "AZTEK TECHNOLOGIES, INC. ACCOUNT. The brokerage account shall be established by Aztek Technologies, Inc., after the execution of the instant agreement by both parties hereto. Equitrade Securities Corporation shall maintain insurance for the account for an amount not to exceed one million dollars. You will promptly deliver to the Company one photocopy of each Subscription Agreement, the Company will mail an interim receipt to each such applicant to purchase for the amount deposited in the Account on behalf of such applicant to purchase. Any entity selected by you to process orders for Shares on behalf of applicants to purchase may deliver cash or checks and Subscription Agreements received from such applicants and you deliver to the company an executed photocopy of the Subscription Agreement and appendix 16 A of the offering circular. It is understood that you shall have the right to refuse to forward any Subscription Agreement, and in such event you shall promptly remit all funds received by you to the person on whose behalf such funds were submitted to you. 4. Closing. Subject to the prior termination of the offering as provided herein, there shall be a closing (the "Closing") at the offices of, Equitrade Securities Corporation located at 23736 Birtcher Drive, Lake Forest, California 92630, or via international teleconference not later than five days immediately following the termination of the Offering Period (the "Closing Date"). Such Closing shall include the following: (i) payment for the Shares to the Company by release of funds and delivery to the Company of properly completed and executed Subscription Agreements to each purchaser; (ii) deliver by the Company of certificates for the Shares purchased by each purchaser; and (iii) payment by the Company to you, out of the proceeds of the offering the commission referred to in Section 3 for each Share sold. The certificates for Shares to be delivered at the Closing will be in definitive form in such denominations and registered in such names as you request at least three business days prior to the Closing Date and will be made available at the above office for checking and packaging at least one full business day prior to the Closing Date. 5. Covenants of the Company. The Company covenants and agrees with you that: (a) The Company has caused the registration statement as filed and any subsequent amendments thereto to become effective. (b) The Company has furnished to you true and accurate copies of the Registration Statement filed with the U.S. Securities and Exchange Commission. (c) During the period of two years from the date hereof, the Company will furnish to you, as soon as practicable after the end of each fiscal year, a copy of its annual report to security holders for such fiscal year, and during such period the Company will also furnish to you as soon as available, a copy of each report and such other information concerning the Company as you may reasonably request. (d) The Company will apply the net proceeds from the sale of the Shares to be sold by it hereunder for the purposes set forth in the Offering Circular. (e) During the course of the offering of the Shares the Company will not take directly or indirectly any action designed to or that might, in the future, reasonably be expected to cause or result in stabilization or manipulation of the price of the Shares. (f) The Company has been approved for listing on the over the counter bulletin board. 6. Expenses. Any and all expenses of the offering shall be borne by the underwriter. 7. This Agreement has been duly authorized, executed and delivered by the Company, and (assuming due authorization, execution and delivery by you) constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization and moratorium laws and other laws affecting enforcement of creditors rights generally and to equitable principles that may restrict the availability of remedies and except as rights to indemnity hereunder may be limited under the provisions of the federal securities laws. 8. The required action has been taken by the Company under the Securities Exchange Act to make the public offering and consummate the sale of the Shares pursuant to this Agreement; the issue and sale by the Company of the Shares and the execution and delivery of this Agreement and the performance by the Company of its obligations hereunder and thereunder will not conflict with, result in a breach of, or constitute a default under any agreement or instrument known to such counsel to which the Company is a party or any applicable law, order, rule, regulation, decree or injunction of any jurisdiction, court or governmental agency or body or the corporate charter or by-laws of the Company; and no consent, approval, authorization or order of, or filing with, any court or body is required in connection with the issuance or sale of the Shares by the Company or for the performance by the Company of this Agreement. No notice of disapproval has been issued or proceedings for that purpose has been instituted by the Commission, the NASD, or any state securities or Blue Sky authority with respect to the distribution arrangements relating to the offering of the Shares. 9. Indemnification and Contribution. (a) The Company will indemnify and hold harmless you and each person, if any, who you control within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any damages or liabilities to which the Company or any such director, officer or controlling person may become subject, insofar as such losses, claims, damages or liabilities or actions are caused by untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Offering Circular, or any amendment or supplement thereto or omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by you specifically for use therein. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 9, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will relieve it from any liability which it may have to any indemnified party otherwise than under this Section 9. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 9 for legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. 10. Termination. You shall have the right to terminate this Agreement and the offering of the Shares at any time prior to the Closing if, between the date hereof and the Closing Date, there shall have been any declaration of war by the Government of the United States, an event resulting in (i) the general establishment of minimum prices by either the Commission or the National Association of Securities Dealers, or (ii) the declaration of a bank moratorium by authorities of the United States or of the State of California, the effect of which in your judgment makes it impracticable or inadvisable to proceed with the offering. 11. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of Company and its officers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of and investigation, or statement as to the results thereof, made by or on behalf of you, the Company or any of its officers, directors or controlling persons, and will survive payment to the Company for the Shares. If this Agreement is terminated pursuant to Section 10 hereof or if for any reason the sale of the Shares is not consummated, the Company shall not be responsible for the expenses incurred by you. 12. Notices. All communications hereunder will be in writing and, if sent to you, will be mailed, delivered, or faxed (714-699-1183) and confirmed to you at Equitrade Securities Corporation, 23736 Birtcher Drive, Lake Forest, California 92630. All communications hereunder to the issuer shall be in writing and, will be mailed, delivered, or faxed (250) 762-7933 and confirmed to you at Aztek Technologies, Inc. 246 Lawrence Avenue, Suite # 5, Kelowna, British Columbia V1Y 6L3. 13. Successors. This Agreement will inure to the benefit and be binding upon the parties hereto and their respective successors and the officers, directors and controlling persons referred to in Section 9, and no other person will have any right or obligation hereunder. 14. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California. 15. Counterparts and Facsimile . This Agreement may be executed in counterparts, all of which, taken together, shall constitute a single agreement. In the event the appropriate parties execute the facsimile version of the instant agreement, said facsimile shall have the same force and effect as the hard copy. If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the instant Agreement, whereupon it will become a binding agreement among the Company and you in accordance with its terms. Very truly yours, AZTEK TECHNOLOGIES, INC. By: /s/ Mike Sintichakis -------------------------------- Michael Sintichakis, President The foregoing Underwriting Agreement is herein confirmed and accepted as of the date first above written. /s/ Kim F. Carroll ------------------------------------------- Kim F. Carroll, Senior Compliance Officers Equitrade Securities Corporation EX-2 3 EXHIBIT 2.1 Minutes Approving the Merger A meeting of the Directors of AZTEK, INC., a Nevada corporation, was held at the Company's office on the 30th day of June, 1998, via teleconference at the hour of 10:00 o'clock a.m., for the purpose of approving a merger between Aztek, Inc. and Aztek Technologies Inc., a Canadian company. Mike Sintichakis, Chairman of the Board, called the meeting to order and Nick Sintichakis, Director and Secretary, recorded the minutes of the meeting. Upon motion duly made, seconded and unanimously carried, the reading correcting and approval of the minutes of the last meetings was waived. Upon motion duly made, the Directors of the Company unanimously agreed to an approved a merger between the Company and Aztek Technologies Inc., a Canadian based company, by way of a share exchange. The Directors of the Company further agreed that the exchange of shares will be on a one for one basis, subject to the approval of the shareholders of Aztek, Inc. and subject to the approval of the shareholders of Aztek Technologies Inc. There being no further business to come before the meeting at this time, the meeting was, upon motion duly made and seconded, adjourned at 11:30 a.m. /s/ Mike Sintichakis ------------------------------ Mike Sintichakis, Director EX-2 4 EXHIBIT 2.2 Plan Of Acquisition PLAN FOR REORGANIZATION THROUGH MERGER This Plan of Reorganization through Merger dated as of October 1, 1998 (the "Merger Plan"), among Aztek Technologies Inc., a Canadian corporation ("ATI"), and Aztek Inc., a Nevada corporation (the "Company") (ATI and the Company being sometimes referred to hereinafter collectively as the "Constituent Corporations"). Witnesseth: WHEREAS, ATI, as of this date, is authorized to issue an aggregate of 100,000,000 shares of stock, consisting wholly of shares of Common Stock, without par value ("ATI Common Stock"); WHEREAS, ATI, as of this date, has issued and there are outstanding 2,051,109 shares of ATI Common Stock; WHEREAS, as of this date, the Company is authorized to issue 100,000,000 shares of common stock, without par value (the "Company Common Stock"), of which two million twenty-five thousand shares are issued and outstanding; and WHEREAS, the Boards of Directors of the Constituent Corporations deem it advisable and in the best interests of such corporations that a reorganization of the corporate structure of such corporations as herein contemplated be consummated; and, in accordance therewith, that ATI be merged with and into the Company (the "Merger"), and that the Company, as the surviving corporation (as such, the "Surviving Corporation"), shall keep the name "Aztek, Inc." Now, therefore, the parties hereby plan and agree as follows: ARTICLE I MERGER 1.1. Merger. Subject to the terms and conditions of this Plan of Merger, ATI shall be merged with and into the Company in accordance with the 92A.100 et seq. of the Nevada Mergers and Exchanges of Interest Law, the separate existence of ATI shall cease, and the Company, as the Surviving Corporation, shall continue its corporate existence under the laws of the State of Nevada and the United States. The Company shall operate an office in Reno, Nevada, offices where ATI currently operates, and such other places as the Company deems appropriate. The Company, as the Surviving Corporation, shall succeed, insofar as provided by law, to all rights, assets, liabilities and obligations of ATI in accordance with the Nevada General Corporation Law. 1.2. Effective Date. Subject to the approval of the Merger by the requisite resolution of the shareholders of ATI, the Merger shall become effective as of the date and time on which this Plan of Merger or an appropriate certificate of merger is filed with the Secretary of State of the State of Nevada, as required by the Nevada Mergers and Exchanges of Interest Law (the "Effective Date"). ARTICLE II Name, Certificate of Incorporation, Bylaws and Directors and Officers of the Surviving Corporation 2.1. Name. The name of the Surviving Corporation shall be "Aztek, Inc." on the Effective Date. 2.2. Bylaws. The Bylaws of the Company in existence and in effect immediately prior to the Effective Date shall be the Bylaws of the Surviving Corporation. 2.3. Directors and Officers. The directors and officers of the Company immediately prior to the Effective Date shall be the directors and officers, respectively, of the Surviving Corporation until expiration of the current terms as such, or prior resignation, removal or death. ARTICLE III CONVERSION AND EXCHANGE OF SECURITIES 3.1. Conversion. At the Effective Date, each of the following transactions shall be deemed to occur simultaneously: (a) Each share of ATI Common Stock issued and outstanding immediately prior to the Effective Date shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become one fully paid and non-assessable share of the Company Common Stock. (b) Each share of the Company Common Stock issued and outstanding immediately prior to the Effective Date shall remain unchanged. 3.2. Exchange. (a) After the Effective Date, each certificate representing issued and outstanding shares of ATI Common Stock, shall represent the same number of shares of the Company Stock. (b) At any time on or after the Effective Date, each holder of certificates evidencing ownership of shares of ATI Common Stock, upon surrender of such certificates to the Company, shall receive in exchange therefor one or more new stock certificates evidencing ownership of the number of shares of the Company Common Stock into which such securities shall have been converted in the Merger. AZTEK TECHNOLOGIES INC. By:_/s/ Mike Sintichakis --------------------------- Mike Sintichakis Director By: /s/ Eileen Keogh --------------------------- Eileen Keogh Director By: /s/ Edson Ng -------------------------- Edson Ng Director Corporate Seal AZTEK INC. By: /s/ Mike Sintichakis ------------------------- Mike Sintichakis Director By: /s/ Nick Sintichakis ------------------------- Nick Sintichakis Director By: /s/ Eileen Keogh ------------------------ Eileen Keogh Director By: /s/ Edson Ng ----------------------- Edson Ng Director EX-3 5 EXHIBIT 3(i).2 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF AZTEK, INC. (formerly Spectral Innovations (1994), Inc.) AMENDED AND RESTATED ARTICLES OF INCORPORATION OF SPECTRAL INNOVATIONS (1994). INC. The undersigned, being the President and Secretary of Spectral Innovations (1994), Inc., hereby declare that the original Articles of the corporation were filed with the Secretary of State of the State of Nevada on August 19, 1994. Pursuant to the provisions of NRS 78.385-390, at a duly noticed and convened meeting on May 28, 1998, the sole Shareholder of the corporation, representing 100% of the of the voting power of the company's common stock, unanimously voted for the following amendment to the Articles of Incorporation. FIRST. The name of the corporation is: AZTEK, INC. SECOND. The location of the registered office of this corporation within the State of Nevada is 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509; this corporation may maintain an office or offices in such other place within or without the State of Nevada as may be from time to time designated by the Board of Directors or by the By-Laws of the corporation; and this corporation may conduct all corporation business of every kind or nature including the holding of any meetings of directors or shareholders, inside or outside the State of Nevada as well as without the State of Nevada. The Resident Agent for the corporation shall be Michael J. Morrison, Esq. 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509. THIRD The purpose for which this corporation is formed is: To engage in any lawful activity. FOURTH The amount of the total authorized capital stock of the corporation shall be One Hundred Thousand Dollars ($100,000.00), consisting of One Hundred Million (100,000,000) shares of Common Stock, par value $.001 pre share. FIFTH The governing board of this corporation shall be known as directors, and the Board shall consist of four (4) directors. The number of directors may, pursuant to the By-Laws, be increased or decreased by the board of Directors, provided there shall be no less than one (1) nor more than nine (9) Directors. The name and post office address of the four (4) Directors constituting the Board of Directors is as follows: NAME POST OFFICE ADDRESS - ----- -------------------- Mike Sintichakis 246 Lawrence Avenue, Suite 5 Kelowna, B.C., Canada V1Y 6L3 Nick Sintichakis 246 Lawrence Avenue, Suite 5 Kelowna, B.C., Canada V1Y 6L3 Edson Ng 623 Alpine Court N. Vancouver, B.C., Canada V7R 2L7 Eileen Keogh 3579 West 1st Avenue Vancouver, B.C., Canada V7R 1G9 SIXTH The capital stock, or the holders thereof, after the amount of the subscription price has been paid in shall not be subject to any assessment whatsoever to pay the debts of the corporation. SEVENTH No cumulative voting shall be permitted in the election of directors. EIGHTH The corporation is to have perpetual existence. NINTH Shareholders shall not be entitled to preemptive rights. TENTH. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans whether the basis of such proceeding is alleged action in an official capacity as an officer or director or in any other capacity while serving as an officer or director shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Nevada General Corporation Law, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be an officer or director and shall inure to the benefit of his or her heirs, executors and administrators provided, however, that except as provided herein with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided however, that, if the Nevada General Corporation Law requires the payment of such expenses incurred by an officer or director in his or her capacity as an officer or director (and not in any other capacity in which service was or is rendered by such person while an officer or director, including without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding , payment shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such officer or director, to repay all amounts so advanced if it shall ultimately be determined that such officer or director is not entitled to be indemnified under this Section or otherwise. If a claim hereunder is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant may, at any time thereafter, bring suit against the Corporation to recover the unpaid amount of the claim and, if successful, in whole or in part, the claimant shall be entitled to be paid the expenses of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Nevada General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Nevada General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, agreement, vote of Stockholders or disinterested directors or otherwise. The Corporation may maintain insurance, at its expense, to protect itself and any officer, director, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Nevada General Corporation Law. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification to any employee or agent of the Corporation to the fullest extent of the provisions of this section with respect to the indemnification and advancement of expenses of officers and directors of the Corporation or individuals serving at the request of the Corporation as an officer, director, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise. The UNDERSIGNED, being the President and Secretary of Spectral Innovations (1994), Inc. hereby declare and certify that the facts herein stated are true and, accordingly, have hereunto set their hands this 28th day of May, 1998. /s/ Mike Sintichakis /s/ Nick Sintichakis - -------------------------- ------------------------------- Mike Sintichakis, President Nick Sintichakis, Secretary Province of British Columbia ) ) ss: County Yale ) On this 28th day of May, 1998, before me, a Notary Public, personally appeared Mike Sintichakis, personally known to me, and who acknowledged to me that he is the President of Spectral Innovations (1994), Inc. and that he executed the above instrument. /s/ Euan M. Gilmour --------------------------------- Notary Public Euan M. Gilmour Barrister & Solicitor 207-478 Bernard Avenue Kelowna, BC V1Y 6N7 Province of British Columbia ) ) ss: County Yale ) On this 28th day of May, 1998, before me, a Notary Public, personally appeared Nick Sintichakis, personally known to me, and who acknowledged to me that he is the Secretary of Spectral Innovations (1994), Inc. and that he executed the above instrument. /s/ Euan M. Gilmour --------------------------------- Notary Public Euan M. Gilmour Barrister & Solicitor 207-478 Bernard Avenue Kelowna, BC V1Y 6N7 THIS FORM SHOULD ACCOMPANY AMENDED AND/OR RESTATED ARTICLES OF INCORPORATION FOR A NEVADA CORPORATION SPECTRAL INNOVATIONS (1994) INC. !..q r. 1. Name of corporation: SPECTRAL INNOVATIONS (1994) INC. 2. Date of adoption of Amended and/or Restated Articles: Jun 08 1998 3. If the articles were amended, please indicate what changes have been made: (a) Was there a name change? Yes [x] No [ ]. If yes, what is the new name? AZTEK INC. (b) Did you change your resident agent? Yes[ ] No [x]. If yes, please indicate new address: (c) Did you change the purposes? Yes[x] No [ ]. Did you add Banking? [ ], Gaming? [ ], Insurance? [ ], None of these? [x]. (d) Did you change the capital stock? Yes [x] No [ ]. If yes, what is the new capital stock? 100,000,000 Shares of Common Stock, par value $.001. (e) Did you change the directors? Yes [x] No [ ]. If yes, indicate the change: Increased the Board to 4 Directors from 2. (f) Did you add the directors liability provision? Yes [x] No [ ]. (g) Did you change the period of existence? Yes [x] No [ ]. If yes, what is the new existence? Perpetual (h) If none of the above apply, and you have amended or modified the articles, how did you change your articles? The status of the corporation was changed from a close corporation to a statutory corporation under NRS Ch. 78. /s/ Mike Sintichakis ------------------------------------ Mike Sintichakis, President Date: May 28, 1998 Province of British Columbia) ) ss: County of Yale ) On May 28th, 1998 personally appeared before me, a Notary Public, Mike Sintichakis, who acknowledged that he executed the above document. /s/ Euan M. Gilmour --------------------------------- Notary Public Euan M. Gilmour Barrister & Solicitor 207-478 Bernard Avenue Kelowna, BC V1Y 6N7 EX-3 6 EXHIBIT 3(i).1 ARTICLES OF INCORPORATION OF AZTEK, INC. (formerly Spectral Innovations (1994), Inc.) ARTICLES OF INCORPORATION OF SPECTRAL INNOVATIONS (1994), INC. A Close Corporation The undersigned, to form a Nevada close corporation, pursuant to NRS 78A.020, certifies that: FIRST. The name of the corporation is Spectral Innovations (1994) Inc. SECOND. Its principal office in the State of Nevada is located at 1025 Ridgeview Drive, Suite 400, Reno, Washoe County, Nevada 89509. The name and address of its resident agent is Michael J. Morrison, Esq., 1025 Ridgeview Drive, Suite 400, Reno, Nevada BC 89509. THIRD. The nature of the business, or objects or purposes proposed to be transacted, promoted or carried on are: To engage in any lawful activity and to market, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description. To hold, purchase and convey real and personal estate and to mortgage or lease any such real and personal estate with its franchises and to take the same by devise or bequest. To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. To acquire, hold, use, sell, assign, lease, grant licenses in respect of, mortgage, or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to or useful in connection with any business in this corporation. To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock or of any bonds, securities or evidences of the indebtedness created by another corporation or corporations of this state, or any other state or government, and while owner of such stock, bonds, securities or evidences of indebtedness, to exercise all the rights, powers and privileges of ownership, including the right to vote, if any. To borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or for any other lawful purpose of its incorporation; to issue bonds, promissory notes, bills of exchange, debentures and other obligations and evidences of indebtedness, payable at specified time or times, or payable upon the happening of a specified event or events, whether secured by mortgage, pledge, or otherwise, or unsecured, for money borrowed, or in payment for property purchased, or acquired, or for any other lawful objects. To purchase, hold, sell and transfer shares of its own capital stock, and use therefor its capital surplus, surplus or other property or funds; provided it shall not use its funds or property for the purchase of its own shares of capital stock when such use would cause any impairment of its capital; and provided further, that shares of its own capital stock belonging to it shall not be voted upon, directly or indirectly, nor counted as outstanding, for the purpose of computing any stockholders' quorum or vote. To conduct business, have one or more offices, and hold, purchase, mortgage and convey real and personal property in this state, and in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia and in any foreign countries. To do all and everything necessary and proper for the accomplishment of the objects hereinbefore enumerated or necessary or incidental to the protection and benefit of the corporation and, in general, to carry on any lawful business necessary or incidental to the attainment of the objects of the corporation, whether, or not such business is similar in nature to the objects hereinbefore set forth. The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in these Articles of Incorporation, but the objects and purposes specified in each of the foregoing clauses of this Article shall be regarded as independent objects and purposes. FOURTH. The amount of the total authorized capital stock of the corporation is TWENTY-FIVE THOUSAND DOLLARS (S25,000.00). The total number of shares of stock which the corporation shall have the authority to issue is TWENTY-FIVE THOUSAND (25,000) shares, which will consist of the following: A. Common Stock. Twenty-Five Thousand (25,000) shares with a par value of Sl.00 each, amounting to an aggregate of Twenty-Five Thousand Dollars ($25,000.00). No holder of any shares of any class of the corporation shall be entitled to the preemptive rights to subscribe for, purchase or receive any part of any new or additional shares of any class, whether now or hereafter authorized, or any securities exchangeable for or convertible into such shares, or any warrants or other instruments evidencing rights or options to subscribe for, purchase or otherwise acquire such shares. No shares of stock shall have cumulative voting rights. Any class of stock may be held by any person or entity. The number of stockholders of the corporation may not exceed 30. An interest in the shares may not be transferred except to the extent permitted by NRS 78A.050. FIFTH. The governing board of this corporation shall be known as directors and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the By-laws of this corporation. The names and post office addresses of the first Board of Directors, which shall be three (3) in number, are as follows: NAME POST OFFICE ADDRESS ----- ------------------- Mike Sintichakis 242 Lawrence Avenue Kelowna, B.C., Canada VlY 6L3 Richard Evans 1400-400 Burrard Street Vancouver, B.C., Canada V6C 3G2 Nick Sintichakis 242 Lawrence Avenue Kelowna, B.C., Canada VlY 6L3 SIXTH. The capital stock, after the amount of the subscription price or par value has been paid in, shall not be subject to assessment to pay the debts of the corporation. SEVENTH. The name and post office address of the Incorporator signing these Articles of Incorporation is as follows: Michael J. Morrison 1025 Ridgeview Drive, Suite 400 Reno, Nevada 8-0509 EIGHTH. The corporation is to have perpetual existence. NINTH. In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: Subject to the By-laws, if any, adopted by the stockholders, to make, alter or amend the By-laws of the corporation. To fix the amount to be reserved as working capital over and above its capital stock paid in, to authorize and cause to be executed, mortgages and liens upon the real and personal property of this corporation. By resolution passed by a majority of the whole board, to designate one or more committees, each committee to consist of one or more of the directors of the corporation, which, to the extent provided in the resolution or in the By-laws of the corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the By-laws of the corporation or as may be determined from time to time by resolution adopted by the Board of Directors. When and as authorized by the affirmative vote of stockholders holding stock entitling them to exercise at least a majority of the voting power given at a stockholders' meeting called for that purpose, or when authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the Board of Directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of the corporation, including its goodwill and its corporate franchises, upon such terms and conditions as its Board of Directors deem expedient and for the best interests of the corporation. TENTH. The corporation shall indemnify and hold all of its officers, directors, agents and employees harmless from and against any and all claims, suits, actions, damages and liabilities of whatsoever nature arising from their actions on behalf of the corporation. This indemnification shall be to the fullest extent permitted under N.R.S. 78.751, as amended from time to time. THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Nevada, does make and file these Articles of Incorporation, hereby declaring and certifying the facts herein stated are true, and, accordingly, has hereunto set his hand this 18th day of August, 1994. /s/ Michael J. Morrison ------------------------ Michael J. Morrison STATE OF NEVADA ) )ss COUNTY OF WASHOE ) On this 18th day of August, 1994, before me, a Notary Public, personally appeared, Rita S. Dickson, who acknowledged she executed the above instrument. /s/ Rita Sue Dickson RITA SUE DICKSON --------------------- Notary Public- State of Nevada Notary Public Appointment Recorded in Washoe County MY APPOINTMENT EXPIRES APRIL 21, 1997 ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT IN THE MATTER OF Spectral Innovations (1994) Inc., I, Michael J. Morrison, hereby certify that on the 18th day of August, 1994, 1 accepted the appointment as Resident Agent of the above-entitled corporation in accordance with Sec. 78.090, NRS 1957. Furthermore, that the principal office in this State is located at 1025 Ridgeview Drive, Suite 400, Reno, Washoe County, Nevada 89509. IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of August, 1994. /s/ Michael J. Morrison ------------------------------------------- Michael J. Morrison, Resident Agent I hereby certify that this is a true and complete copy of the document as filed in this office DATED: AUG 19 1994 /s/ Chaeryl A. Lau --------------------- CHERYL A. LAU Secretary of State By: /s/ Margaret ***** EX-3 7 EXHIBIT 3(ii) BY-LAWS OF AZTEK INC. (formerly Spectral Innovations (1994), Inc.) BYLAWS OF SPECTRAL INNOVATIONS(1994), INC. ARTICLE 1. OFFICES 1.1 Business Office The principal business office ("principal office") of the corporation shall be located at any place either within or without the State of Nevada as designated in the corporation's most current Annual Report filed with the Nevada Secretary of State. The corporation may have such other offices, either within or without the State of Nevada, as the Board of Directors may designate or as the business of the corporation may require from time to time. The corporation shall maintain at its principal office a copy of certain records, as specified in Section 2.14 of Article 2. 