As filed with the Securities and Exchange Commission on December 20, 1999
Registration Number 000-1100399
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
eKOMART.COM, INC.
(Exact name of Registrant as specified in its charter)
Florida _________________ 65-0731234
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Code Number)
eKOMART.COM, Inc. Stan J. H. Lee, President and CEO
71 Stony Hill Road eKOMART.COM, Inc.
Second Floor 71 Stony Hill Road, 2nd Floor
Bethel CT 06801 Bethel CT 06801
(203) 798-1889 (203) 798-1889
(Address, including zip code, (Address,including zip code,
and telephone number telephone number including area code,
and including area code, executive principal or agent for service)
of Registrants principal
place of business)
Approximate date of commencement of the proposed sale to the public:
The business day after the date on which this Registration Statement becomes
effective. If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, please check the following box: |_|
CALCULATION OF REGISTRATION FEE
==============================================================================
Proposed Maximum
Title of Each Class Amount Offering Aggregate Amount
of Securities to be to be Price Offering of Regis-
Registered Registered Per Unit Price tration Fee.
==============================================================================
Common Stock, with
par value of $0.001(1) 2,000,000 $0.10 $ 200,000 $ 100.00
Common Stock, with
par value of $0.001(2) 250,000 $0.10 $ 25,000 $ 100.00
Common Stock, with
par value of $0.001(3) 1,250,000 $0.10 $ 125,000 $ 100.00
Totals 3,500,000 $0.10 $ 350,000 $ 300.00
==============================================================================
(1) Represents treasury stock to be offered for sale to the public.
(2) Represents the resale of stock issued to Cyber-Care Inc. on conversion
of Series "A" Convertible Preferred Shares (See-Selling Shareholders) and
exercise of warrants.
(3) Represents the resale of shares issued to Selling Shareholders,
exclusive of Cyber-Care Inc.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
will file a further amendment which specifically states that this Registration
Statement will thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933. or until the Registration Statement becomes
effective on such date as the Commission, acting pursuant to Section 8(a),
may determine.
This registration statement is comprised of 199 consecutively
numbered pages, including exhibits. The exhibit index called for by Item 601
of Regulation SB is located at page 55.
1
Pursuant to Item 601 of Regulation S-B showing location in the Prospectus
of information required by Items 101 through 510 of Regulation SB-2.
Registration Statement
Item Number and Caption Prospectus Caption
101. Description of Business THE COMPANY
102. Description of Property THE COMPANY - PROPERTY
103. Legal Proceedings LITIGATION
201. Market for Common Stock and CERTAIN MARKET INFORMATION
Related Stockholder Matters
202. Description of Securities to be
Registered DESCRIPTION OF SECURITIES
303. Management's Discussion and MANAGEMENTS DISCUSSION AND ANALYSIS
Analysis or Plan of Operation OF OPERATIONS
& CHANGES IN FINANCIAL CONDITION
304. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure. NOT APPLICABLE
310. Financial Statements FINANCIAL STATEMENTS
401. Directors, Executive MANAGEMENT;
Control Persons TRANSACTIONS;CONFLICTS OF INTEREST
402. Executive Compensation MANAGEMENT
403. Security Ownership of Certain PRINCIPAL STOCKHOLDERS; CERTAIN
Beneficial Owners TRANSACTIONS
and Management
404. Certain Relationships and CERTAIN TRANSACTIONS; CONFLICTS
Related Transactions OF INTEREST
405. Compliance with Section
16(a) of the Exchange Act MANAGEMENT
501. Forepart of the Registration COVER PAGE
Statement and Outside Front Cover
Page of Prospectus
502. Inside Front Cover and Outside COVER PAGE; INSIDE FRONT COVER AND
Back Cover Pages of OUTSIDE BACK COVER PAGES
Prospectus
503. Summary Information SUMMARY OF THE PROSPECTUS;
& Risk Factors RISK FACTORS
504. Use of Proceeds USE OF PROCEEDS
505. Determination of Offering Price COVER PAGE; DILUTION;
CERTAIN MARKET INFORMATION
506. Dilution DILUTION
507. Selling Securities Holders PLAN OF DISTRIBUTION
508. Plan of Distribution COVER PAGE; INSIDE FRONT COVER;
PLAN OF DISTRIBUTION
509. Interests of Named Experts CERTAIN TRANSACTIONS
and Counsel
510. Disclosure of Commission INDEMNIFICATION ARRANGEMENTS
2
Prospectus
eKOMART.COM, INC.
(a Florida Corporation)
3,500,000 Shares of Common Stock, with a Par Value of $0.001
This offering involves the sale to the public of 250,000 Shares
issued to Cyber-care, Inc., the registration of 1,250,000 shares issued to
investors in eKOMART.COM, INC. (the "Company") since February 1997,
(collectively referred to as "the Selling Shareholders") and; the
registration of 2,000,000 shares of treasury stock to be sold to the general
public. Presently, there is no market for these shares. The Registrant is
involved, worldwide, in developing e-commerce applications for goods and
services offered by its Asian and natural organic grocery center and shopping
mall operations in the Aurora section of Denver, Colorado. The Registrant
also plans to consolidate, nationally, its market sector by acquiring or
leasing space, and opening additional Asian grocery centers, restaurants
and shopping malls in primary markets.
It is anticipated that the shares being offered herein will be traded
on the NASDAQ OTC Bulletin Board within one month of the effective date of
the Registration Statement of which this prospectus forms a part.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
==============================================================================
Number of Price Per Aggregate Price Expenses & Proceeds to
Shares Share to Public Commissions Company
==============================================================================
1,500,000 Unknown (1) Unknown (1) Unknown (2) None (3)
2,000,000 $6.00 (4) $12,000,000 (4) $1,250,000 (2) $10,750,000
==============================================================================
(1) The price per Share to the public of the Selling Shareholders' Shares
will be based on the bid price for the Company's common stock on the dates of
specific sales, unless shares are sold in private transactions. Consequently,
no determination can be made as to actual pricing matters.
(2) It is anticipated that normal brokerage commissions will be charged
by firms that sell any of the Selling Stockholders' Shares for the account of
the Selling Stockholders or and that such commissions will be tied to a
percentage of the sales price; however, nospecific information pertaining
thereto can be provided. The Company has no brokerage agreements or other
agreements for the sale of its shares, and will be selling treasury stock
via private placement. The costs of selling the stock, by the most conser-
vative estimate, should not exceed ten percent of the gross value of the
stock. The Company estimates that it will pay approximately $50,000 in fixed
expenses pertaining to the offering, including accounting fees, fees to
Securities and Exchange Commission, National Association of Securities Dealers,
Inc., printing expenses, transfer agent fees and expenses and miscellaneous
costs.
(3) From the 1,500,000 shares held by the Selling Stockholders, there
will be no direct proceeds to the Company.
(4) The price quoted has been arbitrarily set by management, and is
based solely on the opinion of management of the market value of the shares.
The actual price for the shares will be determined by the bid price for the
shares. Management reserves the right to sell all, part of, or none of the
shares offered herein, dependent upon the bid price. Management has indicated
that it plans to sell no shares for less than the arbitrarily set price of
$5.00.
3
eKOMART.COM , Inc.
(a Florida Corporation)
eKOMART.COM, Inc.
71 Stony Hill Road, 2nd Floor
Bethel CT 06801
(203) 798-1889
The date of this Prospectus is December 2, 1999.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 (adopted
under authority of the Securities Act of 1933, as amended) with respect to
the securities offered hereby, with the United States Securities and Exchange
Commission (S. E. C.). This Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits and schedules
attached thereto. For further information, reference is hereby made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete, and
in each instance reference is made to the copy of such contract filed as an
exhibit to the Registration Statement, each such statement may be inspected
without charge at the Public Reference Section of the Commission in its
Washington, D.C. office and copies of all or any part thereof may be obtained
from the Commission at prescribed rates, and may be perused at the S. E. C.'s
Web Site, whose address is http://www.sec.gov. Copies of the Registration
Statement and the Exhibits appended thereto will be provided without charge
upon written or oral request addressed to Mr. Stan J. H. Lee; eKOMART.com,
Inc., 71 Stony Hill Road, 2nd Floor, Bethel CT 06801, or by calling (203)
798-1889.
The Company currently does not furnish its stockholders with annual
reports containing financial statements certified by its independent public
accountants and quarterly reports containing unaudited financial information
for the first three quarters of each fiscal year. Prior to the sale of the
Registered Securities, the Company was not subject to the informational
requirements of the Securities Exchange Act of 1934 since its securities
were not registered with the Commission pursuant to the requirements of
Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended.
No dealer, salesman or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus. Any information or representation not contained herein, if
given or made, must not be relied upon as having been authorized by the
Company or by the Selling Stockholders. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create
any implication that there has been no change in the affairs of the Company
since the date hereof. This Prospectus does not constitute an offer or a
solicitation of any offer to buy any securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such an offer
or solicitation in such jurisdiction.
Until December 30, 2000, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution,
may be required to deliver a Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
4
Introductory Page 1
GLOSSARY OF TERMS
AS USED HEREIN, THE FOLLOWING HAVE THE MEANINGS SET FORTH BELOW:
Capital Stock. The generic term for the Company's Common Stock.
Common Stock. The shares of the Company's common stock, with a par
value of $0.001, of which 20,000,000 shares are authorized and 8,500,000 are
issued and outstanding (see "DESCRIPTION OF SECURITIES").
Commission. Securities and Exchange Commission of the United States
eKOMART or
eKomart. eKomart.com, Inc.
NASD. National Association of Securities Dealers, Inc. The
self-regulatory body registered under the Securities Exchange Act of 1934,
as amended, responsible for regulation of securities brokers and dealers, and
the operator of the NASDAQ inter-dealer automated quotation system's bulletin
board over which Company securities are traded.
Registered Securities. The generic and collective term for the 3,500,000
shares, being both the 1,500,000 shares held by the Selling Shareholders and
the 2,000,000 shares of treasury stock of eKOMART.Com, Inc. being offered for
sale herein.
Selling Shareholders. Collectively, the shareholders whose stock is being
offered for sale herein.
The Company or eKomart.com, Inc., a Florida Corporation and the
The Corporation. issuer of the securities offered hereby.
5
Prospectus Page 1
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information
and financial statements (including notes thereto) appearing elsewhere
herein.
THE COMPANY
eKOMART.com, Inc. ("the Company" or "eKomart") is an emerging
operating company that plans to develop on-line shopping facilities that
cater to the American-Asian Community and members of the general public
wishing to purchase goods and services with a distinct Asian flavor, or
foodstuffs with a natural organic nature. To broaden its exposure, and
create name and brand awareness, the Company also plans to open a series of
Korean-Japanese restaurants, shopping malls, and supermarkets. The future
plans of the Company include the development of Euro-malls, shopping centers,
restaurants, and on-line shopping facilities, which will feature European
goods and services.
The Company has a 15% ownership interest in 2050 S. Havana St. (DTSE) LLC.
( "KOMART MALL"), a 30% interest in Komart Korean & Japanese Supermarket,
LLC.("KOMART SUPERMARKET"), and wholly owns Korean Restaurant, SAAN, LLC.
("SAAN"), all organized pursuant to the laws of Colorado in 1999. eKomart,
utilizing the trade names "KOMART", "eKOMART", and "SAAN", is involved,
worldwide, in developing e-commerce applications for goods and services
offered by its Asian and natural organically grown grocery center and its
shopping mall operations in the Aurora section of Denver, Colorado, as well
as establishing like facilities throughout the United States.
The Company's future income will be from product sales, from both its
traditional and online operations, management of operations in which eKomart
has an equity stake, as well as advertising revenues. Presently, eKomart
receives revenues from its Denver mall and supermarket operations. Online
operations are to commence January 2000.
To better reflect its current business, the Company changed its name from
iNetboard, Inc. to eKomart.com, Inc. on December 2, 1999. The Company had
previously changed its name on April 16, 1999 to iNetboard from its original
name, Diversified Medical Holdings, Inc.
Current Operations
2050 S. Havana St. (DTSE) LLC., a Colorado corporation ( "KOMART MALL" ),
owns and operates a 50,685 square foot (SF) fully leased shopping mall in
the Aurora section of Denver Colorado. eKomart owns 15% of the operation and
is managing partner of the LLC.
Komart Korean & Japanese Supermarket, LLC., a Colorado Corporation ("KOMART
SUPERMARKET") owns and operates the mall's anchor tenant, a Korean-Japanese
supermarket also specializing in natural organically grown food. eKomart owns
30% of the supermarket operation, and is the managing partner of the LLC.
Korean Restaurant, SAAN, LLC. ("SAAN"), a Colorado Corporation, and the
Registrant's third subsidiary, will operate as an 11,000 SF Korean restaurant
and catering business at 1880 S. Havana St., Aurora, CO, said business set
to open in March, 2000. eKomart owns 100% of the operation.
6
Prospectus Page 2
The shopping mall, located at 2000-2080 S. Havana St., Aurora, Colorado, is a
50,685 square foot strip shopping center with KOMART Supermarket as its
anchor tenant. The center was built in 1973 and is an all brick building
with good retail visibility from Havana St. The mall is zoned B-1 and has
an entire city block of frontage along Havana St., a heavily traveled and
congested road providing access to I-70 to the north and I-225.
The Korean-Japanese and Natural Organically Grown Food supermarket, KOMART,
occupies 16,582 square feet of space within the KOMART shopping mall; of
which 5,582 square feet are occupied by five subtenants and four food court
restaurants.
Korean Restaurant, SAAN, is looking to penetrate the Korean & American and
general America food service market by offering 11,000 square feet (SF) of
authentically decorated eating space, with a full service catering operation
on the premises. The cuisine will be produced under the supervision of an
executive chef with 35-years experience in Hotel Shilla in Korea, as well as
in a number of Korean restaurants in New York City. The entire operation is
managed under the stewardship of Mr. Han S. Shin, who has more than 25 years
of restaurant management experience.
Summary
The business of eKomart is the development and operation of its eKOMART.COM
online stores and the development of KOMART MALLS nationwide, with a KOMART
SUPERMARKET and KOREAN RESTAURANT, called SAAN (meaning "mountain" in Korean),
in or near each mall. The current offering is to raise funds necessary for
both continued acquisitions of Asian and natural organic product grocery
centers and shopping malls, and the related development of online stores.
The Company's current mailing address is, 71 Stony Hill Road, 2nd
Floor, Bethel CT 06801; and its phone number is (203) 798-1889.
SELECTED FINANCIAL INFORMATION
Set forth below is selected consolidated financial information of
the Company. The provided information is derived from the more detailed
audited consolidated financial statements as of September 30, 1999, and
should be read in conjunction with the audited consolidated financial
statements included elsewhere in this Prospectus and are qualified in their
entirety by reference thereto (see "FINANCIAL STATEMENTS").
Cumulative 9 Months Annual Annual
Since Ended Ended Ended
Inception September December December
30, 1999 31, 1998 31, 1997
($) ($) ($) ($)
Operating Results:
Revenues 4,460 4,460 0 0
Costs and Expenses 81,065 0 45,520 35,545
General and
Administration 18,363 5,580 4,677 8,106
7
Prospectus Page 3
Cumulative 9 Months Annual Annual
Since Ended Ended Ended
Inception September December December
30, 1999 31, 1998 31, 1997
($) ($) ($) ($)
INCOME FROM
OPERATIONS
BEFORE INCOME
TAXES (94,968) (1,120) (50,197) (43,651)
Earnings (Loss) per
share-Preferred Stock - (0.32) (0.31) (0.15)
Earnings (Loss) per
share-Common Stock (0.0117) (0.0626) (0.0437)
ASSETS:
Current Assets:
Cash 105 105 1,355
Notes Receivable from
Former subsidiary 7,800
Stock subscription
receivable (Subsequently
paid) 600
Total current assets 105 105 9,755
Investment in Subsidiaries 1,104,660
Trademarks,logos,develop-
mental rights and licenses 1,900,000
Note receivable Net of
Deferred Gain of 1,230,000 150,000 150,000 150,000
TOTAL ASSETS 3,154,565 150,105 159,755
LIABILITIES AND STOCKHOLDER'S
EQUITY
Current Liabilities 0 0 0
Long-term Liabilities 198,533 42,953 2,406
TOTAL LIABILITIES 198,533 42,953 2,406
STOCKHOLDERS' EQUITY
Series A voting convertible
preferred stock, $0.001
par value- authorized 2,000,000
shares: issued and outstanding- 300 300
8
Prospectus Page 4
9 Months Annual Annual
Ended Ended Ended
September December December
30, 1999 31, 1998 31, 1997
($) ($) ($)
Common Stock, $0.001 par value-
authorized 20,000,000 shares;
issued and outstanding 8,500,000 8,500 1,500 1,000
Additional Paid-In-Capital 3,042,500 199,200 199,700
Deficit Accumulated during
the development stage (94,968) (93,848) (43,651)
TOTAL STOCKHOLDER'S
EQUITY 2,956,032 107,152 157,349
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY 3,154,565 150,105 159,755
SECURITIES OUTSTANDING
As of the date of this Prospectus, 8,500,000 shares of Common stock
were issued and outstanding. (see "CAPITALIZATION", "PLAN OF DISTRIBUTION"
and "PRINCIPAL STOCKHOLDERS")
CURRENT STOCKHOLDERS
Approximately 9 individuals own shares of the Company's Common Stock
(see "CERTAIN TRANSACTIONS" and "PRINCIPAL STOCKHOLDERS").
DEFINITION OF TERMS
Certain terms used in this Prospectus, usually identified by initial
capital letters, are defined in the section of this Prospectus captioned
"GLOSSARY OF TERMS."
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVEA
DEGREE OF RISK. THEY SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO
LOSE THEIR INVESTMENT IN THE COMPANY WITHOUT A MATERIALLY ADVERSE IMPACT ON
THEIR STANDARD OF LIVING OR FINANCIAL SECURITY. THEREFORE, PRIOR TO PURCHASE
EACH PROSPECTIVE INVESTOR SHOULD CONSIDER THE FOLLOWING RISK FACTORS, AS
WELL AS ALL OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS.
9
Prospectus Page 5
RISKS OF THE OFFERING
Possible Loss of Entire Investment
Prospective investors should be aware that if the Company is not
successful in its endeavors, their entire investment in the Company could
become worthless. Even if the Company is successful in its programs there
can be no assurances that investors will derive a profit from their
investment.
Potential Future Sales Pursuant To Rule 144
Generally, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period may, under certain
circumstances, sell within any three month period a number of shares which
does not exceed the greater of one percent (1%) of the then outstanding
Common Stock or the average weekly trading volume during the four calendar
weeks prior to such sale. Rule 144 also permits, under certain circumstances,
the sale of shares without any quantity limitation by a person who has not
been an affiliate of the Company for at least 90 days and who has satisfied
a one year holding period.
The one year holding period for all the Company's currently
outstanding restricted shares required by Rule 144 will expire during
October of 2000, and thereafter, the holders may periodically sell their
Company securities, subject to applicable volume limitations, restrictions
on the manner of sale and applicable reporting requirements (see "CERTAIN
TRANSACTIONS").
Absence of a Trading Market
At present, there is no market for the securities of the Company,
and there can be no assurance that an established trading market or any
public market will develop in the future, or that if developed, it
could be sustained, or the securities of the Company resold at any price.
Any market the Company may develop will, in all likelihood, be a substantially
limited one.
Adverse effects of Penny Stock Regulations
Securities, generally, with a price $5.00 per share or less are
referred to as penny stock. These securities are unsuitable for investors
with low fixed incomes and limited net worth, or for accounts held in a
fiduciary or custodial capacity. As well, they are not suitable for investors
who are risk aversive or have income as their sole investment objective.
Investment broker/dealers must satisfy special sales practice requirements,
including making written suitability determinations regarding any persons
wishing to invest in penny stock; written consent of the purchaser prior to
purchasing penny stock; delivery of a disclosure statement outlining the
risks associated with penny stock prior to any transaction; a written
current bid and ask quotation and commissions to be earned by the broker/
dealer in the transaction; and monthly statements stating the market value
of any penny stock held in a portfolio. These requirements, if applicable to
the Company, may adversely effect any market for the Company's shares.
Absence of Underwriter
The Selling Stockholders' Shares will be sold directly by the Selling
Stockholders; consequently, no underwriter is expected to be involved
therewith. The absence of an underwriter means that there will be less due
diligence in conjunction with this offering than would be performed in an
underwritten offering, and furthermore, that there are no brokers committed
to stabilizing the market for the Company's securities.
10
Prospectus Page 6
Concentration of Share Ownership
Where approximately 82% (7,000,000 of 8,500,000 voting shares) of
the shares in the Company are currently held by Miyung Lee and Daniel Lee,
wife and son of Stan J. H. Lee, the effective control of the Company rests
with these parties. Stan J. H. Lee is the President, CEO, and sole director
of the Company. Thus Mr. Lee will be in a position to substantially control
the election of the Board of Directors of the Company and the management and
policies of the Company. (See "Principal Stockholders")
Financial Risks
No assurance can be given that the Company's future sales will meet
the Company's expectations or that the Company will be able to operate
profitably. The Company has a history of operating losses, and lacking
future profitable operations, will need additional capital, which the
Company has no assurance whatsoever of being able to obtain. The inability
to obtain such financing would have a material adverse effect on the
Company's results of operations. (See "Financial Statements", "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, CHANGES IN FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.")
BUSINESS RISKS
No Dividends
The Company has never paid dividends on its Common Stock. The
Company does not anticipate paying dividends in the foreseeable future and
intends to devote earnings, if any, to the development of the Company's
business. The payment of dividends in the future rests within the discretion
of the Company's Board of Directors and will depend on the existence of
substantial earnings, the Company's financial requirements and other factors.
The Company has paid no substantial dividends in the past; and earnings for
the foreseeable future are expected to be retained to finance corporate
business expansion.
Material Reliance Upon Officers
The Company is wholly dependent upon the personal efforts and
abilities of its officers and directors, especially Mr. Stan J. H. Lee. The
loss of or unavailability to the Company of the services of any of its
officers or directors would have a materially adverse effect on the Company's
business prospects and potential earning capacity. The Company does not
carry any insurance to compensate for any such loss, nor does it intend to
obtain "key man" life insurance covering its officers or directors.
Limited Operating History; Anticipated Losses; Uncertainty of Future Results
The Company plans to commence its online store during January 2000 while
still in the early stages of operational activity. Accordingly, the Company
shall continue to have a limited operating history on which to base an
evaluation of its business and prospects. The Company's prospects must be
considered in light of the risks, expenses, and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as online commerce. To
address these risks, the Company must, among other things, continue to expand
its manufacturer channels and buyer resources, manage pricing risks, maintain
its customer base and attract significant numbers of new customers, respond
to competitive developments, implement and successfully execute its business
and marketing strategy, continue to develop and upgrade its
11
Prospectus Page 7
technologies and retailing services and commercialize products and services
incorporating such technologies, continue to develop and upgrade its
transaction-processing systems, improve its website, provide superior
customer service and order fulfillment, and attract, retain and motivate
qualified personnel. There can be no assurance that the Company will be
successful in addressing such risks, and the failure to do so could have a
material adverse effect on the Company.
Internet Related Risks
The Company's future revenues and future profits are substantially dependent
upon the widespread acceptance and use of the Internet and online services
as an effective medium of commerce by consumers. Rapid growth in the use of
and interest in the Internet and online services is a recent phenomenon.
There can be no assurance that acceptance and use will continue to develop
or that a sufficiently broad base of consumers will adopt, and continue to
use, the Internet and online services as a medium of commerce.
Demand and market acceptance for recently introduced services and products
over the Internet are subject to a high level of uncertainty. The Company
relies on consumers who have historically used traditional means of commerce
to purchase merchandise. For the Company to be successful, these consumers
must accept and utilize novel ways of conducting business and exchanging
information. Moreover, critical issues concerning the commercial use of the
Internet, such as ease of access, security, reliability, cost and quality of
service, remain unresolved and may affect the growth of Internet use or the
attractiveness of conducting commerce online.
Online Commerce Security Risks
The Company relies on encryption and authentication technology licensed from
third parties to provide the security and authentication necessary to effect
secure transmission of confidential information, such as customer credit card
numbers. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the algorithms used by the
Company to protect customer transaction data. Any compromise of the Company's
security could have a material adverse effect on the Company and its
reputation.
Governmental Regulation and Legal Uncertainties
The Company is not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, and laws or regulations directly applicable to access to online
commerce. However, due to the increasing popularity and use of the Internet
and other online services, it is possible that a number of laws and
regulations may be adopted with respect to the Internet or other online
services covering issues such as user privacy, pricing, content, copyrights,
distribution, and characteristics and quality of products and services.
Furthermore, the growth and development of the market for online commerce
may prompt more stringent consumer protection laws that may impose additional
burdens on those companies conducting business online. The adoption of any
additional laws or regulations may decrease the growth of the Internet or
other online services, which could, in turn, decrease the demand for the
Company's products and services and increase the Company's cost of doing
business, or otherwise have an adverse effect on the Company.
12
Prospectus Page 8
Moreover, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes and personal privacy is uncertain and may
take years to resolve. In addition, as the Company's service is available
over the Internet in multiple states and foreign countries; as the Company
sells to numerous consumers residing in such states and foreign countries,
such jurisdictions may claim that the Company is required to qualify to do
business as a foreign corporation in each such state and foreign country.
Any new legislation or regulation, the application of laws and regulations
from jurisdictions whose laws do not currently apply to the Company's
business, or the application of existing laws and regulations to the
Internet and other online services could have a material adverse effect on
the Company.
Liability for Information Retrieved from the Internet
Due to the fact that material may be downloaded from websites and subsequently
distributed to others, there is a potential that claims will be made against
the Company for negligence, copyright or trademark infringement or other
theories based on the nature and content of such material. Although the
Company carries general liability insurance, the Company's insurance may not
cover potential claims of this type or may not be adequate to cover all costs
incurred in defense of potential claims or to indemnify the Company for all
liability that may be imposed. Any costs or imposition of liability that is
not covered by insurance or in excess of insurance coverage could have a
material adverse effect on the Company.
May Need Additional Capital And It May Not Be Available On Acceptable Terms
The development of our business may require additional capital in the future
to fund the Company's operations, to finance the substantial investments in
equipment and corporate infrastructure needed for our planned expansion, to
enhance and expand the range of services we offer and to respond to
competitive pressures and perceived opportunities, such as investment,
acquisition and international expansion activities. Cash flow from operations
may be insufficient to cover expenses and capital needs. There can be no
assurance that additional financing will be available on terms favorable or
acceptable to the Company, or at all. If adequate funds are not available
on acceptable terms, the Company may be forced to curtail or cease some or
all of its operations.
May Not Be Able To Compete Successfully In The Very Competitive Market
The Company may face competition from competitors with significantly greater
financial, sales and marketing resources, larger customer bases, longer
operating histories, greater name recognition and more established
relationships with advertisers, content and application providers and/or
other strategic partners than the Company has. There can be no assurance
that the Company will be successful in achieving widespread acceptance of
its services before competitors offer services similar to the Company's
planned current offerings, which might preclude or delay purchasing
decisions by potential customers. Widespread commercial acceptance of any
of competitors' products could significantly reduce the potential customer
base for our services, which could have a material adverse effect on our
business and financial results.
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Risk of Capacity Constraints; Reliance on Internally Developed Transaction-
Processing Systems;System Development Risks, Risks Associated with Reliance
on Third Party Internet Services
The satisfactory performance, reliability and availability of the Company's
store on the Internet, transaction-processing systems and network
infrastructure are critical to the Company's reputation and its ability to
attract and retain customers and maintain adequate customer service levels.
The Company's revenues depend on the number of visitors who shop at its
store on the Internet and the volume of orders it fulfills. Any system
interruptions that result in the unavailability of the Company's store on
the Internet or reduced order fulfillment performance would reduce the
volume of goods sold and the attractiveness of the Company's product
offerings. There may be a significant need to upgrade the capacity of the
Company's store on the Internet in order to handle thousands of simultaneous
shoppers. The Company's inability to add additional software and hardware or
to develop and upgrade further its existing technology or its ability to
interlink with existing Internet Services, transaction-processing systems
or network infrastructure to accommodate increased traffic on its store on
the Internet or increased sales volume through its transaction-processing
systems may cause unanticipated system disruptions, slower response times,
degradation in levels of customer service and impaired quality and speed of
order fulfillment, any of which could have a material adverse effect on the
Company.
Rapid Technological Change
To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of its online stores. The
Internet and the online commerce industry are characterized by rapid
technological change. Changes in user and customer requirements and
preferences, frequent new product and service introductions embodying new
technologies, and the emergence of new industry standards and practices
could render the Company's existing store on the Internet and systems
obsolete. The Company's success will depend, in part, on its ability to
license leading technologies useful in its business, enhance its existing
services, develop new services and technology that address prospective
customers and respond to technological advances and emerging industry
standards and practices on a cost-effective and timely basis. The development
of a store on the Internet and other proprietary technology entails
significant technical risks. There can be no assurance that the Company will
successfully use new technologies effectively or adapt its store on the
Internet. The Company's failure to adapt in a timely manner for technical,
legal, financial or other reasons, to changing market conditions or customer
requirements, could have a material adverse effect on the Company.
Possible "Year 2000" Problems
Although the Company believes that its computer systems and software
products are fully year 2000 compatible, it is possible that certain computer
systems or software products of the Company's suppliers or customers may not
accept input of, store, manipulate and output dates prior to the year 2000
or thereafter without error or interruption. The expenses of the Company's
efforts to identify and address such problems, or the expenses or liabilities
to which the Company may become subject as a result of such problems, could
have a material adverse effect on the Company.
FOR ALL OF THE AFORESAID REASONS, AND OTHERS SET FORTH HEREIN, THESE
SECURITIES INVOLVE A HIGH DEGREE OF RISK. ANY PERSON CONSIDERING AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE AWARE OF THESE AND
OTHER FACTORS SET FORTH IN THIS PROSPECTUS. THESE SECURITIES SHOULD ONLY BE
PURCHASED BY PERSONS WHO CAN AFFORD A TOTAL LOSS OF THEIR INVESTMENT IN THE
COMPANY AND HAVE NO IMMEDIATE NEED FOR A RETURN ON THEIR INVESTMENT.
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Prospectus Page 10
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock at a price of $6.00 per share and after deducting estimated
underwriting discounts and commissions and Offering expenses, are estimated
to be approximately $10,750,000 ($12,000,000 less approximately $1,250,000
in costs and fees). The net proceeds from this Offering will be used by the
Company as follows: (i) approximately $ 1,300,000 to expand marketing and
advertising efforts and potential strategic alliances with Internet search
engines guides and online communities; (ii) approximately $6,250,000 to
finance grocery center and shopping mall acquisitions; (iii) approximately
$250,000 to develop and market an online gift registry; (iv) approximately
$450,000 to develop online software and hardware systems, and; (v) the
balance (approximately $2,500,000) for working capital and other general
corporate purposes, including expansion of the Company's technical
infrastructure and possible future strategic alliances.
From time to time, in the ordinary course of business, the Company evaluates
possible acquisitions of, or investments in, businesses, products and
technologies that are complementary to those of the Company. A portion of the
net proceeds are therefore to fund acquisitions or investments.
SELLING SHAREHOLDERS
Cyber-care , Inc., previously known as Medical Industries of America,
Inc., a Florida public corporation presently traded on the NASDAQ SmallCap
market, sold, in a stock-for-stock exchange to the Company, the medical
clinics subsidiary, Outsource Medical Incorporated, which owned two
managed care clinics operating in South Florida. The Company is registering
250,000 shares resulting from that transaction, and owned since 1997 as an
investment holding by Cyber-care.
The Company is also registering 1,250,000 shares held by six
shareholders of the Company (See "SELLING STOCKHOLDERS" at page 34 of this
Prospectus).
The Company is also registering 2,000,000 shares of Treasury Stock
for sale to the general public.
CERTAIN MARKET INFORMATION
MARKET FOR COMMON EQUITY
At present, there is no market, public or private, for the trading of
the Company's common stock. The Company anticipates registering its shares
on the NASDAQ Bulletin Board System within 30 days of the effective date of
the Registration Statement on Form SB-2, of which this Prospectus forms a
part.
SECURITY HOLDERS
As of November 30, 1999, the latest practicable date for which
information is available, the Company had approximately 9 common stock
holders.
There are two shareholder holding 3,500,000 restricted common shares
each, and seven shareholders holding 1,500,000 shares of stock, which shares
are part of the securities to which this Prospectus refers (See "Certain
Transactions", Principal Stockholders", Selling Shareholders").
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DIVIDENDS
There have been no cash dividends declared or paid since the
inception the Company and no dividends are contemplated to be paid in the
foreseeable future. No dividends were paid by the Company's subsidiaries,
prior to their acquisition by the Company; however, it is anticipated that
for the foreseeable future, the Company's profits (if any) will be reinvested
in the Company rather than distributed as dividends.
OFFERING PRICE
No offering price has been pre-established for the shares registered
by the Selling Shareholders. Rather, it is anticipated that the Selling
Stockholders will sell them into the public market at such times the price
is deemed favorable, when considered in light of the recipients' capital
requirements. Therecipients will be the sole determiners of appropriate
pricing, on a case by case basis.
CAPITALIZATION
The following table sets forth the capitalization of the Company as
of September 30, 1999.
September
Title of Class 30, 1999
Stockholders' Equity $2,956,032
Debt
Total Liabilities $198,533
THE COMPANY
BUSINESS (GENERAL)
The Company manages and has an ownership interest in 2050 S. Havana St.
(DTSE) LLC. ("KOMART MALL"), Komart Korean & Japanese Supermarket, LLC.,
("KOMART SUPERMARKET"), and Korean Restaurant, SAAN, LLC. ("SAAN"), all
organized pursuant to the laws of Colorado in 1999. The Company, utilizing
the trade names "KOMART" and "KOMART", is involved, worldwide, in developing
e-commerce applications for goods and services offered by its Asian and
natural organically grown grocery center and its shopping mall operations
in the Aurora section of Denver, Colorado, as well as establishing like
facilities throughout the United States.
eKomart is an emerging operating company that plans to
develop on-line shopping facilities that cater to the American-Asian
Community and members of the general public wishing to purchase goods and
services with a distinct Asian flavor, or foodstuffs with a natural organic
nature. To broaden its exposure, and create name and brand awareness, eKomart
also plans to open a series of Korean restaurants, shopping malls, and
supermarkets. The future plans of the Company include the development of
Euro-malls, shopping centers, restaurants, and on-line shopping facilities,
which will feature European goods and services.
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BUSINESS DEVELOPMENT
The Company plans to consolidate, nationally, its market sector
by acquiring or opening additional Asian grocery centers and shopping malls
in primary markets in conjunction with its reverse markets strategy of
developing online stores to both penetrate target markets and expand
existing market share.
Background Information
The Company was incorporated in the State of Florida in February,
1997 as Diversified Medical Industries, Inc. The Company initially purchased
two medical clinics for resale from Cyber-care, Inc., a Florida public
Corporation, which it subsequently sold. Upon the sale, the Company became a
development stage company, whose only asset was the Note receivable due
pursuant to the aforementioned sale. The clinics subsequently failed, and it
is unlikely that the note receivable will ever be paid. (See- Financial
Statements and accompanying Notes).
On November 3, 1999, the Company purchased and liquidated RTG-TPD
Holding Co., LLC. (RTG), a Colorado Limited Liability Corporation, in
exchange for 7,000,000 shares in the common stock of the Company, said shares
paid to the former owners of RTG, Miyung Lee and Daniel Lee, giving the
Lees an 82% interest in the Company. The Company changed its name on
December 2, 1999 to eKomart.com, Inc. to better reflect its business.
The Company has never been a party to any material reclassification,
merger, consolidation, or purchase or sale of a significant amount of assets
not in the ordinary course of business, except as disclosed herein.
BUSINESS
eKomart's aim is to provide a convenient shopping experience that
incorporates traditional department, grocery store, and mail-order features
into an enticing, interactive, and easy-to-use online environment. By owning
and operating Asian and natural food grocery centers and shopping malls in
both primary and secondary markets, eKOMART, management feels, will control
its own distribution centers for its expanding online operations.
As part of its marketing strategy, the eKomart plans to form strategic
alliances with selected Internet service providers (ISPs), portals, and
search engines, via marketing agreements. These agreements will, management
believes, provide for eKOMART.com to be prominently featured at given sites.
In addition, eKomart plans to establish strategic alliances with other online
companies and begin a targeted advertising campaign to attract additional
customers to its online stores. Management believes both online and
traditional media exposure are critical to maximizing brand recognition
and enticing traffic to its online stores.
Principal Products or Services and Their Market
The focus of eKomart is to develop e-commerce applications for goods
and services offered by its Asian and natural food grocery center and
shopping mall operations in the Aurora section of Denver, Colorado. In
conjunction with its online operations, eKomart plans to consolidate,
nationally, its market
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Prospectus Page 13
sector by acquiring or opening additional Asian grocery and natural food
centers and shopping malls in primary and secondary markets.
Online Stores
Management believes that the Internet is an advantageous medium for the
selling of as compared to traditional retail stores and mail-order catalogs.
Leveraging online technology and the global reach of the Internet, the online
retailing model provides eKOMART with significant online shelf space and the
ability to reach a geographically unlimited consumer base 24 hours a day.
eKomart's strategy is to offer quality Asian and natural organically grown
foods and Asian based goods, provide effective customer service, and
capitalize on the inherent economies of the online retailing model. eKomart
plans to launch its Internet store in January 2000.
The Company's online stores are accessed at eKOMART.COM on the Internet, and,
in the future, at other portals and shopping web sites and pages. eKOMART.
com's online stores provide high quality color pictures and detailed
information, conveniently organized into departments by brand and category
of Asian foods, natural organic foods, housewares, consumer electronics,
gifts and gourmet food. Shoppers can search for, browse, and select products
throughout the store and place selected merchandise in a virtual shopping
cart that facilitates the process of collecting items, subtotaling
selections, and completing the purchase. Customer orders are completed by
credit cards utilizing industry standard secured encryption.
Consolidation of Asian Grocery Centers and Shopping Malls
The Company is currently negotiating to acquire and open additional
KOMART grocery centers and shopping malls similar in operations to its
existing Denver, Colorado operation within certain primary markets, namely
Dallas and Detroit. Replication of its Denver location ensures both
economies of scale and quality control standards to maximize profitability
while facilitating online sales and fulfillment.
SHOPPING MALL OPERATION IN DENVER COLORADO
Geographical and Demographic Considerations
The shopping mall, in which eKomart has a 15% interest, and of which is the
operating Manager, located at 2000-2080 S. Havana St., Aurora, Colorado, is
a 50,685 square foot strip shopping center with KOMART Supermarket as its
anchor tenant. The center was built in 1973 and is an all brick building
with good retail visibility from Havana St. The mall is zoned B-1 and has an
entire city block of frontage along Havana St., a heavily traveled and
congested road providing access to I-70 to the north and I-225.
The mall is located in the heart of the Korean shopping district, with a
substantial number of Koreans residing in the immediate area and within easy
driving distances. The area saw high growth from 1980 through to the
present, with a population increase of 60% within a one-mile radius, and
an increase in the number of households in the same area of nearly 75%
(Source: State Census Figures). With high income areas surrounding the
mall's location, the mall is ideally located for office and retail development.
Operating Characteristics
The mall is 100% occupied with a 16,582 SF Korean-Japanese Supermarket as
the anchor tenant. Recent leases have been for $14/SF. There is increasing
demand for any spaces available in the
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mall by the local Korean merchants, producing a long waiting list for space,
which should help greatly in a continued maximization of rental income from
the mall.
The building is conservatively appraised at $3,400,000 by the lender in
February 1999. Utilizing an income approach, it is currently valued at
$3,800,000 (Source- Appraisal, Key Bank).
Future Expansion Plan
eKOMART plans to develop five additional Korean Shopping malls with the same
marketing and operational concept as eKOMART - Denver CO. in the following
cities; Dallas TX, Houston TX, Chicago IL, Detroit MI, SAN Jose, CA in 2000.
KOREAN-JAPANESE SUPERMARKET OPERATION IN DENVER COLORADO
Demographic and Market Information
There are approximately 35,000 Koreans in the Denver metropolitan area. The
Korean grocery market is served by four small Korean grocery stores; it is
estimated that the combined market share of these four stores is only 30% of
the potential market, leaving the majority of this market niche untapped. In
addition, the Company plans to aggressively market its products to the
general population of Denver through (combined) online and traditional
advertising.
Operations and Management
The Korean, Japanese and natural organic food supermarket, KOMART, of which
eKomart owns 30% and of which it is the operating manager, occupies 16,582
square feet of space within the KOMART shopping mall; of which 5,582 square
feet are occupied by five subtenants and four food court restaurants.
eKomart believes that it has assembled an effective management team.
Executive compensation is directly related to the operating profit. 100% of
the payments to the management team is based on profit-sharing and incentive
plans.
Future Expansion Plan
KOMART SUPERMARKET plans to open or acquire five additional Korean grocery
centers and shopping malls with the same marketing and operational concept as
KOMART in Denver CO. in the following cities: Dallas TX, Houston TX, Chicago
IL, Detroit MI, and SAN Jose CA.
As a core business Komart will advertise and promote its products as all
naturally produced organic products with no chemical additives. Management
believes this differentiates the Komart product from virtually all other
oriental supermarkets, and, indeed, from all major supermarkets, generally.
KOREAN RESTAURANT OPERATION ("SAAN") - DENVER COLORADO
Demographic, Management and Marketing Information
Korean cuisine, known for its bold, healthful foods, a veritable treasure
for the adventurous palate, has not, to date, been properly marketed to the
general public. Korean Restaurant, SAAN, is looking to penetrate this market
by offering 11,000 SF of authentically decorated eating space, with a full
service catering operation on the premises. The cuisine will be produced
under the supervision of an executive chef with 35-years experience in Hotel
Shilla in Korea, as well as in many Korean restaurants
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in New York City. The entire operation is managed by a management group
under the stewardship of Mr. Han S. Shin, who has more than 25 years of
restaurant management experience.
The main client base is the more than 35,000 Koreans in the Denver metro
area. As well, aggressive marketing will be utilized to penetrate the non-
Korean population of Denver. It is believed that the policy of serving only
natural organically produced food with no chemical additives will serve to
enhance the desirability of visiting the restaurant to both the ethnic Asian
and non-Asian population.
Operations
The restaurant will share the same kitchen facilities with the catering
business, producing, what management believes will be, an operation
maximizing both facility and staff utilization. Virtually all food
and materials will be purchased from KOMART SUPERMARKET. This produces a
situation where both entities will benefit from the economies of large bulk
purchases.
SAAN is also looking to tap into the lunch take-out and delivery business
without incurring significant incremental operating expenses, thereby
utilizing the existing facilities to the maximum. Management believes that
SAAN will be able to do approximately 500 bento-style lunches as a take-out
and delivery business on a daily basis, even without much marketing and
promotional activity.
Future Expansion Plan
Restaurants are planned to open in conjunction with the opening of all
KOMART malls and supermarkets, as well as in Las Vegas NV, Phoenix AZ, Salt
Lake City UT, and Orlando FL.
THE eKOMART STRATEGY-MALLS, SUPERMARKETS AND RESTAURANTS
The mall was fully occupied from inception and is profitable. The area is
one of high growth and property appreciation within a stable, middle to high-
income area.
The Korean population in America is growing and tends to concentrate in
certain urban areas. This population is extremely faithful to its ethnic
roots, and tends to frequent Korean malls and restaurants. The exotic flavor
of the mall is also designed to attract the average American.
The plans for growth and expansion have a firm basis in providing predictable
products and services. The malls will all be essentially identical,
providing the community with what management believes is a consistently high
level of service and product. As well, with respect to restaurants,
management feels the SAAN restaurant concept will attract as many non-
Koreans as Koreans.
The number of families in Korea who wish to invest in America, especially in
chain type ventures that they can easily understand, virtually assures,
management believes, that the company will show a high rate of growth in the
establishment of identical malls, restaurants, and supermarkets, nationwide,
using a license or joint venture vehicle to augment growth through company
owned operations.
The Company plans to standardize its menus in all restaurants and to
purchase all goods supplies, sauces, and any necessary services for the
restaurants and supermarkets centrally, both decreasing the cost of the
products to the licensee, and increasing, on an ongoing basis, the Company's
revenue.
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KOREAN RESTAURANT, SAAN, - STRATEGIC ANALYSIS
SAAN'S primary focus is to develop its corporate restaurant in Denver and to
establish Licensees throughout the United States and abroad. eKomart is
attempting to standardize service in a style of restaurant that is popular,
but, at present has no "chain" to promulgate a consistently high quality,
predictable menu and service level.
eKomart will actively market the license opportunity in America and Korea,
where many investors are both available and amenable to this type of
investment. The key is the standardized operation, in an industry which the
investor understands and can operate with even a rudimentary understanding of
English, identifies with, and, in many cases, allows the investor to obtain
permanent residency through investment.
eKomart intends to centralize the purchase of all goods, foodstuffs, and
material to insure a product of the highest quality- while at the same time
simplifying the job of the investor-licensee. All he has to do is provide
the products sent (or ordered) to the public in the proscribed manner.
Management feels that the diversity of restaurants in the food courts, the
shops in the mall, the anchor restaurant and supermarket, and the slightly
exotic nature of the whole operation will attract Koreans and non-Koreans
alike, producing a healthy revenue producing product that benefits both the
shopper and the investor/licensee.
ON-LINE BUSINESS-PRODUCT DEVELOPMENT
eKomart's business strategy is based on establishing a market share within
the Asian sector of the grocery center and shopping mall industry with both
online and traditional primary and secondary market facilities.
Management believes that building brand recognition of eKOMART products,
services, and facilities, is critical to attracting and expanding its
customer base. eKomart intends to promote, advertise and increase its brand
recognition through various marketing and advertising media, including
traditional magazines and newspapers, hyperlinked banner ads, listings in
manufacturers' national advertising programs and hyperlinks from
manufacturers' websites, as well as conducting an ongoing public relations
campaign.
Initially, management plans to directly supply consumers in markets where
eKOMART centers operate while relying on distributors and suppliers for
direct shipment for online sales, then to spread the service both nationally
and internationally. Using the same format, management hopes to develop a
Euro-mall on-line service by late 2000.
eKOMART.com and KOMART are the trademarks and service marks of the
Company, Registered for use over the Internet, and to be registered with the
Patents and Trade Marks Offices of the United States, Canada, Korea, and the
European Common Market.
Proprietary Technology
eKomart plans to develop sophisticated information services delivery and
shopper tracking systems by integrating third-party systems, when available,
and by developing proprietary tools. The Company's information systems can
be viewed as three integrated systems: (i) a publishing system, (ii) a
selling system and (iii) and order processing system, all of which are
supported by relational databases.
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Prospectus Page 17
Publishing System. The publishing system contains information about all
items in the Company's online stores, including retail price, cost, color
and size characteristics, group information and all manufacturer
related information. Once the manufacturers have offered their products to
eKOMART, the datasets are published to the Company's online stores.
Selling System. eKomart's main selling system is the store on the Internet,
which was designed to give customers a convenient and safe environment to
effect their purchases. The Company's store on the Internet uses the
Internet Factory's Commerce Builder web server to handle the transactional
events, queries and to updates the SQL Server database. All transactions are
secured by using Secure Sockets Layer ("SSL") encryption that protects the
information as it is transmitted between the customer's browser and the
eKomart store on the Internet.
