UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20249
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS UNDER SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
FLEETCLEAN SYSTEMS INC.
(Name of Small Business Issuer in its Charter)
TEXAS TAX I.D. 76-0196431
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. BOX 727 HARDIN, TEXAS 77561
HWY 834 EAST .7 MILES (Zip Code)
(Address of principal executive offices)
(409) 298-9835
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
- ------------------- ------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
<PAGE>
All references to Fleetclean Systems, Inc. common stock reflect a one
for 203.991 forward common stock split in August 1996. All references to the
"company" refer to Fleetclean Systems, Inc.
PART I
The company has elected to follow Alternative 2 of Form 10-SB.
ITEM 6. DESCRIPTION OF BUSINESS
ORGANIZATION
The company was incorporated in Texas in 1986, under the name Eastex
Chemex Corporation, as a retail distributor of truck washing equipment and
chemicals to operators of large trucking fleets. In July 1990, the company
changed its name to Fleetclean Systems, Inc.
Until 1992, the company operated locally, in the Houston, Texas area.
Thereafter, sales efforts were directed to large national trucking companies. In
1994, the company acquired the assets and business accounts of Chemex
Southwestern Inc. and began to manufacture equipment and chemicals for retail
distribution. During 1994, the company opened a distribution warehouse in
Statesville, North Carolina. In January 1996, the company acquired the Kentucky
operations, including a distribution warehouse, and customer accounts of
Fleetcleaning Supply Company, Inc. In June 1998, the distribution warehouse was
moved to Lafayette, Indiana and subsequently to Warsaw, Indiana in June 1999. In
February 1999, the company acquired the assets and ongoing business accounts of
Tri-State Chemex Corp of Providence, Rhode Island. After this transaction, the
company has sales and service warehouses in Hardin, Texas; Warsaw, Indiana;
Statesville, North Carolina; and Providence, Rhode Island. All equipment is
manufactured in Texas, with chemical mixing facilities operating in Texas and
Rhode Island. Distribution and customer service is by company employees who
service specific geographic regions.
PRODUCTS AND SERVICES
The company manufactures stainless steel pressure washing equipment for
hand washing of trucks. The chemicals are formulated for "two step" washing,
which allows the user to simply spray the chemical on the unit and rinse it off
for complete cleaning without brushing. The chemical run off is neutral and is
accepted in municipal waste water systems nationwide with no special permitting
required. The company offers several different types of chemicals, depending on
the surface of the truck and upon the level of cleaning required.
The company believes its customer base is stable in that the company
provides washing equipment to it's customers "on loan" at no charge, in return
for the ongoing chemical business, provided the customer purchases a pre-set
amount of chemicals each month. Each customer that is provided the equipment
agrees to purchase a minimum of 200 gallons of chemicals exclusively from the
company, or agrees to pay a rental fee of $250. The current prices of chemicals
are approximately $2.60 to $7.00 per gallon. Company personnel install the
equipment at each customer's facility, and provide instruction and training. The
company believes customer turnover has been low due to the quality of the
products and the level of service provided on a regular monthly basis. Some
customers have been serviced continuously for ten years.
The company has also designed a drive thru truck wash system that
washes a tractor /trailer combination in approximately 90 seconds. Unlike the
hand washing systems, drive thru washing systems are not provided on loan, but
are sold at prices of $55,000 - 75,000. The system cleans without brushing by
means of two chemical spray arches and a rinse arch, each with separate pump
systems, a chemical mixing system, and a master control panel with appropriate
controls and sensors. The system initially dispenses a pre-soak solution,
followed with a detergent solution, which reacts with the pre-soak solution to
finish cleaning. Finally, the truck is rinsed, including an undercarriage rinse,
with a rinse pump dispensing water at a rate of approximately 230 gallons per
minute. The
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system can handle trucks up to 8 feet 6 inches wide and 13 feet 6 inches high.
To date, the company has sold six drive thru wash systems.
The company's business has grown primarily within the large truck
industry. As a result the company's management has become familiar with the
characteristics and needs of that industry, which prompted the company to enter
into "internal" tank cleaning in 1999. In March 1999, the company acquired on a
lease purchase contract, a truck terminal/tank wash facility in Hahnville,
Louisiana. After remodeling the facility at a cost of approximately $300,000,
the facility opened in August 1999.
This facility is permitted by the Louisiana Department of Environmental
Quality, and currently holds an EPA permit as a waste water generator, and an
air quality permit from the state of Louisiana. The company has completed it's
required permitting and expects no further fees or permits. The company is
subject overall to regulation by the DOT, EPA, and OSHA and currently believes
it has complied with all regulatory requirements.
The company believes it has complied with all applicable environmental
regulations with respect to its operations. However, due to the nature of its
business, the company may become subject to future laws regulating the chemicals
used in its operations.
The company does not employ any processes or operations which are
limited by availability of materials or suppliers, as all components of the
company's products are commercially available and can be purchased from a number
of sources. The uniqueness of the products marketed is in the formulation of the
chemicals to proprietary formulas, which are strictly controlled. All employees
sign a confidentiality and non-compete agreement, except the tank wash personnel
who have no access to secret information.
INTELLECTUAL PROPERTY
The company does not have a formal research and development division.
Company expenditures on research and development has been limited to contracting
with a research chemist for assistance with certain new chemical formulas, at a
total cost of $3,000 in the last two years.
The company regards intellectual property rights as essential to its
success, and relies extensively on trademark rights and confidentiality
agreements, between and amongst its partners, employees and others, to protect
its proprietary interests. The company is the proprietor of a service mark on
the Fleetclean Systems, Inc. mark. There is no assurance that the steps taken to
protect the company's proprietary rights will be adequate, or that third parties
will not infringe or misappropriate its service marks or similar proprietary
rights. The company does not currently hold any patents on its chemical formulas
or on the components comprising its drive thru washing system. If the company is
unable to utilize any of the foregoing materials due to intellectual property
restraints, its business would be adversely affected.
MARKETING
The company has not entered into extensive advertising programs, but
has grown through direct sales efforts, and referrals from satisfied customers.
The company currently services 155 customers in 24 states. Although the company
believes it competes in a fragmented market with few large competitors, there is
no assurance that the company will not in the future compete against larger
companies with greater financial resources.
EMPLOYEES
The company currently has 20 full-time employees and one part-time
employee. No employees are covered by a collective bargaining agreement.
Management considers relations with its employees to be satisfactory.
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COMPETITION
Competition in the chemical distribution business is very fragmented,
with the bulk of the competition as locally owned family businesses. There are
currently 265 commercial tank cleaning facilities in the country as listed in
the March 1999 issue of "Modern Bulk Transporter." Of these, management
estimates 51 are limited to food grade only, and another 48 are operated by
trucking firms primarily to service their own trucks, leaving only 166
facilities as independent full service commercial tank washes. Of the 166
independent facilities, 25 are owned and operated by Philip Services
Corporation. In August 1999, the company entered into a real estate purchase
option which will allow the company to acquire property in Baton Rouge,
Louisiana, which Philip Services Corporation currently leases and operates as a
tank wash and waste water treatment facility. The option allows the company to
purchase the facility for a period six months at a purchase price of $1,350,000.
The majority of the independent tank washes are small family owned
businesses. Some of these family owned businesses are being considered as
potential acquisition candidates with a view to developing a national chain.
However, at the present time, the company has no plans for such acquisitions.
The company believes many of these businesses use antiquated, inefficient
methods, and the company believes that an opportunity exists for it to become a
significant service provider nationwide by acquiring certain carefully selected
facilities, while at the same time building new modern facilities in key
markets. The company will require external financing to execute its acquisition
strategy. At this time, the company has no commitments for such financing, and
can provide no assurance that such financing will be available on favorable
terms, if at all.
PLAN OF OPERATIONS
Management believes that its working capital as of June 30, 1999 of
$159,571 should enable it to continue its current operations for a period of
approximately two months. However, unforeseen costs could shorten the period
during which the company's current working capital may be expected to satisfy
its capital requirements. Management's estimates are based on monthly operating
expenses of approximately $85,000. The company requires additional funding to
implement its business strategy, and will be required to seek such funding from
third parties, as its internal funds will not be sufficient. At this time, it
has no commitments for such funding.
ITEM 7. DESCRIPTION OF PROPERTY
HARDIN, TEXAS. The company is purchasing 3.3 acres in Hardin, Texas
which serves as corporate headquarters and its primary manufacturing facility,
with total of 5,500 square feet of office, manufacturing, and warehouse space.
The current mortgage balance is approximately $67,517. The company entered into
a note payable in September 1998, which provides for monthly payments of $941
for 120 months.
HAHNVILLE, LOUISIANA. The company has entered into a lease purchase
contract with Trimac Transportation for the purchase of 1.52 acres, in
Hahnville, Louisiana. The site has 52,844 square feet of 6" reinforced concrete
paving and is surrounded by a chain link fence. The steel frame industrial
building is 7,399 square feet and has two maintenance bays and one oversized
cleaning bay capable of handling two trailers at a time, plus a boiler/equipment
room. Finished office area is 508 square feet plus a 612 square feet finished
mezzanine with an eating area and shower facility. The current balance owed is
$420,000 payable in monthly payments of $5,000. One half of the payment is a
lease payment, and one half is applied to the principal balance, with a balloon
payment after 60 months of $277,500. Payments began June 1, 1999.
The company rents on a month-to-month basis small warehouses in
Statesville, North Carolina; Providence, Rhode Island; and Warsaw, Indiana at a
total monthly rental of $1,450.
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The company believes its present facilities are adequate for its
current operations, and that its properties are adequately covered by insurance.
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The Company's directors, executive officers, and significant employees
are:
NAME AGE POSITION
- ---- --- --------
Kenneth A. Phillips 55 Director and President
Jay G. Phillips 26 Director and Vice-President, Customer Service
Richard R. Royall 53 Director
Kathryn M. Phillips 51 Secretary and Treasurer
Jason Lay 34 Vice-President, Technical Services
Ronald Wallace 42 Vice-President, General Manager, Container Division
KENNETH A. PHILLIPS is the company's founder and has served as a
Director and as President since the company was founded in 1986.
JAY G. PHILLIPS has served as Vice-President, Customer Service since
May 1998. Mr. Phillips began working for the company part time while in high
school and became a full time customer service representative in January 1994,
where he was responsible for the company's business in the eastern United
States, servicing customers from the Statesville, North Carolina warehouse. In
June 1995, Mr. Phillips was elected as a Director of the company. In April 1998,
Mr. Phillips assumed his current duties in Texas where he supervises four
customer service representatives across the eastern half of the country.
RICHARD R. ROYALL has served as a Director of the company since June
1996. Mr. Royall has been a partner in the accounting firm of Royall &
Fleschler, certified public accountants, for the past twelve years. Mr. Royall
also served as Chief Financial Officer of Eagle Wireless International, Inc.
since April 1997.
KATHRYN M. PHILLIPS has served as the company's Secretary and Treasurer
since the founding of the company in 1986. Ms. Phillips is a graduate of Texas
Tech University and has for the past 25 years held positions in general business
accounting and controllership. From February 1986 until January 1997, Ms.
Phillips was plant controller for Akzo Nobel Chemical Co., and worked part-time
for the company. Ms. Phillips has been a full-time employee of the company since
January 1997.
JASON LAY is Vice-President, Technical Services, a position held since
May 1998. Mr. Lay is responsible for design and implementation of all equipment
systems. Mr. Lay joined the company in June 1994 as a technician.
RONALD WALLACE joined the company in June 1999 as Vice-President,
General Manager, Container Division. From April 1997 until June 1999, Mr.
Wallace served as a system service manager for Chemical Leaman Tank Lines. From
October 1996 until April 1997, Mr. Wallace served as an area manager for MCX
Transport. From October 1991 until October 1996, Mr. Wallace served as service
center manager for Highway Transport. Mr. Wallace has a B.S. in Business
Management from the University of New Orleans, and has been employed in the
trucking industry since 1985 in progressively responsible positions. In the tank
truck industry, Mr. Wallace has held positions as service center manager, area
manager, and regional manager, which involves supervision of multi-
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terminal operations including tank wash operations.
Kathryn Phillips is the wife of Kenneth Phillips. Jay Phillips is the
son of Kenneth and Kathryn Phillips. There are no other family relationships.
Pursuant to the company's by-laws, each director is elected annually by the
company's stockholders at the company's annual meeting. The company's officers
serve at the discretion of the
Board of Directors.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the aggregate annual remuneration for
the company's three highest paid persons for the fiscal year ended December 31,
1998:
CAPACITIES IN WHICH
NAME OF INDIVIDUAL REMUNERATION WAS RECEIVED AGGREGATE REMUNERATION
- ------------------ ------------------------- ----------------------
Kenneth A. Phillips President $77,000
Jason Lay Vice-President, Technical Services $42,414
Jay G. Phillips Vice-President, Customer Service $41,890
In July 1996, Kenneth A. Phillips entered into a two-year employment
agreement with the company, which was renewed for an additional two-year period
in July 1998. The employment agreement called for a monthly salary of $9,000
plus an amount equal to 10% of the pretax profit of the company. The company and
Mr. Phillips have amended the employment agreement to allow the company to pay
Mr. Phillips a lesser salary, with the agreement that Mr. Phillips will receive
his salary as set forth in the employment agreement, as the company becomes
financially able to pay such salary. Any salary pursuant to the original
employment agreement that is unpaid is lost, as the parties have agreed not to
accrue such salary. The employment agreement provides for a vehicle to be
provided by the company, as well as health insurance. The employment agreement
may be terminated by the company, upon the death or disability of Mr. Phillips.
In June 1999, Ronald Wallace entered into a two-year employment
agreement with the company, which provides for a monthly salary of $4,416.67.