1.2 Registered Office The registered office of the corporation shall be located within Nevada and may be, but need not be, identical with the principal office, provided the principal office is located within Nevada. The address of the registered office may be changed from time to time by the Board of Directors. ARTICLE 2. SHAREHOLDERS 2.1 Annual Shareholder Meeting The annual meeting of the shareholders shall be held on the 30th day of June each year, beginning with the year 1995 or at such other time on such other day within such month as shall be fixed by the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Nevada, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any subsequent continuation after adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as convenient. 2.2 Special Shareholder Meetings. Special meetings of the shareholders, for any purpose or purposes described in the notice of meeting, may be called by the president, or by the Board of Directors, and shall be called by the president at the request of the holders of not less than one-tenth of all outstanding shares of the corporation entitled to vote on any issue at the meeting. 2.3 Place of Shareholder Meetings The Board of Directors may designate any place, either within or without the State of Nevada, as the place for any annual or any special meeting of the shareholders, unless by written consent, which nay be in the form of waivers of notice or otherwise, all shareholders entitled to vote at the meeting designate a different place, either within or without the State of Nevada, as the place for the holding of such meeting. If no designation is made by either the Board of Directors or unanimous action of the voting shareholders, the place of meeting shall be the principal office of the corporation in the State of Nevada. 2.4 Notice of Shareholder Meeting (a) Required Notice. Written notice stating the place, day and hour of any annual or special shareholder meeting shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the president, the Board of Directors, or other persons calling the meeting, to each shareholder of record entitled to vote at such meeting and to any other shareholder entitled by the laws of the State of Nevada governing corporations (the "Act") or the Articles of Incorporation to receive notice of the meeting. Notice shall be deemed to be effective at the earlier of: (1) when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid; (2) on the date shown on the return receipt if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee; (3) when received; or (4) 5 days after deposit in the United States mail, if mailed postpaid and correctly addressed to an address, provided in writing by the shareholder, which is different from that shown in the corporation's current record of shareholders. (b) Adjourned Meeting. If any shareholder meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, and place if the new date, time, and place is announced at the meeting before adjournment. But if a new record date for the adjourned meeting is, or must be fixed (see Section 2.5 of this Article 2) then notice must be given pursuant to the requirements of paragraph (a) of this Section 2.4, to those persons who are shareholders as of the new record date. (c) Waiver of Notice. A shareholder may waive notice of the meeting (or any notice required by the Act, Articles of Incorporation, or Bylaws), by a writing signed by the shareholder entitled to the notice, which is delivered to the corporation (either before or after the date and time stated in the notice) for inclusion in the minutes of filing with the corporate records. A shareholder's attendance at a meeting: (1) waives objection to lack of notice or defective notice of the meeting unless the shareholder, at the beginning of the meeting, objects to holding the meeting or transacting business at the meeting; and (2) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to consideration of the matter when it is presented. (d) Contents of Notice. The notice of each special shareholder meeting shall include a description of the purpose or purposes for which the meeting is called. Except as provided in this Section 2.4(d), or as provided in the corporation's articles, or otherwise in the Act, the notice of an annual shareholder meeting need not include a description of the purpose or purposes for which the meeting is called. If a purpose of any shareholder meeting is to consider either:(1) a proposed amendment to the Articles of Incorporation(including any restated articles requiring shareholder approval);(2) a plan of merger or share exchange; (3) the sale, lease, exchange or other disposition of all, or substantially all of the corporation's property; (4) the dissolution of the corporation; or (5) the removal of a director, the notice must so state and be accompanied by, respectively, a copy or summary of the: (a)articles of amendment; (b) plan of merger or share exchange; and(c) transaction for disposition of all, or substantially all, of the corporation's property. If the proposed corporate action creates dissenters' rights, as provided in the Act, the notice must state that shareholders are, or may be entitled to assert dissenters' rights, and must be accompanied by a copy of relevant provisions of the Act. If the corporation issues, or authorizes the issuance of shares for promissory notes or for promises to render services in the future, the corporation shall report in writing to all the shareholders the number of shares authorized or issued, and the consideration received with or before the notice of the next shareholder meeting. Likewise, if the corporation indemnifies or advances expenses to an officer or a director, this shall be reported to all the shareholders with or before notice of the next shareholder meeting. 2.5 Fixing of Record Date For the purpose of determining shareholders of any voting group entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any distribution or dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date. Such record date shall not be more than 70 days prior to the date on which the particular action requiring such determination of shareholders entitled to notice of, or to vote at a meeting of shareholders, or shareholders entitled to receive a share dividend or distribution. The record date for determination of such shareholders shall be at the close of business on: (a) With respect to an annual shareholder meeting or any special shareholder meeting called by the Board of Directors or any person specifically authorized by the ' Board of Directors or these Bylaws to call a meeting, the day before the first notice is given to shareholders; (b) With respect to a special shareholder meeting demanded by the shareholders, the date the first shareholder signs the demand; (c) With respect to the payment of a share dividend, the date the Board of Directors authorizes the share dividend; (d) With respect to actions taken in writing without a meeting (pursuant to Article 2, Section 2.12), the first date any shareholder signs a consent; and (e) With respect to a distribution to shareholders, (other than one involving a repurchase or reacquisition of shares), the date the Board of Directors authorizes the distribution. When a determination of shareholders entitled to vote at any meeting of shareholders has been made, as provided in this section, such determination shall apply to any adjournment thereof unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. If no record date has been fixed, the record date shall be the date the written notice of the meeting is given to shareholders. 2.6 Shareholder List The officer or agent having charge of the stock transfer books for shares of the corporation shall, at least ten (10) days before each meeting of shareholders, make a complete record of the shareholders entitled to vote at each meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list must be arranged by class or series of shares. The shareholder list must be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting. The list shall be available at the corporation's principal office or at a place in the city where the meeting is to be held, as set forth in the notice of meeting. A shareholder, his agent, or attorney is entitled, on written demand, to inspect and, subject to the requirements of Section 2.14 of this Article 2, to copy the list during regular business hours and at his expense, during the period it is available for inspection. The corporation shall maintain the shareholder list in written form or in another form capable of conversion into written form within a reasonable time. 2.7 Shareholder Quorum and Voting Requirements A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting, unless a new record date is or must be set for that adjourned meeting. If a quorum exists, a majority vote of those shares present and voting at a duly organized meeting shall suffice to defeat or enact any proposal unless the Statutes of the State of Nevada, the Articles of Incorporation or these Bylaws require a greater-than-majority vote, in which event the higher vote shall be required for the action to constitute the action of the corporation. 2.8 Increasing Either quorum or Voting Requirements For purposes of this Section 2.8, a "supermajority" quorum is a requirement that more than a majority of the votes of the voting group be present to constitute a quorum; and a "supermajority" voting requirement is any requirement that requires the vote of more than a majority of the affirmative votes of a voting group at a meeting. The shareholders, but only if specifically authorized to do so by the Articles of Incorporation, may adopt, amend, or delete a Bylaw which fixes a "supermajority" quorum or "supermajority" voting requirement. The adoption or amendment of a Bylaw that adds, changes, or deletes a "supermajority" quorum or voting requirement for shareholders must meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then if effect or proposed to be adopted, whichever is greater. A Bylaw that fixes a supermajority quorum or voting requirement for shareholders may not be adopted, amended, or repealed by the Board of Directors. 2.9 Proxies At all meetings of shareholders, a shareholder may vote in person, or vote by written proxy executed in writing by the shareholder or executed by his duly authorized attorney-in fact. Such proxy shall be filed with the secretary of the corporation or other person authorized to tabulate votes before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise specifically provided in the proxy or coupled with an interest. 2.10 Voting of Shares Unless otherwise provided in the articles, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without the transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver maybe voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the Court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares are transferred into the name of the pledgee, and thereafter, the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the corporation or held by it in a fiduciary capacity shall not be voted directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Redeemable shares are not entitled to vote after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares. 2.11 Corporation's Acceptance of Votes (a) If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder. (b) If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of its shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if: (1) the shareholder is an entity, as defined in the Act, and the name signed purports to be that of an officer or agent of the entity; (2) the name signed purports to be that of an administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment; (3) the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment; (4) the name signed purports to be that of a pledgee, beneficial owner, or attorney-in- fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or (5) the shares are held in the name of two or more persons as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners. (c) The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. (d) The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this Section 2.11 are not liable in damages to the shareholder for the consequences of the acceptance or rejection. (e) Corporation action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise. 2.12 Informal Action by Shareholders Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if one or more written consents, setting forth the action so taken, shall be signed by shareholders holding a majority of the shares entitled to vote with respect to the subject matter thereof, unless a "supermajority" vote is required by these Bylaws, in which case a "supermajority" vote will be required. Such consent shall be delivered to the corporation secretary for inclusion in the minute book. A consent signed under this Section has the effect of a vote at a meeting and may be described as such in any document. 2.13 Voting for Directors Unless otherwise provided in the Articles of Incorporation, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. 2.14 Shareholders' Rights to Inspect Corporate Records Shareholders shall have the following rights regarding inspection of corporate records: (a) Minutes and Accounting Records - The corporation shall keep, as permanent records, minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by a committee of the Board of Directors in place of the Board of Directors on behalf of the corporation. The corporation shall maintain appropriate accounting records. (b) Absolute Inspection Rights of Records Required at Principal Office - If a shareholder gives the corporation written notice of his demand at least five business days before the date on which he wishes to inspect and copy, he, or his agent or attorney, has the right to inspect and copy, during regular business hours, any of the following records, all of which the corporation is required to keep at its principal office: (1) its Articles or restated Articles of Incorporation and all amendments to them currently in effect; (2) its Bylaws or restated Bylaws and all amendments to them currently in effect; (3) resolutions adopted by its Board of Directors creating one or more classes or series of shares, and fixing their relative rights, preferences and limitations, if shares issued pursuant to those resolutions are outstanding; (4) the minutes of all shareholders' meetings, and records of all action taken by shareholders without a meeting, for the past three years; (5) all written communications to shareholders within the past three years, including the financial statements furnished for the past three years to the shareholders; (6) a list of the names and business addresses of its current directors and officers; and (7) its most recent annual report delivered to the Nevada Secretary of State. (c) Conditional Inspection Right - In addition, if a shareholder gives the corporation a written demand, made in good faith and for a proper purpose, at least five business days before the date on which he wishes to inspect and copy, describes with reasonable particularity his purpose and the records he desires to inspect, and the records are directly connected to his purpose, a shareholder of a corporation, or his duly authorized agent or attorney, is entitled to inspect and copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation: (1) excerpts from minutes of any meeting of the Board of Directors; records of any action of a committee of the Board of Directors on behalf of the corporation; minutes of any meeting of the shareholders; and records of action taken by the shareholders or Board of Directors without a meeting, to the extent not subject to inspection under paragraph (a) of this Section 2.14; (2) accounting records of the corporation; and (3) the record of shareholders (compiled no earlier than the date of the shareholder's demand). (d) Copy Costs - The right to copy records includes, if reasonable, the right to receive copies made by photographic, xerographic, or other means. The corporation may impose a reasonable charge, to be paid by the shareholder on terms set by the corporation, covering the costs of labor and material incurred in making copies of any documents provided to the shareholder. (e) "Shareholder" Includes Beneficial owner - For purposes of this Section 2.14, the term "shareholder" shall include a beneficial owner whose shares are held in a voting trust or by a nominee on his behalf. 2.15 Financial Statements shall Be Furnished to the Shareholders. (a) The corporation shall furnish its shareholders annual financial statements, which may be consolidated or combined statements of corporation and one or more of its subsidiaries, as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of changes in shareholders' equity for the year, unless that information appears elsewhere in the financial statements. If financial statements are prepared for the corporation on the basis of generally accepted accounting principles, the annual financial statements for the shareholders must also be prepared on that basis. (b) If the annual financial statements are reported upon by a public accountant, his report must accompany them. If not, the statements must be accompanied by a statement of the president or the person responsible for the corporation's accounting records: (1) stating his reasonable belief that the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation; and (2) describing any respects in which the statements were not prepared on a basis of accounting consistent with the Statements prepared for the preceding year. (c) A corporation shall mail the annual financial statements to each shareholder within 120 days after the close of each fiscal year. Thereafter, on written request from a shareholder who was not mailed the statements, the corporation shall mail him the latest financial statements. 2.16 Dissenters' Rights. Each shareholder shall have the right to dissent from and obtain payment for his shares when so authorized by the Act, Articles of Incorporation, these Bylaws, or a resolution of the Board of Directors. 2.17 Order of Business. The following order of business shall be observed at all meetings of the shareholders, as applicable and so far as practicable: (a) Calling the roll of officers and directors present and determining shareholder quorum requirements; (b) Reading, correcting and approving of minutes of previous meeting; (c) Reports of officers; (d) Reports of Committees; (e) Election of Directors; (f) Unfinished business; (g) New business; and (h) Adjournment. ARTICLE 3. BOARD OF DIRECTORS 3.1 General Powers. Unless the Articles of Incorporation have dispensed with or limited the authority of the Board of Directors by describing who will perform some or all of the duties of a Board of Directors, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of the Board of Directors. 3.2 Number, Tenure and Qualification of Directors. Unless otherwise provided in the Articles of Incorporation, the authorized number of directors shall be not less than 1 (minimum number) nor more than 11 (maximum number). The initial number of directors was established in the original Articles of Incorporation. The number of directors shall always be within the limits specified above, and as determined by resolution adopted by the Board of Directors. After any shares of this corporation are issued, neither the maximum nor minimum number of directors can be changed, nor can a fixed number be substituted for the maximum and minimum numbers, except by a duly adopted amendment to the Articles of Incorporation duly approved by a majority of the outstanding shares entitled to vote. Each director shall hold office until the next annual meeting of shareholders or until removed. However, if his term expires, he shall continue to serve until his successor shall have been elected and qualified, or until there is a decrease in the number of directors. Unless required by the Articles of Incorporation, directors do not need to be residents of Nevada or shareholders of the corporation. 3.3 Regular Meetings of the Board of Directors. A regular meeting of the Board of Directors shall be held without other notice than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. (If permitted by Section 3.7, any regular meeting may be held by telephone). 3.4 Special Meeting of the Board of Directors. Special meetings of the Board of Directors may be called by or at the request of the president or any one director. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either, within or without the State of Nevada, as the place for holding any special meeting of the Board of Directors or, if permitted by Section 3.7, any special meeting may be held by telephone. 3.5 Notice of, and Waiver of Notice of, Special Meetings of the Board of Directors. Unless the Articles of Incorporation provide for a longer or shorter period, notice of any special meeting of the Board of Directors shall be given at least two days prior thereto, either orally or in writing. If mailed, notice of any director meeting shall be deemed to be effective at the earlier of: (1) when received; (2) five days after deposited in the United States mail, addressed to the director's business office, with postage thereon prepaid; or (3) the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the director. Notice may also be given by facsimile and, in such event, notice shall be deemed effective upon, transmittal thereof to a facsimile number of a compatible facsimile machine at the director's business office. Any director may waive notice of any meeting. Except as otherwise provided herein, the waiver must be in writing, signed by the director entitled to the notice, and filed with the minutes or corporate records. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business and at the beginning of the meeting, or promptly upon his arrival, objects to holding the meeting or transacting business at the meeting, and does not thereafter vote for or assent to action taken at the meeting. Unless required by the Articles of Incorporation or the Act, neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. 3.6 Director Quorum. A majority of the number of directors fixed, pursuant to Section3.2 of this Article 3, shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, unless the Articles of Incorporation or the Act require a greater number for a quorum. Any amendment to this quorum requirement is subject to the provisions of Section 3.8 of this Article 3. Once a quorum has been established at a duly organized meeting, the Board of Directors may continue to transact corporate business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum. 3.7 Actions By Directors. The act of the majority of the directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the Board of Directors, unless the Articles of Incorporation or the Act require a greater percentage. Any amendment which changes the number of directors needed to take action is subject to the provisions of Section 3.8 of this Article 3. Unless the Articles of Incorporation provide otherwise, any or all directors may participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. Minutes of any such meeting shall be prepared and entered into the records of the corporation. A director participating in a meeting by this means is deemed to be present in person at the meeting. A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless: (1)he objects at the beginning of the meeting, or promptly upon his arrival, to holding it or transacting business at the meeting; or(2) his dissent or abstention from the action taken is entered in the minutes of the meeting; or (3) he delivers written notice of his dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation within 24 hours after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken. 3.8 Establishing a "supermajority" Quorum or Voting Requirement for the Board of Directors. For purposes of this Section 3.8, a "supermajority" quorum is a requirement that more than a majority of the directors in office constitute a quorum; and a "supermajority" voting requirement is one which requires the vote of more than a majority of those directors present at a meeting at which a quorum is present to be the act of the directors. A Bylaw that fixes a supermajority quorum or supermajority voting requirement may be amended or repealed: (1) if originally adopted by the shareholders, only by the shareholders (unless otherwise provided by the shareholders); or (2) if originally adopted by the Board of Directors, either by the shareholders or by the Board of Directors. A Bylaw adopted or amended by the shareholders that fixes a supermajority quorum or supermajority voting requirement for the Board of Directors may provide that it may be amended or repealed only by a specified vote of either the shareholders or the Board of Directors. Subject to the provisions of the preceding paragraph, action by the Board of Directors to adopt, amend, or repeal a Bylaw that changes the quorum or voting requirement for the Board of Directors must meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater. 3.9 Director Action Without a Meeting Unless the Articles of Incorporation provide otherwise, any action required or permitted to be taken by the Board of Directors at a meeting may be taken without a meeting if all the directors sign a written consent describing the action taken. Such consents shall be filed with the records of the corporation. Action taken by consent is effective when the last director signs the consent, unless the consent specifies a different effective date. A signed consent has the effect of a vote at a duly noticed and conducted meeting of the Board of Directors and may be described as such in any document. 3.10 Removal of Directors. The shareholders may remove one or more directors at a meeting called for that purpose if notice has been given that a purpose of the meeting is such removal. The removal may be with or without cause unless the Articles of Incorporation provide that directors may only be removed for cause. If cumulative voting is not authorized, a director may be removed only if the number of votes cast in favor of removal exceeds the number of votes cast against removal. 3.11 Board of Director Vacancies. Unless the Articles of Incorporation provide otherwise, if a vacancy occurs on the Board of Directors, excluding a vacancy resulting from an increase in the number of directors, the director(s) remaining in office shall fill the vacancy. If the directors remaining in office constitute fewer than a quorum of the Board of Directors, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. If a vacancy results from an increase in the number of directors, only the shareholders may fill the vacancy. A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date) may be filled by the Board of Directors before the vacancy occurs, but the new director may not take office until the vacancy occurs. The term of a director elected to fill a vacancy expires at the next shareholders' meeting at which directors are elected. However, if his term expires, he shall continue to serve until his successor is elected and qualifies or until there is a decrease in the number of directors. 3.12 Director Compensation. Unless otherwise provided in the Articles of Incorporation, by resolution of the Board of Directors, each director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board of Directors, or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 3.13 Director Committees. (a) Creation of Committees. Unless the Articles of Incorporation provide otherwise, the Board of Directors may create one or more committees and appoint members of the Board of Directors to serve on them. Each committee must have two or more members, who serve at the pleasure of the Board of Directors. (b) Selection of Members. The creation of a committee and appointment of members to it must be approved by the greater of (1) a majority of all the directors in office when the action is taken, or (2) the number of directors required by the Articles of Incorporation to take such action. (c) Required Procedures. Sections 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 of this Article 3 apply to committees and their members. (d) Authority. Unless limited by the Articles of Incorporation or the Act, each committee may exercise those aspects of the authority of the Board of Directors which the Board of Directors confers upon such committee in the resolution creating the committee. Provided, however, a committee may not: (1) authorize distributions to shareholders; (2) approve or propose to shareholders any action that the Act requires be approved by shareholders; (3) fill vacancies on the Board of Directors or on any of its committees; (4) amend the Articles of Incorporation; (5) adopt, amend, or repeal Bylaws; (6) approve a plan of merger not requiring shareholder approval; (7) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; or (8) authorize or approve the issuance or sale, or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares; except -that the Board of Directors may authorize a committee to do so within limits specifically prescribed by the Board of Directors. ARTICLE 4. OFFICERS 4.1 Designation of Officers. The officers of the corporation shall be a president, a secretary, and a treasurer, each of whom shall be appointed by the Board of Directors. Such other officers and assistant officers as may be deemed necessary, including any vice-presidents, may be appointed by the Board of Directors. The same individual may simultaneously hold more than one office in the corporation. 4.2 Appointment and Term of office. The officers of the corporation shall be appointed by the Board of Directors for a term as determined by the Board of Directors. If no term is specified, they shall hold office until the first meeting of the directors held after the next annual meeting of share holders. If the appointment of officers is not made at such meeting, such appointment shall be made as soon thereafter as is convenient. Each officer shall hold office until his successor has been duly appointed and qualified, until his death, or until here signs or has been removed in the manner provided in Section 4.3of this Article 4. The designation of a specified term does not grant to the officer any contract rights, and the Board of Directors can remove the officer at any time prior to the termination of such term. Appointment of an officer shall not of itself create any contract rights. 4.3 Removal of officers. Any officer may be removed by the Board of Directors at anytime, with or without cause. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. 