U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[X] ANNUAL REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ending December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________ to_____________
Commission file number 0-23892
ENVIROMETRICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 57-0941152
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9229 University Blvd.
Charleston, South Carolina 29406
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (843) 553-9456
Securities registered pursuant to Section 12(b) of the Exchange Act
Title of Each Class Name of Each Exchange of Which Registered
None None
---- ----
Securities registered pursuant to Section 12(g) of the Act::
Common Stock, $.001 par value
(Title of Class)
Check whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes NO X
Transitional Small Business Disclosure Format Yes NO X
Check if there is no disclosure of delinquent filers in response to item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
The issuer's net revenues for its most recent fiscal year ended December
31, 1999 were $1,069,746. The aggregate market value of the voting stock held by
non-affiliates for the issuer as of January 3, 2000 was $794,015.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares outstanding of the registrant's Common Stock, $.001
Par Value, on January 3, 2000 was 3,640,880 shares.
Documents incorporated by reference: None
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Company is a public holding company. It formerly had 3 operating
subsidiaries: Trico Envirometrics, Inc. ("Trico"), Envirometrics Products
Company ("EPC"), and Azimuth, Inc. As a result of a "Turnaround" phase which
began in 1996, it currently has one operating subsidiary: Azimuth, Incorporated
("Azimuth"). Azimuth provides the following services: industrial hygiene
laboratory services; environmental health and occupational health and safety
consulting; and asbestos testing services.
The Company's first steps to exit the "Turnaround" phase focused on
increasing the revenue of Azimuth. Management and the Board of Directors agree
that, with the small existing revenue base currently generated from Azimuth,
sizable growth must come from a merger and acquisition strategy. The Company's
ongoing process of attempting to continue financial stabilization through
internal growth, as part of its first steps in exiting the "Turnaround" phase,
is expected to expedite the Company's merger and acquisition strategy. Any
merger and acquisition activity is anticipated to bring further dilution to the
shareholders of the Company. In addition, as part of exiting the "Turnaround"
phase, in January 1999, the Company was able to obtain prepayment of the
purchase price for the sale of Trico, evidenced by a promissory note bearing
$600,000 principal, for a cash payment of $260,000 (current balance at the time
of sale was $364,400), which payment was applied to working capital for further
debt mediation and rebuilding of operations.
During the course of the "Turnaround" phase, the Company has explored
alternative plans for growth to include the identification of companies in other
markets which had greater growth potential than the Environmental, Health and
Safety market. This process was begun with a view to keeping all options open
for the future of the Company. In September 1999, the Company was introduced to
The Catapult Group, Inc. (The Catapult Group), a Georgia corporation. The
Catapult Group is an Internet integration firm offering intelligent end-to-end
e-business solutions to large and middle-market organizations. These solutions
range from strategic e-business planning and application development to
marketing and communications services for Internet enterprises. The Catapult
Group was looking to enter the public market without incurring the cost of an
expensive Initial Public Offering and was exploring the avenue of a reverse
merger with a company whose securities were already traded publicly. In February
2000, the Company and The Catapult Group reached terms that each felt were fair
to the parties and entered into a non-binding agreement ("Agreement") to acquire
The Catapult Group (See Item 13: Exhibits, Lists and Reports on Form 8K--Plan
and Agreement to Exchange Stock). On March 8, 2000, the Agreement became binding
on the transaction parties. Consummation of the Agreement is still subject to
certain specific, as well as additional customary, conditions to closing (e.g.,
the pre-closing completion of a $2 million private placement for provision of
working capital funds by The Catapult Group).
The acquisition of The Catapult Group, if consummated, will be transacted
as a stock exchange whereby the shareholders of The Catapult Group will receive
shares of the Company. The Catapult Group will become a wholly-owned subsidiary
of the Company. The Catapult Group shareholders and option holders as a group
will end up with 90% ownership of the outstanding stock of the Company. The
Company will change its name from Envirometrics, Inc. to The Catapult Group,
Inc. after closing. The transaction will involve the reverse split of the
pre-closing shares of the Company so that current Company shareholders and
option holders, after issuance of common shares to The Catapult Group
shareholders and reserving shares for their option holders, will hold 10% of the
outstanding stock. It is anticipated that the Agreement will close on or about
May 15, 2000.
HISTORICAL BACKGROUND
The consultative and laboratory services now conducted by Azimuth were
begun in 1984 as an asbestos consulting partnership founded by Mr. Richard D.
Bennett, CIH, who resigned employment with the Company on February 18, 2000 and
Charles E. Feigley, Ph.D., CIH, a current Director . Between 1987 and 1989, the
Azimuth laboratory evolved from an asbestos laboratory to a fully accredited
AIHA Industrial Hygiene Laboratory for testing asbestos, metals and organic
vapors (E.G., solvents) and capable of analyzing air samples taken to evaluate
worker exposure to toxic chemicals.
On May 10, 1991 the Company was incorporated in Delaware for the purpose of
consolidating the operations of Azimuth and certain of its former environmental
products businesses and acquiring the assets of four general partnerships which
were then leasing real estate and laboratory and other equipment to Azimuth and
the products businesses. The partners of these partnerships were also
shareholders in Azimuth and Envirometrics, Inc.
In September 1991, the Company began to manufacture and sell ACT cards and
in August 1992 acquired a license to manufacture and sell electronic card
readers. These items provided a convenient monitoring system for personal
exposure to hazardous chemicals. The Company manufactured the ACT cards under a
proprietary process and had an exclusive worldwide license to manufacture and
sell readers with the ACT cards.
On August 8, 1995, the Company acquired certain operating assets, including
cassette injection molds, of the Corning Costar Nucleopore Air Monitoring
Division, which assets (and others of its former environmental products
businesses) were sold on April 28, 1997 to Multi-Metrics, Inc. As part of this
sale, Multi-Metrics agreed to sell the non-cassette inventory of this business
for the Company on a consignment basis. This sale was prompted by the need to
reduce debt and cut unprofitable business lines as a part of the "Turnaround".
In January 1996 the Company signed the Zellweger Agreement pursuant to
which Zellweger was granted the exclusive marketing rights worldwide for the
Company's proprietary ACT technology. On November 14, 1997, to terminate and
settle the Zellweger Agreement: the Company sold ACT to Zellweger for $344,849,
which the Company used to repay certain prepaid purchase deposits made by
Zellweger under the Zellweger Agreement; Zellweger exchanged, $140,000 of
additional prepaid purchase deposits for the Company's issuance to Zellweger of
70,000 shares of Series A Preferred Stock; and the Company made a cash payment
to Zellweger of $10,000.
In 1996 the Company entered into a "Turnaround" phase. The major components
of this "Turnaround" strategy included: salary cuts of 5% to 30% that spanned
all levels of employees from management to hourly employees, with the highest
paid employees taking the largest percentage cut; the sale of Trico back to the
original owner in July 1996, thus eliminating a cash intensive, marginally
profitable subsidiary; in December 1996 all of the Company's real property was
sold to retire the mortgage with Bank of America (formerly NationsBank), which
was due to mature in early 1997, and a $100,000 operating loan made by a former
Director; in April 1997 the Company sold its air monitoring cassette molds to
Multi-Metrics, Inc. with the proceeds used to retire approximately 50% of a
trade payable owed to Precision Southeast, Inc., the former molder of the
Company's cassettes; and in November 1997 the Company entered into a settlement
of the Zellweger Agreement, retiring in excess of $490,000 in debt and avoiding
the potential of a costly legal confrontation. During the twelve month period
ending 1998, trade payables were mediated and a gain of $325,900 was realized
for financial reporting purposes. On June 29, 1998, Company's secured creditors
converted $546,500 of outstanding indebtedness to an aggregate of 281,268 shares
of Series B and C Preferred Stock of the Company. As a result of this debt
conversion, certain notes receivable in favor of the Company, which had been
held as collateral for these creditors were released, payments were made to the
Company and the proceeds were used for needed operating capital.
During the "Turnaround" phase the Company began to network with contacts
that it had established for the purpose of identifying all options to grow and
bring value to the shareholders. These options included acting as a reverse
merger vehicle for another company which desired to go "public" without doing a
conventional Initial Public Offering ("IPO"). A reverse merger is the recognized
term describing a transaction in which the acquired party is issued shares in
excess of the current outstanding of the acquirer. This results in the acquired
party becoming the majority shareholder post transaction. Though this dilutes
the legacy shareholders it may give more value to ownership than what could have
been experienced otherwise. In September 1999, the Company began exploring this
option with The Catapult Group.
On February 16, 2000, the Board of Directors of the Company approved the
terms of the purchase of Catapult and on the same date the Company signed a
non-binding Agreement. On March 8, 2000, certain conditions of the Agreement
were met and the Agreement became binding (See Item 13: Exhibits, Lists and
Reports on Form 8K-Exhibit 10.12, The Plan and Agreement to Exchange Stock). The
basic terms of the Agreement involve the issuance of the Company's common stock
to the shareholders of The Catapult Group in exchange for their shares of The
Catapult Group and the escrow of shares of the Company's common stock to support
exercise of options by the holders of The Catapult Group options, so that after
Agreement closing the shareholders and option holders of The Catapult Group will
hold (or have rights to acquire) 90% of the outstanding common shares of the
Company. The current shareholders and option holders of the Company will retain
fully-diluted 10% ownership of the Company at closing. After closing, the
Company name will be changed to The Catapult Group, Inc. To minimize the
outstanding shares of the Company in connection with the closing, a reverse
split of 10:1 will be done to the currently issued and outstanding Company
common shares. Additionally, to facilitate the merger and the acquisition plans
of The Catapult Group, consents will be solicited from the Company's
shareholders to authorize amendment of the Company's Articles of Incorporation
for the increase of the authorized shares of Company common stock from 10
million to 20 million. The aforementioned terms and related issues associated
with the acquisition of The Catapult Group are subject to shareholder approval
which will be solicited by written consent.
The acquisition of The Catapult Group gives the shareholders of the Company
the potential opportunity for increased share value. This increase is
anticipated because of the high growth e-business market in which The Catapult
Group participates. The Catapult Group transaction, if consummated, will bring
closure to the "Turnaround" phase that the Company has been engaged in since
1996.
The Company is seeking shareholder approval of the Agreement and the
transactions contemplated by it through solicitation of written consents, in the
form of a Schedule 14C Information Statement that the Company plans to deliver
to Company stockholders on or about April 20, 2000. The consent of persons
holding a simple majority (50+%) of the outstanding Company common stock is
needed to approve the closing of the transaction and authorization of the other
transactions identified for which such consents are being solicited. The
Company expects to receive this consent and believes that the transaction will
close on or about May 15, 2000.
INDUSTRY OVERVIEW
The industry that the Company's current sole subsidiary, Azimuth, competes
is the occupational health and safety industry (the "Industry"). This Industry
represents the convergence of safety and industrial hygiene, both of which
consist of professionals and product manufacturers specializing in the
recognition, evaluation and control of hazardous chemical, physical and
biological agents in or around the workplace. The Company's principal areas of
focus for provision of these services are Industrial Hygiene Consulting,
Industrial Hygiene Laboratory Services, Occupational Safety and Health
consulting, and Indoor Air Quality.
OCCUPATIONAL HEALTH AND SAFETY
The safety segment of the Industry has traditionally been the domain of the
certified industrial hygienist (the "CIH") and the certified safety professional
(the "CSP"). The CIH is an expert in the recognition, evaluation and control of
hazardous chemicals and physical and biological agents in the work place. The
Company also employs CSP's to assist with determining OSHA regulation compliance
and identifying potential liability resulting from non-compliance.
INDOOR AIR QUALITY
This segment includes the testing, remediation and control of indoor air
pollutants and is also serviced by the CIH, reflecting the demand for consulting
and analytical services as well as indoor environmental monitors. This area of
the market is experiencing considerable attention as occupants of buildings are
becoming more attuned to the potential for contaminants adversely affecting
health. For example, the Company began a large project in December 1998, which
was completed in July 1999, involving mold contamination in a public school. The
Company acted in a project management capacity and the reaction to this growing
problem is exemplified in the requirement for evacuation of the occupants and
complete facility wide abatement of the contamination under strict containment
conditions.
FACTORS AFFECTING THE INDUSTRY
GOVERNMENTAL REGULATION. Governmental regulation is a key factor affecting
the development of the Industry. The two principal regulatory agencies are OSHA
and the EPA. These agencies complement each other, as OSHA is concerned with the
worker and the environment within a corporate facility, and the EPA is concerned
with the general public and the environment generally outside a corporate
facility. OSHA regulations have established permissible exposure limits over an
eight-hour period as well as short-term exposure limits in fifteen minute
intervals for certain specified types of hazardous or toxic chemicals.
RISING LEGAL/CRIMINAL LIABILITY RISK AND PENALTIES. Many violations that
formerly involved only civil penalties for violation of environmental
regulations applicable to the Industry, now carry potential criminal liability.
The language in the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act (RCRA), the Oil Pollution Act, the Pollution
Prosecution Act of 1990, and the U.S. Sentencing Commission Guidelines Manual
are exposing corporations and their personnel to significantly increased fines
and criminal sanctions. The referral of criminal cases by the EPA to the
Department of Justice has significantly increased since 1993, and the number of
criminal cases prosecuted and the number of cases ending in convictions have
also significantly increased in that time period.
COMPANY SERVICES
LABORATORY SERVICES
The Company's certified industrial hygiene laboratory, operated by its
Azimuth subsidiary, is one of approximately 130 AIHA fee for service
laboratories in the United States. This laboratory services clients on a
nation-wide basis, but the majority of its clients are located primarily in the
southeastern part of the United States. The market for industrial hygiene
analyses includes architects/engineers, environmental consultants, industrial
hygienists, safety professionals, manufacturing companies in the private sector
and governmental agencies, such as the Department of Energy, Department of
Defense, Federal, state and local government agencies.
The Company's laboratory is accredited by the American Industrial Hygiene
Association. The Company's laboratory has also received accreditation under the
AIHA, Environmental Lead Laboratory Accreditation Program, New York State Dept.
of Health accreditation for Lead and other metals in non-potable water, air and
emissions, and solid and hazardous waste.
Industrial hygiene laboratory services involve the analyses of air samples
taken to evaluate worker exposure to hazardous or toxic chemicals. The samples
are called "air samples", but the media analyzed is not air. Rather, analyzing
devices extract particles of the chemical from the air. These devices are called
sampling media and consist of filters, sorbent tubes, liquids, cassettes or
other specialty sampling devices. The sampling media and instrumentation used by
the industrial hygienist depend on the type of chemical being tested. An
industrial hygienist is primarily concerned with airborne chemicals, respirable
particulates, metals including lead, and organic vapor (i.e. vapor containing
carbon and hydrogen).
CONSULTATIVE SERVICES
Consultative services are grouped into four categories:
- SAFETY CONSULTING SERVICES - involves program development for fire,
electrical and process safety and OSHA compliance;
- INDUSTRIAL HYGIENE CONSULTING SERVICES - involves on-site audit and
assessment surveys for compliance with OSHA standards in the areas of indoor air
quality and worker exposure to toxic chemicals and metals; and other physical
health hazards;
- ASBESTOS AND LEAD CONSULTING SERVICES - includes hazard assessments
(surveys, sampling and analyses), design engineering, project management for
abatement and removal of asbestos or lead; and
- TRAINING - involves the establishment of programs and subsequent delivery
of safety, asbestos, lead and industrial hygiene, and OSHA and EPA compliance
training.
Asbestos consulting services had been performed by Azimuth's field
operators until 1996, when it made a transition to providing these services
through subcontractors. Through the subcontractor, the Company continues to
offer these services including both asbestos and lead services inclusive of
building surveys, operations and maintenance plan development, removal cost
estimates, removal specifications, project management, and on-site air sampling
and analysis for abatement projects. The Company has relationships with three
individuals, two who were former employees of the Company, which act as
subcontractors providing Asbestos consultative services. Two of these providers
operate under an oral agreement and the other under a written subcontractor
agreement.
In October 1999 the Company implemented a plan to change the focus of its
service offering from mainly Industrial Hygiene Services to an emphasis on
expanded safety services. Safety Services are specialty consulting and on-site
training products which assist clients to set goals and achieve reductions in
frequency and severity of accidental losses through the process of identifying
and controlling harmful employee behavior and hazardous conditions in the
workplace. Safety Services, when properly implemented, assist clients achieve
compliance with regulatory requirements established by state and Federal OSHA,
transportation, and environmental agencies. Management believes that Safety
Services represent a broader need within the industry, especially for employers
having between 50 and 150 employees. This industry segment makes up the greater
percentage of the market potential for the services of the Company and comprises
the segment in which the Company is focusing its greatest sales effort. It is
Management's belief, based on market trends, that leading with Safety Services
establishes a customer relationship that allows other services, I.E. Idustrial
Hygiene Services and Environmental Services, to be sold to the same customer.
INTELLECTUAL PROPERTY
PATENTS AND LICENSES
The Company's only patent was issued on April 27, 1993 covering the
Bellmouth cassette technology. This cassette technology, including patent rights
was sold to Multi-Metrics, Inc. in 1997. See Item 1:"General" and "Historical
Background".
TRADEMARKS AND TRADE NAMES
Azimuth(R) and Occupational Healthguard(TM) are registered service marks of
Azimuth. Asbestos Analytics(R) is a registered trademark of Envirometrics
Products Company. "Envirometrics" is a registered servicemark with the State of
South Carolina.
SALES AND MARKETING
The Company's laboratory services are marketed through telemarketing
efforts and by attending local and national Industrial Hygiene and Safety trade
conferences.
Emphasis has been placed on internal growth of the consultative services in
the state of South Carolina. In South Carolina there exists an industrial
corridor that geographically extends along Interstate 85 that crosses the
northern quadrant of the state. The Company has never had an office or a
presence in this area. The Company at first tried to penetrate this market by
having a direct sales person domiciled in this area of the state, but has now
entered into a memorandum of agreement with a company in the upstate focusing on
similar service lines that is strong on sales and weak in depth of services. The
memorandum of agreement is based on the Company acting in a subcontractor role
and paying finders fees for work referred.
The Company has determined that employers having from 50 to 150 employees
typically do not have the internal resources to comply with OSHA and EPA
regulations and have the greatest need to secure outside services. This is the
target market to which the Company is directing its sales focus for growth of
Azimuth sales.
Management has evaluated a strategy to increase its revenue per customer.
It has determined that by offering Safety Services, a greater potential exists
to generate higher sales per customer and allow for the integration of other
Company service offerings, i.e. Industrial Hygiene and Environmental Services.
This shift in marketing strategy is anticipated to generate higher revenues per
customer in the future.
EMPLOYEES AND SUBCONTRACTORS
Presently the Company has a total of 11 employees. The number of employees
at December 31, 1999 fiscal year was as follows:
- ------------ -- --------- -- ----------- -- --------------------------
Year Total Parent Lab & Consultative
- ------------ -- --------- -- ----------- -- --------------------------
1999 11 2 9
- ------------ -- --------- -- ----------- -- --------------------------
None of the Company's employees are represented by a labor organization.
The Company considers its relations with employees to be satisfactory.
The Company utilizes the services of three subcontractors in the provision
of Asbestos Consultative services (see "Company Services--Consultative Services"
above).
INSURANCE
The Company presently maintains insurance as required by law (e.g.,
workers' compensation insurance), and liability insurance in respect to hazards
on the Company's business premises. The Company continues to carry product
liability insurance for its former products, generally providing for coverage of
$1.0 million for each occurrence or project, plus a $3.0 million umbrella
liability insurance policy that also covers product liability claims. In
addition, the Company maintains up to $1.0 million of errors and omissions
insurance for consultative services. The Company believes that such insurance is
adequate to cover potential claims relating to its past and existing business
activities. To date, its claims history has been minimal.
COMPETITION
Technological competition from other and longer established environmental
and industrial hygiene companies is significant and expected to increase. Cut
backs in the early 1990's of large Occupational Health and Safety corporate
staffs have resulted in a fragmentation of the Industry through the entry of
such released personnel into private consulting practice. The Company believes
that environmental and industrial hygiene laboratories and consulting firms will
compete intensely to maintain or improve their revenue levels and market shares.
The Company's competitors have, or are developing, consulting and laboratory
services similar to the Company's current service line. Most of these companies
have substantially greater capital resources than the Company and can be
expected to be long-term competitors.
POST "TURNAROUND" PHASE
During 1996 the Company entered a formal "Turnaround" phase as a result of
the critical financial condition that the Company was then facing. Management
analyzed all operations of the Company to determine which operations were
draining cash flow. The extreme debt load (See Item 7. Financial Statements) and
poor cash position required that significant steps be taken immediately. The
Company embarked on a plan to mediate debt through the sale of real estate, sale
of other Company assets and negotiation with vendors. The result is that the
Company has reduced its debt load from $3,203,600 at December 31, 1995 to
$514,300 at December 31, 1999.
The Company has now turned its attention to moving out of the "Turnaround"
phase. Management had devised a plan to accomplish this exit in two steps. Step
One would focus on the internal growth of Azimuth and Step Two would focus on
the development and implementation of a merger and acquisition strategy.
STEP ONE. In October 1999, Azimuth changed its service provision to shift
more focus to broader Safety Services offerings. This change was expected to
expand the customer base by offering a wider range of services and by leading
the sales process with Safety Services. Once a customer relationship was
established with Safety Services, it was expected to allow for the sale of other
service offerings, resulting in a higher revenue base per customer and
ultimately an internal growth in revenue.
STEP TWO. The Company and its management agreed that any appreciable growth
in revenue would only result through a strategy of mergers and/or acquisitions
or other consolidation with other service providers operating in the Company's
fragmented industry. The Company doesn't compete in a market that lends itself
to quick internal growth; therefore, substantial increases in revenues must come
from a roll-up of other synergistic companies. The occupational health and
safety consulting segment of the Industry is very fragmented and would lend
itself to a roll-up strategy model. The Company was in the midst of developing
its merger and acquisition strategy.
On February 18, 2000 Mr. Richard Bennett resigned his position with the
Company to pursue other opportunities. Mr. Bennett had been one of the founders
of the Company and had served from February 1995 to November 1996 as the
President and CEO. He had a strong sense of the Industry, numerous contacts and
was considered integral to the implementation of the previous exit strategy from
the "Turnaround" phase. With his departure, the Company's difficulty encountered
finding his replacement, and with the discussions moving forward with The
Catapult Group, management and the Board of Directors agreed unanimously to exit
the "Turnaround" phase via a reverse merger with The Catapult Group (see Item
13: Exhibits, Lists and Reports on Form 8K-Exhibit 10.12, The Plan and Agreement
to Exchange Stock).
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth information as to each of the principal real
properties owned or leased by the Company as of December 31, 1999, and the
current ownership lease status of that property. No other properties have been
purchased or leased since December 31, 1999.
Location & Use Title/Lessor Expiration Annual Square Lien
Date Rental (1) Feet Holder
9229 University Blvd. SOLD 12/96 & 12/30/01 $66,271 6,694 sq. ft N/A
Charleston, SC Leased back
(Corporate offices, James W. Miller
Consulting offices
& Laboratory)
1) All leases are on a "net, net" basis, which requires the Company to pay its
pro-rata share of all utilities, heat, air conditioning, taxes and other charges
assessed against the leased premises. Annual rental figures shown exclude sales
taxes, if any.
The Company believes that its facilities are adequate for its current and
anticipated requirements for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company currently has no material legal proceedings pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In November 1996, Mr. Richard Bennett resigned as President and CEO.
Because of the financial difficulty that the Company was facing the Board of
Directors directed the new President and CEO to develop and implement a
"Turnaround" plan. Because the cash position of the Company was severely
deteriorated, past audit fees were not paid to the auditor, as well as other
vendors. This non-payment created a delay in performing the annual audits for
1996-98. Because no audits were completed, no 10KSB's were filed and no annual
meetings of shareholders were conducted. As a result, there have been no matters
submitted for vote to the security holders since 1995.
The 1996-1998 10KSB's were filed on January 28, 2000. No shareholders
meetings have been scheduled because of the necessary approval to be sought for
The Catapult Group acquisition. The transaction with The Catapult Group requires
shareholder approval, which approval will be solicited by Written Consents
incorporated into a Schedule 14C Information Statement planned to be delivered
to shareholders on or about April 25, 2000. In the proposed transaction with The
Catapult Group there are four (4) matters that will be put to the shareholders
for which written consents will be solicited by the Company:
1. Reverse split of the current outstanding shares 10:1.
2. Increase of the Authorized Shares from 10 million to 20 million
3. Corporate name change to The Catapult Group, Inc.
4. Consent to consummate the transaction with The Catapult Group.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
The Company's Common Stock has been publicly traded separately and was
initially quoted on the Nasdaq Smallcap Market ("Nasdaq") under the symbol
"EVRM" on August 12, 1994. Upon the divestiture of the Trico subsidiary the
Company fell below the listing requirements of Nasdaq. On December 3, 1996, the
Company's common stock and warrants were delisted from The Nasdaq SmallCap
Market and were subsequently traded on Over the Counter Bulletin Board. On
January 4, 1999, the Securities and Exchange Commission (SEC) approved
amendments to NASD Rules 6530 and 6540 to limit quotations on the OTC Bulletin
Board(R) ("OTCBB") to the securities of companies that report their current
financial information to the SEC. On November 18, 1999, the Company's common
stock and warrants were delisted from the OTCBB because of failure to have the
required SEC periodic filings submitted by that date. Price Quotations for the
Company's common stock where then listed on the National Bureau of Quotation's
Electronic Pink Sheets (the "Pink Sheets"). On January 28, 2000 the Company
brought its filings with the SEC current, thus meeting the requirements for
re-listing on the OTCBB. One of the Company's market makers submitted the
necessary documentation to have the Company's common stock re-listed on OTCBB
and on March 21, 2000 the Company's common stock began trading on OTCBB. On
March 27, 2000, the closing price listed for a share of Company common stock was
$0.625.
On December 31, 1999 there were approximately 453 shareholders of record of
the Company's common stock, based on information provided by the Company's
transfer agent. The Company also has warrants, each to purchase one share of
Common Stock (the "Warrants"), which were previously quoted on OTCBB under the
symbol "EVRMW". On December 31, 1999, there were approximately 244 holders of
record of the Warrants, based on information provided by the Company's transfer
agent.
On April 15, 1999 the Company amended its Warrant Agreement to extend the
expiration date of the Warrants from April 29, 1999 until April 30, 2001. This
extension was executed to permit the Company to retain the ability to obtain
additional capital without incurring the expense and experiencing the delays
inherent in either a secondary public offering or a private placement of
securities.
PRICE RANGE OF OUTSTANDING COMMON STOCK
The following table sets forth the high and low bid prices for the Common
Stock as reported in the trading media and for the periods reflected above for
each fiscal quarter commencing January 1998 through December 1999. The
quotations listed below reflect inter-dealer prices, without retail mark-up,
mark-down on commission and do not necessarily represent actual transactions.
HIGH LOW
1998
FirstQuarter 1.250 0.02
SecondQuarter 0.812 0.25
Third Quarter 0.625 0.125
Fourth Quarter 0.437 0.062
1999
FirstQuarter 0.187 0.062
SecondQuarter 0.375 0.062
Third Quarter 0.375 0.050
Fourth Quarter 0.375 0.005
On March 27, 2000, the last sale price of a share of Common Stock as
reported on OTCBB was $0.625.
DIVIDENDS
The Company has never paid dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future. For the foreseeable
future any future earnings or funds otherwise available, if any, for the payment
of dividends will be used to pay dividends on the outstanding Preferred Stock
(see Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations) or for reinvestment in the Company's business. Any future
determination to pay cash dividends on the Common Stock will be at the
discretion of the Board of Directors and will reflect such other factors
(including contractual requirements) as the Board of Directors deems relevant.
The Company was in arrears for payment of dividends of its Preferred Stock
in the approximate amount of $59,400 at December 31, 1999. In addition, under
the terms of the Preferred Stock, the holder can "put" outstanding shares of
Preferred Stock back to the Company for repurchase. As discussed in the
financial statements, "put" obligations for 1999 through 2003 range from $35,000
to $89,000 annually. The Company will not be able to meet these obligations if
its current revenue trends continue. In March 2000, the holders of Series B
Preferred Stock authorized the company to convert their shares of Preferred
Stock, and all accrued dividends theron of approximately $50,959, to Common
Stock. As of March 31, 2000 approximately $18,345 of accrued dividends on Series
C Preferred Stock are still owed.
Contemplated in the transaction with The Catapult Group, the holders of all
outstanding Preferred Stock will convert their shares of Preferred Stock to
shares of Common Stock. The conversion rights of each class of Preferred Stock
are outlined in Item 6. Management's Discussion and Analysis of Financial
Condition--General Overview. In the aggregate there are currently 353,518 shares
of all classes of Preferred Stock. It is anticipated that all of the Preferred
Stock will be converted to shares of Common Stock which will equal an additional
1,627,590 shares outstanding. In March 2000, the holders of Series B Preferred
Stock converted their Preferred Shares, and accrued and unpaid dividends, to
Common Stock of the Company. The conversion of the accrued dividends was at
$0.40 of dividends per share of Common Stock. This is the same conversion ratio
of the Preferred Stock: one share of Preferred Stock valued at $2.00 per share
converts to 5 shares of Common Stock, or $0.40 per share. The approximate
accrual of total dividends of $69,304 as of March 31, 2000 would result in an
additional 173,260 shares of Common Stock being issued if the holders of Series
C Preferred Stock convert all of their accrued dividends to Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This 10-KSB contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. Investors are cautioned that certain
statements in this 10-KSB are "forward looking statement" within the meaning of
the Private Securities Litigation Reform Act of 1995 and involve known and
unknown risks, uncertainties and other factors. Such uncertainties and risks
include, among others, certain risks associated with the closing of the The
Catapult Group transaction described herein, government regulation, and general
economic and business conditions. Actual events, circumstances, effects and
results may be materially different from the results, performance or
achievements expressed or implied by the forward-looking statements.