The employment agreement provides for a one-time cash bonus of $1,019.23 and
50,000 shares of common stock. The employment agreement may be terminated by the
company, upon the disability of Mr. Wallace, or with cause, which includes,
without limitation, gross negligence, the failure to perform essential duties,
and the willful engaging in misconduct injurious to the company.
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ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
The following table sets forth, as of September 7, 1999, the number and
percentage of outstanding shares of company common stock owned by the company's
three highest paid persons for the fiscal year ended December 31, 1998:
NUMBER OF SHARES
NAME AND ADDRESS OF OF COMMON STOCK PERCENTAGE
OWNER BENEFICIALLY OWNED OF OWNERSHIP
- ------------------- ------------------ ------------
Kenneth A. Phillips.......... 2,903,179 37.2%
Jay G. Phillips.............. 414,971 5.3%
Jason Lay.................... 132,000 1.7%
All officers and directors
as a group (6 persons)....... 3,625,150 46.5%
<TABLE>
<CAPTION>
TITLE AND AMOUNT OF SECURITIES CALLED
NAME OF HOLDER FOR BY OPTIONS OR WARRANTS EXERCISE PRICE DATE OF EXERCISE
- -------------- -------------------------- -------------- ----------------
<S> <C> <C> <C> <C>
Kenneth A. Phillips.......... 100,000 of company common stock $1.00 expire 12/01/2001
Jay G. Phillips.............. -- -- --
Jason Lay.................... -- -- --
All officers and directors
as a group (6 persons)....... 100,000 of company common stock $1.00 expire 12/01/2001
</TABLE>
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In June 1994, the company issued Jay G. Phillips 294,971 shares of
common stock for $15,000. In October 1997, the company issued Kenneth A.
Phillips a warrant to purchase 100,000 shares of common stock at an exercise
price of $0.30 per share, which were exercised in March 1998. In October 1997,
the company issued Kenneth A. Phillips a warrant to purchase 100,000 shares of
common stock at an exercise price of $1.00 per share, which expire in December
2001. In July 1999, the company issued Kenneth A. Phillips 500,000 shares of
common stock, Jay G. Phillips 100,000 shares of common stock, Jason Lay 100,000
shares of common stock, Ronald Wallace 50,000 shares of common stock, and
Richard Royall 75,000 shares of common stock for services rendered.
ITEM 12. SECURITIES BEING REGISTERED
The company is registering its common stock under Section 12(g) of the
Securities Exchange Act of 1934, as amended. The company is authorized to issue
up to 50,000,000 shares of common stock, $0.01 par value per share, of which
7,799,108 shares are issued and outstanding and 150,000 shares are reserved for
issuance underlying outstanding options or warrants. In the event of
liquidation, holders of common stock are entitled to share ratably in the
distribution of assets remaining after payment of liabilities. Holders of common
stock have no preemptive or other rights to subscribe for shares. Holders of
common stock are entitled to such dividends as may be declared by the Board of
Directors out of funds legally available therefor.
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PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The company's common stock trades under the symbol "FLSY" on the OTC
Electronic Bulletin Board. The market for the common stock on the OTC Electronic
Bulletin Board is limited, sporadic, and highly volatile. The following table
sets forth the high and low bid prices per share of the common stock since the
common stock began trading on September 9, 1998, as reported by the OTC
Electronic Bulletin Board. These prices reflect inter-dealer prices, without
retail mark-ups, mark-downs or commissions, and may not necessarily represent
actual transactions.
HIGH LOW
FISCAL 1998
Third Quarter (beginning September 9, 1998) .75 .75
Fourth Quarter 1.375 .6875
FISCAL 1999
First Quarter .6875 .25
Second Quarter .625 .11
On September 15, 1999, the last bid price of the Common Stock as
reported by the OTC Electronic Bulletin Board was $.12. The company believes
that as of September 7, 1999, there were approximately 375 record owners of its
common stock. It is the present policy of the company not to pay cash dividends
and to retain future earnings to support the company's growth. Any payment of
cash dividends in the future will be dependent upon the amount of funds legally
available therefor, the company's earnings, financial condition, capital
requirements and other factors that the Board of Directors may deem relevant.
The company has not paid any dividends during the last two fiscal years and does
not anticipate paying any cash dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
The company is the plaintiff in a suit in which a former employee is
being sued for violating a covenant not to compete. The suit was filed August
1996 in the 75th district court in Liberty County, Texas. In 1997, the suit was
expanded to a co-conspirator who was assisting the defendant. In April 1997, a
temporary injunction was ordered to prevent the defendants from competing
further. The injunction is still in effect. The company is seeking damages,
reimbursement of expenses, and enforcement of the non-compete agreement. In
August 1999, the co-conspirator settled with the company for $17,500 cash and a
four year non-compete agreement, plus cooperation with the company in pursuing
it's claim against the original defendant. In 1996, the defendant countersued
the company for wrongful termination and for unspecified damages.
The company is the defendant in a suit filed in the 29th Judicial
District Court, St. Charles Parish, State of Louisiana. The company's attorney
has filed a motion to remove the case to United States District Court, Eastern
District of Louisiana. The plaintiff alleges that the company entered into a
verbal agreement for a partnership in the Hahnville, Louisiana tank wash. The
plaintiff has alleged fraud and breach of contract, with damages unspecified.
The company has denied the allegations, and intends to vigorously defend the
case.
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ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following information sets forth certain information for all
securities the company sold within the past three years, without registration
under the Securities Act of 1933, as amended ("Securities Act"). There were no
underwriters in any of these transactions, nor were any sales commissions paid
thereon.
1. In October 1997, the company issued Kenneth A. Phillips a warrant to
purchase 100,000 shares of common stock at an exercise price of $.30
per share, expiring April 30, 1998, which were exercised in March 1998.
In October 1997, the company issued Kenneth A. Phillips a warrant to
purchase 100,000 shares of common stock at an exercise price of $1.00
per share, expiring December 31, 2001. The company believes the
transactions were exempt from registration pursuant to Section 4(2) of
the Securities Act, as Mr. Phillips is an officer and director of the
company and an accredited investor, and since the transaction was non-
recurring and privately negotiated.
2. During the last quarter of 1997, the company issued five convertible
notes, three notes of $25,000 each and two notes of $12,500 each, to
five non-affiliates in exchange for loans in the aggregate amount of
$100,000. The principal amount and accrued interest on each note may be
converted into shares at the rate of $1.00 of principal amount per
share. In addition, the note holders received warrants to purchase an
aggregate of 100,000 shares of common stock at an exercise price of
$2.00 per share, expiring September 30, 2000. In September 1998, the
company issued an aggregate of 62,500 shares of common stock to three
individuals who exercised their conversion option. The company believes
the securities issued and the underlying shares of common stock issued
were exempt from registration pursuant to Rule 504 of the Securities
Act.
3. In July 1997, the company issued an aggregate of 549,400 shares to
Mega Holding Corporation, a New York corporation, which in January
1998, distributed an aggregate of 300,000 shares to its shareholders
and an aggregate of 145,000 shares to three individuals and five
entities, retaining 104,400 shares. The company valued these shares at
$60,434 or $.11 per share. The company believes the securities issued
were exempt from registration pursuant to Rule 504 of the Securities
Act.
4. In September 1998, the company issued 25,000 shares of stock to A&R
Transport, Inc. ("A&R") as partial consideration for A&R entering into
an agreement with the company, whereby the company is the sole and
exclusive supplier of cleaning chemicals to A&R. In September 1998, the
company issued an aggregate of 240,000 shares of stock to two
non-affiliated corporations and two non-affiliated attorneys for
financial consulting and legal services rendered. The company has
valued these shares at $66,000 or $.30 per share. In December 1998, the
company issued 346,858 shares to six non-affiliated entities for cash
consideration of $168,314.50, or an average of $.485 per share. The
company believes the above securities issued were exempt from
registration pursuant to Rule 504 of the Securities Act.
5. In February 1999, the company issued to one non-affiliate an 8% Series
A Senior Subordinated Convertible Redeemable Debenture in the principal
amount of $200,000. The conversion price for each conversion share is
75% of the closing bid price of the common stock as reported on the OTC
Bulletin Board for the trading day which immediately precedes the date
of receipt by the company of the conversion notice. As of the date of
this filing, 1,297,168 shares have been issued as conversion of
$136,000 of the principal amount, or an average of $.1274 per share.
In February 1999, the company issued 200,000 shares to one
non-affiliate for cash consideration of $50,000. In March 1999, the
company
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issued an aggregate of 200,000 shares and warrants to purchase 25,000
shares of common stock exercisable at $.50 per share until September
30, 2000 to two non-affiliates for $50,000. The company believes the
securities issued above were exempt from registration pursuant to Rule
504 of the Securities Act.
6. In June 1999, the company issued a two-year option to purchase 400,000
shares of common stock at an exercise price of $.15 per share, provided
the company's bid price of its common stock exceeds $1.00, to an
accredited investor. In July 1999, the company issued an aggregate of
1,577,455 shares of common stock to 17 accredited investors for
services rendered, including an aggregate of 825,000 shares to its
officers and directors. The company believes the above transactions
were exempt from registration pursuant to Section 4(2) of the
Securities Act, as the recipients were all accredited investors, and
since the transactions were non-recurring and privately negotiated.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Texas law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The amended and
restated by-laws of the company limit the liability of directors of the company
(in their capacity as directors but not in their capacity as officers) to the
company or its stockholders to the fullest extent permitted by Texas law.
Specifically, directors of the company will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
company or its stockholders, (ii) for acts or omissions not in good faith that
constitute a breach of duty of the director to the company or an act or omission
which involves intentional misconduct or a knowing violation of law, (iii) for
an act or omission for which the liability of a director is expressly provided
by an applicable statute, or (iv) for any transaction from which the director
received an improper personal benefit, whether the benefit resulted from an
action taken within the scope of the director's office. Section 2.41 of the
Texas Business Corporation Act relates to directors' liability for unlawful
dividends and stock issuances.
The inclusion of this provision in the by-laws may have the effect of
reducing the likelihood of derivative litigation against directors, and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefitted the company and its stockholders.
The company's amended by-laws provide for the indemnification of its
executive officers and directors, and the advancement to them of expenses in
connection with any proceedings and claims, to the fullest extent permitted by
the Texas Business Corporation Act. The amended by-laws include related
provisions meant to facilitate the indemnities' receipt of such benefits. These
provisions cover, among other things: (i) specification of the method of
determining entitlement to indemnification and the selection of independent
counsel that will in some cases make such determination, (ii) specification of
certain time periods by which certain payments or determinations must be made
and actions must be taken, and (iii) the establishment of certain presumptions
in favor of an indemnitee. Insofar as indemnification for liabilities arising
under the Securities Act 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 SEC, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
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[McMANUS & C0., P.C. LETTERHEAD]
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Stockholders
of Fleetclean Systems, Inc.:
We have audited the accompanying balance sheets of Fleetclean Systems, Inc. as
of December 31, 1998 and 1997 and the related statements of income and retained
earnings, stockholders' equity, and cash flows for the years ended December 31,
1998, 1997, and 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our 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
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fleetclean Systems, Inc. at
December 31, 1998 and 1997 and the results of its operations, stockholders'
equity, and its cash flow for the years ended December 31, 1998, 1997, and 1996,
in conformity with generally accepted accounting principles.
/s/ McMANUS & CO., P.C.
McManus & Co., P.C.
Morris Plains, New Jersey
February 15, 1999
<PAGE>
FLEETCLEAN SYSTEMS, INC.
