SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2000
(September 2, 1999)
INTERNATIONAL MERCANTILE CORP.
..............................................................
(Exact name of Registrant as specified in its charter)
Missouri 0-7693 430970243
.........................................................................
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1625 Knecht Ave., Baltimore, Maryland 21277
.........................................................................
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410-242-5000
...........................................................................
(Former name or former address, if changed since last report)
<PAGE> 1
Item 7. Financial Statements and Exhibits.
The initial Form 8-K Report dated September 15, 1999 indicated that
the financial statements and the pro forma financial information required by
Item 7 of Form 8-K would be filed by amendment not later than 60 days after
September 17, 1999. On December 2, 1999 such financial information was filed
pursuant to Amendment No.1 to the September 15, 1999 Form 8-K Report.
This Amendment No. 2 to the September 15, 1999 Form 8-K Report hereby:
1. Replaces in its entirety the financial statements and the pro
forma financial information required by Item 7 contained in
Amendment No.1 to the September 15, 1999 Form 8-K Report; and
2. Includes the Stock Purchase Agreement by and between
International Mercantile Corporation and Micromatix.com, Inc.
erroneously not attached as an exhibit to the initial Form 8-K
Report dated September 15, 1999.
(a) Financial Statements:
1. Financial Statements of Business Acquired
2. Pro Forma Financial Statements.
(b) Exhibits.
10. Stock Purchase Agreement by and between International
Mercantile Corporation and Micromatix.com Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL MERCANTILE CORP.
Date: April 28, 2000 By:/s/C. Timothy Jewel
------------------------
C. Timothy Jewel, President
<PAGE> 2
MICROMATIX.com, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
Balance Sheet as of September 6, 1999
Statements of Operations, Statements of Changes in Stockholders' Equity
and Statements of Cash Flows for the Period September 2, 1999 (Date of
Inception) Through September 6, 1999
<PAGE> 3
MICROMATIX.com, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
SEPTEMBER 6, 1999
Page
Accountants' Review Report 1
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows 5
Notes to the Financial Statements 6-9
<PAGE> 4
To the Board of Directors and Stockholders
Micromatix.com, Inc., a Delaware corporation
Baltimore, Maryland
We have reviewed the accompanying balance sheet of
Micromatix.com, Inc. (A company in the development stage)
as of September 6, 1999, and the related statement of
operations, changes in stockholders' equity, and cash flows
for the period September 2, 1999 (Date of Inception)
through September 6, 1999 in accordance with Statements on
Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All
the information included in these financial statements is
the representation of the management of Micromatix.com, Inc.
A review consists principally of inquiries of Company
personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
financial statements in order for them to be in conformity
with generally accepted accounting principles.
Caruso & Caruso, CPAs', P.A.
Boca Raton, Florida
November 12, 1999
<PAGE> 5
MICROMATIX.com, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
AS OF SEPTEMBER 6, 1999
ASSETS
Current Assets
- --------------
Cash and Cash Equivalents $ 131
---------
Total Current Assets 131
Other Assets
- ------------
Organization Costs, Net of Amortization 357
---------
Total Other Assets 357
---------
Total Assets $ 488
=========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Total Current Liabilities $ 0
---------
Long Term Liabilities
- ---------------------
Committments and Contingencies
Total Long Term Liabilities 0
---------
Total Liabilities 0
---------
Stockholder's Equity
Common stock-Class A - $.01 Par, 1,000 shares
authorized, 1,000 shares outstanding 10
Additional paid in capital 490
Deficit Accumulated During
the Development Stage (12)
---------
Total Stockholder's Equity 488
---------
Total Liabilities &
Stockholder's Equity $ 488
=========
See Auditors' Report and Accompanying Notes to The Financial Statements
2
<PAGE> 6
STATEMENT OF OPERATIONS
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH SEPTEMBER 6, 1999
Revenues
Sales $ 0
---------
Gross Profit 0
---------
Operating Expenses
Amortization 12
---------
Total Operating Expenses 12
=========
Net (Loss) ($ 12)
=========
Earnings (Loss) per Share of Common
Stock-Basic (Note 1) ($ 0.012)
=========
Weighted Average Shares 1,000
=========
See Auditors' Report and Accompanying Notes to the Financial Statements
3
<PAGE> 7
MICROMATIX.com, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS'' EQUITY
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH SEPTEMBER 6, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
PAID IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE
<S> <C> <C> <C> <C>
Incorporation, Micromatix.com, Inc.
September 2, 1999 (Date of Inception) 1,000 $ 10 $ 490 $ 0
Net (Loss) 0 0 0 ( 12)
-----------------------------------------------
1,000 $ 10 $ 490 ($ 12)
===============================================
</TABLE>
See Auditors' Report and Accompanying Notes to the Financial Statements
4
<PAGE> 8
MICROMATIX.com, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH SEPTEMBER 6, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net Loss ($ 12)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation & Amortization 12
(Increase)Decrease in Assets -
Increase(Decrease)
Liabilities -
---------
NET CASH USED IN OPERATING ACTIVITIES 0
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Organization Costs ( 369)
---------
NET CASH USED IN INVESTING ACTIVITIES (369)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Capital Contributions 490
Issuance of Capital Stock 10
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 500
---------
NET INCREASE IN CASH 131
CASH - BEGINNING September 2, 1999 (Date of Inception 0
---------
CASH - ENDING September 6, 1999 $ 131
=========
See Auditors' Report and Accompanying Notes to the Financial Statements
5
<PAGE> 9
MICROMATIX.com, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
ORGANIZATION
Micromatix.com, Inc. (The Company) is a profit corporation
organized under the laws of the State of Delaware on
September 2, 1999. The Company was organized as an internet
based personal computer manufacturing business that sells
build-to-order unbranded or "white box" PC systems and PC
related hardware throughout the United States to value added
retailers and other marketers of micro computer systems.
DEVELOPMENT STAGE
The Company's principal operations, will be comprised of
sales of build-to-order unbranded or "white box" PC systems
and PC related hardware are in a start up phase as of
September 6, 1999. Sales, manufacturing and distribution of
personal computers and related PC hardware have not
commenced as of the date of these financial statements.
Substantially all the efforts of the Company have been
focused on capitalization, the establishment of its website,
internal infrastructure, production lines and development of
a marketing team. Accordingly, the Company is in the
Development Stage.
REVENUE RECOGNITION
Revenues will be derived primarily from sales of build-to-
order personal computers and related PC hardware via the
Company's business to business e:Commerce. Revenues related
to these sales will be recognized when a computer product is
shipped and invoiced.
EARNINGS PER SHARE
As per Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 128 (SFAS 128), Earnings
Per Share, standards for computing and presenting earnings
per share (EPS) applies to publicly held common stock or
potential stock. It requires dual presentation of basic and
diluted EPS on the face of the income statement for all
entities with complex capital structures. Basic EPS
excludes dilution and is computed by dividing income
available to common stockholders by the weighted average
number of commonn shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur
if securities or other contracts to issue common stock
were exercised or converted into common stock or resulred in
the issuance of common stock that then shared in the
earnings (losses) of the entity. As the Company was not
publicly traded as of the date of the financial statements
and its capital structure is not complex as defined by
generally accepted accounting principles, only basic EPS is
presented.
6
<PAGE> 10
MICROMATIX.com, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
INVENTORY
Inventory consists of parts, work in process and finished
products and is valued at the lower of actual cost or
market. The Company will maintain a perpetual inventory
system and will determines quantities by the average cost
method. As of the date of the financial statements, the
Company had no inventory.
ADVERTISING EXPENSE
The Company recognizes advertising expenses in accordance
with Statement of Position ("SOP") 93-7 "Reporting on
Advertising Costs." As such, the Company expenses the costs
of producing advertisements at the time production occurs,
and expenses the cost of communicating advertising in the
period in which the advertising space or airtime is used.
PROPERTY AND EQUIPMENT
Property and equipment will be stated at cost. Depreciation
will be computed using the straight-line method based on the
estimated useful lives of the assets which range from three
to five years. Costs for routine repairs and maintenance
are expensed as incurred and gains and losses on the
disposal of assets are recognized in the period such
disposals occur.
INTANGIBLE ASSETS
Costs incurred to organize the Company are capitalized and
reported on the balance sheet as other assets. The costs
will be amortized over a period of 5 years using the
straight line method.
INCOME TAXES
The Company will file its tax return with the Internal
Revenue Service as a C Corporation. Deferred income taxes
are recognized by applying statutory tax rates to future
years' differences between the tax bases and financial
reporting amounts of assets and liabilities. Due to the
fact that the Company is in the development stage, no
deferred tax asset/valuation allowance has been recognized
for the losses incurred to date, as it is not determinable
that the Company will realize any tax benefit from such
losses. Loss carryforwards, if any, expire fifteen years
following the tax year end in which they occur.
7
<PAGE> 11
MICROMATIX.com, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with
generally accepted accounting principles requires that
management make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the respective reporting periods.
Actual results could vary from these estimates and
assumptions.
CONCENTRATIONS OF RISK
The Company is potentially subject to concentrations of
inventory supply risk involving future supplies of component
computer parts. The company assumes that computer chip and
memory availability will remain constant. This assumption
subjects the Company to concentrations of risk should the
availability of these items become uncertain in the future.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging
Activities effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company does not
anticipate the impact of this pronouncement will be
material.
