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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. _____)
Check the appropriate box:
[x] Preliminary Information Statement
Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
ARMITEC, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11.
(1) Title of each class of securities to which transaction
applies: Common Stock, par value $0.00167
(2) Aggregate number of securities to which transaction applies:
13,940,785
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined): $0.00167 per share
(4) Proposed maximum aggregate value of transaction: $23,281.07
(5) Total fee paid: $4.66
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party: Armitec, Inc.
(4) Date Filed: October [_________________], 2000
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ARMITEC, INC.
Post Office Box 21238
St. Simons Island, GA 31502
INFORMATION STATEMENT PURSUANT TO
REGULATION 14C PROMULGATED UNDER THE
SECURITIES EXCHANGE ACT OF 1934
WE ARE NOT ASKING YOU FOR YOUR PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY. THE ACTIONS DESCRIBED BELOW HAVE ALREADY BEEN APPROVED BY WRITTEN
CONSENT OF HOLDERS OF A MAJORITY OF ARMITEC, INC.COM'S OUTSTANDING SHARES OF
COMMON STOCK. A VOTE OF THE REMAINING STOCKHOLDERS IS NOT NECESSARY. PLEASE DO
NOT SEND IN ANY OF YOUR SHARE CERTIFICATES AT THIS TIME.
Pursuant to the requirements of Section 14(c) of the Securities
Exchange Act of 1934 and Section 228(d) of the General Corporation Law of the
State of Delaware (the "Delaware Corporation Law"), this information statement
is being mailed on or about October 12, 2000 to holders of record as of
September 22, 2000 (the "Record Date") of shares of common stock, par value
$0.00167 ("Common Stock"), of Armitec, Inc., a Delaware corporation (the
"Company" or "Armitec"). It is being furnished in connection with the adoption
of an amendment to the Company's Amended and Restated Certificate of
Incorporation by written consent of the holders of a majority of the outstanding
shares of Common Stock, which changed the name of the Company from Family Health
Systems, Inc. to Armitec, Inc., and increased the authorized shares of Common
Stock of the Company to Fifty Million (50,000,000) (the "Amendments"). This
information statement is also being furnished in connection with a Plan and
Agreement to Exchange Stock by and among Armitec.com, Inc., the Armitec.com
shareholders and the Company, and in connection with an amendment to the
Company's Amended and Restated Certificate of Incorporation by written consent
of the holders of a majority of the outstanding shares of Common Stock, which
effected a one-for-ten reverse stock split of the Company's issued and
outstanding Common Stock.
THE AMENDMENTS
On August 24, 2000, the Board of Directors ("Board") unanimously and
the holders of a majority of the outstanding voting securities of the Company
(the "Majority of the Shareholders"), approved the Amendments by written
consent. An amendment to Registrants Certificate of Incorporation reflecting the
Amendments was filed with the Secretary of the State of Delaware on August 30,
2000.
THE REVERSE STOCK SPLIT
On April 1, 1993, the Company's Board of Directors approved an
amendment to the Company's Amended and Restated Certificate of Incorporation to
effect a one-for-ten reverse stock split (the "Reverse Split") of the Company's
then issued and outstanding Common Stock
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(the "Prior Common"). The amendment was approved in a written consent executed
by the holders of more than a majority of the outstanding shares of Common
Stock.
Pursuant to the Reverse Split, each of the ten shares of Prior Common
issued and outstanding was reclassified as, and exchanged for, one share of
newly issued Common Stock, par value $.00167 ("New Common").
The Reverse Split occurred on April 30, 1993 (the "Effective Date")
without any further action on the part of stockholders of the Company and
without regard to the date or dates on which certificates representing shares of
Existing Common are actually surrendered by each holder thereof for certificates
representing the number of shares of the New Common that each such stockholder
is entitled to receive as a consequence of the Reverse Split. After the
Effective Date of the Reverse Split, the certificates representing shares of
Existing common represent one-tenth the number of shares of New Common.
Certificates representing shares of New Common will be issued in due course as
old certificates are tendered for exchange. No fractional shares of New Common
will be issued and, in lieu thereof, stockholders holding a number of shares of
Existing Common not evenly divisible by 10, and stockholders holding fewer than
10 shares of Existing Common prior to the Effective Date, upon surrender of
their old certificates, will receive one share of stock in lieu of fractional
shares of New Common.
The Reverse Split did not materially affect the proportionate equity
interest in the Company of any holder of Prior Common or the relative rights,
preferences, privileges or priorities of any such stockholder, and the par value
per share of the Common Stock was not changed. The New Common issued pursuant to
the Reverse Split will be fully paid and non-assessable. All shares of New
Common will have the same par value, voting rights and other rights as shares of
the Existing Common have. Stockholders of the Company do not have preemptive
rights to acquire additional shares of Common Stock which may be issued.
THE SHARE EXCHANGE
On September 15, 2000, the Board unanimously and the Majority of the
Shareholders approved the terms of the purchase of Armitec.com, Inc. Those basic
terms involve the issuance of the Company's Common Stock to the shareholders of
Armitec.com in exchange for their shares of Armitec.com., so that after the
issuance, the shareholders of Armitec.com will hold 45.68% of the outstanding
shares of the Company and the current shareholders of the Company will retain
10.00% ownership. Additionally, 39.32% of the outstanding shares of the Company
will be reserved for use in a Private Offering of such shares in order to raise
capital for the Company. To the extent that such shares are not sold in a
Private Placement, the Armitec.com shareholders may purchase such shares for a
nominal amount. Additionally, 5.00% of the outstanding shares of the Company
will be reserved to hire consultants to assist the Company after the
acquisition. On September 15, 2000, the Company executed a definitive Plan and
Agreement to Exchange Stock with Armitec.com (the "Share Exchange"). The closing
date of the Share Exchange is dependent upon the completion and satisfaction of
required shareholder consents and notifications.
The Board of Directors believe that the terms and provisions of the
Share Exchange are fair to and in the best interest of Armitec and holders of
Armitec common stock.
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This transaction has not been approved or disapproved by the Securities and
Exchange Commission (the "SEC") or any state securities commission, nor has the
SEC or any state securities commission passed upon the fairness or the merits of
such transaction nor upon the accuracy or adequacy of the information contained
in this document. Any representation to the contrary is unlawful.
EXCHANGE PROCEDURES
As soon as practicable after closing of the Share Exchange (the
"Effective Time"), the Transfer Agent will mail to each record holder of
outstanding shares of Armitec Common Stock a letter of transmittal (the "Letter
of Transmittal") and instructions for use in effecting the surrender of such
shares in exchange for the proper number of post-stock split shares for such
shareholders who have not already received the proper number of post-stock split
shares.
The Letter of Transmittal will be sent to all record holders of shares
of Armitec Common Stock after the Effective Time under separate cover. The
Letter of Transmittal will advise such holders of the procedures for exchanging
shares, and it will be accompanied by a self-addressed stamped envelope to be
used by the holders for delivering their share certificates evidencing pre-stock
split shares to the Transfer Agent.
Any questions concerning exchange procedures and requests for Letters
of Transmittal may be addressed to Securities Transfer Corporation, Suite 102,
2591 Dallas Parkway, Frisco, Texas 75034, Telephone: (469) 633-0101, Attention:
Kevin Halter, Jr.
SUMMARY OF SHARE EXCHANGE
The following is a brief summary of certain information contained
elsewhere in this Information Statement. This summary is not intended to be
complete and is qualified in its entirety by the more detailed information
contained in this Information Statement and in the Exhibits hereto, to which
reference is made for a complete statement of the matters discussed below.
Capitalized terms used and not defined in this summary have the meaning set
forth elsewhere in this Information Statement. Shareholders are urged to read
this Information Statement and the Exhibits hereto in their entirety.
Transaction Parties
Armitec, Inc. is a Delaware corporation with its principal offices
located at Post Office Box 21238, St. Simons Island, Georgia 31522.
Armitec.com, Inc. is a privately-held Georgia corporation with its
principal offices located at 1295 West Garmon Road, Atlanta, Georgia 30327.
Armitec.com is a manufacturer and distributor of high quality uniforms and
accessories using the internet and direct mail to reach its consumer customer
base and employing sales representatives to sell to retailers and catalog
houses. Armitec.com targets persons in state and local enforcement agencies,
fire departments, EMT, private security agencies and the postal retailers and
catalog houses.
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The Transaction
The Acquisition of Armitec.com will be effected as a stock exchange
whereby the shareholders of Armitec.com will receive shares of Armitec and
Armitec.com will become a wholly-owned subsidiary of Armitec. The shareholders
of Armitec.com will hold 45.68% of the outstanding shares of the Company and the
current shareholders of the Company will retain 10.00% ownership. Additionally,
39.32% of the outstanding shares of the Company will be reserved for use in a
Private Offering of such shares in order to raise capital for the Company. To
the extent that such shares are not sold in a Private Placement, the Armitec.com
shareholders may purchase such shares for a nominal amount. Additionally, 5.00%
of the outstanding shares of the Company will be reserved to hire consultants to
assist the Company after the acquisition.
Written Consent
Under Section 228 of the Delaware General Corporation Law such actions
can be authorized, provided shareholders holding at least a majority of the
outstanding shares of Armitec entitled to vote on the matter at the Record Date
give their written consent thereto. On September 15, 2000, the Majority of the
Shareholders approved the terms of the purchase of Armitec.com, Inc.
Background of the Acquisition
In August, 2000, Armitec and Armitec.com began discussions concerning
the use of Armitec as a reverse merger vehicle to position Armitec.com in the
public market.
On August 29, 2000, Armitec and Armitec.com completed negotiations and
determined that a 90/10 split of the post-transaction equity of Armitec was an
acceptable and fair deal for the shareholders of both parties. On September 15,
2000, the Exchange Agreement was signed. It was a non-binding agreement subject
to the completion of due diligence and exchange of Schedules outlined in the
Exchange Agreement. On , 2000, the Exchange Agreement became binding,
subject to the satisfaction of specified closing conditions.
Recommendation of the Armitec Board
The Armitec Board of Directors, on September 15, 2000, unanimously
approved the Exchange Agreement and the transactions contemplated thereby,
including the Acquisition, and determined that the Acquisition, and the
transactions contemplated thereby are in the best interests of Armitec and its
shareholders. The Board of Directors, consisting of Mr. Donald C. Carman and Mr.
William S. Bryant, gave their consent to the actions contemplated. On the Record
Date, the Board of Directors as a group held approximately 41% of the voting
stock of Armitec.
Reasons for the Recommendation of the Armitec Board
In approving the Exchange Agreement, and recommending that holders of
shares of Armitec Common Stock approve and adopt the Acquisition, and the
Exchange Agreement, the Armitec Board considered a number of factors, including,
but not limited to, the following:
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1. The familiarity of the Armitec Board with the financial
condition, results of operations, business and prospects of Armitec.
2. That Armitec's financial condition, results of operations,
business and prospects make it doubtful that Armitec is strong enough to carry
its operations forward or sustain itself, if this Acquisition is not
consummated.
3. The merger with Armitec.com gives the shareholders of Armitec
the opportunity to participate in a unique market.
4. A review by Armitec's Management of a range of alternative
strategies that might be pursued, the possible values that might be achieved
through those strategies, and the Armitec Board's conclusion that these
alternative strategies entailed increased risk and, in any event, were unlikely
to result in greater value to Armitec or its shareholders than the Acquisition
of Armitec.com on the terms specified in the Exchange Agreement.
The foregoing discussion of the information and factors considered and
given weight by the Armitec's Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Exchange Agreement, the Armitec Board did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of the
Armitec Board may have given different weights to different factors.
Interests of Certain Persons in the Acquisition
The interests of certain members of the Management of Armitec could be
different than those of other Armitec shareholders.
Armitec has incurred accounting and legal expenses to Colonial
Corporation in connection with the reorganization of Armitec. Donald C. Carman
owns 100% of the stock of Colonial Corporation. Armitec.com has agreed to pay an
amount up to $100,000 to Colonial Corporation for reimbursement of such expenses
incurred by Colonial Corporation on behalf of Armitec. Armitec acknowledges the
receipt by Colonial Corporation of $25,000 cash from Armitec.com for such
reimbursement, and Armitec.com agrees to deliver to Colonial Corporation, at the
Closing, a note in the amount of $75,000 due upon the earlier of the completion
of a Private Placement by Armitec or Ninety (90) days from the Closing. The note
will be guaranteed by Bruce R. Davis.
Closing and Conditions of the Acquisition
The Acquisition shall become effective at such time as the Conditions
Precedent for closing the Exchange Agreement have been either satisfied or
waived, and the required Shareholder consents and notifications are completed.
Effects of the Acquisition
After closing the Acquisition, Armitec.com will become a wholly-owned
subsidiary of Armitec. All members of the current Armitec Board of Directors
will resign effective at
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Acquisition closing, and Armitec.com will reconstitute the Board of Directors as
specified in the Exchange Agreement and in this Information Statement. The
corporate offices of Armitec will be moved to the principal offices of
Armitec.com post-closing.
The Acquisition Consideration
Pursuant to the Exchange Agreement, the Armitec.com shareholders will
receive on a pro rata basis, determined by their percent ownership of the
outstanding common stock of Armitec.com, shares of Armitec Common Stock
constituting 45.68% of the post Acquisition Fully-Diluted shares of Armitec
Common Stock. The stock exchange encompassed by the Exchange Agreement
contemplates the issuance of shares of Armitec Common Stock in excess of the
current number of outstanding Common Stock shares and will dilute current
shareholders of Armitec Common Stock to 10% Fully-Diluted ownership
post-Acquisition
Accounting Treatment
The Acquisition will be accounted for as a purchase of net monetary
assets of Armitec by Armitec.com in accordance with generally accepted
accounting principles. The acquisition is a reverse purchase of the assets and
liabilities of Armitec by Armitec.com. The accounting treatment applied in the
reverse acquisition differs from the legal form of the transaction and the
continuing legal entity is Armitec.
Disposition of Current Operations
Due to the lack of synergy between current operations of Armitec and
the operations of Armitec.com, and the poor financial performance experienced in
recent months from Armitec's operations, the Board of Directors authorized Mr.
Bryant to explore the sale of Armitec's operations.
MATERIAL TERMS OF EXCHANGE AGREEMENT
The following is a summary of the material provisions of the Exchange
Agreement by and among Armitec.com, the Armitec.com Shareholders and Armitec.
This summary does not purport to be complete and is qualified in its entirety by
reference to the definitive Exchange Agreement, which is attached as Exhibit A.
Exchange and Purchase of Shares
On the terms and subject to the conditions set forth in the Agreement,
at the closing Armitec shall assign, transfer, and deliver to the Armitec.com
shareholders, in their pro rata percentages based upon their percentage
ownership of Armitec.com common stock pre-closing, a number of shares of Armitec
Common Stock which 45.68% of the number of shares of Fully-Diluted outstanding
Armitec Common Stock post-closing. The pre-closing holders of Armitec Common
Stock shall retain their shares which, immediately following the issuance of
Armitec Common Stock to the Armitec.com shareholders in connection with the
closing of the Acquisition shall constitute 10% of the fully-diluted shares of
Armitec Common Stock post-closing. Additionally, 39.32% of the outstanding
shares of the Company will be reserved for use in a Private Offering of such
shares in order to raise capital for the Company. To the extent that
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such shares are not sold in a Private Placement, the Armitec.com shareholders
may purchase such shares for a nominal amount. Additionally, 5.00% of the
outstanding shares of the Company will be reserved to hire consultants to assist
the Company after the acquisition.
Closing
The "Closing" shall mean the consummation of the exchange of shares of
Armitec Common Stock and shares of Armitec.com common stock, as well as the
consummation of any other transactions which are included in the Exchange
Agreement and required to occur at or before Closing. Closing is anticipated to
occur no later than ____________, 2000.
Representations and Warranties
The Agreement contains various customary representations and warranties
of the parties thereto, without limitation, representations (a) by Armitec and
Armitec.com as to their respective corporate status, capitalization, accuracy of
financial statements, the authorization and the enforceability of the Agreement
against each such party, absence of legal proceedings, the absence of certain
changes or events concerning their respective businesses since December 31,
1999, certain tax matters, certain employee benefit and pension plan matters,
certain environmental matters, quality of assets, certain labor matters,
insurance matters and the absence of material adverse changes with respect to
their material contracts, and (b) by Armitec as to its compliance concerning SEC
filings. The representations and warranties contained in the Exchange Agreement
will survive the Closing.
Covenants
The Exchange Agreement contains various customary covenants of the
parties thereto. A description of certain of these covenants follows.
Conduct of Business Prior to Closing.
From September 15, 2000 until Closing, Armitec and Armitec.com covenant
to, except to the extent that the other party gives written consent to the
contrary, (a) operate their business substantially as previously operated and
only in the regular ordinary course; (b) maintain its assets and properties in
good order and condition; (c) take all steps reasonably necessary to maintain
their Proprietary Rights and other intangible assets; (d) pay all accounts
payable and collect all accounts receivable in accordance with prudent business
practice; (e) comply with all laws applicable to the conduct of their business;
(f) maintain their books and records in the usual, regular, and ordinary manner,
on a basis consistent with past practices.
Actions Prior to Closing
From September 15, 2000 until Closing, Armitec and Armitec.com covenant
not to, without prior written consent of the other party, (a) incur any
obligations, liabilities, or expenses outside the ordinary course; (b) suffer
any material adverse change in their assets or operations; (c) make any change
in any material method of accounting or accounting principle; (d) default
regarding the provisions of any insurance policy; (e) take any other action not
in the ordinary course of business consistent with past practice.
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Supplemental Disclosure
From September 15, 2000 until Closing, Armitec and Armitec.com covenant
that they each have the continuing obligation to disclose in writing to the
other party any matter or information hereafter arising or becoming known that,
if known on the date of execution of the Agreement, would have been required to
be set forth or listed in a Schedule thereto.
Conditions Precedent
Armitec and Armitec.com shall each use its best efforts to satisfy its
respective conditions precedent for Closing.
Audited Financial Statements
Promptly upon completion of the audits referred to in the Exchange
Agreement, Armitec.com shall deliver to Armitec copies of its audited financial
statements, at and through August 31, 2000, together with the notes thereto and
the report thereon. The audits will disclose no material liabilities or
obligations that are not fully accrued or reserved against in Armitec.com
Financial Statements referred to in the Agreement.
Other Transactions
Armitec and Armitec.com shall deal exclusively and in good faith with
each other with regard to the transactions contemplated by the Exchange
Agreement and will not (a) solicit submission of proposals or (b) participate in
any discussions or negotiations or, (c) enter into any agreement or
understanding that would have the effect of preventing the consummation of the
transactions contemplated by the Exchange Agreement until such time.
Conditions Precedent to Obligations of Armitec and Armitec.Com to
Consummate the Exchange Agreement
The obligation of Armitec and Armitec.com to consummate the
transactions as contemplated by the Exchange Agreement are subject to the
fulfillment and satisfaction at Closing of, among others, each of the following
conditions precedent, any or all of which may be waived in whole or in part at
or prior to the Closing by the other party.
Representations and Warranties
All information required to be furnished by the parties pursuant to the
Exchange Agreement shall have been furnished as of the Closing Date and such
representations and warranties shall be true and correct in all material
respects on and as of the Closing Date.
Covenants and Agreement
Armitec and Armitec.com shall have performed and complied in all
material respects with all covenants, agreements and conditions required by the
Agreement to be performed by them prior to or as of the Closing.
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Termination
The Agreement may be terminated and the exchange of stock contemplated
hereby may be abandoned at any time prior to the completion of the Closing: (a)
by mutual consent in writing of Armitec and Armitec.com; or (b) by either
Armitec or Armitec.com if any court of competent jurisdiction shall have issued
an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the exchange of stock and such
order, judgment or decree shall have become final and nonappealable; provided
that the right to terminate the Exchange Agreement on this basis shall not be
available to any party whose failure to fulfill any obligation under the
Exchange Agreement has been the cause of, or resulted in, the failure of the
Closing to occur; or (c) by Armitec if there has been a material breach of any
covenant or agreement or of a representation or warranty on the part of
Armitec.com which has not been cured, or adequate assurance (acceptable to
Armitec in its sole discretion) of cure given, in either case, within 15
business days following receipt of notice of such breach; or (d) by Armitec.com
if (i) there has been a material breach of any covenant or agreement or of a
representation or warranty on the part of Armitec which has not been cured, or
adequate assurance (acceptable to Armitec.com in its sole discretion) of cure
given, in either case, within 15 business days following receipt of notice of
such breach or (ii) at Closing shares of Armitec Common Stock shall not be
listed on the Over-the-Counter Bulletin Board (OTC:BB) (provided Armitec.com has
made its best efforts to assist Armitec in obtaining such listing); or (e) by
either Armitec or Armitec.com (and Armitec.com Shareholders) if either of such
party's due diligence investigation has disclosed the existence of (i) any
matter relating to the other party or its business that is materially and
adversely (to the investigating party) at variance with those matters
theretofore disclosed to the investigating party, or (ii) any matter which, in
the investigating party's reasonable judgment, (A) indicates a material adverse
change in the condition, assets or prospects of the other party, or (B) would
make it inadvisable to consummate the exchange of stock and other transactions
contemplated by the Exchange Agreement.
Certain Consequences of the Acquisition
Effective upon the Closing, Mr. Donald C. Carman, current Chief
Executive Officer and Chairman of the Board, will resign as Chief Executive
Officer, Chairman of the Board and as a director, Mr. William S. Bryant, current
President of Armitec, will resign as President and as director, Mr. Bruce Davis
(the President and CEO of Armitec.com) will become the President and CEO of
Armitec and Armitec.com will designate the members of the post-closing Armitec
Board of Directors. The offices of Armitec.com in Atlanta, Georgia will become
the new corporate headquarters for Armitec post-Closing.
REGULATORY MATTERS
Armitec does not believe that any material federal or state regulatory
approvals, filings or notices are required by Armitec in connection with the
Share Exchange other than such approvals, filings or notices required pursuant
to federal and state securities laws. Under Delaware law, approval of the Share
Exchange must be obtained from the shareholders of Armitec that own a majority
of the outstanding shares.
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FEDERAL INCOME TAX CONSEQUENCES
The receipt of new common in the reverse split should not result in any
taxable gain or loss to stockholders for federal income tax purposes.
The Acquisition and the included transactions contemplated in
connection therewith have been structured with the intent that they be tax-free
to Armitec, Inc., Armitec.com, Inc. and holders of Armitec.com, Inc. stock for
federal income tax purposes. Assuming that the Acquisition constitutes a
tax-free reorganization for federal income tax purposes, the following are the
general federal income tax consequences:
Tax Treatment of Armitec.com, Armitec and Current Armitec Stockholders
No gain or loss will be recognized by Armitec, current stockholders of
Armitec or Armitec.com in connection with the Acquisition and the included
transactions contemplated in connection therewith.
The federal income tax discussion set forth above is included for
general information and may not apply to particular categories of holders of
Armitec.com stock or options subject to special treatment under the federal
income tax laws, such as foreign holders and holders whose stock or options were
acquired pursuant to the exercise of an employee stock option or otherwise as
compensation. In addition, there may be relevant foreign, state, local or other
tax consequences, which are not described above. The Armitec.com shareholders
are urged to consult their tax advisors to determine the specific tax
consequences of the Acquisition, including the applicability and effect of
foreign, state, local and other tax laws.
GENERAL INFORMATION
Date, Time and Place Information
There will not be a meeting of shareholders and none is required under
Delaware Corporation Law when an action has been approved by written consent by
holders of a majority of the outstanding shares of our common stock.
This information statement is first being mailed on or about October ,
2000 to the holders of Common Stock as of September 22, 2000. Under Federal law
the record date was determined as the date that the first public announcement
was made of the Exchange Agreement.
Please read the entire document. Further information is available by
request or can be accessed on the Internet. Armitec is subject to the
informational requirements of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports and
other information with the SEC. Reports and other information filed by Armitec
can be accessed electronically by means of the SEC's home page on the Internet
at http://www.sec.gov or at other Internet sites such as
http://www.freeedgar.com.
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Outstanding Stock and Appraisal Rights
As of the Record Date, there were 3,051,857 shares of Common Stock
outstanding. The Majority of Stockholders held approximately 2,166,975 shares of
Common Stock, or approximately 71% of Armitec's issued and outstanding Common
Stock.
Each holder of Common Stock would normally be entitled to one vote in
person or by proxy for each share of Common Stock in his or her name on the
books of Armitec, as of the Record Date, on any matter submitted to the vote of
stockholders. However, under Section 228(a) of the Delaware Corporation Law, any
action which may be taken at a stockholders' meeting may be taken by written
consent of the requisite number of stockholders required to take such action.
The approval of the Amendments and the Stock Exchange require the affirmative
vote or written consent of a majority of Armitec's outstanding Common Stock. On
September 15, 2000, the Board of Directors and the majority of stockholders
consented to the Amendments and Share Exchange.
This Information Statement is being provided for your information
purposes only. This Information Statement also constitutes your notice of the
availability to you of appraisal rights pursuant to Section 262 of the Delaware
Corporation Law.
Under Section 262 of the Delaware Corporation Law, holders of record of
Shares who do not wish to accept the terms of the Share Exchange have the right
to seek an appraisal of the fair value of their Shares in the Delaware Court of
Chancery (the "Delaware Court"). Holders of Shares wishing to assert this right
must, on or before the twentieth day after the mailing of this Information
Statement, make a written demand for the appraisal of their Shares to: Armitec,
Inc., Attention: President, Post Office Box 21238, St. Simons Island, GA 31522.
The demand must reasonably inform the Corporation of the identity of the
Stockholder making the demand as well as the intention of the Stockholder to
demand an appraisal of the fair value of the Shares held by the Stockholder.
Only a holder of record of Shares, or a person duly authorized and
explicitly purporting to act on his behalf, is entitled to assert an appraisal
right for the Shares registered in his name. Beneficial owners who are not
record holders and who wish to exercise appraisal are advised to consult
promptly with the appropriate record holders as to the timely exercise of
appraisal rights. A record holder, such as a broker, who holds Shares as a
nominee for others may exercise appraisal rights with respect to the Shares held
for one or more beneficial owners, while not exercising such rights for other
beneficial owners. In such a case, the written demand should set forth the
number of Shares as to which the demand is made. Where no Shares are expressly
mentioned, the demand will be presumed to cover all Shares held in the name of
such record holder.
A demand for the appraisal of Shares owned of record by two or more
joint holders must identify and be signed by, or on behalf of, all of the
holders. A demand for appraisal signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity must so identify the persons signing the
demand.
11
<PAGE> 13
An appraisal demand may be withdrawn by a Stockholder within 60 days
after the Effective Time by written withdrawal of his demand for an appraisal
and an acceptance of the terms of the Share Exchange, or may be withdrawn
thereafter with the written approval of the Corporation.
Only a holder of record of Shares on the date of the making of an
appraisal demand with respect to such Shares who continuously holds such Shares
through the Effective Time, who has otherwise complied with the requirements of
Section 262 of the Delaware Corporation Law shall be entitled to an appraisal.
