SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 15, 1999
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FBR Capital Corporation
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(Exact name of registrant as specified in its charter)
Nevada 33-58694 13-3465289
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
20 East University, Suite 304, Tempe, Arizona 85281
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 967-5800
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14988 N. 78th Way, Suite 203, Scottsdale, AZ 85260
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(Former name or former address, if changed since last report.)
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ITEM 1. CHANGE OF CONTROL
Effective April 15, 1999, FBR Capital Corporation ("FBR" or the "Company")
acquired 90.17% (8,398,834 shares) of the outstanding capital stock of Vitrix
Incorporated ("Vitrix"), a privately held Arizona corporation (the
"Acquisition"). The Acquisition was consummated in accordance with the terms of
an Exchange Agreement, dated April 15, 1999, by and among FBR, Vitrix and
certain of the Vitrix shareholders who agreed to participate in the Acquisition
(the "Exchange Agreement").
Under the terms of the Exchange Agreement, upon consummation of the
Acquisition each outstanding share of Vitrix common stock (held by a
participating Vitrix shareholder) was converted into the right to receive a
combination of .9224 shares of FBR common stock ("FBR Common Stock") and 1.0736
shares of Series B Convertible Preferred Stock of FBR ("Preferred Stock"). Each
share of Preferred Stock is automatically convertible into one share of FBR
Common Stock at such time as FBR has the authorized capital to issue such
shares. The aggregate consideration paid in the Acquisition was 7,747,084 shares
of FBR common stock and 9,016,988 shares of Preferred Stock (collectively, the
"Shares"). The Exchange Agreement also provided for the assumption of
outstanding options and warrants to purchase an aggregate of 1,122,000 shares of
Vitrix common stock, which will be converted into options and warrants to
purchase FBR Common Stock, subject to adjustment for the appropriate exchange
ratio.
Giving effect to the issuance of the Shares, the participating Vitrix
shareholders own approximately 78.3% of the outstanding shares of FBR Common
Stock (assuming conversion of the Preferred Stock into FBR Common Stock) and the
current FBR shareholders own the remaining 21.7% of the outstanding FBR shares.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
See the discussion above for a description of FBR's acquisition of Vitrix
common stock. Set forth below is a brief overview of the business of Vitrix
Incorporated ("Vitrix" or the "Company").
BUSINESS
Vitrix was incorporated in 1996 as an Arizona corporation. The Company
designs, develops, manufactures and markets a line of time and labor management
hardware and software products targeting small to medium-sized companies of up
to 2,000 employees. The Company's products are designed to improve productivity
by automating collection of time and attendance data, staff scheduling and
management of labor resources. The Company markets its products through a
nationwide reseller network and directly to end users. Direct end-users purchase
products through the Company's sales representatives or through the Internet at
the Vitrix Online Store.
MARKET
The Company markets its products to small and medium sized companies in
markets in the United States and foreign countries. The Company is actively
engaged in development of advanced products which are applicable to enterprise
environments. The Company believes that the market for time and labor management
products consists of the following three segments:
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SMALL BUSINESSES - Comprised of companies with fewer than 20 employees and
only a single administrator who performs time sheet edits and prepares
employee hours for payroll.
MID-SIZED BUSINESSES - Comprised of companies with 20 to 500 employees.
These companies normally have two or more administrators who perform time
sheet edits and prepare employee hours from a single office. In many cases
multiple stations are necessary for clocking in and out, however, all data
is administered from a central location.
ENTERPRISE BUSINESSES -Enterprise businesses generally have over 500
employees with multiple satellite offices, each of which having one or more
administrators. Payrolls are performed at a central or headquarter office.
An enterprise customer is analogous to a collection of Mid-Sized Businesses
requiring a central location to collect and store data.
The Company believes there are over 2.4 million businesses that fall into
the small to mid-sized businesses market segment. According to industry
statistics, approximately 80% of the businesses that fall into these two market
segments could benefit from the automation of the collection of time and
attendance. At an average solution cost of approximately $1,200, the small to
mid-sized market represents approximately $2.3 billion in potential sales.
PRODUCTS AND SERVICES
The Company's flagship product, HourTrack 98, is an internally developed,
proprietary software application designed to maintain and automate the process
of collecting time sheet information and assist management in enhancing employer
productivity in the workplace. Hour Track 98 also automatically accrues
vacation, sick and personal time, and replaces the traditional punch clock with
a fully automated system designed to save employer's up to $500 annually per
employee, based on estimates of industry experts.
The Company's products offer users three types of solutions:
SOFTWARE ONLY SOLUTIONS. The Company's software solution, HourTrack 98, is
designed for environments in which all employees have access to a personal
computer. Clocking in and out is performed using a Windows 95, 98 or NT computer
running HourTrack 98. This software solution is intended to provide users with
high value due to its low cost and ease of use.
The primary features of HourTrack 98 include time tracking, benefit
tracking, job tracking, human resource functionality, employee scheduling,
messaging, reporting and the import/exporting of data. HourTrack 98 is currently
available in two editions:
HOURTRACK 98 SMALL BUSINESS EDITION (SBE) - This version includes all of
the main features of the software and is designed for a single
administrator environment in a small business.
HOURTRACK 98 PROFESSIONAL EDITION (PRO) - This version contains all the SBE
features and adds individualized security, audit trails and rules based
benefit accruals. HourTrack 98 PRO is for use in a multi-user environment
where individual security is important.
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Both editions of HourTrack are available as stand alone solutions or
bundled in a "kit" format as the QuickSwipe Kit or QuickTouch Kit.
BADGE READER SOLUTIONS. Generally, when there are a large number of hourly
employees or if individuals do not have PC access, the work environment calls
for a badge reading solution. The Company offers four badge reader options which
meet demanding business needs, from high traffic office areas to shop floors.
Included in these options is the QuickSwipe kit, a comprehensive package
containing software, a badge reader, cables and the badge cards which is
necessary to implement a time and attendance system. Vitrix offers four
different badge systems (Datalog, ATS E Series, ATS 3000, and ATS 2000), each of
which is available as a QuickSwipe Kit to make the implementation of a time and
attendance system easier.
BIOMETIC SOLUTIONS. Companies lose tens of thousands of dollars each year
as a result of employees clocking in for one another, often referred to as
"buddy-punching." The Company's Biometic solutions are designed to eliminate
this problem by ensuring that the person clocking in or out is the actual person
being clocked in or out. Vitrix offers two such hardware options which include
fingerprint verification and two-finger geometry (Secure Touch and Secure Scan).
The following table summarizes the Company's product development efforts
since its inception.
August 5, 1996 HourTrack V1.0 released.
December 6, 1996 HourTrack V2.0 released.
March 5, 1997 HourTrack 97 V2.5 released
October 24, 1997 HourTrack 98 V3.0 received Microsoft logo certification
for Windows 95/NT by independent 3rd party laboratory,
VeriTest.
November 24, 1997 HourTrack 98 V3.0 released.
February 16, 1998 Vitrix obtains Microsoft Certified Solution Provider
status.
May 29, 1998 Visual Employee Scheduler V1.0 released.
June 15, 1998 HourTrack 98 SBE and PRO V3.5 released.
SERVICES AND SUPPORT
Vitrix maintains a professional service and technical support organization
which provides a suite of maintenance, professional and educational services.
These services are designed to support the Company's customers throughout the
product life cycle. Maintenance service options are delivered through the
Company's centralized support operation or through local service personnel. The
Company's professional services include implementation support, technical and
business consulting as well as system integration and optimization. The
Company's educational services offer a full range of curriculums which are
delivered through local training at Vitrix headquarters or via computer based
training courses. When necessary, the Company may also provide software
customization services to meet any unique customer requirements.
SALES
The Company offers its products through a nationwide reseller network and
directly to end users via the Internet at the Vitrix Online Store or by
contacting a Vitrix sales representative.
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INSIDE SALES. Vitrix sales representatives generally provide presales
technical and pricing information to potential customers. In addition, from time
to time sales representatives present Vitrix solutions at a customer's facility.
Marketing materials, sample CDs and technical documents are normally provided by
the Company's inside sales staff to customers who wish to research the best
solutions.
VITRIX ONLINE STORE. The Vitrix Online Store, which commenced operation on
the Internet in August 1998, provides customers with the option to purchase
products online. By visiting the Company's web site, http://store.vitrix.com,
any Vitrix product can be purchased directly online from anywhere in the world,
24 hours a day, 7 days a week. The Online Store enables the Company to meet the
needs of existing customers looking for accessories and international customers
who, due to time zone differences, are unable to speak directly with a Vitrix
sales representative.
CUSTOMERS
End-users of the Company's products include companies of all sizes from the
manufacturing, service, public and private sectors. The Company believes that
the dollar amount of backlog is not material to an understanding of its
business. Although the Company has contracts to supply systems to certain
customers over an extended period of time, substantially all of the Company's
product revenue in each quarter results from orders received in that quarter.
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PRODUCT DEVELOPMENT
The Company's product development efforts are focused on enhancing and
increasing the performance of its existing products and developing new products
and interfaces to third party products on a timely basis for the increasingly
sophisticated needs of its customers. During fiscal 1998, 1997 and 1996, the
Company's engineering, research and development expenses were $111,000, $75,000
and $60,000, respectively. The Company intends to continue to commit resources
to enhance and extend its product lines and develop interfaces to third party
products. Although the Company is continually seeking to further enhance its
product offerings and to develop new products and interfaces, there can be no
assurance that these efforts will succeed, or that, if successful, such product
enhancements or new products will achieve widespread market acceptance, or that
the Company's competitors will not develop and market products which are
superior to the Company's products or achieve greater market acceptance. The
Company also depends upon the reliability and viability of a variety of software
development tools owned by third parties to develop its products. If these tools
are inadequate or not properly supported, the Company's ability to release
competitive products in a timely manner could be adversely impacted.
The Company is currently developing an Enterprise-class software solution
designed to meet the time and attendance needs of Enterprise Businesses. The
Company believes that this product will be available for release in the second
half of the calendar year 1999, although no assurance can be given that the
Company will be able to meet this schedule.
COMPETITION
The Company provides time and attendance, data collection and labor
management solutions that enables businesses to optimize their labor resources.
The labor management industry is highly competitive. Competition is increasing
as competitors in related industries, such as human resources management,
payroll processing and employee resource planning ("ERP") enter the time and
attendance market. Advances in software development tools have accelerated the
software development process and, therefore, can allow competitors to penetrate
certain of the Company's markets. Although the Company believes it has certain
technological and other advantages over its current competitors, maintaining
those advantages will require continued investment by the Company in research
and development and marketing and sales programs. There can be no assurance that
the Company will have sufficient resources to make such investments or be able
to achieve the technological advances necessary to maintain its competitive
advantages. Increased competition could adversely affect the Company's operating
results through price reductions and/or loss of market share.
The Company competes primarily on the basis of price/performance, quality,
reliability and customer service. In the time and attendance market, the Company
competes against firms that sell automated time and attendance products to many
industries, against firms that focus on specific industries, and against firms
selling related products, such as payroll processing, human resources
management, or ERP systems. Many of the Company's competitors, such as Kronos
Corporation, Stromberg (formerly known as Jason Data Systems) and Time America,
are larger and have access to significantly greater financial resources than the
Company. Competitive market conditions could have a material adverse effect on
the Company's business, financial condition and results of operations.