Ordering System. The Company's ordering system retrieves ordering information
from selling systems, validates credit cards, processes the orders, creates
and issues purchase orders to manufacturers and handles all post-sale
marketing efforts. The ordering system also allows orders to be taken over
the telephone. The ordering system software was designed by eKomart to give
customer service representatives instant access to all customer information,
to automatically update all changes to a customer's order, and to inform the
customer of order status by automated e-mail communications. The customer
service and marketing departments can access this customer profile
information to search and analyze customer demographics and buying patterns
in order to suggest new programs and offers to customers. The system also
communicates with the warehousing facilities in real time for updates on
order shipments and stock status positions.
Commercially Available Licensed Technology
eKOMART uses commercially available software as well as its own developed
proprietary software. It uses Microsoft Access as a front-end development
tool that connects to a Microsoft NT and Microsoft SQL Server database. In
addition, Easy-Soft is used to manage the eKomart store on the Internet.
A group of systems administrators and network managers monitor and
operate the eKomart store on the Internet, network operations and
transaction-processing systems. The continued uninterrupted operation of
both the Company's store on the Internet and transaction-processing systems
is essential to its business; and, it is the job of the site operations
staff to ensure, to the greatest extent possible, the reliability of these
systems. eKomart's Internet connectivity is provided by Exodus
Communications, Inc., a website provider that specializes in providing
scaleable business solutions to high volume Internet sites.
Technological Enhancements
Management continually evaluates emerging technologies and new developments
in web technologies with the objective of optimizing its customer interfaces,
website features and operational systems. Technologies with which eKomart is
currently working include Tritium's Tvue (tm), for its planned session based
advertising, and Easy-Soft, for its planned website shopping; both of which
would enrich the online shopping experience and allow eKomart to deliver
more effective marketing messages.
Security
A critical issue for the success of online retailing is maintaining the
integrity of information, particularly the security of information such as
credit card numbers. Management believes, however, that security systems
currently planned are at least as secure as those used for traditional
transactions (i.e., in-store or mail order purchases).
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Management believes that there are two potential areas for possible fraud by
shopping electronically. The first is theft of credit card numbers traveling
through phone lines and the second is theft of credit card numbers residing
on the Company's system. eKomart shall address the possibility of theft over
the phone lines by using SSL encryption. The credit card number is encrypted
while it is traveling and is translated only once it reaches eKOMART. This
form of encryption is only available to customers using the SSL encryption
enabled browsers.
To deter the theft of credit card numbers residing in eKomart's system, it
shall install secure "fire walls" installed in the Company hardware. All
credit card numbers become encrypted in the eKomart system until either the
customer or the Company requires them. Firewalls will protect the system
against "hacker" break-ins. Moreover, anyone who successfully breaks into
the system will find nothing but encrypted codes that would be extremely
difficult to decipher.
Competition
The retail shopping industry is very competitive. eKomart currently
competes with a variety of other companies, including traditional stores,
non-traditional retailers, such as television retailers and mail order
catalogs, and with other online retailers. The Company expects there will be
many more online competitors in the future, as barriers to entry are minimal,
and new competitors can launch sites at a relatively low cost.
Management believes that the principal competitive factors in its market are
brand recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of site
content, and reliability and speed of fulfillment. Many of eKomart's
current and potential competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than eKomart. In addition, online
retailers may be acquired by, receive investments from, or enter into other
commercial relationships with larger, well-established and well-financed
companies as use of the Internet and other online services increases.
Certain of eKomart's competitors may be able to secure merchandise from
manufacturers on more favorable terms, devote greater resources to marketing
and promotional campaigns, adopt more aggressive pricing or inventory
availability policies and devote substantially more resources to website
and systems development than eKomart. Increased competition may result in
reduced operating margins, loss of market share and a diminished brand worth.
New technologies and the expansion of existing technologies may increase the
competitive pressures on eKomart.
Future Product Development
Overall product development is managed and directed by Stan J. H. Lee,
President of the Company. In addition, on project-by-project basis, a
product development team is assembled from personnel within the Company and
outside consultants.
The Market
International Data Corporation ("IDC"), an independent market research
organization, estimates that the total value of goods and services purchased
on the Internet will increase to $220 billion by the year 2001. Management
believes it has effectively positioned eKomart to capitalize on the
potential growth of online commerce by selectively targeting quality branded
manufacturers and strategic online partners.
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According to industry analysts, there were 26.5 million households with
Internet access in the United States in 1998. Industry analysts expect this
number to grow to nearly 58.4 million households by the end of 2002. One
recent industry report estimated that, by the end of 2002, 15.8 million U.S.
households will have broadband Internet access. (Source-IDC).
Internet customers (or end-users) have established themselves as a large,
fast-growing segment of the national population. The following statistics
are indicative:
- - 44 million adults (23% of population) use Internet
- - 43.6 million accessed Internet past 30 days
- - 36.9 million PCs regularly access Internet
In addition, the end-user audience demographically represents more of a
"mass market" profile.
The following statistics are indicative:
- - 54/46 male to female user ratios
- - Average user age is 36
- - Mean income $63,000
To target market, reach, services and products are designed for residential
as well as SOHO (small office, home office) markets. The following
statistics indicate that predominant Internet usage occurs from the home
market:
- - 70% plus of users access Internet from homes
- - At home usage now exceeds the workplace by 26%
Given the foregoing, management believes that its Internet operations have a
large and constantly growing customer base.
ONLINE SHOPPING INDUSTRY
IDC estimates that the number of devices accessing the Internet in the
United States will grow to more than 300 million by year end 2001. The
number of users in the United States associated with those devices will grow
to 175 million by the end of 2001. In addition, according to IDC, the
percentage of such users buying goods and services on the Internet is
projected to grow to 39% in December 2001.
According to a CommerceNet/Nielsen survey, as of March 1997, shopping was
one of the most popular activities on the Internet, and the number of people
who shop and buy products on the Internet is growing. This survey also
indicates that a large majority of Internet users (73%) spend some portion
of their time online searching for information about a specific product or
service.
Management believes that the Internet is particularly well suited for
promoting, marketing and selling its merchandise. The Internet permits users
throughout the world to have direct access to merchandisers. A retail site
on the Internet can provide direct product service and information to a
large number of users at the same time with a relatively small sales staff,
it also has the ability to rapidly and continually update such information.
Internet merchandisers, unlike traditional department stores, are not
limited by the constraints or expense of store construction, rental and
extensive personnel costs, or the difficulty of locating their stores in
areas that will attract customers.
In contrast to catalog merchandisers, Internet retailers can react quickly
to the need to change product description, pricing or product mix and are
not subject to the costs of catalog publication and distribution, or
maintaining large "call centers." The Internet is a highly interactive
medium through which
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shopper responses and preferences can be tracked, thereby enabling the
merchandiser to customize the online stores and target specific consumer
groups and individuals.
Distribution Methods of the Products or Services
eKomart's online stores will be accessed at eKOMART.COM on the Internet and
at selected portals and search engines. Products will be delivered
nationwide for a nominal fee (or free if the order is of over $100).
Payment can be by credit card, debit card, or by check or COD.
Management plans to ship products bought at the online stores from its
Denver location, or directly from the manufacturer, dependent upon the
product. Supplier direct shipping enables eKomart to avoid inventory-related
risks, limit overhead costs and provide prompt delivery. Utilizing on-hand
stock at the Denver location allows maximum turn over of product at minimum
cost.
eKomart plans to form strategic alliances with selected ISPs and search
engines, allowing eKomart to be featured as a site "anchor tenant" and to
be prominently featured in the Gift area. In addition, eKomart also plans
to establish strategic alliances with other online companies and begin a
targeted advertising campaign to attract additional customers to the its
online stores. Management believes both online and traditional media
exposure are critical to maximizing brand recognition and driving traffic
to its online stores.
eKomart is actively seeking to establish strategic alliances with global
media companies to attract additional shoppers to, and increase brand
recognition of, the Company's online stores. Management is currently seeking
to establish arrangements with selected Internet service providers
(ISPs) and major Internet search engines, guides and online communities. In
addition, the Company has recently established a "Partners Program,"
whereby third-party websites may register with eKOMART.com and establish
hyperlinks to eKOMART.com for online shopping.
THE eKOMART ONLINE STORES
The eKOMART Internet address, eKOMART.COM, leads to the Company's home page
that contains a store directory in addition to direct links to eKOMART.com
feature departments, including Gourmet Selective, E-Gifts, Asian Style, and
Electronics Imports. eKOMART.com displays new products, best brands and
special offers in each of the departments. By clicking the store directory
or directly on featured products, shoppers are presented with detailed
product information. The home page also serves as a familiar base to which
shoppers can return to find key destinations within the store. Shoppers
choose desired locations by clicking on a navigation bar or hyperlinked text
enabling them to (i) search for products, brands or departments, (ii) access
the Help and e-mail functions, (iii) browse and order products, (iv) enter
other departments and (v) register as an "eKOMART.member," which opens a
personal account for the customer.
In addition, as part of the registration process, the customer is requested
to provide basic demographic information. Management currently utilizes this
data to analyze customer shopping trends and demographics, and is evaluating
ways in which it may utilize this data to customize and target marketing
programs. eKomart encourages shoppers to register by offering incentives,
including varying discounts and special sales in its Patron Program.
The eKomart online store offers products sold in its grocery center and
shopping mall. Products are featured with a high quality color picture and
detailed information relating to product specifics, service, care, or
purchasing instructions.
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The major categories of products sold at the online store are as follows:
- - JAPANESE, CHINESE, KOREAN FOODS
- - NATURAL ORGANIC FOODS
- - GOURMET FOODS
- - TABLETOP & HOUSEWARES
- - CONSUMER ELECTRONICS
- - JEWELRY, BEAUTY & FASHION ACCESSORIES
- - HOME FURNISHINGS
- - CHILDRENS DEPARTMENT
- - MISCELLANEOUS
- - SPECIAL PROMOTIONS
- - PRE-WRAPPED GIFTS (DELIVERY WITHIN 24 HOURS)
- - SPORTS & FITNESS
eKomart's store on the Internet is designed to accommodate the needs of both
the browser and the directed shopper. The browser can view an array of
products by simply clicking on one of the feature departments or product
categories. The directed shopper is able to quickly locate a specific
product by category or brand by using the store's search function or store
directory. By clicking on the picture of a product, the customer is
presented with detailed information relating to product specifics, service,
care, or purchasing instructions.
A primary aim is to make the shopping experience as simple and convenient as
possible. The online store features a virtual shopping cart function that
allows the shopper to accumulate merchandise for purchase while browsing
through the store. Items can be added to or subtracted from the shopping
bag at any time. As a registered eKOMART member, the customer is able to
retain items in the shopping bag indefinitely, even after leaving the store
or logging-off.
After selecting an item to purchase, the customer is prompted to complete an
order. In choosing a payment method when placing an order, customers have
the option of securely submitting credit card information online,
telephoning, or faxing the information to customer service representatives,
or, in the alternative, payment may be made by check or money order. The
Company sends e-mail notifications that confirm the order and shipment and
promote special offers and events.
eKomart intends to offer additional services that management believes are
particularly well suited to online retailing. Under development is an online
gift registry service, including a bridal registry service that is expected
to be available in the second half of 2000. The bridal registry will allow
customers to create, view and modify their own personal registry. Delivery
options will enable the couple to return and exchange gifts before shipping.
E-mail notifications regarding gifts purchased will be provided to the
couple and a comprehensive status screen will show the purchase status of
all registered items detailing items purchased and items still available.
The bridal registry will provide convenient online access for gift givers,
with an easy online ordering process requiring only the submission of a
password selected by the couple. Ordering by phone using a 24-hour 800-
number will also be available.
Online Marketing Plans & Products
eKomart's sales and marketing strategy is to effectively merchandise quality
products by building brand recognition and driving traffic and attracting
repeat customers to its online stores. eKomart will utilize a combination of
advertising, creative product merchandising, and online co-marketing
programs to accomplish these objectives.
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eKomart utilizes numerous sales and marketing techniques to increase brand
recognition and drive traffic to eKomart's online stores, including both
online and traditional advertising and promotion campaigns. eKomart's online
marketing tactics may include the purchase of banner advertising on
search engines and Internet directories such as Yahoo!, Excite, Lycos,
AltaVista, AOL, Netfind, Go2Net, and Webcrawler. The banner advertisements
purchased by eKomart that hyperlink to eKomart's online stores are displayed
when a search engine user searches for information relating to certain
keywords such as gift, sale, holiday and shopping. eKomart also promotes the
eKOMART.com brand through banner advertisements on key websites, which also
hyperlink to the store.
eKomart also promotes its online stores through print advertising and
intends to develop advertising through other media. eKomart has a proactive
public relations program that targets customers through national media
outlets such as magazines, newspapers, and radio and television broadcasts.
In addition, eKomart places advertisement inserts into mail order catalogs
of selected retailers, the packaging of items shipped from its E-Gifts
boutique, and packaging for shipments from certain suppliers. eKomart also
employs an electronic direct response program to promote certain offers or
store events via e-mail, targeting specific customers based on such
customers' prior visits and purchases.
eKomart has created a Partners Program designed to attract customers and
drive traffic by linking the eKOMART.com store with other websites that
participate in the Partners Program. The Partners Program provides
incentives to participants by offering a commission on sales volume generated
from a participating website, by offering a commission on every customer
directed to eKOMART.com from the website, and by offering a discount on
eKOMART.com merchandise for employees of the participant.
eKomart utilizes numerous merchandising tactics to enhance a customer's
shopping experience. Management believes that the shopper's ability to
browse and search from a broad selection of products is a compelling
incentive to shop at eKOMART.com. While the eKOMART.com store offers
thousands of grocery and shopping mall products, online technology offers
eKomart virtually unlimited online shelf space through which to increase its
product offerings. The online stores also provide color pictures and
detailed information relative to product specifics, service or care for
many products in the stores. Management believes access to clear pictures
and helpful information at the point of purchase assists the customer in
reaching an educated purchase decision and reduces the risk of product
returns.
Management has targeted corporate customers as a source of high volume and
repeat purchases. eKomart offers a portfolio of gifts especially targeting
the corporate customer. Corporate services include discounts on special gift
packaging, gift cards, personalized options and professional consultation.
eKomart has also created a system to permit customers to purchase and
redeem gift certificates online.
Management believes its relationships with suppliers will be a key factor to
its success in the online retail industry. In general, except for the E-
Gifts boutique, eKomart does not maintain an inventory of merchandise. Upon
receipt of a customer order, eKomart electronically transmits a purchase
order to the appropriate supplier, who, in turn, ships the products directly
to the customer. The suppliers provide shipping and back-order information,
which eKomart provides to customers by telephone or via e-mail.
Management believes that high levels of customer service and support are
critical to the value of its services and to retaining and expanding its
customer base. Customer service representatives shall be available from 9:00
a.m. to 12:00 p.m. EST on weekdays, and 10:00 a.m. to 11:00 p.m. EST on
weekends for customer service via e-mail, fax and a toll free telephone
number. Customer service is assisted by automated e-mail notifications that
greatly assist in keeping customers up-to-date on the status of their orders.
Company representatives can handle general questions about eKomart's online
stores and provide product information over the phone.
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Prospectus Page 23
Management believes local content will be popular in communities where local
news and information may not be available online or from a single source.
Accordingly, eKomart uses local content as a means of attracting and
retaining additional end users and differentiating its service.
eKomart is seeking to enter into agreements with content providers,
local advertisers and local e-commerce merchants under which the Company
will receive a share of revenue from purchases of goods and services by
eKomart's customers.
Manufacturing/Technology Licensing Agreements
NONE
Competitive Business Conditions and Competitive Position in the Industry and
Methods of Competition
eKomart faces competition primarily from online shopping networks that offer
Asian foods and goods. To date, the Company knows of the following sites
with offer similar goods and services: www.AsiaClub.com, www.orientalfood.
com, www.maruwa.com, www.katagiri.com, www.seoulgarden.com, and www.
Hanahreum.com . The Company is unaware of any of these companies offering
natural organically grown or produced products. As well, none of the
competing companies offers physical malls and supermarkets to augment the
online operations.
In terms of competition, to management's knowledge, no other Asian food and
goods online retailer is currently or planning to provide subscriber and
free Internet access in its local as well as national markets. Second, no
other related retailer is offering integrated advertising that is both site
and session based for products and manufacturers.
In terms of the Komart malls, restaurants, and supermarkets, there
are no chain type competitors. There are numerous small restaurants and
supermarkets throughout the markets Komart is investigation, but management
has found no restaurants and supermarkets that specialize in natural
organically produced foods, and none on the scale of Komart.
Sources and Availability of Raw Materials and the Names of Principal
Suppliers
No supplier of the Company accounts for more than 5% of its business.
Dependence on One or a Few Major Customers
No customer of the Company accounts for more than 5% of its business.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements
or Labor Contracts, Including Duration
The Company's ability to compete successfully depends, in part, on its
ability to develop name recognition both online and local markets. To this
end eKOMART.com has been registered as the Company's web site, and eKomart
and KOMART will be registered in the United States as trade and service
marks used by the Company, said registration to be filed within 3 weeks of
the date of this prospectus.
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Prospectus Page 24
Other Intellectual Rights
No other patents, trademarks, licenses, franchises, concessions,
royalty agreements or labor contracts are used by the Company.
Need for Any Government Approval of Principal Products or Services
To the best of the Company's knowledge, there are no special
requirements for government approval of its principal products or services
not generally applicable to normal business operations.
Effect of Existing or Probable Governmental Regulations on the Business
To the best of management's knowledge there is no existing or
probable regulations which will adversely effect the Company.
Costs and Effects of Compliance with Federal, State and Local Environmental
Laws
The Company is not aware of any expenses directly attributable to
compliance with federal, state or local environment laws or regulations.
Number of Total Employees and Number of Full Time Employee
As of November 1, 1999, the Company had 5 full-time employees. The Company's
employees are not represented by any collective bargaining organization. The
Company has never experienced a work stoppage and considers relations with
its employees to be good.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION,
CHANGES IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis relate to factors which have affected
the financial condition and results of operations of the Company for the
fiscal years ending December 31, 1997, December 31, 1998, and the three
quarters ended September 30, 1999.
The Company was incorporated in February, 1997, in Florida. The
Company is an operating company, having emerged from its development phase
in the current quarter. On November 3, 1999 the company purchased and
liquidated RTG-TPD Holding Co., LLC. ("RTG" or "eKomart"), a Colorado
Limited Liability Corporation (See-Material Events).
The Company manages and has an ownership interest in 2050 S. Havana St.
(DTSE) LLC. ( "KOMART MALL") (15% ownership), Komart Korean & Japanese
Supermarket, LLC., ("KOMART SUPERMARKET") (30% ownership), and Korean
Restaurant, SAAN, LLC. ("SAAN") (wholly owned), all organized pursuant to
the laws of Colorado in 1999. The Company, utilizing the trade names
"KOMART" and "eKOMART", is involved, worldwide, in developing e-commerce
applications for goods and services offered by its Asian and natural
organically grown grocery center and its shopping mall operations in
the Aurora section of Denver, Colorado, as well as establishing like
facilities throughout the United States.
To better reflect its current business, the Company changed its name
from iNetboard, Inc. to eKomart.com, Inc. on December 2, 1999. The Company
had previously changed its name on April 16, 1999 to iNetboard from its
original name, Diversified Medical Holdings, Inc.
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Prospectus Page 25
Discussion of Financial Information
The Company has emerged as an operating entity in the current fiscal
quarter.
For the 9 month period ending September 30, 1999, revenues were
$4,460, all accrued during the month of September, as compared to the
previous 2 fiscal year, ending December 31, 1998, and December 31, 1997,
when there were no revenues.
The loss for the 9 month period ending September 30, 1999 was $1,120.
The overall loss during the development period to the end of September 30,
1999 was $94,968, with losses during the fiscal year ended December 31, 1998,
being $50,197 as compared to losses of $43,651 for the fiscal year ended
December 31, 1997. Total expenses for the development period to September
30, 1999. The majority, $81,065, was for professional fees in organizing
the Company, $45,520 incurred in the fiscal year ending December 31, 1998,
and $35,545 incurred in the year ended December 31, 1997.
The cash and investment certificate position of the Company was
$105 on September 30, 1999, as compared to $105 on December 31, 1998 and
$1,355 on December 31, 1997. Current assets, as a whole, were $105 on
September 30, 1999, as compared to $105 on December 31, 1998 and $9,755 on
December 31, 1997.
Performance to date was, management believes, indicative of a
development stage company, with costs being kept to a minimum.
The unaudited statement of operations for the Supermarket from
June 19, 1999 to the end of November 30, 1999 show a net income of $72,000.
The actual opening of the supermarket was on June 19, 1999.
The shopping Mall had an income of $80,138 (unaudited) for the
period August 13, 1999 to November 30, 1999. Mall income commenced accruing
on September 1, 1999.
Material Events
On November 3, 1999, pursuant to the terms of Purchase and Sale Agreement
(the "Agreement") between the Company and RTG-TPD Holding Co., LLC.
("RTG" or "eKomart"), a Colorado Limited Liability Corporation, the Company
purchased all the outstanding interest in the Limited Liability Corporation,
and liquidated it. Pursuant to the terms of the Agreement, the owners of
RTG received 7,000,000 shares (See "Principal Shareholders").
At a meeting of Shareholders and Directors held on November 3, 1999, Douglas
Dimick, sole officer and Director of the Company resigned, and Stan J. H.
Lee was elected, by unanimous vote, the sole director and officer of the
Company, pending the next meeting of Shareholders at which a Board of
Directors and full slate of officers would be elected. At the said meeting,
it was also decided that the name of the company be changed to eKomart.com,
Inc., to better reflect the business of the Company.
The Company changed its name from iNetboard, Inc. to eKomart.com, Inc. on
December 2, 1999. The Company had previously changed its name on April 16,
1999 to iNetboard from its original name, Diversified Medical Holdings, Inc.
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Prospectus Page 26
Description of Real Estate and Operating Data
The Company currently occupies rent-free space of 1,000 square feet at 71
Stony Hill Road, Bethel CT, and a further 2,500 square feet at 440 West
Street, 3rd Floor, Fort Lee NJ, which is also rent-free. Further, 1,000
square feet of space at the Komart mall at 2000 S. Havana Street in Denver
CO is also provided to the Company, rent free. The space is currently
provided by the president adjacent to the offices of his accounting firm's
offices. It is anticipated that the current facilities will be sufficient
to meet the Company's needs through the end of 2000. It is further
anticipated that the rent free status will continue until that time.
Equipment
Presently, the company has no equipment.
Investment Policies
The Company has no investment policies with respect to investments
in real estate or interests in real estate or investments in real estate
mortgages.
Litigation.
The Company is not a party to any material litigation.
Operating Subsidiaries of the Company
The Company has a 15% ownership interest in 2050 S. Havana St.
(DTSE) LLC. ("KOMART MALL"), a 30% interest in Komart Korean & Japanese
Supermarket, LLC., ("KOMART SUPERMARKET"), and one wholly owned subsidiary,
Korean Restaurant, SAAN, LLC. ("SAAN"), all organized pursuant to the laws
of Colorado in 1999.
It is anticipated that SAAN will commence operations in April,
2000. It is presently a developent stage company whose only activity has
been the negotiation of a lease for its future restaurant operations. The
terms of the lease are $6,130.83 per month commencing in February, 2000,
and then escalating 3% per year for the 10 year term of the lease.
Liquidity
Management believes that the Company has the cash funds and necessary
liquidity to meet the needs of the company over the next year, assuming
sales and development efforts conform to management's anticipated results.
However, to fully maximize the potential presented by the Company's
strategy of integrating the traditional operations with e-commerce
applications, management believes that approximately $10,000,000 will need
to be raised. The funds will be primarily used for acquisitions of grocery
centers and shopping malls in primary markets, to develop related online
stores, and expand both traditional and online marketing programs to
include providing subscriber and free Internet access plans to eKOMART
customers (see- THE COMPANY). It is projected that these funds will be
utilized during a one year period. In the event only part of the funds
are raised, then it will be allocated to acquisitions and online
retailing. The money will likely be raised through private placements of
shares or a secondary offering. In the event the funds are not raised, the
Company will continue with its sales activities and, management believes,
meet its liquidity demands. The funds, as noted above, are for increased
activity and sales, not for primary liquidity demands.
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Current Plans
eKomart plans to commence online sales of products from its grocery center
and shopping mall based in Denver, Colorado as of January 2000. Currently,
the Company does not have revenues from its online division. To date,
the Company's operating activities relate to the ownership and operation
of the shopping mall and grocery center in Denver.
Current plans include establishing relationships with manufacturers, which
may result in the payment of set-up fees by certain manufacturers to
display products in the Company's online stores. As well, the company is
developing the Company's proprietary systems and operating procedures.
The Company intends to increase its operating expenses to increase marketing
and advertising, to enhance existing stores, and to establish strategic
relationships important to the success of the Company. The Company expects
negative cash flow from its online operations for two quarters.
The Company is presently concluding suitability studies in Dallas TX and
Detroit MI for establishing KOMART malls and restaurants in these locations.
Accounting Policies and Procedures
The Company follows generally accepted accounting principles in
preparing its financial statements, and has audited statements produced
annually, with its quarterly statements produced by its management and
accountants.
Revenue Recognition
Revenue is recognized using the accrual method of accounting.
Statements of Cash Flows
Statements of Cash Flow are prepared quarterly, on a consolidated
basis, using generally accepted accounting principles and guidelines.
Inventory
The Company keeps no inventory at present.
Fixed Assets
Fixed assets are valued based on their depreciated value.
Depreciation is calculated using the straight line method. At this time,
the Company has no fixed assets.
Principles of Consolidation
All Financial Statements are produced on a consolidated basis, as
the sole subsidiary, SAAN, accounts for almost no revenue or liability at
present.
Statement Re: Computation of Earnings Per Share
The Company has a simple capital structure as defined by APB Opinion
Number 15. Accordingly, earnings per share is calculated by dividing net
income by the weighted average shares outstanding.
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Provision for Income Taxes
Provisions for income tax are computed quarterly using the
guidelines as defined in the Federal and State Statutes.
The Company's Immediate Capital Requirements
The Company requires approximately $10,000,000 to continue the
growth and market penetration of its products and its R&D (For discussion,
See "Liquidity").
CONFLICTS OF INTEREST
Stan J. H. Lee is the sole Executive Officer and Director of the
Company, and as such has a majority of the votes on all matters which the
Board will vote upon the next annual meeting of the Company's Stockholders.
The members of his immediate family also hold or control a majority of the
Company's outstanding common stock. Because the Company's sole officer
and director will be voting upon matters of personal interest to him (e.g.,
salaries, bonuses and other benefits), the outcome of such votes will not
be based on arm's length negotiations. While the Company's current officer
intends to exercise fairness in determining their compensation and all other
matters, there can be no assurance that the Company would not have
negotiated more favorable arrangements had persons other than its
current officer been responsible for ultimate determinations.
MANAGEMENT
Directors and Executive Officers
The following sets forth the names and ages of all the Directors and
Executive Officers of the Company, positions held by such person, length
of service, when first elected or appointed and term of office.
First Elected
Name Age or Appointed/Term Position
Stan J. H. Lee 43 elected on November 3, 1999 President, Secretary,
Term is at the sole Director
pleasure of the
Board of Directors
Biographies of Directors, Officers and Director Nominees
Stan J. H. Lee, President and CEO
Mr. Lee's responsibilities include the long term strategy development and
implementation of the KOMART concept. He directly manages the development,
market research and business planning of eKomart.com, Inc. Mr. Lees role
will also be to evaluate potential sites for company growth, and act as
overall project manager in bringing each site "on-line".
Mr. Lee is credited with developing the Company's first shopping mall,
supermarket and Korean Restaurant, SAAN, project in Denver CO. He was
instrumental in obtaining $2,375,000 financing from Key Bank, Denver CO for
the project and raising another 2.5 million dollars in private equity
investment.
Mr. Lee currently heads, and has headed for the past 6 years, an established
and successful CPA and Consulting firm in the New York Metro area with six
offices and 15 associates. Mr. Lee also heads a nationwide group of
affiliated CPA's, providing clients nation-wide services, and providing
a good source of local expertise and investment capital for the development
of the Corporation. He holds
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a BS degree in Accounting and professionally is both a CPA and CMA with
membership in American Institutes of CPA's, State Society of CPA's in the
States of New York, New Jersey, Missouri and Colorado.
Biographies of Significant Employees
Han Sik Shin, Director of Operations, Restaurant Division
Mr. Shin's responsibilities include the overall management of the
Supermarket Division, including the development and set-up of new sites.
He will also be directly in charge of product selection and marketing of the
eKomart online sites, respecting food and food related items. Mr. Shin
has over twenty-five years of successful management experience in the Hotel
and Restaurant business. He has consistently demonstrated ability to contain
costs, increase profits and improve operational efficiency. For the last
seven years, he was the Vice-President and CEO of Korean Restaurant
KUMGANSAN, with two successful locations in New York whose annual volume
of business is currently $13 million. In Korea, he rose to the Director of
Food & Beverage in prestigious hotels such as Royal Hotel, Koreana Hotel and
Lotte Hotel where he was named the employee of the year for three years
amongst 1,500 employees. He holds a BS degree in the hospitality industry.
Mr. Sun Mok Hwang- Director of Operations, Supermarket Division
Mr. Hwang brings to the Company over 8 years of managerial, marketing and
operational experience in all aspects of Korean grocery business including
import and purchase, which is considered to be the most critical part of the
operation. His last five years was spent as Marketing & Sales Manager
for C-Kenneth Import., a U.S. subsidiary of Hyundai Group in Korea and in
this capacity, he was responsible for all territories in the Eastern U.S.-
NY, NJ, PA, MD, and VA.
Mr. Hwang's responsibility will be the day to day management of all
Supermarket Operations, and acting as the Company's chief product
procurement officer.
Ivie Yun- Executive Vice President of Korean Restaurant, SAAN, LLC.
Ms. Yun has worked for many years as general manager of KUMKANGSAN
restaurant, the largest and most successful restaurant enterprise in New
York. She will be relocated to Denver to manage the SAAN restaurant and
eventually become involved in the management training and ongoing support
of other SAAN restaurants as eKOMART expands to other cities in the U.S.
She holds an MBA degree in Hotel Management.
Family Relationships
Mr. Stan J. H. Lee, the President and sole director is the husband of Miyung
Lee, and the father of Daniel Lee.
Involvement in Certain Legal Proceedings
During the past five years no current director, person nominated to
become a director, executive officer, promoter or control person of the
Company has been a party to or the subject of: (1) Any bankruptcy
petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time; (2) Any conviction in a
criminal proceeding or has been subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses);
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(3) Any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoying, barring suspending or otherwise limiting
his involvement in any type of business, securities or banking activities;
and (4) Been found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not
been reversed, suspended, or vacated.
Compensation
Compensation of Directors
Standard Arrangements
All members of the Company's board of directors are paid a per diem
fee of for attendance at meetings of the board of directors and committees
thereof. In addition, if required, they are reimbursed for travel expenses
and lodging is arranged for them, at the Company's expense. At such time
as adequate funds are available, all director (and officers) of the Company
will be covered by liability insurance. Directors are reimbursed for all
out of pocket expenses incurred in the performance of their roles, subject
to provision of receipts in form and substance adequate to satisfy Internal
Revenue Service audit requirements (e.g., long distance telephone, postage,
etc.).
Other Arrangements
Neither the Company nor any of its subsidiaries have any other
arrangements to compensate its directors.
Employment contracts, termination of employment & change-in-control
arrangements
The Company does not have any compensatory plan or arrangement,
including payments to be received from the Company, with respect to a
named executive officer that results or will result from the resignation,
retirement or any other termination of such executive officer's employment
with the Company and its subsidiaries or from a change-in-control of the
Company or a change in the name executive officer's responsibilities
following a chance-in-control, which, including all periodic payments or
installments, exceeds $100,000.
SUMMARY, COMPENSATION TABLE
Annual Compensation Awards Payouts
Other Rest-
Annual ricted
Compen- Stock Aw- SU SA
Name and sation ards OP RS LTIP Other
Position Year* Salary($) Bonus ($) (#) ($) __ ($)($)($)
Stan J. H.
Lee (1) 1999 50,000 0 0 (1) 0 0 0 0 0
Sun Hwang(2) 1999 50,000 0 0 (1) 0 0 0 0 0
Han Shin(3) 1999 50,000 0 0 (1) 0 0 0 0 0
Ivie Yun(4) 1999 40,000 0 0 (1) 0 0 0 0 0
_____________________
35
Prospectus Page 31
* All officers and key employees were hired as of November 1,
1999 by the company, and the salary is for the remainder of 1999, and the
calendar year, 2000. Each party has agreed to forego his salary until the
Company can afford to pay the same.
(1) Mr. Lee is the President, Secretary and sole Director. His term is at
the pleasure of the Board.
(2) Mr. Hwang is Director of Operations, Supermarket Division.
(3) Mr. Shin is Director of Operations, Restaurant Division.
(4) Ms. Yun is Exec. V. P., Korean Restaurant, SAAN, LLC.
Resignations of Officers and Directors
In conjunction with the acquisition of RTG, the Company's then
serving officer and sole director resigned in favor of Mr. Stan J. H. Lee.
CERTAIN TRANSACTIONS
Parents of the Company
The following table discloses all persons who are parent of the
Company (as such term is defined in Securities and Exchange Commission
Regulation C), showing the basis of control and as to each parent, the
percentage of voting securities owned or other basis of control by its
immediate parent if any.
Basis Percentage of Other Basis
Name For Control Voting Securities owned For Control
Miyung Lee Share Ownership 41% None
Daniel Lee Share Ownership 41% None
NOTE: Miyung Lee is the wife of Stan J. H. Lee, the Company's President
and sole Director, and Daniel Lee is their son. Daniel Lee is a minor,
aged 14, residing with and under the guardianship of his parents.
Transaction with Promoters, if Organized Within the Past Five Years
There have been no transactions with Promoters over the past five
years.
PRINCIPAL STOCKHOLDERS
The following sets forth the security ownership of Management of the
Company and any holders of the Company's common stock known to own 5% or
more of the Company's issued and outstanding common stock, as of November
30, 1998.
PRINCIPAL STOCKHOLDERS
As of the date of this Prospectus, the following persons (including
any "group" are, based on information available to the Company, beneficial
owners of more than five percent of the Company's common stock (its only
class of voting securities):
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
Common Shares Miyung Lee 3,500,000 shares, owned 41%
335 Continental Avenue personally
River Edge NJ 07661
Common Shares Daniel Lee 3,500,000 shares, owned 41%
335 Continental Avenue personally
River Edge NJ 07661
NOTE: Miyung Lee is the wife of Stan J. H. Lee, the Company's President and
sole Director, and Daniel Lee is their son. Daniel Lee is a minor, aged 14,
residing with and under the guardianship of his parents.
36
Prospectus Page 32
SECURITY OWNERSHIP OF MANAGEMENT
As of the date of this Prospectus, the following table discloses, as
to each class of equity securities of the Company or any of its parents or
subsidiaries other than directors' qualifying shares, beneficially owned by
all directors and nominees, the names of each executive officer (as defined
in Item 402[a][2] of Securities and Exchange Commission regulation S-B), and
directors and executive officers of the Company as a group, the total number
of shares beneficially owned and the percent of class so owned. Of the
number of shares shown, the associated footnotes indicate the amount of
shares with respect to which such persons have the right to acquire
beneficial ownership as specified in Securities and Exchange Commission
Rule 13(d)(1).
Name and Amount and
Title Address of Nature of Percent
of Beneficial Beneficial of
Class Owner Owner Class
Common
Shares Miyung Lee(1) 3,500,000 shares, 41%
335 Continental Avenue owned personally
River Edge NJ 07661
Common
Shares Daniel Lee(1) 3,500,000 shares, 41%
335 Continental Avenue owned personally
River Edge NJ 07661
(1) NOTE: While Mr. Lee, the President and Sole Director owns no shares in
the Company, he is the husband and father of the shareholders listed, and
thus may, by operation of law, at some point in the future have some
beneficial interest in the shares.
COMMON STOCK
The Company is authorized to issue 22,000,000 shares in the capital
stock of the Company, with a par value of $.001 per share, divided into
20,000,000 Common Shares and 2,000,000 Preferred Shares. Immediately prior
to this offering 8,500,000 shares of Common Stock were outstanding and held
of record by 9 persons as of November 1, 1999. The holders of Common Stock
have one vote per share on all matters (including election of directors)
without provision for cumulative voting. Thus, holders of more than fifty
percent (50%) of the shares voting for the election of directors can elect
all of the directors, if they choose to do so. The Common Stock currently
is not redeemable and has no conversion or pre-emptive rights. The Common
Stock currently outstanding is (and the Shares being issued pursuant to this
prospectus will be) validly issued, fully paid and non-assessable.
In the event of liquidation of the Company's assets available for
Common Stock will share equally in any balance of the Company's assets
available for distribution to them after satisfaction of creditors and the
holders of the Company's senior securities. The Company may pay dividends,
in cash or in securities or other property when and as declared by the board
of directors from funds legally available therefor, but has paid no cash
dividends on its Common Stock.
TRANSFER AGENT
The transfer agent for the Company's Capital Stock is Continental
Stock Transfer and Trust Company, 2 Broadway, New York, NY.
37
Prospectus Page 33
SHARES ELIGIBLE FOR FUTURE SALE
Generally, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period may, under certain
circumstances, sell within any three month period a number of shares which
does not exceed the greater of one percent (1%) of the then outstanding
Common Stock or the average weekly trading volume during the four calendar
weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a
person who has not been an affiliate of the Company for at least 90 days and
who has satisfied a one year holding period.
There are 2 shareholders holding 7,000,000 shares, acquired on
November 3, 1999, whose stock may be eligible for sale pursuant to Rule 144
in December of 2000.
ADDITIONAL INFORMATION
The foregoing statement is a summary of the rights and privileges of
the holders of the Company's Stock. It does not purport to be complete and
is subject to the provisions of the Florida General Corporation Act, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, and, upon anticipated registration as a NASDAQ BB OTC issue,
the rules, regulations and bylaws of the National Association of Securities
Dealers, Inc. The foregoing statements are qualified in their entirely by
such references.
PLAN OF DISTRIBUTION
GENERAL
The Shares registered by the Registration Statement of which this
Prospectus is a part are being registered as a result of demand registration
rights granted by the Company to the Selling Stockholders, at the time that
Selling Stockholders subscribed for the subject securities. (For a complete
List of the Selling Shareholders, SEE: "SELLING STOCKHOLDERS" at page 34).
The Selling Shareholders will sell their stock from time to time in
the public forum, at the prices then prevailing. The Shares will be sold
through broker/dealers, at market prices with customary commissions being
charged. It is anticipated that the broker/dealers will sell the shares
based on a "bid" price for the said shares in the public forum, and the
broker/dealers will not act in an active manner soliciting parties to
purchase the shares, either in the public forum or privately. It is
anticipated that this will be the sole manner in which the shares will be
sold.
The Company plans to sell the treasury stock being issued privately,
to accredited investors (As the term is defined in the Securities Act of
1933, and the Exchange Act of 1934). The Company has no underwriting
Agreement with any Broker, nor does it plan to enter into any.
The Company undertakes to file a post effective amendment to the
Registration Statement identifying any underwriter who may agree to sell
any shares of any Selling Stockholder or Company, and to set forth the terms
of any underwriting agreement or arrangement. The said underwriter shall
also deliver a market making prospectus. As far as the Company is aware,
there exists no past, present, or future plans, proposals, or undertakings
with respect to any underwriter and any selling stockholder.
Although there is no current market for the shares, and they are
not currently traded in the public market, it is anticipated that the shares
will be registered and sold on the NASDAQ Bulletin Board System within 1
month of the effective date of the Registration Statement of which this
Prospectus forms a part.
38
Prospectus Page 34
SELLING STOCKHOLDERS
The following is a Table of Selling Stockholders:
SHAREHOLDERS
NAME ADDRESS NO. OF SHARES CONSIDERATION
Douglas R. Dimick
2810 Polo Island Drive C-202 790,000 (1)
Wellington, Fl. 33414
Corporate Services Group
71 Stony Hill Rd., 2nd Floor 300,000 (4)
Bethel, CT 06801
Thomas V. Simmons, Jr.
668 Fergusson Lane 50,000 (2)
West Palm Beach, Fl. 33415
CYBER-CARE, Inc.
1903 S. Congress Blvd., Suite 400 250,000 (3)
Boyton Beach, Fl. 33426
Alan H. Adelson
152 Bayberry Circle 50,000 (2)
Jupiter, Fl. 33458
Lawrence Solomon
Linton Towers 50,000 (2)
100 E. Linton Blvd., 403B
Delray Beach, Fl. 33483
Strategica Group, Inc.
1221 Brickle Ave. Suite 2600 10,000 (2)
Miami, Fl. 33131
(1) Mr. Dimick was the founder of the Company and obtained his shares in
1997 for services rendered the Company. He has never drawn a salary or
received any recompense whatsoever from the Company.
(2) Mr. Simmons, Mr. Adelson, Mr. Solomon, and Strategica Group each received
shares as compensation for efforts in putting together the Cyber-Care
transaction, being the purchase of two medical facilities for resale in
1997, and in the subsequent divestiture by the Company of its clinics for
$1,230,000.
(3) Cyber-Care Inc., received its shares as compensation for two medical
clinics sold to the Company in 1997.received his shares in 1997 for services
rendered the Company, in lieu of cash.
(4) Corporate Services Group received its shares in May of 1999 in return
for services in constructing two transactions that did not come to fruition.
As well Corporate services Group acted as a consultant in the purchase of
RTG, preparing the closing paperwork and negotiating the final deal.
INDEMNIFICATION ARRANGEMENTS
The Company's articles of incorporation and bylaws provide for
indemnification of the Company's officers, directors and agents to the
fullest extent permitted by law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the United States
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
39
Prospectus Page 35
LITIGATION
The Company is not a party to any material pending legal proceedings.
LEGAL OPINIONS
Bernabe Diaz, Esquire, attorney at law, has rendered his opinion
that the shares of Common Stock as described herein, will, when issued, be
validly issued, fully paid and non-assessable, and that future purchasers
thereof will not be subject to personal liability as a result of their
ownership thereof.
EXPERTS
The audited financial statements of the Company appearing in this
Prospectus and in the Registration Statement have been examined by
independent public accountants, as set forth in their report appearing
elsewhere herein, and are included in reliance upon such report and upon
the authority of such firm as expert in auditing and accounting.
FINANCIAL STATEMENTS
(See following pages)
40
Prospectus Page 36
eKomart.com, Inc.
Comparative Financial Statements and
Accountant's Audit Report
For the Fiscal Years Ended
December 31, 1998 and 1997
and for the Three Quarters Ended September 30, 1999
41
Prospectus Page 37
eKomart.com, Inc.
COMPARATIVE FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND l997
AND FOR THE THREE QUARTERS ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
______________________________________________________________________________
Page
Accountant's Audit Report 38
Financial Statements:
Comparative Balance Sheets 39
Comparative Statements of Operations and Deficit 40
Comparative Statements of Stockholder's Equity 41
Comparative Statements of Cash Flows 42
Notes to Financial Statements 43
______________________________________________________________________________
42
Prospectus Page 38
M.H. Park, CPA Tel) 201-944-7246
440 West St. 3rd Fl. Fax) 201-944-7759
Fort Lee, N.J. 07024-5058
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Shareholders of
eKomart.com, Inc.
Bethel, CT
We have audited the accompanying comparative balance sheet of eKomart.com,
Inc. as of December 31, 1998, 1997 and September 30, 1999, the comparative
related statement of operations and deficit, comparative statement of
stockholders' equity and comparative statement of cash flows for the fiscal
years then ended, as well as the Cumulative Since Inception Statements.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of eKomart.
com, Inc. at December 31, 1998, 1997, September 30, 1999 and the results of
its operations and its cash flows for the fiscal years and three quarters
then ended in conformity with generally accepted accounting principles.
/s/M. H. Park, C. P. A./s/
M.H. Park, CPA
December 6, 1999
Fort Lee, N.J.
43
Prospectus Page 39
eKomart.com, Inc.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997, AND FOR THE THREE
QUARTERS ENDED SEPTEMBER 30, 1999
9/30/99 1998 1997
ASSETS
Current Assets:
Cash $ 105 $ 105 $ 1,355
Notes Receivable
From former subsidiary - - 7,800
Stock subscription receivable 600
Total current assets 105 105 9,755
Investment in Mall and
Supermarket (Note 2) 1,104,460 - -
Trademarks, logos,
developmental rights and
licenses (Note 2) 1,900,000 - -
Notes Receivable
Net of Deferred Gain of
$ 1,230,000 (Notes 3 and 4) 150,000 150,000 150,000
TOTAL ASSETS $3,154,565 $150,105 $159,755
LIABILITIES AND
STOCKHOLDER'S EQUITY
Long-term Liabilities
Accounts Payable $30,990 $27,570 $2,406
Loans Payables (Stockholders)
(Note 5) 17,543 15,383 -
Notes Payable 150,000 - -
Total Liabilities 198,533 42,953 2,406
Stockholder's Equity
Series A voting convertible
preferred stock,
$0.001 par value - authorized
2,000,000 shares:
issued and outstanding - 0 - 300 300
Common Stock, $0.001 par value
- - authorized
20,000,000 shares; issued and
outstanding
8,500,000 (Note 6) 8,500 1,500 1,000
Additional Paid-In-Capital 3,042,500 199,200 199,700
Deficit Accumulated during the
development stage (94,968) (93,848) (43,651)
Total Stockholder's Equity 2,956,032 107,152 157,349
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,154,565 $150,105 $159,755
See Accompanying Notes which are an integral part of Financial Statements
44
Prospectus Page 40
eKomart.com, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND FOR THE THREE
QUARTERS ENDED SEPTEMBER 30, 1999
Cumulative
From YTD
Inception 9/30/99 1998 1997
Revenues $ 4,460 $ 4,460 $ - $ -
Costs and Expenses - -
Professional fees 81,065 - 45,520 35,545
General and Administrative 18,363 5,580 4,677 8,106
INCOME FROM OPERATIONS BEFORE
INCOME TAXES (94,968) (1,120) (50,197) (43,651)
Income Tax Expenses - - - -
NET INCOME (LOSS) (94,968) (1,120) (50,197) (43,651)
ACCUMULATED DEFICIT,
at beginning - (93,848) (43,651) -
ACCUMULATED DEFICIT,
at end (94,968) (94,968) (93,848) (43,651)
Earnings (Loss) per share -
Preferred Stock (0.32) (0.31) (0.15)
Earnings (Loss) per share -
Common Stock (0.0112) (0.0626) (0.0437)
See Accompanying Notes which are an integral part of Financial Statements
45
Prospectus Page 41
eKomart.com, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
AS OF DECEMBER 31, 1998, 1997, AND SEPTEMBER 30, 1999
Series A Deficit
Preferred Common Accumulated
Stock Stock Additional during the
Paid-In DeveLopment
Shares Amount Shares Amount Capital Stage Total
(000's) (000's)
Beginning balance,
date of inception
02/11/97 . 10 0 0
100 Shrs.Outs.Par .010 -
Stock split - 10,000
for 1-09/30/99 1,000 1,000 1,000
Issuance of Preferred
Stock 300 300 199,700 200,000
Net Income (Loss) (43,651) (43,651)
Balance December 31,
1997 (Note 10) 300 $300 1,000 $1,000 $199,700$(43,651) $157,349
Beginning balance,
01/01/98 300 300 1,000 1,000 199,700 (43,651) 157,349
Issuance of Common
Stock - - 500 500 (500) (500)
Net Income (Loss) (50,197) (50,197)
Balance December 31,
1998 300 $300 1,500 $1,500 $199,200$(93,848) $107,152
Beginning balance,
01/01/99 300 300 1,500 1,500 199,200 (93,848) 107,152
Issuance of Common
Stock 14,000 14,000 2,851,300 2,851,300
Exercise of warrants
outstanding 200 200 - 200,200
Conversion of Pref-
erred Stock (300)(300) 300 300 - (300)
Reverse split - 2 for 1 (8,000)(8,000) (8,000)
Issuance of Common Stock 500 500 -
Net Income (Loss) (1,120) (1,120)
Balance September 30,
1999 - $- 8,500 $8,500$3,042,500$(94,968)$2,956,032
See Accompanying Notes which are an integral part of Financial Statements
46
Prospectus Page 42
eKomart.com, Inc.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND FOR THE THREE QUARTERS
ENDED SEPTEMBER 30, 1999
Cash Flows from Cumulative 9/30/99 1998 1997
Operating Activities
Net Loss $(94,968) $(1,120) ($50,197) ($43,651)
Adjustments to
reconcile net loss
to net cash
used by operating activities (4,460) - -
Costs and expenses paid
on behalf of the
Company by stockholder,
net of subscription
receivable 18,543 2,160 15,983 400
Changes in operating
assets and liabilities
Increase in accounts
payables 30,990 3,420 25,164 2,406
Net cash used in
operating activities (49,895) $ - $(9,050) ($40,845)
Cash Flows from Investing
Activities
Notes receivables - - 7,800 (7,800)
Cash Flows from Financing
Activities
Proceeds from issuance of
Preferred Stock 50,000 - - 50,000
Net Increase (Decrease)
in cash 105 - (1,250) 1,355
Cash, at beginning
of period - 105 1,355 -
Cash, at end of
period $105 $105 $105 $1,355
See Accompanying Notes which are an integral part of Financial Statements
47
Prospectus Page 43
eKomart.com, Inc.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
For the fiscal years fiscal years ended
December 31, l998 and 1997
and for the three quarters ended September 30, 1999
1. Summary of Significant Accounting Policies
a) Organization, Capitalization and Business Activity
The Company was incorporated in February, 1997, in Florida. The Company is
an operating company, having emerged from its development phase in the
current quarter. On November 3, 1999 the company purchased and liquidated
RTG-TPD Holding Co., LLC. , a Colorado Limited Liability Corporation,
incorporated in June 11, 1999.
