<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-00139-A
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Nouveau International, Inc..
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(Exact name of registrant as specified in its charter)
Delaware 23-2932617
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
212 Phillips Road, Exton, PA 19341
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 524-8393
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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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 Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X YES NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained herein, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. /X/
As of April 8 , 1996 the number of shares of Common Stock outstanding
was 11,433,907. The aggregate market value of the Company's Common
Stock held by non-affiliates of the registrant as of April 8 , 1996
was approximately $53,526,215 (based upon 9,308,907 shares at $5.75
per share).
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Certain exhibits are incorporated by reference to the Company's Form
8-K as listed in response to Item 13(a)(2) of Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
BACKGROUND
In January 1996, Health Management, Inc. ("HMI"), a Florida
corporation, which at the time had not engaged in any business activity for
over two years and had virtually no assets, reincorporated in the State of
Delaware and exchanged its common stock for all of the outstanding capital
stock of Nouveau International, Inc. ("Nouveau PA"), a Pennsylvania
corporation. Nouveau PA emerged from bankruptcy proceedings in December 1995.
HMI also changed its name to Nouveau International, Inc.following the
acquisition of Nouveau PA.. References herein to the Company's products,
business operations and financial condition refer to the products, business
operations and financial condition of Nouveau PA unless otherwise indicated.
BANKRUPTCY REORGANIZATION
In December 1995, Nouveau PA. emerged from protection under Chapter 11
of the United States Bankruptcy Code of 1986. Nouveau PA. believes that the
following unique confluence of circumstances, outside the control of Nouveau
PA., caused Nouveau PA. to seek bankruptcy protection in October 1994. In
1993, the business and reputation of Nouveau PA. was damaged due to a
fraudulent telemarketing operation owned and operated by, a distributor of
vending machines using Nouveau PA.'s technology. As part of the telemarketing
operation, the distributor accepted deposits for machines and never delivered
orders for such machines to Nouveau PA.. Nouveau PA. was never implicated with
any wrongdoing with respect to the telemarketing fraud and, in fact, requested
and cooperated with a federal investigation of the distributor.
The distributor's aggressive sales techniques caused order
rates to increase at a rate well beyond Nouveau PA.'s manufacturing
capacity, which caused Nouveau PA. to have to rely on a third-party
manufacturer, Rowe, Inc. ("Rowe"), to produce machines for customers
of the distributor. Rowe failed to timely produce machines that had
been ordered, and had failed to adhere to the specifications
established by Nouveau PA. in the manufacture of the vending
machines, the result of which was problems with the refrigeration unit
and the microprocessor controller. Business was adversely affected
both as a result of cancellations due to the taint of the
telemarketing fraud, as well as Nouveau PA.'s inability to manufacture
an adequate supply of machines and improperly manufactured machines.
By December 1992, Nouveau PA. had received approximately $4.15
million of financing and services from Teleflex, Inc. ("Teleflex").
In the wake of the telemarketing fraud and the problems caused by
Rowe, Teleflex, which was Nouveau PA.'s principal source of financing,
withdrew its funding and foreclosed on the assets of the business,
including the proprietary technology of the business serving as
collateral for the loans made by Teleflex to Nouveau PA. The
foreclosure and withdrawal of funding led Nouveau PA. to seek
bankruptcy protection.
By order entered June 7, 1995, the Bankruptcy Court approved
the Settlement Agreement between Nouveau and Rowe, which provided a
resolution of Nouveau PA.'s dispute with Rowe regarding the faulty
manufacture of vending machines by Rowe. The terms of the settlement
include the following: (i) cash payments to Nouveau PA of $4 million;
(ii) the return of 450 completed machines and the parts for an
additional 450 machines to Nouveau PA.; and (iii) the withdrawal of
Rowe's proof of claim in Nouveau PA.'s bankruptcy proceeding in the
aggregate amount of $884,000.
The major portion of the cash part of the settlement has been
used for payments to creditors in Nouveau PA.'s bankruptcy proceeding,
including Teleflex.
The Reorganization Plan, was approved by the Bankruptcy Court
on or about December 8, 1995, and such approval became a final order
on December 18, 1995.
<PAGE> 3
Under the Reorganization Plan, the claims of the principal creditors
of Nouveau PA. will be satisfied as follows:
(i) The Reorganization Plan provides for cash payments to
Teleflex totaling $3,444,708. Of this amount, in June 1995,
Nouveau PA. paid Teleflex $1.2 million. Teleflex has an
allowed unsecured claim of approximately $937,000, of which it
will be paid 5% on the first anniversary of the final order,
and 5% on the second anniversary of the final order;
(ii) National Penn Bank, which has already received
payment of $175,000 out of proceeds from the settlement with
Rowe, will receive $5,000 to discharge its secured claim; and
(iii) Unsecured creditors will receive 10% of the amount of
their allowed claims, payable 5% on each of December 18, 1996
and December 18, 1997. The amount of unsecured debt at the
time of approval of the Reorganization Plan was approximately
$1,100,000, and will include the aforementioned Teleflex
unsecured debt in the amount of $937,000.
The Company repurchased it's technology from Teleflex in the first
quarter of 1996 and paid the remaining balance owed.
THE COMPANY
The Company has developed a series of vending machines which are
capable of storing, cooking, and serving specialty foods using
proprietary formulations and packaging. The combination of vending
machines, specialty food formulations and unique food packaging offer
a complete system for automated hot food vending. The combination of
technologies developed by the Company which comprise the Food System
currently consists of:
(1) a patented fully-robotic, coin-operated hot food vending
machine;
(2) a patented and proprietary, cost-effective packaging system
utilizing a unique shape and construction that protects a
frozen food product from freezer degradation, but allows the
products stored in it to be microwave, infrared, or
impingement heated/cooked without being opened or removed
from the box;
(3) a patent pending proprietary formulation for dough-based
products which have unique features that allow the products
made from these formulations such as pizzas and breads to be
baked, frozen, stored frozen, and rapidly reheated by
microwave, infrared, or impingement hot air, without adversely
affecting the taste, consistency, or desired features of the
dough-based food product; and
(4) a microwave oven which is modified to proprietary
specifications which allows for complete and consistent
cooking throughout the food item.
The Company markets its pizza products under the registered trademark
"Pizza Chef(R)" and markets various other products using the technologies
described above under non-registered marks.
In addition to the fully-automated vending machines which both store
and cook the food product, the Company also offers semi-robotic and non-robotic
machines. The semi-robotic machines store frozen food in the Company's food
packaging system and take money automatically, but require the user to manually
deliver the frozen product to the machines' microwave. The non-robotic
machines, which were designed for use mainly in convenience stores, store food
in the Company's food packaging, but do not cook or serve food or take money
automatically.
The Company's products are unique in the following two respects: (i)
the packaging system and
<PAGE> 4
dough formulation allow dough-based products to be microwave cooked without
damaging the taste and quality of such products and (ii) the vending machine
operates as a turn-key system which takes money, cooks, and serves hot food
products in times as short as 60 seconds. Thus, management believes that it
can take advantage of a relatively unpenetrated niche of the market for vended
products.
The Company's operating strategy is to (i) secure strategic licensing
and distribution agreements for the manufacture and distribution of its vending
machine products on a global basis and (ii) develop a network of licensees and
distributors for the supply of food products to owner/operators of the vending
machines.
The Company licenses its technology to third-party manufacturers and to
third-party distributors outside the United States for the assembly and
distribution of the vending machines. Currently, the Company has, among other
agreements: (i) a technology license and distribution agreement with a
distributor in the Pacific Rim which has, with the Company's approval,
sublicensed the manufacture of the fully-robotic vending machine to Daewoo,
Inc. a major Korean manufacturing company; (ii) a joint venture agreement for
European distribution of machines and food products; and (iii) a memorandum of
understanding for a license to manufacture and/or joint venture in the Czech
Republic to be formed for the manufacture and distribution of vending machines
and the distribution of food products. Recently the Company has signed Master
Distributor Agreements and contracts in Russia, Germany and Italy and
Memorandum of Understandings signed in France, Spain and Portugal.
The Company has a co-pack agreement with Crestar Foods, Inc. who
prepares a portion of the food products on behalf of the Company using the
Company's proprietary formulations. The food products are then sold by the
Company to customers both directly and through third-party distributors. The
Company plans to license the production of its food products on a global basis.
The Company owns its own baking equipment and operated its own bakeries until
October 1994, however, it was decided to discontinue baking operations as a
result of its bankruptcy filing in October 1994, and presently such equipment
is not in use and the Company has not yet recommenced baking operations on its
own. In February 1996, the Company entered into an agreement to purchase a
facility that is capable of housing the Company's baking equipment and which
will allow the Company to embark on its own food preparation and development
operations. The Company is presently leasing the facility. Closing on the
agreement is scheduled for June 1996 subject to the Company obtaining
sufficient financing. The Company estimates that approximately 585 robotic
machines have been delivered. The Company shipped approximately 24 machines in
1995 as it essentialy suspend operations during the period of time it was in
bankruptcy proceedings. While the Company continues to supply food products to
some purchasers of these machines it cannot determine how many machines are in
actual use. Since December 31, 1995 through March 31, 1996 the Company has
shipped eighty robotic machines which vend pizzas.
The Company currently has commitments from distributors to place orders
pursuant to the various distribution agreements for 1,637
vending machines, during 1996. No assurance can be given that such
distributors will place orders as required under their respective agreements.
Presently, all of the distributors are located in foreign jurisdictions. In
the event the Company would be required to seek legal redress against any of
the distributors it may be difficult to obtain jurisdiction and/or collect any
judgments.
THE VENDING MARKET
Management believes that a sizable and untapped global market
opportunity exists for a company able to develop and reliably deliver machines
which address hot food vending.
In addition to the domestic market, there is also a mature vending
market in Japan. In addition to the large number of vending machines, the
cultural habits of the Japanese support higher value vended products such as
those offered by the Company. Vending is also beginning to emerge as a growth
industry in countries such as the United Kingdom, Germany, France, Italy,
Spain, Russia, Korea, and Australia.
Much of Europe does not have an established vending machine market.
Management views this
<PAGE> 5
as an opportunity to enter into a relatively untapped market; however,
there can be no assurance that such market will in fact develop.
MANUFACTURING AND DISTRIBUTION
The Company plans to achieve its manufacturing goals through a system
of joint ventures and licensing of its technology to manufacturers located in
strategic geographical areas. In a typical licensing agreement, the licensee
will agree to incur all costs related to obtaining sufficient equipment so that
the machines can be manufactured in accordance with the specifications and
technology transferred by the Company. In order to maintain a license, the
licensees will be required to meet the quality control and production
standards of the Company. The Company plans to have a representative present
at each licensee on a regular basis to monitor quality control with reporting
documentation. Each licensee is generally required to produce a predetermined
minimum number of machines. Manufacturing licenses are often signed in
connection with master distribution agreements, so that the licensees may also
act as exclusive distributors in designated regions.
Distribution will be accomplished through a system of designating
master distributors who will have the exclusive right to distribute products
and machines in specified regions. Such master distributors may contract with
sub-distributors upon approval by the Company. Each master distributor will be
required to purchase minimum quantities of products or lose their exclusivity.
The Company's manufacturing strategy provides five primary
manufacturing areas which will supply economic trade regions that are, or will
be, encompassed by specific distribution agreements. They are expected to be
organized as follows:
<TABLE>
<CAPTION>
Manufacturing Principal Areas of Distribution
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<S> <C>
Czech Republic Northern, Western & Eastern Europe & USA backup
Mexico North America, Central America and South America
Italy Southern Europe
Korea/Malaysia Pacific Rim (except Australia)
South Africa Africa and certain Middle Eastern Countries
</TABLE>
It is the intention of the Company to manufacture certain of its
proprietary specialty vending machines primarily through offshore outsourcing
agreements. These licensing agreements, together with the Company's on-site
representatives, will be designed to allow the Company to maintain satisfactory
production standards and effectively ship its product in an efficient,
cost-effective manner. The Company intends to establish manufacturing
operations in the United States in the future for certain of its products,
however, there can no assurance thereof.
LICENSE AGREEMENTS
In October 1993, the Company signed an exclusive, five-year technology
licensing and distribution agreement in the Pacific Rim region with Woneel
Mercantile, Ltd., a manufacturer of consumer products. Subsequently, the
Company and Woneel contracted with Daewoo, Ltd., a major Korean manufacturing
company, to manufacture the Company's machines at a fixed priced to the
Company, which Woneel will purchase from the Company for distribution. In
order to maintain its exclusive rights, the agreement calls for minimum
purchases by Woneel of 1,000 machines per year over the first 5 years of the
licensing agreement all of which will be used in Korea. This program is just
beginning for delivery of production quantities of machines in April/May 1996.
During the time the Company was in bankruptcy proceedings the parties to the
agreement informally suspended any performance.
In December 1994, the Company formed a joint venture in Italy. The
joint venture company,
<PAGE> 6
called Nouveau Cordon Bleu and incorporated as an Irish company, is the
European licensee for the Company. The Company provided the license to its
proprietary technology and other parties provided capital and ongoing management
with each becoming a 50% owner of the joint venture. The license agreement
provides that Nouveau Cordon Bleu will purchase a minimum of 1,000 machines per
year. As the European licensee, Nouveau Cordon Bleu will also assist the Company
in selling master distributorships, each of which will act as the exclusive
distributor of the Company's products in their respective designated regions.
The distributors will be required to purchase a minimum number of machines
annually in order to maintain regional exclusivity. The Company does not
believe that this joint venture generated any profits during 1995. During the
time the Company was in bankruptcy proceedings the parties to the joint venture
agreement informally suspended any performance guarantees provided for in the
agreements.
In February 1996, the Company entered into two agreements with
CONTITRADE GmbH of Munich, Germany establishing CONTITRADE as a Master
Distributor of the Company's proprietary hot food vending machines and
specialty ready-to-eat food products.
Under the terms of the first agreement, CONTITRADE will be granted the
exclusive marketing, distribution and equipment service rights covering Munich
as a separate territory. The second agreement provides the same exclusivity
for the rest of Germany.
In order to maintain its exclusive distributor rights for Munich,
CONTITRADE must purchase from the Company a minimum of 600 vending machines per
year for five years. Additionally, it is committed to purchase 2,000 machines
per year for five years in order to maintain its exclusivity for the rest of
the German market.
In December 1995, the Company entered into an agreement with
Zernostandart, a Russian corporation headquartered in Moscow which established
Zernostandart as a Master Distributor for all of Russia. In order to maintain
its exclusive rights for Russia, Zernostandart must purchase 26 units a month
over the next year.
In November of 1995, the Company entered into an agreement with Kwang
Hap Siang (S) Pte Ltd., a Singapore corporation. In order to maintain it's
exclusive rights, the agreement calls for Kwang Hap Siang to purchase a minimum
of 650 units over five years. The distributor also has first rights of refusal
for Malaysia and Indonesia for a period of 12 months from receipt of first
containers in Singapore. The agreement may be terminated by Kwang Hap Siang
(S) Pte Ltd. upon ninety days notice.
MACHINE PRODUCT LINE
The Company's current product line includes machines dedicated to
pizza, sandwiches and other types of foods. The machines are available in
various technological categories, including fully-robotic machines (the "200
series"), semi-robotic machines (the "100 series") and non-robotic machines
(the "80 series").
The robotic machines are fully-automatic in all respects. They are
able to store, cook and serve food, as well as take money, in a fully-automated
fashion. The three fully-robotic machines include the following:
PVM-220: a pizza vending machine capable of storing up to 220 pizzas
SVM-110: a sandwich vending machine capable of storing up to 110
sandwiches.
MVM-110: a multi-food vending machine capable of storing up to 110
items.
The semi-robotic machines are able to store food and take money
automatically, but a user will have to deliver the frozen product manually to
the machine's microwave. The semi-robotic machines include:
<PAGE> 7
PEM-120: a pizza vending machine capable of storing up to 120 pizzas.
SEM-60: a sandwich vending machine capable of storing up to 60
sandwiches.
MEM-60: a multi-food vending machine capable of storing up to 60
items.
The non-robotic machines are automatic only in their ability to store
food properly. They are unable to cook, serve or take money automatically,
thus a user will have to deliver the frozen product manually to the machine's
exclusive microwave and pay a cashier. Accordingly, they are designed
primarily for use in convenience stores, of which there are estimated to be
140,000 nationwide. The three non-robotic machines include the following:
PME-80: a pizza vending machine capable of storing up to 80 pizzas
SME-40: a sandwich vending machine capable of storing up to 40
sandwiches.
MME-40: a multi-food vending machine capable of storing up to 40
items.
Management believes that the product which offers the largest
potential for unit sales in the United States and Canada, both of which
management views as mature markets, is its multi-food machine. The multi-food
machine offers up to seven different selections within the machine at a given
time. These seven selections can be changed using a variety of product mixes
and cuisine which range from simple finger food to hot snacks and full meals.
The multi-food machine, which is not yet available for sale, will be
for use with other food companies' food formulas and combinations, although
they will still be required to utilize the Company's patented box/packaging
system. Accordingly, the Company will participate in the vend unit sale
through the value offered by this technology. This arrangement will require
strategic alliances with prime food/meal producers.
The multi-food machine is the same size as the specialty product
machines built by the Company (Pizza Chef(R), Nouveau Hot Sandwiches and Pasta
Chef) and differs only in its selector and cooking device. Although the
multi-food machine will sell food products other than those manufactured by the
Company, the Company will still provide the pizzas, sandwiches, and pasta where
the owner/operator wants those items in the machine. The Company will control
this by signing agreements with other food producers who have no pizza,
sandwiches and pasta that can compete with the Company's technology and
therefore, present no conflicts.
Management expects that while the mature markets of the United States
and Canada both represent opportunities for immediate unit sales, global
penetration for the multi-food machine will require a longer lead time. The
international vending machine market, as a whole, is considered to be an
emerging market and, accordingly, rapid penetration would not be expected.
However, management believes that the increasing global awareness of vending
machines will afford the Company an excellent opportunity for a well-planned,
phased program.
The Company currently offers the Series 220, 110 and 80 machines and
anticipates that these machines will comprise its machine sales during 1996.
FOOD PRODUCT LINE
The Company has developed a proprietary formulation that allows dough
to be cooked or reheated in a high-energy microwave oven without negatively
impacting its constitution. As a result, the Company has developed a complete
line of product offerings consisting of its proprietary dough formulations
coupled with natural ingredients. The offerings will fall into four primary
categories: Pizza Chef Pizzas, Pasta Chef products, Li'l Bite Sandwiches
(which come three to a pack) and Pocket Snacks. The Company expects that its
food product offerings will consist primarily of its Pizza Chef(R) pizza
product line through 1996 with aggressive marketing beginning in June of 1996
for its sandwich line.
In August 1994, the Company established a five year co-packer supply
agreement with Crestar Foods Products, Inc. ,a division of H.J. Heinz,
pursuant to which Crestar produces pizzas for the Company at a fixed price
adjusted annually on an exclusive basis, thereby providing the Company with
predictable
<PAGE> 8
product costs on an annual basis. The supply agreement may be terminated by
Crestar Food Products, Inc. at any time upon ninety days notice.
GOVERNMENT REGULATIONS
The Company is required to comply with certain rules and regulations
of the U.S. Food and Drug Administration. Compliance is mandated because the
Company's vending machines contain a robotically operated microwave oven. The
Company is in compliance with all applicable FDA rules and regulations.