BALANCE SHEETS
ASSETS
DECEMBER 31,
1998 1997
----------- -----------
CURRENT ASSETS:
Cash .......................................... $ 54,383 $ 200
Accounts Receivable (Note 1) .................. 131,888 105,820
Employee Advances ............................. 1,829 1,125
Inventory (Note 1) ............................ 125,573 90,246
Prepaid Expenses .............................. 18,093 21,078
Deferred Tax Asset ............................ 22,421 2,263
----------- -----------
Total Current Assets ........................ 354,187 220,732
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT: (NOTES 1 & 2)
Transportation Equipment ...................... 345,796 218,422
Building ...................................... 95,120 95,120
Demo Machinery ................................ 381,969 297,509
Furniture and Fixtures ........................ 34,108 26,232
Land .......................................... 10,000 10,000
Leasehold Improvements ........................ 3,012 3,012
Machinery and Equipment ....................... 182,688 153,190
Less: Accumulated Depreciation .............. (414,442) (319,360)
----------- -----------
Total Property, Plant, and Equipment ........ 638,251 484,125
----------- -----------
OTHER ASSETS:
Other Assets .................................. 460 700
Deferred Public Offering Costs (Note 7) ....... 0 112,988
Intangible Asset (Note 6) ..................... 17,925 16,440
Less: Accumulated Amortization .............. (2,283) (1,129)
----------- -----------
Total Other Assets .......................... 16,102 128,999
----------- -----------
TOTAL ASSETS .................................. $ 1,008,540 $ 833,856
=========== ===========
2
<PAGE>
FLEETCLEAN SYSTEMS, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
1998 1997
---------- ----------
CURRENT LIABILITIES:
Accounts Payable .................................. $ 98,024 $ 84,687
Notes Payable (Note 3) ............................ 126,566 209,034
Payroll Taxes Payable ............................. 916 637
Sales Tax Payable ................................. 6,193 5,592
Accrued Expenses .................................. 28,486 28,250
---------- ----------
Total Current Liabilities ....................... 260,185 328,200
---------- ----------
LONG - TERM LIABILITIES:
Deferred Tax Liability ............................ 28,882 8,358
Notes Payable - Net of Current Portion (Note 3) ... 272,372 210,283
---------- ----------
Total Long - Term Liabilities ................... 301,254 218,641
---------- ----------
Total Liabilities ................................. 561,439 546,841
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 4)
STOCKHOLDERS' EQUITY:
Common Stock - $.01 par value
Authorized 50,000,000 shares
Issued and Outstanding - 4,736,758 & 3,964,400
at 1998 and 1997, respectively ................ 47,367 39,644
Paid In Capital ................................... 368,091 217,802
Retained Earnings ................................. 31,643 29,569
---------- ----------
Total Stockholders' Equity ...................... 447,101 287,015
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........ $1,008,540 $ 833,856
========== ==========
3
<PAGE>
FLEETCLEAN SYSTEMS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
INCOME:
Net Sales .............................................. $ 1,028,952 $ 832,729 $ 816,029
Less: Cost of Goods Sold ............................... 224,627 208,539 245,240
----------- ----------- -----------
Gross Profit ......................................... 804,325 624,190 570,789
----------- ----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries ............................................... 376,861 275,096 344,043
Payroll Taxes .......................................... 30,804 24,121 29,848
Advertising ............................................ 3,861 761 799
Auto Expense ........................................... 56,223 12,744 16,572
Bad Debts .............................................. 0 1,089 433
Bank Service Charges ................................... 440 362 752
Commissions ............................................ 1,021 0 0
Depreciation and Amortization .......................... 113,291 103,800 97,615
Dues & Subscriptions ................................... 664 355 1,213
Entertainment .......................................... 670 583 660
Insurance .............................................. 52,491 50,879 57,774
Interest Expense ....................................... 46,318 37,054 32,727
Licenses & Fees ........................................ 1,716 1,605 1,194
Office Expense ......................................... 8,646 4,183 6,386
Postage ................................................ 1,354 865 573
Professional Fees ...................................... 29,039 21,168 27,358
Rent ................................................... 4,840 9,888 15,200
Taxes - other .......................................... 6,427 1,936 2,686
Telephone & Utilities .................................. 18,630 19,858 19,653
Trailer Expense ........................................ 3,555 1,632 7,376
Training ............................................... 418 401 847
Travel ................................................. 42,254 11,456 9,976
----------- ----------- -----------
Total General and Administrative Expenses ............ 799,523 579,836 673,685
----------- ----------- -----------
INCOME/(LOSS) FROM OPERATIONS ............................. 4,802 44,354 (102,896)
OTHER INCOME/(EXPENSE)
Miscellaneous Income - Net ............................. 608 8,142 (1,440)
Gain/(Loss) on Sale of Asset ........................... (2,970) -- --
----------- ----------- -----------
Total Other Income ................................... (2,362) 8,142 (1,440)
NET INCOME/(LOSS) BEFORE INCOME TAXES ..................... 2,440 52,496 (104,336)
Provision For Income Taxes ............................. 366 7,199 (1,104)
----------- ----------- -----------
NET INCOME/(LOSS) ......................................... 2,074 45,297 (103,232)
RETAINED EARNINGS/(DEFICIT) BEGINNING OF YEAR ............. 29,569 (15,728) 87,504
----------- ----------- -----------
RETAINED EARNINGS/(DEFICIT) END OF YEAR ................... $ 31,643 $ 29,569 $ (15,728)
=========== =========== ===========
Net Income/(Loss) Per Common Share
Basic (Note 1) ................. $ 0.000 $ 0.013 $ (0.03)
Diluted (Note 1) ............... $ 0.000 $ 0.012 $ (0.03)
</TABLE>
4
<PAGE>
FLEETCLEAN SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
JANUARY 1, 1996 COMMON COMMON PAID IN RETAINED STOCKHOLDERS'
TO DECEMBER 31, 1998 STOCK STOCK CAPITAL EARNINGS EQUITY
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
January 1, 1996 ............................... 14,458 $ 145 $ 46,867 $ 75,156 $ 122,168
Issuance of Common Stock ...................... 761 8 49,992 -- 50,000
Issuance of Common Stock ...................... 1,522 15 99,985 -- 100,000
Stock Split of 1 to 203.991 ................... 3,398,252 33,982 (33,982) -- --
Prior Period Adjustment -
Income Tax Loss Carryback .................. -- -- -- 12,348 12,348
Net Loss (1996) ............................... (103,232) (103,232)
---------- ---------- ---------- ---------- ----------
Total Stockholders' Equity
As of December 31, 1996 ....................... 3,414,993 34,150 162,862 (15,728) 181,284
Services Rendered ............................. 549,407 5,494 54,940 -- 60,434
Net Income (1997) ............................. 45,297 45,297
---------- ---------- ---------- ---------- ----------
Total Stockholders' Equity
As of December 31, 1997 ....................... 3,964,400 39,644 217,802 29,569 287,015
---------- ---------- ---------- ---------- ----------
Issuance of Common Stock ...................... -- -- -- -- --
Exercise of Warrants (March 1998) ............. 100,000 1,000 29,000 -- 30,000
Conversion of Notes Payable (Sept. 1998) ...... 62,500 625 61,875 -- 62,500
Issuance of Common Stock for Services
Rendered (Sept. 1998) ...................... 265,000 2,650 71,850 -- 74,500
Sale of Common Stock (Sept. 1998) ............. 142,858 1,428 48,572 -- 50,000
Sale of Common Stock (Dec. 1998) .............. 202,000 2,020 129,280 -- 131,300
Syndication Costs ............................. -- -- (190,288) -- (190,288)
Net Income (1998) ............................. 2,074 2,074
---------- ---------- ---------- ---------- ----------
Total Stockholders' Equity
As of December 31, 1998 ....................... 4,736,758 $ 47,367 $ 368,091 $ 31,643 $ 447,101
========== ========== ========== ========== ==========
</TABLE>
5
<PAGE>
FLEETCLEAN SYSTEMS, INC.
Statements of Cash Flows
For the Year Ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities:
Net Income/(Loss) ................................................ $ 2,074 $ 45,297 $(103,232)
Adjustments to Reconcile Net Income to Net
Cash Used by Operating Activities:
Depreciation and Amortization ................................ 113,291 103,800 97,615
(Increase)/Decrease in Accounts Receivable ..................... (26,068) 3,536 50,982
(Increase)/Decrease in Employee Advances ....................... (704) (73) 1,708
(Increase)/Decrease in Inventories ............................. (35,328) 34,701 (18,218)
(Increase)/Decrease in Payroll Taxes Receivable ................ 0 5,208 (5,208)
(Increase)/Decrease in Prepaid Expenses ........................ 2,985 6,165 (23,253)
(Increase)/Decrease in Income Taxes Receivable ................. 0 12,348 (12,348)
(Increase)/Decrease in Deferred Public Offering Costs .......... 112,988 (76,684) (36,304)
(Increase)/Decrease in Intangible Assets ....................... (1,485) (16,440) 0
(Increase)/Decrease in Other Assets ............................ 240 0 (200)
(Increase)/Decrease in Deferred Tax Asset ...................... (20,158) 1,632 (3,895)
Increase/(Decrease) in Accounts Payable ........................ 13,337 (27,752) 14,199
Increase/(Decrease) in Accounts Payable - trade ................ 0 (9,448) 9,448
Increase/(Decrease) in Payroll Taxes Payable ................... 279 637 (7,724)
Increase/(Decrease) in Sales Taxes Payable ..................... 601 680 (1,024)
Increase/(Decrease) in Income Taxes Payable .................... 0 (6,260) (3,340)
Increase/(Decrease) in Accrued Expenses ........................ 236 11,753 (3,540)
Increase/(Decrease in Deferred Tax Liability .................. 20,524 5,567 2,791
Increase/(Decrease) in Prior Period Adjustment
- NOL Carryback ........................................... -- -- 12,348
--------- --------- ---------
Net Cash Provided/(Used) for Operating Activities ........... 182,812 94,667 (29,195)
--------- --------- ---------
Investing Activities:
Purchase of Property, Plant, and Equipment ..................... (249,208) (200,488) (241,394)
Disposal of Property, Plant, and Equipment ..................... (17,054) -- --
--------- --------- ---------
Net Cash Provided/(Used) for Investing Activities ........... (266,262) (200,488) (241,394)
--------- --------- ---------
Financing Activities:
Increase/(Decrease) in Notes Payable ........................... (20,379) 45,387 119,647
Issuance of Common Stock ....................................... 158,012 60,434 150,000
--------- --------- ---------
Net Cash Provided/(Used) by Financing Activities ............ 137,633 105,821 269,647
--------- --------- ---------
Net Increase/(Decrease) In Cash .................................. 54,183 -- (942)
Cash Beginning of Year ........................................... 200 200 1,142
--------- --------- ---------
Cash End of Year ................................................. $ 54,383 $ 200 $ 200
========= ========= =========
Additional Disclosure of Operating Cash Flow Cash paid
during the period ended December 31,
1998 1997 1996
--------- --------- ---------
Interest Expense .................................. $ 46,318 $ 37,054 $ 32,727
Income Taxes ..................................... $ (1,267) $ 7,199 $ --
</TABLE>
6
FLEETCLEAN SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
Fleetclean Systems, Inc. (the Company) incorporated as a Texas corporation
and commenced business on June 1, 1986. The Company is engaged in the
business of sales and service of truck washing equipment to the trucking
industry (large fleet operations). In 1994 the Company expanded its
operations to include the manufacture of equipment and blending of washing
materials with its own chemical formulas.
A) INVENTORY
Inventories are valued at the lower of cost or market. Cost is determined
by using the average cost method. Inventories consist primarily of parts
and chemicals.
B) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are carried at cost less accumulated
depreciation and amortization. Prior to January 1, 1996, depreciation was
calculated using the modified accelerated cost recovery system as provided
by the tax reform act of 1986 for property and equipment acquired after
December 31, 1986 for both book and tax purposes. Commencing January 1,
1996, the company continues to use the modified accelerated method above
for income tax purposes, however, it calculates depreciation using the
straight-line method for book purposes. The recovery classifications are
as follows:
Demonstration Equipment 7 years
Furniture and Fixtures 7 years
Machinery and Equipment 7 years
Leasehold Improvements life of lease
Trucks 5 years
All repair and maintenance costs are charged against income in the period
incurred. Any repairs that increase the life of the asset are capitalized
and depreciated over the adjusted life of the asset.
C) INCOME TAXES
The Company adopted the provisions of Statement of Financial Accounting
Standards (FASB) No. 109, "Accounting for Income Taxes", which requires a
change from the deferral method to assets and liability method of
accounting for income taxes. Timing differences exist between book income
and tax income that primarily relates to depreciation.
7
<PAGE>
FLEETCLEAN SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES: (continued)
D) ACCOUNTS RECEIVABLE
Management has elected to write-off uncollectable receivables to bad debt
expense at the time they are identified. No accounts receivables were
written off during 1998.
E) NET EARNINGS PER COMMON SHARE
Net earnings per common share are shown as both basic and diluted. Basic
earnings per share are computed by dividing net income less and preferred
stock dividends (if applicable) by the weighted average number of shares
of common stock outstanding. Diluted earnings per common share are
computed by dividing net income by the weighted average number of shares
of common stock outstanding plus any dilutive common stock equivalents.
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
Weighted Average Number of Common
Shares Outstanding Including:
Basic Common Shares 4,229,679 3,460,776
Dilutive Common Shares 4,492,179 3,860,776
F) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumption that affect the reported amounts of assets and liabilities and
disclosure of contingent asset 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.
G) ADVERTISING
Advertising costs are expensed as incurred. Advertising expenses was
$3,861, $761, and $799 during the years ended December 31, 1998, 1997, and
1996, respectively.
H) ACCOUNTING PRONOUNCEMENTS
During August of 1998, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position (SOP) No. 98-5 "Reporting
on the Costs of Start-Up Activities". This statement requires all costs
related to a company's start-up activities be expensed during the period
incurred rather than capitalized and amortized over a period of time.
This pronouncement becomes effective for fiscal years beginning after
December 15, 1998. The Company has not elected early application of this
new statement.
8
<PAGE>
FLEETCLEAN SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 2 - PROPERTY, PLANT, AND EQUIPMENT:
Components of property, plant, and equipment, at December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Demonstration Equipment ............................. $ 381,969 $ 297,509
Furniture and Fixtures .............................. 34,108 26,232
Machinery and Equipment ............................. 182,688 153,190
Leasehold Improvements .............................. 3,012 3,012
Land ................................................ 10,000 10,000
Building ............................................ 95,120 95,120
Transportation Equipment ............................ 345,796 218,422
----------- -----------
Total Property, Plant, and Equipment ........... $ 1,052,693 $ 803,485
Less: Accumulation Depreciation ..................... (414,442) (319,360)
----------- -----------
Net Property, Plant, and Equipment ............. $ 638,251 $ 484,125
=========== ===========
</TABLE>
NOTE 3 - LONG -TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AMOUNT
NOTE HOLDER MATURITY DATE INTEREST RATE 1998 1997 PURPOSE
----------- ------------- ------------- --------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Compass Bank 09/02/98 2% over prime $ - 0 - $ 59,711 Working Capital
Compass Bank 02/09/99 9.75% - 0 - 26,897 Equipment
Citizens Bank 05/10/99 9.75% 2,232 8,158 1995 truck
Citizens Bank 03/15/99 8.49% - 0 - 8,237 1995 truck
Citizens Bank 02/09/00 2% over prime 8,284 14,994 1996 truck
Citizens Bank 02/09/00 2% over prime 8,284 14,994 1996 truck
Associated Comm. 05/31/00 10.50% 23,044 38,406 UD Box Van
Associated Comm. 06/18/00 10.50% 17,456 30,063 95 UD Flat
Bank United 06/01/98 2% over prime - 0 - 17,500 BK United
Compass Bank 04/02/98 2% over prime - 0 - 42,000 Line of Credit
Dayton State Bank 06/13/07 3% over prime - 0 - 58,357 Building
Cynthia Burger 12/25/98 9% - 0 - 25,000 Working Capital
Magic Transportation 03/31/99 9% 25,000 25,000 Working Capital
Al Clifford 03/31/99 9% - 0 - 25,000 Working Capital
Penelope Banks 03/31/99 9% 12,500 12,500 Working Capital
Susan Knickrehm 03/31/99 9% - 0 - 12,500 Working Capital
Case Credit 08/10/03 10.6% 30,800 - 0 - '99 Ford Truck
Case Credit 10/06/03 9.6% 104,318 - 0 - '99 KW Trucks
1st Liberty National 09/25/03 3% over prime 96,527 - 0 - Working Capital
1st Liberty National 09/04/08 9.875% 70,493 - 0 - Land / Building
---------- ---------
Total Debt $ 398,938 $ 419,317
Less Current Portion (126,566) (209,034)
---------- ---------
Net Long - Term Debt $ 272,372 $ 210,283
========== =========
</TABLE>
9
<PAGE>
FLEETCLEAN SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 3 - LONG -TERM DEBT: (continued)
The notes to C. Burger, M. Transportation, A.L. Clifford, P. Banks, and S.