4.4 President. The president shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall generally supervise and control all of the business and affairs of the corporation. He shall, when present, preside at all meetings of the shareholders. He may sign, with the secretary or any other proper officer of the corporation thereunto duly authorized by the Board of Directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed ' except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. The president shall generally perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. 4.5 Vice-President. If appointed, in the absence of the president or in the event of the president's death, inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their appointment) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. If there is no vice-president, then the treasurer shall perform such duties of the president. Any vice-president may sign with the secretary or an assistant secretary, certificates for shares of the corporation the issuance of which have been authorized by resolution of the Board of Directors. A vice-president shall perform such other duties as from time to time may be assigned to him by the president or by the Board of Directors. 4.6 Secretary. The secretary shall (a) keep the minutes of the proceedings of the shareholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of any seal of the corporation and, if there is a seal of the corporation, see that it is affixed to all documents, the execution of which on behalf of the corporation under its seal is duly authorized; (d)when requested or required, authenticate any records of the corporation; (e) keep a register of the post office address of each shareholder, as provided to the secretary by the shareholders; (f)sign with the president, or a vice-resident, certificates for shares of the corporation, the issuance of which has been authorized by resolution of the Board of Directors; (g) have general charge of the stock transfer books of the corporation; and(h) generally perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the Board of Directors. 4.7 Treasurer. The treasurer shall (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies, or other depositaries as may be selected by the Board of Directors; and (c) generally perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president or by the Board of Directors. If required by the Board of Directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. 4.8 Assistant Secretaries and Assistant Treasurers. The assistant secretaries, when authorized by the Board of Directors, may sign with the president, or a vice-president, certificates for shares of the corporation, the issuance of which has been authorized by a resolution of the Board of Directors. The assistant treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The assistant secretaries and assistant treasurers, generally, shall perform such duties as may be assigned to them by the secretary or the treasurer, respectively, or by the president or the Board of Directors. 4.9 Salaries. The salaries of the officers, if any, shall be fixed from time to time by the Board of Directors. ARTICLE 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS, AND EMPLOYEES 5.1 Indemnification of officers, Directors, Employees and Agents. Unless otherwise provided in the Articles of Incorporation, the corporation shall indemnify any individual made a party to a proceeding because he is or was an officer, director employee or agent of the corporation against liability incurred in the proceeding, all pursuant to and consistent with the provisions of NRS 78.751, as amended from time to time. 5.2 Advance Expenses for Officers and Directors. The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding shall be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, but only after receipt by the corporation of an undertaking by or on behalf of the officer or director on terms set by the Board of Directors, to repay the expenses advanced if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. 5.3 Scope of Indemnification. The indemnification permitted herein is intended to be to the fullest extent permissible under the laws of the State of Nevada, and any amendments thereto. ARTICLE 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER 6.1 Certificates for Shares. (a) Content Certificates representing shares of the corporation shall at minimum, state on their face the name of the issuing corporation; that the corporation is formed under the laws of the State of Nevada; the name of the person to whom issued; the certificate number; class and par value of shares; and the designation of the series, if any, the certificate represents. The form of the certificate shall be as determined by the Board of Directors. Such certificates shall be signed (either manually or by facsimile) by the president or a vice-president and by the secretary or an assistant secretary and may be sealed with a corporate seal or a facsimile thereof. Each certificate for shares shall be consecutively numbered or otherwise identified. (b) Legend as to Class or series If the corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series) must be summarized on the front or back of the certificate indicating that the corporation will furnish the shareholder this information on request in writing and without charge. (c) Shareholder List The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. (d) Transferring Shares All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed, or mutilated certificate, a new one may be issued therefor upon such terms as the Board of Directors may prescribe, including indemnification of the corporation and bond requirements. 6.2 Registration of the Transfer of Shares. Registration of the transfer of shares of the corporation shall be made only on the stock transfer books of the corporation. In order to register a transfer, the record owner shall surrender the share certificate to the corporation for cancellation, properly endorsed by the appropriate person or persons with reasonable assurances that the endorsements are genuine and effective. Unless the corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the corporation as the owner, the person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. 6.3 Restrictions on Transfer of Shares Permitted. The Board of Directors may impose restrictions on the transferor registration of transfer of shares, including any security convertible into, or carrying a right to subscribe for or acquire shares. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction. A restriction on the transfer or registration of transfer of shares may be authorized: (1) to maintain the corporation's status when it is dependent on the number or identity of its shareholders; (2) to preserve exemptions under federal or state securities law; or (3) for any other reasonable purpose. A restriction on the transfer or registration of transfer of shares may: (1) obligate the shareholder first to offer the corporation or other persons (separately, consecutively, or simultaneously) an opportunity to acquire the restricted shares; (2) obligate the corporation or other persons (separately, consecutively, or simultaneously) to acquire the restricted shares; (3) require the corporation, the holders or any class of its shares, or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable; or (4) prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable. A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this Section 6.3 and its existence is noted conspicuously on the front or back of the certificate. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction. 6.4 Acquisition of Shares. The corporation may acquire its own shares and unless otherwise provided in the Articles of Incorporation, the shares so acquired constitute authorized but unissued shares. If the Articles of Incorporation prohibit the reissue of shares acquired by the corporation, the number of authorized shares is reduced by the number of shares acquired, effective upon amendment of the Articles of Incorporation, which amendment shall be adopted by the shareholders, or the Board of Directors without shareholder action (if permitted by the Act). The amendment must be delivered to the Secretary of State and must set forth: (1) the name of the corporation; (2) the reduction in the number of authorized shares, itemized by class and series; and (3) the total number of authorized shares, itemized by class and series, remaining after reduction of the shares. ARTICLE 7. DISTRIBUTIONS 7.1 Distributions. The Board of Directors may authorize, and the corporation may make, distributions (including dividends on its outstanding shares) in the manner and upon the terms and conditions provided by law. ARTICLE 8. CORPORATE SEAL 8.1 Corporate Seal. The Board of Directors may adopt a corporate seal which may be circular in form and have inscribed thereon any designation, including the name of the corporation, Nevada as the state of incorporation, and the words "Corporate Seal." ARTICLE 9. EMERGENCY BYLAWS 9.1 Emergency Bylaws. Unless the Articles of Incorporation provide otherwise, the following provisions shall be effective during an emergency, which is defined as a time when a quorum of the corporation's directors cannot be readily assembled because of some catastrophic event. During such emergency: (a) Notice of Board Meetings Any one member of the Board of Directors or any one of the following officers: president, any vice-president, secretary, or treasurer, may call a meeting of the Board of Directors. Notice of such meeting need be given only to those directors whom it is practicable to reach, and may be given in any practical manner, including by publication and radio. Such notice shall be given at least six hours prior to commencement of the meeting. (b) Temporary Directors and Quorum One or more officers of the corporation present at the emergency board meeting, as is necessary to achieve a quorum, shall be considered to be directors for the meeting, and shall so serve in order of rank, and within the same rank, in order of seniority. In the event that less than a quorum (as determined by Section 3.6 of Article 3) of the directors are present (including any officers who are to serve as directors for the meeting) , those directors present (including the officers serving as directors) shall constitute a quorum. (c) Actions Permitted To Be Taken The Board of Directors, as constituted in paragraph (b), and after notice as set forth in paragraph (a), may: (1) OFFICERS' POWERS Prescribe emergency powers to any officer of the corporation; (2) DELEGATION OF ANY POWER Delegate to any officer or director, any of the powers of the Board of Directors; (3) LINES OF SUCCESSION Designate lines of succession of officers and agents, in the event that any of them are unable to discharge their duties; (4) RELOCATE PRINCIPAL PLACE OF BUSINESS Relocate the principal place of business, or designate successive or simultaneous principal places of business; (5) ALL OTHER ACTION Take any other action which is convenient, helpful, or necessary to carry on the business of the corporation. ARTICLE 10. AMENDMENTS 10.1 Amendments. The Board of Directors may amend or repeal the corporation's Bylaws unless: (1) the Articles of Incorporation or the Act reserve this power exclusively to the shareholders, in whole or part; or (2) the shareholders, in adopting, amending, or repealing a particular Bylaw, provide expressly that the Board of Directors may not amend or repeal that Bylaw; or (3) the Bylaw either establishes, amends or deletes a "supermajority" shareholder quorum or voting requirement, as defined in section 2.8 of Article 2. Any amendment which changes the voting or quorum requirement for the Board of Directors must comply with Section 3.8 of Article 3,and for the shareholders, must comply with Section 2.8 of Article 2. The corporation's shareholders may also amend or repeal the corporation's Bylaws at any meeting held pursuant to Article 2. CERTIFICATE OF SECRETARY I hereby certify that I am the Secretary of SPECTRAL INNOVATIONS(1994), INC. and that the foregoing Bylaws, consisting of twenty-seven (27) pages, constitutes the Code of SPECTRAL INNOVATIONS(1994), INC. as duly adopted by the Board of Directors of the corporation on this 30th day of August, 1994. IN WITNESS WHEREOF, I have hereunto subscribed my name this 30th day of August, 1994 /s/ Nick Sintichakis ------------------------------- Secretary EX-4 8 EXHIBIT 4.1. Minutes Approving Issuance Of Shares And Bonus Shares MINUTES OF THE BOARD OF DIRECTORS A meeting of the Directors of AZTEK, INC., a Nevada corporation, was held at the Company's offices on the 12th day of June, 1998, at the hour of 10:00 o'clock a.m., for the purpose of the sale of a determined number of shares for startup purposes. Mike Sintichakis Chairman of the Board called the meeting to order and Nick Sintichakis Director recorded the minutes of the meeting. On motion duly made, seconded and unanimously carried the reading correcting and approval of the minutes of the last meeting was waived. Upon motion duly made it was resolved that the Company allot an aggregate of 1,000,000 common shares par value $0.001 at a price of US$0.05 per share to the following directors, officers and employees of the Company: Name No. & Class of Shares Mike Sintichakis (director) 400,000 common shares, par value $0.001 Edson Ng (director) 200,000 common shares, par value $0.001 Eileen Keogh (director) 200,000 common shares, par value $0.001 Nick Sintichakis (director) 190,000 common shares, par value $0.001 Dauna Potts (employee) 10,000 common shares, par value $0.001 the ("Shares") Upon motion duly made, it was resolved that the issuance and release of the Shares be subject to the following terms and conditions: 1. The total number of Shares shall be paid for in advance by the purchasers prior to issuance at a price of $0.05 per share. The payment must be made by a cashier's or certified cheque, payable to Aztek, Inc. 2. All purchasers agree to place all of their Shares in the Company's trust account and the Shares will be released in 24 equal monthly installments. All of the directors of the Company agree to sign a resignation letter which shall be used if the board of directors decide to cease a director's services for failure to execute his duties and to avoid additional expenses to the Company for a director's dismissal through shareholder meetings. 3. In the event that any director, officer or employee is released by the Company, based on the board of directors recommendations or leaves through their own free will for any reason, the Company has the power and authority to sell and transfer all remaining Shares held in the individual's trust account to an existing or new employee, director or officer of the Company. 4. All purchasers agree to sign a power of attorney authorizing the Company to sell the balance of the Shares remaining in their trust account as described in paragraph 4 herein. 5. The new purchaser shall pay the original owner US$0.05 for each Share transferred plus 6% per annum interest effective on the day of purchase. If the Company fails to make a decision on the new purchaser within thirty days, the Company will advance the funds to the seller on behalf of the future purchaser. Upon motion duly made, it was resolved that the Company allot an aggregate of 1,000,000 common shares, par value $0.001, at a price of US$0.01 per share to be issued as Bonus Shares to the following directors of the Company: Name No. & Class of Shares Mike Sintichakis 400,000 common shares, par value $0.001 Edson Ng 200,000 common shares, par value $0.001 Eileen Keogh 200,000 common shares, par value $0.001 Nick Sintichakis 200,000 common shares, par value $0.001 (the "Bonus Shares") Upon motion duly made, it was resolved that issuance of any of the Bonus Shares be subject to the following terms and conditions: 1. All of the Bonus Shares must be paid for in advance at a price of US$0.01 per Bonus Share. The payment must be made by a cashier's or certified cheque, payable to Aztek, Inc. 2. The release of the Bonus Shares shall be subject to the director's, officer's or employee's satisfactory performance and certain conditions being met as described herein; 3. Any outstanding Bonus Shares will expire at the end of the term of five (5) years from the date of the resolution of the board of directors approving the granting of the Bonus Shares and shall be automatically cancelled; 4. The maximum number of Bonus Shares to be released to any director, officer or employee in any one year shall be restricted to 20% of the original amount of Bonus Shares awarded; 5. In order for the Company to authorize the issuance of any Bonus Shares to any director, officer or employee the Bonus Shares shall be released only if the Company accumulates the following working capital per year: Year one: $0.05 per share of working capital Year two: $0.10 per share of working capital Year three: $0.20 per share of working capital Year four: $0.30 per share of working capital Year five: $0.40 per share of working capital 6. In the event that any director, officer or employee ceases to serve the Company in any capacity for any reason, the remaining Bonus Shares shall be transferred to a new director, officer or employee of the Company at the board of director's discretion. The new purchaser shall, as a condition of receiving the Bonus Shares, pay to the original beneficial owner US$0.01 for each Bonus Share transferred to him including 6% interest effective on the day of purchase within thirty days. In the event that the Company fails to make a decision of the new beneficial owner within thirty days, the Company will advance the funds and recover the same from the future beneficial owner. 7. All beneficiaries agree to sign a power of attorney authorizing the Company to transfer the balance of the Bonus Shares remaining in their account. The balance of the Bonus Shares described herein, at the board of director's discretion, will be sold or transferred to several or one existing or new director, employee or officer of the Company. The power of attorney will be effective if a beneficiary, based on the board of director's discretion, does not provide satisfactory services to the Company and in result they cease their services to the Company. Upon motion duly made, it was agreed that the funds collected from the issuance of the Shares and the Bonus Shares be used for the Company's start-up costs and working capital. There being no further business to come before the meeting at this time, the meeting was, upon motion duly made and seconded, adjourned at 11:30 a.m. /s/ Mike Sintichakis ---------------------------- Mike Sintichakis, Director EX-4 9 EXHIBIT 4.2 Standard Subscription Agreement for Common Shares Investment Letter Aztek, Inc. Suite #5 - 246 Lawrence Avenue Kelowna, B.C. V1Y 6L3 Dear Sirs: In connection with the acquisition by the undersigned of ____________________ (_________) shares of Common Stock (the "Bonus Shares") of Aztek, Inc. a Nevada corporation ("Aztek" or the "Company"), at a price of US$0.05 per share, from the Company, the undersigned hereby covenants, represents and warrants to you that: 1. The undersigned is acquiring the Shares in good faith for the purpose of an investment in the Company and not for the purpose of distributing or publicly selling the Shares to others, reselling, assigning, pledging or hypothecating the Shares; or dividing his participation with others in the Shares or any portion thereof except as described herein. 2. As of the date of this letter, the undersigned is not aware of any particular occasion, event or circumstance upon the occurrence or happening of which he or she intends to sell the Shares except as described herein. 3. The Shares are being acquired by the undersigned for his or her own account and there is a present arrangement or agreement for the possible transfer of the Shares to other persons employed by the Company. 4. The Shares covered by the above covenants, warranties and representations shall also include any securities into which the above Shares may become converted, subdivided, or split up, in connection with a merger, re-classification, recapitalization or reorganization of the Company. 5. The undersigned further acknowledges that he is familiar with the operations of the Company; that he has received information of the Company, that he is capable of evaluating the merits and risks of the prospective investment; and that he has had the opportunity to ask questions and receive answers concerning the terms and conditions of the issuance of the Shares. 6. The undersigned understands that he or she will issue a cheque for the full amount of the purchase price of the Shares of Common Stock purchased, payable to the order of "Aztek, Inc." This investment letter must be executed and delivered to Aztek, Inc., Suite #5 - 246 Lawrence Avenue, Kelowna, B.C. V1Y 6L3. 7. The undersigned understands and agrees that the Shares so purchased shall be held in trust by Aztek, Inc. and released to the undersigned in 24 equal monthly installments. 8. The undersigned acknowledges and agrees that in the event that he or she ceases to be a director, officer or employee of the Company, or is released by the Board of Directors for any reason, the balance remaining of the Shares not so released to the undersigned shall be transferred to a new holder. The undersigned hereby authorizes the Board of Directors of the Company to transfer or assign the balance so remaining to a new director officer or employee of the Company. As a condition of receiving the Shares, the new beneficial holder of the Shares shall cause to be paid to the undersigned US$0.05 for each share so transferred or assigned together with 6% interest. 9. The undersigned agrees to indemnify the Company against, and hold it harmless from, all losses, liabilities, costs and expenses (including reasonable attorney's fees) which arise as a result of a sale, exchange or other transfer of the Shares other than as permitted hereunder. Yours truly, By: ____________________________________ ________________________________________ Address Date____________________________________ Telephone No.____________________________ Accepted this ______ day of ________________________, 1998. AZTEK, INC. Per:____________________________________ See also Articles six, seven and nine of the Company's Amended And Restated Articles Of Incorporation set forth in this Form S-4 as Exhibit 3(i).2 and Article 2 of the Company's By-laws set forth in this Form S-4 as Exhibit 3(ii). EX-5 10 EXHIBIT 5. Opinion On Legality [LETTERHEAD OF LAW FIRM OF LARSON-JACKSON, P.C.] August 1, 1998 Board of Directors the Company Inc. 1575 Deluccchi Lane, Suite #40 Reno, Nevada 89502 RE: Registration Statement on Form S-4 Ladies and Gentlemen: This opinion is rendered in connection with the Registration Statement on Form S-4 (the "Registration Statement") filed by Aztek, Inc. (the "Company") with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and the Joint Proxy Statement-Prospectus (the "Prospectus"), relating to the issuance by the Company of up to 2,051,109 shares of common stock, par value $0.001 per share (the "Common Stock"), in the manner set forth in the Registration Statement and the Prospectus. As counsel, we have reviewed the Registration Statement, the Prospectus and the Company's Articles of Incorporation and By-Laws, Records of the Company's corporate proceedings relative to the issuance of the Common Stock and such other legal matters as we have deemed appropriate for the purposes of this opinion. We are rendering this opinion as of the time the Registration Statement becomes effective. Based upon the foregoing, and having a regard for such legal considerations as we have deemed relevant, we are of the opinion that the shares of Common Stock will be, upon issuance, against full payment therefor as contemplated in the Registration Statement and the Prospectus, legally issued, fully paid and non-assessable shares of Common Stock of the Company. We consent to the filing of our opinion as an exhibit to the Registration Statement and to the reference to our firm and our opinion in the Registration Statement and all amendments thereto. Very truly yours, LAW FIRM OF LARSON-JACKSON, P.C. BY: /s/ Steve Larson-Jackson - ------------------------------------- Steve Larson-Jackson EX-8 11 January ____, 1999 Board of Directors Aztek Inc. 1575 Delucchi Lane, Suite #40 Reno, Nevada 89502 Board of Directors Aztek Technologies Inc. Suite #5 - 246 Lawrence Ave. Kelowna, B.C. V1Y 6L3 Re: Certain Material Federal Income Tax Consequences Relating to the Acquisition of Aztek Technologies Inc. ------------------------------------------------------------- Ladies and Gentlemen: We are rendering this opinion to you at your request and in our capacity as special counsel to Aztek, Inc. (the "Company"), a Nevada corporation headquartered in Reno, Nevada in connection with the Merger Agreement dated as of July 2, 1998 (the "Agreement"), entered into between the Company and Aztek Technologies Inc. ("ATI"), a computer software company in British Columbia, Canada. Terms used herein, whether capitalized or not, shall have the meanings given to them in the Agreement. In the opinion of counsel, the following constitutes the material federal tax consequences of the Merger under U.S. law. ATI will be merged with and into the Company (the "Merger"). Each issued and outstanding share of common stock of ATI, no par value ("ATI Common Stock"), shall automatically be converted into a number of shares of common stock of the Company, par value $.001 per share (the "Company Common Stock") according in a one-for-one exchange as specified in Section 5.3 of the Agreement. 1. Each issued and outstanding share of ATI common stock shall be converted into an equal number of newly issued shares of the Company Common Stock. 2. The Company will survive the Merger and will operate under its present name and title with its own board of directors for a period of at least _______ months thereafter. 3. We are rendering this opinion at the request of the Boards of the Company and ATI. For purposes of this opinion, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, including but not limited to the Merger Agreement and such other documents as we have deemed necessary or appropriate in order to enable us to render the opinions below. 4. In our examination, we have assumed the genuineness of all signatures where due execution and delivery are requirements to the effectiveness thereof, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such copies. 5. In rendering our opinions, we have considered applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations, pertinent judicial authorities, interpretive rulings of the Internal Revenue Service, and such other authorities as we have considered relevant. We have also assumed that the transactions contemplated by the Agreement will be consummated strictly in accordance with the Merger Agreement. Based solely upon and subject to the foregoing, it is our opinion that, under presently applicable U.S. law: (i) provided the proposed merger of ATI with and into the Company qualifies under federal law, the Merger will qualify as a "reorganization" under Section 368(a) of the Code, and ATI and the Company will be parties to the reorganization; (ii) no gain or loss will be recognized by the Company or ATI by reason of the Merger; (iii) no gain or loss will be recognized by stockholders of ATI in the Merger to the extent they receive solely shares of the Company Common Stock in exchange for their shares of ATI Common Stock; (iv) when cash is received by a U.S. resident who is a dissenting stockholder of ATI, such cash will be treated as received by the dissenting stockholder as a distribution in redemption of the stockholder's ATI Common Stock subject to the provisions and limitations of Section 302 of the Code. Our opinion is limited to the U.S. federal income tax matters described above and does not address any other federal income tax considerations or any state, local, foreign, or other federal tax considerations. If any of the information upon which we have relied is incorrect, or if changes in the relevant facts occur after the date hereof, our opinion could be affected thereby. Moreover, our opinion is based on the case law, Code, Treasury Regulations thereunder, and Internal Revenue Service rulings as they now exist. These authorities are all subject to change, and such change may be made with retroactive effect. We can give no assurance that, after such change, our opinion would not be different. We undertake no responsibility to update or supplement our opinion subsequent to consummation of the Merger. Prior to that time, we undertake to update or supplement our opinion in the event of a material change in the federal income tax consequences set forth above and to file such revised opinion as an exhibit to the Agreement. This opinion is not binding on the Internal Revenue Service and there can be no assurance, and none is hereby given, that the Internal Revenue Service will not take a position contrary to one or more of the positions reflected in the foregoing opinion, or that our opinion will be upheld by the courts if challenged by the Internal Revenue Service. We hereby consent to the filing of this opinion with the SEC as an exhibit to the Registration Statement on Form S-4 of which the Joint Proxy Statement-Prospectus is a part and the reference to our firm in the Joint Proxy Statement-Prospectus under the headings "Summary--Federal Income Tax Consequences of the Transaction. Very truly yours, LAW FIRM OF LARSON-JACKSON, P.C. By:_________________________________________ Steve Larson-Jackson EX-10 12 ESCROW AGREEMENT AMONG MONTREAL TRUST COMPANY OF CANADA 4th Floor - 510 Burrard Street Vancouver, B.C. V6C 3B9 (The "Escrow Agent"); AND CONSOLIDATED MCKINNEY RESOURCES INC #5 - 246 Lawrence Avenue Kelowna, B.C. V1Y 6l3 (the "Issuer"); AND: EACH SHAREHOLDER as defined in this Agreement (Collectively, the "Parties"). WHEREAS the Shareholder has acquired or is about to acquire shares of the Issuer; AND WHEREAS the Escrow Agent has agreed to act as escrow agent in respect of the shares upon the acquisition of the shares by the shareholder; AND WHEREAS the shareholders of the Company approved a share consolidation of the shares of the Company on a five to one basis at the Annual General Meeting of the Company held on December 9, 1994. NOW THEREFORE in consideration of the covenants contained in this agreement and other good and valuable consideration (the receipt and sufficiency of which is acknowledged), the Parties agree as follows: 1. INTERPRETATION In this agreement: (a) "Acknowledgment" means the acknowledgment and agreement to be bound in the form attached as Schedule A to this agreement; (b) "Act" means the Securities Act, S.B.C. 1985, c.83 (c) "Exchange" means the Vancouver Stock Exchange; (d) "IPO" means the initial public offering of common shares of the Issuer under a prospectus which has been filed with, and for which a receipt has been obtained from the Superintendent under section 42 of the Act; (e) "Local Policy Statement 3-07" means the Local Policy Statement 3-07 in effect as of the date of reference of this agreement and attached as Schedule B to this agreement; (f) "Shareholder" means a holder of shares of the Issuer who executes this agreement or an Acknowledgment; (g) Shares" means the post-consolidation shares of the Shareholder described in Schedule C to this agreement, as amended from time to time in accordance with section 9; (i) "Superintendent or the Exchange" means the Superintendent, if the shares of the Issuer are not listed on the Exchange, or the Exchange, if the shares of the Issuer are listed on the Exchange. 