1. Officers' Compensation
The Company's day to day activities were managed by certain
officers, who contributed their time on the Company's behalf
without compensation in either cash or stock. No value for
these services has been determined or recorded on the
accompanying financial statements.
2. Contingencies
The Company's management has confirmed that as of the date
of the financial statements the Company is not involved in
any lawsuits nor is there any pending litigation.
8
<PAGE> 12
MICROMATIX.com, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
3. YEAR 2000
Many currently installed computer systems and software
products are coded to accept only two-digit entries in the
date code field and cannot reliably distinguish dates
beginning January 1, 2000 from dates prior to the year 2000.
Many companies' software and computer systems may need to be
upgraded or replaced in order to correctly process dates
beginning in 2000 and to comply with the "Year 2000"
requirements. The Company has reviewed its internal
programs and has determined that there are no significant
Year 2000 issues within the Company's systems or services.
In addition, the Company utilizes third party hardware,
software and services that may not be Year 2000 compliant.
Although the Company believes that its software and the
hardware and software provided by third parties is Year 2000
compliant, the Company may be wrong. If the Company is
wrong, it could face unexpected expenses to resolve any
related issues and any unexpected interruptions could be
harmful to its business.
4. Subsequent Events
On September 6, 1999, the Company merged with International
Mercantile Corporation (IMTL), an OTC Bulletin Board
publicly traded company with no substantial assets or
liabilities. Shareholders of the Company received 1,000
shares of IMTL common stock for each share of the Company, a
total of 1,000,000 shares issued, in exchange for 100% of the
outstanding stock of the Company. The transaction is, in
substance, a recapitalization of the Company and not a business
combination and, accordingly was accounted for as a capital
transaction with no recognition of goodwill or other
intangible assets. Subsequent to the merger, the owners of
the Company assumed the management of IMTL and owned
approximately 15.91% of the outstanding stock of IMTL
representing 47.98% of the voting rights.
--------------------------------
The Company entered into a lease for its corporate offices
and manufacturing facilities in Baltimore, Maryland on
September 7, 1999. The lease is a six year agreement,
which began on October 1, 1999. The lease encompasses
commercial facilities of approximately 35,000 square feet.
Rent for the first year is $14,274 per month plus applicable
sales tax, utilities, maintenance and property tax
reimbursement and will increase approximately 5% in each of
the succeeding five years. As a result of the merger
described in the previous paragraph the lease was assigned
to International Mercantile Corporation.
Future minimum requirements are:
FYE 9/6/00 $ 185,564
FYE 9/6/01 183,036
FYE 9/6/02 187,040
FYE 9/6/03 187,040
FYE 9/6/04 195,790
Thereafter 192,790
----------
$1,131,260
==========
9
<PAGE> 13
MICROMATIX.com, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
UNAUDITED
Balance Sheet as of September 30, 1999
Statements of Operations, Statements of Changes in Stockholders' Equity
and Statements of Cash Flows for the Period September 2, 1999 (Date of
Inception) Through September 30, 1999
<PAGE> 14
INTERNATIONAL MERCANTILE CORPORATION
(A COMPANY IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
SEPTEMBER 30, 1999
Page
Accountants' Compilation Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Stockholders' Equity 4
Statement of Cash Flows 5
Notes to the Financial Statements 6-13
<PAGE> 15
To the Board of Directors and Stockholders
International Mercantile Corporation, a Missouri
corporation Baltimore, Maryland
We have compiled the accompanying balance sheet of
International Mercantile Corporation (a company in the
development stage) as of September 30, 1999, and the
related statements of operations, changes in stockholders'
equity, and cash flows for the period beginning September
2, 1999 (Date of Inception) through September 30, 1999 in
accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of
Certified Public Accountants. All the information included
in these financial statements is the representation of
management of International Mercantile Corporation.
A compilation is limited to presenting in the form of
financial statements, information that is the
representation of management. We have not audited or
reviewed the accompanying financial statements and,
accordingly, do not express an opinion or any other form of
assurance on them.
Caruso & Caruso C.P.A.s', P.A.
Boca Raton, Florida
December 1, 1999
<PAGE> 16
INTERNATIONAL MERCANTILE CORPORATION
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
AS OF SEPTEMBER 30, 1999
UNAUDITED
ASSETS
Current Assets
- --------------
Cash and Cash Equivalents $ 5,641
Inventory 16,559
Prepaids and Other Assets 15,179
----------
Total Current Assets 37,379
Investments
- -----------
Investment in University Mortgage, Inc. Stock 725,642
----------
Fixed Assets
- ------------
Fixed Assets, net of Accumulated Depreciation 184,595
----------
Other Assets
- ------------
Organization Costs, Net of Amortization 70,578
Deposits 28,548
----------
Total Other Assets 99,126
----------
Total Assets $1,046,742
==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Accounts Payable and Accrued Expenses $ 117,193
Accrued Interest Payable 756
Loan Payable - Related Parties, Current Portion 25,000
----------
Total Current Liabilities 142,949
Long Term Liabilities
- ---------------------
Committments and Contingencies
Loan Payable - Related Party $150,000
Less: Current Portion -25,000 125,000
-------- ----------
Total Long Term Liabilities 125,000
----------
Total Liabilities 267,949
Stockholders' Equity
- --------------------
Common stock-Class A - $.01 Par, 31,000,000 shares
authorized, 7,135,782 shares outstanding 71,358
Common stock-Class B - $.01 Par, 2,000,000 shares
authorized, 2,000,000 shares outstanding 20,000
Preferred stock - Series 1 - $.10 Par, 10,000,000 shares
authorized, -0- shares outstanding
Preferred stock - Series 2 - $.10 Par, 2,000,000 shares
authorized, -0- shares outstanding
Preferred stock - Series 1 - $.10 Par, 5,000,000 shares
authorized, -0- shares outstanding
Additional paid in capital 727,700
Deficit Accumulated During the Deveolpment Stage -40,265
----------
Total Stockholders' Equity 778,793
----------
Total Liabilities & Stockholders' Equity $1,046,742
==========
See Accompanying Notes and Accountants' Compilation Report
2
<PAGE> 17
INTERNATIONAL MERCANTILE CORPORATION
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH SEPTEMBER 30, 1999
UNAUDITED
Revenues
Sales $ 0
Cost of Merchandise Sold 0
----------
Gross Profit 0
----------
Operating Expenses
Amortization 460
Auto Expense 17
Depreciation 1,188
Dues & Subscriptions 464
Interest Expense 756
Office Supplies & Expense 112
Repairs & Maintenance 2,024
Salaries & Related Costs & Benefits 32,821
Supplies 1,454
Telephone 30
Temporary Help 300
Travel, Meals & Promotion 639
----------
Total Operating Expenses 40,265
----------
Net (Loss) ($ 40,265)
==========
Earnings (Loss) per share of Common
Stock - Basic (Note1) ($ 0.0051)
==========
Weighted Average Shares 7,937,964
==========
See Accompanying Notes and Accountants' Compilation Report
3
<PAGE> 18
INTERNATIONAL MERCANTILE CORPORATION
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH SEPTEMBER 30, 1999
UNAUDITED
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
PAID IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, September 2, 1999 (Date of Inception) 1,000 $10 $490 $0
Reverse acquisition, September 6, 1999
Exchange of Micromatix.com, Inc., a Delaware corp
Common Stock -1,000 -10 -490 0
Issuance of Common Stock of International Mercantile
Corporation a Missouri corp to owners of
Micromatix.com, Inc., a Delaware corporation
Class A Common Stock 1,500,000 15,000 0 0
Class B Common Stock 1,000,000 10,000 0 0
Outstanding Common Stock of International Mercantile
Corporation, a Missouri corp.,
Class A Common Stock 5,635,782 56,358 727,700 0
Class B Common Stock 1,000,000 10,000 0 0
Net (Loss) 0 0 0 -40,265
---------------------------------------------------------------
Balance, September 31, 1999 9,135,782 $91,358 $727,700 ($40,265)
===============================================================
</TABLE>
See Accompanying Notes and Accountants' Compilation Report
4
<PAGE> 19
INTERNATIONAL MERCANTILE CORPORATION
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH SEPTEMBER 30, 1999
UNAUDITED
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net Loss ($ 40,265)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation & Amortization 1,648
(Increase)Decrease In
Investment in University Mortgage, Inc. Stock -725,642
Inventory -16,559
Prepaids & Other Assets -15,179
Deposits -28,548
Organization Costs -71,038
Increase(Decrease)
Accounts Payable & Accrued Expenses 117,193
Accrued Interest 756
---------
NET CASH USED IN OPERATING ACTIVITIES -777,634
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of Fixed Assets -185,783
---------
NET CASH USED IN INVESTING ACTIVITIES -185,783
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Loans 150,000
Capital Contributions 727,700
Issuance of Capital Stock 91,358
---------
NET CASH PROVIDED BY IN FINANCING ACTIVITIES 969,058
---------
NET INCREASE IN CASH 5,641
CASH - BEGINNING September 2, 1999(Date of Inception) 0
---------
CASH - ENDING September 30, 1999 $ 5,641
=========
See Accompanying Notes and Accountants' Compilation Report
5
<PAGE> 20
INTERNATIONAL MERCANTILE CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
1. Organization and Summary of Significant Accounting Policies
ORGANIZATION
International Mercantile Corporation (The Company) is a profit corporation
organized under the laws of the State of Missouri on March 10, 1971 as
International Mercantile Corporation (IMTL). On July 31, 1999, the Company
liquidated its' majority interest holdings in its' subsidiary, University
Mortgage, Inc., which represented the Company's operations, through a new
issuance of University Mortgage, Inc. stock to a related third party investor
in consideration of its capital investment in University Mortgage, Inc. The
result of this action left an OTC Bulletin Board publicly traded company with
no substantial assets or liabilities. On September 6, 1999, the Company merged
with Micromatix.com, Inc. (the predecessor company), a newly formed Delaware
corporation which maintained an Internet based personal computer manufacturing
business that sells build-to-order unbranded or "white box" PC systems and PC
related hardware throughout the United States to value added retailers and
other marketers of micro computer systems. Shareholders of the predecessor
company received 2,500 shares of the Company's stock for each share of the
predecessor company; a total of 2,500,000 shares issued, in exchange for 100%
of the outstanding stock of the predecessor company. The merger is being
accounted for as a capital transaction with no recognition of goodwill or other
intangible assets. Subsequent to the merger, the owners of the predecessor
company assumed the management of the Company and owned approximately 26.92%
of the outstanding stock of the Company representing 48.32% of the voting
rights. Since this transaction is, in substance, a recapitalization of
Micromatix.com, Inc. (the predecessor company) and not a business combination,
pro forma information is not presented. Accordingly, the historical data
contained in the financial statements is that of the predecessor company.