Knickrehm are convertible to the Company's common stock at a rate of one
share for each dollar. This transaction may be done in part or whole at the
noteholder's option.
All notes, except the aforementioned, are personally guaranteed by the
President of the Company.
During 1998, C. Burger, A.L. Clifford, and S. Knickrehm converted their
notes, in full, into the Company's common stock. For each dollar converted,
the individuals received one share of the Company's common stock.
Principal repayment for each of the next five years are as follows:
1999 $ 126,566
2000 63,548
2001 54,801
2002 60,619
2003 & Thereafter 93,404
-----------
Total $ 398,938
===========
NOTE 4 - COMMITMENTS AND CONTINGENCIES:
The Company currently leases a facility located in Statesville, North
Carolina on a month-to-month basis. The monthly rental payment is $250 and
is terminable upon thirty days notice.
Additionally, the Company is currently engaged in a one-year lease for a
facility located in W. Lafayette, Indiana. This non-cancelable lease,
payable in monthly installments of $235, began September 1, 1998 and
expires on August 30, 1999.
Future minimum lease payments are summarized as follows:
DECEMBER 31, AMOUNT
--------------- ----------
1999 $ 1,880
Total $ 1,880
10
<PAGE>
FLEETCLEAN SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 5 - WARRANTS:
In October 1997, the Board of Directors adopted a stock option plan under
which 100,000 shares of common stock have been reserved for issuance to
the president of the Company at a purchase price of $ .30 per share. Such
issuance shall lapse if not exercised on or before May 1, 1998. During
1998, these options were exercised.
At the end of 1997, the Company received an aggregate of $100,000 in the
form of five convertible notes bearing 9% interest and due in fifteen
months (See Note 3). Holders of these notes may convert their notes, in
whole or part, into the Company's common stock at the rate of one share
for every one dollar owed. In conjunction with the issuance of such
indebtedness, the Company has agreed to issue such investors $2.00
Warrants to purchase 100,000 additional shares of common stock.
The Company has issued and outstanding the following warrants which have
not yet been exercised at December 31, 1998:
25,000 stock purchase warrants expiring June 16, 1999. These
warrants are subject to the marketability of the Company's common
stock. The warrants are to purchase fully paid and non-assessable
shares of the common stock, par value $.01 per share at a purchase
price of $1.00 per share. Such transactions may occur in whole or in
part, but must never amount to less than 100 shares.
100,000 stock purchase warrants expiring December 2001. These
warrants are subject to the ability of the Company to become a
public company and future marketability of the common stock. The
warrants are to purchase fully paid and non-assessable shares of the
common stock, par value $.01 per share at a purchase price of $1.00
per share. Such transactions may occur in whole or in part, but must
never amount to less than 100 shares.
25,000; 25,000; 25,000; 12,500; and 12,500 stock purchase warrants
that expire September 30, 2000. These warrants are subject to the
ability of the Company to become a public company and future
marketability of the common stock. The warrants are to purchase
fully paid and non-assessable shares of the common stock, par value
$.01 per share at a purchase price of $2.00 per share. Such
transactions may occur in whole or in part, but must never amount to
less than 100 shares.
11
<PAGE>
FLEETCLEAN SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 6 - INTANGIBLE ASSETS:
Intangible assets consist of goodwill and organization costs. The goodwill
was created during 1994 with an acquisition whereas organization costs
were primarily incurred during the reorganization of the Company's main
office. Goodwill and organization costs are both amortized using the
straight-line method for a period of fifteen (15) years. Accumulated
amortization at December 31, 1998 and 1997 was $2,283 and $ 1,129,
respectively.
According to the AICPA's SOP 98-5 (See Note 1), the Company will expense
any organization costs incurred subsequent to December 31, 1998 as
incurred.
NOTE 7 - DEFERRED PUBLIC OFFERING COSTS:
Deferred public offering costs consist of those expenditures incurred
during an attempt to raise capital by selling the Company's common stock
under Regulation D, Rule 504 of the Securities and Exchange Commission
(see Note 10). Upon successful completion of this offering, all expenses
incurred will be reclassified to additional paid in capital and treated as
syndication costs. During 1998, with the 504 stock offering substantially
complete, the Company has reclassified all deferred public offering costs
as syndication costs that reduced additional paid in capital.
NOTE 8 - LITIGATION:
The Company is the plaintiff in a suit in which the defendant (a former
employee) is being sued for violating a covenant not to compete.
Management is seeking damages and reimbursement of legal fees and is
confident that the Company will prevail in this case.
NOTE 9 - INCOME TAXES:
As discussed in note 1, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes". Implementation of SFAS 109 did not have a material cumulative
effect on prior periods nor did it result in a change to the current
year's provision.
12
<PAGE>
FLEETCLEAN SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 9 - INCOME TAXES: (continued)
A) The effective tax rate for the Company is reconcilable to statutory tax
rates as follows:
DECEMBER 31,
1998 1997
------- -------
% %
U.S. Federal Statutory Tax Rate 15 34
U.S. Valuation Difference (-0-) (34)
Effective U.S. Tax Rate 15 - 0 -
======= =======
B) Deferred income taxes are provided for differences between financial
statement and income tax reporting. Principal difference is the manner in
which depreciation is computed for financial and income tax reporting
purposes.
C) The Company experienced income tax losses of $26,796 and $107,852
for the years ended December 31, 1998 and 1996, respectively.
These losses were carried back the allowable three years in order
to offset $81,866 of prior period income. The resulting effects
of this loss carry-back was a refund to the Company in the amount
of $12,348 which constituted federal income taxes paid according
to the liabilities in each of the three preceding tax years;
1995, 1994, and 1993. Additionally, the Company continues to
carry a net operating losses of approximately $25,966 and $26,796
which will expire in 2011 and 2013, respectively, or until it is
completely used; whichever occurs first.
NOTE 10 - SUBSEQUENT EVENTS:
Fleetclean Systems, Inc. is in the process of registering its common stock
in certain states. This registration is being conducted in accordance with
the Securities and Exchange Commission rule 504 of Regulation D. This
registration allows the Company to sell no more than $1,000,000 of its
securities to the public.
Subsequent to December 31, 1998, the Company acquired the assets of
Tri-State Chemex, Inc.
Additionally, subsequent to December 31, 1998, the Company has entered
into a verbal agreement with Trimac Transportation, Inc. to acquire a tank
washing facility in Louisiana.
13
<PAGE>
FLEETCLEAN SYSTEMS, INC.
BALANCE SHEETS-JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
1999 1998
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash ...................................................... $ 37,008 $ 4,360
Accounts receivable, trade ................................ 139,032 155,340
Inventories ............................................... 187,129 123,190
Deferred tax account ...................................... 22,921 2,263
Prepaid expenses .......................................... 33,764 37,797
---------- ----------
419,854 322,950
---------- ----------
PROPERTY AND EQUIPMENT
Land ...................................................... 35,000 10,000
Building .................................................. 546,716 95,120
Machinery and equipment ................................... 608,646 500,139
Transportation equipment .................................. 359,796 218,422
Furniture and equipment ................................... 37,014 33,688
Leasehold improvements .................................... 3,012 3,012
---------- ----------
1,590,184 860,381
Less accumulated depreciation ............................. 480,815 373,360
---------- ----------
1,109,369 487,021
OTHER, principally goodwill, net of amortization .............. 297,986 68,225
---------- ----------
$1,827,209 $ 878,196
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses ..................... $ 137,384 $ 204,451
Current maturities of long-term debt ...................... 122,899 228,588
---------- ----------
260,283 433,039
---------- ----------
LONG-TERM LIABILITIES
Deferred income tax ....................................... 28,883 8,359
Notes payable, bank, net of current maturities ............ 779,034 133,749
---------- ----------
807,917 142,108
---------- ----------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 50,000,000 shares authorized;
5,888,319 and 4,064,400 shares issued and outstanding
at 1999 and 1998, respectively ........................ 58,883 40,644
Paid in capital ........................................... 671,575 186,367
Retained earnings ......................................... 28,551 76,038
159,009 303,049
----------
$1,827,209 $ 878,196
========== ==========
</TABLE>
<PAGE>
FLEETCLEAN SYSTEMS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
--------- ---------
Revenues ...................................... $ 542,075 $ 582,362
Cost of revenues .............................. 98,955 133,857
--------- ---------
Gross profit .................................. 443,120 448,505
--------- ---------
Selling, general and administrative
Salary and related benefits .............. 213,941 195,880
Insurance ................................ 29,782 27,482
Legal and accounting ..................... 15,607 12,877
Transportation costs ..................... 26,168 23,305
Advertising .............................. 1,225 945
Office ................................... 22,703 24,695
Rent ..................................... 10,300 1,500
Travel and entertainment ................. 22,490 21,239
Telephone ................................ 10,330 8,743
Depreciation and amortization ............ 72,636 54,765
Utilities ................................ 1,875 1,809
Interest ................................. 23,543 20,289
--------- ---------
450,600 393,529
--------- ---------
Income (loss) from operations ................. (7,480) 54,976
Other income .................................. 3,889 293
--------- ---------
Income (loss) before income taxes ............. (3,591) 55,269
Provision for income taxes .................... (500) 8,800
--------- ---------
Net Income .................................... (3,091) 46,469
Retained earnings, beginning .................. 31,642 29,569
--------- ---------
Retained earnings, ending ..................... $ 28,551 $ 76,038
========= =========
Earnings per common share
Primary .................................. $(NIL) $ .01
Fully diluted ............................ $(NIL) $ .01
<PAGE>
FLEETCLEAN SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Collections from customers ........................... $ 538,275 $ 538,490
Cash paid to suppliers and employees ................. (515,811) (425,218)
Interest paid ........................................ (23,543) (20,289)
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES .......... (1,079) 92,983
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business ............................... (100,000)
Purchase of property and equipment .................... (498,790) (56,896)
Other ................................................. (85,500) (4,948)
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES .......... (684,290) (61,844)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable ........................... 502,994
Reduction of notes payable ............................ (56,979)
Sale of common stock .................................. 165,000 30,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................. 667,994 (26,979)
--------- ---------
NET INCREASE (DECREASE ) IN CASH .......................... (17,375) 4,160
CASH AT BEGINNING OF YEAR ................................. 54,383 200
--------- ---------
CASH AT END OF YEAR ....................................... $ 37,008 $ 4,360
========= =========
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES
Net income (loss) ......................................... $ (3,091) $ 46,469
Adjustments to reconcile net income to net cash provided
by operation activities
Depreciation and amortization ................. 72,636 54,765
Deferred tax expense .......................... (500) 8,800
(Increase) decrease in:
Accounts receivable ........................... (3,801) (43,872)
Inventories ................................... (54,418) (32,944)
Prepaid expenses .............................. (15,671) (16,719)
Increase (decrease) in:
Accounts payable and accrued expenses ......... 3,766 76,484
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES .......... $ (1,079) $ 92,983
========= =========
Supplemental Disclosures of Cash Flow Information Net cash
paid during the periods for:
Property and equipment ............................ $ 498,790 $ 56,896
========= =========
Interest .......................................... $ 23,543 $ 20,289
========= =========
Supplemental Schedule on Non-cash Investing Activities:
Fair value of assets acquired ......................... $ 46,638
=========
Fair value of common stock issued ..................... $ 150,000
=========
</TABLE>
<PAGE>
FLEETCLEAN SYSTEMS, INC.
NOTE TO FINANCIAL STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Note 1. General
The unaudited financial statements included herein for the Company for the six
months ended June 30, 1999 and 1998 have been prepared without audit pursuant to
the runes and regulations of the Securities and Exchange Commission and include
all adjustments which are, in the opinion of management, necessary for a fair
presentation. Certain information and footnote disclosures required by generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These financial statements should be read in conjunction
with the audited financial statements and related notes thereto included with
this filing for the annual periods ended December 31, 1998 and 1997.
The results for interim periods are not necessarily indicative of trends or of
results to be expected for the full year.
<PAGE>
PART III
ITEM 1. EXHIBITS
The following exhibits are to be filed as part of the Registration
Statement:
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
Exhibit 2.1(1) Articles of Incorporation of Fleetclean Systems, Inc.
Exhibit 2.2(1) Amended and Restated Bylaws of Fleetclean Systems, Inc.
Exhibit 3.1(1) Common Stock Certificate of Fleetclean Systems, Inc.
Exhibit 6.1(1) Kenneth A. Phillips Employment Agreement
Exhibit 6.2(1) Ronald Wallace Employment Agreement
Exhibit 27.1(1) Financial Data Schedule
(1) Filed herewith.