2. PLACEMENT OF SHARES IN ESCROW The Shareholder places the Shares in escrow with the Escrow Agent and shall deliver the certificates representing the Shares to the Escrow Agent as soon as practicable. 3. VOTING OF SHARES IN ESCROW Except as provided by section 4(a), the Shareholder may exercise all voting rights attached to the Shares. 4. WAIVER OF SHAREHOLDER'S RIGHTS The Shareholder waives the rights attached to the Shares. (a) to vote the Shares on a resolution to cancel any of the Shares, (b) to receive dividends, and (c) to participate in the assets and property of the Issuer on a winding up or dissolution of the Issuer. 5. ABSTENTION FROM VOTING AS A DIRECTOR A Shareholder that is or becomes a director of the Issuer shall abstain from voting on a directors' resolution to cancel any of the Shares. 6. TRANSFER WITHIN ESCROW (1) The Shareholder shall not transfer any of the Shares except in accordance with Local Policy Statement 3-07 and with the consent of the Superintendent of the Exchange. (2) The Escrow Agent shall not effect a transfer of the Shares within escrow unless the Escrow Agent has received (a) a copy of an Acknowledgment executed by the person to whom the Shares are to be transferred, and (b) a letter from the Superintendent or the Exchange consenting to the transfer. (3) Upon the death or bankruptcy of a Shareholder, the Escrow Agent shall hold the Shares subject to this agreement for the person that is legally entitled to become the registered owner of the Shares. (4) In the event that a Shareholder (a) ceases to be a principal of the Issuer, as that term is defined in Local Policy Statement 3-07, the directors of the Issuer have the express right to decide whether the Shareholder may retain or must transfer or surrender any Shares, subject to the terms and conditions of Local Policy Statement 3-07; or (b) dies or becomes bankrupt, the directors of the Issuer have the express right to decide whether the Estate or Receiver of the Shareholder or any person that is legally entitled to become the registered owner of the Shares may retain or must transfer or surrender any Shares, subject to the terms and conditions of Local Policy Statement 3-07. 7. RELEASE FROM ESCROW (1) The Shareholder irrevocably directs the Escrow Agent to retain the Shares until the Shares are released from escrow pursuant to subsection (2) or surrendered for cancellation pursuant to section 8. (2) The Shares will be released from escrow on the basis of cash flow from operations as derived from the audited financial statements of the Company and any subsidiary. "Cash Flow" means net income or loss before tax, adjusted to add back the following expenses: (a) depreciation (b) amortization of goodwill and deferred research and development costs, excluding general and administrative costs; (c) expensed research and development costs, excluding general and administrative costs; (d) any other amounts permitted or required by the Superintendent. Cumulative cash flow means at any time the aggregate cash flow of an issuer up to that time from a date no earlier than the issuer's financial year end immediately preceding the date of its initial public offering, net of any negative cash flow. The number of shares released from escrow in that year will be that number of shares computed by taking the cumulative cash flow not previously applied toward a release and dividing the same by $0.31. The Escrow Agent shall not release the Shares from escrow unless the Escrow Agent has received a letter from the Superintendent or the Exchange consenting to the release. (3) The approval of the Superintendent or the Exchange to a release from escrow of any of the Shares shall terminate this agreement only in respect of the Shares so released. 8. SURRENDER FOR CANCELLATION The Shareholder shall surrender the Shares for cancellation and the Escrow Agent shall deliver the certificates representing the Shares to the Issuer: (a) at the time of a major reorganization of the Issuer, if required as a condition of the consent to the reorganization by the Superintendent or the Exchange, (b) where the Issuer's shares have been subject to a cease trade order issued under the Act for a period of 2 consecutive years, (c) 5 years from the date the Exchange has accepted this Agreement for filing. (d) where required by section 6(4). 9. AMENDMENT OF AGREEMENT (1) Subject to subsection (2) this agreement may be amended only by a written agreement among the Parties and with the written consent of the Superintendent or the Exchange. (2) Schedule C to this agreement shall be amended upon (a) a transfer of Shares pursuant to section 6, (b) a release of Shares from escrow pursuant to section 7, or (c) a surrender of Shares for cancellation pursuant to section 8, and the Escrow Agent shall note the amendment on the Schedule C in its possession. 10. INDEMNIFICATION OF ESCROW AGENT The Issuer and the Shareholders, jointly and severally, release, indemnify and save harmless the Escrow Agent from all costs, charges, claims, demands, damages, losses and expenses resulting from the Escrow Agent's compliance in good faith with this agreement. 11. RESIGNATION OF ESCROW AGENT (1) If the Escrow Agent wishes to resign as escrow agent in respect of the Shares, the Escrow Agent shall give notice to the Issuer. (2) If the Issuer wishes the Escrow Agent to resign as escrow agent in respect of the Shares, the Issuer shall give notice to the Escrow Agent. (3) A notice referred to in subsection (1) or (2) shall be in writing and delivered to (a) the Issuer at #5-246 Lawrence Avenue, Kelowna, B.C. V1Y 6L3, or (b) the Escrow Agent at 4th Floor - 510 Burrard Street, Vancouver, B.C. V6C 3B9 and the notice shall be deemed to have been received on the date of delivery. The Issuer or the Escrow Agent may change its address for notice by giving notice to the other party in accordance with this subsection. (4) A copy of a notice referred to in subsection (1) or (2) shall concurrently be delivered to the Superintendent or the Exchange. (5) The resignation of the Escrow Agent shall be effective and the Escrow Agent shall cease to be bound by this agreement on the date that is 180 days after the date of receipt of the notice referred to in subsection (1) or (2) or on such other date as the Escrow Agent and the Issuer may agree upon (the "resignation date"). (6) The Issuer shall, before the resignation date and with the written consent of the Superintendent or the Exchange, appoint another escrow agent and that appointment shall be binding on the Issuer and the Shareholders. 12. FURTHER ASSURANCES The Parties shall execute and deliver any documents and perform any acts necessary to carry out the intent of this agreement. 13. TIME Time is of the essence of this agreement. 14. GOVERNING LAWS This agreement shall be construed in accordance with and governed by the laws of British Columbia and the laws of Canada applicable in British Columbia. 15. COUNTERPARTS This agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which shall constitute one agreement. 16. LANGUAGE Wherever a singular expression is used in this agreement, that expression is deemed to include the plural or the body corporate where required by the context. 17. INUREMENT This Agreement enures to the benefit of and is binding on the Parties and their heirs, executors, administrators, successors and permitted assigns. The Parties have executed and delivered this agreement as of the date of reference of this agreement. The Common Seal of MONTREAL TRUST COMPANY OF CANADA was affixed in the presence of: /s/ - -------------------- /s/ - ------------------------ The Common Seal of CONSOLIDATED MCKINNEY RESOURCES INC was affixed in the presence of: /s/ - ------------------------------- /s/ - ------------------------------- Signed, sealed and delivered by MIKE SINTICHAKIS in the presence of: /s/ Debbie L. Kent - ----------------------- Name 325 - 3535 McCulloch Rd /S/ Mike Sintichakis - ------------------------ -------------------------- Address MIKE SINTICHAKIS Kelowna, B.C. V1W 4R8 Accounting Clerk - ---------------------- Occupation SCHEDULE A TO ESCROW AGREEMENT ACKNOWLEDGMENT AND AGREEMENT TO BE BOUND TO: Vancouver Stock Exchange 4th Floor - 609 Granville Street Vancouver, B.C. V7Y 1H1 I acknowledge that: (a) I have entered into an agreement with _______________ under which ______________ shares of Consolidated McKinney Resources Inc. (The "Shares") will be transferred to me upon receipt of regulatory approval, and (b) the Shares are held in escrow subject to an escrow agreement dated for reference __________, 19___ (the "Escrow Agreement"), a copy of which is attached as Schedule A to this Acknowledgment. In consideration of $1.00 and other good and valuable consideration (the receipt and sufficiency of which is acknowledged) I agree, effective upon receipt of regulatory approval of the transfer to me of the Shares, to be bound by the Escrow Agreement in respect of the Shares as if I were an original signatory to the Escrow Agreement. Dated at __________________ on ________________, 19 ____. Signed, sealed and delivered by _____________________ in the presence of: ____________________ Name ______________________ ____________________ Address ______________________ ______________________ Occupation SCHEDULE C TO ESCROW AGREEMENT NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW Mike Sintichakis 354,000 EX-10 13 Exhibit 10.2 Standard Option Agreement between ATI and Directors DIRECTORS STOCK OPTION AGREEMENT dated the 20th day of March, 1997. BETWEEN: AZTEK TECHNOLOGIES INC., a body corporate duly incorporated in the Province of British Columbia and having its head office at Suite #5, 246 Lawrence Avenue, Kelowna, British Columbia, V1Y 7L3 (The "Company") ON THE FIRST PART AND: MIKE SINTICHAKIS of 1802 Lipsett Court, Kelowna, B.C. V1V 1X3 (the "Director") ON THE SECOND PART WHEREAS the Company wishes to encourage the best efforts of the Director and to recognize the Director's efforts and risk in performing the functions of a director of the Company by granting to the Director an option to purchase shares in the capital stock of the Company. NOW THEREFORE the parties hereto agree as follows: 1. The Company hereby grants to the Director an option to purchase all or any portion of 90,000 fully paid common shares (the "Optioned Shares") of the Company from the treasury, exercisable ta the price of $1.82 per share, on or before March 20, 1999. 2. The Option is exercisable by notice in writing to the Company accompanied by a certified cheque in favour of the Company for the full amount of the purchase price of the shares being then purchased. When such payment is received, the Company covenants and agrees to issue and deliver to the Director share certificates in the name of the Director for the number of shares so purchased. 3. This is an option agreement only and does not impose upon the Director any obligation to take up and pay for any of the Optioned Shares. 4. The Option shall not be transferable or assignable by the Director otherwise than by Will or the law of intestacy and the Option may be exercised during the lifetime of the Director only by the Director. 5. If the Director should die while a director of the Company, the Option may then be exercised by the legal heirs or personal representatives of the Director, to the same extent as if the Director were alive and a director of the Company for a period not exceeding one year after the death of the Director but only for such shares as the Director was entitled to at the date of the death of the Director. 6. Subject to paragraph 5 hereof, the Option shall cease and become null and void 30 days after the Director ceases to act as a director of the Company. 7. In the event of any subdivision, consolidation or other change in the share capital of the Company while any portion of the Option is outstanding, the number of shares under option to the Director and the price thereof shall be adjusted in accordance with such subdivision, consolidation or other change in the share capital of the Company. 8. The Company hereby covenants and agrees that it will reserve in its treasury sufficient shares to permit the issuance and allotment of shares to the Director in the event the Option is exercised. 9. Time shall be of the essence of this Agreement. 10. The granting of the herein Stock Option and any amendment thereto, shall be subject to the approval of the Vancouver Stock Exchange and the shareholders of the Company. 11. Shareholder approval to the grant of the options shall be obtained prior to the exercise of options granted to insiders (as defined in the Securities Act of British Columbia). 12. Shareholder approval shall be obtained in respect of amendments to the agreement if the option as originally constituted was approved by the shareholders of the optionee is an insider of the Company at the time of the amendment. 13. This Agreement shall enure to the benefit of or be binding upon the Company, its successors and assigns and the Director and the Director's personal representatives to the extend provided in paragraph 5. IN WITNESS WHEREOF the parties have hereunto caused these presents to be executed as of the day and year first above written. The COMMON SEAL OF AZTEK TECHNOLOGIES INC. was hereunto affixed in the presence of: /s/ Glen Naka [Corporate Seal] - ------------------------ C/S Glen Naka SIGNED, SEALED AND DELIVERED in the presence of: /s/ Dauna Potts /s/ Mike Sintichakis - ----------------------- --------------------------- Name MIKE SINTICHAKIS 5-246 Lawrence Ave. - ---------------------- Address Kelowna, B.C. EX-10 14 Exhibit 10.3 Demand Note Aztek Technologies Inc. Suite #5-246 Lawrence Avenue Kelowna, British Columbia V1Y 6L3 DEMAND NOTE ($94,000) (September 4, 1997) ON DEMAND, after the above date the company promises to pay to the order of Maria Sintichakis of 1802 Lipsett Court, Kelowna, BC V1V 1X3 NINETY-FOUR THOUSAND DOLLARS ($94,000) with the following provisions for interest and repayment. INTEREST: Without interest REPAYMENT TERMS: No payments shall become due and owing prior to July 1999 FOR VALUE RECEIVED: Aztek Technologies Inc. REGISTERED ADDRESS: 1010 Burrard Building 1030 West Georgia Street Vancouver, British Columbia V6E 2Y3 LENDER: AZTEK TECHNOLOGIES INC.: /s/ Maria Sintichakis Per: /s/ Edson Ng - --------------------- ---------------------- Name Edson Ng, Director 1802 Lipsett Court, Kelowna, BC V1V 1X3 September 4, 1997 - --------------------------------------- ------------------ ADDRESS DATE September 4 - ----------- DATE EX-10 15 License Reference Number SAN FRANCISCO TECHNOLOGY LICENSE AGREEMENT AGREEMENT between INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation ("IBM"), and Aztek, Inc. a Nevada Corporation ("YOU" or "YOUR"). IBM has certain programming code and technical information that is designed to be used for building computer application programs and certain patents and patent applications covered by such programming code and technical information. IBM wishes to license Version 1, including Releases and modifications thereof, of such programming and technical information, listed by product No. In ATTACHMENT A (the "San Francisco Product"), and patents (defined hereinbelow) to YOU for the purpose of YOUR creating further software products to be licensed by YOU to YOUR Customers. YOU wish to receive certain licenses with respect to the San Francisco Product for the aforesaid purposes. In consideration of the premises and the mutual covenants contained in this Agreement and its attachments IBM and YOU agree as follows: Section 1. Definitions 1.1 "Application Development Information" shall mean the files listed in the file named LICENSE.TXT which is located in the root directory of the CD-ROM and in the ...com/ibm/sf/doc/ relative directory that results from the installation of the San Francisco Product on YOUR computer where ... is the prefix directory determined at install time by user specification of directory preference and/or specific platform requirements under Section E, "Application Development Information." The contents of these lists and subdirectories may be updated by IBM from time to time. 1.2 "Base Code" shall mean the Code and Documentation listed in the file named LICENSE.TXT which is located in the root directory of the CD-ROM and in the ...com/ibm/sf/doc/ relative directory that results from the installation of the San Francisco Product on YOUR computer where ... is the prefix directory determined at install time by user specification of directory preference and/or specific platform requirements, under Section C, "Reshippable Materials List," sublist 1. The contents of these lists and subdirectories may be updated by IBM from time to time. 1.3 "CD-ROM" shall mean the CD-ROM on which the San Francisco product is distributed. 1.4 "Code" shall mean computer programming code. Except as otherwise specified, Code shall include Source Code and Binary Code. (a) "Binary Code" shall mean Code including but not limited to Java byte Code and Object Code in a form that is indirectly or directly executable by a computer, and is not readable or understandable by a programmer of ordinary skills. (b) "Object Code" shall mean Code substantially or entirely in binary form, and includes header files of the type necessary for use or inter operation with other computer programs. It is intended to be directly executable by a computer after processing or linking, but without interpretation, compilation or assembly. (c) "Source Code" shall mean Code in a form which when printed out or displayed is readable and understandable by a programmer of ordinary skills. It includes procedural and object oriented Code with associated comments describing the operation of the Code. 1.5 "Core Business Process" or "CBP" shall mean the information and files listed in the file named LICENSE.TXT which is located in the root directory of the CD-ROM and in the ...com/ibm/sf/doc relative directory that results from the installation of the San Francisco Product on YOUR computer where . . . is the prefix directory determined at install time by user specification of directory preference and/or specific platform requirements under Section C, "Reshippable Materials List," sublist 2. The contents of these lists and subdirectories may be updated by IBM from time to time. 1.6 "Customer" shall mean an end user authorized to use Your Product for such end user's internal productive use and not for remarketing or sublicensing. 1.7 "Derivative Work" shall mean a work based upon one or more preexisting works that would be a copyright infringement if prepared without the authorization of the copyright owners of the preexisting work. Derivative Works are subject to the ownership rights and licenses of others in the preexisting work. 1.8 "Distributors" shall mean business entities used to distribute Your Product. 1.9. "Effective Date" shall mean the date on which IBM has signed and dated this Agreement. 1.10 "Error" shall mean any mistake, problem, or defect that causes Licensed Binary Code in Your Product to malfunction. 1.11 "Fixpacks" shall mean revisions that correct Errors or provide small programming enhancements. 1.12 "IBM Parents" shall mean all patents (but not including any design patents or registrations) of IBM: (a) issued or issuing on patent applications entitled to an effective filing date prior to the termination or expiration of this agreement, whichever comes first; (b) which, but for this Agreement, would be infringed by YOUR making, using, importing, offering for sale, leasing, selling or otherwise transferring Your Product in the country in which such patent exists; and (c) under which patents or the applications therefor IBM or any of its Subsidiaries now has, or hereafter obtains, the right to grant licenses to YOU of or within the scope granted herein without such grant or the exercise of rights thereunder resulting in the payment of royalties or other consideration by IBM or its Subsidiaries to third parties (except for payments between IBM and its Subsidiaries, and payments to third parties for inventions made by said third parties while employed by IBM or any its Subsidiaries).IBM Patents shall include said patent applications, continuations in part of said patent applications, and any patents reissuing on any of the aforesaid patents. 1.13 "IHS Product" shall mean an Information Handling System or any instrumentality or aggregate of instrumentalities (including, without limitation, any component, subassembly, computer program or supply) designed for incorporation in an Information Handling System. Any instrumentality or aggregate of instrumentalities primarily designed for use in the fabrication (including testing) of an IHS Product licensed herein shall not be considered to be an IHS Product. 1.14 "Information Handling System" shall mean any instrumentality or aggregate of instrumentalities primarily designed to compute, classify, process, transmit, receive, retrieve, originate, switch, store, display, manifest, measure, detect, record, reproduce, handle or utilize any form of information, intelligence or data for business, scientific, control or other purposes. 1.15 "Internal Production Use" shall mean any use of the San Francisco Product or Your Product other than for the purposes of developing prototypes or application programs. 1.16 "Know-How" shall mean the information contained in the files listed in the file named LICENSE.TXT which is located in the root directory of the CD-ROM and in the ...com/ibm/sf/doc relative directory that results from the installation of the San Francisco Product on YOUR computer where ... is the prefix directory determined at install time by user specification of directory preference and/or specific platform requirements under Section D, entitled "IBM's Know-How." The contents of these lists and subdirectories may be updated by IBM from time to time. 1.17 "Licensed Code" shall mean all Code licensed by IBM to YOU in the San Francisco Product. Except as otherwise specified, Licensed code shall include Licensed Source Code and Licensed Binary Code. (a) "Licensed Binary Code" shall mean Binary Code included in the San Francisco Product. (b) "Licensed Source Code" shall mean Source Code included in the San Francisco Product. 1.18 "Licensed Materials" shall mean Licensed Technology and Licensed Code. 1.19 "Licensed Technology" shall mean Know-How, Application and Development Information and other technical information provided to YOU by IBM which is incorporated in, or used in the design or provision of Your Product. Licensed Technology does not include any Licensed Code. 1.20 "License Reference Number" shall mean a number assigned by IBM in accordance with section 8.1, and used to track and identify YOUR San Francisco Technology License Agreement and all communications by YOU to IBM in connection therewith. 1.21 "Maintenance Services" shall mean any service that redistributes revisions to the San Francisco Product or provides revisions to Your Original Code within Your Product, where such revisions correct Errors or provide small programming enhancements. 1.22 "Publicly Accessible Network" or "PAN" shall mean any configuration of data processing devices and software adapted for information exchange that is accessible for use by the public or other users unaffiliated with YOU, with or without payment of subscription fees or other charges. 1.23 "Release" shall mean the distribution via CD-ROM of a San Francisco Product containing new software functions, enhancements to existing software functions, new or enhanced tools, and/or additional reference material. 1.24 "Specifications" shall mean the document entitled San Francisco Licensed Program Specifications. 1.25 "Specified Operating Environment" shall mean the machines and programs with which the San Francisco Product is designed to operate, as described in the applicable Specifications. 1.26 "Subsidiary" shall mean a corporation, company or other entity: (a) More than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by a party hereto; or (b) which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than fifty percent (50%) of whose ownership interest representing theright to make the decisions for such corporation, company or other entity is now or hereafter owned or controlled, directly or indirectly, by a party hereto, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists. 1.27 "Trademarks" shall mean the common law and registered trademarks listed in ATTACHMENT B. 1.28 "Trademark Usage Guidelines" shall mean the guidelines providing for the use and display of the Trademarks. The current Trademark Usage Guidelines are set forth in ATTACHMENT C. 1.29 "Version" shall mean new and enhanced products based upon one or more existing San Francisco Products, distributed via CD-ROM and containing significant new software functions, enhancements, new or enjanced tools and/or additional reference materials. A Version may include multiple Releases. A new Version shall be identified by new product and Version numbers. 1.30 "Your Original Code" shall mean Code created by YOU, or YOUR subcontractors, to which YOU have a right to grant use licenses to others. Your Original Code may include Code created by or owned by third parties. 1.31 "Your Patents" shall mean all patents (but not including any design patents or registrations) of YOURS: (a) issued or issuing on patent applications entitled to an effective filing date prior to the termination or expiration of this Agreement, whichever comes first; and (b) Under which patents or the applications therefor YOU or any of your Subsidiaries now has, or hereafter obtains, the right to grant licenses to IBM of or within the scope granted herein without such grant or the exercise of rights thereunder resulting in the payment of royalties or other consideration by YOU or your Subsidiaries, and payments to third parties for inventions made by said third parties while employed by YOU or any of your Subsidiaries). Your Patents shall include said patent applications, continuations in part of said patent applications, and any patents reissuing on any of the aforesaid patents. 1.32 "Your Product" shall mean a computer application program that is licensed or otherwise distributed to end users for use by such end users and that contains Licensed Code or was developed using Licensed Technology or contains, incorporates, invokes, calls, or otherwise causes execution of any version of the Licensed Code, or any portion thereof. Your Product shall include Maintenance Services, but shall not include any other services. Your Product shall not include any product that YOU make available for use on a PAN. Such a product shall be the subject of a separate license from IBM. 1.33 "Your Product Revenue" shall be computed as YOUR gross revenue obtained by YOU for the sale or license of Your Products. In no event, however, shall Your Product Revenue be less than 60% of the total revenue obtained by YOU from the sale or license of Your Product and other products and/or services related to or associated with the San Francisco Product. Notwithstanding the foregoing, sales of computer hardware that are separately invoiced at market prices shall not be considered a product related to or associated with the San Francisco Product. 1.34 "Your Product Selling Price" shall mean the bona fide gross selling price, after prompt payment discounts (not to exceed 3%) and quantity discounts actually allowed, at which YOU license or otherwise transfer or provide Your Product, subject to the following: (a) If Your Product was not separately itemized and priced and was incorporated in other items (whether or not said other item was also Your Product), Your Selling price shall be the price at which YOU so provided such other item. (b) If YOU sell or provide identical versions of Your Product at more than one such price, Your Product Selling Price shall mean the total revenue with respect to each of such identical ones of Your Products from said sales in the relevant accounting period divided by the number of Your Products sold in said period. (c) If YOU use Your Product internally or provide Your Product to affiliates for their internal use and not resale, Your Product Selling Price for Your Product used by YOU or YOUR affiliates for such internal use shall be equal to the average of Your Product Selling Price for all of Your Products identical to Your Product which were provided to other than YOUR affiliates in the relevant accounting period or, if there have been no such sales in the relevant accounting period Your Product Selling Price shall be the fair market value of Your Products in an arms length transaction between unaffiliated parties. Section 2. LICENSE GRANTS AND RESTRICTIONS 2.1 Within thirty (30) days after execution of this Agreement, IBM shall furnish to YOU, via Your Technical Coordinator as identified in Section 8.3, one copy of the CD-ROM containing Licensed Materials. IBM further agrees to furnish to YOU a reasonable number of additional copies of the CD-ROM containing Licensed Materials within thirty (30) days of YOUR request for such additional copies. IBM hereby authorizes YOU to download further Licensed Materials which may be located via the URL http://www.ibm.com/java/sanfrancisco on the Internet. Any materials received pursuant to this Agreement and not expressly rejected by YOU within thirty (30) days of receipt shall be deemed accepted. 2.2 Subject to the provisions of Sections 3 and 6, IBM grants to YOU a nonexclusive, nontransferable, worldwide(a) Know-how license to use the Licensed Materials internally for the sole purpose of enabling YOU to develop Your Product based upon the Licensed Technology; (b) copyright license to prepare Derivative Works based upon the Licensed Technology for the sole purpose expressing to YOUR Customers how to use Your Product; provided, however, that YOU distribute copies of such Derivative Work only in combination with Your Products; (c) copyright license to prepare Derivative Works based upon the Application Development Information, and to reproduce and distribute the Application Development Information internally for the purposes of developing, preparing and providing Your Products based on the San Francisco Product; and (d) subject to Section 3.2, right to prepare Derivative Works of the Know-How and reproduce, distribute, perform and display such Derivative Works internally. YOU shall have the further right to distribute to Customers and Distributors, perform and display externally Binary Code versions of Derivative Works of Source Code included in Know-How. 2.3 Subject to the provisions of Sections 4 and 6, IBM grants to YOU and YOUR Distributors, a nonexclusive, nontransferable, worldwide copyright license to reproduce and distribute copies of the Base Code in combination with significant amounts of Your Original Code (as required by Section 4.1(a) included in Your Product and distribute such copies, as part of Your Product, to Customers and Distributors and not as a stand-alone product. 2.4 Subject to the provisions of Sections 4 and 5, IBM grants to YOU and YOUR Distributors a nonexclusive, nontransferrable, worldwide copyright license to reproduce and distribute copies of the CBP in combination with significant amounts of Your Original Code (as required by Section 4.1(a)) included in Your Product and distribute such copies, as part of Your Product, to Customers and Distributors and not as a stand-alone product. 2.5 During the term of this Agreement only, and subject to YOUR full compliance with the terms and conditions of this Agreement, IBM licenses YOU to make, use, import, offer to sell, lease, sell or otherwise transfer Your Products under and patent (including divisions, continuations, reissues and corresponding patents of other countries) issuing from the IBM Patents which are necessarily infringed, and which infringement arises solely and exclusively from, YOUR use of the Licensed Technology pursuant to Sections 2.2(a), 2.2(d), 2.3 and 2.4 and/or YOUR licensed use of the Licensed Code pursuant to Sections 2.3 and 2.4. YOUR rights under this Section 2.5 are personal, nonassignable and nontransferable. 