Within 120 days after the Effective Time (the "120-Day Period"), any
remaining Stockholder who has properly demanded an appraisal and who has not
withdrawn his demand as provided above (such Stockholders being referred to
collectively as the "Dissenting Stockholders") and the Corporation each have the
right to file in the Delaware Court a petition (the "Petition") demanding a
determination of the fair value of the Shares held by all of the Dissenting
Stockholders. If, within the 120-Day Period, no Petition shall have been filed
as provided above, all rights to appraisal will ascertained as of the date of
the Share Exchange that throw any light on future prospects of the corporation.
Section 262 of the Delaware Corporation Law provides that fair value is to be
"exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation." In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenter's exclusive remedy. The costs of the appraisal
proceeding may be determined by the Delaware Court and taxed upon the parties as
the Delaware Court deems equitable in the circumstances. Upon application, the
Delaware Court may also order that all or a portion of the expenses incurred by
any former holder of Shares in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and the fees and
expense of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all the Shares entitled to an appraisal. Determinations by
the Delaware Court are subject to appellate review by the Delaware Supreme
Court.
Dissenting Stockholders generally are permitted to participate in the
appraisal proceedings. No appraisal proceeding in the Delaware Court shall be
dismissed as to any Dissenting Stockholder without the approval of the Delaware
Court, and this approval may be conditioned upon terms which the Delaware Court
deems just.
From and after the Effective Time, Stockholders are not entitled to
vote the Shares for any purpose and are not entitled to receive payment of
dividends or other distributions on the Shares payable to stockholders of record
thereafter.
The foregoing description is not, and does not purport to be, a
complete summary of the applicable provisions of Section 262 of the Delaware
Corporation Law and is qualified in its entirety by reference to the text of
this provision which is set forth in its entirety in Exhibit B hereto. Any
Former Stockholder considering demanding appraisal is advised to consult its own
legal counsel.
12
<PAGE> 14
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding shares of our
Common Stock beneficially owned as of September 22, 2000. Beneficial ownership
is calculated in accordance with Rule 13d-3(d) under the Securities Exchange Act
of 1934. As used in the table below, a beneficial owner includes any person who
directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise has or shares (a) the power to vote, or direct the
voting, of such security or (b) investment power which includes the power to
dispose, or to direct the disposition of, such security. In addition, a person
is deemed to be the beneficial owner of a security if that person has the right
to acquire beneficial ownership of such security within 60 days. Unless
otherwise indicated, each person possesses sole voting and investment power with
respect to the shares identified as beneficially owned. Except as otherwise
indicated in the table, the address of the stockholders listed below is that of
the Company's principal executive office. Directors not included in the table
below do not hold Company securities.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF SEPTEMBER 22, 2000
NAME AND ADDRESS NUMBER PERCENT
<S> <C> <C>
William S. Bryant, President 280,000 9.0%
E.L. Carman 907,875 30.0%
110 St. Andrews,
St. Simons Island, Georgia 31522
Donald C. Carman 979,100 32.0%
</TABLE>
Directors and Executive Officers
Donald C. Carman became a Director and was elected President, Treasurer
and Chief Executive Officer of the Company in 1985. He graduated from West
Liberty College in 1952 with a degree in Pre Law and from West Virginia College
of Law in 1954 with a J.D. He is a former Tax Commissioner of West Virginia and
is an attorney and entrepreneur. He was President of White Ash Mining Corp. and
has served in various executive positions.
William S. Bryant became a Director of the Company in 1988 and was
elected President of the Company in 1991. He from graduated from IAS in Chicago,
Illinois in 1948 with a B.A. in accounting and has served in various positions
in the public and private sector.
No compensation was paid to any of the officers or directors of Armitec
during its fiscal year ended December 31, 1999.
Forward-Looking Statements and Information
This Information Statement includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act. You can
13
<PAGE> 15
identify our forward-looking statements by the words "expects," "projects,"
"believes," "anticipates," "intends," "plans," "budgets," "predicts,"
"estimates" and similar expressions.
14
<PAGE> 16
We have based the forward-looking statements relating to our operations
on our current expectations, estimates and projections about the Company. We
caution you that these statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that we cannot predict. In
addition, we have based many of these forward-looking statements on assumptions
about future events that may prove to be inaccurate. Accordingly, our actual
outcomes and results may differ materially from what we have expressed or
forecast in the forward-looking statements.
BY ORDER OF THE BOARD OF
DIRECTORS
October __, 2000 William S. Bryant
St. Simons Island, Georgia President
15
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<S> <C>
EXHIBIT A Plan and Agreement to Exchange Stock
EXHIBIT B Appraisal Rights Statute
EXHIBIT C Armitec's Annual Report on Form 10-K for the year ended August 31, 1999
EXHIBIT D Armitec's Annual Report on Form 10-K for the four months ended
December 31, 1999
EXHIBIT E Armitec's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000
EXHIBIT F Armitec's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000
EXHIBIT G Armitec's Quarterly Report on Form 10-Q/A for the quarter ended
June 30, 2000
</TABLE>
<PAGE> 18
EXHIBIT A
================================================================================
PLAN AND AGREEMENT TO EXCHANGE STOCK
BY AND AMONG
Armitec.COM, INC.,
THE Armitec.COM SHAREHOLDERS,
and
Armitec, INC.
Dated September 15, 2000
================================================================================
<PAGE> 19
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS......................................................................................................1
ARTICLE II
EXCHANGE AND PURCHASE OF SHARES; CLOSING
Section 2.01. The Armitec Shares.........................................................................2
Section 2.02. The Armitec.Com Shares.....................................................................3
Section 2.03. The Closing................................................................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF Armitec
Section 3.01. Due Organization; Good Standing............................................................4
Section 3.02. Authorized Capital of Armitec..............................................................4
Section 3.03. Financial Statements; Absence of Undisclosed Liabilities...................................5
Section 3.04. Taxes......................................................................................6
Section 3.05. Conduct of Business........................................................................6
Section 3.06. Legal Proceedings..........................................................................7
Section 3.07. Brokers....................................................................................7
Section 3.08. SEC Filings................................................................................7
Section 3.09. Required Approvals, Proxy and Special Shareholder's Meeting................................7
Section 3.10. Officers, Directors and Beneficial Owners..................................................8
Section 3.11. No Untrue Statements.......................................................................8
Section 3.12. Subsidiaries...............................................................................9
Section 3.13. Accounts Receivable; Accounts Payable......................................................9
Section 3.14. Real Property..............................................................................9
Section 3.15. Leased Real Property.......................................................................9
Section 3.16. Tangible Personal Property.................................................................9
Section 3.17. Contracts.................................................................................10
Section 3.18. Environmental Matters and OSHA............................................................13
Section 3.19. Insurance.................................................................................14
Section 3.20. Employee Relations and Employee Agreements................................................14
Section 3.21. Patents; Trademarks; Related Contracts....................................................17
Section 3.22. Availability of Books and Records.........................................................17
Section 3.23. Bank Accounts, Credit Cards...............................................................17
Section 3.24. Absence of Certain Changes or Events......................................................18
Section 3.25. Related Party Transactions................................................................20
Section 3.26. Adverse Conditions........................................................................20
Section 3.27. Annual Reports............................................................................20
</TABLE>
<PAGE> 20
<TABLE>
<S> <C> <C>
Section 3.28. Correctness of Representations............................................................20
Section 3.29. Investment Intent.........................................................................21
Section 3.30. Litigation................................................................................21
Section 3.31. Licenses, Permits and Approvals...........................................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ARMITEC.COM AND THE ARMITEC.COM SHAREHOLDERS
Section 4.01. Due Organization; Good Standing...........................................................22
Section 4.02. Authorized Capital of Armitec.Com.........................................................22
Section 4.03. Financial Statements; Absence of Undisclosed Liabilities..................................23
Section 4.04. Taxes.....................................................................................24
Section 4.05. Conduct of Business.......................................................................24
Section 4.06. Legal Proceedings.........................................................................25
Section 4.07. Required Approvals........................................................................25
Section 4.08. Officers and Directors....................................................................25
Section 4.09. No Untrue Statements......................................................................25
Section 4.10. Subsidiaries..............................................................................26
Section 4.11. Real Property.............................................................................26
Section 4.12. Leased Real Property......................................................................26
Section 4.13. Tangible Personal Property................................................................26
Section 4.14. Contracts.................................................................................26
Section 4.15. Brokers...................................................................................29
Section 4.16. Environmental Matters and OSHA............................................................30
Section 4.17. Insurance.................................................................................31
Section 4.18. Employee Relations and Employment Agreements..............................................31
Section 4.19. Patents; Trademarks; Related Trademarks...................................................34
Section 4.20. Books and Records; Fiscal Year; Method of Accounting......................................34
Section 4.21. Bank Accounts; Credit Cards...............................................................34
Section 4.22. Absence of Certain Changes or Events......................................................34
Section 4.23. Accounts Receivable; Accounts Payable.....................................................37
Section 4.24. Insider Transactions......................................................................37
Section 4.25. Adverse Conditions........................................................................37
Section 4.26. Authorization and Validity of Documents...................................................37
Section 4.27. Investment Intent.........................................................................37
Section 4.28. Correctness of Representations............................................................38
Section 4.29. Litigation................................................................................39
Section 4.30. Licenses, Permits and Approvals...........................................................39
</TABLE>
ii
<PAGE> 21
<TABLE>
<S> <C> <C>
ARTICLE V
COVENANTS OF ARMITEC
Section 5.01. Conduct of Business Prior to Closing......................................................39
Section 5.02. Actions Prior to Closing..................................................................40
Section 5.03. Consents..................................................................................42
Section 5.04. Supplemental Disclosure...................................................................42
Section 5.05. Additional Reports........................................................................42
Section 5.06. Conditions Precedent......................................................................42
Section 5.07. Capital Expenditures......................................................................42
Section 5.08. SEC Filings...............................................................................42
Section 5.09. Shareholder and Other Required Consents...................................................43
Section 5.10. Other Transactions........................................................................43
ARTICLE VI
COVENANTS OF ARMITEC.COM
Section 6.01. Conduct of Business Prior to Closing......................................................43
Section 6.02. Actions Prior to Closing..................................................................44
Section 6.03. Consents..................................................................................46
Section 6.04. Supplemental Disclosure...................................................................46
Section 6.05. Additional Reports........................................................................47
Section 6.06. Conditions Precedent......................................................................47
Section 6.07. Capital Expenditures......................................................................47
Section 6.08. Shareholder and Other Required Consents...................................................47
Section 6.09. Other Transactions........................................................................47
ARTICLE VII
FURTHER AGREEMENTS
Section 7.01. Confidentiality...........................................................................47
Section 7.02. Public Announcements......................................................................48
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ARMITEC TO CONSUMMATE THE EXCHANGE
Section 8.01. Representations and Warranties............................................................48
Section 8.02. Covenants and Agreements..................................................................48
Section 8.03. Certified Resolutions.....................................................................48
Section 8.04. No Injunction, Etc........................................................................48
Section 8.05. Incumbency................................................................................49
</TABLE>
iii
<PAGE> 22
<TABLE>
<S> <C> <C>
Section 8.06. Certificates..............................................................................49
Section 8.07. Deliveries at Closing.....................................................................49
Section 8.08. Certificates..............................................................................49
Section 8.09. Estoppel Certificates.....................................................................49
Section 8.10. Closing Certificate.......................................................................50
Section 8.11. Reimbursement.............................................................................50
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF ARMITEC.COM SHAREHOLDERS TO CONSUMMATE THE EXCHANGE
Section 9.01. Representations and Warranties............................................................50
Section 9.02. Covenants and Agreements..................................................................50
Section 9.03. Certified Resolutions.....................................................................50
Section 9.04. No Injunction, Etc........................................................................51
Section 9.05. Incumbency................................................................................51
Section 9.06. Certificates..............................................................................51
Section 9.07. Deliveries at Closing.....................................................................51
Section 9.08. Certificates..............................................................................51
Section 9.09. Estoppel Certificates.....................................................................51
Section 9.10. Closing Certificate......................................................................52
Section 9.11. Resignation of Officers and Directors.....................................................52
Section 9.12. Assets and Liabilities....................................................................52
ARTICLE X
TERMINATION
Section 10.01. Termination...............................................................................52
Section 10.02. Effect of Termination.....................................................................53
ARTICLE XI
INDEMNIFICATION
Section 11.01. Indemnification by the Company............................................................53
Section 11.02. Indemnification by Armitec.Com Shareholders...............................................54
ARTICLE XII
MISCELLANEOUS
Section 12.01. Survival of Representations, Warranties and Agreements....................................54
Section 12.02. Further Documents.........................................................................54
Section 12.03. Notices...................................................................................54
</TABLE>
iv
<PAGE> 23
<TABLE>
<S> <C> <C>
Section 12.04. Entire Agreement..........................................................................54
Section 12.05. Assignability.............................................................................55
Section 12.06. Binding Effect; Benefit...................................................................55
Section 12.07. Severability..............................................................................55
Section 12.08. Amendment; Waiver.........................................................................55
Section 12.09. Section Headings..........................................................................55
Section 12.10. Counterparts..............................................................................55
Section 12.11. Applicable Law............................................................................55
Section 12.12. Remedies..................................................................................56
Section 12.13. Procedure.................................................................................56
</TABLE>
v
<PAGE> 24
THIS PLAN AND AGREEMENT TO EXCHANGE STOCK (the "Agreement') is made and
entered into this 15th day of September, 2000, by and among (i) Armitec.Com,
Inc., a Georgia corporation ("Armitec.Com") with its principal place of business
in Atlanta, GA; (ii) the shareholders of Armitec.Com, all of whom are listed on
Schedule 1 attached hereto (collectively, the "Armitec.Com Shareholders"); and
(iii) Armitec, Inc., a Delaware corporation ("Armitec") with its principal place
of business in St. Simons Island, GA.
The Armitec.Com Shareholders and Armitec intend to effect a "B"
reorganization pursuant to Section 368 of the Code (as hereinafter defined)
whereby Armitec will acquire all of the outstanding shares of stock of
Armitec.Com from the Armitec.Com Shareholders in exchange solely for newly
issued shares of common stock of Armitec. After giving effect to all of the
transactions contemplated by this Agreement, (a) the Armitec Shareholders (as
defined below) and the Armitec.Com Shareholders will jointly own all of the
issued and outstanding shares of Armitec and (b) Armitec.Com will be a
wholly-owned subsidiary of Armitec.
For and in consideration of these premises and the mutual covenants,
promises, agreements, representations and warranties set forth herein, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Armitec, Armitec.Com and the Armitec.Com Shareholders hereby
covenant, promise, agree, represent and warrant as follows:
ARTICLE I
DEFINITIONS
The capitalized terms listed below are used in this Agreement with the
meanings thereafter ascribed:
"Affiliate" has the meaning ascribed to such term in Rule 405
promulgated under the Securities Act, as such rule is in effect on the date
hereof.
"Armitec Common" means all of the issued and outstanding shares of
Common Stock of Armitec, par value $.00167.
"Armitec Shares" means all of the issued and outstanding shares of the
Armitec Common immediately prior to the closing of the transactions contemplated
by this Agreement.
"Armitec Shareholders" means all Persons owning Armitec Shares prior to
Closing and those Persons, other than the Armitec.Com Shareholders, owning
Armitec Shares after the Closing.
<PAGE> 25
"Armitec.Com Common" means the issued and outstanding Common Stock of
Armitec.Com.
"Armitec.Com Shares" means all of the issued and outstanding shares of
Armitec.Com which consists of ONE HUNDRED (100) shares of the Common Stock of
Armitec.Com.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
Section 101, and all future acts supplemental thereto or amendatory thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Exchange Act" means the Securities Act of 1934, or any similar Federal
statute, and the rules and regulations of the SEC promulgated thereunder, all as
the same shall be in effect at the relevant time.
"Fully-Diluted" means the number of shares of Common Stock of either
Armitec or Armitec.Com outstanding after giving effect to the exercise of
outstanding or committed options and other rights to purchase Common Stock.
"Hold" or "Held" as used herein and pertaining to share ownership shall
include ownership of record as well as beneficial ownership.
"Material" shall mean any condition, circumstance, change or effect (or
any development that, insofar as can be reasonably foreseen, would result in any
condition, circumstance, change or effect) that is material to the business,
assets, results of operations, prospects or condition (financial or otherwise)
of either Armitec or Armitec.Com. The parties hereby acknowledge and agree the
term "material" shall include any obligation, liability, commitment, claim,
expenditure or loss contingencies which individually equals or exceeds $10,000.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, government, or agency or political subdivision of a
government.
"SEC" means the Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act or the Exchange Act.
"Securities Act" means the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect at the relevant time.
ARTICLE II
EXCHANGE AND PURCHASE OF SHARES; CLOSING
SECTION 2.01. THE ARMITEC SHARES.
On the terms and subject to the conditions set forth in this Agreement,
at the Closing (as such term is defined in Section 2.03 of this Agreement):
2
<PAGE> 26
(a) Schedule 2.01 attached hereto contains the names of
all Armitec.Com Shareholders holding Armitec.Com Common, the number of
shares held by each (set forth opposite such shareholder's name), and
the ratio such number bears to the total number of shares of
Fully-Diluted Armitec.Com Common. At Closing Armitec shall assign,
transfer, and deliver to the Armitec.Com Shareholders 13,940,785 shares
of Armitec Common. Additionally, at Closing, Armitec shall reserve
13,525,928 shares of Armitec Common from which 1,525,928 shares of
Armitec Common will be issued for consulting services, and 12,000,000
shares will be reserved for issuance through a private placement of the
shares to occur within six (6) months of the Closing. If the shares, or
any portion thereof, are not issued pursuant to a private placement
within six (6) months of the Closing, Galt Capital Corporation shall
have the right to purchase any of such shares not issued through a
private placement at a nominal price.
(b) The Armitec Shareholders of Armitec Common shall
retain their shares of Armitec Common which, immediately following the
issuance of Armitec Common as set forth in subsection (a) above, shall
constitute 3,051,857 shares or Ten per cent (10%) of the Fully-Diluted
Armitec Common.
(c) Prior to Closing, the exact number of shares of
Armitec Common to be issued to each Armitec.Com Shareholder shall be
appended to Schedule 2.01, as well as such other information as may be
reasonably necessary for the transfer agent of Armitec to issue
certificates evidencing the Armitec Common to the Armitec.Com
Shareholders at Closing.
SECTION 2.02. THE ARMITEC.COM SHARES.
On the terms and subject to the conditions set forth in this Agreement,
at the Closing (as such term is described in Section 2.03 of this Agreement),
each Armitec.Com Shareholders shall assign, transfer, and deliver to Armitec a
certificate(s) evidencing all of the Armitec.Com Shares held by such
shareholder. The certificates representing the Armitec.Com Shares shall be duly
endorsed, or accompanied by stock transfer powers duly endorsed, with the
signature of the Armitec.Com Shareholder thereon guaranteed by a bank, trust
company, or member of the New York Stock Exchange, and otherwise in a form
suitable for transfer on the stock transfer books of Armitec.Com.
SECTION 2.03. THE CLOSING.
The "Closing" shall mean the consummation of the exchange of Armitec
Shares and the Armitec.Com Shares, as set forth in Sections 2.01 and 2.02 above,
as well as the consummation of any other transactions which are contemplated by
this Agreement to occur at Closing. Closing shall take place no later than
within Two (2) days following the date upon which all of the conditions
precedent contained in Articles VIII and IX of this Agreement have occurred and
all regulatory matters have been complied with, at 10:00 a.m., local time, at
the offices of Kutak Rock, LLP, Suite 2100, 225 Peachtree Street, N.E. Atlanta,
GA 30303, or at such other time and place as the parties may agree in writing.
The date the Closing actually occurs is the "Closing Date."
3
<PAGE> 27
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ARMITEC
Armitec represents and warrants to Armitec.Com and the Armitec.Com
Shareholders (which representations and warranties shall be valid and binding as
of the time of Closing) as follows:
SECTION 3.01. DUE ORGANIZATION; GOOD STANDING.
Armitec is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Armitec has the power and
authority to own, lease and operate its properties and to conduct its business
in each location where Armitec owns, leases or operates its property and
conducts business as such business is now being conducted by Armitec. Armitec is
duly qualified and is in good standing as a foreign corporation in each of the
jurisdictions in which the nature of the property or assets owned by Armitec or
the nature of the operations or business conducted by Armitec requires such
qualification. Complete and correct copies of the Certificate of Incorporation,
as amended, and the Bylaws, as amended, of Armitec, as certified by the
Secretary of State of Delaware and the Secretary of Armitec, respectively, are
attached hereto as Schedule 3.01, and no changes will be made therein prior to
Closing except such change(s) as may be necessary to effectuate the terms
hereof.
SECTION 3.02. AUTHORIZED CAPITAL OF ARMITEC.
The authorized capital of Armitec consists of FIFTY MILLION
(50,000,000) shares of Common Stock, Three Million Fifty One Thousand Eight
Hundred Fifty Seven (3,051,857) shares of which are validly issued and
outstanding, fully paid and nonassessable. The relative rights, powers,
preferences, qualifications, limitations, and restrictions in respect of each
class of authorized capital stock of Armitec are as set forth in the Certificate
of Incorporation, attached as Schedule 3.01 and the Certificate of Designation,
and all such rights, powers, preferences, qualifications, limitations, and
restrictions are valid, binding, and enforceable and in accordance with all
applicable laws. Except as contemplated by this Agreement or as set forth in
Schedule 3.02, (a) no subscription, warrant, option, convertible security, or
other right (contingent or other) to purchase or otherwise acquire equity
securities of Armitec is authorized or outstanding, and (b) there is no
commitment by Armitec to (i) issue any equity securities of Armitec, including
without limitation, Armitec Common and Armitec Preferred, or any subscriptions,
warrants, options, convertible securities, or other rights to purchase or
acquire equity securities of Armitec or securities convertible into or
exchangeable for equity securities of Armitec or (ii) distribute to holders of
Armitec Common, Armitec Preferred, or any other equity securities of Armitec,
any evidence of indebtedness, or any assets of Armitec. Except as set forth in
Schedule 3.02 or the Certificate of Incorporation, as amended, Armitec has no
obligation or right (contingent or other) to purchase, redeem, or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any other distribution in respect thereof. Except as set forth
in Schedule 3.02, there are no voting trusts or agreements nor any preemptive
rights relating to any outstanding securities of Armitec (whether or not
4
<PAGE> 28
Armitec is a party thereto). All outstanding securities of Armitec were issued
in compliance with all applicable federal and state securities laws.
SECTION 3.03. FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Attached hereto as Schedule 3.03 are true, correct
and complete copies of:
(i) the audited Consolidated Balance Sheets of
Armitec and its subsidiaries dated as of August 31, 1998, 1999
and December 31, 1999 and the audited, consolidated statements
of income, cash flow and stockholders equity for the years
then ended, together with the notes thereto and the report
thereon of Moore Stephens Tiller LLC, independent certified
public accountants for Armitec.
Such financial statements and the notes thereto are
hereinafter referred to collectively as the "Armitec Financial
Statements."
(b) The Armitec Financial Statements (i) are in
accordance with the books and records of Armitec, (ii) present fairly
the consolidated financial condition of Armitec and its subsidiaries as
of the respective dates indicated and the results of operations for
such periods, (iii) have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved, and (iv) reflect adequate reserves for all
liabilities and losses. Armitec has no material liabilities or
obligations (secured or unsecured, whether accrued, absolute, direct,
indirect, contingent, or otherwise, and whether due or to become due)
that are not fully accrued or reserved against in the Armitec Financial
Statements or described in Schedule 3.03. Armitec has not received any
advice or notification from its independent certified public
accountants that Armitec has used any improper accounting practice that
would have the effect of not reflecting or incorrectly reflecting in
the Armitec Financial Statements or the books and records of Armitec,
any properties, assets, liabilities, revenues, or expenses. The Armitec
Financial Statements do not contain any items of special or
nonrecurring income, or other income not earned in the ordinary course
of business, except as set forth in the notes to the Armitec Financial
Statements or in Schedule 3.03. The books, records, and accounts of
Armitec accurately and fairly reflect, in reasonable detail, all
transactions, assets, and liabilities of Armitec. Armitec has not
engaged in any transaction, maintained any bank account, or used any of
the funds of Armitec, except for transactions, bank accounts, and funds
which have been and are reflected in the normally maintained books and
records of Armitec.
(c) Armitec has no material liabilities or obligations
(secured or unsecured, whether accrued, absolute, direct, indirect,
contingent, or otherwise, and whether due or to become due) that are
not fully accrued or reserved against in the Armitec Financial
Statements, other than:
(i) liabilities incurred in the ordinary course
of business subsequent to the date of the Armitec Financial
Statements consistent with past practice, none of
5
<PAGE> 29
which deviate in any material respect from liabilities
incurred in prior comparable fiscal periods;
(ii) obligations under Contracts listed on
Schedule 3.03 or incurred in the ordinary course of business
and not required under generally accepted accounting
principles to be reflected in the Armitec Financial
Statements, which liabilities and obligations, individually or
in the aggregate, are not material to the financial condition
or operating results of Armitec; and
(iii) the liabilities listed on Schedule 3.03.
SECTION 3.04. TAXES.
Except as set forth on Schedule 3.04, Armitec has filed or obtained
filing extensions for all tax returns, federal, state, county, and local,
required to be filed by it, and Armitec has paid or established adequate
reserves (in accordance with generally accepted accounting principles) for the
payment of all taxes shown to be due by such returns as well as all other taxes,
assessments, and governmental charges which have become due or payable,
including, without limitation, all taxes which Armitec is obligated to withhold
from amounts owing to employees, creditors, and third parties. The federal
income tax returns of Armitec have never been audited by the Internal Revenue
Service and no state income or sales tax returns of Armitec have been audited.
No deficiency assessment with respect to or proposed adjustment of Armitec's
federal, state, county, or local taxes is pending or, to the best of Armitec's
knowledge, threatened. There is no tax lien, whether imposed by any federal,
state, county, or local taxing authority, outstanding against the assets,
properties, or business of Armitec. Neither Armitec nor any of its shareholders
has ever filed a consent pertaining to Armitec pursuant to Section 341(f) of the
IRC (as hereinafter defined), relating to collapsible corporations. Any amounts
reserved in the Armitec Financial Statements for taxes are sufficient for the
payment of all accrued and unpaid federal, state and local taxes of all types,
including interest and penalties thereon of Armitec for or on account of which
Armitec is or may become liable in any manner whatsoever for the quarter ending
June 30, 2000 and for all prior periods.
SECTION 3.05. CONDUCT OF BUSINESS.
(a) ORDINARY COURSE. Since September 1, 1997 the business
of Armitec has been operated, and prior to Closing will be operated,
only in the ordinary course except for: (i) any transactions contained
in Schedule 3.05.1 attached hereto; or (ii) any transactions disclosed
in the Form 10-K's and 10-QSB's filed by Armitec since that date (the
"Armitec Form 10-K's and QSB's").