Consequently, the forward-looking statements contained herein should not be
regarded as representations by the Company or any other person that the
projected outcomes can or will be achieved.
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto, appearing elsewhere in
this Form 10-KSB.
GENERAL OVERVIEW
As discussed earlier, the Company formerly had 3 operating subsidiaries. As
a result of a "Turnaround" phase which began in 1996, it currently has one
operating subsidiary, Azimuth, Incorporated, which provides the following
services: industrial hygiene laboratory services; environmental health and
occupational health and safety consulting; and asbestos services. Azimuth
operates a fully accredited Industrial Hygiene ("IH") laboratory, certified by
the American Industry Hygiene Association ("AIHA"), to perform analyses of air
samples for asbestos, metals and organic vapors.
Pursuant to authority expressly granted to and vested in the Board of
Directors by the Certificate of Incorporation, in connection with effecting the
mediation of outstanding obligations of the Company, the Board ratified the
creation and issuance of the following Series (the "Series") of Preferred Stock
(the "Preferred Stock") and Classes of each such Series (the "Classes) to
Company creditors.
1. Shares of Preferred Stock designated "Series A Preferred Stock", to
consist of 70,000 shares divided into four Classes as follows:
Class 1 17,500 Shares
Class 2 17,500 Shares
Class 3 17,500 Shares
Class 4 17,500 Shares
No dividends will be paid on the Series A Preferred Stock, and the Series A
Preferred Stock is convertible at the ratio of one such share for three shares
of Company Common Stock. All shares of Series A Preferred Stock can be "put"
back to the Company by holders, at $2.00 per share, on the following schedule:
Class 1 -- From December 31, 1999 to
December 31, 2003;
Class 2 -- From December 31, 2000 to
December 31, 2003;
Class 3 -- From December 31, 2001 to
December 31, 2003; and
Class 4 -- From December 31, 2002 to
December 31, 2003.
Any shares of Series A Preferred Stock that are neither converted nor put
to the Company on or prior to December 31, 2003, shall at that time lose all
such conversion and put rights.
2. Shares of Preferred Stock designated "Series B Preferred Stock," to
consist of 208,640 shares divided into five Classes as follows:
Class 1 41,728 Shares
Class 2 41,728 Shares
Class 3 41,728 Shares
Class 4 41,728 Shares
Class 5 41,728 Shares
Shares of Series B Preferred Stock bear cumulative dividends at the rate of
$.14 per annum, and the Series B Preferred Stock is convertible at the ratio of
one such share for five shares of Company Common Stock. All shares of Series A
Preferred Stock can be "put" back to the Company by holders at the amounts per
share and on such timing as meets the following schedule:
Class 1 $2.36 From June 15, 2004 to
June 14, 2009;
Class 2 $2.42 From June 15, 2005 to
June 14, 2009;
Class 3 $2.48 From June 15, 2006 to
June 14, 2009;
Class 4 $2.54 From June 15, 2007 to
June 14, 2009; and
Class 5 $2.60 From June 15, 2008 to
June 14, 2009.
Series B Preferred Stock can be "called" by the Company by the Company's
payment of the following redemption amounts on the following schedule:
CALL DATE AMOUNTS PER SHARE
--------- -----------------
-- From June 15, 1998 to $2.00;
June 14, 1999
-- From June 15, 1999 to $2.06;
June 14, 2000
-- From June 15, 2000 to $2.12;
June 14, 2001
-- From June 15, 2001 to $2.18;
June 14, 2002
-- From June 15, 2002 to $2.24;
June 14, 2003
-- From June 15, 2003 to $2.30;
June 15, 2004
-- From June 15, 2004 to $2.36;
June 14, 2005
-- From June 15, 2005 to $2.42;
June 14, 2006
-- From June 15, 2006 to $2.48;
June 14, 2007
-- From June 15, 2007 to $2.54; and
June 14, 2008
-- From June 15, 2008 to $2.60.
June 14, 2009
Any shares of Series B Preferred Stock that are not converted or put to the
Company on or prior to June 14, 2009, or tendered by the Company pursuant to a
"call" by the Company, shall not be entitled thereafter to any dividend,
conversion, put or other rights.
3. Shares of Preferred Stock designated "Series C Preferred Stock," to
consist of 74,878 shares divided into three Classes as follows:
Class 1 24,959 Shares
Class 2 24,959 Shares
Class 3 24,960 Shares
Shares of Series C Preferred Stock bear cumulative dividends at the rate of
$.14 per annum, and the Series C Preferred Stock is convertible at the ratio of
one such share for five shares of Company Common Stock. All shares of Series C
Preferred Stock can be "put" back to the Company by holders at the amounts per
share and on such timing as meets the following schedule:
Class 1 $2.12 From June 15, 2000 to
June 14, 2003;
Class 2 $2.18 From June 15, 2001 to
June 14, 2003; and
Class 3 $2.24 From June 15, 2002 to
June 14, 2003.
Series C Preferred Stock can be "called" by the Company by the Company's
payment of the following redemption amounts on the following schedule:
CALL DATE AMOUNTS PER SHARE
--------- -----------------
-- From June 15, 1998 to $2.00;
June 14, 1999
-- From June 15, 1999 to $2.06;
June 14, 2000
-- From June 15, 2000 to $2.12;
June 14, 2001
-- From June 15, 2001 to $2.18; and
June 14, 2002
-- From June 15, 2002 to $2.24.
June 14, 2003
Any shares of Series C Preferred Stock that are not converted or put to the
Company on or prior to June 14, 2003, or tendered by the Company pursuant to a
"call" by the Company, shall not be entitled thereafter to any dividend,
conversion, put or other rights.
On March 16, 2000 the holders of all 70,000 shares of Series A Preferred
Stock converted their Series A Preferred Stock to Common Stock. This conversion
resulted in an additional 210,000 shares of Common Stock issued. In March 2000,
the holders of all 208,640 shares of Series B Preferred Stock converted their
Series B Preferred Stock to Common Stock. This conversion resulted in an
additional 1,043,200 shares of Common Stock issued. Additionally, the Company
was instructed to convert the approximate accrued dividends of $50,959 on Series
B Preferred Stock to Common Stock. This conversion was done using the same value
of $0.40 per share of Common Stock, which was the value of the Common Stock in
the conversion of the Preferred Stock. The conversion of these dividends
resulted in 127,398 shares of Common Stock issued. The holders of Series C
Preferred Stock are expected to convert some portion, possibly all, of their
Series C Preferred Stock to Common Stock, including the accrued dividends, but
at this time the amount is unknown. The Common Stock that will be issued is
prior to the 10:1 reverse stock split that will occur if The Catapult Group
transaction is approved by shareholders and consummated.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
The following financial information reports operating trends for the period
ending December 31, 1999. Revenue for the Service Division, which is comprised
of Azimuth (the remaining operating subsidiary), for the year ended December 31,
1999 amounted to $1,069,700, which was $226,200 (26.8%) higher than the $843,500
reported for the year ended December 31, 1998. One large Indoor Air Quality
consultative project that occurred in the first half of 1999 accounted for
$288,500 in 1999 revenue. 1998 revenue related to the same project was $10,453.
Cost of revenue was $186,100 higher and amounted to $776,100 for the year
ended December 31, 1999, as compared to $590,000 reported for the year ended
December 31, 1998. Most of the increase is due to costs associated with the
consultative project discussed above. The Service Division experienced higher
direct service costs from the use of subcontractors on an "as needed" basis.
The gross profit for the year ended December 31, 1999 increased by $40,200,
an increase of 15.8% to $293,700, as compared to $253,500 for the year ended
December 31, 1998.
The Company reported a 27.5% gross margin for 1999 as compared to a 30.1%
gross margin for the same period in 1998. The reason for the deterioration in
gross margin is due to the high fixed cost in the Laboratory.
Operating expenses were $12,200 lower and amounted to $489,800 for the year
ended December 31, 1999 as compared to the $502,000 reported for the year ended
December 31, 1998. Sales and marketing expenses decreased by $14,200 to $36,400
for 1999 as compared to $50,600 reported for 1998, which decreases were mostly
attributable to a reallocation of staff responsibilities in this area for 1999.
General and administrative costs increased by $10,800 to $415,800 for 1999 as
compared to the $405,000 for 1998. The increase was attributed to additional
professional services needed to complete the 10-KSB fillings for the period
1996-1998.
Depreciation and amortization costs decreased overall by $8,800 to $37,500
in 1999 from $46,300 in 1998, due to older assets being fully depreciated and
not replaced.
The Company incurred an operating loss (before extraordinary item) of
$196,100 in 1999 as compared to the $248,400 operating loss (before
extraordinary item) reported for 1998 due to the reasons discussed above
Interest income for the year ended December 31, 1999 was $8,900 compared to
$54,300 reported for the year ended December 31, 1998. The decrease is due to
the reduction in the principal balance outstanding for a note receivable that
was executed during 1996 in connection with the disposition of the Trico
business. The Company negotiated the sale of the Trico note receivable to a
shareholder, which resulted in a loss on the transaction of $104,400 reported in
1998. Cash received by the Company amounted to $260,000, of which $200,000 was
collected in January 1999.
Interest expense of $5,200 for 1999 was $22,100 lower than the amount
reported for 1998 which was $27,300. The decrease in interest expense is
attributable to conversion of long-term debt to equity at June 30, 1998. There
was no amortization of loan costs for 1999 and as compared to $9,900 for the
same period in 1998.
The Company reported a loss before extraordinary item of $174,900 for the
year ended December 31, 1999 as compared to a loss before extraordinary item of
$320,400 for the year ended 1998 for the reasons stated above.
The Company reported extraordinary gain from mediation of vendor
debt of $47,900 in 1999 as compared to $325,900 for 1998.
Net loss for the year ended December 31, 1999 was $127,100, which is a
$132,600 decrease over the net income of $5,500 reported for the year ended
1998.
FINANCIAL CONDITION
The independent auditor's report stated that the Company has suffered from
recurring losses from operations and decreases in working capital and
stockholders' equity. This raises substantial doubt about the Company's ability
to continue as a going concern. The Company's financial condition deteriorated
during 1999 over 1998 due to decreased revenue activity in the last quarter of
1999 and additional professional services incurred in the fourth quarter to
complete audits of the Company's financial statements for the years 1996 through
1998 and to file the related 10-KSB's with the Securities and Exchange
Commission. The Company is experiencing cash flow constraints.
The working capital deficiency increased by $147,500, from a deficiency of
$3,100 at December 31, 1998 to a deficiency of $150,600 at December 31, 1999.
This is primarily due to increased vendor payables related to professional fees
as discussed above and accrued dividends on Preferred Stock.
Trade accounts receivable decreased approximately $51,500 to $131,700 at
December 31, 1999 from $183,200 at December 31, 1998 due to a large project with
a public school system that was initiated during the last quarter of 1998 and
carried over into the first two quarters of 1999.
The Company was in arrears for payment of dividends on its Preferred Stock
in the approximate amount of $59,400 at December 31, 1999. In addition, other
terms of the Preferred Stock issued during 1997 and 1998 permit the holders to
"put" the shares back to the Company. As discussed in the financial statements,
"put" obligations for 1999 through 2003 range from $35,000 to $89,000 annually.
In March 2000, the holders of Series B Preferred Stock converted to Common Stock
all accrued dividends of $50,959 owed to them. $18,345 of accrued dividends on
Series C Preferred Stock are still owed.
During 1999, the Company continued to eliminate its older vendor debt and
recognized approximately $47,900 of extraordinary gain from mediation of vendor
debt.
In January 1999, the Company was able to liquidate the Trico note
recievable and net $260,000 in working capital. These funds were used to
continue debt mediation and begin a focused exit from the "Turnaround" phase.
The first steps to exit the "Turnaround" phase focused on increasing the revenue
of Azimuth. The increase in revenue was predicated on changing the service
offering from mainly Industrial Hygiene Services to broader based Safety
Services, and cultivating the rising emphasis placed on Indoor Air Quality.
Management and the Board of Directors agree that, with the small revenue base,
which currently is generated in Azimuth(the only operating subsidiary), sizable
growth must come from a merger and acquisition strategy. Any merger and
acquisition activity is anticipated to bring further dilution to the
shareholders of the Company.
Equipment used by Azimuth is not being replaced currently because of tight
cash constraints being experienced by the Company. There is no guaranty that the
Company will be able to finance the acquisition of needed equipment, resulting
in a material adverse impact on the Company's continuing operations.
On February 18, 2000, Mr. Richard Bennett resigned his position with
Azimuth to pursue other opportunities. With his departure,the Company
encountered difficulty finding his replacement, particularly due to the ongoing
discussions with The Catapult Group. As a result, management and the Board of
Directors determined that it is in the best interests of the Company to exit the
"Turnaround" phase via a reverse merger acquisition of The Catapult Group (see
Item 13: Exhibits, Lists and Reports on Form 8K-Exhibit 10.12, The Plan and
Agreement to Exchange Stock). The Company is currently in discussion with a
company owned by Mr. Bennett concerning the acquisition of certain operating
assets and client contracts of Azimuth.
The acquisition of The Catapult Group, if consummated, will be transacted
as a stock exchange whereby the shareholders of The Catapult Group will receive
shares of the Company. The Catapult Group will become a wholly-owned subsidiary
of the Company. The Catapult Group shareholders and option holders as a group
will end up with 90% ownership of the fully-diluted equity of the Company. The
Company will change its name from Envirometrics, Inc. to The Catapult Group,
Inc. after closing. The transaction will involve the reverse split of the
pre-closing shares of the Company. It is anticipated that the Agreement will
close on or about May 15, 2000.
EFFECTS OF INFLATION
Inflation has not been a material factor affecting the Company's business.
However, the Company's consulting, laboratory and manufacturing operations are
subject to the effects of inflation to the extent that it may adversely affect
interest rates and the availability of credit which directly and adversely
affects the construction industry, a primary user of the Company's products and
services.
ITEM 7. FINANCIAL STATEMENTS
Page No.
Financial Statements:
Independent Auditor's Report 22
Consolidated Balance Sheets as of
December 31, 1999, and 1998 23-24
Consolidated Statements of Operations for the
years ended December 31, 1999 and 1998 25
Consolidated Statements of Stockholders'
Equity for the years ended December 31, 1999 and 1998 26
Consolidated Statements of Cash Flows for the
years ended December 31, 1999 and 1998 27-28
Notes to the Consolidated Financial Statements 29-38
<PAGE>
Independent Auditors' Report
To The Board of Directors
Envirometrics, Inc.
Charleston, South Carolina
We have audited the accompanying consolidated balance sheets of
Envirometrics, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, common stock and
accumulated deficit and of cash flows for the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Envirometrics, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 13 to the consolidated financial statements, the Company has suffered
recurring losses from operations and decreases in working capital and
stockholders' equity. This raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 13. The consolidated financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Welch, Roberts & Amburn, LLP
March 31, 2000
22
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- ------------
ASSETS
- ------
<S> <C> <C>
Current Assets
- --------------
Cash and cash equivalents $ 104,607 $ 40,934
Notes receivable, current portion 418,294
Trade receivables, less allowance for doubtful accounts
1999 $5,000; 1998 $5,000 131,654 183,155
Other receivables - 22,213
Inventories 4,000 14,974
Prepaid expenses 27,634 27,077
----------- -----------
Total Current Assets 267,895 706,647
----------- -----------
Other Assets and Intangibles
- ----------------------------
Deposits 2,500 2,951
----------- -----------
Property and Equipment
- ----------------------
Furniture and equipment 921,358 997,754
Vehicles 9,490 9,490
----------- ----------
930,848 1,007,244
Less accumulated depreciation and amortization (870,816) (913,919)
----------- -----------
60,032 93,325
----------- -----------
$ 330,427 $ 802,923
=========== ===========
<FN>
See Notes to Consolidated Financial Statements
</FN>
23
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
<S> <C> <C>
Current Liabilities
- -------------------
Notes payable
Current maturities of long-term debt $ 12,848 $ 23,260
Stockholders - 195,000
Other 13,708 32,094
Accounts payable 221,228 247,074
Accrued expenses and other 170,677 212,328
----------- -----------
418,461 709,756
----------- -----------
Total Current Liabilities
Noncurrent Liabilities
- ----------------------
Long-Term Debt 71,681 85,350
Deferred gain on asset sale 24,167 48,333
--------------------------- ----------- -----------
Total Noncurrent Liabilities 95,848 133,683
----------- -----------
Redeemable Preferred Stock
- ---------------------------
Par value $.001; authorized 2,500,000 shares;
issued 1998 - 353,518 shares; 1997 - 70,000 shares 717,985 700,974
----------- -----------
Common Stock and Accumulated Deficit
- ------------------------------------
Common stock, par value $.001;authorized 10,000,000shares
shares; issued 1999 - 3,640,880 shares;
1998 - 3,010,186 shares; 3,640 3,010
Additional paid-in capital 5,069,388 5,103,334
Accumulated deficit (5,974,895) (5,847,834)
----------- -----------
(901,867) (741,490)
----------- -----------
$ 330,427 $ 802,923
============ ============
<FN>
See Notes to Consolidated Financial Statements
</FN>
24
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------------ ------------
Service Revenue $ 1,069,746 $ 843,497
- ---------------
Direct Service Costs 776,070 589,975
- ------------------- ------------ ------------
Gross Profit 293,676 253,522
Operating Expenses
- ------------------
Sales and marketing 36,443 50,621
General and administrative 415,846 405,020
Depreciation and amortization 37,522 46,328
------------ ------------
489,811 501,969
------------ ------------
Operating Loss (196,135) (248,447)
Other Income (Expense)
- ----------------------
Interest income 8,886 54,275
Interest expense (5,161) (27,268)
Gain on disposition of property 17,475 15,350
Loss on note receivable - (104,427)
Amortization of loan costs - (9,880)
------------ ------------
21,200 (71,950)
------------ -------------
Loss before extraordinary item (174,935) (320,397)
------------ ------------
Extraordinary item - gain on vendor debt
mediation 47,874 325,869
------------ ------------
Net Income (Loss) $ (127,061) $ 5,472
------------ ------------
Earnings Per Common Share
- -------------------------
Net loss before extraordinary item (.074) (.126)
Extraordinary item .015 .117
------------ ------------
Net (Loss) Per Common Share $ (.059) $ (0.009)
============ ============
Weighted average number of common shares
outstanding $ 3,108,678 $ 2,786,695
============ ============
<FN>
See Notes to Consolidated Financial Statements
</FN>
25
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCK AND ACCUMULATED DEFICIT
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Additional Accumulated
Common Stock Paid-in Capital Deficit
------------ --------------- --------------
Balance, December 31, 1997 $ 2,667 $ 5,095,673 $ (5,853,306)
Net income 5,472
Issuance of 180,287 shares of common stock
in consideration of vendor debt 180 21,810 -
Issuance of 162,500 shares of common stock in
consideration of loan cost 163 15,478 -
Dividends accrued and accretion on preferred
shares - (29,627) -
------------ ------------ -------------
Balance, December 31, 1998 $ 3,010 $ 5,103,334 $ (5,847,834)
============ ============ =============
Net Loss (127,061)
Issuance of 274,669 shares of common stock
for compensation 274 16,885
Issuance of 356,025 shares of common stock
for legal expenses 356 5,873
Dividends accrued and accretion on preferred
shares - (56,704) -
------------ ------------ -------------
Balance, December 31, 1998 $ 3,640 $ 5,069,388 $ (5,974,895)
============ ============ =============
<FN>
See Notes to Consolidated Financial Statements
</FN>
26
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------------ ------------
Cash Flows From Operating Activities
Net income/(loss) $ (127,061) $ 5,472
Adjustments to reconcile net income/(loss) to net cash
provided by (used in) operations:
Depreciation 37,522 46,328
Amortization - 9,880
Provision for doubtful accounts - 5,385
Non-cash expense paid by issuance of common
stock 23,388 4,500
(Gain) loss of disposal of property & equipment (17,475) (15,350)
Extraordinary Item - Gain on debt restructuring (47,874) (325,869)
Loss on sale of note receivable - 104,427
Change in assets and liabilities
(Increase) decrease in accounts receible 73,714 (92,972)
(Increase) decrease in inventory 10,974 2,360
(Increase) decrease in prepaid expenses (557) 26,744
(Increase) decrease in other assets 451 18,142
Increase (decrease) in accounts payable and
accrued expenses (59,316) 72,766
------------ ------------
Net Cash (Used in) Operations (106,234) (138,187)
------------ ------------
Cash Flows From Investing Activities
- ------------------------------------
Proceeds from sale of property and equipment - 3,456
Purchase of property and equipment (10,920) -
Collections on notes receivable 418,294 174,023
------------ -------------
Net Cash Provided by Investing
Activities 407,374 177,479
Cash Flows From Financing Activities
- ------------------------------------
Principal payments on revolving credit agreements
and short-term notes (10,412) (3,310)
Proceeds from long-term borrowing - 20,000
Principal payments on long-term borrowing (227,055) (69,144)
----------- -----------
Net Cash (Used in) Financing
Activities (237,467) (52,454)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 63,673 (13,162)
</TABLE>
27
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------------ ------------
Cash and Cash Equivalents
Beginning $ 40,934 54,096
------------ ------------
Ending $ 104,607 $ 40,934
============ ============
Supplemental Disclosure of Cash Flow Information
- -----------------------------------------------
Cash Payments for Interest $ 21,509 $ 2,972
============ ============
Supplemental Schedule of Noncash Investing and
- ----------------------------------------------
Financing Activities
--------------------
Conversion of Debt to Preferred Stock $ - 551,035
============ ============
Debt Assumed on Disposition of Property and
Equipment $ - $ 8,003
============ ============
Issuance of Common Stock in Settlement of Vendor
Debt $ - $ 2,972
============ ============
Accretion in the Carrying Value of Preferred Stock $ 17,011
============
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
28
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of Business. The Company functions as a holding company for its
subsidiaries; Azimuth, Incorporated, ("Azimuth"), and Envirometrics
Products Company, ("EPC"). Azimuth operates as consultants in environmental
and occupational health matters and in addition provides the services of an
American Industrial Hygiene Association ("AIHA") and National Voluntary
Laboratory Accreditation Program ("NVLAP") accredited industrial hygiene
laboratory. EPC is inactive. The Company's primary facilities are located
in Charleston, South Carolina, with sales throughout the United States.
A summary of the Companies' significant accounting policies follows:
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents. For purposes of reporting the statements of cash
flows, the Company considers all cash accounts, which are not subject to
withdrawal restrictions or penalties, and all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
Accounts Receivable. Accounts receivable are evaluated for collectibility
by aging, with an allowance for doubtful accounts maintained based on
historical losses and recoveries. Accounts are written off when deemed to
be uncollectible.
Inventories. Supplies were valued at $4,000 and $14,974 at December 31,
1999 and 1998 respectively.
Property and Equipment. Property and equipment is stated at cost.
Depreciation is computed using primarily accelerated methods, over the
following useful lives:
Furniture and equipment 5 - 7 years
Vehicles 3 - 5 years
Revenue Recognition. Revenue from services are recognized when the services
are performed. During 1999, in excess of twenty percent of the Company's
revenue was from one customer and one project which has been completed.
Income Taxes. Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating losses, tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and
their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets may not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
Concentration of Credit Risk. Financial instruments that potentially
subject the Company to credit risk consists principally of cash, notes and
accounts receivable. The Company provides product and services to various
local and national clients and, therefore, issues credit under binding
contracts to these entities. The Company places its cash with a high credit
quality financial institution. At times such cash may be in excess of the
FDIC insurance limit.
Loss per Common Share. Loss per common share is based upon the weighted
average number of common shares outstanding.
29
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies - continued
Loss before extraordinary item attributable to common shareholders is as
follows:
1999 1998
-------------- --------------
Loss before extraordinary item $ (174,935) $ (320,397)
Preferred stock dividend require-
ments 56,704 29,677
-------------- --------------
Loss before extraordinary item
attributable to common share-
holders $ (231,639) $ (350,074)
-------------- ==============
Per share amount (.074) $ (.126)
-------------- --------------
Weighted average number of
common shares outstanding 3,108,678 2,786,695
============== ==============
Basic and diluted earnings per common share and common share equivalents
are calculated using the weighted average number of common shares
outstanding during the year and on the net additional number of shares
which would be issuable upon the exercise of all stock options and
warrants, assuming that the Company used the proceeds received to purchase
additional common shares at market value. The impact of the incremental
shares is anti-dilutive.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Note 2. Notes Receivable
Notes receivable are comprised of the following for 1998:
Mortgage note receivable payable interest only
at 10% per annum through January 1999. $218,294
Note receivable from former shareholder due
$10,979 per month including interest at 7%
through July 15, 2008 (see Note 7) 200,000
-------
418,294
Less current portion 418,294
-------
$ -
=======
30
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Notes Payable, Long-Term Debt and Pledged Assets
Notes payable at December 31, consisted of the following:
1999 1998
---- ----
Note with interest at 11.85% per annum due in
monthly principal and interest payments of
$2,515 with a final payment due in June 2000. $ 12,848 $ 22,129
Due to factor - 1,131
-------- ---------
Total $ 12,848 $ 23,260
======== ========
<TABLE>
<CAPTION>
<S> <C> <C>
Long-term debt at December 31 consisted of the following:
1999 1998
--------- ---------
U.S. Small Business Administration (SBA) loans (two loans)
4% interest rate, due in monthly installments of $1,408,
including interest, due July 2005,collateralized by
equipment, furniture and fixtures.
$ 85,389 $ 98,520
Various installment loans, with interest rates ranging from
6% to 24%, due in monthly installments ranging from
$290 to $2,500, including interest due collateralized by
vehicles, equipment and furniture and fixtures,
due June 1999. 18,924
Note payable to stockholders, collateralized by shares of
stock of certain officers, directors and former employees.
195,000
-------- ---------
85,389 312,444
Less current maturities 13,708 227,094
----------------------- -------- ---------
$ 71,681 $ 85,350
======== =========
</TABLE>
Maturities of long-term debt are as follows:
December 31:
2000 13,708
2001 14,267
2002 14,848
2003 15,451
2004 27,115
---- ------
$ 85,389
========
At December 31, 1999, substantially all Company assets are pledged as
collateral on the above-mentioned debt agreements.
31
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Operating Leases
The Company leases various office facilities and equipment under
noncancellable operating leases. The Company also subleased an office
facility. Rental expense from operating leases were as follows:
Sublease Net
Rent Expense Rental Income Rental Expense
December 31,
1998 242,488 (142,106) 100,382
1999 113,956 -0- 113,956
Future obligations for minimum rentals on remaining noncancellable leases
in excess of one year are as follows:
2000 $ 84,624
2001 84,624
2002 70,710
2003 70,557
2004 72,420
Thereafter 151,428
During 1996, the Company sold its laboratory and office facilities along
with other properties resulting in a gain of $223,120. Concurrently
therewith, the Company entered into a lease with the purchaser for the
continued use of the facilities for a five year term at $66,276 per year.
In accordance with SFAS 13, gain in the amount of $120,831 has been
deferred and is being recognized in the financial statements over the lease
term, $24,166 per year.
Note 5. Income Taxes
As explained in Note 1, the liability method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the reported amounts of
assets and liabilities and their tax bases.
Net deferred tax assets consist of the following components as of December
31:
1999 Current Long-Term Total
Deferred tax assets:
Receivable allowances $ 1,950 $ - $ 1,950
Operating loss carryforwards - 1,789,081 1,789,081
Less valuation allowance (1,950) (1,783,910) (1,785,860)
-------- ----------- -----------
- 5,171 5,171
Deferred tax liability:
Property and equipment - (5,171) (5,171)
-------- ----------- -----------
$ $ $
- - -
======== =========== ===========
32
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Income Taxes - continued
1998 Current Long-Term Total
Deferred tax assets:
Receivable allowances $ 1,950 $ - $ 1,950
Other 2,535 - 2,535
Operating loss carryforwards - 1,739,527 1,739,527
Less valuation allowance (4,485) (1,735,331) (1,739,816)
------- ----------- -----------
- 4,196 4,196
Deferred tax liability:
Property and equipment - (4,196) (4,196)
------- ---------- -----------
$ - $ - $ -
======= ========== ===========
The Company recorded a valuation allowance of $1,785,860 and $1,739,816 on
deferred tax assets at December 31, 1999 and 1998, respectively.
Realization of deferred tax assets is dependent upon sufficient future
taxable income during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable income. The
net valuation allowance increased (decreased) $46,044 and $(4,552), for the
years ended December 31, 1999 and 1998, respectively, due primarily to the
change in loss carryforwards.
Loss carryforwards for tax purposes as of December 31, 1999, have the
following expiration dates:
Expiration Date Amount
2001 $ 9,469
2002 3,027
2003 33,108
2004 118,331
2005 132,119
2006 280,783
2007 633,538
2008 226,315
2009 518,545
2010 890,256
2011 1,312,613
2012 258,683
2014 127,061
----------
$4,543,848
==========
33
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Income Taxes - continued
The following is a reconciliation of income tax at the federal statutory
rate to the Company's income tax provision.
1999 1998
Tax (benefit) at statutory rate of 35% $ (44,471) $ 1,915
State tax (benefit) - net (3,811) 219
Non deductible charges 875 2,808
Change in valuation allowance 46,044 (4,552)
Other net 1,363 (390)
---------- ---------
Provision for taxes $ - $ -
========== =========
Note 6. Debt Compromise
The Company compromised debt with vendors and suppliers in 1999 and 1998.
Extraordinary gain is recognized to the extent the applicable debt exceeds
the cash or the fair market value of stock issued and is summarized as
follows:
1999 1998
---- ----
Debt settled for cash $ 47,874 $ 232,061
Debt settled for options and common stock - 93,808
-------- ----------
$ 47,874 $ 325,869
======== ==========
Note 7. Redeemable Preferred Stock
In 1997 the Company issued 70,000 shares of Series A preferred stock, $2
stated value, which have preferences in the event of a liquidation of the
Company. These preferred shares are convertible into common shares at the
ratio of one share of preferred stock for three shares of common stock and
are puttable, 17,500 shares annually beginning in December 1999 through
2002 at a put price of $2 for each preferred share. Shares not put back to
the Company may be carried forward to the next year.