ITEM 2. DESCRIPTION OF EXHIBITS
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
FLEETCLEAN SYSTEMS, INC.
Dated: September 27, 1999 By:/s/ KENNETH A. PHILLIPS
KENNETH A. PHILLIPS, Chief
Executive Officer
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
EASTEX CHEMEX CORPORATION
The undersigned natural person of the age of eighteen years or more, acting
as incorporator of a corporation under the Texas Business Corporation Act,
hereby adopts the following Articles of Incorporation for the corporation.
ARTICLE I
Name: The name of the corporation is:
EASTEX CHEMEX CORPORATION
ARTICLE II
Duration: The period of its duration is perpetual.
Purpose: The purposes for which the corporation is organized are: To
transact any and all lawful business for which corporations may
be incorporated under the Texas Business Corporation Act
including, but not limited to operating and managing a sales
business, owning, buying and selling real and personal property,
and conducting all business reasonably associated therewith.
ARTICLE IV
Shares: The aggregate number of shares which the corporation has authority
to issue is 1,000,000 shares of the par value of $.01 per share. The shares are
designated as Common Stock and have identical rights and privileges in every
respect.
ARTICLE V
Commencement of Business: The corporation will not commence business until
it has received for the issuance of its shares consideration of the value of One
Thousand Dollars ($1,000.00) consisting of money, labor done or property
actually received.
<PAGE>
ARTICLE VI
Registered Office and Agent: The street address of the registered office of the
corporation is 611 Melody Lane, Friendswood, TX 77546 and the name of its
registered agent at that address is Kenneth A. Phillips.
ARTICLE VII
Initial Directors: The number of directors constituting the initial Board of
Directors is two (2) and the name and address of each person who is to serve as
director until the first annual meeting of shareholders, or until his successor
is elected and qualified is:
NAME ADDRESS
Kenneth A. Phillips 611 Melody Lane
Friendswood, TX 77546
Kathryn M. Phillips 611 Melody Lane
Friendswood, TX 77546
ARTICLE VIII
Incorporator: The name of the incorporator is:
Kenneth A. Phillips
and his address is:
611 Melody Lane
Friendswood, TX 77546
Each of the incorporators is more than eighteen (18) years of age.
ARTICLE IX
Bylaws: The initial bylaws shall be adopted by the Board of Directors. The
power to alter, amend or repeal the bylaws or adopt new bylaws is vested in the
Board of Directors, subject to repeal of change by action of the shareholders.
ARTICLE X
Prior Written Consent: A shareholder who desires to pledge shares of the
Corporation as collateral for any loan or otherwise to encumber any shares of
the shareholders of the Corporation may do so only with the prior written
consent of all of the shareholders of the Corporation.
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of June, 1986.
/s/ KENNETH A. PHILLIPS
KENNETH A. PHILLIPS
Incorporator
STATE OF TEXAS
COUNTY OF HARRIS
I, a Notary Public, do hereby certify that on this the 1st day of June,
1986, personally appeared before me, Kenneth A. Phillips, who being by me first
duly sworn, declared to me that he/she is the person who signed the foregoing
document as the Incorporator, and that the statements therein contained are
true.
/s/ SANDRA KAY JONES
Notary Public in and for
Harris County, Texas
My commission expires:
October 12, 1988
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JULY 27 1990
Corporations Section
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATIONS
OF EASTEX CHEMEX CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business Corporation
Act, the undersigned corporation adopts the following articles of amendment to
the Articles of Incorporation which shall change the name of the corporation to
Fleetclean Systems, Inc.
1. Name
The name of the corporation is Eastex Chemex Corporation.
2. Date of Adoption
The following amendment to the Articles of Incorporation was adopted by the
shareholders of the corporation on the 15th day of April, 1990.
Article One of the Articles of Incorporation is amended so as to read as
follows:
The name of the corporation is Fleetclean Systems, Inc.
3. Number of Shares
The number of shares of the corporation outstanding at the time of the adoption
was 13,012 shares; the number of shares entitled to vote was 13,012 shares.
The designation and number of outstanding shares of each class entitled to vote
as a class were as follows:
CLASS NUMBER OF SHARES
----------------------------- ----------------
Common....................... 13,012
4. Adoption by Vote
The number of shares voted for the amendment was 13.012 and the number shares
voted against the amendment was zero (0).
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
AUG 09 1996
Corporations Section
ARTICLES OF AMENDMENT
BY THE SHAREHOLDERS TO
THE ARTICLES OF INCORPORATION OF
FLEETCLEAN SYSTEMS, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
I
The name of the corporation is FLEETCLEAN SYSTEMS, INC.
II
The following amendment to the Articles of Incorporation was adopted by the
shareholders of the corporation on May 1, 1996.
The amendment deletes all of Article IV of the original Articles of
Incorporation. The part that is deleted read as follows:
Shares: The aggregate number of shares which the Corporation has
authority to issue is 1,000,000 shares of the par value of $.01 per
share.
The amendment adds the following words to Article IV so that Article IV as
amended now reads as follows:
The aggregate number of shares which the Corporation has authority to
issue is 50,000,000 of the par value of $.01 per share. The shares are
designated as Common Stock and have identical rights and privileges is
every respect.
III
The number of shares of the corporation issued and outstanding at the time
of such adoption was 14,458 and the number of shares entitled to vote thereon
was 14,458.
IV
The number of shares voted for such amendment was 14,458; the number of
shares voted against such amendment was zero. Accordingly, such amendment was
unanimously approved by the shareholders.
V
The holders of all of the shares outstanding entitled to vote on the
amendment have signed a consent in writing adopting such amendment.
Dated: June 30, 1996
/s/ KENNETH A. PHILLIPS
KENNETH A. PHILLIPS, President
/s/ KATHRYN M. PHILLIPS
KATHRYN M. PHILLIPS, President
<PAGE>
STATE OF TEXAS
COUNTY OF TEXAS
This instrument was acknowledged before me on June 30th, 1996, by KENNETH
A. PHILLIPS and KATHRYN M. PHILLIPS.
/s/ MARTHA BROWN
NOTARY PUBLIC In and for
The State of Texas
Printed Name: MARTHA BROWN
My Commission Expires: September 11,
1999
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
AUG 28 1996
Corporations Section
ARTICLES OF AMENDMENT
BY THE SHAREHOLDERS TO
THE ARTICLES OF INCORPORATION OF
FLEETCLEAN SYSTEMS, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation.
I
The name of the corporation is FLEETCLEAN SYSTEMS, INC.
II
The following amendment to the Articles of Incorporation was adopted by the
shareholders of the corporation on May 8, 1996.
The amendment deletes all of Article X of the original Articles of
Incorporation. The part that is deleted read as follows:
Prior Written Consent: A shareholder who desires to
pledge shares of the corporation as collateral for any loan or
otherwise to encumber any shares of the Corporation may do so
only with the prior written consent of all of the shareholders
of the Corporation.
The amendment substitutes the following words to Article X so that Article
X as amended now reads as follows:
The shareholders of this Corporation shall not have the
preemptive right to subscribe to any and all issues of shares
and securities of this Corporation.
III
The number of shares of the corporation issued and outstanding at the time
of such adoption was 14,458 and the number of shares entitled to vote thereon
was 14,458.
IV
The number of shares voted for such amendment was 14,458; the number of
shares voted against such amendment was zero. Accordingly, such amendment was
unanimously approved by the shareholders.
<PAGE>
V
The holders of all of the shares outstanding entitled to vote on the
amendment have signed a consent in writing adopting such amendment.
Dated: June 30, 1996
/s/ KENNETH A. PHILLIPS
KENNETH A. PHILLIPS, President
/s/ KATHRYN M. PHILLIPS
KATHRYN M. PHILLIPS, President
STATE OF TEXAS
COUNTY OF LIBERTY
This instrument was acknowledged before me on June 30, 1996, by KENNETH A.
PHILLIPS and KATHRYN M. PHILLIPS.
/s/ MARTHA BROWN
NOTARY PUBLIC In and For
The State of Texas
[Notary Public Seal]
Printed Name: MARTHA BROWN
My Commission Expires: September 11,
1999
2
EXHIBIT 2.2
AMENDED AND RESTATED
BYLAWS
OF
FLEETCLEAN SYSTEMS, INC.
A TEXAS CORPORATION
ARTICLE 1.
DEFINITIONS
1.1 DEFINITIONS. Unless the context clearly requires otherwise, in these
Bylaws:
(a) "BOARD" means the board of directors of the Company.
(b) "BYLAWS" means these bylaws as adopted by the Board and includes
amendments subsequently adopted by the Board or by the Stockholders.
(c) "CERTIFICATE OF INCORPORATION" means the Certificate of
Incorporation of Fleetclean Systems, Inc. as filed with the Secretary of
State of the State of Texas and includes all amendments thereto and
restatements thereof subsequently filed.
(d) "COMPANY" means Fleetclean Systems, Inc., a Texas corporation.
(e) "SECTION" refers to sections of these Bylaws.
(f) "STOCKHOLDER" means stockholders of record of the Company.
1.2 OFFICES. The title of an office refers to the person or persons who at
any given time perform the duties of that particular office for the Company.
ARTICLE 2.
OFFICES
2.1 PRINCIPAL OFFICE. The Company may locate its principal office within
or without the state of incorporation as the Board may determine.
2.2 REGISTERED OFFICE. The registered office of the Company required by
law to be maintained in the state of incorporation may be, but need not be, the
same as the principal place of business of the Company. The Board may change the
address of the registered office from time to time.
2.3 OTHER OFFICES. The Company may have offices at such other places,
either within or without the state of incorporation, as the Board may designate
or as the business of the Company may require from time to time.
ARTICLE 3.
MEETINGS OF STOCKHOLDERS
3.1 ANNUAL MEETINGS. The Stockholders of the Company shall hold their
annual meetings for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings at such time, date
and place as the Board shall determine by resolution.
1
<PAGE>
3.2 SPECIAL MEETINGS. Only the Board, the Chairman of the Board, the
President or a committee of the Board duly designated and whose powers and
authority include the power to call meetings may call special meetings of the
Stockholders of the Company at any time for any purpose or purposes.
3.3 PLACE OF MEETINGS. The Stockholders shall hold all meetings at such
places, within or without the State of Texas, as the Board or a committee of the
Board shall specify in the notice or waiver of notice for such meetings.
3.4 NOTICE OF MEETINGS. Except as otherwise required by law, the Board or
a committee of the Board shall give notice of each meeting of Stockholders,
whether annual or special, not less than 10 nor more than 60 days before the
date of the meeting. The Board or a committee of the Board shall deliver a
notice to each Stockholder entitled to vote at such meeting by delivering a
typewritten or printed notice thereof to him personally, or by depositing such
notice in the United States mail, in a postage prepaid envelope, directed to him
at his address as it appears on the records of the Company, or by transmitting a
notice thereof to him at such address by telegraph, telecopy, cable or wireless.
If mailed, notice is given on the date deposited in the United States mail,
postage prepaid, directed to the Stockholder at his address as it appears on the
records of the Company. An affidavit of the Secretary or an Assistant Secretary
or of the Transfer Agent of the Company that he has given notice shall
constitute, in the absence of fraud, prima facie evidence of the facts stated
therein.
Every notice of a meeting of the Stockholders shall state the place,
date and hour of the meeting and, in the case of a special meeting, also shall
state the purpose or purposes of the meeting. Furthermore, if the Company will
maintain the list at a place other than where the meeting will take place, every
notice of a meeting of the Stockholders shall specify where the Company will
maintain the list of Stockholders entitled to vote at the meeting.
3.5 STOCKHOLDER NOTICE. Subject to the Certificate of Incorporation, the
Stockholders who intend to nominate persons to the Board of Directors or propose
any other action at an annual meeting of Stockholders must timely notify the
Secretary of the Company of such intent. To be timely, a Stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 60 days nor more than 90 days prior to the date of
such meeting; provided, however, that in the event that less than 75 days'
notice of the date of the meeting is given or made to Stockholders, notice by
the Stockholder to be timely must be received not later than the close of
business on the 15th day following the date on which such notice of the date of
the annual meeting was mailed. Such notice must be in writing and must include a
(i) a brief description of the business desired to the brought before the annual
meeting and the reasons for conducting such business at the meeting; (ii) the
name and record address of the Stockholder proposing such business; (iii) the
class, series and number of shares of capital stock of the Company which are
beneficially owned by the Stockholder; and (iv) any material interest of the
Stockholder in such business. The Board of Directors reserves the right to
refuse to submit any such proposal to stockholders at an annual meeting if, in
its judgment, the information provided in the notice is inaccurate or
incomplete.
3.6 WAIVER OF NOTICE. Whenever these Bylaws require written notice, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall constitute the equivalent of notice.
Attendance of a person at any meeting shall constitute a waiver of notice of
such meeting, except when the person attends the meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. No written
waiver of notice need specify either the business to be transacted at, or the
purpose or purposes of any regular or special meeting of the Stockholders,
directors or members of a committee of the Board.
3.7 ADJOURNMENT OF MEETING. When the Stockholders adjourn a meeting to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Stockholders may transact any business
which they may have transacted at the original meeting. If the adjournment is
for more than 30 days or, if after the adjournment, the Board or a committee of
the Board fixes a new record date for the adjourned meeting, the Board or a
committee of the Board shall give notice of the adjourned meeting to each
Stockholder of record entitled to vote at the meeting.
2
<PAGE>
3.8 QUORUM. Except as otherwise required by law, the holders of a majority
of all of the shares of the stock entitled to vote at the meeting, present in
person or by proxy, shall constitute a quorum for all purposes at any meeting of
the Stockholders. In the absence of a quorum at any meeting or any adjournment
thereof, the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, or, in the absence therefrom of all the
Stockholders, any officer entitled to preside at, or to act as secretary of,
such meeting may adjourn such meeting to another place, date or time.