(b) NO MATERIAL CHANGE. Since December 31, 1999, except
as set forth on Schedule 3.05.2, there has been, and prior to the
Closing there will be, no material adverse change, individually or in
the aggregate, in Armitec's condition (financial or otherwise) or in
Armitec's assets, liabilities or business.
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(c) NO LOSS OR DESTRUCTION. There has been, and prior to
Closing there will be, no damage, destruction or loss or other events
or conditions of any character, or any pending or threatened
developments, which individually or in the aggregate, would materially
and adversely affect Armitec's condition (financial or otherwise) or
Armitec's assets, liabilities or business.
SECTION 3.06. LEGAL PROCEEDINGS.
Except as set forth on Schedule 3.06 attached hereto and incorporated
by reference herein, there is, and as of Closing there will be, no action, suit,
proceeding or investigation pending or, to the best knowledge of Armitec,
threatened, against or affecting Armitec or any of its assets. Armitec is not,
and as of Closing will not be, in default under or with respect to any judgment,
order, writ, injunction or decree of any court or of any federal, state,
municipal or other governmental authority, department, commission, board, agency
or other instrumentality. Armitec has, and as of Closing will have, complied in
all material respects with all laws, rules, regulations and orders applicable to
it and to its business; and it has, and as of the Closing will have, performed
in all material respects all of its material obligations and duties to be
performed by it to the extent required in accordance with their respective
terms; and is not, and as of the Closing will not be, in any material respect in
default under or in breach of any material contract, agreement, commitment or
other instrument to which it is subject or a party or under which it is bound.
SECTION 3.07. BROKERS.
Neither Armitec nor any Affiliate of Armitec has any contract,
arrangement or understanding with, or has incurred any obligation or liability
to, any broker, finder, investment banker, intermediary or similar agent with
respect to this Agreement or the transactions contemplated hereby.
SECTION 3.08. SEC FILINGS.
Except as set forth of Schedule 3.08, Armitec and each of its officers
and directors are current in its or their filings with the SEC including all
registration statements, financial statements, applications, reports, schedules,
forms, proxy statements, Forms 3 and 4, and all other instruments, documents,
and written information (collectively "SEC Filings") required to have been filed
by Armitec, its officers and directors under the Securities Act and the Exchange
Act. None of the SEC Filings contained, as of its date, any untrue statement of
a material fact or omitted, as of its date, to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 3.09. REQUIRED APPROVALS, PROXY AND SPECIAL SHAREHOLDER'S
MEETING.
The Board of Directors of Armitec, pursuant to the power and authority
legally vested in it, has duly authorized the execution and delivery of this
Agreement by Armitec, the issuance of shares of Armitec Common and the
transactions hereby contemplated, and no action,
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confirmation or ratification by the shareholders of Armitec or by any other
person, entity or governmental authority is required in connection therewith,
except:
(a) the filing of a Definitive Proxy which shall contain
the nominees for the Board of Directors of Armitec (one of whom is to
be named by Armitec Shareholders), the proposed Officers of Armitec,
and such other items as are necessary and appropriate, and the
obtaining of a majority vote of a quorum of Armitec Shareholders at a
Special or Annual Meeting of Shareholders to be held prior to or on the
date of the Closing which approves the transactions set forth in this
Agreement; or,
(b) the obtaining of the required shareholder approval of
these transactions by a written consent of a majority of Armitec
Shareholders and appropriate notification to Armitec Shareholders.
Except as may be otherwise set forth herein, Armitec has taken all
actions required by law, its Certificate of Incorporation, as amended,
its Bylaws, as amended, or otherwise, to authorize the execution,
delivery and performance of this Agreement, and as of Closing Armitec
will have the power and authority to consummate the transactions hereby
contemplated, including the issuance, sale, transfer and delivery of
the Armitec Shares pursuant to the provisions hereof and to take all
other actions required to be taken by it pursuant to the provisions
hereof, subject to obtaining prior shareholder approval and except as
may be otherwise set forth herein. This Agreement is valid and binding
upon Armitec in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will constitute a violation or breach of the
Articles of Incorporation, as amended, or the Bylaws, as amended, of
Armitec, or any agreement, stipulation, order, writ, injunction,
decree, law, rule or regulation applicable to Armitec.
SECTION 3.10. OFFICERS, DIRECTORS AND BENEFICIAL OWNERS.
Attached hereto as Schedule 3.10 is a list of all officers and
directors of Armitec and all beneficial owners of more than Five (5%) percent of
Armitec Shares known to Armitec, and the number of Armitec Shares owned of
record and beneficially by each such Officer and Director of Armitec.
SECTION 3.11. NO UNTRUE STATEMENTS.
Neither this Agreement nor any written information, statement, list or
certificate furnished or to be furnished to Armitec.Com or the Armitec.Com
Shareholders pursuant to this Agreement or in connection with this Agreement or
any of the transactions contemplated by this Agreement contains, or as of the
Closing will contain, any untrue statement of a material fact or omits, or as of
the Closing will omit, a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
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SECTION 3.12. SUBSIDIARIES.
Except as set forth on Schedule 3.12, Armitec does not have any
subsidiaries and does not, directly or indirectly, own a controlling interest in
any corporation, partnership, joint venture, or other entity.
SECTION 3.13. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
Armitec's accounts receivable reflected in the December 31, 1999
Armitec Financial Statement, and all accounts receivable arising after the date
thereof (collectively, the "Accounts Receivable") were or are bona fide accounts
receivable, the full amount of which were or are actually owing to Armitec, and,
to the best of its knowledge, those not collected prior to Closing will be fully
collectible by Armitec within ninety (90) days of Closing without offset,
recoupment, counterclaim, claim or diminution. Armitec's accounts payable
reflected on the December 31, 1999 Armitec Financial Statement and all accounts
payable arising after the date thereof (collectively, the "Accounts Payable")
arose from bona fide transactions in the ordinary course of Armitec's business.
SECTION 3.14. REAL PROPERTY.
Except as set forth on Schedule 3.14 attached hereto, Armitec does not
own any real estate.
SECTION 3.15. LEASED REAL PROPERTY.
Schedule 3.15 contains a true and correct list of each parcel of real
property leased by Armitec (the "Armitec Leased Real Property"). Attached to
Schedule 3.15 is a true and correct copy of each lease pursuant to which Armitec
leases the Armitec Leased Real Property and any amendments, extensions, and
renewals thereof (the "Armitec Real Property Leases"). Each Armitec Real
Property Lease is in full force and effect and there is no existing default or
event of default, real or claimed, or event which with notice or lapse of time
or both would constitute a default thereunder. Except as described in Schedule
3.15, Armitec's interest in the Armitec Real Property Leases is free and clear
of any mortgages and liens, and is not subject to any deeds of trust,
assignments, subleases, or rights of any third parties other than the lessor
thereof. To the knowledge of Armitec, no lessor under any such lease is in
default under any such leases in its duties to the lessee. Armitec has not
assigned, transferred, conveyed or otherwise encumbered by way of security
interest or otherwise any of the Armitec Real Property Leases. Except as
described in Schedule 3.15, the continuation, validity, and effectiveness of
each Armitec Real Property Lease will in no way be affected by the consummation
of the transactions contemplated by this Agreement.
SECTION 3.16. TANGIBLE PERSONAL PROPERTY.
Attached hereto as Schedule 3.16 is a true, correct and complete list
of all tangible personal property owned by Armitec or used by Armitec in the
conduct of its business, including, but not limited to, all equipment, machinery
and fixtures (collectively, the "Armitec
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Personal Property"), indicating whether it is owned or the manner in which it is
otherwise utilized by Armitec. Armitec has exclusive good and merchantable title
to all of the Armitec Personal Property owned by it, free and clear of all
pledges, claims, liens, restrictions, security interests, charges and other
encumbrances except those contained in said Schedule 3.16. All of the Armitec
Personal Property is in good repair and good operating condition, fit for its
intended purposes, and is adequate for the continuation of Armitec's business as
presently conducted.
SECTION 3.17. CONTRACTS.
(a) Schedule 3.17.1 contains a true and correct list of
all contracts, agreements, or understandings, written or oral, by which
Armitec receives any right or benefit or undertakes any liability or
obligation (the "Armitec Contracts"). Armitec has delivered or has
otherwise made available to Armitec.Com a correct and complete copy of
each contract or agreement set forth in Schedule 3.17.1. Except as
listed on Schedule 3.17.1, Armitec is not a party to any written or
oral:
(i) agreement, contract, or commitment with any
present or former employee or consultant or for the employment
of any person, including any consultant, contractor, or agent
who performs services for Armitec;
(ii) agreement, contract, or commitment for the
future purchase of, or payment for, supplies or products, or
for the performance of services by a third party which
supplies, products, or services are used by Armitec involving
in any one case an amount or value of five thousand dollars
($5,000) or more;
(iii) lease (relating to real property or personal
property) under which Armitec is lessor or lessee;
(iv) license, franchise, assignment or other
agreement of Armitec relating to trademarks, trade names,
patents, copyrights and service marks (or applications
therefor), unpatented designs or styles, know-how and
technical assistance;
(v) permit relating to the operation of the
business of Armitec;
(vi) agreement for the purchase, sale or lease of
goods, materials, supplies, machinery, equipment, capital
assets and services having a cost in excess of Ten Thousand
($10,000.00) Dollars in any one instance or in excess of
Twenty-Five Thousand ($25,000.00) Dollars in the aggregate;
(vii) agreement or arrangement with any supplier,
distributor, franchisor dealer, sales agent, broker or
representative;
(viii) agreement or arrangement for the
construction, modification or improvement of any building or
structure having a cost in excess of Ten
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Thousand ($10,00.00) Dollars, or any other capital expenditure
involving payments in excess of Ten Thousand ($10,000.00)
Dollars;
(ix) agreement or understanding which is material
in nature, involves the payment or receipt, in any 12 month
period, of more than Ten Thousand ($10,000.00) Dollars or has
a term of more than twelve (12) months;
(x) note, debenture, bond, equipment trust
agreement, letter of credit agreement, loan agreement, or
other contract or commitment for the borrowing or lending of
money, or agreement or arrangement for a line of credit or
guarantee, pledge, or undertaking of the indebtedness of any
other person;
(xi) agreement, contract, or commitment for any
charitable or political contribution relating to Armitec's
business;
(xii) agreement, contract, commitment, or
outstanding proposal pursuant to which Armitec sells, or
proposes to sell, products and services for any amount or
value;
(xiii) agreement, contract, or commitment limiting
or restraining Armitec, its business, or any successor thereto
from engaging or competing in any manner or in any business;
(xiv) material agreement, contract, or commitment
relating to Armitec's business not made in the ordinary course
of business; or
(xv) any distributor agreement, reseller
agreement, franchise agreement, or any other agreement which
authorizes Armitec to (A) sell products or services of any
other person or entity, or (B) use the trademarks, trade
names, or trade styles of any other Person in Armitec's
business.
(b) Schedule 3.17.2 contains a true and correct list of
all commitments for capital expenditures that have been approved or
made prior to the date of this Agreement by Armitec and that remain
outstanding as of the date hereof.
(c) Except as may be otherwise noted in Schedule 3.17.1,
the Armitec Financial Statements or the Armitec Form 10-K's and Q's,
each of the Armitec Contracts was entered into in the ordinary course
of business on terms substantially consistent with Armitec's practice
prior thereto, is in full force and effect, and there exists no breach
or violation of, or default by Armitec under, any of the Armitec
Contracts nor, to the knowledge of Armitec by any other party to such
Contract, or any event which, with notice or the lapse of time, or
both, will create a breach or violation of, or default under by Armitec
nor, to the knowledge of Armitec by any other party to such Contract.
There is no Armitec Contract that contains any contractual requirement
with which there is a reasonable likelihood that Armitec or any other
party thereto will be unable to comply. Except as set forth on Schedule
3.17.1, the continuation, validity, and effectiveness of
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each Armitec Contract will in no way be affected by the consummation of
the transactions contemplated by this Agreement.
(d) Schedule 3.17.3 contains a true and correct list of
all customers (ranked by annual revenue) of Armitec, and the annual
revenue obtained from each such customer for the year ended December
31, 1999. No customer reflected in Schedule 3.17.3, whose purchases of
products and services are material to Armitec (individually or in the
aggregate) has terminated its business relationship nor has suspended
nor significantly reduced its purchases of products and services from
Armitec from the levels reflected therein, if any, with Armitec; nor
does Armitec have knowledge of facts which suggest that such a
termination, suspension or significant reduction is likely within the
reasonably foreseeable future. Except as indicated on Schedule 3.17.3,
there exists no actual or, to the knowledge of Armitec, any threatened
termination, cancellation, or limitation of, or any amendment,
modification, or change to any Armitec Contract, which would have a
material adverse effect on the business or the condition, financial or
otherwise, of Armitec, including without limitation, (i) the business
relationship of Armitec with any customer, distributor, or related
group of customers or distributors whose purchases individually or in
the aggregate are material to the operations and financial condition of
Armitec, (ii) the requirements of any customer or related group of
customers of Armitec whose purchases individually or in the aggregate
are material to the operations and financial condition of Armitec, or
(iii) the business relationship of Armitec with any material supplier
to Armitec. Except as indicated on Schedule 3.17.3, there is no
Contract with any customer, the performance of which by Armitec will
result in a loss to Armitec.
(e) Except as indicated on Schedule 3.17.3, no customer
listed on Schedule 3.17.3 has notified Armitec, nor is Armitec
otherwise aware that any customer listed on Schedule 3.17.3 has, or has
plans to, reduce the volume of purchases made from Armitec.
(f) None of the Armitec Contracts is for materials,
supplies, equipment, or services in excess of Armitec's normal
requirements or as needed for reasonably anticipated needs of its
business.
(g) Armitec has not granted any power of attorney
affecting or with respect to any of its business, affairs, or assets,
or any combination thereof, that remains outstanding.
(h) Attached to Schedule 3.17.1 is a true and correct
copy (and if oral, a description of material terms) of each Armitec
Contract listed on Schedule 3.17.1 and all modifications, amendments,
renewals, or extensions thereof.
(i) Except as reflected in Schedule 3.17.4, the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not terminate, breach, give rise to a right in
favor of any other party to an Armitec Contract
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to terminate such Contract, or constitute an event which with notice,
lapse of time or both, constitute an event of default under any
Contract.
SECTION 3.18. ENVIRONMENTAL MATTERS AND OSHA.
Except as set forth in Schedule 3.18.1:
(a) Armitec is and has been in compliance with all
environmental Laws. Armitec has not received notice of any
Environmental Claim filed or threatened against it or against any other
person or entity whose liability for any Environmental Claim has been
retained or assumed either contractually or by operation of law;
(b) Armitec has not disposed of, emitted, discharged,
handled, stored, transported, used, or released any Hazardous Materials
(or arranged for any of the foregoing), or exposed any employee or
other individual to any Hazardous Materials or condition so as to give
rise to any liability or corrective or remedial obligation under any
Environmental Laws;
(c) No Hazardous Materials are present in, on, or under
any properties owned, leased, or used at any time (including both land
and improvements thereon) by Armitec, and no reasonable likelihood
exists that any Hazardous Materials will come to be present in, on, or
under any properties owned, leased, or used at any time (including both
land and improvements thereon) by Armitec so as to give rise to any
material liability or corrective or remedial obligation under any
Environmental Laws.
As used herein, "Environmental Claim" means any notice, claim, act,
cause of action or investigation by any Person alleging potential liability
arising out of, based on or resulting from the presence, or release into the
environment, of any Hazardous Materials or any violation, or alleged violation,
of any Environmental Law. As used herein, "Environmental Laws" means all
federal, state, local and foreign laws and regulations relating to pollution or
protection of the environment or the protection of human health. As used herein,
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes, toxic
substances, radioactive and biological materials, asbestos-containing materials
(ACM), hazardous substances, petroleum and petroleum products or any fraction
thereof, excluding, however, any chemicals used or waste generated as a result
of typical office and janitorial activities. Except as set forth in Schedule
3.18.2, Armitec is in compliance with all applicable laws relating to employee
health and safety and has complied in the past with all applicable laws relating
to employee safety. Except as set forth in Schedule 3.18.2, Armitec has not
received any notice that past or present conditions of the assets and properties
of Armitec violate any applicable legal requirements or otherwise can be made
the basis of any claim, proceeding or investigation, based on OSHA violations or
otherwise related to employee health and safety. Except as set forth in Schedule
3.18.2, Armitec is not aware of any potential causes of action which may be
asserted against Armitec by third parties, including employees, former employees
and customers, arising out of (a) the handling or disposal of Hazardous
Materials by Armitec, (b) the violation of OSHA regulations, or (c) violation of
other applicable laws relating to employee safety.
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SECTION 3.19. INSURANCE.
Attached hereto as Schedule 3.19.1 is a list of all insurance policies
of Armitec setting forth with respect to each policy the name of the insurer, a
description of the policy, the dollar amount of coverage, the amount of the
premium, the date through which all premiums have been paid, and the expiration
date. Each insurance policy relating to the insurance referred to in Schedule
3.19.1 is in full force and effect, is valid and enforceable, and Armitec is not
in breach of or in default under any such policy. All policies listed on
Schedule 3.19.1 will be outstanding and duly in force at the Closing Date, the
premiums payable in respect of such policies have been paid in full, and none of
such policies provide for any retrospective premium adjustment or other
experience based liability on the part of Armitec. Armitec has not received any
notice of or any reason to believe that there is or has been any actual,
threatened, or contemplated termination or cancellation of any insurance policy
relating to the said insurance. Armitec has not since inception (a) been denied
or had revoked, canceled or rescinded any policy of insurance, or (b) self
insured against any risk ordinarily insured against by similar businesses.
Attached hereto as Schedule 3.19.2 is a true, correct and complete list and
summary of all claims which have been made under each insurance policy relating
to the said insurance. Armitec has not failed to give any notice or to present
any claim under any insurance policy in a due and timely fashion, and to the
best of its knowledge, all insurable risks are adequately covered by insurance
except for any exposure occasioned by lack of Directors' and Officers' insurance
coverage.
SECTION 3.20. EMPLOYEE RELATIONS AND EMPLOYEE AGREEMENTS.
(a) None of Armitec's employees is represented by a labor
organization. No petition for representation has ever been filed with
the National Labor Relations Board (the "NLRB") with respect to
Armitec's employees. Armitec is not aware of any union organizational
activity with respect to Armitec and have no reason to believe that any
such activity is being contemplated.
(b) Armitec is not in violation of applicable equal
employment opportunity laws, wage and hour laws, occupational safety
and health laws, federal labor laws, or any other laws of any
Government or Governmental Agency relating to employment. Schedule
3.20.2 attached hereto sets forth the status of all investigations,
claims, charges, and employment-related suits or controversies which
have occurred with respect to Armitec within the last 10 years or which
are presently pending or threatened with respect to Armitec under any
employment-related law of any Government or Governmental Agency
(including common law). Armitec has satisfied and performed fully all
judgments, decrees, conciliation agreements, or settlement agreements
by which it is bound or to which it is subject concerning
employment-related matters, and each such judgment, decree or agreement
is disclosed on Schedule 3.20.2.
(c) Except as set forth on Schedule 3.20.3, Armitec has
not entered into any employment agreement, and all employees can be
terminated at will. Armitec has no
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contractual obligation or special termination or severance arrangement
in respect of any employee.
(d) Except as set forth on Schedule 3.20.4 Armitec has
paid all wages due (including all required taxes, insurance and
withholding thereon). Schedule 3.20.4 attached hereto sets forth all
accrued vacation, sick leave and bonuses (including pro rata accruals
for a period of a year) due to employees of Armitec as of the Closing.
(e) Schedule 3.20.5 attached hereto sets forth each of
Armitec's employee's date of hire, position, present salary, amount of
bonus paid in the past year, and announced termination date (if any).
(f) Schedule 3.20.6 contains a true and complete list of
all the following agreements or plans of Armitec or any subsidiary of
Armitec which, together with Armitec constitutes a single employer
within the meaning of Section 414 of the Code (hereinafter collectively
referred to as the "Armitec Group") which are presently in effect or
which have been in effect at any time (if it may result in a material
liability), or, in the case of documents referred to in clause (i)
below, have been in effect at any time prior to the date hereof:
(i) "employee pension benefit plans" and
employee benefit plans" as defined in Sections 3(2) and 3(3)
of the Employee Retirement Income Security Act of 1974
("ERISA");
(ii) any other pension, profit sharing,
retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision,
dental, prescription drug, supplemental unemployment, layoff,
automobile, apprenticeship and training, day care,
scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement,
whether written or unwritten, formal or informal, including
any employee benefit plan covering any employees of Armitec
Group which any member of Armitec Group maintains or to which
any member of Armitec Group has any outstanding, present, or
future obligations to contribute or make payments under,
whether voluntary, contingent, or otherwise (the plans,
programs, policies, or arrangements described in clauses (ii)
or (iii) are herein collectively referred to as the "Armitec
Plans").
Included in said Schedule 3.20.6 are true and complete copies
of all documents as they may have been amended to the date hereof
involving or relating to clauses (i) and (ii) hereinabove, together
with all filings, IRS determination letters and financial statements,
including but not limited to, the most recent actuarial report for each
employee pension benefit plan and IRS Form 5500 for each Armitec Plan
for each of the five most recent plan years.
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(g) Except as to those plans identified on Schedule
3.20.7 as tax-qualified Armitec Plans (the "Armitec Qualified Plans"),
no member of Armitec Group maintains a tax-qualified employee plan
which meets or was intended to meet the requirements of Code Section
401 for the benefit of present or former employees. The Internal
Revenue Service has issued favorable determination letters to the
effect that each Armitec Qualified Plan qualifies under Code Section
401(a) and that any related trust is exempt from taxation under Code
Section 501(a), and such determination letters are in effect. Copies of
the most recent determination letters and any outstanding requests for
a determination letter with respect to each Armitec Qualified Plan have
been delivered to Armitec.Com. Armitec Qualified Plans have been
administered according to their terms, except for those terms which are
inconsistent with the changes required by the Tax Reform Act of 1986
and other acts, regulations, and rulings, in which case Armitec
Qualified Plans have been administered in accordance with the
provisions of those acts, regulations, and rulings in all material
respects. No member of Armitec Group or any fiduciary of any Armitec
Qualified Plan has done anything that would adversely affect the
qualified status of Armitec Qualified Plans or the related trusts.
Armitec Qualified Plans currently comply in form with the requirements
under Code Section 401(a), other than changes required by the Tax
Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1986 and
other acts, regulations, and rulings for which amendments are not yet
required. Any Armitec Qualified Plan subject to Code Sections 401(k) or
401(m) has been tested for compliance with, and has satisfied the
requirements of, Code Sections 401(k)(3), 401(m)(2), or both, as
application, for each plan year ending prior to the Closing Date.
(h) With respect to any Armitec Qualified Plan or any
member of Armitec Group, no termination liability to the Pension
Benefit Guaranty Corporation ("PBGC") has been or is expected to be
incurred or would be incurred if any Armitec Qualified Plan were
terminated on the Closing Date. If any Armitec Qualified Plan were
terminated on the Closing Date, the present value of all benefit
liabilities under Armitec Qualified Plan would not, as of the Closing
Date, exceed the then current value of the assets of such Armitec
Qualified Plan. No Armitec Qualified Plan has suffered any accumulated
funding deficiency within the meaning of ERISA Section 302 and Code
Section 412. Armitec has made all quarterly contributions required
under Code Section 412(m) and no conditions exist which would subject
the assets of Armitec or Armitec.Com to a lien under Code Section
412(m) or ERISA Section 4068. No member of Armitec Group has any
outstanding liability under Code Section 4971. As of the Closing Date,
all contributions required to have been made on or prior to the Closing
Date under Armitec Plans will have been made or have been accrued on
the Financial Statements and all required premium payments for Armitec
Qualified Plans have been made, when due, to PBGC. No event or
condition exists with respect to any Armitec Qualified Plan which could
be deemed a "reportable event" as defined in ERISA Section 4043, with
respect to which the 30-day notice requirement has not been waived and
which could result in a liability to Armitec.Com, and no condition
exists which would subject Armitec.Com to a fine under ERISA Section
4071. No amendment has occurred to any Armitec Qualified
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Plan which has required or which would require Armitec Group to provide
security under Code Section 401(a)(29).
(i) No member of Armitec Group has any past, present, or
future obligation to contribute to any multiemployer plan as defined in
ERISA Section 3(37).
(j) No member of Armitec Group nor any other
"disqualified person" or "party in interest" (as defined in Code
Section 4975 and ERISA Section 3(14), respectively) with respect to
Armitec Plans, has engaged in any "prohibited transaction" (as defined
in Code Section 4975 or ERISA Section 406). Armitec Group and all other
"fiduciaries" (as defined in ERISA Section 3(21)) with respect to
Armitec Plans have complied in all respects with the requirements of
ERISA Section 404. Neither Armitec Group nor any party in interest or
disqualified person with respect to Armitec Plans has taken or omitted
any action which could lead to the imposition of an excise tax under
the Code or a fine under ERISA against Armitec.Com or Armitec Plans.
SECTION 3.21. PATENTS; TRADEMARKS; RELATED CONTRACTS.
Attached hereto as Schedule 3.21 is a true, correct and complete list
of all of Armitec's intangible personal property, including but not limited to,
patents, trademarks, trade names, or trademark or trade name registrations,
domain name registrations, service marks, and copyrights or copyright
registrations (the "Proprietary Rights"). All of Armitec's Proprietary Rights
are valid, enforceable, in full force and effect and free and clear of any and
all security interests, liens, pledges and encumbrances of any nature or kind.
Armitec has not infringed upon and is not infringing upon any patent, trademark,
trade name, or trademark or trade name registration, service mark, copyright, or
copyright registration of any other Person.
SECTION 3.22. AVAILABILITY OF BOOKS AND RECORDS.
Armitec will make available to Armitec.Com for inspection and its due
diligence hereunder during business hours all of its tax, accounting, corporate
and financial books and records as well as its personnel and employment and
other records of any nature which are pertinent to this Agreement. Such books
and records pertaining to Armitec's business are true, correct and complete,
have been maintained on a current basis, and fairly reflect the basis for
Armitec's financial condition and results of operations as set forth in Armitec
Financial Statements. In 1999, Armitec changed its fiscal year ending to
December 31; however, prior to such time, Armitec has consistently used the
fiscal year ending August 31 as its taxable year and has consistently used the
accrual method as its method of accounting for tax purposes.
SECTION 3.23. BANK ACCOUNTS, CREDIT CARDS.
Schedule 3.23 contains a true, correct and complete list of each bank,
savings and loan association, brokerage house or other financial institution
with which Armitec has an account, line of credit, safe deposit box, or other
relationship, the account numbers thereof, and the names of all persons
authorized to withdraw funds or other property from, or otherwise act in
connection therewith. Schedule 3.23 contains a true, correct, and complete
listing of the name,
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business address, and residence address of each person who has a credit card
which is billed to Armitec. Except as set forth on Schedule 3.23, Armitec has no
bank account, brokerage account, line of credit, safe deposit box, or credit
card account.