The Company's vending machines to be used in the United States must
also be in compliance with Underwriters Laboratories standards.
The Company's products are also subject to local foreign regulations
where such products are in use.
The Company is also in voluntary compliance with the manufacturing
standards as outline by the National Automatic Merchandising Association.
PATENTS, TRADEMARKS AND PROPRIETARY PROTECTION
The Company holds design and utility patents on the delivery system
for its vending machines and its packaging system. The Company also holds
patents for the food formulation for its dough based products and for its pizza
box and coating. The company has been granted patents on the packaging system
in Japan, Israel, United Kingdom, Korea, Italy and France. The Company has
been granted patents on the delivery system in Israel, United Kingdom and
Korea. The Company has applied for patents in other select foreign
jurisdictions.
The Company has registered the "Pizza Chef(R)" name and logo and has
applied for registration with the Patent and Trademark Office for "Nouveau
Chef". The Company is aware that a number of concerns may be using the Pizza
Chef(R) name in their businesses. The Company has retained special trademark
counsel to prosecute any party that is using the Pizza Chef(R) name in
violation of the Company's registration.
The Company enters into confidentially agreements with all persons and
entities who or which may have access to its technology. However, no assurance
can be given that such agreements, the patents or any additional patents which
may be issued to the Company will prevent third parties from developing similar
or competitive technologies.
There can be no assurance that the patents will provide the Company
with any significant competitive advantages, or that challenges will not be
instituted against the validity or enforceability of its patents, or if
instituted that any such challenges will not be successful. The cost of
litigation to uphold the validity and prevent infringement can be substantial.
In addition, no assurance can be given that the Company will have sufficient
resources to either institute or defend any action, suit or other proceeding by
or against the Company will respect to any claimed infringement of patent or
other proprietary rights.
COMPETITION
The Company's unique systems approach combines the custom designed
food, package, and oven into a fully-robotic self-contained vending machine.
Each machine features an on-board computer/microprocessor, self-diagnostic
controller, storage freezer, product selector and transporter and high-energy
directional microwave, all of which provides a system that serves the customer
a fresh, ready-to-eat hot meal in approximately two minutes.
To date, to the knowledge of the Company, there are no commercially
available machines that have successfully demonstrated the ability to reliably
deliver a food product from frozen storage to a cooked, ready-to-eat state
entirely within the confines of a single machine, and without user interface.
Thus, to the knowledge of management, there are no direct comparisons
available.
<PAGE> 9
Management is aware of a number of attempts to design and build
machines which mimic, and would compete with, Pizza Chef(R). Some of the more
notable efforts have been made by the American Pizza Company (Vancouver, B.C.),
Cafe Quik, (Dallas, TX) and Edgewater Foods/Presto Pizzeria (Washington D.C.).
The failure of competitors to successfully address this market demonstrates the
technological barriers to entry which exist. There can be no assurance that
additional entrants into the hot food vending machine industry will not be
forthcoming nor can the Company know all of the developments being made by
others.
Some similar, although less-advanced, competitive offerings do exist.
Little Charlie's' as well as other pizza brands sell a pizza product from
refrigerated machines its pizza offering is smaller both in weight and
diameter, is built upon a pastry crust and must be manually transferred to a
cooking device and removed from its package before cooking. Vend prices for
this product generally exceed $2.50. Company officials report sales in excess
of three million units per year.
Toppers has produced machines which resemble automated production
lines, with a pre-prepared crust, indexing from one station (sauce, cheese,
toppings, etc.) to the next and , finally, into a cooking unit. However, the
machine differs from Pizza Chef (R) insofar as it has a greater cycle time
(five minutes versus Pizza Chef(R)' s approximately two minutes), requires
personnel to be present for operation and is very large and expensive. To
date, they have found a market only in Japan on a limited basis and do not
resemble vending machines.
Neither franchised nor individually owned pizza outlets can
effectively compete for several reasons. While a pizzeria may provide a cost
competitive offering (on a cost/serving basis), delivery times often approach a
full half-hour and availability in remote locations may be limited. At lease
one major food service company, PepsiCo's Pizza Hut unit, has attempted to
match the portability of the distribution site which is fundamental to vending
machines in general, by experimenting with mobile carts and small kiosks, both
of which require greater capital expenditure and still require attended service
and tend to experiences food spoilage loses.
The domestic vending industry is dominated by a handful of large
national firms such ARAMARK, Service America and Canteen, who are able to exert
buying power from the machine and product manufacturers and placing power with
the location owners. If such large firms decided to enter the hot food vending
machine market, they would enjoy the advantage of "owning" many prime locations
through exclusive contractual arrangements. For example, a firm might contract
with a large hospitality chain, whereby they will retain exclusive access to
locations at the chain's facilities. In addition, the necessity of a well
trained, readily available service network and other capital intensive
infrastructure requirements also tend to work in favor of larger, more
sophisticated and better capitalized firms.
EMPLOYEES
The Company currently has twenty-five employees and considers its
relations with its employees to be good. It is currently in the
process of hiring additional employees in key areas of management and
production.
CONSOLIDATED SELECTED FINANCIAL DATA
Set forth below is selected financial data derived from the Company's
consolidated financial statements, some of which appear elsewhere in
this report. This data should be read in conjunction with the
consolidated financial statements, some of which are included
elsewhere in this report. The financial data presented below is that
of Nouveau PA and its subsidiaries and does not reflect the merger
with HMI and the attendent financing. See "Pro Forme Consolidated
Balance Sheet"
<PAGE> 10
<TABLE>
<CAPTION>
YEAR ENDED
31-DEC-95
<S> <C>
Operations Revenue $ 245,313.00
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Net Income $ 7,593,984.00
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Net Income (Loss) per Share
of Common Stock $(.16)
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Balance Sheet Data
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Working Capital (deficit) 2,031,405
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Total Assets $ 4,595,560.00
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Total Liabilities $ 2,666,932.00
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Stockholder's equity
(deficiency) 1,928,628
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</TABLE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company pursuant to a sub-lease agreement leases approximately
15,000 square feet in Exton, Pennsylvania where it currently maintains its
corporate offices, limited warehouse and assembly facility. The term of the
sub-lease agreement is three years ending in October 1998. The current base
rent is $67,792. Other annual operating expenses under the sub-lease agreement
are currently $11,600.
The Company lease approximately 3,000 square feet of warehouse space
in Royersford, Pennsylvania on a month to month basis. The monthly rent is
$600.00. The Company also leases approximately 5,000 square feet of warehouse
space in Folcroft, Pennsylvania on a month to month basis. The monthly rent is
$500.00.
In April, 1996 the Company leased approximately 16,400 square feet in
Exton, Pennsylvania across the street from its other 15,000 square feet Exton
plant. The term of the lease is three years. The current annual rent is
$65,600. The Company intends to consolidate the operation in Folcroft and
Royersford into this facility and to also assemble vending machines therein.
In February 1996, the Company entered into an agreement to purchase a
manufacturing facility in West Chester, Pennsylvania. The facility is
approximately 36,000 square feet of which approximately 26,000 square feet is
designed for USDA food manufacturing. The property consists of approximately
twenty developable acres. The purchase price is $1,360,000 of which $40,000
has been paid. Closing on the sale is expected to take place in June 1996
subject to the Company obtaining sufficient funds to complete the purchase.
The Company is currently leasing the facility. It is the Company's intention
to use the facility as its corporate office and food production operation
beginning in June 1996.
ITEM 3. LEGAL PROCEEDINGS. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market for the Company's Common Stock is the National
Association of Securities Dealers, Inc. over-the-counter market, on the
Electronic Bulletin Board. The trading symbol for the Common Stock is
"VEND.U".
Prior to January 18, 1996, the Company's Common Stock was
traded under the symbol "HEMI". For the years 1994 and 1995 the high
and low bid price of its Common Stock was 1/4. On January 18, 1996
the Company acquired all of the capital stock of Nouveau PA.. For the
quarter ending March 31, 1996, the high and low bid price of the
Company's Common Stock was 1/4 to 5 3/4. The prices represent prices
between dealers, do not include retail mark-ups, mark downs or
commissions and may not represent actual transactions.
HOLDERS
As of April 8, 1996, the number of stockholders of record was 155,
not including beneficial owners whose shares are held by banks,
brokers and other nominees.
DIVIDENDS
The company has paid no dividends since its inception and does not
anticipate or contemplate paying cash dividends in the foreseeable
future.
Pursuant to the terms of the Company's Series A Preferred Stock, a 4%
annual dividend is due and payable upon redemption. The dividend is
currently being accrued. As of March 31, 1996, the unpaid cumulative
dividends totaled approximately $28,689.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FISCAL YEARS 1994 AND 1995
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company has working capital of $2,037,405
compared with a working capital deficiency of $4,668,013 at December 31, 1994.
The major reason for the increase in working capital was a $3,920,000 reduction
in liabilities as a result from confirmation of the Company's Plan of
Reorganization and settlement of a lawsuit with Rowe totaling $5,109,000 which
consisted of $3,038,000 in cash, inventory valued at $2,592,000 and receivables
of $363,000 less cancellation of payables of $884,000. The settlement was
reached in September 1995.
In March 1996, the Company received an additional $300,000 as part of
the settlement. The remaining balance is due in installments of $100,000 in
June 1996 and $500,000 in June 1997.
During the period ending December 31, 1995 the Company received
$183,000 in advances from an officer of the Company. In January 1996, the
Company received an additional advance of $30,000 from the same officer.
In January 1996, the Company received approximately $3,045,000 in net
proceeds from the sale of its
<PAGE> 12
convertible preferred stock in a private placement.
In February 1996, the Company entered into an agreement to purchase a
facility capable of manufacturing the Company's food products. The Company
paid $40,000 to lease the facility until the closing on the sale which is
scheduled for June 1996. At closing the Company will be required to pay
$1,320,000 to purchase the facility. Management presently estimates that it
will cost approximately $700,000 to renovate the facility so that the Company
can begin food manufacturing operations. The Company will need to obtain
financing to purchase the facility and renovate it. The Company will also
need additional funds to finance the manufacturing of its vending machines.
The amount of funds will be determined by the number of vending machines that
are ordered. Currently, the Company has distribution agreements that require
that 1,673 machines be delivered in 1996. The Company's current inventory can
supply approximately 810 machines provided that additional parts are ordered.
The Company will require additional funding to fund its food
production operation and to purchase vending machines. The Company is
currently in the process of attempting to raise additional financing through a
private placement of its securities to meet its short term capital needs. The
Company is also seeking additional sources of financing to meet its longer term
needs. No assurance can be given that the Company will be able to obtain any
additional financing.
RESULTS OF OPERATIONS
For the year ended December 31, 1995 the Company had net sales of
$245,313 compared to net sales of $943,345 at December 31, 1994. The decrease
was as the result of lower pizza sales, machine sales and no license fees paid
in 1995 as the Company had essentially suspended operations during the period
it was in bankruptcy proceedings. In October 1994, the Company sought
protection under Chapter 11 of the bankruptcy code. The Company emerged from
bankruptcy proceedings in December 1995. During the period it was in
bankruptcy the Company's operation were greatly reduced on account of limited
funds. Approximately fifty percent of the Company's sales in 1995 were derived
from one customer, AMTRAK, and consisted of bulk sales of pizzas. The Company
does not expect that it will realize any significant sales to this customer in
the future. The Company currently has agreements from various distributots
that call for orders from such distributors for 1,673 vending machines during
1996. As the Company is only now beginning to commence operations and because
it has no prior experience with the various distributors no assurance can be
given as to how many actual purchase orders will be received pursuant to the
various agreement.
The Company anticipates that it will enter into additional
distribution agreements during 1996. The current distribution agreements are
for sales outside the United States. During 1996, the Company intends to
expand its marketing effort to the domestic marketplace.
General and administrative expenses total $618,392 during 1995. Of
this amount approximately $245,000 was for salaries and approximately $132,00
for rent. General and administrative expenses in 1994 were $998,293.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements required to be filed pursuant to
this Item 7 begins on page F-1 of this report. Such consolidated
financial statements are hereby incorporated by reference into this
Item 7.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. Non applicable.
<PAGE> 13
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gary W. Black, Sr. 55 Chief Executive Officer, Chief Financial Officer and,
Chairman of the Board of Directors
Robert J. Brock, Sr. 54 Chief Operating Officer, and Director
Frederick W. Johnson 57 Production Manager, Secretary and Director
</TABLE>
Mr. Black founded Nouveau PA in 1989 and brings thirty years of
experience in the fields of materials engineering, actuation and
mechanism design and systems analysis to the Company. His background
covers sub-systems design for numerous aerospace and space hardware,
commercial and military aircraft, weapons systems and automotive
engine combustion. Mr. Black holds numerous patents on exotic
materials, chemical formulations, weapons delivery systems, packaging,
electro-mechanical actuation devices and most recently, in food
formulation and robotic vending equipment. Prior to founding and
becoming Chief Executive Officer of Nouveau PA, Mr. Black held
positions as founder and Chief Scientist of Turbo-Technologies, a
materials research and product manufacturing company; owner and Chief
Executive Officer of Penn Precision Manufacturing ("Penn Precision"),
a defense product manufacturing company; owner and Chief Executive
Officer of Applied Manufacturing Sciences, a defense product
manufacturing company; founder and President of MATRA Defense Systems,
a defense product manufacturing company; and a Vice President of
Teleflex Incorporated.
Mr. Brock also brings over thirty years of manufacturing experience to
the Company, has an extensive background in manufacturing,
particularly within the scope of military equipment and has held
leadership positions related to plant management, production
operations, and personnel management. Mr. Brock began his career with
George E. Ellis Company, a manufacturer of specialty containers for
the military, where he held positions as Time Study Engineer,
Personnel Manager and Manufacturing Manager over a ten year period.
He then worked for thirteen years at Ametek, a manufacturer of
aircraft and automotive instruments, where he held managerial
positions related to manufacturing, personnel, production, materials
and plant and production management. Mr. Brock held similar positions
at Action Manufacturing. Mr. Brock was General Manager for Penn
Precision. Mr. Brock is Chief Operating Officer, has responsibility
for Human Resources, Operations Management and reports to the
Company's Chief Executive Officer. He has been employed by the
Company for over five years.
Mr. Johnson brings almost thirty years of experience in industrial
management to the Company. Mr. Johnson received a degree in Business
Administration with a major in Industrial Management. Mr. Johnson
held management positions with Handy & Harmon Tube, Speeline Inc.,
Commodore Optoelectronics and Franke over a twenty year period. Mr.
Johnson joined the Company as Production Manager and has held this
position for over five years. His responsibilities include oversight
of production of vending machines, shift management, labor relations,
quality control and production control. Mr. Johnson reports directly
to the Chief Operating Officer. He is an active member of both the
Chamber of Commerce and the American Manufacturing Association.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation earned or paid to the
named executive officer by the Company for the fiscal year ended December 31,
1995
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------
AWARDS
============================================================================================================================
OTHER RESTRICTED SECURITIES
Year Salary($) Bonus($) ANNUAL STOCK UNDERLYING
COMPENSATION AWARDS OPTIONS/SAR'S(#)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gary W. Black, Sr. 1995 $32,500 $9,000
<CAPTION>
LONG TERM
COMPENSATION
---------------
PAYOUT
==================================
LTIP ALL OTHER
PAYOUTS COMPENSATION
($) ($)
- --------------------------------------------------------
<S> <C>
Gary W. Black, Sr.
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 1995 AND
FY-END OPTION/SAR VALUES
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF THE UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY OPTIONS
NAME YEAR ACQUIRED ON VALUE UNEXERCISED AT FY-END ($)
EXERCISE (#) REALIZED OPTIONS/SARS AT
EXERCISABLE/ EXERCISABLE/UNEXERCISABLE
UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gary W. Black, Sr. 1995 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN THE FISCAL YEAR 1995
=============================================================================================================================
INDIVIDUAL GRANTS
=============================================================================================================================
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE OR
NAME YEAR UNDERLYING GRANTED TO BASE PRICE EXPIRATION
OPTION/SARS EMPLOYEES ($/SHARE) DATE
GRANTED IN FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gary W. Black, Sr. 1995 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the outstanding shares of the Company's
<PAGE> 14
Common Stock, each director, and all executive officers and directors of the
Company as a group, as of April 8, 1996, and their percentage ownership of
Common Stock and their percentage voting power.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Ownership
- ---------------- ----------------------------- ---------
<S> <C> <C>
Gary W. Black, Sr. 3,000,000 26%
212 Phillips Road
Exton, PA 19341
Glengarry Family Investments, L.P. 2,000,000 17%
1120 Pine Street
Norristown, PA 19401 (2)
Robert J. Brock, Sr. 100,000 *
Frederick W. Johnson 25,000 *
ALL executive officers and directors as a
group (3 persons) 3,125,000 27.0%
</TABLE>
- ------------------------
* Less than 1%
(1) Except as otherwise indicated, all of the shares are owned beneficially
and of record. Beneficial ownership has been determined in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended.
(2) A Delaware Limited Partnership whose sole limited partner is a
corporation owned by the spouse of Mr. Gary W. Black, Sr. Mr. Black,
Sr. disclaims any beneficial ownership in these shares.
By virtue of his stock ownership and position with the Company Mr.
Black may be deemed to "control" the Company.
STOCK OPTION PLAN
The Company has adopted a stock option plan (the "Plan") covering
59,000 shares of the Company's Common Stock, $.001 par value, pursuant
to which officers, directors, key employees and consultants of the
Company are eligible to receive incentive as well as non-qualified
stock options and Stock Appreciation Rights ("SAR'S"). The Plan, which
expires in September 1998, is administered by the Board of Directors.
Incentive stock options granted under the Plan are exercisable for a
period of up to 10 years from the date of grant and at an exercise
price which is not less than the fair market value of the Common Stock
on the date of the grant, except that the term of an incentive stock
option granted under the Plan to a stockholder owning more than 10% of
the outstanding Common Stock may not exceed five years and the
exercise price of an incentive stock option granted to such a
stockholder may not be less than 110% of the fair market value of the
Common Stock on the date of the grant. Non-qualified stock options may
be granted on terms determined by the Board of Directors. SAR's which
give the holder the privilege of surrendering such rights for the
appreciation in the Company's Common Stock between the time of grant
and the surrender, may be granted on any terms determined by the Board
of Directors. No SAR's have been granted.
To date, no options are currently in effect.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Gary W. Black, Sr. is employed by the Company as it Chief
Executive Officer. His annual
<PAGE> 15
compensation is $150,000. Mr. Black also receives a car allowance of $750.00
per month. Mr. Black's spouse and three sons also are employed by the Company.
Mr. Robert Brock is employed by the Company as its President and Chief
Operating Officer. His annual compensation is $80,000.
Mr. Frederick W. Johnson is employed by the Company as its Production
Manager. His annual compensation is $60,000.
Mr. Gary W. Black, Jr. is the President of Nouveau Vend International
a wholly owned subsidary of the Company. His annual compensation is $72,000.
The Company leases automobiles for Messrs. Brock, Johnson and Gary W.