2.6 With the exception of the rights granted in sections 2.2. 2.3, 2.4, 2.5, 2.7 and 11.1, no license or other right is granted by IBM to YOU under this agreement, either directly or by implication, estoppel, or otherwise, under any other intellectual property rights including patents, trademarks, copyrights (including but not limited to, the right to prepare Derivative Works), registered semiconductor mask works, knowhow or trade secrets. 2.7 The licenses granted herein include the right for YOU to sublicense YOUR Subsidiaries and the right of such sublicensed Subsidiaries to sublicense other Subsidiaries of YOURS. Each Subsidiary so sublicensed shall be bound by the terms and conditions of this agreement as if it were named herein in the place of YOU, provided that YOU shall pay and account to IBM for royalties hereunder in respect of the exercise by any Subsidiary of any sublicense granted to it hereunder. Any sublicense granted to a Subsidiary shall terminate on the earlier of the date such Subsidiary ceases to be a Subsidiary or the date this Agreement terminates or expires. 2.8 YOU shall have a right to license third parties to prepare Derivative Works of Your Products(s) if such third party licensees have obtained a license to prepare Derivative Works of the San Francisco Product from IBM. Section 3. Know-How: Nondisclosure3.1 All documents, resumes and other tangible items containing Know-How shall be clearly marked with the words "KNOW-HOW" or a similar restrictive legend. IBM does not wish to receive any information considered confidential by YOU. In the event this becomes necessary, the parties will enter into a separate agreement with respect to such information. All information received from YOU that is not subject to a separate agreement shall be considered as nonconfidential information. 3.2 Subject to the provisions of Sections 3.4 and 3.5, for a period of twenty (20) years from the date of each receipt of Know-How, YOU shall use the same care and discretion to avoid disclosure, publication or dissemination of such received Know-How as YOU use with information of YOUR own that YOU do not wish to publish, disclose or disseminate. 3.3 Subject to the provisions of Sections 3.4 and 3.5, for a period of five (5) years from the Effective Date, YOU shall use the same care and discretion to avoid disclosure, publication or dissemination of ATTACHMENT D of this Agreement, as YOU use with information of YOUR own that you do not wish to publish, disclose or disseminate. 3.4 Disclosure by YOU of Know-How is permissible if: (a) such disclosure is in response to a valid order of a court or other governmental body or otherwise required by law. YOU, however, will give IBM prompt notice to allow IBM a reasonable opportunity to obtain a protective order; or (b) such disclosure is to other Know-How licensees of the San Francisco Product. It shall be YOUR sole responsibility to determine if a third party is a licensee of such Know-How. YOU shall have absolute liability for any damages to IBM caused by YOUR malfeasance or misfeasance in disclosure to a third party. 3.5 The obligations specified in Sections 3.2 and 3.3 shall not apply to any information that: (a) is already in YOUR possession or the possession of any of YOUR Subsidiaries without obligation of confidence; (b) is independently developed by YOU or any of YOUR Subsidiaries; (c) is or becomes publicly available without breach of this Agreement; (d) is rightfully received by YOU from a third party without obligation of confidence; or (e) is released for disclosure by IBM with its written consent. 3.6 Upon any termination of this Agreement pursuant to Sections 9.1, 9.2 or 9.3, YOU shall promptly return to IBM or destroy all documents and other tangible items containing Know-How and/or Licensed Materials in the possession of YOU or YOUR sublicensed Subsidiaries. Section 4. YOUR OBLIGATIONS 4.1 YOU shall: (a) integrate the Licensed Code into Your Product such that in IBM's discretion Your Product is substantially different from and includes the addition of valuable function in addition to that contained in the Licensed Code per se; (b) provide the Licensed Code in Binary Code form only under YOUR license agreement as part of the YOUR Product; (c) not remove IBM copyright and other notices from the Licensed Code; (d) use all commercially reasonable efforts to ensure that all YOUR employees comply with the terms of this Agreement; (e) not make any representations or warranties on behalf of IBM about IBM or the Licensed Materials; (f) not reverse assemble, reverse compile or translate any Binary Code except as permitted by law without the possibility of contractual waiver; (g) not insert, delete, replace, change or otherwise alter any files in the directories and subdirectories of the San Francisco Product; (h) not modify, change or otherwise alter the directory structure of the San Francisco Product; (i) not modify, change, prepare Derivative Works of or otherwise alter any Binary Code files included with the San Francisco Product; and (j) provide sufficient support, service and documentation to YOUR Customer to eliminate any right, permission, or authorization your Customer may have in the absence of such support, service and documentation under the national or regional law of the places where YOU or YOUR Customer do business to reverse assemble, reverse compile or translate Your Product. 4.2 For Your Product that may be distributed in the U.S. or to U.S. Government users, YOU will include on Your Product: (a) a copyright notice in the form specified by 17 U.S.C. Chapter 4; and (b) a U.S. Government user limited and restricted rights notice that complies with DFAR 227.7202 for military agencies and F.A.R. 12.212 for civilian agencies. 4.3 At IBM's request, YOU will provide to IBM for review and approval copies of YOUR standard form and variations of YOUR standard form license agreements used to license Your Product. YOU will obtain the Customer' assent (either by signature or by any other legally enforceable means) to YOUR license agreements all of which shall include the substance of the following: (a) authorization to use, execute, perform, and display and to make one copy of Your Product for backup or archival purposes only; (b)subject to Section 2.8, prohibition from any preparation of derivative works, or modifying of Your product or sublicensing, distributing, leasing, renting, or otherwise transferring Your Product; (c) prohibition from copying Your product unless the Customer has been licensed to do so by YOU; (d) direction to destroy all copies of Your product unless the Customer has been licensed to do so by YOU; (e) prohibition from reverse assembling, reverse compiling or translating Your Product except as permitted without the possibility of contractual waiver by the national or regional law of the places where YOU or YOUR Customer do business; and (f) statements that: (1) Your Product is copyrighted and licensed; it is not sold. YOU do not pass title to Your Product; (2) Your Product may contain materials licensed by a third party and YOU have assumed responsibility for these materials and their use in Your Product; (3) Third party suppliers disclaim all implied warranties, including the implied warranties of noninfringement, merchantability and fitness for a particular purpose; and (4) limit liabilities to a reasonable amount and state in comparable words, "The collective liabilities of the seller/licensor's third party suppliers shall be limited to no more than one hundred thousand 100,000.00) dollars and is subject to all other limitations of liabilities described in this agreement. Third party suppliers disclaim all liability for consequential or other indirect damages. The third party supplier is an intended beneficiary of the limitations and disclaimers and the limitation of liabilities for seller/licensor and its third party suppliers are not cumulative." 4.4 YOU agree to notify IBM within ten (10) business days if YOU become aware of any acts of infringement of the IBM Patents or copyright infringement of the Licensed Materials. Section 5. TECHNICAL SUPPORT 5.1 IBM shall provide orientation materials on the CD-ROM. 5.2 At no additional charge to YOU (other than the payments specified in this Agreement), and provided that YOU have registered with IBM, IBM shall, through its Internet website, provide access to: (a) a frequently asked questions (FAQ) file; (b) a Hints and Techniques (HAT) file; (c) technical road maps and papers; (d) downloadable Fixpacks for the Version and Release of San Francisco Product that is then being distributed to the public by IBM hereinafter the "Then Current Version and Release"); (e) downloadable Fixpacks for the Version and Release of San Francisco Product immediately previous to the Then Current Version and Release for a period of one hundred and eighty (180) days after public availability of the Then Current Version and Release; and (f) a public forum. IBM shall have no obligation whatsoever to respond to any questions posted on such public forum. Registration and further instructions on how to access the foregoing electronic support services may be obtained via the URL http://www.ibm.com/java/sanfrancisco on the Internet. 5.3 IBM shall have no obligation: to provide technical assistance except as set forth in Sections 5.1 and 5.2; to provide technical assistance to YOUR Customers; and/or to have direct contact with any of YOUR Customers. In no event shall any information provided by YOU to IBM under this Section 5 be deemed confidential information or Know-How of YOU or any third party. 5.4 IBM shall use commercially reasonable efforts to perform its obligations under Sections 5.1 and 5.2. In no event shall IBM be liable on account of any technical information provided pursuant to this Section 5, or its inability to provide technical assistance. 5.5 YOU shall be responsible for all service to YOUR Customers. 5.6 IBM shall provide, at no additional cost other than the payments specified in this Agreement), the technical support set forth n Section 5.2 for a period of eighteen (18) months from the Effective Date of this agreement. Thereafter, if YOU pay royalties to IBM pursuant to Section 6.1, IBM shall continue, during the term of this Agreement, to provide to YOU, at no additional charge, new Releases and the technical support set forth in Section 5.2 for so long as YOU continue to pay royalties to IBM. If after the first eighteen (18) months from the Effective Date of this agreement YOU are not paying royalties to IBM pursuant to Section 6.1, IBM agrees to make Releases and the technical support set forth in Section 5.2 available to YOU at a fee to be set by IBM. IBM reserves the right to change the terms and conditions, including charges, under which it licenses future Versions of products based upon the San Francisco Product. Section 6. PAYMENTS 6.1 As partial consideration for the licenses granted by IBM to YOU in Sections 2.2, 2.3, 2.4 2.5, 2.7 and 11.1, YOU shall pay, as hereinafter provided, royalties to IBM in respect of each Your Product licensed by YOU or YOUR sublicensees for use by end-users or used for Internal Production Use. 6.2 YOU shall pay IBM running royalties calculated as a percentage ("Royalty Rate") of Your Product Revenue. These Royalty Rates are set forth in ATTACHMENT D. Royalty Rates shall be selected from ATTACHMENT D according to the appropriate Rate Code and Your Product Revenue Step. YOU shall pay royalties under Rate Code A if YOU ship product that uses Base Code and/or provides Maintenance Services. YOU shall pay royalties under Rate Code B if YOU ship product that uses Base Code and CBP or CBP alone. The step under which YOU shall pay royalties is selected from ATTACHMENT D in accordance with the year to date (YTD) amount of Your Product based on the Licensed Code ("Your Product Revenue Step"). YOU shall, regardless of the net of Your Product Revenue, calculate royalties starting at Step 1 on January 1 of each year in which royalties are due IBM and only proceed to subsequent steps after royalties have been paid on the full amount in a Your Product Revenue Step.(a) YOU may create Derivative Works of programs obtained from third parties who are also licensed by IBM to create works based upon the San Francisco Product ("Other Company"). In such event, YOU may deduct from Your Product Revenue payments made to such Other Company and on which royalties were paid to IBM by such Other Company under a San Francisco Technology License Agreement for their products upon which Your Product is based. 6.3 Royalties payable pursuant to Section 6.1 shall accrue when Your Product is first sold, licensed or otherwise transferred (internally or externally). A quarterly accounting period shall end on the last day of each March, June, September and December during the term of this Agreement. Within thirty (30) days after the end of each such period, YOU shall furnish to IBM a written report certified by YOU, one of YOUR officers or another individual authorized to legally bind YOU, in the forms set forth in ATTACHMENT E and ATTACHMENT F. In addition to YOUR Name, License Reference Number, Date of the Report and Period covered, the Statement of Royalty Form of ATTACHMENT E shall specify: (a) the name of Your Product for which royalties are being paid, including a type number or other description that uniquely describes the product (Column 1); (b) the total net of Your Product Revenue for Your Product sold during the accounting period and the year to date (YTD) total for all San Francisco based products sold by YOU. If YOU are paying royalties for Your Product based upon Other Company products pursuant to Section 6.2(a), the net of Your Product Revenue shall be calculated using the worksheet of ATTACHMENT F (Column 2). Otherwise, this amount shall be the revenue for the Your Product calculated as the product of Column 3 and Column 5; (c) the number of copies of Your Product, exclusive of copies licensed at no charge and reported in accordance with Section 6.3(d), licensed to Distributors or directly to Customers or otherwise indirectly to Customers by Your sublicensees (Column 3); (d) the number of copies of Your Product licensed without charge or other payment to YOUR Customers (Column 4) (e) the Licensed Product Selling Price per copy of such Your Product (Column 5); (f) identification of the Rate Code at which royalties are being paid (Column 6); (g) the applicable royalty rate (Column 7); and (h) the amount of royalties due (Column 2 multiplied by Column 7) and the total due for all of Your Product(s); and YOU shall pay said total amount due to IBM. With respect to each copy licensed without charge, YOU shall, on or before the end date of the next quarterly accounting period, either (a) charge the Customer based on Your Product Selling Price and remit royalty payment in due course, (b) terminate each such Customer's license with respect to such copy, or (c) treat such copies as sold at Your Selling Price and pay royalties on such copies in accordance with Section 6.2. 6.4 If YOU are paying royalties to IBM for Your Product based upon Other Company products pursuant to Section 6.2(a) YOU shall have the following additional reporting obligations which together with YOUR Name, License Reference Number, Date of the Report and Period covered, shall be reported on the form of ATTACHMENT F: (a) identification of Your Product for which royalties are being paid, including a type number or other description that uniquely describes the product (Column A); (b) the amount of Your Product Revenue received by YOU (Column B); (c) identification of the Other Company paying royalties to IBM for the product upon which Your Product is based (Column C); (d) identification of the Other Company product that YOUR Product is based (Column C); (e) the payment paid to the Other Company that is deductible under Section 6.2(a) (Column E); and(f) the net of Your Product Revenue upon which royalty is paid (Column E subtracted from Column B) and such amount shall also be entered into Column 2 of ATTACHMENT E, where it shall be mark with an asterisk ("*") for each of Your Product(s) for which the deduction allowed under 6.2(a) is being taken. 6.5 YOU shall pay all royalties and other payments due hereunder in United States dollars. YOU shall report all money amounts in U.S. dollars. All royalties for an accounting period computed in other currencies shall be converted into US dollars at the exchange rate for bank transfers from such currency to US dollars as quoted by the head office of Citibank N.A., New York, USA, at the close of banking on the last day of such accounting period (or the first business day thereafter if such last day is a non-business day). 6.6 In the event no royalties are due, YOU shall submit a report so stating. Such report may be submitted by e-mail to sfrantla@us.ibm.com and shall contain the following, or a substantively similar statement: "We have not licensed any applications based upon the San Francisco Product nor placed any such applications into Internal Production Use in the reporting period and therefore no royalty is due." Such e-mail report shall also contain your License Reference Number and the name of the person submitting the report on YOUR behalf. 6.7 YOU shall keep records in sufficient detail to permit the determination of royalties payable hereunder and at the request and expense of IBM will permit an independent auditor s elected by IBM, or any other person acceptable to both IBM and YOU, to examine such records during ordinary business hours once in each calendar year to verify or determine royalties paid or payable under this Agreement. Such examination shall include the right to examine and inspect any materials required to verify YOUR obligations under Sections 4.3 and 11.3. If no request for examination of such records for a particular accounting period has been made by IBM within three (3) years after the end of said period, the right to examine, and the obligation to keep, such records for said period shall terminate. 6.8 YOU shall be liable for interest on any overdue royalty commencing on the date such royalty becomes due, i.e., thirty (30) days after the end of the applicable accounting period, at an annual rate which is the greater of ten percent (10%) or one percentage point higher than the prime interest rate as quoted by the head office of Citibank N.A., New York, at the close of banking on such date, or on the first business day thereafter if such date falls on a non-business day. If such interest rate exceeds the maximum legal rate in the jurisdiction where a claim therefor is being asserted, the interest rate shall be reduced to such maximum legal rate. YOU shall bear and pay all taxes (including, without limitation, sales and value added taxes but excluding income tax as specified below) imposed by the national government, including any political subdivision thereof, of any country in which YOU are doing business as the result of the existence of the Agreement or the exercise of rights hereunder. YOU shall not bear and pay any income tax imposed by such national government upon the payments made pursuant to this Section 6 to the extent that such income tax is to be credited to taxes payable to IBM to its national government. YOU may deduct such income tax from said payments, and YOU shall furnish IBM with a tax certificate for such income tax. YOU shall also bear and pay all other fees or charges, including, but not limited to, the fees charged by financial institutions, incurred by YOU or on YOUR behalf in association with your payment of royalty under this Agreement or as the result of the existence of this Agreement or the exercise of rights hereunder. Section 7. OPTION GRANTED 7.1 YOU grant to IBM the right to obtain a patent license under Your Patents to make, use, import, offer to sell or lease, sell, lease or otherwise transfer any IHS Product. Said license shall be under terms and conditions no less favorable than those granted to YOU herein or any amendment hereto and shall include royalty rates no less favorable than one percent per patent (up to a maximum of five per cent for five or more patents) of the actual selling price of IBM products to unaffiliated customers, and the greater of actual selling price or fair market value in sales to affiliated customers. For the purposes of this Section 7.1, each one of Your Parents and its corresponding patents in other countries, shall be deemed to be one of your Patents. Section 8. COMMUNICATIONS 8.1 Upon execution of this Agreement IBM shall assign a License Reference Number. This number shall be included in any report, payment or other communication YOU make to IBM concerning this Agreement. 8.2 Payment shall be made by electronic funds transfer and shall include in the payment details YOUR License Reference Number. Any notice or other communication required or permitted to be made or given to either party hereto pursuant to this Agreement shall be sent to such party by facsimile or registered airmail, postage prepaid, addressed to it at its address set forth 8.2(b) below, or to such other address as it shall designate by written notice given to the other party. Payment shall be deemed to be made on the date of electronic funds transfer. Notices or other communications shall be deemed to have been given or provided on the date of sending. The addresses are as follows:(a) For electronic funds transfers of payments: IBM, Director of Licensing The Bank of New York 48 Wall Street New York, New 10286 United States of America Credit Account No. 890-0209-674 ABA No. 0210-0001-8 (b) Mailing addresses and facsimile numbers: For IBM: Director of Licensing IBM Corporation 500 Columbus Avenue Thornwood, NY 10594 Facsimile#: 914-742-6737 E-mail: sfrantla@us.ibm.com For YOU: Edson Ng Vice President Aztek, Inc. Suite 115, Meadow Wood Crown Plaza 1575 Delucchi Lane Reno, Nevada 89502 USA Telephone # (604) 294-0290 Facsimile # (604) 294-1816 E-mail: edsonng@direct.ca 8.3 Your Technical Coordinator is as follows: Name: Eileen Keogh Title: Director, Research & Development Address: Aztek, Inc. 450-6450 Roberts St. Burnaby, B.C. V5G 4E1 Canada Telephone # (604) 294-0290 Facsimile # (604) 294-1816 E-mail: Eileen_Keogh@bc.sympatico.ca YOU will promptly advise IBM in writing of any change in Technical Coordinator or address. Section 9 TERM AND TERMINATION 9.1 This Agreement shall be from the Effective Date until three (3) years after such date, unless earlier terminated under the provisions of the Agreement. Termination or expiration of this Agreement does not affect previously granted paid-up rights and licenses to Customers authorized by this Agreement, including without limitation licenses granted in the last quarterly accounting period of a calendar year for which royalties are paid in accordance with Section 6 even if such payment occurs after expiration of this Agreement. Termination of this license shall also terminate previously granted rights of Customers authorized by this Agreement who have licensed Your Product under periodic license payments. YOU shall promptly notify such Customers of the termination of such previously granted rights. 9.2 In the event that YOU materially breach this Agreement, IBM shall give written notice of the breach and, if such breach is not cured within ninety (90) days of said notice, IBM shall have the right to terminate this Agreement by giving fifteen (15) days written notice. 9.3 YOU shall have the right to terminate this Agreement without cause at any time by giving written notice; provided, however, that such termination shall be subject to YOUR payment obligations under Section 6 (which shall be come immediately due and payable) and to the provisions of Section 13.14. 9.4 Upon termination or expiration of this Agreement, YOU shall provide IBM with proof of the destruction of all existing packages, cartons, containers, point of sale displays, advertising, labels, stencils, cut-outs, forms and the like which bear the Trademark or are or can be used in the application or reproduction of the Trademark, and shall provide IBM with proof of the obliteration or removal of the Trademark from all products. For the purposes of this section 9.4, a written statement fully describing such destructions and obliterations, certified by YOU, one of YOUR officers or another individual authorized to legally bind YOU, shall constitute acceptable proof to IBM. 9.5 IBM hereby agrees to make available a new license to YOU for the Version of the San Francisco Product that is being licensed by IBM as of the date of termination of this Agreement, under IBM's then current terms and conditions, provided that: (a) IBM shall have no obligation to make available such new license if IBM is not then offering such licenses to others; (b) all outstanding intellectual property claims between IBM and YOU have been resolved to IBM's satisfaction as of the date of termination of this Agreement; and (c) all outstanding claims between IBM and YOU under this Agreement have been resolved to IBM's satisfaction as of the date of termination of this Agreement. 9.6 IBM hereby agrees that if IBM ceases all marketing, licensing and support of all Versions of the San Francisco Product and does not establish or otherwise provide for a successor to provide such marketing, licensing and support then IBM shall amend this Agreement: (a) to extend its term to the life of the copyright of the Version of the San Francisco Product last provided to you under this Agreement, except that any licenses granted in such amended agreement shall be only to intellectual property, including, patents, trademark, copyright and Know-How covered under this Agreement and existing at the effective date of such amendment; (b) to delete Sections 2.1, 5.2, 5.6, 9.5, 10.1, 10.4 and 13.6; and (c) to the extent, IBM has the right to do so, to provide access to YOU under license to the Source Code of those portions of the last Version of the San Francisco Product previously supplied to YOU only as Licensed Binary Code under this Agreement. Notwithstanding the foregoing, IBM shall have no obligation to provide such amended agreement unless: (I) all outstanding intellectual property claims between IBM and YOU have been resolved to IBM's satisfaction as of the date IBM ceases support, marketing and licensing of all Versions of the San Francisco Product; and (ii) all outstanding claims between IBM and YOU under this Agreement have been resolved to IBM's satisfaction as of the date IBM ceases support, marketing and licensing of all Versions of the San Francisco Product. Section 10 INDEMNIFICATION 10.1 If a third party claims that the Base Code or CBP in Binary Code form that IBM provides to YOU infringes that party's copyright, IBM will, subject to the limitations of Section 13.4, defend YOU against that claim at IBM's expense and pay all costs, damages, and attorney's fees that a court finally awards, provided that YOU: (a) notify IBM in writing of any such claim within ten (10) business days of YOUR receipt of such claim; and (b) allow IBM to control, and cooperate with IBM in, the defense and any related settlement discussions. 10.2 If a third party claim that the Base Code or CBP in Binary Code form that IBM provides to YOU infringe that party's copyright is made or appears likely to be made, YOU agree to permit IBM to obtain the right for YOU to continue to use the Base Code or CBP, or to modify it, or replace it with non-infringing Base Code or CBP that is at least functionally equivalent. If IBM determines that none of these alternatives is reasonably available, YOU agree to return the Licensed Materials to IBM upon IBM's written request. Sections 10.1 and 10.2 state IBM's entire obligation to YOU regarding any claim of infringement. 10.3 IBM has no obligation regarding any claim based on any of the following: (a) anything YOU provide which is incorporated into the Licensed Materials or into which the Base Code or CBP is incorporated; (b) YOUR modification of the Licensed Code; or the use thereof in other than its specified operating environment; (c) the combination, operation, or use of Licensed Code with other products. 10.4 Subject to the limitations of Section 13.4, IBM shall settle or defend all claims made by third parties against YOU and shall thereby indemnify and hold YOU, YOUR officers, agents and employees, harmless from any and all claims made against YOU for infringement or unfair competition arising from YOUR use of the terms in accordance with the terms of this Agreement. Following notice of an infringement claim or at any time IBM deems appropriate, IBM may provide to YOU a substitute trademark for use under the terms and conditions of this Agreement. (a) Notwithstanding the above, IBM shall not be liable for any lost revenue, profits, business opportunities or consequential, incidental or punitive damages, even if advised of the possibility of such damages. (b) To qualify for such indemnification, YOU must notify IBM of any such claim in writing within ten (10) business days of YOUR receipt of such claim, and allow IBM to control and fully cooperate with IBM in the defense of and all settlement negotiations related to such claim. 10.5 YOU shall indemnify IBM, its officers, agents and employees from and against any and all claims, damages, liabilities (including settlements entered into in good faith), suits, actions, judgments, penalties and taxes, civil and criminal, and all costs and expenses (including without limitation reasonable attorneys' fees) incurred in connection therewith, arising out of: (a) any act, omission, neglect or default of YOU or YOUR agents on or in connection with the manufacture, sale, distribution, promotion, or marketing of Your Product; (b) any defect (whether obvious or hidden) in Your Product manufactured, sold or licensed by YOU, except if such defect is contained wholly within Licensed Binary Code provided by IBM to YOU; (c) personal injury or any infringement of any rights (including copyrights) of any person by the manufacture, sale, distribution, possession or use of Your Product; or (d) YOUR failure to comply with applicable laws with respect to the manufacture, sale, distribution, possession or use of Your Product. To qualify for such indemnification IBM must notify YOU in writing of any such claim within ten (10) business days of IBM'S receipt of such claim, and allow YOU to control and fully cooperate with YOU in the defense of and all settlement negotiations related to such claim. Section 11. TRADEMARK LICENSE 11.1 To the extent it has the right to do so, IBM grants to YOU a worldwide, non-exclusive, non-transferable, right and license to use the Trademarks on Your Product in accordance with the terms of this Agreement. YOU shall have no right and/or license to use the Trademarks on goods other than YOUR Product, including, by way of example, and not limitation, promotional goods, such as clothing, sports gear, computer accessories, office supplies, and jewelry. 11.2 The license granted to YOU in Section 11.1 includes the right to sublicense the Trademarks to YOUR Subsidiaries, provided that each sublicensed subsidiary shall be bound by the terms and conditions of this Agreement as if it were named herein in YOUR place. YOU agree that any breach of the terms and conditions of this Agreement by a sublicensee shall also be considered a breach by YOU. 11.3. YOU agree to display and use the Trademarks solely in the form, manner and style required in the Trademark Usage Guidelines which may be modified from time to time, upon reasonable notice, by IBM. 11.4 YOU agree to use the Trademarks only on Your Products, and sales literature, advertising, presentation materials, press materials, and exhibits for Your Products. 