During 1998, the Company issued 283,518 shares of Series B and C preferred
stock, $2 stated value, to certain officers and related parties in exchange
for the conversion of outstanding debt by the Company. These shares provide
for cumulative dividends of $.14 per share, per annum. The preferred
shareholders have the right at any time on or before June 14, 2009 (the
"Maturity Date") to convert all or a portion of the Preferred Stock, into
shares of Company's Common Stock, upon sixty (60) days prior written notice
to Company. At all times up until the Maturity Date, the conversion ratio
shall be one share of Preferred Stock for five shares of Common Stock. If
the shareholder elects to convert less than all of the Preferred Stock
owned by it, all remaining shares of Preferred Stock shall be convertible
under the same terms. As an alternative to the conversion into Common stock
as set forth above, the shareholder has the right to put the shares of
Preferred Stock issued back to the Company in exchange for a cash payment.
The put price on these shares of preferred stock accretes at a rate of
three percent annually. Shares that are not put by the shareholder back to
the Company in any given year may be carried forward to the next year at
the price for that year.
34
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Redeemable Preferred Stock - continued
Obligations under the put options discussed above are as follows:
2000 $ 70,000
2001 87,913
2002 89,411
2003 55,910
2004 -0-
Thereafter 517,428
-----------
$ 820,662
===========
Dividends on Preferred Shares The Company is in arrears for payment of
dividends on its preferred stock in the amount of $59,381 at December 31,
1999. The Company continues to accrue dividends at the stated rate of $.14
per share per annum. This amount accrued for the first year (through June
30, 1999) and is to be divided equally among and added to the quarterly
payments for the second year. The accrued amount at December 31, 1998 was
$19,689.
Note 8. Unregistered Stock
The Company issued 630,694 shares of unregistered common stock in 1999 for
compensation and legal expenses. In 1998, the Company issued 162,500 shares
in consideration of loan costs on notes payable to shareholders. The
transactions were recorded at discounted prices due to lack of
marketability, liquidity and control related to the shares issued.
On December 30, 1999 the Board of Directors awarded stock options to the
directors to purchase an aggregate of 350,000 shares. All such options
provide for an exercise price of $.10 per share, all are exercisable at the
grant date and all expire on December 30, 2004. The exercise price
applicable under such outstanding stock options represent 100% of the fair
market value of the underlying common stock as of the date that such
options were granted, as determined by the Board of Directors of the
Company on the date that such options were granted.
Note 9. Related Party Transactions and Balances
Shakespeare Partners, LTD, whose general partner is a stockholder of the
Company, had an outstanding note due from the Company of $195,000 at
December 31, 1998. The note was repaid in January 1999. No interest was
paid by the Company. During 1998, approximately $149,700 of debt was
converted to 74,878 preferred shares.
In December 1998 the Company entered into an agreement with Shakespeare
Partners, LTD and its General Partner to sell its note receivable from
Trico Incorporated amounting to $364,427 to the General Partner's
retirement plan for $260,000 which resulted in a loss to the Company of
$104,427 that was recorded in December 1998.
During 1998, $207,296 of debt to the United States Company, a stockholder,
was converted to 111,648 preferred shares. Certain principals in the United
States Company serve the Company as Secretary, Treasurer and directors
The President and CEO converted 100% of his outstanding notes during 1998.
No interest was paid by the Company. Approximately $17,700 was converted to
8,835 preferred shares.
An officer converted $4,500 of accrued salary to 2,250 preferred shares in
December 1998.
In addition to the related party transactions discussed above,
approximately $171,812 of vendor debt was converted to 85,907 preferred
shares during 1998.
35
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Stock Options and Warrants
In January 1994, the Board of Directors of the Company adopted the
Company's Stock Option Plan, (the "Plan") as previously authorized by the
Company's stockholders. Under the Plan, officers, directors, key employees
and/or consultants of the Company can receive incentive stock options and
nonqualified stock options to purchase up to an aggregate of 150,000 shares
of the Company's common stock (of which no more than 50,000 shares may be
pursuant to incentive stock options, and no more than 100,000 shares may be
pursuant to nonqualified stock options). In January 1994, the Company's
Board of Directors awarded, under the Plan, nonqualified stock options for
an aggregate of 75,000 shares, all of which provide for an exercise price
of $2.00 per share, are exercisable beginning on January 1, 1995 and
expired on December 31, 1998 (subject to prior termination in accordance
with the applicable stock option agreements).
On March 31, 1995, the Board of Directors awarded, under the Plan,
non-qualified stock options to purchase an aggregate of 34,500 shares. The
Board of Directors granted 23,000 incentive stock options to certain
employees, 10,000 non-qualified stock options to a Director and 1,500
non-qualified stock options to an individual under its stock option plan.
All such options provide for an exercise price of $3.625 per share, all are
exercisable at the grant date and all expire on March 20, 2005 (subject to
prior termination in accordance with the applicable stock option
agreements). The exercise price applicable under such outstanding stock
options represents 100% of the fair market value of the underlying Common
Stock as of the date that such options were granted, as determined by the
Board of Directors of the Company on the date that such options were
granted.
On April 17, 1996 the Board of Directors awarded under the Plan incentive
stock options to purchase an aggregate of 23,750 shares. All such options
provide for an exercise price of $1.88 per share, all are exercisable at
the grant date and all expire on April 16, 2006 (subject to prior
termination in accordance with the applicable stock option agreements). On
December 10, 1996 the Board of Directors awarded under the Plan
non-qualified stock options to purchase an aggregate of 30,000 shares. All
such options provide for an exercise price of $2.38 per share, all are
exercisable at the grant date and all expire on December 9, 2004 (subject
to prior termination in accordance with the applicable stock option
agreements). The exercise price applicable under such outstanding stock
options represents 100% of the fair market value of the underlying common
stock as of the date that such options were granted, as determined by the
Board of Directors of the Company on the date that such options were
granted.
During the period 1996 through 1998, 23 employees who were holding
incentive stock options left the employment of the Company without
exercising their options. Subject to the stock option agreements, their
options terminated on the effective dates of their resignations. Of the
options for 88,250 issued in March, 1995 and April and December 1996,
42,250 options have expired, (40,750 incentive stock options and 1,500
non-qualified stock options).
On January 28, 1999 the Board of Directors awarded under the Plan incentive
stock options to purchase an aggregate of 40,000 shares. All of such
options provide for an exercise price of $0.10 per share, all are
exercisable at the grant date and all expire on January 27, 2009 (subject
to prior termination in accordance with the applicable stock option
agreements). The exercise price applicable under such outstanding stock
options represents 100% of the fair market value of the underlying common
stock as of the date that such options were granted, as determined by the
Board of Directors of the Company on the date that such options were
granted. 10,000 options expired on September 4, 1999 when the employee
resigned employment.
As of March 15, 2000 there were 87,000 options outstanding, including both
incentive stock options and non-qualified stock options, which have been
issued under the Plan since January 1994. As of this date no options have
been exercised and on April 28, 2000 an additional 6,000 options will
expire.
The Company applied Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" in accounting for stock-based employee
compensation arrangements whereby no compensation cost related to stock
options is deducted in determining net income (loss). Had compensation cost
for the Company's stock option plans been determined pursuant to SFAS No.
123, "Accounting for Stock-Based Compensation," the effect on the Company's
net income (loss) and earnings (loss) per share would not have been
material.
On December 31, 1998 the Company had outstanding 600,000 warrants to
purchase it common stock at $6.00 per share. On April 29, 1999 the company
amended its warrant agreement to extend the expriation date of the warrants
to April 30, 2001. Under certain conditions, the warrants are subject to
redemption by the Company for $.05 per share.
Note 11.Fair Value of Financial Instruments
The following disclosure of estimated fair value of financial instruments
is made in accordance with the requirements of Financial Accounting
Standards No. 107, Disclosure About Fair Value of Financial Instruments.
The estimated fair value amounts have been determined by the Company using
available market information. Accordingly, the estimates presented herein
may not be indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions or valuation
methodologies may have a material effect on the estimated fair value
amounts.
The carrying values of cash and accounts receivable approximate fair values
due to the short-term maturities of these instruments. The carrying value
of note receivable, notes payable and long-term debt approximate fair
values based on the discounted cash flow of those instruments, using
current interest rates and remaining maturities at December 31, 1999.
Accounts payable are carried at their face amount. Due to the Company's
debt compromise program, the fair value will differ from the face amount.
The amount of such differences has not been quantified and accordingly, is
not disclosed.
36
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12.Other
Loss of Listing from NASDAQ
The Company's Common Stock has been publicly traded separately and was
initially quoted on the Nasdaq Smallcap Market ("Nasdaq") under the symbol
"EVRM" on August 12, 1994. Upon the divestiture of the Trico Envirometrics,
Inc. subsidiary the Company fell below the listing requirements of Nasdaq.
On December 3, 1996 the Company's common stock and warrants were delisted
from The Nasdaq SmallCap Market and were subsequently traded on the Over
the Counter Bulletin Board. On January 4, 1999, the Securities and Exchange
Commission (SEC) approved amendments to NASD Rules 6530 and 6540 to limit
quotations on the OTC Bulletin Board ("OTCBB") to the securities of
companies that report their current financial information to the SEC. On
November 18, 1999 the Company's common stock and warrants were delisted
from the OTCBB because of failure to have the required SEC periodic filings
submitted by that date. Price Quotations for the Company's common stock
were listed on the National Bureau of Quotation's Electronic Pink Sheets
(the "Pink Sheets").. On January 28, 2000 the Company brought its filings
with the SEC current, thus meeting the requirements for re-listing on the
OTCBB. One of the Company's market makers submitted the necessary
documentation to have the Company's common stock re-listed on OTCBB and on
March 21, 2000 the Company's common stock began trading again with a volume
of 3,000 shares traded, closing at 5/8.
Note13. Going Concern
The Company incurred losses from continuing operations of $174,935 and
$320,397 for the years ended December 31, 1999 and 1998, respectively. At
December 31, 1999, current liabilities exceeded current assets by $150,500.
As discussed in Note 14, the Company has entered into a binding agreement
to exchange shares of the Company for shares of The Catapult Group. Both
the Company and The Catapult Group are in the process of raising capital to
complete the share exchange. However, Envirometrics can waive funding as a
condition for the transaction to close.
Subject to the successful completion of this share exchange, there is
substantial doubt regarding the company's ability to continue as a going
concern.
37
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note14. Subsequent Events
On February 16, 2000, the Board of Directors of the Company approved the
terms of the purchase of Catapult and on the same date the Company signed a
non-binding Agreement. On March 8, 2000, certain conditions of the
Agreement were met and the Agreement became binding. The basic terms of the
Agreement involve the issuance of the Company's common stock to the
shareholders of Catapult in exchange for their shares of Catapult and the
escrow of shares of the Company's common stock to support exercise of
options by the holders of Catapult options, so that after Agreement closing
the shareholders and option holders of Catapult will hold (or have rights
to acquire) 90% of the outstanding common shares of the Company. The
current shareholders and option holders of the Company will retain
fully-diluted 10% ownership of the Company at closing. After closing, the
Company name will be changed to The Catapult Group, Inc. To minimize the
outstanding shares of the Company after closing, a reverse split of 10:1
will be completed for the currently issued and outstanding Company common
shares. Additionally, to facilitate the merger and the acquisition plans of
The Catapult Group, consents will be solicited from the Company's
shareholders to authorize amendment of the Company's Articles of
Incorporation for the increase of the authorized shares of Company common
stock from 10 million to 20 million.
On March 16, 2000 the holders of all 70,000 shares of Series A Preferred
Stock instructed the Company to convert their Preferred Stock to Common
Stock. This conversion will result in an additional 210,000 shares of
Common Stock being issued. On March 10, 20, 24, and 30, 2000 the holders of
all 208,640 shares of Series B Preferred Stock instructed the Company to
convert their Preferred Stock to Common Stock. This conversion will result
in an additional 1,043,200 shares of Common Stock to be issued.
Additionally, the Company was instructed by certain holders of preferred
shares to convert the related accrued dividends of $50,929 on Series B
Preferred Stock to Common Stock. This conversion will be at the same value
of $0.40 per share of Common Stock which was the value of the Common Stock
in the conversion of the Preferred Stock. The conversion of these dividends
will result in 127,322 shares of Common Stock being issued. The holder of
Series C Preferred Stock is expected to convert some portion, possibly all,
of its Preferred Stock to Common Stock along with the accrued dividend, but
at this time the amount is unknown. The Common Stock that will be issued is
prior to the 10:1 reverse stock split that will occur if The Catapult Group
transaction is consummated.
38
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
CHANGE IN AUDITOR
The Company contacted its auditor, McGladrey & Pullen, LLC ("McGladrey"),
in May of 1999 to discuss the need to complete the audits of its financial
statements for the years ended December 31, 1998, 1997 and 1996 so that it
could file the require annual10-KSB reports for those years. The Company
had $37,812 outstanding in past due fees to McGladrey of which $20,657
related to fees for the 1995 audit; $12,750 related to accounting services
in connection with due diligence services for a terminated merger and
regulatory matters during 1996; and $4,405 related to fees in connection
with preliminary audit services for the 1996 calendar year performed in
early 1997. The 1996 audit was not completed as the Company was
experiencing severe cash flow problems.
In discussing the past due fees and the audit services, McGladrey
communicated that it might not be possible for them to continue as
auditors. Company management indicated to McGladrey that it would consider
alternatives and make a decision regarding these matters.
In connection with the audit of financial statements as of and for the year
ended December 31, 1995, there were no disagreements with McGladrey &
Pullen, LLP on any matter of accounting principles, financial disclosure,
or auditing scope or procedures, which disagreements if not resolved to
their satisfaction would have caused them to make reference in connection
with their opinion to the subject matter of the disagreement.
The audit report of McGladrey & Pullen, LLP on the consolidated financial
statements of Envirometrics, Inc. as of and for the year ended December 31,
1995 did not contain any adverse opinion or disclaimer of opinion; however,
the 1995 opinion was modified with respect to an emphasis of a matter
paragraph discussing recurring losses from operations and decreases in
working capital issues confronting the Company.
In October 1999 the Company notified McGladrey that it had engaged the firm
of Welch, Roberts & Amburn, Certified Public Accountants, LLP, to conduct
the audits of its financial statements for the years ended December 31,
1998, 1997 and 1996.
Welch, Roberts & Amburn, Certified Public Accountants, LLP were retained to
conduct the 1999 audit of the Company's financial statements for the year
ended December 31, 1999.
39
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND
- --------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
- -------------------------------------------------
On January 28, 1999 Ms. Elsie L. Rose was appointed as a Director of the
Company.
The following table sets forth certain information concerning the directors
and executive officers of the Company as of March 15, 2000.
Directors and Executive Officers
Name Age Position
---- --- --------
Walter H. Elliott, III 44 President,Chief Executive Officer; Director
Elsie L. Rose, CPA 44 Treasurer, Acting Chief Financial Officer,
Secretary; Director
Charles E. Feigley, Ph.D. 54 Director
Richard H. Guilford 70 Chairman of the Board of Directors
Maurizio F. Giabbai, Ph.D. 50 Director
Walter H. Elliott, III - President, Chief Executive Officer & Director. He
joined the Company in 1988 as Director of Marketing for Azimuth, Inc. and took
on these duties as well for Envirometrics Products in 1989. He subsequently was
appointed as the Chief Operating Officer in March 1990, with responsibility for
complete business operations at Envirometrics Products. Mr. Elliott brings many
years of marketing and sales experience which he gained as a sales and technical
service representative and Product Manager from 1982 to 1986 at Organon Teknika,
Inc. (formerly Litton Bionetics, Inc.), a provider of health care products. Mr.
Elliott graduated with honors from Clemson University with a B.S. in
Microbiology (1977).
Elsie L. Rose, CPA - Ms. Rose was elected Treasurer of the Company in
August 1995, Acting CFO in November of 1996 and Director on January 28, 1999.
Ms. Rose was a founder of The United States Company and is a Director and its
Treasurer. The United States Company is a privately held management company
specializing in forming strategic partnerships with small and medium sized
businesses to provide management, financing, accounting, marketing, and
technology support. Ms. Rose has practiced public accounting, primarily in
Richmond, Virginia, for over 18 years. Ms. Rose was a senior manager at Deloitte
& Touche, LLC before joining a local Richmond, Virginia Certified Public
Accounting Firm in 1989. She began practicing as a sole practitioner before
formation of the firm of Rose, Sanderson & Creasy, LLC, in 1992. Ms. Rose is
currently a member of that firm. Ms. Rose graduated with honors from Virginia
Commonwealth University with a B.S. in Accounting in 1979.
Charles E. Feigley, Ph.D, MSPH, CIH - Dr. Feigley co-founded Azimuth,
Incorporated while serving as Chairman of Environmental Health Sciences at the
University of South Carolina. Dr. Feigley brings extensive experience in
engineering and research through his employment history with the University of
South Carolina as an Assistant and Associate Professor, a Research Associate at
the University of North Carolina, as an Environmental Control Engineer at
Diamond Shamrock Chemical Company, a chemical manufacturer, and as an
Engineering Aid with the U.S. Naval Marine Engineering Laboratory. Dr. Feigley
is a Board Member of the Company, and currently serves in various positions
within industry councils and professional societies. He is also a Diplomat for
the American Academy of Industrial Hygiene and a member of the Editorial Board
of Applied Industrial Hygiene. Dr. Feigley is a graduate of the University of
Delaware with a B.S. degree in Chemical Engineering (1967), of Rutgers
University with a M.S. degree in Environmental Sciences (1971), and of the
University of North Carolina with a Ph.D. in Environmental Sciences and
Engineering (1977). He is certified in the "Comprehensive Practice of Industrial
Hygiene" by the American Board of Industrial Hygiene.
Richard H. Guilford - Mr. Guilford is currently employed by and serves as
the Executive Vice President and Director of Imtek, Incorporated and Imtek
Office Solutions, Inc. From March 1995 until August 1999, Mr. Guilford had been
the Chairman of The United States Company, a privately held management company
specializing in forming strategic partnerships with small and medium sized
business to provide management, financing, accounting, marketing and technology
support. Mr. Guilford was a founder of HazWaste Industries Incorporated in 1987
and served as Chairman of the Board and Treasurer until February 1995. HazWaste
was ranked by Inc. Magazine among the top 500 fastest growing privately held
companies in the Untied States in 1992, 1993 and 1994. In early 1995, HazWaste
Industries Incorporated was acquired by The Earth Technology Corporation, USA, a
publicly owned international environmental company. Mr. Guilford graduated from
the Executive Management Program of the University of Virginia Graduate School
of Business in 1964 where he was President of his class. He was a finalist in
the Entrepreneur of the Year contest in 1993 and 1994 conducted by Merrill
Lynch, Ernst & Young, and Inc. Magazine.
Maurizio F. Giabbai, Ph.D. - Dr. Giabbai was elected Director of the
Company in March 1996. Dr. Giabbai a co-founder of The STAR* Group (formerly
HazWaste Inc.) and is Chairman of The United States Company. Dr. Giabbai has
over 23 years of professional experience in analytical and environmental
chemistry and management of major projects applied to environmental/hazardous
waste management programs. He held positions in academia for over 10 years as a
research scientist, and has over 10 years business management experience of
environmental consulting/engineering/remediation companies. He was the
co-founder of HazWaste Industries Incorporated in 1987, a $50 million
consulting/remediation firm, which was listed for three consecutive years among
the Inc. 500 fastest growing companies in U.S. Dr. Giabbai was with HazWaste
Industries Incorporated until February 1995. He is a graduate of the Technical
Institute G.L. Bernini (1968). He received his Doctorate in Chemistry from the
University of Rome in 1976 and served as Post-doctoral Research Associate at the
University of Alabama in 1977-1978 when he relocated to the United States of
America. He recently completed the MBA program at Georgia State University (May
1999).
If the transaction with The Catapult Group is consummated, all current
Officers and Directors will resign. The Catapult Group will appoint new
Directors and the legacy shareholders of the Company will have one
representative on the new Board of Directors.
Significant Employees
James W. Brown, CSP, CHMM - Mr. Brown joined Azimuth, Inc. in October, 1999
and is Director of Risk Management Services for Azimuth, Incorporated. His
expertise in OSHA, EPA, and DOT regulatory compliance consulting, safety and
environmental program administration, technical training, and risk management
decision-making spans 21 years in Federal government and private industry. Mr.
Brown's employment history includes assignments as Corporate
Safety/Environmental Manager for an international machining and assembly
company; Commercial Sales Executive for an insurance broker providing loss
prevention and environmental liability products; Risk Control Consultant for an
insurance company servicing clients in general industry and construction; and
Safety Director for a manufacturing plant in the secondary lead smelting &
refining industry. Mr. Brown holds a B.S. in Engineering/Management from the U.
S. Naval Academy and an M.S. in Systems Management from the University of
Southern California. He is designated a Certified Safety Professional
(CSP/Comprehensive Practice) and a Certified Hazardous Materials Manager
(CHMM/Senior Level). Mr. Brown is President-Elect of the American Society of
Safety Engineers' Low Country Chapter in Charleston, SC. He is a Commander in
the U.S. Navy Reserves.
Board Committees
The Company has Audit and Compensation Committees. The responsibilities of
the Audit Committee include recommending to the Board of Directors the firm of
independent accountants to be retained by the Company, reviewing with the
Company's independent accountants the scope and results of their audits, and
reviewing with the independent accountants and Management the Company's
accounting and reporting principles, policies and practices, as well as the
Company's accounting, financial and operating controls and staff. The
Compensation Committee has responsibility for establishing and reviewing
employee compensation plans. The Compensation Committee also administers the
Company's stock option plan.
During the "Turnaround" phase of the Company's operations, the full Board
of Directors has acted to function as the Audit and Compensation Committees of
the Board of Directors and there have not been separate meetings of those
committees.
Compliance with Section 16(a) Of the Exchange Act.
To the knowledge of the Company, except as set forth below, no officers,
directors, beneficial owners of more than 10 percent of any class of equity
securities of the Company registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any other person
subject to Section 16 of the Exchange Act with respect to the Company, failed to
file on a timely basis reports required by Section 16(a) of the Exchange Act
during the fiscal years, which ended December 31, 1996, 1997 and 1998.
None of Walter H. Elliott, III, Richard H. Guilford, Elsie L. Rose, Charles
E. Feigley, Maurizio F. Giabbai, Richard D. Bennett, The United States Company,
H. E. Igoe and Shakespeare Partners, L.P. who are all Directors, Officers and/or
10% stock holders have timely filed reports under Section 16 of the Exchange Act
with respect to the Company since the beginning of the Company's 1996 fiscal
year. On January 27, 2000 each of such persons filed a Form 5 under Section 16
of the Exchange Act with respect to their holdings of relevant equity securities
of the Company as of the end of the Company's 1999 fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
- -------------------------------
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation*
--------------------
Fiscal Year
ended Other Annual
12/31 Salary Bonus Compensation($)
($) ($)
Name and
Principal Position
Walter H. Elliott, III 1999 75,000 0 0
President and Chief 1998 59,500 0 0
Executive Officer (Nov. 96
until present) 1997 59,500 0 0
President, EPC (Until Nov.
96)
============================= ======== ========= ======== ================
Long-Term Compensation
----------------------
Awards Payouts
------ -------
Securities
Restricted Underlying
Stock Options/ LTIP All Other
AWARD(S) SARS(#)(1) PAYOUTS($) COMPENSATION(2)
-------- ---------- ---------- ---------------
($) ($)
Walter H. Elliott, III
1999 93,174 150,000 0 0
1998 0 0 0 0
1997 0 0 0 0
================================================================================
* Does not include personal benefits and other forms of non-cash
compensation that did not in the aggregate exceed 10% of the aggregate
amount of cash compensation for the subject individual.
(1) Represents shares of stock issued in lieu of salary during 1997 and
1998 when Mr. Elliott's salary was cut from $85,000 annually to $59,500.
This number does not reflect the 10:1 stock split that will occur at
closing if The Catapult Group acquisition is consummated.
(2) Represents stock options granted in December 1999. This number does not
reflect the 10:1 stock split that will occur at closing if The Catapult
Group acquisition is consummated (See Item 10: Executive
Compensation--Compensation Policy and Other Compensation.)
Employment Agreements
- ---------------------
The Company currently has no employment agreements with any of it's
employees.
Stock Option Plan
In January 1994, the Board of Directors of the Company adopted the
Company's Stock Option Plan, as previously authorized by the Company's
stockholders (the "Plan"). Under the Plan, officers, directors, key employees
and/or consultants of the Company can receive incentive stock options and
non-qualified stock options to purchase up to an aggregate of 150,000 shares of
the Company's Common Stock (of which no more than 50,000 shares may be pursuant
to incentive stock options, and no more than 100,000 shares may be pursuant to
non-qualified stock options). On January 1, 1994, the Company's Board of
Directors awarded under the Plan non-qualified stock options to purchase an
aggregate of 75,000 shares. All of such options were granted to the then serving
officers of the Company, all provide for an exercise price of $2.00 per share,
all were exercisable beginning on January 1, 1995 and all expired on December
31, 1998 (subject to prior termination in accordance with the applicable stock
option agreements). The exercise price applicable under such outstanding stock
options represents 100% of the fair market value of the underlying Common Stock
as of the date that such options were granted, as determined by the Board of
Directors of the Company on the date that such options were granted.
On March 31, 1995 the Board of Directors awarded under the Plan stock
options to purchase an aggregate of 34,500 shares. The Board of Directors
granted 23,000 incentive stock options, and 11,500 non-qualified stock options
to plan participants. All of such options provide for an exercise price of
$3.625 per share, all are exercisable at the grant date and 23,000 incentive
stock options expire on March 20, 2005, 1,500 non-qualified stock options
expired on March 20, 1998 and 10,000 non-qualified stock options expire on March
20, 2003 (subject to prior termination in accordance with the applicable stock
option agreements). The exercise price applicable under such outstanding stock
options represents 100% of the fair market value of the underlying common stock
as of the date that such options were granted, as determined by the Board of
Directors of the Company on the date that such options were granted.
On April 17, 1996 the Board of Directors awarded under the Plan incentive
stock options to purchase an aggregate of 23,750 shares. All of such options
provide for an exercise price of $1.88 per share, all are exercisable at the
grant date and all expire on April 16, 2006 (subject to prior termination in
accordance with the applicable stock option agreements). On December 10, 1996
the Board of Directors awarded under the Plan non-qualified stock options to
purchase an aggregate of 30,000 shares. All of such options provide for an
exercise price of $2.38 per share, all are exercisable at the grant date and all
expire on December 9, 2004 (subject to prior termination in accordance with the
applicable stock option agreements). The exercise price applicable under such
outstanding stock options represents 100% of the fair market value of the
underlying common stock as of the date that such options were granted, as
determined by the Board of Directors of the Company on the date that such
options were granted.
During the period 1996 through 1998, 23 employees who were holding
incentive stock options left the employment of the Company without exercising
their options. Subject to the stock option agreements, their options terminated
on the effective dates of their resignations. Of the 88,250 issued in March,
1995 and April and December, 1996, 42,250 options have expired, (40,750
incentive stock options and 1,500 non-qualified stock options).
On January 28, 1999 the Board of Directors awarded under the Plan incentive
stock options to purchase an aggregate of 40,000 shares. All of such options
provide for an exercise price of $0.10 per share, all are exercisable at the
grant date and all expire on January 27, 2009 (subject to prior termination in
accordance with the applicable stock option agreements). The exercise price
applicable under such outstanding stock options represents 100% of the fair
market value of the underlying common stock as of the date that such options
were granted, as determined by the Board of Directors of the Company on the date
that such options were granted. 10,000 options expired on September 4, 1999 when
the employee resigned employment.
As of March 15, 2000 there were 87,000 options outstanding, including both
incentive stock options and non-qualified stock options, which have been issued
under the Plan since January 1994. As of this date no options have been
exercised and on April 28, 2000 an additional 6,000 options will expire.
With respect to incentive stock options, the Plan provides that the
exercise price of each such option must be at least equal to 100% of the fair
market value of the common stock on the date that such option is granted (and
110% of fair market value in the case of stockholders who, at the time the
option is granted, own more than 10% of the total outstanding common stock), and
requires that all such options have an expiration date not later than that date
which is one day before the tenth anniversary of the date of the grant of such
options (or the fifth anniversary of the date of grant in the case of 10%
stockholders). However, with certain limited exceptions, in the event that the
option holder ceases to be associated with the Company, or engages in or is
involved with any business similar to that of the Company, such option holder's
incentive options immediately terminate. Pursuant to the provisions of the Plan,
the aggregate fair market value, determined as of the date(s) of grant, for
which incentive stock options are first exercisable by an option holder during
any one calendar year cannot exceed $100,000.
With respect to non-qualified stock options, the Plan requires that the
exercise price of all such options be at least equal to 100% of the fair market
value of the Common Stock on the date such option is granted, provided that
non-qualified options may be issued at a lower exercise price (but in no event
less than 85% of fair market value) if the net pre-tax income of the Company in
the full fiscal year immediately preceding the date of the grant of such option
(the "Prior Year") exceeded 125% of the mean annual average net pre-tax income
of the Company for the three fiscal years immediately preceding such Prior Year.
Non-qualified options must have an expiration date not later than that date
which is the day before the eighth anniversary of the date of the grant of the
subject option. However, with certain limited exceptions, in the event that the
option holder ceases to be associated with the Company, or engages in or becomes
involved with any business similar to that of the Company, such option holder's
non-qualified options immediately terminate.