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PROPRIETARY RIGHTS
The Company relies on a combination of trademarks, trade secret law and
contracts to protect its proprietary technology.
The Company generally provides software products to end-users under
non-exclusive shrink-wrap licenses or under signed licenses, both of which may
be terminated by Vitrix if the end-user breaches the terms of the license. These
licenses generally require that the software be used only internally subject to
certain limitations, such as the number of employees, simultaneous users,
computer model and serial number, features and/or terminals for which the
end-user has aid the required license fee. The Company authorizes its resellers
to sublicense software products to end-users under similar terms. In certain
circumstances, the Company also makes master software licenses available to
end-users which permit either a specified limited number of copies or an
unlimited number of copies of the software to be made for internal use. Some
customers license software products under individually negotiated terms.
Despite these precautions, it may be possible to copy or otherwise obtain
and use the Company's products or technology without authorization. In addition,
effective copyright and trade secret protection may be unavailable or limited in
certain foreign countries.
MANUFACTURING AND SOURCES OF SUPPLY
The duplication of the Company's software and the printing of documentation
are outsourced to suppliers. The Company currently has four suppliers who have
been certified to the Company's manufacturing specifications to perform the
software duplication process. Although most of the parts and components included
within the Company's products are available from multiple suppliers, certain
parts and components are purchased from single suppliers. The Company has chosen
to source these items from single suppliers because it believes that the
supplier chosen is able to consistently provide the Company with the highest
quality product at a competitive price on a timely basis. While the Company has
to date been able to obtain adequate supplies of these parts and components, the
Company's inability to transition to alternate sources on a timely basis if and
as required in the future could result in delays or reductions in product
shipments which could have a material adverse effect on the Company's operating
results.
EMPLOYEES
As of March 31, 1999, the Company had ten employees. None of the Company's
employees is represented by a union or other collective bargaining agreement,
and the Company considers its relations with its employees to be good. The
Company has encountered intense competition for experienced technical personnel
for product development, technical support and sales and expects such
competition to continue in the future. Any inability to attract and retain a
sufficient number of qualified technical personnel could adversely affect the
Company's ability to produce, support and sell products in a timely manner.
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EXECUTIVE OFFICERS AND DIRECTORS
Information concerning the Company's current directors and executive
officers of the Company and their ages as of April 9, 1999, are as follows:
Name Age Position
- --------- --- --------
Michael A. Wolf 46 Chairman of the Board
Philip R. Shumway 52 President, Chief Executive Officer and Director
Todd P. Belfer 31 Director
Lise Lambert 42 Director
Hamid Shojaee 25 Director
Bahan Sadegh 25 Director
MICHAEL A. WOLF has served as Chairman of the Board of Directors of the
Company since March 1999 and as a director of the Company since June 1997. Mr.
Wolf co-founded VIASOFT, served as its Executive Vice President and Chief
Technology Officer and as a director from which he retired in August 1997. Mr.
Wolf is a member of the Board of Directors of the Arizona Software Association.
Mr. Wolf serves on the Boards or Advisory Boards of several other technology
related companies. Mr. Wolf earned a Bachelor of Science in Quantitative Systems
from Arizona State University.
PHILIP R. SHUMWAY has served as President and Chief Executive Officer and a
director of the Company since March 1999. Prior to assuming his current
position, Mr. Shumway served as Director of Strategic Accounts in the Channel
Sales Division for Unisys Corporation from 1997 until 1998. In 1996, Mr. Shumway
founded Performance Marketing Group, Inc. and served as its President until
1997. Mr. Shumway also served as Director of Sales Operations for the U.S. Sales
Division of Apple Computer, Inc. from 1994 until 1996. From 1984 until 1994, Mr.
Shumway held other sales and marketing management positions with Apple Computer,
Inc. Mr. Shumway earned a Masters in Business Administration from the University
of Northern Colorado and a Bachelor of Science in Business Administration from
Bowling Green State University.
TODD P. BELFER has served as a director of the Company since April 1996,
and Chairman of the Board of Directors of the Company from April 1996 until
March 1999. Mr. Belfer also is currently serving as President and Chairman of
the Board of M.D. Labs, Incorporated, a private Arizona based company, where he
has been employed since February 1994. Mr. Belfer also co-founded Employee
Solutions, Inc. in May of 1990 and served as its Executive Vice President and as
a director from 1991 to 1996. Mr. Belfer earned a Bachelor of Science in Finance
and Economics from the University of Arizona in 1989.
LISE LAMBERT has served as a director of the Company since January 1998.
Ms. Lambert is currently President of Relevant, Inc., a consulting company that
serves the computer software industry. Ms. Lambert has been employed by
Relevant, Inc. since 1996. In 1986, Ms. Lambert co-founded Mastersoft, Inc.,
where she served as Vice President of Marketing from 1986 to 1990 and Senior
Vice President of Sales from 1990 to 1995. Ms. Lambert has held various sales
and management positions including Product Manager at MicroAge, Inc. Ms. Lambert
currently serves as director for several software companies. Ms. Lambert earned
a Bachelor of Arts in education and music, and a Masters degree in deafness and
audiology from Smith College.
BAHAN SADEGH has served as a director of the Company since 1996. Mr. Sadegh
co-founded the Company in 1996. Mr. Sadegh currently serves as Chief Technology
Officer of the Company, where he has been employed since 1996. Mr. Sadegh served
as an engineer consultant for Brouwer, Palmer and Associates from 1992 until
1995. Mr. Sadegh is completing a degree in mechanical engineering and business
administration at Arizona State University.
HAMID SHOJAEE has served as a director of the Company since April 1996. Mr.
Shojaee co-founded the Company in 1996, served as its President and Chief
Executive Officer from June 1998 until March 1999. Mr. Shojaee currently serves
as Information Technology Director for the Company. Mr. Shojaee formerly owned
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and operated Power Computing Solutions, a computer consulting business, from
August 1993 until December 1995. Mr. Shojaee served as a network administrator
for International Business Machines Corporation from January 1992 until December
1993. Mr. Shojaee is a Microsoft Certified Systems Engineer. Mr. Shojaee
attended Arizona State University.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Pursuant to Item 7(a)(4) of Form 8-K, any required financial statements of
Vitrix, and any required financial information will be filed pursuant to
an amendment to the Form 8-K as soon as practicable (but no later than 60
days following the date on which this report was required to have been
filed).
(b) PRO FORMA FINANCIAL INFORMATION
See (a) above.
(c) EXHIBITS.
EXHIBIT DESCRIPTION METHOD OF FILING
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No. 2 Exchange Agreement dated as of Filed herewith
April 15, 1999 by and between FBR
Capital Corporation, Vitrix
Incorporated and certain Vitrix
shareholders who elected to
participate in the exchange.
(The text of all Schedules and
Exhibits to the aforementioned
Exchange Agreement have been
omitted in accordance with Item
601(b)(2) of the Regulation S-K,
and the Company agrees to furnish
supplementally to the Commission
upon request a copy of any omitted
schedule or exhibit)
No. 99 Press Release Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FBR CAPITAL CORPORATION
Date: April 15, 1999 By /s/ Philip R. Shumway
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Philip R. Shumway
President and Chief Executive Officer
FBR CAPITAL CORPORATION - VITRIX INCORPORATED
EXCHANGE AGREEMENT
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TABLE OF CONTENTS
FBR CAPITAL CORPORATION - VITRIX, INCORPORATED.............................. i
EXCHANGE AGREEMENT.......................................................... i
1. RECITALS........................................................... 1
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF VITRIX AND
OF THE SHAREHOLDERS................................................ 1
2.1 ORGANIZATION AND GOOD STANDING OF VITRIX........................... 2
2.2 NO VITRIX SUBSIDIARY............................................... 2
2.3 DISCLOSURE BY VITRIX............................................... 2
2.4 COMPLIANCE WITH LAW................................................ 2
2.5 LICENSES, PERMITS AND FRANCHISES................................... 2
2.6 VITRIX TAX LIABILITIES............................................. 3
2.7 VITRIX LITIGATION AND CLAIMS....................................... 3
2.8 VITRIX CONTRACT AND OTHER INSTRUMENTS.............................. 3
2.9 VITRIX PATENTS, TRADEMARKS, ETC.................................... 4
2.10 VITRIX QUESTIONABLE PAYMENTS....................................... 4
2.11 AUTHORITY.......................................................... 5
2.12 NON-DISTRIBUTIVE INTENT............................................ 6
2.13 INFORMATION OF FBR................................................. 6
2.14 DISCLOSURE......................................................... 6
2.15 CAPITALIZATION OF VITRIX........................................... 6
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF FBR.................. 6
3.1 ORGANIZATION AND GOOD STANDING OF FBR.............................. 6
3.2 NO FBR SUBSIDIARIES................................................ 7
3.3 AUTHORITY.......................................................... 7
3.4 COMPLIANCE WITH LAW................................................ 7
3.5 OTC BULLETIN BOARD LISTING ("OTCBB")............................... 7
3.6 VALIDITY OF FBR SHARES............................................. 8
3.7 DISCLOSURE DOCUMENTS............................................... 8
3.8 CAPITALIZATION OF FBR.............................................. 8
3.9 ABSENCE OF CHANGE.................................................. 8
3.10 FBR TAX LIABILITIES................................................ 9
3.11 FBR LITIGATION AND CLAIMS.......................................... 9
3.12 FBR CONTRACT AND OTHER INSTRUMENTS................................. 10
3.13 LICENSES, PERMITS AND FRANCHISES................................... 11
3.14 FBR EMPLOYEE BENEFITS.............................................. 11
3.15 FBR QUESTIONABLE PAYMENTS.......................................... 11
3.16 FBR NON-DISTRIBUTIVE INTENT........................................ 12
3.17 FULL DISCLOSURE.................................................... 12
3.18 BANK ACCOUNTS...................................................... 12
3.19 SEC FILINGS........................................................ 12
4. EXCHANGE OF SHARES................................................. 12
4.1 PROVISIONS FOR EXCHANGE............................................ 12
4.2 THE CLOSING........................................................ 13
5. CONDITIONS TO THE OBLIGATIONS OF FBR............................... 13
5.1 ACCURACY OF REPRESENTATIONS AND FULFILLMENT OF CONDITIONS.......... 13
5.2 OPINION OF COUNSEL................................................. 13
5.3 OTHER CLOSING DOCUMENTS............................................ 15
5.4 REVIEW OF PROCEEDINGS.............................................. 15
5.5 NO LITIGATION...................................................... 15
5.6 NO GOVERNMENTAL ACTION............................................. 15
5.7 CONTRACTUAL CONSENTS............................................... 16
5.8 PRIOR EQUITY FINANCING............................................. 16
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5.9 MINIMUM SHAREHOLDER PARTICIPATION.................................. 16
5.10 INTEREST OF CURRENT FBR COMMON STOCK OUTSTANDING................... 16
6. CONDITIONS TO THE OBLIGATIONS OF VITRIX AND THE SHAREHOLDERS....... 16
6.1 ACCURACY OF REPRESENTATIONS AND FULFILLMENT OF CONDITIONS.......... 16
6.2 OPINION OF COUNSEL................................................. 17
6.3 MINIMUM FBR CASH................................................... 19
6.4 SETTLEMENT OF OUTSTANDING NOTE..................................... 19
6.5 DIRECTOR RESIGNATIONS.............................................. 19
6.6 RELEASES........................................................... 19
6.7 REVIEW OF PROCEEDINGS.............................................. 19
6.8 OTHER CLOSING DOCUMENTS............................................ 19
6.9 NO LITIGATION...................................................... 19
6.10 NO GOVERNMENTAL ACTION............................................. 20
6.11 CONTRACTUAL CONSENTS............................................... 20
7. COVENANTS OF VITRIX AND THE SHAREHOLDERS........................... 20
7.1 ACCESS............................................................. 20
7.2 CONDUCT OF BUSINESS................................................ 20
7.3 ADVICE OF CHANGES.................................................. 21
8. COVENANTS OF FBR................................................... 21
8.1 ACCESS............................................................. 21
8.2 CONDUCT OF BUSINESS................................................ 21
8.3 ADVICE OF CHANGES.................................................. 22
8.4 PUBLIC STATEMENTS.................................................. 22
8.5 CAPITAL STRUCTURE.................................................. 22
9. MISCELLANEOUS...................................................... 22
9.1 NO BROKERS......................................................... 22
9.2 FURTHER ACTIONS.................................................... 22
9.3 REMEDIES........................................................... 23
9.4 SURVIVAL........................................................... 23
9.5 KNOWLEDGE OF VITRIX SHAREHOLDERS................................... 23
9.6 APPOINTMENT OF SHAREHOLDERS' AGENT................................. 23
9.7 MODIFICATION....................................................... 24
9.8 NOTICES............................................................ 24
9.9 NO WAIVER.......................................................... 24
9.10 SEVERAL OBLIGATIONS................................................ 24
9.11 BINDING EFFECT..................................................... 24
9.12 NO THIRD PARTY BENEFICIARIES....................................... 25
9.13 SEVERABILITY....................................................... 25
9.14 HEADINGS........................................................... 25
9.15 COUNTERPARTS....................................................... 25
9.16 GOVERNING LAW...................................................... 25
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The parties to this Agreement, dated as of April 15, 1999, are FBR Capital
Corporation ("FBR"), a Nevada corporation having its principal place of business
at 14988 N. 78th Way, Suite 203, Scottsdale, Arizona 85260; Vitrix Incorporated
("Vitrix"), an Arizona corporation having its principal place of business at 20
East University, Suite 304, Tempe, Arizona 85281; and each of the additional
parties (collectively "Shareholders" and individually "Shareholder"), severally,
whose respective names and addresses are shown with the signatures hereon. The
parties have agreed as follows.