SECTION 3.24. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as permitted or required by this Agreement or as set forth in
Schedule 3.24 or elsewhere herein, since December 31, 1999, the business of
Armitec has been conducted in the ordinary course consistent with past practices
and there has not been any material transaction or occurrence in which Armitec
has:
(a) incurred any indebtedness, obligation or liability
(contingent or otherwise), except normal trade or business obligations
incurred in the ordinary course of its business, none of which was
entered into for inadequate consideration and none of which exceeds
$10,000.00 in amount;
(b) discharged or satisfied any claim, security interest,
lien or encumbrance or paid any indebtedness, obligation or liability
(contingent or otherwise), except (i) current liabilities, (ii)
scheduled payments pursuant to obligations under contracts, agreements
or leases listed in this Agreement, or (iii) in the ordinary course of
business consistent with past practice of liabilities reflected or
reserved against in the Armitec Financial Statements or incurred since
such date in the ordinary course of business consistent with past
practice;
(c) permitted, allowed or suffered any of its assets or
properties to be subjected to any mortgage, pledge, lien, charge,
restriction, security interest or other encumbrance of any kind;
(d) sold, assigned, transferred, leased, disposed of, or
agreed to sell, assign, transfer, lease, or dispose of, any of its
assets or properties;
(e) acquired or leased any assets or property of any
other Person;
(f) canceled or compromised any debt or claim;
(g) waived or released any rights or claims;
(h) granted, or made any contract, agreement, promise or
commitment to grant, or otherwise incurred any obligation for any
increase in, any wage, salary or employee benefit, or entered into any
employment contract, bonus, stock option, profit sharing, pension,
incentive, retirement or other similar arrangement or plan with, any
officer, employee or other Person, except in accordance with and in
amounts not greater than provided for in written agreements between
Armitec and employees of Armitec entered into prior to December 31,
1999 (copies of which shall be furnished to Armitec.Com) and except for
merit raises to hourly employees in the ordinary course of business
consistent with past practice;
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(i) entered into any collective bargaining or labor
agreement (oral or written), made any commitment or incurred any
liability to any labor organization, or experienced any slowdown, work
interruption, strike or work stoppage;
(j) made any capital expenditure in excess of Ten
Thousand ($10,000.00) Dollars or entered into any commitment therefor;
(k) suffered any casualty loss or damage in excess of
$5,000 in the aggregate, whether or not such loss or damage is or was
covered by insurance;
(l) changed the nature of its business or its method of
accounting or accounting principle, practice or policy;
(m) other than in the ordinary course of business,
entered into any transaction, contract or commitment;
(n) terminated or modified, or agreed to the termination
or modification of, any Service Contract, Participation Agreement or
any of the Commitments;
(o) suffered a loss of any supplier or suppliers, which
loss (individually or in the aggregate) has had, or may have, an
adverse effect on its financial condition, results of operations,
business or prospects;
(p) suffered any material adverse change in its business,
operations, condition (financial or otherwise), liabilities, assets,
earnings, or prospects of the Business nor, to Armitec's knowledge, has
there been any event which has had or may reasonably be expected to
have a material adverse effect on the Business;
(q) transferred or granted any rights with respect to, or
disposed of or permitted to lapse any right to the use of any software,
patent, trademark, assumed name, service mark, trade name, copyright,
license, or application therefor or disposed of or disclosed to any
person not authorized to have such information any trade secret,
proprietary information, formula, process, or know-how not previously a
matter of public knowledge or existing in the public domain;
(r) incurred any long term indebtedness;
(s) paid, loaned, distributed (by dividend or otherwise),
or advanced any amounts to, sold, transferred, or leased any properties
or assets (real, personal or mixed, tangible or intangible) to,
purchased, leased, licensed, or otherwise acquired any properties or
assets from, or entered into any other agreement or arrangement with
(i) any Shareholder, officer, employee, or director of Armitec, (ii)
any corporation or partnership in which any Affiliate is an officer,
director, or holder directly or indirectly of five percent (5%) or more
of the outstanding equity or debt securities, or (iii) any person
controlling, controlled by, or under common control with any such
partner, Shareholder, officer, director, or Affiliate except for
compensation not exceeding the rate
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of compensation in effect at December 31, 1999, and for routine travel
advances to officers and employees;
(t) made or agreed to make any charitable contributions
or incurred or agreed to incur any non-business expenses in excess of
$1,000 in the aggregate;
(u) taken any other action neither in the ordinary course
of business and consistent with past practice nor provided for in this
Agreement;
(v) increased (or experienced any change in the
assumptions underlying or the methods of calculating) any bad debt,
contingency, or other reserve, other than in the ordinary course of
business consistent with past practice; or
(w) written down or written up the value of any inventory
(including write-downs by reason of shrinkage or markdowns), determined
as collectible any Accounts Receivable or any portion thereof which
were previously considered uncollectible, or written off as
uncollectible any Accounts Receivable or any portion thereof, except
for write-downs, write-ups, and write-offs in the ordinary course of
business consistent with past practice, none of which is material in
amount.
SECTION 3.25. RELATED PARTY TRANSACTIONS.
Except for what is shown on Schedule 3.25 attached hereto and in the
Armitec Form 10-K's and Q's, there are not and have been no, indebtedness,
obligations, agreements, undertakings, liabilities or commitments (contingent or
otherwise) of Armitec since 1995 to or from any past or present officer,
director, member, shareholder or any Person related to, controlling, controlled
by or under common control with any of the foregoing. All such indebtedness,
obligations, agreements, undertakings, liabilities or commitments currently
outstanding or currently in effect are listed on Schedule 3.25.
SECTION 3.26. ADVERSE CONDITIONS.
Armitec has no knowledge of any present or future condition, state of
facts or circumstances which has affected or may affect adversely the business
of Armitec or prevent Armitec from carrying on its business other than may be
disclosed elsewhere in this Agreement.
SECTION 3.27. ANNUAL REPORTS.
Armitec has filed all of its 10-K Annual Reports required to be filed
through December 31, 1999.
SECTION 3.28. CORRECTNESS OF REPRESENTATIONS.
No representation or warranty of Armitec in this Agreement or in any
Exhibit, certificate, or Schedule attached hereto or furnished pursuant hereto,
contains, or on the Closing Date will contain, any untrue statement of fact or
omits, or on the Closing Date will omit, to state any material fact necessary in
order to make the statements contained therein not misleading, and all
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such statements, representations, warranties, Exhibits, certificates, and
Schedules shall be true and complete in all material respects on and as of the
Closing Date as though made on that date. All copies of mortgages, indentures,
notes, leases, agreements, plans, Armitec contracts and other instruments listed
on or referred to in the Schedules delivered or furnished to Armitec pursuant to
this Agreement are true copies thereof.
SECTION 3.29. INVESTMENT INTENT.
Armitec represents and warrants to Armitec.Com and the Armitec.Com
Shareholders that Armitec is acquiring the Armitec.Com Shares (the "Acquired
Shares") under this Agreement for investment only and for its own account and
not as nominee or agent; nor are the said shares being acquired with a view to
their offer for resale, distribution or transfer of any part thereof nor with
any present intention of selling, granting any participation in, or otherwise
distributing the same; nor are they being purchased for subdivision or
fractionalization thereof. By executing this Agreement, Armitec represents:
(a) That Armitec has no contract, undertaking, agreement
or arrangement with any Person to sell, hypothecate, pledge, donate or
otherwise transfer (with or without consideration) any of the Acquired
Shares, and that Armitec has no present plan or intention to enter into
any such contract, undertaking, agreement or arrangement.
(b) That Armitec covenants and agrees that none of the
Acquired Shares shall be sold, assigned or otherwise transferred other
than in transactions which are not in violation of the Securities Act
and applicable state securities laws. Each stock certificate of the
Acquired Shares shall bear the following legend, unless such legend may
be removed in accordance with its terms:
THE SECURITIES REPRESENTED BY THIS STOCK CERTIFICATE (THE "SECURITIES")
HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933 (THE "1933 ACT") AND APPLICABLE STATE SECURITIES LAWS
(THE "STATE LAWS"). THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED OTHER THAN (I) PURSUANT TO AN EFFECTIVE REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE 1933 ACT AND THE STATE LAWS AND (II) UPON RECEIPT BY THE
ISSUER OF EVIDENCE SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933 ACT AND ANY
APPLICABLE STATE LAWS. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF
COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
SECTION 3.30. LITIGATION. Schedule 3.30 sets forth each instance in
which Armitec or any of its officers or directors (a) is the subject to any
unsatisfied judgment, order, decree, stipulation, injunction or charge or (b) is
a party to or, to the knowledge of Armitec, is threatened to be made a party to,
any charge, complaint, action, suit, proceeding, hearing or investigation of in
any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator.
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SECTION 3.31. LICENSES, PERMITS AND APPROVALS. Schedule 3.31 lists all
governmental and regulatory licenses, permits and approvals necessary to conduct
Armitec's business. All such licenses, permits and approvals are in full force
and effect. There are no violations by Armitec of, or any claims, or proceedings
pending or to the knowledge or Armitec threatened, challenging the validity of
or seeking to discontinue, any such licenses, permits or approvals.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ARMITEC.COM AND THE
ARMITEC.COM SHAREHOLDERS
Armitec.Com represents and warrants, and the Armitec.Com Shareholders
represent and warrant to the best of their knowledge, to Armitec (which
representations and warranties shall be valid and binding as of the time of
Closing) as follows:
SECTION 4.01. DUE ORGANIZATION; GOOD STANDING.
Armitec.Com is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia. Armitec.Com has the power
and authority to own, lease and operate its properties and to conduct its
business in each location where Armitec.Com owns, leases or operates its
property and conducts business, as such business is now being conducted by
Armitec.Com. Armitec.Com is duly qualified and is in good standing as a foreign
corporation in each of the jurisdictions in which the nature of the property or
assets owned by Armitec.Com or the nature of the operations or business
conducted by Armitec.Com requires such qualification. Complete and correct
copies of the Articles of Incorporation, as amended, and the Bylaws, as amended,
of Armitec.Com, as certified by the Secretary of State of Georgia and the
Secretary of Armitec.Com, respectively, are attached hereto collectively as
Schedule 4.01.
SECTION 4.02. AUTHORIZED CAPITAL OF ARMITEC.COM.
The authorized capital of Armitec.Com consists of _________(_____)
shares of Common Stock, ONE HUNDRED (100) shares of which are validly issued and
outstanding, fully paid and nonassessable. The relative rights, powers,
preferences, qualifications, limitations, and restrictions in respect of each
class of authorized capital stock of Armitec.Com are as set forth in the
Articles of Incorporation, attached as Schedule 4.02 and all such rights,
powers, preferences, qualifications, limitations, and restrictions are valid,
binding, and enforceable and in accordance with all applicable laws. Except as
contemplated by this Agreement or as set forth in Schedule 4.02, (a) no
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of Armitec.Com is
authorized or outstanding, and (b) there is no commitment by Armitec.Com to (i)
issue any equity securities of Armitec.Com, or any subscriptions, warrants,
options, convertible securities, or other rights to purchase or acquire equity
securities of Armitec.Com or securities convertible into or exchangeable for
equity securities of Armitec.Com or (ii) distribute to Armitec.Com Shareholders
or other Persons any equity securities of Armitec.Com, any evidence of
indebtedness, or any assets of Armitec.Com. Except as set forth in the
Certificate of Incorporation, Armitec.Com has no obligation or right (contingent
or other) to purchase,
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redeem, or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any other distribution in respect
thereof. Except as set forth in Schedule 4.02, there are no voting trusts or
agreements, nor are there any preemptive rights relating to any outstanding
securities of Armitec.Com (whether or not Armitec.Com is a party thereto). All
outstanding securities of Armitec.Com were issued in compliance with all
applicable federal and state securities laws.
SECTION 4.03. FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Attached hereto as Schedule 4.03 are true, correct
and complete copies of the audited Consolidated Balance Sheet of
Armitec.com and its subsidiaries from inception through August 31,
2000, and the audited, consolidated statements of income, Cash Flow and
Stockholders equity for the same period, together with the notes
thereto and the report thereon of Habif Arogeti and Wynne PC,
independent certified public accountants.
(b) The Armitec.Com Financial Statements (i) are in
accordance with the books and records of Armitec.Com, (ii) present
fairly the financial condition of Armitec.Com as of the respective
dates indicated and the results of operations for such periods, (iii)
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, and
reflect adequate reserves for all liabilities and losses. Armitec.Com
has no material liabilities or obligations (secured or unsecured,
whether accrued, absolute, direct, indirect, contingent, or otherwise,
and whether due or to become due) that are not fully accrued or
reserved against in the Armitec.Com Financial Statements or described
in Schedule 4.03 Armitec.Com has not received any advice or
notification from its independent certified public accountants that
Armitec.Com has used any improper accounting practice that would have
the effect of not reflecting or incorrectly reflecting in the
Armitec.Com Financial Statements or the books and records of
Armitec.Com, any properties, assets, liabilities, revenues, or
expenses. The Armitec.Com Financial Statements do not contain any items
of special or nonrecurring income, or other income not earned in the
ordinary course of business, except as set forth in the notes to the
Armitec.Com Financial Statements or on Schedule 4.03. The books,
records, and accounts of Armitec.Com accurately and fairly reflect, in
reasonable detail, all transactions, assets, and liabilities of
Armitec.Com. Armitec.Com has not engaged in any transaction, maintained
any bank account, or used any of the funds of Armitec.Com, except for
transactions, bank accounts, and funds which have been and are
reflected in the normally maintained books and records of Armitec.Com.
(c) Armitec.Com has no material liabilities or
obligations (secured or unsecured, whether accrued, absolute, direct,
indirect, contingent, or otherwise, and whether due or to become due)
that are not fully accrued or reserved against in the Armitec.Com
Financial Statements, other than:
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(i) liabilities incurred in the ordinary course
of business subsequent to the date of the Armitec.Com
Financial Statements consistent with past practice, none of
which deviate in any material respect from liabilities
incurred in prior comparable fiscal periods;
(ii) obligations under Contracts listed on
Schedule 4.03 or incurred in the ordinary course of business
and not required under generally accepted accounting
principles to be reflected in the Armitec.Com Financial
Statements, which liabilities and obligations, individually or
in the aggregate, are not material to the financial condition
or operating results of Armitec.Com; and
(iii) the liabilities listed on Schedule 4.03.
SECTION 4.04. TAXES.
Except as set forth on Schedule 4.04, Armitec.Com has filed or obtained
filing extensions for all tax returns, federal, state, county, and local,
required to be filed by it, and Armitec.Com has paid or established adequate
reserves (in accordance with generally accepted accounting principles) for the
payment of all taxes shown to be due by such returns as well as all other taxes,
assessments, and governmental charges which have become due or payable,
including, without limitation, all taxes which Armitec.Com is obligated to
withhold from amounts owing to employees, creditors, and third parties. The
federal income tax returns of Armitec.Com have never been audited by the
Internal Revenue Service and no state income or sales tax returns of Armitec.Com
have been audited. No deficiency assessment with respect to or proposed
adjustment of Armitec.Com's federal, state, county, or local taxes is pending
or, to the best of the Armitec.Com's knowledge, threatened. There is no tax
lien, whether imposed by any federal, state, county, or local taxing authority,
outstanding against the assets, properties, or business of Armitec.Com. Neither
Armitec.Com nor any of its shareholders has ever filed a consent pursuant to
Section 341(f) of the IRC (as hereinafter defined), relating to collapsible
corporations. Any amounts reserved in the Armitec.Com Financial Statements for
taxes are sufficient for the payment of all accrued and unpaid federal, state
and local taxes of all types, including interest and penalties thereon of
Armitec.Com for or on account of which Armitec.Com is or may become liable in
any manner whatsoever for the quarter ending June 30, 2000 and for all prior
periods.
SECTION 4.05. CONDUCT OF BUSINESS. Since its inception:
(a) ORDINARY COURSE. The business of Armitec.Com has been
operated, and prior to the Closing will be operated, only in the
ordinary course.
(b) NO MATERIAL CHANGE. Since June 30, 2000, except as
set forth on Schedule 4.05, there has been, and prior to the Closing
there will be, no material adverse change, individually or in the
aggregate, in the condition (financial or otherwise) of Armitec.Com or
in the assets, liabilities or business of Armitec.Com.
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(c) NO LOSS OR DESTRUCTION. There has been, and prior to
the Closing there will be, no damage, destruction or loss or other
events or conditions of any character, or any pending or threatened
developments, which individually or in the aggregate, would materially
and adversely affect the condition (financial or otherwise) or the
assets, liabilities or business of Armitec.Com.
SECTION 4.06. LEGAL PROCEEDINGS.
Except as set forth on Schedule 4.06 attached hereto and incorporated
by reference herein, there is, and as of the Closing there will be, no material
action, suit, proceeding or investigation pending or, to the best knowledge of
Armitec.Com and the Armitec.Com Shareholders, threatened, against or affecting
Armitec.Com or any of its assets. Armitec.Com is not, nor as of the Closing will
be, in default under or with respect to any judgment, order, writ, injunction or
decree of any court or of any federal, state, municipal or other governmental
authority, department, commission, board, agency or other instrumentality.
Armitec.Com has, and as of the Closing will have, complied in all material
respects with all laws, rules, regulations and orders applicable to it and to
its businesses; has, and as of the Closing will have, performed in all material
respects all of its material obligations and duties to be performed by it to the
extent required in accordance with their respective terms; and is not, and as of
the Closing will not be, in any material respect in default under or in breach
of any material contract, agreement, commitment or other instrument to which it
is subject or a party or under which it is bound.
SECTION 4.07. REQUIRED APPROVALS. The Board of Directors of Armitec.Com
and the Armitec.Com Shareholders have duly authorized the execution and delivery
of this Agreement by Armitec.Com, the exchange of the Armitec.Com Shares and the
transactions hereby contemplated, and no further action, confirmation or
ratification by the Armitec.Com Shareholders or by any other person, entity or
governmental authority is required in connection therewith. Armitec.Com and the
Armitec.Com Shareholders have the power and authority to execute and deliver
this Agreement, to consummate the transactions hereby contemplated and to take
all other actions required to be taken by them pursuant to the provisions
hereof. This Agreement is valid and binding upon Armitec.Com and the Armitec.Com
Shareholders in accordance with its terms. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
constitute a violation or breach of the Articles of Incorporation, as amended,
or the Bylaws, as amended, of Armitec.Com, or any agreement, stipulation, order,
writ, injunction, decree, law, rule or regulation applicable to Armitec.Com or
the Armitec.Com Shareholders.
SECTION 4.08. OFFICERS AND DIRECTORS. Attached hereto as Schedule 4.08
is a list of all Officers and Directors of Armitec.Com.
SECTION 4.09. NO UNTRUE STATEMENTS. Neither this Agreement nor any
written information, statement, list or certificate furnished or to be furnished
to Armitec pursuant to this Agreement or in connection with this Agreement or
any of the transactions contemplated by this Agreement contains, or as of the
Closing will contain, any untrue statement of a material fact or
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omits, or as of the Closing will omit, a material fact necessary in order to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
SECTION 4.10. SUBSIDIARIES. Except as set forth on Schedule 4.10,
Armitec.Com does not have any subsidiaries and does not, directly or indirectly,
own a controlling interest in any corporation, partnership, joint venture, or
other entity.
SECTION 4.11. REAL PROPERTY. Except as set forth on Schedule 4.11,
Armitec.Com does not own any real estate.
SECTION 4.12. LEASED REAL PROPERTY. Schedule 4.12 contains a true and
correct list of each parcel of real property leased by Armitec.Com (the
"Armitec.Com Leased Real Property"). Attached to Schedule 4.12 is a true and
correct copy of each lease pursuant to which Armitec.Com leases the Armitec.Com
Leased Real Property and any amendments, extensions, and renewals thereof (the
"Armitec.Com Real Property Leases"). Each Armitec.Com Real Property Lease is in
full force and effect and there is no existing material default or event of
default, real or claimed, or event which with notice or lapse of time or both
would constitute a material default thereunder. Except as described in Schedule
4.12, Armitec.Com's interest in the Armitec.Com Real Property Leases is free and
clear of any mortgages and liens, and is not subject to any deeds of trust,
assignments, subleases, or rights of any third parties other than the lessor
thereof. Except as described in Schedule 4.12, the continuation, validity, and
effectiveness of each Armitec.Com Real Property Lease will in no way be affected
by the consummation of the transactions contemplated by this Agreement.
SECTION 4.13. TANGIBLE PERSONAL PROPERTY. Attached hereto as Schedule
4.13 is a true, correct and complete list of all tangible personal property
owned by Armitec.Com or used by it in the conduct of its business, including,
but not limited to, all equipment, machinery and fixtures (collectively, the
"Armitec.Com Personal Property"), indicating whether it is owned or the manner
in which it is otherwise utilized by Armitec.Com. Armitec.Com has sole and
exclusive, good and merchantable title to all of the Armitec.Com Personal
Property owned by it, free and clear of all pledges, claims, liens,
restrictions, security interests, charges and other encumbrances except those
contained on Schedule 4.13. All of the Armitec.Com Personal Property is in good
repair and good operating condition, fit for its intended purposes, and is
adequate for the continuation of Armitec.Com's business as presently conducted.
SECTION 4.14. CONTRACTS.
(a) Schedule 4.14.1 contains a true and correct list of
all contracts, agreements, or understandings, written or oral, by which
Armitec.Com receives any right or benefit or undertakes any liability
or obligation (the "Armitec.Com Contracts"). Armitec.Com has delivered
or has otherwise made available to Armitec a correct and complete copy
of each contract or agreement set forth in Schedule 4.14.1. Except as
listed on Schedule 4.14.1, Armitec.Com is not a party to any written or
oral:
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(i) agreement, contract, or commitment with any
present or former employee or consultant or for the employment
of any person, including any consultant, contractor, or agent
who performs services for Armitec.Com;
(ii) agreement, contract, or commitment for the
future purchase of, or payment for, supplies or products, or
for the performance of services by a third party which
supplies, products, or services are used by Armitec.Com
involving in any one case an amount or value of five thousand
dollars ($5,000) or more;
(iii) lease (relating to real or personal
property) under which Armitec.Com is lessor or lessee;
(iv) license, franchise, assignment or other
agreement of Armitec.Com relating to trademarks, trade names,
patents, copyrights and service marks (or applications
therefor), unpatented designs or styles, know-how and
technical assistance;
(v) permit relating to the operation of the
business of Armitec.Com;
(vi) agreement for the purchase, sale or lease of
goods, materials, supplies, machinery, equipment, capital
assets and services having a cost in excess of Ten Thousand
($10,000.00) Dollars in any one instance or in excess of
Twenty-five Thousand ($25,000.00) Dollars in the aggregate;
(vii) agreement or arrangement with any supplier,
distributor, franchisor, dealer, sales agent, broker or
representative;
(viii) agreement or arrangement for the
construction, modification or improvement of any building or
structure having a cost in excess of Ten Thousand ($10,00.00)
Dollars, or any other capital expenditure involving payments
in excess of Ten Thousand ($10,000.00) Dollars;
(ix) agreement or understanding which is material
in nature, involves the payment or receipt, in any 12 month
period, of more than Ten Thousand ($10,000.00) Dollars or has
a term of more than twelve (12) months;
(x) note, debenture, bond, equipment trust
agreement, letter of credit agreement, loan agreement, or
other contract or commitment for the borrowing or lending of
money, or agreement or arrangement for a line of credit or
guarantee, pledge, or undertaking of the indebtedness of any
other person relating to Armitec.Com's business;
(xi) agreement, contract, or commitment for any
charitable or political contribution relating to Armitec.Com's
business;
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(xii) agreement, contract, commitment, or
outstanding proposal pursuant to which Armitec.Com sells, or
proposes to sell, products and services for any amount or
value;
(xiii) agreement, contract, or commitment limiting
or restraining Armitec.Com, its business, or any successor
thereto from engaging or competing in any manner or in any
business;
(xiv) material agreement, contract, or commitment
relating to Armitec.Com's business not made in the ordinary
course of business, or
(xv) any distributor agreement, reseller
agreement, franchise agreement, or any other agreement which
authorizes Armitec.Com to (A) sell products or services of any
other person or entity, or (B) use the trademarks, trade
names, or trade styles of any other Person in Armitec.Com's
business.
(b) Schedule 4.14.2 contains a true and correct list of
all commitments for capital expenditures that have been approved or
made prior to the date of this Agreement by Armitec.Com and that remain
outstanding as of the date hereof.
(c) Each of the Armitec.Com Contracts was entered into in
the ordinary course of business on terms substantially consistent with
Armitec.Com's practice prior thereto, is in full force and effect, and
there exists no breach or violation of, or default by Armitec.Com
under, any of the Armitec.Com Contracts nor, to the knowledge of
Armitec.Com by any other party to such Contract, or any event which,
with notice or the lapse of time, or both, will create a breach or
violation of, or default under by Armitec.Com nor, to the knowledge of
Armitec.Com by any other party to such Contract. There is no
Armitec.Com Contract that contains any contractual requirement with
which there is a reasonable likelihood that Armitec.Com or any other
party thereto will be unable to comply. Except as set forth on Schedule
4.14.1, the continuation, validity, and effectiveness of each
Armitec.Com Contract will in no way be affected by the consummation of
the transactions contemplated by this Agreement.
(d) Schedule 4.14.3 contains a true and correct list of
all customers (ranked by annual revenue) of Armitec.Com, and the
revenue obtained from each such customer, since inception. No customer
reflected therein whose purchases of products and services are material
to Armitec.Com (individually or in the aggregate) has terminated,
suspended, or significantly reduced its purchases of products and
services from Armitec.Com from the levels reflected therein, nor does
Armitec.Com have knowledge of facts which suggest that such a
termination, suspension, or significant reduction is likely within the
reasonably foreseeable future. Except as indicated on Schedule 4.14.3,
there exists no actual or, to the knowledge of Armitec.Com, any
threatened termination, cancellation, or limitation of, or any
amendment, modification, or change to any Armitec.Com Contract, which
would have a material adverse effect on the business or the condition,
financial or otherwise, of Armitec.Com, including without limitation:
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(i) the business relationship of Armitec.Com
with any customer, distributor, or related group of customers
or distributors whose purchases individually or in the
aggregate are material to the operations and financial
condition of Armitec.Com;
(ii) the requirements of any customer or related
group of customers of Armitec.Com whose purchases individually
or in the aggregate are material to the operations and
financial condition of Armitec.Com; or
(iii) the business relationship of Armitec.Com
with any material supplier to Armitec.Com. Except as indicated
on Schedule 4.14.3, there is no Contract with any customer,
the performance of which by Armitec.Com will result in a loss
to Armitec.Com.
(e) Except as indicated on Schedule 4.14.3, no customer
listed on Schedule 4.14.3 has notified Armitec.Com, nor is Armitec.Com
otherwise aware that any customer listed on Schedule 4.14.3 has, or has
plans to, reduce the volume of purchases made from Armitec.Com.
(f) None of the Armitec.Com Contracts is for materials,
supplies, equipment, or services in excess of Armitec.Com's normal
requirements or as needed for reasonably anticipated needs of its
business.
