-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A3U7cfoORjvM7/AeQ9SN7L4hUimYKG35roNHx0AD3E6gUWXl+1yEVdIPlvgSq92T iPcRL5RLYmFWbL6rf2+gVw== 0000948830-02-000332.txt : 20020925 0000948830-02-000332.hdr.sgml : 20020925 20020925121642 ACCESSION NUMBER: 0000948830-02-000332 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020912 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020925 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RECOM MANAGED SYSTEMS INC DE/ CENTRAL INDEX KEY: 0000810365 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 870441351 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-11795 FILM NUMBER: 02771794 BUSINESS ADDRESS: STREET 1: C/O KRYS BOYLE, P.C. STREET 2: 600 17TH STREET, SUITE 2700 SOUTH CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: (303) 893-2300 MAIL ADDRESS: STREET 1: C/O KRYS BOYLE, P.C. STREET 2: 600 17TH STREET, SUITE 2700 SOUTH CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: DOUBLE R RESORTS INC DATE OF NAME CHANGE: 19940510 FORMER COMPANY: FORMER CONFORMED NAME: MT OLYMPUS ENTERPRISES INC /UT/ DATE OF NAME CHANGE: 19970210 FORMER COMPANY: FORMER CONFORMED NAME: ROCOM MANAGED SYSTEMS INC DATE OF NAME CHANGE: 19990309 8-K 1 recom8k.txt RECOM MANAGED FORM 8-K DTD 9-19-02 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 8-K CURRENT REPORT Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 September 19, 2002 ------------------------------------------------ Date of Report (date of earliest event reported) RECOM MANAGED SYSTEMS, INC. ---------------------------------------------------- Exact name of Registrant as Specified in its Charter DELAWARE 33-11795 84-0441351 - --------------------------- --------------- --------------------------- State or Other Jurisdiction Commission File IRS Employer Identification of Incorporation Number Number c/o Jon D. Sawyer Krys Boyle, P.C. 600 17th Street, Suite 2700 South Denver, Colorado 80202 ----------------------------------------------------------- Address of Principal Executive Offices, Including Zip Code (303) 893-2300 -------------------------------------------------- Registrant's Telephone Number, Including Area Code 914 Westwood Boulevard, Suite 809 Los Angeles, California 90024 ------------------------------------------- Former Address if Changed Since Last Report Item 1. Changes in Control of Registrant. On September 19, 2002, Recom Managed Systems, Inc. ("Recom" or the "Company") acquired certain know how, trade secrets and other intellectual property described below in Item 2 from ARC Finance Group LLC ("ARC") (collectively referred to as the "Technology") in exchange for seven million eight hundred thousand (7,800,000) shares of common stock in the Company (the "Shares"). Following the closing of this transaction Recom intends to be principally engaged in further developing and commercializing the Technology. The Shares represent approximately 85% of the issued and outstanding common stock of Recom. As a result of the transaction with ARC and the issuance of 7,800,000 shares of the Company's common stock to ARC, following are those persons known by the Company to own 5% or more of the Company's common stock. Number of Percent of Shares of Outstanding Name Common Stock Shares ---- ------------ ----------- Vanguard West LLC (1) 900,000 9.75% ARC Finance Group LLC (2) 7,800,000 84.51% __________________ (1) Vanguard West LLC is a Nevada limited liability company of which Sim Farar is the manager and owner. Therefore, Sim Farar should be considered as the beneficial owner of these shares. (2) ARC Finance Group LLC is a Delaware limited liability company of which Tracey Hampton is the manager and owner. Therefore, Tracey Hampton should be considered as the beneficial owner of these shares. Effective on the closing, the Company's Officers and Directors resigned and the following persons were elected: Steven O. Sparks - President, CEO and Director Brian Oxman - Director Mr. Sparks was a securities broker for over 22 years with major New York Stock Exchange member firms. Since 1995 he served two years as the President of Sherwood Financial, a hedge fund, and he has served as President and owner of Sparks Financial, a financial services company since 1998. Mr. Oxman has practiced law in Southern California since 1976. He has also served as a law professor at Western State University and he has served as a Judge Pro Tem in the Orange County Superior and Downey Municipal Courts in California. Item 2. Acquisition or Disposition of Assets. See Item 1. above. Before acquiring the Technology from ARC, Recom was a development stage company with little or no tangible assets, no material obligations and no operating business. After acquiring the Technology, the principal business of Recom will be to seek further development and possible commercialization of products or services which embody or otherwise utilize the Technology. The Technology relates to certain proprietary methods, processes and ideas concerning devices and services which, if successfully developed, may be capable of Page 2 * accurately measuring heart functions * automatically and remotely evaluating these functions over the telephone, the Internet, or other wireless transmission systems * providing the patient and the patient's physician(s) with vital heart and other data on a real time basis to provide early warnings about the patient's heart functions. The acquisition of the Technology involved no operating business or tangible assets of any kind. Following acquisition of the Technology, Recom remains in the development stage with no material tangible assets and Recom will require substantial additional funds, in amounts which are currently uncertain, in order for Recom to become fully operational. For a more complete description of the terms and conditions by which Recom acquired the Technology from ARC, see the Stock Acquisition and Technology Transfer Agreement attached hereto as Exhibit 10, and incorporated herein by this reference. All descriptions in this document of the Technology and other conditions of the Technology acquisition are qualified in their entirety by reference to that document. No assurance can be given that Recom will be able to raise or obtain any funds whatever. Even if Recom obtains funds which may be adequate to develop the Technology, no assurance can be given that commercial products or services will ever result or that those products or services will be accepted by regulatory agencies, physicians, patients or insurance providers. In evaluating the transactions described in this report, one should be aware of the highly speculative nature and very substantial risks associated with Recom's financial condition, its ongoing business which must be viewed as being in the early start up stage, its attempts to develop and commercialize the Technology and its management team which has no experience in launching a medical devices and services enterprise such as Recom. Any of these risks may cause Recom to fail. A further presentation of these risks follows. WE ARE MERELY A DEVELOPMENT STAGE COMPANY WITH NO OPERATING HISTORY. We have not yet begun development operations with respect to our transaction with ARC, and the Technology. Recom is uncertain that it will be capable of completing the development of any saleable products arising from the transaction. Because of the complexity of our planned attempts at developing and launching products utilizing the Technology, it is not currently feasible to evaluate our potential business. As a development stage company, we may fail completely in developing any new products. It is further possible that any products Recom may ultimately develop will be "behind the power curve" and will "lag behind" the products of competitors. Further, at this stage of Recom's development, i.e., inception, Recom may later discover that the ultimate market for our products will be non-existent. While management views the Technology to have substantial potential, no assurance of success in any field of endeavor relating to the Technology or its commercialization can be given. As our evaluation of developments progresses, management expects to release information through press releases, web casts or demonstrations, conference calls, mailings or other distribution techniques. Absent such dissemination, it should be assumed that we have not reached a significant stage in our development efforts. Page 3 Recom's historical financial information is of no value in projecting future operating results because we are only in the first stages of development of a complex product in what may prove to be a difficult and speculative market. WE HAVE INCURRED AND WILL CONTINUE TO INCUR LOSSES. We have had no operating business before acquiring the Technology. Product development, efforts at obtaining regulatory approvals, product launch, advertising, promotion and attempts at marketing, distribution and market penetration all require substantial expenditures. We further expect the need to make significant investments in hiring, training and retaining qualified staff and infrastructure. As a result for the foreseeable future, we expect to incur significant losses, including expenses for the following: - funding operating expenses; - developing additional infrastructure; - retaining financial consultants; - retaining medical and regulatory consultants; and - ultimately, bringing to market our products, if development efforts are successful. We cannot give any assurance that Recom can ever achieve revenues. Even if revenues can be achieved Recom can give no assurance that it will ever be profitable. WE INTEND TO RELY ON STRATEGIC RELATIONSHIPS. Recom currently intends to establish and maintain strategic relationships with leaders in a number of health care industry segments, including the health care services, health care devices and other areas of health care and technology industries. Recom currently believes that these relationships may have a material impact on its ability to - raise capital; - acquire additional technologies beyond those acquired by ARC; - bring to market products and services; - establish and/or enhance our brand; and - generate revenue. No assurance can be given that Recom will be able to enter into any strategic relationship. THE HEALTH CARE INDUSTRY MAY NOT ACCEPT