The Plan further provides that non-qualified options may (but need not)
include a provision that, in the event of any change in control and management
of the Company or any sale of the business of the Company, except to the extent
that the subject option holder affirmatively elects during a limited period of
time following such event to permanently revoke and terminate the subject
non-qualified option (in whole or in part) and/or to reaffirm all or any portion
of such non-qualified option without giving effect to the reduction in exercise
price herein described, then the otherwise applicable exercise price in respect
of such option may thereafter be reduced (but not by more than 50%) in the event
that, and at such time(s) as, the subject option holder thereafter exercises
such option (or the non-revoked and non-reaffirmed portion thereof, as the case
may be).
The Plan is administered by the Compensation Committee of the Company's
Board of Directors, which has wide discretion in determining the recipients of
options, the amounts of options awarded, and various other terms and conditions
applicable to options granted under the Plan. In determining whether and to what
extent specific employees will be awarded options, the Compensation Committee
takes into account the value of the specific employee's services to the Company,
the employee's time in service, the long-term prospects for the employee to
handle additional responsibilities within the Company, and such other factors as
the Compensation Committee may deem relevant in order to reward and motivate the
Company's key employee.
The following tables set forth information concerning the exercise of
options during the 1996,1997 and 1998 fiscal years, the number of unexercised
options, and the value of such unexercised options, for the executive officers
named in the Summary Compensation Table.
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Grants
in Fiscal Year ended 12/31/99
<S> <C> <C> <C> <C>
Options/SAR
(A) Granted to (B)
Options/SAR Employees in Exercise or Base Price
Name Granted(#) Fiscal Year (S/Share) Expiration Date
---- ----------- ----------- ----------------------- ---------------
Walter H. Elliott, III 150,000 79% $ 0.10 12/29/04
Aggregated Option/SAR Exercise
in Fiscal Year ended 12/31/99 and FY-End Option/SAR Value
Value of Unexercised in the
Shares Number of Money Options/
Acquired On Value Unexercised Options/ SAR at FY-End($)
Name Exercise# Realized($) SAR AT Year End(#) Exercisable/Unexercisable
- ---- ----------- ----------- ------------------- -------------------------
Walter H. Elliott, III - - 155,000 $38,750/0
</TABLE>
Compensation Policy and Other Compensation
- ------------------------------------------
During the fiscal year ended December 31, 1999 the Company's Board of
Directors determined all compensation matters relating to the Company's
executive officers.
The Board of Directors of the Company in the past determined that the best
way to attract and retain highly capable employees on a basis that will
encourage them to perform at increasing levels of effectiveness and to use their
best efforts to promote the growth and profitability of the Company and its
subsidiaries, was to enter into employment agreements with its senior executive
officers. During the "Turnaround" phase, including fiscal year 1999, there have
been no additional senior executive officers recruited and Mr. Elliott has
continued to serve without an employment contract. The Company believes that its
compensation levels as to all of its employees are comparable to industry
standards.
In setting levels of compensation for Mr. Elliott and in approving
management's compensation of all other Company employees, the Board of Directors
has evaluated the Company's overall performance, the contribution of particular
individuals to Company performance and industry compensation standards. On
January 28, 1999 the Board of Directors recognized the 30% cut ($85,000 to
$59,500) in salary that Mr. Elliott took in 1996 for the 1997 and 1998 fiscal
years and increased his annual compensation to $100,000. Because of the cash
situation of the Company, Mr. Elliott offered to take $75,000 of such annual
compensation in cash and the balance in non-qualified stock options. The Board
accepted Mr. Elliott's offer. On March 20, 2000 the Board authorized the
issuance of 50,000 options to Mr. Elliott in lieu of the remaining $25,000 in
salary not taken in cash. All of such options provide for an exercise price of
$0.10 per share, all are exercisable at the grant date and all expire on March
19, 2010 (subject to prior termination in accordance with the applicable stock
option agreements). The exercise price applicable under such outstanding stock
options represents 100% of the fair market value of the underlying common stock
as of the date that such options were granted, as determined by the Board of
Directors of the Company on the date that such options were granted.
The Company has adopted a policy of compensating non-employee Directors at
the rate of $500 per meeting (plus reasonable out-of-pocket expenses in a manner
consistent with past practice) for attendance at meetings of the Company's Board
of Directors. At this time, Richard H. Guilford, Maurizio F. Giabbai, PhD,
Charles E. Feigley, PhD and Elsie L. Rose, CPA are the only directors eligible
to be compensated pursuant to this policy. The Board agreed to suspend this
policy until such time as the Company is financially stable.
On December 30, 1999 the Board of Directors awarded stock options outside
of the Plan to members of the Board of Directors and to Mr. Elliott to purchase
an aggregate of 350,000 shares. All of such options provide for an exercise
price of $.10 per share, all are exercisable at the grant date and all expire on
December 29, 2004. The exercise price applicable under such outstanding stock
options represents 100% of the fair market value of the underlying common stock
as of the date that such options were granted, as determined by the Board of
Directors of the Company on the date that such options were granted.
Item 11. STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding shares of
common stock beneficially owned as of December 31, 1999 by (i) each person known
by the Company to be the beneficial owner of more than 5% of outstanding common
stock, (ii) each of the Company's officers and/or directors, and (iii) all
officers and directors as a group. Except as otherwise indicated, the Company
believes, based on information furnished by such owners, that the beneficial
owners of the Common Stock listed below have sole investment and voting power
with respect to such shares, subject to community property laws where
applicable. All numbers designating beneficial ownership of the Company's common
stock do not reflect the 10:1 stock split which will occur if The Catapult Group
acquisition is consummated.
<PAGE>
================================================================================
Amount of Common Stock Percentage of Outstanding
Name Beneficially Owned Common Stock
================================================================================
Richard D. Bennett 384,597(1) 10.56%
2059 Emerald Terrace
Mt. Pleasant, SC 29464
- --------------------------------------------------------------------------------
Charles E. Feigley, PhD 187,864(10) 5.09%
2538 Wheat Street
Columbia, SC 29205
- --------------------------------------------------------------------------------
Walter H. Elliott, III 349,849(2)(3)(6)(11) 9.11%
205 Walnut Hill Drive
Summerville, SC 29485
- --------------------------------------------------------------------------------
Patrick H. Cooper 221,614 6.09%
4501 Old Park Road
North Charleston, SC 29405
- --------------------------------------------------------------------------------
Jack E. Bennett 229,503(5) 6.30%
403 E. Marion Street
Kershaw, SC 29067
- --------------------------------------------------------------------------------
Shakespeare Partners, L.P. 584,730(9) 14.56%
21 Legare Street
Charleston, SC 29401
- --------------------------------------------------------------------------------
H. E. Igoe 724,730(8) 18.05%
21 Legare Street
Charleston, SC 29401
- --------------------------------------------------------------------------------
Michael McGehee 304,080 8.35%
1 North Adgers Wharf
Charleston, SC 29401
- --------------------------------------------------------------------------------
The United States Company 683,240(7) 16.27%
1051 Technology Park Drive
Glen Allen, Virginia 23060
- --------------------------------------------------------------------------------
Richard H. Guilford 277,747(7)(10) 7.16%
5900 Patterson Avenue, Chalet 9
Richmond, Virginia 23226
- --------------------------------------------------------------------------------
Maurizio F. Giabbai, PhD 277,747(7)(10) 7.16%
5652 Buttonwood Court
Stone Mountain, Georgia 30087
- --------------------------------------------------------------------------------
Elsie L. Rose 340,280 (4)(7)(10) 8.75%
12645 Mount Hermon Road
Ashland, Virginia 23005
================================================================================
All Directors and Executive Officer 1,433,486(2) (3) 4)(6) 31.10%
as a group (five persons) (7)(10)(11)
================================================================================
<PAGE>
(1) Includes 127,011 shares issued in November 1999.
(2) Includes 93,174 shares issued in November 1999.
(3) Includes exercisable options to purchase up to 5,000 shares of Common
Stock at $3.63 per share granted under the Plan.
(4) Includes 14,400 shares issued in lieu of 1998 accrued compensation in
January 1999 and 31,884 shares issued in November 1999.
(5) Includes exercisable options to purchase up to 2,000 shares of Common
Stock at $2.00 per share granted under the Plan.
(6) Includes 44,175 shares of Common Stock assuming conversion, which
conversion occurred in March 2000, of shares the Series B Preferred stock
held at a 5 shares of Common Stock to 1 share of Preferred Stock conversion
rate.
(7) Includes 125,000 shares of Common Stock issued to The United States
Company ("USC"). Includes 558,240 shares of Common Stock, assuming
conversion, which conversion occurred in March 2000, of the shares of
Series B Preferred Stock held at a 5 shares of Common Stock to 1 share of
Preferred Stock conversion rate. Richard H. Guilford, Chairman of the Board
of the Company, Maurizio F. Giabbai, Ph.D., a Director of the Company, and
Elsie L. Rose, CPA, the Treasurer of the Company, are principals in USC.
Messrs. Guilford and Giabbai, and Ms. Rose, each owns a one-third interest
in The United States Company and based upon the organizational documents of
USC has beneficial ownership of one-third of the securities in which it
invests (including the Company's Securities).
(8) H. E Igoe is the General Partner of Shakespeare Partners, LP. Includes
shares of Common Stock and Preferred Stock held by Shakespeare Partners,
L.P., of which Mr. Igoe has beneficial ownership.
(9) Includes 374,390 shares of Common Stock, assuming conversion of the
Series C Preferred Stock held at a 5 shares of Common Stock to 1 share of
Preferred Stock conversion rate.
(10) Includes exercisable options to purchase up to 50,000 shares of Common
Stock at $0.10 per share, awarded in December 1999 to Directors: Guilford,
Rose, Giabbai and Feigley.
(11) Includes exercisable options to purchase up to 150,000 shares of
Common Stock at $0.10 per share, awarded in December 1999.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
On December 24, 1996, the Company, USC and each of Messrs. Guilford and
Giabbai and Ms. Rose (with such individuals being collectively referred to as
the "USC Principals") entered into an agreement (the "Memorandum Agreement")
pursuant to which certain outstanding indebtedness owed to USC by the Company
and all other expense reimbursements and compensation which may have been owed
by the Company at that date to any of USC or the USC Principals, was settled and
paid with the delivery by the Company of two promissory notes (the "New Notes")
in the aggregate principal of $171,000, which New Notes were made payable by the
Company to USC. The principal of the New Notes was to be paid as follows:
(i) out of the proceeds of certain mortgage loans held by the Company
(which resulted from the Company's sale of certain real property),
with the resulting note bearing interest at 8.75% per annum; and
(ii) $136,000 being due and payable in 60 equal monthly installments
of $2,629.26 (including 6% per annum interest), with the final payment
to be made on December 15, 2001, with principal payments to USC only
made to the extent that the Company receives interest payments under a
specified second mortgage held by the Company on property owned by a
non-affiliate of the Company.
Any unpaid principal due under the New Notes is payable out of the net
proceeds of a public or private securities offering by the Company which exceed
$1,000,000.
Repayment of the New Notes was secured under a security agreement granting
to USC (i) a security interest in the Company's rights under the $600,000 Trico
Note delivered to the Company upon its sale of the Trico Business on July 26,
1996; and (ii) all of the Company's rights under a pledge agreement, dated July
26, 1996, between Andrew Gillette and the Company, pursuant to which Mr.
Gillette pledged to the Company all of his interest in the Trico shares he
acquired from the Company in connection with his purchase of the Trico business.
As part of the Memorandum Agreement, the Company also issued to USC 125,000
unregistered shares of its Common Stock (the "Exchange Shares").
As a result of the Memorandum Agreement, all outstanding or unissued
warrants, options or other rights for the issuance of Company shares held by USC
or the USC principals were terminated and released, and the Company, USC and the
USC principals extended mutual releases of all existing and potential claims and
liabilities one against the other, related to that certain agreement, dated July
11, 1995, between USC and the Company (see above). The Exchange Shares were
subject to limited demand and piggyback registration rights granted by the
Company.
The United States Company, had outstanding notes due from the Company
bearing principal of $208,727 and $221,000 in 1997 and 1996, respectively.
During 1998, $207,296 (93 %) of debt to the United States Company was converted
to 111,648 shares of Series B Preferred Stock. Richard H. Guilford, Chairman of
the Board of the Company, Maurizio F. Giabbai, Ph.D., a Director of the Company,
and Elsie L. Rose, CPA, the Treasurer of the Company, are Principals in USC.
Shakespeare Partners, LTD, whose general partner is a stockholder of the
Company, had outstanding notes due from the Company amounting to $250,000,
$287,685 and $195,000 at December 31, 1998, 1997 and 1996, respectively. During
1998, approximately $149,700 of outstanding debt was converted to 74,878 shares
of Series C Preferred Stock.
In December 1998 the Company entered into an agreement with Shakespeare
Partners, LTD and its General Partner to sell the Company's secured note
receivable from Trico Incorporated, received upon the sale of the Trico
business, bearing outstanding principal of $364,427, to the General Partner's
retirement plan for $260,000. This resulted in a loss to the Company of
$104,427, which was recorded in December 1998.
The President and CEO converted to equity 100% of his outstanding notes
during 1998. Approximately $17,700 was converted to 8,835 shares of Series B
Preferred Stock, which Series B Preferred Stock shares (and accrued dividends)
were converted into 49,587 shares of Company Common Stock in March 2000.
Pursuant to an agreement, dated February 4, 1999, Azimuth agreed to engage
Patrick Cooper as an independent contractor to provide asbestos analysis and
other consulting services. The services are provided at rates specified in the
Agreement (generally 50% of the rate charged to Azimuth clients for work
performed by Mr. Cooper), with the term of the agreement being initially
one-year, subject to successive one-year renewal periods; provided, that the
agreement may be terminated by either party on 30 days notice. The agreement has
been extended for another one year period.
On November 23, 1999, the individual members of the Board of Directors, who
were recipients of options to acquire an aggregate of 700,000 shares of Company
Stock at an exercise price of $0.10 per share, agreed to terminate all such
options (the "Terminated Options"). On December 30, 1999, the Board of Directors
awarded stock options outside of the Plan to the individual members of the Board
of Directors and to Walter H. Elliott, the Company's President and Chief
Executive Officer, to purchase an aggregate of 350,000 shares of Common Stock.
All of such options provide for an exercise price of $.10 per share (the "New
Options"), all are exercisable at the grant date and all expire on December 29,
2004. The exercise price applicable under such outstanding stock options
represents 100% of the fair market value of the underlying common stock as of
the date that such options were granted, as determined by the Board of Directors
of the Company on the date that such options were granted. All of the Terminated
Options and the New Options were granted by the Board of Directors to the
recipients in lieu of directors fees and other monetary compensation, in order
to maintain the continued service of the recipients on behalf of the Company.
The United States Company, Walter H. Elliott, III and Elsie L. Rose
converted all shares of Preferred Stock held by each as of March 31, 2000. This
amounted to 122,733 shares of Series B Preferred Stock. Additionally, all
accrued dividends on these shares of Preferred Stock were converted to Common
Stock.
All references to stockholdings and stock issuance in this Item 12:
"Certain Relationships and Related Transactions", give effect to all prior stock
splits (but not to the proposed 10:1 reverse split in connection with
consummation of the acquisition of The Catapult Group).
<PAGE>
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
- -------------------------------------------------
(a) The following exhibits are filed along with this Report on Form 10-KSB:
Number Description of Exhibit
- ------ ----------------------
3.1 Amended and Restated Certificate of Incorporation of Registrant.(2.)
3.2 Amended and Restated By-laws of Registrant.(2.)
3.3 Certificate of Designation of Series A, B, and C Preferred Stock of
Envirometrics, Inc.(2.)
4.2 1993 Stock Option Plan, including form of Stock Option Agreement. (1.)
4.3 Warrant Amendment Extension dated April 15, 1999.(2.)
10.1 Certifications of accreditation from American Industrial Hygiene
Association and State of New York Department of Health in
respect of Registrant's Azimuth Laboratory. (1.)
10.2 Lease Agreement dated December 17, 1996 by and between Registrant and
James W. Miller, M.D. for the Corporate Facitlity located at 9229
University Blvd. (2.)
10.3 Preferred Stock Subscription and Conversion Agreement and Investment
Representations dated November 14, 1997 by Zellweger Analytics, Inc.(2.)
10.4 Preferred Stock Agreement between Registrant and Ten State Street, LLP
dated June 30, 1998. (2.)
10.5 Preferred Stock Agreement between Registrant and The United States
Company dated June 30, 1998. (2.)
10.6 Preferred Stock Agreement between Registrant and Precision Southeast,
Inc. dated June 30, 1998. (2.)
10.7 Preferred Stock Agreement between Registrant and Shakespeare Partners,
L.P. dated June 30, 1998. (2.)
10.8 Preferred Stock Agreement between Registrant and Walter H. Elliott, III
dated June 30, 1998. (2.)
10.9 Preferred Stock Agreement between Registrant and Elsie L. Rose dated
January 1, 1999. (2.)
10.10 Amendment to Lease Agreement dated January 18, 1999 by and between
Registrant and James W. Miller, M.D. for the Corporate Facility located
at 9229 University Blvd. (2.)
10.11 Consulting Agreement by and between Azimuth, Inc. and Patrick H. Cooper
dated February 4, 1999. (2.)
10.12 The Plan and Agreement to Exchange Stock by and between the Registrant
and The Catapult Group, Inc. dated February 16, 2000.
Item 21 - Subsidiaries of Registrant.
(1.) Incorporated by reference, filed as an Exhibit to Report on Form
10-KSB for 1995, filed on March 25, 1996, (SEC File No. 0-23892).
(2.) Incorporated by reference, filed as an Exhibit to Report on Form
10-KSB for 1998, filed on January 28, 2000, (SEC File No. 0-23892).
<PAGE>
(b) No reports were filed on Form 8-K during the fourth quarter of 1999.
<PAGE>
SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: April 10, 2000
ENVIROMETRICS, INC.
BY: S/WALTER H. ELLIOTT, III
Walter H. Elliott, III, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
SIGNATURES TITLE DATE
s/Richard H. Guilford
- ------------------------ Chairman of the Board April 10, 2000
Richard H. Guilford
s/Walter H. Elliott, III
- ------------------------ April 10, 2000
Walter H. Elliott, III Director, President, Chief
Executive Officer
s/Elsie L. Rose
- ------------------------ April 10, 2000
Elsie L. Rose Treasurer, Chief Accounting Officer
& Acting Chief Financial Officer
s/Charles E. Feigley
- ------------------------ Director April 10, 2000
Charles E. Feigley
s/Maurizio F. Giabbai
- ------------------------ Director April 10, 2000
Maurizio F. Giabbai
<PAGE>
EXHIBIT 21 SUBSIDIARIES OF ENVIROMETRICS, INC.
- ----------------------------------------------
1. Azimuth, Incorporated
<PAGE>
plan and AGREEMENT to Exchange Stock
by and among
the catapult group, inc.,
the catapult shareholders,
and
ENVIROmetrics, inc.
Dated February 16, 2000
THIS PLAN AND AGREEMENT TO EXCHANGE STOCK (the "Agreement') is made and
entered into this ____ day of February, 2000, by and among (i) The Catapult
Group, Inc., a Georgia corporation ("Catapult") with its principal place of
business in Norcross, GA; (ii) the shareholders of Catapult, all of whom are
listed on Schedule 1 attached hereto (collectively, the "Catapult
Shareholders"); and (iii) Envirometrics, Inc., a Delaware corporation ("EVRM")
with its principal place of business in Charleston, SC.
Background
The Catapult Shareholders and EVRM intend to effect a "B" reorganization
pursuant to Section 368 of the Code (as hereinafter defined) whereby EVRM will
acquire all of the outstanding shares of stock of Catapult from the Catapult
Shareholders in exchange solely for newly issued shares of common stock of EVRM.
Immediately following the share exchange, EVRM will change its name to The
Catapult Group, Inc. and will effect a private placement of equity securities to
accredited investors as more fully described in Section 9 of this Agreement.
After giving effect to all of the transactions contemplated by this Agreement,
(a) the EVRM Shareholders (as defined below), the Catapult Shareholders and the
New Investor(s) (as defined below) will jointly own all of the issued and
outstanding shares of EVRM, (b) Catapult will be a wholly-owned subsidiary of
EVRM, and (c) EVRM will have effected a name change to The Catapult Group, Inc.
Agreement
For and in consideration of these premises and the mutual covenants,
promises, agreements, representations and warranties set forth herein, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, EVRM, Catapult and the Catapult Shareholders hereby covenant,
promise, agree, represent and warrant as follows:
ARTICLE 1. DEFINITIONS.
The capitalized terms listed below are used in this Agreement with the
meanings thereafter ascribed:
"Affiliate" has the meaning ascribed to such term in Rule 405 promulgated
under the Securities Act, as such rule is in effect on the date hereof.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
Section 101, and all future acts supplemental thereto or amendatory thereof.
"Catapult Common" means the issued and outstanding Common Stock of
Catapult.
"Catapult Shares" means all of the issued and outstanding shares of
Catapult which consists of Six Million (6,000,000) shares of the Common Stock of
Catapult.
"Code" means the Internal Revenue Code of 1986, as amended.
"EVRM Common" means all of the issued and outstanding shares of Common
Stock of EVRM, par value $.001.
"EVRM Preferred" means all of the issued and outstanding Preferred Stock of
EVRM, which consists entirely of the Redeemable Preferred Stock of EVRM, par
value $.01, having the rights, privileges, and preferences set forth on Exhibit
A hereof (the "Certificate of Designation").
"EVRM Shares" means all of the issued and outstanding shares of the EVRM
Preferred and the EVRM Common immediately prior to the closing of the
transactions contemplated by this Agreement.
"EVRM Shareholders" means all Persons owning EVRM Shares prior to Closing
and those Persons, other than the Catapult Shareholders or the New Investor(s)
(as defined below), owning EVRM Shares after the Closing.
"Exchange Act" means the Securities Act of 1934, or any similar Federal
statute, and the rules and regulations of the SEC promulgated thereunder, all as
the same shall be in effect at the relevant time.
"Fully-Diluted" means the number of shares of Common Stock of either EVRM
or Catapult outstanding after giving effect to the exercise of outstanding or
committed options and other rights to purchase Common Stock except, in the case
of EVRM, for 680,000 Redeemable Common Stock Purchase Warrants described in
Schedule 1.1 hereof.
"Hold" or "Held" as used herein and pertaining to share ownership shall
include ownership of record as well as beneficial ownership.
"Material" shall mean any condition, circumstance, change or effect (or any
development that, insofar as can be reasonably foreseen, would result in any
condition, circumstance, change or effect) that is material to the business,
assets, results of operations, prospects or condition (financial or otherwise)
of either EVRM or Catapult. The parties hereby acknowledge and agree the term
"material" shall include any obligation, liability, commitment, claim,
expenditure or loss contingencies which individually equals or exceeds $10,000.
"New Investor(s) " means Person(s) purchasing EVRM securities in the
private placement referred to in Section 9 of this Agreement.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, government, or agency or political subdivision of a
government.
"SEC" means the Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act or the Exchange Act.
"Securities Act" means the Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the SEC promulgated thereunder, all as
the same shall be in effect at the relevant time.
ARTICLE 2. EXCHANGE AND PURCHASE OF SHARES; CLOSING
Section 2.1 The EVRM Shares.
On the terms and subject to the conditions set forth in this Agreement, at
the Closing (as such term is defined in Section 2.3 of this Agreement):
(a) Schedule 2.1 attached hereto contains the names of all Catapult
Shareholders holding Catapult Common, the number of shares held by each (set
forth opposite such shareholder's name), and the ratio such number bears to the
total number of shares of Fully-Diluted Catapult Common. At Closing EVRM shall
assign, transfer, and deliver to each Catapult Shareholder a number of shares of
EVRM Common which equals such ratio, as it applies to such shareholder,
multiplied by Ninety per cent (90%) of the number of shares of Fully-Diluted
EVRM Common. No fractional shares shall be issued. The shares constituting the
difference between the shares of EVRM Common issued hereunder to the Catapult
Shareholders and Ninety per cent (90%) of the number of shares of Fully-Diluted
EVRM Common will be held as Treasury Stock and utilized for the purpose of
satisfying the exercise of outstanding or committed options and other rights to
purchase Catapult Common which have been converted to rights to purchase EVRM
Common.
(b) The EVRM Shareholders of EVRM Common shall retain their shares of EVRM
Common which, immediately following the issuance of EVRM Common as set forth in
subsection (a) above, shall constitute Ten per cent (10%) of the Fully-Diluted
EVRM Common minus such shares as may be necessary to satisfy the exercise of
outstanding or committed options and other rights to purchase EVRM Common and
these latter shares will be held as Treasury Stock for that purpose.
(c) Prior to Closing, the exact number of shares of EVRM Common to be
issued to each Catapult Shareholder shall be determined and confirmed by the
accountants of EVRM and of Catapult and appended to Schedule 2.1, as well as
such other information as may be reasonably necessary for the transfer agent of
EVRM to issue certificates evidencing the EVRM Common to the Catapult
Shareholders at Closing.
Section 2.2 The Catapult Shares.
On the terms and subject to the conditions set forth in this Agreement, at
the Closing (as such term is described in Section 2.3 of this Agreement), each
Catapult Shareholders shall assign, transfer, and deliver to EVRM a
certificate(s) evidencing all of the Catapult Shares held by such shareholder.
The certificates representing the Catapult Shares shall be duly endorsed, or
accompanied by stock transfer powers duly endorsed, with the signature of the
Catapult Shareholder thereon guaranteed by a bank, trust company, or member of
the New York Stock Exchange, and otherwise in a form suitable for transfer on
the stock transfer books of Catapult.
Section 2.3 The Closing.
The "Closing" shall mean the consummation of the exchange of EVRM Shares
and the Catapult Shares, as set forth in Sections 2.1 and 2.2 above, as well as
the consummation of any other transactions which are contemplated by this
Agreement to occur at Closing. Closing shall take place no later April 3, 2000
or within Five (5) days following the date upon which all of the conditions
precedent contained in Articles 8 and 9 of this Agreement have occurred, at
10:00 a.m., local time, at 3475 Lenox Rd. NE, Suite 995, Atlanta, GA 30326, or
at such other time and place as the parties may agree in writing. The date the
Closing actually occurs is the "Closing Date."
Section 2.4 Name Change.
Immediately after the Closing, EVRM shall file an amendment to its
Certificate of Incorporation and take all other actions necessary to effect a
name change of EVRM from "Envirometrics, Inc." to "The Catapult Group, Inc."
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF EVRM.
EVRM represents and warrants to Catapult and the Catapult Shareholders
(which representations and warranties shall be valid and binding as of the time
of Closing) as follows:
Section 3.1 Due Organization; Good Standing.
EVRM is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. EVRM has the power and authority to
own, lease and operate its properties and to conduct its business in each
location where EVRM owns, leases or operates its property and conducts business
as such business is now being conducted by EVRM. EVRM is duly qualified and is
in good standing as a foreign corporation in each of the jurisdictions in which
the nature of the property or assets owned by EVRM or the nature of the
operations or business conducted by EVRM requires such qualification. Complete
and correct copies of the Certificate of Incorporation, as amended, and the
Bylaws, as amended, of EVRM, as certified by the Secretary of State of Delaware
and the Secretary of EVRM, respectively, are attached hereto as Schedule 3.1,
and no changes will be made therein prior to Closing except such change(s) as
may be necessary to effectuate the terms hereof.
Section 3.2 Authorized Capital of EVRM.
The authorized capital of EVRM consists of (i) Two Million Five Hundred
Thousand (2,500,000) shares of Preferred Stock, Three Hundred Fifty-three
Thousand Five Hundred Eighteen (353,518) shares of which are issued and
outstanding, fully paid and nonassessable and (ii) Ten Million (10,000,000)
shares of Common Stock, Three Million Six Hundred Forty Thousand Eight Hundred
Eighty (3,640,880) shares of which are validly issued and outstanding, fully
paid and nonassessable. The relative rights, powers, preferences,
qualifications, limitations, and restrictions in respect of each class of
authorized capital stock of EVRM are as set forth in the Certificate of
Incorporation, attached as Schedule 3.1 and the Certificate of Designation, and
all such rights, powers, preferences, qualifications, limitations, and
restrictions are valid, binding, and enforceable and in accordance with all
applicable laws. Except as contemplated by this Agreement or as set forth in
Schedule 3.2, (a) no subscription, warrant, option, convertible security, or
other right (contingent or other) to purchase or otherwise acquire equity
securities of EVRM is authorized or outstanding, and (b) there is no commitment
by EVRM to (i) issue any equity securities of EVRM, including without
limitation, EVRM Common and EVRM Preferred, or any subscriptions, warrants,
options, convertible securities, or other rights to purchase or acquire equity
securities of EVRM or securities convertible into or exchangeable for equity
securities of EVRM or (ii) distribute to holders of EVRM Common, EVRM Preferred,
or any other equity securities of EVRM, any evidence of indebtedness, or any
assets of EVRM. Except as set forth in Schedule 3.2 or the Certificate of
Incorporation, as amended, EVRM has no obligation or right (contingent or other)
to purchase, redeem, or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any other distribution in
respect thereof. Except as set forth in Schedule 3.2, there are no voting trusts
or agreements nor any preemptive rights relating to any outstanding securities
of EVRM (whether or not EVRM is a party thereto). All outstanding securities of
EVRM were issued in compliance with all applicable federal and state securities
laws.
Section 3.3 Financial Statements; Absence of Undisclosed Liabilities.
(a) Attached hereto as Schedule 3.3 are true, correct and complete copies
of:
(i) the audited Consolidated Balance Sheet of EVRM and its subsidiaries
dated as of December 31, 1995, and the audited, consolidated statements of
income, cash flow and stockholders equity for the year then ended, together with
the notes thereto and the report thereon of McGladrey and Pullen, LLP,
independent certified public accountants; and (iii) the audited Consolidated
Balance Sheets of EVRM and its subsidiaries dated as of December 31, 1996, 1997,
1998 and the audited, consolidated statements of income, cash flow and
stockholders equity for the years then ended, together with the notes thereto
and the report thereon of Welch, Roberts and Amburn, LLP, Charleston, SC,
independent certified public accountants for EVRM; (iv) the unaudited
Consolidated Balance Sheets of EVRM and its subsidiaries dated as of December
31, 1999 and the unaudited, consolidated statements of income, cash flow and
stockholders equity for the year then ended.