DEVELOPMENT STAGE
The Company's principal operations, comprised of sales of build-to-order
unbranded or "white box" PC systems and PC related hardware are in a start up
phase as of October 31, 1999. Although some sales, manufacturing and
distribution of personal computers and related PC hardware has commenced as of
the date of these financial statements, there has been no significant revenue
generated therefrom. Substantially all the efforts of the Company have been
focused on capitalization of the Company, the establishment of its' website,
internal infrastructure, production lines and development of a marketing team.
Accordingly, the Company is in the Development Stage.
6
<PAGE> 21
INTERNATIONAL MERCANTILE CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
REVENUE RECOGNITION
Revenues are derived primarily from sales of build-to-order personal computers
and related PC hardware via the Company's business to business e:commerce.
Revenues related to these sales are recognized when a computer product is
shipped and invoiced.
INVENTORY
Inventory consists of parts, work in process and finished products and is
valued at the lower of actual cost or market. The Company maintains a
perpetual inventory system and determines quantities by the average cost
method.
ADVERTISING EXPENSE
The Company recognizes advertising expenses in accordance with Statement of
Position ("SOP") 93-7 "Reporting on Advertising Costs." As such, the Company
expenses the costs of producing advertisements at the time production occurs,
and expenses the cost of communicating advertising in the period in which the
advertising space or airtime is used.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets which
range from three to five years. Costs for routine repairs and maintenance are
expensed as incurred and gains and losses on the disposal of assets are
recognized in the period such disposals occur.
SOFTWARE DEVELOPMENT COSTS
Internal and external costs incurred to develop internal-use software are
capitalized during the application development stage and will be amortized over
three years once operations begin.
INTANGIBLE ASSETS
Costs incurred to organize the Company are capitalized and reported on the
balance sheet as other assets. The costs will be amortized over a period of 5
years using the straight line method.
7
<PAGE> 22
INTERNATIONAL MERCANTILE CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
INCOME TAXES
The Company files its tax return with the Internal Revenue Service as a C
Corporation. Deferred income taxes are recognized by applying statutory tax
rates to future years differences between the tax bases and financial reporting
amounts of assets and liabilities. Due to the fact that the Company is in
the development stage, no deferred tax asset/valuation allowance has been
recognized for the losses incurred to date, as it is not determinable that the
Company will realize any tax benefit from such losses. Loss carryforwards, if
any, expire fifteen years following the tax year end in which they occur.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the respective reporting
period. Actual results could vary from these estimates and assumptions.
CONCENTRATIONS OF RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents. The Company
maintains its cash and cash equivalents in bank deposit accounts, the balances
of which, at times, may exceed federally insured limits. Additionally, the
Company assumes that computer chip and memory availability will remain constant.
This assumption subjects the Company to concentrations of risk should the
availability of these items become uncertain in the future.
EARNINGS PER SHARE
As per Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 128 (SFAS 128), Earnings Per Share, standards for computing and
presenting earnings per share (EPS) applies to publicly held common stock or
potential common stock. It requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
8
<PAGE> 23
INTERNATIONAL MERCANTILE CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
EARNINGS PER SHARE, cont'd
In computing EPS as a result of the reverse acquisition, the number of shares
outstanding for the period from September 2, 1999 until the date of the reverse
acquisition, September 6, 1999, is the number of shares issued by the Company
to the shareholders of the predecessor company. For the period September 6,
1999 to September 30, 1999 the number of shares considered to be outstanding
is computed as actual number of shares of the Company outstanding during that
period. The average number of shares outstanding for the full period being
reported upon has been computed by averaging these two amounts. Other
appropriate adjustments have been made to deal with changes in numbers of
shares issued during the period.Diluted EPS were not computed as the Company's
capital structure is not complex, having no dilutive instruments outstanding
as of the date of the financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. The Company does not anticipate
the impact of this pronouncement will be material.
2. Related Party Transactions
The Company's financing during its development stage has been provided by non-
interest
bearing loans and capital contributions to the Company by its shareholders. At
September 30, 1999 the Company had liabilities to a major shareholder of
$150,000 in the form of an unsecured note payable bearing interest at 8% per
annum. The note calls for six annual principle installments of $25,000 plus
accrued interest. The note was issued for the purchase of machinery, office
equipment and furniture from the shareholder. Accrued interest through
September 30, 1999 was $756. In addition, shareholders' contribution amounts
totaling $819,058 as of September 30, 1999 are recorded as par value class A
and class B common stock and as additional paid in capital.
A B Securities, a shareholder of IMTL, acquired authorized but unissued shares
of UMI diluting the voting and equity interest of IMTL in UMI to less than 5%.
9
<PAGE> 24
INTERNATIONAL MERCANTILE CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
3. Commitments
The Company leases its corporate offices and manufacturing facilities in
Baltimore, Maryland under a six year lease agreement, which began on September
7, 1999 and included rent at no cost through September 30, 1999. The lease
encompasses commercial facilities of approximately 40,000 square feet. Rent
for the first year is $14,274 per month plus applicable sales tax, utilities,
maintenance and property tax reimbursement and will increase approximately 5%
in each of the succeeding five years.
Future minimum requirements are:
12/31/99 $ 42,823
12/31/00 174,205
12/31/01 182,371
12/31/02 187,040
12/31/03 189,957
Thereafter 326,317
-------
$1,102,713
==========
4. Officers' Compensation
Prior to the reverse acquisition, the Company's day to day activities were
managed by certain officer/shareholders, who contributed their time on the
Company's behalf without compensation in either cash or stock. No value for
these services has been determined or recorded on the accompanying financial
statements. The Company currently employs these two individuals and fourteen
other employees at their administrative and operating facilities in Baltimore,
Maryland.
5. Fixed Assets
Fixed assets for the Company consisted of the following at September 30, 1999:
<TABLE>
<CAPTION>
Accumulated
Fixed Asset Depreciation Balance
----------- ------------ ---------
<S> <C> <C> <C>
Furniture & Fixtures $ 32,000 $ 162 $ 31,838
Manufacturing/Warehouse Equip 33,000 167 32,833
Computer Hardware 52,862 375 52,487
Transportation Equip 7,000 50 6,950
Office Equipment 28,000 199 27,801
Software Systems 32,921 235 32,686
----------- ------------ ---------
$ 185,783 $ 1,188 $ 184,595
=========== ============ =========
</TABLE>
10
<PAGE> 25
INTERNATIONAL MERCANTILE CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
6. Investment in University Mortgage, Inc.
The Company has a minority interest in University Mortgage, Inc. as a
result of the liquidation of its majority interest on July 31,
1999. The Company reflects this majority interest on the balance
sheet as an investment at cost, the basis of which, is adjusted
by the earnings and losses reported by Universal Mortgage, Inc.
in accordance with generally accepted accounting principles. At
September 30, 1999 the balance of the Company's investment is
$725,642.
7. Contingencies
The Company's management has confirmed that as of the date of the
financial statements the Company is not involved in any lawsuits
nor is there any pending litigation.
An unwind provision exists as part of the merger agreement, whereby
the merger agreement could be rendered void. Management,
however, believes that the provision will not be exercised as all
other provisions of the merger agreement have been fulfilled as
of the date of these financial statements.