1. RECITALS
The Shareholders are each shareholders of Vitrix. The purpose of this
Agreement is to provide for the acquisition by FBR of at least ninety percent
(90%) of the capital stock of Vitrix outstanding at the Closing (defined in
paragraph 4.2 hereof) in exchange for the issuance to the Shareholders, of a
certain number of shares of the Common Stock, $.005 par value, of FBR and of a
specified number of shares of the Series B Convertible Preferred Stock of FBR
(together, "FBR Shares") in accordance with the provisions of this Agreement. It
is the intention of the parties that as soon as practicable after the Closing,
Vitrix shall be merged into FBR or a wholly-owned subsidiary of FBR, with any
remaining outstanding shares of Vitrix converted in such merger to FBR Shares on
the same basis as if such Vitrix shares were exchanged hereunder. For the
purpose of determining the number of FBR Shares to be issued to the Vitrix
Shareholders in this transaction, no effect is given to capital stock issuable
upon the exercise of the currently outstanding and unexercised stock purchase
warrants or options of either FBR or of Vitrix. It is, however, contemplated
that after the Closing of this transaction, (i) all warrants and options for the
purchase of Vitrix capital stock then outstanding will be converted, by due
action of the Board of Directors of FBR as then constituted, into warrants and
options to purchase such number of shares of FBR common stock as shall be
determined on the same basis as the ratio provided in this Agreement for the
exchange of Vitrix Common Stock for FBR Common Stock and (ii) the exercise price
thereunder shall be determined by dividing the aggregate exercise price under
the Vitrix warrants and options by the resulting number of shares of FBR Common
Stock.
This is intended to be a tax-free transaction under the Internal Revenue
Code and the regulations promulgated thereunder in which transaction Vitrix
shall become the subsidiary of FBR.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF VITRIX AND OF THE SHAREHOLDERS
As an inducement to FBR to enter into and to perform under this Agreement,
Vitrix and each Shareholder severally represents, warrants and agrees as
follows, it being understood that each Shareholder, is making such
representations and warranties only on the basis of his or its own respective
knowledge (as defined in Section 9.5) and only with respect to Vitrix and such
Shareholder. The representations and warranties are true in all material
respects as of the date hereof and will be true and correct in all material
respects on and as of the Closing Date with the same effect as though made on
such date.
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2.1 ORGANIZATION AND GOOD STANDING OF VITRIX.
Vitrix is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona, with full power and authority
to own its property and conduct its business as it is now being and as it is
proposed to be conducted and it is qualified to do business in each other
jurisdiction in which qualification is necessary for enforcement of any material
legal rights.
2.2 NO VITRIX SUBSIDIARY.
Vitrix has no subsidiary or affiliate corporation and owns no interest in
any other enterprise (whether or not the enterprise is a corporation).
2.3 DISCLOSURE BY VITRIX.
Attached hereto as Schedule 2.3 is a copy of the SEC Form 8-K, with respect
to the transactions contemplated hereunder to be filed by FBR following the
Closing, under the Securities Exchange Act of 1934, including a description of
the financial condition, business and affairs of Vitrix. Schedule 2.3 is in
compliance in every respect with the requirements of SEC Form 8-K and with the
applicable securities laws generally, and includes all of the exhibits required
to be filed therewith. To the knowledge of Vitrix and the Shareholders, the said
description does not contain any untrue statement of any material fact nor does
it omit any statement of fact necessary to make the statements made therein not
misleading. There is no fact known to Vitrix or any Shareholder which has not
been disclosed in this Agreement or any Schedule hereto, which materially
adversely affects, or which may in the future (as far as Vitrix or any
Shareholder can reasonably foresee) materially adversely affect, the financial
condition, results of operations, business, properties, assets, liabilities, or
future prospects of Vitrix; provided, however, that no representation is made
herein as to political or economic matters of general applicability, or the
effect of any future technological developments by competitors of Vitrix which
are not currently known to Vitrix or the Shareholders.
2.4 COMPLIANCE WITH LAW.
Except as described in Schedule 2.4 attached hereto, Vitrix is in
compliance with all requirements (including those relating to environmental
matters) of federal, state and local law, and all requirements of all
governmental bodies and agencies having jurisdiction over it or its assets and
properties and all premises occupied by it, except where failure to comply would
not have a material adverse effect. Without limiting the foregoing, Vitrix has
properly filed all reports, paid all monies and obtained all licenses, permits,
certificates and authorizations needed or required for the conduct of its
business and the use of its assets and properties and the premises occupied by
it and is in compliance in all material respects with all conditions,
restrictions and provisions of any of the foregoing, except where failure to
comply would not have a material adverse effect. Vitrix has not received any
notice from any federal, state or local authority or any insurance or inspection
body that any of its assets, properties, facilities, equipment or business
procedures or practices or its assets and properties fails to comply with any
applicable law, ordinance, regulation, building or zoning law or requirement of
any public authority or body.
2.5 LICENSES, PERMITS AND FRANCHISES.
Vitrix has, and will continue to have as a subsidiary of FBR, the full
right to conduct its business as it is now and as it is proposed to be conducted
after the Closing hereunder free of any rights or equities in any other person.
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Without limiting the generality of the foregoing, Vitrix has, and will continue
to have as a subsidiary of FBR, all of the licenses, permits and franchises
necessary to the conduct of such business.
2.6 VITRIX TAX LIABILITIES.
Except as disclosed in Schedule 2.6 attached hereto, Vitrix has no
liability of any nature, accrued or contingent, including, without limitation,
liabilities for federal, state, local, or foreign taxes and liabilities to
customers, or suppliers, other than the following:
(a) Liabilities for which full provision has been made on the latest
balance sheet ("Last Vitrix Balance Sheet") which is a part of
Schedule 2.6 hereof; or
(b) Other liabilities arising since the Last Vitrix Balance Sheet Date and
prior to the Closing (as hereinbelow defined) in the ordinary course
of business which are not inconsistent with the representations and
warranties of Vitrix or any Shareholder or of any other provision of
this Agreement.
Without limiting the generality of the foregoing, the amounts set up as
provisions for taxes on the Last Vitrix Balance Sheet are sufficient for all
accrued and unpaid federal, state, local, and foreign taxes of Vitrix, whether
or not due and whether or not disputed, under tax laws as in effect on the Last
Balance Sheet Date or now in effect, for the period ended on that date and for
all fiscal years prior thereto. Vitrix has filed all federal state, local, and
foreign tax returns required to be filed by it, and has paid (or has established
on the Last Vitrix Balance Sheet a reserve for) all taxes, assessments, and
other governmental charges payable or remittable by it or levied upon it or its
properties, assets, income, or franchises which are due and payable.
2.7 VITRIX LITIGATION AND CLAIMS.
Except as disclosed in Schedule 2.7 attached hereto, there is no
litigation, arbitration, claim, governmental or other proceeding (formal or
informal) or investigation pending or threatened (or any basis therefor known to
Vitrix or any Shareholder) with respect to Vitrix, any Shareholder (to the
extent material to this Agreement or the transaction contemplated hereby) or any
of its or his, to the extent material to this Agreement, business, properties,
or assets. Vitrix is not affected by any present or threatened strike or other
labor disturbance nor, to the knowledge of Vitrix or any Shareholder, is any
union attempting to represent any employee of Vitrix as collective bargaining
agent. Vitrix is not, in any material respect, in violation of, or in default
with respect to, any law, rule, regulation, order, judgment, or decree; nor is
Vitrix or any Shareholder required to take any specific affirmative action,
outside of the ordinary course, in order to avoid such a violation or default.
2.8 VITRIX CONTRACT AND OTHER INSTRUMENTS.
Schedule 2.8 attached hereto describes each material contract, agreement,
instrument, lease, license or understanding (collectively referred to as
"Material Contracts") to which Vitrix is a party or by which it is bound which
is not listed on any other Schedule to this Agreement. Vitrix has furnished to
FBR:
(a) The certificate of incorporation (or other charter document) and
by-laws of Vitrix and all amendments thereto, as presently in effect,
certified by the Secretary of the corporation, and
(b) True and correct copies of all Material Contracts referred to on
Schedule 2.8, initialed by the chief executive officer of Vitrix.