The Company manages and has an ownership interest in 2050 S. Havana St.
(DTSE) LLC. ("KOMART MALL") (15% ownership), Komart Korean & Japanese
Supermarket, LLC., ("KOMART SUPERMARKET") (30% ownership), and Korean
Restaurant, SAAN, LLC. ("SAAN") (wholly owned and incorporated in February,
1999), all organized pursuant to the laws of Colorado in 1999. The Company,
utilizing the trade names "KOMART" and "eKOMART", is involved, worldwide,
in developing e-commerce applications for goods and services offered by
its Asian and natural organically grown grocery center and its shopping
mall operations in the Aurora section of Denver, Colorado, as well as
establishing like facilities throughout the United States.
The Company changed its name from iNetboard, Inc. to eKomart.com, Inc. on
December 6, 1999. The Company had previously changed its name on April 16,
1999 to iNetboard from its original name, Diversified Medical Holdings, Inc.
Currently all operations are run from the head office facility in Fort Lee,
NJ
b) Development Stage Enterprise
The Company is presently emerging from its development phase in the current
quarter. However, for the purposes of these financial statements, the
Company, as at September 30, 1999, was still in its development stage, and
the financial statements represent those of a development stage enterprise.
c) 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 financial statements and the
reported amounts of revenues and expenses during the reported periods.
Actual results could differ from those amounts.
See Accompanying Accountant's Audit Report, which is an Integral Part of
Financial Statements
48
Prospectus Page 44
eKomart.com, Inc.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
For the fiscal years ended
December 31, l998 and 1997
and for the three quarters ended September 30, 1999
d) Revenue and Expense Recognition
The Company prepares its financial statements on the accrual accounting
basis. Consequently, certain revenue and related assets are recognized when
earned rather than when received, and certain expenses are recognized when
the obligation is incurred or the asset consumed, rather than when paid.
e) Accounting Method
The Company recognizes income and expenses on accrual basis.
f) Income Taxes
The Company account for its income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which
requires recognition of deferred tax liabilities and assets for expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method income taxes are provided for
the tax effects of transactions reported in the financial statements and
consist of taxes currently due plus deferred taxes related primarily to
differences between the bases of certain assets and liabilities for
financial and tax reporting. The deferred taxes represent the future tax
return consequences of those differences, which will either be taxable when
the assets and liabilities are recovered or settled.
g) Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes for operating losses that are available to offset future taxable income.
h) Intangible Assets
Intangible assets subject to amortization include organization costs, loan
closing costs, and in-force leasehold costs. Organization costs and in-force
leasehold costs are being amortized using the interest method over the life
of the related loan.
i) Reclassifications
Certain accounts in the prior-year financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current-year financial statements. For federal income
tax purposes, depreciation is computed using the modified accelerated
cost recovery system. Expenditures for major renewals and betterment that
extend the useful lives of property and equipment are capitalized.
Expenditures for maintenance and repairs are charged to expense as incurred.
49
See the accompanying Accountant's Audit Report, which is an Integral Part of
Financial Statements
Prospectus Page 45
eKomart.com, Inc.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
For the fiscal years ended
December 31, l998 and 1997
and for the three quarters ended September 30, 1999
2. Business Combination
Pursuant to an Agreement dated November 3, 1999 and effective on that
date, eKomart.com, Inc. issued 7,000,000 common shares in exchange for a
100% interest in RTG-TPD Holding Co., LLC. (RTG). RTG was then liquidated.
This left the company with a 15% interest in 2050 S. Havana St. (DTSE) LLC,
a shopping mall real estate holding company, a 30 % interest in Komart
Korean & Japanese Supermarket, LLC., a retail of Korean/Japanese and
natural organic food grocery store and 100% of Korean Restaurant, SAAN, LLC.
This business combination situation is referred to as a "Reverse Takeover".
Legally, eKomart.com, Inc. is the continuing corporation; however, Generally
Accepted Accounting Principles require that the former members of RTG as
identified in the transaction be identified as the acquirer and that eKomart.
com, Inc. be treated as the acquired company.
The acquisition is summarized as follows;
Assets and liabilities of 2050 S. Havana St. (DTSE) LLC., Komart Korean &
Japanese Supermarket, LLC., and Korean Restaurant, SAAN, LLC,
("Colorado LLCs") on November 3, l999:
See the accompanying Accountant's Audit Report, which is an Integral Part of
Financial Statements
50
Prospectus Page 46
eKomart.com, Inc.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
For the fiscal years ended
December 31, l998 and 1997
and for the three quarters ended September 30, 1999
3. Business Acquisition and Disposition
In October 1997, the Company acquired Outsource Medical Incorporated (OMI)
and its wholly-owned subsidiary, Essential Care Medical Center, Inc.
(Essential) and $ 50,000 in cash, in exchange for 300,000 shares of Series
A Convertible Preferred Stock of the Company, and 200,000 warrants to
acquire 200,000 shares of common stocks of the Company for $.0001 per
share.
Additionally, the Company agreed to pay the seller 40% of certain accounts
receivable of Essential as of June 1, 1997 as collected. To date, none has
been collected.
On December 1, l997, the Company sold 100% of the capital stock of
Essential. In payment, the Company received a promissory note in the amount
of $ 1,200,000 which bears interest at a rate of 8.75 per annum for the
first 24 months beginning January 1998 and 10 per annum for 36 months.
Thereafter, principal and interest payments shall be due in equal monthly
installments based on a 7-year amortization schedule with a balloon payment
of the remaining principal balance at the earlier of the sale of the capital
stock or substantially all the assets of the purchaser or October 31, 2002.
In the first 24 months, the interest earned in excess of 6% per annum may
be deferred until maturity at the option of the buyer.
In addition, the purchase contract assigned responsibility for the payment
for certain accounts receivable as of June 1, 1997 to the purchaser.
4. Note Receivable
Due in part to the fact that the purchaser was a newly formed, thinly
capitalized, highly leveraged entity, significant uncertainties exist as to
the ability of the purchaser to meet the obligations created by the note
receivable received by the Company in this transaction. As a result, the
gain on the above transaction has been deferred until such time as cash
flows of the purchaser are sufficient to fund the obligation on a full
accrual basis. As a result, the note receivable has been reflected net of
the deferred gain in the accompanying financial statements.
5. Stockholder's Loans
The loans payable to a stockholder are unsecured, non-interest bearing with
non-set terms of repayment. They will be retired as the company has surplus
funds to repay these loans.
6. Common Stocks
The Company is authorized to issue 20,000,000 common shares at $ 0.001
par value share and 2,000,000 preferred shares with a par value of $0.001,
and, as of November 30, l999, 8,500,000 voting common shares are issued
and outstanding.
See Accompanying Accountant's Audit Report, which is an Integral Part of
Financial Statements
51
Prospectus Page 47
eKomart.com, Inc.
NOTES TO COMPARATIVE FINANCIAL STATEMENTS
For the calendar years ended
December 31, l998 and 1997 and
for the three quarters ended September 30, 1999
7. Stockholders Equity
Stockholders Equity has been restated to reflect the purchase of RTG.
(See Note 2)
8. Description of Leasing Arrangements
The Company uses office space for which no rent is paid. This arrangement
will continue through December, 2000.
9. Earnings Per Shares
Earnings (Loss) per share are calculated using the weighted-average number
of common shares outstanding and common shares equivalents.
10. Consolidation and Pro-Forma Statements
The Statements presented herein are the consolidated Statements for
the Company and its sole Subsidiary, Korean Restaurant, SAAN, LLC. The
restaurant has no significant assets, liabilities, income or expenses to
date, and as a result it was felt a separate set of statements for this
entity would serve no purpose.
The shareholders' Equity was restated for the nine month period ended
September 30, 1999, but it was felt that where it is a new company, and
eKomart.com, Inc. has no real operating history, a pro- forma set of
financial statements would not give the reader a greater insight. It was
felt that the statements as presented reflect the transactions and histories
of the company much clearer than a fully restated set of Statements and
Pro-forma statements. For these reasons it was felt that the statements
as presented represent the fiscal history of the Company in the most clear
and accurate light.
See Accompanying Accountant's Audit Report, which is an Integral Part of
Financial Statements.
52
TABLE OF CONTENTS
ITEM PAGE
Prospectus Summary 1
The Company 1,11
The Offering Front Cover
Stockholders 4,10
Securities Outstanding 4 eKomart.com, Inc.
Definition of Terms I-3,4
Selected Financial Information 2
Risk Factors 5 3,500,000 Shares of Common
Stock
Certain Market Information 10
Capitalization 11
Management's Discussion & Analysis 24
Conflicts of Interest 28
Management 28
Directors and Executive
Officers 28
Biographies of the Company's
Executive Officers and Directors 28
Certain Transactions 31
Principal Stockholders 31 =========================
Securities- Description(Common Stock) 32
Common Stock 32 PROSPECTUS
Dividend Policy 6
Transfer Agent 32 =========================
Shares Eligible for Future Sale 33
Additional Information Inside Front Cover, 33
Plan of Distribution 33
Indemnification Arrangements 34
Litigation 35
Legal Opinions 35
Experts 35
Financial Statements 36
Selling Shareholders 10,34
53
eKomart.com, Inc.
71 Stony Hill Rd. 2nd Flr.
Bethel CT 06801
(203) 798-1889
Part II, Page I
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24: INDEMNIFICATION OF OFFICERS AND DIRECTORS
In accordance with the General Corporation Laws of the State of
Florida which were in effect at the time the Registrant was incorporated,
the Registrant's Board of Directors adopted by resolution, as further set
forth in the Registrant's by laws, provisions relative to indemnification of
its Officers and Directors against expenses, judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with the
defense of any proceeding or threatened proceeding to which such person was
or is a party, or is threatened to be made a party by reason of the fact
that such person was or is an officer or director, provided that, (i) such
director or officers acted in good faith or in a manner reasonably believed
by him to be in the best interests of the corporation to procure a judgment
in its favor. In the latter case, the power to indemnify extends to
expenses actually or reasonably incurred in connection with the defense or
settlement of any proceeding if such person (i) acted in good faith, and
(ii) the manner such officer and director believed to be in the best
interest of the corporation and with such care, including reasonable
inquiry, as an ordinary prudent person would use under similar
circumstances. No indemnification will be made in respect of any claim,
issue or matter, as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless, and only to the extent that the court in which such
action or suit was brought shall determine upon an application of that,
despite the adjudication of liability, but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper. Otherwise, indemnification
for an officer and director meeting the applicable standards of conduct is
determined by a majority of the disinterested directors or shareholders or
upon application by the corporation, such officer or director or his
attorney, to the court in which such proceeding was pending.
The Securities & Exchange Commission is of the opinion that
indemnification of Company officers or directors for matters involving
violation of securities laws is against public policy and that agreements
therefor are consequently unenforceable.
ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with distribution of the securities of
the Company being Registered hereby, other than commissions and non-
accountable expense allowances, will be borne directly by the Company
rather than by the selling stockholder. Such expenses are estimated to be
$50,000.
Item Amount
United States Securities and Exchange Commission filing fee $ 300
Printing Expenses 4,000
Fees and expenses of counsel for the Company 22,000
Accounting fees and expenses 20,000
Transfer agent fees and expenses 3,000
Miscellaneous 700
TOTAL $50,000
54
PART II, Page 2
ITEM 26 RECENT SALES OF UNREGISTERED SECURITIES
Acquisition of RTG-TPD Holding Co., LLC.
On November 3, 1999, pursuant to the terms of a Purchase and Sale Agreement
(the "Agreement") between the Company and RTG-TPD Holding Co., LLC. ("RTG"),
a Colorado Limited Liability Corporation, the Company purchased all the
outstanding interest in the Limited Liability Corporation, and liquidated
it. Pursuant to the terms of the Agreement, the owners of RTG received
7,000,000 shares (See Prospectus-Principal Shareholders). The owners are
Miyung Lee and Daniel Lee, who each received 3,500,000 shares each. Mrs.
Lee is the wife of the President, Stan J. H. Lee, and Daniel Lee is their
14 year old son.
The shares received by Mr. And Mrs. Lee are subject to Rule 144 of the
Securities and Exchange Commission, and exempt from registration through
reliance on Section 4(2) of the Securities Act of 1933, in that both parties
are sophisticated purchasers.
ITEM 27: EXHIBITS
Exhibit
Number Description Page
1. Constituent Document:
.1 Original Article of Incorporation 62
.11 Amended and Restated Articles of Incorporation 65
.12 Second Amended and Restated Articles of Incorporation 84
.2 Bylaws 87
5.1 Opinion of Counsel 96
10. Material Contracts:
.1 Operating Agreement, Komart Korean & Japanese
Supermarket, LLC. 97
.2 Operating Agreement, 2050 S. Havana St. (DTSE), LLC. 113
.3 Operating Agreement RTG-TPD Holding Co., LLC. 129
22. Subsisiaries of the Registrant 145
24.6 Consent of Auditors 146
27 Financial Data Schedule 198
99 Additional Exhibits
.1 Financial Statements Diversified Medical Holdings
(unaudited) 1997-1999 147
55
Part II, Page 3
ITEM 28: UNDERTAKINGS
A. Certificates
The Company hereby undertakes to provide its transfer agent with
certificates in such denominations and registered in such names as required
to permit delivery thereof to each purchaser of the Selling Stockholders'
stock offered hereby, from time to time, as required, starting as of the
close of business on the day immediately following the date of this
Registration Statement.
B. Liabilities
Insofar as indemnification of liabilities arising under the
securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing provisions
or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C. Further Undertakings
The Company undertakes to file a post effective amendment to the
Registration Statement identifying any underwriter who may agree to sell any
shares of any Selling Stockholder, and to set forth the terms of any
underwriting agreement or arrangement. The said underwriter shall also
deliver a market making prospectus. As far as the Company is aware, there
exists no past, present, or future plans, proposals, or undertakings with
respect to any underwriter and any selling stockholder.
The Company further undertakes to:
1. File during any period in which it offers or sells securities, a
post effective amendment to this Registration Statement to:
a) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
b) Reflect in the prospectus any facts or events which,
individually or together represent a fundamental change in
the information in th registration statement; and,
c) Include any additional or changed material information on
the plan of distribution.
2. For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
3. File a post effective amendment to remove from registration any
securities that remain unsold at the end of the offering.
56
Part II, Page 4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement to be
signed on its behalf by the undersigned in the City of Fort Lee, State of
New Jersey on December 8, 1999.
eKOMART.COM, INC.
By: /s/Stan J. H. Lee/s/
Stan J. H. Lee
President and Chairman of the Board
of Directors
Pursuant to the requirements of the Exchange Act of 1934, as
amended, this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Date: December 8, 1999.
eKOMART.COM, INC.
By: /s/Stan J. H. Lee/s/
Stan J. H. Lee
President and Chairman of the Board
of Directors, sole Director
57
58 BLANK PAGE
Registration Number: 000-1100399
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = == = = = = = = = = =
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = == = == = = = = = =
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = == = = = = = = = = =
EXHIBITS
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = == = = = = = = = = =
59
(SEAL)
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
February 12, 1997
DIVERSIFIED MEDICAL HOLDINGS, INC.
PO BOX 16546
WEST PALM BEACH, FL 33416
The Articles of Incorporation for DIVERSIFIED MEDICAL HOLDINGS, INC. were
filed on February 11, 1997, and assigned document number P97000013637 Please
refer to this number whenever corresponding with this office.
Enclosed is the certification requested. To be official, the certification
for a certified copy must be attached to the original document that was
electronically submitted and filed under FAX audit number H97000002477.
A corporation annual report will be due this office between January 1 and
May 1 of the year following the calendar year of the file date year. A
Federal Employer Identification (FEI) number will be required before this
report can be filed. Please apply NOW with the Internal Revenue Service by
calling 1-800-829-3676 and requesting form SS-4.
Please be aware if the corporate address changes, of the corporation to
notify this office. it is the responsibility of the corporation to notify
this office.
Should you have questions regarding corporations, please contact this office
at the address given below.
Neysa Culligan
Document Specialist
New Filings Section
Division of Corporations Letter Number: 397A00007435
60
(SEAL)
State of Florida
Department of State
I certify from the records of this office that DIVERSIFIED MEDICAL
HOLDINGS, INC. is a corporation organized under the laws of the State of
Florida, filed on February 11, 1997.
The document number of this corporation is P97000013637.
I further certify that said corporation has paid all fees and penalties due
this office through December 31, 1997, and its status is active.
I further certify that said corporation has not filed Articles of Dissolution.
I further certify that this is an electronically transmitted certificate
authorized by section 15.16, Florida Statutes, and authenticated by the code,
397A00007435-021297-P97000013637-l/1, noted below.
Given under my hand and the Great Seal of the State of Florida, at
Tallahassee, the Capital, this the Twelfth day of February, 1997
Authentication Code: 397A00007435-021297-P97000013637-1/1
(SEAL) /s/Sandra B. Mortham/s/
Secretary of State
61
Articles of Incorporation
of
Diversified Medical Holdings, Inc.
Article I.Name
The name of this Florida corporation is:
Diversified Medical Holdings, Inc.
Article II. Address
The mailing address of the Corporation is:
Diversified Medical Holdings, Inc.
PO Box 16546
West Palm Beach FL 33416
Article III. Registered Agent
The name and address of the registered agent of the Corporation is:
Corporate Creations Enterprises, Inc.
4521 PGA Boulevard #211
Palm Beach Gardens FL 33418
Article IV. Board of Directors
The name of each member of the Corporation's Board of Directors is:
Thomas V. Simmons, Jr.
The affairs of the Corporation shall be managed by a Board of Directors
consisting of no less than one director. The number of directors may be
increased or decreased from time to time in accordance with the Bylaws
of the Corporation. The election of directors shall be done in
accordance with the Bylaws. The directors shall be protected from personal
liability to the fullest extent permitted by applicable law.
H97000002477
Corporate Creations International Inc.
401 Ocean Drive #312 (Door Code 125)
Miami Beach FL 33139-6629
(305) 672-0686
62
Article V. Capital Stock
The Corporation shall have the authority to issue 100 shares of common
stock, par value $.01 per share.
Article VI. Incorporator
The name and address of the incorporator is:
Corporate Creations International Inc.
401 Ocean Drive #312 (Door Code 125)
Miami Beach FL 33139-6629
Article VII. Corporate Existence
The corporate existence of the Corporation shall begin effective
February 11, 1997
The undersigned incorporator executed these Articles of Incorporation on
February 11, 1997
Corporate Creations International Inc.
By: /s/Luis A. Uriarte/s/
Vice President
H97000002477
Corporate Creations International Inc.
401 Ocean Drive #312 (Door Code 125)
Miami Beach FL 33139-6629
(305) 672-0686
63
CERTIFICATE OF DESIGNATION
REGISTERED AGENT AND REGISTERED OFFICE
CORPORATION:
Diversified Medical Holdings, Inc.
REGISTERED AGENT:
Corporate Creations Enterprises, Inc.
4521 PGA Boulevard #211
Palm Beach Gardens Ft 33418
I agree to act as registered agent to accept service of process for the
corporation named above at the place designated in this Certificate. I agree
to comply with the provisions of all statutes relating to the proper and
complete performance of the registered agent duties. I am familiar with and
accept the obligations of the registered agent position.
/s/Luis A. Uriarte/s/, Vice President
Corporate Creations Enterprises, Inc.
Date: February 11, 1997
H97000002477
Corporate Creations International Inc,
401 Ocean Drive #312 (Door Code 125)
Miami Beach FL 33139-6e29
(305) 672-0686
64
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
October 1, 1997
DIVERSIFIED MEDICAL HOLDINGS, INC.
PO BOX 16546
WEST PALM BEACH, FL 33416
Re: Document Number P97000013637
The Amended and Restated Articles of Incorporation for DIVERSIFIED MEDICAL
HOLDINGS, INC., a Florida corporation, were filed on October 1, 1997.
The certification you requested is enclosed. To be official, the
Certificate for a certified copy must be attached to the original document
that was electronically submitted under FAX audit number H97000016317.
Should you have any questions concerning this matter, please telephone
(850) 487-6050, the Amendment Filing Section.
/s/Darlene Connell/s/
Corporate Specialist
Division of Corporations Letter Number: 797A00048395
65
State of Florida
Department of State
I certify the attached is a true and correct copy of the Amended and
Restated Articles of Incorporation, filed on October 1, 1997, for
DIVERSIFIED MEDICAL HOLDINGS, INC., a Florida corporation, as shown by
the records of this office.
I further certify the document was electronically received under FAX audit
number H97000016317. This certificate is issued in accordance with
section 15.16, Florida Statutes, and authenticated by the code noted
below.
The document number of this corporation is P97000013637.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
First day of October, 1997
Authentication Code: 797A00048395-100197-P97000013637-1/1
(SEAL)
/s/Sandra B. Mortham/s/
Secretary of State
66
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
DIVERSIFIED MEDICAL HOLDINGS, INC.
Pursuant to Section 607.1007 of the Florida Statutes, Diversified Medical
Holdings, Inc. (the "Corporation"), certifies that:
FIRST: The name of the Corporation is Diversified Medical Holdings, Inc.
The original Articles of Incorporation were filed with the Secretary of
State of the State of Florida on February 11, 1997.
SECOND: These Amended and Restated Articles of Incorporation contain
amendments requiring the approval of the holders of a majority of the
issued and outstanding shares of the common stock of the Corporation. The
holders of a majority of the issued and outstanding shares of the
Corporation's common stock approved such amendments and the Board of
Directors of the Corporation duly adopted these Amended and Restated
Articles of Incorporation by a Joint Unanimous Written Consent of Sole
Director and Sole Stockholder of the Corporation dated September 30, 1997.
The number of votes cast for the amendments was sufficient for approval
by the holders of common stock of the Corporation.
THIRD: The Articles of Incorporation of the Corporation are amended and
restated to read in their entirety as follows:
ARTICLE ONE
The name of the Corporation is: Diversified Medical Holdings, Inc.
ARTICLE TWO
The mailing address of the Corporation shall be: P.O. Box 16546, West
Palm Beach, FL 33416.
ARTICLE THREE
The street address of the registered office of the Corporation is: 4521 PGA
Boulevard #211, Palm Beach Gardens, FL 3341 S. The name of the registered
agent of the Corporation at that address is: Corporate Creations
Enterprises, Inc.
ARTICLE FOUR
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Business Corporation Act
of the State of Florida.
Phillip T. Ridolfo, Jr., Esq.
777 S. Flagler Drive, Suite 310-East
West Palm Beach, FL 33401
(561)650-7900
FL Bar #0963275
67
ARTICLE FIVE
Authorized Capital. The total number of shares of all classes of capital
stock which the Corporation has authority to issue is 8,000,000 shares
consisting of (i) 6,000,000 shares of Common Stock with a par value of
$.001 per share, (ii) 300,000 shares of Series A Preferred Stock with a
par value of $.001 per share, and (iii) 1,700,000 shares of "blank check
preferred stock."
A. Series A Preferred Stock.
1. Designation and Number. There is hereby designated a series of
Preferred Stock to be known as "Series A Preferred Stock." The number of
shares constituting the Series A Preferred Stock shall be 300,000.
2. Dividends. The Corporation shall not declare or pay any dividend
or make any other distribution to the holders of the Common Stock unless
the holders of the Series A Preferred Stock participate with the holders
of the Common Stock in any such dividend or distribution, and a dividend
or distribution is prior thereto or simultaneously therewith, declared or
paid, as the case may be, to the holders of the Series A Preferred Stock
as set forth in the immediately succeeding sentence. In the case of a
dividend or distribution to the holders of the Common Stock, the holder
of each share of Series A Preferred Stock shall receive the same dividend
or distribution that a holder of the number of shares of Common Stock equal
to the Conversion Ratio would be entitled to receive.
3. Conversion. A holder of shares of Series A Preferred Stock shall
have the right, at such holder's option, at any time or from time to time
to convert any shares of Series A Preferred Stock owned by such holder into
shares of Common Stock on a one-for-one basis (the "Conversion Ratio").
In addition, Each share of Series A Preferred Stock shall automatically be
converted into the number of shares of Common Stock issuable upon the
conversion thereof at the then effective Conversion Ratio upon the
Corporation's Common Stock being Publicly Traded. For purposes of this
designation, the term "Publicly Traded" shall mean from and after the time
the Corporation's Common Stock becomes registered pursuant to the Exchange
Act of 1934 Before any holder of Series A Preferred Stock shall be entitled
to convert such stock into full shares of Common Stock pursuant to this
section, such holder shall surrender the certificate or certificates there
for, duly endorsed, at the office of the Corporation or of any transfer agent
for the Series A Preferred Stock (or the holder shall notify the
Corporation or its transfer agent that such certificate has been lost,
stolen or destroyed and execute an agreement in form and substance
reasonably satisfactory to the Corporation to indemnify the Corporation
from any loss incurred by it in connection therewith), and shall give
written notice to the Corporation at such office that holder elects to
convert the same and shall state therein holder's name or the name or
names of holder's nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation, as
soon as practicable thereafter, shall issue and deliver at such office to
such holder of Series A Preferred Stock, or to such holder's nominee or
nominees a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled, together with cash in lieu
of any fractional shares. In case the number of shares of Series A
Preferred Stock represented by the certificate or certificates surrendered
68
exceeds the number of shares converted. the Corporation shall, upon such
conversation, execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Series A Preferred Stock represented by the certificate or certificates
surrendered which are not to be converted. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date of
such surrender of the shares of Series A Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall at that time cease to be a holder of the
shares of Series A Preferred Stock for any purpose whatsoever and shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date.
4. Anti-Dilution. The Conversion Ratio shall be subject to adjustment
from time to time upon the happening of certain events as provided in this
section as follows:
(a) In case the Corporation shall at any time or from time to time
after the date hereof (i) pay any dividend, or make any distribution, on
the outstanding shares of Common Stock (or Common Stock Equivalents) in
shares of Common Stock, (ii) subdivide the outstanding shares of Common
Stock, (iii) combine the outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of the shares of Common
Stock any shares of capital stock of the Corporation, then and in each such
case, the Conversion Ration in effect immediately prior to such event or
the record date therefor, whichever is earlier, shall be adjusted so that
the holder shall be entitled to receive the number and type of shares of
Common Stock which such holder would have owned or have been entitled to
receive after the happening of any of the events described above, had such
holder's Series A Preferred Stock been converted into Common Stock
immediately prior to the happening of such event or the record date
therefor, whichever is earlier. An adjustment made pursuant to this Section
shall become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive
such dividend or distribution, or (y) in the case of such subdivision,
reclassification or combination, at the close of business on the day upon
which such corporate action becomes effective.
(b) Except with respect to Excluded Securities (as defined below), in
case the Corporation shall issue any shares of Common Stock (or Common
Stock Equivalents) after the date hereof at a consideration per share (or
having a conversion price per share) less than $1.00 per share, then in
each such case, the Conversion Ratio shall be adjusted by multiplying (i)
the Conversion Ratio in effect on the day immediately prior to the date of
issuance of such shares (or Common Stock Equivalents) by (ii) a fraction,
the numerator of which shall be the sum of (x) the number of shares of
Common Stock outstanding on such date prior to such issuance and (y) the
number of shares of Common Stock convertible at the then current Conversion
Ratio with the aggregate consideration receivable by the Corporation for
the total number of shares of Common Stock so issued (or issuable upon
conversion, exchange or exercise of such Common Stock Equivalents), and the
denominator of which shall be the sum of (x) the number of shares of Common
Stock outstanding on such date prior to such issuance and (y) the number of
additional shares of
69
Common Stock issued (or issuable upon conversion, exchange or exercise of
such Common Stock Equivalents). An adjustment made pursuant to this
Section shall be made on the next Business Day following the date on which
any such issuance is made and shall be effective retroactively to the close
of business on the date of such issuance. For purposes of this Section, the
aggregate consideration receivable by the Corporation in connection with
the issuance of shares of Common Stock or of Common Stock Equivalents shall
be deemed to be equal to the sum of the aggregate offering price (the
aggregate consideration received by the Corporation in connection with the
issuance of all such Common Stock and/or Common Stock Equivalents before
deduction of underwriting discounts or commissions and expenses payable to
third parties, if any) of all such Common Stock and/or Common Stock
Equivalents plus the minimum aggregate amount, if any, payable upon
conversion, exchange or exercise of any such Common Stock Equivalents. The
issuance or reissuance of any shares of Common Stock (whether treasury
shares or newly issued shares) pursuant to a dividend or distribution on,
or subdivision, combination or reclassification of, the outstanding shares
of Common Stock requiring an adjustment in the Conversion Ratio pursuant
to Section (a) above shall not be deemed to constitute an issuance of
Common Stock or Common Stock Equivalents by the Corporation to which this
Section applies. Upon the expiration of any unconverted, unexchanged or
unexercised Common Stock Equivalents for which an adjustment has been made
pursuant to this Section, the adjustments shall forthwith be reversed to
effect such Conversion Ratio as would have been in effect if at the time of
such Common Stock Equivalents, to the extent outstanding immediately prior
to such expiration or termination, had never been issued. Excluded
Securities shall mean (i) all shares of Common Stock or Common Stock
Equivalents issued and outstanding upon the date on which shares of
Series A Preferred Stock are first issued, (ii) 500,000 shares of Common
Stock options and/or warrants issuable pursuant to a Stock Incentive Plan
to be adopted by the Board of Directors of the Corporation, and (iii)
warrants to purchase up to 200,000 shares of Common Stock exercisable at
$.30 per share.
(c) For purposes of Subsections (a) through (d) of this Section, the
number of shares of Common Stock at any time outstanding shall mean the
aggregate of all shares of Common Stock then outstanding (other than any
shares of Common Stock then owned or held by or for the account of the
Corporation) treating for purposes of this calculation all Common Stock
Equivalents as having been converted, exchanged or exercised.
(d) If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution and shall thereafter, and before such dividend or distribution
is paid or delivered to stockholders entitled thereto, legally abandon its
plan to pay or deliver such dividend or distribution, then no adjustment
in the Conversion Ratio then in effect shall be made by reason of the
taking of such record, and any such adjustment previously made as a result
of the taking of such record shall be reversed.
(e) As used in this Section, the term "Common Stock" shall mean and
include the Corporation's authorized Common Stock, par value $0.00l per
share, as constituted on the date hereof, and shall also include any
capital stock of any class of the Corporation thereafter authorized which
shall neither be limited to a fixed sum or percentage in respect of the
rights of the holders thereof to participate in dividends nor be entitled
to a preference, in the distribution of assets upon the voluntary or
70
involuntary liquidation dissolution or winding up of the Corporation.
(f) In the case of a Sale of the Corporation or a proposed
reorganization of the Corporation or a proposed reclassification of the
capital stock of the Corporation (except a transaction for which provision
for adjustment is otherwise made in this Section), the Warrant shall
thereafter be exercisable into the number of shares of stock or other
securities or property to which a holder of the number of shares of Common
Stock of the Corporation deliverable upon exercise of such Warrant would
have been entitled upon such Sale of the Corporation, reorganization or
reclassification; and, in every such case, appropriate adjustment (as
determined by the Board of Directors) shall be made in the application of
the provisions herein set forth with respect to the rights and interest
thereafter of the holders of the Series A Preferred Stock, to the end that
the provisions set forth herein (including provisions with respect to
changes in and other adjustments of the applicable Conversion Ratio) shall
thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the
conversion of Series A Preferred Stock. The Corporation shall not effect any
such Sale of the Corporation unless prior to or simultaneously with the
consummation thereof the successor Corporation or purchaser, as the case
may be, shall assume by written instrument the obligation to deliver to the
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, each such holder is entitled to receive.
(g) Whenever the Conversion Ratio is adjusted as herein provided, the
Corporation shall prepare and deliver forthwith to the holder a certificate
signed by its President or a Vice President, or by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, setting
forth the adjusted Conversion after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which adjustment was made.
5. Liquidation, Dissolution or Winding Up.
(a) Upon the voluntary or involuntary dissolution, liquidation or
winding up (each, a "Liquidation") of the Corporation, the holders of the
shares of the Series A Preferred Stock shall be entitled to receive and to
be paid out of the assets of the Corporation available for distribution to
its stockholders the Preferred Distribution Preference Per Share (as defined
below) with respect to each outstanding share of Series A Preferred Stock.
(b) If upon any such Liquidation, whether voluntary or involuntary, the
assets to be distributed to the holders of the Series A Preferred Stock
shall be insufficient to permit payment of the full amount of the Preferred
Distribution Preference Per Share with respect to each share of Series A
Preferred Stock, then the entire assets of the Corporation to be distributed
among the holders of the Series A Preferred Stock shall be distributed
ratably among such holders.
71
(c) After the payment to the holders of shares of the Series A
Preferred Stock of the full amount of the liquidating distribution to which
they are entitled under this Section (collectively, the "Aggregate Preference
Amount"), an amount equal to the Aggregate Preference Amount shall be
distributed ratably to the holders of Common Stock out of the assets of the
Corporation. After the Payment to the holders of Common Stock of an amount
equal to the Aggregate Preference Amount, the remaining assets of the
Corporation available for distribution to the stock holders shall be
distributed ratably to the holders of Common Stock (treating for purposes
of this calculation all shares of Series A Preferred Stock as having been
converted into Common Stock).
(d) Neither the consolidation, merger or other business combination of
the Corporation with or into any other Person or Persons nor the sale of all
or substantially all the assets of the Corporation shall be deemed to be a
Liquidation for purposes of this Section.
(e) "Preferred Distribution Preference Per
Share" shall mean, with respect to each share of Series A Preferred Stock,
One and no/100 dollars ($1.00).
6. Voting Rights. In addition to any voting rights provided by law, the
holder of each share of Series A Preferred Stock shall be entitled to vote
on all matters and shall be entitled to the number of votes equal to the
number of votes a holder of the shares of Common Stock, whole or fractional,
into which such share of Series A Preferred Stock is convertible pursuant to
Section is entitled to, at the record date for the determination of the
shareholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholder is solicited. In the event the Corporation is not (i) Publicly
Traded prior to December 31, 1999, and (ii) more that 150,000 shares of
Series A Preferred Stock remains outstanding subsequent to January 31, 2000,
then, for so long as at least 100,000 shares of Series A Preferred Stock
remains outstanding, the holders of a majority of Series A Preferred Stock
outstanding shall have the right to elect a majority of the Corporation's
Board of Directors. In such an election, each holder of shares of Series A
Preferred Stock shall be entitled to one vote for each share of Series A
Preferred Stock held and no holder of Series A Preferred Stock shall be
entitled to cumulate his votes by giving one candidate more than one vote
per share.
7. Redemption. In the event that the Corporation's Common Stock is not
Publicly Traded prior to December 31, 1999, the shares of Series A
Preferred Stock shall be subject to mandatory redemption at the election of
the holder of such shares. Upon a redemption election, the holder shall be
entitled to receive from the Corporation a cash amount per share equal to
the Preferred Distribution Preference per share plus accrued dividends if
any. Any redemption payment to be made hereunder shall hereinafter be
referred to as a "Preferred Redemption Payment." If less than all the shares
of the Series A Preferred Stock then outstanding are to be redeemed, the
redemption shall be on a pro rata basis with respect to such shares based
upon the number of outstanding shares of Series A Preferred Stock then owned
by each holder thereof. If, upon a redemption, the assets of the Corporation
available for redemption shall be insufficient to pay the holders of Series
A Preferred Stock the full amounts to which they shall be entitled, the
holders of shares of Series A Preferred
72
Stock shall share ratably in any such redemption according to the respective
amounts which would be payable in respect of shares held by them upon such
redemption if all amounts payable on or with respect to said shares were
paid in full, and the Corporation shall immediately thereafter commence with
a Liquidation. A holder of Series A Preferred Stock shall be entitled to
redemption of such stock pursuant to this section upon the surrender of the
certificate or certificates thereof, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series A Preferred Stock (or
the holder shall notify the Corporation or its transfer agent that such
certificate has been lost, stolen or destroyed, and execute an agreement in
form and substance reasonably satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith), and
shall give written notice to the Corporation at such office that holder
elects to redeem the same. The Corporation, as soon as practicable
thereafter but in no event later than Fifteen (15) days, shall provide
such holder of Series A Preferred Stock with a Preferred Redemption Payment.
B. Blank Check Preferred Stock.
I. Issuance. The blank check preferred stock may be issued from time to
time in one or more series. Subject to the limitations set forth herein and
any limitations prescribed by law, the Board of Directors is expressly
authorized, prior to issuance of any series of blank check preferred stock,
to fix by resolution or resolutions providing for the issue of any series
the number of shares included in such series and the designations, relative
powers, preferences and rights, and the qualifications, limitations or
restrictions of such series. Pursuant to the foregoing general authority
vested in the Board of Directors, but not in limitation of the powers
conferred on the Board of Directors thereby and by the Florida Business
Corporation Act, the Board of Directors is expressly authorized to determine
with respect to each series of blank check preferred stock:
(a) the designation or designations of such series and the number of
shares (which number from time to time may be decreased by the Board of
Directors, but not below the number of such shares then outstanding, or may
be increased by the Board of Directors unless otherwise provided in creating
such series) constituting such series;
(b) the rate or amount and times at which, and the preferences and
conditions under which, dividends shall be payable on shares of such series,
the status of such dividends as cumulative or noncumulative, the date or
dates from which dividends, if cumulative, shall accumulate, and the status
of such shares as participating or nonparticipating after the payment of
dividends as to which such shares are entitled to any preference;
(c) the rights and preferences, if any, of the holders of shares of such
series upon the liquidation, dissolution or winding up of the affairs of,
or upon any distribution of the assets of' the corporation, which amount
may vary depending upon whether such liquidation, dissolution or winding up
is voluntary or involuntary and, if voluntary, may vary at different dates,
and the status of the shares of such series as participating or
nonparticipating after the satisfaction of any such rights and preferences,
(d) the full or limited voting rights, if any, to be provided for shares of
such series, in addition to the voting rights provided by law;
(e) the times, terms and conditions, if any, upon which shares of such
series shall be subject to redemption, including the amount the holders of
shares of such series shall be entitled to receive upon redemption (which
amount may vary under different conditions or at different redemption dates)
and the amount, terms, conditions and manner of operation of any purchase,
retirement or sinking fund to be provided for the shares of such series;
(f) the rights, if any, of holders of shares of such series to convert
such shares into, or to exchange such shares for, share of any other class
or classes or of any other series of the same class, the prices or rates of
conversion or exchange, and adjustments thereto, and any other terms and
conditions applicable to such conversion or exchange;
73
(g) the limitations, if any, applicable while such series is outstanding
on the payment of dividends or making of distributions on, or the
acquisition or redemption of Common Stock or any other class of shares
ranking junior, either as to dividends or upon liquidation, to the shares
of such series;
(h) the conditions or restrictions, if any, upon the issue of any
additional shares (including additional shares of such series or any other
series or of any other class) ranking on a parity with or prior to the
shares of such series either as to dividends or upon liquidation; and
(i) any other relative powers, preferences and participating, optional
or other special right, and the qualifications, limitations or restrictions
thereof' of shares of such series; in each case, so far as not inconsistent
with the provisions of these Amended and Restated Articles of Incorporation
or the Florida Business Corporation Act as then in effect.
ARTICLE SIX
The business and affairs of the Corporation shall be managed by the Board of
Directors consisting of no less than one director. The number of directors
may be increased or decreased from time to time in accordance with the
Bylaws of the Corporation. The election of directors shall be done in
accordance with the Bylaws.
ARTICLE SEVEN
The Corporation shall have perpetual existence.
ARTICLE EIGHT
The Corporation shall indemnify and advance expenses to, and may purchase
and maintain insurance on behalf of, its officers and directors or any
former officer or director, to the fullest extent permitted by law.
74
IN WITNESS WHEREOF, these Amended and Restated Articles of Incorporation
were signed by the Chairman of the Board of Directors of the Corporation
this 30th day of September, 1997.
/s/Douglas R. Dimick/s/,
Chairman of the Board
75
ACTION BY UNANIMOUS WRITTEN CONSENT OF
THE SOLE DIRECTOR OF
DIVERSIFIED MEDICAL HOLDINGS, INC.
IN LIEU OF A SPECIAL MEETING
The undersigned, being the sole Director of Diversified Medical Holdings,
Inc., a Florida corporation (the "Corporation"), hereby makes the following
written statements in lieu of holding a special meeting, pursuant to the
terms of Section 607.0821, Florida Statutes.
WHEREAS, the sole Director of the Corporation believes it to be in the best
interests of the Corporation to issue 300,000 shares of blank check preferred
stock which shall be referred to as "Series A Preferred Stock" (the "Series
A Preferred Stock") in accordance with the terms set forth herein.
NOW, THEREFORE, Be It:
RESOLVED, that the sole Director does hereby approve the issuance of 300,000
shares of Series A Preferred Stock, the terms of which are as follows:
(1) Designation and Number There is hereby designated a series
of Preferred Stock to be known as "Series A Preferred Stock". The number of
shares constituting the Series A Preferred Stock shall be 300,000.
(2) Dividends The Corporation shall not declare or pay any dividend
or make any other distribution to the holders of the Cornmon Stock unless the
holders of the Series A Preferred Stock participate with the holders of the
Common Stock in any such dividend or distribution, and a dividend or
distribution is prior thereto or simultaneously therewith, declared or paid,
as the case may be, to the holders of the Series A Preferred Stock as set
forth in the immediately succeeding sentence. In the case of a dividend or
distribution to the holders of the Common Stock, the holder of each share of
Series A Preferred Stock shall receive the same dividend or distribution
that a holder of the number of shares of Common Stock equal to the
Conversion Ratio would be entitled to receive.
(3) Conversion A holder of shares of Series A Preferred Stock
shall have the right, at such holder's option, at any time or from time to
time to convert any shares of Series A Preferred Stock owned by such holder
into shares of Common Stock on a one-for-one basis (the "Conversion Ratio").
In addition, Each share of Series A Preferred Stock shall automatically be
converted into the number of shares of Common Stock issuable upon the
conversion thereof at the then effective Conversion Ratio upon the
Corporation's Common Stock being Publicly Traded. For purposes of this
designation, the term "Publicly Traded" shall mean from and after the time
the Corporation's Common Stock becomes registered pursuant to the Exchange
Act of 1934. Before any holder of Series A Preferred Stock shall be entitled
to convert such stock into full shares of Common Stock pursuant to this
section, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series A Preferred Stock (or the holder shall notify the
76
Corporation or its transfer agent that such certificate has been lost, stolen
or destroyed and execute an agreement in form and substance reasonably
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection therewith), and shall give written notice to
the Corporation at such office that holder elects to convert the same and
shall state therein holder's name or the name or names of holder's nominees
in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. The Corporation, as soon as practicable thereafter,
shall issue and deliver at such office to such holder of Series A Preferred
Stock, or to such holder's nominee or nominees a certificate or certificates
for the number of shares of Common Stock to which such holder shall be
entitled, together with cash in lieu of any fractional shares. In case the
number of shares of Series A Preferred Stock represented by the certificate
or certificates surrendered exceeds the number of shares converted, the
Corporation shall, upon such conversation, execute and deliver to the
holder, at the expense of the Corporation, a new certificate or certificates
for the number of shares of Series A Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted. Such
conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of Series A
Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon conversion shall at that
time cease to be a holder of the shares of Series A Preferred Stock for any
purpose whatsoever and shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on such date.
(4) Anti-Dilution. The Conversion Ratio shall be subject to adjustment
from time to time upon the happening of certain events as provided in this
section as follows:
(a) In case the Corporation shall at any time or from time to time after
the date hereof (i) pay any dividend, or make any distribution, on the
outstanding shares of Common Stock (or Common Stock Equivalents) in shares
of Common Stock, (ii) subdivide the outstanding shares of Common Stock, (iii)
combine the outstanding shares of Common Stock into a smaller number of
shares or (iv) issue by reclassification of the shares of Common Stock any
shares of capital stock of the Corporation, then and in each such case, the
Conversion Ration in effect immediately prior to such event or the record
date therefor, whichever is earlier, shall be adjusted so that the holder
shall be entitled to receive the number and type of shares of Common Stock
which such holder would have owned or have been entitled to receive after
the happening of any of the events described above, had such holder's Series
A Preferred Stock been converted into Common Stock immediately prior to the
happening of such event or the record date therefor, whichever is earlier.
An adjustment made pursuant to this Section shall become effective (x) in
the case of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares of
Common Stock entitled to receive such dividend or distribution, or (y) in
the case of such subdivision, reclassification or combination, at the close
of business on the day upon which such corporate action becomes effective.