8. YEAR 2000
Many currently installed computer systems and software products are
coded to accept only two-digit entries in the date code field and
cannot reliably distinguish dates beginning January 1, 2000 from
dates prior to the year 2000. Many companies' software and
computer systems may need to be upgraded or replaced in order to
correctly process dates beginning in 2000 and to comply with the
"Year 2000" requirements. The Company has reviewed its' internal
programs and has determined that there are no significant Year
2000 issues within the Company's systems or services. The
Company has completed modifications to its internal systems to
attempt to ensure Year 2000 compliance. The costs of these
modifications was not material and involved a
reallocation of internal resources rather than incremental
expenditures. In addition, the Company utilizes third party
hardware, software and services that may not be Year 2000
compliant. Although the Company believes that its' software and the
hardware and software provided by third parties is Year 2000
compliant, the Company may be wrong. If the Company is wrong, it
could face unexpected expenses to resolve any related issues and
any unexpected interruptions could be harmful to its business.
11
<PAGE> 26
INTERNATIONAL MERCANTILE CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
9. Subsequent Events
Subsequent to September 30, 1999 the Company instituted an unqualified
employee stock option plan. The terms of such options are
contracted between each eligible employee and the Company on a
case by case basis. As of the date of these financial
statements, 7 such plans are either active, pending the start of
employment or under negotiation; none are vested.
Subsequent to September 30, 1999 and through the date of the
Accountants' Compilation Report, the Company sold to unrelated
private investors 878,493 shares of Class A Common stock for a
total of $ 250,000.
In October, 1999, the Company entered into a consulting agreement with
an individual for securities consulting and corporate investment
banking services. In addition to 150,000 shares of Class A
common stock issued on October 13, 1999, compensation for this
individual is to be equal to 10% of capital funds raised.
On October 15, 1999 the Company entered into a three year irrevocable
investment agreement with an unrelated third party (Private
Equity Company) for a private equity line of common stock
totaling an aggregate $5 million. The agreement calls for the
Company to put up to $1 million of common stock to the Private Equity
Company at a purchase price equal to 91% of the Company's per
share "Market Price." Market price is defined as the lowest
closing bid of the Company's common stock during the 20 business
days following each "Put Date." As compensation to enter into
this agreement, the Private Equity Company received a warrant to
purchase 150,000 shares of the Company's common stock. The
Private Equity Company shall also receive an amount of Warrants
equal to 10% of the number of shares purchased under each Put,
exercisable at a price equal to 110% of the market price of each
Put. The agreement further calls for a $25,000 due diligence fee
and a $100,000 non usage fee (less 10% of the dollar amount Put
during the 6 month period) in the event the Company fails to Put
$1 million of common stock each 6 month period during the
agreement's 3 year term.
On October 15, 1999 the Company entered into a $1 million private
placement agreement with an unrelated third party. The placement
will be sold on a best efforts basis
to qualified institutional investors.
12
<PAGE> 27
INTERNATIONAL MERCANTILE CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
Subsequent Events cont'd
On November 1, 1999 the Company entered into a four month
consulting agreements with two individuals for securities
consulting and corporate investment banking services. Monthly
compensation for each of these individuals is to be at the
Company's option, either in the form of a total of 25,000 shares
of Class A common stock or $8,000. On November 3, 1999 each
individual was issued 25,000 shares of Class A common stock of
the Company as their first month's compensation.
On November 15, 1999 the Company entered into a capital lease
transaction with an unrelated third party for the purpose of
financing the Company's operational and accounting software
systems. The lease is for a term of three years including
monthly payments of $1,235 plus applicable sales tax and
concludes with a $1 buy out option at the end of the lease term.
On November 23, 1999 the Company entered into an agreement to
manufacture 3,000
whitebox computer units per month beginning December of 1999 with a
national satellite distributed program network marketing group.
The agreement is open ended and has no minimum purchase
requirements.
On November 23, 1999, a director/shareholder contributed $425,000 as
additional paid in capital to fund operations.
13
<PAGE> 28
STOCK PURCHASE AGREEMENT
By and between
International Mercantile Corporation
and
Micromatix.com Incorporated
This Stock Purchase Agreement (the "Agreement") is effective
this 6th day of September, 1999, by and between International
Mercantile Corporation, a Missouri corporation (the "Buyer"), Red
River Trading Company, Inc., a Maryland corporation (the "Seller"),
and Micromatix.com Incorporated, a Delaware corporation
("Micromatix" or the "Company." International Mercantile
Corporation is a publicly-traded corporation (symbol OTCBB: IMTL).
WHEREAS, Seller owns, free and clear of all adverse claims,
all of the issued and outstanding capital shares of Micromatix; and
WHEREAS, Seller desires to sell, and Buyer desires to
purchase, all of the issued and outstanding capital shares of
Micromatix in a tax-free reorganization, for the consideration and
upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, the
provisions and the respective agreements hereinafter set forth, the
parties hereto hereby agree as follows:
1. Purchase and Sale of Stock.
1.1 Agreement to Purchase and Sell. Upon the terms and
subject to the conditions set forth in this Agreement and in
reliance upon the representations, warranties, covenants, and
agreements contained herein, on the Closing Date (as hereinafter
defined), Seller shall sell, grant, convey, assign, transfer, and
deliver to Buyer, and Buyer shall purchase and acquire from Seller,
all of the issued and outstanding shares of capital stock of the
Company (collectively, the "Micromatix Shares"). The exact number
of Micromatix Shares to be sold by Seller hereunder is as follows:
100 shares of common stock, $.01 par value.
1.2 Purchase Price. At Closing (as hereinafter defined), the
Company will be purchased by Buyer and held as a wholly-owned
subsidiary. The Buyer and Seller agree that the aggregate Purchase
Price is the sum of one million three hundred seventy-five thousand
Dollars ($1,375,000.00) U.S. (the "Purchase Price").
1.3 Terms of Payment. The Purchase price will be paid by
the buyer as follows:
1.3.1 The Purchase Price will be paid by the Buyer
through the delivery of one million (1,000,000)
shares of Class B common stock of International
Mercantile Corporation (the "IMTL Stock"), at a
deemed price of U.S. $1.00 per share and one
million five hundred thousand (1,500,000) shares of
Class A common stock of International Mercantile
Corporation, at a present market value of twenty-
five cents ($0.25) U. S. per share (collectively,
the IMTL stock).
1.3.2 All of the issued and outstanding Micromatix Shares
shall be exchanged for the IMTL Stock. As a class,
the International Mercantile Corporation Class B
1
<PAGE> EX-10.1
common stock, including without limitation the IMTL
Stock, carries a voting preference of 51 votes per
share, but has no other preference rights or
obligations, including those with respect to
payment of dividends, conversion, redemption, and
liquidation value, over and above the rights and
obligations afforded the International Mercantile
Corporation Class A common shareholders.
1.3.3 Upon the expiration of Buyer's Put Option as
defined hereinbelow, Seller shall have the option
to purchase, for the aggregate sum of one dollar
($1.00) U. S., thirty percent (30.0%) of the IMTL
Class B common shares then held by FSR, consisting
of three hundred thousand (300,000) IMTL Class B
common shares as of the date of Closing, subject to
adjustment for stock splits or other share
issuances subsequent to Closing.
1.4 Post Closing Adjustments to Purchase Price. Not
Applicable.
1.5 Buyer's Put Option on Micromatix Shares.
1.5.1 If, in Buyer's sole and exclusive opinion,
within 12 months of the Date of Closing, and given the
financial resources that (a) Buyer has committed to provide
the Company in accordance with this Agreement; and (b) the
Company has committed to raise on its own, the Company has
materially failed to implement its business plan (attached as
Exhibit 1.5 hereto), including without limitation failure to
achieve such performance benchmarks as assets, stockholder's
equity, revenues, earnings, market capitalization, and/or
stock price, then, at Buyer's sole and exclusive option, and
upon Buyer's written notice to Seller, Buyer may put all of
Buyer's Micromatix Shares back from Seller, and Seller shall,
within 10 days of receipt of such notice, return to Buyer all
of the IMTL Shares received by Seller pursuant to this
Agreement.
1.5.2 In the event that Buyer elects to exercise its
put option (the "Buyer's Put Option"), then the fair value of
any and all assets invested into the Company by the Buyer or
by third-parties secured by the Buyer's efforts, shall be
evidenced by a promissory note (the "Promissory Note") payable
from the Company to the Buyer. The Promissory Note shall bear
interest at the Wall Street Journal prime rate of interest
plus one percent (1.0%), fixed as of the last business day
prior to Buyer's notice to Seller of Buyer's intention to
exercise its put option. The Promissory Note shall be and
guaranteed by the Seller and secured by all of the capital
stock and assets of the Company, and both Seller and the
Company hereby grant to Buyer a security interest in such
capital stock and assets. The Promissory Note shall be fully
amortized and payable in 24 equal monthly installments
beginning 30 day's from the date of Buyer's notice to Seller.
Buyer agrees to subordinate to the note to the any bona fide
debt financing secured by the Company subsequent to the
exercise of the Buyer's Put Option. All non-cash assets
invested into the Company shall be returned to the Buyer or
Buyer's designee concurrently with the execution of the
Promissory Note and the exercise of Buyer's Put Option. Until
the expiration of Buyer's Put Option, all assets invested in
the Company (whether cash or other assets) shall be itemized
by Buyer to Seller from time-to time and shall be subject to
seller's approval prior to investment.