ELECTRONIC HEART MONITORING DEVICES OF THE KIND WE INTEND TO DEVELOP. Even if we develop attractive, state of the art products, our business could suffer dramatically if solutions we develop are not accepted or are not perceived to be effective. Growth in demand for our applications and services will depend on the adoption of our solutions by health care participants. Health care participants must be willing to allow sensitive information to be transmitted and evaluated electronically or in person over remote stations and remote transmission devices. Page 4 WE FACE INTENSE COMPETITION, WHICH COULD HARM OUR BUSINESS. The market for health care heart monitoring services is intensely competitive, rapidly evolving, and subject to rapid technological change. Substantially all of our existing competitors have greater financial, technical, product development, marketing, and other resources than we do. These organizations may be better known and are all likely to have more customers, money, products and systems today than we intend to develop over the next two years. Our development may not even be completed in that time frame, but even if it is, we will likely lag behind the competition. We may be unable to compete successfully against current and future competitors, and competitive pressures may seriously harm or even destroy our business. CHANGES IN THE HEALTH CARE INDUSTRY COULD ADVERSELY AFFECT OUR BUSINESS. The health care industry is subject to changing political, economic, and regulatory influences. These factors affect the purchasing practices and operations of health care organizations. Changes in current health care financing and reimbursement systems could cause us to make unplanned enhancements of applications or services, or result in delays or cancellations of orders, or in the revocation of endorsement of our applications and services by health care participants. Federal and state legislatures have periodically considered programs to reform or amend the U.S. health care system at both the federal and state level. Such programs may increase governmental involvement in health care, lower reimbursement rates, or otherwise change the environment in which health care industry participants operate. Health care industry participants may respond by reducing their investments or postponing investment decisions, including investments in our applications and services. Many health care industry participants are consolidating to create integrated health care delivery systems with greater market power. As the health care industry consolidates, competition to provide products and services to industry participants will become even more intense, as will the importance of establishing a relationship with each industry participant. These industry participants may try to use their market power to negotiate price reductions for our products and services. If we were forced to reduce our prices, our operating results could suffer as a result if we cannot achieve corresponding reductions in our expenses. GOVERNMENT REGULATION OF THE HEALTH CARE INDUSTRY COULD ADVERSELY AFFECT OUR BUSINESS. We will be subject to significant regulation and approval processes with respect to what may ultimately amount to various branches of the State and Federal government, including, but not limited to, the Food and Drug Administration. Such regulation may result in significant delays in the commercialization of any products we may ultimately develop (if any). WE MAY BE ADVERSELY AFFECTED BY PRODUCT-RELATED LIABILITIES. If we are successful in developing any new products, we will face the potential for product liability claims once we start marketing such products. Before marketing any products we will attempt to obtain product liability insurance. Such insurance is likely to be very expensive, and there is no assurance that we will be able to obtain any insurance. If we do, it may not be sufficient to cover large claims. Page 5 WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS FROM THIRD PARTIES. We expect that we could be subject to intellectual property infringement claims as the number of competitors grows and the functionality of our applications overlaps with competitive offerings. These claims, even if not meritorious, could be expensive to resolve and divert management's attention from operating the business. If we become liable to others for infringing their intellectual property rights, we could be required to pay a substantial damage award. Such a judgment would have a material adverse effect on our business, financial condition, and results of operations. In addition, we may be unable to develop non-infringing technology or obtain a license on commercially reasonable terms. WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS. Our future success and ability to compete in the health care information services business may be dependent in part upon our proprietary rights to products and services that we develop. We expect to rely on a combination of patent, copyrights, trademark, and trade secret laws and contractual restrictions to protect our proprietary technology and to rely on similar proprietary rights of any of our content and technology providers. We intend to acquire, perfect or file patent applications to protect certain of our proprietary technology. Recom can provide no assurance that such applications for patents will be approved or, if approved, will be effective in protecting technology that we believe is proprietary. We may enter into confidentiality agreements with our employees, as well as with our clients and potential clients seeking proprietary information, and limit access to and distribution of our methods, processes, software, documentation, and other proprietary information. We cannot assure { DELETE "YOU"} that the steps we take or the steps such providers take would be adequate to prevent misappropriation of our proprietary rights. THE INABILITY TO HIRE OR RETAIN QUALIFIED PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS. Our operations are dependent on obtaining qualified personnel to oversee and implement our development and business plans, to raise money to pay for negative cash flow and to otherwise supervise continued improvements and enhancements to the Technology. If we are unable to attract and retain qualified management and other employees, our business and prospects could be adversely affected. Our success is also dependent to a significant degree on our ability to attract, motivate, and retain highly skilled sales, marketing, and technical personnel. Competition for such personnel in the device, software and information services industries is intense. The loss of key personnel or the inability to hire or retain qualified personnel is likely to have a material adverse effect on our business. To make matters worse, because we are merely a development stage company, we currently have none of the key personnel necessary to even begin to carry out our developmental plans. If we fail to attract the capital or management savvy we are seeking, our entire business plan could be subject to failure. Page 6 WE WILL NEED TO OBTAIN SUBSTANTIAL ADDITIONAL CAPITAL IN THE FUTURE. Recom believes that its currently available $125,000 may be sufficient to meet operating requirements for approximately six months. Recom will need to raise additional financing to become fully operational. We will seek to raise funds by selling debt or equity securities, by entering into strategic relationships, or through other arrangements. We may be unable to raise any additional amounts on reasonable terms, or at all, when they are needed and in that event it is likely that we will fail. Item 5. Other Events and Regulation FD Disclosure. Attached hereto as Exhibit 99.2 is Recom's press release dated September 19, 2002 concerning acquisition of the Technology from ARC. To provide initial working capital, the former principal shareholder of Recom delivered $125,000 to Recom at closing and Recom issued to him a warrant to purchase 200,000 shares of common stock at an exercise price of $2.00 per share. The Warrant may not be exercised before September 1, 2003, expires in September 2006, and contains cashless exercise, certain antidilution and other provisions. Following the closing, after giving effect to the issuance of the Shares to ARC, Recom has 9,229,928 shares of common stock outstanding. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Business Acquired. Not Applicable. (b) Pro Forma Financial Information. Not Applicable. (c) Exhibits. Exhibit 10 Stock Acquisition and Technology Transfer Agreement Exhibit 99.1 Warrant to Purchase 200,000 Shares Exhibit 99.2 Press Release dated September 19, 2002 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized. RECOM MANAGED SYSTEMS, INC. Dated: September 24, 2002 By:/s/ Steve Sparks Steve Sparks, President Page 7 EX-10 3 ex10.txt EXHIBIT 10 EXHIBIT 10 STOCK ACQUISITION AND TECHNOLOGY TRANSFER AGREEMENT This Stock Acquisition and Technology Transfer Agreement (the "Agreement") is entered into as of this 12th day of September 2002, by and between ARC Finance Group, LLC ("ARC"), a Delaware limited liability corporation and Recom Managed Systems, Inc., a Delaware corporation ("Recom"). RECITALS WHEREAS, Recom is a publicly-traded company that has been presented with an opportunity to acquire certain Technology from ARC, which ARC has stated it intends to seek commercial development of or with respect to, and Recom wishes to acquire that Technology, whether now owned by ARC or developed hereinafter by or on behalf of ARC, in order to maximize Recom's future business development; and WHEREAS, for purposes of this Agreement the term "Technology" shall mean all intellectual property (including, without limitation, all know-how, patents, copyrights, trade secrets, applications for patents, or other methods now or hereafter acquired or developed with the involvement of ARC) that ARC claims ownership of and which ARC is utilizing in order to bolster its plans to develop certain valuable devices, products and/or services relating to the business of heart monitoring, all of which ARC hopes -- upon the completion of development --will be capable of (a) accurately measuring heart functions, (b) automatically and remotely evaluating such functions by use of