(g) Armitec.Com has not granted any power of attorney
affecting or with respect to any of its business, affairs, or assets,
or any combination thereof, that remains outstanding.
(h) Attached to Schedule 4.14.1 is a true and correct
copy (and if oral, a description of material terms) of each Armitec.Com
Contract listed on Schedule 4.14.1 and all modifications, amendments,
renewals, or extensions thereof.
(i) Except as reflected in Schedule 4.14.4, the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby and thereby will not terminate, breach, give rise
to a right in favor of any other party to a Armitec.Com Contract to
terminate such Contract, or constitute an event which with notice,
lapse of time or both, constitute an event of default under any
Contract.
SECTION 4.15. BROKERS.
Armitec.Com has entered into an agreement with VisionQuest Securities,
LLC for the provision of broker services in connection with this Agreement.
Except for the foregoing, neither Armitec.Com nor any Affiliate of Armitec.Com
has any contract, arrangement or understanding with, or has incurred any
obligation or liability to, any broker, finder, investment banker, intermediary
or similar agent with respect to this Agreement or the transactions contemplated
hereby.
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SECTION 4.16. ENVIRONMENTAL MATTERS AND OSHA.
Except as set forth in Schedule 4.16.1:
(a) Armitec.Com is and has been in compliance with all
Environmental Laws. Armitec.Com has not received notice of any
Environmental Claim filed or threatened against it or against any other
person or entity whose liability for any Environmental Claim has been
retained or assumed either contractually or by operation of law;
(b) Armitec.Com has not disposed of, emitted, discharged,
handled, stored, transported, used, or released any Hazardous Materials
(or arranged for any of the foregoing), or exposed any employee or
other individual to any Hazardous Materials or condition so as to give
rise to any liability or corrective or remedial obligation under any
Environmental Laws;
(c) No Hazardous Materials are present in, on, or under
any properties owned, leased, or used at any time (including both land
and improvements thereon) by Armitec.Com, and no reasonable likelihood
exists that any Hazardous Materials will come to be present in, on, or
under any properties owned, leased, or used at any time (including both
land and improvements thereon) by Armitec.Com so as to give rise to any
material liability or corrective or remedial obligation under any
Environmental Laws.
As used herein, "Environmental Claim" means any notice, claim, act,
cause of action or investigation by any Person alleging potential liability
arising out of, based on or resulting from the presence, or release into the
Environment, of any Hazardous Materials or any violation, or alleged violation,
of any Environmental Law. As used herein, "Environmental Laws" means all
federal, state, local and foreign laws and regulations relating to pollution or
protection of the environment or the protection of human health. As used herein,
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes, toxic
substances, radioactive and biological materials, asbestos-containing materials
(ACM), hazardous substances, petroleum and petroleum products or any fraction
thereof, excluding, however, any chemicals used or waste generated as a result
of typical office and janitorial activities. Except as set forth in Schedule
4.16.2, Armitec.Com is in compliance with all applicable laws relating to
employee health and safety and has not received any notice that past or present
conditions of the assets and properties of Armitec.Com violate any applicable
legal requirements or otherwise can be made the basis of any claim, proceeding,
or investigation, based on OSHA violations or otherwise related to employee
health and safety.
SECTION 4.17. INSURANCE. Attached hereto as Schedule 4.17.1 is a list
of all insurance policies of Armitec.Com setting forth with respect to each
policy the name of the insurer, a description of the policy, the dollar amount
of coverage, the amount of the premium, the date through which all premiums have
been paid, and the expiration date. Each insurance policy relating to the
insurance referred to in Schedule 4.17.1 is in full force and effect, is valid
and enforceable, and Armitec.Com is not in breach of or in default under any
such policy, nor received any notice of or any reason to believe that there is
or has been any actual, threatened, or
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contemplated termination or cancellation of any insurance policy relating to the
insurance referred to in Schedule 4.17.1. Attached hereto as Schedule 4.17.2 is
a true, correct and complete list and summary of all claims which have been made
under each insurance policy relating to the insurance referred to in Schedule
4.17.2. Armitec.Com has not failed to give any notice or to present any claim
under any insurance policy in a due and timely fashion.
SECTION 4.18. EMPLOYEE RELATIONS AND EMPLOYMENT AGREEMENTS.
(a) None of Armitec.Com's employees is represented by a
labor organization. No petition for representation has ever been filed
with the National Labor Relations Board (the "NLRB") with respect to
Armitec.Com's employees. Armitec.Com is not aware of any union
organizational activity with respect to Armitec.Com and has no reason
to believe that any such activity is being contemplated.
(b) Armitec.Com is not in violation of applicable equal
employment opportunity laws, wage and hour laws, occupational safety
and health laws, federal labor laws, or any other laws of any
Government or Governmental Agency relating to employment. Schedule
4.18.2 attached hereto sets forth the status of all investigations,
claims, charges, and employment-related suits or controversies which
have occurred with respect to Armitec.Com within the last 10 years or
which are presently pending or threatened with respect to Armitec.Com
under any employment-related law of any Government or Governmental
Agency (including common law). Armitec.Com has satisfied and performed
fully all judgments, decrees, conciliation agreements, or settlement
agreements by which it is bound or to which it is subject concerning
employment-related matters, and each such judgment, decree or agreement
is disclosed on Schedule 4.18.2.
(c) Except as set forth on Schedule 4.18.3, Armitec.Com
has not entered into any employment agreement, and all employees can be
terminated at will. Armitec.Com has no contractual obligation or
special termination or severance arrangement in respect of any
employee.
(d) Except as set forth on Schedule 4.18.4 Armitec.Com
has paid all wages due (including all required taxes, insurance and
withholding thereon). Schedule 4.18.4 attached hereto sets forth all
accrued vacation, sick leave and bonuses (including pro rata accruals
for a period of a year) due to employees of Armitec.Com as of the
Closing.
(e) Schedule 4.18.5 attached hereto sets forth each of
Armitec.Com's employee's date of hire, position, present salary, amount
of bonus paid in the past year, and announced termination date (if
any).
(f) Schedule 4.18.6 contains a true and complete list of
all the following agreements or plans of Armitec.Com or any subsidiary
of Armitec.Com which, together with Armitec.Com constitutes a single
employer within the meaning of Section 414 of the Code (hereinafter
collectively referred to as the"Armitec.Com Group") which are presently
in effect or which have been in effect at any time (if it may result in
a material
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liability), or, in the case of documents referred to in clause (i)
below, have been in effect at any time prior to the date hereof:
(i) "employee pension benefit plans" and
"employee benefit plans" as defined in Sections 3(2) and 3(3)
of the Employee Retirement Income Security Act of 1974
("ERISA");
(ii) any other pension, profit sharing,
retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision,
dental, prescription drug, supplemental unemployment, layoff,
automobile, apprenticeship and training, day care,
scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement,
whether written or unwritten, formal or informal, including
any employee benefit plan covering any employees of
Armitec.Com Group which any member of Armitec.Com Group
maintains or to which any member of Armitec.Com Group has any
outstanding, present, or future obligations to contribute or
make payments under, whether voluntary, contingent, or
otherwise (the plans, programs, policies, or arrangements
described in clauses (ii) or (iii) are herein collectively
referred to as the "Armitec.Com Plans").
Included in said Schedule 4.18.6 are true and complete copies of all
documents as they may have been amended to the date hereof involving or relating
to clauses (i) and (ii) hereinabove, together with all filings, IRS
determination letters and financial statements, including but not limited to,
the most recent actuarial report for each employee pension benefit plan and IRS
Form 5500 for each Armitec.Com Plan for each of the five most recent plan years.
(g) Except as to those plans identified on Schedule
4.18.2 as tax-qualified Armitec.Com Plans (the "Armitec.Com Qualified
Plans"), no member of Armitec.Com Group maintains a tax-qualified
employee plan which meets or was intended to meet the requirements of
Code Section 401 for the benefit of present or former employees. The
Internal Revenue Service has issued favorable determination letters to
the effect that each Armitec.Com Qualified Plan qualifies under Code
Section 401(a) and that any related trust is exempt from taxation under
Code Section 501(a), and such determination letters are in effect.
Copies of the most recent determination letters and any outstanding
requests for a determination letter with respect to each Armitec.Com
Qualified Plan have been delivered to Armitec. Armitec.Com Qualified
Plans have been administered according to their terms, except for those
terms which are inconsistent with the changes required by the Tax
Reform Act of 1986 and other acts, regulations, and rulings, in which
case Armitec.Com Qualified Plans have been administered in accordance
with the provisions of those acts, regulations, and rulings in all
material respects. No member of Armitec.Com Group or any fiduciary of
any Armitec.Com Qualified Plan has done anything that would adversely
affect the qualified status of Armitec.Com Qualified Plans or the
related trusts. Armitec.Com Qualified Plans currently comply in form
with the requirements under Code Section 401(a), other than changes
required by the Tax Reform
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Act of 1986, the Omnibus Budget Reconciliation Act of 1986 and other
acts, regulations, and rulings for which amendments are not yet
required. Any Armitec.Com Qualified Plan subject to Code Sections
401(k) or 401(m) has been tested for compliance with, and has satisfied
the requirements of, Code Sections 401(k)(3), 401(m)(2), or both, as
application, for each plan year ending prior to the Closing Date.
(h) With respect to any Armitec.Com Qualified Plan or any
member of Armitec.Com Group, no termination liability to the Pension
Benefit Guaranty Corporation ("PBGC") has been or is expected to be
incurred or would be incurred if any Armitec.Com Qualified Plan were
terminated on the Closing Date. If any Armitec.Com Qualified Plan were
terminated on the Closing Date, the present value of all benefit
liabilities under Armitec.Com Qualified Plan would not, as of the
Closing Date, exceed the then current value of the assets of such
Armitec.Com Qualified Plan. No Armitec.Com Qualified Plan has suffered
any accumulated funding deficiency within the meaning of ERISA Section
302 and Code Section 412. Armitec.Com has made all quarterly
contributions required under Code Section 412(m) and no conditions
exist which would subject the assets of Armitec.Com or Armitec to a
lien under Code Section 412(m) or ERISA Section 4068. No member of
Armitec.Com Group has any outstanding liability under Code Section
4971. As of the Closing Date, all contributions required to have been
made on or prior to the Closing Date under Armitec.Com Plans will have
been made or have been accrued on the Financial Statements and all
required premium payments for Armitec.Com Qualified Plans have been
made, when due, to PBGC. No event or condition exists with respect to
any Armitec.Com Qualified Plan which could be deemed a "reportable
event" as defined in ERISA Section 4043, with respect to which the
30-day notice requirement has not been waived and which could result in
a liability to Armitec.Com or Armitec, and no condition exists which
would subject Armitec.Com to a fine under ERISA Section 4071. No
amendment has occurred to any Armitec.Com Qualified Plan which has
required or which would require Armitec.Com Group to provide security
under Code Section 401(a)(29).
(i) No member of Armitec.Com Group has any past, present,
or future obligation to contribute to any multiemployer plan as defined
in ERISA Section 3(37).
(j) No member of Armitec.Com Group nor any other
"disqualified person" or "party in interest" (as defined in Code
Section 4975 and ERISA Section 3(14), respectively) with respect to
Armitec.Com Plans, has engaged in any "prohibited transaction" (as
defined in Code Section 4975 or ERISA Section 406). Armitec.Com Group
and all other "fiduciaries" (as defined in ERISA Section 3(21)) with
respect to Armitec.Com Plans have complied in all respects with the
requirements of ERISA Section 404. Neither Armitec.Com Group nor any
party in interest or disqualified person with respect to Armitec.Com
Plans has taken or omitted any action which could lead to the
imposition of an excise tax under the Code or a fine under ERISA
against Armitec.Com Plans.
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SECTION 4.19. PATENTS; TRADEMARKS; RELATED TRADEMARKS. Attached hereto
as Schedule 4.19 is a true, correct and complete list of all of Armitec.Com's
intangible personal property, including, but not limited to, all patents,
trademarks, trade names, or trademark or trade name registrations, domain name
registrations, service marks, and copyrights or copyright registrations
("Armitec.Com's Proprietary Rights"). All of Armitec.Com's Proprietary Rights
are valid, enforceable, in full force and effect and free and clear of any and
all security interests, liens, pledges and encumbrances of any nature or kind.
Armitec.Com has not infringed upon and is not infringing upon any patent,
trademark, trade name, or trademark or trade name registration, service mark,
copyright, or copyright registration of any other Person.
SECTION 4.20. BOOKS AND RECORDS; FISCAL YEAR; METHOD OF ACCOUNTING.
Armitec.Com will make available to Armitec for inspection and its due diligence
hereunder during business hours all of its tax, accounting, corporate and
financial books and records as well as its personnel and employment and other
records of any nature which are pertinent to this Agreement. Such books and
records pertaining to Armitec.Com's business are true, correct and complete,
have been maintained on a current basis, and fairly reflect the basis for
Armitec.Com's financial condition and results of operations as set forth in the
Armitec.Com Financial Statements. Armitec.Com has consistently used the fiscal
year ending December 31 as its taxable year and has consistently used the
accrual method as its method of accounting for tax purposes.
SECTION 4.21. BANK ACCOUNTS; CREDIT CARDS. Schedule 4.21 contains a
true, correct and complete list of each bank, savings and loan association,
brokerage house or other financial institution with which Armitec.Com has an
account, line of credit, safe deposit box, or other relationship, the account
numbers thereof, and the names of all persons authorized to withdraw funds or
other property from, or otherwise act in connection therewith. Schedule 4.21
contains a true, correct, and complete listing of the name, business address,
and residence address of each person who has a credit card which is billed to
Armitec.Com. Except as set forth on Schedule 4.21, Armitec.Com has no bank
account, brokerage account, line of credit, safe deposit box, or credit card
account.
SECTION 4.22. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as permitted
or required by this Agreement or as set forth in Schedule 4.22, since inception,
the business of Armitec.Com has been conducted in the ordinary course consistent
with past practices and there has not been any material transaction or
occurrence in which Armitec.Com has:
(a) incurred any indebtedness, obligation or liability
(contingent or otherwise), except normal trade or business obligations
incurred in the ordinary course of its business, none of which was
entered into for inadequate consideration and none of which exceeds
$25,000.00 in amount;
(b) discharged or satisfied any claim, security interest,
lien or encumbrance or paid any indebtedness, obligation or liability
(contingent or otherwise), except (i) current liabilities, (ii)
scheduled payments pursuant to obligations under contracts, agreements
or leases listed in this Agreement, or
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(i) (iii) in the ordinary course of business
consistent with past practice of liabilities reflected or
reserved against in the Armitec.Com Financial Statements or
incurred since such date in the ordinary course of business
consistent with past practice;
(c) permitted, allowed or suffered any of its assets or
properties to be subjected to any mortgage, pledge, lien, charge,
restriction, security interest or other encumbrance of any kind;
(d) sold, assigned, transferred, leased, disposed of, or
agreed to sell, assign, transfer, lease, or dispose of, any of its
assets or properties;
(e) acquired or leased any assets or property of any
other Person;
(f) canceled or compromised any debt or claim;
(g) waived or released any rights or claims;
(h) granted, or made any contract, agreement, promise or
commitment to grant, or otherwise incurred any obligation for any
increase in, any wage, salary or employee benefit, or entered into any
employment contract, bonus, stock option, profit sharing, pension,
incentive, retirement or other similar arrangement or plan with, any
officer, employee or other Person, except in accordance with and in
amounts not greater than provided for in written agreements between
Armitec.Com and employees of Armitec.Com entered into prior to June 30,
2000 and except for merit raises to hourly employees in the ordinary
course of business consistent with past practice;
(i) entered into any collective bargaining or labor
agreement (oral or written), made any commitment or incurred any
liability to any labor organization, or experienced any slowdown, work
interruption, strike or work stoppage;
(j) made any capital expenditure in excess of Ten
Thousand ($10,000.00) Dollars or entered into any commitment therefor;
(k) suffered any casualty loss or damage in excess of
$5,000 in the aggregate, whether or not such loss or damage is or was
covered by insurance;
(l) changed the nature of its business or its method of
accounting or accounting principle, practice or policy;
(m) other than in the ordinary course of business,
entered into any transaction, contract or commitment;
(n) terminated or modified, or agreed to the termination
or modification of, any Service Contract, Participation Agreement or
any of the Commitments;
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(o) suffered a loss of any supplier or suppliers, which
loss (individually or in the aggregate) has had, or may have, an
adverse effect on its financial condition, results of operations,
business or prospects;
(p) suffered any material adverse change in its business,
operations, condition (financial or otherwise), liabilities, assets,
earnings, or prospects of the Business nor, to Armitec.Com's knowledge,
has there been any event which has had or may reasonably be expected to
have a material adverse effect on the Business;
(q) transferred or granted any rights with respect to, or
disposed of or permitted to lapse any right to the use of any software,
patent, trademark, assumed name, service mark, trade name, copyright,
license, or application therefor or disposed of or disclosed to any
person not authorized to have such information any trade secret,
proprietary information, formula, process, or know-how not previously a
matter of public knowledge or existing in the public domain;
(r) incurred any long term indebtedness;
(s) paid, loaned, distributed (by dividend or otherwise),
or advanced any amounts to, sold, transferred, or leased any properties
or assets (real, personal or mixed, tangible or intangible) to,
purchased, leased, licensed, or otherwise acquired any properties or
assets from, or entered into any other agreement or arrangement with
(i) any shareholder, officer, employee, or director of Armitec.Com,
(ii) any corporation or partnership in which any Affiliate is an
officer, director, or holder directly or indirectly of five percent
(5%) or more of the outstanding equity or debt securities, or (iii) any
person controlling, controlled by, or under common control with any
such partner, shareholder, officer, director, or Affiliate except for
compensation not exceeding the rate of compensation in effect at June
30, 2000, and for routine travel advances to officers and employees;
(t) made or agreed to make any charitable contributions
or incurred or agreed to incur any non-business expenses in excess of
$5,000 in the aggregate;
(u) taken any other action neither in the ordinary course
of business and consistent with past practice nor provided for in this
Agreement;
(v) increased (or experienced any change in the
assumptions underlying or the methods of calculating) any bad debt,
contingency, or other reserve, other than in the ordinary course of
business consistent with past practice; or
(w) written down or written up the value of any inventory
(including write-downs by reason of shrinkage or markdowns), determined
as collectible any Accounts Receivable or any portion thereof which
were previously considered uncollectible, or written off as
uncollectible any Accounts Receivable or any portion thereof, except
for write-downs, write-ups, and write-offs in the ordinary course of
business consistent with past practice, none of which is material in
amount.
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SECTION 4.23. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. Armitec.Com's
accounts receivable reflected in the Armitec.Com Financial Statements, and all
accounts receivable arising after the date of the Armitec.Com Financial
Statements (collectively the "Accounts Receivable") were or are bona fide
accounts receivable, the full amount of which was or is actually owing to
Armitec.Com. And, to the best of its knowledge, those not collected prior to
Closing will be fully collectible by Armitec.Com within ninety (90) days of
Closing without offset, recoupment, counterclaim, claim or diminution.
Armitec.Com's accounts payable reflected in the Armitec.Com Financial Statements
and all accounts payable arising after the date of the Armitec.Com Financial
Statements (collectively, the "Accounts Payable") arose from bona fide
transactions on the ordinary course of Armitec.Com's business.
SECTION 4.24. INSIDER TRANSACTIONS. Attached hereto as Schedule 4.24 is
a true, correct and complete list of the amounts and other essential terms of
all currently outstanding indebtedness or other obligations, agreements,
undertakings, liabilities or commitments (contingent or otherwise) of
Armitec.Com to or from any past or present officer, director, member,
shareholder or any person related to, controlling, controlled by or under common
control with any of the foregoing.
SECTION 4.25. ADVERSE CONDITIONS. Neither Armitec.Com nor any of the
Armitec.Com Shareholders has any knowledge of any present or future condition,
state of facts or circumstances which has affected or may affect adversely the
business of Armitec.Com or prevent Armitec.Com from carrying on its business.
SECTION 4.26. AUTHORIZATION AND VALIDITY OF DOCUMENTS. The execution,
delivery and performance of this Agreement by Armitec.Com and the Armitec.Com
Shareholders, and the consummation by Armitec.Com and the Armitec.Com
Shareholders of the transactions contemplated hereby, have been duly and validly
authorized by Armitec.Com and Armitec.Com Shareholders. This Agreement has been
duly executed and delivered by Armitec.Com and each Armitec.Com Shareholder and
is a legal, valid and binding obligation of Armitec.Com and the Armitec.Com
Shareholders, enforceable against each of in accordance with its terms except as
such enforceability may be limited by the applicable laws of bankruptcy,
insolvency, moratorium and similar governing laws relating to creditors' rights.
SECTION 4.27. INVESTMENT INTENT. Each Armitec.Com Shareholder
represents and warrants to Armitec that the Armitec.Com Shareholders are
acquiring Armitec Shares (the "Acquired Shares") under this Agreement for
investment only and for their own accounts and not as nominees or agents; nor
are the said shares being acquired with a view to their offer for resale,
distribution or transfer of any part thereof nor with any present intention of
selling, granting any participation in, or otherwise distributing the same; nor
are they being purchased for subdivision or fractionalization thereof. By
executing this Agreement, each Armitec.Com Shareholder represents:
(a) That shareholder has no contract, undertaking,
agreement or arrangement with any Person to sell, hypothecate, pledge,
donate or otherwise transfer (with or
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without consideration) any of the Acquired Shares, and that shareholder
has no present plan or intention to enter into any such contract,
undertaking, agreement or arrangement.
(b) That shareholder is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and is aware of
Armitec's business affairs and financial condition and has had access
to and has acquired sufficient information about Armitec to reach an
informed and knowledgeable decision to acquire the Acquired Shares, and
has such business and financial experience as is required to provide
the capacity to protect one's own interests in connection with the
purchase of such shares. Nor is that shareholder a "broker" or a
"dealer" as defined in the Exchange Act.
(c) That shareholder covenants and agrees that none of
the Acquired Shares shall be sold, assigned or otherwise transferred
other than in transactions which are not in violation of the Securities
Act and applicable state securities laws. Each stock certificate of the
Acquired Shares shall bear the following legend, unless such legend may
be removed in accordance with its terms:
THE SECURITIES REPRESENTED BY THIS STOCK CERTIFICATE (THE "SECURITIES")
HAVE BEEN ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933 (THE "1933 ACT") AND APPLICABLE STATE SECURITIES LAWS
(THE "STATE LAWS"). THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED OTHER THAN (I) PURSUANT TO AN EFFECTIVE REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE 1933 ACT AND THE STATE LAWS AND (II) UPON RECEIPT BY THE
ISSUER OF EVIDENCE SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933 ACT AND ANY
APPLICABLE STATE LAWS. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF
COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
SECTION 4.28. CORRECTNESS OF REPRESENTATIONS. No representation or
warranty of Armitec.Com in this Agreement or in any Exhibit, certificate, or
Schedule attached hereto or furnished pursuant hereto, contains, or on the
Closing Date will contain, any untrue statement of fact or omits, or on the
Closing Date will omit, to state any material fact necessary in order to make
the statements contained therein not misleading, and all such statements,
representations, warranties, Exhibits, certificates, and Schedules shall be true
and complete in all material respects on and as of the Closing Date as though
made on that date. All copies of mortgages, indentures, notes, leases,
agreements, plans, Armitec.Com Contracts, and other instruments listed on or
referred to in the Schedules delivered or furnished to Armitec pursuant to this
Agreement are true copies thereof.
SECTION 4.29. LITIGATION. Schedule 4.29 sets forth each instance in
which Armitec.Com or any of its officers or directors (a) is the subject to any
unsatisfied judgment, order, decree, stipulation, injunction or charge or (b) is
a party to or, to the knowledge of Armitec.Com, is threatened to be made a party
to, any charge, complaint, action, suit, proceeding, hearing or
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investigation of in any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or before any arbitrator.
SECTION 4.30. LICENSES, PERMITS AND APPROVALS. Schedule 4.30 lists all
governmental and regulatory licenses, permits and approvals necessary to conduct
Armitec.Com's business. All such licenses, permits and approvals are in full
force and effect. There are no violations by Armitec.Com of, or any claims, or
proceedings pending or to the knowledge or Armitec.Com threatened, challenging
the validity of or seeking to discontinue, any such licenses, permits or
approvals.
ARTICLE V
COVENANTS OF ARMITEC
Armitec covenants and agrees with Armitec.Com and the Armitec.Com
Shareholders as follows:
SECTION 5.01. CONDUCT OF BUSINESS PRIOR TO CLOSING. From the date
hereof to the Closing Date, and except to the extent that Armitec.Com shall
otherwise consent in writing, Armitec shall:
(a) operate the business of Armitec substantially as
previously operated and only in the regular and ordinary course, not
make any purchase or sale, or introduce any new method of management or
operation except in the ordinary course of business and in a manner
consistent with past practices, and use its best efforts to maintain
and preserve intact each of the goodwill, reputation, present business
organization, and relationships of Armitec with persons having business
dealings with it, and maintain the services of present employees of
Armitec;
(b) maintain its assets and properties in good order and
condition, reasonable wear and use excepted, and maintain all policies
of insurance covering its assets and properties in amounts and on terms
substantially equivalent to those in effect on the date hereof;
(c) take all steps reasonably necessary to maintain the
Armitec Proprietary Rights and other intangible assets of Armitec;
(d) pay all accounts payable when due and collect all
accounts receivable in accordance with prudent business practices; and
(e) comply with all laws applicable to the conduct of the
business of Armitec where the failure to so comply would have a
material adverse affect on the business or condition of Armitec;
(f) maintain the books and records of Armitec in the
usual, regular, and ordinary manner, on a basis consistent with past
practices and prepare and file all foreign,
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federal, state, and local tax returns and amendments thereto required
to be filed by Armitec after taking into account any extensions of time
granted by such taxing authorities.