Black, Jr. and Brett A. Black, the General Manager of the Company's Food
Division who is a son of Mr. Gary W. Black, Sr. The terms of the leases are
for three years ending in February 1999. The total lease payment is $1,500 per
month. The automobiles are leased from a company owned by a stockholder of the
Company. This stockholder also performs legal services for the Company. The
Company considers the terms of the leases to be no less favorable then could
have been obtained from a third party and multiple bids were received prior to
effecting the subject leases.
In February, the Company advanced Mr. Gary W. Black, Sr.
$200,000. In April, $100,000 was repaid with interest.
ITEM 13. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
A. The following documents are filed as part of this report:
1. The consolidated financial statements filed as part
of this report are listed under the caption "Index to
Financial Statements and Schedules", appearing
elsewhere in this report.
2. The following Exhibits are filed herein:
<TABLE>
<CAPTION>
Exhibit
Number Description
-------------------
<S> <C>
3.1(a) Certificate of Incorporation and By Laws
3.2(b) Form of Certificate of Designation - Series A Convertible Preferred Stock
4.1(a) Form of Warrant
*10.0 Agreement and Plan of Merger By and Among Health
Management, Inc. and Nouveau International, Inc.
dated January 18, 1996.
21.0(d) Subsidiaries of the registrant
27.0(d) Financial Data Schedule
</TABLE>
B. Reports on Form 8-K filed January 30, 1996: (i) to report an event under
Item 2 regarding the registrants' acquisition of all of the issued and
outstanding capital stock of Nouveau International, Inc.and
<PAGE> 16
an event under item 4 to report a change in certifying accountants.
* Incorporated by reference from registrants' Current Report on
Form 8-K January 30, 1996.
<PAGE> 17
HEALTH MANAGEMENT, INC.
- I N D E X -
-------------
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
REPORT OF INDEPENDENT AUDITORS F-2
BALANCE SHEET F-3
STATEMENTS OF OPERATIONS F-4
STATEMENTS OF CHANGES IN CAPITAL
DEFICIENCY F-5
STATEMENTS OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7
PRO FORMA CONSOLIDATED BALANCE SHEET F-8
NOTES TO PRO FORMA CONSOLIDATED BALANCE
SHEET F-9
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS F-10
</TABLE>
F-1
<PAGE> 18
[RICHARD A. EISNER & COMPANY LETTERHEAD]
To the Directors
Health Management, Inc.
We have audited the balance sheet of Health Management, Inc. (a
Florida Corporation) as at December 31, 1995 and the related statement of
operations, changes in capital deficiency 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 audit.
We conducted our audit 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 our audit provides 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 Health Management,
Inc. as of December 31, 1995 and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
RICHARD A. EISNER & COMPANY, LLP
New York, New York
March 11, 1996
F-2
<PAGE> 19
HEALTH MANAGEMENT, INC.
BALANCE SHEET
AS AT DECEMBER 31, 1995
<TABLE>
<S> <C>
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - 0 -
==========
L I A B I L I T I E S
---------------------
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . $ 5,000
---------
CAPITAL DEFICIENCY
------------------
Common stock - authorized 10,000,000 shares of $.001 par
value; issued and outstanding 2,959,593 shares. . . . . . . 2,960
Additional paid-in capital . . . . . . . . . . . . . . . . . . 784,705
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . (792,665)
---------
Total capital deficiency . . . . . . . . . . . . . . (5,000)
---------
T O T A L. . . . . . . . . . . . . . . . . . . . . . $ - 0 -
=========
</TABLE>
The accompanying notes are an integral part hereof.
F-3
<PAGE> 20
HEALTH MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
December 31,
----------------------------
1995 1994
-------- --------
<S> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . $ - 0 - $ - 0 -
Operating expenses:
General and administrative. . . . . . . . . . . (14,022) (24,054)
-------- --------
NET LOSS . . . . . . . . . . . . . . . . . . . . . $(14,022) $(24,054)
======== ========
Net loss per share . . . . . . . . . . . . . . . . $(.003) $(.005)
====== ======
Weighted average number of common
shares outstanding. . . . . . . . . . . . . . . 4,500,000 4,500,000
========= =========
</TABLE>
The accompanying notes are an integral part hereof.
F-4
<PAGE> 21
HEALTH MANAGEMENT, INC.
STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Capital
Stock Capital Deficit Deficiency
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance - January 1, 1994................... $2,960 $749,717 $(754,589) $ (1,912)
Net loss.................................... (24,054) (24,054)
Capital contributions....................... 25,444 25,444
------- --------- ---------- ---------
Balance - December 31, 1994................. 2,960 775,161 (778,643) (522)
Net loss.................................... (14,022) (14,022)
Capital contributions....................... 9,544 9,544
------- --------- ---------- ---------
BALANCE - DECEMBER 31, 1995................. $ 2,960 $ 784,705 $ (792,665) $ (5,000)
======= ========= ========== =========
</TABLE>
The accompanying notes are an integral part hereof.
F-5
<PAGE> 22
HEALTH MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . $(14,022) $(24,054)
Change in accrued expenses . . . . . . . . . . . 4,478 (1,610)
-------- --------
Net cash used in operating activities . . (9,544) (25,664)
Cash flows from financing activities:
Capital contribution . . . . . . . . . . . . . . 9,544 25,444
-------- --------
NET CHANGE IN CASH. . . . . . . . . . . . . . . . . - 0 - (220)
Cash - beginning of year. . . . . . . . . . . . . . - 0 - 220
-------- --------
CASH - END OF YEAR. . . . . . . . . . . . . . . . . $ - 0 - $ - 0 -
======== ========
</TABLE>
The accompanying notes are an integral part hereof.
F-6
<PAGE> 23
HEALTH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Organization and Business:
The Company was incorporated on March 19, 1981 and was engaged in
providing management and consulting services. The Company was inactive since
mid 1993.
(NOTE B) - Summary of Significant Accounting Policies:
Net loss per common share is based on the weighted average number of
shares outstanding during the period after giving effect to a stock split of
1.52 for 1 on January 6, 1996.
(NOTE C) - Subsequent Event:
In January 1996, Health Management, Inc. ("HMI") acquired all the
outstanding common stock of Nouveau International, Inc. in exchange for shares
representing 60% of HMI common stock. Concurrent with the transaction, HMI
sold 70 units in a private placement, each unit consisting of 1 share of 4%
cumulative redeemable preferred stock and 1,608 common stock purchase warrants,
for $3,500,000. HMI changed its name to Nouveau International, Inc.
The preferred stock is mandatorily redeemable at a price per share
which is equal to the original issuance price plus accrued dividends on the
earlier of the date of a public offering of its common stock for minimum gross
proceeds of $5,000,000 or January 4, 1997 which is the beginning of the 13th
month following the date of the sale of the preferred shares. If not redeemed
through the public offering, the Company may, at its option, convert the
preferred stock into 1,125,000 shares of common stock. The preferred stock has
a liquidation value equal to the redemption value.
Each common stock purchase warrant entitles the holder to purchase one
share of the new Company's common stock at an exercise price of $.50 per share.
The warrants expire in January 1996.
F-7
<PAGE> 24
PRO FORMA CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1995
(Unaudited)
The following pro forma consolidated balance sheet gives effect to (i)
the acquisition of Nouveau International, Inc., by Health Management, Inc. for
60% of the common stock of HMI. Since the stockholders of Nouveau have the
majority of the outstanding shares, the transaction has been accounted for as
if Nouveau were the acquiring company. The accounts of HMI have been recorded
at book amount since it had no operations, (ii) the issuance in a private
placement of preferred stock with warrants to purchase 112,560 shares of common
stock for an aggregate of $3,500,000, (iii) repayment of debt and acquisition
of patent technology from proceeds of private placement. This statement should
be read in conjunction with the financial statements of Nouveau International,
Inc. appearing elsewhere herein. The pro forma financial information is
presented for illustrative purposes only and is not necessarily indicative of
financial position had the transactions occurred on December 31, 1995.
<TABLE>
<CAPTION>
Historical
-----------------------------
Nouveau Health
International, Management, Pro Forma
A S S E T S Inc. Inc. Adjustments Pro Forma
----------- -------------- ----------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . $ 376,971 $ 3,045,000 (B)) $1,190,200
(2,231,771) (C))
Accounts receivable . . . . . . . . . . . . . . . . 22,083 22,083
Inventory . . . . . . . . . . . . . . . . . . . . . 3,174,659 3,174,659
Settlement receivable . . . . . . . . . . . . . . . 362,694 362,694
Due from affiliate. . . . . . . . . . . . . . . . . 32,287 32,287
----------- ------------ -----------
Total current assets . . . . . . . . . . . . 3,968,694 813,229 4,781,923
Property and equipment, net. . . . . . . . . . . . . . 117,250 117,250
Settlement receivable. . . . . . . . . . . . . . . . . 448,142 448,142
Technology patents . . . . . . . . . . . . . . . . . . 530,821 (C) 530,821
Other assets . . . . . . . . . . . . . . . . . . . . . 61,474 (45,000) (B) 16,474
----------- ------------ -----------
T O T A L. . . . . . . . . . . . . . . . . . $4,595,560 $ 1,299,050 $5,894,610
=========== ============ ===========
L I A B I L I T I E S
---------------------
Current liabilities:
Current portion of prepetition liabilities. . . . . $1,397,885 $(1,200,950) (C) $ 196,935
Accounts payable, accrued expenses and other
current liabilities . . . . . . . . . . . . . . . 349,640 349,640
Loan payable, stockholder . . . . . . . . . . . . . 183,764 183,764
----------- ------------ -----------
Total current liabilities. . . . . . . . . . 1,931,289 (1,200,950) 730,339
Prepetition liabilities. . . . . . . . . . . . . . . . 635,643 (500,000) (C) 135,643
Fees payable . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
----------- ------------ -----------
Total liabilities. . . . . . . . . . . . . . 2,666,932 (1,700,950) 965,982
----------- ------------ -----------
STOCKHOLDERS' EQUITY
--------------------
Convertible preferred stock (convertible into
1,125,000 shares of common stock) ($3,500,000
liquidation preference) . . . . . . . . . . . . . . 3,000,000 (B) 3,000,000
Common stock . . . . . . . . . . . . . . . . . . . . . 389,714 $ 2,960 (381,424) (A) 11,250
Additional paid-in capital . . . . . . . . . . . . . . 784,705 378,464 (A)) 378,464
(784,705) (A))
Retained earnings (deficit). . . . . . . . . . . . . . 1,538,914 (787,665) 787,665 (A) 1,538,914
----------- ---------- ----------- -----------
Total stockholders' equity . . . . . . . . . 1,928,628 - 0 - 3,000,000 4,928,628
----------- ---------- ------------ -----------
T O T A L . . . . . . . . . . . . . . . . . $4,595,560 $ - 0 - $ 1,299,050 $5,894,610
=========== ========== ============ ===========
</TABLE>
F-8
<PAGE> 25
PRO FORMA CONSOLIDATED BALANCE SHEET
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(A) Reflects the exchange of 6,750,000 shares (60%) of HMI's common stock
for all of the outstanding shares of Nouveau International, Inc.'s
common stock.
(B) Reflects the issuance of 70 shares of Series A 4% Cumulative
Convertible Redeemable Preferred Stock with a par value $.001 per
share. Each share was issued with warrants to purchase 1,608 shares
of common stock at an exercise price of $.50 per share expiring three
years from the date of issue.
<TABLE>
<S> <C>
Shares. . . . . . . . 70
Price per unit. . . . $ 50,000
-----------
3,500,000
Less issuance costs . 500,000
-----------
$3,000,000
===========
</TABLE>
(C) Reflects the repayment of debt and acquisition of patent technology
from the proceeds of the private placement.
F-9
<PAGE> 26
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
The following pro forma consolidated statement of operations gives
effect to the acquisition of Nouveau International, Inc., for 60% of the
outstanding stock of Health Management, Inc. This statement should be read in
conjunction with the financial statements of Nouveau International, Inc. and
Health Management, Inc. appearing elsewhere herein. The pro forma financial
information is presented for illustrative purposes only and is not necessarily
indicative of the operating results or what would have occurred if the merger
had occurred, nor is it indicative of the future operating results or financial
position of the Company.
<TABLE>
<CAPTION>
Historical
----------------------------
Nouveau Health
International, Management, Pro Forma
Inc. Inc. Adjustments Pro Forma
------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . $ 245,313 $ 245,313
Cost of goods sold. . . . . . . . . . . . . . . . . 224,282 224,282
------------ ------------
Gross profit . . . . . . . . . . . . . . . . 21,031 21,031
------------ ------------
Operating expenses:
General and administrative. . . . . . . . . . . . . 618,398 $ 9,022 627,420
Selling . . . . . . . . . . . . . . . . . . . . . . 34,839 34,839
------------ -------- ------------
653,237 9,022 662,259
------------ -------- ------------
Loss from operations . . . . . . . . . . . . . . . . . (632,206) (9,022) (641,228)
Gain from settlement of lawsuit. . . . . . . . . . . . 5,979,459 $(5,979,459) (1) - 0 -
Interest income. . . . . . . . . . . . . . . . . . . . 105,216 105,216
Interest expense . . . . . . . . . . . . . . . . . . . (32,352) (32,352)
------------ -------- ------------ ------------
Income (loss) before extraordinary item . . . . . . . $ 5,420,117 $(9,022) $(5,979,459) $ (568,364)
============ ======== ============ ============
Pro forma loss per share before extraordinary item . . $(.05)
======
Pro forma weighted average shares outstanding. . . . . 11,750,000
===========
</TABLE>
(1) To adjust for nonrecurring gain on settlement of lawsuit.
F-10
<PAGE> 27
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND DECEMBER 31, 1994
<PAGE> 28
REPORT OF INDEPENDENT AUDITORS
To the Stockholder
Nouveau International, Inc.
and Subsidiaries
We have audited the accompanying balance sheets of Nouveau International,
Inc. and subsidiaries as at December 31, 1995 and December 31, 1994 and the
related statements of operations, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of Nouveau International, Inc.
and subsidiaries at December 31, 1995 and December 31, 1994, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note L, in January 1996, the Company was acquired by
Health Management, Inc. through a reverse acquisition of stock.
New York, New York
February 7, 1996
<PAGE> 29
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------
A S S E T S 1995 1994
----------- ------------ ------------
(debtor-in-
possession)
<S> <C> <C>
Current assets:
Cash (Note B) . . . . . . . . . . . . . . . $ 376,971 $ 16,932
Accounts receivable . . . . . . . . . . . . 22,083 28,979
Inventory (Notes A[3] and C). . . . . . . . 3,174,659 621,298
Settlement receivable (Note D). . . . . . . 362,694
Due from affiliate (Note E) . . . . . . . . 32,287 32,287
----------- ------------
Total current assets . . . . . . . . 3,968,694 699,496
Property and equipment, net (Notes A[4] and F) 117,250 265,099
Settlement receivable (Note D) . . . . . . . . 448,142
Other assets . . . . . . . . . . . . . . . . . 61,474 38,508
----------- ------------
T O T A L. . . . . . . . . . . . . . $4,595,560 $ 1,003,103
=========== ============
L I A B I L I T I E S
---------------------
Current liabilities:
Current portion of prepetition liabilities
(Note G). . . . . . . . . . . . . . . . . $1,397,885 $ 5,318,371
Accounts payable, accrued expenses and
other current liabilities (Note D). . . . 349,640 49,138
Loan payable, stockholder (Note H). . . . . 183,764
----------- ------------
Total current liabilities. . . . . . 1,931,289 5,367,509
Prepetition liabilities (Note G) . . . . . . . 635,643 1,300,950
Fees payable (Note D). . . . . . . . . . . . . 100,000
----------- ------------
Total liabilities. . . . . . . . . . 2,666,932 6,668,459
----------- ------------
Commitments and contingencies (Note I)
STOCKHOLDER'S EQUITY (CAPITAL DEFICIENCY)
-----------------------------------------
Common stock (Note J). . . . . . . . . . . . . 389,714 389,714
Retained earnings (deficit). . . . . . . . . . 1,538,914 (6,055,070)
----------- ------------
Total stockholder's equity
(capital deficiency) . . . . . . . 1,928,628 (5,665,356)
----------- ------------
T O T A L. . . . . . . . . . . . . . $4,595,560 $ 1,003,103
=========== ============
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 2 -
<PAGE> 30
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------------
1995 1994
------------ ------------
(debtor-in-
possession)
<S> <C> <C>
Revenues:
Net sales (Note K). . . . . . . . . . . . . $ 245,313 $ 943,345
Cost of goods sold. . . . . . . . . . . . . 224,282 859,287
------------ ------------
Gross profit . . . . . . . . . . . . 21,031 84,058
------------ ------------
Operating expenses:
General and administrative. . . . . . . . . 618,398 922,909
Selling . . . . . . . . . . . . . . . . . . 34,839 75,384
------------ ------------
653,237 998,293
------------ ------------
(Loss) from operations . . . . . . . . . . . . (632,206) (914,235)
------------ ------------
Other income (expenses):
Gain from settlement of lawsuit (Note D). . 5,979,459
Gain from disposition of technology
patents (Note I). . . . . . . . . . . . . 530,821
Interest income . . . . . . . . . . . . . . 105,216 23,686
Interest expense. . . . . . . . . . . . . . (32,352) (213,179)
(Loss) on abandonment and sale of property
(Note F). . . . . . . . . . . . . . . . . (92,338) (3,279)
Reorganization expense. . . . . . . . . . . (41,401) (15,000)
------------ ------------
5,918,584 323,049
------------ ------------
Income (loss) before extraordinary item. . . . 5,286,378 (591,186)
Extraordinary item:
Compromise of prepetition liabilities
(Note G). . . . . . . . . . . . . . . . . 2,307,606
----------- -----------
NET INCOME (LOSS). . . . . . . . . . . . . . . 7,593,984 (591,186)
(Deficit) - beginning of year. . . . . . . . . (6,055,070) (5,463,884)
------------ ------------
RETAINED EARNINGS (DEFICIT) - END OF YEAR. . . $ 1,538,914 $(6,055,070)
============ ============
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 3 -
<PAGE> 31
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------------
1995 1994
------------ -----------
(debtor-in-
possession)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . . $ 7,593,984 $ (591,186)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Gain from sale of technology . . . . . (530,821)
Litigation settlement. . . . . . . . . (5,979,459)
Loss on abandonment and sale of
property . . . . . . . . . . . . . . 92,338 3,279
Compromise of prepetition liabilities. . (2,307,606)
Depreciation . . . . . . . . . . . . . . 58,276 63,987
Interest imputed on lawsuit settlement . (97,266)
Changes in operating assets and
liabilities:
Decrease in accounts receivable. . . 6,896 14,790
Decrease in inventory. . . . . . . . 39,553 88,939
(Increase) decrease in other assets. (22,966) 5,478
Increase (decrease) in accounts
payable and accrued fees and
expenses:
Prepetition. . . . . . . . . . . (46,783) 603,434
Postpetition . . . . . . . . . . (849,498) 49,138
Proceeds from litigation settlement. 3,038,000
(Decrease) in customer deposits. . . (17,542)
Net cash provided by (used in)
operating activities . . . . . . 1,525,469 (310,504)
------------ ----------
Cash flows from investing activities:
Purchase of property and equipment . . . . . (3,765) (25,444)
Proceeds from sale of asset. . . . . . . . . 1,000
------------ ----------
Net cash (used in) investing
activities . . . . . . . . . . . (2,765) (25,444)
------------ ----------
Cash flows from financing activities:
Proceeds from loans made by investor . . . . 90,169
Payment of secured prepetition liabilities . (1,346,429) (23,071)
Loans from stockholder . . . . . . . . . . . 183,764 268,616
------------ ----------
Net cash provided by (used in)
financing activities . . . . . . (1,162,665) 335,714
------------ ----------
NET INCREASE (DECREASE) IN CASH . . . . . . . . 360,039 (234)
Cash - beginning of year. . . . . . . . . . . . 16,932 17,166
------------ ----------
CASH - END OF YEAR. . . . . . . . . . . . . . . $ 376,971 $ 16,932
============ ==========
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest . $ 29,931 $ 4,976
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 4 -
<PAGE> 32
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Business and Summary of Significant Accounting Principles:
[1] The Company:
Nouveau International, Inc. and subsidiaries (the "Company") manufactures
and distributes hot food vending machines and related food products. The
Company uses certain proprietary machine and food technology in the manufacture
of its products.