the telephones, the Internet and other like transmission systems and (c) providing the patient and the patient's physician with important data on a timely basis. ARC hopes that this technology, if ultimately developed to a commercial state, will result in medical products and devices that are capable of providing early warnings to patients and physicians regarding heart malfunctioning; and WHEREAS, ARC hopes to utilize the Technology to, ultimately, develop medical products and devices that are capable of providing early warnings to patients and physicians regarding potential heart function; and WHEREAS, ARC desires to sell, convey and transfer all of its rights in the Technology and in the above referenced enhancements thereof to Recom in exchange for Recom issuing to ARC seven million eight hundred thousand (7,800,000) restricted shares of common stock of Recom, which will represent approximately 85% of the total Recom shares issued and outstanding on the Closing, as hereinafter defined. NOW, THEREFORE, in consideration of the mutual promises, covenants and representations set forth below and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows: ARTICLE 1 ISSUANCE OF SECURITIES IN EXCHANGE FOR ASSIGNMENT OF TECHNOLOGY 1.1 Issuance of Shares. Subject to the terms and conditions of this Agreement, Recom hereby agrees to issue to ARC on the Closing Date, 7,800,000 shares of common stock of Recom ("Shares"), which are not registered under the Securities Act of 1933 as amended (the "Act"), shall be fully restricted under Rule 144 as promulgated under the Act but shall also be free and clear of any and all encumbrances. Page 1 1.2 Assignment of Technology. In exchange for the Shares being issued to ARC, ARC hereby transfers and assigns to Recom, on the Closing, fully and absolutely, all right, title and interest of ARC in and to the Technology, all intellectual property rights and all other intangible property rights appertaining or relating to the Technology hereafter developed by ARC. Upon the Closing, Recom shall be the sole owner and beneficiary of the Technology and all enhancements or other derivations of the Technology described anywhere in this Agreement. 1.3 Exemption from Registration. The parties hereto intend that the Common Stock to be issued by Recom to ARC shall be exempt from the registration requirements of the Act, pursuant to Section 4(2) thereof and other applicable exemptions contained in rules and regulations promulgated thereunder. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF RECOM Except as disclosed in Schedule 2, which is attached hereto and incorporated herein by reference, Recom represents and warrants to ARC that: 2.1 Organization. Recom is a corporation duly organized, validly existing, and in good standing under the laws of Delaware, has all necessary corporate powers to own properties and to carry on business, and it is not now conducting any business, except to the extent to which the effecting of the transaction contemplated by this Agreement constitutes doing business. Recom is duly qualified to do business as a foreign corporation and is in good standing under the laws of California. 2.2 Capitalization. The authorized capital stock of Recom consists of 50,000,000 shares of $.001 par value Common Stock of which 1,429,928 shares of Common Stock are currently issued and outstanding. All of the issued and outstanding shares of Common Stock are duly authorized, validly issued, fully paid and nonassessable. There are no outstanding subscriptions, options, rights, warrants, convertible securities, or other agreements or commitments obligating Recom to issue or to transfer from treasury any additional shares of its capital stock of any class. 2.3 Subsidiaries. Recom does not presently have any subsidiaries or own any interest in any other enterprise (whether or not such enterprise is a corporation). 2.4 Directors and Officers. Schedule 2 contains the names and titles of all directors and officers of Recom as of the date of this Agreement. 2.5 Financial Statements. Recom has delivered to ARC its audited balance sheet and statements of operations and cash flows as of and for the year ended December 31, 2001, and its unaudited balance sheet and statement of operations for the six months ended June 30, 2002 (the "Financial Statements"). The Financial Statements are complete and correct in all material respects and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated. The Financial Statements accurately set out and describe the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein. As of the Closing, all payables and debts of Recom shall have been paid. Page 2 2.6 Absence of Changes. Since June 30, 2002, except for changes in the ordinary course of business which have not in the aggregate been materially adverse, to Recom's knowledge, Recom has not experienced or suffered any material adverse change in its condition (financial or otherwise), results of operations, properties, business or prospects or waived or surrendered any claim or right of material value. 2.7 Absence of Undisclosed Liabilities. To Recom's knowledge and to the extent not material, neither Recom nor any of its assets is subject to any liabilities or obligations of any nature, whether absolute, accrued, contingent or otherwise and whether due or to become due, that are not reflected in the Financial Statements. 2.8 Tax Returns. Recom has filed all federal, state and local tax returns required by law and has paid all taxes, assessments and penalties, if any, due and payable. 2.9 Investigation of Financial Condition. Without in any manner reducing or otherwise mitigating the representations contained herein, ARC shall have the opportunity to meet with Recom's accountants and attorneys to discuss the financial condition of Recom. Recom shall make available to ARC all books and records of Recom. 2.10 Trade Names and Rights. Recom does not use any trademark, service mark, trade name, or copyright in its business, or own any trademarks, trademark registrations or applications, trade names, service marks, copyrights, copyright registrations or applications. 2.11 Compliance with Laws. To its knowledge and except to the extent not material, Recom has complied with, and is not in violation of, applicable federal, state or local statutes, laws and regulations (including, without limitation, any applicable building, zoning, or other law, ordinance, or regulation) affecting its properties or the operation of its business. 2.12 Litigation. Recom is not a party to any suit, action, arbitration, or legal, administrative, or other proceeding, or governmental investigation pending or, to the knowledge of Recom, threatened against or affecting Recom or its business, assets, or financial condition. Recom is not in default with respect to any order, writ, injunction, or decree of any federal, state, local, or foreign court, department agency, or instrumentality. Recom is not engaged in any legal action to recover moneys due to it. 2.13 No Pending Investigation. Recom is not aware of any pending investigations or legal proceedings by the SEC, the NASD, any state securities regulatory agency, or any other governmental agency regarding Recom or any officers or directors of Recom. 2.14 Authority. Recom has full corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The Board of Directors of Recom has taken all action required to authorize the execution and delivery of this Agreement by or on behalf of Recom, the performance of the obligations of Recom under this Agreement and the consummation by Recom of the transactions contemplated under this Agreement. No other corporate proceedings on the part of Recom are necessary to authorize the execution and delivery of this Agreement by Recom in the performance of its obligations under this Agreement. This Agreement is, and when executed and delivered by Recom, will be a valid and binding agreement of Recom, enforceable against Recom in accordance with its terms, except as such enforceability may be limited by general principles of equity, bankruptcy, insolvency, moratorium and similar laws relating to creditors rights generally. Page 3 2.15 Ability to Carry Out Obligations. Neither the execution and delivery of this Agreement, the performance by Recom of its obligations under this Agreement, nor the consummation of the transactions contemplated under this Agreement will, to Recom's knowledge: (a) violate any provision of Recom's certificate of incorporation or bylaws; (b) with or without the giving of notice or the passage of time, or both, violate, or be in conflict with, or constitute a default under, or cause or permit the termination or the acceleration of the maturity of, any debt, contract, agreement or obligation of Recom, or require the payment of any prepayment or other penalties; (c) require notice to, or the consent of, any party to any agreement or commitment, lease or license, to which Recom is bound; (d) result in the creation or imposition of any security interest, lien or other encumbrance upon any property or assets of Recom; or (e) violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority to which Recom is bound or subject, except to the extent notice or approval by shareholders and regulatory authorities may be required. 2.16 Validity of the Shares. The Shares, when issued and delivered under the provisions of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable. 2.17 Full Disclosure. None of the representations and warranties made by Recom herein, or in any exhibit, certificate or memorandum furnished or to be furnished by Recom, or on its behalf, contains or will contain any untrue statement of material fact, or omit any material fact the omission of which would be misleading. 2.18 Material Contracts and Obligations. Recom has no material contracts to which it is a party or by which it is bound. 2.19 Consents and Approvals. No consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority is required to be made or obtained by Recom in order for Recom to: (a) execute and deliver this Agreement; (b) perform its obligations under this Agreement; or (c) consummate the transactions contemplated by this Agreement. In the event shareholder approval of Recom is determined by Recom prior to the Closing to be necessary to effectuate the Closing, Recom will proceed under applicable State and Federal law to promptly obtain such approval. 