11.5 All ownership rights in the Trademarks belong exclusively to IBM. YOU have no ownership rights in the Trademarks and shall acquire no ownership rights in the Trademarks as a result of YOUR performance (or breach) of this Agreement. All use of the Trademarks or variations thereon shall insure solely to the benefit of IBM. Upon termination of this Agreement all of YOUR rights to use the Trademarks shall terminate immediately except as otherwise provided herein. 11.6 YOU agree: (a) not to take any action which will interfere with any of IBM's rights in and to the Trademarks; (b) not to challenge IBM's right, title or interest in and to the Trademarks or the benefits therefrom; (c) not to make any claim or take any action adverse to IBM's ownership of the Trademarks; (d) not to register or apply for registrations, anywhere, for the trademarks or any other mark which is similar to the Trademark or which incorporates the Trademarks; and (e) not to use any mark, anywhere, which is confusingly similar to the Trademarks. 11.7 YOU agree that it is of fundamental importance that Your Product bearing the Trademarks be of the highest quality and integrity and that the Trademarks be properly used and displayed. YOU agree that the level of quality of Your Product manufactured, sold or licensed by YOU shall meet or exceed industry standards. 11.8 The parties agree that IBM may inspect Your Product distributed by YOU upon reasonable notice, and may purchase Your Product without notice to insure that the quality standards set forth in Section 11.7 and the Trademark Usage Guidelines are maintained and that the Trademarks are properly used. 11.9 Failure to meet the quality standards set forth in Section 11.7 and the Trademark Usage Guidelines shall be deemed to be a breach thereof which must be corrected to IBM'S satisfaction within ninety (90) days of being put on notice. Until such breach is corrected YOU may not sell or distribute Your Products with the Trademarks. 11.10 YOU represent and warrant that Your Product meets the applicable San Francisco criteria and quality standards in accordance with Section 11.7 and the Trademark Usage Guidelines. 11.11 YOU agree to notify IBM within ten (10) business days if YOU become aware of: (a) any uses of, or any application or registration for, a trademark, service mark or trade name that conflicts with or is confusingly similar to the Trademarks; (b) any acts of infringement or unfair competition involving the Trademarks; or (c) any allegations or claims whether or not made in a lawsuit, that the use of the Trademarks by IBM or YOU infringe the trademark or service mark or other rights of any other entity. 11.12 IBM may, but shall not be required to, take whatever action it, in its sole discretion, deems necessary or desirable to protect the validity and strength of the Trademarks at IBM's sole expense. YOU agree to comply with all reasonable requests from IBM for assistance in connection with any action with respect to the Trademarks that I BM may choose to take. 11.13 YOU shall not institute or settle any claims or litigation affecting any rights in and to the Trademarks without IBM's prior written approval. Section 12. REPRESENTATIONS AND WARRANTIES 122.1 IBM represents and warrants that it has the full right and power to grant the licenses granted I Sections 2 and 11, and that there are no outstanding agreements, assignments or encumbrances inconsistent with the provisions of said licenses or with any other provisions of this Agreement. 12.2 IBM represents and warrants that it is not aware of any claims of infringement of intellectual property that have been brought against it by third parties for infringement of such third party's intellectual property by the San Francisco Product. 12.3 YOU represent and warrant that other than in Your Product(s), no computer program product of YOURS contains, incorporates, invokes, calls, or otherwise causes execution of any version of the Licensed Code, or any portion thereof. 12.4 IBM warrants that when the San Francisco Product is used in the Specific Operating Environment, it will conform to thee Specifications, provided that YOU provide a substantially similar warranty to YOUR Customers of Your Product. The warranty period for a Release of the San Francisco Product licensed under this Agreement commences on the day YOU receive such Release and continues for a period of one hundred eighty (180) days after public availability of a subsequent Release or new Version. In no event, however, shall such warranty continue after the termination or expiration of this Agreement. THESE WARRANTIES ARE YOUR EXCLUSIVE WARRANTIES AND REPLACE ALL OTHER WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY FOR A PARTICULAR PURPOSE. IBM SHALL HAVE NO OTHER LIABILITY IN RESPECT OF ANY INFRINGEMENT OF PATENTS OR OTHER RIGHTS OF THIRD PARTIES DUE TO YOUR OPERATION UNDER THE LICENSES GRANTED HEREIN. Section 13. MISCELLANEOUS 13.1 IBM shall not assign or grant any right under any of its intellectual property that is licensed to YOU pursuant to Section 2, unless such assignment or grant is made subject to the terms and conditions of this Agreement. YOU shall not assign this Agreement or any of its rights, licenses or privileges hereunder or delegate or subcontract YOUR obligations, except to a purchaser of all, or substantially all, of YOUR assets, provided that, any such assignment, delegation or subcontracting shall be with IBM's written consent, which consent shall not be unreasonably withheld and all outstanding intellectual property claims between IBM and such purchaser, and all outstanding issues between YOU and IBM under this Agreement, if any, shall have been resolved to the satisfaction of IBM as of the date of such purchase of YOUR assets. Any assignment in derogation of the foregoing shall be null and void. 13.2 Except as specifically permitted in section 11.1, nothing contained in this Agreement shall be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trade name, trademark or other designation of either party hereto (including any contraction, abbreviation or simulation of any of the foregoing). 13.3 With the exception of any reduction in the value of the Licensed Materials resulting from YOUR material breach of YOUR obligations, neither party shall be entitled to indirect, incidental, consequential, special or punitive damages, including lost profits based on any breach or default of the other party and including those arising from infringement or alleged infringement of any patent, trademark, copyright, mask work or any other intellectual property right. 13.4 IBM's entire liability and YOUR exclusive remedy for actual damages from any cause whatsoever relating to this Agreement shall be limited to the greater of one hundred thousand ($100,000.00) dollars or the royalty payment made by YOU under this Agreement in the immediately preceding annual year. The limitation will apply, except as otherwise stated in this section, regardless of the form of action, whether in contract or in tort, including negligence. The limitation will not apply to claims by YOU for bodily injury or damage to real property or tangible personal property for which IBM is legally liable. 13.5 IBM shall have no obligation hereunder to institute any action or suit against third parties for any cause. 13.6 YOU recognize that URLs change from time to time. In the event that YOU are unable to gain access to any URL recited in this Agreement, please contact your IBM marketing representative to obtain any updates or other changes to the URL. 13.7 This Agreement will not be binding upon the parties until it has been signed hereinbelow by or on behalf of each party, in which event it shall be effective as of the Effective Date. No amendment or modification hereof shall be valid or binding upon tne parties unless made in writing and signed on behalf of each of the parties. 13.8 Each party shall, at its own expense, comply with any governmental law, statute, ordinance, administrative order, rule or regulation relating to its duties, obligations and performance under this Agreement and shall procure all licenses and pay all fees and other charges required thereby. Each party agrees to comply with all applicable federal, state and local laws, regulations and ordinances, including the Regulations of the U.S. Department of Commerce and/or the U.S. State Department. YOU hereby give written assurance that, unless authorized by appropriate U.S. Government license or regulations, neither software nor technical data provided by IBM under this Agreement, nor the direct product thereof, shall be exported, directly or indirectly, to prohibited countries or nations thereof. YOU agree that YOU are responsible for obtaining required government documents and approvals prior to export of any commodity, machine, software or technical data. As a part of the technical assistance provided under Section 5.2, IBM agrees to cooperate and provide reasonable information concerning the Licensed Materials to YOU in order for YOU to obtain export approval for Your Product. 13.9 If any section of this Agreement is found by competent authority to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such section in every other respect and the remainder of this Agreement shall continue in effect so long as the Agreement still expresses the intent of the parties. If the intent of the parties cannot be preserved, this Agreement shall be either renegotiated or terminated. 13.10 This Agreement shall be construed, and the legal relations between the parties hereto shall be determined, in accordance with the law of the State of New as such law applies to contracts signed and fully performed in such State. Both parties agree that any action brought concerning this Agreement shall be brought in a court of competent jurisdiction in the State of New Both parties agree to waive their right to a trial by jury in any dispute arising out of this Agreement. The prevailing party in any legal action hereunder shall be entitled to reimbursement by the other party of its expenses including, without limitation, reasonable attorneys' fees. 13.11 Each party is an independent contractor. Neither party is, nor will claim to be, a legal representative, partner, franchisee, agent or employee of the other. Neither party will assume or create obligations for the other. Each party is responsible for the direction and compensation of its employees. 13.12 Neither party relies on any promises, inducements, or representations made by the other or expectations of more business dealings. This Agreement accurately states our business agreement. 13.13 The headings of the sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 13.14 Any terms of this Agreement which by their nature extend beyond its expiration ro termination, including but not limited to the terms of Sections 3 and 6 shall remain in effect until fulfilled and shall bind the parties and their legal representatives, successors, heirs and assigns. This Agreement and any attachments thereto embody the entire understanding of the parties with respect to the subject matter hereof and merge all prior discussions between them. Aztek, Inc.By: /s/ Edson Ng------------------ Title: Vice President Date: July 8, 1998 INTERNATIONAL BUSINESS MACHINES CORPORATION By /s/ Marshall C. Phelps, Jr. - ------------------------------ Marshall C. Phelps, Jr. Vice President Date: 7/22/98 ATTACHMENT A Product Nos. covered by this agreement Product No. 5648-SF1-San Francisco Base Product No. 5648-GL1-San Francisco General Ledger Product No. 5647-WM1-San Francisco Warehouse Management Product No. 5648-OM1-San Francisco Order Management The product numbers covered by this Agreement shall also be listed in the file named LICENSE.TXT which is located in the root directory of the CD-ROM and in the ...com/ibm/sf/doc/ relative directory that results from the installation of the San Francisco Product on YOUR computer where ... is the prefix directory determined at install time by user specification of directory preference and/or specific platform requirements under Section B, entitled "San Francisco Product Numbers and Names." The contents of these lists and subdirectories may be updated by IBM from time to time. ATTACHMENT B Trademarks IBM San Francisco ATTACHMENT C Trademark Usage Guidelines 1.0 General Overview 1.1 This Attachment C ("Guidelines") sets forth the proper treatment and use in advertising of all trademarks licensed under the San Francisco Technology License Agreement to which they are appended and incorporated by reference (hereafter Agreement). Compliance with these Guidelines is the sole responsibility of YOU, YOUR Subsidiaries and/or YOUR Distributors. In the event of a conflict between the provisions of the text of the Agreement and these Guidelines, the Agreement shall control. 1.2 None of the Licensed Marks may be used on or in connection with novelty items or T-shirts without IBM's Approval. 2.0 Use of Trademarks in Advertising, Promotional Materials and Licensed Materials 2.1 General Trademark Use - Trademarks licensed by IBM under the Agreement shall always be used as adjectives, not as nouns or verbs. A trademark is not used in the possessive sense nor in the plural. Further, a trademark should not be used as a substitute for a type or class of product. Verify trademark use in this respect by mentally inserting the word "brand" after a trademark and before its product type to see if the entire phrase sounds reasonable. If it does not, the use is generally improper and should be checked with your legal department. Do not use any trademark in or as part of a hyphenated expression. Do not combine any trademark licensed hereunder in composite form with any other trademark, especially the trademark of a third party. 2.2 Use of the Licensed Marks by a Subsidiary - Trademark use by YOUR Subsidiaries shall form, at the least and in all respects, to the guidelines and requirements set forth in these Guidelines. 2.3 Trademark Use in Emblems - A Licensed Mark may not be used in any Subsidiary emblem or insignia. 2.4 Advertising Claims - The accuracy and appropriateness of all claims used in advertising or promotional materials which includes one or more of the Licensed Marks is the sole responsibility of YOU, YOUR Subsidiary, or YOUR Distributor, as the case may be, even though IBM may have reviewed the advertisement or promotional materials in question pursuant to this Agreement. 3.0 Use of IBM Trademarks 3.1 General - The following guidelines have been developed to explain the proper treatment of one of IBM's most valuable assets, its terms. The only legitimate purpose for using the trademark "IBM San Francisco" is to identify a relationship or the source of products which are based on the IBM San Francisco Product from International Business Machines Corporation. As such, the following general rules apply to the use of the trademark 'IBM San Francisco":"IBM San Francisco" may not be used to describe any product or service which is not based on and developed using the San Francisco Product from IBM. Right : Wrong: Based on IBM San Francisco software Based on IBM San Francisco Designed for IBM San Francisco software IBM San Francisco Order Tracking (where the order tracking modules were created by YOU) 3.2 More Specific Basis For and Manner of Use of" IBM San Francisco" -The trademark "IBM San Francisco" consists of two portions "IBM," which is a registered trademark, and "San Francisco," which, as of the date of this Agreement, is not registered. Under no circumstances are YOU permitted to use the trademark "IBM" in a design or logotype form or as a trademark separate and apart from the words "San Francisco." "IBM San Francisco" (or any other trademark) may not be used as a noun, but only as an adjective. Right: Wrong Solve your development problems Solve your development problems with IBM San Francisco software with IBM San Francisco Note the use of a general term "software" in the previous example which is used to avoid making the trademark "IBM San Francisco" a generic term as happened with the former trademark "Aspirin." In addition to following the above guidelines, the trademark "IBM San Francisco", in either its word or logotype form, must not be used in a manner which may cause confusion as to the source or origin of products or services being offered. As such, the trademark "IBM San Francisco" may not be: displayed in a striking and solitary manner; made more prominent than the remainder of the text in which it is used by another; as prominent or more prominent than the YOUR trademark or company name; used as part of the name or other identifier of a business, product, or service not originating not based upon or developed using the San Francisco product. At the first or a prominent occurrence of the trademark "IBM San Francisco" in advertising, it should be symbolically indicated that "IBM San Francisco" is a trademark. Each portion of the trademark should be marked according to its registration status. The registered portion should be marked with the symbol "registered trademark" and in the United States, the unregistered portion is usually marked by using the symbol "trademark." Thus, the marking of the entire IBM San Francisco trademark should be: IBM "registered trademark" San Francisco "trademark." Where space permits, the footnote "IBM, San Francisco and IBM San Francisco are trademarks or registered trademarks of IBM Corporation." Where space requirements dictate, a shortened legend may be agreed to. In either case, the position of the symbols should be in close proximity to the mark. Should IBM be granted a registration of the trademark "San Francisco" in the US and foreign patent and trademark offices, the symbol "registered trademark" should be substituted for the "trademark" symbol. IBM will notify you in the event that such registration is granted. Outside the U.S., an asterisk is sometimes used instead of the "trademark" with the same footnote. Note that in some countries a translated version of the US trademark attribution is not only used, but may be required. You should check with your legal department to insure that local laws and customs are adhered to and followed. ATTACHMENT D *********************** Attachment D has been omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission. ATTACHMENT E
Your Product Net Your Number of Number of Unit Rate Code Royalty Amount of Description/ Product Copies No Charge Selling (A or B)Rate(%) Royalty Type Revenue Copies Price Due Number (Column 1)(Column 2)(Column 3)(Column 4)(Column 5)(Column 6)(Column 7)(Column 2x7) Total: Total Due: YTD Total: _________ ___
ATTACHMENT F SAN FRANCISCO PRODUCT WORKSHEET FOR NET LICENSED PRODUCT REVENUE UNDER SECTION 6.2(a) Licensee Name: ____________________ Date of Report: __________ License Reference Number: _________ Period Covered: __________ Your Product Gross Your Other Company Licensed Other Payment Net Your Product Company product made to Revenue Revenue incorporated Other In Your Company Product Deductible Under Section 6.2(a) (Column A) (Column B) (Column C) (Column D) (Column E) (Column B-3) EX-10 16 [Letterhead of Consolidated McKinney Resources Inc.] August 28, 1994 VIA FAX: (905) 316-3699 IBM CANADA LTD. 3600 Steeles Avenue East Vendor and Channels Marketing Software Solutions Business Unit Markham, Ontario L3R 9Z7 Attention: Mr. Kelly Paul, Relationship Manager Dear Sir: Re: Proposed Settlement ("Settlement") of the Shared Cost Development Agreement ("SCDA Agreement") between ResponseWare Corp. ("ResponseWare") and IBM given ResponseWare acquisition by Consolidated McKinney Resources Inc. ("CKY" or the "Company") Revised proposal to reaching a working Settlement on the SCDA Agreement: 1. A payment of C$100,000 shall be made by CKY to IBM via ten (10), equal, monthly payments of C$10,000 commencing on the last day of January 1995 and completing on the last day of October 1995. This Settlement shall settle and supercede all other agreements that have been entered into between ResponseWare and IBM as of August 28, 1994, other than the Capital Lease ("Lease") between ResponseWAre and IBM as mentioned in 2 below. 2. CKY shall continue to honor the Lease agreement between IBM and ResponseWare as outlined in the terms and conditions of the Lease. 3. The portion of software developed under the SCDA Agreement that is still being marketed by ResponseWare, CKY will negotiate with IBM a new compensation plan that is mutually agreeable to both parties. CKY requests that an initial three (3) month assessment period, starting five business days after official Vancouver Stock Exchange ("VSE") approval of the starting five business days after official Vancouver Stock Exchange ("VSE") approval of the acquisition of ResponseWare by CKY, be invoked so that CKY has time to determine the extent of use of the software developed under the SCDA Agreement. During the second half of the three month assessment period CKY will negotiate in good faith with IBM the revised compensation plan - to be invoked after the three month period. 4. The laws of the Province of British Columbia, B.C. Securities Commission and the VSE prohibit CKY from executing an agreement until it has been approved by the VSE. The effective date of the agreement with ResponseWare shall be five working days after the official approval of the acquisition of ResponseWare by CKY. 5. If necessary, the revised terms and conditions of this agreement (CKY/IBM Agreement") shall be reviewed directly by IBM with ResponseWare only upon the date of official notice by CKY to ResponseWare and IBM that CkY does not intend to complete the acquisition of ResponseWare. CKY shall commit to provide this disclosure to IBM at that time. 6. The terms and conditions of the CKY/IBM Agreement and the revised SCDA Agreement as well as all discussions regarding the proposed acquisition of ResponseWare by CKY may not be disclosed by IBM to other parties without the written consent of CKY. Terms of this CKY/IBM Agreement should be kept confidential and must not be divulged to others without IBM's written consent. Yours truly, CONSOLIDATED McKINNEY RESOURCES INC. /s/ Richard W. Evans, Director - ----------------------------------------- per Mr. Mike Sintichakis President and CEO AGREED TO AND ACCEPTED BY IBM CANADA LTD. THIS 29th DAY OF August, 1994 Kelly Paul - ---------------------------------------- Name Per: /s/ Kelly Paul - --------------------------------------- Signature Reationship Manager - --------------------------------------- Official Capacity Enclosure: Copy of ResponseWare/CKY Letter - ResponseWare authorization - creditors EX-23 17 EXHIBIT 23.1 Consent Of Independent Accountants [LETTERHEAD OF BDO DUNWOODY, CHARTERED ACCOUNTANTS APPEARS HERE] INDEPENDENT AUDITORS CONSENT We hereby consent to the use of our report to the shareholders of Aztek, Inc., dated July 23, 1998 on the audit of the financial statements described therein, in the Joint Proxy Statement-Prospectus and Registration Statement on Form S-4, relating to shares of Common Stock of Aztek, Inc., to be issued to shareholders of Aztek Technologies Inc., as filed with the Securities and Exchange Commission. We hereby consent to the use of our report to the shareholders of Aztek Technologies Inc., dated July 10, 1998 on the audit of the financial statements described therein, in this Registration Statement on Form S-4, relating to the annual and extraordinary meeting of the shareholders of Aztek Technologies Inc., as filed with the Securities and Exchange Commission. We hereby consent to the use of our opinion on the income tax effect on Canadian resident shareholders, of Aztek Technologies Inc., of the proposed merger of Aztek Technologies Inc. with Aztek, Inc. described in this Registration Statement on Form S-4. "BDO Dunwoody" CHARTERED ACCOUNTANTS Penticton, British Columbia February 26, 1999 BDO Dunwoody, LLP is a Limited Liability Partnership registered in Ontario EX-23 18 EXHIBIT 23.2 Consent of Stephen K. Winters [LETTERHEAD OF STEPHEN K WINTERS LAW CORPORATION] November 5, 1998 Board of Directors Aztek Technologies Inc. #5 - 246 Lawrence Ave. Kelowna, B.C. V1Y 6L3 Re: Aztek Technologies Inc. ("ATI") - Consent Members of the Board: We hereby consent to the use of our legal opinion dated August 5, 1998, on the Dissenter's Rights described therein of ATI's Proxy Statement to be sent to the shareholders of ATI as filed with the Securities and Exchange Commission. We also consent to the reference to our firm under the caption "Experts" in the Prospectus. Yours truly, STEPHEN K WINTERS LAW CORPORATION /s/ Stephen K. Winters - ---------------------- Per: Stephen K. Winters EX-24 19 MINUTES OF PROCEEDING OF THE BOARD CONSENT AND RESOLUTION OF BOARD OF DIRECTORS OF AZTEK, INC. Held on August 12, 1998 PRESENT: MIKE SINTICHAKIS NICK SINTICHAKIS EDSON NG EILEEN KEOGH Being all of the Directors of Aztek, Inc. (the "Company"). All of the Directors being present in person and having waived notice of the meeting as evidenced by their signatures at the bottom of these minutes, notice calling the meeting was dispensed with and the meeting declared to be regularly constituted. WHEREAS, the Company will file a Registration Statement on Form S-4 with the U.S. Securities & Exchange Commission in connection with the merger of the Company and Aztek Technologies Inc. of Canada, to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirement of the Securities and Exchange Commission, it is RESOLVED, That Mike Sintichakis, as an officer of the Company, will sign the registration statement for the directors and officers by power of attorney. AZTEK, INC. By:/s/ Mike Sintichakis Date: 8/12/98 ---------------------- ------------------- Mike Sintichakis, Director By:/s/ Nick Sintichakis Date: 8/12/98 ------------------------ -------------------- Nick Sintichakis, Director By:/s/ Edson Ng Date: 8/12/98 ------------------------ -------------------- Edson Ng By:/s/ Eileen Keogh Date: 8/12/98 ------------------------ -------------------- Eileen Keogh EX-27 20
5 THIS SUMMARY CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S ANNUAL FINANCIAL STATEMENTS SET FORTH IN THIS FORM S-4 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUN-30-1998 JUN-30-1998 60000 0 0 0 0 60000 0 0 60000 0 0 0 0 60000 0 60000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-99 21 EXHIBIT 99.1 Merger Agreement MERGER AGREEMENT THIS AGREEMENT MADE THE 2nd DAY OF July, 1998. BETWEEN: AZTEK TECHNOLOGIES INC., a company incorporated under the laws of the Province of British Columbia, and having its registered office at 505 - 700 West Pender Street, Vancouver, British Columbia, V6C 1G8 ("ATI") OF THE FIRST PART AND: AZTEK, INC., a company incorporated under the laws of the State of Nevada, and having its registered office at 1025 Ridgeview Drive, Suite 400 Reno, Nevada, 89509 ("the Corporation") OF THE SECOND PART WHEREAS: A. Aztek Technologies Inc. shareholders are legal and beneficial owners of all the issued and outstanding shares in the capital stock of Aztek Technologies Inc., a corporation incorporated under the laws of British Columbia as follows:
Description No. Of Registered Number of Shares Shares Shareholders Outstanding Common 347 2,051,109 Escrow 1 354,000 Options 5 175,000 Total *347 2,051,109
* The above shareholders are as of June 30, 1997. The current number of shareholders is not available from the transfer agent at this time but will be made available at a later date. (the "ATI Shares"). B. Aztek, Inc. shareholders are legal and beneficial owners of all of the issued and outstanding shares in the capital stock of Aztek, Inc., a corporation incorporated under the laws of Nevada as follows:
Description No. of Shareholders Number of Shares Shares Outstanding Common 6 1,025,000 Escrow 5 1,000,000 Options 0 0 Total 6 2,025,000
(the "Corporation Shares"). C. ATI has agreed to merge with the Corporation and the Corporation has agreed to merge with ATI, through a pooling of Shares, all of the assets and liabilities of the respective parties, on the terms and conditions as set out in this Agreement. BASED ON WHAT HAS BEEN SET OUT ABOVE THIS AGREEMENT WITNESSES that in consideration of the premises and the mutual representations, warranties, agreements and covenants contained in this Agreement (the receipt and adequacy of such consideration is by this Agreement mutually admitted by each party), the parties covenant and agree as follows: 1. INTERPRETATION 1.1 Definitions - In this Agreement the following words and phrases shall have the meanings set out after each: (a) "ATI" means Aztek Technologies Inc., a company incorporated under the laws of the Province of British Columbia, and having its registered office at 505 - 700 West Pender Street, Vancouver, British Columbia, V6C 1G8; (b) "ATI Shares" means all of the issued and outstanding shares in the capital of ATI; (c) "ATI's Certificates" means the stock certificates to be delivered at Completion Date pursuant to paragraph 5.2(a). (d) "ATI's Solicitor" means Stephen K. Winters Law Corporation, Barristers and Solicitors, of #505 - 700 West Pender Street, Vancouver, British Columbia, V6C 1G8; (e) "Business" means the business carried on by ATI which primarily involves the development, sale, and servicing of computer software; (f) "Completion Date" means October 1, 1998, or will become effective the date of the registration statement date, or such other date as may be agreed upon in writing by the parties to this Agreement and accepted be the regulatory authorities; (g) "Corporation" means Aztek, Inc., a company incorporated under the laws of the State of Nevada, and having its registered office at 1025 Ridgeview Drive, Suite 400 Reno, Nevada, 89509 (h) "Corporation Shares" means all of the issued and outstanding shares in the capital of the Corporation; (i) "Corporation's Solicitor" means Michael J. Morrison 1025 Ridgeview Drive, Suite # 400 Reno, Nevada 89509. (j) "Financial Statements" means the Financial Statements of ATI for the fiscal year of ATI ending on the 30th day of June, 1998 consisting of a balance sheet, statement of retained earnings, an income statement and a statement of changes in financial position of ATI including the notes to such Financial Statements, a copy of which is attached to this Agreement as Schedule "B"; (k) "Material Contracts" means those subsisting commitments, contracts, agreements, instruments, leases or other documents entered into by ATI, by which it is bound or to which it or its assets are subject which have total payment obligations on the part of ATI in excess of $1,000; (l) "Person" includes an individual, corporation, body corporate, partnership, joint venture, association, trust or unincorporated organization or any trustee, executor, administrator or other legal representative of such entity; (m) "Surviving Business" means the business to be carried on by the Corporation. 1.2 Schedules - The following are the schedules to this Agreement:
SCHEDULE DESCRIPTION "A" Authorized Share Capital and Issued Shares "B" Financial Statements "C" Material Contracts "D" Encumbrances "E" Assets other than Real Property "F" Equipment Leases "G" Real Property "H" Tax Elections "I" Service Marks, Trade Marks, Trade Names, Intellectual Property, Codes, Designs "J" Litigation "K" License, Agency & Distribution Agreements