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Neither Vitrix or any Shareholder, nor (to the knowledge of Vitrix or any
Shareholder) any other party to any of the Material Contracts is now or expects
in the future to be in violation or breach of, or in default with respect to
complying with, any material provision thereof, and each Material Contract is in
full force and is the legal, valid, and binding obligation of the parties
thereto and is enforceable as to them in accordance with its terms (subject to
applicable bankruptcy, insolvency, other laws affecting the enforceability of
creditors' rights generally, and to the discretion of the court with respect to
the granting of equitable remedies). Each Material Contract is a valid and
continuing contract; neither Vitrix nor any other party to such Material
Contract has given notice of termination or taken any action inconsistent with
the continuance of such arrangement or understanding, and the execution,
delivery, and performance of this Agreement will not prejudice any such
arrangement or understanding in any way. Vitrix enjoys peaceful and undisturbed
possession under all leases and licenses under which it is operating. Vitrix is
not a party to or bound by any Material Contract or subject to any charter or
other restriction, which has had, or (to the knowledge of Vitrix or any
Shareholder) could reasonably be expected to in the future have, a material
adverse effect on the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of Vitrix or FBR.
Vitrix has not within the last five years engaged in, is not now engaged
in, and does not have any current intention to engage in any transaction with,
or has had within the last five years, has now, or does not have any current
intention to have any Material Contract with, any Shareholder, any director,
officer, or employee of Vitrix, any relative or affiliate of any Shareholder or
of any director, officer, or employee, or any other corporation or enterprise in
which any Shareholder, any director, officer, or employee, or any relative or
affiliate then had or now has a five percent or greater equity or voting or
other substantial interest, other than Material Contracts described and so
specified in Schedule 2.8. The stock ledgers and stock transfer books and the
minute book records of Vitrix relating to all issuances and transfers of stock
by Vitrix, and all proceedings of the shareholders and the Board of Directors
and committees thereof of Vitrix since its incorporation made available to FBR's
counsel are the original stock ledgers and stock transfer books and minute book
records of Vitrix or exact copies thereof.
Vitrix is not in violation or breach of, or in default with respect to, any
term of its certificate of incorporation (or other charter document) or by-laws,
except where such violation, breach, or default would not have a material
adverse effect.
2.9 VITRIX PATENTS, TRADEMARKS, ETC.
Except as disclosed in Schedule 2.9, Vitrix does not own or have pending,
and is not licensed under, any patent, patent application, trademark, trademark
application, trade name, service mark, copyright, franchise, or other intangible
property or asset.
2.10 VITRIX QUESTIONABLE PAYMENTS.
Neither Vitrix, nor any director, officer, agent, employee, shareholder or
other person acting on behalf of Vitrix, has, directly or indirectly:
(a) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political
activity;
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(b) Made any unlawful payment to foreign or domestic government officials
or employees, or to foreign or domestic political parties or
campaigns, from corporate funds;
(c) Violated any provision of the Foreign Corrupt practices Act of 1977;
(d) Established or maintained any unlawful or fund of corporate monies or
other assets;
(e) Made any false or fictitious entry on the records of Vitrix;
(f) Made any bribe, rebate, payoff, influence kickback, or other unlawful
payment;
(g) Given any favor or gift which is not deductible for federal income tax
purposes; or
(h) Made any bribe, kickback, or other payment of a similar or comparable
nature, whether lawful or not, to any person or entity, private or
public, regardless of form, whether in money, property, or services,
to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business
secured or for special concessions already obtained.
2.11 AUTHORITY.
Vitrix and the Shareholders have all requisite power and authority to
execute, deliver, and perform under this Agreement. All necessary corporate
proceedings of Vitrix have been duly taken to authorize the execution, delivery,
and performance of this Agreement by Vitrix. This Agreement has been duly
authorized, executed, and delivered by Vitrix, has been duly executed and
delivered by the Shareholders, is the legal, valid, and binding obligation of
Vitrix and the Shareholders, and is enforceable as to them in accordance with
its terms (subject to applicable bankruptcy, insolvency, other laws affecting
the enforceability of creditors' rights generally, and to the discretion of the
court with respect to granting equitable remedies).
No consent, authorization, approval, order, license, certificate, or permit
of or from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by Vitrix or
any Shareholder for the execution, delivery, or performance of this Agreement by
Vitrix or any Shareholder. The parties shall obtain the required consents of any
party to any Material Contract to which Vitrix or any Shareholder (to the extent
material to this Agreement or the transaction contemplated hereby) is a party,
or to which any of its or his, to the extent material to this Agreement or the
transaction contemplated hereby, properties or assets are subject, that is
required for the execution, delivery, or performance of this Agreement; and the
execution, delivery, and performance of this Agreement will not violate, result
in a breach of, conflict with, or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or call a default under
any Material Contract, or violate or result in a breach of any term of the
certificate of incorporation (or other charter document) or by-laws of Vitrix or
any Shareholder, or to which any of its or his, to the extent material to the
Agreement or the transaction contemplated hereby, operations, business,
properties, or assets are subject, except where such breach, conflict,
termination or default would not have a material adverse effect on Vitrix, the
Agreement or the transaction contemplated hereby.
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Upon the Closing, Vitrix will have good title to all properties and assets
used in the business of Vitrix or owned by Vitrix (except real and other
properties and assets held pursuant to leases or licenses described in Schedule
2.8), free and clear of all liens, mortgages, security interests, pledges,
charges, and encumbrances, (except those described in Schedule 2.8 and except
liens from taxes not yet due and payable).
2.12 NON-DISTRIBUTIVE INTENT.
Each Shareholder is acquiring the FBR Shares to be issued to him or it for
his or its own account and not with a view to the resale or distribution thereof
and with no present intention of distributing the same or selling the same for
distribution. He or it will not sell transfer or otherwise dispose of any of the
FBR Shares in the absence of either an effective registration statement relating
to such transaction under the Securities Act of 1933 and all applicable state
securities laws, or an opinion of counsel, satisfactory to FBR and its counsel,
prior to such proposed transaction, that registration is not required under said
Act or laws and an undertaking by the prospective transferee to be bound by
restrictions on transfer similar to those contained herein.
2.13 INFORMATION OF FBR.
Each of the Shareholders and/or his or its authorized representatives has
received a copy of the FBR documents referred to in paragraph 3.7, and has in
connection with this transaction relied on the information contained therein.
2.14 DISCLOSURE.
No representation or warranty by Vitrix or any Shareholder made in this
Agreement (including the Schedules hereto) contains or on the Closing Date will
contain any untrue statement of a material fact. Neither Vitrix nor any
shareholder is aware of any fact or circumstance which has not been disclosed to
FBR which could reasonably be expected to have a material adverse effect on
Vitrix.
2.15 CAPITALIZATION OF VITRIX.
The authorized capital stock of Vitrix consists of 10,000,000 shares of
Common Stock, without par value of which no more than 9,314,444 shares will be
outstanding immediately prior to the Closing, together with options for the
purchase of not more than 759,000 additional shares of common stock, and
warrants for the purchase of 312,000 additional shares of common stock.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF FBR
As an inducement to Vitrix and the Shareholders to enter into and to
perform under this Agreement, FBR represents, warrants and agrees, which
representations and warranties are true and correct as of the date hereof and
will be true and correct on and as of the Closing Date with the same effect as
though made on such date, as follows:
3.1 ORGANIZATION AND GOOD STANDING OF FBR.
FBR is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, with full power and authority to own its
property and conduct its business as it is now being and as it is proposed to be
conducted and it is qualified to do business in each other jurisdiction in which
qualification is necessary for enforcement of any material legal rights.
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3.2 NO FBR SUBSIDIARIES.
FBR has no subsidiaries.
3.3 AUTHORITY.
FBR has all requisite power and authority to execute, deliver and perform
under this Agreement. All necessary corporate proceedings of FBR have been duly
taken to authorize the execution, delivery and performance of this Agreement by
FBR. This Agreement has been duly authorized, executed and delivered by FBR and
is the legal, valid and binding obligation of FBR and is enforceable against it
in accordance with its terms.
No consent, authorization, approval, order, license, certificate, or permit
of or from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal is required by FBR for the
execution, delivery, or performance of this Agreement by FBR. No consent of any
party to any Material Contract to which FBR is a party, or to which any of its
properties or assets are subject, is required for the execution, delivery, or
performance of this Agreement as is, and the execution, delivery, and
performance of this Agreement will not violate, result in a breach of, conflict
with, or (with or without the giving of notice or the passage of time or both)
entitle any party to terminate or call a default under any Material Contract, or
violate or result in a breach of any term of the certificate of incorporation
(or other charter document) or by-laws of FBR, or to which any of its
operations, business, properties, or assets are subject. Upon the Closing, FBR
will have good title to all properties and assets used in the business of FBR or
owned by FBR (except real and other properties and assets held pursuant to
leases or licenses described in Schedule 3.12), free and clear of all liens,
mortgages, security interests, pledges, charges, and encumbrances (except those
listed in Schedule 3.12).
3.4 COMPLIANCE WITH LAW.
Except as described in Schedule 3.4 attached hereto, FBR is in compliance
with all requirements (including those relating to environmental matters) of
federal, state and local law, and all requirements of all governmental bodies
and agencies having jurisdiction over it or its assets and properties and all
premises occupied by it, except where failure to comply would not have a
material adverse effect. Without limiting the foregoing, FBR has properly filed
all reports, paid all monies and obtained all licenses, permits, certificates
and authorizations needed or required for the conduct of its business and the
use of its assets and properties and the premises occupied by it and is in
compliance in all material respects with all conditions, restrictions and
provisions of any of the foregoing, except where failure to comply would not
have a material adverse effect. FBR has not received any notice from any
federal, state or local authority or any insurance or inspection body that any
of its assets, properties, facilities, equipment or business procedures or
practices or its assets and properties fails to comply with any applicable law,
ordinance, regulation, building or zoning law or requirement of any public
authority or body.
3.5 OTC BULLETIN BOARD LISTING ("OTCBB").
FBR represents and warrants that: (i) its Common Stock is eligible for
trading on the OTCBB; (ii) FBR is in compliance, in all material respects, with
the regulations and rules of the OTCBB; and (iii) all of the shares of FBR
Common Stock to be issued under this Agreement and the shares of FBR Common
Stock resulting from the exercise of any outstanding Vitrix options and warrants
will be eligible for trading on the OTCBB; provided however, that: (a) such
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representation and warranty regarding the exercise of any outstanding Vitrix
warrants and options shall apply only to the extent that the OTCBB rules and
regulations do not change post-Closing thereby prohibiting the trading of such
shares on the OTCBB; (b) there is no adverse change in the financial or business
condition of FBR post-closing that prohibits the trading of such shares on the
OTCBB (however, nothing in this section 3.5 shall be construed as a waiver or
release of any of FBR's representations, warranties, agreements or obligations
under this Agreement, including, but not limited to, the financial or business
condition of FBR); or (c) there is no change in the management of FBR
post-closing which directly results in a prohibition of trading such shares on
the OTCBB.
3.6 VALIDITY OF FBR SHARES.
The FBR Shares to be delivered to the Shareholders pursuant to this
Agreement, when issued in accordance with the provisions of this Agreement, will
be duly authorized, validly issued, fully paid and non-assessable and will not
have been issued in violation of any preemptive right of any shareholder. Vitrix
and the Shareholders acknowledge, however, that further corporate and
shareholder action will be required to authorize the full number of shares of
Common Stock issuable upon the due conversion of the Series B Convertible
Preferred Stock.