2.20 Real Property. Recom does not own, use or claim any interest in any real property, including without limitation any license, leasehold or any similar interest in real property. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ARC ARC represents, warrants and covenants to Recom that as of the date of this Agreement and through and including the Closing Date: Page 4 3.1 Consents, Authorization and Validity of Agreement. ARC has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement and the Closing Documents and to perform its obligations under this Agreement. The execution, delivery and performance by ARC of this Agreement, and any other documents relating thereto are within its power and have been duly authorized. Upon execution hereof, this Agreement shall constitute valid and binding agreements and obligations of ARC, enforceable against ARC and its affiliates in accordance with their respective terms. 3.2 Consents and Approvals; No Violations. The execution and delivery of this Agreement by ARC and the consummation by ARC of the sale of the Technology as contemplated herein and the other transactions contemplated hereby will not (a) constitute a violation of any statute, rule, regulation, order or decree of any public body or authority by which ARC or any of its affiliates is bound or by which any of their respective properties or assets are bound, except to the extent that any such violation proves to be immaterial to the businesses of ARC or (after the Closing) Recom, (b) result in a violation or breach of, conflict with, constitute a default, or result in the creation of any encumbrance upon any of the properties or assets of ARC under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, lease, franchise agreement or any other instrument or obligation to which ARC or any company controlled by ARC is a party, except to the extent that any such violation proves to be immaterial to the businesses of ARC or (after the Closing) Recom. 3.3 Existence and Good Standing. ARC is a limited liability corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified or licensed as a foreign corporation to conduct its business or shall obtain qualification or licensure in such a manner compliant with applicable law or, to the extent of any non-compliance, such non-compliance being immaterial. 3.4 Compliance with Law. ARC is and at all times relevant to this Agreement has been in compliance in all material respects with Legal Requirements applicable to this Agreement. To the knowledge of ARC no event has occurred or circumstance exists that (with or without notice or lapse of time or both) may constitute or result in a violation by ARC of, or a failure by ARC to comply with, any applicable Legal Requirement other than violations which prove to be immaterial. For purposes of this Section 3.4, "Legal Requirement" means any federal, state, local, municipal or other administrative order, constitution, law, code, rule, directive, ordinance, principle of common law, regulation, statute and similar provisions having the force or effect of law and also means any award, decision, summons, writ, injunction, judgment, order, ruling, subpoena, citation, decree or verdict entered, issued, made, given or rendered by any court, administrative agency or other governmental body or by any arbitrator. 3.5 Litigation. There are no (i) actions, suits or legal, equitable, arbitrative or administrative proceedings pending, or to the knowledge of ARC, threatened against ARC or (ii) judgements, injunctions, writs, rulings or orders by any governmental agency or authority against ARC which relates to or may have an adverse effect upon the Agreement or any provision thereof, except as to such matters that are immaterial to this Agreement. Page 5 3.6 Disclosures. No representation or warranty by ARC in this Agreement or any Schedule or Exhibit, or any statement, list or certificate furnished or to be furnished by the ARC pursuant to this Agreement, or in connection with these transactions, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact required to be stated herein or therein or necessary to make the statements contained herein or therein not misleading. 3.7 Investment Representation. The Shares are restricted securities within the meaning of the United States federal securities laws including the Act, and ARC is acquiring the Shares for its own account for investment purposes only and not with a view to or for sale in connection with the distribution thereof. The certificate or certificates evidencing the Shares shall bear a legend substantially as follows: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE OR SECURITIES LAWS AND NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, IS AVAILABLE." 3.8 Technology. No officer, employee, owner, relative of such officer, employee, or owner, or affiliate of ARC has any right or interest in or to any part of the Technology. ARC has taken all reasonable security measures to protect the secrecy, confidentiality and value of all of its trade secrets and confidential information, including, without limitation, entering into written agreements with its employees and other persons who may have participated in the development, discovery or invention of any trade secret, or who may have knowledge of or access to any trade secret or confidential information, which provides for the non-disclosure of trade secrets and confidential information and the transfer of all rights in and to the same to ARC. ARTICLE 4 COVENANTS 4.1 Investigative Rights. From the date of this Agreement until the Closing Date, each party shall provide to the other party, and such other party's counsels, accountants, auditors, and other authorized representatives, full access during normal business hours and upon reasonable advance written notice to all of each party's properties, books, contracts, commitments, and records for the purpose of examining the same. Each party shall furnish the other party with all information concerning each party's affairs as the other party may reasonably request. If the transaction contemplated hereby is not completed, all documents received by each party and/or its attorneys and accountants, auditors or other authorized representatives shall be returned to the other party who provided same upon request. The parties hereto, their directors, employees, agents and representatives shall not disclose any of the information described above unless such information is already disclosed to the public, without the prior written consent of the party to which the confidential information pertains. Each party shall take such steps as are necessary to prevent disclosure of such information to unauthorized third parties. Page 6 4.2 Conduct of Business. Prior to the Closing, Recom shall conduct its business in the normal course, and shall not sell, pledge, or assign any assets, without the prior written approval of the other party, except in the regular course of business. Recom shall not amend its Articles of Incorporation or Bylaws, declare dividends, redeem or sell stock or other securities, incur additional or newly-funded liabilities, acquire or dispose of fixed assets, change employment terms, enter into any material or long-term contract, guarantee obligations of any third party, settle or discharge any balance sheet receivable for less than its stated amount, pay more on any liability than its stated amount, or enter into any other transaction other than in the regular course of business except as otherwise contemplated herein. ARTICLE 5 CONDITIONS PRECEDENT TO RECOM'S PERFORMANCE 5.1 Conditions. The obligations of Recom hereunder shall be subject to the satisfaction, at or before the Closing, of all the conditions set forth in this Article 5. Recom may waive any or all of these conditions in whole or in part without prior notice; provided, however, that no such waiver of a condition shall constitute a waiver by Recom of any other condition of or any of Recom's other rights or remedies, at law or in equity, if ARC shall be in default of any of its representations, warranties, or covenants under this Agreement. 5.2 Accuracy of Representations. Except as otherwise permitted by this Agreement, all representations and warranties by ARC in this Agreement or in any written statement that shall be delivered to Recom by ARC under this Agreement shall be true and accurate on and as of the Closing Date as though made at that time. 5.3 Performance. ARC shall have performed, satisfied, and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it, on or before the Closing Date. 5.4 Delivery of Assignment. ARC shall have delivered to Recom an assignment of the Technology and of other rights as set forth in subparagraph 1.2 above, in form and substance acceptable to counsel for Recom consistent with this Agreement. 5.5 Absence of Litigation. No action, suit, or proceeding before any court or any governmental body or authority, pertaining to the transaction contemplated by this Agreement or to its consummation, shall have been instituted or threatened against ARC or against the Technology or any component thereof on or before the Closing Date. ARTICLE 6 CONDITIONS PRECEDENT TO ARC'S PERFORMANCE 6.1 Conditions. ARC's obligations hereunder shall be subject to the satisfaction, at or before the Closing, of all the conditions set forth in this Article 6. ARC may waive any or all of these conditions in whole or in part without prior notice; provided, however, that no such waiver of a condition shall constitute a waiver by ARC of any other condition of or any of ARC's rights or remedies, at law or in equity, if Recom shall be in default of any of its representations, warranties, or covenants under this Agreement. Page 7 6.2 Accuracy of Representations. Except as otherwise permitted by this Agreement, all representations and warranties by Recom in this Agreement or in any written statement that shall be delivered to ARC by Recom under this Agreement shall be true and accurate on and as of the Closing Date as though made at that time. 6.3 Performance. Recom shall have performed, satisfied, and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it, on or before the Closing Date. 6.4 Absence of Litigation. No action, suit or proceeding before any court or any governmental body or authority, pertaining to the transaction contemplated by this Agreement or to its consummation, shall have been instituted or threatened against Recom on or before the Closing Date. 6.5 Sale of Warrants to Sim Farar. Prior to the Closing, Sim Farar will purchase from Recom a warrant to purchase 200,000 shares of Recom common stock (the "Warrant") at an exercise price of $2.00 per share commencing September 1, 2004 and terminating thirty six months thereafter substantially in a form acceptable to Recom. The purchase price of the Warrant shall be $125,000. The Warrant shall contain customary antidilution provisions, shall provide for cashless exercise, and the shares underlying the Warrant shall be registered at the same time and within the same registration statement as that provided for any other shareholder of Recom. Recom's bank account will have at least $125,000 in cleared funds from this transaction as of the Closing, after the payment of all payables and debts arising prior to the Closing. 