If the chairman of the meeting gives notice of any adjourned special
meeting of Stockholders to all Stockholders entitled to vote thereat, stating
that the minimum percentage of stockholders for a quorum as provided by Texas
law shall constitute a quorum, then, except as otherwise required by law, that
percentage at such adjourned meeting shall constitute a quorum and a majority of
the votes cast at such meeting shall determine all matters.
3.9 ORGANIZATION. Such person as the Board may have designated or, in the
absence of such a person, the highest ranking officer of the Company who is
present shall call to order any meeting of the Stockholders, determine the
presence of a quorum, and act as chairman of the meeting. In the absence of the
Secretary or an Assistant Secretary of the Company, the chairman shall appoint
someone to act as the secretary of the meeting.
3.10 CONDUCT OF BUSINESS. The chairman of any meeting of Stockholders
shall determine the order of business and the procedure at the meeting,
including such regulations of the manner of voting and the conduct of discussion
as he deems in order.
3.11 LIST OF STOCKHOLDERS. At least 10 days before every meeting of
Stockholders, the Secretary shall prepare a list of the Stockholders entitled to
vote at the meeting or any adjournment thereof, arranged in alphabetical order,
showing the address of each Stockholder and the number of shares registered in
the name of each Stockholder. The Company shall make the list available for
examination by any Stockholder for any purpose germane to the meeting, during
ordinary business hours, for a period of at least 10 days prior to the meeting,
either at a place within the city where the meeting will take place or at the
place designated in the notice of the meeting.
The Secretary shall produce and keep the list at the time and place
of the meeting during the entire duration of the meeting, and any Stockholder
who is present may inspect the list at the meeting. The list shall constitute
presumptive proof of the identity of the Stockholders entitled to vote at the
meeting and the number of shares each Stockholder holds.
A determination of Stockholders entitled to vote at any meeting of
Stockholders pursuant to this Section shall apply to any adjournment thereof.
3.12 FIXING OF RECORD DATE. For the purpose of determining Stockholders
entitled to notice of or to vote at any meeting of Stockholders or any
adjournment thereof, or Stockholders entitled to receive payment of any
dividend, or in order to make a determination of Stockholders for any other
proper purpose, the Board or a committee of the Board may fix in advance a date
as the record date for any such determination of Stockholders. However, the
Board shall not fix such date, in any case, more than 60 days nor less than 10
days prior to the date of the particular action.
If the Board or a committee of the Board does not fix a record date
for the determination of Stockholders entitled to notice of or to vote at a
meeting of Stockholders, the record date shall be at the close of business on
the day next preceding the day on which notice is given or if notice is waived,
at the close of business on the day next preceding the day on which the meeting
is held or the date on which the Board adopts the resolution declaring a
dividend.
3.13 VOTING OF SHARES. Each Stockholder shall have one vote for every
share of stock having voting rights registered in his name on the record date
for the meeting. The Company shall not have the right to vote treasury stock of
the Company, nor shall another corporation have the right to vote its stock of
the Company if the Company holds, directly or indirectly, a majority of the
shares entitled to vote in the election of directors of such other corporation.
3
<PAGE>
Persons holding stock of the Company in a fiduciary capacity shall have the
right to vote such stock. Persons who have pledged their stock of the Company
shall have the right to vote such stock unless in the transfer on the books of
the Company the pledgor expressly empowered the pledgee to vote such stock. In
that event, only the pledgee, or his proxy, may represent such stock and vote
thereon.
A plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote shall determine all
elections and, except when the law or Certificate of Incorporation requires
otherwise, the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote shall determine all
other matters.
Where a separate vote by a class or classes is required, a majority
of the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of the majority of
shares of such class or classes present in person or represented by proxy at the
meeting shall be the act of such class.
The Stockholders may vote by voice vote on all matters. Upon demand
by a Stockholder entitled to vote, or his proxy, the Stockholders shall vote by
ballot. In that event, each ballot shall state the name of the Stockholder or
proxy voting, the number of shares voted and such other information as the
Company may require under the procedure established for the meeting.
3.14 INSPECTORS. At any meeting in which the Stockholders vote by ballot,
the chairman may appoint one or more inspectors. Each inspector shall take and
sign an oath to execute the duties of inspector at such meeting faithfully, with
strict impartiality, and according to the best of his ability. The inspectors
shall ascertain the number of shares outstanding and the voting power of each;
determine the shares represented at a meeting and the validity of proxies and
ballots; count all votes and ballots; determine and retain for a reasonable
period a record of the disposition of any challenges made to any determination
by the inspectors; and certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
certification required herein shall take the form of a subscribed, written
report prepared by the inspectors and delivered to the Secretary of the Company.
An inspector need not be a Stockholder of the Company, and any officer of the
Company may be an inspector on any question other than a vote for or against a
proposal in which he has a material interest.
3.15 PROXIES. A Stockholder may exercise any voting rights in person or by
his proxy appointed by an instrument in writing, which he or his authorized
attorney-in-fact has subscribed and which the proxy has delivered to the
secretary of the meeting pursuant to the manner prescribed by law.
A proxy is not valid after the expiration of 13 months after the
date of its execution, unless the person executing it specifies thereon the
length of time for which it is to continue in force (which length may exceed 12
months) or limits its use to a particular meeting. Each proxy is irrevocable if
it expressly states that it is irrevocable and if, and only as long as, it is
coupled with an interest sufficient in law to support an irrevocable power.
The attendance at any meeting of a Stockholder who previously has
given a proxy shall not have the effect of revoking the same unless he notifies
the Secretary in writing prior to the voting of the proxy.
3.16 ACTION BY CONSENT. Any action required to be taken at any annual or
special meeting of stockholders of the Company or any action which may be taken
at any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Company by delivery to its registered office, its principal place of business,
or an officer or agent of the Company having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Company's registered office shall be by hand or by certified or registered mail,
return receipt requested.
4
<PAGE>
Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this section to the
Company, written consents signed by a sufficient number of holders to take
action are delivered to the Company by delivery to its registered office, its
principal place of business or an officer or agent of the Company having custody
of the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the Company's registered office shall be by hand or by
certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE 4.
BOARD OF DIRECTORS
4.1 GENERAL POWERS. The Board shall manage the property, business and
affairs of the Company.
4.2 NUMBER. The number of directors who shall constitute the Board shall
equal not less than one nor more than 10, as the Board may determine by
resolution from time to time.
4.3 ELECTION OF DIRECTORS AND TERM OF OFFICE. The Stockholders of the
Company shall elect the directors at the annual or adjourned annual meeting
(except as otherwise provided herein for the filling of vacancies). Each
director shall hold office until his death, resignation, retirement, removal, or
disqualification, or until his successor shall have been elected and qualified.
4.4 RESIGNATIONS. Any director of the Company may resign at any time by
giving written notice to the Board or to the Secretary of the Company. Any
resignation shall take effect upon receipt or at the time specified in the
notice. Unless the notice specifies otherwise, the effectiveness of the
resignation shall not depend upon its acceptance.
4.5 REMOVAL. Stockholders holding a majority of the outstanding shares
entitled to vote at an election of directors may remove any director or the
entire Board of Directors at any time, with or without cause.
4.6 VACANCIES. A majority of the remaining directors, although less than a
quorum, or a sole remaining director may fill any vacancy on the Board, whether
because of death, resignation, disqualification, an increase in the number of
directors, or any other cause. Any director elected to fill a vacancy shall hold
office until his death, resigna tion, retirement, removal, or disqualification,
or until his successor shall have been elected and qualified.
4.7 CHAIRMAN OF THE BOARD. At the initial and annual meeting of the Board,
the directors may elect from their number a Chairman of the Board of Directors.
The Chairman shall preside at all meetings of the Board and shall perform such
other duties as the Board may direct. The Board also may elect a Vice Chairman
and other officers of the Board, with such powers and duties as the Board may
designate from time to time.
4.8 COMPENSATION. The Board may compensate directors for their services
and may provide for the payment of all expenses the directors incur by attending
meetings of the Board or otherwise.
ARTICLE 5.
MEETINGS OF DIRECTORS
5.1 REGULAR MEETINGS. The Board may hold regular meetings at such places,
dates and times as the Board shall establish by resolution. If any day fixed for
a meeting falls on a legal holiday, the Board shall hold the meeting at the same
place and time on the next succeeding business day. The Board need not give
notice of regular meetings.
5
<PAGE>
5.2 PLACE OF MEETINGS. The Board may hold any of its meetings in or out of
the State of Texas, at such places as the Board may designate, at such places as
the notice or waiver of notice of any such meeting may designate, or at such
places as the persons calling the meeting may designate.
5.3 MEETINGS BY TELECOMMUNICATIONS. The Board or any committee of the
Board may hold meetings by means of conference telephone or similar
telecommunications equipment that enable all persons participating in the
meeting to hear each other. Such participation shall constitute presence in
person at such meeting.
5.4 SPECIAL MEETINGS. The Chairman of the Board, the President, or
one-half of the directors then in office may call a special meeting of the
Board. The person or persons authorized to call special meetings of the Board
may fix any place, either in or out of the State of Texas as the place for the
meeting.
5.5 NOTICE OF SPECIAL MEETINGS. The person or persons calling a special
meeting of the Board shall give written notice to each director of the time,
place, date and purpose of the meeting of not less than three business days if
by mail and not less than 24 hours if by telegraph or in person before the date
of the meeting. If mailed, notice is given on the date deposited in the United
States mail, postage prepaid, to such director. A director may waive notice of
any special meeting, and any meeting shall constitute a legal meeting without
notice if all the directors are present or if those not present sign either
before or after the meeting a written waiver of notice, a consent to such
meeting, or an approval of the minutes of the meeting. A notice or waiver of
notice need not specify the purposes of the meeting or the business which the
Board will transact at the meeting.
5.6 WAIVER BY PRESENCE. Except when expressly for the purpose of objecting
to the legality of a meeting, a director's presence at a meeting shall
constitute a waiver of notice of such meeting.
5.7 QUORUM. A majority of the directors then in office shall constitute a
quorum for all purposes at any meeting of the Board. In the absence of a quorum,
a majority of directors present at any meeting may adjourn the meeting to
another place, date or time without further notice. No proxies shall be given by
directors to any person for purposes of voting or establishing a quorum at a
directors meetings.
5.8 CONDUCT OF BUSINESS. The Board shall transact business in such order
and manner as the Board may determine. Except as the law requires otherwise, the
Board shall determine all matters by the vote of a majority of the directors
present at a meeting at which a quorum is present. The directors shall act as a
Board, and the individual direc tors shall have no power as such.
5.9 ACTION BY CONSENT. The Board or a committee of the Board may take any
required or permitted action without a meeting if all members of the Board or
committee consent thereto in writing and file such consent with the minutes of
the proceedings of the Board or committee.
ARTICLE 6.
COMMITTEES
6.1 COMMITTEES OF THE BOARD. The Board may designate, by a vote of a
majority of the directors then in office, committees of the Board. The
committees shall serve at the pleasure of the Board and shall possess such
lawfully delegable powers and duties as the Board may confer.
6.2 SELECTION OF COMMITTEE MEMBERS. The Board shall elect by a vote of a
majority of the directors then in office a director or directors to serve as the
member or members of a committee. By the same vote, the Board may designate
other directors as alternate members who may replace any absent or disqualified
member at any meeting of a committee. In the absence or disqualification of any
member of any committee and any alternate member in his place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may appoint by unanimous
vote another member of the Board to act at the meeting in the place of the
absent or disqualified member.
6
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6.3 CONDUCT OF BUSINESS. Each committee may determine the procedural rules
for meeting and conducting its business and shall act in accordance therewith,
except as the law or these Bylaws require otherwise. Each committee shall make
adequate provision for notice of all meetings to members. A majority of the
members of the committee shall constitute a quorum, unless the committee
consists of one or two members. In that event, one member shall constitute a
quorum. A majority vote of the members present shall determine all matters. A
committee may take action without a meeting if all the members of the committee
consent in writing and file the consent or consents with the minutes of the
proceedings of the committee.
6.4 AUTHORITY. Any committee, to the extent the Board provides, shall have
and may exercise all the powers and authority of the Board in the management of
the business and affairs of the Company, and may authorize the affixation of the
Company's seal to all instruments which may require or permit it. However, no
committee shall have any power or authority with regard to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the Stockholders the sale, lease or exchange of all or
substantially all of the Company's property and assets, recommending to the
Stockholders a dissolution of the Company or a revocation of a dissolution of
the Company, or amending these Bylaws of the Company. Unless a resolution of the
Board expressly provides, no committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock, or to adopt a
certificate of ownership and merger.
6.5 MINUTES. Each committee shall keep regular minutes of its proceedings
and report the same to the Board when required.
ARTICLE 7.
OFFICERS
7.1 OFFICERS OF THE COMPANY. The officers of the Company shall consist of
a President, a Secretary and such Vice Presidents, Assistant Secretaries,
Assistant Treasurers, and other officers as the Board may designate and elect
from time to time. The same person may hold at the same time any two or more
offices, except the offices of President and Secretary.
7.2 ELECTION AND TERM. The Board shall elect the officers of the Company.
Each officer shall hold office until his death, resignation, retirement, removal
or disqualification, or until his successor shall have been elected and
qualified.
7.3 COMPENSATION OF OFFICERS. The Board shall fix the compensation of all
officers of the Company. No officer shall serve the Company in any other
capacity and receive compensation, unless the Board authorizes the additional
compensation.