3.7 DISCLOSURE DOCUMENTS
There is attached hereto as Schedule 3.7 copies of each of the following
documents which have been duly filed with the Securities and Exchange
Commission: Annual Report on Form 10-KSB for the fiscal year ended June 30,
1998, and Quarterly Reports on form 10-QSB for the fiscal quarters ended
September 30, 1998 and December 31, 1998, and all amendments thereto. Except as
disclosed in Schedule 3.7 attached hereto, the information contained therein
does not contain any untrue statement of material fact or omit to state a
material fact necessary in order to make the statements, made in light of the
circumstances under which they were made, not misleading, as of the date thereof
and as of the date of this Agreement.
3.8 CAPITALIZATION OF FBR.
The authorized capital stock of FBR consists of 16,666,667 shares of Common
Stock, $.005 par value of which no more than 4,648,205 shares will be
outstanding immediately prior to the Closing, together with warrants and options
for the purchase of not more than 97,500 additional shares of common stock, and
10,000,000 shares of preferred stock, none of which are outstanding.
3.9 ABSENCE OF CHANGE.
Except as disclosed in Schedule 3.9 hereto, since December 31, 1998, the
date of FBR's most recent Quarterly Report on Form 10-QSB:
(a) There has, at no time, been a material adverse change in the financial
condition, results of operations, business, properties, assets,
liabilities, or future prospects of FBR;
(b) FBR has not authorized, declared, paid, or effected any dividend or
liquidating or other distribution in respect of its capital stock or
any direct or indirect redemption, purchase or other acquisition of
any of said stock, except as described in Schedule 3.9(b) attached
hereto;
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<PAGE>
(c) FBR has not authorized the issuance of any Common Stock or stock
options or warrants except as described in Schedule 3.9(c) attached
hereto;
(d) The activities of FBR have been conducted in the ordinary course as
described in the documents contained in Schedule 3.7;
(e) There has been no material accepted purchase order or quotation,
arrangement, or understanding for future sale of products or services
of FBR which FBR expects will not be profitable;
(f) FBR has not suffered an extraordinary loss (whether or not covered by
insurance) or waived any right of substantial value.
There is no fact known to FBR which materially adversely affects, or in the
future (as far as FBR can foresee) may adversely affect, the financial
condition, results of operations, business, properties, assets, liabilities, or
future prospects of FBR; provided, however, that no opinion is expressed herein
as to political or economic matters of general applicability.
3.10 FBR TAX LIABILITIES.
Except as disclosed in this Agreement or the Schedules thereto, FBR has no
liability of any nature, accrued or contingent, including, without limitation,
liabilities for federal, state, local, or foreign taxes and liabilities to
customers or suppliers, other than the following:
Liabilities for which full provision has been made on the latest financial
statements included in the FBR Disclosure Documents ("Last FBR Financial
Statements"); and
Other liabilities arising since the date of the Last FBR Financial
Statements and prior to the Closing (as hereinbelow defined) in the ordinary
course of business. Without limiting the generality of the foregoing, the
amounts set up as provisions for taxes in the Last FBR Financial Statements are
sufficient for all accrued and unpaid federal, state, local, and foreign taxes
of FBR, whether or not due and payable and whether or not disputed, under tax
laws as in effect on the date of the Last FBR Financial Statements or now in
effect, for the period ended on that date and for all fiscal years prior
thereto. FBR has filed all federal, state, local, and foreign tax returns
required to be filed by it; has delivered to Vitrix and the Shareholders a true
and correct copy thereof initialed by the chief executive officer of FBR; has
paid (or has established in the Last FBR Financial Statements a reserve for) all
taxes, assessments, and other governmental charges payable or remittable by it
or levied upon it or its properties, assets, income, or franchises which are due
and payable; and has delivered to Vitrix and the Shareholders a true and correct
copy so initialed of any report as to adjustments received by FBR from any
taxing authority during the past five years and a statement, so initialed, as to
any litigation pending, threatened, or in prospect with respect to any of those
reports or the subject matter of those reports.
3.11 FBR LITIGATION AND CLAIMS.
Except as disclosed in Schedule 3.11, there is no litigation, arbitration,
claim, governmental or other proceeding (formal or informal), or investigation
(pending, threatened, or in prospect or any basis therefor known to FBR) with
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respect to FBR, or any of its business, properties, or assets. FBR is not
affected by any present or threatened strike or other labor disturbance nor, to
the knowledge of FBR, is any union attempting to represent any employee of FBR
as collective bargaining agent. FBR is not in violation of, or in default with
respect to, any law, rule, regulation, order, judgment, or decree; nor is FBR
required to take any action in order to avoid such a violation or default.
3.12 FBR CONTRACT AND OTHER INSTRUMENTS.
Schedule 3.12 describes each Material Contract, as defined in section 2.8,
to which FBR is a party or by which it is bound. FBR has furnished to Vitrix and
the Shareholders:
(a) The certificate of incorporation (or other charter document) and
by-laws of FBR and all amendments thereto, as presently in effect,
certified by the Secretary of the corporation, and
(b) The following, initialed by the chief executive officer of FBR, true
and correct copies of all Material Contracts, referred to in Schedule
3.12.
Except as disclosed in this Agreement or the Schedules thereto, neither
FBR, nor (to the knowledge of FBR) any other party to any of those Material
Contracts is now or expects in the future to be in violation or breach of, or in
default with respect to complying with, any material provision thereof, and each
Material Contract is in full force and is the legal, valid, and binding
obligation of the parties thereto and is enforceable as to them in accordance
with its terms (subject to applicable bankruptcy, insolvency, other laws
affecting the enforceability of creditors' rights generally, and general
principles of equity). Each supply, distribution, agency, financing, or other
Material Contract is a valid and continuing arrangement or understanding;
neither FBR or any other party to any Material Contract has given notice of
termination or taken any action inconsistent with the continuance of such
arrangement or understanding; and the execution, delivery, and performance of
this Agreement will not prejudice any such arrangement or understanding in any
way. FBR enjoys peaceful and undisturbed possession under all leases and
licenses under which it is operating. FBR is not a party to or bound by any
Material Contract, or subject to any charter or other restriction, which has
had, or (to the knowledge of FBR) may in the future have, a material adverse
effect on the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects of FBR or Vitrix, FBR has not engaged
within the last five years in, is not now engaging, and does not intend to
engage in any transaction with, nor has it had within the last five years, nor
does it now have, or does it intend to have any Material Contract, with, any
stockholder, any director, officer, or employee of FBR, any relative or
affiliate of any such stockholder, director, officer, or employee, or any other
corporation or enterprise in which any such stockholder, director, officer, or
employee, or any relative or affiliate of the same then had or now has a 5% or
greater equity or voting or other substantial interest, other than Material
Contracts and agreements listed and so specified in Schedule 3.12. The stock
ledgers and stock transfer books and the minute book records of FBR relating to
all issuances and transfers of stock by FBR, and all proceedings of the
shareholders and the Board of Directors and committees thereof of FBR since its
incorporation made available to counsel for Vitrix and the Shareholders are the
original stock ledgers and stock transfer books and minute book records of FBR
or exact copies thereof.
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FBR is not in violation or breach of, or in default with respect to, any
term of its certificate of incorporation (or other charter document) or by-laws.
FBR is not a member of a customer or user organization or of a trade
association.
3.13 LICENSES, PERMITS AND FRANCHISES.
Except as disclosed in this Agreement or the Schedules thereto, FBR has the
full right to conduct its business as it is now and as it is proposed to be
conducted after the Closing hereunder free of any rights or equities in any
other person. Without limiting the generality of the foregoing, FBR has all of
the licenses, permits and franchises necessary to the conduct of such business.
3.14 FBR EMPLOYEE BENEFITS.
Except as disclosed in this Agreement or the Schedules thereto, FBR does
not have, or contribute to, any pension, profit sharing, option, other incentive
plan, or any other type of Employee Benefit Plan (as defined in the Employee
Retirement Income Security Act of 1974), nor does it have any obligation to or
customary arrangement with employees for bonuses, incentive compensation,
vacations, severance pay, insurance, or other benefits except as have been
reflected in the FBR Financial Statements as normal operating expenses.
3.15 FBR QUESTIONABLE PAYMENTS.
Neither FBR nor any director, officer, agent, employee, nor any other
person acting on behalf of FBR has, directly or indirectly:
(a) raised any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political
activity;
(b) made any unlawful payment to foreign or domestic government officials
or employees, or to foreign or domestic political parties or
campaigns, from corporate funds;
(c) violated any provision of the Foreign Corrupt practices Act of 1977;
(d) established or maintained any unlawful or unrecorded fund of corporate
monies or other assets;
(e) Made any false or fictitious entry on the books or records of FBR;
(f) Made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment;
(g) Given any favor or gift which is not deductible for federal income tax
purposes; or
(h) Made any bribe, kickback, or other payment of a similar or comparable
nature, whether lawful or not, to any person or entity, private or
public, regardless of form, whether in money, property, or services,
to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business
secured or for special concessions already obtained.
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3.16 FBR NON-DISTRIBUTIVE INTENT.
FBR is acquiring the shares of Vitrix from the Shareholders for its own
account and not with a view to the resale or distribution thereof and with no
present intention of distributing the same or selling the same for distribution.
It will not sell, transfer or otherwise dispose of any of the shares of Vitrix
in the absence of either an effective registration statement relating to such
transaction under the Securities Act of 1933 and all applicable state securities
laws, or an opinion of counsel, satisfactory to Vitrix and its counsel, prior to
such proposed transaction, that registration is not required under said Act or
laws and an undertaking by the prospective transferee to be bound by
restrictions on transfer similar to those contained herein.
3.17 FULL DISCLOSURE.
No representation or warranty by FBR made in this Agreement or in any
document mentioned herein contains or on the Closing Date will contain any
untrue statement of a material fact or omits or on the Closing Date will omit,
to state a material fact necessary to make the statements made not misleading.
3.18 BANK ACCOUNTS.
Attached hereto as Schedule 3.18 is a full and complete list of all bank
accounts and safe deposit boxes of FBR, together with the names of each
authorized signatory on each thereof.
3.19 SEC FILINGS.
FBR will cause its officers to deliver, at the Closing, a written
undertaking to cooperate with Vitrix's management, counsel and accountants in
preparing a Current Report on Form 8-K with the Securities and Exchange
Commission in connection with this transaction.
4. EXCHANGE OF SHARES
4.1 PROVISIONS FOR EXCHANGE.
On the basis of the representations, warranties, covenants and agreements
contained in and subject to the terms and conditions of this Agreement:
(a) The Shareholders shall sell, assign, transfer and convey to FBR at the
Closing at least 90% of the outstanding shares of the capital stock of
Vitrix. At the Closing the Shareholders shall deliver certificates
representing the shares being transferred duly endorsed in blank or
accompanied by stock powers duly endorsed in blank, in each case in
proper form for transfer, with signatures guaranteed by a commercial
bank located in the United States, with all stock transfer and any
other required documentary stamps affixed thereto.
(b) In consideration of the transfer and delivery of the Vitrix shares,
FBR shall deliver at the Closing to the Shareholders certificates
registered in the names and for the number of FBR Shares respectively
set forth in Schedule 4.1 attached hereto.