On October 24, 1994, the Company (the "Debtor") filed petitions for relief
under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy
Court and subsequently submitted a plan of reorganization to the court. Under
Chapter 11, certain claims against the Debtor in existence prior to the filing
of the petitions for relief under the federal bankruptcy laws were stayed while
the Debtor continued business operations as Debtor-in-possession. On December
8, 1995 the plan of reorganization (the "Plan") was confirmed.
The Company is currently in the process of negotiating supply and
marketing agreements needed to broaden the distribution of their products.
[2] Principles of consolidation:
The consolidated financial statements of Nouveau International, Inc.
include the accounts of its wholly owned subsidiaries, Nouveau Foods
International, Inc. and Nouveau Vend International, Inc. Intercompany balances
and transactions have been eliminated in the consolidated financial statements.
[3] Inventories:
Inventories are valued at the lower of cost (first-in, first-out method)
or market.
[4] Property and equipment:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (5 to 7 years).
(continued)
- 5 -
<PAGE> 33
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Business and Summary of Significant Accounting Principles:
(continued)
[5] Income taxes:
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109 "Accounting for Income Taxes." SFAS No. 109 provides for income
taxes to be accounted for based on the difference between reported amounts of
assets and liabilities and their tax bases.
The confirmation of the plan of reorganization, has eliminated all net
operating loss carryforwards which were available to offset future taxable
income.
[6] Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(NOTE B) - Cash:
At December 31, 1995, cash includes $338,000 of funds received from the
lawsuit settlement referred to in Note D. These funds are being held in a
restricted escrow account and are segregated for payment to a secured creditor
and the Company's attorneys.
(NOTE C) - Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
----------- -----------
(debtor-in-
possession)
<S> <C> <C>
Component parts . . . . . . . $1,443,885 $153,560
Work-in-process . . . . . . . 151,800 55,962
Finished machines . . . . . . 1,578,974 411,776
---------- --------
T o t a l . . . . . $3,174,659 $621,298
========== ========
</TABLE>
(continued)
- 6 -
<PAGE> 34
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE C) - Inventories: (continued)
Included in inventory at December 31, 1995 is approximately $900,000 of
parts and substantially all of the work-in-process and finished machines which
were received from a vendor pursuant to the litigation settlement referred to
in Note D. These goods were valued at their current replacement cost.
(NOTE D) - Litigation Settlement:
In 1995, the Company settled a lawsuit with the former supplier of its
vending machines. Under the terms of the settlement agreement, the supplier
cancelled accounts payable of $884,975 and agreed to pay the Company cash of
$3,938,000 and deliver to the Company inventory parts, work-in-process and
finished machines held by them, which were valued at $2,592,914. The Company
has received cash payments totalling $3,038,000 through December 1995; the
remaining balance is due in installments of $300,000 in March 1996, $100,000 in
June 1996 and a final installment of $500,000 in June 1997.
The settlement balance receivable is shown at its net present value
discounted at an effective interest rate of 11% per annum. The bankruptcy
court ordered that a portion of the cash proceeds of the settlement be used to
pay a secured claim owed to a creditor (Note G) and attorneys' fees for
services rendered in connection with the settlement of the lawsuit. Fees
payable to the litigating attorneys amount to $300,000 at December 31, 1995.
The current portion due of $200,000 is included in accounts payable and accrued
expenses in the accompanying balance sheet.
(NOTE E) - Due From Affiliate:
Due from affiliate consists of a loan due on demand from a company which
is wholly owned by the stockholder of the Company.
(continued)
- 7 -
<PAGE> 35
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Property and Equipment:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
--------- -----------
(debtor-in-
possession)
<S> <C> <C>
Machinery and equipment . . . . $228,428 $425,027
Furniture and fixtures. . . . . 23,015 23,015
Transportation equipment. . . . 10,796 7,032
--------- ---------
262,239 455,074
Less accumulated depreciation . 144,989 189,975
--------- ---------
T o t a l . . . . . . $117,250 $265,099
========= =========
</TABLE>
In July 1995, the Company abandoned leasehold improvements with a net book
value of $90,640. In addition, the Company limited production to the assembly
of vending machines during the first three months of 1995. The Company
discontinued depreciating manufacturing equipment for the remainder of the
year. In 1996, the Company expects to resume full production and will
depreciate its manufacturing equipment over its remaining useful life.
(continued)
- 8 -
<PAGE> 36
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Prepetition Liabilities:
Prepetition liabilities consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
----------- -----------
(debtor-in-
possession)
<S> <C> <C>
Secured:
Former investor. . . . . $1,700,950 $2,900,950
Bank . . . . . . . . . . 146,429
----------- -----------
1,700,950 3,047,379
----------- -----------
Priority:
Tax claims . . . . . . . 33,293 80,076
Former stockholder . . . 48,000
----------- -----------
81,293 80,076
----------- ----------
Unsecured:
Stockholders . . . . . . 22,636 226,356
Trade and other
miscellaneous claims . 132,131 2,300,333
Former investor. . . . . 96,518 965,177
----------- -----------
251,285 3,491,866
----------- -----------
T o t a l . . . . 2,033,528 6,619,321
Less current portion. . . . 1,397,885 5,318,371
----------- -----------
Noncurrent portion. . . . . $ 635,643 $1,300,950
=========== ===========
</TABLE>
When the Company petitioned for bankruptcy in October 1994 two claims were
owed to secured creditors. The first claim was owed to a bank who was paid in
full in June of 1995. The payment amounted to $175,000 including accrued
interest of $28,571. The remaining claim is payable to a former investor in
the Company and is partly collateralized by the proceeds of the litigation
settlement referred to in Note D. Total payments made against this claim
through December 31, 1995 amount to $1,200,000.
In January 1996, the Company used a portion of the proceeds received from
the sale of preferred stock (Note L) to pay the remaining balance of secured
claims owed to the former investor of $1,700,950.
(continued)
- 9 -
<PAGE> 37
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE G) - Prepetition Liabilities: (continued)
The plan of reorganization did not provide for the payment of interest to
the secured creditor subsequent to the date of petition. Contractual interest
on these loans was approximately 11% per annum and if it would have continued
to accrue, it would have amounted to approximately $242,000 for the year ended
December 31, 1995 and $55,000 for the period of October 24, 1994 through
December 31, 1994.
In June 1995, the Bankruptcy Court ordered the Company to pay $46,783 to
the Internal Revenue Service from the proceeds of the initial payment received
from the litigation settlement. Priority claims include remaining payroll tax
liabilities owed to a state government and unpaid rent due to a former
stockholder for leased premises which were vacated in 1995.
Upon confirmation of the plan of reorganization, unsecured claims,
including those due to certain stockholders and the former investor were
settled for 10% of their prepetition amount and are payable in two equal
installments of 5% each in December 1996 and December 1997. Cancellation of
debt pursuant to the plan of reorganization resulted in an extraordinary gain
of $2,307,606.
Minimum payments due for all claims under the plan of reorganization are
as follows:
<TABLE>
<CAPTION>
Secured Priority Unsecured Total
------------ -------- --------- -----------
<S> <C> <C> <C> <C>
1996 . . . . . . . . $1,200,950 $71,293 $125,642 $1,397,885
1997 . . . . . . . . 500,000 10,000 125,643 635,643
----------- -------- --------- -----------
$1,700,950(1) $81,293 $251,285 $2,033,528
========== ======== ========= ===========
</TABLE>
(1) Amount paid in full using the proceeds of the sale of preferred stock (Note
J).
(NOTE H) - Loans Payable - Stockholder:
These loans were made to the Company from October to December 1995, were
secured, and were repaid in January 1996. The loans bore interest at 10% per
annum. Interest expense on these loans amounted to $2,421 for the year ended
December 31, 1995.
(continued)
- 10 -
<PAGE> 38
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Commitments and Contingencies:
[1] The Company occupies premises pursuant to an operating lease which
expires in July 1998. In addition, the Company entered into a three year lease
in January 1996 for a building which it intends to use as a facility to
assemble and store pizza vending machines. The new lease expires on March 31,
1999. These leases are subject to escalations for the Company's pro rata share
of real estate taxes and operating expense. Future minimum rental payments,
exclusive of escalation payments for taxes and utilities, under these leases
are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1996 . . . . . . . . . . . . . . . . $ 69,672
1997 . . . . . . . . . . . . . . . . 73,440
1998 . . . . . . . . . . . . . . . . 37,662
---------
T o t a l. . . . . . . . . $180,774
=========
</TABLE>
The Company also leases certain storage facilities on a
month-to-month basis. In 1995, rent expense amounted to $61,357 including
$24,668 paid to a former stockholder. In 1994 rent expense amounted to $34,105
which was paid to a former stockholder.
[2] In 1994, the Company repaid $530,281 of its secured debt upon the
foreclosure by the creditor against certain technology patents. The Company
recorded a gain of $530,281 from the disposition of its technology patents. In
January 1996, the Company used a portion of the proceeds received from the sale
of preferred stock (Note L) to repurchase these patents for its exclusive use
for $530,821.
[3] In connection with the Company's petition for relief under the
bankruptcy laws, various suits and judgements have been filed against the
Company. In the opinion of the Company's management and legal counsel, these
claims will not result in any liability to the Company.
(NOTE J) - Common Stock:
At December 31, 1995, 10,000,000 shares of $1 par common stock are
authorized, of which 2,198,992 are issued and outstanding. From inception, the
Company received payments totalling $389,714 from the sale of stock. The
Company is 100% owned by one stockholder who became the owner of all
outstanding shares upon confirmation of the Plan.
(continued)
- 11 -
<PAGE> 39
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE K) - Other:
In 1995 and 1994 sales to one customer amounted to $124,638 and $329,716
which represents 50% and 35% of net sales in each of these years, respectively.
In addition, accounts receivable due from this customer was $21,873 at December
31, 1995.
In addition, the Company sold certain vending machines to a stockholder in
1994 for $12,000.
(NOTE L) - Subsequent Event:
[1] In January 1996, all of the outstanding stock of the Company was
acquired by Health Management Inc. ("HMI") in exchange for 6,750,000 shares,
representing 60%, of HMI common stock. HMI was a nonoperating company and
therefore the acquisition will not be accounted for as a business combination.
Concurrent with the transaction, in a private placement, HMI sold 70 units,
each unit consisting of 1 share of 4% cumulative redeemable preferred stock and
1,608 common stock purchase warrants for $3,500,000. HMI changed its name to
Nouveau International, Inc. ("NI").
The preferred stock is mandatorily redeemable at a price per share
which is equal to the original issuance price plus accrued dividends on the
earlier of the date of a public offering of its common stock for minimum gross
proceeds of $5,000,000 or January 4, 1997. If not redeemed through the public
offering, the Company may, at its option, convert the preferred stock into
1,125,000 shares of common stock. The preferred stock has a liquidation value
equal to the redemption value.
Each common stock purchase warrant entitles the holder to purchase
one share of the new Company's common stock at an exercise price of $.50 per
share. The warrants expire in January 1999.
[2] NI is currently in the process of attempting to raise additional
financing through a private placement of debt securities. The Company is
seeking additional sources of financing however there is no assurance that such
financing will be obtained.
[3] In February 1996, NI formed Noveau Equities, Inc. and entered into
contract for the purchase of a building in which it will construct and operate
a food processing plant. The purchase price of the building is $1,360,000. NI
has made a nonrefundable down payment of $40,000 and is currently seeking
additional financing which is needed to fund the balance of the purchase price.
There is noassurance that such financing will be obtained.
- 12 -
<PAGE> 40
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, duly authorized.
DATED: April 15, 1996 NOUVEAU INTERNATIONAL, INC.
BY:/S/ Gary W. Black
-----------------------
Gary W. Black, Sr.
Chief Executive Officer
In accordance with Section 13 or 15(d) of the Exchange Act, this
report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/S/ Gary W. Black, Sr. Chief Executive Officer (Principle April 15, 1996
- ------------------------ Executive Officer , Principal
Gary W. Black, Sr. Financial Officer and Principal
Accounting Official and Director
/S/ Robert J. Brock, Sr. Chief Operating Officer and April 15, 1996
- ------------------------ Director
Robert J. Brock, Sr.
* Director April * , 1996
- ------------------------
Frederick W. Johnson
</TABLE>
32
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
NOUVEAU HEALTH MANAGEMENT, INC.
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as
follows:
FIRST: NAME.
The name of the Corporation is:
NOUVEAU HEALTH MANAGEMENT, INC.
SECOND: REGISTERED OFFICE; REGISTERED AGENT.
The registered office of the Corporation is to be located at
Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, DE,
County of New Castle. The name of its registered agent at that address is The
Prentice-Hall Corporation Systems, Inc.
THIRD: PURPOSE.
The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: CAPITALIZATION.
The total number of shares of stock which the Corporation
shall have authority to issue is twenty-six million (26,000,000) shares of
which twenty-five million (25,000,000) shares shall be designated "Common
Stock" and one million (1,000,000) shares shall be designated "Preferred
Stock". Shares of Common Stock and Preferred Stock shall have a par value of
$.001 per share.
COMMON STOCK.
Subject to the prior or equal rights, if any, of any Preferred
Stock which hereafter may be authorized of any and all series stated and
expressed by the Board of Directors in the resolution or resolutions providing
for the issuance of such Preferred Stock, the holders of Common Stock shall be
entitled (i) to receive dividends when and as declared by the Board of
Directors out of any funds legally available therefor and (ii) in the event of
any dissolution, liquidation or winding up of the Corporation, to receive the
remaining assests of the Corporation, ratably according to the number of shares
of Common Stock held. The holders of Common Stock shall be entitled to one
vote for each share of Common Stock held on all matters submitted to a vote of
stockholders of the Corporation. No holder of Common Stock shall have any
preemptive right to purchase or subscribe for any part of any issue of stock of
any class whatsoever, whether now or hereafter authorized.
PREFERRED STOCK
Authority is hereby expressly granted to the Board of
Directors from time to time to issue series of Preferred Stock and, in
connection with the creation of each such series, to fix by the resolution or
resolutions providing for the issue of shares thereof, the number of shares of
such series, and the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions of such series, to the full extent now or
hereafter permitted by the laws of the State of Delaware.
<PAGE> 2
FIFTH: LIABILITY OF DIRECTORS.
No director shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided however, that to the extent required by the provisions of
paragraph 102(b)(7) of the General Corporation Law of the State of Delaware or
any successor statute, or any other laws of the State of Delaware, this
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under paragraph 174
of the General Corporation Law of the State of Delaware, (iv) for any
transaction from which the director derived an improper personal benefit or (v)
for any act or omission occurring prior to the date when the provision becomes
effective. If the General Corporation Law of the State of Delaware hereafter
is amended to authorize the further elimination or limitation on personal
liability of directors, then the liability of a director of the Corporation, in
addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended General Corporation Law
of the State of Delaware. Any repeal or modification of this Article Fifth by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
SIXTH: INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
1. Indemnification. The Corporation shall indemnify
each person who was or is made a party or is threatened to be made a party to
or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or alleged action in any other capacity while service as a director,
officer, employee or agent, to the maximum extent authorized by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, excise taxes or penalties pursuant to the Employee Retirement
Income Security Act of 1974, as amended, and amounts paid or to be paid in
settlement) reasonably incurred by such person in connection with such
proceeding and such indemnification shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators. The Corporation
may, to the fullest extent permitted by the General Corporation Law of the
State of Delaware, purchase and maintain insurance on behalf of any such
person. The Corporation may create a trust fund, grant a security interest or
use other means (including without limitation a letter of credit) to ensure the
payment of such sums as may become necessary to effect the indemnification as
provided herein. The indemnification provided herein shall not be deemed to
limit the right of the Corporation to indemnify any other person for any such
expenses to the fullest extent permitted by the General Corporation Law of the
State of Delaware, nor shall it be deemed exclusive of any other rights to
which any person seeking indemnification from the Corporation may be entitled
under any agreement, the Corporation's By-Laws, vote of stockholders or
disinterested directors, or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
2. Reimbursement and Advances. The Corporation, from
time to time, shall reimburse or advance to any person referred to in paragraph
1 the funds necessary for payment of expenses (including attorneys' fees, costs
and charges) incurred in connection with any action or proceeding referred to
in paragraph 1, upon receipt of a written undertaking by or on behalf of such
person to repay such amount(s) if a judgment or other final adjudication
adverse to such person establishes that he or she is not entitled to be
indemnified by the Corporation under this Article Sixth.
3. Serving at the Request of the Corporation. Without
limitation of any indemnification
<PAGE> 3
provided by paragraph 1, any person referred to in paragraph 1 serving (a)
another corporation, partnership, joint venture or trust of which the majority
of the voting power or residual economic interest is held, directly or
indirectly, by the Corporation, or (b) any employee benefit plan of the
Corporation, in any capacity, shall be deemed to be doing so at the request of
the Corporation.
4. Determination of Entitlement. Any person entitled to
indemnification or to the reimbursement or advancement of expenses as a matter
of right pursuant to this Article Sixth may elect to have the right to
indemnification for the reimbursement or advancement of expenses) interpreted
on the basis of the applicable law in effect at the time of the occurrence of
the event or events giving rise to the action or proceeding, to the extent
permitted by law, or on the basis of the applicable law in effect at the time
indemnification is sought.
5. Contractual Right. The right to indemnification or
to the reimbursement or advancement of expenses pursuant to this Article Sixth
or a resolution or agreement authorized pursuant to this Article Sixth (a) is a
contract right pursuant to which the person entitled thereto may bring suit as
if the provisions hereof (or of any such resolution) were set forth in a
separate written contract between the Corporation and such person, (b) is
intended to be retroactive and, to the extent permitted by law, shall be
available with respect to events occurring prior to the adoption hereof, and
(c) shall continue to exist after the rescission or restrictive modification
hereof with respect to events occurring prior thereto. The Corporation shall
not be obligated under this Article Sixth to make any payment hereunder to the
extent the person seeking indemnification hereunder has actually received
payment of the amounts otherwise indemnifiable hereunder.