6.6 Directors of Recom. Effective on the Closing, Recom shall have appointed two directors and left one vacancy to be filled in the future, and such two appointees shall be subject to the approval of Recom. The current Officers and Directors of Recom shall have submitted their resignations as the Officers and Directors of Recom effective on the Closing of this transaction. 6.7 Officers of Recom. Effective on the Closing, Recom shall have appointed the persons named on Exhibit B hereto as new officers and management. ARTICLE 7 CLOSING 7.1 Closing. The Closing of this transaction shall be held at a location designated by ARC in writing to Recom in the County of Los Angeles, State of California, or such other place as shall be mutually agreed upon, on September 19, 2002 or if not closed on that date for any reason as soon thereafter as may be agreed upon by the parties. This Agreement may be rescinded by either party (within its sole discretion) at any time prior to the Closing, without liability upon delivery of written notice to the other party. 7.2 Recom shall deliver to ARC a stock certificate representing 7,800,000 shares of Recom restricted common stock issued in the name of ARC or its limited designees as may be approved by Recom. 7.3 ARC shall deliver to Recom an assignment of the technology and other rights in accordance with subparagraph 1.2 above substantially in the form of Exhibits A and B attached hereto. 7.4 Recom shall deliver a signed Consent and/or Minutes of the Directors approving this transaction. Page 8 ARTICLE 8 INDEMNIFICATION 8.1 (a) Each of Recom, ARC and Tracey Hampton, (individually an "Indemnitor" and collectively the "Indemnitors"), jointly and severally, agrees to indemnify and hold Sim Farar, Joel Farar, Justin Farar, Vanguard West, LLC, Jack Brehm and Arthur Lyons (individually an "Indemnitee" and collectively the "Indemnitees") and each person, if any, who controls any of the Indemnitees within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon the Technology, entering into this Agreement, or arise out of or are based upon any act or omission or alleged omission occurring after the date of this Agreement. This indemnity agreement will be in addition to any liability which the Company may otherwise have under this Agreement. (b) The Indemnitees agree to indemnify and hold harmless the Indemnitors, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), jointly or several by, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement of a material fact contained in this Agreement, provided that the provisions in this Section shall terminate and be of no force or effect whatever six months from the date hereof and provided that in the aggregate the amount of any liability hereunder by Indemnitees to the Indemnitors shall not exceed $100,000. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Article 8). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless: Page 9 (i) the employment of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action; (ii) the indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action; or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the indemnifying parties. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that such consent was not unreasonably withheld. (d) The only claims subject to this indemnification provision are those claims arising directly out of this Agreement, and no other claims may be asserted by Indemnitors or Indemnitees under any circumstances whatsoever that would limit or offset in any way the scope of this indemnification provision. 8.2 Survival of Representations and Agreements. All representations and warranties, covenants and agreements of the Indemnitors and Recom contained in this Agreement, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Indemnitees or any controlling person thereof or by or on behalf of the Indemnitees or any of them, any of their officers and directors or any controlling person thereof, and shall survive the execution and delivery of this Agreement except to the extent expressly set forth herein. ARTICLE 9 MISCELLANEOUS 9.1 Captions and Headings. The Article and paragraph headings throughout this Agreement are for convenience and reference only, and shall in no way be deemed to define, limit, or add to the meaning of any provision of this Agreement. 9.2 No Oral Change. This Agreement and any provision hereof, may not be waived, changed, modified, or discharged orally, but it can be changed by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought. 9.3 Non-Waiver. Except as otherwise expressly provided herein, no waiver of any covenant, condition, or provision of this Agreement shall be deemed to have been made unless expressly in writing and signed by the party against whom such waiver is charged; and (i) the failure of any party to insist in any one or more cases upon the performance of any of the provisions, covenants, or conditions of this Agreement or to exercise any option herein contained shall not be construed as a waiver or relinquishment for the future of any such provisions, covenants, or conditions, (ii) the acceptance of performance of anything required by this Agreement to be performed with knowledge of the breach or failure of a covenant, condition, or provision hereof shall not be deemed a waiver of such breach or failure, and (iii) no waiver by any party of one breach by another party shall be construed as a waiver with respect to any other or subsequent breach. Page 10 9.4 Time of Essence. Time is of the essence of this Agreement and of each and every provision hereof. 9.5 Entire Agreement. This Agreement contains the entire Agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings. There are and have in fact been no restrictions, promises, warranties or undertakings other than those set forth herein. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated except by a subsequent amendment in writing signed by all parties hereto. 9.6 Choice of Law; Arbitration. This Agreement and its application shall be governed by the laws of the State of California, except to the extent its conflict of laws provisions would apply the laws of another jurisdiction, and California will be the proper venue for jurisdictional purposes for any actions brought to enforce this Agreement. Any dispute hereunder shall be subject to binding arbitration in accordance with the rules of the American Arbitration Association and judgment thereon shall be not subject to appeal or collateral attack. 9.7 Notices. All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, or on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed as follows: Recom: Sim Farar, President Recom Managed Systems, Inc. 914 Westwood Boulevard, Suite 809 Los Angeles, California 90024 (818) 702-9977 (818) 8630-0768 fax ARC: Tracey Hampton Manager ARC Finance Group, LLC 21550 Oxnard Street Suite 300 Woodland Hills, California 91367 (818) 615-2058 with copy not constituting notice to: Jon D. Sawyer Krys Boyle, P.C. 600 17th Street, Suite 2700 South Denver, Colorado 80202 (303) 893-2300 (303) 893-2882 fax Page 11 9.8 Binding Effect. This Agreement shall inure to and be binding upon the heirs, executors, personal representatives, successors and assigns of each of the parties to this Agreement. 9.9 Mutual Cooperation. The parties hereto shall cooperate with each other to achieve the purpose of this Agreement, and shall execute such other and further documents and take such other and further actions as may be necessary or convenient to effect the transaction described herein. 9.10 Brokers. The parties hereto represent and agree that no broker has brought about the aforementioned transaction. Each of the parties hereto shall indemnify and hold the other harmless against any and all claims, losses, liabilities or expenses which may be asserted against it as a result of its dealings, arrangements or agreements with any broker or person, except as described in this paragraph. 9.11 Announcements. Recom and ARC will consult and cooperate with each other as to the timing and content of any announcements of the transactions contemplated hereby to the general public or to employees, customers or suppliers, subject to Recom's obligations under the Delaware General Corporation Law and the federal securities laws. Recom expects to issue a press release and to provide its shareholders with a letter generally describing the transaction. Recom and ARC currently anticipate that the only other public pronouncement necessary or appropriate with respect to this transaction will be the filing of a Form 8-K with the Securities and Exchange Commission in accordance with applicable law. 9.12 Expenses. Recom and ARC will pay their own legal, accounting and any other out-of-pocket expenses reasonably incurred in connection with this transaction, whether or not the transaction contemplated hereby is consummated. 9.13 Exhibits. As of the execution hereof, the parties hereto have provided each other with the Exhibits provided for herein above, including any items referenced therein or required to be attached thereto. Any material changes to the Exhibits shall be immediately disclosed to the other party. 9.