SECTION 5.02. ACTIONS PRIOR TO CLOSING. From the date of this Agreement
through the Closing Date, Armitec shall not, without the prior written consent
of Armitec.Com:
(a) incur any obligations, liabilities, or expenses of
any nature (whether absolute, accrued, contingent, or otherwise and
whether due or to become due) that would constitute liabilities other
than items incurred in the ordinary course of business consistent with
past practice;
(b) permit, allow, or suffer any of Armitec's assets to
be subjected to any mortgage, pledge, lien, or encumbrances;
(c) suffer any material adverse change in Armitec's
assets or in the operations, condition (financial or otherwise),
liabilities, earnings, or prospects of the Business;
(d) waive any claims or rights with respect to and
materially and adversely affecting any of Armitec's business or assets;
(e) sell, transfer, or otherwise dispose of any of
Armitec's assets, except in the ordinary course of business consistent
with past practice;
(f) dispose of or permit to lapse any right to the use of
any of Armitec's Proprietary Rights, except for the expiration of any
proprietary rights to use patents that may expire by law;
(g) other than in accordance with, and in amounts not
greater than provided for in, existing agreements between Armitec and
its employees, grant any increase in the salary and wages of any
employee or any increase in such salary and wages payable or to become
payable at any time in the future to any of the employees, except
pursuant to promotions previously disclosed to Armitec.Com that will
become effective on or prior to the Closing Date;
(h) make any change in any material method of accounting
or accounting principle, practice, or policy affecting or relating to
Armitec's assets or liabilities including, without limitation, any
extension of the useful lives of Armitec's assets and consequent
adjustments to the depreciation or valuation thereof on the books and
records of Armitec with respect to its business;
(i) make any change (or change any assumption underlying
or method of calculating) in the amount of any bad debt, contingency,
or other reserve, other than in the ordinary course of business
consistent with past practice;
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(j) write-down or write-up the value of any inventory
(including write-downs by reason of shrinkage or mark downs), except
for write-downs, write-ups, and write-offs in the ordinary course of
business consistent with past practice, none of which are or will be
material in amount;
(k) except consistent with past practices or existing
programs, pay, loan, or advance any amount to, sell, transfer, or lease
any properties or assets (real, personal or mixed, tangible, or
intangible) to, or enter into any agreement or arrangement with, any
employee, or any spouse or Affiliate of any such person except for
routine travel advances to employees, and compensation to employees
consistent with Section 5(g) hereof;
(l) dispose of or permit to lapse any right to the use of
any patent, trademark, assumed name, service mark, trade name,
copyright, license, or application therefor or dispose of or disclose
to any person not authorized to have such information, any trade
secret, proprietary information, formula, process, or know-how not
previously a matter of public knowledge or existing in the public
domain;
(m) waive, terminate, or breach under any provision under
or relating to any of the Armitec Contracts;
(n) enter into any contracts or agreements or other
transactions with respect to or affecting Armitec's liabilities other
than contracts or agreements entered into in the ordinary course of
business and consistent with past practices;
(o) with respect to Armitec's assets, permit any option
to renew any lease or any option to purchase any property to expire or
exercise any such option;
(p) omit to do any act or permit any act which could
reasonably be expected to cause a breach of any material Armitec
Contract, commitment, or obligation with respect to or affecting
Armitec's assets or any breach of any representation, warranty,
covenant, or agreement made by Armitec in this Agreement;
(q) default regarding the provisions of any insurance
policy or fail to give notice or present any claim under any such
policy in due and timely fashion if such default or failure to give
notice would give the insurer the right to cancel any policy, deny
claims, or limit coverage;
(r) take any other action not in the ordinary course of
business consistent with past practice or omit to take any other action
that would be taken in the ordinary course of business consistent with
past practice if such action or omission to take action would
materially and adversely affect the assets or liabilities of Armitec.
SECTION 5.03. CONSENTS. Armitec shall obtain prior to Closing, at
its sole cost and expense, all consents and estoppels required for the
continuation of the Armitec Contracts after Closing. All such consents and
estoppels shall be in writing and in form and substance
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satisfactory to Armitec.Com, and executed counterparts thereof will be delivered
to Armitec.Com promptly after receipt thereof but in no event later than the
Closing Date.
SECTION 5.04. SUPPLEMENTAL DISCLOSURE. Armitec shall have the
continuing obligation up to and including the Closing Date to disclose in
writing to Armitec.Com and the Armitec.Com Shareholders any matter or
information hereafter arising or becoming known that, if known on the date of
Armitec's execution and delivery of this Agreement, would have been required to
be set forth or listed in a Schedule hereto. Any such matter or information
hereafter disclosed shall be deemed to amend the Schedules hereto (to the extent
of such written disclosure) as of the date hereof unless Armitec.Com or the
Armitec.Com Shareholders shall within five (5) business days after receipt of
such written disclosure by Armitec and its counsel, but in any event prior to
the Closing, notify Armitec in writing that the matter or information so
disclosed materially varies from, or materially and adversely to the interests
Armitec.Com and the Armitec.Com Shareholders, changes, the information disclosed
on the Schedules on the date hereof. In such event, the Schedules hereto shall
not be deemed amended or changed by the matter or information so disclosed, and,
unless the acts or circumstances giving rise to the matter or information so
disclosed is corrected prior to the Closing, the matter or information so
disclosed shall constitute items at variance with the warranties and
representations of Armitec herein.
SECTION 5.05. ADDITIONAL REPORTS. Subject to the confidentiality
restrictions set forth in Article VII hereof, promptly after they become
available, Armitec shall deliver to Armitec.Com and the Armitec.Com Shareholders
true and correct copies of all internal management and control reports and
financial statements furnished to management of Armitec. Each such report shall
be in accordance with the books and records of Armitec, and, in the case of
financial statements shall present fairly the consolidated financial condition
of Armitec and its subsidiaries as of the dates indicated and the results of
operations for the periods then ended, and be prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, and shall reflect adequate reserves for all known liabilities
and reasonably anticipated losses.
SECTION 5.06. CONDITIONS PRECEDENT. Armitec shall use its best
efforts to satisfy the conditions enumerated in Article IX hereof.
SECTION 5.07. CAPITAL EXPENDITURES. Armitec shall discuss with
Armitec.Com and the Armitec.Com Shareholders any proposed significant capital
expenditure to be made by Armitec after the date of this Agreement prior to
entering into any contract or commitment for such capital expenditure.
SECTION 5.08. SEC FILINGS. Prior to Closing, Armitec shall make all
necessary filings and reports such that, as of the Closing Date, Armitec will be
current in its filings with the SEC of all required SEC Filings, including, but
not limited to, filing the Armitec Form 10-K for the year ended December 31,
1999, and filing the Armitec Form 10-Q for the quarters ended March 31, 2000 and
June 30, 2000, and none of Armitec's SEC Filings will contain any untrue
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statement of a material fact or omit to state a material fact required or
necessary in order to make the statements therein not misleading.
SECTION 5.09. SHAREHOLDER AND OTHER REQUIRED CONSENTS. Armitec
shall take all actions necessary and use its best efforts to obtain any and all
consents, approvals, ratifications and authorizations of its Board of Directors,
its shareholders and any other person, entity or governmental authority
necessary for the execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby.
SECTION 5.10. OTHER TRANSACTIONS. Armitec shall deal exclusively
and in good faith with Armitec.Com and the Armitec.Com Shareholders with regard
to the transactions contemplated by this Agreement and will not, and will direct
its officers, directors, financial advisors, accountants, agents, and counsel
not to (a) solicit submission of proposals or offers from any person other than
Armitec.Com and the Armitec.Com Shareholders relating to any acquisition of all
or any material part of the assets of Armitec, the sale or issuance of any
capital stock of Armitec or of any corporation formed by Armitec or its
Affiliates to which any of the assets of Armitec may be contributed, or any
merger or consolidation of Armitec or of any corporation formed by Armitec or
its Affiliates to which any of the assets of Armitec may be contributed (an
"Acquisition Proposal"), (b) participate in any discussions or negotiations
regarding, or furnish any non-public information to any other person regarding
Armitec other than Armitec.Com and the Armitec.Com Shareholders and their
representatives or otherwise cooperate in any way or assist, facilitate, or
encourage any Acquisition Proposal by any person other than Armitec.Com and the
Armitec.Com Shareholders or, (c) enter into any agreement or understanding,
whether oral or in writing, that would have the effect of preventing the
consummation of the transactions contemplated by this Agreement. If,
notwithstanding the foregoing, Armitec, or its representatives or agents should
receive any Acquisition Proposal or any inquiry regarding such proposal from a
third party, such persons shall promptly inform Armitec.Com and its counsel
thereof. This covenant shall survive the termination of this Agreement for a
period of ninety (90) days.
ARTICLE VI
COVENANTS OF ARMITEC.COM
Armitec.Com covenants and agrees with Armitec as follows:
SECTION 6.01. CONDUCT OF BUSINESS PRIOR TO CLOSING. From the date
hereof to the Closing Date, and except to the extent that Armitec shall
otherwise consent in writing, Armitec.Com shall:
(a) operate the business of Armitec.Com substantially as
previously operated and only in the regular and ordinary course, not
make any purchase or sale, or introduce any new method of management or
operation except in the ordinary course of business and in a manner
consistent with past practices, and use its best efforts to maintain
and preserve intact each of the goodwill, reputation, present business
organization, and
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relationships of Armitec.Com with persons having business dealings with
it, and maintain the services of present employees of Armitec.Com;
(b) maintain its assets and properties in good order and
condition, reasonable wear and use excepted, and maintain all policies
of insurance covering its assets and properties in amounts and on terms
substantially equivalent to those in effect on the date hereof;
(c) take all steps reasonably necessary to maintain the
Armitec.Com Proprietary Rights and other intangible assets of
Armitec.Com;
(d) pay all accounts payable when due and collect all
accounts receivable in accordance with prudent business practices; and
(e) comply with all laws applicable to the conduct of the
business of Armitec.Com where the failure to so comply would have a
material adverse affect on the business or condition of Armitec.Com;
(f) maintain the books and records of Armitec.Com in the
usual, regular, and ordinary manner, on a basis consistent with past
practices and prepare and file all foreign, federal, state, and local
tax returns and amendments thereto required to be filed by Armitec.Com
after taking into account any extensions of time granted by such taxing
authorities.
SECTION 6.02. ACTIONS PRIOR TO CLOSING. From the date of this
Agreement through the Closing Date, Armitec.Com shall not, without the prior
written consent of Armitec:
(a) incur any obligations, liabilities, or expenses of
any nature (whether absolute, accrued, contingent, or otherwise and
whether due or to become due) that would constitute liabilities other
than items incurred in the ordinary course of business consistent with
past practice;
(b) permit, allow, or suffer any of Armitec.Com's assets
to be subjected to any mortgage, pledge, lien, or encumbrances;
(c) suffer any material adverse change in Armitec.Com's
assets or in the operations, condition (financial or otherwise),
liabilities, earnings, or prospects of Armitec.Com's business;
(d) waive any claims or rights with respect to and
materially and adversely affecting any of Armitec.Com's business or
assets;
(e) sell, transfer, or otherwise dispose of any of
Armitec.Com's assets, except in the ordinary course of business
consistent with past practice;
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(f) dispose of or permit to lapse any right to the use of
any of Armitec.Com's Proprietary Rights, except for the expiration of
any proprietary rights to use patents that may expire by law;
(g) other than in accordance with, and in amounts not
greater than provided for in, existing agreements between Armitec.Com
and its employees, grant any increase in the salary and wages of any
employee or any increase in such salary and wages payable or to become
payable at any time in the future to any of the employees, except
pursuant to promotions previously disclosed to Armitec that will become
effective on or prior to the Closing Date;
(h) make any change in any material method of accounting
or accounting principle, practice, or policy affecting or relating to
Armitec.Com's assets or liabilities including, without limitation, any
extension of the useful lives of Armitec.Com's assets and consequent
adjustments to the depreciation or valuation thereof on the books and
records of Armitec.Com with respect to the business;
(i) make any change (or change any assumption underlying
or method of calculating) in the amount of any bad debt, contingency,
or other reserve, other than in the ordinary course of business
consistent with past practice;
(j) write-down or write-up the value of any inventory
(including write-downs by reason of shrinkage or mark downs), except
for write-downs, write-ups, and write-offs in the ordinary course of
business consistent with past practice, none of which are or will be
material in amount;
(k) except consistent with past practices or existing
programs, pay, loan, or advance any amount to, sell, transfer, or lease
any properties or assets (real, personal or mixed, tangible, or
intangible) to, or enter into any agreement or arrangement with, any
employee, or any spouse or Affiliate of any such person except for
routine travel advances to employees, and compensation to employees
consistent with Section 6.02(g) hereof;
(l) dispose of or permit to lapse any right to the use of
any patent, trademark, assumed name, service mark, trade name,
copyright, license, or application therefor or dispose of or disclose
to any person not authorized to have such information, any trade
secret, proprietary information, formula, process, or know-how not
previously a matter of public knowledge or existing in the public
domain;
(m) waive, terminate, or breach under any provision under
or relating to any of the Armitec.Com Contracts;
(n) enter into any contracts or agreements or other
transactions with respect to or affecting Armitec.Com's liabilities
other than contracts or agreements entered into in the ordinary course
of business and consistent with past practices;
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(o) with respect to Armitec.Com's assets, permit any
option to renew any lease or any option to purchase any property to
expire or exercise any such option;
(p) omit to do any act or permit any act which could
reasonably be expected to cause a breach of any material Armitec.Com
Contract, commitment, or obligation with respect to or affecting
Armitec.Com's assets or any breach of any representation, warranty,
covenant, or agreement made by Armitec.Com in this Agreement;
(q) default regarding the provisions of any insurance
policy or fail to give notice or present any claim under any such
policy in due and timely fashion if such default or failure to give
notice would give the insurer the right to cancel any policy, deny
claims, or limit coverage; or
(r) take any other action not in the ordinary course of
business consistent with past practice or omit to take any other action
that would be taken in the ordinary course of business consistent with
past practice if such action or omission to take action would
materially and adversely affect the assets or liabilities of
Armitec.Com.
SECTION 6.03. CONSENTS. Armitec.Com shall obtain prior to Closing,
at its sole cost and expense, all consents and estoppels required for the
continuation of the Armitec.Com Contracts after Closing. All such consents and
estoppels shall be in writing and in form and substance satisfactory to Armitec,
and executed counterparts thereof will be delivered to Armitec promptly after
receipt thereof but in no event later than the Closing Date.
SECTION 6.04. SUPPLEMENTAL DISCLOSURE. Armitec.Com shall have the
continuing obligation up to and including the Closing Date to disclose in
writing to Armitec any matter or information hereafter arising or becoming known
that, if known on the date of Armitec.Com's execution and delivery of this
Agreement, would have been required to be set forth or listed in a Schedule
hereto. Any such matter or information hereafter disclosed shall be deemed to
amend the Schedules hereto (to the extent of such written disclosure) as of the
date hereof unless Armitec shall within five (5) business days after receipt of
such written disclosure by Armitec.Com and its counsel, but in any event prior
to the Closing, notify Armitec.Com in writing that the matter or information so
disclosed materially varies from, or materially and adversely to the interests
of Armitec, changes, the information disclosed on the Schedules on the date
hereof. In such event, the Schedules hereto shall not be deemed amended or
changed by the matter or information so disclosed, and, unless the acts or
circumstances giving rise to the matter or information so disclosed is corrected
prior to the Closing, the matter or information so disclosed shall constitute
items at variance with the warranties and representations of Armitec.Com herein.
SECTION 6.05. ADDITIONAL REPORTS. Subject to the confidentiality
restrictions set forth in Article VII hereof, promptly after they become
available, Armitec.Com shall deliver to Armitec true and correct copies of all
internal management and control reports and financial statements furnished to
management of Armitec.Com. Each such report shall be in accordance with the
books and records of Armitec.Com, and, in the case of financial statements shall
present fairly the consolidated financial condition of the business as of the
dates indicated and the results of
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operations for the periods then ended, and be prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, and shall reflect adequate reserves for all known liabilities
and reasonably anticipated losses.
SECTION 6.06. CONDITIONS PRECEDENT. Armitec.Com shall use its best
efforts to satisfy the conditions enumerated in Article VIII hereof.
SECTION 6.07. CAPITAL EXPENDITURES. Armitec.Com shall discuss with
Armitec any proposed significant capital expenditure to be made by Armitec.Com
after the date of this Agreement prior to entering into any contract or
commitment for such capital expenditure.
SECTION 6.08. SHAREHOLDER AND OTHER REQUIRED CONSENTS. Armitec.Com
shall take all actions necessary and use its best efforts to obtain any and all
consents, approvals, ratifications and authorizations of its Board of Directors,
its shareholders and any other person, entity or governmental authority
necessary for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 6.09. OTHER TRANSACTIONS. Armitec.Com shall deal
exclusively and in good faith with Armitec with regard to the transactions
contemplated by this Agreement and will not, and will direct its officers,
directors, financial advisors, accountants, agents, and counsel not to, (a)
solicit submission of proposals or offers from any person other than Armitec
relating to any acquisition of all or any material part of the assets of
Armitec.Com, the sale or issuance of any capital stock of Armitec.Com or of any
corporation formed by Armitec.Com or its affiliates to which any of the assets
of Armitec.Com may be contributed, or any merger or consolidation of Armitec.Com
or of any corporation formed by Armitec.Com or its affiliates to which any of
the assets of Armitec.Com may be contributed (an "Acquisition Proposal"), (b)
participate in any discussions or negotiations regarding, or furnish any
non-public information to any other person regarding Armitec.Com other than
Armitec and its representatives or otherwise cooperate in any way or assist,
facilitate, or encourage any Acquisition Proposal by any person other than
Armitec, or (c) enter into any agreement or understanding, whether oral or in
writing, that would have the effect of preventing the consummation of the
transactions contemplated by this Agreement. If, notwithstanding the foregoing,
Armitec.Com or its representatives or agents should receive any Acquisition
Proposal or any inquiry regarding such proposal from a third party, such persons
shall promptly inform Armitec and its counsel thereof. This covenant shall
survive the termination of this Agreement for a period of ninety (90) days.
ARTICLE VII
FURTHER AGREEMENTS
SECTION 7.01. CONFIDENTIALITY. Armitec and Armitec.Com agree that
each shall hold in confidence any confidential information about the other that
it has received, or hereafter receives, pursuant to any provision of this
Agreement under circumstances indicating the confidentiality of such information
unless (a) such information shall have been publicly disclosed other than as a
result of any wrongful action by the recipient of such information, or (b) the
recipient of such information independently develops or is aware of such
information.
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SECTION 7.02. PUBLIC ANNOUNCEMENTS. Armitec, Armitec.Com and the
Armitec.Com Shareholders will consult with each other before issuing any press
releases or otherwise making any public statements or filings with governmental
entities with respect to this Agreement or the transactions contemplated hereby
and shall not issue any press releases or make any public statements or filings
with governmental entities prior to such consultation and shall modify any
portion thereof if the other party objects thereto, unless the same may be
required by applicable law.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ARMITEC TO CONSUMMATE THE EXCHANGE
The obligation of Armitec to acquire the Armitec.Com Shares from the
Armitec.Com Shareholders in exchange for Armitec Shares and to consummate the
transactions as contemplated by this Agreement shall be subject to the
fulfillment and satisfaction, at or before the Closing, of each of the following
conditions precedent, any or all of which may be waived in writing, in whole or
in part, by Armitec:
SECTION 8.01. REPRESENTATIONS AND WARRANTIES. All information
required to be furnished or delivered by Armitec.Com pursuant to this Agreement
shall have been furnished or delivered as of the date hereof and the Closing
Date as required hereunder; the representations and warranties made by
Armitec.Com in Article IV hereof shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of the Closing Date.
SECTION 8.02. COVENANTS AND AGREEMENTS. Armitec.Com and the
Armitec.Com Shareholders shall have performed and complied in all material
respects with all covenants, agreements and conditions required by this
Agreement to be performed by them prior to or as of the Closing.
SECTION 8.03. CERTIFIED RESOLUTIONS. Armitec shall have received
from Armitec.Com a certificate executed by the Secretary of Armitec.Com
containing a true and correct copy of resolutions duly adopted by Armitec.Com's
Board of Directors approving and authorizing the execution and delivery by
Armitec.Com of each of this Agreement to which Armitec.Com is a party, and the
consummation of each of the transactions contemplated hereby and thereby. The
Secretary of Armitec.Com shall also certify that, as of the Closing Date, such
resolutions have not been rescinded, revoked, modified, or otherwise affected
and remain in full force and effect.
SECTION 8.04. NO INJUNCTION, ETC. No action, proceeding,
investigation, regulation, or legislation shall be pending or overtly threatened
which seeks to enjoin, restrain, or prohibit Armitec or to obtain substantial
damages from Armitec in respect of the consummation of the transactions
contemplated hereby, which, in the reasonable judgment of Armitec would make it
inadvisable to consummate such transactions.
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SECTION 8.05. INCUMBENCY. Armitec shall have received a certificate
of incumbency of Armitec.Com executed by the President and Secretary of
Armitec.Com listing the officers of Armitec.Com authorized to execute this
Agreement and certifying the authority of each such officer to execute the
agreements, documents, and instruments on behalf of Armitec.Com in connection
with the consummation of the transactions contemplated herein.
SECTION 8.06. CERTIFICATES. Armitec shall have received from
Armitec.Com all such certificates, dated as of the Closing Date, as Armitec
shall reasonably request to evidence the fulfillment by Armitec.Com, or such
other satisfaction as of the Closing Date, of the terms and conditions of this
Agreement.
SECTION 8.07. DELIVERIES AT CLOSING. At the Closing, Armitec.Com
and the Armitec.Com Shareholders shall have delivered to Armitec each of the
following:
(a) certificates evidencing all Armitec.Com Shares, duly
endorsed for transfer and otherwise in a form suitable for transfer on
the books of Armitec.Com;
(b) the certificates described in Articles VIII and IX
hereof;
(c) a certificate of good standing, as of the most recent
practicable date prior to the Closing Date, from the jurisdiction of
incorporation and each jurisdiction in which Armitec.Com is qualified
to do business as a foreign corporation;
(d) the written opinion of counsel for Armitec.Com, dated
as of the Closing Date, in substantially the form of Exhibit B hereto;
SECTION 8.08. CERTIFICATES. Armitec.Com and the Armitec.Com
Shareholders shall have delivered to Armitec all such certificates, dated as of
the Closing Date, as Armitec shall reasonably request to evidence the
fulfillment by Armitec.Com and the Armitec.Com Shareholders or other
satisfaction as of the Closing Date, of the terms and conditions of this
Agreement. The form and substance of all opinions, certificates, assignments,
orders, and other documents and instruments hereunder shall be satisfactory in
all reasonable respects to Armitec and its counsel.
SECTION 8.09. ESTOPPEL CERTIFICATES. Armitec.Com shall obtain, at
its cost and expense, prior to Closing an Estoppel Certificate, in form and
substance satisfactory to Armitec, from:
(a) The lessors of the Armitec.Com Leased Real Property,
to the effect that there are no events of default or events which with
notice or lapse of time or both would be events of default under the
lease, attaching a true and correct copy of the lease, and indicating
the date through which rent is paid and the amounts of any deposits
held by such lessor; and
(b) Each lessor of personal property, to the effect that
there are no events of default or events which with notice or lapse of
time or both would be events of default under any such lease, attaching
a true and correct copy of any such lease, and indicating
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the date through which rent is paid and the amounts of any deposits
held by the lessor under each such lease agreement;
SECTION 8.10. CLOSING CERTIFICATE. Armitec shall have received a
certificate of the President of Armitec.Com, whose signature, as such President,
shall be attested by the Secretary of the Armitec.Com, dated the Closing Date,
in form reasonably satisfactory to Armitec certifying that, to the best of his
knowledge, each of the conditions precedent specified in Sections 9.01 and 9.02
of this Agreement has been fulfilled and satisfied.
SECTION 8.11. REIMBURSEMENT. Armitec has incurred accounting and
legal expenses to Colonial Corporation in connection with the reorganization of
Armitec. Armitec.Com has agreed to pay an amount up to $100,000 to Colonial
Corporation for reimbursement of such expenses incurred by Colonial Corporation
on behalf of Armitec. Armitec acknowledges the receipt by Colonial Corporation
of $25,000 cash from Armitec.Com for such reimbursement, and Armitec.com agrees
to deliver to Colonial Corporation, at the Closing, a note in the amount of
$75,000 due upon the earlier of the completion of a Private Placement by Armitec
or Ninety (90) days from the Closing. The note will be guaranteed by Bruce R.
Davis.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF ARMITEC.COM
SHAREHOLDERS TO CONSUMMATE THE EXCHANGE
The obligation of the Armitec.Com Shareholders to acquire the Exchange
Shares from Armitec in exchange for Armitec.Com Shares and the obligation of
Armitec.Com to consummate the transactions as contemplated by this Agreement are
subject to the fulfillment and satisfaction at Closing of each of the following
conditions precedent, any or all of which may be waived in whole or in part at
or prior to the Closing by Armitec.Com and the Armitec.Com Shareholders:
SECTION 9.01. REPRESENTATIONS AND WARRANTIES. All information
required to be furnished or delivered by Armitec pursuant to this Agreement
shall have been furnished or delivered as of the date hereof and the Closing
Date as required hereunder; the representations and warranties made by Armitec
in Article III hereof shall be true and correct in all material respects on and
as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
SECTION 9.02. COVENANTS AND AGREEMENTS. Armitec shall have
performed and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed by them prior to or as
of the Closing.
SECTION 9.03. CERTIFIED RESOLUTIONS. Armitec.Com shall have
received from Armitec a certificate executed by the Secretary of Armitec
containing a true and correct copy of resolutions duly adopted by Armitec's
Board of Directors approving and authorizing the execution and delivery by
Armitec of each of this Agreement to which Armitec is a party, and the
consummation of each of the transactions contemplated hereby and thereby. The
Secretary of
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Armitec shall also certify that, as of the Closing Date, such resolutions have
not been rescinded, revoked, modified, or otherwise affected and remain in full
force and effect.
SECTION 9.04. NO INJUNCTION, ETC. No action, proceeding,
investigation, regulation, or legislation shall be pending or overtly threatened
which seeks to enjoin, restrain, or prohibit Armitec or to obtain substantial
damages from Armitec.Com in respect of the consummation of the transactions
contemplated hereby, which, in the reasonable judgment of Armitec.Com would make
it inadvisable to consummate such transactions.
SECTION 9.05. INCUMBENCY. Armitec.Com shall have received a
certificate of incumbency of Armitec executed by the President and Secretary of
Armitec listing the officers of Armitec authorized to execute this Agreement and
certifying the authority of each such officer to execute the agreements,
documents, and instruments on behalf of Armitec in connection with the
consummation of the transactions contemplated herein.
SECTION 9.06. CERTIFICATES. Armitec.Com shall have received from
Armitec all such certificates, dated as of the Closing Date, as Armitec.Com
shall reasonably request to evidence the fulfillment by Armitec, or such other
satisfaction as of the Closing Date, of the terms and conditions of this
Agreement.
SECTION 9.07. DELIVERIES AT CLOSING. At the Closing, Armitec shall
have delivered to Armitec.Com each of the following:
(a) certificates evidencing all Armitec Shares, duly
endorsed for transfer and otherwise in a form suitable for transfer on
the books of Armitec;
(b) the certificates described in Articles VIII and IX
hereof;
(c) a certificate of good standing, as of the most recent
practicable date prior to the Closing Date, from the jurisdiction of
incorporation and each jurisdiction in which Armitec.Com is qualified
to do business as a foreign corporation;
(d) the written opinion of counsel for Armitec, dated as
of the Closing Date, in substantially the form of Exhibit C hereto;
SECTION 9.08. CERTIFICATES. Armitec shall have delivered to
Armitec.Com all such certificates, dated as of the Closing Date, as Armitec.Com
shall reasonably request to evidence the fulfillment by Armitec or other
satisfaction as of the Closing Date, of the terms and conditions of this
Agreement. The form and substance of all opinions, certificates, assignments,
orders, and other documents and instruments hereunder shall be satisfactory in
all reasonable respects to Armitec.Com and its counsel.