2. COVENANTS, REPRESENTATIONS AND WARRANTIES OF ATI 2.1 Representations and Warranties - In order to induce the Corporation to enter into and to consummate the transactions contemplated by this Agreement, ATI by this Agreement represents and warrants to the Corporation as follows: (a) Organization and Good Standing of ATI - ATI is duly incorporated and is validly existing and in good standing with respect to the filing of annual reports under the British Columbia Company Act and has all necessary corporate power, authority and capacity to own its property and assets and to carry on its business as presently conducted. Neither the nature of the business of ATI nor the location or character of the property owned or leased by it requires that ATI be registered or otherwise qualified or to be in good standing in any other jurisdiction; (b) Capitalization of ATI - The issued share capital of ATI together with the names and the number, class and kind of shares held by each director, officer, insider, or major shareholders (greater than 10%) of ATI is as set out in Schedule "A" to this Agreement; (c) Authority - ATI has due and sufficient right and authority to enter into this Agreement on the terms and conditions set out in this Agreement; (d) Agreement Valid - This Agreement constitutes a valid and binding obligation of ATI. On the Completion Date, ATI shall not be a party to, bound by or subject to any indenture, mortgage, lease, agreement, instrument, statute, regulation, order, judgment, decree or law which would be violated, contravened or breached by or under which any default would occur as a result of the execution and delivery by ATI of this Agreement or the performance by ATI of any of the terms of this Agreement; (e) Absence of Options, etc. - The Shares represent all of the issued and outstanding shares in the capital of ATI and no Person has any agreement or option, present or future, contingent, absolute or capable of becoming an agreement or option or which with the passage of time or the occurrence of any event could become an agreement or option: (i) to require ATI to issue any further or other shares in its capital or any other security convertible or exchangeable into shares in its capital or to convert or exchange any securities into or for shares in the capital of ATI; (ii) for the issue and allotment of any of the authorized but unissued shares in the capital of ATI; (iii) to require ATI to purchase, redeem or otherwise acquire any of the issued and outstanding shares in the capital of ATI; or (iv) to acquire the Shares or any of them; (f) Absence of Other Interest - ATI does not own any shares in or other securities of, or have any interest in the assets or business of any other Person; (g) Financial Statements - The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of prior fiscal years. To the best of the knowledge of ATI, such Financial Statements present fairly the financial position of ATI as at the date of such Financial Statements and the results of ATI's operations and the changes in ATI's financial position for the period then ending; (h) Absence of Undisclosed Liabilities - Except to the extent reflected or reserved against in the Financial Statements or the Schedules hereto or incurred subsequent to the date of such Financial Statements in the ordinary and usual course of the business of ATI, to the best of the knowledge of ATI, ATI does not have any outstanding indebtedness or any liabilities or obligations (whether accrued, absolute, contingent, or otherwise); (i) Absence of Changes - To the best of the knowledge of ATI, prior to the Completion Date, there has not been any damage, destruction or loss, labour trouble or other event, development or condition, of any character (whether or not covered by insurance) which is not generally known or which has not been disclosed to the Corporation, which has or may materially and adversely affect the business, assets, properties or future prospects of ATI; (j) Accuracy of Records - To the best of the knowledge of ATI, all material financial transactions of ATI have been accurately recorded in the books and records of ATI and such books and records fairly present the financial position and the corporate affairs of ATI; (k) Absence of Unusual Transactions - Prior to the Completion Date, ATI has not: (i) transferred, assigned, sold or otherwise disposed of any of the assets shown in the Financial Statements or canceled any debts or claims except in each case in the ordinary and usual course of business; (ii) incurred or assumed any obligation or liability (fixed or contingent), except unsecured current obligations and liabilities incurred in the ordinary and normal course of business; (iii) issued or sold any shares in its capital stock or any warrants, bonds, debentures or other corporate securities or issued, granted or delivered any right, option or other commitment for the issuance of any such or other securities; (iv) discharged or satisfied any lien or encumbrance, or paid any obligation or liability (fixed or contingent), other than current liabilities in the ordinary and normal course of business; (v) declared or made, or committed itself to make, any payment of any dividend or other distribution in respect of any of its shares or purchased or redeemed any of its shares or split, consolidated or reclassified any of its shares; (vi) entered into any material commitment or transaction not in the ordinary and usual course of business; (vii) waived or surrendered any right of substantial value; (viii) made any gift of money or of any property or assets to any Person; (ix) purchased or sold any fixed assets; (x) amended or changed or taken any action to amend or change its memorandum or articles of incorporation; (xi) increased or agreed to increase the pay of, or paid or agreed to pay any pension, bonus, share of profits or other similar benefit of, any director, employee or officer or former director, employee or officer of ATI; (xii) made payments of any kind to or on behalf of ATI or any affiliate or associate of ATI or under any management agreement with ATI save and except business related expenses and salaries in the ordinary course of business and at the regular rates payable to them; (xiii) mortgaged, pledged, subjected to lien, granted a security interest in or otherwise encumbered any of its assets or property, whether tangible or intangible; or (xiv) authorized or agreed or otherwise have become committed to do any of the foregoing; (l) Title to Properties - ATI has good and marketable title to all of its properties, interests in properties and assets, real and personal including those referred to in Schedules "E" and "G" hereto, including those reflected in the Financial Statements or acquired since the date of the Financial Statements (except as since transferred, sold or otherwise disposed of in the ordinary and usual course of business), free and clear of all mortgages, pledges, liens, title retention agreements, encumbrances or charges of any kind or character whatsoever except as shown in Schedule "D" to this Agreement, and none of ATI's assets or properties are in the possession of or under the control of any other Person; (m) Leased Equipment - Schedule "F" sets out a true and complete list of all equipment, other personal property and fixtures in the possession or custody of ATI which, as of the date of this Agreement, are leased or are held under license or similar arrangement and accurately describes the leases, licenses, agreements or other documentation relating to such personal property. Except as set out in Schedule "B", all rental or other payments required to be paid by ATI pursuant to such leases or licenses have been duly paid and ATI is not otherwise in default in meeting its obligations under any such leases or licenses; (n) Collectability of Accounts Receivable - The accounts receivable shown in the Financial Statements of ATI have been recorded by ATI in accordance with its usual accounting practices. The reserves taken for doubtful or bad accounts is adequate based on the past experience of ATI and is consistent with the accounting procedures used by ATI in previous fiscal periods. There is nothing which would indicate that such reserve is not adequate or that a higher reserve should be taken; (o) Real Property - Schedule "G" contains accurate descriptions of all real property in respect of which ATI holds an interest, whether freehold, leasehold or otherwise. ATI is not party to or bound by any leases of real property other than those referred to in Schedule "G" to this Agreement and all interests held by ATI whether as owner or as lessee are free and clear of any and all liens, charges and encumbrances of any nature and kind whatsoever except as set out in Schedule "D". All rental and other payments required to be paid by ATI pursuant to such leases have been duly paid and ATI is not otherwise in default in meeting its obligations under any such lease; (p) Material Contracts - Except for the liens, charges and encumbrances listed in Schedule "D", the equipment and other personal property leases and agreements listed in Schedule "F", the real property leases listed in Schedule "G", and the contracts and agreements listed in Schedule "C", ATI is not party to or bound by any Material Contract, whether oral or written, and the contracts and agreements listed in Schedule "C" are all in full force and effect and unamended, no material default exists in respect of such agreements on the part of any of the other parties to such agreements, ATI is not aware of any intention on the part of any of the other parties to such agreements to terminate or materially alter any such contracts or agreements, and Schedule "C" lists all the present outstanding Material Contracts entered into by ATI in the course of carrying on its business; (q) Absence of Guarantees - ATI has no guarantees with respect to the obligations of any other Person. ATI has no indemnities or contingent or indirect obligations with respect to the obligation of any other Person (including any obligation to service the debt of or otherwise acquire an obligation of another Person or to supply funds to, or otherwise maintain any working capital or other balance sheet condition of any other Person); (r) Absence of Conflicting Agreements - ATI is not party to, bound by or subject to any indenture, mortgage, lease, agreement, instrument, judgment or decree which would be violated or breached by, or under which default would occur or which could be terminated, cancelled or accelerated, in whole or in part, as a result of the execution and delivery of this Agreement or the consummation of any of the transactions provided for in this Agreement; (s) Litigation - Other than as set out in Schedule "J", to the best of the knowledge of ATI there is not any suit, action, litigation, arbitration proceeding or governmental proceeding, including appeals and applications for review, in progress, pending or threatened against, or relating to ATI or affecting its assets, properties or business which might materially and adversely affect the assets, properties, business, future prospects or financial condition of ATI; and there is not presently outstanding against any of ATI any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator; (t) Copies of Agreements, etc. - True, correct and complete copies of all mortgages, leases, agreements, instruments and other documents listed in Schedules "B", "C", "D", "F", "G", and "I" have been delivered to the Corporation; (u) Corporate Records - To the best of the knowledge of ATI, ATI has kept the records required to be kept by ATI and any other applicable corporate legislation and such records are complete and accurate and contain all minutes of all meetings of directors and members of ATI; (v) Absence of Approvals Required - Relying upon the Corporation's representations and warranties with respect to the Investment Canada Act and the Competition Act as set out in subsection 3.1(b) of this Agreement, no authorization, approval, order, license, permit or consent of any governmental authority, regulatory body or court, and no registration, declaration or filing by ATI with any such governmental authority, regulatory body or court is required in order for ATI: (i) to incur the obligations expressed to be incurred by ATI pursuant to this Agreement; (ii) to execute and deliver all of the documents and instruments to be delivered by ATI pursuant to this Agreement; (iii) to duly perform and observe the terms and provisions of this Agreement; and (iv) to render this Agreement legal, valid, binding and enforceable in accordance with its terms; (w) Permits and Licenses - ATI holds all permits, licenses, consents and authorities issued by any governmental authority of Canada or any Province of Canada, or any municipal, regional or other authority, or any subdivision of the same, including without limitation, any governmental department, commission, bureau, board or administrative agency, which are necessary or desirable in connection with the conduct and operation of ATI's business and the ownership or leasing of its assets and the conduct and operation of ATI's business as the same are now owned, leased, conducted or operated is not in breach of or in default under any term or condition of any such permits, licenses, consents and authorities: (x) Filings - ATI: (i) has duly filed in a timely manner all federal and provincial income tax returns and election forms and the tax returns of any other jurisdiction required to be filed and to the best of the knowledge of ATI all such returns and forms have been completed accurately and correctly in all respects; (y) Additional Tax Matters - Except as specified in Schedule "H", ATI has not: (i) made any election under Section 85 of the Income Tax Act with respect to the acquisition or disposition of any property; (ii) made any election under Section 83 of the Income Tax Act with respect to the payment out of the capital dividend account of ATI; (iii) acquired or had the use of any property from a person with whom it was not dealing at arm's length other than at fair market value; (iv) disposed of anything to a person with whom it was not dealing at arm's length for proceeds less than fair market value of such thing; or (v) discontinued carrying on any business in respect of which non-capital losses were incurred, and any non-capital losses which ATI has are not losses from property or business investment losses; (z) Tax Elections - ATI has made all elections required to be made pursuant to Part III of the Income Tax Act in connection with any distributions by ATI and all such elections were true and correct and in the prescribed form and were made within the prescribed time periods; (aa) Statements Attached to Tax Returns - To the best of the knowledge of ATI, the financial statements and schedules attached to the corporate income tax returns as filed by ATI for each of its taxation years reflect and disclose all transactions to which ATI was party as required by the Income Tax Act or other applicable revenue laws and all of the transactions to which ATI was or is a party are reflected or disclosed in such financial statements and schedules and the corporate income tax returns and schedules have been duly and accurately completed as required by such Act; (bb) Intellectual Property - (i) Schedule "I" attached hereto lists and contains a description of: (1) all patents, patent applications and registrations, trade marks, trade mark applications and registrations, copyrights, copyright applications and registrations, trade names and industrial designs, domestic or foreign, owned or used by ATI or relating to the operation of the Business, (2) all trade secrets, know-how, inventions and other intellectual property owned or used by ATI or relating to the Business, and (3) all computer systems and application software, including without limitation all documentation relating thereto and the latest revisions of all related object and source codes therefor, owned or used by ATI or relating to the Business, (all of the foregoing being collectively called the "Intellectual Property"); (ii) ATI has good and valid title to all of the Intellectual Property, free and clear of any and all encumbrances. Complete and correct copies of all agreements whereby any rights in any of the Intellectual Property have been granted or licensed to ATI have been provided to the Corporation. No royalty or other fee is required to be paid by ATI to any other person in respect of the use of any of the Intellectual Property except as provided in such agreements delivered to the Corporation. (iii) Except as disclosed in Schedule "I" or "K", there are no restrictions on the ability of ATI or any successor to or assignee from ATI to use and exploit all rights in the Intellectual Property. All statements contained in all applications for registration of the Intellectual Property were true and correct as of the date of such applications. Each of the trade marks and trade names included in the Intellectual Property is in use. None of the rights of ATI in the Intellectual Property will be impaired or affected in any way by the transactions contemplated by this Agreement; (iv) To the best of the knowledge of ATI, the conduct of the Business and the use of the Intellectual Property does not infringe, and ATI has not received any notice, complaint, threat or claim alleging infringement of, any patent, trade mark, trade name, copyright, industrial design, trade secret or other Intellectual Property or proprietary right of any other person, and the conduct of the Business does not include any activity which may constitute passing-off; (v) Partnerships or Joint Ventures - Except as disclosed in the Schedules hereto, ATI is not a partner or participant in any partnership, joint venture, profit-sharing arrangement or other association of any kind and is not party to any agreement under which ATI agrees to carry on any part of the Business or any other activity in such manner or by which ATI agrees to share any revenue or profit with any other person; (vi) Customers - ATI has previously delivered to the Corporation a true and complete list of all customers of the Business as of the date hereof. ATI is the sole and exclusive owner of, and has the unrestricted right to use, such customer list. Neither the customer list nor any information relating to the customers of the Business have, within three years prior to the date of this Agreement, been made available to any person other than the Corporation and ATI's User Group. ATI has no knowledge of any facts which could reasonably be expected to result in the loss of any customers or sources of revenue of the Business which, in the aggregate, would be material to the Business or the condition of ATI; (vii) Restrictions on Doing Business - Except as disclosed in the Schedules hereto, ATI is not a party to or bound by any agreement which would restrict or limit its right to carry on any business or activity or to solicit business from any person or in any geographical area or otherwise to conduct the Business as ATI may determine. (viii) No Breach of Material Contracts - All Material Contracts are valid and subsisting and no material default exists under the Material Contracts except as disclosed in Schedule "B"; (ix) Indebtedness to ATI - The Business shall not at Completion be indebted to ATI or any directors, officers, or employees of ATI or any affiliate or associate of any of them, on any account whatsoever; (x) Condition of Assets - All assets and all other plant, machinery, facilities and equipment used by ATI in connection with its business is in good operating condition and in a good state of maintenance and repair for equipment of similar age relative to the standards of maintenance and repair maintained by other companies carrying on similar Business in Canada; (xi) Undisclosed Information - ATI has no specific information relating to ATI which is not generally known or which has not been disclosed to the Corporation and which if known could reasonably be expected to have a materially adverse effect on the value of the Shares; (xii) Conduct of Business - The conduct of business by ATI on any lands from which they operate their business is not subject to any restriction or limitation other than those registered against title to the lands, contained in applicable zoning regulations or that are of general application and the conduct of any such business is not in contravention of any law, regulation or order or any court or other body having jurisdiction including zoning requirements; (xiii) Licenses, Agency and Distribution Agreements - Schedule "K" attached hereto lists all agreements to which ATI is a party or by which it is bound under which the right to manufacture, use or market any product, service, technology, information, data, computer hardware or software or other property has been granted, licensed or otherwise provided to ATI or by ATI to any other person, or under which ATI has been appointed or any person has been appointed by ATI as an agent, distributor, licensee or franchisee for any of the foregoing. Complete and correct copies of all of the agreements listed in Schedule "K" have been provided to the Corporation. None of the agreements listed in Schedule "K" grant to any person any authority to incur any liability or obligation or to enter into any agreement on behalf of ATI; (xiv) Outstanding Agreements - ATI is not a party to or bound by any outstanding or executory agreement, contract or commitment, whether written or oral, except for: (1) any contract, lease or agreement described or referred to in this Agreement or in the Schedules hereto, (2) any contract, lease or agreement made in the ordinary course of the routine daily affairs of the Business under which ATI has a financial obligation of less than One Thousand Dollars ($1,000) per annum and which can be terminated by ATI without payment of any damages, penalty or other amount by giving not more than thirty (30) days' notice, and (3) the contracts, leases and agreements described in Schedule "K" attached hereto. Complete and correct copies of each of the contracts, leases and agreements described in Schedule "K" have been provided to the Corporation; and ATI covenants, represents and warrants to the Corporation that all of the representations and warranties set forth in this paragraph shall be true and correct at the Completion Time as if made on that date. (cc) Guarantees, Warranties and Discounts (i) ATI is not a party to or bound by any agreement of guarantee, indemnification, assumption or endorsement or any other like commitment of the obligations, liabilities (contingent or otherwise) or indebtedness of any person; (ii) ATI has not given any guarantee or warranty in respect of any of the products sold or the services provided by it, except warranties made in the ordinary course of the Business and in the form of ATI's standard written warranty, a copy of which has been provided to the Corporation, and except for warranties implied by law; (iii) during each of the three fiscal years of ATI ended immediately preceding the date hereof, no claims have been made against ATI for breach of warranty or contract requirement or negligence or for a price adjustment or other concession in respect of any defect in or failure to perform or deliver any products, services or work which had, in any such year, an aggregate cost exceeding $25,000; (iv) there are no repair contracts or maintenance obligations of ATI in favor of the customers or users of products of the Business, except obligations incurred in the ordinary course of the Business and in accordance with ATI's standard terms, a copy of which has been provided to the Corporation; (v) ATI is not now subject to any agreement or commitment, and ATI has not, within three years prior to the date hereof, entered into any agreement with or made any commitment to any customer of the Business which would require ATI to repurchase any products sold to such customers or to adjust any price or grant any refund, discount or other concession to such customer; (vi) ATI is not required to provide any letters of credit, bonds or other financial security arrangements in connection with any transactions with its suppliers or customers; and 2.2 Other Representations - All statements contained in any certificate or other instrument delivered by or on behalf of ATI pursuant to this Agreement or in connection with the transactions contemplated by this Agreement shall be deemed to be representations and warranties by ATI under this Agreement. 2.3 Survival - The representations and warranties of ATI contained in this Agreement shall survive the Completion and the Share exchange and, notwithstanding the Completion and the Share exchange, notwithstanding any investigations or inquiries made by the Corporation prior to the Completion and notwithstanding the waiver of any condition by the Corporation, the representations, warranties, covenants and agreements of ATI shall (except where otherwise specifically provided in this Agreement) survive the Completion and shall continue in full force and effect for a period of two (2) years from the Completion Date for all matters except income tax liability or other tax matters. With respect to income tax liability of ATI or other tax matters, the representations, warranties, covenants and agreements of ATI shall survive the Completion and continue in full force and effect for six (6) years from the later of the date of mailing of a notice of original assessment by the Minister of National Revenue and the date of mailing of a notification from the Minister of National Revenue that no tax is payable by ATI for the fiscal year of ATI ending on the Completion Date. 2.4 Reliance - ATI acknowledges and agrees that the Corporation has entered into this Agreement relying on the warranties and representations and other terms and conditions of this Agreement notwithstanding any independent searches or investigations that may be undertaken by or on behalf of the Corporation and that no information which is now known or should be known or which may from the date of this Agreement become known to the Corporation or its agents or professional advisers shall limit or extinguish the right to indemnification under this Agreement. 3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE CORPORATION 3.1 Representations and Warranties - In order to induce ATI to enter into and to consummate the transactions contemplated by this Agreement, the Corporation represents and warrants to ATI that: (a) Organization and Good Standing - The Corporation is a company duly organized, validly existing and in good standing under the laws of Nevada with respect to the filing of annual reports; (b) Authority Relative to this Agreement - The Corporation has all necessary corporate power, authority and capacity to acquire the Shares and to perform its obligations under this Agreement. The execution and delivery of this Agreement has been duly authorized by all necessary corporate action on the part of the Corporation and this Agreement constitutes a valid and binding obligation of the Corporation. The Corporation is not a party to, bound by or subject to any indenture, mortgage, lease, agreement, instrument, statute, regulation, order, judgment, decree or law which would be violated, contravened or breached by or under which any default would occur as a result of the execution and delivery by the Corporation of this Agreement or the performance by the Corporation of any of the terms of this Agreement; and the Corporation covenants, represents and warrants to ATI that all of the representations and warranties set forth in this paragraph 3.1 shall be true and correct at the Completion Time as if made on that date; 3.2 Survival - The representations and warranties of the Corporation contained in this Agreement shall survive the Completion and the exchange of the Shares and notwithstanding the Completion and the exchange of the Shares, the representations and warranties of the Corporation shall continue in full force and effect for the benefit of ATI for a period of three (3) years from the Completion Date; 3.3 Reliance - The Corporation acknowledges and agrees that ATI has entered into this Agreement relying on the warranties and representations and other terms and conditions of this Agreement notwithstanding any independent searches or investigations that may be undertaken by or on behalf of ATI, and that no information which is now known or which should be known or which may after the date of this Agreement become known to ATI or its agents or professional advisers shall limit or extinguish the right to indemnification under this Agreement. 5. POOLING OF SHARES 4.1 Shares - Based and relying on the representations and warranties set forth in paragraphs 2 and 3, the Corporation agrees to exchange the Shares of ATI and ATI agrees to accept the exchange of Shares from the Corporation, free and clear of all liens, claims, charges, options and encumbrances whatsoever and the Corporation agrees to exchange ATI Shares on the terms and conditions set out in this Agreement. 5. COMPLETION 5.1 Completion Date - The transactions contemplated in this Agreement shall be completed effective as of the Completion Date. The Completion Date is October 1st, 1998 subject to shareholder and regulatory approval of ATI and the Corporation. In the event that the Vancouver Stock Exchange does not approve the merger in an ordinary fashion, ATI may request the Vancouver Stock Exchange to de-list ATI from the Exchange in order to complete the merger transaction. 5.2 Completion Deliveries - On or before the Completion Date: (a) ATI will deliver to the Corporation: (i) resignations in writing, dated as of the Completion Date, of the officers and directors of ATI with the exception of ATI President, Mike Sintichakis, which will be delivered when all or any outstanding matters have been resolved and the merger has been totally completed; (ii) certified copies of directors and members resolutions of ATI approving this Agreement; (b) Corporation will deliver to ATI: (i) certified copy of directors resolutions of the Corporation approving this Agreement and the completion of the transaction contemplated hereby; 5.3 Share Exchange and Pooling of Assets and Liabilities - Upon Completion Date, the Corporation will; (a) Exchange the Shares of ATI for Shares of the Corporation as follows: (i) One (1) Common share of the Corporation will be issued in exchange for each Common share of ATI; (ii) One (1) Common share option of the Corporation will be issued in exchange for each Common share option of ATI under existing restrictions; (iii) One (1) Escrow share of the Corporation will be issued in exchange for each Escrow share of ATI under existing restrictions. (b) Transfer all assets and liabilities of ATI to the Corporation; 6. CONDITIONS PRECEDENT TO THE PERFORMANCE BY CORPORATION OF ITS OBLIGATIONS UNDER THIS AGREEMENT 6.1 Corporation's Conditions - The obligations of the Corporation to complete the exchange of the Shares shall be subject to the satisfaction of, or compliance with, on or before the Completion Date, each of the following conditions precedent: (a) Truth and Accuracy of Representations of ATI at Completion - The representations and warranties of ATI made in paragraph 2.1 shall be true and correct in all material respects as at the Completion Date and with the same effect as if made at and as of the Completion Date and ATI shall have complied in all material respects with its obligations and covenants under this Agreement; (b) Performance of Obligations - ATI shall have caused the Corporation to have performed and complied with all the obligations to be performed and complied with by ATI under this Agreement; (c) Absence of Injunctions, etc. - No injunction or restraining order of any Court or administrative tribunal of competent jurisdiction shall be in effect prohibiting the transactions contemplated by this Agreement and no action or proceeding shall have been instituted or be pending before any Court or administrative tribunal to restrain or prohibit the transactions between the parties contemplated by this Agreement; (d) Absence of Change of Conditions - No event shall have occurred or condition or state of facts of any character shall have arisen or legislation (whether by statute, rule, regulation, by-law or otherwise) shall have been introduced which might reasonably be expected to have a materially adverse effect upon the financial condition, results of operations or business prospects of ATI. 6.2 The conditions set out in this paragraph 6 are for the exclusive benefit of the Corporation and may be waived by the Corporation in writing in whole or in part on or before the Completion Date. Notwithstanding any such waiver, the completion of merger contemplated by this Agreement by the Corporation shall not prejudice or affect in any way the rights of the Corporation in respect of the warranties and representations of ATI set out in paragraph 2.1 of this Agreement, and the representations and warranties of ATI set out in paragraph 2.1 of this Agreement shall survive the completion of the merger. 