6. Judicial Claims. If a request for indemnification or
for the reimbursement or advancement of expenses pursuant to this Article Sixth
is not paid in full by the Corporation within thirty (30) days after a written
claim has been received by the Corporation, the claimant, at any time
thereafter, may bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled also to be paid the expenses of prosecuting such claim. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel or stockholders) to have made a determination prior to the commencement
of such action that indemnification of, or reimbursement or advancement of
expenses to, the claimant is proper in the circumstances, or an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or stockholders) that the claimant is not entitled to
indemnification or to the reimbursement or advancement of expenses, shall be a
defense to the action or create a presumption that the claimant is not so
entitled.
7. Successor Corporation. For purposes of this Article
Sixth, the term "the Corporation" shall include any legal successor to the
Corporation, including any corporation which acquires all or substantially all
of the assets of the Corporation in one or more transactions.
8. Nonexclusivity. The rights granted pursuant to, or
provided by, the foregoing provisions of this Article Sixth shall be in
addition to, and shall not be exclusive of, any other rights to indemnification
or the reimbursement or advancement of expenses to which such person otherwise
may be entitled by law, contract or otherwise.
SEVENTH: INCORPORATOR.
The name and mailing address of the incorporator of the
Corporation is:
Jeanne R. Solomon, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
The undersigned, being the incorporator hereinbefore named, for
the purpose of forming a corporation to do business both within and without the
State of Delaware, and in pursuance of the General Corporation Law of the State
of Delaware, does make and file this Certificate this 11th day of January,
1996.
<PAGE> 4
CORPORATE RECORDS
OF
NOUVEAU INTERNATIONAL, INC.
INCORPORATED UNDER THE LAWS
OF THE
STATE OF DELAWARE
BY LAWS
OF
NOUVEAU INTERNATIONAL INC.
(a Delaware corporation)
ARTICLE I
OFFICES AND FISCAL YEAR
Section 1.01. REGISTERED OFFICE. The registered office of the
corporation in Delaware shall be at until otherwise established by an
amendment of the articles or by the board of directors and record of such
change is filed with the Department of State in the manner provided by law.
Section 1.02. OTHER OFFICE. The corporation may also have offices
at such other places within or without Delaware as the board of directors
may from time to time appoint or the business of the corporation may require.
Section 1.03. FISCAL YEAR. The fiscal year of the corporation shall
begin the day of in each year.
ARTICLE II
NOTICE - WAIVERS - MEETING GENERALLY
Section 2.01. MANNER OF GIVING NOTICE.
<PAGE> 5
a)General rule. Whenever written notice is required to be given to
any person under the provisions of the Business corporation Law or by
the Articles or these bylaws, it may be given to the person either
personally or by sending a copy thereof by first class or express
mail, postage prepaid, or by telegram (with messenger service
specified), telex or TWX (with answerback received) or courier
service, charges prepaid, or by telecopier, to the address (or to the
telex, TWX, telecopier or telephone number) of the person appearing on
the books of the corporation or, in the case of directors, supplied by
the directors to the corporation for the purpose of notice. If the
notice is by mail, telegraph or courier service, it shall be deemed to
have been given to the person entitled thereto when deposited in the
United States mail or with a telegraph office or courier service for
delivery to that person or, in the case of telex or TWX, when
dispatched or, in the case of telecopier, when received. A notice of
meeting shall specify the place, day and hour of the meeting and any
other information required by any other provision of the Business
Corporation Law, the articles or these bylaws.
b)Adjourned shareholder meetings. When a meeting of shareholders is
adjourned, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted at an adjourned
meeting, other than by announcement at the meeting at which the
adjournment is taken, unless the board fixes a new record date for the
adjourned meeting.
Section 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS. Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex, TWX or telecopier) or 48 hours (in the case of notice by telegraph,
courier service or express mail) or five days (in the case of notice by first
class mail) before the time at which the meeting is to be held. Every such
notice shall state the time and place of the meeting. Neither the business to
be transacted at, nor the purpose of any regular or special meeting of the
board need be specified in a notice of a meeting.
Section 2.03. NOTICE OF MEETINGS OF SHAREHOLDERS.
(a) General rule. Written notice of every meeting of the
shareholders shall be given by, or at the direction of, the secretary to each
shareholder of record entitled to vote at the meeting at least:
(1) ten days prior to the day named for a meeting called to
consider a fundamental transaction under 15 Pa.C.S. Chapter 19
regarding amendments of articles of incorporation, mergers,
consolidations, share exchanges, sale of assets, divisions,
conversions, liquidation's and dissolution; or
(2) five days prior to the day named for the meeting in any
other case.
If the secretary neglects or refuses to give notice of a meeting, the person or
persons calling the meeting may do so. In the case of a special meeting of
shareholders, the notice shall specify the general nature of the business to be
transacted.
(b) Notice of action by shareholders on bylaws. In the case of a
meeting of shareholders that has as one its purposes action on the
bylaws, written notice shall be given to each shareholder that the
purpose, or one of the purposes, of the meeting is to consider the
adoption, amendment or repeal of the bylaws. There shall be included
in, or enclosed with, the notice a copy of the proposed amendment or a
summary of the changes to be effected thereby.
Section 2.04. WAIVER OF NOTICE.
(a) Written waiver. Whenever any written notice is required to be
given under the provisions of the Business Corporation Law, the
articles of these bylaws, a waiver thereof in writing, signed by the
person or persons entitled to the notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of the
notice. Except as otherwise required by this subsection,
<PAGE> 6
neither the business to be transacted at, nor the purpose of, a
meeting need be specified in the waiver of notice of the meeting. In
the case of a special meeting of shareholders, the waiver of notice
shall specify the general nature of the business to be transacted.
(b) Waiver by attendance. Attendance of a person at any meeting
shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting was not
lawfully called or convened.
Section 2.05. MODIFICATION OF PROPOSAL CONTAINED IN NOTICE. Whenever
the language of a proposed resolution is included in a written notice of a
meeting required to be given under the provisions of the Business Corporation
Law or the articles or these bylaws, the meeting considering the resolution may
without further notice adopt it with such clarifying or other amendments as do
not enlarge its original purpose.
Section 2.06. EXCEPTION TO REQUIREMENT OF NOTICE.
(a) General rule. Whenever any notice or communication is required to
be given to any person under the provisions of the Business
Corporation Law or by the articles or these bylaws or by the terms of
any agreement or other instrument or a condition precedent to taking
any corporate action and communication with that person is then
unlawful, the giving of the notice or communication to that person
shall not be required.
(b) Shareholders without forwarding addresses. Notice or other
communications shall not be sent to any shareholder with whom the
corporation has been unable to communicate for more than 24
consecutive months because communications to the shareholder are
returned unclaimed or the shareholder has otherwise failed to provide
the corporation with a current address. Whenever the shareholder
provides the corporation with a current address, the corporation shall
commence sending notices and other communications to the shareholder
in the same manner as to other shareholders.
Section 2.07. USE OF CONFERENCE TELEPHONE AND SIMILAR EQUIPMENT. One
or more persons may participate in a meeting of the board of directors
or the shareholders of the corporation by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute
presence in person at the meeting.
ARTICLE III
SHAREHOLDERS
Section 3.01. PLACE OF MEETING. All meetings of the shareholders of
the corporation shall be held at the registered office of the corporation
unless another place is designated by the board of directors in the notice of a
meeting.
Section 3.02. ANNUAL MEETING. The board of directors may fix the
date and time of the annual meeting of the shareholders, but if no such date
and time is fixed by the board, the meeting for any calendar year, if not a
legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on
the next succeeding business day, not a Saturday, at 4:00 o'clock P.M., and at
said meeting the shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought before the
meeting. If the annual meeting shall not have been called and held within six
months after the designated time, any shareholder may call the meeting at any
time thereafter.
Section 3.03. SPECIAL MEETINGS.
(a) Call of special meetings. Special meetings of the shareholders
may be called at any time:
<PAGE> 7
(1) by the board of directors; or
(2) unless otherwise provided in the articles, by shareholders
entitled to cast at least 20% of the vote that all shareholders are entitled to
cast at the particular meeting.
(b) Fixing of time for meeting. At any time, upon written request of
any person who has called a special meeting, it shall be the duty of
the secretary to fix the time of the meeting which shall be held not
more than 60 days after the receipt of the request. If the secretary
neglects or refuses to fix a time of the meeting, the person or
persons calling the meeting may do so.
Section 3.04. QUORUM AND ADJOURNMENT
(a) General rule. A meeting of shareholders of the corporation duly
called shall not be organized for the transaction of business sunless
a quorum is present. The presence of shareholders entitled to cast at
least fifty-one percent (51%) of the votes that all shareholders are
entitled to cast on a particular matter to be acted upon at the
meeting shall constitute a quorum for the purposes of consideration
and action on the matter. Shares of the corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the board
of directors of this corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes
at any given time.
(b) Withdrawal of a quorum. The shareholders present at a duly
organized meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
(c) Adjournment for lack of quorum. If a meeting cannot be organized
because a quorum has not attended, those present may, except as provided in the
Business Corporation Law, adjourn the meeting to such time and place as they
may determine.
(d) Adjournments generally. Any meeting at which directors are to be
elected shall be adjourned only from day to day, or for such longer
periods not exceeding 15 days each as the shareholders present and
entitled to vote shall direct, until the directors have been elected.
Any other regular or special meeting may be adjourned for such period
as the shareholders present and entitled to vote shall direct.
(e) Electing directors at adjourned meeting. Those shareholders
entitled to vote who attend a meeting called for the election of
directors that has been previously adjourned for lack of a quorum,
although less than a quorum as fixed in this section, shall
nevertheless constitute a quorum for the purpose of electing
directors.
(f) Other action in absence of quorum. Those shareholders entitled to
vote who attend a meeting of shareholders that has been previously
adjourned for one or more periods aggregating at least 15 days because
of an absence of a quorum, although less than a quorum as fixed in
this section, shall nevertheless constitute a quorum for the purpose
of acting upon any matter set forth in the notice of the meeting if
the notice states that those shareholders who attend the adjourned
meeting shall nevertheless constitute a quorum for the purpose of
acting upon the matter.
Section 3.05. ACTION BY SHAREHOLDERS
(a) General rule. Except as otherwise provided in the Business
Corporation Law or the articles or these bylaws, whenever any
corporate action is to be taken by vote of the shareholders of the
corporation, it shall be authorized by a majority of the votes cast at
a duly organized meeting of shareholders by the holders of shares
entitled to vote thereon.
(b) Interested shareholders. Any merger or other transaction
authorized under 15Pa.C.S. Subchapter 19C between the corporation or
subsidiary thereof and a shareholder of this
<PAGE> 8
corporation, or any voluntary liquidation authorized under 15 Pa. C.S.
Subchapter 19F in which a shareholder is treated differently from
other shareholders of the same class (other than any dissenting
shareholders), shall require the affirmative vote of the shareholders
entitled to cast at least a majority of the votes that all
shareholders other than the interested shareholder are entitled to
cast with respect to the transaction, without counting the vote of the
interested shareholder. For the purposes of the preceding sentence,
interested shareholder shall include the shareholder who is a party to
the transaction or who is treated differently from other shareholders
and any person, or group of persons, that is acting jointly or in
concert with the interested shareholder and any person who, directly
or indirectly, controls, is controlled by or is under common control
with the interested shareholder. An interested shareholder shall not
include any person who, in good faith and not for the purpose of
circumventing this subsection, is an agent, bank, broker, nominee or
trustee for one or more other persons, to the extent that the other
person or persons are not interested shareholders.
(c) Exceptions. Subsection (b) shall not apply to a transaction:
(1) that has been approved by a majority vote of the board of
directors without counting the vote of directors who:
(ii) are directors or officers of, or have a material
equity interest in, the interested shareholder; or
(ii) were nominated for election as a director by
the interested shareholder, and first elected as a
director, within 24 months of the date of the vote on
the proposed transaction; or
(2) in which the consideration to be received by the
shareholders for shares of any class of which shares are owned by the
interested shareholder is not less than the highest amount paid by the
interested shareholder in acquiring shares of the same class.
(d) Additional approvals. The approvals required by subsection (b)
shall be in addition to, and not in lieu of, any other approval
required by the Business Corporation Law, the articles or these
bylaws, or otherwise.
Section 3.06. ORGANIZATION. At every meeting of the shareholders,
the chairman of the board, if there be one, or, in the case of vacancy in
office or absence of the chairman of the board, one of the following officers
present in the order stated: the vice chairman of the board, if there be one,
the president, the vice presidents in their order of rank and seniority, or a
person chosen by vote of the shareholders present, shall act as chairman of the
meeting. The secretary or, in the absence of the secretary, an assistant
secretary, or in the absence of both the secretary and assistant secretaries, a
person appointed by the chairman of the meeting, shall act as secretary.
Section 3.07. VOTING RIGHTS OF SHAREHOLDERS. Unless otherwise
provided in the articles, every shareholder of the corporation shall be
entitled to one vote for every share standing in the name of the shareholder on
the books of the corporation.
Section 3.08. VOTING AND OTHER ACTION BY PROXY.
(a) General rule
(1) Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another
person to act for the shareholder by proxy.
(2) the presence of, or vote or other action at a meeting of
shareholders, or the expression of consent or dissent to corporate
action in writing, by a proxy of a shareholder shall constitute the
presence of, or vote or action by, or written consent or dissent of
the shareholder.
<PAGE> 9
(3) Where two or more proxies of a shareholder are present,
the corporation shall, unless otherwise expressly provided in
the proxy, accept as the vote of all shares represented
thereby the vote or upon the manner of voting the shares, the
voting of the shares shall be divided equally among those
persons.
(b) Minimum requirements. Every proxy shall be executed in writing by
the shareholder or by the duly authorized attorney-in-fact of the
shareholder and filed with the secretary of the corporation. A proxy,
unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to
the contrary, but the revocation of a proxy shall not be effective
until written notice thereof has been given to the secretary of the
corporation. An unrevoked proxy shall not be valid after three years
from the date of its execution unless a longer time is expressly
provided therein. A proxy shall not be revoked by the death or
incapacity of the maker unless, before the vote is counted or the
authority is exercised, written notice of the death or incapacity is
given to the secretary of the corporation.
(c) Expenses. Unless otherwise restricted in the articles, the
corporation shall pay the reasonable expenses of solicitation of
votes, proxies or consents of shareholders by or on behalf of the
board of directors or its nominees for election to the board,
including solicitation by professional proxy solicitors and otherwise.
Section 3.09. VOTING BY FIDUCIARIES AND PLEDGEES. Shares of the
corporation standing in the name of a trustee or other fiduciary and shares
held by an assignee for the benefit of creditors or by a receiver may be voted
by the trustee, fiduciary, assignee or receiver. A shareholder whose shares
are pledged shall be entitled to vote the shares until the shares have been
transferred into the name of the pledgee, or a nominee of the pledgee, but
nothing in this section shall affect the validity of a proxy given to a pledgee
or nominee.
Section 3.10. VOTING BY JOINT HOLDERS OF SHARES.
(a) General rule. Where shares of the corporation are held jointly or
as tenants in common by two or more persons, as fiduciaries or
otherwise:
(1) if only one or more of such persons is present in person
or by proxy, all of the shares standing in the names of such
persons shall be deemed to be represented for the purpose of
determining a quorum and the corporation shall accept as the
vote of all the shares the vote cast by a joint owner or a
majority or them; and
(2) if the persons are equally divided upon whether the
shares held by them shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally among the
persons without prejudice to the rights of the joint owners or the
beneficial owners thereof among themselves.
(b) Exception. If there has been filed with the secretary of the
corporation a copy, certified by an attorney at law to be correct, of
the relevant portions of the agreement under which the shares are held
or the instrument by which the trust or estate was created or the
order of court appointing them or of an order of court directing the
voting of the shares, the persons specified as having such voting
power in the document latest in date of operative effect so filed, and
only those persons, shall be entitled to vote the shares but only in
accordance therewith.
Section 3.11. VOTING BY CORPORATIONS
(a) Voting by corporate shareholders. Any corporation that is a
shareholder of this corporation may vote by any of its officers or
agents, or by proxy appointed by any officer or agent, unless some
other person, by resolution of the board of directors of the other
corporation or provision of its articles or bylaws, a copy of which
resolution or provision certified to be correct by one of its officers
has been filed with the secretary of this corporation, is appointed
its general or special proxy in which case that person shall be
entitled to vote the shares.
<PAGE> 10
(b) Controlled shares. Shares of this corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the board of
directors of this corporation as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.
Section 3.12. DETERMINATION OF SHAREHOLDERS OF RECORD.
(a) Fixing record date. The board of directors may fix a time prior
to the date of any meeting of shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting, which time, except in the case of an adjourned meeting, shall be not
be less than 10 days nor more than 60 days prior to the date of the meeting of
shareholders. Only shareholders of record on the date fixed shall be so
entitled notwithstanding any transfer of shares on the books of the corporation
after any record date fixed as provided in this subsection. The board of
directors may similarly fix a record date for the determination of shareholders
of record for any other purpose. When a determination of shareholders of record
has been made as provided in this section for purposes of a meeting, the
determination shall apply to any adjournment thereof unless the board fixes a
new record date for the adjourned meeting.
(b) Determination when a record date is not fixed. If a record date
is not fixed:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the
close of business on the date next preceding the day on which notice
is given or, if notice is waived, at the close of business on the day
immediately preceding the day on which the meeting is held.
(2) The record date for determining shareholders entitled to
express consent or dissent to corporate action in writing without a
meeting, when prior action by the board of directors is not necessary,
shall be the close of business on the day on which the first written
consent or dissent is filed with the secretary of the corporation.
(3) The record date for determining shareholders for any
other purpose shall be at the close of business on the day on which
the board of directors adopts the resolution relating thereto.
Section 3.13. VOTING LISTS
(a) General rule. The officer or agent having charge of the transfer
books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and of the number of shares held by
each. The list shall be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting for the purposes thereof.
(b) Effect of list. Failure to comply with the requirements of this
section shall not effect the validity of any action taken at a meeting prior to
a demand at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book, or a duplicate thereof
kept in this Commonwealth, shall be prima facie evidence as to who are the
shareholders entitled to examine the list or share register or transfer book or
to vote at any meeting of shareholders.
Section 3.14. JUDGES OF ELECTION.
(a) Appointment. In advance of any meeting of shareholders of the
corporation, the board of directors may appoint judges of election, who need
not be shareholders, to act at the meeting or any adjournment thereof. If
judges of election are not so appointed, the presiding officer of the meeting
may, and on the request of any shareholder shall, appoint judges of election at
the meeting. The number of judges shall be one or three. A person who is a
candidate for office to be filled at the meeting shall not act as a judge.
<PAGE> 11
(b) Vacancies. In case any person appointed as a judge fails to
appear or fails or refuses to act, the vacancy may be filled by
appointment made by the board of directors in advance of the convening
of the meeting or at the meeting by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
question in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith, to the best of
their ability and as expeditiously as is practical. If there are three judges
of election the decision, act or certificate of a majority shall be effective
in all respects as the decision, act or certificate of all.
(d) Report. On request of the presiding officer of the meeting, or of
any shareholder, the judge shall make a report in writing of any
challenge or question or matter determined by them, and execute a
certificate of any fact found by them. Any report or certificate made
by them shall be prima facie evidence of the facts stated therein.
Section 3.15. CONSENT OF SHAREHOLDERS IN LIEU OF MEETING.