Such financial statements and the notes thereto are hereinafter referred to
collectively as the "EVRM Financial Statements."
(b) The EVRM Financial Statements (i) are in accordance with the books and
records of EVRM, (ii) present fairly the consolidated financial condition of
EVRM and its subsidiaries as of the respective dates indicated and the results
of operations for such periods, (iii) have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, and (iv) reflect adequate reserves for all liabilities and
losses. EVRM has no material liabilities or obligations (secured or unsecured,
whether accrued, absolute, direct, indirect, contingent, or otherwise, and
whether due or to become due) that are not fully accrued or reserved against in
the EVRM Financial Statements or described in Schedule 3.3. EVRM has not
received any advice or notification from its independent certified public
accountants that EVRM has used any improper accounting practice that would have
the effect of not reflecting or incorrectly reflecting in the EVRM Financial
Statements or the books and records of EVRM, any properties, assets,
liabilities, revenues, or expenses. The EVRM Financial Statements do not contain
any items of special or nonrecurring income, or other income not earned in the
ordinary course of business, except as set forth in the notes to the EVRM
Financial Statements or in Schedule 3.3. The books, records, and accounts of
EVRM accurately and fairly reflect, in reasonable detail, all transactions,
assets, and liabilities of EVRM. EVRM has not engaged in any transaction,
maintained any bank account, or used any of the funds of EVRM, except for
transactions, bank accounts, and funds which have been and are reflected in the
normally maintained books and records of EVRM.
(c) EVRM has no material liabilities or obligations (secured or unsecured,
whether accrued, absolute, direct, indirect, contingent, or otherwise, and
whether due or to become due) that are not fully accrued or reserved against in
the EVRM Financial Statements, other than:
(i) liabilities incurred in the ordinary course of business subsequent to
the date of the EVRM Financial Statements consistent with past practice, none of
which deviate in any material respect from liabilities incurred in prior
comparable fiscal periods;
(ii) obligations under Contracts listed on Schedule 3.3 or incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the EVRM Financial Statements, which liabilities
and obligations, individually or in the aggregate, are not material to the
financial condition or operating results of EVRM; and
(iii) the liabilities listed on Schedule 3.3.
Section 3.4 Taxes.
Except as set forth on Schedule 3.4, EVRM has filed or obtained filing
extensions for all tax returns, federal, state, county, and local, required to
be filed by it, and EVRM has paid or established adequate reserves (in
accordance with generally accepted accounting principles) for the payment of all
taxes shown to be due by such returns as well as all other taxes, assessments,
and governmental charges which have become due or payable, including, without
limitation, all taxes which EVRM is obligated to withhold from amounts owing to
employees, creditors, and third parties. The federal income tax returns of EVRM
have never been audited by the Internal Revenue Service and no state income or
sales tax returns of EVRM have been audited. No deficiency assessment with
respect to or proposed adjustment of EVRM's federal, state, county, or local
taxes is pending or, to the best of the EVRM's knowledge, threatened. There is
no tax lien, whether imposed by any federal, state, county, or local taxing
authority, outstanding against the assets, properties, or business of EVRM.
Neither EVRM nor any of its shareholders has ever filed a consent pertaining to
EVRM pursuant to Section 341(f) of the IRC (as hereinafter defined), relating to
collapsible corporations. Any amounts reserved in the EVRM Financial Statements
for taxes are sufficient for the payment of all accrued and unpaid federal,
state and local taxes of all types, including interest and penalties thereon of
EVRM for or on account of which EVRM is or may become liable in any manner
whatsoever for the quarter ending December 31, 1999 and for all prior periods.
Section 3.5 Conduct of Business.
(a) Ordinary Course. Since January 1, 1996 the business of EVRM has been
operated, and prior to Closing will be operated, only in the ordinary course
except for: (a) any transactions contained in Schedule 3.5.1 attached hereto; or
(b) any transactions disclosed in the Form 10-K's and 10-QSB's filed by EVRM
since that date (the "EVRM Form10-K's and QSB's").
(b) No Material Change. Since December 31, 1999, except as set forth on
Schedule 3.5.2, there has been, and prior to the Closing there will be, no
material adverse change, individually or in the aggregate, in EVRM's condition
(financial or otherwise) or in EVRM's assets, liabilities or business.
(c) No Loss or Destruction. There has been, and prior to Closing there will
be, no damage, destruction or loss or other events or conditions of any
character, or any pending or threatened developments, which individually or in
the aggregate, would materially and adversely affect EVRM's condition (financial
or otherwise) or EVRM's assets, liabilities or business.
Section 3.6 Legal Proceedings.
Except as set forth on Schedule 3.6 attached hereto and incorporated by
reference herein, there is, and as of Closing there will be, no action, suit,
proceeding or investigation pending or, to the best knowledge of EVRM,
threatened, against or affecting EVRM or any of its assets. EVRM is not, and as
of Closing will not be, in default under or with respect to any judgment, order,
writ, injunction or decree of any court or of any federal, state, municipal or
other governmental authority, department, commission, board, agency or other
instrumentality. EVRM has, and as of Closing will have, complied in all material
respects with all laws, rules, regulations and orders applicable to it and to
its business; and it has, and as of the Closing will have, performed in all
material respects all of its material obligations and duties to be performed by
it to the extent required in accordance with their respective terms; and is not,
and as of the Closing will not be, in any material respect in default under or
in breach of any material contract, agreement, commitment or other instrument to
which it is subject or a party or under which it is bound.
Section 3.7 Brokers.
Neither EVRM nor any Affiliate of EVRM has any contract, arrangement or
understanding with, or has incurred any obligation or liability to, any broker,
finder, investment banker, intermediary or similar agent with respect to this
Agreement or the transactions contemplated hereby.
Section 3.8 SEC Filings.
Except as set forth of Schedule 3.8, EVRM and each of its officers and
directors are current in its or their filings with the SEC including all
registration statements, financial statements, applications, reports, schedules,
forms, proxy statements, Forms 3 and 4, and all other instruments, documents,
and written information (collectively "SEC Filings") required to have been filed
by EVRM, its officers and directors under the Securities Act and the Exchange
Act. None of the SEC Filings contained, as of its date, any untrue statement of
a material fact or omitted, as of its date, to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
Section 3.9 Required Approvals, Proxy and Special Shareholder's Meeting.
The Board of Directors of EVRM, pursuant to the power and authority legally
vested in it, has duly authorized the execution and delivery of this Agreement
by EVRM, the issuance of shares of EVRM Common and the transactions hereby
contemplated, and no action, confirmation or ratification by the shareholders of
EVRM or by any other person, entity or governmental authority is required in
connection therewith, except:
(a) the filing of a Definitive Proxy which shall contain the nominees for
the Board of Directors of EVRM (one of whom is to be named by EVRM
Shareholders), the proposed Officers of EVRM, and such other items as are
necessary and appropriate, and the obtaining of a majority vote of a quorum of
EVRM Shareholders at a Special or Annual Meeting of Shareholders to be held
prior to or on the date of the Closing which approves the transactions set forth
in this Agreement; or,
(b) the obtaining of the required shareholder approval of these
transactions by a written consent of a majority of EVRM Shareholders and
appropriate notification to EVRM Shareholders. Except as may be otherwise set
forth herein, EVRM has taken all actions required by law, its Certificate of
Incorporation, as amended, its Bylaws, as amended, or otherwise, to authorize
the execution, delivery and performance of this Agreement, and as of Closing
EVRM will have the power and authority to consummate the transactions hereby
contemplated, including the issuance, sale, transfer and delivery of the EVRM
Shares pursuant to the provisions hereof and to take all other actions required
to be taken by it pursuant to the provisions hereof, subject to obtaining prior
shareholder approval and except as may be otherwise set forth herein. This
Agreement is valid and binding upon EVRM in accordance with its terms. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will constitute a violation or breach of the
Articles of Incorporation, as amended, or the Bylaws, as amended, of EVRM, or
any agreement, stipulation, order, writ, injunction, decree, law, rule or
regulation applicable to EVRM.
Section 3.10 Officers, Directors and Beneficial Owners.
Attached hereto as Schedule 3.10 is a list of all officers and directors of
EVRM and all beneficial owners of more than Five (5%) percent of EVRM Shares
known to EVRM, and the number of EVRM Shares owned of record and beneficially by
each such Officer and Director of EVRM.
Section 3.11 No Untrue Statements.
Neither this Agreement nor any written information, statement, list or
certificate furnished or to be furnished to Catapult or the Catapult
Shareholders pursuant to this Agreement or in connection with this Agreement or
any of the transactions contemplated by this Agreement contains, or as of the
Closing will contain, any untrue statement of a material fact or omits, or as of
the Closing will omit, a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
Section 3.12 Subsidiaries.
Except as set forth on Schedule 3.12, EVRM does not have any subsidiaries
and does not, directly or indirectly, own a controlling interest in any
corporation, partnership, joint venture, or other entity.
Section 3.13 Accounts Receivable; Accounts Payable.
EVRM's accounts receivable reflected in the December 31, 1999 EVRM
Financial Statement, and all accounts receivable arising after the date thereof
(collectively, the "Accounts Receivable") were or are bona fide accounts
receivable, the full amount of which were or are actually owing to EVRM, and, to
the best of its knowledge, those not collected prior to Closing will be fully
collectible by EVRM within ninety (90) days of Closing without offset,
recoupment, counterclaim, claim or diminution. EVRM's accounts payable reflected
on the December 31, 1999 EVRM Financial Statement and all accounts payable
arising after the date thereof (collectively, the "Accounts Payable") arose from
bona fide transactions in the ordinary course of EVRM's business.
Section 3.14 Real Property.
Except as set forth on Schedule 3.14 attached hereto, EVRM does not own any
real estate.
Section 3.15 Leased Real Property.
Schedule 3.15 contains a true and correct list of each parcel of real
property leased by EVRM (the "EVRM Leased Real Property"). Attached to Schedule
3.15 is a true and correct copy of each lease pursuant to which EVRM leases the
EVRM Leased Real Property and any amendments, extensions, and renewals thereof
(the "EVRM Real Property Leases"). Each EVRM Real Property Lease is in full
force and effect and there is no existing default or event of default, real or
claimed, or event which with notice or lapse of time or both would constitute a
default thereunder. Except as described in Schedule 3.15, EVRM's interest in the
EVRM Real Property Leases is free and clear of any mortgages and liens, and is
not subject to any deeds of trust, assignments, subleases, or rights of any
third parties other than the lessor thereof. To the knowledge of EVRM, no lessor
under any such lease is in default under any such leases in its duties to the
lessee. EVRM has not assigned, transferred, conveyed or otherwise encumbered by
way of security interest or otherwise any of the EVRM Real Property Leases.
Except as described in Schedule 3.15, the continuation, validity, and
effectiveness of each EVRM Real Property Lease will in no way be affected by the
consummation of the transactions contemplated by this Agreement.
Section 3.16 Tangible Personal Property.
Attached hereto as Schedule 3.16 is a true, correct and complete list of
all tangible personal property owned by EVRM or used by EVRM in the conduct of
its business, including, but not limited to, all equipment, machinery and
fixtures (collectively, the "EVRM Personal Property"), indicating whether it is
owned or the manner in which it is otherwise utilized by EVRM. EVRM has
exclusive good and merchantable title to all of the EVRM Personal Property owned
by it, free and clear of all pledges, claims, liens, restrictions, security
interests, charges and other encumbrances except those contained in said
Schedule 3.16. All of the EVRM Personal Property is in good repair and good
operating condition, fit for its intended purposes, and is adequate for the
continuation of EVRM's business as presently conducted.
Section 3.17 Contracts.
(a) Schedule 3.17.1 contains a true and correct list of all contracts,
agreements, or understandings, written or oral, by which EVRM receives any right
or benefit or undertakes any liability or obligation (the "EVRM Contracts").
EVRM has delivered or has otherwise made available to Catapult a correct and
complete copy of each contract or agreement set forth in Schedule 3.17.1. Except
as listed on Schedule 3.17.1, EVRM is not a party to any written or oral:
(ii) agreement, contract, or commitment with any present or former employee
or consultant or for the employment of any person, including any consultant,
contractor, or agent who performs services for EVRM;
(ii) agreement, contract, or commitment for the future purchase of, or
payment for, supplies or products, or for the performance of services by a third
party which supplies, products, or services are used by EVRM involving in any
one case an amount or value of five thousand dollars ($5,000) or more;
(iii) lease (relating to real property or personal property) under which
EVRM is lessor or lessee;
(iv) license, franchise, assignment or other agreement of EVRM relating to
trademarks, trade names, patents, copyrights and service marks (or applications
therefor), unpatented designs or styles, know-how and technical assistance.
(v) permit relating to the operation of the business of EVRM.
(vi) agreement for the purchase, sale or lease of goods, materials,
supplies, machinery, equipment, capital assets and services having a cost in
excess of Ten Thousand ($10,000.00) Dollars in any one instance or in excess of
Twenty-Five Thousand ($25,000.00) Dollars in the aggregate.
(vii) agreement or arrangement with any supplier, distributor, franchisor,
dealer, sales agent, broker or representative.
(viii) agreement or arrangement for the construction, modification or
improvement of any building or structure having a cost in excess of Ten Thousand
($10,00.00) Dollars, or any other capital expenditure involving payments in
excess of Ten Thousand ($10,000.00) Dollars.
(ix) agreement or understanding which is material in nature, involves the
payment or receipt, in any 12 month period, of more than Ten Thousand
($10,000.00) Dollars or has a term of more than twelve (12) months.
(x) note, debenture, bond, equipment trust agreement, letter of credit
agreement, loan agreement, or other contract or commitment for the borrowing or
lending of money, or agreement or arrangement for a line of credit or guarantee,
pledge, or undertaking of the indebtedness of any other person;
(xi) agreement, contract, or commitment for any charitable or political
contribution relating to EVRM's business;
(xii) agreement, contract, commitment, or outstanding proposal pursuant to
which EVRM sells, or proposes to sell, products and services for any amount or
value;
(xiii) agreement, contract, or commitment limiting or restraining EVRM, its
business, or any successor thereto from engaging or competing in any manner or
in any business;
(xiv) material agreement, contract, or commitment relating to EVRM's
business not made in the ordinary course of business; or
(xv) any distributor agreement, reseller agreement, franchise agreement, or
any other agreement which authorizes EVRM to (A) sell products or services of
any other person or entity, or (B) use the trademarks, trade names, or trade
styles of any other Person in EVRM's business.
(b) Schedule 3.17.2 contains a true and correct list of all commitments for
capital expenditures that have been approved or made prior to the date of this
Agreement by EVRM and that remain outstanding as of the date hereof.
(c) Except as may be otherwise noted in Schedule 3.17.1, the EVRM Financial
Statements or the EVRM Form 10-K's and QSB's, each of the EVRM Contracts was
entered into in the ordinary course of business on terms substantially
consistent with EVRM's practice prior thereto, is in full force and effect, and
there exists no breach or violation of, or default by EVRM under, any of the
EVRM Contracts nor, to the knowledge of EVRM by any other party to such
Contract, or any event which, with notice or the lapse of time, or both, will
create a breach or violation of, or default under by EVRM nor, to the knowledge
of EVRM by any other party to such Contract. There is no EVRM Contract that
contains any contractual requirement with which there is a reasonable likelihood
that EVRM or any other party thereto will be unable to comply. Except as set
forth on Schedule 3.17.1, the continuation, validity, and effectiveness of each
EVRM Contract will in no way be affected by the consummation of the transactions
contemplated by this Agreement.
(d) Schedule 3.17.3 contains a true and correct list of all customers
(ranked by annual revenue) of EVRM, and the annual revenue obtained from each
such customer for the year ended December 31, 1999. No customer reflected in
Schedule 3.17.3, whose purchases of products and services are material to EVRM
(individually or in the aggregate) has terminated its business relationship nor
has suspended nor significantly reduced its purchases of products and services
from EVRM from the levels reflected therein, if any, with EVRM; nor does EVRM
have knowledge of facts which suggest that such a termination, suspension or
significant reduction is likely within the reasonably foreseeable future. Except
as indicated on Schedule 3.17.3, there exists no actual or, to the knowledge of
EVRM, any threatened termination, cancellation, or limitation of, or any
amendment, modification, or change to any EVRM Contract, which would have a
material adverse effect on the business or the condition, financial or
otherwise, of EVRM, including without limitation, (i) the business relationship
of EVRM with any customer, distributor, or related group of customers or
distributors whose purchases individually or in the aggregate are material to
the operations and financial condition of EVRM, (ii) the requirements of any
customer or related group of customers of EVRM whose purchases individually or
in the aggregate are material to the operations and financial condition of EVRM,
or (iii) the business relationship of EVRM with any material supplier to EVRM.
Except as indicated on Schedule 3.17.3, there is no Contract with any customer,
the performance of which by EVRM will result in a loss to EVRM.
(e) Except as indicated on Schedule 3.17.3, no customer listed on Schedule
3.17.3 has notified EVRM, nor is EVRM otherwise aware that any customer listed
on Schedule 3.17.3 has, or has plans to, reduce the volume of purchases made
from EVRM.
(f) None of the EVRM Contracts is for materials, supplies, equipment, or
services in excess of EVRM's normal requirements or as needed for reasonably
anticipated needs of its business.
(g) EVRM has not granted any power of attorney affecting or with respect to
any of its business, affairs, or assets, or any combination thereof, that
remains outstanding.
(h) Attached to Schedule 3.17.1 is a true and correct copy (and if oral, a
description of material terms) of each EVRM Contract listed on Schedule 3.17.1
and all modifications, amendments, renewals, or extensions thereof.
(i) Except as reflected in Schedule 3.17.4, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not terminate, breach, give rise to a right in favor of any other party to an
EVRM Contract to terminate such Contract, or constitute an event which with
notice, lapse of time or both, constitute an event of default under any
Contract.
Section 3.18 Environmental Matters and OSHA.
Except as set forth in Schedule 3.18.1:
(a) EVRM is and has been in compliance with all environmental Laws. EVRM
has not received notice of any Environmental Claim filed or threatened against
it or against any other person or entity whose liability for any Environmental
Claim has been retained or assumed either contractually or by operation of law;
(b) EVRM has not disposed of, emitted, discharged, handled, stored,
transported, used, or released any Hazardous Materials (or arranged for any of
the foregoing), or exposed any employee or other individual to any Hazardous
Materials or condition so as to give rise to any liability or corrective or
remedial obligation under any Environmental Laws;
(c) No Hazardous Materials are present in, on, or under any properties
owned, leased, or used at any time (including both land and improvements
thereon) by EVRM, and no reasonable likelihood exists that any Hazardous
Materials will come to be present in, on, or under any properties owned, leased,
or used at any time (including both land and improvements thereon) by EVRM so as
to give rise to any material liability or corrective or remedial obligation
under any Environmental Laws.
As used herein, "Environmental Claim" means any notice, claim, act, cause
of action or investigation by any Person alleging potential liability arising
out of, based on or resulting from the presence, or release into the
environment, of any Hazardous Materials or any violation, or alleged violation,
of any Environmental Law. As used herein, "Environmental Laws" means all
federal, state, local and foreign laws and regulations relating to pollution or
protection of the environment or the protection of human health. As used herein,
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes, toxic
substances, radioactive and biological materials, asbestos-containing materials
(ACM), hazardous substances, petroleum and petroleum products or any fraction
thereof, excluding, however, any chemicals used or waste generated as a result
of typical office and janitorial activities. Except as set forth in Schedule
3.18.2, EVRM is in compliance with all applicable laws relating to employee
health and safety and has complied in the past with all applicable laws relating
to employee safety. Except as set forth in Schedule 3.18.2, EVRM has not
received any notice that past or present conditions of the assets and properties
of EVRM violate any applicable legal requirements or otherwise can be made the
basis of any claim, proceeding or investigation, based on OSHA violations or
otherwise related to employee health and safety. Except as set forth in Schedule
3.18.2, EVRM is not aware of any potential causes of action which may be
asserted against EVRM by third parties, including employees, former employees
and customers, arising out of (a) the handling or disposal of Hazardous
Materials by EVRM, (b) the violation of OSHA regulations, or (c) violation of
other applicable laws relating to employee safety.
Section 3.19 Insurance.
Attached hereto as Schedule 3.19.1 is a list of all insurance policies of
EVRM setting forth with respect to each policy the name of the insurer, a
description of the policy, the dollar amount of coverage, the amount of the
premium, the date through which all premiums have been paid, and the expiration
date. Each insurance policy relating to the insurance referred to in Schedule
3.19.1 is in full force and effect, is valid and enforceable, and EVRM is not in
breach of or in default under any such policy. All policies listed on Schedule
3.19.1 will be outstanding and duly in force at the Closing Date, the premiums
payable in respect of such policies have been paid in full, and none of such
policies provide for any retrospective premium adjustment or other experience
based liability on the part of EVRM. EVRM has not received any notice of or any
reason to believe that there is or has been any actual, threatened, or
contemplated termination or cancellation of any insurance policy relating to the
said insurance. EVRM has not since inception (i) been denied or had revoked,
canceled or rescinded any policy of insurance, or (ii) self insured against any
risk ordinarily insured against by similar businesses. Attached hereto as
Schedule 3.19.2 is a true, correct and complete list and summary of all claims
which have been made under each insurance policy relating to the said insurance.
EVRM has not failed to give any notice or to present any claim under any
insurance policy in a due and timely fashion, and to the best of its knowledge,
all insurable risks are adequately covered by insurance except for any exposure
occasioned by lack of Directors' and Officers' insurance coverage.
Section 3.20 Employee Relations and Employee Agreements.
(a) None of EVRM's employees is represented by a labor organization. No
petition for representation has ever been filed with the National Labor
Relations Board (the "NLRB") with respect to EVRM's employees. EVRM is not aware
of any union organizational activity with respect to EVRM and have no reason to
believe that any such activity is being contemplated.
(b) EVRM is not in violation of applicable equal employment opportunity
laws, wage and hour laws, occupational safety and health laws, federal labor
laws, or any other laws of any Government or Governmental Agency relating to
employment. Schedule 3.20.2 attached hereto sets forth the status of all
investigations, claims, charges, and employment-related suits or controversies
which have occurred with respect to EVRM within the last 10 years or which are
presently pending or threatened with respect to EVRM under any
employment-related law of any Government or Governmental Agency (including
common law). EVRM has satisfied and performed fully all judgments, decrees,
conciliation agreements, or settlement agreements by which it is bound or to
which it is subject concerning employment-related matters, and each such
judgment, decree or agreement is disclosed on Schedule 3.20.2.
(c) Except as set forth on Schedule 3.20.3, EVRM has not entered into any
employment agreement, and all employees can be terminated at will. EVRM has no
contractual obligation or special termination or severance arrangement in
respect of any employee.
(d) Except as set forth on Schedule 3.20.4 EVRM has paid all wages due
(including all required taxes, insurance and withholding thereon). Schedule
3.20.4 attached hereto sets forth all accrued vacation, sick leave and bonuses
(including pro rata accruals for a period of a year) due to employees of EVRM as
of the Closing.
(e) Schedule 3.20.5 attached hereto sets forth each of EVRM's employee's
date of hire, position, present salary, amount of bonus paid in the past year,
and announced termination date (if any).
(f) Schedule 3.20.6 contains a true and complete list of all the following
agreements or plans of EVRM or any subsidiary of EVRM which, together with EVRM
constitutes a single employer within the meaning of Section 414 of the Code
(hereinafter collectively referred to as the "EVRM Group") which are presently
in effect or which have been in effect at any time (if it may result in a
material liability), or, in the case of documents referred to in clause (i)
below, have been in effect at any time prior to the date hereof:
(i) "employee pension benefit plans" and employee benefit plans" as defined
in Sections 3(2) and 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, including any employee benefit plan covering any
employees of EVRM Group which any member of EVRM Group maintains or to which any
member of EVRM Group has any outstanding, present, or future obligations to
contribute or make payments under, whether voluntary, contingent, or otherwise
(the plans, programs, policies, or arrangements described in clauses (ii) or
(iii) are herein collectively referred to as the "EVRM Plans").
Included in said Schedule 3.20.6 are true and complete copies of all
documents as they may have been amended to the date hereof involving or relating
to clauses (i) and (ii) hereinabove, together with all filings, IRS
determination letters and financial statements, including but not limited to,
the most recent actuarial report for each employee pension benefit plan and IRS
Form 5500 for each EVRM Plan for each of the five most recent plan years.
(g) Except as to those plans identified on Schedule 3.20.7 as tax-qualified
EVRM Plans (the "EVRM Qualified Plans"), no member of EVRM Group maintains a
tax-qualified employee plan which meets or was intended to meet the requirements
of Code Section 401 for the benefit of present or former employees. The Internal
Revenue Service has issued favorable determination letters to the effect that
each EVRM Qualified Plan qualifies under Code Section 401(a) and that any
related trust is exempt from taxation under Code Section 501(a), and such
determination letters are in effect. Copies of the most recent determination
letters and any outstanding requests for a determination letter with respect to
each EVRM Qualified Plan have been delivered to Catapult. EVRM Qualified Plans
have been administered according to their terms, except for those terms which
are inconsistent with the changes required by the Tax Reform Act of 1986 and
other acts, regulations, and rulings, in which case EVRM Qualified Plans have
been administered in accordance with the provisions of those acts, regulations,
and rulings in all material respects. No member of EVRM Group or any fiduciary
of any EVRM Qualified Plan has done anything that would adversely affect the
qualified status of EVRM Qualified Plans or the related trusts. EVRM Qualified
Plans currently comply in form with the requirements under Code Section 401(a),
other than changes required by the Tax Reform Act of 1986, the Omnibus Budget
Reconciliation Act of 1986 and other acts, regulations, and rulings for which
amendments are not yet required. Any EVRM Qualified Plan subject to Code
Sections 401(k) or 401(m) has been tested for compliance with, and has satisfied
the requirements of, Code Sections 401(k)(3), 401(m)(2), or both, as
application, for each plan year ending prior to the Closing Date.
(h) With respect to any EVRM Qualified Plan or any member of EVRM Group, no
termination liability to the Pension Benefit Guaranty Corporation ("PBGC") has
been or is expected to be incurred or would be incurred if any EVRM Qualified
Plan were terminated on the Closing Date. If any EVRM Qualified Plan were
terminated on the Closing Date, the present value of all benefit liabilities
under EVRM Qualified Plan would not, as of the Closing Date, exceed the then
current value of the assets of such EVRM Qualified Plan. No EVRM Qualified Plan
has suffered any accumulated funding deficiency within the meaning of ERISA
Section 302 and Code Section 412. EVRM has made all quarterly contributions
required under Code Section 412(m) and no conditions exist which would subject
the assets of EVRM or Catapult to a lien under Code Section 412(m) or ERISA
Section 4068. No member of EVRM Group has any outstanding liability under Code
Section 4971. As of the Closing Date, all contributions required to have been
made on or prior to the Closing Date under EVRM Plans will have been made or
have been accrued on the Financial Statements and all required premium payments
for EVRM Qualified Plans have been made, when due, to PBGC. No event or
condition exists with respect to any EVRM Qualified Plan which could be deemed a
"reportable event" as defined in ERISA Section 4043, with respect to which the
30-day notice requirement has not been waived and which could result in a
liability to Catapult, and no condition exists which would subject Catapult to a
fine under ERISA Section 4071. No amendment has occurred to any EVRM Qualified
Plan which has required or which would require EVRM Group to provide security
under Code Section 401(a)(29).
(i) No member of EVRM Group has any past, present, or future obligation to
contribute to any multiemployer plan as defined in ERISA Section 3(37).
(j) No member of EVRM Group nor any other "disqualified person" or "party
in interest" (as defined in Code Section 4975 and ERISA Section 3(14),
respectively) with respect to EVRM Plans, has engaged in any "prohibited
transaction" (as defined in Code Section 4975 or ERISA Section 406). EVRM Group
and all other "fiduciaries" (as defined in ERISA Section 3(21)) with respect to
EVRM Plans have complied in all respects with the requirements of ERISA Section
404. Neither EVRM Group nor any party in interest or disqualified person with
respect to EVRM Plans has taken or omitted any action which could lead to the
imposition of an excise tax under the Code or a fine under ERISA against
Catapult or EVRM Plans.
Section 3.21 Patents; Trademarks; Related Contracts.
Attached hereto as Schedule 3.21 is a true, correct and complete list of
all of EVRM's intangible personal property, including but not limited to,
patents, trademarks, trade names, or trademark or trade name registrations,
domain name registrations, service marks, and copyrights or copyright
registrations (the "Proprietary Rights"). All of EVRM's Proprietary Rights are
valid, enforceable, in full force and effect and free and clear of any and all
security interests, liens, pledges and encumbrances of any nature or kind. EVRM
has not infringed upon and is not infringing upon any patent, trademark, trade
name, or trademark or trade name registration, service mark, copyright, or
copyright registration of any other Person.
Section 3.22 Availability of Books and Records.
EVRM will make available to Catapult for inspection and its due diligence
hereunder during business hours all of its tax, accounting, corporate and
financial books and records as well as its personnel and employment and other
records of any nature which are pertinent to this Agreement. Such books and
records pertaining to EVRM's business are true, correct and complete, have been
maintained on a current basis, and fairly reflect the basis for EVRM's financial
condition and results of operations as set forth in EVRM Financial Statements.
EVRM has consistently used the fiscal year ending December 31 as its taxable
year and has consistently used the accrual method as its method of accounting
for tax purposes.
Section 3.23 Bank Accounts, Credit Cards.