1.5.3 If, within 12 months of Closing, in Buyer's
sole and exclusive opinion, the Company has materially
satisfied its performance obligations with respect to
implementing the business plan, then Buyer's Put Option shall
expire unexercised.
2
<PAGE> EX-10.1
1.6 Seller's Put Option on IMTL Stock.
1.6.1 If Buyer fails to invest, or cause to be
invested, an additional $350,000 in equity into the Company on
or before November 30, 1999, then Seller shall have the
unilateral right to put all of Seller's IMTL Stock back to
Buyer, and Buyer shall, within 10 days of receipt of such
notice, return to Seller all of the Micromatix Shares received
by Buyer pursuant to this Agreement.
1.6.2 In the event that Seller elects to exercise its
put option (the "Seller's Put Option"), then the fair value of
any and all assets invested into the Company by the Buyer or
by third-parties secured by the Buyer's efforts, shall be
evidenced by a promissory note in accordance with the same
terms and conditions stated in Section 1.5.2. All non-cash
assets shall be returned to Buyer or Buyer's designee in
accordance with the terms of Section 1.5.2.
1.6.3 If Buyer has invested, or caused to be
invested, an additional $350,000 into the Company on or before
November 30, 1999, then Seller's Put Option shall expire
unexercised.
1.7 Closing. The closing of the purchase and sale of the
Micromatix Shares provided herein (the "Closing") will be at the
offices of the Buyer at 10:00 a.m., local time, on September 2,
1999, or at such other place or at such other date and time as
Seller and Buyer may mutually agree. Such date and time of Closing
is herein referred to as the "Closing Date".
1.8 Company Acquisitions Prior and Subsequent to Closing.
Not Applicable.
1.9 Additional Terms and Conditions.
1.9.1 Subsequent to Closing, but prior to the
expiration of Buyer's Put Option as described in Section 1.5
herein, Seller agrees that
(a) any merger, consolidation, reorganization,
dissolution, liquidation, winding up, or sale of all or
substantially all of the Company's assets shall require
the approval of Buyer's board of directors; and
(b) Seller shall not sell, encumber, liquidate, or
otherwise dispose of the IMTL Shares without the approval
of the Buyer's board of directors.
(c) The rights of approval granted in this section
1.8.1 shall expire with the expiration of Buyer's Put
Option as described in Section 1.5 herein.
1.9.2 As soon as possible, but in no event later than
60 days subsequent to Closing, Buyer shall conduct its annual
stockholder and board of director's meeting. At such meeting,
Seller agrees to vote to support resolutions calling for the
following:
(a) the 2 to 1 reverse split of the International
Mercantile Corporation Class B common stock, such that
subsequent to such split there shall be only one million
(1,000,000) shares of Class B common stock issued and
3
<PAGE> EX-10.1
outstanding;
(b) the payment of a stock dividend to the Buyer's
shareholders consisting of the 11,000 issued and
outstanding common shares of University Mortgage, Inc.
("UMI") owned by Buyer as of the date of such dividend
declaration;
(c) The issuance to Frederic Richardson of one
million five hundred thousand (1,500,000) shares or, at
the election of the board of directors, options for
shares of International Mercantile Corporation Class A
common stock in consideration for services rendered as
chairman of the corporation;
(d) the creation by Buyer of an employee stock
ownership plan and/or employee stock option plan to
facilitate the hiring and retention of key employees;
(e) the execution of an irrevocable investment
agreement with Swartz Institutional Finance providing for
the sale of five million dollars ($5,000,000) of
International Mercantile Corporation Class A common
stock;
(f) the ratification of all actions taken by the
Buyer's officers and directors since September 1998
through the date of Closing.
(g) The change of International Mercantile
Corporation's name to Micromatix.com, Inc., or
a derivative thereof.
(h) The redomestication of International
Mercantile Corporation to the State of Delaware.
1.9.3 At Closing, Timothy Jewell and Bernard Cary
shall be elected to the Buyer's board to directors to fill
vacancies created by the resignations of Ed Hutya and Walt De
Ronde. Until the sooner of the expiration of Buyer's Put
Option, or the resignation of one or more of the following
named individuals, the board of directors of International
Mercantile Corporation shall consist of Frederic Richardson
(Chairman), Max Apple (Chairman Emeritus), Timothy Jewell,
Bernard Cary, George Weast and Michael Scott Hess, unless
otherwise approved by the unanimous consent of the holders of
International Mercantile Corporation Class B common stock; and
1.9.4 At Closing, Timothy Jewell shall be elected to
serve as President/CEO of Buyer, filling the vacancy caused by
the resignation of Michael Scott Hess. Bernard Cary shall be
elected to serve as Vice President and Chief Operating
Officer, a newly created position. Within five business days
subsequent to Closing, the company shall enter into mutually
agreeable employment contracts with Timothy Jewell, Bernard
Cary, Frederic Richardson, and Michael Scott Hess.
1.9.5 At Closing, unless otherwise agreed between the
parties, Buyer shall invest, or cause to be invested, $150,000
into the Company as equity capital.
1.9.6 As soon as possible after Closing, but in no
event later than December 31, 1999, unless otherwise agreed
between the parties, Buyer shall invest, or cause to be
invested, an additional $350,000 in equity into the Company
4
<PAGE> EX-10.1
2. Representations and Warranties of Seller.
Each Seller, as to itself only, represents and warrants to
Buyer as follows:
2.1 Subsidiaries; Existence; Good Standing; Corporate
Authority; Compliance With Law.
2.1.1 The Company has no subsidiaries.
2.1.2 The Company is a private corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite
corporate power and authority to own its properties and carry
on its business as now conducted. The Company is not in
default with respect to any order of any court, governmental
authority, or arbitration board or tribunal to which the
Company is a party or is subject, and the Company is not in
violation of any laws, ordinances, governmental rules, or
regulations to which it is subject. The Company has obtained
all licenses, permits, and other authorizations and has taken
all actions required by applicable laws or governmental
regulations in connection with its business as now conducted.
2.2 Validity and Effect of Agreements. This Agreement
constitutes, and all agreements and documents contemplated hereby
when executed and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of Seller
enforceable in accordance with their terms, and the Buyer hereby is
granted the right of specific performance. The execution and
delivery of this Agreement does not and the consummation of the
transactions contemplated hereby will not (a) require the consent
of any third party (except as set forth in Section 5.1 of this
Agreement), (b) result in the breach of any term or provision of,
or constitute a default under, or result in the acceleration of or
entitle any party to accelerate (whether after the giving of notice
or the lapse of time or both) any obligation under, or result in
the creation or imposition of any lien, charge, pledge, security
interest or other encumbrance upon any part of the property of the
Company pursuant to any provision of, any order, judgment,
arbitration award, injunction, decree, indenture, mortgage, lease,
license, lien, or other agreement or instrument to which Seller or
the company is a party or by which any of them is bound, or violate
or conflict with any provision of the Bylaws or Articles/
Certificate of Incorporation of the Company as amended to the date
of this Agreement.
2.3 Capitalization. The Company has the following capital
structures:
Authorized Capital Issued Capital
------------------ --------------
Micromatix.com Incorporated 1,000 Common Shares 100 Common Shares
No shares other than listed herein will be presently issued and
outstanding as of the Closing Date. Except for rights granted
pursuant to this Agreement and as described in Schedule 2.3.3
attached hereto, there are no outstanding rights, warrants,
options, subscriptions, agreements or commitments giving anyone any
right to require the Company to sell or issue, or the Seller to
sell, any capital stock or other securities.
2.4 Records. The corporate minute books of the Company to be
delivered to Buyer at the Closing shall contain true and complete
copies of the Articles of Incorporation, as amended to the Closing
Date, bylaws, as amended to the Closing Date, and the minutes of
5
<PAGE> EX-10.1
all meetings of directors and shareholders and certificates
reflecting all actions taken by the directors or shareholders
without a meeting, from the date of incorporation of the Company to
the Closing Date.
2.5 Officers and Directors; Bank Accounts; Powers of
Attorney; Insurance. The officers and directors of the Company are
as set forth in Schedule 2.5. Schedule 2.5 also sets forth (a) the
name of each bank, savings institution or other person with which
the Company has an account or safe deposit box and the names and
identifications of all persons authorized to draw thereon or have
access thereto, (b) the names of all persons, if any, holding
powers of attorney from the Company and a summary statement of the
terms thereof, and (c) a list of all insurance policies owned by
the Company (other than those required to be listed in Schedule
2.14 hereof), together with a brief statement of the coverage
thereof.
2.6 Financial Statements. Seller has furnished to Buyer (a)
an unaudited balance sheet of the Company as of September 2, 1999
(the "Unaudited Balance Sheet"), and (b) an unaudited income
statement of the Company for the eight months ending August 31,
1999 (the "Unaudited Income Statement "). The Unaudited Balance
Sheet and Unaudited Income Statement referred to above are
hereinafter collectively referred to as the "Financial Statements".
The Financial Statements fully and fairly set forth the financial
condition of the Company as of the dates indicated, and the results
of its operations for the periods indicated, in accordance with
generally accepted accounting principles consistently applied,
except as otherwise stated therein and in the related reports of
independent accountants and other data, copies of which are
attached hereto as Exhibit 2.6.