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SECTION 9.09. ESTOPPEL CERTIFICATES. Armitec shall obtain, at its
cost and expense, prior to Closing an Estoppel Certificate, in form and
substance satisfactory to Armitec.Com, from:
(a) The lessors of the Armitec Leased Real Property, to
the effect that there are no events of default or events which with
notice or lapse of time or both would be events of default under the
lease, attaching a true and correct copy of the lease, and indicating
the date through which rent is paid and the amounts of any deposits
held by such lessor; and
(b) Each lessor of personal property, to the effect that
there are no events of default or events which with notice or lapse of
time or both would be events of default under any such lease, attaching
a true and correct copy of any such lease, and indicating the date
through which rent is paid and the amounts of any deposits held by the
lessor under each such lease agreement.
SECTION 9.10. CLOSING CERTIFICATE. Armitec.Com shall have received
a certificate of the President of Armitec, whose signature, as such President,
shall be attested by the Secretary of the Armitec, dated the Closing Date, in
form reasonably satisfactory to Armitec.Com certifying that, to the best of his
knowledge, each of the conditions precedent specified in Sections 8.01 and 8.02
of this Agreement has been fulfilled and satisfied.
SECTION 9.11. RESIGNATION OF OFFICERS AND DIRECTORS. Prior to or at
the Closing, all of the officers and directors of Armitec will resign from their
respective positions.
SECTION 9.12. ASSETS AND LIABILITIES. At the closing, the balance
sheet of Armitec shall reflect the absence of any assets or liabilities for
Armitec.
ARTICLE X
TERMINATION.
SECTION 10.01. TERMINATION.
This Agreement may be terminated and the exchange of stock contemplated
hereby may be abandoned at any time prior to the completion of the Closing,
whether before or after approval by the shareholders of Armitec:
(a) by mutual consent in writing of Armitec and
Armitec.Com; or
(b) by either Armitec or Armitec.Com if any court of
competent jurisdiction in the United States or any State shall have
issued an order, judgment or decree (other than a temporary restraining
order) restraining, enjoining or otherwise prohibiting the exchange of
stock and such order, judgment or decree shall have become final and
nonappealable; provided that the right to terminate this Agreement
under this Section 10.01(b) shall not be available to any party whose
failure to fulfill any obligation
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under this Agreement has been the cause of, or resulted in, the failure
of the completion of the Closing to occur on or before such date; or
(c) by Armitec if there has been (i) a material breach of
any covenant or agreement or of a representation or warranty herein on
the part of Armitec.Com which has not been cured, or adequate assurance
(acceptable to Armitec in its sole discretion) of cure given, in either
case, within 15 business days following receipt of notice of such
breach; or
(d) by Armitec.Com if (i) there has been a material
breach of any covenant or agreement or of a representation or warranty
herein on the part of Armitec which has not been cured, or adequate
assurance (acceptable to Armitec.Com in its sole discretion) of cure
given, in either case, within 15 business days following receipt of
notice of such breach or (ii) at Closing Armitec shall not be listed on
the Over-the-Counter Bulletin Board (OTC:BB) exchange, provided
Armitec.Com has made its best efforts to assist Armitec in obtaining
such listing; or
(e) by either Armitec or Armitec.Com (and the Armitec.Com
Shareholders) if either of such party's due diligence investigation has
disclosed the existence of (i) any matter relating to the other party
or its business that is materially and adversely (to the investigating
party) at variance with those matters theretofore disclosed to the
investigating party, or (ii) any matter which, in the investigating
party's reasonable judgement, (A) indicates a material adverse change
in the condition, assets or prospects of the other party, or (B) would
make it inadvisable to consummate the exchange of stock and other
transactions contemplated by this Agreement.
SECTION 10.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either Armitec or Armitec.Com as provided in Section 10.01,
all obligations of the parties hereunder shall terminate unless otherwise
specifically stated herein and except that the confidentiality provisions of
Article VII hereof shall survive the termination hereof. Nothing in this Article
X hereof shall relieve any party from liability for any breach of this
Agreement.
ARTICLE XI
INDEMNIFICATION
SECTION 11.01. INDEMNIFICATION BY THE COMPANY. Armitec shall defend,
indemnify and hold harmless: Armitec.Com and the Armitec.Com Shareholders and
their respective heirs, personal and legal representatives, guardians,
successors and assigns, from and against any and all claims, threats,
liabilities, taxes, interest, fines, penalties, suits, actions, proceedings,
demands, damages, losses, costs and expenses (including attorneys' and experts'
fees and court costs) of every kind and nature arising out of, resulting from or
in connection with any misrepresentation or omission or breach by Armitec of any
representation or warranty contained in this Agreement.
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SECTION 11.02. INDEMNIFICATION BY ARMITEC.COM SHAREHOLDERS. The
Armitec.Com Shareholders shall defend, indemnify and hold harmless Armitec and
its respective representatives, successors and assigns, from and against any and
all claims, threats, liabilities, taxes, interest, fines, penalties, suits,
actions, proceedings, demands, damages, losses, costs and expenses (including
attorneys' and experts' fees and court costs) of every kind and nature arising
out of, resulting from, or in connection with any misrepresentation or omission
or breach by Armitec.Com or the Armitec.Com Shareholders of any representation
or warranty contained in this Agreement.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. All of the covenants, promises, agreements, representations and
warranties set forth in this Agreement shall survive the Closing and the
consummation of the transactions contemplated by this Agreement.
SECTION 12.02. FURTHER DOCUMENTS. At any reasonable time upon prior
reasonable notice by a party to another party (whether at or after the Closing),
the other party shall execute and deliver such further instruments and documents
and take such other actions as the other party may reasonably request to vest
more effectively in the other party full right, title and interest in and to the
shares being conveyed hereunder and to secure for that party the full benefits
intended to be secured by this Agreement.
SECTION 12.03. NOTICES. All notices, requests, demands, consents and
other communications which are required or may be given under this Agreement
(collectively, the "Notices") shall be in writing and shall be given either (a)
by personal delivery against a receipted copy, or (b) by certified or registered
U. S. mail, postage prepaid, or (c) by overnight courier service to the
following addresses or to such other address of which written notice in
accordance with this Section 12.03 shall have been provided by such party to the
others. Notices may only be given in the manner hereinabove described in this
Section 12.03 and shall be deemed received when given in such manner.
If to Armitec: Armitec, Inc.
P.O. Box 21238
St. Simons Island, GA 31522
Attention: Mr. Don Carman
If to the Armitec.Com Shareholders: c/o Armitec.Com, Inc.
1295 West Garmon Road, NW
Atlanta, GA 30327
Attention: Mr. Bruce Davis
If to Armitec.Com: Armitec.Com, Inc.
1295 West Garmon Road, NW
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Atlanta, GA 30327
Attention: Mr. Bruce Davis
SECTION 12.04. ENTIRE AGREEMENT. This Agreement (including the
Exhibits and Schedules hereto) constitutes the full, entire and integrated
agreement between the parties hereto with respect to the subject matter hereof,
and supersedes all prior negotiations, correspondence, understandings and
agreements among the parties hereto respecting the subject matter hereof.
SECTION 12.05. ASSIGNABILITY. This Agreement shall not be assignable
by any party hereto without the prior written consent of the other parties
hereto.
SECTION 12.06. BINDING EFFECT; BENEFIT. This Agreement shall inure
to the benefit of and be binding upon the parties hereto, each other Person who
is indemnified under any provision of this Agreement, and their respective
heirs, personal and legal representatives, guardians and successors. Nothing in
this Agreement, express or implied, is intended to confer upon any other Person
any rights, remedies, obligations or liabilities except as may be otherwise set
forth herein.
SECTION 12.07. SEVERABILITY. Any provision of this Agreement which
is held by a court of competent jurisdiction to be prohibited or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability,
without invalidating or rendering unenforceable the remaining provisions of this
Agreement.
SECTION 12.08. AMENDMENT; WAIVER. No provision of this Agreement may
be amended, waived or otherwise modified without the prior written consent of
all of the parties hereto. No action taken pursuant to this Agreement, including
any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action or compliance by the other party with any
representation, warranty, covenant or agreement herein contained. The effective
written waiver by any party hereto of a breach of any provision or condition
contained in this Agreement shall not operate or be construed as a waiver of any
subsequent breach or of any other conditions hereof.
SECTION 12.09. SECTION HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
SECTION 12.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be the same Agreement.
SECTION 12.11. APPLICABLE LAW. This Agreement is made and entered
into, and shall be governed by and construed in accordance with, the laws of the
State of Georgia.
SECTION 12.12. REMEDIES. The parties hereto acknowledge that the
Shares being exchanged hereunder are unique, that any claim for monetary damages
may not constitute an adequate remedy, and that it may therefore be necessary
for the protection of the parties and to
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carry out the terms of this Agreement to apply for the specific performance of
the provisions hereof. It is accordingly hereby agreed by all parties that no
objection to the form of the action or the relief prayed for in any proceeding
for specific performance of this Agreement shall be raised by any party, in
order that such relief may be expeditiously obtained by an aggrieved party. All
parties may proceed to protect and enforce their rights hereunder by a suit in
equity or at law or other appropriate proceeding, whether for specific
performance or for an injunction against a violation of the terms hereof or in
aid of the exercise of any right, power or remedy granted hereunder or by law,
equity or statute or otherwise. No course of dealing and no delay on the part of
any party hereto in exercising any right, power or remedy shall operate as a
waiver thereof or otherwise prejudice its rights, powers or remedies, and no
right, power or remedy conferred hereby shall be exclusive of any other right,
power or remedy referred to herein or now or hereafter available at law, in
equity, by statute or otherwise.
SECTION 12.13. PROCEDURE. Within _______ (__) days of the execution
hereof, Armitec and Armitec.Com each shall provide to the other all of the
Schedules required of it hereunder, and their respective attorneys shall agree
on exemplars of the requisite Exhibits B and C described herein. Armitec and
Armitec.Com each shall have an additional five (5) business days to notify the
other of its decision to invoke Section 10.01(e)(ii)(B) hereof and terminate
this Agreement because it deems it inadvisable to consummate the transactions
contemplated hereby. Failing such notice by either Armitec or Armitec.Com within
such time, all parties shall be deemed, conclusively, to have waived the
provisions of Section 10.01(e)(ii)(B) hereof, which provisions shall thereupon
become null and void.
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Attest: ARMITEC, INC.
By
-------------------------- -----------------------------------
(CORPORATE SEAL) Don Carman, Chief Executive Officer
Attest: ARMITEC.COM, INC.
By
-------------------------- -----------------------------------
(CORPORATE SEAL) Bruce Davis, Chief Executive Officer
THE ARMITEC.COM SHAREHOLDERS
-------------------------- --------------------------------------
Witness Name
-------------------------- --------------------------------------
Witness Name
-------------------------- --------------------------------------
Witness Name
-------------------------- --------------------------------------
Witness Name
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EXHIBIT B
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION
8 Del. C.ss.262 (2000)
ss. 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds
shares of stock on the date of the making of a demand pursuant to subsection (d)
of this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in favor
of the merger or consolidation nor consented thereto in writing pursuant to ss.
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to ss. 251 (other than a merger effected
pursuant to ss. 251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss.
263 or ss. 264 of this title:
(1) Provided, however, that no appraisal rights under
this section shall be available for the shares of any class or series of stock,
which stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of ss.
251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant to ss.
ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
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b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary
Delaware corporation party to a merger effected under ss. 253 of this title is
not owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be available for
the shares of any class or series of its stock as a result of an amendment to
its certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder electing
to demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such stockholder's shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant
to ss. 228 or ss. 253 of this title, each consitutent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock of
such constitutent corporation who are entitled to appraisal rights of the
approval of the merger or
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consolidation and that appraisal rights are available for any or all shares of
such class or series of stock of such constituent corporation, and shall include
in such notice a copy of this section; provided that, if the notice is given on
or after the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the effective
date of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation, either
(i) each such constitutent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constitutent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or (ii)
the surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided, however,
that if such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is required
to give either notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constitutent corporation may fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or consolidation,
the record date shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date shall be the close
of business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
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(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court
4
<PAGE> 85
may order all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including, without limitation,
reasonable attorney's fees and the fees and expenses of experts, to be charged
pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
5
<PAGE> 86
EXHIBIT C
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20459
--------------------------------------------------------------------------------
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year Ended: August 31, 1999
Commission File Number: 0-11419
Family Health Systems, Inc.
--------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
<TABLE>
<S> <C>
Delaware 22-2435595
------------------------------------------------ ------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
Post Office Box 21238, St. Simons Island, Georgia 31522-0738
------------------------------------------------- ------------------------------------
Address of Principal executive offices of Zip Code
Incorporation or organization
</TABLE>
912-634-2584
-------------------------------------------------
Registrants telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the last 90 days.
YES [ ] NO [X]
At August 31, 1999, 3,161,702 shares of the Registrant's Common Stock were
issued and 2,006,757 shares of the Registrant's Common Stock were outstanding
and the estimated aggregate market value of the Registrant's outstanding common
stock held by non-affiliates of the Registrant was approximately $246,000.
<PAGE> 87
Item 1. Management's Discussion and Analysis of Financial Condition and results
of operation
(A) General Development of Business.
Family Health Systems, Inc. (FHS or REGISTRANT), a Delaware
corporation, was incorporated on January 20, 1983. The
Registrant was formed to provide comprehensive business
services to physicians, dentists and professional corporations
operating full service dental centers and emergency/industrial
medical centers. FHS found this activity to be unprofitable
and it exited the business service activity in fiscal year
1987 and became engaged in the formation, registration,
distribution and sale of developmental stage companies. FHS
has no activities other than investment portfolio management
at this time.
(B) Description of business:
The Registrant is currently inactive in the formation of
subsidiaries, by registration of those stocks through filing
with the SEC, and is seeking a merger or business combination
for itself.
(C) Competition.
NONE
(D) Employees
NONE
Item 2. Properties
NONE
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders:
NONE
<PAGE> 88
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market information:
The Registrant's common stock trades in the over-the-counter market.
The Registrant's common stock was listed on the NASDAQ National Market
System, under the symbol FHSI until November 26, 1986, at which time
such listing was suspended until FHS assets and Net Worth were
increased to the minimum required levels. FHS was reinstated on NASDAQ
on April 2, 1987, but was again suspended on February 12, 1988 when its
assets and net worth were below the NASDAQ minimum requirements. There
has not been any trading of FHS common stock any listed exchange during
calendar years 1995, 1996, 1997, 1998 and 1999.
HOLDERS:
As of August 31, 1999, the approximate number of holders of record of
the Registrant's common stock was 568. In addition to those who hold
shares in their individual names, it is reported to Registrant that
there are 267 holder's in "street names" for a total of 835
shareholders.
DIVIDENDS:
Cash dividends have not been paid by the Registrant since it was
formed; however, Registrant has during past fiscal years paid stock
dividends in it's wholly-owned subsidiaries from 1987-1988.
Item 6. SELECTED FINANCIAL DATA:
The following data, insofar as it relates to the period September 1,
1996 to August 31, 1999 has been derived from annual financial
statements, including the balance sheets at August 31, 1999, 1998 and
1997 and the related statements of income and cash flows for the years
ending August 31 1997 through 1999 and notes thereto appearing
elsewhere herein. This financial data should be read in conjunction
with the financial statements of the Company and the related notes
thereto included in Item 8 of this Annual Report.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Operating Revenues $ Nil $ Nil $350,301
Income (loss) from continuing
Operations $ 60,821 $(57,333) $317,542
Income (loss) from continuing
operations per share $ .0303 $ (.0286) $ .167
Current assets $169,451 $165,488 $139,251
</TABLE>
<PAGE> 89
<TABLE>
<S> <C> <C> <C>
Working Capital $114,693 $163,495 $139,251
Total Assets $300,749 $187,163 $378,806
Stockholders' equity $245,991 $185,170 $378,806
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
(a) Results of Operations
The discontinuance in 1988 of the professional administrative
marketing business decreased revenues; however, it also
decreased liabilities and the risk of potential liabilities.
The only income presently is gains and losses from sales of
stock in the marketplace. Gains from sales of stocks during
the year ending August 31, 1999 aggregated $75,596. The
Company portfolio dropped significantly in Market value at
August 31, 1998 due to the downturn in the market overall.
(b) Financial Condition, Liquidity and Capital Resources.
Management does not expect that the condition of FHS can be
improved unless it can form a business relationship between it
and another going concern.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following documents are filed as part of this report:
(1)Financial statements:
Balance Sheet as of August 31, 1999 F-1
Statement of income for the year ending August 31, 1999 F-2
Statement of cash flows for the years ending August 31, 1999 F-3
Notes to Financial Statements F-4
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or other notes herein.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL MATTERS
NONE
<PAGE> 90
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth all the directors, executive officers
and significant employees of the Registrant as of August 31, 1999:
William S. Bryant President
Chief Executive Officer
Treasurer
Director
Directors hold office until the next annual meeting of shareholders.
Officers are elected by the Board of Directors following the Annual
meeting of stockholders.
Item 11. EXECUTIVE COMPENSATION
Cash compensation. The following table sets forth the actual cash
compensation of any officer or director of the Registrant who received
in excess of $60,000 in the fiscal year ended August 31, 1999 and the
actual cash compensation of all officers and directors of the
Registrant as a group for said fiscal year.
Officer or Director NONE
All Officers or Directors as a group NONE
Compensation of Directors:
During the Registrant's fiscal year ended August 31, 1987, the
Registrant passed a resolution that all officers and directors who
attended meetings of the Board of Directors or Shareholders and who
were not on other salary with FHS, would receive restricted shares of
stock of FHS, equal to $500 per day. The number of shares to be
determined by the bid price of the stock on the meeting date.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND MANAGEMENT
The following table sets forth information regarding ownership of the
Registrant's common stock by all persons who are known by the
Registrant to own more than 5% of the total outstanding shares and by
all officers and directors of the Company as of August 31, 1999.
E.L. Carman 1,009,673 shares 53% ownership
Changes in Control:
Registrant is not aware of any arrangement which may result in a change
of control of Registrant at present.
<PAGE> 91
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Certain Business Relationships.
NONE
Indebtedness of Management
NONE
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(c) 27.1 Financial Data Schedule (for SEC use only)
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Section 3 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FAMILY HEALTH SYSTEMS, INC.
Date 06/09/2000 /s/ William S. Bryant
----------------------------------
William S. Bryant, President
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date 06/09/2000 /s/ William S. Bryant
--------------------------------------
WILLIAM S. BRYANT, Director,
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial and Accounting Officer
Treasurer
<PAGE> 93
EXHIBITS
FINANCIAL INFORMATION
<PAGE> 94
EXHIBIT F-1
FAMILY HEALTH SYSTEMS, INC.
BALANCE SHEET
August 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash $ 2,718
Accounts receivable 688
Marketable securities 166,045
------------
Total current assets 169,451
------------
Other receivables 114,423
------------
Investment in closely-held company 16,875
------------
Total Assets $ 300,749
============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Cash overdraft - Investment margin account $ 54,758
------------
Common Stock 3,351
Paid in capital 2,673,705
Retained earnings (deficit) (2,431,065)
------------
245,991
------------
Total Liabilities and stockholder's equity (deficit) $ 300,749
============
</TABLE>
See Notes to Financial Statements.
<PAGE> 95
EXHIBIT F-2
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF INCOME
Year Ended August 31,1999
<TABLE>
<CAPTION>
<S> <C>
Revenues $ Nil
------------
Expenses
Auto expense 718
Bank service charges 3
Miscellaneous 3,194
Office Supplies 371
Postage 341
Professional Fees 3,000
Publications 4,928
Stock Transfer Fees (1,250)
Telephone 216
Travel 3,254
------------
14,775
------------
Net operating (loss) (14,775)
------------
Other income (loss)
Capital gains on available-for-sale securities 75,596
------------
Net Income (Loss) 60,821
Retained earnings (deficit), beginning (2,491,886)
------------
Retained earnings (deficit), ending $ (2,431,065)
============
</TABLE>
See Notes to Financial Statements.
<PAGE> 96
EXHIBIT F-3
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF CASH FLOWS
Year Ended August 31,1999
<TABLE>
<CAPTION>
1999
----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss) $ 60,821
Adjustments to reconcile net income (loss) to
(Gain) loss on sale of investments (75,596)
Change in working capital components
(Increase) decrease in trade receivables (688)
----------
Net cash (used in) operating activities (15,463)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 514,325
Purchase of investments (491,090)
Advances made to drilling company (134,373)
Repayment of advances by drilling company 24,750
Repayment of notes receivable 34,155
----------
Net cash (used in) investing activities (52,233)
----------
Net (decrease) in cash (67,696)
Cash:
Beginning 15,656
----------
Ending $ (52,040)
==========
Cash:
Cash - operating $ 2,718
Cash - Money Market (overdraft) (54,758)
----------
$ (52,040)
==========
</TABLE>
See Notes to Financial Statements.
<PAGE> 97
EXHIBIT F-4
FAMILY HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended August 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS -- Family Health Systems, Inc. ("FHS") was
organized to provide comprehensive administrative, marketing
and consulting services to group dental and medical practices
and began operations on May 1, 1983. Effective in October
1987, all administrative and marketing agreements had been
terminated and the Corporation has been inactive since that
time.
B. BASIS OF ACCOUNTING -- The Company's policy is to prepare its
financial statements on the accrual basis of accounting.
C. NET INCOME (LOSS) PER SHARE -- Net income (loss) per share has
been computed using the weighted average number of shares of
common stock outstanding during the applicable period.
D. ESTIMATES -- The process of preparing financial statements in
conformity with generally accepted accounting principles
requires the use of management's estimates and assumptions
regarding certain types of assets, liabilities revenues and
expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
2. NOTES RECEIVABLE
During August of 1998, the Company advanced $25,000 to a going concern.
This advance bears no interest or maturity date. The advance was repaid
in November 1998.
An advance was made to the majority stockholder of the Company during
1998. This advance was evidenced by a note receivable in the amount of
$15,079. The balance outstanding and unpaid at August 31, 1998 was
$9,155. This note was repaid subsequent to August 31, 1998.
<PAGE> 98
3. OTHER RECEIVABLES
The Company is currently advancing funds to a going concern involved in
pumping water into otherwise non-productive or low production oil wells
and extracting the raw crude oil. These advances are non-interest
bearing with no stated method of repayment and are not evidenced by a
note. Advances made during the years August 31, 1999 aggregated
$112,323. Repayments of advances in the amount of $24,750 were made
during the year ending August 31, 1999.
In addition, the Company made advances during the year ending August
31, 1999 in connection with a natural gas drilling operation in West
Virginia. The drilling operations are on acreage adjoining a producing
natural gas field. Advances made to the Company during the year ending
August 31, 1999 aggregated $22,050. No repayments have been received.
4. INVESTMENTS
The Company investments in marketable equity securities are held for an
indefinite period and thus are classified as available for sale.
Available for sale securities are recorded at fair value in investments
on the balance sheet, with the change in fair value during the period
excluded from earnings and recorded in the equity section of the
balance sheet. There were no unrealized holding gains or losses at
August 31, 1999.
At August 31, 1999, investments were written down to their estimated
realizable values, because in the opinion of management, the decline in
market value of those securities is considered to be other than
temporary.
Investments in securities are summarized below:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Description Gain Loss Value
----------------------------------- -------- -------- --------
<S> <C> <C> <C>
August 31, 1999:
Available-for-sale securities:
Common Stock $ -- $ -- $166,045
======== ======== ========
</TABLE>
<PAGE> 99
5. INCOME TAXES
As of August 31, 1999, FHS has net operating loss carryforwards of
approximately $1,819,807, which expire under current law from 2000
through 2013. FHS also has investment tax credit carryforwards expiring
in 2000.
6. RELATED PARTY TRANSACTIONS
The president and majority stockholder are reimbursed for travel
expenses as incurred in the ordinary course of business.
As mentioned in Note 2, the Company advanced $15,079 to the majority
stockholder in 1998.
7. EARNINGS PER SHARE
The following data show the amounts used in computing earnings per
share.
<TABLE>
<CAPTION>
1999
------------
<S> <C>
Income (loss) available to common
stockholders $ 60,821
Weighted average number of common
shares used in basic EPS 2,006,757
------------
Earnings per common share $ 0.0303
============
</TABLE>
8. CONCENTRATIONS OF CREDIT RISK
The Company has outstanding accounts receivable from companies in oil
and gas exploration industry which are considered speculative
industries. Therefore, the Company has an industry concentration of
credit risk in the oil and gas industry.
9. CONTINGENCY
As disclosed in Note 1, the Company has been inactive in its operating
business since 1987. As a result, several Forms 10-K and 10-Q have not
been filed. The Company has since filed a notification of late filing
with the Securities and Exchange Commission for reports 10-K and 10-Q
due to be filed for the period August 31, 1997 to August 31, 1999 and
is currently filing all late filings. Any liability resulting from the
late filing is undetermined and is not reflected in these financial
statements.
<PAGE> 100
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Family Health Systems, Inc.
St. Simons Island, Georgia
We have audited the accompanying balance sheets of Family Health Systems, Inc.
as of August 31, 1999 and the related statements of income and retained earnings
(deficit), and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Family Health Systems, Inc. as
of August 31, 1999 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
MOORE STEPHENS TILLER LLC
Brunswick, Georgia
February 20, 2000
<PAGE> 101
EXHIBIT D
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20459
-----------------------------------------------------------------------
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the four months ended: December 31, 1999
Commission File Number: 0-11419
FAMILY HEALTH SYSTEMS, INC.
------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
DELAWARE 22-2435595
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
POST OFFICE BOX 21238, ST. SIMONS ISLAND, GEORGIA 31522-0738
------------------------------------------------- ----------
Address of Principal executive offices of Zip Code
Incorporation or organization
912-634-2584
-------------------------------------------------
Registrants telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the last 90 days.
YES [ ] NO [X]
At December 31, 1999, 3,161,702 shares of the Registrant's Common Stock were
issued and 2,006,757 shares of the Registrant's Common Stock were outstanding
and the estimated aggregate market value of the Registrant's outstanding common
stock held by non-affiliates of the Registrant was approximately $165,000.
<PAGE> 102
Item 1. Management's Discussion and Analysis of Financial Condition and results
of operation
(A) General Development of Business.
Family Health Systems, Inc. (FHS or REGISTRANT), a Delaware
corporation, was incorporated on January 20, 1983. The
Registrant was formed to provide comprehensive business
services to physicians, dentists and professional corporations
operating full service dental centers and emergency/industrial
medical centers. FHS found this activity to be unprofitable
and it exited the business service activity in fiscal year
1987 and became engaged in the formation, registration,
distribution and sale of developmental stage companies. FHS
has no activities other than investment portfolio management
at this time.
(B) Description of business:
The Registrant is currently inactive in the formation of
subsidiaries, by registration of those stocks through filing
with the SEC, and is seeking a merger or business combination
for itself.
(C) Competition.