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(c) The FBR Convertible Preferred Stock to be issued as shown in Schedule
4.1 shall be in the form shown by the Statement of Rights and
Privileges of Series B Convertible Preferred Stock which is attached
hereto as Exhibit 4.1(c).
4.2 THE CLOSING.
The delivery of the certificates specified in paragraph 4.1 and of the
other documents and instruments required by the provisions of this Agreement
("the Closing") shall take place at the offices of Squire, Sanders & Dempsey
L.L.P. at 1:00 P.M. local time on April 15, 1999 or ("the Closing Date"). The
Closing may be held at such other place, time or date upon which the parties may
agree in writing.
5. CONDITIONS TO THE OBLIGATIONS OF FBR
The obligations of FBR under this Agreement are subject, to the following
conditions:
5.1 ACCURACY OF REPRESENTATIONS AND FULFILLMENT OF CONDITIONS.
All representations and warranties of Vitrix or any Shareholder contained
in this Agreement shall be accurate, in all material respects, when made and, in
addition shall be accurate, in all material respects, as of the Closing as
though the representations and warranties were then made in exactly the same
language by Vitrix or that Shareholder and regardless of knowledge or lack
thereof on the part of Vitrix or any Shareholder or changes beyond its or his
control; as of the Closing, Vitrix and Shareholders shall have performed and
complied with all covenants and agreements and satisfied all conditions required
to be performed and complied with by any of them at or before that time by this
Agreement; and FBR shall have received a certificate signed by the chief
executive officer of Vitrix dated the date of the Closing to that effect,
substantially in the form of Exhibit 5.1.
5.2 OPINION OF COUNSEL.
FBR shall have received at the Closing the written opinion of counsel to
Vitrix, addressed to FBR, in form and substance, reasonably satisfactory to FBR
and its counsel, that
(a) Vitrix is a corporation validly existing and in good standing under
the laws of the State of Arizona, with all requisite corporate power
and authority to own its properties and to carry on the business in
which it is now engaged and is in good standing as a foreign
corporation in the jurisdictions in which the real or personal
property owned or leased or business conducted by Vitrix is material
to the operations of Vitrix taken as a whole.
(b) The authorized capital stock of Vitrix consists of 10,000,000 shares
of common stock, without par value. Of the authorized capital stock,
there are outstanding: 9,314,444 shares of common stock, without par
value, options for the purchase of 759,000 additional shares of common
stock and warrants for the purchase of 312,000 additional shares of
common stock. Except as otherwise stated, there is no commitment, plan
or arrangement to issue, and no outstanding option, warrant or other
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right calling for the issuance of, any share of Vitrix capital stock,
or any security or other instrument convertible into, exercisable for,
or exchangeable for capital stock of Vitrix; and there is no
outstanding security or other instrument convertible into or
exchangeable for capital stock of Vitrix. Each outstanding share of
Vitrix capital stock is duly authorized, validly issued, fully paid
and non-assessable, has not been issued and is not owned or held in
violation of any preemptive right of stockholders, and is owned of
record and by the Shareholders in accordance with the table shown on
Schedule 5.2 attached hereto.
(c) All necessary corporate proceedings of Vitrix have been duly taken to
authorize the execution, delivery, and performance of this Agreement
by Vitrix and the consummation of the transactions contemplated by
this Agreement.
(d) Vitrix has corporate power and authority to execute, deliver, and
perform this Agreement, the respective Shareholders have the power and
authority to execute, deliver, and perform this Agreement, and this
Agreement has been duly authorized, executed, and delivered by Vitrix,
has been duly executed and delivered by the Shareholders, constitutes
the legal, valid, and binding obligation of Vitrix and the
Shareholders, and, (subject to applicable bankruptcy, insolvency,
other laws affecting the enforceability of creditors' rights
generally, and to the discretion of the court in granting equitable
remedies) is enforceable as to Vitrix and the Shareholders in
accordance with its terms.
(e) The execution, delivery, and performance of this Agreement by Vitrix
will not violate or result in a breach of any term of Vitrix's
certificate of incorporation (or other charter document) or of its
by-laws.
(f) After reasonable investigation, such counsel has no actual knowledge
of any consent of, or declaration or filing with, any governmental
authority which is required of Vitrix or any Shareholder for the
execution, delivery, or performance of this Agreement by Vitrix or any
Shareholder, to the extent material to this Agreement or the
transaction contemplated hereby.
(g) After reasonable investigation such counsel has no actual knowledge of
any action, suit, or proceeding pending or threatened against Vitrix
or any Shareholder, to the extent material to this Agreement or the
transaction contemplated hereby, at law or in equity, or before any
federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality that:
(i) Can reasonably be expected to result in any materially adverse
change in the business, properties, operations, prospects, or
assets, or in the condition, financial or otherwise, of Vitrix
taken as a whole, or
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(ii) Seeks to prohibit or otherwise challenge the consummation of the
transactions contemplated by this Agreement, or to obtain
substantial damages with respect thereto, except as disclosed in
this Agreement.
(h) The offer, sale, and delivery of the shares of Vitrix Common Stock
under the circumstances contemplated by this Agreement constitute
exempted transactions under the Securities Act of 1933, and
registration of those shares under the Securities Act of 1933 is not
required in connection with any offer, sale, or delivery of those
shares.
5.3 OTHER CLOSING DOCUMENTS.
Vitrix and the Shareholders shall have delivered to FBR at or prior to the
Closing other documents (including certificates of officers of Vitrix) that FBR
may reasonably request in order to enable FBR to determine whether the
conditions to their obligations under this Agreement have been met and otherwise
to carry out the provisions of this Agreement.
5.4 REVIEW OF PROCEEDINGS.
All actions, proceedings, instruments, and documents required to carry out
this Agreement or incidental thereto and all other related legal matters shall
be subject to the reasonable approval of Cruse, Firetag & Bock, P.C., counsel to
FBR, and Vitrix and the Shareholders shall have furnished such counsel those
documents as such counsel may have reasonably requested for the purpose of
enabling them to pass upon such matters.
5.5 NO LITIGATION.
There shall not have been instituted or threatened any legal proceeding
relating to, or seeking to prohibit or otherwise challenge the consummation of,
the transactions contemplated by this Agreement, or to obtain substantial
damages with respect thereto.
5.6 NO GOVERNMENTAL ACTION.
There shall not have been any action taken, or any law, rule, regulation,
order, judgment, or decree proposed, promulgated, enacted, entered, enforced, or
deemed applicable to the transactions contemplated by this Agreement by any
federal, state, local, or other governmental authority or by any court or other
tribunal, including the entry of a preliminary or permanent injunction, which,
in the sole judgment of FBR:
(a) Makes any of the transactions contemplated by this Agreement illegal;
(b) Results in a delay in the ability of FBR to consummate any of the
transactions contemplated by this Agreement;
(c) Requires the divestiture by FBR of any of the shares of Vitrix Common
Stock to be sold pursuant to this Agreement or of a material portion
of the business of FBR, or of Vitrix;
(d) Imposes material limitations on the ability of FBR effectively to
exercise full rights of ownership of such shares including the right
to vote such shares on all matters properly presented to the
shareholders of Vitrix, or
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(e) Otherwise materially prohibits, restricts, or delays consummation of
any of the transactions contemplated by this Agreement or materially
impairs the contemplated benefits to FBR of the transactions
contemplated by this Agreement.
5.7 CONTRACTUAL CONSENTS.
The parties to this Agreement shall have obtained, at or prior to the
Closing, all consents required for the consummation of the transactions
contemplated by this Agreement from any party to any Material Contract to which
any of them is a party, or to which any of their respective businesses,
properties, or assets are subject.
5.8 PRIOR EQUITY FINANCING.
Prior to the Closing, Vitrix shall have closed a transaction in which no
less than $200,000 has been received by Vitrix solely in exchange for the sale
and issuance of its Common Stock in a private placement.
5.9 MINIMUM SHAREHOLDER PARTICIPATION
The Shareholders who are parties to this Agreement shall own, in the
aggregate, not less than ninety percent (90%) of the capital stock of Vitrix
outstanding at the Closing and shall have tendered the same pursuant to this
Agreement.
5.10 INTEREST OF CURRENT FBR COMMON STOCK OUTSTANDING
At the Closing shares of FBR Common Stock outstanding as of the date of
this Agreement (plus any shares issued in the Holtz Note settlement, which shall
be no more than 2,300 shares of FBR Common Stock) shall constitute approximately
20% of the number of shares to be outstanding after the Closing, assuming all
Vitrix shareholders exchange their Vitrix Stock for FBR shares, including for
this purpose, the number of shares of Common Stock issuable upon the due
conversion of the Series B Convertible Preferred Stock.
6.0 CONDITIONS TO THE OBLIGATIONS OF VITRIX AND THE SHAREHOLDERS
The obligations of Vitrix and the Shareholders under this Agreement are
subject to the following conditions:
6.1 ACCURACY OF REPRESENTATIONS AND FULFILLMENT OF CONDITIONS.
All representations and warranties of FBR contained in this Agreement shall
be accurate when made and, in addition, shall be accurate as of the Closing as
though the representations and warranties were then made in exactly the same
language by FBR and regardless of knowledge or lack thereof on the part of FBR
or changes beyond its control; as of the Closing, FBR shall have performed and
complied with all covenants and agreements and satisfied all conditions required
to be performed and complied with by any of them at or before that time by this
Agreement; and Vitrix and the Shareholders shall have received certificates
signed by the chief executive officer and the chief financial officer of FBR
dated the date of the Closing to that effect, substantially in the form of
Exhibits 6.1A and 6.IB, respectively.
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6.2 OPINION OF COUNSEL.
Vitrix shall have received at the Closing the written opinion of Cruse,
Firetag & Bock, P.C., counsel to FBR, addressed to Vitrix and the Shareholders,
in form and substance satisfactory to Vitrix and its counsel, that:
(a) FBR is a corporation validly existing and in good standing under the
laws of the State of Nevada, with all requisite corporate power and
authority to own its properties and to carry on the business in which
it is now engaged and is in good standing as a foreign corporation in
the jurisdictions in which the real or personal property owned or
leased or business conducted by FBR is material to the operations of
FBR taken as a whole.
(b) The authorized capital stock of FBR consists of 16,666,667 shares of
common stock, par value $.005, 10,000,000 shares of preferred stock,
par value $.01, of which there are, at the Closing Date, outstanding
4,648,205 shares of common stock, and warrants and options for the
purchase of 97,500 additional shares of common stock. Each outstanding
share of FBR capital stock is validly authorized, validly issued,
fully paid and non-assessable; has not been issued and is not owned or
held in violation of any preemptive right of stockholders. Except as
otherwise stated, including but not limited to the conversion of all
Vitrix options and warrants to FBR common stock as contemplated by
this Agreement and as required under the 1996 Vitrix Stock Option
Plan, there is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the issuance
of, any share of FBR capital stock, or any security or other
instrument convertible into, exercisable for, or exchangeable for
capital stock of FBR; and there is outstanding no security or other
instrument convertible into or exchangeable for capital stock of FBR.