Schedule 3.23 contains a true, correct and complete list of each bank,
savings and loan association, brokerage house or other financial institution
with which EVRM has an account, line of credit, safe deposit box, or other
relationship, the account numbers thereof, and the names of all persons
authorized to withdraw funds or other property from, or otherwise act in
connection therewith. Schedule 3.23 contains a true, correct, and complete
listing of the name, business address, and residence address of each person who
has a credit card which is billed to EVRM. Except as set forth on Schedule 3.23,
EVRM has no bank account, brokerage account, line of credit, safe deposit box,
or credit card account.
Section 3.24 Absence of Certain Changes or Events.
Except as permitted or required by this Agreement or as set forth in
Schedule 3.24 or elsewhere herein, since December 31, 1999, the business of EVRM
has been conducted in the ordinary course consistent with past practices and
there has not been any material transaction or occurrence in which EVRM has:
(a) incurred any indebtedness, obligation or liability (contingent or
otherwise), except normal trade or business obligations incurred in the ordinary
course of its business, none of which was entered into for inadequate
consideration and none of which exceeds $10,000.00 in amount;
(b) discharged or satisfied any claim, security interest, lien or
encumbrance or paid any indebtedness, obligation or liability (contingent or
otherwise), except (i) current liabilities, (ii) scheduled payments pursuant to
obligations under contracts, agreements or leases listed in this Agreement, or
(iii) in the ordinary course of business consistent with past practice of
liabilities reflected or reserved against in the EVRM Financial Statements or
incurred since such date in the ordinary course of business consistent with past
practice;
(c) permitted, allowed or suffered any of its assets or properties to be
subjected to any mortgage, pledge, lien, charge, restriction, security interest
or other encumbrance of any kind;
(d) sold, assigned, transferred, leased, disposed of, or agreed to sell,
assign, transfer, lease, or dispose of, any of its assets or properties;
(e) acquired or leased any assets or property of any other Person;
(f) canceled or compromised any debt or claim;
(g) waived or released any rights or claims;
(h) granted, or made any contract, agreement, promise or commitment to
grant, or otherwise incurred any obligation for any increase in, any wage,
salary or employee benefit, or entered into any employment contract, bonus,
stock option, profit sharing, pension, incentive, retirement or other similar
arrangement or plan with, any officer, employee or other Person, except in
accordance with and in amounts not greater than provided for in written
agreements between EVRM and employees of EVRM entered into prior to December 31,
1999 (copies of which shall be furnished to Catapult) and except for merit
raises to hourly employees in the ordinary course of business consistent with
past practice;
(i) entered into any collective bargaining or labor agreement (oral or
written), made any commitment or incurred any liability to any labor
organization, or experienced any slowdown, work interruption, strike or work
stoppage;
(j) made any capital expenditure in excess of Ten Thousand ($10,000.00)
Dollars or entered into any commitment therefor;
(k) suffered any casualty loss or damage in excess of $5,000 in the
aggregate, whether or not such loss or damage is or was covered by insurance;
(l) changed the nature of its business or its method of accounting or
accounting principle, practice or policy;
(m) other than in the ordinary course of business, entered into any
transaction, contract or commitment;
(n) terminated or modified, or agreed to the termination or modification
of, any Service Contract, Participation Agreement or any of the Commitments;
(o) suffered a loss of any supplier or suppliers, which loss (individually
or in the aggregate) has had, or may have, an adverse effect on its financial
condition, results of operations, business or prospects;
(p) suffered any material adverse change in its business, operations,
condition (financial or otherwise), liabilities, assets, earnings, or prospects
of the Business nor, to EVRM's knowledge, has there been any event which has had
or may reasonably be expected to have a material adverse effect on the Business;
(q) transferred or granted any rights with respect to, or disposed of or
permitted to lapse any right to the use of any software, patent, trademark,
assumed name, service mark, trade name, copyright, license, or application
therefor or disposed of or disclosed to any person not authorized to have such
information any trade secret, proprietary information, formula, process, or
know-how not previously a matter of public knowledge or existing in the public
domain;
(r) incurred any long term indebtedness;
(s) paid, loaned, distributed (by dividend or otherwise), or advanced any
amounts to, sold, transferred, or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, purchased, leased, licensed, or
otherwise acquired any properties or assets from, or entered into any other
agreement or arrangement with (i) any Shareholder, officer, employee, or
director of EVRM, (ii) any corporation or partnership in which any Affiliate is
an officer, director, or holder directly or indirectly of five percent (5%) or
more of the outstanding equity or debt securities, or (iii) any person
controlling, controlled by, or under common control with any such partner,
Shareholder, officer, director, or Affiliate except for compensation not
exceeding the rate of compensation in effect at December 31, 1999, and for
routine travel advances to officers and employees;
(t) made or agreed to make any charitable contributions or incurred or
agreed to incur any non-business expenses in excess of $1,000 in the aggregate;
(u) taken any other action neither in the ordinary course of business and
consistent with past practice nor provided for in this Agreement;
(v) increased (or experienced any change in the assumptions underlying or
the methods of calculating) any bad debt, contingency, or other reserve, other
than in the ordinary course of business consistent with past practice; or
(w) written down or written up the value of any inventory (including
write-downs by reason of shrinkage or markdowns), determined as collectible any
Accounts Receivable or any portion thereof which were previously considered
uncollectible, or written off as uncollectible any Accounts Receivable or any
portion thereof, except for write-downs, write-ups, and write-offs in the
ordinary course of business consistent with past practice, none of which is
material in amount.
Section 3.25 Related Party Transactions.
Except for what is shown on Schedule 3.25 attached hereto and in the EVRM
Form 10-K's and QSB's, there are not and have been no, indebtedness,
obligations, agreements, undertakings, liabilities or commitments (contingent or
otherwise) of EVRM since 1995 to or from any past or present officer, director,
member, shareholder or any Person related to, controlling, controlled by or
under common control with any of the foregoing. All such indebtedness,
obligations, agreements, undertakings, liabilities or commitments currently
outstanding or currently in effect are listed on Schedule 3.25.
Section 3.36 Adverse Conditions.
EVRM has no knowledge of any present or future condition, state of facts or
circumstances which has affected or may affect adversely the business of EVRM or
prevent EVRM from carrying on its business other than may be disclosed elsewhere
in this Agreement.
Section 3.27 Annual Reports.
EVRM has filed all of its 10-KSB Annual Reports required to be filed
through December 31, 1999.
Section 3.28 Correctness of Representations.
No representation or warranty of EVRM in this Agreement or in any Exhibit,
certificate, or Schedule attached hereto or furnished pursuant hereto, contains,
or on the Closing Date will contain, any untrue statement of fact or omits, or
on the Closing Date will omit, to state any material fact necessary in order to
make the statements contained therein not misleading, and all such statements,
representations, warranties, Exhibits, certificates, and Schedules shall be true
and complete in all material respects on and as of the Closing Date as though
made on that date. All copies of mortgages, indentures, notes, leases,
agreements, plans, EVRM contracts and other instruments listed on or referred to
in the Schedules delivered or furnished to EVRM pursuant to this Agreement are
true copies thereof.
Section 3.29 Investment Intent.
EVRM represents and warrants to Catapult and the Catapult Shareholders that
EVRM is acquiring the Catapult Shares (the "Acquired Shares") under this
Agreement for investment only and for its own account and not as nominee or
agent; nor are the said shares being acquired with a view to their offer for
resale, distribution or transfer of any part thereof nor with any present
intention of selling, granting any participation in, or otherwise distributing
the same; nor are they being purchased for subdivision or fractionalization
thereof. By executing this Agreement, EVRM represents:
(a) That EVRM has no contract, undertaking, agreement or arrangement with
any Person to sell, hypothecate, pledge, donate or otherwise transfer (with or
without consideration) any of the Acquired Shares, and that EVRM has no present
plan or intention to enter into any such contract, undertaking, agreement or
arrangement.
(b) That EVRM covenants and agrees that none of the Acquired Shares shall
be sold, assigned or otherwise transferred other than in transactions which are
not in violation of the Securities Act and applicable state securities laws.
Each stock certificate of the Acquired Shares shall bear the following legend,
unless such legend may be removed in accordance with its terms:
The securities represented by this stock certificate (the "Securities")
have been issued and sold in reliance upon an exemption from registration under
the Securities Act of 1933 (the "1933 Act") and applicable state securities laws
(the "State Laws"). The Securities may not be offered for sale, sold or
transferred other than (i) pursuant to an effective registration or an exemption
therefrom under the 1933 Act and the State Laws and (ii) upon receipt by the
issuer of evidence satisfactory to it of compliance with the 1933 Act and any
applicable State Laws. The issuer shall be entitled to require an opinion of
counsel satisfactory to it with respect to compliance with the above laws.
Section 3.30. Litigation. Schedule 3.30 sets forth each instance in which
EVRM or any of its officers or directors (a) is the subject to any unsatisfied
judgment, order, decree, stipulation, injunction or charge or (b) is a party to
or, to the knowledge of EVRM, is threatened to be made a party to, any charge,
complaint, action, suit, proceeding, hearing or investigation of in any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator.
Section 3.31. Licenses, Permits and Approvals. Schedule 3.31 lists all
governmental and regulatory licenses, permits and approvals necessary to conduct
EVRM's business. All such licenses, permits and approvals are in full force and
effect. There are no violations by EVRM of, or any claims, or proceedings
pending or to the knowledge or EVRM threatened, challenging the validity of or
seeking to discontinue, any such licenses, permits or approvals.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CATAPULT AND THE CATAPULT
SHAREHOLDERS
Catapult represents and warrants, and the Catapult Shareholders represent
and warrant to the best of their knowledge, to EVRM (which representations and
warranties shall be valid and binding as of the time of Closing) as follows:
Section 4.1 Due Organization; Good Standing.
Catapult is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia. Catapult has the power and
authority to own, lease and operate its properties and to conduct its business
in each location where Catapult owns, leases or operates its property and
conducts business, as such business is now being conducted by Catapult. Catapult
is duly qualified and is in good standing as a foreign corporation in each of
the jurisdictions in which the nature of the property or assets owned by
Catapult or the nature of the operations or business conducted by Catapult
requires such qualification. Complete and correct copies of the Articles of
Incorporation, as amended, and the Bylaws, as amended, of Catapult, as certified
by the Secretary of State of Georgia and the Secretary of Catapult,
respectively, are attached hereto collectively as Schedule 4.1.
Section 4.2 Authorized Capital of Catapult.
The authorized capital of Catapult consists of Nine Million (9,000,000)
shares of Common Stock, Six Million (6,000,000) shares of which are validly
issued and outstanding, fully paid and nonassessable and One Million (1,000,000)
Shares of Preferred Stock. The relative rights, powers, preferences,
qualifications, limitations, and restrictions in respect of each class of
authorized capital stock of Catapult are as set forth in the Articles of
Incorporation, attached as Schedule 4.2 and all such rights, powers,
preferences, qualifications, limitations, and restrictions are valid, binding,
and enforceable and in accordance with all applicable laws. Except as
contemplated by this Agreement or as set forth in Schedule 4.2, (a) no
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of Catapult is
authorized or outstanding, and (b) there is no commitment by Catapult to (i)
issue any equity securities of Catapult, or any subscriptions, warrants,
options, convertible securities, or other rights to purchase or acquire equity
securities of Catapult or securities convertible into or exchangeable for equity
securities of Catapult or (ii) distribute to Catapult Shareholders or other
Persons any equity securities of Catapult, any evidence of indebtedness, or any
assets of Catapult. Except as set forth in the Certificate of Incorporation,
Catapult has no obligation or right (contingent or other) to purchase, redeem,
or otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any other distribution in respect thereof. Except as
set forth in Schedule 4.2, there are no voting trusts or agreements, nor are
there any preemptive rights relating to any outstanding securities of Catapult
(whether or not Catapult is a party thereto). All outstanding securities of
Catapult were issued in compliance with all applicable federal and state
securities laws.
Section 4.3 Financial Statements; Undisclosed Liabilities.
(a) Attached hereto as Schedule 4.3 are the unaudited financial statements
of the Catapult since its inception through December 31, 1999 with the related
notes thereto and reports thereon of independent certified public accountants
(the "Catapult Financial Statements").
(b) The Catapult Financial Statements (i) are in accordance with the books
and records of Catapult, (ii) present fairly the financial condition of Catapult
as of the respective dates indicated and the results of operations for such
periods, (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved, and
(iv) reflect adequate reserves for all liabilities and losses. Catapult has no
material liabilities or obligations (secured or unsecured, whether accrued,
absolute, direct, indirect, contingent, or otherwise, and whether due or to
become due) that are not fully accrued or reserved against in the Catapult
Financial Statements or described in Schedule 4.3 Catapult has not received any
advice or notification from its independent certified public accountants that
Catapult has used any improper accounting practice that would have the effect of
not reflecting or incorrectly reflecting in the Catapult Financial Statements or
the books and records of Catapult, any properties, assets, liabilities,
revenues, or expenses. The Catapult Financial Statements do not contain any
items of special or nonrecurring income, or other income not earned in the
ordinary course of business, except as set forth in the notes to the Catapult
Financial Statements or on Schedule 4.3. The books, records, and accounts of
Catapult accurately and fairly reflect, in reasonable detail, all transactions,
assets, and liabilities of Catapult. Catapult has not engaged in any
transaction, maintained any bank account, or used any of the funds of Catapult,
except for transactions, bank accounts, and funds which have been and are
reflected in the normally maintained books and records of Catapult.
(c) Catapult has no material liabilities or obligations (secured or
unsecured, whether accrued, absolute, direct, indirect, contingent, or
otherwise, and whether due or to become due) that are not fully accrued or
reserved against in the Catapult Financial Statements, other than:
(i) liabilities incurred in the ordinary course of business subsequent to
the date of the Catapult Financial Statements consistent with past practice,
none of which deviate in any material respect from liabilities incurred in prior
comparable fiscal periods;
(ii) obligations under Contracts listed on Schedule 4.3 or incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Catapult Financial Statements, which
liabilities and obligations, individually or in the aggregate, are not material
to the financial condition or operating results of Catapult; and
(iii) the liabilities listed on Schedule4.3.
(d) The Catapult Financial Statements shall, prior to the Closing, be
audited by the firm of independent certified public accountants of Catapult,
which audits (i) will fairly present the financial position of Catapult as of
their respective dates and be prepared in accordance with generally accepted
accounting principles consistently applied, and (ii) contain no material
deviation from the Catapult Financial Statements. The said audits will be
forwarded to EVRM upon their receipt by Catapult.
Section 4.4 Taxes.
Except as set forth on Schedule 4.4, Catapult has filed or obtained filing
extensions for all tax returns, federal, state, county, and local, required to
be filed by it, and Catapult has paid or established adequate reserves (in
accordance with generally accepted accounting principles) for the payment of all
taxes shown to be due by such returns as well as all other taxes, assessments,
and governmental charges which have become due or payable, including, without
limitation, all taxes which Catapult is obligated to withhold from amounts owing
to employees, creditors, and third parties. The federal income tax returns of
Catapult have never been audited by the Internal Revenue Service and no state
income or sales tax returns of Catapult have been audited. No deficiency
assessment with respect to or proposed adjustment of Catapult's federal, state,
county, or local taxes is pending or, to the best of the Catapult's knowledge,
threatened. There is no tax lien, whether imposed by any federal, state, county,
or local taxing authority, outstanding against the assets, properties, or
business of Catapult. Neither Catapult nor any of its shareholders has ever
filed a consent pursuant to Section 341(f) of the IRC (as hereinafter defined),
relating to collapsible corporations. Any amounts reserved in the Catapult
Financial Statements for taxes are sufficient for the payment of all accrued and
unpaid federal, state and local taxes of all types, including interest and
penalties thereon of Catapult for or on account of which Catapult is or may
become liable in any manner whatsoever for the quarter ending December 31, 1999
and for all prior periods.
Section 4.5 Conduct of Business. Since its inception:
(a) Ordinary Course. The business of Catapult has been operated, and prior
to the Closing will be operated, only in the ordinary course.
(b) No Material Change. Since December 31, 1999, except as set forth on
Schedule 4.5, there has been, and prior to the Closing there will be, no
material adverse change, individually or in the aggregate, in the condition
(financial or otherwise) of Catapult or in the assets, liabilities or business
of Catapult.
(c) No Loss or Destruction. There has been, and prior to the Closing there
will be, no damage, destruction or loss or other events or conditions of any
character, or any pending or threatened developments, which individually or in
the aggregate, would materially and adversely affect the condition (financial or
otherwise) or the assets, liabilities or business of Catapult.
Section 4.6 Legal Proceedings.
Except as set forth on Schedule 4.6 attached hereto and incorporated by
reference herein, there is, and as of the Closing there will be, no material
action, suit, proceeding or investigation pending or, to the best knowledge of
Catapult and the Catapult Shareholders, threatened, against or affecting
Catapult or any of its assets. Catapult is not, nor as of the Closing will be,
in default under or with respect to any judgment, order, writ, injunction or
decree of any court or of any federal, state, municipal or other governmental
authority, department, commission, board, agency or other instrumentality.
Catapult has, and as of the Closing will have, complied in all material respects
with all laws, rules, regulations and orders applicable to it and to its
businesses; has, and as of the Closing will have, performed in all material
respects all of its material obligations and duties to be performed by it to the
extent required in accordance with their respective terms; and is not, and as of
the Closing will not be, in any material respect in default under or in breach
of any material contract, agreement, commitment or other instrument to which it
is subject or a party or under which it is bound.
Section 4.7 Required Approvals. The Board of Directors of Catapult and the
Catapult Shareholders have duly authorized the execution and delivery of this
Agreement by Catapult, the exchange of the Catapult Shares and the transactions
hereby contemplated, and no further action, confirmation or ratification by the
Catapult Shareholders or by any other person, entity or governmental authority
is required in connection therewith. Catapult and the Catapult Shareholders have
the power and authority to execute and deliver this Agreement, to consummate the
transactions hereby contemplated and to take all other actions required to be
taken by them pursuant to the provisions hereof. This Agreement is valid and
binding upon Catapult and the Catapult Shareholders in accordance with its
terms. Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will constitute a violation or breach of
the Articles of Incorporation, as amended, or the Bylaws, as amended, of
Catapult, or any agreement, stipulation, order, writ, injunction, decree, law,
rule or regulation applicable to Catapult or the Catapult Shareholders.
Section 4.8 Officers and Directors. Attached hereto as Schedule 4.8 is a
list of all Officers and Directors of Catapult.
Section 4.9 No Untrue Statements. Neither this Agreement nor any written
information, statement, list or certificate furnished or to be furnished to EVRM
pursuant to this Agreement or in connection with this Agreement or any of the
transactions contemplated by this Agreement contains, or as of the Closing will
contain, any untrue statement of a material fact or omits, or as of the Closing
will omit, a material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
Section 4.10 Subsidiaries. Except as set forth on Schedule 4.10, Catapult
does not have any subsidiaries and does not, directly or indirectly, own a
controlling interest in any corporation, partnership, joint venture, or other
entity.
Section 4.11 Real Property. Except as set forth on Schedule 4.11, Catapult
does not own any real estate.
Section 4.12 Leased Real Property. Schedule 4.12 contains a true and
correct list of each parcel of real property leased by Catapult (the "Catapult
Leased Real Property"). Attached to Schedule 4.12 is a true and correct copy of
each lease pursuant to which Catapult leases the Catapult Leased Real Property
and any amendments, extensions, and renewals thereof (the "Catapult Real
Property Leases"). Each Catapult Real Property Lease is in full force and effect
and there is no existing material default or event of default, real or claimed,
or event which with notice or lapse of time or both would constitute a material
default thereunder. Except as described in Schedule 4.12, Catapult's interest in
the Catapult Real Property Leases is free and clear of any mortgages and liens,
and is not subject to any deeds of trust, assignments, subleases, or rights of
any third parties other than the lessor thereof. Except as described in Schedule
4.12, the continuation, validity, and effectiveness of each Catapult Real
Property Lease will in no way be affected by the consummation of the
transactions contemplated by this Agreement.
Section 4.13 Tangible Personal Property. Attached hereto as Schedule 4.13
is a true, correct and complete list of all tangible personal property owned by
Catapult or used by it in the conduct of its business, including, but not
limited to, all equipment, machinery and fixtures (collectively, the "Catapult
Personal Property"), indicating whether it is owned or the manner in which it is
otherwise utilized by Catapult. Catapult has sole and exclusive, good and
merchantable title to all of the Catapult Personal Property owned by it, free
and clear of all pledges, claims, liens, restrictions, security interests,
charges and other encumbrances except those contained on Schedule 4.13. All of
the Catapult Personal Property is in good repair and good operating condition,
fit for its intended purposes, and is adequate for the continuation of
Catapult's business as presently conducted.
Section 4.14 Contracts.
(a) Schedule 4.14.1 contains a true and correct list of all contracts,
agreements, or understandings, written or oral, by which Catapult receives any
right or benefit or undertakes any liability or obligation (the "Catapult
Contracts"). Catapult has delivered or has otherwise made available to EVRM a
correct and complete copy of each contract or agreement set forth in Schedule
4.14.1. Except as listed on Schedule 4.14.1, Catapult is not a party to any
written or oral:
(i) agreement, contract, or commitment with any present or former employee
or consultant or for the employment of any person, including any consultant,
contractor, or agent who performs services for Catapult;
(ii) agreement, contract, or commitment for the future purchase of, or
payment for, supplies or products, or for the performance of services by a third
party which supplies, products, or services are used by Catapult involving in
any one case an amount or value of five thousand dollars ($5,000) or more;
(iii) lease (relating to real or personal property) under which Catapult is
lessor or lessee;
(iv) license, franchise, assignment or other agreement of Catapult relating
to trademarks, trade names, patents, copyrights and service marks (or
applications therefor), unpatented designs or styles, know-how and technical
assistance;
(v) permit relating to the operation of the business of Catapult;
(vi) agreement for the purchase, sale or lease of goods, materials,
supplies, machinery, equipment, capital assets and services having a cost in
excess of Ten Thousand ($10,000.00) Dollars in any one instance or in excess of
Twenty-five Thousand ($25,000.00) Dollars in the aggregate.
(vii) agreement or arrangement with any supplier, distributor, franchisor,
dealer, sales agent, broker or representative.
(viii) agreement or arrangement for the construction, modification or
improvement of any building or structure having a cost in excess of Ten Thousand
($10,00.00) Dollars, or any other capital expenditure involving payments in
excess of Ten Thousand ($10,000.00) Dollars.
(ix) agreement or understanding which is material in nature, involves the
payment or receipt, in any 12 month period, of more than Ten Thousand
($10,000.00) Dollars or has a term of more than twelve (12) months.
(x) note, debenture, bond, equipment trust agreement, letter of credit
agreement, loan agreement, or other contract or commitment for the borrowing or
lending of money, or agreement or arrangement for a line of credit or guarantee,
pledge, or undertaking of the indebtedness of any other person relating to
Catapult's business;
(xi) agreement, contract, or commitment for any charitable or political
contribution relating to Catapult's business;
(xii) agreement, contract, commitment, or outstanding proposal pursuant to
which Catapult sells, or proposes to sell, products and services for any amount
or value;
(xiii) agreement, contract, or commitment limiting or restraining Catapult,
its business, or any successor thereto from engaging or competing in any manner
or in any business;
(xiv) material agreement, contract, or commitment relating to Catapult's
business not made in the ordinary course of business, or
(xv) any distributor agreement, reseller agreement, franchise agreement, or
any other agreement which authorizes Catapult to (A) sell products or services
of any other person or entity, or (B) use the trademarks, trade names, or trade
styles of any other Person in Catapult's business.
(b) Schedule 4.14.2 contains a true and correct list of all commitments for
capital expenditures that have been approved or made prior to the date of this
Agreement by Catapult and that remain outstanding as of the date hereof.
(c) Each of the Catapult Contracts was entered into in the ordinary course
of business on terms substantially consistent with Catapult's practice prior
thereto, is in full force and effect, and there exists no breach or violation
of, or default by Catapult under, any of the Catapult Contracts nor, to the
knowledge of Catapult by any other party to such Contract, or any event which,
with notice or the lapse of time, or both, will create a breach or violation of,
or default under by Catapult nor, to the knowledge of Catapult by any other
party to such Contract. There is no Catapult Contract that contains any
contractual requirement with which there is a reasonable likelihood that
Catapult or any other party thereto will be unable to comply. Except as set
forth on Schedule 4.14.1, the continuation, validity, and effectiveness of each
Catapult Contract will in no way be affected by the consummation of the
transactions contemplated by this Agreement.
(d) Schedule 4.14.3 contains a true and correct list of all customers
(ranked by annual revenue) of Catapult, and the annual revenue obtained from
each such customer, for the year ended December 31, 1999. No customer reflected
therein whose purchases of products and services are material to Catapult
(individually or in the aggregate) has terminated, suspended, or significantly
reduced its purchases of products and services from Catapult from the levels
reflected therein, nor does Catapult have knowledge of facts which suggest that
such a termination, suspension, or significant reduction is likely within the
reasonably foreseeable future. Except as indicated on Schedule 4.14.3, there
exists no actual or, to the knowledge of Catapult, any threatened termination,
cancellation, or limitation of, or any amendment, modification, or change to any
Catapult Contract, which would have a material adverse effect on the business or
the condition, financial or otherwise, of Catapult, including without
limitation:
(i) the business relationship of Catapult with any customer, distributor,
or related group of customers or distributors whose purchases individually or in
the aggregate are material to the operations and financial condition of
Catapult;
(ii) the requirements of any customer or related group of customers of
Catapult whose purchases individually or in the aggregate are material to the
operations and financial condition of Catapult; or
(iii) the business relationship of Catapult with any material supplier to
Catapult. Except as indicated on Schedule 4.14.3, there is no Contract with any
customer, the performance of which by Catapult will result in a loss to
Catapult.
(e) Except as indicated on Schedule 4.14.3, no customer listed on Schedule
4.14.3 has notified Catapult, nor is Catapult otherwise aware that any customer
listed on Schedule 4.14.3 has, or has plans to, reduce the volume of purchases
made from Catapult.
(f) None of the Catapult Contracts is for materials, supplies, equipment,
or services in excess of Catapult's normal requirements or as needed for
reasonably anticipated needs of its business.
(g) Catapult has not granted any power of attorney affecting or with
respect to any of its business, affairs, or assets, or any combination thereof,
that remains outstanding.
(h) Attached to Schedule 4.14.1 is a true and correct copy (and if oral, a
description of material terms) of each Catapult Contract listed on Schedule
4.14.1 and all modifications, amendments, renewals, or extensions thereof.
(i) Except as reflected in Schedule 4.14.4, the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby and
thereby will not terminate, breach, give rise to a right in favor of any other
party to a Catapult Contract to terminate such Contract, or constitute an event
which with notice, lapse of time or both, constitute an event of default under
any Contract.
Section 4.15 Brokers.
Neither Catapult nor any Affiliate of Catapult has any contract,
arrangement or understanding with, or has incurred any obligation or liability
to, any broker, finder, investment banker, intermediary or similar agent with
respect to this Agreement or the transactions contemplated hereby.
Section 4.16 Environmental Matters and OSHA.
Except as set forth in Schedule 4.16.1:
(a) Catapult is and has been in compliance with all Environmental Laws.
Catapult has not received notice of any Environmental Claim filed or threatened
against it or against any other person or entity whose liability for any
Environmental Claim has been retained or assumed either contractually or by
operation of law;
(b) Catapult has not disposed of, emitted, discharged, handled, stored,
transported, used, or released any Hazardous Materials (or arranged for any of
the foregoing), or exposed any employee or other individual to any Hazardous
Materials or condition so as to give rise to any liability or corrective or
remedial obligation under any Environmental Laws;
(c) No Hazardous Materials are present in, on, or under any properties
owned, leased, or used at any time (including both land and improvements
thereon) by Catapult, and no reasonable likelihood exists that any Hazardous
Materials will come to be present in, on, or under any properties owned, leased,
or used at any time (including both land and improvements thereon) by Catapult
so as to give rise to any material liability or corrective or remedial
obligation under any Environmental Laws.
As used herein, "Environmental Claim" means any notice, claim, act, cause
of action or investigation by any Person alleging potential liability arising
out of, based on or resulting from the presence, or release into the
Environment, of any Hazardous Materials or any violation, or alleged violation,
of any Environmental Law. As used herein, "Environmental Laws" means all
federal, state, local and foreign laws and regulations relating to pollution or
protection of the environment or the protection of human health. As used herein,
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes, toxic
substances, radioactive and biological materials, asbestos-containing materials
(ACM), hazardous substances, petroleum and petroleum products or any fraction
thereof, excluding, however, any chemicals used or waste generated as a result
of typical office and janitorial activities. Except as set forth in Schedule
4.16.2, Catapult is in compliance with all applicable laws relating to employee
health and safety and has not received any notice that past or present
conditions of the assets and properties of Catapult violate any applicable legal
requirements or otherwise can be made the basis of any claim, proceeding, or
investigation, based on OSHA violations or otherwise related to employee health
and safety.
Section 4.17 Insurance. Attached hereto as Schedule 4.17.1 is a list of all
insurance policies of Catapult setting forth with respect to each policy the
name of the insurer, a description of the policy, the dollar amount of coverage,
the amount of the premium, the date through which all premiums have been paid,
and the expiration date. Each insurance policy relating to the insurance
referred to in Schedule 4.17.1 is in full force and effect, is valid and
enforceable, and Catapult is not in breach of or in default under any such
policy, nor received any notice of or any reason to believe that there is or has
been any actual, threatened, or contemplated termination or cancellation of any
insurance policy relating to the insurance referred to in Schedule 4.17.1.
Attached hereto as Schedule 4.17.2 is a true, correct and complete list and
summary of all claims which have been made under each insurance policy relating
to the insurance referred to in Schedule 4.17.2. Catapult has not failed to give
any notice or to present any claim under any insurance policy in a due and
timely fashion.
Section 4.18 Employee Relations and Employment Agreements.