(b) Except with respect to Excluded Securities (as defined below), in
case the Corporation shall issue any shares of Common Stock (or Common Stock
Equivalents) after the date hereof at a consideration per share (or having a
conversion price per share) less than $1.00 per share, then in each such
case, the Conversion Ratio shall be adjusted by multiplying (i) the
77
Conversion Ratio in effect on the day immediately prior to the date of
issuance of such shares (or Common Stock Equivalents) by (ii) a fraction,
the numerator of which shall be the sum of (x) the number of shares of
Common Stock outstanding on such date prior to such issuance and (y) the
number of shares of Common Stock convertible at the then current Conversion
Ratio with the aggregate consideration receivable by the Corporation for the
total number of shares of Common Stock so issued (or issuable upon conversion,
exchange or exercise of such Common Stock Equivalents), and the denominator
of which shall be the sum of (x) the number of shares of Common Stock
outstanding on such date prior to such issuance and (y) the number of
additional shares of Common Stock issued (or issuable upon conversion,
exchange or exercise of such Common Stock Equivalents.) An adjustment made
pursuant to this Section shall be made on the next Business Day following
the date on which any such issuance is made and shall be effective
retroactively to the close of business on the date of such issuance. For
purposes of this Section, the aggregate consideration receivable by the
Corporation in connection with the issuance of shares of Common Stock or of
Common Stock Equivalents shall be deemed to be equal to the sum of the
aggregate offering price (the aggregate consideration received by the
Corporation in connection with the issuance of all such Common Stock and/or
Common Stock Equivalents before deduction of underwriting discounts or
commissions and expenses payable to third parties, if any) of all such
Common Stock and/or Common Stock Equivalents plus the minimum aggregate
amount, if any, payable upon conversion, exchange or exercise of any such
Common Stock Equivalents. The issuance or reissuance of any shares of Common
Stock (whether treasury shares or newly issued shares) pursuant to a dividend
or distribution on, or subdivision, combination or reclassification of, the
outstanding shares of Common Stock requiring an adjustment in the Conversion
Ratio pursuant to Section (a) above shall not be deemed to constitute an
issuance of Common Stock or Common Stock Equivalents by the Corporation to
which this Section applies. Upon the expiration of any unconverted, unexchanged
or unexercised Common Stock Equivalents for which an adjustment has been made
pursuant to this Section, the adjustments shall forthwith be reversed to
effect such Conversion Ratio as would have been in effect if at the time of
such Common Stock Equivalents, to the extent outstanding immediately prior
to such expiration or termination, had never been issued. Excluded Securities
shall mean (i) all shares of Common Stock or Common Stock Equivalents issued
and outstanding upon the date on which shares of Series A Preferred Stock are
first issued, (ii) 500,000 shares of Common Stock options and/or warrants
issuable pursuant to a Stock Incentive Plan to be adopted by the Board of
Directors of the Corporation, and (iii) warrants to purchase up to 200,000
shares of Common Stock exercisable at $.30 per share.
(c) For purposes of Subsections (a) through (d) of this Section, the
number of shares of Common Stock at any time outstanding shall mean the
aggregate of all shares of Common Stock then outstanding (other than any
shares of Common Stock then owned or held by or for the account of the
Corporation) treating for purposes of this calculation all Common Stock
Equivalents as having been converted, exchanged or exercised.
(d) If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution and shall thereafter, and before such dividend or distribution
is paid or delivered to stockholders entitled thereto, legally abandon
its plan to pay or deliver such dividend or distribution, then no
78
adjustment in the Conversion Ratio then in effect shall be made by reason of
the taking of such record, and any such adjustment previously made as a
result of the taking of such record shall be reversed.
(e) As used in this Section, the term "Common Stock" shall mean and
include the Corporation's authorized Common Stock, par value $.00l per share,
as constituted on the date hereof, and shall also include any capital stock
of any class of the Corporation thereafter authorized which shall neither be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends nor be entitled to a preference in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.
(f) In the case of a Sale of the Corporation or a proposed reorganization
of the Corporation or a proposed reclassification of the capital stock of
the Corporation (except a transaction for which provision for adjustment is
otherwise made in this Section), the Warrant shall thereafter be exercisable
into the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon exercise of such Warrant would have been entitled upon such
Sale of the Corporation, reorganization or reclassification; and, in every
such case, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of the provisions herein set forth with
respect to the rights and interest thereafter of the holders of the Series
A Preferred Stock, to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the applicable
Conversion Ratio) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of Series A Preferred Stock. The Corporation
shall not effect any such Sale of the Corporation unless prior to or
simultaneously with the consummation thereof the successor Corporation or
purchaser, as the case may be, shall assume by written instrument the
obligation to deliver to the holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, each such holder is
entitled to receive.
(g) Whenever the Conversion Ratio is adjusted as herein provided, the
Corporation shall prepare and deliver forthwith to the holder a certificate
signed by its President or a Vice President, or by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary,
setting forth the adjusted Conversion after such adjustment, setting forth
a brief statement of the facts requiring such adjustment and setting forth
the computation by which adjustment was made.
(5) Liquidation, Dissolution or Winding Up.
(a) Upon the voluntary or involuntary dissolution, liquidation or
winding up (each, a "Liquidation") of the Corporation, the holders of the
shares of the Series A Preferred Stock shall be entitled to receive and to
be paid out of the assets of the Corporation available for distribution
to its stockholders the Preferred Distribution Preference Per Share (as
defined below) with respect to each outstanding share of Series A Preferred
Stock.
(b) If upon any such Liquidation, whether voluntary or involuntary, the
assets to be distributed to the holders of the Series A Preferred Stock
shall be insufficient to permit payment of the full amount of the Preferred
79
Distribution Preference Per Share with respect to each share of Series A
Preferred Stock, then the entire assets of the Corporation to be distributed
among the holders of the Series A Preferred Stock shall be distributed
ratably among such holders.
(c) After the payment to the holders of shares of the Series A Preferred
Stock of the flill amount of the liquidating distribution to which they are
entitled under this Section (collectively, the "Aggregate Preference Amount"),
an amount equal to the Aggregate Preference Amount shall be distributed
ratably to the holders of Common Stock out of the assets of the Corporation.
After the Payment to the holders of Common Stock of an amount equal to the
Aggregate Preference Amount, the remaining assets of the Corporation
available for distribution to the stock holders shall be distributed ratably
to the holders of Common Stock (treating for purposes of this calculation
all shares of Series A Preferred Stock as having been converted into
Common Stock).
(d) Neither the consolidation, merger or other business combination of
the Corporation with or into any other Person or Persons nor the sale of all
or substantially all the assets of the Corporation shall be deemed to be a
Liquidation for purposes of this Section.
(e) "Preferred Distribution Preference Per Share" shall mean, with
respect to each share of Series A Preferred Stock, One and no/100 dollars
($1.00).
(6) Voting Rights. In addition to any voting rights provided by law,
the holder of each share of Series A Preferred Stock shall be entitled to
vote on all matters and shall be entitled to the number of votes equal to
the number of votes a holder of the shares of Common Stock, whole or
fractional, into which such share of Series A Preferred Stock is convertible
pursuant to Section is entitled to, at the record date for the determination
of the shareholders entitled to vote on such matters or, if no such record
date is established, at the date such vote is taken or any written
consent of shareholder is solicited. In the event the Corporation is not (i)
Publicly Traded prior to December 31, 1999, and (ii) more that 150,000
shares of Series A Preferred Stock remains outstanding subsequent to January
31, 2000, then, for so long as at least 100,000 shares of Series
A Preferred Stock remains outstanding, the holders of a majority of Series
A Preferred Stock outstanding shall have the right to elect a majority of
the Corporation's Board of Directors. In such an election, each holder of
shares of Series A Preferred Stock shall be entitled to one vote for each
share of Series A Preferred Stock held and no holder of Series A Preferred
Stock shall be entitled to cumulate his votes by giving one candidate more
than one vote per share.
(7) Redemption. In the event that the Corporation's Common Stock is
not Publicly Traded prior to December 31, 1999, the shares of Series A
Preferred Stock shall be subject to mandatory redemption at the election of
the holder of such shares. Upon a redemption election, the holder shall be
entitled to receive from the Corporation a cash amount per share equal to
the Preferred Distribution Preference per share plus accrued dividends, if
any. Any redemption payment to be made hereunder shall hereinafter be
referred to as a "Preferred Redemption Payment." If less than all the shares
of the Series A Preferred Stock then outstanding are to be redeemed, the
redemption shall be on a pro rata basis with respect to such shares based
upon the number of outstanding shares of Series A Preferred Stock then owned
by each holder thereof. If; upon a redemption, the assets of the Corporation
80
available for redemption shall be insufficient to pay the holders of Series
A Preferred Stock the full amounts to which they shall be entitled, the
holders of shares of Series A Preferred Stock shall share ratably in any
such redemption according to the respective amounts which would be payable
in respect of shares held by them upon such redemption if all amounts
payable on or with respect to said shares were paid in full, and
the Corporation shall immediately thereafter commence with a Liquidation. A
holder of Series A Preferred Stock shall be entitled to redemption of such
stock pursuant to this section upon the surrender of the certificate or
certificates thereof; duly endorsed, at the office of the Corporation
or of any transfer agent for the Series A Preferred Stock (or the holder
shall notify the Corporation or its transfer agent that such certificate
has been lost, stolen or destroyed, and execute an agreement in form and
substance reasonably satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection therewith), and
shall give written notice to the Corporation at such office that holder
elects to redeem the same. The Corporation, as soon as practicable
thereafter but in no event later than Fifteen (15) days, shall provide
such holder of Series A Preferred Stock with a Preferred Redemption Payment.
FINALLY RESOLVED, that the proper officers are hereby authorized to take
any actions and do any and all other things necessary or appropriate in
order to implement the foregoing Resolution.
Dated: September 30, 1997
/s/Douglas R. Dimick,/s/ Sole Director
81
CORPORATE CREATIONS
941 Fourth Street #200 Tel (305) 672-0686
Miami Beach, FL 33139 Fax (305)672-9110
Apri1 22, 1999
Thomas Simmons
P.O. Box 16546
West Palm Beach, Fl 33416
Please find enclosed the Amended and Restated Articles of Incorporation a
long with stock certificates for preferred and common stock.
Thank you very much for choosing our services.
Sincere1y,
/s/Todd Hardy/s/
Todd Hardy
Vice President
www.corpcreations.com
todd@corpcreations.com
82
FLORIDA DEPARTMENT OF STATE
Katherine Harris
Secretary of State
April 19, 1999
INETBOARD, INC.
PO BOX 16546
WEST PALM BEACH, FL 33416
Re: Document Number P97000013637
The Amended and Restated Articles of Incorporation for DIVERSIFIED
MEDICAL HOLDINGS, INC. which changed its name to INETBOARD, INC., a
Florida corporation, were filed on April 16, 1999.
This document was electronically received and filed under FAX audit number
H 99000008877.
Should you have any questions concerning this matter, please
telephone (650) 487-6050, the Amendment Filing Section.
/s/Darlene Connell/s/
Darlene Connell
Corporate Specialist
Division of Corporations Letter Number: 899A00020146
83
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
These Amended and Restated Articles of Incorporation were
adopted effective by the Corporation's Board of Directors and shareholders
pursuant to section 607.1007, Florida Statutes. Each amendment set forth in
these Amended and Restated Articles of Incorporation was approved by the
shareholders by a vote sufficient for approval of the amendment. These
Amended and Restated Articles of Incorporation supersede the original
Articles of Incorporation, as amended.
Article I Name
If no old name is listed below, the name of this Florida corporation has not
been changed. If the current/new name listed below differs from the old name,
the current/new name will become effective upon the filing of this document.
Current/New Name: iNetboard, Inc.
Old Name: Diversified Medical Holdings, Inc.
Article II. Address
The mailing address of the Corporation is:
iNetboard, Inc.
P.O. Box 16546
West Palm Beach FL 33416
Article III. Board of Directors
The name of each member of the Corporation's Board of Directors is:
Douglas R. Dimick
The affairs of the Corporation shall be managed by a Board of Directors
consisting of no less than one director. The number of directors may be
increased or decreased from time to time in accordance with the Bylaws of the
Corporation. The election of directors shall be done in accordance with the
Bylaws. The directors shall be protected from personal liability to the
fullest extent permitted by applicable law.
Corporate Creations International Inc.
941 Fourth Street #200
Miami Beach FL 33139
(305) 672-0686
84
Article IV Capital Stock
The Corporation shall have the authority to issue 20,000,000 shares of
common stock, par value $.001 per share. In addition, the Corporation shall
have the authority to issue 2,000,000 shares of preferred stock, par value
$.001 per share, which may be divided into series and with the preferences,
limitations and relative rights determined by the Board of Directors.
Article V. Registered Agent
The name and address of the registered agent of the Corporation is:
Thomas V. Simmons, Jr.
668 Fergusson Lane
West Palm Beach FL 33415
Article VI. Corporate Existence
The corporate existence of the Corporation will begin effective upon the
filing date of the original Articles of Incorporation.
The undersigned executed these Amended and Restated Articles of
Incorporation on the date shown below.
Diversified Medical Holdings, Inc. iNetboard, Inc.
By: /s/Douglas R. Dimick/s/
Name: Douglas R. Dimick
Title: President
Date: 15 April 99
Corporate Creations International Inc.
941 Fourth Street #200
Miami Beach FL 33139
(305) 672-0686
85
CERTIFICATE OF DESIGN
ON REGISTERED AGENT/OFFICE
CORPORATION
iNetboard, Inc.
REGISTERED AGENT/OFFICE:
Thomas V. Simmons, Jr.
668 Fergusson Lane
West Palm Beach FL 33415
I agree to act as registered agent to accept service of process for the
corporation named above at the place designated in this Certificate. I agree
to comply with the provisions of all statutes relating to the proper and
complete performance of the registered agent duties. I am familiar with
and accept the obligations of the registered agent position.
/s/Thomas V. Simmons, Jr./s/
Date: April 15, 1999
Corporate Creations International Inc.
941 Fourth Street #200
Miami Beach FL 33139
(305) 672-0886
86
Bylaws
of
Diversified Medical Holdings, Inc.
ARTICLE I. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or under
the authority of the Board of Directors. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors.
Directors must be natural persons who are at least 18 years of age but need
not be shareholders of the Corporation. Residents of any state may be
directors.
Section 2. Compensation. The shareholders shall have authority to fix
the compensation of directors. Unless specifically authorized by a
resolution of the shareholders, the directors shall serve in such capacity
without compensation.
Section 3. Presumption of Assent. A director who is present at a meeting
of the Board of Directors or a committee of the Board of Directors at which
action on any corporate matter is taken shall be presumed to have assented
to the action taken unless he objects at the beginning of the meeting (or
promptly upon arriving) to the holding of the meeting or transacting the
specified business at the meeting, or if the director votes against the
action taken or abstains from voting because of an asserted conflict of
interest.
Section 4. Number. The Corporation shall have at least the minimum number
of directors required by law. The number of directors may be increased or
decreased from time to time by the Board of Directors.
Section 5. Election and Term. At each annual meeting of shareholders, the
shareholders shall elect directors to hold office until the next annual
meeting or until their earlier resignation, removal from office or death.
Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
Section 6. Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may
be filled by the shareholders or by the affirmative vote of a majority of
the remaining directors though less than a quorum of the Board of Directors.
A director elected to fill a vacancy shall hold office only until the next
election of directors by the shareholders. If there are no remaining
directors, the vacancy shall be filled by the shareholders.
87
Section 7. Removal of Directors. At a meeting of shareholders, any
director or the entire Board of Directors may be removed, with or without
cause, provided the notice of the meeting states that one of the purposes of
the meeting is the removal of the director. A director may be removed only
if the number of votes cast to remove him exceeds the number of votes
cast against removal.
Section 8. Quorum and Voting. A majority of the number of directors fixed
by these Bylaws shall constitute a quorum for the transaction of business.
The act of a majority of directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 9. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may
designate from among its members one or more committees each of which must
have at least two members. Each committee shall have the authority set
forth in the resolution designating the committee.
Section 10. Place of Meeting. Regular and special meetings of the Board
of Directors shall be held at the principal place of business of the
Corporation or at another place designated by the person or persons giving
notice or otherwise calling the meeting.
Section 11. Time. Notice and Call of Meetings. Regular meetings of the
Board of Directors shall be held without notice at the time and on the date
designated by resolution of the Board of Directors. Written notice of the
time, date and place of special meetings of the Board of Directors shall be
given to each director by mail delivery at least two days before the meeting.
Notice of a meeting of the Board of Directors need not be given to a director
who signs a waiver of notice either before or after the meeting. Attendance
of a director at a meeting constitutes a waiver of notice of that meeting
and waiver of all objections to the place of the meeting, the time of the
meeting, and the manner in which it has been called or convened, unless a
director objects to the transaction of business (promptly upon arrival at
the meeting) because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors must be specified in
the notice or waiver of notice of the meeting.
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place.
Notice of an adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place
88
of the adjourned meeting are announced at the time of the adjournment, to
the other directors. Meetings of the Board of Directors may be called by the
President or the Chairman of the Board of Directors. Members of the Board
of Directors and any committee of the Board may participate in a meeting by
telephone conference or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Participation by these means constitutes presence in person at a meeting.
Section 12. Action By Written Consent. Any action required or permitted
to be taken at a meeting of directors may be taken without a meeting if a
consent in writing setting forth the action to be taken and signed by all of
the directors is filed in the minutes of the proceedings of the Board. The
action taken shall be deemed effective when the last director signs the
consent, unless the consent specifies otherwise.
ARTICLE II. MEETING OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of the
corporation for the election of officers and for such other business as may
properly come before the meeting shall be held at such time and place as
designated by the Board of Directors.
Section 2. Special Meeting. Special meetings of the shareholders shall be
held when directed by the President or when requested in writing by
shareholders holding at least 10% of the Corporation's stock having the
right and entitled to vote at such meeting. A meeting requested by
shareholders shall be called by the President for a date not less than 10
nor more than 60 days after the request is made. Only business within the
purposes described in the meeting notice may be conducted at a special
shareholders' meeting.
Section 3. Place. Meetings of the shareholders will be held at the
principal place of business of the Corporation or at such other place as is
designated by the Board of Directors.
Section 4. Notice. A written notice of each meeting of shareholders shall
be mailed to each shareholder having the right and entitled to vote at the
meeting at the address as it appears on the records of the Corporation. The
meeting notice shall be mailed not less than 10 nor more than 60 days before
the date set for the meeting. The record date for determining shareholders
entitled to vote at the meeting will be the close of business on the day
before the notice is sent. The notice shall state the time and place the
meeting is to be held. A notice of a special meeting shall also state the
purposes of the meeting. A notice of meeting shall be sufficient for that
meeting and any adjournment of it. If a shareholder transfers any shares
after the notice is sent, it shall not be necessary to notify the transferee.
All shareholders may waive notice of a meeting at any time.
89
Section 5. Shareholder Quorum A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. Any number of shareholders, even if less than a quorum, may
adjourn the meeting without further notice until a quorum is obtained.
Section 6. Shareholder Voting. If a quorum is present, the affirmative
vote of a majority of the shares represented at the meeting and entitled to
vote on the subject matter shall be the act of the shareholders. Each
outstanding share shall be entitled to one vote on each matter submitted to
a vote at a meeting of shareholders. An alphabetical list of all
shareholders who are entitled to notice of a shareholders' meeting along
with their addresses and the number of shares held by each shall be produced
at a shareholders' meeting upon the request of any shareholder.
Section 7. Proxies. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy
executed in writing and signed by the shareholder or his attorney-in-fact.
The appointment of proxy will be effective when received by the Corporation's
officer or agent authorized to tabulate votes. No proxy shall be valid more
than 11 months after the date of its execution unless a longer term is
expressly stated in the proxy.
Section 8. Validation. If shareholders who hold a majority of the voting
stock entitled to vote at a meeting are present at the meeting, and sign a
written consent to the meeting on the record, the acts of the meeting shall
be valid, even if the meeting was not legally called and noticed.
Section 9. Conduct of Business Bv Written Consent. Any action of the
shareholders may be taken without a meeting if written consents, setting
forth the action taken, are signed by at least a majority of shares entitled
to vote and are delivered to the officer or agent of the Corporation
having custody of the Corporation's records within 60 days after the date
that the earliest written consent was delivered. Within 10 days after
obtaining an authorization of an action by written consent, notice shall be
given to those shareholders who have not consented in writing or who
are not entitled to vote on the action. The notice shall fairly summarize
the material features of the authorized action. If the action creates
dissenters' rights, the notice shall contain a clear statement of the right
of dissenting shareholders to be paid the fair value of their shares upon
compliance with and as provided for by the state law governing corporations.
ARTICLE III. OFFICERS
Section 1. Officers; Election; Resignation; Vacancies. The Corporation
shall have the officers and assistant officers that the Board of Directors
90
appoint from time to time. Except as otherwise provided in an employment
agreement which the Corporation has with an officer, each officer
shall serve until a successor is chosen by the directors at a regular or
special meeting of the directors or until removed. Officers and agents
shall be chosen, serve for the terms, and have the duties determined by the
directors. A person may hold two or more offices.
Any officer may resign at any time upon written notice to the Corporation.
The resignation shall be effective upon receipt, unless the notice specifies
a later date. If the resignation is effective at a later date and the
Corporation accepts the future effective date, the Board of Directors may
fill the pending vacancy before the effective date provided the successor
officer does not take office until the future effective date. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the
Board of Directors at any regular or special meeting.
Section 2. Powers and Duties of Officers. The officers of the Corporation
shall have such powers and duties in the management of the Corporation as
may be prescribed by the Board of Directors and, to the extent not so
provided, as generally pertain to their respective offices, subject to the
control of the Board of Directors.
Section 3. Removal of Officers. An officer or agent or member of a
committee elected or appointed by the Board of Directors may be removed by
the Board with or without cause whenever in its judgment the best interests
of the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer, agent or member of a committee shall
not of itself create contract rights. Any officer, if appointed by another
officer, may be removed by that officer.
Section 4. Salaries. The Board of Directors may cause the Corporation to
enter into employment agreements with any officer of the Corporation. Unless
provided for in an employment agreement between the Corporation and an
officer, all officers of the Corporation serve in their capacities without
compensation.
Section 5. Bank Accounts. The Corporation shall have accounts with
financial institutions as determined by the Board of Directors.
ARTICLE IV DISTRIBUTIONS
The Board of Directors may, from time to time, declare distributions to its
91
shareholders in cash property, or its own shares, unless the distribution
would cause (i) the Corporation to be unable to pay its debts as they become
due in the usual course of business, or (ii) the Corporation's assets to be
less than its liabilities plus the amount necessary, if the Corporation
were dissolved at the time of the distribution, to satisfy the preferential
rights of shareholders whose rights are superior to those receiving the
distribution. The shareholders and the Corporation may enter into
an agreement requiring the distribution of corporate profits, subject to the
provisions of law.
ARTICLE V CORPORATE RECORDS
Section 1. Corporate Records. The corporation shall maintain its records
in written form or in another form capable of conversion into written form
within a reasonable time. The Corporation shall keep as permanent records
minutes of all meetings of its shareholders and Board of Directors, a record
of all actions taken by the shareholders or Board of Directors without a
meeting, and a record of all actions taken by a committee of the Board of
Directors on behalf of the Corporation. The Corporation shall maintain
accurate accounting records and a record of its shareholders in a form that
permits preparation of a list of the names and addresses of all shareholders
in alphabetical order by class of shares showing the number and series of
shares held by each.
The Corporation shall keep a copy of its articles or restated articles of
incorporation and all amendments to them currently in effect; these Bylaws
or restated Bylaws and all amendments currently in effect; resolutions
adopted by the Board of Directors creating one or more classes or series of
shares and fixing their relative rights, preferences, and limitations, if
shares issued pursuant to those resolutions are outstanding; the minutes of
all shareholders' meetings and records of all actions taken by shareholders
without a meeting for the past three years; written communications to all
shareholders generally or all shareholders of a class of series within the
past three years, including the financial statements furnished for the last
three years; a list of names and business street addresses of its current
directors and officers; and its most recent annual report delivered to the
Department of State.
Section 2. Shareholders' Inspection Rights. A shareholder is entitled to
inspect and copy, during regular business hours at a reasonable location
specified by the Corporation, any books and records of the Corporation. The
shareholder must give the Corporation written notice of this demand at least
five business days before the date on which he wishes to inspect and copy
the record(s). The demand must be made in good faith and for a proper
purpose. The shareholder must describe with reasonable particularity the
purpose and the records he desires to inspect, and the records must be
92
directly connected with this purpose. This Section does not affect the
right of a shareholder to inspect and copy the shareholders' list described
in this Article if the shareholder is in litigation with the Corporation.
In such a case, the shareholder shall have the same rights as any other
litigant to compel the production of corporate records for examination.
The Corporation may deny any demand for inspection if the demand was made
for an improper purpose, or if the demanding shareholder has within the two
years preceding his demand, sold or offered for sale any list of shareholders
of the Corporation or of any other corporation, has aided or abetted any
person in procuring any list of shareholders for that purpose, or has
improperly used any information secured through any prior examination of the
records of this Corporation or any other corporation.
Section 3. Financial Statements for Shareholders. Unless modified by
resolution of the shareholders within 120 days after the close of each
fiscal year, the Corporation shall furnish its shareholders with annual
financial statements which may be consolidated or combined statements of the
Corporation and one or more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the fiscal year, an income
statement for that year, and a statement of cash flows for that year. If
financial statements are prepared for the Corporation on the basis
of generally accepted accounting principles, the annual financial statements
must also be prepared on that basis.
If the annual financial statements are reported upon by a public accountant,
his report must accompany them. If not, the statements must be accompanied
by a statement of the President or the person responsible for the
Corporation's accounting records stating his reasonable belief whether the
statements were prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation and describing
any respects in which the statements were not prepared on a basis of
accounting consistent with the statements prepared for the preceding year.
The Corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within
such additional time thereafter as is reasonably necessary to enable the
Corporation to prepare its financial statements. Thereafter, on written
request from a shareholder who was not mailed the statements, the Corporation
shall mail him the latest annual financial statements.
Section 4. Other Reports to Shareholders. If the Corporation indemnifies
or advances expenses to any director, officer, employee or agent otherwise
than by court order or action by the shareholders or by an insurance carrier
93
pursuant to insurance maintained by the Corporation, the Corporation shall
report the indemnification or advance in writing to the shareholders with
or before the notice of the next annual shareholders' meeting, or prior to
the meeting if the indemnification or advance occurs after the giving of
the notice but prior to the time the annual meeting is held. This report
shall include a statement specifying the persons paid, the amounts
paid, and the nature and status at the time of such payment of the
litigation or threatened litigation.
It the Corporation issues or authorizes the issuance of shares for promises
to render services in the future, the Corporation shall report in writing to
the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice
of the next shareholders' meeting.
ARTICLE VI STOCK CERTIFICATES
Section 1. Issuance. The Board of Directors may authorize the issuance of
some or all of the shares of any or all of its classes or series without
certificates. Each certificate issued shall be signed by the President and
the Secretary (or the Treasurer). The rights and obligations of
shareholders are identical whether or not their shares are represented by
certificates.
Section 2. Registered Shareholders. No certificate shall be issued for
any share until the share is fully paid. The Corporation shall be entitled
to treat the holder of record of shares as the holder in fact and, except as
otherwise provided by law, shall not be bound to recognize any equitable or
other claim to or interest in the shares.
Section 3. Transfer of Shares. Shares of the Corporation shall be
transferred on its books only after the surrender to the Corporation of the
share certificates duly endorsed by the holder of record or attorney-in-fact.
If the surrendered certificates are canceled, new certificates shall be
issued to the person entitled to them, and the transaction recorded on the
books of the Corporation.
Section 4. Lost Stolen or Destroyed Certificates. If a shareholder
claims to have lost or destroyed a certificate of shares issued by the
Corporation, a new certificate shall be issued upon the delivery to the
Corporation of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed, and, at the discretion
of the Board of Directors, upon the deposit of a bond or other indemnity as
the Board reasonably requires.
94
ARTICLE VII INDEMNIFICATION
Section 1. Right to Indemnification. The Corporation hereby indemnifies
each person (including the heirs, executors, administrators, or estate of
such person) who is or was a director or officer of the Corporation to the
fullest extent permitted or authorized by current or future legislation or
judicial or administrative decision against all fines, liabilities, costs
and expenses, including attorneys fees, arising out of his or her status as
a director, officer, agent, employee or representative. The foregoing right
of indemnification shall not be exclusive of other rights to which those
seeking an indemnification may be entitled. The Corporation may maintain
insurance, at its expense, to protect itself and all officers and directors
against fines, liabilities, costs and expenses, whether or not the
Corporation would have the legal power to indemnify them directly against
such liability.
Section 2. Advances. Costs, charges, and expenses (including attorneys'
fees) incurred by a person referred to in Section 1 of this Article in
defending a civil or criminal proceeding shall be paid by the Corporation in
advance of the final disposition thereof upon receipt of an undertaking
to repay all amounts advanced if it is ultimately determined that the person
is not entitled to be indemnified by the Corporation as authorized by this
Article, and upon satisfaction of other conditions required by current or
future legislation.
Section 3. Savings Clause. If this Article or any portion of it is
invalidated on any ground by a court of competent jurisdiction, the
Corporation nevertheless indemnifies each person described in Section 1 of
this Article to the fullest extent permitted by all portions of this Article
that have not been invalidated and to the fullest extent permitted by law.
ARTICLE VIII. AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws adopted,
by a majority vote of the directors or by a vote of the shareholders holding
a majority of the shares.
I certify that these are the Bylaws adopted by the Board of Directors of the
Corporation.
/s/ Thomas V. Simmons, Jr./s/
Secretary
Date: 11 FEB 97
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EXHIBIT 5.1
Opinion of Selling Stockholders' Counsel
November 30, 1999
Securities and Exchange Commission
Washington, D.C. 20549
RE: eKOMART.COM, INC.
Registration Number: 000-1100399
Gentlemen:
This opinion is given in connection with the filing of a Registration
Statement on Form SB-2 by eKomart.com, Inc., registration number 000-1100399
(the "Registration Statement"), filed with the United States Securities and
Exchange Commission, as it pertains to 1,500,000 currently outstanding
shares in the common stock of eKomart.com, Inc. (the "Company"), with par
value of $0.001 per share held by Selling Stockholders(as defined in the said
Registration Statement, as described in the Registration Statement. This
opinion is also given with respect to 2,000,000 shares in the common stock of
the Company, to be issued from treasury as described in the said Registration
Statement.
Certain terms used in this opinion characterized by initial capital
letters have the meaning set forth in the Prospectus which constitutes a
portion of the Registration.
We have examined the originals and copies of corporate instruments,
certificates and other documents of the Company and interviewed represent-
atives of the Company to the extent we deemed it necessary, in order to
form the basis for the opinion hereinafter set forth.
In such examination we have assumed the genuineness of all signatures
and authenticity of all documents submitted to us as certified or photostatic
copies. As to all questions of fact material to this opinion which have
not been independently established, we have relied upon statements or
certificates of officers or representatives of the Company.
According to the records maintained by the Company, there were, as of
the date of this opinion, 20,000,000 shares of common stock authorized, with
a par value of $0.001 each, of which 8,500,000 shares of common stock were
issued.
Based upon the foregoing, we are of the opinion that:
The 8,500,000 shares of Common Stock of the Company heretofore issued
are fully paid and non- assessable and there is no personal liability to the
owners thereof.
The 2,000,000 shares of Common Stock of the Company to be sold to the
public will, upon issuance thereof and payment in full thereof, be fully paid
and non-assessable and with no personal liability to the owners thereof.
This law firm hereby consents to the filing of this opinion as an
exhibit to the Registration Statement; however, this opinion is limited to
the facts set forth herein and is not to be interpreted as an opinion that
the Registration Statement has been properly prepared, or provides all
required disclosure.
Very truly yours,
/s/Bernabe Diaz/s/
Bernabe Diaz, Esq.
Corporate Counsel for the Company
71 Stony Hill Rd., 2nd Flr.
Bethel CT 06801
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Operating Agreement
of
Denver-Cal Market, LLC.
(The Corporation)
Dated: March 1, 1999.
Article I
Offices
Section 1. Principal Office: The principal office of the Corporation shall be
located at 2000 South Havana St., Aurora, Colorado 80014.
Section 2. Additional Offices: The Corporation may have such additional
offices at such other place within or without the State of Colorado as the
Members may from time to time determine or as the business of the Corporation
may require.
Article II
Meetings
Section 1. Annual Meeting: An annual meeting of Members shall be held within
five (5) months alter the close of the fiscal year of the Corporation on such
date and at the time and place as shall be fixed by the Members. At the
annual meeting the Members shall elect an Operating Manager and other
officers and transact such other business as may properly be brought before
the meeting.
Section 2. Special Meeting: A special meeting of Members may be called at
any time by the Operating Manager and shall be called by the Operating
Manager at the request in writing of a majority of the Members entitled to
vote at such meeting. Any such request shall state the purpose or purposes
of the proposed meeting. Business transacted at any special meeting of
Members shall be confined to the purposes set forth in the notice thereof.
Special meetings may be held by telephonic Conference Call, provided all
Members agree to the said Meeting by telephonic Conference Call in writing,
and attest to any resolutions passed at the said meeting in writing.
Section 3. Notice of Meetings: Written notice of the time, place and purpose
of every meeting of Members (and, if other than an annual meeting, the
person or persons at whose discretion the meeting is being called), shall be
given by the Operating Manager to each Member of record entitled to vote at
such meeting, not less than five nor more than fifty days prior to the date
set for the meeting. Notice shall be given either personally or by mailing
said notice by first class mail to each Member at his address appearing on
the record book of the Corporation or at such other address supplied by him
in writing to the Operating Manager of the Corporation for the purpose of
receiving notice.
97
A written waiver of notice setting forth the purposes of the meeting for
which notice is waived, signed by the person or persons entitled to such
notice, whether before or alter the time of the meeting stated therein,
shall be deemed equivalent to the giving of such notice. The attendance by a
Member at a meeting either in person or by proxy without protesting the lack
of notice thereof shall constitute a waiver of notice of such Member.
All notices given with respect to an original meeting shall extend to any
and all adjournments thereof and such business as might have been transacted
at the original meeting may be transacted at any adjournment thereof; no
notice of any adjourned meeting need be given if an announcement of the
time and place of the adjourned meeting is made at the original meeting.
Section 4. Quorum: The holders of at least 70% in interest of the Members
present in person or represented in proxy, shall be requisite and shall
constitute a quorum at all meetings, of members except as otherwise provided
by statute or the Articles of Organization. A Members Interest in the
Corporation shall be in proportion to his contribution to the capital of the
Corporation adjusted from time to time to reflect additions or withdrawals.
The phrase "at least 70% in interest" of the Members shall mean Members who,
in the aggregate, shall have Capital Contributions in excess of seventy
(70%) percent of the total Capital Contributions of all of the Members. If,
however, a quorum shall not be present or represented at any meeting of
Members, the Members entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally notified when a quorum is
once present to organize a meeting, such quorum is not deemed broken by the
subsequent withdrawal of any Members.
Section 5. Voting: Every Member entitled to vote at any meeting shall be
entitled to vote in accordance with his Interest in the Corporation held by
him of record on the date fixed as the record date for said meeting and may
so vote in person or by proxy. Any Corporation action shall be authorized by
a majority in interest of the votes cast by the Members entitled to vote
thereon except as may otherwise by provided by statute, the Articles of
Organization or this Operating Agreement.
Section 6. Proxies: Every proxy must be signed by the Members entitled to
vote or by his duly authorized attorney-in-fact and shall be valid only if
filed with the Operating Manager of the Corporation prior to the commencement
of voting on the matter in regard to which said proxy is to be voted. No
proxy shall be valid after the expiration of eleven months from the date of
its execution unless otherwise expressly provided in the proxy. Every proxy
shall be revocable at the pleasure of the person executing it except as
otherwise provided by statute. Unless the proxy by its terms provided for a
specific revocation date and except as otherwise provided by statute,
revocation of a proxy shall not be effective unless and until such revocation
is executed in writing by the Member who executed such proxy and the
revocation is filed with the Operating Manager of the Corporation prior to
the voting of the proxy.
Section 7. Minutes of Meetings: Minutes of the Corporation's last meeting,
and the resolutions passed thereat, shall be prepared for every meeting of
Members and shall be produced by the Operating Manager thereat. Annual
statements reflecting the financial status of the Corporation shall be
distributed to all members no later than 45 days after the end of every
fiscal year, and at least 30 days before any annual meeting. Minutes of any
Meeting shall be prepared by the Operating Manager and sent to the Members at
their last known address by ordinary mail not later than 30 days after any
meeting.
Section 8. Inspectors at Meetings: In advance of any Members meeting, the
Members may appoint one or more inspectors to act at the meeting or at any
adjournment thereof and if not so appointed the person presiding at any such
meeting may, and at the request of any Member entitled to vote thereat shall,
appoint one or more inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and
according to the best of his ability.
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Section 9. Conduct of Meeting: All meetings of Members shall he presided
over by the Operating Manager, or if he is not present, by a Member thereby
chosen by the Members at the meeting. The Operating Manager or the person
presiding at the meeting shall appoint any person present to act as
secretary of the meeting.
Article III
Officers
Section 1. Executive Officers: The officers of the Corporation shall be an
Operating Manager, a President, a Secretary and a Treasurer and such other
officers as the Members may determine. The same person may hold any two or
more offices. The initial Operating Manager shall be RTG-TPD Holding Co.,
LLC., and the initial President shall be Sun Mok Hwang. These Officers may
be removed or replaced with, and only with, the unanimous consent of the
Members.
Section 2. Election: Except as provided in Article 4(2), the Operating
Manager and the other officers shall be chosen by the Members and shall hold
office for the term for which elected and until their successors have been
elected and qualified. The Members may from time to time appoint all such
other officers as they determine and such officers shall hold office from
the time of their appointment and qualifications until the time at which
their successors are appointed and qualified. The Members may fill a vacancy
in any office arising from any cause for the unexpired portion of the term.
Section 3. Removal: Subject to Article 4(2), ante, the Members may remove
any officer from office at any time with or without cause.
Section 4. Delegation of Powers: The Members may, with the unanimous consent
of all Members, from time to time delegate the powers or duties of any
officer of the Corporation, in the event of his absence or failure to act
otherwise, to any other officer or Member of person whom they may select.
Section 5. Compensation: The compensation of each officer shall be such as
the Members may from time to time determine.
Section 6. Operating Manager: The Operating Manager shall be the chief
executive officer of the Corporation and shall have general charge of the
business and affairs of the Corporation, subject, however, to the right of
the Members to confer specified powers on officers and subject generally to
the direction of the Members. The president shall have those powers as may be
conferred upon him by the Operating Manager, provided, however, that such
powers shall not exceed the powers conferred upon the Operating Manager.
Unless otherwise ordered by the Members, the Operating Manager, or in the
event of his inability to act, the President, shall have full power and
authority on behalf of the Corporation to attend and to act and to vote at
any meeting of security holders of companies in which the Corporation may
hold securities, and at such meetings shall possess and may exercise any and
all rights and powers incident to the ownership of such securities, and
which, as the owner thereof, the Corporation might have possessed and
exercised, if present. The Members by unanimous resolution from time to time
may confer like powers upon any other person or persons.
Section 7. Secretary: The Secretary shall keep the minutes of all meetings
and record all votes of Members and committees in a book to be kept for that
purpose. He shall give or cause to be given any required notice of meetings
of Members or any committee, and shall be responsible for preparing or
obtaining from a transfer agent appointed by the Members, the list of Members
required by Article II, Section 7 hereof. He shall be the custodian of the
seal of the Corporation and shall affix or cause to be affixed the seal to
any instrument requiring it and attest the same and exercise the powers and
perform the duties incident to the office of Secretary subject to the
direction of the Members.
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Section 8. Treasurer: Subject to the direction of the Members, the Treasurer
shall have charge of the general supervision of the funds and securities of
the Corporation and the books of account of the Corporation and shall
exercise the powers and perform the duties incident to the office of the
Treasurer. If required by the Members, he shall give the Corporation a bond
in such sum and with such sureties as may be satisfactory to the Members for
the faithful discharge of his duties.
Section 9. Other Officers: All other officers, if any, shall have such
authority and shall perform such duties as may be specified from time to
time by the Members.
Article IV
Committees
Section 1. Committees: The Members, by resolution of a majority in interest
of the Members, may designate from among themselves one or more committees,
each consisting of three or more Members, and each of which, to the extent
provided in such resolution, shall have all the authority of the Members
except that no such committee shall have the authority as to any of the
following matters:
(a) The filing of vacancies in any committee;
(b) The fixing of compensation of the Members for serving on any committee;
(c) The amendment of repeal of this Operating Agreement or the adoption of a
new Operating Agreement; and
(d) The amendment or repeal of any resolution of the Members which by its
terms shall not be so amenable or repealable.
The Members may designate one or more Members as alternate members of any
such committee who may replace any absent member or members at any such
meeting of such committee.
Each such committee shall serve at the pleasure of the Members. The Members
shall have the power at any time to fill vacancies in, to change the
membership of, or to discharge any such committee. Committees shall keep
minutes of their proceedings and shall report the same to the Members at
the meeting of the Members next succeeding, and any action by the committee
shall be subject to revision and alteration by the Members, provided that no
rights of a third party shall be affected in any such revision or alteration.
Article V
Resignations
Section 1. Resignations: Any officer of the Corporation or any members of
any committee of the Members may resign at any time by giving written notice
to the Members, the Operating Manager or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time is not
specified therein, upon the receipt thereof, irrespective of whether any
such resignations shall have been accepted.
Article VI
Certificates Representing Membership
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Section 1. Form of Certificates: Each Member shall be entitled to a
Certificate or Certificates in such form as prescribed by the Members and by
any applicable statutes, which Certificate shall certify the interest of the
Member in the Corporation. The Certificates shall be numbered and registered
in the order in which they are issued and upon issuance the name in which
each Certificate has been issued together with the Interest in the
Corporation represented thereby and the date of issuance shall be entered in
the Membership book of the Corporation by the Secretary or by the transfer
agent of the Corporation. Each Certificate shall be signed by the Operating
Manager and countersigned by the Secretary and shall be sealed with the
Corporation Seal or facsimile thereof The signatures of the officers upon a
Certificate may also be facsimiles if the Certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation itself
or an employee of the Corporation. In case any officer who has signed or
whose facsimile signature has been placed upon a Certificate shall have
ceased to be such officer before the Certificate is issued, such Certificate
may be issued by the Corporation with the same effect as if the officer had
not ceased to be such at the time of its issue.
Section 2. Record Date for Members: For the purpose of determining the
Members entitled to notice of; or to vote at any meeting of Members or any
adjournment thereof or to express consent or dissent from any proposal
without a meeting, or for the purpose of determining the Members entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Members may fix, in advance, a date as the
record date for any such determination of Members. Such date shall not be
more than fifty (50) nor less than ten (10) days before the date of any
meeting nor more than fifty days prior to any action taken without a meeting,
the payment of any dividend or the allotment of any rights, or any other
action.
Article VII
General Restriction on Transfer of Interest
Section 1. General Restriction on Transfer of Interest: Except as hereinafter
provided in this Agreement, no Member shall transfer by sale, gift, bequest
or otherwise, or encumber by pledge, assignment, mortgage, charge or
otherwise, or otherwise dispose of or cease to be the holder of any of
the Interest in the Corporation of which it is at any time the registered or
beneficial owner, without the prior written consent of the other Members. In
the case of any permitted transfer, no Member shall sell any of its Interest
in the Corporation unless the purchaser is already or becomes a party to
this Agreement upon completion of the applicable sale.
Article VIII
Bankruptcy and Default
Section 1. Bankruptcy and Default Provisions:
8.01 Upon the happening of the earliest of:
(a) the bankruptcy of any one or more of the Members, or
in the event any one or more of the Members is at any time in breach of or
in default under any of the provisions of this Agreement, which breach or
default is not remedied within thirty (30) days of receipt or written notice
of same from the Corporation; or
(b) the bankruptcy of any one or more of the Members or
in the event any one or more of the Members is at any time in breach of or in
default under any of the provisions of this Agreement, which breach or
default is not remedied within thirty (30) days of receipt of written notice
of same from the Corporation;
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then, upon the happening of such event, in the case of subparagraph
(a), The Member(s) shall, and in the case of subparagraph (b), the Member(s)
shall, for the purposes of this Article Eight, be deemed to be a "Retiring
Party".
8.02 Upon the happening of an event causing one of the Members to
become a Retiring Party;
(a) the other Members shall have the option to purchase
all but not less than all the Interest in the Corporation owned by the
Retiring Party on a pro rata basis equal to the Interest in the Corporation
then held by each Member, which option shall be exercised by giving written
notice to the Retiring Party or his Personal Representative and to the
Corporation within thirty (30) days of the said event; or
(b) in the event the other Members do not so elect, the
Corporation shall have the option to purchase all but not less than all of
the Interest in the Corporation owned by the Retiring Party or his personal
Representative within thirty (30) days of the expiry of the option period
specified in Article 7.02 (a) hereof, for a price and in the manner calculated
and set forth in Articles 8.03 through 8.06 hereof. If any Member does not
take up his option for his pro rate proportion of the Interest in the
Corporation of the Retiring Party, the unclaimed Interest in the Corporation
shall be used to satisfy any request made by any other Members who have
indicated that they desire to purchase the said Interest in the Corporation
in excess of their pro rata proportion.
8.03 The purchase price for any Interest in the Corporation to be
purchased pursuant to the provisions of this Article Eight shall be equal to
the fair market value of such Interest in the Corporation at the date that
written notice is given by the purchasing Members or the Corporation, as the
case may be, (hereinafter referred to as the "Purchaser"), of its intention
to purchase the Interest in the Corporation of the Retiring Party. If the
Purchaser and the Retiring Party, or his Personal Representative, are unable
to agree as to the fair market value of the Interest in the Corporation to
be purchased, such determination shall be made by the Corporation's
Accountant.
8.04 If the parties do not agree with the valuation made by the
Corporation's Accountant, then the Purchaser shall nominate a representative
and the Retiring Party or his Personal Representative shall nominate a
representative, the two representatives so nominated shall nominate a third
representative and a majority of the three representatives shall select a
qualified appraiser to make the necessary fair market value determination.
The Purchaser and the Retiring Party shall pay for the cost of their own
representatives and the costs of the third representative and the qualified
appraiser shall be borne equally by the Purchaser and by the Retiring Party.
8.05 In arriving at the valuation, the qualified appraiser shall:
(a) determine the fair market value of the Interest in
the Corporation as of the appropriate date without premium for control or
discount for minority;
(b) refer to and use as a guideline the valuation, if
any, last determined pursuant to the provisions of this Article Eight; and
(c) consider any written representations which either
the Purchaser or Retiring Party may make.
The valuation determined by the appraiser in accordance with
this Article Eight shall be binding upon all of the parties hereto.
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8.06 Unless other terms of sale are agreed to by the Members, the
terms of any sale under this Article Eight shall be as follows:
(a) a minimum of twenty (20%) percent of the total
purchase price shall be paid at the time of closing by certified check
against delivery of the relevant Certificates duly endorsed in blank
with signatures guaranteed. The unpaid balance of the total purchase price,
if any, from time to time of the purchase shall bear interest from the time
of closing at a rate per annum equal to the prime lending rate charged by
the Corporation's bank at the time of closing plus two (2%) percent, and
such principal and interest shall be paid in twelve (12) equal monthly
consecutive installments commencing one (1) calendar month from the time of
closing. The Purchaser shall execute and deliver to the Retiring Party a
promissory note in the amount equal to the unpaid balance of the purchase
price at the time of closing and bearing interest as recited above. Default
of any payment of principal or interest shall, at the option of the holder of
the promissory note, cause the entire balance thereof to mature, provided that
the Purchaser may prepay the same in whole or in part, in reverse order of
maturity, without notice or bonus payments;
(b) the closing shall be at 10:00 o'clock a.m. at the
registered office of the Corporation on the sixtieth (60th) day following the
event causing one of the Members to become a Retiring Party;
(c) if the Retiring Party refuses or neglects to complete
the sale for any reason, the Purchaser shall have the right, upon payment of
the purchase price to the credit of the Retiring Party in any chartered bank
in the State of Colorado for and on behalf of and in the name of the
Retiring Party or his nominee or nominees, to execute and deliver such
transfers, resignations and other documents as may be necessary or desirable
in order to complete the transaction.