(c) The FBR Shares delivered at the Closing constitute duly authorized,
validly issued and outstanding shares of the common stock, par value
of $.005 per share, of FBR, fully paid and non-assessable, and the
outstanding FBR options and warrants are the duly authorized, validly
existing and binding obligations of FBR, enforceable according to
their terms; 85,000 shares have been duly reserved for issuance upon
the due exercise of the FBR options and when so issued will constitute
duly authorized, validly issued and outstanding shares of the common
stock, $.005 par value, of FBR, fully paid and non-assessable; 12,500
shares have been duly reserved for issuance upon the due exercise of
the FBR warrants and when so issued will constitute duly authorized,
validly issued and outstanding shares of the common stock, at $2.00
per share, of FBR, fully paid and non-assessable.
(d) To the best knowledge of such counsel, FBR has, through the Closing
Date, made timely filings with the Securities and Exchange Commission
of all reports, amendments and other documents (including exhibits)
required by law to be filed by FBR and all of them were at the time,
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and at the Closing Date will be, (except as modified by subsequent
reports or amendments) true and accurate and in full compliance with
the federal securities laws and the rules promulgated thereunder.
(e) The following will be or have become effective as of the Closing: (i)
resignations of the present FBR directors and their replacement as
designated by the Vitrix Board of Directors; and (ii) the resignations
of the present FBR officers and their replacement as designated by the
Vitrix Board of Directors,
(f) All necessary corporate proceedings of FBR have been duly taken to
authorize the execution, delivery, and performance of this Agreement
by FBR and the consummation of the transactions contemplated by this
Agreement.
(g) FBR has corporate power and authority to execute, deliver, and perform
this Agreement, the respective Shareholders have the power and
authority to execute, deliver, and perform this Agreement, and this
Agreement has been duly authorized, executed, and delivered by FBR,
has been duly executed and delivered by the Shareholders, constitutes
the legal, valid, and binding obligation of FBR and the Shareholders,
and, (subject to applicable bankruptcy, insolvency, other laws
affecting the enforceability of creditors' rights generally, and
general principles of equity) is enforceable as to FBR and the
Shareholders in accordance with its terms.
(h) After reasonable investigation such counsel has no actual knowledge of
any action, suit, or proceeding pending or threatened against FBR or
any Shareholder, to the extent material to this Agreement or the
transaction contemplated hereby, at law or in equity, or before any
federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality that:
(i) Can reasonably be expected to result in any materially adverse
change in the business, properties, operations, prospects, or
assets, or in the condition, financial or otherwise, of FBR taken
as a whole, or
(ii) Seeks to prohibit or otherwise challenge the consummation of the
transactions contemplated by this Agreement, or to obtain
substantial damages with respect thereto, except as disclosed in
this Agreement.
(i) After reasonable investigation, such counsel has no actual knowledge
of any consent of, or declaration or filing with, any governmental
authority which is required of FBR or any Shareholder for the
execution, delivery, or performance of this Agreement by Vitrix or any
Shareholder, to the extent material to this Agreement or the
transaction contemplated hereby.
(j) The execution, delivery and performance of this Agreement by FBR will
not violate or result in a breach of any term of FBR's certificate of
incorporation (or other charter document) or of its by-laws.
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6.3 MINIMUM FBR CASH.
The amount of unrestricted cash owned by FBR at the Closing immediately
available for expenditure, in excess of the proceeds of the exercise of any
warrants or other rights for the purchase of any FBR capital stock and in excess
of all other assets including those required to discharge in full all
liabilities, claims or liens shall not be less than $250,000 (to be adjusted per
Schedule 6.3 for accrued assets and accrued liabilities as approved by both
parties).
6.4 SETTLEMENT OF OUTSTANDING NOTE.
FBR shall have completely discharged, to the reasonable satisfaction of
Vitrix, all financial and legal obligations, including but not limited to
principal, interest and all other amounts owing, under the Richard Barrie
Fragrances, Inc. Series of 10% Convertible Subordinated Promissory Notes which
became due on January 15, 1996 ("1996 Note"), including but not limited to, the
1996 Note now in default held by Richard Holtz, or his heirs or other successors
in interest ("Holtz"). If FBR Common Shares are issued as part of the settlement
of the 1996 Note held by Holtz, the number of outstanding common shares of FBR
as stated in Sections 3.8 and 6.2 will be increased by the number of FBR common
shares issued in the settlement of such note.
6.5 DIRECTOR RESIGNATIONS.
All officers and directors of FBR shall have resigned at or prior to the
Closing, in writing, effective immediately upon the Closing, and the persons
designated by the Board of Directors of Vitrix shall have been elected to the
Board of Directors of FBR. All FBR officer and director resignations shall be
attached hereto as Exhibit 6.5.
6.6 RELEASES.
FBR shall have received, at or prior to the Closing, from each person who
is, who before the Closing becomes, or who at any time was, an officer or
director of FBR, a release dated the Closing Date in the form shown by Exhibit
6.6 attached hereto.
6.7 REVIEW OF PROCEEDINGS.
All actions, proceedings, instruments, and documents required to carry out
this Agreement or incidental thereto and all other related legal matters shall
be subject to the reasonable approval of counsel to Vitrix, and FBR shall have
furnished such counsel those documents as such counsel may have reasonably
requested for the purpose of enabling him to pass upon such matters.
6.8 OTHER CLOSING DOCUMENTS.
FBR shall have delivered to Vitrix at or prior to the Closing other
documents (including certificates of officers of FBR) that Vitrix may reasonably
request in order to enable Vitrix to determine whether the conditions to its
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
6.9 NO LITIGATION.
There shall not have been instituted or threatened any legal proceeding
relating to, or seeking to prohibit or otherwise challenge the consummation of,
the transactions contemplated by this Agreement, or to obtain substantial
damages with respect thereto.
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6.10 NO GOVERNMENTAL ACTION.
There shall not have been any action taken, or any law, rule, regulation,
order, judgment, or decree proposed, promulgated, enacted, entered, enforced, or
deemed applicable to the transactions contemplated by this Agreement by any
federal, state, local, or other governmental authority or by any court or other
tribunal, including the entry of a preliminary or permanent injunction, which,
in the sole judgment of Vitrix;
(a) Makes any of the transactions contemplated by this Agreement illegal,
(b) Results in a material delay in the ability of Vitrix or the
Shareholders to consummate any of the transactions contemplated by
this Agreement; or
(c) otherwise materially prohibits, restricts, or delays consummation of
any of the transactions contemplated by this Agreement or impairs the
contemplated benefits to Vitrix or the Shareholders of the
transactions contemplated by this Agreement.
6.11 CONTRACTUAL CONSENTS.
The parties to this Agreement shall have obtained, at or prior to the
Closing, all consents required for the consummation of the transactions
contemplated by this Agreement from any party to any Material Contract, to which
any of them is a party, or to which any of their respective businesses,
properties, or assets are subject.
7. COVENANTS OF VITRIX AND THE SHAREHOLDERS
7.1 ACCESS.
Vitrix will afford, and the Shareholders will cause Vitrix to afford, the
officers, employees, attorneys, agents, investment bankers, accountants, and
other representatives of FBR full access during normal business hours to the
plants, properties, books, and records of Vitrix and will permit them to make
extracts from and copies of such books and records, and will, from time to time,
furnish FBR with such additional financial and operating data and other
information as to the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of Vitrix that FBR from
time to time may request. Vitrix and the Shareholders will cause the independent
certified public accountants of Vitrix to make available to FBR and its
independent certified public accountants the work papers relating to the audits
of the Vitrix Financial Statements.
7.2 CONDUCT OF BUSINESS.
Vitrix will use its best efforts and the Shareholders will use their best
efforts to cause Vitrix to, conduct its affairs so that at the Closing no
representation or warranty of Vitrix or any Shareholder will be inaccurate, no
covenant or agreement of Vitrix or any Shareholder will be breached, and no
condition in this Agreement will remain unfulfilled by reason of the actions or
omissions of Vitrix or any Shareholder. Except as otherwise requested by FBR in
writing, until the Closing or the earlier rightful termination of this
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Agreement, Vitrix will and the Shareholders will cause Vitrix to, use its best
efforts to preserve intact the business operations of Vitrix, to keep available
the services of their present personnel, to reserve in full force and effect the
Material Contracts of Vitrix, and to preserve the goodwill of their suppliers,
customers, and others having business relations with any of them. Until the
Closing or earlier rightful termination of this Agreement, Vitrix will and the
Shareholders will cause Vitrix to conduct its business and operations, in all
respects, only in the ordinary course.
7.3 ADVICE OF CHANGES.
Until the Closing or the earlier rightful termination as contemplated under
this Agreement, Vitrix will and the Shareholders will immediately advise FBR, in
a detailed written notice, of any fact or occurrence or any pending or
threatened occurrence of which any of them obtains knowledge and which
(a) if existing and known at the date of the execution of this Agreement
would have been required to be set forth or disclosed in or pursuant
to this Agreement or a Schedule hereto,
(b) if existing and known at any time prior to or at the Closing would
make the performance by any party of a covenant contained in this
Agreement impossible or make that performance materially more
difficult than in the absence of that fact or occurrence, or
(c) if existing and known at the time of the Closing would cause a
condition to any party's obligations under this Agreement not to be
fully satisfied.
8. COVENANTS OF FBR
8.1 ACCESS.
FBR will afford the officers, employees, attorneys, agents, investment
bankers, accountants, and other representatives of Vitrix during normal business
hours access to the plants, properties, books, and records of FBR, will permit
them to make extracts from and copies of such books and records, and will, from
time to time, furnish Vitrix with such additional financial and operating data
and other information as to the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of FBR that
Vitrix from time to time may request. FBR will cause the independent certified
public accountants of FBR to make available to Vitrix and its independent
certified public accountants the work papers relating to the FBR Financial
Statements.
8.2 CONDUCT OF BUSINESS.
FBR will conduct its affairs so that at the Closing no representation or
warranty of FBR will be inaccurate, no covenant or agreement of FBR will be
breached, and no condition in this Agreement will remain unfulfilled by reason
of the actions or omissions of FBR. Except as otherwise requested by Vitrix in
writing, until the Closing or the earlier rightful termination of this
Agreement, FBR will use its best efforts to preserve intact the business
operations of FBR, to keep available the services of its present personnel, to
preserve in full force and effect the Material Contracts, and to preserve the
goodwill of its suppliers, customers, and others having business relations with
it. Until the Closing or earlier rightful termination of this Agreement, FBR
will conduct its business and operations, in all respects, only in the ordinary
course.
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8.3 ADVICE OF CHANGES.
Until the Closing or the earlier rightful termination as contemplated under
this Agreement, FBR will immediately advise Vitrix, in a detailed written
notice, of any fact or occurrence or any pending or threatened occurrence of
which any of them obtains knowledge and which (a) if existing and known at the
date of the execution of this Agreement would have been required to be set forth
or disclosed in or pursuant to this Agreement or a Schedule hereto, (b) if
existing and known at any time prior to or at the Closing would make the
performance by any party of a covenant contained in this Agreement impossible or
make that performance materially more difficult than in the absence of that fact
or occurrence, or (c) if existing and known at the time of the Closing would
cause a condition to any party's obligations under this Agreement not to be
fully satisfied.