(a) Unanimous written consent. Any action required or permitted to be
taken at a meeting of the shareholders or of a class of shareholders may be
taken without a meeting if, prior or subsequent to the action, a consent or
consents thereto by all of the shareholders who would be entitled to vote at a
meeting for such purpose shall be filed with the secretary of the corporation.
(b) Partial written consent. Any action required or permitted to be
taken at a meeting of the shareholders or of a class of shareholders may be
taken without a meeting upon the written consent of shareholders who would have
been entitled to cast the minimum number of votes that would be necessary to
authorize the action at a meeting at which all shareholders entitled to vote
thereon were present and voting. The consents shall be filed with the
secretary of the corporation. The action shall not become effective until
after at least ten days' written notice of the action has been given to each
shareholder entitled to vote thereon who has not consented thereto.
Section 3.16. MINORS AS SECURITY HOLDERS. The corporation may treat
a minor who holds shares or obligations of the corporation as having capacity
to receive and to empower others to receive dividends, interest, principal and
other payments or distributions, to vote or express consent or dissent and to
make elections and exercise rights relating to such shares or obligations
unless, in the case of payments or distributions on shares, the corporate
officer responsible for maintaining the list of shareholders or the transfer
agent of the corporation or, in the case of payments or distributions on
obligations, the treasurer or paying officer or agent has received written
notice that the holder is a minor.
ARTICLE IV
BOARD OF DIRECTORS
Section 4.01. POWERS; PERSONAL LIABILITY.
(a) General rule. Unless otherwise provided by statute all powers
vested by law in the corporation shall be exercised by or under the
authority of, and the business and affairs of the corporation shall be
managed under the direction of, the board of directors.
(b) Standard of care; justifiable reliance. A director shall stand in
a fiduciary relation to the corporation and shall perform his or her
duties as a director, including duties as a member of any committee of
the board upon which the director may serve, in good faith, in a
manner the director reasonably believes to be in the best interests of
the corporation and with such care, including reasonable inquiry,
skill and diligence, as a person of ordinary prudence would use under
similar circumstances. In performing his or duties, a director shall
be entitled to rely in good faith on
<PAGE> 12
information;, opinions reports or statements, including financial
statements and other financial data, in each case prepared or
presented by any of the following:
(1) One or more officers or employees of the corporation whom
the director reasonably believes to be reliable and competent in the
matters presented.
(2) Counsel, public accountants or other persons as to
matters which the director reasonably believes to be within the
professional or expert competence of such person.
(3) A committee of the board upon which the director does not
serve, duly designated in accordance with law, as to matters within
its designated authority, which committee the director reasonably
believes to merit confidence.
A director shall not be considered to be acting in good faith if the director
has knowledge concerning the matter in question that would cause his or her
reliance to be unwarranted.
(c) Consideration of factors. In discharging the duties of their
respective positions, the board of directors, committees of the board
and individual directors may, in considering the best interests of the
corporation, consider the effects of any action upon employees, upon
suppliers and customers of the corporation and upon communities in
which offices or other establishments of the corporation are located,
and all other pertinent factors. The consideration of those factors
shall not constitute a violation of subsection (b).
(d) Presumption. Absent breach of fiduciary duty, lack of good faith
or self-dealing, actions taken as a director or any failure to take
any action shall be presumed to be in the best interests of the
corporation.
(e) Personal liability of directors.
(1) A director shall not be personally liable, as such, for
monetary damages for any action taken, or any failure to take
any action, unless:
(i) the director has breached or failed to perform
the duties of his or her office under this section; and
(ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or
(2) The provisions of paragraph (1) shall not apply to the
responsibility or liability of of a director pursuant to any criminal
statute, or the liability of a director for the payment of taxes
pursuant to local, State or Federal law.
(f) Notation of dissent. A director who is present at a meeting of
the board of directors, or of a committee of the board, at which
action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his or her dissent is entered in
the minutes of the meeting or unless the director files a written
dissent to the action with the secretary of the meeting before the
adjournment thereof or transmits the dissent in writing to the
secretary of the corporation immediately after the adjournment of the
meeting. The right to dissent shall not apply to a director who voted
in favor of the action;. Nothing in this section shall bar a director
from asserting that minutes of the meeting incorrectly omitted his or
her dissent if, promptly upon receipt of a copy of such minutes, the
director notifies the secretary in writing, of the asserted omission
or inaccuracy.
Section 4.02. QUALIFICATION AND SELECTION OF DIRECTORS.
(a) Qualifications. Each director of the corporation shall be a
natural person of full age who need not be a resident of Pennsylvania
or a shareholder of the corporation.
<PAGE> 13
(b) Election of directors. Except as otherwise provided in these
bylaws, directors of the corporation shall be elected by the shareholders. In
elections for directors, voting need not be by ballot, except upon demand made
by a shareholder entitled to vote at the election and before the voting begins.
The candidates receiving the highest number of votes from each class or group
of classes, if any, entitled to elect directors separately up to the number of
directors to be elected by the class or group of classes shall be elected. If
at any meeting of shareholders, directors of more than one class are to be
elected, each class of directors shall be elected in a separate election.
(c) Cumulative voting. Unless the articles provide for straight
voting, in each election of directors every shareholder entitled to vote shall
have the right to multiply the number of votes to which the shareholder may be
entitled by the total number of directors to be elected in the same election by
the holders of the class or classes of shares of which his or her shares are a
part and the shareholders may cast the whole number of his or her votes for one
candidate or may distribute them among two or more candidates.
Section 4.03. NUMBER AND TERM OF OFFICE.
(a) Number. the board of directors shall consist of such number of
directors, not less than two nor more than six, as may be determined from time
to time by resolution of the board of directors.
(b) Term of office. Each director shall hold office until the
expiration of the term for which he or she was elected and until a
successor has been selected and qualified or until his or her earlier
death, resignation or removal. A decrease in the number of directors
shall not have the effect of shortening the term of any incumbent
director.
(c) Resignation. Any director may resign at any time upon written
notice to the corporation. The resignation shall be effective upon
receipt thereof by the corporation or at such subsequent time as shall
be specified in the notice of resignation.
Section 4.04. VACANCIES.
(a) General rule. Vacancies in the board of directors, including
vacancies resulting from an increase in the number of directors, may
be filled by a majority vote of the remaining members of the board
though less than a quorum, or by a sole director to serve for the
balance of the unexpired term, and until a successor has been
selected and qualified or until his or her earlier death, resignation
or removal.
(b) Action by resigned directors. When one or more directo4s resign
from the board effective at a future date, the directors then in office,
including those who have so resigned, shall have power by the applicable vote
to fill the vacancies, the vote thereon to take effect when the resignations
become effective.
Section 4.05. REMOVAL OF DIRECTORS.
(a) Removal by the shareholders. The entire board of directors, or
any class of the board, or any individual director may be removed from office
without assigning any cause by the vote of shareholders, or of the holders of a
class or series of shares, entitled to elect directors, or the class of
directors. In case the board or a class of the board or any one or more
directors are so removed, new directors may be elected at the same meeting.
The board of directors may be removed at any time with our without cause by the
unanimous vote or consent of shareholders entitled to vote thereon.
(b) Removal by the board. The board of directors may declare vacant
the office of a director who has been judicially declared of unsound mind or
who has been convicted of an offense punishable by imprisonment for a term of
more than one year or if, within 60 days after notice of his or her selection,
the director does not accept the office either in writing or by attending a
meeting of the board of directors.
(c) Removal of directors elected by cumulative voting. An individual
director shall not be
<PAGE> 14
removed (unless the entire board or class of the board is removed) if
sufficient votes are cast against the resolution for his removal
which, if cumulatively voted at an annual or other regular election of
directors, would be sufficient to elect one or more directors to the
board or to the class.
Section 4.06. PLACE OF MEETINGS.
Meetings of the board of directors may be held at such place within or
without Pennsylvania as the board of directors may from time to time
appoint or as may be designated in the notice of the meeting.
Section 4.07. ORGANIZATION OF MEETING.
At ever meeting of the board of directors, the chairman of the board,
if there be one, or, in the case of a vacancy in the office or absence
of the chairman of the board, one of the following officers present in
the order stated: the vice chairman of the board, if there be one,
the president, the vice presidents in their order of rank and
seniority, or a person chosen by a majority of the directors present,
shall act as chairman of the meeting. The secretary or, in the absence
of the secretary, an assistant secretary, or, in the absence of the
secretary and the assistant secretaries, any person appointed by the
chairman of the meeting, shall act as secretary.
Section 4.08. REGULAR MEETINGS.
Regular meetings of the board of directors shall be held at such time
and place as shall be designated from time to time by resolution of
the board of directors.
Section 4.09. SPECIAL MEETINGS.
Special meetings of the board of directors shall be held whenever
called by the chairman or by two or more of the directors.
Section 4.10. QUORUM OF AND ACTION BY DIRECTORS.
(a) General rule. A majority of the directors in the office of the
corporation shall be necessary to constitute a quorum for the
transaction of business and the acts of a majority of the directors
present and voting at a meeting at which a quorum is present shall be
the acts of the board of directors.
(b) Action by written consent. Any action required or permitted to be
taken at a meeting of the directors may be taken without a meeting if,
prior or subsequent to the action, a consent with the secretary of the
corporation.
Section 4.11. EXECUTIVE AN OTHER COMMITTEES.
(a) Establishment and powers. The board of directors may, by
resolution adopted by a majority of the directors in office, establish
one or more committees to consist of one or more directors of the
corporation. Any committee, to the extent provided in the resolution of
the board of directors, shall have and may exercise all of the powers
and authority of the board of directors except that a committee shall
not have any power or authority as to the following:
(1) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation Law.
(2) The creation or filling of vacancies in the board of
directors.
(3) The adoption, amendment or repeal of these by laws.
<PAGE> 15
(4) The amendment or repeal of any resolution of the board
that by its terms is amendable or repealable only by the
board.
(5) Action on matters committed by a resolution of the board
of directors to another committee of the board.
(b) Alternate committee members. The board may designate one or more
directors as alternate members of any committee who may replace any
absent or disqualified member at any meeting of the committee or for
the purposes of any written action by the committee. In the absence
or disqualification of a member of members thereof present at any
meeting and not disqualified from voting, whether or not constituting
a quorum, may unanimously appoint another director to act at the
meeting in the place of the absent or disqualified member.
(c) Term. Each committee of the board shall serve at the pleasure of
the board.
(d) Committee procedures. The term "board of directors" or "board"
when used in any provision of these bylaws relating to the
organization or procedures of or the manner of taking action by the
board of directors, shall be construed to include and refer to any
executive or other committee of the board.
Section 4.12. COMPENSATION. The board of directors shall have the
authority to fix compensation of directors for their services as directors and
a director may be a salaried officer of the corporation.
ARTICLE V
OFFICERS
Section 5.01. OFFICERS GENERALLY.
(a) Number, qualification and designation. The officers of the
corporation shall be a president, a secretary, a treasurer, and such other
officers as may be elected in accordance with the provisions of Section 5.03.
officers may but need not be directors or shareholders of the corporation. The
president and secretary shall be natural persons of full age. The treasurer
may be a corporation, but if a natural person shall be of full age. The board
of directors may elect from among the members of the board a chairman of the
board and a vice chairman of the board who shall be officers of the
corporation. Any number of offices may be held by the same person.
(b) Resignations. Any officer may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as may be specified in
the notice of resignation.
(c) Bonding. The corporation may secure the fidelity of any or all of
its officers by bond or otherwise.
(d) Standard of care. Except as otherwise provided in the articles,
an officer shall perform his or her duties as an officer in good faith, in a
manner he or she reasonably believes to be in the best interests of the
corporation and with such care, including reasonable inquiry, skill and
diligence, as a persons of ordinary prudence would use under similar
circumstances. A person who so performs his or her duties shall not be liable
by reason of having been an officer of the corporation.
Section 5.02. ELECTION AND TERM OF OFFICE. The officers of the
corporation, except those elected by delegated authority pursuant to Section
5.03, shall be elected annually by the board of directors, and each such
officer shall hold office for a term of one year and until a successor has been
selected and qualified or until his or her earlier death, resignation or
removal.
Section 5.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The board
of directors may from time to time elect such other officers and appoint such
committees, employees or other
<PAGE> 16
agents as the business of the corporation may require, including one or more
assistant secretaries, and one or more assistant treasurers, each of whom shall
hold office for such period, have such authority, and perform such duties as
are provided in these bylaws.
Section 5.04. REMOVAL OF OFFICERS AND AGENTS. Any officer or agent
of the corporation may be removed by the board of directors with or without
cause. The removal shall be without prejudice to the contract rights, if any,
of any person so removed. Election or appointment of an officer or agent shall
not of itself created contract rights.
Section 5.05. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, shall be filled by
the board of directors or by the officer or committee to which the power to
fill such office has been delegated pursuant to Section 5.03, as the case may
be, and if the office is one for which these bylaws prescribe a term, shall be
filled for the unexpired portion of the term.
Section 5.06. AUTHORITY. All officers of the corporation, as between
themselves and the corporation, shall have such authority and perform such
duties in the management of the corporation as may be provided by or pursuant
to resolution or orders of the board of directors or in the absence of
controlling provisions in the resolutions or orders of the board of directors,
as may be determined by or pursuant to these bylaws.
Section 5.07. THE CHAIRMAN OF THE BOARD. The chairman of the board
if there be one, or in the absence of the chairman, the vice chairman of the
board, shall preside at all meetings of the shareholders and of the board of
directors and shall perform such other duties as may from time to time be
requested by the board of directors.
Section 5.08 THE PRESIDENT. The president shall be the chief
executive officer of the corporation and shall have general supervision over
the business and operations of the corporation, subject however, to the control
of the board of directors. The president shall sign, execute, and acknowledge,
in the name of the corporation, deeds, mortgages, contracts or other
instruments authorized by the board of directors, except in cases where the
signing and execution thereof shall be expressly delegated by the board of
directors, or by these bylaws, to some other officer or agent of the
corporation; and , in general, shall perform all duties incident to the office
of president and such other duties as from time to time may be assigned by the
board of directors.
Section 5.09. THE SECRETARY. The secretary or an assistant secretary
shall attend all meetings of the shareholders and of the board of directors and
shall record all votes of the shareholders and of the directors and the minutes
of the meetings of the shareholders and of the board of directors and o
committees of the board in a book or books to be kept for that purpose; shall
see that notices are given and records and reports properly kept and filed by
the corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be executed on
behalf of the corporation under its seal; and , in general, shall perform all
duties incident to the office of secretary, and such other duties as may from
time to time be assigned by the board of directors or the president.
Section 5.10. THE TREASURER. The treasurer or an assistant treasurer
shall have or provide for custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and
receipt of moneys earned by or in any manner due to or received by the
corporation; shall deposit all funds in his or her custody as treasurer in such
banks or other places of deposit as the board of directors may from time to
time designate; shall, whenever so required by the board of directors, render
an account showing all transactions as treasurer and the financial condition of
the corporation; and, in general, shall discharge such other duties as may from
time to time ve assigned by the board of directors or the president.
Section 5.11. SALARIES. The salaries of the officers elected by the
board of directors shall be fixed from time to time by the board of directors
or by such officer as may be designated by resolution of the board. The
salaries or other compensation of any other officers, employees and other
agents shall be fixed from time to time by the officer or committee to which
the power to elect such officers or to retain or
<PAGE> 17
appoint such employees or other agents has been delegated pursuant to Section
5.03. no officer shall be prevented from receiving such salary or other
compensation by reason of the fact that the officer is also a director of the
corporation.
Section 5.12. DISALLOWED COMPENSATION. Any payments made to an
officer or employee of the corporation such as a salary, commission;, bonus,
interest, rent, travel or entertainment expense incurred by him, which shall be
disallowed in whole or in part as a deductible expense by the Internal Revenue
Service, shall be reimbursed by such officer or employee to the corporation to
the full extent of such disallowance. It shall be the duty of the directors,
as a Board, to enforce payment of each such amount disallowed, in lieu of
payment by the officer or employee, subject to the determination of the
directors, proportionate amounts may be withheld from future compensation
payments until the amount owed to the corporation has been recovered.
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER, ETC.
Section 6.01. SHARE CERTIFICATES. Certificates for shares of the
corporation shall be in such form as approved by the board of directors, and
shall state that the corporation is incorporated under the laws of
Pennsylvania, the name of the person to whom issued, and the number and class
of shares and the designation of the series (if any) that the certificate
represents. The share register or transfer books and blank share certificates
shall be kept by the secretary or by any transfer agent or registrar designated
by the board of directors for that purpose.
Section 6.02. ISSUANCE. The share certificates of the corporation
shall be numbered and registered in the share register ofr transfer books of
the corporation as they are issued. They shall be signed by the president or a
vice president and by the assistant treasurer, and shall bear the corporate
seal, which may be a facsimile, engraved or printed; but where such
certificate is signed by a transfer agent or a registrar the signature of any
corporate officer upon such certificate may be a facsimile, engraved or
printed. In caase any officer who has signed, or whose facsimile signature has
been placed upon, any share certificate shall have ceased to be such officer
because of death, resignation or otherwise, before the certificate is issued,
it may be issued at the date of its issue. The provisions of this Section 6.02
shall be subject to any inconsistent or contrary agreement at the time between
the corporation and any transfer agent or registrar.
Section 6.03. TRANSFER. Transfers of shares shall be made on the
share register or transfer books of the corporation upon surrender of the
certificate therefor, endorsed by the person named in the certificate or by an
attorney lawfully constituted in writing. No transfer shall be made
inconsistent with the provisions of the Uniform Commercial Code, 13 Pa.C.S.
8101 et seq., and its amendments and supplements.
Section 6.04. RECORD HOLDER OF SHARES. The corporation shall be
entitled to treat the person in whose name any share or shares of the
corporation stand on the books of the corporation as the absolute owner
thereof, and shall not be bound to recognize any equitable or other claim to,
or interest in, such share or shares on the part of any other person.
Section 6.05. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder
of any shares of the corporation shall immediately notify the corporation of
any loss, destruction or mutilation of the certificate therefor, and the board
of directors may, in its discretion, cause a new certificate or certificates to
be issued to such holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of
the certificate, upon satisfactory proof of such loss or destruction and, if
the board of directors shall so determine, the deposit of a bond in such form
and such sum, and with such surety or sureties, as it may direct.
ARTICLE VII
<PAGE> 18
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER
AUTHORIZED REPRESENTATIVES
Section 7.01. SCOPE OF INDEMNIFICATION
(a) General rule. The corporation shall indemnify an indemnified
representative against any liability incurred in connection with any proceeding
in which the indemnified representative may be involved as a party or otherwise
by reason of the fact that such person is or was serving in an indemnified
capacity, including, without limitation, liabilities resulting from any actual
or alleged breach or neglect of duty, error, misstatement or misleading
statement, negligence, gross negligence or act giving rise to strict or
products liability, except:
(1) where such indemnification is expressly prohibited by
applicable law;
(2) where the conduct of the indemnified representative has
been finally determined pursuant to Section 7.06 or otherwise:
(i) to constitute willful misconduct or recklessness
sufficient in the circumstances to bar
indemnification against liabilities arising from the
conduct; or
(ii) to be based upon or attributable to the receipt
by the indemnified representative from the
corporation of a personal benefit to which the
indemnified representative is not legally entitled;
or
(3) to the extent such indemnification has been finally
determined in a final adjudication pursuant to Section 7.06 to
be otherwised unlawful.