Article IX
Buy-Sell Provisions
Section 1. Buy-Sell Provisions:
9.01 Except in cases where Article Eight, which supersedes the
provisions hereof, would apply, any Member (hereinafter referred to as the
"Offering Party") may, at any time during the term of the Agreement, send a
offer in writing to the other Members, (hereinafter referred to individually
as a "Notified Party" and collectively as the "Notified Parties"), which
shall be signed by the Offering Party and shall be an offer to sell to the
Notified Parties, on a pro rata basis equal to the Interest in the
Corporation held by each Notified Party, all of the Interest in the
Corporation owned by the Offering Party at an arbitrary price and on terms
stipulated in the offer. Each Notified Party shall have a period of sixty
(60) days following the delivery of the offer to accept by notice in writing
the offer in accordance with its terms.
9.02 If one or more of the Notified Parties is prepared to
purchase his pro rata portion of the Interest in the Corporation, (the
"Accepting Party" or "Accepting Parties", as the case may be), but the other
Notified Party or Notified Parties are not so prepared, then the Accepting
Party or Accepting Parties shall have the first right and option to purchase
all of the Interest in the Corporation owned by the Offering Party on a pro
rata basis equal to the Interest in the Corporation held by the Accepting
Parties at the specified price. The Accepting Party or Accepting Parties
shall have a period of thirty (30) days within which to exercise the said
option. If the Accepting Party or Accepting Parties elect to exercise the
said option within the time stipulated the Accepting Party or Accepting
Parties shall then purchase and pay for all of the Interest in the
Corporation owned by the Offering Party at the specified price.
9.03 The terms of sale under this Article Nine shall be as follows:
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(a) the purchase price shall be paid as set out in the
offer made pursuant to Article 9.01 hereof;
(b) the closing shall be at 10:00 o'clock a.m. at the
registered office of the Corporation on the sixtieth (60th) day following the
date of delivery of the offer under Article 9.01;
(c) if the selling Member(s) refuses or neglects to
complete the sale for any reason, the purchasing Member(s) shall have the
right, upon payment of the purchase price to the credit of the selling
Member(s) at any chartered bank in the State of Colorado for and on behalf
of and in the name of the selling Member(s) or his nominee(s), to execute and
deliver such transfers, resignations and other documents as may be necessary
or desirable in order to complete the transaction.
9.04 The rights granted by this Article Nine are in lieu of any
rights, statutory or otherwise, which a dissenting Member may now or
hereafter have to require a party hereto to purchase any of his Interest in
the Corporation in the capital stock of the Corporation.
9.05 The provisions of Article 9.01 shall, in any event, be
subject to the compliance by the selling Member(s) with applicable law and
the obtaining of requisite approvals for transfer thereunder. The closing
date referred to in Article 9.03 is hereby deemed to be extended by the
amount of time of any delay or delays occasioned by a regulatory or
governmental agency which is required to give approval to a transfer hereunder.
Article X
Right of First Refusal
Section 1. Right of First Refusal:
10.01 Except in cases where Article Eight or Article Nine, which
shall supersede the provisions hereof, would apply, no Member shall entertain
offers for the purchase of his Interest in the Corporation nor make
agreements for the sale, transfer or assignment of his Interest in the
Corporation except upon compliance with this Article Ten, (and where
applicable, compliance with Article Eleven), and subject to the terms and
conditions hereinafter set forth:
(a) no sale, transfer or assignment of Interest in the
Corporation shall be considered by a Member unless he shall have first
received a bona fide offer in writing form from a third party dealing at
arm's length, who is a responsible purchaser of good business reputation and
who has agreed to enter into an agreement with the remaining Members of the
Corporation identical to this Agreement, (except changes in the Agreement
required because it has ceased to apply to a party hereto), to purchase all
of his Interest in the Corporation, which offer shall provide that the
purchase price shall be payable in cash;
(b) a party to the Agreement receiving an offer as
contemplated by subsection (a) of this Article 10.01, (herein referred to as
the "Selling Party"), which the Selling Party is prepared to accept shall,
within ten (10) days of the receipt of such offer, deliver a copy of such
offer, together with his own offer to sell all of the Interest in the
Corporation so proposed to be sold, to the other Members upon the same terms
and conditions as the third party shall have offered;
(c) the Members receiving the offer of the Selling Party
shall have the first right and option to purchase on a pro rata basis the
Interest in the Corporation to be sold by the Selling Party for a period of
thirty (30) days from the date of receipt of the offer of the Selling Party,
such right and option to be exercised before the expiration of such thirty
(30) days by notice in writing;
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(d) if the other Members accept the offer of the Selling
Party within the time stipulated, they shall purchase on a pro rata basis all
of the Interest in the Corporation owned by the Selling Party upon the same
terms and conditions as the third party shall have offered;
(e) if one or more of the other Members is prepared to
purchase his pro rata portion of the Interest in the Corporation, (the
"Accepting Party" or "Accepting Parties", as the case may be), but the other
Member or Members are not so prepared, then the Accepting Party or Accepting
Parties shall have the first right and option to purchase all of the Interest
in the Corporation of the Selling Party on a pro rata basis equal to the
Interest in the Corporation held by the Accepting Parties, upon the same
terms and conditions as the third party shall have offered;
(f) if the other Members do not accept the offer of the
Selling Party within the time stipulated in Article 10.01(c) hereof or if the
Accepting Party or Accepting Parties elect not to exercise the right and
option set out in Article 10.01(e) hereof or do not exercise the said right
and option within the time stipulated, the Selling Party shall accept the
offer of the said third party, and complete the transaction with the said
third party in accordance with the offer of such third party and the parties
to this Agreement hereby agree to take all steps and proceedings requisite to
have such third party entered on the books of the Corporation as a Member of
the Corporation and to execute and deliver an Operating Agreement in
replacement of this Agreement. The Selling Party is hereby appointed the
agent and attorney of the other Members for the purpose of effecting
registration of the third party as a Member of the Corporation.
10.02 The provisions of Article 10.01 shall, in any event, be
subject to the compliance by the Selling Party and the third party with
applicable law and the obtaining of requisite approvals for transfer
thereunder.
Article XI
Piggyback Rights
Section 1. Piggy-back Rights. If the completion of any sale of Interest in
the Corporation to a third party in accordance with Article Ten would
result in the said third party acquiring more than a forty (40%)
percent Interest in the Corporation, each of the Members Receiving the
offer of the Selling Party, (hereinafter referred to the "Offerees"), shall
have the further right, to be exercised by notice in writing to the Selling
Party within the time limited for the acceptance of the Selling Party's
offer, to require the Selling Party to sell all but not less than all of the
Interest in the Corporation owned or controlled by each Offeree upon the
same terms and conditions as are contained in the third party's offer. If
any of the Offerees exercise such right, the Selling Party shall not
complete the sale of its Interest in the Corporation unless all of the
Interest in the Corporation of such Offerees who shall have so exercised such
right are also sold to the third party on the same terms and conditions as
are contained in the third party's offer.
Article XII
Security for Purchase of Interest in the Corporation
Section 1. Security for Purchase:
12.01 As security for the unpaid balance of the purchase price
with respect to a purchase and sale of Interest in the Corporation pursuant
to this Agreement, the purchasing Member shall pledge the said Interest in
the Corporation being the subject matter of such purchase and sale,
(hereinafter called the "Pledged Interest in the Corporation"), to and in
favor of the disposing Member, free and clear of any lien, charge or
encumbrance of whatsoever nature.
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12.02 The Certificate(s) evidencing the Pledged Interest in the
Corporation shall be endorsed in blank by the purchasing Member with
signature guaranteed at the time of closing and be delivered to the attorneys
for the Corporation, or to such other persons as the parties hereto may
agree, (hereinafter called the "Trustee"), to be held in trust as provided
herein, together with a certified copy of a resolution of the Members of the
Corporation consenting to the transfer of the said Interest in the
Corporation to the disposing Member pursuant to the provisions of this
Article Twelve. Subject as herein provided, the Trustee shall hold the
Certificates evidencing the Pledged Interest in the Corporation until the
purchase price therefore has been paid in full, at which time and upon proof
thereof being furnished to the Trustee in the form of a receipt signed by
the disposing Member and an affirmative statement of payment signed by the
purchasing Member, the Trustee shall deliver the said Certificates to the
purchasing Member.
12.03 If at any time and from time to time during the period that
the purchase price remains outstanding:
(a) any of the said Interest in the Corporation are
subdivided, consolidated, changed or reclassified; or
(b) the Corporation is re-organized or amalgamated with
another Corporation or any other event occurs which results in the
substitution or exchange of any of the Interest in the Corporation
for, or the conversion of any of the said Interest in the Corporation into
other securities; the Corporation, forthwith after the occurrence of any
such event shall substitute for the Pledged Interest in the Corporation, a
Certificate reflecting the resulting Interest in the Corporation, or other
securities. In this connection, Certificates or other evidence of ownership
of such resulting Interest in the Corporation or other securities in
transferable form with signatures guaranteed shall be forthwith deposited
with the Trustee against receipt of the said Certificates.
12.04 Until such time as the security hereby constituted shall
become enforceable, the purchasing Member shall be entitled to and may
exercise all voting and other rights attached to the Pledged Interest in
the Corporation.
12.05 While any part of the purchase price of any Interest in the
Corporation sold pursuant to this Agreement by the disposing Member is
unpaid, the purchasing Member insofar as it is permitted by law to do so,
covenants and agrees hereby that it will not vote in favor of nor suffer the
Corporation to do any of the following, namely:
(a) to allot or issue stock, bonds or other corporate
securities;
(b) to incur any obligations or liabilities, (absolute
or contingent), except if incurred under contracts or agreements entered into
in the course of business of the Corporation;
(c) to purchase or redeem any Member's Interest in the
Corporation;
(d) to mortgage, pledge or subject to lien, charge or
any other encumbrance any assets, tangible or intangible, of the Corporation
except in the ordinary course of business;
(e) to sell or transfer any assets, cancel any debts or
claims or transact any business except in each case in the ordinary course of
the business of the Corporation;
(f) to knowingly permit any extraordinary losses or
waive any rights of substantial value to the Corporation;
(g) to enter into any agreement other than in the
ordinary course of business of the Corporation including, but not limited to,
agreements regarding increases in salaries, bonuses, payments, stock options
or deferred compensation, provided that increments may be paid to the
purchasing Member, by way of increased salary or compensation in an amount
which shall not exceed ten (10%) percent of its previous year's aggregate
consideration;
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(h) to grant options, warrants or other rights to acquire
Interest in the Corporation;
(i) to re-organize the capital structure of the
Corporation; or
(j) to merge, consolidate, amalgamate or sell the
business assets or undertakings of the Corporation unless the disposing
Member is supplied with evidence satisfactory to it that any amount owing
to it under this Agreement will be paid in full at the time of closing upon
completion of the foregoing events.
12.06 In the event that the purchasing Member defaults in payment
of the purchase price or the interest thereon or upon the breach of any of
the covenants set forth in Article 12.05 hereof, the disposing Member may
give notice thereof to the Trustee who shall forthwith give notice to the
purchasing Member that if the cure for the default is not made or such
breach is not cured by the purchasing Member within forty-five (45) days of
receiving notice thereof from the Trustee, the balance of the moneys then
remaining unpaid on account of the purchase price shall immediately become
due and payable.
If the purchasing Member fails to pay the balance of the moneys remaining
unpaid within thirty (30) days following such balance becoming due and
payable as aforesaid, the disposing Member shall have the right to realize
upon the said Interest in the Corporation by way of a sale thereof and
herein provided or, if the purchasing Member has not paid at least seventy-
five (75%) percent of the purchase price therefore, the disposing Member
shall alternatively have the right to take delivery of the Certificates
evidencing the Pledged Interest in the Corporation from the Trustee as
herein provided and continue to hold and own the same as if such Interest in
the Corporation had never been sold by it and the provisions of this
Agreement shall continue to govern the rights of the Members with respect
to the disposition of their Interest in the Corporation.
If less than seventy-five (75%) percent of the purchase price for
the Pledged Interest in the Corporation has been paid by the purchasing
Member, the disposing Member shall notify the Trustee within thirty (30)
days of the expiry of the aforesaid forty-five (45) days notice period as to
whether it intends to realize upon the Pledged Interest in the Corporation
by way of a sale thereof or intends to hold same. In the event that the
disposing Member fails to give such notice, it shall be deemed to have
elected to hold and own the Pledged Interest in the Corporation. The
disposing Member shall take delivery of the Pledged Interest in the
Corporation for its own account, in full and complete satisfaction of any
claims that it may have against the purchasing Member with respect to the
unpaid balance of the purchase price for the Pledged Interest in the
Corporation and will not pursue any other remedies available according to
law. If however the disposing Member elects to sell the said Interest in
the Corporation as provided herein, such action shall not be deemed to
exclude any other remedy which may be available to it at law to recover the
moneys and interest thereon due to it under this Agreement.
12.07 If the disposing Member elects to realize upon the Pledged
Interest in the Corporation by way of a sale, the following provisions shall
apply:
(a) any such sale shall be on the best terms which,
after making reasonable effort, the disposing Member is able to obtain;
provided however that the purchasing Member shall be given the opportunity
to obtain an offer for the purchase of the Pledged Interest in the
Corporation and if a bona fide offer is obtained by the purchasing Member
which provides for better terms, including the payment of the purchase
moneys in full by cash or certified check, then the offer obtained by the
purchasing Member shall be used for such realization;
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(b) the disposing Member may, at its option, purchase
the said Interest in the Corporation on the same terms and conditions as the
best offer obtained by either the purchasing or disposing Member as provided
above; and
(c) after deducting from the proceeds of any such sale
reasonable allowance for all costs, charges and expenses reasonably incurred
by the disposing Member in connection therewith, the residue of the moneys
arising from such sale shall be applied on account of or in payment of the
balance of the moneys and accrued interest thereon then remaining unpaid on
account of the purchase price and if any surplus remains the same shall be
paid forthwith to the purchasing Member.
Article XIII
Purchase of Interest in the Corporation by the Corporation
Section 1. Purchase of Interest in the Corporation by the Corporation:
13.01 Except in cases where Article Eight, Nine or Ten, which
shall supersede the provisions hereof, would apply, any Member, (in this
Article Thirteen referred to as the "Selling Party"), may, at any time after
ninety days, during the term of this Agreement, send a notice in writing to
the Corporation and to the other Members which shall be signed by the Selling
Party and shall be notice of the Selling Party's intention to sell all or a
portion of the Interest in the Corporation owned by the Selling Party.
13.02 Upon receipt of any notice pursuant to Article 13.01 hereof,
the Corporation shall be obligated to purchase the Interest in the
Corporation specified in the said notice upon the terms and conditions
recited in Articles 13.03 through 13.07 hereof.
13.03 The purchase price for the Interest in the Corporation to be
purchased pursuant to the provisions of this Article Thirteen shall be
determined in accordance with Article 13.04 through 13.06.
13.04 All Members shall meet within ten (10) days following
receipt of the said notice and at such meeting shall agree on a value for
the Interest in the Corporation which the Selling Party proposes to sell. If
the parties can not agree to a valuation, then the Selling party shall
nominate a representative and the Members shall nominate a representative,
the two representatives so nominated shall nominate a third representative
and a majority of the three representatives shall select a qualified
appraiser to make the necessary fair market 90 value determination. The
Members and the Selling Party shall pay for the cost of their own
representatives and the costs of the third representative and the qualified
appraiser shall be borne equally by the Members and the Selling Party.
13.05 In arriving at its valuation, the Valuator shall:
(a) determine the value of all property, assets and
undertaking of the Corporation, less any amount which may, according to such
valuation, be due for income or capital gain taxes if any such property,
assets or undertaking were sold;
(b) refer to and use as a guide the valuation, if any,
last determined pursuant to their Article Thirteen; and
(c) consider any written representations which any
Member may make.
13.06 As soon as is practicable but in all cases within sixty (60)
days of its appointment, the Valuator shall prepare and deliver a report to
(in this Article Thirteen referred to as the Accountant/Auditor of the
Corporation). Based upon the Valuator's report, the auditors shall
determine the value to be attributed to the Interest in the Corporation
which the Selling Party proposes to sell. The Valuator's report and the
108
Accountant/Auditor's determination based thereon shall both be binding upon
the Members.
13.07 Unless other terms of sale are agreed to by the Members, the
terms of sale under this Article Thirteen shall be as follows:
(a) the Interest in the Corporation which the Selling
Party proposed to sell shall have a redemption amount equal to the value
attributed as determined above, (hereinafter referred to as the "Redeemable
Interest in the Corporation"):
(b) the Redeemable Interest in the Corporation shall
then be redeemed by the Corporation over a period not to exceed two (2)
years with a minimum annual redemption of fifty (50%) percent of the total
Redeemable Interest in the Corporation attributable to the Selling Party;
(c) if all of the Redeemable Interest in the Corporation
is immediately purchased by the Corporation, the Selling Party shall deliver
at closing a Certificate or Certificates representing the Redeemable Interest
in the Corporation to the Corporation duly endorsed by the Selling Party in
blank form transfer and/or cancellation;
(d) if on closing the Corporation does not redeem all of
the Redeemable Interest in the Corporation, the following provisions shall
apply:
(i) as stated above, the annual minimum
redemption will be fifty (50%) percent of the total Redeemable Interest in
the Corporation;
(ii) an annual dividend in the aggregate
to be equivalent to the interest that would accrue each year if the prime
lending rate charged by the Corporation's banker minus fifty (50%) percent
was applied to the aggregate redemption amount of all Redeemable Interest in
the Corporation not yet paid by the Corporation;
(iii) in the event any portion of the
Redeemable Interest in the Corporation is not paid by the Corporation within
two (2) years of the original closing date, thereafter the interest rate to
be used in determining the annual dividend payable on the outstanding
Redeemable Interest in the Corporation shall be varied to the prime lending
rate charged by the Corporation's banker, plus two (2%) percent;
(iv) the Selling Party shall deliver to
the Accountant/Auditor of the Corporation all Certificates representing the
Redeemable Interest in the Corporation duly endorsed in blank for transfer
and such Interest in the Corporation shall be held in escrow by the
Accountant/Auditor of the Corporation until the Accountant/Auditor receives,
on behalf of the Selling Party, the unpaid balance of the redemption amount
and dividends in full calculated as aforesaid;
(v) so long as the Corporation is not in
default in payment of any redemption amount or dividends thereon, the
Accountant/Auditor shall execute and deliver to the Corporation or its
nominee from time to time such instruments of proxy with respect to the
Redeemable Interest in the Corporation held in escrow as the Corporation may
request;
(vi) if the Corporation is in default in
respect of the payment of any redemption amount or dividends thereon, the
Accountant/Auditor shall give written notice to the Corporation, (with a
copy to the Selling Party), describing the nature of the default within
thirty (30) days from the occurrence of the default. If the default is not
corrected by the Corporation within the grace period, the Accountant/Auditor
of the Corporation will, at the request of the Selling Party, return all of
the Redeemable Interest in the Corporation to the Selling Party who shall be
entitled to re-transfer the said Interest in the Corporation into its own
name and thereafter require the Corporation to re-convert the Redeemable
Interest in the Corporation into the original Interest in the Corporation
109
held by the Selling Party. The Selling Party shall be entitled to retain
the portion of the redemption amount received by it and the Corporation
shall be discharged from liability for payment of the remaining unpaid
balance of the redemption amount; and
(vii) upon payment in full by the
Corporation of the redemption amount and dividends thereon, the Accountant/
Auditor shall deliver to the Corporation the Certificates representing the
Redeemable Interest in the Corporation duly endorsed in blank for transfer
and/or cancellation.
13.08 The rights granted by this Article Thirteen are in lieu of
any rights, statutory or otherwise, which a dissenting Member may now or
hereafter have to require a party hereto to purchase any of its Interest in
the Corporation.
13.09 The provisions of Article Thirteen shall, in any event, be
subject to the compliance of the selling Member(s) with applicable law and
the obtaining of requisite approvals for transfer thereunder. Any closing
date is hereby deemed to be extended by the amount of time of any delay or
delays occasioned by a regulatory or governmental agency which is required
to give approval to transfer hereunder.
Article XIV
Jurisdiction
Section 1. Jurisdiction: This Agreement shall be governed according to the
Laws of the state of Colorado, whose Courts shall have sole and exclusive
jurisdiction over any matter herein.
Article XV
General
Section 1. Miscellaneous Provisions:
15.01 Each of the parties severally agrees to indemnify each of
the other parties hereto against, and reimburse each of the other parties
for, any and all liabilities which such other party or parties may incur or
become subject to an amounts which such other party or parties may pay or
be required to pay which are in excess of the proportionate share of the
liabilities and obligations of the parties under the terms of this Agreement,
provided that nothing in this Article, 15.01 shall in any way be deemed to
or shall require any party to incur any liability or provide any funds other
than as may be expressly provided for in any other provisions of this
Agreement.
15.02 No consent or waiver, expressed implied, by any party hereto
of any breach or default by any other party hereto in the performance of his
obligations hereunder shall be deemed or construed to be a consent to or
waiver of any other breach or default in the performance by such other party
of the same or any other obligations of such party hereunder. Failure on
the part of any party to complain of any act or failure to act of any other
party or to declare the other party in default, irrespective of how long
such failure continues, shall not constitute a waiver by the first mentioned
party of his rights hereunder.
15.03 This Agreement shall continue to be effective notwithstanding
the sale of Interest in the Corporation by a Member howsoever, and this
Agreement shall be binding upon the remaining Members.
15.04 The invalidity of any provision of this Agreement or any
covenant herein contained on the part of any party shall not affect the
validity of any other provision or covenant hereof or herein contained which
shall remain in full force and effect.
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15.05 The Members agree to sign all such documents and do all such
things as may be necessary or desirable to more completely and effectively
carry out the terms and intentions of this Agreement and to cause the
Corporation to act in the manner contemplated by this Agreement and, to
the extent permitted by law, cause the Board of Directors so to act.
15.06 Nothing in this Agreement shall be deemed in any way or for
any purposes to constitute any party a partner of, a member of a joint
venture or joint enterprise with any other party to this Agreement in the
conduct of any business or otherwise.
15.07 Time shall be of the essence of this Agreement.
15.08 This Agreement constitutes the entire agreement among the
parties and shall not be modified, amended or assigned except with the
consent in writing of the parties hereto. A consent to any assignment
required hereunder may be arbitrarily or unreasonably withheld until the
proposed assignee executes and delivers such documents as, in the opinion of
the legal counsel of the Corporation, are necessary to oblige himself or
itself hereunder.
15.9 If at the time of any sale of Interest in the Corporation as
contemplated in this Agreement:
(a) there are any loans outstanding from the Corporation
to the selling Member(s) or vise versa, ;such loans shall be paid; and
(b) there are any securities or covenants lodged by the
selling Member(s) with any person or institution or any personal guarantees
given by the selling Member(s) or his nominee(s) to secure any indebtedness,
liability or obligation of the Corporation, the remaining parties to this
Agreement shall use their best efforts to have the selling Member(s) and
any nominee(s) released therefrom. If, notwithstanding such best efforts,
the releases as aforesaid are not obtained, the remaining parties shall
deliver to the selling Member(s) their indemnity in writing indemnifying the
selling Member(s) and his nominee(s) from any and all liabilities thereunder.
15.10 All notices contemplated or required to be given hereunder
shall be effective if sent by prepaid registered mail or delivered personally
to any of the parties at the address of that party as it appears on the
books of the Corporation from time to time, or at such other address as the
party to whom such notice is to be given otherwise directs in writing.
Any notice delivered aforesaid shall be effective on the date of delivery
and any notice mailed as aforesaid shall be effective two (2) business days
after the mailing thereof, provided that where interruption of mail services
is likely by reason of any strike or other labor dispute, notice shall be by
personal delivery only to the person or to the address as aforesaid.
15.11 In this Agreement, wherever the singular and masculine or
neuter are used, they shall be construed as is the plural or the feminine or
the neuter had been used, where the context or the party or parties so
requires, and the rest of the sentence shall construed as if the grammatical
and terminological changes thereby rendered necessary had been made.
15.12 This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their Personal Representatives, successors and
permitted assign and any reference to a right or a obligation of a party
hereto shall be deemed to include a reference to such Personal
Representatives, successors and permitted assigns to the extent that the
context requires.
15.13 This Agreement may be executed in any number of counterparts,
all of which shall constitute one and the same instrument, and such
instrument shall be deemed made on the first day of March, 1999, irrespective
of the time or times when any counterpart may be made, executed and delivered.
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15.14 Interest in the Corporation as used herein refers to a
Member's interest in the Capital of the Corporation.
15.15 In consideration of the sums paid on behalf of RTG-TPD
Holdings Co. Ltd. (RTG) for logo development, RTG hereby grants the company
non-exclusive use of the Trademarks, KOMART and KOMART KOREAN AND JAPANESE
SUPERMARKET, provided however such use is for and in connection with the mall
being developed at 2000 S. Havana St., Denver CO only.
In Witness Whereof the parties hereto have duly executed this Agreement as
of the date and year first above written.
Signed
and Delivered
in the presence of: ) /s/Sun Mok Hwang/s/
) Member
)
) __________________
) Member
)
) RTG-TPD Holdings Co. LLC.
s/Stan J. H. Lee/s/.
) Per: Stan Lee
)
) The Company
) /s/Stan J. H. Lee/s/.
) Per:
112
Operating Agreement
of
2050 S. Havana St. (DTSE), LLC.
(The Corporation)
Dated: March 1, 1999.
Article I
Offices
Section 1. Principal Office: The principal office of the Corporation shall
be located at 2000 South Havana St., Aurora, Colorado 80014.
Section 2. Additional Offices: The Corporation may have such additional
offices at such other place within or without the State of Colorado as the
Members may from time to time determine or as the business of the
Corporation may require.
Article II
Meetings
Section 1. Annual Meeting: An annual meeting of Members shall be held within
five (5) months after the close of the fiscal year of the Corporation on
such date and at the time and place as shall be fixed by the Members. At the
annual meeting the Members shall elect an Operating Manager and other
officers and transact such other business as may properly be brought before
the meeting.
Section 2. Special Meeting: A special meeting of Members may be called at
any time by the Operating Manager and shall be called by the Operating
Manager at the request in writing of a majority of the Members entitled to
vote at such meeting. Any such request shall state the purpose or purposes
of the proposed meeting. Business transacted at any special meeting of
Members shall be confined to the purposes set forth in the notice thereof.
Special meetings may be held by telephonic Conference Call, provided all
Members agree to the said Meeting by telephonic Conference Call in writing,
and attest to any resolutions passed at the said meeting in writing.
Section 3. Notice of Meetings: Written notice of the time, place and purpose
of every meeting of Members (and, if other than an annual meeting, the
person or persons at whose discretion the meeting is being called), shall be
given by the Operating Manager to each Member of record entitled to vote at
such meeting, not less than five nor more than fifty days prior to the date
set for the meeting. Notice shall be given either personally or by mailing
said notice by first class mail to each Member at his address appearing on
the record book of the Corporation or at such other address supplied by him
in writing to the Operating Manager of the Corporation for the purpose of
receiving notice.
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A written waiver of notice setting forth the purposes of the meeting for
which notice is waived, signed by the person or persons entitled to such
notice, whether before or alter the time of the meeting stated therein,
shall be deemed equivalent to the giving of such notice. The attendance by a
Member at a meeting either in person or by proxy without protesting the lack
of notice thereof shall constitute a waiver of notice of such Member.
All notices given with respect to an original meeting shall extend to any
and all adjournments thereof and such business as might have been transacted
at the original meeting may be transacted at any adjournment thereof; no
notice of any adjourned meeting need be given if an announcement of the
time and place of the adjourned meeting is made at the original meeting.
Section 4. Quorum: The holders of at least 70% in interest of the Members
present in person or represented in proxy, shall be requisite and shall
constitute a quorum at all meetings, of members except as otherwise provided
by statute or the Articles of Organization. A Members Interest in the
Corporation shall be in proportion to his contribution to the capital of the
Corporation adjusted from time to time to reflect additions or withdrawals.
The phrase "at least 70% in interest" of the Members shall mean Members who,
in the aggregate, shall have Capital Contributions in excess of seventy
(70%) percent of the total Capital Contributions of all of the Members. If,
however, a quorum shall not be present or represented at any meeting of
Members, the Members entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which
a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified when
a quorum is once present to organize a meeting, such quorum is not deemed
broken by the subsequent withdrawal of any Members.
Section 5. Voting: Every Member entitled to vote at any meeting shall be
entitled to vote in accordance with his Interest in the Corporation held
by him of record on the date fixed as the record date for said meeting and
may so vote in person or by proxy. Any Corporation action shall be
authorized by a majority in interest of the votes cast by the Members
entitled to vote thereon except as may otherwise by provided by statute,
the Articles of Organization or this Operating Agreement.
Section 6. Proxies: Every proxy must be signed by the Members entitled to
vote or by his duly authorized attorney-in-fact and shall be valid only if
filed with the Operating Manager of the Corporation prior to the
commencement of voting on the matter in regard to which said proxy is to
be voted. No proxy shall be valid after the expiration of eleven months from
the date of its execution unless otherwise expressly provided in the proxy.
Every proxy shall be revocable at the pleasure of the person executing it
except as otherwise provided by statute. Unless the proxy by its terms
provided for a specific revocation date and except as otherwise provided
by statute, revocation of a proxy shall not be effective unless and
until such revocation is executed in writing by the Member who executed
such proxy and the revocation is filed with the Operating Manager of the
Corporation prior to the voting of the proxy.
Section 7. Minutes of Meetings: Minutes of the Corporation's last meeting,
and the resolutions passed thereat, shall be prepared for every meeting of
Members and shall be produced by the Operating Manager thereat. Annual
statements reflecting the financial status of the Corporation shall be
distributed to all members no later than 45 days after the end of every
fiscal year, and at least 30 days before any annual meeting. Minutes of
any Meeting shall be prepared by the Operating Manager and sent to
the Members at their last known address by ordinary mail not later than
30 days after any meeting.
Section 8. Inspectors at Meetings: In advance of any Members meeting, the
Members may appoint one or more inspectors to act at the meeting or at any
adjournment thereof and if not so appointed the person presiding at any such
meeting may, and at the request of any Member entitled to vote thereat
shall, appoint one or more inspectors. Each inspector, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting with strict impartiality
and according to the best of his ability.
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Section 9. Conduct of Meeting: All meetings of Members shall he presided
over by the Operating Manager, or if he is not present, by a Member thereby
chosen by the Members at the meeting. The Operating Manager or the person
presiding at the meeting shall appoint any person present to act as secretary
of the meeting.
Article III
Officers
Section 1. Executive Officers: The officers of the Corporation shall be an
Operating Manager, a President, a Secretary and a Treasurer and such other
officers as the Members may determine. The same person may hold any two or
more offices. The initial Operating Manager shall be RTG-TPD Holdings Co.,
LLC., and the initial President shall be Chang Moo Yi. These Officers may be
removed or replaced with, and only with, the unanimous consent of the Members.
Section 2. Election: Except as provided in Article 4(2), the Operating
Manager and the other officers shall be chosen by the Members and shall hold
office for the term for which elected and until their successors have been
elected and qualified. The Members may from time to time appoint all such
other officers as they determine and such officers shall hold office from
the time of their appointment and qualifications until the time at which
their successors are appointed and qualified. The Members may fill a vacancy
in any office arising from any cause for the unexpired portion of the term.
Section 3. Removal: Subject to Article 4(2), ante, the Members may remove
any officer from office at any time with or without cause.
Section 4. Delegation of Powers: The Members may, with the unanimous consent
of all Members, from time to time delegate the powers or duties of any
officer of the Corporation, in the event of his absence or failure to act
otherwise, to any other officer or Member of person whom they may select.
Section 5. Compensation: The compensation of each officer shall be such as
the Members may from time to time determine.
Section 6. Operating Manager: The Operating Manager shall be the chief
executive officer of the Corporation and shall have general charge of the
business and affairs of the Corporation, subject, however, to the right of
the Members to confer specified powers on officers and subject generally to
the direction of the Members. The president shall have those powers as may
be conferred upon him by the Operating Manager, provided, however, that such
powers shall not exceed the powers conferred upon the Operating Manager.
Unless otherwise ordered by the Members, the Operating Manager, or in the
event of his inability to act, the President, shall have full power and
authority on behalf of the Corporation to attend and to act and to vote at
any meeting of security holders of companies in which the Corporation may
hold securities, and at such meetings shall possess and may exercise any and
all rights and powers incident to the ownership of such securities, and
which, as the owner thereof, the Corporation might have possessed and
exercised, if present. The Members by unanimous resolution from time to
time may confer like powers upon any other person or persons.
Section 7. Secretary: The Secretary shall keep the minutes of all
meetings and record all votes of Members and committees in a book to be kept
for that purpose. He shall give or cause to be given any required notice of
meetings of Members or any committee, and shall be responsible for preparing
or obtaining from a transfer agent appointed by the Members, the list of
Members required by Article II, Section 7 hereof. He shall be the custodian
of the seal of the Corporation and shall affix or cause to be affixed the
seal to any instrument requiring it and attest the same and exercise the
powers and perform the duties incident to the office of Secretary subject to
the direction of the Members.
115
Section 8. Treasurer: Subject to the direction of the Members, the Treasurer
shall have charge of the general supervision of the funds and securities of
the Corporation and the books of account of the Corporation and shall
exercise the powers and perform the duties incident to the office of the
Treasurer. If required by the Members, he shall give the Corporation a bond
in such sum and with such sureties as may be satisfactory to the Members for
the faithful discharge of his duties.
Section 9. Other Officers: All other officers, if any, shall have such
authority and shall perform such duties as may be specified from time to
time by the Members.
Article IV
Committees
Section 1. Committees: The Members, by resolution of a majority in interest
of the Members, may designate from among themselves one or more committees,
each consisting of three or more Members, and each of which, to the extent
provided in such resolution, shall have all the authority of the Members
except that no such committee shall have the authority as to any of the
following matters:
(a) The filing of vacancies in any committee;
(b) The fixing of compensation of the Members for serving on any committee;
(c) The amendment of repeal of this Operating Agreement or the adoption of a
new Operating Agreement; and;
(d) The amendment or repeal of any resolution of the Members which by its
terms shall not be so amenable or repealable.
The Members may designate one or more Members as alternate members of any
such committee who may replace any absent member or members at any such
meeting of such committee.
Each such committee shall serve at the pleasure of the Members. The Members
shall have the power at any time to fill vacancies in, to change the
membership of, or to discharge any such committee. Committees shall keep
minutes of their proceedings and shall report the same to the Members at
the meeting of the Members next succeeding, and any action by the committee
shall be subject to revision and alteration by the Members, provided that no
rights of a third party shall be affected in any such revision or alteration.
Article V
Resignations
Section 1. Resignations: Any officer of the Corporation or any members of
any committee of the Members may resign at any time by giving written notice
to the Members, the Operating Manager or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time is not
specified therein, upon the receipt thereof, irrespective of whether any
such resignations shall have been accepted.
Article VI
Certificates Representing Membership
116
Section 1. Form of Certificates: Each Member shall be entitled to a
Certificate or Certificates in such form as prescribed by the Members and by
any applicable statutes, which Certificate shall certify the interest of the
Member in the Corporation. The Certificates shall be numbered and registered
in the order in which they are issued and upon issuance the name in which
each Certificate has been issued together with the Interest in the
Corporation represented thereby and the date of issuance shall be entered
in the Membership book of the Corporation by the Secretary or by the
transfer agent of the Corporation. Each Certificate shall be signed by the
Operating Manager and countersigned by the Secretary and shall be sealed
with the Corporation Seal or facsimile thereof. The signatures of the
officers upon a Certificate may also be facsimiles if the Certificate is
countersigned by a transfer agent or registered by a registrar other than
the Corporation itself or an employee of the Corporation. In case any
officer who has signed or whose facsimile signature has been placed upon a
Certificate shall have ceased to be such officer before the Certificate is
issued, such Certificate may be issued by the Corporation with the same
effect as if the officer had not ceased to be such at the time of its issue.
Section 2. Record Date for Members: For the purpose of determining the
Members entitled to notice of; or to vote at any meeting of Members or any
adjournment thereof or to express consent or dissent from any proposal
without a meeting, or for the purpose of determining the Members entitled
to receive payment of any dividend or the allotment of any rights, or for
the purpose of any other action, the Members may fix, in advance, a date as
the record date for any such determination of Members. Such date shall not
be more than fifty (50) nor less than ten (10) days before the date of any
meeting nor more than fifty days prior to any action taken without a
meeting, the payment of any dividend or the allotment of any rights, or any
other action.
Article VII
General Restriction on Transfer of Interest
Section 1. General Restriction on Transfer of Interest: Except as hereinafter
provided in this Agreement, no Member shall transfer by sale, gift, bequest
or otherwise, or encumber by pledge, assignment, mortgage, charge or
otherwise, or otherwise dispose of or cease to be the holder of any of
the interest in the Corporation of which it is at any time the registered
or beneficial owner, without the prior written consent of the other Members.
In the case of any permitted transfer, no Member shall sell any of its
Interest in the Corporation unless the purchaser is already or becomes a
party to this Agreement upon completion of the applicable sale.
Article VIII
Bankruptcy and Default
Section 1. Bankruptcy and Default Provisions:
8.01 Upon the happening of the earliest of:
(a) the bankruptcy of any one or more of the Members, or
in the event any one or more of the Members is at any time in breach of or
in default under any of the provisions of this Agreement, which breach or
default is not remedied within thirty (30) days of receipt or written notice
of same from the Corporation; or
(b) the bankruptcy of any one or more of the Members or
in the event any one or more of the Members is at any time in breach of or
in default under any of the provisions of this Agreement, which breach or
default is not remedied within thirty (30) days of receipt of written notice
of same from the Corporation;
117
then, upon the happening of such event, in the case of subparagraph
(a), The Member(s) shall, and in the case of subparagraph (b), the Member(s)
shall, for the purposes of this Article Eight, be deemed to be a "Retiring
Party".
8.02 Upon the happening of an event causing one of the Members to
become a Retiring Party;
(a) the other Members shall have the option to purchase
all but not less than all the Interest in the Corporation owned by the
Retiring Party on a pro rata basis equal to the Interest in the Corporation
then held by each Member, which option shall be exercised by giving written
notice to the Retiring Party or his Personal Representative and to the
Corporation within thirty (30) days of the said event; or
(b) in the event the other Members do not so elect, the
Corporation shall have the option to purchase all but not less than all of
the Interest in the Corporation owned by the Retiring Party or his personal
Representative within thirty (30) days of the expiry of the option period
specified in Article 7.02 (a) hereof,
for a price and in the manner calculated and set forth in Articles
8.03 through 8.06 hereof. If any Member does not take up his option for his
pro rate proportion of the Interest in the Corporation of the Retiring Party,
the unclaimed Interest in the Corporation shall be used to satisfy any
request made by any other Members who have indicated that they desire to
purchase the said Interest in the Corporation in excess of their pro rata
proportion.
8.03 The purchase price for any Interest in the Corporation to be
purchased pursuant to the provisions of this Article Eight shall be equal to
the fair market value of such Interest in the Corporation at the date that
written notice is given by the purchasing Members or the Corporation, as the
case may be, (hereinafter referred to as the "Purchaser"), of its intention
to purchase the Interest in the Corporation of the Retiring Party. If the
Purchaser and the Retiring Party, or his Personal Representative, are
unable to agree as to the fair market value of the Interest in the
Corporation to be purchased, such determination shall be made by the
Corporation's Accountant.
8.04 If the parties do not agree with the valuation made by the
Corporation's Accountant, then the Purchaser shall nominate a representative
and the Retiring Party or his Personal Representative shall nominate a
representative, the two representatives so nominated shall nominate a
third representative and a majority of the three representatives shall
select a qualified appraiser to make the necessary fair market value
determination. The Purchaser and the Retiring Party shall pay for the
cost of their own representatives and the costs of the third representative
and the qualified appraiser shall be borne equally by the Purchaser and by
the Retiring Party.
8.05 In arriving at the valuation, the qualified appraiser shall:
(a) determine the fair market value of the Interest in
the Corporation as of the appropriate date without premium for control or
discount for minority;
(b) refer to and use as a guideline the valuation, if
any, last determined pursuant to the provisions of this Article Eight; and
(c) consider any written representations which either
the Purchaser or Retiring Party may make.
The valuation determined by the appraiser in accordance with
this Article Eight shall be binding upon all of the parties hereto.
8.06 Unless other terms of sale are agreed to by the Members, the
terms of any sale under this Article Eight shall be as follows:
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(a) a minimum of twenty (20%) percent of the total
purchase price shall be paid at the time of closing by certified check
against delivery of the relevant Certificates duly endorsed in blank
with signatures guaranteed. The unpaid balance of the total purchase price,
if any, from time to time of the purchase shall bear interest from the time
of closing at a rate per annum equal to the prime lending rate charged by
the Corporation's bank at the time of closing plus two (2%) percent, and
such principal and interest shall be paid in twelve (12) equal monthly
consecutive installments commencing one (1) calendar month from the time of
closing. The Purchaser shall execute and deliver to the Retiring Party a
promissory note in the amount equal to the unpaid balance of the purchase
price at the time of closing and bearing interest as recited above. Default
of any payment of principal or interest shall, at the option of the holder
of the promissory note, cause the entire balance thereof to mature, provided
that the Purchaser may prepay the same in whole or in part, in reverse order
of maturity, without notice or bonus payments;
(b) the closing shall be at 10:00 o'clock a.m. at the
registered office of the Corporation on the sixtieth (60th) day following
the event causing one of the Members to become a Retiring Party;
(c) if the Retiring Party refuses or neglects to
complete the sale for any reason, the Purchaser shall have the right, upon
payment of the purchase price to the credit of the Retiring Party in
any chartered bank in the State of Colorado for and on behalf of and in the
name of the Retiring Party or his nominee or nominees, to execute and
deliver such transfers, resignations and other documents as
may be necessary or desirable in order to complete the transaction.
Article IX
Buy-Sell Provisions
Section 1. Buy-Sell Provisions:
9.01 Except in cases where Article Eight, which supersedes the
provisions hereof, would apply, any Member (hereinafter referred to as the
"Offering Party") may, at any time during the term of the Agreement, send a
offer in writing to the other Members, (hereinafter referred to individually
as a "Notified Party" and collectively as the "Notified Parties"), which
shall be signed by the Offering Party and shall be an offer to sell to the
Notified Parties, on a pro rata basis equal to the Interest in the
Corporation held by each Notified Party, all of the Interest in the
Corporation owned by the Offering Party at an arbitrary price and on terms
stipulated in the offer. Each Notified Party shall have a period of
sixty (60) days following the delivery of the offer to accept by notice in
writing the offer in accordance with its terms.
9.02 If one or more of the Notified Parties is prepared to
purchase his pro rata portion of the Interest in the Corporation, (the
"Accepting Party" or "Accepting Parties", as the case may be), but the
other Notified Party or Notified Parties are not so prepared, then the
Accepting Party or Accepting Parties shall have the first right and option
to purchase all of the Interest in the Corporation owned by the Offering
Party on a pro rata basis equal to the Interest in the Corporation held by
the Accepting Parties at the specified price. The Accepting Party or
Accepting Parties shall have a period of thirty (30) days within which to
exercise the said option. If the Accepting Party or Accepting Parties elect
to exercise the said option within the time stipulated the Accepting Party
or Accepting Parties shall then purchase and pay for all of the Interest in
the Corporation owned by the Offering Party at the specified price.
9.03 The terms of sale under this Article Nine shall be as follows:
(a) the purchase price shall be paid as set out in the
offer made pursuant to Article 9.01 hereof;
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(b) the closing shall be at 10:00 o'clock a.m. at the
registered office of the Corporation on the sixtieth (60th) day following
the date of delivery of the offer under Article 9.01;
(c) if the selling Member(s) refuses or neglects to
complete the sale for any reason, the purchasing Member(s) shall have the
right, upon payment of the purchase price to the credit of the selling Member
(s) at any chartered bank in the State of Colorado for and on behalf of and
in the name of the selling Member(s) or his nominee(s), to execute and
deliver such transfers, resignations and other documents as may be necessary
or desirable in order to complete the transaction.
9.04 The rights granted by this Article Nine are in lieu of any
rights, statutory or otherwise, which a dissenting Member may now or
hereafter have to require a party hereto to purchase any of his
Interest in the Corporation in the capital stock of the Corporation.
9.05 The provisions of Article 9.01 shall, in any event, be
subject to the compliance by the selling Member(s) with applicable law and
the obtaining of requisite approvals for transfer thereunder. The closing
date referred to in Article 9.03 is hereby deemed to be extended by the
amount of time of any delay or delays occasioned by a regulatory or
governmental agency which is required to give approval to a transfer
hereunder.
Article X
Right of First Refusal
Section 1. Right of First Refusal:
10.01 Except in cases where Article Eight or Article Nine, which
shall supersede the provisions hereof, would apply, no Member shall
entertain offers for the purchase of his Interest in the Corporation
nor make agreements for the sale, transfer or assignment of his Interest
in the Corporation except upon compliance with this Article Ten, (and where
applicable, compliance with Article Eleven), and subject to the terms and
conditions hereinafter set forth:
(a) no sale, transfer or assignment of Interest in the
Corporation shall be considered by a Member unless he shall have first
received a bona fide offer in writing form from a third party dealing at
arm's length, who is a responsible purchaser of good business reputation
and who has agreed to enter into an agreement with the remaining Members of
the Corporation identical to this Agreement, (except changes in the
Agreement required because it has ceased to apply to a party hereto),
to purchase all of his Interest in the Corporation, which offer shall
provide that the purchase price shall be payable in cash;
(b) a party to the Agreement receiving an offer as
contemplated by subsection (a) of this Article 10.01, (herein referred to as
the "Selling Party"), which the Selling Party is prepared to accept shall,
within ten (10) days of the receipt of such offer, deliver a copy of such
offer, together with his own offer to sell all of the Interest in the
Corporation so proposed to be sold, to the other Members upon the same terms
and conditions as the third party shall have offered;
(c) the Members receiving the offer of the Selling Party
shall have the first right and option to purchase on a pro rata basis the
Interest in the Corporation to be sold by the Selling Party for a period of
thirty (30) days from the date of receipt of the offer of the Selling Party,
such right and option to be exercised before the expiration of such thirty
(30) days by notice in writing;
(d) if the other Members accept the offer of the Selling
Party within the time stipulated, they shall purchase on a pro rata basis
all of the Interest in the Corporation owned by the Selling Party upon the
same terms and conditions as the third party shall have offered;
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(e) if one or more of the other Members is prepared to
purchase his pro rata portion of the Interest in the Corporation, (the
"Accepting Party" or "Accepting Parties", as the case may be), but
the other Member or Members are not so prepared, then the Accepting Party
or Accepting Parties shall have the first right and option to purchase all
of the Interest in the Corporation of the Selling Party on a pro rata basis
equal to the Interest in the Corporation held by the Accepting Parties,
upon the same terms and conditions as the third party shall have offered;
(f) if the other Members do not accept the offer of the
Selling Party within the time stipulated in Article 10.01(c) hereof or if
the Accepting Party or Accepting Parties elect not to exercise the right and
option set out in Article 10.01(e) hereof or do not exercise the said right
and option within the time stipulated, the Selling Party shall accept the
offer of the said third party, and complete the transaction with the said
third party in accordance with the offer of such third party and the parties
to this Agreement hereby agree to take all steps and proceedings requisite
to have such third party entered on the books of the Corporation as a Member
of the Corporation and to execute and deliver an Operating Agreement in
replacement of this Agreement. The Selling Party is hereby appointed the
agent and attorney of the other Members for the purpose of effecting
registration of the third party as a Member of the Corporation.