2.7 Undisclosed Liabilities. The Company has no liabilities
or obligations whatsoever, either accrued, absolute, contingent, or
otherwise, which are not reflected or provided for in the Financial
Statements except (a) those arising after the date of the Unaudited
Balance Sheet which are in the ordinary course of business, in each
case in normal amounts and none of which is materially adverse, and
(b) as and to the extent specifically described in the Schedules
hereto.
2.8 Absence of Certain Changes or Events Since the Date of
the Unaudited Balance Sheet. Since the date of the Unaudited
Balance Sheet, the Company has not, with the exception of those
items enumerated on Schedule 2.8 which is attached hereto and made
a part hereof:
2.8.1 incurred any obligation or liability (fixed or
contingent), except normal trade or business obligations
incurred in the ordinary course of business and consistent
with past practice, none of which is materially adverse, and
except in connection with this Agreement and the transactions
contemplated hereby;
2.8.2 discharged or satisfied any lien, security
interest or encumbrance or paid any obligation or liability
(fixed or contingent), other than in the ordinary course of
business and consistent with past practice;
2.8.3 mortgaged, pledged or subjected to any lien,
security interest or other encumbrance any of its assets or
properties (other than mechanic's, materialman's, and similar
statutory liens arising in the ordinary course of business and
purchase money security interests arising as a matter of law
between the date of delivery and payment);
6
<PAGE> EX-10.1
2.8.4 transferred, leased or otherwise disposed of any
of its assets or properties except for a fair consideration in
the ordinary course of business and consistent with past
practice or, except in the ordinary course of business and
consistent with past practice, acquired any assets or
properties;
2.8.5 canceled or compromised any debt or claim, except
in the ordinary course of business and consistent with past
practice;
2.8.6 waived or released any rights of material value;
2.8.7 transferred or granted any rights under any
concessions, leases, licenses, agreements, patents,
inventions, trademarks, trade names, service marks or
copyrights or with respect to any know-how;
2.8.8 made or granted any wage or salary increase
applicable to any group or classification of employees
generally entered into any employment contract with, or made
any loan to, or entered into any material transaction of any
other nature with any officer or employee of the Company;
2.8.9 entered into any transaction, contract or
commitment, except in the ordinary course of business;
2.8.10 suffered any casualty loss or damage (whether or
not such loss or damage shall have been covered by insurance)
which affects in any material respect its ability to conduct
business; or
2.8.11 declared any dividends or bonuses, or authorized
or affected any amendment or restatement of the Article of
Incorporation or bylaws of the Company or taken any steps
looking toward the dissolution or liquidation of the Company.
Between the date of this Agreement and the Closing hereunder,
the Company will not, without the prior written consent of
Buyer, do any of the things listed in Sections 2.8.1 through
2.8.11 above.
2.9 Taxes. The Company (a) has duly and timely filed or
caused to be filed all federal, state, local, and foreign tax
returns (including, without limitation, consolidated and/or
combined tax returns) required to be filed by it prior to the date
of this Agreement which relate to the Company or with respect to
which the Company or the Assets or properties of the Company are
liable or otherwise in any way subject, (b) has paid or fully
accrued for all taxes shown to be due and payable on such returns
(which taxes are all the taxes due and payable under the laws and
regulations pursuant to which such returns were filed), and (c) has
properly accrued for all such taxes accrued in respect of the
Company or the assets and properties of the Company for periods
subsequent to the periods covered by such returns. No deficiency in
payment of taxes for any period has been asserted by any taxing
body and remains unsettled at the date of this Agreement. Copies of
all federal, state, local, and foreign tax returns of the Company
have been made available for inspection by Buyer.
2.10 Title To Micromatix Shares. The Micromatix Shares are
duly authorized, validly issued, fully paid and nonassessable and
are owned by Seller free and clear of all liens, encumbrances,
charges, assessments and adverse claims. The Micromatix Shares are
subject to no restrictions with respect to transferability to Buyer
in accordance with the terms of this Agreement. Upon transfer of
7
<PAGE> EX-10.1
the Micromatix Shares by Seller, Buyer will, as a result, receive
good and marketable title to all 100 percent of the Micromatix
Shares, free and clear of all security interests, liens,
encumbrances, charges, assessments, restrictions, and adverse
claims.
2.11 Title to Property and Assets. The Company has good and
marketable title to all of the properties and assets used by it in
the conduct of its business (including, without limitation, the
properties and assets reflected in the Balance Sheets except any
thereof since disposed of for value in the ordinary course of
business) and none of such properties or assets is, except as
disclosed in said Balance Sheets or the Schedules hereto, subject
to a contract of sale not in the ordinary course of business, or
subject to security interests, mortgages, encumbrances, liens, or
charges of any kind or character.
2.12 Condition of Personal Property. All tangible personal
property, equipment, fixtures and inventories included within the
assets of the Company or required to be used in the ordinary course
of business are in good, merchantable, or in reasonable repairable
condition and are suitable for the purposes for which they are
used. No value in excess of applicable reserves has been given to
any inventory with respect to obsolete or discontinued products.
All of the inventories and equipment, including equipment leased to
others, are well maintained and in good operating condition.
2.13 Real Estate. Schedule 2.13 contains a list of all real
property owned by the Company or in which the Company has a
leasehold or other interest and of any lien, charge, or encumbrance
thereupon. Such Schedule also contains a substantially accurate
description identifying all such real property and the significant
rental terms (including rents, termination dates, and renewal
conditions). The improvements upon such properties and use thereof
by the Company conforms to all applicable lease restrictions,
zoning, and other local ordinances. To the best of Seller's
knowledge, the Company's real property (the "Property") does not
contain any hazardous substance; the Seller has not conducted or
authorized the generation, transportation, storage, treatment or
disposal at the Property of any hazardous substance; that the
Seller has not received any notice of and has no knowledge that any
government authority or any employee or agent thereof, or any
private citizen, has determined, or threatens to determine, or made
any claim in any form, that there is a presence, release, threat of
release, placement on or in the Property, or the generation,
transportation, storage, treatment or disposal at the Property, of
any hazardous substance. For purposes of this paragraph,
"hazardous substance" means any matter giving rise to liability
under any local, state or federal law, ordinance or regulation or
any common law theory based on nuisance or strict liability; does
not contain unacceptable levels of natural asbestos; has not been
used as a grave site, fill or borrow area; does not contain
underground storage tanks on the Property;
2.14 List of Contracts and Other Data. Schedule 2.14 sets for
the following:
2.14.1 all collective bargaining agreements, employment
and consulting agreements, executive compensation plans, bonus
plans, profit-sharing plans, deferred compensation agreements,
employee pension or retirement plans, employee stock purchase
and stock option plans, group life insurance, hospitalization
insurance or other plans or arrangements providing for
benefits to employees of the Company.
8
<PAGE> EX-10.1
2.14.2 all contracts, understandings, and commitments,
(including, without limitation, mortgages, indentures, and
loan agreements) to which the Company is a party, or to which
it or any of its assets or properties are subject and which
are not specifically referred to herein.
2.14.3 the names and current annual compensation rates
of all employees of the Company; and
True and complete copies of all documents and complete
descriptions of all oral understandings, if any, referred to in
Schedules 2.13 and 2.14 have been provided or made available to
Buyer and its counsel.
2.15 No Breach or Default. The Company is not in default
under any contract to which it is a party or by which it is bound,
nor has any event occurred which, after the giving of notice or the
passage of time or both, would constitute a default under any such
contract. Seller have no reason to believe that the parties to such
contracts will not fulfill their obligations under such contracts
in all material respects or are threatened with insolvency.
2.16 Litigation. Except as set forth in Schedule 2.16, there
are no actions, suits or proceedings with respect to the Company
involving claims by or against Seller or the Company which are
pending or threatened against Seller or the Company, at law or in
equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency, or
instrumentality. No basis for any action, suit, or proceeding
exists, and there are no orders, judgments, injunctions, or decrees
of any court or governmental agency with respect to which Seller or
the company has been named or to which Seller or the Company is a
party, which apply, in whole or in part, to the business of the
Company, or to any of the assets or properties of the Company or
the Micromatix Shares or which would result in any material adverse
change in the business or prospects of the Company.
2.17 No Brokers. Neither Seller nor the Company has entered
into any contract, arrangement or understanding with any person or
firm which may result in the obligation of Buyer or the Company to
pay any finder's fees, brokerage or agent's commissions, or other
like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated
hereby, and neither Seller nor the Company is aware of any claim or
basis for any claim for payment of any finder's fees, brokerage or
agent's commissions, or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
2.18 Investment Representation. The Seller represents that it
understands that (a) the Micromatix Shares being acquired by Buyer
pursuant to this Agreement have not been registered under the
Securities Act of 1933, as amended, and are being issued in
reliance upon an exemption afforded by Section 4(2) thereof for a
transaction by an issuer not involving any public offering, (b)
such Micromatix Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities
Act of 1933, as amended, or is exempt from such registration, (c)
such Micromatix Shares will bear a legend to such effect, and (d)
Seller will make a notation on its transfer books to such effect.