(b) Partial payment. If an indemnified represetative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the corporation shall indemnify such
indemnified representative to the maximum extent for such portion of the
liabilities.
(c) Presumption. The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the indemnified representative is
not entitled to indemnification.
(d) Definitions. For purposes of this Article:
(1) "indemnified capacity" means any and all past, present
and future service by an indemnified representative in one or
more capacities as a director, officer, employee or agent of
the corporation, or, at the request of the corporation, as a
director, officer, employee, agent, fiduciary or trustee of
another corporation, partnership, joint ventureeee, trust,
employee benefit plan or other entity or enterprise;
(2) "indemnified representative" means any and all directors
and officers of the corporation and any other person
designated as an indemnified representative by the board of
directors of the corporation (which may, but need not, include
any person serving at the request of the corporation, as a
director, officer, employee, agent, fiduciary or trustee of
another corporation, partnership, joint venture, trust,
employee benefit plan or other entity or enterprise):
(3) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax
assessed with respect to an employee benefit plan, or cost or
expense, of any nature (including, without limitation,
attorneys' fees and disbursements); and
<PAGE> 19
(4) "proceeding" means any threatened, pending or completed
action, suit, appeal or other proceeding of any nature,
whether civil, criminal, administrative or investigative,
whether formal or informal, and whether brought by or in the
right of the corporation, a class of its security holders or
otherwise.
Section 7.02. PROCEEDINGS INITIATED BY INDEMNIFIED REPRESENTATIVES.
Notwithstanding any other provision of this Article, the corporation shall not
indemnify under this Article an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of
or participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in office.
This section does not apply to a reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under Section 7.06 or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.
Section 7.03. ADVANCING EXPENSES. The corporation shall pay the
expenses (including attorneys' fees and disbursements) incurred in good faith
by an indemnified representative in advance of the final disposition of a
proceeding described in Section 7.01 or the initiation of or participation in
which is authorized pursuant to Section 7.02 upon receipt of an undertaking by
or on behalf of the indemnified representative to repay the amount if it is
ultimately determined pursuant to Section 7.06 that such person is not entitled
to repay an advance shall not be a prerequisite to the making of such advance.
Section 7.04. SECURING OF INDEMNIFICATION OBLIGATIONS. To further
effect, satisfy or secure the indemnification obligations provided herein or
otherwise, the corporation may maintain insurance, obtain a letter of credit,
act as self-insurer, create a reserve, trust, escrow, cash collateral or other
fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the corporation, or use any
other mechanism or arrangement whatsoever in such amounts, at such costs, and
upon such other terms and conditions as the board of directors shall deem
appropriate. Absent fraud, the determination of the board of directors with
respect to such amounts, costs, terms and conditions shall be conclusive against
all security holders, officers and directors and shall not be subject to
voidability.
Section 7.05. PAYMENT OF INDEMNIFICATION. An indemnified
representative shall be entitled to idemnification within 30 days after a
written request for indemnification has been delivered to the secretary of the
corporation.
Section 7.06. ARBITRATION.
(a) General rule. Any dispute related to the right to
indemnification, contribution or advancement of expenses as provided under this
Article, except with respect to indemnification for liabilities arising under
the Securities Act of 1933 that the corporation has undertaken to submit to a
court for adjudication, shall be decided only by arbitration in the
metropolitan area in which the principal executive offices of the corporation
are located at the time, in accordance with the commercial arbitration rules
then in effect of theAmerican Arbitration Association, before a panel of three
arbitrators, one of whom shall be selected by the corporation, the second of
whom shall be selected by the other two arbitrators. In the absence of the
American Arbitration Association, or if for any reason arbitration under the
arbitration rules of the American Arbitration Association cannot be initiated,
or if one of the parties fails or refuses to select an arbitrator or if the
arbitrators selected by the corporation and the indemnified representative
cannot agree on the selection of the third arbitrator within 30 days after such
time as the corporation and the indemnified representative have each been
notified of the selection of the other's arbitrator, the necessary arbitrator
or arbitrators shall be selected by the presiding judge of the court of general
jurisdiction in such metropolitan area.
(b) Burden of proof. The party or parties challenging the right of
an indemnified representative to the benefits of this Article shall have the
burden of proof.
(c) Expenses. The corporation shall reimburse an indemnified
representative for the expenses
<PAGE> 20
(including attorneys' fees and disbursements) incurred in successfully
prosecuting or defending such arbitration.
(d) Effect. Any award entered by the arbitrators shall be final,
binding and nonappealable and judgment may be entered thereon by any party in
accordance with applicable law in any court of competent jurisdiction, except
that the corporation shall be entitled to interpose as a defense in any such
judicial enforcement proceeding any prior final judicial determination adverse
to the indemnified representative under Section 7.01 (a) (2) in a proceeding
not directly involving indemnification under this Article. This arbitration
provision shall be specifically enforceable.
Section 7.07. CONTRIBUTION. If the indemnification provided for in
this Article or otherwise is unavailable for any reason in respect of any
liability or portion thereof, the corporation shall contribute to the
liabilities to which the indemnified representative may be subject in such
proportion as is appropriate to reflect the intent of this Article or
otherwise.
Section 7.08. MANDATORY INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC.
To the extent that an authorized representative of the corporation has been
successful on the merits or otherwise in defense of any action or proceeding
referred to in or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees and
disbursements) actually and reasonably incurred by such person in connection
therewith.
Section 7.09. CONTRACT RIGHTS; AMENDMENT OR REPEAL. All rights
under this Article shall be deemed a contract between the corporation and the
indemnified representative pursuant to which the corporation and each
indemnified representative intend to be legally bound. Any repeal, amendment
or modification hereof shall be prospective only and shall not affect any
rights or obligations then existing.
Section 7.10. SCOPE OF ARTICLE. The rights granted by this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advncement of expenses may be entitled under
any statute, agreement, vote of shareholders or disinterested directors or
otherwise both as to action in an indemnified capacity and as to action in any
other capacity. The indemnification, contribution and advancement of expenses
provided by or granted pursuant to this Article shall continue as to a person
who has ceased to be an indemnified representative in respect of matters
arising prior to such time, and shall inure to the benefit of the heirs,
executors, administrators and personal representatives of such a person.
Section 7.11. RELIANCE OF PROVISIONS. Each person who shall act as
an indemnified representative of the corporation shall be deemed to be doing so
in reliance upon the rights provided in this Article.
ARTCILE VIII
MISCELLANEOUS
Section 8.01. CORPORATE SEAL. The corporation seal shall have
inscribed thereon the name of the corporation, the year of its organization
and the words "Corporate Seal. Delaware".
Section 8.02. CHECKS. All checks, notes, bills of exchange or other
orders in writing shall be signed by such person or persons as the board of
directors or any person authorized by resolution of the board of directors may
from time to time designate.
Section 8.03. CONTRACTS.
<PAGE> 21
(a) General rule. Excepts as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the board of directors may authorize any officer or agent to
enter into any contract or to execute or deliver any instrument on behalf of
the corporation, and such authority may be general or confined to specific
instances.
(b) Statutory form of execution of instruments. Any note, mortgage,
evidence of indebtedness, contract or other document, or any assignment or
endorsement thereof, executed or entered into between the corporation and any
other person, when signed by one or more officers or agents having actual or
apparent authority to sign it, or by the president or vice president and
secretary or assistant secretary or treasurer or assistant treasurer of the
corporation, shall be held to have been properly executed for and in behalf of
the corporation, without prejudice to the rights of the corporation against any
person who shall have executed the instrument in excess of his or her actual
authority.
Section 8.04. INTERESTED DIRECTORS OR OFFICERS; QUORUM.
(a) General rule. A contract or transaction between the corporation
and one or more of its directors or officers or between the corporation and
another corporation, partnership, joint venture, trust or other enterprise in
which one or more of its directors or officers are directors or officers or
have a financial or other interest, shall not be void or voidable solely for
that reason, or sole because the director of officer is present at or
participates in the meeting of the board of directors that authorize the
contract or transaction, or solely because his, her or their votes are counted
for that purpose, if:
(1) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known
to the board of directors and the board authorizes the
contract or transaction by the affirmative votes of a majority
of the disinterested directors even though the disinterested
directors are less than a quorum;
(2) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed
or are known to the shareholders entitled to vote thereon and
the contract or transaction is specifically approved in good
faith by vote of those shareholders; or
(3) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the
board of directors or the shareholders.
(b) Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board which authorizes
a contract or transaction specified in subsection (a).
Section 8.05. DEPOSITS. All funds of the corporation shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by
such one or more officers or employees as the board of directors shall from
time to time determine.
Section 8.06. CORPORATE RECORDS.
(a) Required records. The corporation shall keep complete and
accurate books and records of account, minutes of the proceedings of the
incorporators, shareholders and directors and a share register giving the names
and addresses of all shareholders and the number and class of shares held by
each. The share register shall be kept at either the registered office of the
corporation in Pennsylvania or at its principal place of business wherever
situated or at the office of its registrar or transfer agent. Any books,
minutes or other records may be in written form or any other form capable of
being converted into written form within a reasonable time.
(b) Right of inspection. Every shareholder shall, upon written
verified demand stating the purpose thereof, have a right to examine, in person
or by agent or attorney, during the usual hours for business for any proper
purpose, the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make copies
or extracts therefrom. A
<PAGE> 22
proper purpose shall mean a purpose reasonably related to the interst of the
person as a shareholder. In every instance where an attorney or other agent is
the person who seeks the right of inspection, the demand shall be accompanied
by a verified power of attorney or other writing that authorizes the attorney
or other agent to so act on behalf of the shareholder. The demand shall be
directed to the corporation at its registered office in Pennsylvania or at its
principal place of business wherever situated.
Section 8.07. FINANCIAL REPORTS. Unless otherwise agreed between the
corporation and a shareholder, the corporation shall furnish to its
shareholders and annual financial statements, including at least a balance
sheet as of the end of each fiscal year and a statement of income and expenses
for the fiscal year. The financial statements shall be prepared on the basis
of generally accepted accounting principles, if the corporation prepares
financial statements for the fiscal year on that basis for any purpose, and may
be consolidated statements of the corporation and one or more of its
subsidiaries. The financial statements shall be mailed by the corporation to
each of its shareholders entitled thereto within 120 days after the close of
each fiscal year and, after the mailing and upon written request, shall be
mailed by the corporation to any shareholder or beneficial owner entitled
thereto to whoma copy of the most recent annual financial statements has not
previously been mailed. Statements that are audited or reviewed by a public
accountant shall be accompanied by the report of the accountant; in other
cases, each copy shall be accompanied by a statement of the person in charge of
the financial records of the corporation:
(1) Stating his reasonable belief as to whether or not the
financial statements were prepared in accordance with
generally accepted accounting principles and, if not,
describing the basis of presentation.
(2) Describing any material respects in which the financial
statements were not prepared on a basis consistent with those
prepared for the previous year.
Section 8.08. AMENDMENT OF BYLAWS. These bylaws may be amended or
repealed, or new bylaws may be adopted, either (i) by vote of the shareholders
at any duly organized annual or special meeting of shareholders, or (ii) with
respect to those matters that are not by statute committed expressly to the
shareholders and regardless of whether the shareholders have previously adopted
or approved the bylaw being amended or repealed, by vote of a majority of the
board of directors of the corporation in office at any regular or special
meeting of directors. Any change in these bylaws shall take effect when
adopted unless otherwise provided in the resolution effecting the change. See
Section 2.03(b) (relating to notice of action by shareholders on bylaws).
<PAGE> 1
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS, AND LIMITATIONS
OF
SERIES A 4% CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
OF
HEALTH MANAGEMENT, INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
(the "DGCL"), HEALTH MANAGEMENT, INC., a Delaware corporation (the
"Corporation"), does hereby certify that:
FIRST: The Corporation was incorporated in the State of Delaware on _________,
19__, and the authorized number of shares of Preferred Stock, par value $.001
per share, of the Corporation is 1,000,000, none of which is outstanding prior
to the filing hereof;
SECOND: Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation and by the provisions of
Sections 141 and 151 et seq of the DGCL, the Board of Directors, by unanimous
written consent in lieu of a meeting in accordance with Section 141(f) of the
DGCL, adopted the following resolutions authorizing the issuance of an
aggregate of 70 shares of Series A 4% Cumulative Convertible Redeemable
Preferred Stock (as described below), which resolutions are still in full force
and effect and are not in conflict with any provisions of the Certificate of
Incorporation or By-Laws of the Corporation:
WHEREAS, the Board of Directors of the Corporation is authorized,
within the limitations and restrictions stated in the Certificate of
Incorporation, to fix by resolution or resolutions the designation of
each series of Preferred Stock and the powers, preferences, and
relative participating, optional, voting or other special rights, and
the qualifications, limitations, or restrictions thereof; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to its authority as aforesaid, to fix the terms
of one series of Preferred Stock;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to authority vested in
the Board of Directors of the Corporation by Section 151 of the DGCL,
and in accordance with the provisions of the Certificate of
Incorporation of the Corporation, one series of Preferred Stock, par
value $.001 per share, of the Corporation be and hereby is created and
provided for with the terms, designation, relative rights,
preferences, and limitations as follows:
<PAGE> 2
1. DEFINITIONS.
Common Stock. Common stock, par value $.001 per share, of the
Corporation.
Initial Issuance Date. The first Issuance Date.
Issuance Date. With respect to any shares of Series A
Preferred Stock, the date of the issuance of such shares of
Series A Preferred Stock by the Corporation.
Liquidation. The event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation.
Liquidation Price. With respect to any share of Series A
Preferred Stock, the amount equal to the sum of (i) the
purchase price for such share of Series A Preferred Stock from
the Corporation and (ii) accrued, but unpaid, cumulative
dividends on such share of Series A Preferred Stock from the
Issuance Date thereof to, but excluding the date of the
Liquidation.
Public Offering. The first public offering under the
Securities Act of 1933, as amended, of the Common Stock after
the date hereof.
Redemption Date. The date which is the earlier to occur of
(i) the date of the closing of any offering of securities of
the Corporation the gross proceeds of which equals or exceeds
$5,000,000 and (ii) the date one year from the Initial
Issuance Date.
Redemption Price. With respect to any share of Preferred
Stock, the amount equal to the sum of (i) the purchase price
for such share of Series A Preferred Stock from the
Corporation and (ii) accrued, but unpaid, cumulative dividends
on such share of Series A Preferred Stock from the Issuance
Date thereof to, but excluding, the Redemption Date.
Reorganization. As defined in Section 7(c) hereof.
Series A Preferred Stock. The Series A 4% Cumulative
Convertible Redeemable, par value $.001 per share.
2. DESIGNATION AND NUMBER OF SHARES. The series of
preferred stock established hereby shall consist of 70 shares
and shall be designated "Series A 4% Cumulative Convertible
Redeemable Preferred Stock, par value $.001 per share".
3. DIVIDENDS. Subject to Section 7 hereof, dividends on
the Series A Preferred Stock shall be cumulative and shall
accrue at the rate of 4% per annum from the Issuance Date to,
but excluding, the earlier of (i) the Redemption Date and (ii)
the date one year from the Issuance Date.
4. VOTING. Except as may be required from time to time
by the Certificate of Incorporation of the Corporation or
applicable law, the holders of Series A Preferred Stock shall
not be entitled to vote on matters submitted to a vote of the
stockholders of the Corporation.
5. MANDATORY REDEMPTION. Subject to Section 7, the
shares of Series A Preferred Stock shall be redeemed by the
Corporation for an amount per share equal to the Redemption
Price on the Redemption Date. Upon the redemption thereof in
accordance with this Section 5, the shares of Series A
Preferred Stock shall become authorized, but unissued, shares
of capital stock of the Corporation.
6. LIQUIDATION RIGHTS. In the event of any Liquidation,
before any
<PAGE> 3
payment or distribution of assets of the Corporation shall be
made to, or set apart for, the holders of the Common Stock or
any other stock of the Corporation not ranking prior to, or on
a parity with, the Series A Preferred Stock in respect of
rights upon a Liquidation, the holders of the Series A
Preferred Stock shall first be entitled to receive payment out
of such assets of the Corporation of an amount of cash per
share equal to the Liquidation Price. If the assets of the
Corporation are insufficient to permit full payment to the
holders of the Series A Preferred Stock as herein provided,
such assets shall be distributed ratably among the holders of
the outstanding Series A Preferred Stock.
7. CONVERSION.
(a) In the event that a Public Offering shall not
have closed on or prior to the date one year after
the Initial Issuance Date, on 10 days prior written
notice from the Corporation to the holders of the
Series A Preferred Stock, each share of the Series A
Preferred Stock shall be convertible, in the sole and
absolute discretion of the Corporation, into 16,072
shares of Common Stock. Upon such conversion, all
amounts otherwise payable with respect to the Series
A Preferred Stock shall be deemed paid in full by the
issuance of such shares of Common Stock. Upon the
conversion thereof in accordance with this Section 7,
the shares of Series A Preferred Stock shall be
cancelled and shall become authorized, but unissued,
shares of capital stock of the Corporation.
(b) In the event that the Corporation shall at
any time after the Initial Issuance Date (i) declare
a dividend on the outstanding Common Stock payable in
shares of its capital stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock
by reclassification of the Common Stock (including
any such reclassification in connection with a
consolidation or merger in which the Corporation is
the continuing corporation), then, in each case, the
number of Conversion Shares for which each share of
Series A Preferred Stock may be converted in
accordance with paragraph (a) of this Section 7 in
effect at the time of the record date for the
determination of stockholders entitled to receive
such dividend or distribution or of the effective
date of such subdivision, combination, or
reclassification shall be adjusted so that it shall
equal the number of Conversion Shares (and other
securities, if any) to which the holder of such share
of Series A Preferred Stock would have been entitled
had such share of Series A Preferred Stock been
converted in accordance with paragraph (a) of this
Section 7 immeditaely prior to such record date or
effective date.
(c) In case of any capital reorganization, other
than in the cases referred to in paragraph (b) of
this Section 7, or the consolidation or merger of the
Corporation with or into another corporation (other
than a merger or consolidation in which the
Corporation is the continuing corporation and which
does not result in any
<PAGE> 4
reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of
Common Stock into shares of other stock or other
securities or property), or in the case of any sale,
lease, or conveyance to another corporation of the
property and assets of any nature of the Company as
an entirety or substantially as an entirety (such
actions being hereinafter collectively referred to as
"Reorganizations"), there shall thereafter be
deliverable upon conversion of each share of Series A
Preferred Stock (in lieu of the number of Conversion
Shares theretofore deliverable) the number of shares
of stock or other securities or property which would
theretofore have been deliverable upon the conversion
of such share of Series A Preferred Stock if such
share of Series A Preferred Stock had been converted
immediately prior to such Reorganization. In case of
any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of
the Corporation, shall be made in the application of
the provisions herein set forth with respect to the
rights and interests of the holders of the Series A
Preferred Stock so that the provisions set forth
herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property
thereafter deliverable upon converion of the Series A
Preferred Stock. Any such adjustment shall be made
by, and set forth in, a supplemental agreement
between the Corporation, or any successor thereto,
and the holders of the Series A Preferred Stock, and
shall for all purposes hereof conclusively be deemed
to be an appropriate adjustment. The Corporation
shall not effect any such Reorganization unless, upon
or prior to the consummation thereof, the successor
corporation, or if the Corporation shall be the
surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other
securities or property to be delivered to holders of
shares of the capital stock of the Corporation
outstanding at the effective time thereof, then such
issuer, shall assume by written instrument the
obligation to deliver to the holders of the Series A
Preferred Stock such shares of stock, securities,
cash, or other property as such holders shall be
entitled to purchase in accordance with the foregoing
provisions.