10.02 The provisions of Article 10.01 shall, in any event, be
subject to the compliance by the Selling Party and the third party with
applicable law and the obtaining of requisite approvals for transfer
thereunder.
Article XI
Piggyback Rights
Section 1. Piggy-back Rights. If the completion of any sale of Interest in
the Corporation to a third party in accordance with Article Ten would result
in the said third party acquiring more than a forty (40%) percent Interest
in the Corporation, each of the Members Receiving the offer of the Selling
Party, (hereinafter referred to the "Offerees"), shall have the further
right, to be exercised by notice in writing to the Selling Party within the
time limited for the acceptance of the Selling Party's offer, to require
the Selling Party to sell all but not less than all of the Interest in the
Corporation owned or controlled by each Offeree upon the same terms and
conditions as are contained in the third party's offer. If any of the
Offerees exercise such right, the Selling Party shall not complete the sale
of its Interest in the Corporation unless all of the Interest in the
Corporation of such Offerees who shall have so exercised such right are also
sold to the third party on the same terms and conditions as are contained in
the third party's offer.
Article XII
Security for Purchase of Interest in the Corporation
Section 1. Security for Purchase:
12.01 As security for the unpaid balance of the purchase price
with respect to a purchase and sale of Interest in the Corporation pursuant
to this Agreement, the purchasing Member shall pledge the said Interest in
the Corporation being the subject matter of such purchase and sale,
(hereinafter called the "Pledged Interest in the Corporation"), to and in
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favor of the disposing Member, free and clear of any lien, charge or
encumbrance of whatsoever nature.
12.02 The Certificate(s) evidencing the Pledged Interest in the
Corporation shall be endorsed in blank by the purchasing Member with
signature guaranteed at the time of closing and be delivered to the
attorneys for the Corporation, or to such other persons as the parties
hereto may agree, (hereinafter called the "Trustee"), to be held in trust
as provided herein, together with a certified copy of a resolution of the
Members of the Corporation consenting to the transfer of the said Interest
in the Corporation to the disposing Member pursuant to the provisions of
this Article Twelve. Subject as herein provided, the Trustee shall hold the
Certificates evidencing the Pledged Interest in the Corporation until the
purchase price therefore has been paid in full, at which time and upon proof
thereof being furnished to the Trustee in the form of a receipt signed by
the disposing Member and an affirmative statement of payment signed by the
purchasing Member, the Trustee shall deliver the said Certificates to the
purchasing Member.
12.03 If at any time and from time to time during the period that
the purchase price remains outstanding:
(a) any of the said Interest in the Corporation are
subdivided, consolidated, changed or reclassified; or
(b) the Corporation is re-organized or amalgamated with
another Corporation or any other event occurs which results in the
substitution or exchange of any of the Interest in the Corporation for, or
the conversion of any of the said Interest in the Corporation into other
securities;
the Corporation, forthwith after the occurrence of any such event shall
substitute for the Pledged Interest in the Corporation, a Certificate
reflecting the resulting Interest in the Corporation, or other securities.
In this connection, Certificates or other evidence of ownership of such
resulting Interest in the Corporation or other securities in transferable
form with signatures guaranteed shall be forthwith deposited with the
Trustee against receipt of the said Certificates.
12.04 Until such time as the security hereby constituted shall
become enforceable, the purchasing Member shall be entitled to and may
exercise all voting and other rights attached to the Pledged Interest in
the Corporation.
12.05 While any part of the purchase price of any Interest in the
Corporation sold pursuant to this Agreement by the disposing Member is
unpaid, the purchasing Member insofar as it is permitted by law to do so,
covenants and agrees hereby that it will not vote in favor of nor suffer the
Corporation to do any of the following, namely:
(a) to allot or issue stock, bonds or other corporate
securities;
(b) to incur any obligations or liabilities, (absolute
or contingent), except if incurred under contracts or agreements entered
into in the course of business of the Corporation;
(c) to purchase or redeem any Member's Interest in the
Corporation;
(d) to mortgage, pledge or subject to lien, charge or
any other encumbrance any assets, tangible or intangible, of the Corporation
except in the ordinary course of business;
(e) to sell or transfer any assets, cancel any debts or
claims or transact any business except in each case in the ordinary course
of the business of the Corporation;
(f) to knowingly permit any extraordinary losses or
waive any rights of substantial value to the Corporation;
(g) to enter into any agreement other than in the
ordinary course of business of the Corporation including, but not limited
to, agreements regarding increases in salaries, bonuses, payments, stock
options or deferred compensation, provided that increments may be paid to
the purchasing Member, by way of increased salary or compensation in an
amount which shall not exceed ten (10%) percent of its previous year's
aggregate consideration;
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(h) to grant options, warrants or other rights to
acquire Interest in the Corporation;
(i) to re-organize the capital structure of the
Corporation; or
(j) to merge, consolidate, amalgamate or sell the
business assets or undertakings of the Corporation unless the disposing
Member is supplied with evidence satisfactory to it that any amount owing
to it under this Agreement will be paid in full at the time of closing upon
completion of the foregoing events.
12.06 In the event that the purchasing Member defaults in payment
of the purchase price or the interest thereon or upon the breach of any of
the covenants set forth in Article 12.05 hereof, the disposing Member may
give notice thereof to the Trustee who shall forthwith give notice to the
purchasing Member that if the cure for the default is not made or such
breach is not cured by the purchasing Member within forty-five (45) days of
receiving notice thereof from the Trustee, the balance of the moneys then
remaining unpaid on account of the purchase price shall immediately become
due and payable.
If the purchasing Member fails to pay the balance of the moneys remaining
unpaid within thirty (30) days following such balance becoming due and
payable as aforesaid, the disposing Member shall have the right to realize
upon the said Interest in the Corporation by way of a sale thereof and
herein provided or, if the purchasing Member has not paid at least seventy-
five (75%) percent of the purchase price therefore, the disposing Member
shall alternatively have the right to take delivery of the Certificates
evidencing the Pledged Interest in the Corporation from the Trustee as
herein provided and continue to hold and own the same as if such Interest in
the Corporation had never been sold by it and the provisions of this
Agreement shall continue to govern the rights of the Members with respect to
the disposition of their Interest in the Corporation.
If less than seventy-five (75%) percent of the purchase price for the
Pledged Interest in the Corporation has been paid by the purchasing Member,
the disposing Member shall notify the Trustee within thirty (30) days of the
expiry of the aforesaid forty-five (45) days notice period as to whether it
intends to realize upon the Pledged Interest in the Corporation by way of a
sale thereof or intends to hold same. In the event that the disposing
Member fails to give such notice, it shall be deemed to have elected to hold
and own the Pledged Interest in the Corporation. The disposing Member
shall take delivery of the Pledged Interest in the Corporation for its own
account, in full and complete satisfaction of any claims that it may have
against the purchasing Member with respect to the unpaid balance of the
purchase price for the Pledged Interest in the Corporation and will not
pursue any other remedies available according to law. If however the
disposing Member elects to sell the said Interest in the Corporation as
provided herein, such action shall not be deemed to exclude any other remedy
which may be available to it at law to recover the moneys and interest
thereon due to it under this Agreement.
12.07 If the disposing Member elects to realize upon the Pledged
Interest in the Corporation by way of a sale, the following provisions
shall apply:
(a) any such sale shall be on the best terms which,
after making reasonable effort, the disposing Member is able to obtain;
provided however that the purchasing Member shall be given the opportunity
to obtain an offer for the purchase of the Pledged Interest in the
Corporation and if a bona fide offer is obtained by the purchasing Member
which provides for better terms, including the payment of the purchase
moneys in full by cash or certified check, then the offer obtained by the
purchasing Member shall be used for such realization;
(b) the disposing Member may, at its option, purchase
the said Interest in the Corporation on the same terms and conditions as the
best offer obtained by either the purchasing or disposing Member as provided
above; and
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(c) after deducting from the proceeds of any such sale
reasonable allowance for all costs, charges and expenses reasonably incurred
by the disposing Member in connection therewith, the residue of the moneys
arising from such sale shall be applied on account of or in payment of the
balance of the moneys and accrued interest thereon then remaining unpaid on
account of the purchase price and if any surplus remains the same shall be
paid forthwith to the purchasing Member.
Article XIII
Purchase of Interest in the Corporation by the Corporation
Section 1. Purchase of Interest in the Corporation by the Corporation:
13.01 Except in cases where Article Eight, Nine or Ten, which
shall supersede the provisions hereof, would apply, any Member, (in this
Article Thirteen referred to as the "Selling Party"), may, at any time after
ninety days, during the term of this Agreement, send a notice in writing to
the Corporation and to the other Members which shall be signed by the
Selling Party and shall be notice of the Selling Party's intention to sell
all or a portion of the Interest in the Corporation owned by the Selling
Party.
13.02 Upon receipt of any notice pursuant to Article 13.01 hereof,
the Corporation shall be obligated to purchase the Interest in the
Corporation specified in the said notice upon the terms and conditions
recited in Articles 13.03 through 13.07 hereof.
13.03 The purchase price for the Interest in the Corporation to be
purchased pursuant to the provisions of this Article Thirteen shall be
determined in accordance with Article 13.04 through 13.06.
13.04 All Members shall meet within ten (10) days following
receipt of the said notice and at such meeting shall agree on a value for
the Interest in the Corporation which the Selling Party proposes to sell.
If the parties can not agree to a valuation, then the Selling party shall
nominate a representative and the Members shall nominate a representative,
the two representatives so nominated shall nominate a third representative
and a majority of the three representatives shall select a qualified
appraiser to make the necessary fair market 90 value determination. The
Members and the Selling Party shall pay for the cost of their own
representatives and the costs of the third representative and the
qualified appraiser shall be borne equally by the Members and the Selling
Party.
13.05 In arriving at its valuation, the Valuator shall:
(a) determine the value of all property, assets and
undertaking of the Corporation, less any amount which may, according to
such valuation, be due for income or capital gain taxes if any such property,
assets or undertaking were sold;
(b) refer to and use as a guide the valuation, if any,
last determined pursuant to their Article Thirteen; and
(c) consider any written representations which any
Member may make.
13.06 As soon as is practicable but in all cases within sixty (60)
days of its appointment, the Valuator shall prepare and deliver a report to
(in this Article Thirteen referred to as the Accountant/Auditor of the
Corporation). Based upon the Valuator's report, the auditors shall
determine the value to be attributed to the Interest in the Corporation
which the Selling Party proposes to sell. The Valuator's report and the
Accountant/Auditor's determination based thereon shall both be binding upon
the Members.
13.07 Unless other terms of sale are agreed to by the Members, the
terms of sale under this Article Thirteen shall be as follows:
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(a) the Interest in the Corporation which the Selling
Party proposed to sell shall have a redemption amount equal to the value
attributed as determined above, (hereinafter referred to as the
"Redeemable Interest in the Corporation"):
(b) the Redeemable Interest in the Corporation shall
then be redeemed by the Corporation over a period not to exceed two (2)
years with a minimum annual redemption of fifty (50%) percent of the total
Redeemable Interest in the Corporation attributable to the Selling Party;
(c) if all of the Redeemable Interest in the Corporation
is immediately purchased by the Corporation, the Selling Party shall deliver
at closing a Certificate or Certificates representing the Redeemable
Interest in the Corporation to the Corporation duly endorsed by the Selling
Party in blank for transfer and/or cancellation;
(d) if on closing the Corporation does not redeem all of
the Redeemable Interest in the Corporation, the following provisions shall
apply:
(i) as stated above, the annual minimum
redemption will be fifty (50%) percent of the total Redeemable Interest in
the Corporation;
(ii) an annual dividend in the aggregate
to be equivalent to the interest that would accrue each year if the prime
lending rate charged by the Corporation's banker minus fifty (50%) percent
was applied to the aggregate redemption amount of all Redeemable Interest
in the Corporation not yet paid by the Corporation;
(iii) in the event any portion of the
Redeemable Interest in the Corporation is not paid by the Corporation within
two (2) years of the original closing date, thereafter the interest rate to
be used in determining the annual dividend payable on the outstanding
Redeemable Interest in the Corporation shall be varied to the prime lending
rate charged by the Corporation's banker, plus two (2%) percent;
(iv) the Selling Party shall deliver to
the Accountant/Auditor of the Corporation all Certificates representing the
Redeemable Interest in the Corporation duly endorsed in blank for transfer
and such Interest in the Corporation shall be held in escrow by the
Accountant/Auditor of the Corporation until the Accountant/Auditor receives,
on behalf of the Selling Party, the unpaid balance of the redemption amount
and dividends in full calculated as aforesaid;
(v) so long as the Corporation is not in
default in payment of any redemption amount or dividends thereon, the
Accountant/Auditor shall execute and deliver to the Corporation or its
nominee from time to time such instruments of proxy with respect to the
Redeemable Interest in the Corporation held in escrow as the Corporation
may request;
(vi) if the Corporation is in default in
respect of the payment of any redemption amount or dividends thereon, the
Accountant/Auditor shall give written notice to the Corporation, (with a
copy to the Selling Party), describing the nature of the default within
thirty (30) days from the occurrence of the default. If the default is not
corrected by the Corporation within the grace period, the Accountant/Auditor
of the Corporation will, at the request of the Selling Party, return all of
the Redeemable Interest in the Corporation to the Selling Party who shall be
entitled to re-transfer the said Interest in the Corporation into its own
name and thereafter require the Corporation to re-convert the Redeemable
Interest in the Corporation into the original Interest in the Corporation
held by the Selling Party. The Selling Party shall be entitled to retain
the portion of the redemption amount received by it and the Corporation
shall be discharged from liability for payment of the remaining unpaid
balance of the redemption amount; and
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(vii) upon payment in full by the
Corporation of the redemption amount and dividends thereon, the Accountant/
Auditor shall deliver to the Corporation the Certificates representing the
Redeemable Interest in the Corporation duly endorsed in blank for transfer
and/or cancellation.
13.08 The rights granted by this Article Thirteen are in lieu of
any rights, statutory or otherwise, which a dissenting Member may now or
hereafter have to require a party hereto to purchase any of its Interest
in the Corporation.
13.09 The provisions of Article Thirteen shall, in any event, be
subject to the compliance of the selling Member(s) with applicable law and
the obtaining of requisite approvals for transfer thereunder. Any closing
date is hereby deemed to be extended by the amount of time of any delay or
delays occasioned by a regulatory or governmental agency which is required
to give approval to transfer hereunder.
Article XIV
Jurisdiction
Section 1. Jurisdiction: This Agreement shall be governed according to the
Laws of the state of Colorado, whose Courts shall have sole and exclusive
jurisdiction over any matter herein.
Article XV
General
Section 1. Miscellaneous Provisions:
15.01 Each of the parties severally agrees to indemnify each of
the other parties hereto against, and reimburse each of the other parties
for, any and all liabilities which such other party or parties may incur or
become subject to an amounts which such other party or parties may pay or
be required to pay which are in excess of the proportionate share of the
liabilities and obligations of the parties under the terms of this
Agreement, provided that nothing in this Article, 15.01 shall in any way
be deemed to or shall require any party to incur any liability or provide
any funds other than as may be expressly provided for in any other
provisions of this Agreement.
15.02 No consent or waiver, expressed implied, by any party hereto
of any breach or default by any other party hereto in the performance of his
obligations hereunder shall be deemed or construed to be a consent to or
waiver of any other breach or default in the performance by such other party
of the same or any other obligations of such party hereunder. Failure on
the part of any party to complain of any act or failure to act of any other
party or to declare the other party in default, irrespective of how
long such failure continues, shall not constitute a waiver by the first
mentioned party of his rights hereunder.
15.03 This Agreement shall continue to be effective notwithstanding
the sale of Interest in the Corporation by a Member howsoever, and this
Agreement shall be binding upon the remaining Members.
15.04 The invalidity of any provision of this Agreement or any
covenant herein contained on the part of any party shall not affect the
validity of any other provision or covenant hereof or herein contained which
shall remain in full force and effect.
15.05 The Members agree to sign all such documents and do all
such things as may be necessary or desirable to more completely and
effectively carry out the terms and intentions of this Agreement and to
cause the Corporation to act in the manner contemplated by this Agreement
and, to the extent permitted by law, cause the Board of Directors so to act.
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15.06 Nothing in this Agreement shall be deemed in any way or for
any purposes to constitute any party a partner of, a member of a joint
venture or joint enterprise with any other party to this Agreement in the
conduct of any business or otherwise.
15.07 Time shall be of the essence of this Agreement.
15.08 This Agreement constitutes the entire agreement among
the parties and shall not be modified, amended or assigned except with the
consent in writing of the parties hereto. A consent to any assignment
required hereunder may be arbitrarily or unreasonably withheld until the
proposed assignee executes and delivers such documents as, in the opinion of
the legal counsel of the Corporation, are necessary to oblige himself or
itself hereunder.
15.9 If at the time of any sale of Interest in the Corporation as
contemplated in this Agreement:
(a) there are any loans outstanding from the Corporation
to the selling Member(s) or vise versa; such loans shall be paid; and
(b) there are any securities or covenants lodged by the
selling Member(s) with any person or institution or any personal guarantees
given by the selling Member(s) or his nominee(s) to secure any indebtedness,
liability or obligation of the Corporation, the remaining parties to this
Agreement shall use their best efforts to have the selling Member(s) and any
nominee(s) released therefrom. If, notwithstanding such best efforts, the
releases as aforesaid are not obtained, the remaining parties shall deliver
to the selling Member(s) their indemnity in writing indemnifying the selling
Member(s) and his nominee(s) from any and all liabilities thereunder.
15.10 All notices contemplated or required to be given hereunder
shall be effective if sent by prepaid registered mail or delivered personally
to any of the parties at the address of that party as it appears on the
books of the Corporation from time to time, or at such other address as the
party to whom such notice is to be given otherwise directs in writing. Any
notice delivered aforesaid shall be effective on the date of delivery and
any notice mailed as aforesaid shall be effective two (2) business days
after the mailing thereof, provided that where interruption of mail services
is likely by reason of any strike or other labor dispute, notice shall be
by personal delivery only to the person or to the address as aforesaid.
15.11 In this Agreement, wherever the singular and masculine or
neuter are used, they shall be construed as is the plural or the feminine or
the neuter had been used, where the context or the party or parties so
requires, and the rest of the sentence shall construed as if the grammatical
and terminological changes thereby rendered necessary had been made.
15.12 This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their Personal Representatives, successors and
permitted assign and any reference to a right or a obligation of a party
hereto shall be deemed to include a reference to such Personal
Representatives, successors and permitted assigns to the extent that the
context requires.
15.13 This Agreement may be executed in any number of counterparts,
all of which shall constitute one and the same instrument, and such
instrument shall be deemed made on the first day of March, 1999,
irrespective of the time or times when any counterpart may be made,
executed and delivered.
15.14 Interest in the Corporation as used herein refers to a
Member's interest in the Capital of the Corporation.
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15.15 In consideration of the sums paid on behalf of RTG-TPD
Holdings Co. Ltd. (RTG) for logo development, RTG hereby grants the company
non-exclusive use of the Trademarks, KOMART and KOMART MALL, provided
however such use is for and in connection with the mall being developed at
2000 S. Havana St., Denver CO only.
In Witness Whereof the parties hereto have duly executed this Agreement as
of the date and year first above written.
Signed
and Delivered
in the presence of: )
)
) /s/Chang Moo Yi/s/
) Member
)
) _________________
) Member
)
) RTG-TPD Holdings Co. Ltd.
) /s/Stan J. H. Lee/s/
) Per:
)
) The Company
) /s/Stan J. H. Lee/s/
) Per:
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Operating Agreement
of
RTG-TPD HOLDINGS CO., LLC.
(The Corporation)
Dated: March 1, 1999.
Article I
Offices
Section 1. Principal Office: The principal office of the Corporation shall
be located at 2000 South Havana St., Aurora, Colorado 80014.
Section 2. Additional Offices: The Corporation may have such additional
offices at such other place within or without the State of Colorado as the
Members may from time to time determine or as the business of the Corporation
may require.
Article II
Meetings
Section 1. Annual Meeting: An annual meeting of Members shall be held within
five (5) months after the close of the fiscal year of the Corporation on
such date and at the time and place as shall be fixed by the Members. At the
annual meeting the Members shall elect an Operating Manager and other
officers and transact such other business as may properly be brought before
the meeting.
Section 2. Special Meeting: A special meeting of Members may be called at
any time by the Operating Manager and shall be called by the Operating
Manager at the request in writing of a majority of the Members entitled to
vote at such meeting. Any such request shall state the purpose or purposes
of the proposed meeting. Business transacted at any special meeting of
Members shall be confined to the purposes set forth in the notice thereof.
Special meetings may be held by telephonic Conference Call, provided all
Members agree to the said Meeting by telephonic Conference Call in writing,
and attest to any resolutions passed at the said meeting in writing.
Section 3. Notice of Meetings: Written notice of the time, place and purpose
of every meeting of Members (and, if other than an annual meeting, the
person or persons at whose discretion the meeting is being called), shall
be given by the Operating Manager to each Member of record entitled to vote
at such meeting, not less than five nor more than fifty days prior to the
date set for the meeting. Notice shall be given either personally or by
mailing said notice by first class mail to each Member at his address
appearing on the record book of the Corporation or at such other address
supplied by him in writing to the Operating Manager of the Corporation for
the purpose of receiving notice.
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A written waiver of notice setting forth the purposes of the meeting for
which notice is waived, signed by the person or persons entitled to such
notice, whether before or alter the time of the meeting stated therein,
shall be deemed equivalent to the giving of such notice. The attendance
by a Member at a meeting either in person or by proxy without protesting
the lack of notice thereof shall constitute a waiver of notice of such
Member.
All notices given with respect to an original meeting shall extend to any
and all adjournments thereof and such business as might have been transacted
at the original meeting may be transacted at any adjournment thereof; no
notice of any adjourned meeting need be given if an announcement of the
time and place of the adjourned meeting is made at the original meeting.
Section 4. Quorum: The holders of at least 70% in interest of the Members
present in person or represented in proxy, shall be requisite and shall
constitute a quorum at all meetings, of members except as otherwise provided
by statute or the Articles of Organization. A Members Interest in the
Corporation shall be in proportion to his contribution to the capital of
the Corporation adjusted from time to time to reflect additions or
withdrawals. The phrase "at least 70% in interest" of the Members shall
mean Members who, in the aggregate, shall have Capital Contributions in
excess of seventy (70%) percent of the total Capital Contributions of all of
the Members. If, however, a quorum shall not be present or represented at
any meeting of Members, the Members entitled to vote thereat, present in
person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At such adjourned meeting at which
a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified when
a quorum is once present to organize a meeting, such quorum is not deemed
broken by the subsequent withdrawal of any Members.
Section 5. Voting: Every Member entitled to vote at any meeting shall be
entitled to vote in accordance with his Interest in the Corporation held by
him of record on the date fixed as the record date for said meeting and may
so vote in person or by proxy. Any Corporation action shall be authorized
by a majority in interest of the votes cast by the Members entitled to vote
thereon except as may otherwise by provided by statute, the Articles of
Organization or this Operating Agreement.
Section 6. Proxies: Every proxy must be signed by the Members entitled to
vote or by his duly authorized attorney-in-fact and shall be valid only if
filed with the Operating Manager of the Corporation prior to the
commencement of voting on the matter in regard to which said proxy is to
be voted. No proxy shall be valid after the expiration of eleven months from
the date of its execution unless otherwise expressly provided in the proxy.
Every proxy shall be revocable at the pleasure of the person executing it
except as otherwise provided by statute. Unless the proxy by its terms
provided for a specific revocation date and except as otherwise provided by
statute, revocation of a proxy shall not be effective unless and until such
revocation is executed in writing by the Member who executed such proxy
and the revocation is filed with the Operating Manager of the Corporation
prior to the voting of the proxy.
Section 7. Minutes of Meetings: Minutes of the Corporation's last meeting,
and the resolutions passed thereat, shall be prepared for every meeting of
Members and shall be produced by the Operating Manager thereat. Annual
statements reflecting the financial status of the Corporation shall be
distributed to all members no later than 45 days after the end of every
fiscal year, and at least 30 days before any annual meeting. Minutes of any
Meeting shall be prepared by the Operating Manager and sent to the Members
at their last known address by ordinary mail not later than 30 days after
any meeting.
Section 8. Inspectors at Meetings: In advance of any Members meeting, the
Members may appoint one or more inspectors to act at the meeting or at any
adjournment thereof and if not so appointed the person presiding at any such
meeting may, and at the request of any Member entitled to vote thereat shall,
appoint one or more inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and
according to the best of his ability.
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Section 9. Conduct of Meeting: All meetings of Members shall he presided
over by the Operating Manager, or if he is not present, by a Member thereby
chosen by the Members at the meeting. The Operating Manager or the person
presiding at the meeting shall appoint any person present to act as secretary
of the meeting.
Article III
Officers
Section 1. Executive Officers: The officers of the Corporation shall be an
Operating Manager, a President, a Secretary and a Treasurer and such other
officers as the Members may determine. The same person may hold any two or
more offices. The initial Operating Manager shall be Stan J. H. Lee,
and the initial President shall be Stan J. H. Lee. These Officers may be
removed or replaced with, and only with, the unanimous consent of the Members.
Section 2. Election: Except as provided in Article 4(2), the Operating
Manager and the other officers shall be chosen by the Members and shall hold
office for the term for which elected and until their successors have been
elected and qualified. The Members may from time to time appoint all such
other officers as they determine and such officers shall hold office from
the time of their appointment and qualifications until the time at which
their successors are appointed and qualified. The Members may fill
a vacancy in any office arising from any cause for the unexpired portion
of the term.
Section 3. Removal: Subject to Article 4(2), ante, the Members may remove
any officer from office at any time with or without cause.
Section 4. Delegation of Powers: The Members may, with the unanimous consent
of all Members, from time to time delegate the powers or duties of any
officer of the Corporation, in the event of his absence or failure to act
otherwise, to any other officer or Member of person whom they may select.
Section 5. Compensation: The compensation of each officer shall be such as
the Members may from time to time determine.
Section 6. Operating Manager: The Operating Manager shall be the chief
executive officer of the Corporation and shall have general charge of the
business and affairs of the Corporation, subject, however, to the right of
the Members to confer specified powers on officers and subject generally to
the direction of the Members. The president shall have those powers as may
be conferred upon him by the Operating Manager, provided, however, that such
powers shall not exceed the powers conferred upon the Operating Manager.
Unless otherwise ordered by the Members, the Operating Manager, or in the
event of his inability to act, the President, shall have full power and
authority on behalf of the Corporation to attend and to act and to vote at
any meeting of security holders of companies in which the Corporation may
hold securities, and at such meetings shall possess and may exercise any and
all rights and powers incident to the ownership of such securities, and
which, as the owner thereof, the Corporation might have possessed and
exercised, if present. The Members by unanimous resolution from time to
time may confer like powers upon any other person or persons.
Section 7. Secretary: The Secretary shall keep the minutes of all meetings
and record all votes of Members and committees in a book to be kept for that
purpose. He shall give or cause to be given any required notice of meetings
of Members or any committee, and shall be responsible for preparing or
obtaining from a transfer agent appointed by the Members, the list of
Members required by Article II, Section 7 hereof. He shall be the custodian
of the seal of the Corporation and shall affix or cause to be affixed the
seal to any instrument requiring it and attest the same and exercise the
powers and perform the duties incident to the office of Secretary subject to
the direction of the Members.
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Section 8. Treasurer: Subject to the direction of the Members, the Treasurer
shall have charge of the general supervision of the funds and securities of
the Corporation and the books of account of the Corporation and shall
exercise the powers and perform the duties incident to the office of the
Treasurer. If required by the Members, he shall give the Corporation a
bond in such sum and with such sureties as may be satisfactory to the
Members for the faithful discharge of his duties.
Section 9. Other Officers: All other officers, if any, shall have such
authority and shall perform such duties as may be specified from time to
time by the Members.
Article IV
Committees
Section 1. Committees: The Members, by resolution of a majority in interest
of the Members, may designate from among themselves one or more committees,
each consisting of three or more Members, and each of which, to the extent
provided in such resolution, shall have all the authority of the Members
except that no such committee shall have the authority as to any of the
following matters:
(a) The filing of vacancies in any committee;
(b) The fixing of compensation of the Members for serving on any committee;
(c) The amendment of repeal of this Operating Agreement or the adoption of
a new Operating Agreement; and;
(d) The amendment or repeal of any resolution of the Members which by its
terms shall not be so amenable or repealable.
The Members may designate one or more Members as alternate members of any
such committee who may replace any absent member or members at any such
meeting of such committee.
Each such committee shall serve at the pleasure of the Members. The Members
shall have the power at any time to fill vacancies in, to change the
membership of, or to discharge any such committee. Committees shall keep
minutes of their proceedings and shall report the same to the Members at
the meeting of the Members next succeeding, and any action by the committee
shall be subject to revision and alteration by the Members, provided that no
rights of a third party shall be affected in any such revision or alteration.
Article V
Resignations
Section 1. Resignations: Any officer of the Corporation or any members of
any committee of the Members may resign at any time by giving written notice
to the Members, the Operating Manager or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time is not
specified therein, upon the receipt thereof, irrespective of whether any
such resignations shall have been accepted.
Article VI
Certificates Representing Membership
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Section 1. Form of Certificates: Each Member shall be entitled to a
Certificate or Certificates in such form as prescribed by the Members and by
any applicable statutes, which Certificate shall certify the interest of the
Member in the Corporation. The Certificates shall be numbered and registered
in the order in which they are issued and upon issuance the name in which
each Certificate has been issued together with the Interest in the
Corporation represented thereby and the date of issuance shall be entered in
the Membership book of the Corporation by the Secretary or by the transfer
agent of the Corporation. Each Certificate shall be signed by the Operating
Manager and countersigned by the Secretary and shall be sealed with the
Corporation Seal or facsimile thereof. The signatures of the officers upon
a Certificate may also be facsimiles if the Certificate is countersigned by
a transfer agent or registered by a registrar other than the Corporation
itself or an employee of the Corporation. In case any officer who has
signed or whose facsimile signature has been placed upon a Certificate
shall have ceased to be such officer before the Certificate is issued, such
Certificate may be issued by the Corporation with the same effect as if the
officer had not ceased to be such at the time of its issue.
Section 2. Record Date for Members: For the purpose of determining the
Members entitled to notice of; or to vote at any meeting of Members or any
adjournment thereof or to express consent or dissent from any proposal
without a meeting, or for the purpose of determining the Members entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Members may fix, in advance, a date as the
record date for any such determination of Members. Such date shall not be
more than fifty (50) nor less than ten (10) days before the date of any
meeting nor more than fifty days prior to any action taken without a
meeting, the payment of any dividend or the allotment of any rights, or
any other action.
Article VII
General Restriction on Transfer of Interest
Section 1. General Restriction on Transfer of Interest: Except as
hereinafter provided in this Agreement, no Member shall transfer by sale,
gift, bequest or otherwise, or encumber by pledge, assignment, mortgage,
charge or otherwise, or otherwise dispose of or cease to be the holder of
any of the interest in the Corporation of which it is at any time the
registered or beneficial owner, without the prior written consent of the
other Members. In the case of any permitted transfer, no Member shall
sell any of its Interest in the Corporation unless the purchaser is already
or becomes a party to this Agreement upon completion of the applicable sale.
Article VIII
Bankruptcy and Default
Section 1. Bankruptcy and Default Provisions:
8.01 Upon the happening of the earliest of:
(a) the bankruptcy of any one or more of the Members,
or in the event any one or more of the Members is at any time in breach of
or in default under any of the provisions of this Agreement, which breach
or default is not remedied within thirty (30) days of receipt or written
notice of same from the Corporation; or
(b) the bankruptcy of any one or more of the Members or
in the event any one or more of the Members is at any time in breach of or
in default under any of the provisions of this Agreement, which breach or
default is not remedied within thirty (30) days of receipt of written
notice of same from the Corporation;
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then, upon the happening of such event, in the case of subparagraph
(a), The Member(s) shall, and in the case of subparagraph (b), the Member(s)
shall, for the purposes of this Article Eight, be deemed to be a "Retiring
Party".
8.02 Upon the happening of an event causing one of the Members to
become a Retiring Party;
(a) the other Members shall have the option to purchase
all but not less than all the Interest in the Corporation owned by the
Retiring Party on a pro rata basis equal to the Interest in the Corporation
then held by each Member, which option shall be exercised by giving written
notice to the Retiring Party or his Personal Representative and to the
Corporation within thirty (30) days of the said event; or
(b) in the event the other Members do not so elect, the
Corporation shall have the option to purchase all but not less than all of
the Interest in the Corporation owned by the Retiring Party or his personal
Representative within thirty (30) days of the expiry of the option period
specified in Article 7.02 (a) hereof,for a price and in the manner
calculated and set forth in Articles 8.03 through 8.06 hereof. If any
Member does not take up his option for his pro rate proportion of the
Interest in the Corporation of the Retiring Party, the unclaimed Interest
in the Corporation shall be used to satisfy any request made by any other
Members who have indicated that they desire to purchase the said Interest
in the Corporation in excess of their pro rata proportion.
8.03 The purchase price for any Interest in the Corporation to be
purchased pursuant to the provisions of this Article Eight shall be equal to
the fair market value of such Interest in the Corporation at the date that
written notice is given by the purchasing Members or the Corporation, as the
case may be, (hereinafter referred to as the "Purchaser"), of its intention
to purchase the Interest in the Corporation of the Retiring Party. If the
Purchaser and the Retiring Party, or his Personal Representative, are
unable to agree as to the fair market value of the Interest in the
Corporation to be purchased, such determination shall be made by the
Corporation's Accountant.
8.04 If the parties do not agree with the valuation made by the
Corporation's Accountant, then the Purchaser shall nominate a representative
and the Retiring Party or his Personal Representative shall nominate a
representative, the two representatives so nominated shall nominate a
third representative and a majority of the three representatives shall
select a qualified appraiser to make the necessary fair market value
determination. The Purchaser and the Retiring Party shall pay for the cost
of their own representatives and the costs of the third representative and
the qualified appraiser shall be borne equally by the Purchaser and by the
Retiring Party.
8.05 In arriving at the valuation, the qualified appraiser shall:
(a) determine the fair market value of the Interest in
the Corporation as of the appropriate date without premium for control or
discount for minority;
(b) refer to and use as a guideline the valuation, if
any, last determined pursuant to the provisions of this Article Eight; and
(c) consider any written representations which either
the Purchaser or Retiring Party may make.
The valuation determined by the appraiser in accordance
with this Article Eight shall be binding upon all of the parties hereto.
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8.06 Unless other terms of sale are agreed to by the Members, the
terms of any sale under this Article Eight shall be as follows:
(a) a minimum of twenty (20%) percent of the total
purchase price shall be paid at the time of closing by certified check
against delivery of the relevant Certificates duly endorsed in blank
with signatures guaranteed. The unpaid balance of the total purchase
price, if any, from time to time of the purchase shall bear interest from
the time of closing at a rate per annum equal to the prime lending
rate charged by the Corporation's bank at the time of closing plus two
(2%) percent, and such principal and interest shall be paid in twelve (12)
equal monthly consecutive installments commencing one (1) calendar month
from the time of closing. The Purchaser shall execute and deliver to the
Retiring Party a promissory note in the amount equal to the unpaid balance
of the purchase price at the time of closing and bearing interest as recited
above. Default of any payment of principal or interest shall, at the
option of the holder of the promissory note, cause the entire balance
thereof to mature, provided that the Purchaser may prepay the same in whole
or in part, in reverse order of maturity, without notice or bonus payments;
(b) the closing shall be at 10:00 o'clock a.m. at the
registered office of the Corporation on the sixtieth (60th) day following
the event causing one of the Members to become a Retiring Party;
(c) if the Retiring Party refuses or neglects to
complete the sale for any reason, the Purchaser shall have the right, upon
payment of the purchase price to the credit of the Retiring Party in any
chartered bank in the State of Colorado for and on behalf of and in the name
of the Retiring Party or his nominee or nominees, to execute and deliver
such transfers, resignations and other documents as may be necessary or
desirable in order to complete the transaction.
Article IX
Buy-Sell Provisions
Section 1. Buy-Sell Provisions:
9.01 Except in cases where Article Eight, which supersedes the
provisions hereof, would apply, any Member (hereinafter referred to as the
"Offering Party") may, at any time during the term of the Agreement, send a
offer in writing to the other Members, (hereinafter referred to individually
as a "Notified Party" and collectively as the "Notified Parties"), which
shall be signed by the Offering Party and shall be an offer to sell to the
Notified Parties, on a pro rata basis equal to the Interest in the
Corporation held by each Notified Party, all of the Interest in the
Corporation owned by the Offering Party at an arbitrary price and on terms
stipulated in the offer. Each Notified Party shall have a period of sixty
(60) days following the delivery of the offer to accept by notice in writing
the offer in accordance with its terms.
9.02 If one or more of the Notified Parties is prepared to
purchase his pro rata portion of the Interest in the Corporation, (the
"Accepting Party" or "Accepting Parties", as the case may be), but the
other Notified Party or Notified Parties are not so prepared, then the
Accepting Party or Accepting Parties shall have the first right and option
to purchase all of the Interest in the Corporation owned by the
Offering Party on a pro rata basis equal to the Interest in the Corporation
held by the Accepting Parties at the specified price. The Accepting Party
or Accepting Parties shall have a period of thirty (30) days within which
to exercise the said option. If the Accepting Party or Accepting Parties
elect to exercise the said option within the time stipulated the Accepting
Party or Accepting Parties shall then purchase and pay for all of the
Interest in the Corporation owned by the Offering Party at the specified
price.
9.03 The terms of sale under this Article Nine shall be as follows:
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(a) the purchase price shall be paid as set out in the
offer made pursuant to Article 9.01 hereof;
(b) the closing shall be at 10:00 o'clock a.m. at the
registered office of the Corporation on the sixtieth (60th) day following
the date of delivery of the offer under Article 9.01;
(c) if the selling Member(s) refuses or neglects to
complete the sale for any reason, the purchasing Member(s) shall have the
right, upon payment of the purchase price to the credit of the Selling
Member(s) at any chartered bank in the State of Colorado for and on behalf
of and in the name of the selling Member(s) or his nominee(s), to execute
and deliver such transfers, resignations and other documents as may be
necessary or desirable in order to complete the transaction.
9.04 The rights granted by this Article Nine are in lieu of any
rights, statutory or otherwise, which a dissenting Member may now or
hereafter have to require a party hereto to purchase any of his
Interest in the Corporation in the capital stock of the Corporation.
9.05 The provisions of Article 9.01 shall, in any event, be
subject to the compliance by the selling Member(s) with applicable law and
the obtaining of requisite approvals for transfer thereunder. The closing
date referred to in Article 9.03 is hereby deemed to be extended by the
amount of time of any delay or delays occasioned by a regulatory or
governmental agency which is required to give approval to a transfer
hereunder.
Article X
Right of First Refusal
Section 1. Right of First Refusal:
10.01 Except in cases where Article Eight or Article Nine, which
shall supersede the provisions hereof, would apply, no Member shall
entertain offers for the purchase of his Interest in the Corporation nor
make agreements for the sale, transfer or assignment of his Interest in the
Corporation except upon compliance with this Article Ten, (and where
applicable, compliance with Article Eleven), and subject to the terms and
conditions hereinafter set forth:
(a) no sale, transfer or assignment of Interest in the
Corporation shall be considered by a Member unless he shall have first
received a bona fide offer in writing form from a third party dealing at
arm's length, who is a responsible purchaser of good business reputation
and who has agreed to enter into an agreement with the remaining Members of
the Corporation identical to this Agreement, (except changes in the Agreement
required because it has ceased to apply to a party hereto), to purchase all
of his Interest in the Corporation, which offer shall provide that the
purchase price shall be payable in cash;
(b) a party to the Agreement receiving an offer as
contemplated by subsection (a) of this Article 10.01, (herein referred to as
the "Selling Party"), which the Selling Party is prepared to accept shall,
within ten (10) days of the receipt of such offer, deliver a copy of such
offer, together with his own offer to sell all of the Interest in the
Corporation so proposed to be sold, to the other Members upon the same terms
and conditions as the third party shall have offered;
(c) the Members receiving the offer of the Selling Party
shall have the first right and option to purchase on a pro rata basis the
Interest in the Corporation to be sold by the Selling Party for a period of
thirty (30) days from the date of receipt of the offer of the Selling Party,
such right and option to be exercised before the expiration of such thirty
(30) days by notice in writing;
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(d) if the other Members accept the offer of the Selling
Party within the time stipulated, they shall purchase on a pro rata basis
all of the Interest in the Corporation owned by the Selling Party upon the
same terms and conditions as the third party shall have offered;
(e) if one or more of the other Members is prepared to
purchase his pro rata portion of the Interest in the Corporation, (the
"Accepting Party" or "Accepting Parties", as the case may be), but
the other Member or Members are not so prepared, then the Accepting Party
or Accepting Parties shall have the first right and option to purchase all
of the Interest in the Corporation of the Selling Party on a pro rata basis
equal to the Interest in the Corporation held by the Accepting Parties,
upon the same terms and conditions as the third party shall have offered;
(f) if the other Members do not accept the offer of the
Selling Party within the time stipulated in Article 10.01(c) hereof or if
the Accepting Party or Accepting Parties elect not to exercise the right and
option set out in Article 10.01(e) hereof or do not exercise the said right
and option within the time stipulated, the Selling Party shall accept the
offer of the said third party, and complete the transaction with the said
third party in accordance with the offer of such third party and the parties
to this Agreement hereby agree to take all steps and proceedings requisite
to have such third party entered on the books of the Corporation as a Member
of the Corporation and to execute and deliver an Operating Agreement in
replacement of this Agreement. The Selling Party is hereby appointed the
agent and attorney of the other Members for the purpose of effecting
registration of the third party as a Member of the Corporation.
10.02 The provisions of Article 10.01 shall, in any event, be
subject to the compliance by the Selling Party and the third party with
applicable law and the obtaining of requisite approvals for transfer
thereunder.
Article XI
Piggyback Rights
Section 1. Piggy-back Rights. If the completion of any sale of Interest in
the Corporation to a third party in accordance with Article Ten would result
in the said third party acquiring more than a forty (40%) percent Interest
in the Corporation, each of the Members Receiving the offer of the Selling
Party, (hereinafter referred to the "Offerees"), shall have the further
right, to be exercised by notice in writing to the Selling Party within the
time limited for the acceptance of the Selling Party's offer, to require
the Selling Party to sell all but not less than all of the Interest in the
Corporation owned or controlled by each Offeree upon the same terms and
conditions as are contained in the third party's offer. If any of the
Offerees exercise such right, the Selling Party shall not complete the sale
of its Interest in the Corporation unless all of the Interest in the
Corporation of such Offerees who shall have so exercised such right are also
sold to the third party on the same terms and conditions as are contained
in the third party's offer.
Article XII
Security for Purchase of Interest in the Corporation
Section 1. Security for Purchase:
12.01 As security for the unpaid balance of the purchase price
with respect to a purchase and sale of Interest in the Corporation pursuant
to this Agreement, the purchasing Member shall pledge the said Interest in
the Corporation being the subject matter of such purchase and sale,
(hereinafter called the "Pledged Interest in the Corporation"), to and in
favor of the disposing Member, free and clear of any lien, charge or
encumbrance of whatsoever nature.
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12.02 The Certificate(s) evidencing the Pledged Interest in the
Corporation shall be endorsed in blank by the purchasing Member with
signature guaranteed at the time of closing and be delivered to the
attorneys for the Corporation, or to such other persons as the parties
hereto may agree, (hereinafter called the "Trustee"), to be held in trust as
provided herein, together with a certified copy of a resolution of the
Members of the Corporation consenting to the transfer of the said Interest
in the Corporation to the disposing Member pursuant to the provisions of
this Article Twelve. Subject as herein provided, the Trustee shall hold the
Certificates evidencing the Pledged Interest in the Corporation until the
purchase price therefore has been paid in full, at which time and upon proof
thereof being furnished to the Trustee in the form of a receipt signed by
the disposing Member and an affirmative statement of payment signed by the
purchasing Member, the Trustee shall deliver the said Certificates to the
purchasing Member.
12.03 If at any time and from time to time during the period that
the purchase price remains outstanding:
(a) any of the said Interest in the Corporation are
subdivided, consolidated, changed or reclassified; or
(b) the Corporation is re-organized or amalgamated with
another Corporation or any other event occurs which results in the
substitution or exchange of any of the Interest in the Corporation
for, or the conversion of any of the said Interest in the Corporation into
other securities;
the Corporation, forthwith after the occurrence of any such event shall
substitute for the Pledged Interest in the Corporation, a Certificate
reflecting the resulting Interest in the Corporation, or other securities.
In this connection, Certificates or other evidence of ownership of such
resulting Interest in the Corporation or other securities in transferable
form with signatures guaranteed shall be forthwith deposited with the
Trustee against receipt of the said Certificates.
12.04 Until such time as the security hereby constituted shall
become enforceable, the purchasing Member shall be entitled to and may
exercise all voting and other rights attached to the Pledged Interest in
the Corporation.
12.05 While any part of the purchase price of any Interest in the
Corporation sold pursuant to this Agreement by the disposing Member is
unpaid, the purchasing Member insofar as it is permitted by law to do so,
covenants and agrees hereby that it will not vote in favor of nor suffer
the Corporation to do any of the following, namely:
(a) to allot or issue stock, bonds or other corporate
securities;
(b) to incur any obligations or liabilities, (absolute
or contingent), except if incurred under contracts or agreements entered
into in the course of business of the Corporation;
(c) to purchase or redeem any Member's Interest in the
Corporation;
(d) to mortgage, pledge or subject to lien, charge or
any other encumbrance any assets, tangible or intangible, of the Corporation
except in the ordinary course of business;
(e) to sell or transfer any assets, cancel any debts or
claims or transact any business except in each case in the ordinary course
of the business of the Corporation;
(f) to knowingly permit any extraordinary losses or
waive any rights of substantial value to the Corporation;
(g) to enter into any agreement other than in the
ordinary course of business of the Corporation including, but not limited
to, agreements regarding increases in salaries, bonuses, payments, stock
options or deferred compensation, provided that increments may be paid to
the purchasing Member, by way of increased salary or compensation in an
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amount which shall not exceed ten (10%) percent of its previous year's
aggregate consideration;
(h) to grant options, warrants or other rights to
acquire Interest in the Corporation;
(i) to re-organize the capital structure of the
Corporation; or
(j) to merge, consolidate, amalgamate or sell the
business assets or undertakings of the Corporation unless the disposing
Member is supplied with evidence satisfactory to it that any amount owing
to it under this Agreement will be paid in full at the time of closing upon
completion of the foregoing events.