8.4 PUBLIC STATEMENTS.
Before FBR releases any information concerning this Agreement or the
transactions contemplated thereby which is intended for or may result in the
public dissemination thereof, it shall cooperate with Vitrix and the
Shareholders, shall furnish them with drafts of all documents or proposed oral
statements and shall not release any Information without their written consent.
Nothing herein shall prevent FBR from furnishing any information to any
governmental authority or issuing any press releases if its counsel advises that
the same is required or advisable in compliance with the applicable securities
laws.
8.5 CAPITAL STRUCTURE.
Prior to the Closing, FBR shall not recapitalize or reclassify its capital
stock, or effect any stock dividend, stock split or reverse stock split of FBR
Common Stock, nor shall FBR merge, consolidate, reorganize or enter into any
business combination with any other entity, or sell or exchange all or
substantially all of its assets, or enter into any agreement or understanding
with respect to any of the foregoing.
9. MISCELLANEOUS
9.1 NO BROKERS.
Each party represents and warrants to the other that no person, firm or
corporation has acted in the capacity of broker or finder on its behalf to bring
about the negotiation of this Agreement, and agrees to indemnify and hold the
other harmless against any claims or liabilities asserted against it by any
person acting or claiming to act as a broker or finder on behalf of the party
against whom indemnity is sought.
9.2 FURTHER ACTIONS.
At any time and from time to time, each party agrees, at its or his
expense, to take actions and to execute and deliver documents as may be
reasonably necessary to effectuate the purposes of this Agreement.
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9.3 REMEDIES.
Since a material breach of the provisions of this Agreement could not
adequately be compensated by money damages, any party shall be entitled, either
before or after the Closing, in addition to any other right or remedy available
to it, to an injunction restraining the breach or threatened breach of this
Agreement and to specific performance of any provision of this Agreement, and,
in either case, no bond or other security shall be required in connection
therewith, and the parties hereby consent to the issuance of such an injunction
and to the ordering of specific performance.
9.4 SURVIVAL.
For a period of 12 months following the Closing, the covenants, agreements,
representations and warranties contained in or made pursuant to this Agreement
shall survive the Closing and any delivery of the FBR Shares by FBR in respect
of any investigation made by or on behalf of any party.
9.5 KNOWLEDGE OF VITRIX SHAREHOLDERS.
For purposes of this Agreement, when any representation, warranty or
statement is made to the "knowledge" of a Vitrix Shareholder, "knowledge" shall
mean the actual knowledge of such Shareholder without additional inquiry;
provided, however, that any Shareholder who has served as a director and/or
officer of Vitrix shall be presumed to have such knowledge as would be gained in
the course of such service by a person of reasonable prudence and diligence
acting in the proper exercise of his fiduciary obligations.
9.6 APPOINTMENT OF SHAREHOLDERS' AGENT.
Hamid Shojaee will be the representative ("Representative") of the interest
of Shareholders for all purposes of this Agreement. Without giving notice to
shareholders, the Representative shall have full and irrevocable authority on
behalf of Shareholders to
(a) Deal with the other parties to this Agreement,
(b) Accept the FBR shares or any other amounts payable by the other
parties to this Agreement,
(c) Accept and give notices and other communications relating to this
Agreement,
(d) Settle any dispute relating to the terms of this Agreement,
(e) Waive any condition to the obligations of the Shareholders found in
this Agreement,
(f) Modify or amend this Agreement, except with respect to the number of
FBR Shares to be received by each Shareholder,
(g) Execute any instrument or document that Representative may determine
is necessary or desirable in the exercise of his authority under this
paragraph 9.5, and
(h) Act on behalf of the Shareholders in connection with all matters
relating to this Agreement and the transactions contemplated hereby.
Notwithstanding and prevailing over any contrary provision of this
Agreement, except for his criminal acts (acts which would constitute crimes were
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they prosecuted therefor and convicted thereof), acts constituting bad faith or
acts constituting willful misconduct, the Representative is not and shall not in
any way be liable to the Shareholders for any acts or omissions taken in his
capacity as Representative, either directly or indirectly, in connection with
this Agreement or the transaction contemplated hereby.
9.7 MODIFICATION.
This Agreement and the attachments hereto set forth the entire
understanding of the parties with respect to the subject matter hereof,
supersede all existing agreements among them concerning the subject matter, and
may be modified only by a written instrument duly executed by or on behalf of
each party with the approval of the Board of Directors of each corporate party
(except as otherwise provided in paragraph 9.5).
9.8 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 the most nearly comparable method if mailed from or to
a location outside of the united States), or delivered against receipt to the
party to whom it is to be given at the address of that party set forth in the
preamble to this Agreement (or to another address the party shall have furnished
in writing in accordance with the provisions of this paragraph 9.7) with a copy
to each of the other parties hereto. Any notice given to any corporate party
shall be addressed to the attention of the Corporate secretary. Notice to the
estate of any party shall be sufficient if addressed to the party as provided in
this paragraph 9.7. Any notice or other communication given by certified mail
(or by such comparable method) shall be deemed given at the time of
certification thereof (or comparable act), except for a notice changing a
party's address which will be deemed given at the time of receipt thereof.
9.9 NO WAIVER.
Any waiver by any party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions will not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing and, in the case of a corporate
party, be authorized by a resolution of the Board of Directors or by a duly
authorized officer of the waiving party.
9.10 SEVERAL OBLIGATIONS.
The representations, warranties, covenants, and agreements of Shareholders
in this Agreement are several, but no Shareholder shall have any rights against
Vitrix if a remedy is sought or obtained against any Shareholder because both
Vitrix and any Shareholder breach a representation, warranty, covenant, or
agreement.
9.11 BINDING EFFECT.
The provisions of this Agreement shall be binding upon and inure to the
benefit of Vitrix, FBR, and their respective successors and assigns, and each
Shareholder, and his assigns, heirs, and personal representatives.
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<PAGE>
9.12 NO THIRD PARTY BENEFICIARIES.
This Agreement does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this Agreement (except as
provided in paragraph 9.10).
9.13 SEVERABILITY.
If any provision of this Agreement is invalid, illegal, or unenforceable,
the balance of this Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
9.14 HEADINGS.
The headings of this Agreement are solely for convenience of reference and
shall be given no effect in the construction or interpretation of this
Agreement.
9.15 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
9.16 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of Arizona, without giving effect to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
FBR CAPITAL CORPORATION,
a Nevada corporation
By: /s/ Charles D. Snead, Jr.
----------------------------
Charles D. Snead, Jr.
Its: President (Chief Executive
Officer, Financial and
Accounting Officer)
VITRIX INCORPORATED,
an Arizona corporation
By: /s/ Philip R. Shumway
----------------------------
Philip R. Shumway
Its: President and Chief
Executive Officer
-25-
<PAGE>
[VITRIX INCORPORATED
SHAREHOLDER SIGNATURES
ATTACHED HERETO AS
COUNTERPART SIGNATURES]
-26-
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Arash Amini
By: Arash Amini
Date: 4-7-99
Address:
2931 South Las Palmas
Mesa, Arizona 85202
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Bahan Sadegh
By: Bahan Sadegh
Date: 4-11-99
Address:
3652 North 70th Street
Scottsdale, Arizona 85251
(602) 946-0105
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
BELFER LABS
/s/ Todd Belfer
By: Todd Belfer
Its: Manager
Date: 3-7-99
Address:
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Dan Suceava
By: Dan Suceava
Date: 3-7-99
Address:
8787 East Mountain View #2127
Scottsdale, Arizona 85258
(602) 607-0129
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Hamid Shojaee
By: Hamid Shojaee
Date: 4/8/99
Address:
1833 East Pebble Beach
Tempe, Arizona 85282
(602) 838-0352
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Harvey Belfer
By: Harvey Belfer
Date: 4/7/99
Address:
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Hooman Nikzad
By: Hooman Nikzad
Date: 3/7/99
Address:
8100 East Camelback Road #17
Scottsdale, Arizona 85251
(602) 623-0239
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Lise Lambert
By: Lise Lambert
Date: 4/8/99
Address:
10725 East Palomino Road
Scottsdale, Arizona 85258
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Michael A. Wolf
General Partner
By: Michael Wolf
Date: 4/6/99
LOBODOS VENTURES, L.P.
Address:
11640 South Warcloud Court
Phoenix, Arizona 85044-3457
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Michael A. Wolf
By: Michael Wolf
Date: 4/6/99
Address:
11640 South Warcloud Court
Phoenix, Arizona 85044-3457
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Todd Belfer
By: Todd Belfer
Date: 4/7/99
Address:
4456 East Valley Vista Drive
Paradise Valley, Arizona 85253
(602) 840-8588
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
TPB INVESTMENTS LTD.
/s/ Todd Belfer
By: Todd Belfer
Its: General Partner
Date: 3-7-99
Address:
<PAGE>
EXCHANGE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, in executing this Agreement as of the date first
written above, the undersigned Shareholder acknowledges that he has read the
Agreement, understands the transactions contemplated hereby, and agrees to its
terms.
/s/ Phil Shumway
By: Phil Shumway
Date: 4/8/99
Address:
14656 South 20th Street
Phoenix, Arizona 85048
FBR CAPITAL CORPORATION ACQUIRES 90.17 % OF OUTSTANDING SHARES OF VITRIX
INCORPORATED TEMPE, ARIZONA - APRIL 16, 1999 - FBR Capital Corporation reported
today that it has acquired 90.17 percent of the outstanding shares of Vitrix
Incorporated upon the terms and conditions previously announced. The Vitrix
shares were acquired for a combination of newly-issued FBR common stock and
Series B FBR convertible preferred stock. After completion of the transaction
the shareholders of Vitrix own approximately 78.3 percent of the outstanding
capital stock of FBR which has resulted in a change in control of FBR. The prior
officers and directors of FBR have resigned and Philip R. Shumway, Michael Wolf,
Todd P. Belfer, Lise Lambert, Hamid Shojaee, and Bahan Sadegh, have been elected
directors of FBR. Mr. Shumway, President of Vitrix, will serve as FBR's
President and Chief Executive Officer.
"We believe that Vitrix is poised for tremendous growth in a market that is
growing rapidly and has a need for some consistent solutions." said Mr. Shumway.
"The price/performance attractiveness of the HourTrack(TM) labor management
solutions makes Vitrix a key player in this industry, not only in the
small/medium market segment, but also in the enterprise arena as we introduce
new versions of our product. Vitrix currently has over 1200 customers and 50,000
employees worldwide using our software products. We intend to continue to expand
distribution through high quality resellers, as well as developing partnerships
and OEM relationships with other key industry hardware and software vendors."
Vitrix is a developer and provider of software and hardware for time and
labor management solutions for businesses of all sizes. Vitrix products are
designed to improve productivity by automating collection of time and attendance
data, staff scheduling and management of labor resources. It currently sells its
products to users through sales representatives, resellers, and directly through
its Web site at http://www.vitrix.com and Online store at
http://store.vitrix.com.
Certain information and comments contained in this press release may be
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Factors set
forth in the Company's Annual Report on Form 10KSB for the fiscal year ended
June 30, 1998 and Quarterly Report on Form 10QSB for the period ended December
31, 1998 together with other factors that appear in this press release or in the
Company's other Securities and Exchange Commission filings could affect the
Company's actual results and could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company in this press release.