NONE
(D) Employees
NONE
Item 2. Properties
NONE
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders:
NONE
Item 5. Other information:
NONE
<PAGE> 103
Item 6. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market information:
The Registrant's common stock trades in the over-the-counter market.
The Registrant's common stock was listed on the NASDAQ National Market
System, under the symbol FHSI until November 26, 1986, at which time
such listing was suspended until FHS assets and Net Worth were
increased to the minimum required levels. FHS was reinstated on NASDAQ
on April 2, 1987, but was again suspended on February 12, 1988 when its
assets and net worth were below the NASDAQ minimum requirements. There
has not been any trading of FHS common stock any listed exchange during
calendar years 1995, 1996, 1997, 1998 and 1999.
HOLDERS:
As of December 31, 1999, the approximate number of holders of record of
the Registrant's common stock was 568. In addition to those who hold
shares in their individual names, it is reported to Registrant that
there are 267 holder's in "street names" for a total of 835
shareholders.
DIVIDENDS:
Cash dividends have not been paid by the Registrant since it was
formed; however, Registrant has during past fiscal years paid stock
dividends in it's wholly-owned subsidiaries from 1987-1988.
Item 7. SELECTED FINANCIAL DATA:
The following data, insofar as it relates to the period September 1,
1998 to December 31, 1999 has been derived from annual financial
statements, including the balance sheets at December 31, 1999 and
August 31, 1999 and 1998 and the related statements of income and cash
flows for four months ended December 31, 1999 and the years ending
August 31 1998 and 1999 and notes thereto appearing elsewhere herein.
This financial data should be read in conjunction with the financial
statements of the Company and the related notes thereto included in
Item 8 of this Annual Report.
<TABLE>
<CAPTION>
Four months
1999 1999 1998
----------- --------- ---------
<S> <C> <C> <C>
Operating Revenues $ Nil $ Nil $ Nil
Income (loss) from continuing
Operations $(57,505) $ 60,821 $(57,333)
Income (loss) from continuing
operations per share $ (.0287) $ .0303 $( .0286)
Current assets $140,832 $169,451 $165,488
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
Four months
1999 1999 1998
----------- --------- ---------
<S> <C> <C> <C>
Working Capital $ 78,599 $ 34,665 $163,495
Total Assets $225,719 $300,749 $187,163
Stockholders' equity $163,486 $220,991 $185,170
</TABLE>
Item 8. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
(a) Results of Operations
The discontinuance in 1988 of the professional administrative
marketing business decreased revenues; however, it also
decreased liabilities and the risk of potential liabilities.
The only income presently is gains and losses from sales of
stock in the marketplace. Losses from sales of stocks for the
four months ending December 31, 1999 aggregated $(37,547).
(b) Financial Condition, Liquidity and Capital Resources.
Management does not expect that the condition of FHS can be
improved unless it can form a business relationship between it
and another going concern.
Item 9. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
<S> <C>
(1)Independent Auditor's Report on the Financial Statements F-1
(2)Financial statements:
Balance Sheet as of December 31, 1999 F-2
Statement of income for the four months ending December 31, 1999 F-3
Statement of Stockholders' Equity (deficit) for Four months ended
December 31, 1999
Statement of cash flows for the four months ending December 31, 1999 F-4
Notes to Financial Statements F-5
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or other notes herein.
Item 10. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL MATTERS
NONE
<PAGE> 105
Item 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth all the directors, executive officers
and significant employees of the Registrant as of December 31, 1999:
William S. Bryant President
Chief Executive Officer
Treasurer
Director
Directors hold office until the next annual meeting of shareholders.
Officers are elected by the Board of Directors following the Annual
meeting of stockholders.
Item 12. EXECUTIVE COMPENSATION
Cash compensation. The following table sets forth the actual cash
compensation of any officer or director of the Registrant who received
in excess of $60,000 in the fiscal year ended December 31, 1999 and the
actual cash compensation of all officers and directors of the
Registrant as a group for said fiscal year.
Officer or Director NONE
All Officers or Directors as a group NONE
Compensation of Directors:
During the Registrant's fiscal year ended December 31, 1987, the
Registrant passed a resolution that all officers and directors who
attended meetings of the Board of Directors or Shareholders and who
were not on other salary with FHS, would receive restricted shares of
stock of FHS, equal to $500 per day. The number of shares to be
determined by the bid price of the stock on the meeting date.
Item 13. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND
MANAGEMENT
The following table sets forth information regarding ownership of the
Registrant's common stock by all persons who are known by the
Registrant to own more than 5% of the total outstanding shares and by
all officers and directors of the Company as of December 31, 1999.
E.L. Carman 1,009,673 shares 53% ownership
Changes in Control:
<PAGE> 106
Registrant is not aware of any arrangement which may result in a change
of control of Registrant at present.
Item 14. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Certain Business Relationships.
NONE
Indebtedness of Management
NONE
Item 15. OTHER
Exhibit 27 - Financial Data Schedule
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date 06/23/00 /s/ WILLIAM S. BRYANT
--------------------------------------
WILLIAM S. BRYANT, Director,
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial and Accounting Officer
Treasurer
<PAGE> 108
EXHIBITS
FINANCIAL INFORMATION
<PAGE> 109
EXHIBIT F-1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Family Health Systems, Inc.
St. Simons Island, Georgia
We have audited the accompanying balance sheets of Family Health Systems, Inc.
as of December 31, 1999 and the related statements of income, stockholders'
equity (deficit), and cash flows for the four months ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the overall accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Family Health Systems, Inc. as
of December 31, 1999 and the results of its operations and its cash flows for
the four months ended December 31, 1999 in conformity with generally accepted
accounting principles.
MOORE STEPHENS TILLER LLC
Brunswick, Georgia
May 23, 2000
<PAGE> 110
EXHIBIT F-2
FAMILY HEALTH SYSTEMS, INC.
BALANCE SHEET
December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash $ 41,758
Marketable securities 99,074
-----------
Total current assets 140,832
-----------
Other receivables 60,512
-----------
Investment in closely-held company 24,375
-----------
Total Assets $ 225,719
===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Cash overdraft - Investment margin account $ 23,333
Accounts payable 13,900
Note payable 25,000
-----------
62,233
-----------
Common Stock 3,351
Paid in capital 2,673,705
Retained earnings (deficit) (2,513,570)
-----------
163,486
-----------
Total Liabilities and stockholder's equity (deficit) $ 225,719
===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 111
EXHIBIT F-3
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF INCOME
Four months Ended December 31,1999
<TABLE>
<CAPTION>
<S> <C>
Revenues $ NIL
Expenses
Auto expense 109
Miscellaneous 189
Office Supplies 353
Postage 66
Professional Fees 17,900
Publications 62
Telephone 80
Travel 1,199
-----------
19,958
-----------
Operating income (loss) (19,958)
-----------
Other income (expense)
Capital gains (losses) on available-for-sale securities (37,547)
-----------
Net Income(Loss) (57,505)
Retained earnings (deficit), beginning (2,456,065)
-----------
Retained earnings (deficit), ending $(2,513,570)
===========
</TABLE>
See Notes to Financial Statements.
1
<PAGE> 112
EXHIBIT F-4
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EARNINGS (DEFICIT)
Four months Ended December 31,1999
<TABLE>
<CAPTION>
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit) Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, August 31, 1998 as previously reported $ 3,351 $ 2,673,705 $(2,491,886) $ 85,170
Adjustment applicable to re-establishment of
note
Payable for liability written off in a
prior year -- -- (25,000) (25,000)
----------- ----------- ----------- -----------
Balance, August 31, 1998, as restated 3,351 2,673,705 (2,516,886) 160,170
Net income (loss) for year ending
August 31, 1999 -- -- (57,505) (57,505)
----------- ----------- ----------- -----------
Balance, August 31, 1999 3,351 2,673,705 (2,456,065) 220,991
Net income (loss) for four months ended
December 31, 1999 -- -- (57,505) (57,505)
----------- ----------- ----------- -----------
Balance, December 31, 1999 $ 3,351 $ 2,673,705 $(2,513,570) $ 163,486
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 113
EXHIBIT F-5
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF CASH FLOWS
Four Months Ended December 31,1999
1999
---------
CASH FLOWS FROM OPERATING ACTIVITIES
(USED IN) OPERATING ACTIVITIES
Net income (loss) $ (57,505)
Adjustments to reconcile net income (loss) to
(Gain) loss on sale of investments 37,547
Change in working capital components
Increase (decrease) in accounts payable 13,900
(Increase) decrease in trade receivables 688
---------
Net cash (used in) operating activities (5,370)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 124,979
Purchase of investments (95,554)
Advances made to drilling company (9,090)
Repayment of advances by drilling company 63,000
Investment in closely-held company 7,500
---------
Net cash provided by investing activities 75,835
---------
Net increase in cash 70,465
Cash:
Beginning (overdraft) (52,040)
---------
Ending $ 18,425
=========
Cash:
Cash - operating $ 41,758
Cash - Money Market (overdraft) (23,333)
---------
$ 18,425
=========
See Notes to Financial Statements.
<PAGE> 114
EXHIBIT F-6
FAMILY HEALTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Four Months Ended December 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF BUSINESS -- Family Health Systems, Inc. ("FHS") was organized
to provide comprehensive administrative, marketing and consulting
services to group dental and medical practices and began operations on
May 1, 1983. Effective in October 1987, all administrative and
marketing agreements had been terminated and the Corporation has been
inactive since that time.
B. BASIS OF ACCOUNTING - The Company's policy is to prepare its financial
statements on the accrual basis of accounting.
C. NET INCOME (LOSS) PER SHARE -- Net income (loss) per share has been
computed using the weighted average number of shares of common stock
outstanding during the applicable period.
D. ESTIMATES -- The process of preparing financial statements in
conformity with generally accepted accounting principles requires the
use of management's estimates and assumptions regarding certain types
of assets, liabilities revenues and expenses. Such estimates primarily
relate to unsettled transactions and events as of the date of the
financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
2. CHANGE IN ACCOUNTING YEAR
The Company has elected to change its accounting year from a fiscal
year ending August 31 to a calendar year ending December 31. The change
results in a short accounting year of four months ended December 31,
1999.
3. OTHER RECEIVABLES
The Company is currently advancing funds to a going concern involved in
pumping water into otherwise non-productive or low production oil wells
and extracting the raw crude oil. These advances are non-interest
bearing with no stated method of repayment and are not evidenced by a
note. Advances made during the four months ended December 31, 1999
$2,800. Repayments of advances in the amount of $63,000 were made
during the four months ended December 31, 1999.
<PAGE> 115
In addition, the Company made advances during the year ending August
31, 1999 in connection with a natural gas drilling operation in West
Virginia. The drilling operations are on acreage adjoining a producing
natural gas field. Advances made to the Company during the four months
ended December 31, 1999 aggregated $2,090. No repayments have been
received.
Advances were also made to a formerly dormant corporation during the
four months ended December 31, 1999. This advance is not evidenced by a
note and bears no rate of interest or method of repayment. The amount
advanced during the four months ended December 31, 1999 aggregated
$5,000.
Additionally, advances of $2,000 were made to another going concern in
the oil and gas industry.
4. INVESTMENTS
The Company investments in marketable equity securities are held for an
indefinite period and thus are classified as available for sale.
Available for sale securities are recorded at fair value in investments
on the balance sheet, with the change in fair value during the period
excluded from earnings and recorded in the equity section of the
balance sheet. There were no unrealized holding gains or losses at
December 31, 1999 due to all unrealized losses being realized in the
write-down to cost.
At December 31, 1999, investments were written down to their estimated
realizable values, because in the opinion of management, the decline in
market value of those securities is considered to be other than
temporary.
Investments in securities are summarized below:
Unrealized Unrealized Fair
Description Gain Loss Value
----------- ---------- ---------- ------
December 31, 1999:
Available-for-sale securities:
Common Stock $ -- $ -- $99,074
------- ------- -------
5. INCOME TAXES
As of December 31, 1999, FHS has net operating loss carryforwards of
approximately $1,833,707, which expire under current law from 2000
through 2013. FHS also has investment tax credit carryforwards expiring
in 2000.
<PAGE> 116
6. DEFERRED INCOME TAXES
Temporary differences giving rise to the deferred tax accounts consist
primarily of the net operating loss carryforwards, capital loss
carryforwards and investment tax credit carryforwards.
The deferred tax benefit and deferred tax liability comprised the
following at December 31, 1999:
December 31,
1999
------------
Deferred tax benefit:
Net operating loss carryforwards $ 579,848
Capital loss carryforwards 17,070
Investment tax credit carryforwards 11,190
Value allowance (608,108)
---------
Net deferred tax benefit $ --
=========
The change in valuation allowance for the four months ended December
31, 1999 aggregated $201,895 largely due to expiration of tax
carryforwards.
7. RELATED PARTY TRANSACTIONS
The president and majority stockholder are reimbursed for travel
expenses as incurred in the ordinary course of business.
8. EARNINGS PER SHARE
The following data show the amounts used in computing earnings per
share.
December 31,
1999
------------
Income (loss) available to common
stockholder $ (57,505)
Weighted average number of common
shares used in basic EPS 2,006,757
----------
Earnings per common share $ (0.0287)
==========
<PAGE> 117
9. CONCENTRATIONS OF CREDIT RISK
The Company has outstanding accounts receivable from companies in oil
and gas exploration industry which are considered speculative
industries. Therefore, the Company has an industry concentration of
credit risk in the oil and gas industry.
10. PRIOR PERIOD ADJUSTMENT
The Company discovered during a review of old records a liability
determined to be valid which had been written off in a prior year. The
liability was re-established through a prior period adjustment charged
to retained earnings at August 31, 1998. The amount of the liability
was $25,000 and has been settled subsequent to December 31, 1999
through the issuance of 18,000 shares of common stock and a cash
payment of $5,000.
11. SUBSEQUENT EVENT
Subsequent to December 31, 1999, the Company sustained losses in the
stock market from options purchased due to a devaluation of
technologies stocks within the stock market. The losses aggregated
$160,797 at March 31, 2000 and reduced the value of marketable
securities to $23,578. Management for the Company represents the value
of their remaining portfolio is expected to increase to recover these
losses.
12. CONTINGENCY
As disclosed in Note 1, the Company has been inactive in its operating
business since 1987. As a result, several Forms 10-K and 10-Q have not
been filed. The Company has since filed a notification of late filing
with the Securities and Exchange Commission for reports 10-K and 10-Q
due to be filed for the period August 31, 1997 to December 31, 1999 and
is currently filing all late filings. Any liability resulting from the
late filing is undetermined and is not reflected in these financial
statements.
<PAGE> 118
EXHIBIT E
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20459
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: March 31, 2000
Commission File Number: 0-11419
Family Health Systems, Inc.
-----------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
Delaware 22-2435595
------------------------------- -------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Post Office Box 21238, St. Simons Island, Georgia 31522-0738
------------------------------------------------- ---------------------------
Address of Principal executive offices of Zip Code
Incorporation or organization
912-634-2584
-------------------------------------------------
Registrants telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the last 90 days.
YES [ ] NO [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as to the latest practical date.
<TABLE>
<CAPTION>
CLASS No. of shares Outstanding on
March 31, 2000
<S> <C>
Common Stock 2,024,757
Par Value $.00167
Per share
</TABLE>
<PAGE> 119
PART I
FINANCIAL INFORMATION
<PAGE> 120
Item 1. Financial Statements
FAMILY HEALTH SYSTEMS, INC.
BALANCE SHEET
March 31, 2000
(Unaudited)
<TABLE>
ASSETS
<S> <C>
Cash $ 28,114
Marketable securities 13,607
-----------
Total current assets 41,721
-----------
Other receivables 66,512
-----------
Investment in closely-held company 24,375
-----------
Total Assets $ 132,608
===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Cash (Overdraft) - Investment margin account $ 14,463
Accounts payable 13,900
-----------
28,363
-----------
Common Stock 3,381
Paid in capital 2,693,675
Retained earnings (deficit) (2,592,811)
-----------
104,245
-----------
Total Liabilities and stockholder's equity (deficit) $ 132,608
===========
</TABLE>
See Notes to Interim Financial Statements.
<PAGE> 121
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF INCOME
Three Months Ended March 31, 2000
(Unaudited)
<TABLE>
<S> <C>
Revenues $ Nil
-----------
Expenses
Interest 410
Miscellaneous 700
Postage 33
Professional Fees 3,000
Telephone 60
Travel 454
-----------
4,657
-----------
Other income (expense)
Capital gains (losses) on available-for-sale securities (76,319)
Interest and dividends 133
Miscellaneous income 1,602
-----------
Net Income (loss) (79,241)
Retained earnings (deficit), beginning (2,513,570)
-----------
Retained earnings (deficit), ending $(2,592,811)
===========
</TABLE>
See Notes to Interim Financial Statements.
<PAGE> 122
FAMILY HEALTH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
For Three Months Ended March 31, 2000
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
For the three
months ended
March 31, 2000
--------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss) $ (79,240)
Adjustments to reconcile net income (loss) to
(Gain) loss on sale of investments 76,319
Change in working capital components
(Increase) decrease in other receivables (6,000)
---------
Net cash (used in) operating activities $ (8,921)
=========
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 229,934
Purchase of investments (234,657)
Transfer to operating cash 8,871
Transfer from operating cash --
---------
Net cash provided by investing activities 4,148
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment on Notes payable 5,000
---------
Net cash used in financing activities 5,000
---------
Net increase in cash and cash equivalents (4,773)
Cash and cash equivalents
Beginning 18,424
Ending $ 13,651
=========
Cash and cash equivalents:
Operating cash $ 28,114
Cash (overdraft) - Investment margin account (14,463)
=========
$ 13,651
=========
</TABLE>
See Notes to Interim Financial Statements.
<PAGE> 123
FAMILY HEALTH SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Three Months Ended March 31, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and wit the instructions to Form 10-Q
and Rule 10-01 of Regulations S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair
presentation of the operating results for the first quarter of the
fiscal year 2000 have been included. Operating results for the quarter
ended November 30, 1999 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2000.
2. CONDENSED PRESENTATION
The Condensed balance sheet and income statement was derived form the
balance sheet and statement of income for that date.
Item 2. Management's Discussion and Analysis of Financial Condition and results
of operation
(A) General Development of Business.
Family Health Systems, Inc. (FHS or REGISTRANT), a Delaware
corporation, was incorporated on January 20, 1983. The
Registrant was formed to provide comprehensive business
services to physicians, dentists and professional corporations
operating full service dental centers and emergency/industrial
medical centers. FHS found this activity to be unprofitable
and it exited the business service activity in fiscal year
1987 and became engaged in the formation, registration,
distribution and sale of developmental stage companies. FHS
has no activities other than investment portfolio management
at this time.
(B) Description of business:
The Registrant is currently inactive in the formation of
subsidiaries, by registration of those stocks through filing
with the SEC, and is seeking a merger or business combination
for itself.
<PAGE> 124
(C) Market risk and Investment Risk:
The assets of the Company consist primarily of common stock of
publicly traded companies. As such, the value of the assets of
the Company may be more or less than historical cost. Any
significant declines in market value of investments will
results in a write-down to market value in accordance with
accounting for investments at lower of cost or market.
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders:
NONE
Item 5. Other information:
NONE
Item 6. Exhibits and Reports on Form 8-K:
Exhibit 27 - Financial Data Schedule (for SEC use only)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereto duly authorized.
FAMILY HEALTH SYSTEMS, INC.
May 15, 2000 /s/ William S. Bryant
-------------------------------------
William S. Bryant, President
Chief Financial Officer
<PAGE> 125
EXHIBIT F
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20459
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: June 30, 2000
Commission File Number: 0-11419
Family Health Systems, Inc.
--------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
<TABLE>
<S> <C>
Delaware 22-2435595
------------------------------------------------ --------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
Post Office Box 21238, St. Simons Island, Georgia 31522-0738
------------------------------------------------- --------------------------------------
Address of Principal executive offices of Zip Code
Incorporation or organization
912-634-2584
-------------------------------------------------
Registrants telephone number, including area code
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the last 90 days.
YES NO X
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as to the latest practical date.
<TABLE>
<CAPTION>
CLASS No. of shares Outstanding on
March 31, 2000
<S> <C>
Common Stock 3,024,757
Par Value $.00167
Per share
</TABLE>
<PAGE> 126
PART I
FINANCIAL INFORMATION
<PAGE> 127
Item 1. Financial Statements
FAMILY HEALTH SYSTEMS, INC.
BALANCE SHEET
June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Cash $ 1,935
Marketable securities 10,808
-----------
Total current assets 12,743
-----------
Other receivables 71,512
-----------
Investment in closely-held company 34,745
-----------
Total assets $ 119,000
===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Cash (Overdraft) - Investment margin account $ 8,505
Accounts payable 10,881
Advance payable - E. Carman 8,000
-----------
27,386
Common Stock 5,051
Paid in capital 2,702,005
Retained earnings (deficit) (2,615,442)
-----------
91,614
Total liabilities and stockholder's equity (deficit) $ 119,000
===========
</TABLE>
See Notes to Interim Financial Statements.
<PAGE> 128
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF INCOME
Six Months Ended June 30, 2000
(Unaudited)
<TABLE>
<S> <C>
Revenues $ Nil
-----------
Expenses
Auto expense 1,374
Salaries and compensation 10,000
Miscellaneous 1,032
Office Supplies 176
Postage 246
Professional fees 11,886
Publications 4,061
Telephone 100
Travel 1,162
-----------
30,037
Other income (expense)
Capital gains (losses) on available-for-sale securities (72,905)
Interest and dividends 133
Miscellaneous income 1.602
Interest expense (665)
-----------
Net Income (loss) (101,872)
Retained earnings (deficit), beginning (2,513,570)
-----------
Retained earnings (deficit), ending $(2,615,442)
===========
</TABLE>
See Notes to Interim Financial Statements.
<PAGE> 129
FAMILY HEALTH SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EARNINGS (DEFICIT)
Six months Ended June 30, 2000
<TABLE>
<CAPTION>
Additional Retained
Common Paid-in Earnings
Stock Capital (Deficit) Total
----- ------- --------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1999
3,381 2,693,675 (2,513,570) 183,486
Issuance of 1,000,000 shares of common stock 1,670 8,330 10,000
Net income (loss) for six months ended
June 30, 2000 -- -- (101,872) (101,872)
---------- ----------- ----------- ---------
Balance, June 30, 2000 $ 5,051 $ 2,702,005 $(2,615,442) $ 91,614
========== =========== =========== =========
</TABLE>
See Notes to Interim Financial Statements.
<PAGE> 130
FAMILY HEALTH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
June 30, 2000
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss) $(101,871)
Adjustments to reconcile net income (loss) to
(Gain) loss on sale of investments 72,905
Compensaton stock issued 10,000
Change in working capital components
(Increase) decrease in other receivables (6,000)
Increase (decrease) in accounts payable (3,019)
---------
Net cash (used in) operating activities $ (27,985)
=========
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 236,148
Purchase of investments (242,028)
Transfer to operating cash 8,871
---------
Net cash provided by investing activities 2,991
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Advance received from an individual 8,000
Principal payment on Notes payable (5,000)
---------
Net cash used in financing activities 3,000
---------
Net increase in cash and cash equivalents (24,994)
Cash and cash equivalents
Beginning 18,424
---------
Ending $ (6,570)
=========
Cash and cash equivalents:
Operating cash $ 1,935
Cash (overdraft) - Investment margin account (8,505)
=========
$ (6,570)
=========
</TABLE>
See Notes to Interim Financial Statements
<PAGE> 131
FAMILY HEALTH SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Six Months Ended June 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and wit the instructions to Form 10-Q
and Rule 10-01 of Regulations S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair
presentation of the operating results for the second quarter of the
fiscal year 2000 have been included. Operating results for the quarter
ended June 30, 2000 are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 2000.
2. CONDENSED PRESENTATION
The Condensed balance sheet and income statement was derived form the
balance sheet and statement of income for that date.
Item 2. Management's Discussion and Analysis of Financial Condition and results
of operation
(A) General Development of Business.
Family Health Systems, Inc. (FHS or REGISTRANT), a Delaware
corporation, was incorporated on January 20, 1983. The
Registrant was formed to provide comprehensive business
services to physicians, dentists and professional corporations
operating full service dental centers and emergency/industrial
medical centers. FHS found this activity to be unprofitable
and it exited the business service activity in fiscal year
1987 and became engaged in the formation, registration,
distribution and sale of developmental stage companies. FHS
has no activities other than investment portfolio management
at this time.
(B) Description of business:
The Registrant is currently inactive in the formation of
subsidiaries, by registration of those stocks through filing
with the SEC, and is seeking a merger or business combination
for itself.
<PAGE> 132
(C) Market risk and Investment Risk:
The assets of the Company consist primarily of common stock of
publicly traded companies. As such, the value of the assets of
the Company may be more or less than historical cost. Any
significant declines in market value of investments will
results in a write-down to market value in accordance with
accounting for investments at lower of cost or market.
(D) Issuance of common stock
The Company issued 1,000,000 shares of common stock to the
majority stockholder and the President in recognition of
previous services rendered to the Company. Management
represents the value of the shares to be .01 per share. This
valuation results in compensation recorded in the current
period of $10,000 reflected in the accompanying interim
financial statements. The par value of $1,670 and paid in
capital over par of $8,330 has also been reflected in the
accompanying financial statements.
(E) Letter of intent
The Company has received a letter of intent to purchase all of
the outstanding common stock shares of the Company. As of the
date of this filing, no purchase agreement has been executed.
If not executed, the letter of intent will expire on September
5, 2000.
Item 3. Legal Proceedings
NONE
Item 4. Submission of Matters to a Vote of Security Holders:
NONE
Item 5. Other information:
NONE
Item 6. Exhibits and Reports on Form 8-K:
Exhibit 27 - Financial Data Schedule (for SEC use only)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereto duly authorized.
FAMILY HEALTH SYSTEMS, INC.
August 29, 2000 /s/ William S. Bryant
-----------------------------
William S. Bryant, President
Chief Financial Officer
<PAGE> 133
EXHIBIT G
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20459
FORM 10Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: June 30, 2000
Commission File Number: 0-11419
Family Health Systems, Inc.
--------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
<TABLE>
<S> <C>
Delaware 22-2435595
------------------------------------------------ --------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
Post Office Box 21238, St. Simons Island, Georgia 31522-0738
------------------------------------------------- --------------------------------------
Address of Principal executive offices of Zip Code
Incorporation or organization
912-634-2584
-------------------------------------------------
Registrants telephone number, including area code
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the last 90 days.
YES NO X
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as to the latest practical date.
<TABLE>
<CAPTION>
CLASS No. of shares Outstanding on
March 31, 2000
<S> <C>
Common Stock 3,051,857
Par Value $.00167
Per share
</TABLE>
<PAGE> 134
Item 6. Exhibits and Reports on Form 8-K:
Exhibit 27 - Financial Data Schedule (for SEC use only)*
* Previously Filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereto duly authorized.
FAMILY HEALTH SYSTEMS, INC.
September 6, 2000 /s/ William S. Bryant
-----------------------------
William S. Bryant, President
Chief Financial Officer