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be considered an original instrument and all of which together will be considered one and the same agreement, and will become effective when counterparts, which together contain the signatures of each party, will have been delivered to Recom and ARC. Delivery of executed signature pages by facsimile transmission will constitute effective and binding execution and delivery of this Agreement. AGREED TO AND ACCEPTED as of the date first above written. RECOM MANAGED SYSTEMS, INC. By /s/ Sim Farar Sim Farar, President ARC FINANCE GROUP, LLC By /s/ Tracey Hampton Tracey Hampton, Manager Page 12 SCHEDULE 2 Recom Managed Systems, Inc. ("Recom") 2.4 The Officers and Directors of Recom are as follows: Name Position ---- -------- Sim Farar Chairman of the Board, CEO and President Jack Brehm CFO and Director Arthur Lyons Secretary and Director EXHIBIT A ASSIGNMENT OF TECHNOLOGY AND RIGHTS Pursuant to the requirements of that certain Stock Acquisition and Technology Transfer Agreement attached hereto, ARC Finance Group, LLC ("ARC") hereby assigns and transfers to Recom Managed Systems, Inc., a Delaware corporation ("Recom"), all right, title and interest of ARC in and to the technology as described in the foregoing Agreement, and ARC agrees that Recom shall and hereby is the sole owner and beneficiary of all rights held by ARC in and to the technology. WHEREFORE, the assignor has set his signature below to confirm and acknowledge the foregoing assignment. ___________________________________________ Tracey Hampton, for ARC Finance Group, LLC EX-99 4 ex991.txt EXHIBIT 99.1 EXHIBIT 99.1 NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED UNDER THE ACT OR IN THE OPINION OF COUNSEL AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE. Void after 5:00 P.M., Los Angeles Time on September 30, 2006 (the "Expiration Date") RECOM MANAGED SYSTEMS, INC. A Delaware Corporation WARRANT TO PURCHASE 200,000 SHARES OF COMMON STOCK AS HEREIN DESCRIBED Dated: as of September 19, 2002 This certifies that, for value received SIM FARAR 914 Westwood Boulevard Suite 809 Los Angeles, California 90020 or his registered assigns (the "Holder") is entitled, subject to the terms set forth herein, to purchase from Recom Managed Systems, Inc. (the "Company"), a Delaware corporation having its offices at c/o Jon D. Sawyer, 600 17th Street, Suite 27005, Denver, Colorado, 80202, two hundred thousand (200,000) shares of the Company's common stock subject to adjustment as set forth herein. 1. DEFINITIONS. Unless otherwise provided herein, the following terms shall be defined as follows: 1.1 "Common Stock" or "Common Shares" shall initially refer to the Company's common stock including Underlying Securities, as more fully set forth in Section 4 hereof. 1.2 "Company" shall mean Recom Managed Systems, Inc., its successors and assigns. 1.3 "Effective Date" shall mean September 1, 2003. 1.4 "Expiration Date" shall mean September 30, 2006. 1.5 "Holder" shall mean Sim Farar or his registered assigns. 1.6 "Warrant" shall mean the Holder's right to purchase the Common Shares pursuant to the terms contained herein. 1.7 "Warrant Price" or "Common Share Price" shall be Two Dollars ($2.00) per Share, which is above fair market value as of the date of this grant, subject to adjustment as set forth herein. 1.8 "Purchase Form" shall mean the form attached hereto as Exhibit "A". Page 1 1.9 "Underlying Securities" or "Underlying Shares" or "Underlying Stock" shall refer to the Common Shares or other securities or property issuable or issued upon exercise of the Warrants. 1.10 "Registrable Securities" means: (a) The Common Stock issuable or previously issued on the exercise of the Warrant and any Common Stock issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the Common Stock issued on such exercise. 1.11 "Registrable Securities Holder" means any holder of outstanding Registrable Securities, provided, however, that for the purpose of this definition the holder of this Warrant shall be deemed to be the Holder of the Registrable Securities into which that security is then exercisable. 2. TERMS OF WARRANT. 2.1 EXERCISE OF WARRANT. (a) Exercise by Payment. Subject to the terms of this Warrant, the purchase rights represented by this Warrant may be exercised by the Holder hereof, in whole or in part (but not as to less than a whole Common Share), at any time, and from time to time, during the period commencing on the Effective Date and terminating on the Expiration Date. A Warrant may be exercised by the Holder upon presentation of this Warrant, with the Purchase Form duly executed, at the Company's office (or such office or agency of the Company as it may designate in writing to the Holder hereof by notice pursuant to the terms hereof), specifying the number of Common Shares as to which the Warrant is being exercised, and upon payment by the Holder to the Company of the Warrant Price. Such payment shall be made by cash, by certified check, bank draft or confirmed wire transfer, in an amount equal to the Warrant Price times the number of Common Shares then being purchased hereunder. (b) Effect of Exercise. Company agrees that the Holder hereof shall be deemed the record owner of such Underlying Securities as of the close of business on the date on which this Warrant shall have been presented and payment made for such Underlying Securities as aforesaid. Certificates for the Underlying Securities so obtained shall be delivered to the Holder hereof within a reasonable time, not exceeding fourteen (14) days, after the rights represented by this Warrant shall have been so exercised. If this Warrant shall be exercised in part only or transferred in part by this Warrant for cancellation or partial transfer, upon request by the Holder the Company shall deliver a new Warrant evidencing the rights of the Holder hereof to purchase the balance of the Underlying Shares which such Holder is entitled to purchase hereunder. Exercise in full of the rights represented by this Warrant shall not extinguish any rights granted related to registration of the Underlying shares under the Securities Act of 1933, as amended (the "Act"), as may be set forth elsewhere herein. (c) Cashless (Net Issue) Exercise. Notwithstanding any provisions herein to the contrary, if the fair market value of one share of the Company's Common Stock is greater than the Stock Purchase Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly Page 2 endorsed Form of Subscription and notice of such election in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula: X = Y (A-B) ---------- A Where X = the number of shares of Common Stock to be issued to the Holder; Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being canceled (as of one day prior to the date of such calculation); A = the fair market value of one share of the Company's Common Stock (as of one day prior to the date of such calculation); and B = Stock Purchase Price (as adjusted to one day prior to the date of such calculation). For purposes of the above calculation, the fair market value of one share of Common Stock shall mean: (A) If traded on a securities exchange, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange over the 30-day period ending five business days prior to the net issuance exercise date; (B) If traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the fair market value of the Common Stock shall be deemed to be the average of the last reported sales prices of the Common Stock on such market over the 30-day period ending five business days prior to the net issuance exercise date; (C) If traded over-the-counter other than on the Nasdaq National Market or the Nasdaq SmallCap Market, the fair market value of the Common Stock shall be deemed to be the average of the closing bid prices of the Common Stock over the 30-day period ending five business days prior to the net issuance exercise date; and (D) If there is no public market for the Common Stock, then fair market value shall be determined by mutual agreement of the Holder and the Company, and if the Holder and the Company are unable to so agree, at the Company's sole expense, by an investment banker of national reputation selected by the Company and reasonably acceptable to the Holder. In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of shares of Common Stock as are not disputed in accordance with this Warrant. If such dispute involves the calculation of the Stock Purchase Price, the Company shall submit the disputed calculations to a "Big Six" independent accounting firm (selected by the Company) via facsimile within three (3) business days of receipt of the Form of Subscription. The accounting firm shall audit the calculations and notify the Company and the converting Holder of the results no later than two (2) business days from the date it receives the disputed calculations. The accounting firm's calculation shall be deemed conclusive, absent manifest error. The Company shall then issue the appropriate number of shares of Common Stock in accordance with this Section. Page 3 2.2. EXCHANGE OF WARRANT. Subject to the provision of restrictions on transfer related to the requirement for registration under the Act and such other restrictions as may be set forth herein; (i) this Warrant is exchangeable at the option of the Holder at the aforesaid office of the company for other Warrants of different denominations entitling the Holder thereof to purchase in the aggregate the same number of Common Shares as are purchasable hereunder; and (ii) this Warrant may be divided or combined with other Warrants which carry the same rights, in either case, upon presentation hereof at the aforesaid office of the company together with a written notice, signed by the Holder hereof, specifying the names and denominations in which new Warrants are to be issued, and the payment of any transfer tax due in connection therewith. 3. ADJUSTMENT OF WARRANT AND NUMBER OF SHARES. Subject and pursuant to the provisions of this Section 3, the Warrant Price and number of Common Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter in this Section 3. 