(d) In case of any reclassification or change of
the shares of Common Stock or other securities
issuable upon conversion of the Series A Preferred
Stock (other than a change in par value or from a
specified par value to no par value, or as a result
of a subdivision or combination, but including any
change in the shares into two or more classes or
series of shares), or in case of any consolidation or
merger of another corporation into the Corporation in
which the Corporation is the continuing corporation
and in which there is a reclassification or change
(including a change to the right to receive cash or
other property) of the shares of Common Stock or
other securities issuable upon conversion of the
Series A Preferred Stock (other than a change in par
value, or from no par value to a
<PAGE> 5
specified par value, or as a result of a subdivision
or combination, but including any change in the
shares into two or more classes or series of shares),
each share of Series A Preferred Stock shall
thereafter be convertible into solely the kind and
amount of shares of stock and other securities,
property, cash, or any combination thereof receivable
upon such reclassification, change, consolidation, or
merger by a holder of the number of Conversion Shares
for which such share of Series A Preferred Stock
might have been exercised immediately prior to such
reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as
practicable to the adjustments in this Section 7.
(e) The adjustment provided by paragraph (b) of
this Section 7 shall be made successively whenever
any event listed above shall occur and shall become
effective at the close of business on such record
date or at the close of business on the date
immediately preceding such effective date, as
applicable. The provisions of paragraphs (c) and (d)
of this Section 7 shall similarly apply to successive
reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers,
sales, leases, or conveyances.
8. MISCELLANEOUS.
(a) Closing of Transfer Books. To facilitate the
payment of any dividend with respect to the Series A
Preferred Stock or any Liquidation, the Board of
Directors of the Corporation is authorized, but not
required, to set a record date not earlier than 60
days and not later than 10 days prior to the date of
the distribution, in the case of a dividend or a
Liquidation, as the case may be.
(b) Notices. Any notice or other communication
required or permitted to be given hereunder shall be
in writing and shall be mailed by certified mail,
return receipt requested or by Federal Express,
Express Mail, or similar overnight delivery or
courier service or delivered (in-person or by
telecopy, telex, or similar telecommunications
equipment) against receipt to the party to whom it is
to be given, in the case of the holders of the Series
A Preferred Stock, at the address of each such holder
set forth in the stock transfer ledger of the
Corporation, or, in the case of the Corporation, at
212 Phillips Road, Exton, Pennsylvania 19341. Any
notice or other communication given by certified mail
shall be deemed given at the time of certification
thereof. Any notice given by other means permitted
by this paragraph 8(a) shall be deemed given at the
time of receipt thereof.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed
by the President and attested by its Secretary this____ day of January, 1996.
<PAGE> 6
HEALTH MANAGEMENT, INC.
BY:
-------------------------
NAME:
TITLE: PRESIDENT
ATTEST:
- ------------------------
NAME:
TITLE: SECRETARY
<PAGE> 1
FORM
OF
WARRANTS
NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THIS WARRANT OR SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT THIS
WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
NOUVEAU INTERNATIONAL, INC.
WARRANTS FOR THE PURCHASE
OF
SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
NO. [DATE], 1996
THIS CERTIFIES that, for value received, _____________________
(together with all permitted assigns, the "Holder") is entitled to
subscribe for, and purchase from, NOUVEAU INTERNATIONAL, INC., a Delaware
corporation (the "Company"), upon the terms and conditions set forth herein, at
any time or from time to time during the period commencing on the date of the
closing of the private placement (the "Initial Exercise Date") of the Units
each consisting of one share of Series A 4% Cumulative Redeemable Convertible
Preferred Stock, par value $.001 per share, and an aggregate of 1,608 Common
Stock Purchase Warrants (as hereinafter defined), of the Company and
terminating at 5:00 p.m., New York City local time, on the third anniversary of
the Initial Exercise Date (the "Exercise Period"), [amount] shares of the common
stock, par value $.001 per share (the "Common Stock"), of the Company. This
<PAGE> 2
Warrant is exercisable at an exercise price per share equal to $.50 per share;
provided, however, that upon the occurrence of any of the events specified in
Section 5 hereof, the rights granted by this Warrant, including the number of
shares of Common Stock to be received upon such exercise, shall be adjusted as
therein specified.
This Warrant, together with warrants of like tenor, constituting in
the aggregate warrants to purchase approximately 112,500 shares of Common
Stock (the "Warrants), have been offered and sold by the Company, through
Hampshire Securities Corporation and Americorp Securities, Inc., as the
placement agents, in the above-referenced private placement of units exempt
from registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to the Confidential Private Placement Memorandum, dated January
4, 1996 (the "Memorandum").
Each share of Common Stock issuable upon the exercise hereof shall be
hereinafter referred to as a "Warrant Share".
SECTION 1 EXERCISE OF WARRANT.
This Warrant may be exercised during the Exercise Period,
either in whole or in part, by the surrender of this Warrant
(with the election at the end hereof duly executed) to the
Company at its office at 212 Phillips Road, Exton,
Pennsylvania, 19341, or at such other place as is designated
in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an
amount equal to the product of the Exercise Price and the
number of Warrant Shares for which this Warrant is being
exercised.
SECTION 2 RIGHTS UPON EXERCISE; DELIVERY OF SECURITIES.
Upon each exercise of the Holder's rights to purchase Warrant
Shares, the Holder shall be deemed to be the holder of record
of the Warrant Shares, notwithstanding that the transfer books
of the Company shall then be closed or certificates
representing the Warrant Shares with respect to which this
Warrant was exercised shall not then have been actually
delivered to the Holder. As soon as practicable after each
such exercise of this Warrant, the Company shall issue and
deliver to the Holder a certificate or certificates
representing the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this
Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and
deliver a Warrant evidencing the right of the Holder to
purchase the balance of the aggregate number of Warrant Shares
purchasable hereunder as to which this Warrant has not been
exercised or assigned.
SECTION 3 REGISTRATION OF TRANSFER AND EXCHANGE.
<PAGE> 3
Any Warrants issued upon the transfer or exercise in part of
this Warrant shall be numbered and shall be registered in a
warrant register (the "Warrant Register") as they are issued.
The Company shall be entitled to treat the registered holder
of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes, and shall not be bound to recognize
any equitable or other claim to, or interest in, such Warrant
on the part of any other person, and shall not be liable for
any registration or transfer of Warrants which are registered
or to be registered in the name of a fiduciary or the nominee
of a fiduciary unless made with the actual knowledge that a
fiduciary or nominee is committing a breach of trust in
requesting such registration of transfer, or with the
knowledge of such facts that its participation therein amounts
to bad faith. This Warrant shall be transferable on the books
of the Company only upon delivery thereof duly endorsed by the
Holder or by his duly authorized attorney or representative,
or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an
attorney, executor, administrator, guardian, or other legal
representative, duly authenticated evidence of his, her, or
its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants
to the person entitled thereto. This Warrant may be
exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like
tenor and representing in the aggregate the right to purchase
a like number of Warrant Shares (or portions thereof), upon
surrender to the Company or its duly authorized agent.
Notwithstanding the foregoing, the Company shall have no
obligation to cause Warrants to be transferred on its books to
any person if, in the opinion of counsel to the Company, such
transfer does not comply with the provisions of the Securities
Act and the rules and regulations thereunder.
SECTION 4 RESERVATION OF SHARES.
The Company shall at all times reserve and keep available out
of its authorized and unissued Common Stock, solely for the
purpose of providing for the exercise of the Warrants, such
number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company represents that all
shares of Common Stock issuable upon exercise of this Warrant
are duly authorized and, upon receipt by the Company of the
full payment for such Warrant Shares, will be validly issued,
fully paid, and nonassessable, without any personal liability
attaching to the ownership thereof and will not be issued in
violation of any preemptive or similar rights of stockholders.
SECTION 5 ANTIDILUTION.
(a) In the event that the Company shall at any time after
the Initial Exercise Date: (i) declare a dividend on the
outstanding Common Stock payable in shares of its capital
stock; (ii) subdivide the outstanding
<PAGE> 4
Common Stock; (iii) combine the outstanding Common Stock into
a smaller number of shares; or (iv) issue any shares of its
capital stock by reclassification of the Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
corporation), then, in each case, the Exercise Price per
Warrant Share in effect at the time of the record date for the
determination of stockholders entitled to receive such
dividend or distribution or of the effective date of such
subdivision, combination, or reclassification shall be
adjusted so that it shall equal the price determined by
multiplying such Exercise Price by a fraction, the numerator
of which shall be the number of shares of Common Stock
outstanding immediately prior to such action, and the
denominator of which shall be the number of shares of Common
Stock outstanding after giving effect to such action. Such
adjustment shall be made successively whenever any event
listed above shall occur and shall become effective at the
close of business on such record date or at the close of
business on the date immediately preceding such effective
date, as applicable.
(b) All calculations under this Section 5 shall be made
to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(c) In any case in which this Section 5 shall require
that an adjustment in the number of Warrant Shares be made
effective as of a record date for a specified event, the
Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this
Warrant after such record date, the Warrant Shares, if any,
issuable upon such exercise over and above the number of
Warrant Shares issuable upon such exercise on the basis of the
number of shares of Common Stock in effect prior to such
adjustment; provided, however, that the Company shall deliver
to the Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional
shares of Common Stock upon the occurrence of the event
requiring such adjustment.
(d) Whenever there shall be an adjustment as provided in
this Section 5, the Company shall within 15 days thereafter
cause written notice thereof to be sent by registered mail,
postage prepaid, to the Holder, at its address as it shall
appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the
number of Warrant Shares issuable and the Exercise Price
thereof after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be
conclusive evidence of the correctness of any such adjustment
absent manifest error.
(e) The Company shall not be required to issue fractions
of shares of Common Stock or other capital stock of the
Company upon the exercise of this Warrant. If any fraction of
a share of Common Stock would be issuable on the exercise of
this Warrant (or specified portions thereof), the Company
shall pay lieu of such fraction an amount in cash equal to the
<PAGE> 5
same fraction of the average closing sale price (or average of
the closing bid and asked prices, if closing sale price is not
available) of Common Stock for the 10 trading days ending on
and including the date of exercise of this Warrant.
(f) No adjustment in the Exercise Price per Warrant Share
shall be required if such adjustment is less than $.05;
provided, however, that any adjustments which by reason of
this Section 5 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(g) Whenever the Exercise Price payable upon exercise of
this Warrant is adjusted pursuant to subsection (a) above, the
number of Warrant Shares issuable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the
number of Warrant Shares theretofore issuable upon exercise of
this Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the Exercise
Price, as adjusted.
SECTION 6 RECLASSIFICATION; REORGANIZATION; MERGER.
(a) In case of any capital reorganization, other than in
the cases referred to in Section 5(a) hereof, or the
consolidation or merger of the Company with or into another
corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not
result in any reclassification of the outstanding shares of
Common Stock or the conversion of such outstanding shares of
Common Stock into shares of other stock or other securities or
property), or in the case of any sale, lease, or conveyance to
another corporation of the property and assets of any nature
of the Company as an entirety or substantially as an entirety
(such actions being hereinafter collectively referred to as
"Reorganizations"), there shall thereafter be deliverable upon
exercise of this Warrant (in lieu of the number of Warrant
Shares theretofore deliverable) the number of shares of stock
or other securities or property to which a holder of the
respective number of Warrant Shares which would otherwise have
been deliverable upon the exercise of this Warrant would have
been entitled upon such Reorganization if this Warrant had
been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate
adjustment, as determined in good faith by the Board of
Directors of the Company, shall be made in the application of
the provisions herein set forth with respect to the rights and
interests of the Holder so that the provisions set forth
herein shall thereafter be applicable, as nearly as possible,
in relation to any shares or other property thereafter
deliverable upon exercise of this Warrant. Any such
adjustment shall be made by, and set forth in, a supplemental
agreement between the Company, or any successor thereto, and
the Holder, with respect to this Warrant, and shall for all
purposes hereof conclusively be deemed to be an appropriate
adjustment. The Company shall not effect any such
Reorganization unless, upon or prior to
<PAGE> 6
the consummation thereof, the successor corporation, or if the
Company shall be the surviving corporation in any such
Reorganization and is not the issuer of the shares of stock or
other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time
thereof, then such issuer, shall assume by written instrument
the obligation to deliver to the Holder such shares of stock,
securities, cash, or other property as such Holder shall be
entitled to purchase in accordance with the foregoing
provisions. In the event of sale, lease, or conveyance or
other transfer of all or substantially all of the assets of
the Company as part of a plan for liquidation of the Company,
all rights to exercise this Warrant shall terminate 30 days
after the Company gives written notice to the Holder that such
sale or conveyance or other transfer has been consummated.
(b) In case of any reclassification or change of the
shares of Common Stock issuable upon exercise of this Warrant
(other than a change in par value or from a specified par
value to no par value, or as a result of a subdivision or
combination, but including any change in the shares into two
or more classes or series of shares), or in case of any
consolidation or merger of another corporation into the
Company in which the Company is the continuing corporation and
in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or
from no par value to a specified par value, or as a result of
a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the
Holder or holders of this Warrant shall have the right
thereafter to receive upon exercise of this Warrant solely the
kind and amount of shares of stock and other securities,
property, cash, or any combination thereof receivable upon
such reclassification, change, consolidation, or merger by a
holder of the number of Warrant Shares for which this Warrant
might have been exercised immediately prior to such
reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable
to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall
similarly apply to successive reclassifications and changes of
shares of Common Stock and to successive consolidations,
mergers, sales, leases, or conveyances.
SECTION 7 NOTICE OF CERTAIN EVENTS.
In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution
(other than regularly scheduled cash dividends which are not in a
greater amount per share than the most recent such cash dividend) to
all holders of Common Stock; or
(b) to issue any rights, warrants, or other securities to all
holders of Common
<PAGE> 7
Stock entitling them to purchase any additional shares of Common Stock
or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding shares
of Common Stock or any consolidation, merger, sale, lease, or
conveyance of property, as described in Section 6; or
(d) to effect any liquidation, dissolution, or winding-up of the
Company; or
(e) to take any other action which would cause an adjustment to
the Exercise Price per Warrant Share;
then, and in any one or more of such cases, the Company shall give written
notice thereof by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least 15
days prior to: (i) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined; (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up; or (iii) the date of such action which would
require an adjustment to the Exercise Price per Warrant Share.
SECTION 8 CHARGES AND TAXES.
The issuance of any shares or other securities upon the
exercise of this Warrant and the delivery of certificates or
other instruments representing such shares or other securities
shall be made without charge to the Holder for any tax or
other charge in respect of such issuance. The Company shall
not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery
of any certificate in a name other than that of the Holder and
the Company shall not be required to issue or deliver any such
certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 9 PERIODIC REPORTS.
The Company agrees that following the date of the Closing of
an initial public offering (the "Initial Public Offering") and
until all the Warrant Shares shall have been sold pursuant to
Rule 144 under the Securities Act, it shall keep current in
filing all reports, statements, and other materials required
to be filed with the Commission to permit holders of the
Warrant Shares to sell such securities under Rule 144 under
the Securities Act.
<PAGE> 8
SECTION 10 LEGEND.
Until sold pursuant to the provisions of Rule 144 or otherwise
registered under the Securities Act, the Warrant Shares issued
on exercise of the Warrants shall be subject to a stop
transfer order and the certificate or certificates
representing the Warrant Shares shall bear the following
legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THE SECURITIES, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR APPLICABLE STATE SECURITIES LAWS.
SECTION 11 LOSS; THEFT; DESTRUCTION; MUTILATION.
Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction, or mutilation of any Warrant (and
upon surrender of any Warrant if mutilated), and upon receipt
by the Company of reasonably satisfactory indemnification, the
Company shall execute and deliver to the Holder thereof a new
Warrant of like date, tenor, and denomination.
SECTION 12 STOCKHOLDER RIGHTS.
The Holder of any Warrant shall not have, solely on account of
such status, any rights of a stockholder of the Company,
either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company,
except as provided in this Warrant.
SECTION 13 GOVERNING LAW.
This Warrant shall be construed in accordance with the laws of
the State of New York applicable to contracts made and
performed within such State, without regard to principles of
conflicts of law.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first above written.
<PAGE> 9
NOUVEAU INTERNATIONAL, INC.
BY:
------------------------------
NAME:
TITLE:
[Seal]
- ----------------------
Secretary
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns, and
transfers unto _________________ a Warrant to purchase __________
shares of Common Stock, without par value, of Nouveau International,
Inc., a Delaware corporation (the "Company"), and does hereby
irrevocably constitute and appoint ___________ attorney to transfer
such Warrant on the books of the Company, with full power of
substitution.
Dated:
-----------------
Signature
-----------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
ELECTION TO EXERCISE
To: Nouveau International, Inc.
The undersigned hereby exercises his, her, or its rights to purchase
shares of Common Stock, without par value ("the Common Stock"), of
Nouveau International, Inc., a Delaware corporation (the "Company"),
covered by the within Warrant and tenders payment herewith in the
amount of $_____ in accordance with the terms thereof, and requests
that certificates for the securities
<PAGE> 10
constituting such shares of Common Stock be issued in the name of, and
delivered to:
(Print Name, Address, and Social
Security or Tax Identification Number)
and, if such number of shares of Common Stock shall not constitute all such
shares of Common Stock covered by the within Warrant, that a new Warrant for
the balance of the shares of Common Stock covered by the within Warrant shall
be registered in the name of, and delivered to, the undersigned at the address
stated below.
Dated: Name
------------------
(Print)
Address:
------------------------
(Signature)
<PAGE> 1
EXHIBIT 21
Name Jurisdiction
---- ------------
Nouveau International, Inc. Pennsylvania
Nouveau Food, Inc. Pennsylvania
Nouveau Vend International, Inc. Pennsylvania
Nouveau Equities, Inc. Delaware
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 376,971
<SECURITIES> 0
<RECEIVABLES> 22,083
<ALLOWANCES> 0
<INVENTORY> 3,174,659
<CURRENT-ASSETS> 3,968,694
<PP&E> 262,239
<DEPRECIATION> 144,989
<TOTAL-ASSETS> 4,595,560
<CURRENT-LIABILITIES> 1,931,289
<BONDS> 0
0
0
<COMMON> 389,714
<OTHER-SE> 1,538,914
<TOTAL-LIABILITY-AND-EQUITY> 4,595,560
<SALES> 245,313
<TOTAL-REVENUES> 245,313
<CGS> 224,282
<TOTAL-COSTS> 259,121
<OTHER-EXPENSES> 618,398
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,352
<INCOME-PRETAX> 5,286,378
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,286,378
<DISCONTINUED> 0
<EXTRAORDINARY> 2,307,606
<CHANGES> 0
<NET-INCOME> 7,593,984
<EPS-PRIMARY> 3.45
<EPS-DILUTED> .76
</TABLE>