Each Buyer further represents that (i) such Micromatix Shares are
being acquired for investment and without any present view toward
distribution thereof to any other person, (ii) it will not sell or
otherwise dispose of such Micromatix Shares except in compliance
with the registration requirements or exemption provisions under
the Securities Act of 1933, as amended, the rules and regulations
thereunder, and as otherwise set forth by the Securities and
9
<PAGE> EX-10.1
Exchange Commission, (iii) it has knowledge and experience in
financial and business matters and that he is capable of evaluating
the risks and merits of an investment in Micromatix Shares, (iv) it
has consulted with counsel to the extent deemed necessary, as to
all matters covered by this Agreement and has not relied upon
Seller for any explanation of the application of the various
federal or state securities laws with regard to the acquisition of
such Micromatix Shares, (v) it has investigated and is familiar
with the affairs, financial condition, and prospects of the
Company, and has been given sufficient access to and has acquired
sufficient information about the Company to reach an informed and
knowledgeable decision to acquire such Micromatix Shares, and (vi)
it is able to bear the economic risks of such an investment.
2.19 Independent Legal Advice. The Company and the Seller
have sought and will continue to seek independent legal advice in
this transaction.
2.20 No Misrepresentations or Omissions. No representation or
warranty by Seller in this Article 2 or in any other Article or
Section of this Agreement, or in any certificate or other document
furnished or to be furnished by Seller pursuant hereto, contains or
will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to provide
Buyer with accurate information as to the Company.
3. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
3.1 Existence; Good Standing; Corporate Authority; Compliance
with Law. Buyer is a publicly-traded corporation. Buyer is duly
incorporated, validly existing, and in good standing under the laws
of the State of Missouri. Buyer is duly licensed or qualified to
do business as a foreign corporation and is in good standing under
the laws of all other jurisdictions in which the character of the
properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary.
Buyer has all requisite corporate power and authority to own its
properties and carry on its business as now conducted. Buyer is not
in default with respect to any order of any court, governmental
authority, or arbitration board or tribunal to which Buyer is a
party or is subject, and Buyer is not in violation of any laws,
ordinances, governmental rules or regulations to which it is
subject. Buyer has obtained all licenses, permits, or other
authorizations and has taken all actions required by applicable
laws or governmental regulations in connection with its business as
now conducted.
3.2 Authorization; Validity and Effect of Agreements. The
execution and delivery of this Agreement and all agreements and
documents contemplated hereby by Buyer, and the consummation by it
of the transactions contemplated hereby, have been duly authorized
by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby when executed and
delivered pursuant hereto for value received will constitute, the
valid and legally binding obligations of Buyer enforceable in
accordance with their terms. The execution and delivery of this
Agreement does not and the consummation of the transactions
contemplated hereby will not (a) require the consent of any third
party (except as set forth in Section 5.2 of this Agreement), (b)
result in the breach of any term or provision of, or constitute a
default under, or result in the acceleration of, or entitle any
party to accelerate (whether after the giving of notice or the
lapse of time or both) any obligation under, or result in the
creation or imposition of any lien, charge, pledge, security
interest or other encumbrance upon any part of the property of the
Company pursuant to any provision of, any order, judgment,
arbitration award, injunction, decree, indenture, mortgage, lease,
10
<PAGE> EX-10.1
license, lien, or other agreement or instrument to which Buyer is a
party or by which it is bound, and (c) violate or conflict with any
provision of the bylaws or Articles of Incorporation of Buyer as
amended to the date of this Agreement.
4. Other Covenants and Agreements.
4.1 Indemnification by Seller. Upon the terms and subject to
the conditions set forth in Section 4.1, Seller agrees to indemnify
and hold Buyer harmless from and against, and will reimburse Buyer
on demand for, any payment, loss, cost, or expense (including
reasonable attorney's fees and reasonable costs of investigation
incurred in defending against any such payment, loss, cost, or
expense, or claim therefor) made or incurred by Buyer at any time
after the Closing Date in respect of:
4.1.1 any and all losses, damage, costs or deficiencies
directly or indirectly resulting from any misrepresentation,
breach of warranty or non-fulfillment of any covenant on the
part of such Seller under this Agreement or from any
misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to Buyer hereunder;
and
4.1.2 any and all actions, suits, proceedings, demands,
assessments, judgements, costs and legal and other expenses
incidental to the foregoing, and Buyer is hereby authorized,
at its option, to settle such claims and make any payment in
relation thereto as may be reasonable in the circumstances.
4.2 Indemnification by Buyer. Upon the terms and subject to
the conditions set forth in Section 4.2, Buyer agrees to indemnify
and hold Seller harmless from and against, and will reimburse
Seller on demand for, any payment, loss, cost, or expense
(including reasonable attorney's fees and reasonable costs of
investigation incurred in defending against any such payment, loss,
cost, or expense, or claim therefor) made or incurred by Seller at
any time after the Closing Date in respect of:
4.2.1 any and all losses, damage, costs or deficiencies
directly or indirectly resulting from any misrepresentation,
breach of warranty or non-fulfillment of any covenant on the
part of such Seller under this Agreement or from any
misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to Seller hereunder;
and
4.2.2 any and all actions, suits, proceedings, demands,
assessments, judgements, costs and legal and other expenses
incidental to the foregoing, and Seller is hereby authorized,
at its option, to settle such claims and make any payment in
relation thereto as may be reasonable in the circumstances.
4.3 Tax Indemnity. Upon the terms and subject to the
conditions set forth in Section 4.3, Seller agrees to indemnify and
hold Buyer and the Company harmless against, and will reimburse
Buyer (or the Company if Buyer so requests) on demand for:
4.3.1 any and all tax deficiencies in respect of
federal, state, local, and foreign sales, use, income, or
franchise tax or taxes based on or measured by income,
including any interest or penalties thereon and legal fees and
expenses incurred by Buyer and the Company with respect to the
taxable year ended December 31, 1998, and all prior taxable
years; and
11
<PAGE> EX-10.1
4.3.2 any and all such taxes, interest, penalties, and
legal fees and expenses in respect of the period from January
1, 1999 up to and including the Closing Date, but only to the
extent that such deficiencies, taxes, interest, penalties, and
legal fees and expenses exceed, in the aggregate, the amount
of the aggregate reserves for such taxes, if any, shown as
liabilities on the Unaudited Balance Sheet.
The indemnity provided for in this Section 4.3 shall be
independent of and in addition to any other indemnity provision of
this Agreement and, anything in this Agreement to the contrary
notwithstanding, shall survive until the expiration of the
applicable statutes of limitation for the taxes referred to herein.
5. Conditions of Closing.
5.1 Buyer's Conditions of Closing. The obligation of Buyer
to purchase and pay for the Micromatix Shares shall be subject to
and conditioned upon the satisfaction at the Closing of each of the
following conditions:
5.1.1 All representations and warranties of Seller
contained in this Agreement and the Schedules hereto shall be
true and correct at and as of the Closing Date, Seller shall
have performed all agreements and covenants and satisfied all
conditions on their part to be performed or satisfied by the
Closing Date pursuant to the terms of this Agreement, and
Buyer shall have received a certificate of the Seller dated
the Closing Date to such effect.
5.1.2 There shall have been no material adverse change
since the date of the Unaudited Balance Sheet in the financial
condition, business or affairs of the Company or any
affiliate, and the Company or any affiliate shall not have
suffered any material loss (whether or not insured) by reason
of physical damage caused by fire, earthquake, accident, or
other calamity which substantially affects the value of its
assets, properties or business, and Buyer shall have received
a certificate of the Seller dated the Closing Date to such
effect.
5.1.3 Seller shall have delivered to Buyer a Certificate
of the Secretary of State (or other authorized officer) of the
Company's and each Affiliate's respective jurisdiction of
incorporation certifying as of a date reasonably close to the
Closing Date that the Company or such Affiliate, as the case
may be, has filed all required reports, paid all required fees
and taxes, and is, as of such date, in good standing and
authorized to transact business as a domestic corporation.
5.1.4 Seller shall have delivered to Buyer certificates
and other instruments representing all of the Micromatix
Shares, duly endorsed for transfer or accompanied by
appropriate stock powers (in either case executed in blank or
in favor of Buyer with the execution thereof guaranteed by a
bank or trust company), together with all other documents
necessary or appropriate to validly transfer the Micromatix
Shares to Buyer free and clear of all security interests,
liens, encumbrances, and adverse claims.
5.1.5 Neither any investigation of the Company by Buyer,
nor the Schedules attached hereto or any supplement thereto
nor any other document delivered to Buyer as contemplated by
this Agreement, shall have revealed any facts or circumstances
12
<PAGE> EX-10.1
which, in the sole and exclusive judgment of Buyer and
regardless of the cause thereof, reflect in an adverse way on
the Company or its financial condition, assets, liabilities
(absolute, accrued, contingent, or otherwise), reserves,
business, operations, or prospects.
5.1.6 No suit, action, investigation, inquiry, or other
proceeding by any governmental body or other person or legal
or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the
transactions contemplated hereby.
5.1.7 As of the Closing, there shall be no effective
injunction, writ, preliminary restraining order, or any order
of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or any of
them not be consummated as so provided or imposing any
conditions on the consummation of the transactions
contemplated hereby, which is unduly burdensome on Buyer.