3.1 SUBDIVISION OF SHARES. If the Company shall at any time subdivide its outstanding common Shares by recapitalization, reclassification, stock dividend, or split-up thereof or other means, the number of Common Shares subject to this Warrant immediately prior to such subdivision shall be proportionately increased and the Warrant Price shall be proportionately decreased, and if the Company shall at any time combine the outstanding common Shares by recapitalization, reclassification or combination thereof or other means, the number of Common Shares subject to this Warrant immediately prior to such combination shall be proportionately decreased and the Warrant Price shall be proportionately increased. Any such adjustment and adjustment to the Warrant Price shall become effective at the close of business on the record date for such subdivision or combination. 3.2 DISTRIBUTION OF SECURITIES OR OTHER ASSETS. If the Company after the date hereof shall distribute to all of the holders of its common shares any securities including, but not limited to Common Shares, or other assets (other than a cash distribution made as a dividend payable out of earnings or out of any earned surplus legally available for dividends under the laws of the jurisdiction of incorporation of the company), the Company shall be required to make such equitable adjustment in the Warrant Price and the type and/or number of Underlying Securities in effect immediately prior to the record date of such distribution as may be necessary to preserve to the Holder of this Warrant rights substantially proportionate to and economically equivalent to those enjoyed hereunder by such Holder immediately prior to the happening of such distribution. Any such adjustment made reasonably and in good faith by the Company shall be final and binding upon the Holders and shall become effective as of the record date for such distribution. 3.3 MINIMUM ADJUSTMENT. No adjustment in the number of Common shares subject to this Warrant or the Warrant Price shall be required under this Section 3 unless such adjustment would require an increase or decrease in such number of shares of at least 1% of the then adjusted number of Common shares issuable upon exercise of the Warrant, provided, however, that any adjustments which by reason of the foregoing are not required at the time to be made shall be carried forward and taken into account and included in determining the amount of any subsequent adjustment. If the Company shall make a record of the Holders of its Common Shares for the purpose of entitling them to receive any dividend or adjustment in the number of Common Shares subject to the Warrant shall be required by reason of the making of such record. Page 4 3.4 REORGANIZATION. In case of any capital reorganization or reclassification or change of the outstanding Common Shares (exclusive of a change covered by Section 3.1 hereof or which solely affects the par value of such Common Shares) or in the case of any merger or consolidation of the company with or into another corporation (other than a consolidated or merger in which the Company is the continuing corporation and which does not result in any reclassification, change, capital reorganization or change in the ownership of the outstanding Common Shares), or in the case of any sale or conveyance or transfer of all or substantially all of the property of the Company and in connection with which the Company is dissolved, the Holder of this Warrant shall have the right thereafter (until the expiration of the right of exercise of this Warrant) to receive upon the exercise hereof, for the same aggregate Warrant Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property receivable upon such reclassification, change, capital reorganization, merger or consolidation, or upon the dissolution following any sale or other transfer, by a holder of the number of Common Shares of the Company equal to the number of common shares obtainable upon exercise of this Warrant immediately prior to such event; and if any reorganization, reclassification, change, merger, consolidation, sale or transfer also results in a change in Common Shares covered by Section 3.1, then such adjustment shall be made pursuant to both this Section 3.4 and Section 3.1. The provisions of this Section 3.4 shall similarly apply to successive reclassification, or capital reorganizations, mergers or consolidations, changes, sales or other transfers. 3.5 FRACTIONAL SHARES. The Company shall not be required to issue fractional Common Shares upon any exercise of this Warrant. As to any final fraction of a Common Share which the Holder of this Warrant would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the market value of a share of such stock on the business day preceding the day of exercise or book value as determined by the Company's independent public accountants if not publicly traded. The Holder of this Warrant, by his acceptance hereof, expressly waives any right to receive any fractional shares of stock upon exercise of this Warrant. As used herein, the current market price per share at any date shall be the price of Common Shares on the business day immediately preceding the event requiring an adjustment hereunder and shall be (A) if the principal trading market for such securities is an exchange or NASDAQ NMS, the closing price on such exchange or NASDAQ NMS on such day provided if trading of such Common Shares is listed on any consolidated tape, the price shall be the closing price set forth on such consolidated tape or (B) if the principal market for such securities is the over-the-counter market, the high bid price on such date as set forth by NASDAQ SmallCap or the NASDAQ Electronic Bulletin Board (or its announced successor, the Bulletin Board Exchange), if the security is not quoted on NASDAQ SmallCap or the NASDAQ Electronic Bulletin Board (or its announced successor, the Bulletin Board Exchange), the high bid price as set forth in the National Quotation Bureau sheet listing such securities for such day. Notwithstanding the foregoing, if there is no reported closing price or high bid price, as the case may be, on a date prior to the event requiring an adjustment hereunder, then the current market price shall be determined as of the latest date prior to such day for which such closing price or high bid price is available. 3.6 CERTIFICATE. Irrespective of any adjustments pursuant to this Section 3 in the Warrant Price or in the number, or kind, or class of shares or other securities or other property obtainable upon exercise of this Warrant, and Without impairing any such adjustment, this certificate Page 5 representing this Warrant may continue to express the Warrant Price and the number of Common Shares obtainable upon exercise at the same price and number of Common Shares as are stated herein. 3.7 DETERMINATION OF SHARES AND WARRANT PRICE. Until this Warrant is exercised, the Underlying Shares, and the Warrant Price shall be determined exclusively pursuant to the provisions hereof. 3.8 ADJUSTMENT NOTICE. Upon any adjustment of this Warrant the Company shall give written notice thereof to the Holder which notice shall include the number of Underlying Securities purchasable and the price per share upon exercise of this Warrant and shall set forth in reasonable detail the events which resulted in such adjustment. 4. COMMON STOCK. For the purposes of this Warrant, the terms "Common Shares" or "Common Stock" shall mean (i) the class of stock designated as the common stock of the Company on the Effective Date or (ii) any other class of stock resulting from successive changes or reclassification of such Common Stock consisting solely of changes from par value to no par value, or from no par value to par value or changes in par value. If at any time, as a result of an adjustment made pursuant to Section 3, the securities or other property obtainable upon exercise of this Warrant shall include shares or other securities of another corporation or other property, then thereafter, the number of such other shares or other securities or property so obtainable shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Shares contained in Section 3, and all other provisions of this Warrant with respect to Common Shares shall apply on like terms to any such other shares or other securities or property. Subject to the foregoing, and unless the context requires otherwise, all references herein to Common Shares shall, in the event of an adjustment pursuant to Section 3, be deemed to refer also to any other shares or other securities or property when obtainable as a result of such adjustments. 5. OBLIGATIONS OF THE COMPANY. The Company covenants and agrees that: (a) During the period within which the rights represented by this Warrant may be exercised, the Company shall, at all times, reserve and keep available out of its authorized capital stock, solely for the purposes of issuance upon exercise of this Warrant, such number of its Common Shares as shall be issuable upon the exercise of this Warrant and at its expense will obtain the listing thereof on all quotation systems or national securities exchanges on which the Common Shares are then listed; and if at any time the number of authorized Common Shares shall not be sufficient to effect the exercise of this Warrant, the Company will take such corporate action as may be necessary to increase it authorized but unissued Common Shares to such number of shares as shall be sufficient for such purpose; the Company shall have analogous obligations with respect to any other securities or property issuable upon exercise of this Warrant: (b) All Common Shares which may be issued upon exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid, nonassessable and free from all taxes, liens and charges with respect to the issuance thereof; and Page 6 (c) All original issue taxes payable in respect of the issuance of Common Shares upon the exercise of the rights represented by this Warrant shall be borne by the Company, but in no event shall the Company be responsible or liable for income taxes or transfer taxes upon the transfer of any Warrants. 