(a) None of Catapult's employees is represented by a labor organization. No
petition for representation has ever been filed with the National Labor
Relations Board (the "NLRB") with respect to Catapult's employees. Catapult is
not aware of any union organizational activity with respect to Catapult and has
no reason to believe that any such activity is being contemplated.
(b) Catapult is not in violation of applicable equal employment opportunity
laws, wage and hour laws, occupational safety and health laws, federal labor
laws, or any other laws of any Government or Governmental Agency relating to
employment. Schedule 4.18.2 attached hereto sets forth the status of all
investigations, claims, charges, and employment-related suits or controversies
which have occurred with respect to Catapult within the last 10 years or which
are presently pending or threatened with respect to Catapult under any
employment-related law of any Government or Governmental Agency (including
common law). Catapult has satisfied and performed fully all judgments, decrees,
conciliation agreements, or settlement agreements by which it is bound or to
which it is subject concerning employment-related matters, and each such
judgment, decree or agreement is disclosed on Schedule 4.18.2.
(c) Except as set forth on Schedule 4.18.3, Catapult has not entered into
any employment agreement, and all employees can be terminated at will. Catapult
has no contractual obligation or special termination or severance arrangement in
respect of any employee.
(d) Except as set forth on Schedule 4.18.4 Catapult has paid all wages due
(including all required taxes, insurance and withholding thereon). Schedule
4.18.4 attached hereto sets forth all accrued vacation, sick leave and bonuses
(including pro rata accruals for a period of a year) due to employees of
Catapult as of the Closing.
(e) Schedule 4.18.5 attached hereto sets forth each of Catapult's
employee's date of hire, position, present salary, amount of bonus paid in the
past year, and announced termination date (if any).
(f) Schedule 4.18.6 contains a true and complete list of all the following
agreements or plans of Catapult or any subsidiary of Catapult which, together
with Catapult constitutes a single employer within the meaning of Section 414 of
the Code (hereinafter collectively referred to as the"Catapult Group") which
are presently in effect or which have been in effect at any time (if it may
result in a material liability), or, in the case of documents referred to in
clause (i) below, have been in effect at any time prior to the date hereof:
(i) "employee pension benefit plans" and "employee benefit plans" as
defined in Sections 3(2) and 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, including any employee benefit plan covering any
employees of Catapult Group which any member of Catapult Group maintains or to
which any member of Catapult Group has any outstanding, present, or future
obligations to contribute or make payments under, whether voluntary, contingent,
or otherwise (the plans, programs, policies, or arrangements described in
clauses (ii) or (iii) are herein collectively referred to as the "Catapult
Plans").
Included in said Schedule 4.18.6 are true and complete copies of all
documents as they may have been amended to the date hereof involving or relating
to clauses (i) and (ii) hereinabove, together with all filings, IRS
determination letters and financial statements, including but not limited to,
the most recent actuarial report for each employee pension benefit plan and IRS
Form 5500 for each Catapult Plan for each of the five most recent plan years.
(g) Except as to those plans identified on Schedule 4.18.2 as tax-qualified
Catapult Plans (the "Catapult Qualified Plans"), no member of Catapult Group
maintains a tax-qualified employee plan which meets or was intended to meet the
requirements of Code Section 401 for the benefit of present or former employees.
The Internal Revenue Service has issued favorable determination letters to the
effect that each Catapult Qualified Plan qualifies under Code Section 401(a) and
that any related trust is exempt from taxation under Code Section 501(a), and
such determination letters are in effect. Copies of the most recent
determination letters and any outstanding requests for a determination letter
with respect to each Catapult Qualified Plan have been delivered to EVRM.
Catapult Qualified Plans have been administered according to their terms, except
for those terms which are inconsistent with the changes required by the Tax
Reform Act of 1986 and other acts, regulations, and rulings, in which case
Catapult Qualified Plans have been administered in accordance with the
provisions of those acts, regulations, and rulings in all material respects. No
member of Catapult Group or any fiduciary of any Catapult Qualified Plan has
done anything that would adversely affect the qualified status of Catapult
Qualified Plans or the related trusts. Catapult Qualified Plans currently comply
in form with the requirements under Code Section 401(a), other than changes
required by the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of
1986 and other acts, regulations, and rulings for which amendments are not yet
required. Any Catapult Qualified Plan subject to Code Sections 401(k) or 401(m)
has been tested for compliance with, and has satisfied the requirements of, Code
Sections 401(k)(3), 401(m)(2), or both, as application, for each plan year
ending prior to the Closing Date.
(h) With respect to any Catapult Qualified Plan or any member of Catapult
Group, no termination liability to the Pension Benefit Guaranty Corporation
("PBGC") has been or is expected to be incurred or would be incurred if any
Catapult Qualified Plan were terminated on the Closing Date. If any Catapult
Qualified Plan were terminated on the Closing Date, the present value of all
benefit liabilities under Catapult Qualified Plan would not, as of the Closing
Date, exceed the then current value of the assets of such Catapult Qualified
Plan. No Catapult Qualified Plan has suffered any accumulated funding deficiency
within the meaning of ERISA Section 302 and Code Section 412. Catapult has made
all quarterly contributions required under Code Section 412(m) and no conditions
exist which would subject the assets of Catapult or EVRM to a lien under Code
Section 412(m) or ERISA Section 4068. No member of Catapult Group has any
outstanding liability under Code Section 4971. As of the Closing Date, all
contributions required to have been made on or prior to the Closing Date under
Catapult Plans will have been made or have been accrued on the Financial
Statements and all required premium payments for Catapult Qualified Plans have
been made, when due, to PBGC. No event or condition exists with respect to any
Catapult Qualified Plan which could be deemed a "reportable event" as defined in
ERISA Section 4043, with respect to which the 30-day notice requirement has not
been waived and which could result in a liability to Catapult or EVRM, and no
condition exists which would subject Catapult to a fine under ERISA Section
4071. No amendment has occurred to any Catapult Qualified Plan which has
required or which would require Catapult Group to provide security under Code
Section 401(a)(29).
(i) No member of Catapult Group has any past, present, or future obligation
to contribute to any multiemployer plan as defined in ERISA Section 3(37).
(j) No member of Catapult Group nor any other "disqualified person" or
"party in interest" (as defined in Code Section 4975 and ERISA Section 3(14),
respectively) with respect to Catapult Plans, has engaged in any "prohibited
transaction" (as defined in Code Section 4975 or ERISA Section 406). Catapult
Group and all other "fiduciaries" (as defined in ERISA Section 3(21)) with
respect to Catapult Plans have complied in all respects with the requirements of
ERISA Section 404. Neither Catapult Group nor any party in interest or
disqualified person with respect to Catapult Plans has taken or omitted any
action which could lead to the imposition of an excise tax under the Code or a
fine under ERISA against Catapult Plans.
Section 4.19 Patents; Trademarks; Related Trademarks. Attached hereto as
Schedule 4.19 is a true, correct and complete list of all of Catapult's
intangible personal property, including, but not limited to, all patents,
trademarks, trade names, or trademark or trade name registrations, domain name
registrations, service marks, and copyrights or copyright registrations
("Catapul's Proprietary Rights"). All of Catapult's Proprietary Rights are
valid, enforceable, in full force and effect and free and clear of any and all
security interests, liens, pledges and encumbrances of any nature or kind.
Catapult has not infringed upon and is not infringing upon any patent,
trademark, trade name, or trademark or trade name registration, service mark,
copyright, or copyright registration of any other Person.
Section 4.20 Books and Records; Fiscal Year; Method of Accounting. Catapult
will make available to EVRM for inspection and its due diligence hereunder
during business hours all of its tax, accounting, corporate and financial books
and records as well as its personnel and employment and other records of any
nature which are pertinent to this Agreement. Such books and records pertaining
to Catapult's business are true, correct and complete, have been maintained on a
current basis, and fairly reflect the basis for Catapult's financial condition
and results of operations as set forth in the Catapult Financial Statements.
Catapult has consistently used the fiscal year ending December 31 as its taxable
year and has consistently used the accrual method as its method of accounting
for tax purposes.
Section 4.21 Bank Accounts; Credit Cards. Schedule 4.21 contains a true,
correct and complete list of each bank, savings and loan association, brokerage
house or other financial institution with which Catapult has an account, line of
credit, safe deposit box, or other relationship, the account numbers thereof,
and the names of all persons authorized to withdraw funds or other property
from, or otherwise act in connection therewith. Schedule 4.21 contains a true,
correct, and complete listing of the name, business address, and residence
address of each person who has a credit card which is billed to Catapult. Except
as set forth on Schedule 4.21, Catapult has no bank account, brokerage account,
line of credit, safe deposit box, or credit card account.
Section 4.22 Absence of Certain Changes or Events. Except as permitted or
required by this Agreement or as set forth in Schedule 4.22, since December 31,
1999, the business of Catapult has been conducted in the ordinary course
consistent with past practices and there has not been any material transaction
or occurrence in which Catapult has:
(a) incurred any indebtedness, obligation or liability (contingent or
otherwise), except normal trade or business obligations incurred in the ordinary
course of its business, none of which was entered into for inadequate
consideration and none of which exceeds $25,000.00 in amount;
(b) discharged or satisfied any claim, security interest, lien or
encumbrance or paid any indebtedness, obligation or liability (contingent or
otherwise), except (i) current liabilities, (ii) scheduled payments pursuant to
obligations under contracts, agreements or leases listed in this Agreement, or
(iii) in the ordinary course of business consistent with past practice of
liabilities reflected or reserved against in the Catapult Financial Statements
or incurred since such date in the ordinary course of business consistent with
past practice;
(c) permitted, allowed or suffered any of its assets or properties to be
subjected to any mortgage, pledge, lien, charge, restriction, security interest
or other encumbrance of any kind;
(d) sold, assigned, transferred, leased, disposed of, or agreed to sell,
assign, transfer, lease, or dispose of, any of its assets or properties;
(e) acquired or leased any assets or property of any other Person;
(f) canceled or compromised any debt or claim;
(g) waived or released any rights or claims;
(h) granted, or made any contract, agreement, promise or commitment to
grant, or otherwise incurred any obligation for any increase in, any wage,
salary or employee benefit, or entered into any employment contract, bonus,
stock option, profit sharing, pension, incentive, retirement or other similar
arrangement or plan with, any officer, employee or other Person, except in
accordance with and in amounts not greater than provided for in written
agreements between Catapult and employees of Catapult entered into prior to June
30,1999 and except for merit raises to hourly employees in the ordinary course
of business consistent with past practice;
(i) entered into any collective bargaining or labor agreement (oral or
written), made any commitment or incurred any liability to any labor
organization, or experienced any slowdown, work interruption, strike or work
stoppage;
(j) made any capital expenditure in excess of Ten Thousand ($10,000.00)
Dollars or entered into any commitment therefor;
(k) suffered any casualty loss or damage in excess of $5,000 in the
aggregate, whether or not such loss or damage is or was covered by insurance;
(l) changed the nature of its business or its method of accounting or
accounting principle, practice or policy;
(m) other than in the ordinary course of business, entered into any
transaction, contract or commitment;
(n) terminated or modified, or agreed to the termination or modification
of, any Service Contract, Participation Agreement or any of the Commitments;
(o) suffered a loss of any supplier or suppliers, which loss (individually
or in the aggregate) has had, or may have, an adverse effect on its financial
condition, results of operations, business or prospects;
(p) suffered any material adverse change in its business, operations,
condition (financial or otherwise), liabilities, assets, earnings, or prospects
of the Business nor, to Catapult's knowledge, has there been any event which has
had or may reasonably be expected to have a material adverse effect on the
Business;
(q) transferred or granted any rights with respect to, or disposed of or
permitted to lapse any right to the use of any software, patent, trademark,
assumed name, service mark, trade name, copyright, license, or application
therefor or disposed of or disclosed to any person not authorized to have such
information any trade secret, proprietary information, formula, process, or
know-how not previously a matter of public knowledge or existing in the public
domain;
(r) incurred any long term indebtedness;
(s) paid, loaned, distributed (by dividend or otherwise), or advanced any
amounts to, sold, transferred, or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, purchased, leased, licensed, or
otherwise acquired any properties or assets from, or entered into any other
agreement or arrangement with (i) any shareholder, officer, employee, or
director of Catapult, (ii) any corporation or partnership in which any Affiliate
is an officer, director, or holder directly or indirectly of five percent (5%)
or more of the outstanding equity or debt securities, or (iii) any person
controlling, controlled by, or under common control with any such partner,
shareholder, officer, director, or Affiliate except for compensation not
exceeding the rate of compensation in effect at December 31, 1999, and for
routine travel advances to officers and employees;
(t) made or agreed to make any charitable contributions or incurred or
agreed to incur any non-business expenses in excess of $5,000 in the aggregate;
(u) taken any other action neither in the ordinary course of business and
consistent with past practice nor provided for in this Agreement;
(v) increased (or experienced any change in the assumptions underlying or
the methods of calculating) any bad debt, contingency, or other reserve, other
than in the ordinary course of business consistent with past practice; or
(w) written down or written up the value of any inventory (including
write-downs by reason of shrinkage or markdowns), determined as collectible any
Accounts Receivable or any portion thereof which were previously considered
uncollectible, or written off as uncollectible any Accounts Receivable or any
portion thereof, except for write-downs, write-ups, and write-offs in the
ordinary course of business consistent with past practice, none of which is
material in amount.
Section 4.23 Accounts Receivable; Accounts Payable. Catapult's accounts
receivable reflected in the Catapult Financial Statements, and all accounts
receivable arising after the date of the Catapult Financial Statements
(collectively the "Accounts Receivable") were or are bona fide accounts
receivable, the full amount of which was or is actually owing to Catapult. And,
to the best of its knowledge, those not collected prior to Closing will be fully
collectible by Catapult within ninety (90) days of Closing without offset,
recoupment, counterclaim, claim or diminution. Catapult's accounts payable
reflected in the Catapult Financial Statements and all accounts payable arising
after the date of the Catapult Financial Statements (collectively, the "Accounts
Payable") arose from bona fide transactions on the ordinary course of Catapult's
business.
Section 4.24 Insider Transactions. Attached hereto as Schedule 4.24 is a
true, correct and complete list of the amounts and other essential terms of all
currently outstanding indebtedness or other obligations, agreements,
undertakings, liabilities or commitments (contingent or otherwise) of Catapult
to or from any past or present officer, director, member, shareholder or any
person related to, controlling, controlled by or under common control with any
of the foregoing.
Section 4.25 Adverse Conditions. Neither Catapult nor any of the Catapult
Shareholders has any knowledge of any present or future condition, state of
facts or circumstances which has affected or may affect adversely the business
of Catapult or prevent Catapult from carrying on its business.
Section 4.26 Authorization and Validity of Documents. The execution,
delivery and performance of this Agreement by Catapult and the Catapult
Shareholders, and the consummation by Catapult and the Catapult Shareholders of
the transactions contemplated hereby, have been duly and validly authorized by
Catapult and Catapult Shareholders. This Agreement has been duly executed and
delivered by Catapult and each Catapult Shareholder and is a legal, valid and
binding obligation of Catapult and the Catapult Shareholders, enforceable
against each of in accordance with its terms except as such enforceability may
be limited by the applicable laws of bankruptcy, insolvency, moratorium and
similar governing laws relating to creditors' rights.
Section 4.27 Investment Intent. Each Catapult Shareholder represents and
warrants to EVRM that the Catapult Shareholders are acquiring EVRM Shares (the
"Acquired Shares") under this Agreement for investment only and for their own
accounts and not as nominees or agents; nor are the said shares being acquired
with a view to their offer for resale, distribution or transfer of any part
thereof nor with any present intention of selling, granting any participation
in, or otherwise distributing the same; nor are they being purchased for
subdivision or fractionalization thereof. By executing this Agreement, each
Catapult Shareholder represents:
(i) That shareholder has no contract, undertaking, agreement or arrangement
with any Person to sell, hypothecate, pledge, donate or otherwise transfer (with
or without consideration) any of the Acquired Shares, and that shareholder has
no present plan or intention to enter into any such contract, undertaking,
agreement or arrangement.
(b) That shareholder is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and is aware of EVRM's business affairs and financial
condition and has had access to and has acquired sufficient information about
EVRM to reach an informed and knowledgeable decision to acquire the Acquired
Shares, and has such business and financial experience as is required to provide
the capacity to protect one's own interests in connection with the purchase of
such shares. Nor is that shareholder a "broker" or a "dealer" as defined in the
Exchange Act.
(c) That shareholder covenants and agrees that none of the Acquired Shares
shall be sold, assigned or otherwise transferred other than in transactions
which are not in violation of the Securities Act and applicable state securities
laws. Each stock certificate of the Acquired Shares shall bear the following
legend, unless such legend may be removed in accordance with its terms:
The securities represented by this stock certificate (the "Securities")
have been issued and sold in reliance upon an exemption from registration under
the Securities Act of 1933 (the "1933 Act") and applicable state securities laws
(the "State Laws"). The Securities may not be offered for sale, sold or
transferred other than (i) pursuant to an effective registration or an exemption
therefrom under the 1933 Act and the State Laws and (ii) upon receipt by the
issuer of evidence satisfactory to it of compliance with the 1933 Act and any
applicable State Laws. The issuer shall be entitled to require an opinion of
counsel satisfactory to it with respect to compliance with the above laws.
Section 4.28 Correctness of Representations. No representation or warranty
of Catapult in this Agreement or in any Exhibit, certificate, or Schedule
attached hereto or furnished pursuant hereto, contains, or on the Closing Date
will contain, any untrue statement of fact or omits, or on the Closing Date will
omit, to state any material fact necessary in order to make the statements
contained therein not misleading, and all such statements, representations,
warranties, Exhibits, certificates, and Schedules shall be true and complete in
all material respects on and as of the Closing Date as though made on that date.
All copies of mortgages, indentures, notes, leases, agreements, plans, Catapult
Contracts, and other instruments listed on or referred to in the Schedules
delivered or furnished to EVRM pursuant to this Agreement are true copies
thereof.
Section 4.29. Litigation. Schedule 4.29 sets forth each instance in which
Catapult or any of its officers or directors (a) is the subject to any
unsatisfied judgment, order, decree, stipulation, injunction or charge or (b) is
a party to or, to the knowledge of Catapult, is threatened to be made a party
to, any charge, complaint, action, suit, proceeding, hearing or investigation of
in any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator.
Section 4.30. Licenses, Permits and Approvals. Schedule 4.30 lists all
governmental and regulatory licenses, permits and approvals necessary to conduct
Catapult's business. All such licenses, permits and approvals are in full force
and effect. There are no violations by Catapult of, or any claims, or
proceedings pending or to the knowledge or Catapult threatened, challenging the
validity of or seeking to discontinue, any such licenses, permits or approvals.
ARTICLE 5. COVENANTS OF EVRM.
EVRM covenants and agrees with Catapult and the Catapult Shareholders as
follows:
Section 5.1 Conduct of Business Prior to Closing. From the date hereof to
the Closing Date, and except to the extent that Catapult shall otherwise consent
in writing, EVRM shall:
(a) operate the business of EVRM substantially as previously operated and
only in the regular and ordinary course, not make any purchase or sale, or
introduce any new method of management or operation except in the ordinary
course of business and in a manner consistent with past practices, and use its
best efforts to maintain and preserve intact each of the goodwill, reputation,
present business organization, and relationships of EVRM with persons having
business dealings with it, and maintain the services of present employees of
EVRM;
(b) maintain its assets and properties in good order and condition,
reasonable wear and use excepted, and maintain all policies of insurance
covering its assets and properties in amounts and on terms substantially
equivalent to those in effect on the date hereof;
(c) take all steps reasonably necessary to maintain the EVRM Proprietary
Rights and other intangible assets of EVRM;
(d) pay all accounts payable when due and collect all accounts receivable
in accordance with prudent business practices; and
(e) comply with all laws applicable to the conduct of the business of EVRM
where the failure to so comply would have a material adverse affect on the
business or condition of EVRM;
(f) maintain the books and records of EVRM in the usual, regular, and
ordinary manner, on a basis consistent with past practices and prepare and file
all foreign, federal, state, and local tax returns and amendments thereto
required to be filed by EVRM after taking into account any extensions of time
granted by such taxing authorities.
Section 5.2 Actions Prior to Closing. From the date of this Agreement
through the Closing Date, EVRM shall not, without the prior written consent of
Catapult:
(a) incur any obligations, liabilities, or expenses of any nature (whether
absolute, accrued, contingent, or otherwise and whether due or to become due)
that would constitute liabilities other than items incurred in the ordinary
course of business consistent with past practice;
(b) permit, allow, or suffer any of EVRM's assets to be subjected to any
mortgage, pledge, lien, or encumbrances;
(c) suffer any material adverse change in EVRM's assets or in the
operations, condition (financial or otherwise), liabilities, earnings, or
prospects of the Business;
(d) waive any claims or rights with respect to and materially and adversely
affecting any of EVRM's business or assets;
(e) sell, transfer, or otherwise dispose of any of EVRM's assets, except in
the ordinary course of business consistent with past practice;
(f) dispose of or permit to lapse any right to the use of any of EVRM's
Proprietary Rights, except for the expiration of any proprietary rights to use
patents that may expire by law;
(g) other than in accordance with, and in amounts not greater than provided
for in, existing agreements between EVRM and its employees, grant any increase
in the salary and wages of any employee or any increase in such salary and wages
payable or to become payable at any time in the future to any of the employees,
except pursuant to promotions previously disclosed to Catapult that will become
effective on or prior to the Closing Date;
(h) make any change in any material method of accounting or accounting
principle, practice, or policy affecting or relating to EVRM's assets or
liabilities including, without limitation, any extension of the useful lives of
EVRM's assets and consequent adjustments to the depreciation or valuation
thereof on the books and records of EVRM with respect to its business;
(i) make any change (or change any assumption underlying or method of
calculating) in the amount of any bad debt, contingency, or other reserve, other
than in the ordinary course of business consistent with past practice;
(j) write-down or write-up the value of any inventory (including
write-downs by reason of shrinkage or mark downs), except for write-downs,
write-ups, and write-offs in the ordinary course of business consistent with
past practice, none of which are or will be material in amount;
(k) except consistent with past practices or existing programs, pay, loan,
or advance any amount to, sell, transfer, or lease any properties or assets
(real, personal or mixed, tangible, or intangible) to, or enter into any
agreement or arrangement with, any employee, or any spouse or Affiliate of any
such person except for routine travel advances to employees, and compensation to
employees consistent with Section 5(g) hereof;
(l) dispose of or permit to lapse any right to the use of any patent,
trademark, assumed name, service mark, trade name, copyright, license, or
application therefor or dispose of or disclose to any person not authorized to
have such information, any trade secret, proprietary information, formula,
process, or know-how not previously a matter of public knowledge or existing in
the public domain;
(m) waive, terminate, or breach under any provision under or relating to
any of the EVRM Contracts;
(n) enter into any contracts or agreements or other transactions with
respect to or affecting EVRM's liabilities other than contracts or agreements
entered into in the ordinary course of business and consistent with past
practices;
(o) with respect to EVRM's assets, permit any option to renew any lease or
any option to purchase any property to expire or exercise any such option;
(p) omit to do any act or permit any act which could reasonably be expected
to cause a breach of any material EVRM Contract, commitment, or obligation with
respect to or affecting EVRM's assets or any breach of any representation,
warranty, covenant, or agreement made by EVRM in this Agreement;
(q) default regarding the provisions of any insurance policy or fail to
give notice or present any claim under any such policy in due and timely fashion
if such default or failure to give notice would give the insurer the right to
cancel any policy, deny claims, or limit coverage;
(r) take any other action not in the ordinary course of business consistent
with past practice or omit to take any other action that would be taken in the
ordinary course of business consistent with past practice if such action or
omission to take action would materially and adversely affect the assets or
liabilities of EVRM.
Section 5.3 Consents. EVRM shall obtain prior to Closing, at its sole cost
and expense, all consents and estoppels required for the continuation of the
EVRM Contracts after Closing. All such consents and estoppels shall be in
writing and in form and substance satisfactory to Catapult, and executed
counterparts thereof will be delivered to Catapult promptly after receipt
thereof but in no event later than the Closing Date.
Section 5.4 Supplemental Disclosure. EVRM shall have the continuing
obligation up to and including the Closing Date to disclose in writing to
Catapult and the Catapult Shareholders any matter or information hereafter
arising or becoming known that, if known on the date of EVRM's execution and
delivery of this Agreement, would have been required to be set forth or listed
in a Schedule hereto. Any such matter or information hereafter disclosed shall
be deemed to amend the Schedules hereto (to the extent of such written
disclosure) as of the date hereof unless Catapult or the Catapult Shareholders
shall within five (5) business days after receipt of such written disclosure by
EVRM and its counsel, but in any event prior to the Closing, notify EVRM in
writing that the matter or information so disclosed materially varies from, or
materially and adversely to the interests Catapult and the Catapult
Shareholders, changes, the information disclosed on the Schedules on the date
hereof. In such event, the Schedules hereto shall not be deemed amended or
changed by the matter or information so disclosed, and, unless the acts or
circumstances giving rise to the matter or information so disclosed is corrected
prior to the Closing, the matter or information so disclosed shall constitute
items at variance with the warranties and representations of EVRM herein.
Section 5.5 Additional Reports. Subject to the confidentiality restrictions
set forth in Section 7 hereof, promptly after they become available, EVRM shall
deliver to Catapult and the Catapult Shareholders true and correct copies of all
internal management and control reports and financial statements furnished to
management of EVRM. Each such report shall be in accordance with the books and
records of EVRM, and, in the case of financial statements shall present fairly
the consolidated financial condition of EVRM and its subsidiaries as of the
dates indicated and the results of operations for the periods then ended, and be
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, and shall reflect adequate
reserves for all known liabilities and reasonably anticipated losses.
Section 5.6 Conditions Precedent. EVRM shall use its best efforts to
satisfy the conditions enumerated in Article 9 hereof.
Section 5.7 Capital Expenditures. EVRM shall discuss with Catapult and the
Catapult Shareholders any proposed significant capital expenditure to be made by
EVRM after the date of this Agreement prior to entering into any contract or
commitment for such capital expenditure.
Section 5.8 SEC Filings. Prior to Closing, EVRM shall make all necessary
filings and reports such that, as of the Closing Date, EVRM will be current in
its filings with the SEC of all required SEC Filings, including, but not limited
to, filing the EVRM Form 10-K for the year ended December31, 1999, and none of
EVRM's SEC Filings will contain any untrue statement of a material fact or omit
to state a material fact required or necessary in order to make the statements
therein not misleading.
Section 5.9 Shareholder and Other Required Consents. EVRM shall take all
actions necessary and use its best efforts to obtain any and all consents,
approvals, ratifications and authorizations of its Board of Directors, its
shareholders and any other person, entity or governmental authority necessary
for the execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby.
Section 5.10 Other Transactions. EVRM shall deal exclusively and in good
faith with Catapult and the Catapult Shareholders with regard to the
transactions contemplated by this Agreement and will not, and will direct its
officers, directors, financial advisors, accountants, agents, and counsel not to
(a) solicit submission of proposals or offers from any person other than
Catapult and the Catapult Shareholders relating to any acquisition of all or any
material part of the assets of EVRM, the sale or issuance of any capital stock
of EVRM or of any corporation formed by EVRM or its Affiliates to which any of
the assets of EVRM may be contributed, or any merger or consolidation of EVRM or
of any corporation formed by EVRM or its Affiliates to which any of the assets
of EVRM may be contributed (an "Acquisition Proposal"), (b) participate in any
discussions or negotiations regarding, or furnish any non-public information to
any other person regarding EVRM other than Catapult and the Catapult
Shareholders and their representatives or otherwise cooperate in any way or
assist, facilitate, or encourage any Acquisition Proposal by any person other
than Catapult and the Catapult Shareholders or, (c) enter into any agreement or
understanding, whether oral or in writing, that would have the effect of
preventing the consummation of the transactions contemplated by this Agreement.
If, notwithstanding the foregoing, EVRM, or its representatives or agents should
receive any Acquisition Proposal or any inquiry regarding such proposal from a
third party, such persons shall promptly inform Catapult and its counsel
thereof. This covenant shall survive the termination of this Agreement for a
period of ninety (90) days.
ARTICLE 6. COVENANTS OF CATAPULT.
Catapult covenants and agrees with EVRM as follows:
Section 6.1 Conduct of Business Prior to Closing. From the date hereof to
the Closing Date, and except to the extent that EVRM shall otherwise consent in
writing, Catapult shall:
(a) operate the business of Catapult substantially as previously operated
and only in the regular and ordinary course, not make any purchase or sale, or
introduce any new method of management or operation except in the ordinary
course of business and in a manner consistent with past practices, and use its
best efforts to maintain and preserve intact each of the goodwill, reputation,
present business organization, and relationships of Catapult with persons having
business dealings with it, and maintain the services of present employees of
Catapult;
(b) maintain its assets and properties in good order and condition,
reasonable wear and use excepted, and maintain all policies of insurance
covering its assets and properties in amounts and on terms substantially
equivalent to those in effect on the date hereof;
(c) take all steps reasonably necessary to maintain the Catapult
Proprietary Rights and other intangible assets of Catapult;
(d) pay all accounts payable when due and collect all accounts receivable
in accordance with prudent business practices; and
(e) comply with all laws applicable to the conduct of the business of
Catapult where the failure to so comply would have a material adverse affect on
the business or condition of Catapult;
(f) maintain the books and records of Catapult in the usual, regular, and
ordinary manner, on a basis consistent with past practices and prepare and file
all foreign, federal, state, and local tax returns and amendments thereto
required to be filed by Catapult after taking into account any extensions of
time granted by such taxing authorities.