5.2 Seller's Conditions of Closing. The obligation of Seller
to sell the Micromatix Shares shall be subject to and conditioned
upon the satisfaction at the Closing of each of the following
conditions:
5.2.1 All representations and warranties of Buyer
contained in this Agreement shall be true and correct at and
as of the Closing Date and Buyer shall have performed all
agreements and covenants and satisfied all conditions on its
part to be performed or satisfied by the Closing Date pursuant
to the terms of this Agreement; and Seller shall have received
a certificate of Buyer dated the Closing Date to such effect.
5.2.2 Buyer shall have effected payment of the Purchase
Price in accordance with this Agreement.
5.2.3 Buyer shall have delivered to Seller certificates
representing the IMTL Stock to be issued pursuant to Section
1.3 of this Agreement.
5.2.4 Buyer shall have delivered to Seller a certificate
of its corporate secretary certifying:
(a) Resolutions of its Board of Directors
authorizing execution of this Agreement and the
execution, performance, and delivery of all agreements,
documents, and transactions contemplated hereby; and
(b) The incumbency of its officers executing this
Agreement and all agreements and documents contemplated
hereby.
5.2.5 As of the Closing, there shall be no effective
injunction, writ, preliminary restraining order, or any order
of any nature issued by court of competent jurisdiction
directing that the transactions provided for herein or any of
them not be consummated as so provided or imposing any
conditions on the consummation of the transactions
contemplated hereby, which is unduly burdensome on Seller.
13
<PAGE> EX-10.1
6. Termination and Abandonment; Arbitration.
6.1 Methods of Termination. The transactions contemplated
herein may be terminated and/or abandoned at any time before or
after approval thereof by Seller and Buyer, in accordance with the
following:
6.1.1 not later than Closing, by mutual consent of Buyer
and Seller;
6.1.2 not later than Closing, by Buyer if any of the
conditions provided for in Section 5.1 hereof shall not have
been met or waived in writing by Buyer prior to such date.
6.2 Procedure Upon Termination. In the event of termination
and/or abandonment by Buyer, pursuant to Section 6.1 or 6.2 hereof,
written notice thereof shall forthwith be given to the other party
and the transactions contemplated by this Agreement shall be
terminated and/or abandoned, without further action by Buyer or
Seller. If the transactions contemplated by this Agreement are
terminated and/or abandoned as provided herein:
6.2.1 Each party will redeliver all documents, work
papers, and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before
or after the execution of this Agreement, to the party
furnishing the same; and
6.2.2 No party hereto shall have any liability or
further obligation to any other party to this Agreement except
as stated in this Section 6.2, as the case may be; provided,
however, that: (a) if such termination and/or abandonment is a
result of the failure of any condition set forth in Section
5.1 hereof, then Buyer shall be entitled to recover from
Seller all out-of-pocket costs which Buyer has incurred
(including reasonable attorney's fees, accounting fees, and
expenses); and (b) if such termination and/or abandonment is a
result of the failure of any condition set forth in Section
5.2 hereof, then Seller shall be entitled to recover from
Buyer all out-of-pocket costs which Seller has incurred
(including reasonable attorney's fees, accounting fees, and
expenses).
6.3 Arbitration. In the event of any dispute arising out of
this Section 6 only, the parties shall then submit the dispute to
binding arbitration in accordance with the Rules of the American
Arbitration Association, the parties agreeing to each pay one-half
of the costs of the arbitration and to pay its own expenses
including its own legal fees. The parties agree that the
arbitrator shall be an independent certified public accountant or
attorney with experience in public merger transactions.
7. Miscellaneous.
7.1 Notices. Any notice required or permitted hereunder
shall be in writing and shall be sufficiently given if personally
delivered or mailed by certified or registered mail, return receipt
requested, addressed as follows:
If to Buyer:
International Mercantile Corporation
P.O. Box 1810
Brookville, MD 20832
Attention: Frederic Richardson, Chairman
14
<PAGE> EX-10.1
With Copies to:
Art Fillmore 816-571-1700
David Levenson 202-857-1757
Doug Luizio 215-665-9300
If to Seller:
Red River Trading Company, Inc.
P.O. Box 359
Crownsville, MD 21032
Attention: Timothy Jewell, President
With Copies to:
John Harman, Coggins Harman & Hewitt
8905 Fairview Road, Suite 600
Silver Spring, MD 20910
7.2 Execution of Additional Documents. The parties hereto
will at any time, and from time to time after the Closing Date,
upon request of the other party, execute, acknowledge and deliver
all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney, and assurances as may be required to carry out
the intent of this Agreement, and to transfer and vest title to any
Micromatix Shares being transferred hereunder, and to protect the
right, title, and interest in and enjoyment of all of the
Micromatix Shares sold, granted, assigned, transferred, delivered,
and conveyed pursuant to this Agreement; provided, however, that
this Agreement shall be effective regardless of whether any such
additional documents are executed.
7.3 Binding Effect, Benefits. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective heirs, successors, executors, administrators,
and assigns. Notwithstanding anything contained in this Agreement
to the contrary, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto
or their respective heirs, successors, executors, administrators,
and assigns any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
7.4 Entire Agreement. This Agreement, together with the
Exhibits, Schedules, and other documents contemplated hereby,
constitute the final written expression of all of the agreements
between the parties, and is a complete and exclusive statement of
those terms. It supersedes all understandings and negotiations
concerning the matters specified herein. Any representations,
promises, warranties, or statements made by either party that
differ in any way from the terms of this written Agreement and the
Exhibits, Schedules, and other documents contemplated hereby, shall
be given no force or effect. The parties specifically represent,
each to the other, that there are no additional or supplemental
agreements between them related in any way to the matters herein
contained unless specifically included or referred to herein. No
addition to or modification of any provision of this Agreement
shall be binding upon any party unless made in writing and signed
by all parties.
15
<PAGE> EX-10.1
7.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland
exclusive of the conflict of law provisions thereof.
7.6 Survival. All of the terms, conditions, warranties, and
representations contained in this Agreement shall survive, in
accordance with their terms, delivery by Buyer of the consideration
to be given by him hereunder and delivery by Seller of the
consideration to be given by them hereunder, and shall survive the
execution hereof and the Closing hereunder.
7.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same instrument.
Until manually signed counterparts have been exchanged between the
parties, the parties agree to be bound by counterparts delivered by
facsimile containing facsimile representations of actual signatures
affixed by the parties.
7.8 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be
given no substantive or interpretive effect whatsoever.
7.9 Waivers. Either Buyer or Seller may, by written notice
to the other; (a) extend the time for the performance of any of the
obligations or other actions of the other under this Agreement; (b)
waive any inaccuracies in the representations or warranties of the
other contained in this Agreement or in any document delivered
pursuant to this Agreement; (c) waive compliance with any of the
conditions or covenants of the other contained in this Agreement;
or (d) waive performance of any of the obligations of the other
under this Agreement. Except as provided in the preceding sentence,
no action taken pursuant to this Agreement, including without
limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, or
agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the
same or any other provision hereunder.
7.10 Merger of Documents. This Agreement and all agreements
and documents contemplated hereby constitute one agreement and are
interdependent upon each other in all respects.
7.11 Incorporation of Exhibits and Schedules. All Exhibits
and Schedules attached hereto are by this reference incorporated
herein and made a part hereof for all purposes as if fully set
forth herein.
7.12 Severability. If for any reason whatsoever, any one or
more of the provisions of this Agreement shall be held or deemed to
be inoperative, unenforceable, or invalid as applied to any
particular case or in all cases, such circumstances shall not have
the effect of rendering such provision invalid in any other case or
of rendering any of the other provisions of this Agreement
inoperative, unenforceable, or invalid.
7.13 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable to any party hereto
without the prior written consent of the other parties hereto.
16
<PAGE> EX-10.1
IN WITNESS WHEREOF the respective parties hereto have hereunto
affixed their respective hands and/or seals on the day, month, and
year first above written.
FOR: INTERNATIONAL MERCANTILE CORPORATION ("BUYER")
/s/Frederic Richardson 9/6/99
by: Frederic Richardson, Chairman Date
FOR: RED RIVER TRADING COMPANY, INC. ("SELLER")
/s/Timothy Jewell 9/6/99
by: Timothy Jewell, President Date
FOR: MICROMATIX.COM INCORPORATED ("COMPANY")
/s/Timothy Jewell 9/6/99
by: Timothy Jewell, President Date
17
<PAGE> EX-10.1
STOCK PURCHASE AGREEMENT
By and between
International Mercantile Corporation
and
Micromatix.com Incorporated
ADENDUM
It is hereby agreed that the transaction referenced in the Stock
Purchase Agreement dated September 6, 1999 shall be accounted for
as a capital transaction with no recognition of goodwill or other
intangible assets. This transaction is a recapitalization of
Micromatix.com, Inc. (the predecessor company) and not a business
combination. As such, all historical data shall be that of
Micromatix.com, Inc. A Reverse Merger.
FOR: INTERNATIONAL MERCANTILE CORPORATION ("BUYER")
/s/Frederic Richardson /s/
by: Frederic Richardson, Chairman Witness
Date 9/6/99 Date 9/6/99
FOR: MICROMATIX.COM INCORPORATED ("COMPANY")
/s/ Timothy Jewell /s/
by: Timothy Jewell, President Witness
Date 9/6/99 Date 9/6/99