6. VOTING RIGHTS. Until exercised, this Warrant shall not entitle the Holder hereof to any voting rights or other rights as a shareholder of the Company, except that the Holder of this Warrant shall be deemed to be a shareholder of the company for the purpose of bringing suit on the ground that the issuance of shares of stock of the Company is improper under the Delaware General Corporation Law. 7. REGISTRATION RIGHTS OF HOLDERS. If the Company shall at any time during the period that this Warrant is exercisable by the Holder hereof prepare and file one or more notifications pursuant to Section 3 of the Act or registration statements under the Act with respect to the public offering of any class of equity or debt security of the Company, whenever authorized, the Company shall give written notice thereof to the Holder, and shall, upon the written request of the Holders, given within twenty (20) days after such notice from the Company is received by the Holder, include in such registration statement or notification such number of shares underlying this Warrant as such Holder may request to be sold on a time to time basis and the Company agrees to keep such notification or registration statement and prospectus effective and current under the Act permitting the sale of the shares covered thereby to be sold on a time to time basis at its expense for a period of six (6) months after the effective date of such registration statement or notification. Such inclusion shall be at no cost to the Holder and shall be at the sole cost and expense of the Company except with respect to any underwriting discounts or commissions or other selling expenses denominated as such in any notification, registration statement or prospectus and the Holders' own legal fees and expenses incurred in connection therewith. In the event the Company fails to receive written request from the Holder within twenty (20) days after the receipt by the Holder of such written notice of the Company, then the Company shall treat such failure with the same force and effect as if the Holder advised the Company that the Holder does not intend to include their shares in such registration statement or notification. The provisions of this Section shall not apply to any notification or registration statement if such notification or registration statement solely to any employee benefit plan or to a transaction of the nature contemplated by Rule 145, promulgated under the Act. The rights granted under this section shall not apply if, in the opinion of counsel to the Company, the Holder could resell the shares proposed to be included in the registration statement or notification without registration under the act or if, in the reasonable opinion of an Underwriter, the inclusion of such shares would materially impair the prospects of the offering to which the registration statement or notification relates. Notwithstanding anything herein to the contrary, the Company shall only be required to give a notice under this Section on one occasion. 8. TRANSFERS. The Warrant shall not be transferable otherwise than by will or by the laws of descent and distribution, and the Warrant may be exercised during the lifetime of the Warrantee only by it. 9. LOST, STOLEN OR MUTILATED WARRANTS. If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, on such terms as to indemnity or otherwise as the Company may reasonably impose, issue a new Warrant of like Page 7 denomination, tenor and date. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. 10. ISSUANCE OF SUCCESSOR WARRANT. Any Warrant issued pursuant to the provisions of Section 9, or upon transfer, exchange, division or partial exercise of this Warrant or combination thereof with another Warrant or Warrants, shall set forth each provision set forth in this Warrant as each such provision is set forth herein, and shall be duly executed on behalf of the Company by its chief executive officer. 11. SURRENDER OF WARRANT. Upon surrender of this Warrant for transfer or exchange or upon the exercise hereof, this Warrant shall be canceled by the Company, and shall not be reissued by the Company and, except as provided in Section 2 in case of a partial exercise or an exchange or Section 8 in case of a transfer, or Section 9 in case of mutilation. Any new Warrant certificate shall be issued promptly but not later than fourteen (14) days after receipt of the old Warrant certificate. 12. SUCCESSORS. This Warrant shall inure to the benefit of and be binding upon the Holder hereof, the Company and their respective successors, heirs, executors, legal representatives and assigns. 13. NOTICES. All notices required hereunder shall be in writing and shall be deemed given when telegraphed, delivered personally, or within two (2) days after being sent by Federal Express, Airborne Express, UPS or other recognized international overnight courier, to the party to whom such notice is intended, at the address of such other party as set forth on the first page hereof, or at such other address of which the Company or Holder has been advised by the notice hereunder. 14. SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the Holders shall be enforceable to the fullest extent permitted by law. 15. APPLICABLE LAW. The validity, interpretation and performance of this Warrant and of the terms and provisions hereof shall be governed by the laws of the State of California applicable to agreements entered into and performed entirely in such state. The Federal and State Courts that sit in the County of Los Angeles, State of California shall have exclusive jurisdiction over any dispute arising hereunder. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of this 19th day of September 2002. Recom Managed Systems, Inc., By:/s/ Steve Sparks Its: President ACCEPTED AS OF THE EFFECTIVE DATE /s/ Sim Farar Name : SIM FARAR Page 8 EXHIBIT "A" RECOM MANAGED SYSTEMS, INC. A Delaware Corporation PURCHASE FORM To Be Executed Upon Exercise of Warrant The undersigned record holder of the within Warrant hereby irrevocably elects to exercise the right to purchase _________________ Common Shares evidenced by the within Warrant dated ______________________, according to the terms and conditions thereof, and herewith makes payment of the purchase price in full. The undersigned requests that certificates for such shares and Warrants shall be issued in the name set forth below. Dated:_________________________ By: _____________________________________ Signature _____________________________________ Print Name and Title of Signatory Social Security No. or other identifying number: ___________________________ __________________________________ Name to who certificates are to be issued if different from above. Address: _____________________________________________________________________________ _____________________________________________________________________________ Social Security No. or other identifying number: ____________________________ If said number of shares and Warrants shall not be all of the shares purchasable under the within Warrant, the undersigned requests that a new Warrant for the unexercised portion be registered in the name of: __________________________________________ (Please Print) Address:_____________________________________________________________________ Social Security No. or other identifying number: ____________________________ Signature: ________________________________ Print Name of Signatory EX-99 5 ex992.txt EXHIBIT 99.2 EXHIBIT 99.2 LOS ANGELES, Calif., Sept. 19, 2002 /Business Wire/ -- Recom Managed Systems, Inc. (OTCBB: RECM) is pleased to announce the acquisition of certain know how, technology, and other intellectual property from ARC Finance Group, LLC, that relate to the possible future development of devices, products and/or services pertaining to the business of heart monitoring. ARC has advised Recom that the technology requires substantial additional funds and effort to develop into scaleable medical products and devices that may be capable of providing early warnings to patients and physicians regarding potential heart function. In exchange for this technology Recom issued 7,800,000 shares of restricted common stock to ARC, representing on close approximately 85% of the issued and outstanding shares of Recom. Recom Managed Systems, Inc., a Delaware corporation, is a development stage company that has limited assets and no operating business. Following this technology acquisition, Recom will remain a development stage company with negligible cash or other tangible assets, no currently outstanding debt and no immediate prospects of revenue. Recom will require substantial additional money to fund further development and continue with attempts to commercialize the technology into products and services. Neither Recom nor ARC can give any assurance that any of these endeavors will be successful. The Board of Directors of Recom Managed Systems, Inc. has resigned in favor of the persons who, together with a summary of their backgrounds, are named below. The new Board of Directors will be comprised by Brian Oxman, a respected Lawyer, Law Professor and Judge Pro Tem with 25 years of experience; and Steven Sparks, who has 30 years experience in the financial services and business development industries with Paine Webber, Inc. and later with numerous start-up companies and financial services businesses. While Mr. Sparks will act as Interim CEO of Recom, the Company is confident of additional appointments in the upcoming months. Statements in this release that are not strictly historical are "forward-looking" statements that are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward looking statements involve known and unknown risks, which may cause Recom's actual results in the future to differ materially from expected results. Factors which could cause or contribute to such differences include, but are not limited to failure to complete the development and introduction of new products or services, failure to obtain federal or state regulatory approvals governing medical devices, monitoring and other related services or products, inability to obtain physician, patient or insurance acceptance of Recom's products or services, adverse equity market conditions and declines in the value of Recom's common stock, and the unavailability of financing to complete management's plans and objectives. These risks are qualified in their entirety by cautionary language and risk factors set forth and to be further described in Recom's filings with the Securities and Exchange Commission, including, but not limited to, the Form 8-K which is filed along with this press release. Source: Recom Managed Systems, Inc. -----END PRIVACY-ENHANCED MESSAGE-----