7.4 REMOVAL OF OFFICERS AND AGENTS. The Board may remove any officer or
agent it has elected or appointed at any time, with or without cause.
7.5 RESIGNATION OF OFFICERS AND AGENTS. Any officer or agent the Board has
elected or appointed may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President, or the Secretary of the
Company. Any such resignation shall take effect at the date of the receipt of
such notice or at any later time specified. Unless otherwise specified in the
notice, the Board need not accept the resignation to make it effective.
7.6 BOND. The Board may require by resolution any officer, agent, or
employee of the Company to give bond to the Company, with sufficient sureties
conditioned on the faithful performance of the duties of his respective office
or agency. The Board also may require by resolution any officer, agent or
employee to comply with such other conditions as the Board may require from time
to time.
7.7 PRESIDENT. The President shall be the chief operating officer of the
Company and, subject to the Board's control, shall supervise and direct all of
the business and affairs of the Company. When present, he shall sign
7
<PAGE>
(with or without the Secretary, an Assistant Secretary, or any other officer or
agent of the Company which the Board has authorized) deeds, mortgages, bonds,
contracts or other instruments which the Board has authorized an officer or
agent of the Company to execute. However, the President shall not sign any
instrument which the law, these Bylaws, or the Board expressly require some
other officer or agent of the Company to sign and execute. In general, the
President shall perform all duties incident to the office of President and such
other duties as the Board may prescribe from time to time.
7.8 VICE PRESIDENTS. In the absence of the President or in the event of
his death, inability or refusal to act, the Vice Presidents in the order of
their length of service as Vice Presidents, unless the Board determines
otherwise, shall perform the duties of the President. When acting as the
President, a Vice President shall have all the powers and restrictions of the
Presidency. A Vice President shall perform such other duties as the President or
the Board may assign to him from time to time.
7.9 SECRETARY. The Secretary shall (a) keep the minutes of the meetings of
the Stockholders and of the Board in one or more books for that purpose, (b)
give all notices which these Bylaws or the law requires, (c) serve as custodian
of the records and seal of the Company, (d) affix the seal of the corporation to
all documents which the Board has authorized execution on behalf of the Company
under seal, (e) maintain a register of the address of each Stockholder of the
Company, (f) sign, with the President, a Vice President, or any other officer or
agent of the Company which the Board has authorized, certificates for shares of
the Company, (g) have charge of the stock transfer books of the Company, and (h)
perform all duties which the President or the Board may assign to him from time
to time.
7.10 ASSISTANT SECRETARIES. In the absence of the Secretary or in the
event of his death, inability or refusal to act, the Assistant Secretaries in
the order of their length of service as Assistant Secretary, unless the Board
determines otherwise, shall perform the duties of the Secretary. When acting as
the Secretary, an Assistant Secretary shall have the powers and restrictions of
the Secretary. An Assistant Secretary shall perform such other duties as the
President, Secretary or Board may assign from time to time.
7.11 TREASURER. The Treasurer shall (a) have responsibility for all funds
and securities of the Company, (b) receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, (c) deposit all moneys in
the name of the Company in depositories which the Board selects, and (d) perform
all of the duties which the President or the Board may assign to him from time
to time.
7.12 ASSISTANT TREASURERS. In the absence of the Treasurer or in the event
of his death, inability or refusal to act, the Assistant Treasurers in the order
of their length of service as Assistant Treasurer, unless the Board determines
otherwise, shall perform the duties of the Treasurer. When acting as the
Treasurer, an Assistant Treasurer shall have the powers and restrictions of the
Treasurer. An Assistant Treasurer shall perform such other duties as the
Treasurer, the President, or the Board may assign to him from time to time.
7.13 DELEGATION OF AUTHORITY. Notwithstanding any provision of these
Bylaws to the contrary, the Board may delegate the powers or duties of any
officer to any other officer or agent.
7.14 ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless the
Board directs otherwise, the President shall have the power to vote and
otherwise act on behalf of the Company, in person or by proxy, at any meeting of
stockholders of or with respect to any action of stockholders of any other
corporation in which the Company holds securities. Furthermore, unless the Board
directs otherwise, the President shall exercise any and all rights and powers
which the Company possesses by reason of its ownership of securities in another
corporation.
7.15 VACANCIES. The Board may fill any vacancy in any office because of
death, resignation, removal, disqualification or any other cause in the manner
which these Bylaws prescribe for the regular appointment to such office.
8
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ARTICLE 8.
CONTRACTS, LOANS, DRAFTS,
DEPOSITS AND ACCOUNTS
8.1 CONTRACTS. The Board may authorize any officer or officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name and on behalf of the Company. The Board may make such authorization general
or special.
8.2 LOANS. Unless the Board has authorized such action, no officer or
agent of the Company shall contract for a loan on behalf of the Company or issue
any evidence of indebtedness in the Company's name.
8.3 DRAFTS. The President, any Vice President, the Treasurer, any
Assistant Treasurer, and such other persons as the Board shall determine shall
issue all checks, drafts and other orders for the payment of money, notes and
other evidences of indebtedness issued in the name of or payable by the Company.
8.4 DEPOSITS. The Treasurer shall deposit all funds of the Company not
otherwise employed in such banks, trust companies, or other depositories as the
Board may select or as any officer, assistant, agent or attorney of the Company
to whom the Board has delegated such power may select. For the purpose of
deposit and collection for the account of the Company, the President or the
Treasurer (or any other officer, assistant, agent or attorney of the Company
whom the Board has authorized) may endorse, assign and deliver checks, drafts
and other orders for the payment of money payable to the order of the Company.
8.5 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may authorize the opening
and keeping of general and special bank accounts with such banks, trust
companies, or other depositories as the Board may select or as any officer,
assistant, agent or attorney of the Company to whom the Board has delegated such
power may select. The Board may make such special rules and regulations with
respect to such bank accounts, not inconsistent with the provisions of these
Bylaws, as it may deem expedient.
ARTICLE 9.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
9.1 CERTIFICATES FOR SHARES. Every owner of stock of the Company shall
have the right to receive a certificate or certificates, certifying to the
number and class of shares of the stock of the Company which he owns. The Board
shall determine the form of the certificates for the shares of stock of the
Company. The Secretary, transfer agent, or registrar of the Company shall number
the certificates representing shares of the stock of the Company in the order in
which the Company issues them. The President or any Vice President and the
Secretary or any Assistant Secretary shall sign the certificates in the name of
the Company. Any or all certificates may contain facsimile signatures. In case
any officer, transfer agent, or registrar who has signed a certificate, or whose
facsimile signature appears on a certificate, ceases to serve as such officer,
transfer agent, or registrar before the Company issues the certificate, the
Company may issue the certificate with the same effect as though the person who
signed such certificate, or whose facsimile signature appears on the
certificate, was such officer, transfer agent, or registrar at the date of
issue. The Secretary, transfer agent, or registrar of the Company shall keep a
record in the stock transfer books of the Company of the names of the persons,
firms or corporations owning the stock represented by the certificates, the
number and class of shares represented by the certificates and the dates thereof
and, in the case of cancellation, the dates of cancellation. The Secretary,
transfer agent, or registrar of the Company shall cancel every certificate
surrendered to the Company for exchange or transfer. Except in the case of a
lost, destroyed, stolen or mutilated certificate, the Secretary, transfer agent,
or registrar of the Company shall not issue a new certificate in exchange for an
existing certificate until he has canceled the existing certificate.
9.2 TRANSFER OF SHARES. A holder of record of shares of the Company's
stock, or his attorney-in-fact authorized by power of attorney duly executed and
filed with the Secretary, transfer agent or registrar of the Company, may
transfer his shares only on the stock transfer books of the Company. Such person
shall furnish to the Secretary,
9
<PAGE>
transfer agent, or registrar of the Company proper evidence of his authority to
make the transfer and shall properly en dorse and surrender for cancellation his
existing certificate or certificates for such shares. Whenever a holder of
record of shares of the Company's stock makes a transfer of shares for
collateral security, the Secretary, transfer agent, or registrar of the Company
shall state such fact in the entry of transfer if the transferor and the
transferee request.
9.3 LOST CERTIFICATES. The Board may direct the Secretary, transfer agent,
or registrar of the Company to issue a new certificate to any holder of record
of shares of the Company's stock claiming that he has lost such certificate, or
that someone has stolen, destroyed or mutilated such certificate, upon the
receipt of an affidavit from such holder to such fact. When authorizing the
issue of a new certificate, the Board, in its discretion may require as a
condition precedent to the issuance that the owner of such certificate give the
Company a bond of indemnity in such form and amount as the Board may direct.
9.4 REGULATIONS. The Board may make such rules and regulations, not
inconsistent with these Bylaws, as it deems expedient concerning the issue,
transfer and registration of certificates for shares of the stock of the
corporation. The Board may appoint or authorize any officer or officers to
appoint one or more transfer agents, or one or more registrars, and may require
all certificates for stock to bear the signature or signatures of any of them.
9.5 HOLDER OF RECORD. The Company may treat as absolute owners of shares
the person in whose name the shares stand of record as if that person had full
competency, capacity and authority to exercise all rights of ownership, despite
any knowledge or notice to the contrary or any description indicating a
representative, pledge or other fiduciary relation, or any reference to any
other instrument or to the rights of any other person appearing upon its record
or upon the share certificate. However, the Company may treat any person
furnishing proof of his appointment as a fiduciary as if he were the holder of
record of the shares.
9.6 TREASURY SHARES. Treasury shares of the Company shall consist of
shares which the Company has issued and thereafter acquired but not canceled.
Treasury shares shall not carry voting or dividend rights.
ARTICLE 10.
INDEMNIFICATION
10.1 The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner in which
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
10.2 The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the Company
10
<PAGE>
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application 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 of Chancery or such other court shall deem proper.
10.3 To the extent that a director, officer, employee or agent of the
Company has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections 10.1 and 10.2 of this Article, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
10.4 Any indemnification under subsections 10.1 and 10.2 of this Article
(unless ordered by a court) shall be made by the Company only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections 10.1 and 10.2 of this
Article. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
10.5 Expenses (including attorneys' fees) incurred by an officer or
director in defending in a civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized by this Article. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
10.6 The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
10.7 The Company shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under this Article.
10.8 For purposes of this section references to "the Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
10.9 The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
10.10 Nothing contained in this Article 10, or elsewhere in these Bylaws,
shall operate to indemnify any director or officer is such indemnification is
contrary to law, either as a matter of public policy, or under the provisions
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of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, or any other applicable state or Federal law.
ARTICLE 11.
TAKEOVER OFFERS
In the event the Company receives a takeover offer, the Board of Directors
shall consider all relevant factors in evaluating such offer, including, but not
limited to, the terms of the offer, and the potential economic and social impact
of such offer on the Company's stockholders, employees, customers, creditors and
community in which it operates.
ARTICLE 12.
NOTICES
12.1 GENERAL. Whenever these Bylaws require notice to any Stockholder,
director, officer or agent, such notice does not mean personal notice. A person
may give effective notice under these Bylaws in every case by depositing a
writing in a post office or letter box in a postpaid, sealed wrapper, or by
dispatching a prepaid telegram addressed to such Stockholder, director, officer
or agent at his address on the books of the Company. Unless these Bylaws
expressly provide to the contrary, the time when the person sends notice shall
constitute the time of the giving of notice.
12.2 WAIVER OF NOTICE. Whenever the law or these Bylaws require notice,
the person entitled to said notice may waive such notice in writing, either
before or after the time stated therein.
ARTICLE 13.
MISCELLANEOUS
13.1 FACSIMILE SIGNATURES. In addition to the use of facsimile signatures
which these Bylaws specifically authorize, the Company may use such facsimile
signatures of any officer or officers, agents or agent, of the Company as the
Board or a committee of the Board may authorize.
13.2 CORPORATE SEAL. The Board may provide for a suitable seal containing
the name of the Company, of which the Secretary shall be in charge. The
Treasurer, any Assistant Secretary, or any Assistant Treasurer may keep and use
the seal or duplicates of the seal if and when the Board or a committee of the
Board so directs.
13.3 FISCAL YEAR. The Board shall have the authority to fix and
change the fiscal year of the Company.
ARTICLE 14.
AMENDMENTS
Subject to the provisions of the Certificate of Incorporation, the Board
may amend or repeal these Bylaws at any meeting, subject to repeal of change by
action of the shareholders.
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The undersigned hereby certifies that the foregoing constitutes a true and
correct copy of the Amended and Restated Bylaws of the Company as adopted by the
Directors on the ____ day of September, 1999.
Executed as of this ______ day of September, 1999.
/S/ KENNETH A. PHILLIPS
Kenneth A. Phillips, President
13
EXHIBIT 3.1
============= =============
| NUMBER | | SHARES |
| FC 005522 | | |
============= =============
FLEETCLEAN SYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS
COMMON STOCK CUSIP 339036 10 5
THIS CERTIFIES THAT:
SPECIMEN
NOT NEGOTIABLE
IS OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.1 PAR VALUE, OF
FLEETCLEAN SYSTEMS, INC.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Texas, and
to the Articles of Incorporation and Bylaws of the Corporation, as now or
hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED:______________
COUNTERSIGNED:
OLDE MONMOUTH STOCK TRANSFER CO., INC.
77 MEMORIAL PARKWAY, SUITE 101, ATLANTIC
HIGHLANDS, NJ 07716
TRANSFER AGENT
BY:
VOID
AUTHORIZED SIGNATURE
[FLEETCLEAN SYSTEMS, INC.
CORPORATE SEAL 1986 TEXAS]
Kathryn M. Phillips Kenneth A. Phillips
SECRETARY PRESIDENT
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though
they were written out in full according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT - .......... Custodian ........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common Act ......................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, ............... hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- -----------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the stock represented by the within certificate, and do hereby irrevocably
constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ___________________
_________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A
COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR
OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE
MEDALLION PROGRAM.