Section 6.2 Actions Prior to Closing. From the date of this Agreement
through the Closing Date, Catapult shall not, without the prior written consent
of EVRM:
(a) incur any obligations, liabilities, or expenses of any nature (whether
absolute, accrued, contingent, or otherwise and whether due or to become due)
that would constitute liabilities other than items incurred in the ordinary
course of business consistent with past practice;
(b) permit, allow, or suffer any of Catapult's assets to be subjected to
any mortgage, pledge, lien, or encumbrances;
(c) suffer any material adverse change in Catapult's assets or in the
operations, condition (financial or otherwise), liabilities, earnings, or
prospects of Catapult's business;
(d) waive any claims or rights with respect to and materially and adversely
affecting any of Catapult's business or assets;
(e) sell, transfer, or otherwise dispose of any of Catapult's assets,
except in the ordinary course of business consistent with past practice;
(f) dispose of or permit to lapse any right to the use of any of Catapult's
Proprietary Rights, except for the expiration of any proprietary rights to use
patents that may expire by law;
(g) other than in accordance with, and in amounts not greater than provided
for in, existing agreements between Catapult and its employees, grant any
increase in the salary and wages of any employee or any increase in such salary
and wages payable or to become payable at any time in the future to any of the
employees, except pursuant to promotions previously disclosed to EVRM that will
become effective on or prior to the Closing Date;
(h) make any change in any material method of accounting or accounting
principle, practice, or policy affecting or relating to Catapult's assets or
liabilities including, without limitation, any extension of the useful lives of
Catapult's assets and consequent adjustments to the depreciation or valuation
thereof on the books and records of Catapult with respect to the business;
(i) make any change (or change any assumption underlying or method of
calculating) in the amount of any bad debt, contingency, or other reserve, other
than in the ordinary course of business consistent with past practice;
(j) write-down or write-up the value of any inventory (including
write-downs by reason of shrinkage or mark downs), except for write-downs,
write-ups, and write-offs in the ordinary course of business consistent with
past practice, none of which are or will be material in amount;
(k) except consistent with past practices or existing programs, pay, loan,
or advance any amount to, sell, transfer, or lease any properties or assets
(real, personal or mixed, tangible, or intangible) to, or enter into any
agreement or arrangement with, any employee, or any spouse or Affiliate of any
such person except for routine travel advances to employees, and compensation to
employees consistent with Section 6.2(g) hereof;
(l) dispose of or permit to lapse any right to the use of any patent,
trademark, assumed name, service mark, trade name, copyright, license, or
application therefor or dispose of or disclose to any person not authorized to
have such information, any trade secret, proprietary information, formula,
process, or know-how not previously a matter of public knowledge or existing in
the public domain;
(m) waive, terminate, or breach under any provision under or relating to
any of the Catapult Contracts;
(n) enter into any contracts or agreements or other transactions with
respect to or affecting Catapult's liabilities other than contracts or
agreements entered into in the ordinary course of business and consistent with
past practices;
(o) with respect to Catapult's assets, permit any option to renew any lease
or any option to purchase any property to expire or exercise any such option;
(p) omit to do any act or permit any act which could reasonably be expected
to cause a breach of any material Catapult Contract, commitment, or obligation
with respect to or affecting Catapult's assets or any breach of any
representation, warranty, covenant, or agreement made by Catapult in this
Agreement;
(q) default regarding the provisions of any insurance policy or fail to
give notice or present any claim under any such policy in due and timely fashion
if such default or failure to give notice would give the insurer the right to
cancel any policy, deny claims, or limit coverage; or
(r) take any other action not in the ordinary course of business consistent
with past practice or omit to take any other action that would be taken in the
ordinary course of business consistent with past practice if such action or
omission to take action would materially and adversely affect the assets or
liabilities of Catapult.
Section 6.3 Consents. Catapult shall obtain prior to Closing, at its sole
cost and expense, all consents and estoppels required for the continuation of
the Catapult Contracts after Closing. All such consents and estoppels shall be
in writing and in form and substance satisfactory to EVRM, and executed
counterparts thereof will be delivered to EVRM promptly after receipt thereof
but in no event later than the Closing Date.
Section 6.4 Supplemental Disclosure. Catapult shall have the continuing
obligation up to and including the Closing Date to disclose in writing to EVRM
any matter or information hereafter arising or becoming known that, if known on
the date of Catapult's execution and delivery of this Agreement, would have been
required to be set forth or listed in a Schedule hereto. Any such matter or
information hereafter disclosed shall be deemed to amend the Schedules hereto
(to the extent of such written disclosure) as of the date hereof unless EVRM
shall within five (5) business days after receipt of such written disclosure by
Catapult and its counsel, but in any event prior to the Closing, notify Catapult
in writing that the matter or information so disclosed materially varies from,
or materially and adversely to the interests of EVRM, changes, the information
disclosed on the Schedules on the date hereof. In such event, the Schedules
hereto shall not be deemed amended or changed by the matter or information so
disclosed, and, unless the acts or circumstances giving rise to the matter or
information so disclosed is corrected prior to the Closing, the matter or
information so disclosed shall constitute items at variance with the warranties
and representations of Catapult herein.
Section 6.5 Additional Reports. Subject to the confidentiality restrictions
set forth in Section 7 hereof, promptly after they become available, Catapult
shall deliver to EVRM true and correct copies of all internal management and
control reports and financial statements furnished to management of Catapult.
Each such report shall be in accordance with the books and records of Catapult,
and, in the case of financial statements shall present fairly the consolidated
financial condition of the business as of the dates indicated and the results of
operations for the periods then ended, and be prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, and shall reflect adequate reserves for all known liabilities
and reasonably anticipated losses.
Section 6.6 Conditions Precedent. Catapult shall use its best efforts to
satisfy the conditions enumerated in Article 8 hereof.
Section 6.7 Capital Expenditures. Catapult shall discuss with EVRM any
proposed significant capital expenditure to be made by Catapult after the date
of this Agreement prior to entering into any contract or commitment for such
capital expenditure.
Section 6.8 Shareholder and Other Required Consents. Catapult shall take
all actions necessary and use its best efforts to obtain any and all consents,
approvals, ratifications and authorizations of its Board of Directors, its
shareholders and any other person, entity or governmental authority necessary
for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
Section 6.9 Audited Financial Statements. Promptly upon completion of the
audits referred to in Section 4.3(d), Catapult will deliver to EVRM copies of
them, together with the notes thereto and the report thereon. Such audited
financial statements, when so delivered, (i) will be in accordance with the
books and records of Catapult, (ii) present fairly the consolidated financial
condition of Catapult as of the respective dates indicated and the results of
operations for such periods, (iii) will have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, and (iv) will reflect adequate reserves for all liabilities
and losses. The audits will disclose no material liabilities or obligations
(secured or unsecured, whether accrued, absolute, direct, indirect, contingent,
or otherwise, and whether due or to become due) that are not fully accrued or
reserved against in the Catapult Financial Statements nor any material deviation
from the Catapult Financial Statements. Catapult will have not received any
advice or notification from its independent certified public accountants that it
has used any improper accounting practice that would have the effect of not
reflecting or incorrectly reflecting in the Catapult Financial Statements or the
books and records of Catapult, any properties, assets, liabilities, revenues, or
expenses. Such audits will not contain any items of special or nonrecurring
income, or other income not earned in the ordinary course of business, except as
was set forth in the Catapult Financial Statements or in the notes thereto. The
books, records, and accounts of Catapult will accurately and fairly reflect, in
reasonable detail, all transactions, assets, and liabilities of Catapult.
Catapult will not have engaged in any transaction, maintained any bank account,
or used any of the funds of Catapult, except for transactions, bank accounts,
and funds which have been and are reflected in the normally maintained books and
records of Catapult.
Section 6.10 Other Transactions. Catapult shall deal exclusively and in
good faith with EVRM with regard to the transactions contemplated by this
Agreement and will not, and will direct its officers, directors, financial
advisors, accountants, agents, and counsel not to, (a) solicit submission of
proposals or offers from any person other than EVRM relating to any acquisition
of all or any material part of the assets of Catapult, the sale or issuance of
any capital stock of Catapult or of any corporation formed by Catapult or its
affiliates to which any of the assets of Catapult may be contributed, or any
merger or consolidation of Catapult or of any corporation formed by Catapult or
its affiliates to which any of the assets of Catapult may be contributed (an
"Acquisition Proposal"), (b) participate in any discussions or negotiations
regarding, or furnish any non-public information to any other person regarding
Catapult other than EVRM and its representatives or otherwise cooperate in any
way or assist, facilitate, or encourage any Acquisition Proposal by any person
other than EVRM, or (c) enter into any agreement or understanding, whether oral
or in writing, that would have the effect of preventing the consummation of the
transactions contemplated by this Agreement. If, notwithstanding the foregoing,
Catapult or its representatives or agents should receive any Acquisition
Proposal or any inquiry regarding such proposal from a third party, such persons
shall promptly inform EVRM and its counsel thereof. This covenant shall survive
the termination of this Agreement for a period of ninety (90) days.
ARTICLE 7. FURTHER AGREEMENTS.
Section 7.1 Azimuth. The parties acknowledge that, prior to the
negotiations which culminated in this Agreement, EVRM was actively engaged in
the formulation of a campaign to grow its subsidiary, Azimuth, through mergers
and acquisitions with other companies in Azimuth's, and other related, spheres
of business. Catapult and the Catapult Shareholders have discussed and reviewed
this strategy with EVRM and acknowledge that the post-Closing value of Azimuth
to EVRM may be best realized by its growth through a strategy of mergers and
acquisitions. The parties acknowledge that this objective may be achieved by the
identification of a public company for utilization as "roll up" vehicle for
Azimuth. Therefore, notwithstanding anything to the contrary contained herein,
prior to Closing EVRM will continue to implement its mergers and acquisitions
strategy to the extent that it may:
(a) contract with finders and consultants for assistance in the planning
and implementation of the strategy;
(b) forthwith begin the process of trying to identify existing public
"shell" candidates for merger with Azimuth;
(c) proceed to qualify and negotiate with such candidates;
(d) enter into contracts with acquisition candidates; and
(e) engage in such other activities as will expedite and augment this
strategy;
provided, however, that no letter of intent, definitive contract or other
understanding or commitment shall be entered into or executed by EVRM without
the prior written consent of Catapult and the Catapult Shareholders, which
consent will not be unreasonably withheld.
Section 7.2 Confidentiality. EVRM and Catapult agree that each shall hold
in confidence any confidential information about the other that it has received,
or hereafter receives, pursuant to any provision of this Agreement under
circumstances indicating the confidentiality of such information unless (i) such
information shall have been publicly disclosed other than as a result of any
wrongful action by the recipient of such information, or (ii) the recipient of
such information independently develops or is aware of such information.
Section 7.3 Public Announcements. EVRM, Catapult and the Catapult
Shareholders will consult with each other before issuing any press releases or
otherwise making any public statements or filings with governmental entities
with respect to this Agreement or the transactions contemplated hereby and shall
not issue any press releases or make any public statements or filings with
governmental entities prior to such consultation and shall modify any portion
thereof if the other party objects thereto, unless the same may be required by
applicable law.
ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EVRM TO CONSUMMATE
THE EXCHANGE
The obligation of EVRM to acquire the Catapult Shares from the Catapult
Shareholders in exchange for EVRM Shares and to consummate the transactions as
contemplated by this Agreement shall be subject to the fulfillment and
satisfaction, at or before the Closing, of each of the following conditions
precedent, any or all of which may be waived in writing, in whole or in part, by
EVRM:
Section 8.1 Representations and Warranties. All information required to be
furnished or delivered by Catapult pursuant to this Agreement shall have been
furnished or delivered as of the date hereof and the Closing Date as required
hereunder; the representations and warranties made by Catapult in Article 4
hereof shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date.
Section 8.2 Covenants and Agreements. Catapult and the Catapult
Shareholders shall have performed and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed
by them prior to or as of the Closing.
Section 8.3 Certified Resolutions. EVRM shall have received from Catapult a
certificate executed by the Secretary of Catapult containing a true and correct
copy of resolutions duly adopted by Catapult's Board of Directors approving and
authorizing the execution and delivery by Catapult of each of this Agreement to
which Catapult is a party, and the consummation of each of the transactions
contemplated hereby and thereby. The Secretary of Catapult shall also certify
that, as of the Closing Date, such resolutions have not been rescinded, revoked,
modified, or otherwise affected and remain in full force and effect.
Section 8.4 No Injunction, Etc. No action, proceeding, investigation,
regulation, or legislation shall be pending or overtly threatened which seeks to
enjoin, restrain, or prohibit EVRM or to obtain substantial damages from EVRM in
respect of the consummation of the transactions contemplated hereby, which, in
the reasonable judgment of EVRM would make it inadvisable to consummate such
transactions.
Section 8.5 Incumbency. EVRM shall have received a certificate of
incumbency of Catapult executed by the President and Secretary of Catapult
listing the officers of Catapult authorized to execute this Agreement and
certifying the authority of each such officer to execute the agreements,
documents, and instruments on behalf of Catapult in connection with the
consummation of the transactions contemplated herein.
Section 8.6 Certificates. EVRM shall have received from Catapult all such
certificates, dated as of the Closing Date, as EVRM shall reasonably request to
evidence the fulfillment by Catapult, or such other satisfaction as of the
Closing Date, of the terms and conditions of this Agreement.
Section 8.7 Deliveries at Closing. At the Closing, Catapult and the
Catapult Shareholders shall have delivered to EVRM each of the following:
(a) certificates evidencing all Catapult Shares, duly endorsed for transfer
and otherwise in a form suitable for transfer on the books of Catapult;
(b) the certificates described in Sections 8 and 9 hereof;
(c) a certificate of good standing and a revenue certificate, as of the
most recent practicable date prior to the Closing Date, from the jurisdiction of
incorporation and each jurisdiction in which Catapult is qualified to do
business as a foreign corporation;
(d) the written opinion of counsel for Catapult, dated as of the Closing
Date, in substantially the form of Exhibit B hereto;
Section 8.8 Certificates. Catapult and the Catapult Shareholders shall have
delivered to EVRM all such certificates, dated as of the Closing Date, as EVRM
shall reasonably request to evidence the fulfillment by Catapult and the
Catapult Shareholders or other satisfaction as of the Closing Date, of the terms
and conditions of this Agreement. The form and substance of all opinions,
certificates, assignments, orders, and other documents and instruments hereunder
shall be satisfactory in all reasonable respects to EVRM and its counsel.
Section 8.9 Estoppel Certificates. Catapult shall obtain, at its cost and
expense, prior to Closing an Estoppel Certificate, in form and substance
satisfactory to EVRM, from:
(i) The lessors of the Catapult Leased Real Property, to the effect that
there are no events of default or events which with notice or lapse of time or
both would be events of default under the lease, attaching a true and correct
copy of the lease, and indicating the date through which rent is paid and the
amounts of any deposits held by such lessor; and
(ii) Each lessor of personal property, to the effect that there are no
events of default or events which with notice or lapse of time or both would be
events of default under any such lease, attaching a true and correct copy of any
such lease, and indicating the date through which rent is paid and the amounts
of any deposits held by the lessor under each such lease agreement;
Section 8.10 Financing. Prior to the date of Closing, and in accordance
with Section 2 hereof, Catapult shall have obtained a commitment for a minimum
of Two Million Dollars ($2,000,000.00) (or such lesser amount as may be agreed
to by EVRM and Catapult) in net proceeds (the "Issue Price") from a third party
investor(s) (the "New Investor(s)") upon terms and conditions satisfactory to
EVRM and Catapult. The issuance of EVRM shares to the New Investors will be
dilutive to both the Catapult Shareholders and the EVRM Shareholders.
Section 8.11 Closing Certificate. EVRM shall have received a certificate of
the President of Catapult, whose signature, as such President, shall be attested
by the Secretary of the Catapult, dated the Closing Date, in form reasonably
satisfactory to EVRM certifying that, to the best of his knowledge, each of the
conditions precedent specified in Sections 8 and 9 of this Agreement has been
fulfilled and satisfied.
ARTICLE 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CATAPULT SHAREHOLDERS TO
CONSUMMATE THE EXCHANGE
The obligation of the Catapult Shareholders to acquire the Exchange Shares
from EVRM in exchange for Catapult Shares and the obligation of Catapult to
consummate the transactions as contemplated by this Agreement are subject to the
fulfillment and satisfaction at Closing of each of the following conditions
precedent, any or all of which may be waived in whole or in part at or prior to
the Closing by Catapult and the Catapult Shareholders:
Section 9.1 Representations and Warranties. All information required to be
furnished or delivered by EVRM pursuant to this Agreement shall have been
furnished or delivered as of the date hereof and the Closing Date as required
hereunder; the representations and warranties made by EVRM in Article 3 hereof
shall be true and correct in all material respects on and as of the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of the Closing Date.
Section 9.2 Covenants and Agreements. EVRM shall have performed and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed by them prior to or as of the
Closing.
Section 9.3 Certified Resolutions. Catapult shall have received from EVRM a
certificate executed by the Secretary of EVRM containing a true and correct copy
of resolutions duly adopted by EVRM's Board of Directors approving and
authorizing the execution and delivery by EVRM of each of this Agreement to
which EVRM is a party, and the consummation of each of the transactions
contemplated hereby and thereby. The Secretary of EVRM shall also certify that,
as of the Closing Date, such resolutions have not been rescinded, revoked,
modified, or otherwise affected and remain in full force and effect.
Section 9.4 No Injunction, Etc. No action, proceeding, investigation,
regulation, or legislation shall be pending or overtly threatened which seeks to
enjoin, restrain, or prohibit EVRM or to obtain substantial damages from
Catapult in respect of the consummation of the transactions contemplated hereby,
which, in the reasonable judgment of Catapult would make it inadvisable to
consummate such transactions.
Section 9.5 Incumbency. Catapult shall have received a certificate of
incumbency of EVRM executed by the President and Secretary of EVRM listing the
officers of EVRM authorized to execute this Agreement and certifying the
authority of each such officer to execute the agreements, documents, and
instruments on behalf of EVRM in connection with the consummation of the
transactions contemplated herein.
Section 9.6 Certificates. Catapult shall have received from EVRM all such
certificates, dated as of the Closing Date, as Catapult shall reasonably request
to evidence the fulfillment by EVRM, or such other satisfaction as of the
Closing Date, of the terms and conditions of this Agreement.
Section 9.7 Deliveries at Closing. At the Closing, EVRM shall have
delivered to Catapult each of the following:
(a) certificates evidencing all EVRM Shares, duly endorsed for transfer and
otherwise in a form suitable for transfer on the books of EVRM;
(b) the certificates described in Sections 8 and 9 hereof;
(c) a certificate of good standing and a revenue certificate, as of the
most recent practicable date prior to the Closing Date, from the jurisdiction of
incorporation and each jurisdiction in which Catapult is qualified to do
business as a foreign corporation;
(d) the written opinion of counsel for EVRM, dated as of the Closing Date,
in substantially the form of Exhibit C hereto;
Section 9.8 Certificates. EVRM shall have delivered to Catapult all such
certificates, dated as of the Closing Date, as Catapult shall reasonably request
to evidence the fulfillment by EVRM or other satisfaction as of the Closing
Date, of the terms and conditions of this Agreement. The form and substance of
all opinions, certificates, assignments, orders, and other documents and
instruments hereunder shall be satisfactory in all reasonable respects to
Catapult and its counsel.
Section 9.9 Estoppel Certificates. EVRM shall obtain, at its cost and
expense, prior to Closing an Estoppel Certificate, in form and substance
satisfactory to Catapult, from:
(i) The lessors of the EVRM Leased Real Property, to the effect that there
are no events of default or events which with notice or lapse of time or both
would be events of default under the lease, attaching a true and correct copy of
the lease, and indicating the date through which rent is paid and the amounts of
any deposits held by such lessor; and
(ii) Each lessor of personal property, to the effect that there are no
events of default or events which with notice or lapse of time or both would be
events of default under any such lease, attaching a true and correct copy of any
such lease, and indicating the date through which rent is paid and the amounts
of any deposits held by the lessor under each such lease agreement;
Section 9.10 Financing. Prior to the date of Closing, and in accordance
with Section 2 hereof, Catapult shall have obtained a commitment for a minimum
of Two Million Dollars ($2,000,000.00) (or such lesser amount as may be agreed
to by EVRM and Catapult) in net proceeds (the "Issue Price") from a third party
investor(s) (the "New Investor(s)") upon terms and conditions satisfactory to
EVRM and Catapult. The issuance of EVRM shares to the New Investors will be
dilutive to both the Catapult Shareholders and the EVRM Shareholders.
Section 9.11 Closing Certificate. Catapult shall have received a
certificate of the President of EVRM, whose signature, as such President, shall
be attested by the Secretary of the EVRM, dated the Closing Date, in form
reasonably satisfactory to Catapult certifying that, to the best of his
knowledge, each of the conditions precedent specified in Sections 8.1 and 8.2 of
this Agreement has been fulfilled and satisfied.
ARTICLE 10. TERMINATION.
Section 10.1 Termination.
This Agreement may be terminated and the exchange of stock contemplated
hereby may be abandoned at any time prior to the completion of the Closing,
whether before or after approval by the shareholders of EVRM:
(a) by mutual consent in writing of EVRM and Catapult; or
(b) by either EVRM or Catapult if any court of competent jurisdiction in
the United States or any State shall have issued an order, judgment or decree
(other than a temporary restraining order) restraining, enjoining or otherwise
prohibiting the exchange of stock and such order, judgment or decree shall have
become final and nonappealable; provided that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the completion of the Closing to occur on or before
such date; or
(c) by EVRM if there has been (i) a material breach of any covenant or
agreement or of a representation or warranty herein on the part of Catapult
which has not been cured, or adequate assurance (acceptable to EVRM in its sole
discretion) of cure given, in either case, within 15 business days following
receipt of notice of such breach; or
(d) by Catapult if (i) there has been a material breach of any covenant or
agreement or of a representation or warranty herein on the part of EVRM which
has not been cured, or adequate assurance (acceptable to Catapult in its sole
discretion) of cure given, in either case, within 15 business days following
receipt of notice of such breach or (ii) at Closing EVRM shall not be listed on
the Over-the-Counter Bulletin Board (OTC:BB) exchange, provided Catapult has
made its best efforts to assist EVRM in obtaining such listing; or
(e) by either EVRM or Catapult (and the Catapult Shareholders) if either of
such party's due diligence investigation has disclosed the existence of (i) any
matter relating to the other party or its business that is materially and
adversely (to the investigating party) at variance with those matters
theretofore disclosed to the investigating party, or (ii) any matter which, in
the investigating party's reasonable judgement, (A) indicates a material adverse
change in the condition, assets or prospects of the other party, or (B) would
make it inadvisable to consummate the exchange of stock and other transactions
contemplated by this Agreement.
Section 10.2 Effect of Termination. In the event of termination of this
Agreement by either EVRM or Catapult as provided in Section 10, all obligations
of the parties hereunder shall terminate unless otherwise specifically stated
herein and except that the confidentiality provisions of Section 7 hereof shall
survive the termination hereof. Nothing in this Section 10 hereof shall relieve
any party from liability for any breach of this Agreement.
ARTICLE 11. Indemnification.
Section 11.1. Indemnification by the Company. EVRM shall defend, indemnify
and hold harmless: Catapult and the Catapult Shareholders and their respective
heirs, personal and legal representatives, guardians, successors and assigns,
from and against any and all claims, threats, liabilities, taxes, interest,
fines, penalties, suits, actions, proceedings, demands, damages, losses, costs
and expenses (including attorneys' and experts' fees and court costs) of every
kind and nature arising out of, resulting from or in connection with any
misrepresentation or omission or breach by EVRM of any representation or
warranty contained in this Agreement.
Section 11.2. Indemnification by Catapult Shareholders. The Catapult
Shareholders shall defend, indemnify and hold harmless EVRM and its respective
representatives, successors and assigns, from and against any and all claims,
threats, liabilities, taxes, interest, fines, penalties, suits, actions,
proceedings, demands, damages, losses, costs and expenses (including attorneys'
and experts' fees and court costs) of every kind and nature arising out of,
resulting from, or in connection with any misrepresentation or omission or
breach by Catapult or the Catapult Shareholders of any representation or
warranty contained in this Agreement.
ARTICLE 12. MISCELLANEOUS
Section 12.1 Survival of Representations, Warranties and Agreements. All of
the covenants, promises, agreements, representations and warranties set forth in
this Agreement shall survive the Closing and the consummation of the
transactions contemplated by this Agreement.
Section 12.2 Further Documents. At any reasonable time upon prior
reasonable notice by a party to another party (whether at or after the Closing),
the other party shall execute and deliver such further instruments and documents
and take such other actions as the other party may reasonably request to vest
more effectively in the other party full right, title and interest in and to the
shares being conveyed hereunder and to secure for that party the full benefits
intended to be secured by this Agreement.
Section 12.3 Notices. All notices, requests, demands, consents and other
communications which are required or may be given under this Agreement
(collectively, the "Notices") shall be in writing and shall be given either (i)
by personal delivery against a receipted copy, or (ii) by certified or
registered U. S. mail, postage prepaid, or (iii) by overnight courier service to
the following addresses or to such other address of which written notice in
accordance with this Section 12 shall have been provided by such party to the
others. Notices may only be given in the manner hereinabove described in this
Section 12 and shall be deemed received when given in such manner.
If to EVRM:
Envirometrics, Inc.
9229 University Blvd.
Charleston, SC 29406
Attention: Mr. Walter H. Elliott
If to the Catapult Shareholders:
c/o The Catapult Group, Inc.
4940 Peachtree Industrial Boulevard
Suite 350
Norcross, GA 30071
If to Catapult:
The Catapult Group, Inc.
4940 Peachtree Industrial Boulevard
Suite 350
Norcross, GA 30071
Section 12.4 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) constitutes the full, entire and integrated agreement between
the parties hereto with respect to the subject matter hereof, and supersedes all
prior negotiations, correspondence, understandings and agreements among the
parties hereto respecting the subject matter hereof.
Section 12.5 Assignability. This Agreement shall not be assignable by any
party hereto without the prior written consent of the other parties hereto.
Section 12.6 Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, each other Person who is
indemnified under any provision of this Agreement, and their respective heirs,
personal and legal representatives, guardians and successors. Nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights, remedies, obligations or liabilities except as may be otherwise set
forth herein.
Section 12.7 Severability. Any provision of this Agreement which is held by
a court of competent jurisdiction to be prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability, without
invalidating or rendering unenforceable the remaining provisions of this
Agreement.
Section 12.8 Amendment; Waiver. No provision of this Agreement may be
amended, waived or otherwise modified without the prior written consent of all
of the parties hereto. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action or compliance by the other party with any
representation, warranty, covenant or agreement herein contained. The effective
written waiver by any party hereto of a breach of any provision or condition
contained in this Agreement shall not operate or be construed as a waiver of any
subsequent breach or of any other conditions hereof.
Section 12.9 Section Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
Section 12.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be the same Agreement.
Section 12.12 Applicable Law. This Agreement is made and entered into, and
shall be governed by and construed in accordance with, the laws of the State of
Georgia.
Section 12.12 Remedies. The parties hereto acknowledge that the Shares
being exchanged hereunder are unique, that any claim for monetary damages may
not constitute an adequate remedy, and that it may therefore be necessary for
the protection of the parties and to carry out the terms of this Agreement to
apply for the specific performance of the provisions hereof. It is accordingly
hereby agreed by all parties that no objection to the form of the action or the
relief prayed for in any proceeding for specific performance of this Agreement
shall be raised by any party, in order that such relief may be expeditiously
obtained by an aggrieved party. All parties may proceed to protect and enforce
their rights hereunder by a suit in equity or at law or other appropriate
proceeding, whether for specific performance or for an injunction against a
violation of the terms hereof or in aid of the exercise of any right, power or
remedy granted hereunder or by law, equity or statute or otherwise. No course of
dealing and no delay on the part of any party hereto in exercising any right,
power or remedy shall operate as a waiver thereof or otherwise prejudice its
rights, powers or remedies, and no right, power or remedy conferred hereby shall
be exclusive of any other right, power or remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.
Section 12.13. Procedure. Within seven (7) days of the execution hereof,
EVRM and Catapult each shall provide to the other all of the Schedules required
of it hereunder, and their respective attorneys shall agree on exemplars of the
requisite Exhibits B and C described herein. EVRM and Catapult each shall have
an additional five (5) business days to notify the other of its decision to
invoke Section 10.1(e)(ii)(B) hereof and terminate this Agreement because it
deems it inadvisable to consummate the transactions contemplated hereby. Failing
such notice by either EVRM or Catapult within such time, all parties shall be
deemed, conclusively, to have waived the provisions of Section 10.1(e)(ii)(B)
hereof, which provisions shall thereupon become null and void.
Attest: Envirometrics., Inc.
By: __________________________________
__________________________ Walter H. Elliott III, Chief Executive Officer
[CORPORATE SEAL]
Attest: The Catapult Group, Inc.
By: __________________________________
__________________________ Bryan M. Johns, Chief Executive Officer
[CORPORATE SEAL]
The Catapult Shareholders:
__________________________________ ___________________________________
Witness Name:
___________________________________ ___________________________________
Witness Name:
___________________________________ ___________________________________
Witness Name:
___________________________________ ___________________________________
Witness Name:
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 104,607
<SECURITIES> 0
<RECEIVABLES> 131,654
<ALLOWANCES> (5,000)
<INVENTORY> 4,000
<CURRENT-ASSETS> 267,895
<PP&E> 930,848
<DEPRECIATION> 870,819
<TOTAL-ASSETS> 330,427
<CURRENT-LIABILITIES> 418,461
<BONDS> 0
0
717,985
<COMMON> 3,640
<OTHER-SE> (905,507)
<TOTAL-LIABILITY-AND-EQUITY> 303,427
<SALES> 1,069,746
<TOTAL-REVENUES> 1,069,746
<CGS> 776,070
<TOTAL-COSTS> 776,070
<OTHER-EXPENSES> 489,811
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,161
<INCOME-PRETAX> (174,935)
<INCOME-TAX> 0
<INCOME-CONTINUING> (174,935)
<DISCONTINUED> 0
<EXTRAORDINARY> 47,874
<CHANGES> 0
<NET-INCOME> (127,061)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