7. CONDITIONS PRECEDENT TO THE PERFORMANCE OF ATI OF ITS OBLIGATIONS UNDER THIS AGREEMENT 7.1 The obligations of ATI to complete the exchange of Shares under this Agreement shall be subject to the satisfaction of or compliance with, at or before the Completion Time, of each of the following conditions precedent: (a) Truth and Accuracy of Representations of the Corporation at Completion - All of the representations and warranties of the Corporation set out in paragraph 3.1 of this Agreement shall be true and correct in all material respects as at the Completion Date and with the same effect as if made at and as of the Completion Date; (b) Performance of Agreements - The Corporation shall have complied with and/or performed all its obligations, covenants and agreements contained in this Agreement. 7.2 The conditions set out in this paragraph 7 are for the exclusive benefit of ATI and may be waived by ATI in writing in whole or in part on or before the Completion Date. Notwithstanding any such waiver, completion of the merger contemplated by this Agreement by ATI shall not prejudice or affect in any way the rights of ATI in respect of the warranties and representations of the Corporation set out in paragraph 3.1 of this Agreement, and the representations and warranties of the Corporation set out in paragraph 3.1 of this Agreement shall survive for a period of two (2) years from the date of this Agreement. 8. CONDUCT OF BUSINESS PRIOR TO COMPLETION 8.1 Conduct - Except as otherwise contemplated or permitted by this Agreement, during the period from the date of this Agreement to the Completion Date, the Corporation shall cause ATI to do the following: (a) Conduct Business in Ordinary Course - Conduct ATI's business in the ordinary and normal course of such business and not, without the prior written consent of the Corporation, enter into any transaction which would constitute a breach of the representations, warranties or agreements contained in this Agreement; (b) Continue Insurance - Continue in force all existing policies of insurance presently maintained by ATI; (c) Perform Obligations - Comply with all laws affecting the operation of ATI's businesses and pay all required taxes; (d) Prevent Certain Changes - Not, without the prior written consent of the Corporation, take any of the actions, do any of the things or perform any of the acts described in sub-paragraph 2.1(k) except as specifically permitted under such sub-paragraph; and (e) Compliance with Paragraph 9 - Comply with the provisions of paragraph 9 of this Agreement. 9. EXAMINATIONS AND WAIVERS 9.1 Access for Investigation - ATI shall permit the Corporation and its agent, legal counsel, accountants and other representatives, between the date of this Agreement and the Completion Date, to have access during normal business hours to the premises and to all the key employees, books, accounts, records and other data of ATI computer designs and codes, (including without limitation, all corporate, accounting and tax records and any electronic or computer accessed data) and to the properties and assets of ATI and ATI will furnish, and require that ATI's principal bankers, appraisers and independent auditors and other advisors furnish, to the Corporation such financial and operating data and other information with respect to the business, properties and assets of ATI as the Corporation shall from time to time reasonably request to enable confirmation of the matters warranted in paragraph 2 of this Agreement. It is also the intention of the parties that the Corporation shall be entitled to meet with ATI's major clients, customers and suppliers prior to Completion. 9.2 Disclosure of Information - Until the Completion Date and, in the event of the termination of this Agreement without consummation of the transactions contemplated by this Agreement, the Corporation shall use its best efforts to keep confidential any information (unless otherwise required by law or such information is readily available or becomes readily available, from public or published information or sources) obtained from ATI. If this Agreement is so terminated, promptly after such termination all documents, work papers and other written material obtained from a party in connection with this Agreement and not previously made public (including all copies and photocopies thereof), shall be returned to the party which provided such material. 10. INDEMNITIES 10.1 Indemnification of the Corporation - Subject to the limitations set out in this Agreement, ATI agrees with the Corporation to indemnify the Corporation against all liabilities, claims, demands, actions, causes of action, damages, losses, costs or expenses (including legal fees on a solicitor and its own client basis) suffered or incurred by the Corporation, directly or indirectly, by reason of or arising out of: (a) any warranties or representations on the part of ATI set out in this Agreement being materially untrue; (b) a material breach of any agreement, term or covenant on the part of ATI made or to be observed or performed pursuant to this Agreement; which liabilities, claims, demands, actions, causes of action, damages, losses, costs and expenses are collectively referred to as the "Corporation's Losses"; 10.2 Indemnification of ATI - Subject to the limitations set out in this Agreement, the Corporation covenants and agrees with ATI to indemnify ATI against all liabilities, claims, demands, actions, causes of action, damages, losses, costs or expenses (including legal fees on a solicitor and its own client basis) suffered or incurred by ATI, directly or indirectly, by reason of or arising out of: (a) any warranties or representations on the part of the Corporation set out in this Agreement being materially untrue; (b) a material breach of any agreement, term or covenant on the part of the Corporation made or to be observed or performed pursuant to this Agreement; which liabilities, claims, demands, actions, causes of action, damages, losses, costs and expenses are collectively referred to as "ATI's Losses". 10.3 Claims under ATI's Indemnity - If any claim is made by any Person against the Corporation in respect of which the Corporation may incur or suffer damages, losses, costs or expenses that might reasonably be considered to be subject to the indemnity obligation of ATI as provided in paragraph 10.1, the Corporation shall notify ATI as soon as reasonably practicable of the nature of such claim and ATI shall be entitled (but not required) to assume the defense of any suit brought to enforce such claim. The defense of any such claim (whether assumed by ATI or not) shall be through legal counsel and shall be conducted in a manner acceptable to the Corporation and ATI, acting reasonably, and no settlement may be made by ATI or the Corporation without the prior written consent of the other. If ATI assumes the defense of any claim then the Corporation and the Corporation's counsel shall cooperate with ATI and its counsel in the course of the defense, such cooperation to include using reasonable best efforts to provide or make available to ATI and its counsel documents and information and witnesses for attendance at examinations for discovery and trials. The reasonable legal fees and disbursements and other costs of such defense shall, from and after such assumption, be borne by ATI. If ATI assumes the defense of any claim and the Corporation retains additional counsel to act on its behalf, ATI and his counsel shall cooperate with the Corporation and its counsel, such cooperation to include using reasonable best efforts to provide or make available to the Corporation and its counsel documents and information and witnesses for attendance at examinations for discovery and trials. All fees and disbursements of such additional counsel shall be paid by the Corporation. If ATI and the Corporation are or become parties to the same action, and the representation of all parties by the same counsel would be inappropriate due to a conflict of interest, then the Corporation and ATI shall be represented by separate counsel and, subject to the indemnity obligations of ATI as set out in paragraph 10.1, the costs associated with the action shall be borne by the parties incurring such costs. 10.4 Claims under the Corporation's Indemnity - If any claim is made by any Person against ATI in respect of which ATI may incur or suffer damages, losses, costs or expenses that might reasonably be considered to be subject to the indemnity obligation of the Corporation as provided in paragraph 10.2, ATI shall notify the Corporation as soon as reasonably practicable of the nature of such claim and the Corporation shall be entitled (but not required) to assume the defense of any suit brought to enforce such claim. The defense of any such claim (whether assumed by the Corporation or not) shall be through legal counsel and shall be conducted in a manner acceptable to ATI and the Corporation, acting reasonably, and no settlement may be made by the Corporation or ATI without the prior written consent of the other. If the Corporation assumes the defense of any claim, ATI and ATI's counsel shall cooperate with the Corporation and his counsel in the course of the defense, such cooperation to include using reasonable best efforts to provide or make available to the Corporation and its counsel documents and information and witnesses for attendance at examinations for discovery and trials. The reasonable legal fees and disbursements and other costs of such defense shall be borne by the Corporation. If the Corporation assumes the defense of any claim and ATI retains additional counsel to act on its behalf, then the Corporation and its counsel shall cooperate with ATI and its counsel, such cooperation to include using reasonable best efforts to provide or make available to ATI and its counsel documents and information and witnesses for attendance at examinations for discovery and trials. All fees and disbursements of such additional counsel shall be paid by ATI. If the Corporation and ATI are or become parties to the same action, and the representation of all parties by the same counsel would be inappropriate due to a conflict of interest, then ATI and the Corporation shall be represented by separate counsel and, subject to the indemnity obligations of the Corporation as set out in paragraph 10.2, the costs associated with the action shall be borne by the parties incurring such costs. 11. GENERAL 11.1 Public Notices - The parties agree that all notices to third parties and all other publicity concerning the transactions contemplated by this Agreement shall be jointly planned and coordinated and no party shall act unilaterally in this regard without the prior approval of the others, such approval not to be unreasonably withheld. 11.2 Expenses - All costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. 11.3 Time - Time shall be of the essence of this Agreement. 11.4 Notices - Any notice or other writing required or permitted to be given under this Agreement or for the purposes of this Agreement shall be sufficiently given if delivered or telecopied to the party to whom it is given or if mailed, by prepaid registered mail, addressed to such party at: (a) If to Aztek, Inc. at: Meadow Wood Crown Plaza 1575 Delucchi Lane, Suite # 40 Reno, Nevada 89502 with a copy to the Corporation's Solicitors at: Michael J. Morrison Attorney and Counselor at Law 1025 Ridgeview Drive Suite 400, Reno Nevada 89509 (b) If to Aztek Technologies Inc. at: #5 -246 Lawrence Avenue Kelowna, British Columbia, V1Y 6L3 with a copy to ATI's Solicitors at: Stephen K. Winters Law Corporation #505 - 700 West Pender Street Vancouver, British Columbia, V6C 1G8 or at such other address as the party to whom such writing is to be given shall have last notified to the party giving the same in the manner provided in this paragraph. Any notice mailed as set out above shall be deemed to have been given and received on the fifth (5th) business day next following the date of its mailing unless at the time of mailing or within five (5) business days after the date of such mailing there occurs a postal interruption which could have the effect of delaying the mail in the ordinary course, in which case any notice shall only be effectively given if actually delivered or sent by telecopy. Any notice delivered or telecopied to the party to whom it is addressed shall be deemed to have been given and received on the day it was delivered, provided that if such day is not a business day then the notice shall be deemed to have been given and received on the business day next following such day. 11.5 Governing Law - This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada and the parties submit and attorn to the jurisdiction of the Courts of the State of Nevada. 11.6 Severability - If any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision or provisions shall not in any way be affected or impaired as a result of such event in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired as a result of such event, unless in either case as a result of such determination this Agreement would fail in its essential purpose. 11.7 Entire Agreement - This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, oral or written, by and between any of the parties with respect to the subject matter of this Agreement. 11.8 Further Assurances - The parties shall with reasonable diligence do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated by this Agreement, and each party shall provide such further documents or instruments required by the other party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions whether before or after the Completion Date. 11.9 Enurement - This Agreement and each of its terms and provisions shall enure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, personal representatives, successors and assigns. 11.10 Counterparts - This Agreement may be executed in as many counterparts as may be necessary or by facsimile and each such agreement or facsimile so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument. IN WITNESS TO THIS AGREEMENT the parties have duly executed this Agreement as of the day and year first above written. SIGNED, SEALED AND DELIVERED ) BY AZTEK TECHNOLOGIES INC. ) in the presence of: ) ) ) /s/ Edson Ng ______________________________) ------------------------- Name of Witness ) EDSON NG ) ______________________________) Address of Witness ) ) ______________________________ ) SIGNED, SEALED AND DELIVERED ) BY AZTEK, INC. ) in the presence of: ) ) ) /s/ Mike Sintichakis ______________________________ ) - ----------------------------------- Name of Witness ) ) MIKE E. SINTICHAKIS ) ______________________________ ) Address of Witness ) ) ______________________________ ) EX-99 22 EXHIBIT 99.2 Letter Of Intent For ATI To Acquire Harrison Muirhead Systems Inc. And Q-Smart Investments Inc. [ATI's Letterhead] Letter of Intent August 20, 1997 Blaine Harrison, President Harrison Muirhead Systems Inc. 101, 15023 - 123 Avenue Edmonton, Alberta T5V 1J7 Dear Blaine, This Letter of Intent formalizes the sale of assets and business operations of Harrison Muirhead Systems Inc. and Q-Smart Investments Inc. to Aztek Technologies Inc. The close date for the acquisisiiotn is Feb. 28, 1998 and subject to the following conditions: Completion of Aztek Technologies Inc. financing. Aztek completing due diligence review on Harrison Muirhead Systems Inc. Harrison Muirhead completing due diligence review on Aztek products. Finalizing terms and conditions for future purchase agreement. Approval by the Vancouver Stock Exchange. By signing below, the parties agree to the terms and conditions set forth in this agreement. Aztek Technologies Inc. Harrison Muirhead Systems Inc. and Q-Smart Investments Inc. /s/ Mike Sintichakis /s/ Blaine Harrison - -------------------- ----------------------- Mike Sintichakis, President Blaine Harrison, President Aug. 26/1997 Aug. 25\1997 EX-99 23 EXHIBIT 99.3 Letter of Intent for ATI to acquire Concord Consultants. [ATI's Letterhead] Letter of Intent September 3, 1997 Gerry Schaup, President Concord Consultants Limited 228 - 11121 Horseshoe Way Richmond, British Columbia V7A 4Y1 Dear Gerry, This Letter of Intent formalizes the sale of assets and business operations of Concord Consultants Limited to Aztek Technologies Inc. The close date for the acquisition is November 1, 1997 and subject to the following conditions: Completion of Aztek equity financing Aztek completing due diligence review on Concord Consultants Limited Concord Consultants Limited completing due diligence review on Aztek and Aztek products. Finalizing terms and conditions for purchase agreement. Approval by the Vancouver Stock Exchange and B.C. Securities Commission. By signing below, the parties agree to the terms and conditions set forth in this agreement. Aztek Technologies Inc. Concord Consultants Limited /s/ Mike Sintichakis /s/ Gerry Schaap, President - ------------------------- ---------------------------- Mike Sintichakis, President Gerry Schaap, President Sept. 5/97 Sept. 3/97 EX-99 24 EXHIBIT 99.4 Minutes Of Shareholders Of Aztek Inc. To Approve Merger MINUTES OF THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS OF AZTEK, INC. (the "Company") The Annual and Special Meeting of the Shareholders of AZTEK, INC., a Nevada corporation, was held at the Company's offices, on the 30th day of June, 1998, at the hour of 10:00 o'clock a.m., for the purposes of: (a) electing Directors for the ensuing year; (b) approving a merger and share exchange with Aztek Technologies Inc.; (c) approving directors, officers and employees options; (d) authorizing Mike Sintichakis to arrange financing of a maximum $10 million for the purpose of acquiring and developing two properties, one located in the U.S. and one located in Canada for sales and support of the Company's customers. The Directors do not anticipate that the maximum development costs of the properties will not exceed $6.0 million. The balance of $4.0 million will be used as follows: $1.5 million for new acquisitions; $1.0 million for completion of products under development; and $1.5 million to be used for financing expenses, marketing and working capital. Mike Sintichakis, President and Chairman of the Company, called the meeting to order, and Nick Sintichakis, Secretary, recorded the minutes. On motion duly made and unanimously carried, the reading, correcting and approval of the minutes of the last meeting was waived. Upon motion duly made, Mike Sintichakis, Nick Sintichakis, Edson Ng and Eileen Keogh were elected as Directors of the Company to serve for the ensuing year. On motion duly made and unanimously carried, it was resolved that the Company enter into an agreement with Aztek Technologies Inc., on terms and conditions acceptable to the Board of Directors of the Company in their discretion, whereby each one outstanding share of common stock of Aztek Technologies Inc. would be exchanged for one common share par value $0.001 of the Company resulting in all shareholders of Aztek Technologies Inc. becoming shareholders of the Company. Aztek Technologies Inc. is a British Columbia public company listed on the Vancouver Stock Exchange and the Electronic Bulletin Board of NASD. The transaction is subject to regulatory acceptance and the approval of the shareholders of Aztek Technologies Inc. The transaction is also subject to the approval of all regulatory bodies having jurisdiction over the Company. On motion duly made and unanimously carried, it was resolved the Board of Directors of the Company be and are hereby authorized to grant directors, officers and employees stock options at prices and on terms and conditions acceptable to the Board of Directors in their sole discretion and to amend such options as from time to time may be required. The granting, alteration and pricing of such options shall be in accordance with, and subject to the approval of, the prevailing policies of all regulatory bodies and stock exchanges having jurisdiction over the Company and no further resolution or approval by the shareholders of the Company shall be required for the granting of the options or the exercise of such options granted. On motion duly made and unanimously carried, it was resolved that Mike Sintichakis, President of the Company, be and is hereby authorized on behalf of the Company to enter into agreements to arrange equity or debt financings. Be it further resolved that the maximum number of shares to be issued to any new investor or group of investors shall not exceed 5% of all outstanding shares of the Company. On motion duly made and unanimously carried, it was resolved that Mike Sintichakis be and is hereby authorized on behalf of the Company to enter into agreements for the acquisition and/or development of any property on terms and conditions deemed appropriate and in the best interests of the Company. Be it further resolved that Mike Sintichakis be authorized and empowered on behalf of the Company to do all such acts and deeds and execute and deliver all such documents and instruments as he in his discretion may deem necessary or desirable in order to effect the purchase and development of any property. There being no further business to come before the meeting at this time, the meeting was, upon motion duly made, adjourned at 10:30 a.m. Dated this 30th day of June, 1998. /s/ Mike Sintichakis --------------------------- Mike Sintichakis, President /s/ Nick Sintichakis --------------------------- Nick Sintichakis, Secretary EX-99 25 Exhibit 99.5 Schedule II Valuation and Qualifying Accounts Aztek Technologies Inc.
Beginning of Costs and Charges to Balance at end Description Period Expenses Other Accounts Deductions Of Period Allowance for Doubtful Accounts 0 0 0 0 0
EX-99 26 99.6 Opinion Letter of Independent Accountants in Reference to Canadian Tax Consequences [Letterhead of BDO Dunwoody] August 19, 1998 Aztek Technologies Inc. #5 - 246 Lawrence Avenue Kelowna, B.C. V1Y 6L3 Attention: Mike Sintachakis Dear Sirs: RE: MERGER WITH U.S. COMPANY This letter is further to your request that our firm offer an opinion as to the Canadian tax implications to the shareholders of Aztek Technologies Inc. ("Canco") of a merger with Aztek Inc. ("Usco"). FACTS AND ASSUMPTIONS Our opinion is based on our understanding of the following facts and assumptions. Please review them to ensure that they are correct and, if not, advise our office immediately so that our opinion can be revised accordingly. 1) Canco is a widely held, Canadian corporation with only one class of issued shares. These shares are publicly traded on the Vancouver Stock Exchange. 2) Usco is a privately owned Nevada corporation. 3) Pursuant to U.S. corporate law: a) Canco is to be merged into Usco. Usco will receive the assets of Canco, and each shareholder of Canco will receive shares of Usco on a one-for-one basis. b) Canco will not be continued into Nevada prior to this merger, and at no time in this process will Canco be a U.S. resident corporation. c) Immediately upon the completion of the merger, Canco will cease to exist, while Usco will be the surviving corporation. 4) The Canadian and U.S. corporate counsel for the companies agree that the above merger is effected in the following manner for purposes of Canadian corporate law: a) The shareholders of Canco exchange their shares thereof for shares of Usco on a one-for-one basis. Canco will then be a wholly-owned subsidiary of Usco. b) Canco is wound up into Usco, which takes possession of Canco's assets and liabilities. 5) At no time in the last five years has a) a non-resident shareholder, b) a person related to a non-resident shareholder, or c) a non-resident shareholder and a person related thereto owned more than 25% of the issued shares of any class of Canco. 6) Usco has (and will have, after the above transaction) only one issued class of shares. QUESTION What are the Canadian tax ramifications to the shareholders of Canco? OPINION Deemed Disposition In our opinion the Canadian shareholders of Canco have, for Canadian tax purposes, disposed of their shares of Canco on the date of the merger for proceeds equal to the fair market value of the shares of Usco received in exchange therefor. Any gain or loss will be reportable for Canadian tax purposes. Whether the gain is on account of capital (75% of which is included in taxable income) or income (100% of which is included in taxable income) depends on the particular shareholder's circumstances. The actual gain or loss to each shareholder is a function of: 1. the fair market value of Usco's shares as at the date of amalgamation, and 2. the adjusted cost base of the particular shareholder's shares of Canco. Generally, there are no Canadian tax ramifications to the non-resident shareholders of Canco. However, this may not be true for a non-resident shareholder that was a Canadian resident at some time in the past or a non-resident shareholder that carries on business in Canada. Any such persons should seek professional advice in this regard. Foreign Affiliate Usco will be a "foreign affiliate" for Canadian tax purposes of a Canadian-resident shareholder if: 1. the particular shareholder owns 1% or more of the issued shares of Usco, and 2. the particular shareholder and all persons "related" (as defined for Canadian tax purposes) thereto own (directly, or through other corporations) 10% or more of the issued shares of Usco. Usco will be a "controlled foreign affiliate" for Canadian tax purposes of a Canadian-resident shareholder if at that time it is a "foreign affiliate" of the taxpayer that is controlled by: 1. the shareholder, 2. the particular shareholder and not more than four other persons resident in Canada, 3. not more than 4 persons resident in Canada, other than the shareholder, 4. a person or persons with whom the shareholder does not deal at arm's length, or 5. the shareholder and a person or persons with whom the shareholder does not deal at arm's length. If Usco pays dividends to a corporation resident in Canada, the Canadian taxation of those dividends may be impacted if Usco is a "foreign affiliate" of said corporation. Any Canadian corporation of which Usco is a "foreign affiliate" should seek professional advice. If Usco is a "controlled foreign affiliate" of a person resident in Canada, certain types of income earned by Usco (broadly defined as passive investment income and income from certain services) is taxed in Canada on a current basis. Again, any such person should seek professional advice. Canadian Information Reporting If Usco is a "foreign affiliate" of a person or partnership resident in Canada, the person or partnership is required to file an annual information return with Revenue Canada in respect of Usco pursuant to S.233.4 of the Income Tax Act (Canada). This return is due within 15 months after the end of the taxation year or fiscal period for which the person or partnership is required to report. If Usco is a "controlled foreign affiliate" of a Canadian shareholder, that shareholder may be required to file additional information returns under S.233.2 of the Income Tax Act (Canada) in respect of loans or transfers to the corporation by certain foreign Trusts or in respect of loans and transfers to those Trusts by the corporation. The same reporting requirement will apply to loans and transfers to Usco made by the Canadian shareholder if Usco is a "controlled foreign affiliate" of a foreign Trust that the Canadian shareholder is in any way connected with. This return if required is due by the normal Canadian tax filing deadline for the filer. Withholding Tax Any dividends paid by Usco to a Canadian-resident shareholder will be subject to U.S. withholding tax at the following rates: (a) 5% of the gross amount of the dividends if the beneficial owner is a company which owns at least 10% of the voting stock of Usco; (b) 15% of the gross amount of the dividends in all other cases. Foreign Property The shares of Usco will be considered "foreign property" for pension funds and certain other tax-exempt entities (i.e. registered retirement savings plans). These funds and entities are limited in the amount of "foreign property" that they can own without incurring a special tax under Part XI of the Income Tax Act (Canada). Any such fund, plan or entity that currently owns shares of Canco should seek professional advice regarding the pending change to its investment. CAVEAT The opinions expressed above are our views as Chartered Accountants experienced in Canadian income tax matters. They are restricted to the specific facts as set out above and are based on our interpretation of the Income Tax Act (Canada) and the Income Tax Regulations as they presently exist. None of the opinions are or should be construed to be legal opinions. We have not been asked to express an opinion in respect of the tax ramifications to Canco or Usco of this merger, nor have we been asked to express an opinion as to the non-Canadian tax implications to any party. We trust that we have addressed the issues to your satisfaction. If you have any questions in this regard, please contact Murray Swales @ (250) 492-6020. Sincerely, BDO DUNWOODY /s/ BDO Dunwoody - ----------------- BDO/mmb EX-99 27 EXHIBIT 99.7 Proxy REVOCABLE PROXY AZTEK TECHNOLOGIES INC. ANNUAL AND EXTRAORDINGARY MEETING, _________, 1999 PROXY SOLICITED BY BOARD OF DIRECTORS The undersigned stockholder of the Company Technologies Inc. ("ATI") hereby appoints Mike Sintichakis, the lawful attorney and proxy of the undersigned, with several powers of substitution, to vote all shares of Common Stock of ATI which the undersigned is entitled to vote at the Annual and Extraordinary Meeting of Stockholders to be held on ___________, 1998, and at any adjournments thereof: 1. Approval of the Merger Agreement and the Plan of Merger providing for a merger pursuant to which ATI will be merged into the Company Inc. (the "Company") and each outstanding share of ATI Common Stock will be converted into one share of the Company Common Stock. 2. IN THEIR DISCRETION ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. Shares represented by all properly executed proxies will be voted in accordance with instructions appearing on the proxy. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT AND PLAN OF REORGANIZATION AND THE PLAN OF MERGER ANDIN THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTERS. [X] Please mark votes as in this example. FOR AGAINST ABSTAIN [_] [_] [_] Please date and sign as name appears on the stock certificate, including designation as executor, etc., if applicable. A corporation must sign in its name by the president or other authorized officers. All co-owners must sign. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_] Signature Date ----------------------------- ------------- Signature Date ----------------------------- ------------- -----END PRIVACY-ENHANCED MESSAGE-----