12.06 In the event that the purchasing Member defaults in payment
of the purchase price or the interest thereon or upon the breach of any of
the covenants set forth in Article 12.05 hereof, the disposing Member may
give notice thereof to the Trustee who shall forthwith give notice to the
purchasing Member that if the cure for the default is not made or such
breach is not cured by the purchasing Member within forty-five (45) days of
receiving notice thereof from the Trustee, the balance of the moneys then
remaining unpaid on account of the purchase price shall immediately become
due and payable.
If the purchasing Member fails to pay the balance of the moneys remaining
unpaid within thirty (30) days following such balance becoming due and
payable as aforesaid, the disposing Member shall have the right to realize
upon the said Interest in the Corporation by way of a sale thereof and
herein provided or, if the purchasing Member has not paid at least seventy-
five (75%) percent of the purchase price therefore, the disposing Member
shall alternatively have the right to take delivery of the Certificates
evidencing the Pledged Interest in the Corporation from the Trustee as
herein provided and continue to hold and own the same as if such Interest
in the Corporation had never been sold by it and the provisions of this
Agreement shall continue to govern the rights of the Members with respect
to the disposition of their Interest in the Corporation.
If less than seventy-five (75%) percent of the purchase price for the
Pledged Interest in the Corporation has been paid by the purchasing Member,
the disposing Member shall notify the Trustee within thirty (30) days of the
expiry of the aforesaid forty-five (45) days notice period as to whether
it intends to realize upon the Pledged Interest in the Corporation by way of
a sale thereof or intends to hold same. In the event that the disposing
Member fails to give such notice, it shall be deemed to have elected to
hold and own the Pledged Interest in the Corporation. The disposing Member
shall take delivery of the Pledged Interest in the Corporation for its own
account, in full and complete satisfaction of any claims that it may have
against the purchasing Member with respect to the unpaid balance of the
purchase price for the Pledged Interest in the Corporation and will not
pursue any other remedies available according to law. If however the
disposing Member elects to sell the said Interest in the Corporation as
provided herein, such action shall not be deemed to exclude any other remedy
which may be available to it at law to recover the moneys and interest
thereon due to it under this Agreement.
12.07 If the disposing Member elects to realize upon the Pledged
Interest in the Corporation by way of a sale, the following provisions shall
apply:
(a) any such sale shall be on the best terms which,
after making reasonable effort, the disposing Member is able to obtain;
provided however that the purchasing Member shall be given the opportunity
to obtain an offer for the purchase of the Pledged Interest in the
Corporation and if a bona fide offer is obtained by the purchasing Member
which provides for better terms, including the payment of the purchase
moneys in full by cash or certified check, then the offer obtained by the
purchasing Member shall be used for such realization;
139
(b) the disposing Member may, at its option, purchase
the said Interest in the Corporation on the same terms and conditions as the
best offer obtained by either the purchasing or disposing Member as provided
above; and
(c) after deducting from the proceeds of any such sale
reasonable allowance for all costs, charges and expenses reasonably incurred
by the disposing Member in connection therewith, the residue of the moneys
arising from such sale shall be applied on account of or in payment of the
balance of the moneys and accrued interest thereon then remaining unpaid on
account of the purchase price and if any surplus remains the same shall be
paid forthwith to the purchasing Member.
Article XIII
Purchase of Interest in the Corporation by the Corporation
Section 1. Purchase of Interest in the Corporation by the Corporation:
13.01 Except in cases where Article Eight, Nine or Ten, which
shall supersede the provisions hereof, would apply, any Member, (in this
Article Thirteen referred to as the "Selling Party"), may, at any time after
ninety days, during the term of this Agreement, send a notice in writing to
the Corporation and to the other Members which shall be signed by the
Selling Party and shall be notice of the Selling Party's intention to sell
all or a portion of the Interest in the Corporation owned by the Selling
Party.
13.02 Upon receipt of any notice pursuant to Article 13.01 hereof,
the Corporation shall be obligated to purchase the Interest in the
Corporation specified in the said notice upon the terms and conditions
recited in Articles 13.03 through 13.07 hereof.
13.03 The purchase price for the Interest in the Corporation to be
purchased pursuant to the provisions of this Article Thirteen shall be
determined in accordance with Article 13.04 through 13.06.
13.04 All Members shall meet within ten (10) days following
receipt of the said notice and at such meeting shall agree on a value for
the Interest in the Corporation which the Selling Party proposes to sell. If
the parties can not agree to a valuation, then the Selling party shall
nominate a representative and the Members shall nominate a representative,
the two representatives so nominated shall nominate a third representative
and a majority of the three representatives shall select a qualified
appraiser to make the necessary fair market 90 value determination. The
Members and the Selling Party shall pay for the cost of their own
representatives and the costs of the third representative and the
qualified appraiser shall be borne equally by the Members and the Selling
Party.
13.05 In arriving at its valuation, the Valuator shall:
(a) determine the value of all property, assets and
undertaking of the Corporation, less any amount which may, according to such
valuation, be due for income or capital gain taxes if any such property,
assets or undertaking were sold;
(b) refer to and use as a guide the valuation, if any,
last determined pursuant to their Article Thirteen; and
(c) consider any written representations which any
Member may make.
13.06 As soon as is practicable but in all cases within sixty (60)
days of its appointment, the Valuator shall prepare and deliver a report to
(in this Article Thirteen referred to as the Accountant/Auditor of the
Corporation). Based upon the Valuator's report, the auditors shall
determine the value to be attributed to the Interest in the Corporation
which the Selling Party proposes to sell. The Valuator's report and the
140
Accountant/Auditor's determination based thereon shall both be binding
upon the Members.
13.07 Unless other terms of sale are agreed to by the Members, the
terms of sale under this Article Thirteen shall be as follows:
(a) the Interest in the Corporation which the Selling
Party proposed to sell shall have a redemption amount equal to the value
attributed as determined above, (hereinafter referred to as the "Redeemable
Interest in the Corporation"):
(b) the Redeemable Interest in the Corporation shall
then be redeemed by the Corporation over a period not to exceed two (2) years
with a minimum annual redemption of fifty (50%) percent of the total
Redeemable Interest in the Corporation attributable to the Selling Party;
(c) if all of the Redeemable Interest in the Corporation
is immediately purchased by the Corporation, the Selling Party shall
deliver at closing a Certificate or Certificates representing the Redeemable
Interest in the Corporation to the Corporation duly endorsed by the Selling
Party in blank for transfer and/or cancellation;
(d) if on closing the Corporation does not redeem all of
the Redeemable Interest in the Corporation, the following provisions shall
apply:
(i) as stated above, the annual minimum
redemption will be fifty (50%) percent of the total Redeemable Interest in
the Corporation;
(ii) an annual dividend in the aggregate
to be equivalent to the interest that would accrue each year if the prime
lending rate charged by the Corporation's banker minus fifty (50%) percent
was applied to the aggregate redemption amount of all Redeemable Interest
in the Corporation not yet paid by the Corporation;
(iii) in the event any portion of the
Redeemable Interest in the Corporation is not paid by the Corporation within
two (2) years of the original closing date, thereafter the interest rate to
be used in determining the annual dividend payable on the outstanding
Redeemable Interest in the Corporation shall be varied to the prime lending
rate charged by the Corporation's banker, plus two (2%) percent;
(iv) the Selling Party shall deliver to
the Accountant/Auditor of the Corporation all Certificates representing the
Redeemable Interest in the Corporation duly endorsed in blank for transfer
and such Interest in the Corporation shall be held in escrow by the
Accountant/Auditor of the Corporation until the Accountant/Auditor receives,
on behalf of the Selling Party, the unpaid balance of the redemption amount
and dividends in full calculated as aforesaid;
(v) so long as the Corporation is not in
default in payment of any redemption amount or dividends thereon, the
Accountant/Auditor shall execute and deliver to the Corporation or its
nominee from time to time such instruments of proxy with respect to the
Redeemable Interest in the Corporation held in escrow as the Corporation may
request;
(vi) if the Corporation is in default in
respect of the payment of any redemption amount or dividends thereon, the
Accountant/Auditor shall give written notice to the Corporation, (with a copy
to the Selling Party), describing the nature of the default within thirty (30)
days from the occurrence of the default. If the default is not corrected
by the Corporation within the grace period, the Accountant/Auditor of the
Corporation will, at the request of the Selling Party, return all of the
Redeemable Interest in the Corporation to the Selling Party who shall be
entitled to re-transfer the said Interest in the Corporation into its own
name and thereafter require the Corporation to re-convert the Redeemable
Interest in the Corporation into the original Interest in the Corporation
held by the Selling Party. The Selling Party shall be entitled to retain
141
the portion of the redemption amount received by it and the Corporation shall
be discharged from liability for payment of the remaining unpaid balance of
the redemption amount; and
(vii) upon payment in full by the
Corporation of the redemption amount and dividends thereon, the Accountant/
Auditor shall deliver to the Corporation the Certificates representing the
Redeemable Interest in the Corporation duly endorsed in blank for transfer
and/or cancellation.
13.08 The rights granted by this Article Thirteen are in lieu of
any rights, statutory or otherwise, which a dissenting Member may now or
hereafter have to require a party hereto to purchase any of its Interest in
the Corporation.
13.09 The provisions of Article Thirteen shall, in any event, be
subject to the compliance of the selling Member(s) with applicable law and
the obtaining of requisite approvals for transfer thereunder. Any closing
date is hereby deemed to be extended by the amount of time of any delay or
delays occasioned by a regulatory or governmental agency which is required
to give approval to transfer hereunder.
Article XIV
Jurisdiction
Section 1. Jurisdiction: This Agreement shall be governed according to the
Laws of the state of Colorado, whose Courts shall have sole and exclusive
jurisdiction over any matter herein.
Article XV
General
Section 1. Miscellaneous Provisions:
15.01 Each of the parties severally agrees to indemnify each of
the other parties hereto against, and reimburse each of the other parties
for, any and all liabilities which such other party or parties may incur or
become subject to an amounts which such other party or parties may pay or
be required to pay which are in excess of the proportionate share of the
liabilities and obligations of the parties under the terms of this Agreement,
provided that nothing in this Article, 15.01 shall in any way be deemed to
or shall require any party to incur any liability or provide any funds
other than as may be expressly provided for in any other provisions of this
Agreement.
15.02 No consent or waiver, expressed implied, by any party hereto
of any breach or default by any other party hereto in the performance of his
obligations hereunder shall be deemed or construed to be a consent to or
waiver of any other breach or default in the performance by such other party
of the same or any other obligations of such party hereunder. Failure on
the part of any party to complain of any act or failure to act of any other
party or to declare the other party in default, irrespective of how long such
failure continues, shall not constitute a waiver by the first mentioned
party of his rights hereunder.
15.03 This Agreement shall continue to be effective notwithstanding
the sale of Interest in the Corporation by a Member howsoever, and this
Agreement shall be binding upon the remaining Members.
15.04 The invalidity of any provision of this Agreement or any
covenant herein contained on the part of any party shall not affect the
validity of any other provision or covenant hereof or herein contained which
shall remain in full force and effect.
142
15.05 The Members agree to sign all such documents and do all such
things as may be necessary or desirable to more completely and effectively
carry out the terms and intentions of this Agreement and to cause the
Corporation to act in the manner contemplated by this Agreement and, to
the extent permitted by law, cause the Board of Directors so to act.
15.06 Nothing in this Agreement shall be deemed in any way or for
any purposes to constitute any party a partner of, a member of a joint
venture or joint enterprise with any other party to this Agreement in the
conduct of any business or otherwise.
15.07 Time shall be of the essence of this Agreement.
15.08 This Agreement constitutes the entire agreement among the
parties and shall not be modified, amended or assigned except with the
consent in writing of the parties hereto. A consent to any assignment
required hereunder may be arbitrarily or unreasonably withheld until the
proposed assignee executes and delivers such documents as, in the opinion of
the legal counsel of the Corporation, are necessary to oblige himself or
itself hereunder.
15.9 If at the time of any sale of Interest in the Corporation as
contemplated in this Agreement:
(a) there are any loans outstanding from the Corporation
to the selling Member(s) or vise versa, ;such loans shall be paid; and
(b) there are any securities or covenants lodged by the
selling Member(s) with any person or institution or any personal guarantees
given by the selling Member(s) or his nominee(s) to secure any indebtedness,
liability or obligation of the Corporation, the remaining parties to this
Agreement shall use their best efforts to have the selling Member(s) and any
nominee(s) released therefrom. If, notwithstanding such best efforts, the
releases as aforesaid are not obtained,the remaining parties shall deliver
to the selling Member(s) their indemnity in writing indemnifying the
selling Member(s) and his nominee(s) from any and all liabilities
thereunder.
15.10 All notices contemplated or required to be given hereunder
shall be effective if sent by prepaid registered mail or delivered personally
to any of the parties at the address of that party as it appears on the
books of the Corporation from time to time, or at such other address as the
party to whom such notice is to be given otherwise directs in writing. Any
notice delivered aforesaid shall be effective on the date of delivery and
any notice mailed as aforesaid shall be effective two (2) business days
after the mailing thereof, provided that where interruption of mail services
is likely by reason of any strike or other labor dispute, notice shall be by
personal delivery only to the person or to the address as aforesaid.
15.11 In this Agreement, wherever the singular and masculine or
neuter are used, they shall be construed as is the plural or the feminine or
the neuter had been used, where the context or the party or parties so
requires, and the rest of the sentence shall construed as if the grammatical
and terminological changes thereby rendered necessary had been made.
15.12 This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their Personal Representatives, successors and
permitted assign and any reference to a right or a obligation of a party
hereto shall be deemed to include a reference to such Personal
Representatives, successors and permitted assigns to the extent that the
context requires.
15.13 This Agreement may be executed in any number of counterparts,
all of which shall constitute one and the same instrument, and such
instrument shall be deemed made on the first day of March, 1999, irrespective
of the time or times when any counterpart may be made, executed and
delivered.
143
15.14 Interest in the Corporation as used herein refers to a
Member's interest in the Capital of the Corporation.
15.15 In consideration of the sums paid on behalf of RTG-TPD
Holdings Co. Ltd. (RTG) for logo development, RTG hereby grants the company
non-exclusive use of the Trademarks, KOMART and KOMART MALL, provided
however such use is for and in connection with the mall being developed at
2000 S. Havana St., Denver CO only.
In Witness Whereof the parties hereto have duly executed this Agreement as
of the date and year first above written.
Signed
and Delivered
in the presence of:
) /s/Miyung Lee/s/
) Member
) /s/ Miyung Lee/s/
) for and on Behalf
) of Daniel Lee,
a minor
)
) RTG-TPD Holdings Co. Ltd.
) /s/Stan J. H. Lee/s/
144
EXHIBIT 22
Subsidiaries of the Registrant
Korean Restaurant, SAAN, LLC., a Colorado Limited Liability Corporation
145
EXHIBIT 24.6
Consent of Registrant's Auditors
June 9, 1998, 1997
Securities and Exchange Commission
Washington, D.C. 20549
RE: eKOMART.COM, INC.
Registration Number: 000-1100399
Gentlemen:
We have audited the balance sheet and accompanying statements of the
Registrant, as found in the Prospectus which forms part of this Registration
Statement at page 40, et seq., for the 9month periods ending September 30,
1999, and the 1996 and 1997 fiscal years, ending on December 31, and
consent to the Auditor's reports, statements, and notes being filed with the
SB2 Registration Statement of which this exhibit forms a part, and with any
amendment thereto.
This accounting firm hereby consents to the filing of this
consent as an exhibit to the Registration Statement.
/s/M. H. Park/s/
M. H. Park, CPA
440 West St., 3rd Fl.
Fort Lee, NJ 07024-5058
146
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
TABLE OF CONTENTS
PAGE
REPORT OF INDEPENDENT CERTFIED PUBLIC ACCOUNTANTS 1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
147
RCH
Rachlin
Cohen &
Holtz
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
A Partnership Including Professional Associations
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Directors
Diversified Medical Holdings, Inc. and Subsidiary
West Palm Beach, Florida
We have reviewed the accompanying consolidated balance sheet of Diversified
Medical Holdings, Inc.and Subsidiary (a development stage company) as of
December 31, 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the period February 11, 1997
(inception) through December 31, 1997, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants. All information included in these financial
statements is the representation of the management of the Company.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less
in scope than an audit in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements in
order for them to be in conformity' with generally accepted accounting
principles.
/s/Rachlin, Cohen & Holtz/s/
Fort Lauderdale, Florida
June 16, 1998
One Southeast Third Avenue, Tenth Floor, Miami, Florida 33131
Dade (305)377-4228. Fax (305) 377-8331
700 Southeast Third Avenue, Third Floor, Ft.Lauderdale, Florida 33316
Broward (954)525-1040. Fax (954) 525-2004
148
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(SEE ACCOUNTANTS' REVIEW REPORT)
ASSETS
Current Assets:
Cash $ 1,355
Note receivable, former subsidiary 7,800
Stock subscription receivable (subsequently paid) 600
Total current assets 9,755
Note Receivable, Net of Deferred Gain of $1,050,000 l50,000
$ 159,755
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,406
Stockholders' Equity:
Series A voting convertible preferred stock, $.001
par value authorized 2,000,000 shares; issued and
outstanding 300,000 shares (liquidation value $300,000) 300
Common stock, $.001 par value; authorized 6,000,000
shares; issued and outstanding 1,000,000 shares 1,000
Additional paid-in capital 199,700
Deficit accumulated during the development stage (43,651)
157,349
$ 159,755
See notes to consolidated financial statements.
149
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FEBRUARY 11, 1997 (INCEPTION) TO DECEMBER 31, 1997
(SEE ACCOUNTANTS' REVIEW REPORT)
Revenues $ 0-
Costs and Expenses:
Professional fees $ 35,545
General and administrative 8,106
43,651
Net Loss $ (43,651)
See notes to consolidated financial statements.
150
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FEBRUARY 11, 1997 (INCEPTION) TO DECEMBER 31, 1997
(SEE ACCOUNTANTS' REVIEW REPORT)
Deficit
Series A Accumulated
Preferred Stock Common Stock Additional During the
Paid-in Development
Shares Amount Shares Amount Capital Stage Total
Capital contribution
represented by costs
and expenses
paid on behalf of the
Company - $- 1,000,000 $1,000 $- - 1,000
Issuance of
preferred stock 300,000 300 - - 199,700 - 200,000
Net Loss - - - - (43,651) (43,651)
Balance,
December 31, 1997 300,000$ 300 1,000,000 $1,000$199,700$(43,651) $157,349
151
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FEBRUARY 11, 1997 (INCEPTION) TO DECEMBER 31, 1997
(SEE ACCOUNTANTS' REVIEW REPORT)
Cash Flows from Operating Activities:
Net loss $ (43,651)
Adjustments to reconcile net loss to net cash
used by operating activities:
Costs and expenses paid on behalf of the Company
by stockholder,
net of subscription receivable 400
Changes in operating assets and liabilities:
Increase in accounts payable 2,406
Net cash used in operating activities (40,845)
Cash Flows from Investing Activities:
Note receivable (7,800)
Cash Flows from Financing Activities:
Proceeds from issuance of preferred stock 50,000
Net Increase in Cash 1,355
Cash, Beginning -
Cash, Ending $ 1,355
See notes to consolidated financial statements.
152
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
Diversified Medical Holdings, Inc. (the "Company"), was incorporated under
the laws of the State of Florida on February 11, 1997.
On October 1, 1997, the Company amended its Articles of Incorporation to
increase the Company's authorized common stock to consist of 6,000,000
shares, with a par value of $.001 and 1,000,000 shares of preferred stock,
with a par value of $.001.
During 1997, the Board of Directors authorized the issuance of 300,000
shares of Series A preferred stock. The Series A is a voting convertible
redeemable preferred stock. Each share is convertible into one share of the
Company's common stock. The preferred stock is subject to an anti-dilution
provision with respect to this conversion rate. The preferred stockholders
are entitled to participate with the holders of the common stock in any
dividend or distribution as if the preferred shares had been converted
into common shares.
The preferred stockholders are entitled to one vote for each share of
preferred stock they hold.
In the event of a liquidation of the Company, the preferred stockholders are
entitled to a liquidating distribution of $1.00 per share. In the event that
assets remain after the Common stockholders have also received $1.00 per
share, then those remaining assets are to be distributed ratably amongst
both the preferred and common stockholders.
In the event that the Company's common stock is not publicly traded prior to
December 31, 1999, the Series A preferred stock shall be subject to
mandatory redemption at the option of the holder for $1.00 per share.
The rights and privileges associated with additional series of preferred
stock if any, will be established by the Board of Directors.
Development Stage Enterprise
The Company was organized primarily for the purpose of raising capital to
take advantage of potential business opportunities in the healthcare
industry in a managed care environment. Accordingly, the Company is
considered to be in the development stage as of December 31, 1997, and the
accompanying financial statements represent those of a development stage
enterprise.
153
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of Consolidation
The consolidated financial statements include the accounts of Diversified
Medical Holdings, Inc. and its wholly owned subsidiary, Outsource Medical
Incorporated. All significant intercompany balances and transactions have
been eliminated in consolidation.
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.
Income Taxes
The Company accounts for its income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which
requires recognition of deferred tax liabilities and assets for expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
NOTE 2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate the continuance
of the Company as a going concern. The Company's continued existence is
dependent on management's ability to negotiate to raise additional
capital. Management is currently seeking additional capital. The financial
statements do not include any adjustments that may be necessary if the
Company is unable to continue as a going concern.
NOTE 3. BUSINESS ACQUISITIONS AND DISPOSITIONS
In October 1997, the Company acquired Outsource Medical Incorporated (OMI)
and its wholly-owned subsidiary, Essential Care Medical Center, Inc.
(Essential) and $50,000 in exchange for (i) 300,000
shares of Series A convertible preferred stock of the Company and (ii)
stock purchase warrants to acquire 200,000 shares of common stock of the
Company for $.001 per share.
154
DIVERSIFIED MEDICAL HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 3. BUSINESS ACQUISITIONS AND DISPOSITIONS (Continued)
Additionally, the Company agreed to pay the seller forty percent of certain
accounts receivable of Essential as of June 1, 1997 as collected.
On December 1, 1997, the Company sold 100% of the capital stock of Essential.
In payment, the Company received a promissory note in the amount of
$1,200,000 which bears interest at a rate of 8.75% per annum for the first
24 months beginning January 1998 and 10% per annum for 36 months. Thereafter,
principal and interest payments shall be due in equal monthly installments
based on a 7-year amortization schedule with a balloon payment of the
remaining principal balance at the earlier of the sale of the capital stock
or substantially all the assets of the purchaser or October 31, 2002. In the
first 24 months, the interest earned in excess of 6% per annum may be
deferred until maturity at the option of the buyer.
In addition, the purchase contract assigned responsibility for the payment
for certain accounts receivable as of June 1, 1997 to the purchaser.
Due in part to the fact that the purchaser is a newly formed, thinly
capitalized, highly leveraged entity, significant uncertainties exist as to
the ability of the purchaser to meet the obligations created by the note
receivable received by the Company in this transaction. As a result, the
gain on the above transaction has been deferred until such time as cash
flows of the purchaser are sufficient to fund the obligation on a full
accrual basis. As a result, the note receivable has been reflected net of
the deferred gain in the accompanying financial statements.
NOTE 4. INCOME TAXES
The Company has net operating loss carryforwards of approximately $44,000
that may be offset against future taxable income. These carryforwards expire
in 2012.
The deferred tax asset resulting from such loss carryforwards has been
fully offset by a valuation allowance of approximately $13,000 in accordance
with the provisions of Statement of Financial Accounting Standards No.109,
Accounting for Income Taxes.
155
Diversified Medical Holdings, Inc.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1998
(unaudited)
ASSETS:
Current Assets.
Cash: $ 105
Note Receivable,
Net of Deferred Gain of $l,230,000 150,000
$ 150,195
LIABILITIES AND STOCKHOLDERS EQUITY:
Current Liabilities:
Accounts Payable $ 27,570
Loans Payable (stockholders) 15,383
42,953
Stockholders Equity:
Series A voting convertible preferred stock,
$.00l par value authorized 2,000,000 shares;
issued and outstanding
300,000 shares (liquidation value $300,000) 300
Common Stock, $.001 par value;
authorized 6,000,000 shares;
issued and outstanding 1,000,000 shares 1,000
Additional paid-in capital 199,700
Deficit accumulated during the development stage (93,848)
107,152
Total Liabilities and Stockholders' Equity $ 150,105
156
Diversified Medical Holdings, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
DECEMBER 31, 1998
(unaudited)
Revenues: $ 0-
Costs and Expenses:
Professional Fees 45,520
General and Administrative 6,357
51,877
Net Loss: $ (51,877)
157
iNetboard Inc,
(A Development Stage Company)
BALANCE SHEET
MARCH 31, 1999
(unaudited)
ASSETS:
Current Assets:
Cash: $ 350
Note Receivable, Net of Deferred Gain of $1,230,000 $ 150,000
$ 150,305
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 31,650
Loans Payable (stockholders) $ 20,113*
$ 51,763
Stockholders Equity:
Series A voting convertible preferred stock,
$.001 par value authorized 2,000,000 shares;
issued and outstanding
300,000 shares (liquidation value $300,000). $ 300
Common Stock, $.001 par value; authorized
20,000,000 shares; issued and outstanding
800,000 shares 800
Additional paid-in capital 199,700
Deficit accumulated during the development stage (102,258)
98,542
Total Liabilities and Stockholders' Equity $ 105,305
* Retired and Forgiven-DRD/11-3-99/SL
158
iNetboard Inc,
(A Development Stage Company)
STATEMENT OF OPERATIONS
MARCH 31, 1999
(unaudited)
Revenues: $ 0-
Costs and Expenses:
Professional Fees 0
General and Administrative 6,830
Net Loss: $ ( 6,830)
159
Subj: Fwd: Domain Name Registration Confirmation - ekomart.com
Date: 12/4/99 9:33:10 AM Eastern Standard Time
From: SIERRA5533
To: PPNG
- -----------------
Forwarded Message:
Subj: Re: Domain Name Registration Confirmation - ekomart.com
Date: 11/27/99 2:57:28 PM Eastern Standard Time
From: administration@d-na.com (Administration)
To: sierra5533@aol.com
_)_)_)_)_) Domain NAmereserve (_(_(_(_(_
TO: Stan Lee
RE: DOMAIN NAME REGISTRATION
ekomart.com
Dear Mr. Lee,
I am happy to report that your Domain Name registration has been approved
and processed.
The following services and options that you chose on the registration form
have been recorded:
* DNS (Domain Name Services) on our servers.
* E-MAIL FORWARDING
* SITE UNDER CONSTRUCTION PAGE
Internet users who point their browsers to: http://www.ekomart.com
or www.ekomart.com or ekomart.com
Will be redirected to a SITE UNDER CONSTRUCTION PAGE http://
Additionally any e-mail sent to: Any Name name@ekomart.com
Will be forwarded to: sierra5533@aol.com
It normally takes one business day for the Domain Name to be entered into
the Internet's root servers, however it can take as long as two weeks for
the name to replicate over the entire Internet.
You can make changes to your forwarding and e-mail forwarding options any
time and as often as you like. To do this visit our UPDATES page, by
clicking on the UPDATE link at www.d-na.com/index2.htm.
Appended to this confirmation notice are: Internics' Registration Record and
Registration Agreement, for your records .
Additionally, although Internic will bill you by e-mail and by snail mail
within 10 to 14 days, you might wish to take advantage of their online
payment method at http://d-na.com/payregistryonline.htm
160
Once again thank you for choosing Domain NAmereserve to service your domain
registration.
Sincerely,
TS Rolle
Customer-Care
Domain NAmereserve - http://www.d-na.com
*********** So Whats Next? ************
HOST YOUR SITE WITH US: WE MAKE IT EASY FOR YOU
http://www.d-na.com/webhosting.htm
JOIN OUR RESELLER TEAM
http://www.d-na.com/resellerteam.htm
______________________________________________________________________________
YOUR INTERNIC REGISTRATION RECORD
==============================================================================
RTG-TPD Holding Co LLC (EKOMART-DOM)
P.O. Box 1777
Fort Lee, NJ 07024
US
Domain Name: EKOMART.COM
Administrative Contact:
Lee, Stan (SLT94) sierra5533@AOL.COM
201-363-0540
Technical Contact:
Network Administrator (NA466-ORG) hostmaster@D-NA.COM
1-407-322-4043
Fax- 1-407-322-1901
Billing Contact:
Lee, Stan (SLT94) sierra5533@AOL.COM
201-363-0540
Record last updated on 26-Nov-1999.
Domain servers in listed order:
ROME.NETWIDE.NET 209.26.140.2
NAPLES.NETWIDE.NET 209.26.140.4
==============================================================================
Domain Version Number: 4.0
161
NETWORK SOLUTIONS, INC.
DOMAIN NAME REGISTRATION AGREEMENT
A. Introduction. This domain name registration agreement
("Registration Agreement")is submitted to NETWORK SOLUTIONS, INC.
("NSI") for the purpose of applying for and registering a domain name
on the Internet. If this Registration Agreement is accepted by NSI,
and a domain name is registered in NSI's domain name database and
assigned to the Registrant, Registrant ("Registrant") agrees to be
bound by the terms of this Registration Agreement and the terms of
NSI's Domain Name Dispute Policy ("Dispute Policy") which is
incorporated herein by reference and made a part of this Registration
Agreement. This Registration Agreement shall be accepted at the
offices of NSI.
B. Fees and Payments.
1) Registration or renewal (re-registration) date through March 31, 1998:
Registrant agrees to pay a registration fee of One Hundred United States
Dollars (US$100) as consideration for the registration of each new domain
name or Fifty United States Dollars (US$50) to renew (re-register) an
existing registration.
2) Registration or renewal date on and after April 1, 1998: Registrant
agrees to pay a registration fee of Seventy United States Dollars (US$70)
as consideration for the registration of each new domain name or the
applicable renewal (re-registration) fee (currently Thirty-Five United
States Dollars (US$35) at the time of renewal (re-registration).
3) Period of Service: The non-refundable fee covers a period of two (2)
years for each new registration, and one (1) year for each renewal,
and includes any permitted modification(s) to the domain name record
during the covered period.
4) Payment: Payment is due to Network Solutions within thirty (30)
days from the date of the invoice.
C. Dispute Policy. Registrant agrees, as a condition to
submitting this Registration Agreement, and if the Registration
Agreement is accepted by NSI, that the Registrant shall be bound by
NSI's current Dispute Policy. The current version of the Dispute
Policy may be found at the InterNIC Registration Services web site:
"http://www.netsol.com/rs/dispute-policy.html".
D. Dispute Policy Changes or Modifications. Registrant agrees
that NSI, in its sole discretion, may change or modify the Dispute
Policy, incorporated by reference herein, at any time. Registrant
agrees that Registrant's maintaining the registration of a domain name
after changes or modifications to the Dispute Policy become effective
constitutes Registrant's continued acceptance of these changes or
modifications. Registrant agrees that if Registrant considers any such
changes or modifications to be unacceptable, Registrant may request
that the domain name be deleted from the domain name database.
E. Disputes. Registrant agrees that, if the registration of its
domain name is challenged by any third party, the Registrant will be
162
subject to the provisions specified in the Dispute Policy.
F. Agents. Registrant agrees that if this Registration Agreement
is completed by an agent for the Registrant, such as an ISP or
Administrative Contact/Agent, the Registrant is nonetheless bound as a
principal by all terms and conditions herein, including the Dispute
Policy.
G. Limitation of Liability. Registrant agrees that NSI shall have
no liability to the Registrant for any loss Registrant may incur in
connection with NSI's processing of this Registration Agreement, in
connection with NSI's processing of any authorized modification to the
domain name's record during the covered period, as a result of the
Registrant's ISP's failure to pay either the initial registration fee
or renewal fee, or as a result of the application of the provisions of
the Dispute Policy. Registrant agrees that in no event shall the
maximum liability of NSI under this Agreement for any matter exceed
Five Hundred United States Dollars (US$500).
H. Indemnity. Registrant agrees, in the event the Registration
Agreement is accepted by NSI and a subsequent dispute arises with any
third party, to indemnify and hold NSI harmless pursuant to the terms
and conditions contained in the Dispute Policy.
I. Breach. Registrant agrees that failure to abide by any
provision of this Registration Agreement or the Dispute Policy may be
considered by NSI to be a material breach and that NSI may provide a
written notice, describing the breach, to the Registrant. If, within
thirty (30) days of the date of mailing such notice, the Registrant
fails to provide evidence, which is reasonably satisfactory to NSI,
that it has not breached its obligations, then NSI may delete
Registrant's registration of the domain name. Any such breach by a
Registrant shall not be deemed to be excused simply because NSI did
not act earlier in response to that, or any other, breach by the
Registrant.
J. No Guaranty. Registrant agrees that, by registration of a
domain name, such registration does not confer immunity from objection
to either the registration or use of the domain name.
K. Warranty. Registrant warrants by submitting this Registration
Agreement that, to the best of Registrant's knowledge and belief, the
information submitted herein is true and correct, and that any future
changes to this information will be provided to NSI in a timely manner
according to the domain name modification procedures in place at that
time. Breach of this warranty will constitute a material breach.
L. Revocation. Registrant agrees that NSI may delete a
Registrant's domain name if this Registration Agreement, or subsequent
modification(s) thereto, contains false or misleading information, or
conceals or omits any information NSI would likely consider material
to its decision to approve this Registration Agreement.
M. Right of Refusal. NSI, in its sole discretion, reserves the
right to refuse to approve the Registration Agreement for any
163
Registrant. Registrant agrees that the submission of this Registration
Agreement does not obligate NSI to accept this Registration Agreement.
Registrant agrees that NSI shall not be liable for loss or damages
that may result from NSI's refusal to accept this Registration
Agreement.
N. Severability. Registrant agrees that the terms of this
Registration Agreement are severable. If any term or provision is
declared invalid, it shall not affect the remaining terms or
provisions which shall continue to be binding.
O. Entirety. Registrant agrees that this Registration Agreement
and the Dispute Policy is the complete and exclusive agreement between
Registrant and NSI regarding the registration of Registrant's domain
name. This Registration Agreement and the Dispute Policy supersede all
prior agreements and understandings, whether established by custom,
practice, policy, or precedent.
P. Governing Law. Registrant agrees that this Registration
Agreement shall be governed in all respects by and construed in
accordance with the laws of the Commonwealth of Virginia, United
States of America. By submitting this Registration Agreement,
Registrant consents to the exclusive jurisdiction and venue of the
United States District Court for the Eastern District of Virginia,
Alexandria Division. If there is no jurisdiction in the United States
District Court for the Eastern District of Virginia, Alexandria
Division, then jurisdiction shall be in the Circuit Court of Fairfax
County, Fairfax, Virginia.
Q. This is Domain Name Registration Agreement Version
Number 4.0. This Registration Agreement is only for registrations
under top-level domains: COM, ORG, NET, and EDU. By completing
and submitting this Registration Agreement for consideration and
acceptance by NSI, the Registrant agrees that he/she has read and
agrees to be bound by A through P above.
Authorization
0a. (N)ew (M)odify (D)elete....: N
0b. Auth Scheme................:
0c. Auth Info..................:
1. Comments...................:
2. Complete Domain Name.......: ekomart.com
Organization Using Domain Name
3a. Organization Name..........: RTG-TPD Holding Co LLC
3b. Street Address.............: P.O. Box 1777
3c. City.......................: Fort Lee
3d. State......................: NJ
3e. Postal Code................: 07024
3f. Country Code...............: US
Administrative Contact
4a. NIC Handle (if known)......:
164
4b. (I)ndividual (R)ole........: I
4c. Name.......................: Lee, Stan
4d. Organization Name..........: RTG-TPD Holding Co LLC
4e. Street Address.............: P.O. Box 1777
4f. City.......................: Fort Lee
4g. State......................: NJ
4h. Postal Code................: 07024
4i. Country Code...............: US
4j. Phone Number...............: 201-363-0540
4k. Fax Number.................: 815-846-7550
4l. E-Mailbox..................: sierra5533@aol.com
Technical Contact
5a. NIC Handle (if known)......: NA466-ORG
5b. (I)ndividual (R)ole........: R
5c. Name.......................:
5d. Organization Name..........:
5e. Street Address.............:
5f. City.......................:
5g. State......................:
5h. Postal Code................:
5i. Country Code...............:
5j. Phone Number...............:
5k. Fax Number.................:
5l. E-Mailbox..................:
Billing Contact
6a. NIC Handle (if known)......:
6b. (I)ndividual (R)ole........: I
6c. Name.......................: Lee, Stan
6d. Organization Name..........: RTG-TPD Holding Co LLC
6e. Street Address.............: P.O. Box 1777
6f. City.......................: Fort Lee
6g. State......................: NJ
6h. Postal Code................: 07024
6i. Country Code...............: US
6j. Phone Number...............: 201-363-0540
6k. Fax Number.................: 815-846-7550
6l. E-Mailbox..................: sierra5533@aol.com
Primary Name Server
7a. Primary Server Hostname....: ROME.NETWIDE.NET
7b. Primary Server Netaddress..: 209.26.140.2
Secondary Name Server(s)
8a. Secondary Server Hostname..: NAPLES.NETWIDE.NET
8b. Secondary Server Netaddress: 209.26.140.4
8a. Secondary Server Hostname..:
8b. Secondary Server Hostname..:
8a. Secondary Server Hostname..:
8b. Secondary Server Netaddress:
END OF AGREEMENT
165
- --------------------
<!DOCTYPE HTML PUBLIC "-//W3C//DTD W3 HTML//EN">
<META content=text/html;charset=iso-8859-1 http-equiv=Content-Type>
<META content='"MSHTML 4.71.1712.3"' name=GENERATOR>
_)_)_)_)_) Domain NAmereserve (_(_(_(_(_
TO: Stan Lee
RE: DOMAIN NAME REGISTRATION
ekomart.com
Dear Mr. Lee,
I am happy to report that your Domain Name registration has been approved
and processed.
The following services and options that you chose on the registration form
have been recorded:
* DNS (Domain Name Services) on our servers.
* E-MAIL FORWARDING
* SITE UNDER CONSTRUCTION PAGE
Internet users who point their browsers to: http://www.ekomart.com
or www.ekomart.com or ekomart.com
Will be redirected to a SITE UNDER CONSTRUCTION PAGE http://
Additionally any e-mail sent to: Any Name name@ekomart.com
Will be forwarded to: sierra5533@aol.com
It normally takes one business day for the Domain Name to be entered into
the Internet's root servers, however it can take as long as two weeks for
the name to replicate over the entire Internet.
You can make changes to your forwarding and e-mail forwarding options any
time and as often as you like. To do this visit our UPDATES page, by
clicking on the UPDATE link at www.d-na.com/index2.htm.
Appended to this confirmation notice are: Internics' Registration Record
and Registration Agreement, for your records .
Additionally, although Internic will bill you by e-mail and by snail mail
within 10 to 14 days, you might wish to take advantage of their online
payment method at http://d-na.com/payregistryonline.htm
Once again thank you for choosing Domain NAmereserve to service your domain
registration.
Sincerely,
166
TS Rolle
Customer-Care
Domain NAmereserve - http://www.d-na.com
*********** So Whats Next?
************
HOST YOUR SITE WITH US: WE MAKE IT EASY FOR YOU
http://www.d-na.com/webhosting.htm
JOIN OUR RESELLER TEAM
http://www.d-na.com/resellerteam.htm
______________________________________________________________________________
YOUR INTERNIC REGISTRATION RECORD
==============================================================================
RTG-TPD Holding Co LLC (EKOMART-DOM)
P.O. Box 1777
Fort Lee, NJ 07024
US
Domain Name: EKOMART.COM
Administrative Contact:
Lee, Stan (SLT94) sierra5533@AOL.COM
201-363-0540
Technical Contact:
Network Administrator (NA466-ORG) hostmaster
@D-NA.COM
1-407-322-4043
Fax- 1-407-322-1901
Billing Contact:
Lee, Stan (SLT94) sierra5533@AOL.COM
201-363-0540
Record last updated on 26-Nov-1999.
Domain servers in listed order:
ROME.NETWIDE.NET
209.26.140.2
NAPLES.NETWIDE.NET
209.26.140.4
=========================================================================
Domain Version Number: 4.0
NETWORK SOLUTIONS, INC.
DOMAIN NAME REGISTRATION AGREEMENT
A. Introduction. This domain name registration agreement
("Registration Agreement")is submitted to NETWORK SOLUTIONS, INC.
("NSI") for the purpose of applying for and registering a domain
167
name on the Internet. If this Registration Agreement is accepted by NSI,
and a domain name is registered in NSI's domain name database and
assigned to the Registrant, Registrant ("Registrant") agrees to be
bound by the terms of this Registration Agreement and the terms of
NSI's Domain Name Dispute Policy ("Dispute Policy") which is
incorporated herein by reference and made a part of this Registration
Agreement. This Registration Agreement shall be accepted at the
offices of NSI.
B. Fees and Payments.
1) Registration or renewal (re-registration) date through March 31, 1998:
Registrant agrees to pay a registration fee of One Hundred United States
Dollars (US$100) as consideration for the registration of each new domain
name or Fifty United States Dollars (US$50) to renew (re-register) an
existing registration.
2) Registration or renewal date on and after April 1, 1998: Registrant
agrees to pay a registration fee of Seventy United States Dollars (US$70)
as consideration for the registration of each new domain name or the
applicable renewal (re-registration) fee (currently Thirty-Five United
States Dollars (US$35)) at the time of renewal (re-registration).
3) Period of Service: The non-refundable fee covers a period of two (2)
years for each new registration, and one (1) year for each renewal,
and includes any permitted modification(s) to the domain name record
during the covered period.
4) Payment: Payment is due to Network Solutions within thirty (30)
days from the date of the invoice.
C. Dispute Policy. Registrant agrees, as a condition to
submitting this Registration Agreement, and if the Registration
Agreement is accepted by NSI, that the Registrant shall be bound by
NSI's current Dispute Policy. The current version of the Dispute
Policy may be found at the InterNIC Registration Services web site:
"http://www.netsol.com/rs/dispute-policy.html".
D. Dispute Policy Changes or Modifications. Registrant agrees
that NSI, in its sole discretion, may change or modify the Dispute
Policy, incorporated by reference herein, at any time. Registrant
agrees that Registrant's maintaining the registration of a domain name
after changes or modifications to the Dispute Policy become effective
constitutes Registrant's continued acceptance of these changes or
modifications. Registrant agrees that if Registrant considers any such
changes or modifications to be unacceptable, Registrant may request
that the domain name be deleted from the domain name database.
E. Disputes. Registrant agrees that, if the registration of its
domain name is challenged by any third party, the Registrant will be
subject to the provisions specified in the Dispute Policy.
F. Agents. Registrant agrees that if this Registration Agreement
is completed by an agent for the Registrant, such as an ISP or
Administrative Contact/Agent, the Registrant is nonetheless bound as a
principal by all terms and conditions herein, including the Dispute
Policy.
168
G. Limitation of Liability. Registrant agrees that NSI shall have
no liability to the Registrant for any loss Registrant may incur in
connection with NSI's processing of this Registration Agreement, in
connection with NSI's processing of any authorized modification to the
domain name's record during the covered period, as a result of the
Registrant's ISP's failure to pay either the initial registration fee
or renewal fee, or as a result of the application of the provisions of
the Dispute Policy. Registrant agrees that in no event shall the
maximum liability of NSI under this Agreement for any matter exceed
Five Hundred United States Dollars (US$500).
H. Indemnity. Registrant agrees, in the event the Registration
Agreement is accepted by NSI and a subsequent dispute arises with any
third party, to indemnify and hold NSI harmless pursuant to the terms
and conditions contained in the Dispute Policy.
I. Breach. Registrant agrees that failure to abide by any
provision of this Registration Agreement or the Dispute Policy may be
considered by NSI to be a material breach and that NSI may provide a
written notice, describing the breach, to the Registrant. If, within
thirty (30) days of the date of mailing such notice, the Registrant
fails to provide evidence, which is reasonably satisfactory to NSI,
that it has not breached its obligations, then NSI may delete
Registrant's registration of the domain name. Any such breach by a
Registrant shall not be deemed to be excused simply because NSI did
not act earlier in response to that, or any other, breach by the
Registrant.
J. No Guaranty. Registrant agrees that, by registration of a
domain name, such registration does not confer immunity from objection
to either the registration or use of the domain name.
K. Warranty. Registrant warrants by submitting this Registration
Agreement that, to the best of Registrant's knowledge and belief, the
information submitted herein is true and correct, and that any future
changes to this information will be provided to NSI in a timely manner
according to the domain name modification procedures in place at that
time. Breach of this warranty will constitute a material breach.
L. Revocation. Registrant agrees that NSI may delete a
Registrant's domain name if this Registration Agreement, or subsequent
modification(s) thereto, contains false or misleading information, or
conceals or omits any information NSI would likely consider material
to its decision to approve this Registration Agreement.
M. Right of Refusal. NSI, in its sole discretion, reserves the
right to refuse to approve the Registration Agreement for any
Registrant. Registrant agrees that the submission of this Registration
Agreement does not obligate NSI to accept this Registration Agreement.
Registrant agrees that NSI shall not be liable for loss or damages
that may result from NSI's refusal to accept this Registration
Agreement.
N. Severability. Registrant agrees that the terms of this
Registration Agreement are severable. If any term or provision is
169
declared invalid, it shall not affect the remaining terms or
provisions which shall continue to be binding.
O. Entirety. Registrant agrees that this Registration Agreement
and the Dispute Policy is the complete and exclusive agreement between
Registrant and NSI regarding the registration of Registrant's domain
name. This Registration Agreement and the Dispute Policy supersede all
prior agreements and understandings,
whether established by custom,
practice, policy, or precedent.
P. Governing Law. Registrant agrees that this Registration
Agreement shall be governed in all respects by and construed in
accordance with the laws of the Commonwealth of Virginia, United
States of America. By submitting this Registration Agreement,
Registrant consents to the exclusive jurisdiction
and venue of the
United States District Court for the Eastern District of Virginia,
Alexandria Division. If there is no jurisdiction in the United States
District Court for the Eastern District of Virginia, Alexandria
Division, then jurisdiction shall be in the Circuit Court of Fairfax
County, Fairfax, Virginia.
Q. This is Domain Name Registration Agreement Version
Number 4.0. This Registration Agreement is only for registrations
under top-level domains: COM, ORG, NET, and EDU. By completing
and submitting this Registration Agreement for consideration and
acceptance by NSI, the Registrant agrees that he/she has read and
agrees
to be bound by A through P above.
Authorization
0a. (N)ew (M)odify (D)elete....: N
0b. Auth Scheme................:
0c. Auth Info..................:
1. Comments...................:
2. Complete Domain Name.......: ekomart.com
Organization
Using Domain Name
3a. Organization Name..........: RTG-TPD Holding Co LLC
3b. Street Address.............: P.O. Box 1777
3c. City.......................: Fort Lee
3d. State......................: NJ
3e. Postal Code................: 07024
3f. Country Code...............: US
Administrative Contact
4a. NIC Handle (if known)......:
4b. (I)ndividual (R)ole........: I
4c. Name.......................: Lee, Stan
4d. Organization Name..........: RTG-TPD Holding Co LLC
4e. Street Address.............: P.O. Box 1777
170
4f. City.......................: Fort Lee
4g. State......................: NJ
4h. Postal Code................: 07024
4i. Country Code...............: US
4j. Phone Number...............: 201-363-0540
4k. Fax Number.................: 815-846-7550
4l. E-Mailbox..................: sierra5533@aol.com
Technical Contact
5a. NIC Handle (if known)......: NA466-ORG
5b. (I)ndividual (R)ole........: R
5c. Name.......................:
5d. Organization Name..........:
5e. Street Address.............:
5f. City.......................:
5g. State......................:
5h. Postal Code................:
5i. Country Code...............:
5j. Phone Number...............:
5k. Fax Number.................:
5l. E-Mailbox..................:
Billing Contact
6a. NIC Handle (if known)......:
6b. (I)ndividual (R)ole........: I
6c. Name.......................: Lee, Stan
6d. Organization Name..........: RTG-TPD Holding Co LLC
6e. Street Address.............: P.O. Box 1777
6f. City.......................: Fort Lee
6g. State......................: NJ
6h. Postal Code................: 07024
6i. Country Code...............: US
6j. Phone Number...............: 201-363-0540
6k. Fax Number.................: 815-846-7550
6l. E-Mailbox..................: sierra5533@aol.com
Primary Name Server
7a. Primary Server Hostname....: ROME.NETWIDE.NET
7b. Primary Server Netaddress..: 209.26.140.2
Secondary Name Server(s)
8a. Secondary Server Hostname..: NAPLES.NETWIDE.NET
8b. Secondary Server Netaddress: 209.26.140.4
8a. Secondary Server Hostname..:
8b. Secondary Server Hostname..:
8a. Secondary Server Hostname..:
8b. Secondary Server Netaddress:
END OF AGREEMENT
171
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From: "Administration" <administration@d-na.com>
To: <sierra5533@aol.com>
Subject: Re: Domain Name Registration Confirmation - ekomart.com
Date: Sat, 27 Nov 1999 10:29:45 -0500
Message-ID: <01bf38ec$3c1af460$0a0030ce@grouper.batelnet.bs>
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172
STOCK PURCHASE AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 3rd day of November, 1999
BETWEEN:
Stan J. H. Lee,
for and on behalf of RTG-TPD Holding Co., LLC., and
its Members
(hereinafter called the "Seller")
OF THE FIRST PART
A N D:
iNetboard, Inc.,
a corporation incorporated under the laws of the State of Florida
(hereinafter called the "Purchaser")
OF THE SECOND PART
WHEREAS, the Seller controls and represents all of the authorized issued
and outstanding interest of all the members of RTG-TPD Holding Company,
LLC., (herein referred to as the "Corporation"), and;
WHEREAS, the Purchaser desires to acquire all of the outstanding
shares of the Corporation's Common Stock, and;
NOW, THEREFORE, THIS AGREEMENT WITNESSETH THAT, in
consideration of the covenants, agreements, warranties, and payments herein
set out and provided for, the parties hereby respectively covenant and
agree as follows:
173
ARTICLE 1.00 - DEFINED TERMS
1.1 When used herein or in any amendments hereto, the following terms
shall have the following meanings respectively.
"Agreement" means this agreement and all schedules attached to this
agreement. The term includes each case where it may be supplemented or
amended from time to time. The expressions "hereof", "herein", "hereto",
"Hereunder", "hereby" and similar expressions refer to this agreement, and
"Article", "section" and "subsection" mean and refer to the specified
Article, section, and subsection of this agreement.
"books and records" means the accounting books of original entry including
the general ledger, record of cash receipts and disbursements, purchase
journal and banking records.
"Business" means the business presently and heretofore carried on by the
Corporation, consisting of being operating manager of Komart Shopping Mall,
Komart Suprtmanrket, and San Restaurant located in Denver, Colorado as well
as the planned purchase and sale, development, support, maintenance, and
enhancement of commercial and retail shopping centers and developments, to
include related e-commerce and multi media online and outdoor advertising
businesses, and such other ventures as the directors of the Corporation may
from time to time deem appropriate.
"Business day" means a day other than a Saturday, Sunday or a day that is a
statutory holiday.
"Closing" means the closing of the transaction for purchase and sale
contemplated herein.
"Closing Date" or "Date of Closing" means September 14, 1999 or such other
date as may be mutually agreed upon in writing by the parties hereto.
"Closing Financial Statements" has the meaning ascribed to it in section
4.1.1.
"Common Shares" means the issued and outstanding common shares in the
capital of the Corporation.
"Corporation" means the companies listed hereinabove as the Seller.
"EBIT" means net earnings before income taxes, as determined by the auditors,
in accordance with GAAP.
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"Exchange Shares" means 7,000,000 common.
"Financial statements" means, collectively, the Closing Financial Statements
defined hereinabove.
"Intercompany Transactions" means, collectively, all transactions of any
nature between the Corporation and any Person associated with or related to
the Corporation or otherwise not dealing with the Corporation on an arms-
length basis.
"GAAP" means generally accepted accounting principles in the United States,
as appropriate and as in effect from time to time, consistently applied.
"NASDAQ" means the National Association of Securities Dealers and
Quotations.
"Non Arm's Length Person" means any shareholder director, officer, employee,
affiliate, or associate (as defined in the Securities Act of 1933, as amended)
of the Corporation. This term includes any one or more of the Seller or any
other Person who does not deal at arm's length with the Corporation or any one
or more of the Seller within the meaning of such concept as used in the Income
Tax Act (USA).
"Person" includes an individual, a corporation, a joint venture, a partnership,
a trust or trustee, any unincorporated organization, an association, or any
other entity (including any governmental, administrative, or regulatory
authority).
"Permitted Liens" means, at any time, such Liens as the Purchaser may agree,
in writing, shall constitute a Permitted Lien for the purpose of this
Agreement.
"Preferred Shares" mean, preferred convertible voting shares in the capital
of the Purchaser, said shares being convertible at a price of $0.01 per share
one year from the effective date of a Registration Statement to be filed
with the SEC (defined hereinbelow) no later than 60 days from the Closing
Date.
"Purchased Shares" shall have the meaning attributed thereto in section 3.1
hereof.
"Requirements of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational, governing documents of
such Person. This term includes any law, treaty, regulation or rule, or
determination of an arbitrator or a court or other governmental authority or
agency, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
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"Rule 144" means rule 144 of the United States Securities and Exchange
Commission.
"SEC" means the Securities and Exchange Commission of the United States.
"Seller" shall mean, specifically for purposes of this agreement and
identifying the parties thereto, all of the shareholders of the Corporation.
"Subsidiary", in relation to any body corporate, means any corporation of
which issued and outstanding securities are held, other than by way of
security only, by such body corporate, and includes any corporation in like
relation to a Subsidiary.
"this agreement", "this agreement", "herein", "hereto", "hereunder", "hereof"
and similar expressions refer to the within agreement and not to any
particular portion thereof, and include the schedules referred to in
Article 2.00.
"Time of Closing" means two o'clock in the afternoon on the Closing Date.
ARTICLE 2.00 - SCHEDULES
2.1 The following schedules, at time of closing, shall be delivered and
attached to and incorporated in this Agreement by reference and deemed to be
part hereof:
Schedule 4.2.1 - Financial Statements of Corporation
Schedule 4.2.6 - Corporation's Shareholders
Schedule 4.2.22 - Outstanding Obligations of Corporation
Schedule 4.2.23 - Leases of Corporation
Schedule 4.2.26 - Insurance Policies of Corporation
Schedule 4.2.34 - Accounts List of Corporation
Schedule 5.2.1 - Financial Statements of Purchaser
Schedule 5.2.7 - Outstanding Rights to Securities of Purchaser
Schedule 5.2.22 - Outstanding Obligations of Purchaser
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Schedule 5.2.33 - Accounts List of Purchaser
Schedule 5.2.37 - Shareholder Credit Facility to Purchaser
Schedule 6.2.4 - Power of Attorney
Schedule 9.9 - Indemnification Agreement
ARTICLE 3.00 - PURCHASE AND SALE
3.1 Subject to the terms and conditions hereof, the Seller hereby agree to
sell, assign, and transfer to the Purchaser a 100% interest in the
Corporation ("the Purchased Shares"). The Purchaser covenants and agrees to
purchase from the Seller the Purchased Shares for an amount equal in the
aggregate to the Purchase Price of $7,000,000 dollars ($7,000,000), payable
as hereinafter set out. At time of Closing, the Purchased Shares will
constitute 100% of the interst of all members of the Corporation.
3.2 Subject to the hereinafter described conditions, the Purchaser
hereby agrees to exchange the equivalent of 7,000,000 shares of its Common
Shares (7/8.05 share or 875% of the outstanding shares of the Purchaser) on
the Closing Date, provided, however that 2.0 million common shares are
reserved for raising capital for the Corporation, (providing the Seller, on
a fully diluted basis including shares reserved for sale to the public for
raising Capital, shall have a total of 7/10.5 interest in the Purchaser),
with $0.01 par value (the "Exchange Shares"), with the Seller for all of the
Purchased Shares as follows:
(A) at Closing, the Purchaser will issue and deliver 7,000,000 shares of
its common stock to the Seller on a pari passu basis, and;
(B) at Closing and immediately following completion of the exchange
described in Section 3.2(A), the Purchaser shall call a special meeting of
its stockholders for the following purposes:
(1) new directors shall be elected and new bylaws shall
be adopted;
(2) Purchaser's entry into this agreement shall be ratified, provided,
however, that such ratification shall not be a condition subsequent but a
condition precedent to this agreement and that by executing this Agreement,
the Purchasers declare such ratification has been effected.
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3.3 The Seller hereby represent, warrant, covenant, and acknowledge the
following.
3.3(A) The Purchased Shares are being transferred without registration under
the provisions of Section 5 of the Act.
3.3(B) All of the Purchased Shares will bear legends restricting the
transfer, sale, conveyance, and hypothecation within the jurisdictional
boundaries of the United States. This provision is exclusive of when such
Exchange Shares are registered under the provisions of Section 5 of the act
and under applicable state and provincial securities laws. Moreover, an
opinion of legal counsel may be provided by the Purchaser to certify that
such registration is not required as a result of applicable exemptions
therefrom.
3.3(C) The Seller shall not transfer any of the Exchanged Shares except in
compliance with all applicable laws.
3.3(D) The Seller is acquiring the Exchanged Shares for their own account,
for investment purposes only and not with a view to further sale or
distribution, except as permitted by law.
3.3(E) The Seller have made themselves fully and completely familiar with
all aspects of the Purchaser's business, operations, and financial statements
and, immediately following closing on this Agreement, will assume
operational control thereof.
3.4 The Purchaser hereby represents, warrants, covenants and acknowledges
the following.
3.4(A) The Exchange Shares are being transferred without Registration under
the provisions of Section 5 of the Securities Exchange Act of 1934, as
amended (the "Act") or Florida Blue Sky Law.
3.4(B) All of the Exchange Shares will bear legends restricting the
transfer, sale, conveyance, and hypothecation within the jurisdictional
boundaries of the United States. This provision is exclusive of when such
Exchange Shares are registered under the provisions of Section 5 of the act
and under applicable state and provincial securities laws. Moreover, an
opinion of legal counsel may be provided by the Purchaser to certify that
such registration is not required as a result of applicable exemptions
therefrom.
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3.4(C) The Purchaser shall not transfer any of the Purchased Shares except
in compliance with all applicable laws.
3.4(D) The Purchaser is acquiring the Purchased Shares for its own account,
for investment purposes only and not with a view to further sale or
distribution.
3.4.1 The Purchaser has 22,000,000 shares of capital stock, $0.01 par value,
authorized, 1,050,000 of which will be the total outstanding and fully
diluted amount immediately prior to conclusion of this transaction and upon
its conversion of both the preferred stock and warrants held by Medical
Industries of America, Inc. A further 2.45 Million Shares shall be issued
by the Purchaser prior to the Closing Date, 2.0 million to be reserved for
sale of common shares to the public at a minimum of $6.00 per share.
3.4.2 Except as described herein, the Purchaser has no other, outstanding
securities of any class or of any kind or character. There are no
outstanding subscriptions, options, warrants, or other agreements or
commitments obligating the Purchaser to issue or sell any additional shares
or options or rights with respect thereto or any securities convertible into
any shares of Stock of any class.
3.5 The Purchase Price shall be paid and satisfied in full by the delivery
of the issued Exchange Shares at the Times of Closing.
3.6 The certificates representing the shares being exchanged shall each bear
the following legend:
"THESE SHARES HAVE NEITHER BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR WITH THE
SECURITIES REGULATORY AUTHORITIES OF ANY STATE, PROVINCE, OR
NATIONAL AUTHORITY). CONSEQUENTLY, THESE SHARES MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THEY ARE
FIRST REGISTERED UNDER APPLICABLE STATE, PROVINCIAL AND
FEDERAL SECURITIES LAWS OR THE TRANSACTION'S EXEMPTION
THEREFROM IS DEMONSTRATED TO THE FULL SATISFACTION OF THE
CORPORAITON'S LEGAL COUNSEL."
ARTICLE 4.00 - COVENANTS, REPRESENTATIONS, AND WARRANTIES OF AND THE
CORPORATION
4.1 The Shareholders of the Seller hereby covenant, represent, and warrant,
and the Seller, jointly and severally, represent to the best of their
knowledge, as follows:
4.2.1 Delivered at Closing, warranted to be true and correct to the best
knowledge of the Seller, and made a part hereof as Schedule 4.2.1 are the
following:
(A) unaudited balance sheet of the Corporation to be acquired as of July 31,
1999, with the related statement of operations and unaudited statement of
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cash flow for the period ending July 31, 1999 (such balance sheets,
statements of operations, and other statements are referred to herein as
the "Corporation's Financial Statements").
4.2.2 Corporation has been duly incorporated and organized and is validly
subsisting and in good standing under the laws of Colorado.
4.2.3 Corporation has the corporate power to own or lease its property and
carry on the Business. The Corporation is duly qualified as a corporation to
do business under the laws of Colorado, being the only jurisdictions in which
the nature of its business or the property owned or leased by it makes such
qualification necessary.
4.2.4 At Time of Closing, the authorized capital of the Corporation shall
consist of 200 units without par value.
4.2.5 At Time of Closing, the authorized capital of the said corporation
shall be 200 units (and no more) and will have been duly and validly
allotted and issued and outstanding as fully paid and non-assessable and
beneficially owned by the Seller.
4.2.6 All of the Purchased Shares are owned by the shareholders of the
Corporation as the beneficial owners of record as listed at Schedule 4.2.6.
Such listed shareholders have good and marketable title thereto, free and
clear of all mortgages, liens, charges, security interests, adverse claims,
pledges, encumbrances, and demands whatsoever. This provision includes
voting trusts, shareholders' agreements, options, or other agreements of
any kind. The Seller represent that said listed shareholders have the
absolute right to transfer the Purchased Shares, and they shall be enjoyed
by the Purchaser free from any interruption or disturbance subject only to
the terms and conditions herein.
4.2.7 The Corporation has no subsidiaries and owns no shares in the capital
of any other corporation and has not agreed to acquire any subsidiary or
any shares of the capital of any other corporation or to acquire or lease
any other business operations.
4.2.8 No person, firm, or corporation has any agreement, option, or any
right or privilege (whether by law, pre-emptive, or contractual) for the
purchase, subscription, allotment, or issuance of either any of the
authorized stock in the capital of the Corporation or of any securities of
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the Corporation. This provision includes convertible securities, warrants,
and convertible obligations of any nature.
4.2.9 Except with respect to product warranties provided by the
Corporation in the ordinary course of business, the Corporation is not a
party to or bound to any person, firm, or corporation. This provision
includes any agreement of guarantee, indemnification, assumption,
endorsement, or any other like commitment of obligations or liabilities
(contingent or otherwise) or indebtedness of any person, firm, or
corporation.
4.2.10 There are not now, nor will there be on Closing, any material claims
or potential or contingent claims against the Corporation for product
liability in respect of goods manufactured and/or sold by the Corporation.
4.2.11 The Corporation's Financial Statements have been prepared in
accordance with GAAP and present fairly to include:
4.2.11(A) all the assets, liabilities (whether accrued, absolute,
contingent, or otherwise), and the financial condition of the Corporation
as at the respective dates of the Corporation's Financial Statements; and
4.2.11(B) the sales, earnings, and results of the operations of the
Corporation during the periods covered by the Corporation's
Financial Statements.
4.2.12 The corporate records and minute books of the Corporation
contain complete and accurate minutes of all meetings of and copies of all
by-laws and resolutions passed by the directors and shareholders of the
Corporation since the incorporation of the Corporation. All such meetings
have been duly called and held. The share certificate book with register of
shareholders, register of transfers, register of directors, and other
corporate registers of the Corporation are complete and accurate in all
material respects.
4.2.13 The Business has been carried on in the ordinary course since
January 1999. Since then, there has been no change in the business
operations, affairs, or condition of the Corporation, financial or
otherwise. This provision includes changes arising as a result of any
legislative or regulatory change, revocation of any license or right to do
business,fire, explosion, accident, casualty, labor trouble, flood,
drought, riot, storm, condemnation, act of God, or otherwise. This provision
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excludes changes occurring in the ordinary course of business, which changes
have not materially aversely affected and will not materially aversely
affect the organization, business, properties, prospects, and financial
condition of the Corporation or the ability of the Corporation to carry on
Business.
4.2.14 The books and records, financial and otherwise, of the Corporation
fairly and correctly set out and disclose, in all material respects, the
financial position and result of operations of the Corporation as at the
date hereof. All material, financial transactions of the Corporation are
accurately recorded in such books and records.
4.2.15 Execution of this Agreement by the Seller and delivery of the
Agreement by them to the Purchaser and their performance hereunder has been
duly authorized. No further action is necessary on the part of the Seller
to make this agreement valid and binding in accordance with its terms upon
the Seller.
4.2.16 The execution and the consummation of this transaction for purchase
and sale contemplated by this Agreement will not result in a breach of any
term or provision of or constitute any default under the constituting
documents, by-laws, or resolutions of the Corporation. This provision
includes any indenture, agreement, instrument, license, permit, or
understanding to which the Corporation or any one or more of the Seller
is a party or by which any one or more of them is bound. Nor will the
consummation of this transaction accelerate any commitment or obligation of
the Corporation or result in the creation of any lien or encumbrance upon
any of the assets or property of the Corporation.
4.2.17 This agreement and the consummation of the transactions contemplated
hereby will not result in the violation of any law or regulation or any
applicable order of any court, arbitrator, or governmental authority having
jurisdiction over the Corporation, the Seller, or their respective
properties or businesses.
4.2.18 No consent, authorization, license, franchise, permit, approval, or
order of any court, governmental agency or body, of any lessor, or of any
person is required for the acquisition by the Purchaser of the Purchased
Shares, including completion of any of the other transactions contemplated
hereby. This provision also includes the continuance of any rights of the
Corporation pursuant to any agreement affecting its assets or the Business
following closing.
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4.2.19 The Corporation will not, prior to the Closing Date, hire any new
employees, terminate any employee, or increase the salary or remuneration of
any employee except in the normal course of business.
4.2.20 The aggregate amount of salaries, pension, bonuses, rents, or other
remuneration of any nature paid or payable by the Corporation, subsequent to
the execution of this Agreement and up to the Time of Closing, will be made
only at the regular rates heretofore paid.
4.2.21 No capital expenditures, except in the ordinary course of business,
will be made or authorized by the Corporation after the date hereof and up
to the Time of Closing without the prior written consent of the Purchaser.
4.2.22 Annexed hereto as Schedule 4.2.22 is a complete list of all
outstanding bonds, debentures, mortgages, notes or other evidence of
indebtedness or other security instruments of the Corporation. None of
which are presently in default, and the Corporation is not under any
agreement to and shall not create or issue any bonds, debentures, mortgages,
notes, or other evidence of indebtedness or other security agreements from
the date hereof until Closing without the written consent of the Purchaser.
4.2.23 The Corporation is not a party to any lease or agreement in the
nature of a lease, whether as lessor or lessee, except those leases
described in Schedule 4.2.23 hereto. The schedule specifies the parties
to each of such leases, their dates of execution and expiry dates, any
options to renew, any consents required, the locations of any leased lands
and premises, and the rental payable thereunder. Each of such leases is in
good standing and in full force and effect without amendment thereto, and
the Corporation is not in breach of any of the covenants, conditions, or
agreements contained in each such lease. There are no consents required
from or on behalf of any persons to the transaction contemplated by this
Agreement.
4.2.24 The Corporation is not a party to any conditional sales contract,
hire-purchase agreement, or other title retention agreement.
4.2.25 The Corporation is not, and will not be at the Time of Closing, a
party to any agreement to acquire or to acquire any beneficial interest in
any real or immovable property.
4.2.26 The Corporation maintains appropriate policies of insurance, given
the nature of the Business, and such insurance coverage will be continued in
full force and effect to and including the Date of Closing. The Corporation
is not in default with respect to any of the provisions contained in any
such insurance policy, and it has not failed to give any notice or present
any claim under any such insurance policy in due and timely fashion.
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Schedule 4.2.26 hereto lists all insurance policies of the Corporation,
specifying the insurance company, insurance agent, policy number, type of
coverage, and amount of coverage.
4.2.27 There are no actions, suits, or proceedings, including product
warranty claims, pending or threatened against or affecting the
Corporation, at law or in equity or before or by any federal, provincial,
municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality, domestic or foreign. The Seller are not
aware of any existing ground on which any such action, suit, or proceeding
might be commenced with any reasonable likelihood of success.
4.2.28 Except for agreements, contracts, and commitments in the ordinary
course of business, the Corporation is not a party to any outstanding
agreement, contract, or commitment, whether written or oral.
4.2.29 All vacation pay, bonuses, commissions, and other emoluments are
accurately reflected and have been accrued in the books of account of the
Corporation.
4.2.30 The Corporation is and at Closing will be in substantial compliance
in all jurisdictions in which it employs persons, with legislation governing
hours of work, termination and severance pay, vacation pay and similar
employee rights, the Worker's Compensation Act, and all such similar statutes.
4.2.31 The uses of the real properties owned or leased by the Corporation
referred to in this agreement or the schedules hereto are not in material
breach of any statute, by-law, ordinance, regulation, covenant, restriction,
or official plan.
4.2.32 The Corporation owns, possesses, and has a good and marketable title
to its undertaking, property, and assets, being free and clear of any and
all mortgages, liens, pledges, charges, security interests, encumbrances,
actions, claims, or demands of any nature whatsoever or howsoever arising
except as listed at Schedule 4.2.22; the purchase price is based on and
directly correlates to the net tangible worth (being assets less liabilities)
of the Corporation, which the Corporation represents to be approximately
$7,000,000 upon audit.
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4.2.33 The conduct of the Business does not infringe upon the patents,
trade marks, trade names, or copyrights (domestic or foreign) of any other
person, firm, or corporation.
4.2.34 Annexed hereto as Schedule 4.2.34 is a true and complete list
showing the name of each bank, trust company, or similar institution in
which the Corporation has accounts or safe deposit boxes and the names of
all persons authorized to draw thereon or to have access thereto.
4.2.35 The Corporation is conducting the Business in compliance with all
applicable laws, rules and regulations of each jurisdiction in which the
Business is carried on, is not in breach of any such laws, rules or
regulations, except for breaches which in the aggregate are immaterial.
Also the Corporation is duly licensed, registered, or qualified in each
jurisdiction in which it owns or leases property or carries on the Business.
To enable the business to be carried on as now conducted and its property
and assets to be owned, leased, and operated, all such licenses,
registrations and qualifications are valid and subsisting and in good
standing. None of the same will be canceled or amended by virtue of the
transaction for purchase and sale provided for herein.
4.2.36 All facilities and equipment owned and used by the Corporation in
connection with the Business are in good operating condition and are in a
state of good repair and maintenance.
4.2.37 There are not now any loans or other indebtedness outstanding
between the Corporation and the Seller or either any current or former
directors, officers, shareholders, or employees of the Corporation or any
Non Arms Length Persons. This provision is exclusive of normal salaries,
bonuses, fringe benefits, and the obligation to reimburse for expense
incurred on behalf of the Corporation in the normal course of business or
otherwise disclosed in the Corporation's Financial Statements.
4.2.38 To the best of the Seller' knowledge, there are no liabilities of
the Corporation of any kind whatsoever, whether or not accrued and whether
or not determined or determinable, in respect of which the Corporation or
the Purchaser may become liable before, on, or after the Closing. This
provision is exclusive of liabilities disclosed on, reflected in, or
provided for in the Financial Statements or incurred in the ordinary course
of business. This provision is also exclusive of those liabilities
attributable to the period from the Corporation's Financial Statements
to the actual time of Closing and are not materially adverse, individually
or in the aggregate, to the Business, operations, affairs or financial
condition of the Corporation.
4.2.39 There is not now nor will there be at the Time of Closing any
application pending for the issuance of articles of amendment to the
originating documents of the Corporation.
185
4.2.40 The Corporation is not in default in the filing of any corporate
return or report that may be required under any federal, provincial and/or
municipal law or regulation.
4.2.41 The Corporation has duly and timely filed all tax returns required
and has paid all taxes and installments of taxes which are due and payable.
This provision includes all assessments, reassessments, and all other taxes,
governmental charges, penalties, interest, and fines due and payable by it
on or before the date hereof. The income tax liability of the corporation
has been not reviewed or determined by the IRS or the applicable State for
all fiscal years up to and including the fiscal year to date. Adequate
provision has been made for taxes payable for the current period of which
tax returns are not yet required to be filed. There are no agreements,
waivers, or other arrangements providing for an extension of time with
respect to the filing of any tax return by, or payment of any tax,
governmental charge, or deficiency against the Corporation in respect of
taxes, governmental charges, or assessments, asserted by such authority.
The Corporation has withheld from each payment made to any of its officers,
directors, employees, former directors, officers, and employees the amount
of all taxes, including but not limited to income tax, and other deductions
required to be withheld therefrom. The Corporation has paid the same to
the proper tax or other receiving officers within the time required under
the applicable tax legislation.
4.2.42 The Seller have no information or knowledge of any facts relating to
the Seller, the Business, the Corporation, or the Purchased Shares which, if
known to the Purchaser, might reasonably be expected to deter the Purchaser
from completing the transaction of purchase and sale herein contemplated.
4.2.43 The Corporation shall prepare and file all documents and forms
necessary to effect the filing and registration of the combined companies
(with iNbd as the parent holding corporation) so as to complete and receive
approval of an effective registration statement for NASDAQ SmallCap
listing as soon as reasonable (i.e., within 90 days) from the date of
closing.
/s/ All items requested have been examined, and approved. DRD/s/
ARTICLE 5.00 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1 The Purchaser covenants, represents, and warrants as follows and
acknowledges that the Seller are relying upon such covenants,
representations, warranties, and covenants in connection with the sale
by the Seller of the Purchased Shares.
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5.2.1 Delivered at Closing, warranted to be true and correct to the best
knowledge of the Purchaser, and made a part hereof as Schedule 5.2.1 are the
following:
(A) unaudited balance sheet of the Purchaser to be acquired for the fiscal
years of 1997 and 1998, with the related statement of operations and
unaudited statement of cash flow for the same years, and;
(B) unaudited balance sheet of the Purchaser to be acquired as of March 31,
1999 (the "Purchaser's Interim Balance Sheet") with the related unaudited
statement of income and unaudited statement of cash flow for the one month
ended April 30, 1999 (such balance sheets, statements of operations, and
other statements are referred to herein as the "Purchaser's Financial
Statements").
5.2.2 Purchaser has been duly incorporated and organized and is validly
subsisting and in good standing under the laws of Florida.
5.2.3 Purchaser has the corporate power to own or lease its property and
carry on the Business. The Corporation is duly qualified as a corporation
to do business under the laws of Florida, being the only jurisdiction in
which the nature of its business or the property owned or leased by it makes
such qualification necessary.
5.2.4 At time of Closing, the authorized capital of the Purchaser shall
consist of 22,000,000 shares with a par value of $0.01.
5.2.5 At time of Closing, the authorized issued capital of the Purchaser
shall be 4,000,000 shares of its common stock (and no more) and will have
been duly and validly allotted and issued and outstanding as fully paid and
non-assessable and beneficially owned by the Purchaser.
5.2.6 The Purchaser has no subsidiaries and owns no shares in the capital
of any other corporation and has not agreed to acquire any subsidiary or any
shares of the capital of any other corporation or to acquire or lease any
other business operations.
5.2.7 Except as listed at Schedule 5.2.7, no person, firm, or corporation
has any agreement, option, or any right or privilege (whether by law, pre-
emptive, or contractual) for the purchase, subscription, allotment, or
issuance of either any of the authorized stock in the capital or any
securities of the Purchaser. This provision includes convertible securities,
warrants, and convertible obligations of any nature.
5.2.8 The Purchaser is not a party to or bound to any person, firm, or
corporation. This provision includes any agreement of guarantee,
indemnification, assumption, endorsement, or any other like commitment of
obligations or liabilities (contingent or otherwise) or indebtedness of any
187
person, firm, or corporation.
5.2.9 There are not now, nor will there be on Closing, any material claims or
potential or contingent claims against the Purchaser for product liability.
5.2.10 The Purchaser's Financial Statements have been prepared in accordance
with GAAP and present fairly to include:
(A) all the assets, liabilities (whether accrued, absolute, contingent, or
otherwise), and the financial condition of the Purchaser as at the respective
dates of the Purchaser's Financial Statements, and;
(B) the sales, earnings, and results of operations during the periods covered
by the Corporation's Financial Statements.
5.2.11 The corporate records and minute books of the Purchaser contain
complete and accurate minutes of all meetings of and copies of all by-laws
and resolutions passed by the directors and shareholders of the Purchaser
since the incorporation of the Purchaser. All such meetings have been duly
called and held. The share certificate book with register of shareholders,
register of transfers, register of directors, and other corporate registers
of the Purchaser are complete and accurate in all material respects.
5.2.12 The Purchaser does not have an active business or operations.
5.2.13 The Purchaser has no inventory.
5.2.14 The books and records, financial and otherwise, of the Purchaser
fairly and correctly set out and disclose, in all material respects, the
financial position and result of operations of the Purchaser as at the date
hereof. All material, financial transactions of the Purchaser are
accurately recorded in such books and records.
5.2.15 The execution and delivery of this Agreement by the Purchaser as well
as the performance by the Purchaser hereunder have been duly authorized.
No further action will be necessary on the part of the Purchaser to make
this Agreement valid and binding in accordance with its terms upon the
Purchaser.
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5.2.16 The execution and the consummation of this transaction for purchase
and sale contemplated by this Agreement will not result in a breach of any
term or provision of or constitute any default under the constituting
documents, by-laws, or resolutions of the Purchaser. This provision
includes any indenture, agreement, instrument, license, permit, or
understanding to which the Purchaser is a party or by which any one or more
of them is bound. Nor will the consummation of this transaction accelerate
any commitment or obligation of the Purchaser or result in the creation of
any lien or encumbrance upon any of the assets or property of the Purchaser.
5.2.17 This agreement and the consummation of the transactions contemplated
hereby will not result in the violation of any law or regulation or any
applicable order of any court, arbitrator, or governmental authority having
jurisdiction over the Purchaser.
5.2.18 No consent, authorization, license, franchise, permit, approval, or
order of any court, governmental agency or body, of any lessor, or of any
person is required for the acquisition by the Purchaser of the Purchased
Shares, including completion of any of the other transactions contemplated
hereby. This provision also includes the continuance of any rights of the
Purchaser pursuant to any agreement affecting its assets or the Business
following closing.
5.2.19 The Purchaser will not, prior to the Closing Date, hire any new
employees, terminate any employee, or increase the salary or remuneration
of any employee except in the normal course of business.
5.2.20 The aggregate amount of salaries, pension, bonuses, rents, or other
remuneration of any nature paid or payable by the Purchaser, subsequent to
the execution of this Agreement and up to the Time of Closing, will be made
only at the regular rates heretofore paid.
5.2.21 No capital expenditures, except in the ordinary course of business,
will be made or authorized by the Purchaser after the date hereof and up to
the Time of Closing without the prior written consent of the Seller.
5.2.22 Annexed hereto as Schedule 5.2.22 is a complete list of all
outstanding bonds, debentures, mortgages, notes or other evidence of
indebtedness or other security instruments of the Purchaser. None of which
are presently in default, and the Purchaser is not under any agreement to
and shall not create or issue any bonds, debentures, mortgages, notes, or
other evidence of indebtedness or other security agreements from the date
hereof until Closing without the written consent of the Seller.
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5.2.23 The Purchaser is not a party to any lease or agreement in the nature
of a lease, whether as lessor or lessee.
5.2.24 The Purchaser is not a party to any conditional sales contract, hire-
purchase agreement, or other title retention agreement.
5.2.25 The Purchaser is not, and will not be at the Time of Closing, a party
to any agreement to acquire or to acquire any beneficial interest in any
real or immovable property.
5.2.26 The Purchaser does not maintain any insurance policies.
5.2.27 There are no actions, suits, or proceedings, including product
warranty claims, pending or threatened against or affecting the Purchaser,
at law or in equity or before or by any federal, provincial, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign. The Purchaser is not aware of any
existing ground on which any such action, suit, or proceeding might be
commenced with any reasonable likelihood of success.
5.2.28 Except for agreements, contracts, and commitments in the ordinary
course of business, the Purchaser is not a party to any outstanding
agreement, contract, or commitment, whether written or oral, except for the
Agreement of Purchase and Sale for all the outstanding shares of Tritium,
Inc. said Agreement as executed on or before August 17, 1999.
5.2.29 All vacation pay, bonuses, commissions, and other emoluments are
accurately reflected and have been accrued in the books of account of the
Purchaser.
5.2.30 The Purchaser is and at Closing will be in substantial compliance in
all jurisdictions in which it employs persons, with legislation governing
hours of work, termination and severance pay, vacation pay and similar
employee rights, the Worker's Compensation Act, and all such similar
statutes.
5.2.31 The Purchaser does not lease any real properties.
5.2.32 The Purchaser owns, possesses, and has a good and marketable title
to its undertaking, property, and assets, being free and clear of any and
all mortgages, liens, pledges, charges, security interests, encumbrances,
actions, claims, or demands of any nature whatsoever or howsoever arising.
5.2.33 The conduct of business does not infringe upon the patents, trade
marks, trade names, or copyrights (domestic or foreign) of any other person,
firm, or corporation.
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5.2.34 Annexed hereto as Schedule 5.2.33 is a true and complete list showing
the name of each bank, trust company, or similar institution in which the
Purchaser has accounts or safe deposit boxes and the names of all persons
authorized to draw thereon or to have access thereto.
5.2.35 The Purchaser exists in compliance with all applicable laws, rules
and regulations of each jurisdiction in which the Business is carried on,
is not in breach of any such laws, rules or regulations, except for breaches
in the aggregate are immaterial. Also the Purchaser is duly licensed,
registered, or qualified in each jurisdiction in which it owns or leases
property or carries on the Business. To enable the business to be carried
on as now conducted and its property and assets to be owned, leased, and
operated, all such licenses, registrations and qualifications are valid and
subsisting and in good standing. None of the same will be canceled or
amended by virtue of the transaction for purchase and sale provided for
herein.
5.2.36 All facilities and equipment owned or used by the Purchaser are in
good operating condition and are in a state of good repair and maintenance.
5.2.37 Except as specified at Schedule 5.2.37, there are not any loans or
other indebtedness outstanding between the Purchaser and either the Seller
or either any current or former directors, officers, shareholders, or
employees of the Purchaser or any Non Arms Length Persons. This provision
is exclusive of normal salaries, bonuses, fringe benefits, and the
obligation to reimburse for expense incurred on behalf of the Purchaser
in the normal course of business.
5.2.38 There are no liabilities of the Purchaser of any kind whatsoever,
whether or not accrued and whether or not determined or determinable, in
respect of which the Purchaser may become liable before, on, or after the
Closing. This provision is exclusive of liabilities disclosed on, reflected
in, or provided for in the Financial Statements or incurred in the ordinary
course of business. This provision is also exclusive of those liabilities
attributable to the period from the Purchaser's Financial Statements to the
actual time of Closing and are not materially adverse, individually or in
the aggregate, to the Business, operations, affairs or financial condition
of the Purchaser.
5.2.39 There is not now nor will there be at the time of Closing any
application pending for the issuance of articles of amendment to the
originating documents of the Purchaser.
5.2.40 The Purchaser is not in default in the filing of any corporate return
or report that may be required under any federal, provincial and/or
municipal law or regulation.
191
5.2.41 The Purchaser has duly and timely filed or has pending all tax
returns required and has paid all taxes and installments of taxes which are
due and payable. This provision includes all assessments, reassessments,
and all other taxes, governmental charges, penalties, interest, and fines
due and payable by it on or before the date hereof. The income tax
liability of the Purchaser has been not reviewed or determined by the IRS
or the applicable State for all fiscal years up to and including the fiscal
year to date.
5.2.42 The Purchaser has no information or knowledge of any facts relating
to the Purchaser which if known to the Seller might reasonably be expected
to deter the Seller from completing the transaction and sale herein
contemplated.
/s/ all items supplied, examined and approved/ SJHLs/
ARTICLE 6.00 - COVENANTS OF THE SELLER
6.1 The Seller covenant and agree with the Purchaser that on or before
the Closing Date they will do or cause to be done the following.
6.2.1 Take all necessary steps and proceedings required for all of the
Purchased Shares to be duly and regularly transferred to the Purchaser.
6.2.2 Until the time of Closing, continue to operate the business of the
Corporation prudently and in such a manner as to preserve and maintain the
goodwill of the Corporation.
6.2.3 All necessary corporate actions and proceedings by the Purchaser
shall have been taken to permit the due execution and delivery of this
Agreement and the valid transfer of the Purchased Shares to the Purchaser
ARTICLE 7.00 - COVENANTS OF THE PURCHASER
7.1 The Purchaser covenants and agrees with the Seller that, on or before
the Closing Date, it will do or cause to be done the following.
7.2.1 All necessary corporate actions and proceedings by the Purchaser shall
have been taken to permit the due execution and delivery of this Agreement
and the valid transfer of the Exchange Shares to the Seller.
7.2.2 Provide the Seller, at least four (4) days prior to the Closing Date,
with a list of all persons in possession of all of the keys, credit cards,
books, records, files, and other properties of the Purchaser. The Purchaser
192
shall deliver to the Seller custody of all such keys, credit cards, books,
records, files, and other property in the possession of the Purchaser.
7.2.3 Cause such directors and officers of the Purchaser as the Seller may
specify to resign in favor of nominees of the Seller, such resignations to
be effective as at the time of Closing.
7.2.4 Up to the Time of Closing, continue to operate the businesses of the
Purchaser prudently and in such a manner as to preserve and maintain the
goodwill of the Purchaser.
ARTICLE 8.00 - SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
8.1 The covenants, representations, and warranties of the Seller contained
in this Agreement and contained in any document or certificate given
pursuant hereto shall survive the Closing herein. Notwithstanding Closing,
this survival is inclusive of any investigation made by or on behalf of the
Purchaser and shall continue in full force and effect for the benefit of the
Purchaser following the Closing Date.
8.2 The covenants, representations and warranties of the Purchaser contained
in this Agreement and contained in any document or certificate given
pursuant hereto shall survive the Closing herein. Notwithstanding Closing,
this survival is inclusive of any investigation made by or on behalf of the
Seller and shall continue in full force and effect for the benefit of the
Seller following the Closing Date.
ARTICLE 9.00 - CONDITIONS OF CLOSING
9.1 The sale and purchase of the Purchase Shares is subject to the following
terms and conditions, each of which is hereby declared to be for the
exclusive benefit of the Purchaser to be fulfilled and performed at or
prior to the time of Closing.
9.2 The covenants, representations, and warranties of the Seller contained
in this Agreement or any schedule hereto or certificate or other document
delivered or given to the Purchaser pursuant to this Agreement, including
without limitation the representations and warranties contained in Article
4.00, shall be true and correct on and as of the Closing Date with the same
force and effect as if they had been made as of the date hereof, each and
every one of which is hereby deemed to be a condition.
9.3 The Seller shall provide at the time of Closing a certificate, dated the
Closing Date, to the effect that the covenants, representations, and
warranties of the Seller contained herein are true and correct on and as
of the Closing Date, with the same force and effect as though made on and
193
as of such date, provided that the acceptance of such certificate and the
closing of the transaction herein provided for shall not be a waiver of the
said covenants, representations, and warranties, which shall continue in
full force and effect as provided herein.
9.4 The Seller shall have complied with all covenants and agreements herein
agreed to be performed or caused to be performed by them.
9.5 At the Closing Date, there shall have been no material adverse change
in the affairs, assets, liabilities, financial condition, or business of the
Corporation from that shown on or reflected in the Financial Statements.
9.6 Any consent, authorization, licence, franchise, permit, approval, or
order of any court or governmental agency or regulatory body required for
the acquisition by the Purchaser of the Purchased Shares shall have been
obtained.
9.7 The Purchaser shall provide at the time of Closing a certificate, dated
the Closing Date, to the effect that the covenants, representations, and
warranties of the Purchaser contained herein are true and correct on and
as of the Closing Date. This certificate shall have the same force and
effect as though made on and as of such date provided that the acceptance
of such certificate and the closing of the transaction herein provided for
shall not be a waiver of the said covenants, representations, and warranties
which shall continue in full force and effect as provided herein.
9.8 The Purchaser shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it.
9.9 The parties shall execute and deliver an indemnification agreement to be
annexed hereto as Schedule 9.9.
9.10 The parties shall not close and complete this transaction unless both
Seller and Purchaser have signed a written acknowledgement that the
exchange of shares between them does not create a taxable event for
either party.
9.11 The parties hereby agree that the scheduled closing shall be
conditional upon shareholder approval by the shareholders of both companies.
ARTICLE 10.00-CLOSING ARRANGEMENTS
10.1 The closing is scheduled to take place on September 14, 1999 and at the
Time of Closing at such offices as are agreed to in writing among the
parties hereto at least 24 hours prior to the said Closing.
194
10.2 At the Time of Closing and upon fulfillment of all the conditions set
out in this Agreement, which have not been waived in writing by the Seller
or the Purchaser, the Seller shall deliver to the Purchaser proper
certificates for all the Purchased Shares.
ARTICLE 11.00-NOTICE
11.1 Any notice or other document to be given by any party hereto to any
other party shall be in writing and may be given by personal delivery or
by registered mail. Any notice directed to any party shall be addressed
to it as follows:
To the Purchaser:
iNetboard, Inc.,
Attn: D. R. Dimick, Chairman
668 Fergusson Lane
West Palm Beach, Florida 334145
To the Seller and the Corporation:
RTG-TPD Holding Co., LLC.,
71 Stony Hill Road
Second Floor
Bethel, Connecticut 06801
11.2 Any notice or other document aforesaid, if delivered, shall be deemed
to have been given or made on the date on which it was delivered or, if
mailed, shall be deemed to have been given and received on the fourth (4th)
business day following the date on which it was mailed. Provided that if
there exists at the time of mailing of a notice hereunder or within four (4)
business days thereafter a labor dispute or other event which would affect
the normal delivery of the notice by an express or postal service, then such
notice will only be effective if actually delivered.
11.3 The parties hereto may change any address for notices hereunder, from
time to time, by notice given in accordance with the foregoing.
ARTICLE 12.00 - GENERAL
12.1 Time shall be of the essence of this Agreement.
12.2 This Agreement may be executed in one or more counterparts, each of
which when so executed shall constitute an original, and all of which
together shall constitute one and the same agreement.
195
12.3 This Agreement, including the schedules hereto, constitutes the entire
agreement between the parties hereto. There are not and shall not be any
verbal statements, representations, warranties, undertakings, or agreements
between the parties, and this Agreement may not be amended or modified in
any respect except by written instrument signed by the parties hereto.
12.4 This Agreement shall be construed and enforced in accordance with and
the rights of the parties shall be governed by the laws of the State of
Florida. Any and all disputes arising under this Agreement, whether as to
interpretation, performance or otherwise, shall be subject to the exclusive
jurisdiction of the Courts of the State of Florida. Each of the parties
hereto irrevocably submit to the jurisdiction of the Courts of the State of
Florida.
12.5 The headings used herein are inserted for convenience of reference
only and shall not affect the construction of or interpretation of this
Agreement.
12.6 Except as otherwise set out in this Agreement, each of the parties
hereto shall pay all of its own costs and expenses of the transaction of
purchase and sale, including all fees and expenses of its accountants,
counsel, and officers.
12.7 In the event that any Article or section of this Agreement is held to
be invalid or unenforceable by a court of competent jurisdiction, such
invalidity or unenforceability shall not affect the remainder of the
provisions hereof. Any such part shall be fully severable, and this
Agreement shall be construed and enforced as if such invalid or
unenforceable part had not been inserted herein. The parties hereby agree
that they would have signed this Agreement without such invalid or
unenforceable part included herein.
12.8 In this Agreement, words importing the singular number only include
the plural and vice versa; words importing the masculine gender include the
feminine and vice versa.
12.9 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, legal personal representatives,
successors, and permitted assigns.
12.10 Where the date either for the expiration of any time period or for
the closing of anything hereunder expires or falls upon a day which is not a
Business Day, the time so limited extends to and the thing shall be done on
the day next following that is a Business Day.
12.11 The parties hereto agree that no disclosure or public announcement
with respect to this Agreement, or any of the transactions contemplated by
this Agreement, shall be made by any party hereto without the prior written
consent of the other parties hereto.
196
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
SIGNED, SEALED AND DELIVERED )
in the presence of )
) /s/Stan J. H. Lee/s/
) SELLER
) By Stan J. H. Lee,
)
)
)
)
) /s/Douglas R. Dimick/s/
PURCHASER
197
Exhibit 27
Financial Data Schedule
[ARTICLE] 5
[PERIOD-TYPE] 9-MOS YEAR YEAR
[FISCAL-YEAR-END] DEC-31-1999 DEC-31-1998 DEC-31-1997
[PERIOD-END] SEP-30-1999 DEC-31-1998 DEC-31-1997
[CASH] 105 105 1,355
[SECURITIES] 0 0 0
[RECEIVABLES] 0 0 8,400
[ALLOWANCES] 0 0 0
[INVENTORY] 0 0 0
[CURRENT-ASSETS] 105 105 9,755
[PP&E] 0 0 0
[DEPRECIATION] 0 0 0
[TOTAL-ASSETS] 3,154,565 150,105 159,155
[CURRENT-LIABILITIES] 0 0 0
[BONDS] 0 0 0
[PREFERRED-MANDATORY] 0 0 0
[PREFERRED] 0 300 300
[COMMON] 8,500 1,500 1,500
[OTHER-SE] 3,042,500 199,200 199,700
<TOTAL-LIABILITY-
AND-EQUITY> 3,154,565 150,105 159,755
[SALES] 4,460 0 0
[TOTAL-REVENUES] 4,460 0 0
[CGS] 0 0 0
[TOTAL-COSTS] 0 0 0
[OTHER-EXPENSES] 5,580 50,197 43,551
[LOSS-PROVISION] 0 0 0
[INTEREST-EXPENSE] 0 0 0
[INCOME-PRETAX] (1,120) (50,197) (43,651)
[INCOME-TAX] 0 0 0
[INCOME-CONTINUING] 0 0 0
[DISCONTINUED] 0 0 0
[EXTRAORDINARY] 0 0 0
[CHANGES] 0 0 0
[NET-INCOME] (1,120) (50,197) (43,651)
[EPS-BASIC] (0.012) (0.006) (0.003)
[EPS-DILUTED] (0.012) (0.006) (0.003)
198
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