EXHIBIT 6.1
EMPLOYMENT CONTRACT BETWEEN FLEETCLEAN SYSTEMS, INC. AND
KEN PHILLIPS
State of Texas SS.
SS.
COUNTY OF LIBERTY SS.
Fleetclean Systems, Inc. ("Employer") and Ken Phillips ("Employee"), for
good and valuable consideration and in exchange for the mutual promises and
covenants exchanged one unto another, the parties hereby agree to the following
Employment Contract:
1. COMPENSATION
Employer agrees to pay Employee, during the term of this Agreement, a
salary of Nine Thousand and No/100 Dollars ($9,000.00) per month plus an amount
equal to 10% pretax profit of Employer. Employee will receive his salary,
payable in two (2) equal installments on the fifth (5th) and twentieth (20th) of
each month during the term of this Agreement. The bonus, if any, shall be paid
within ninety (90) days of the end of the fiscal year of Employer. All
compensation shall be subject to the customary withholding tax and other
employment taxes as required by law with respect to compensation paid by an
Employer to an Employee. Employee will also be entitled to certain fringe
benefits described in the attached Schedule A.
2. DUTIES
During the period of employment hereunder, Employee shall devote
Employee's full time and efforts to the business and affairs of Employer, with
the exception of vacation time as provided below, serve as President of
Employer, perform such services not inconsistent with Employee's position as
shall be designated by the Board of Directors of Employer, use Employee's best
effort to promote the interests of Employer, serve as a director of Employer and
hold the offices in the Corporation to which from time to time Employee may be
elected or appointed.
3. WORKING FACILITIES
Employer shall furnish Employee with facilities and services suitable to
Employee's position and adequate for the performance of Employee's duties.
4. VACATION
Employee shall be entitled to an annual vacation as established by the
Board of Directors (but in no event less than two weeks per year), without loss
of compensation. Employee shall be entitled to such additional time without loss
of compensation for attendance at meetings and
<PAGE>
conventions related to Employer's business as the Board of Directors shall from
time to time determine.
5. HEALTH INSURANCE
Employee shall be entitled to participate in the Employer's Group Health
Benefits as now established or later amended.
6. VEHICLE
Employer agrees to provide Employee with a vehicle commensurate with his
position as President and shall pay all expense and maintenance on the vehicle.
7. TERMINATION
This Agreement may be terminated by Employer upon the occurrence of any of
the following events:
(a) The death of Employee; or
(b) At Employer's option, Employee's permanent disability.
Employer's option shall be exercised in writing, delivered to
Employee and shall be effective on delivery.
Upon termination for any of the foregoing causes, Employee shall be
entitled to receive only the compensation accrued but unpaid as of the date of
termination and shall not be entitled to additional compensation except as
expressly provided in this Agreement. If Employee dies during the term of this
employment, Employer shall pay to the estate of Employee the compensation which
would otherwise be payable to Employee up to the end of the month in which
Employee's death occurs.
8. EMPLOYER'S AUTHORITY
Employee agrees to observe and comply with the rules and regulations of
Employer as adopted by Employer's Board of Directors, either orally or in
writing, respecting performance of Employee's duties, and to carry out and to
perform orders, directions, and policies conveyed by Employer to Employee from
time to time, either orally or in writing.
9. EXPENSES
Employee is authorized to incur reasonable expenses for promoting the
business of Employer, including expenses for entertainment, travel, and similar
items. Employer will
2
<PAGE>
reimburse Employee for all such expenses upon the presentation by Employee, from
time to time, of an itemized account of those expenditures.
10. REIMBURSEMENT OF DISALLOWED COMPENSATION AND EXPENSES
In the event any compensation paid to Employee or expenses paid for
Employee, or any reimbursement of expenses paid to Employee shall, upon audit or
other examination of the income tax returns of Employer, be determined not to be
allowable deductions from the gross income of Employer and the determination
shall be agreed to by Employer, or the determination shall be made final by the
appropriate State or Federal taxing authority or a final judgment of a court of
competent jurisdiction, and no appeal is taken therefrom, or the applicable
period for filing notice of appeal shall have expired, Employee will repay to
Employer the amount of the disallowed compensation or expenses, or both.
Repayment may not be waived by Employer.
11. RELATIONSHIP BETWEEN THE PARTIES
The parties recognize that the Board of Directors of Employer, in
accordance with the statutes of the State of Texas, shall manage the business
affairs of Employer. Employee shall be considered under the provisions of this
Agreement as being entitled to participate in any plans, arrangements or
distributions by Employer pertaining to or in connection with any pension,
bonus, profit sharing, group life insurance, disability insurance, medical
insurance, or similar benefits for key employees of the Company. Nothing
contained in this Agreement shall be construed to give Employee any interest in
the physical assets or the accounts receivable of Employer.
12. DISABILITY
In the event that Employee shall be permanently disabled for a period of
more than six (6) months, Employee shall receive compensation for six (6) months
after commencement of disability. Employee's full compensation shall be
reinstated upon Employee's return to employment and the discharge of Employee's
full duties hereunder. Notwithstanding anything in this Agreement to the
contrary, Employer may terminate this Agreement at any time after Employee has
been absent from Employee's employment, for whatever cause, for a continuous
period of more than six (6) months, and all obligations of Employer hereunder
shall cease upon any such termination.
13. TERM
The term of this Agreement shall be for a period of two (2) years,
commencing on the effective date of this Agreement and terminating on the second
anniversary thereof, subject, however to prior termination as provided above.
This Agreement shall be automatically renewed for a succeeding term of two (2)
years provided the contract has not been violated or terminated as specified in
Paragraph 7 of this Agreement. If this Agreement is not renewed
3
<PAGE>
pursuant to this paragraph, Employee shall be paid a severance payment equal to
two (2) years' salary. Further, upon such failure to renew this Agreement,
Employee shall be retained by Employer as a consultant to the Board of Directors
for a period of ten (10) years and shall receive compensation, as an independent
contractor and not as an employee, equal to fifty percent (50%) of his gross
salary and shall be entitled to participate in Employer's health plan providing
coverage for Employee and his spouse. If for any reason Employee and his spouse
cannot be enrolled in or covered by Employer's health plan, Employer shall
purchase similar coverage or, if required, pay to Employee the cost of similar
coverage for Employee and his spouse. If Employer purchases such health coverage
or pays the premium amount to Employee, Employer shall, in addition to such
amount, pay Employee an amount equal to the highest marginal federal income tax
rate times the amount paid on behalf of or to Employee.
14. NONCOMPETITION
Employee expressly agrees that while this Agreement is in effect, and for
a period of five (5) years following termination of this Agreement, Employee
will not directly or indirectly as an employee, agent, proprietor, partner,
broker, stockbroker, stockholder, officer, director, or otherwise use special
knowledge or training or divulge trade secrets to any person or to any
competitive business that would compete directly or indirectly with Employer's
business without prior consent of Employer.
Furthermore, during the term of this Agreement, Employee shall not engage in any
activity, employment or capacity either directly or indirectly, as a partner,
shareholder, owner, or otherwise in the management and operation of any
competitive business.
15. EFFECTIVE DATE
The effective date of this Agreement shall be the date endorsed on page 5
of this Agreement in the space provided therefor.
16. WAIVER OF BREACH
The Waiver by Employer of a breach of any provision of this Agreement by
Employee shall not operate or be construed as a waiver of any subsequent breach
by Employee.
17. ASSIGNMENT
The rights and obligations of Employer under this Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of Employer.
4
<PAGE>
18. MISCELLANEOUS
This Agreement is drawn to be effective in and shall be construed in
accordance with the laws of the state of Texas. No amendment or variation of the
terms of this Agreement shall be valid unless made in writing and signed by
Employee and a duly authorized representative of Employer. A waiver of any of
the terms and conditions hereof shall not be construed as a general waiver by
Employer, and Employer shall be free to reinstate any such term or condition
with notice to Employee.
Executed in duplicate originals.
Dated: July 1, 1996
Employer:
FLEETCLEAN SYSTEMS, INC.
By:/s/ KEN PHILLIPS
Ken Phillips, President
Employee:
/s/ KEN PHILLIPS
Ken Phillips
Attest:
/s/ KATHRYN M. PHILLIPS
Secretary
5
EXHIBIT 6.2
EMPLOYMENT AND CONFIDENTIALITY AGREEMENT
STATE OF TEXAS
COUNTY OF LIBERTY
This Agreement is made and entered into in Hardin, Liberty County, Texas,
on this the 5th day of July, 1999, by and between Fleetclean Systems, Inc., a
Texas corporation with its principal office located in Hardin, Liberty County,
Texas (hereinafter referred to as "Fleetclean" and /or "Company") and Ron
Wallace, an individual residing at 4165 Rhone Dr., Kenner, Louisiana,
(hereinafter referred to as "Wallace").
RECITALS
WHEREAS, Fleetclean desires to retain the services of Wallace as an
employee of Fleetclean on the terms and conditions hereinafter set forth.
WHEREAS, Fleetclean will maintain and employ Wallace at its Hahnville,
Louisiana facility, and other locations as may be needed from time to time.
NOW THEREFORE, in consideration of the mutual covenants and promises, the
receipt and sufficiency of such mutual consideration is hereby acknowledged and
confessed by Fleetclean and Wallace, and to induce Fleetclean to hire Wallace on
the terms and conditions hereinafter, Fleetclean and Wallace hereby agree as
follows:
I.
EMPLOYMENT
Fleetclean shall employ Wallace as a full time employee, and Wallace
hereby accepts such employment with Fleetclean, upon the terms and conditions
hereinafter set forth.
II.
DUTIES DURING EMPLOYMENT PERIOD
A. Wallace shall perform and discharge well and faithfully such management
and other duties for Fleetclean and its subsidiaries and affiliates, as may be
assigned to him from time to time by President, Kenneth Phillips, The Executive
Committee or the Board of Directors of Fleetclean. Wallace shall devote his full
time, attention and energies to the business of Fleetclean, and shall not during
the terms of this Agreement be employed in any other business activity, whether
or not such activity is pursued for gain, profit or other pecuniary advantage;
B. During the term of this agreement, Fleetclean and its affiliates and
subsidiaries shall, within their best efforts, continue to operate and maintain
Fleetclean in its Liberty County, Texas office or in any future locations, if
any, as may be deemed necessary or advantageous in Fleetclean's sole discretion
in a manner and method consistent with the past business of Fleetclean and shall
use its best efforts to have adequate liquidity and capital to insure the
continued success of Fleetcean, its affiliates and subsidiaries, as well as the
obligations set forth herein from Fleetclean to Wallace.
III.
TERM OF EMPLOYMENT
1
<PAGE>
The employment under Section II. of this Agreement shall be for a period
(the "Employment Period") commencing on the date hereof and ending after twenty
four (24) months from the date hereof or at the termination of this Agreement
under Section V, unless sooner terminated in accordance with one of the
following alternatives:
A. Wallace's employment under Section II, if not already terminated under
clause B of this Section III, may be terminated at any time during the
Employment Period for Cause (as hereinafter defined) by action of the Board of
Directors of Fleetclean upon giving Wallace notice of such termination at least
thirty (30) days prior to the date upon which termination shall take effect. As
used herein, the term "Cause" shall mean any of the following events.
1. Wallace's conviction of or pleas of guilty or NOLO CONTENDERE to
a crime involving a felony.
2. Wallace's intentional and willful failure to follow the good
faith instructions to perform usual and necessary duties under this
Agreement, of President, Kenneth Phillips, the Executive Committee
referred to in Section II or the Board of Directors of Fleetclean
following written notice thereof; or
3. Wallace's fraud, willful misconduct, insubordination, or, neglect
of duties or failure to act with respect to duties or actions provided
under this Agreement previously communicated to Wallace by President,
Kenneth Phillips, the Executive Committee or the Board of Directors of
Fleetclean.
B. Wallace's employment under Section II may be terminated at any time
following twenty four (24) months after the date hereof, by action of the Board
of Directors of Fleetclean, upon giving Wallace notice of such termination at
least thirty (30) days prior to the date on which such termination shall take
effect. If Wallace's employment is terminated under the provisions of this
clause B, his rights pursuant to Section IV shall cease as of the effective date
of such termination.
IV.
COMPENSATION AND RELATED MATTERS
A. For services rendered by Wallace hereunder, Fleetclean shall pay him as
compensation during this Employment Period as follows:
(a) From the beginning of the first month of this agreement, until
termination as provided herein, by either party, a salary of $4416.67 per
month.
(b) Wallace shall receive as a one time employment bonus fifty
thousand (50,000) shares of Fleetclean common stock, to be delivered to
Wallace within 30 days of the commencement of this agreement, plus a one
time cash bonus of $1,019.23 payable at the commencement of employment.
B. Vacation and Sick Leave. Wallace is entitled to vacation and sick leave
in accordance with the standard policy of Fleetclean as it applies to all
employees and as it may be arnended from time to time.
C. Insurance. Fleetclean shall include Wallace under Fleetclean's group
health and major medical insurance, life insurance programs and long term
disability insurance, if any, with the same coverage and options that are
available under said policies to all executives of Fleetclean.
D. Stock Options. Fleetclean shall include Wallace under any stock option
program which may be offered to employees or executives in accordance with the
policy of Fleetclean as it applies to all employees and as it may be amended
from time to time.
2
<PAGE>
V.
NON-COMPETITION AGREEMENT
A. This Noncompetition Agreement is by and between Wallace and Fleetclean
Systems, Inc., a Texas Corporation.
B. To induce Fleetclean to enter into this Employment Agreement, Employee
has agreed to enter into this Non-Competition Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the Company and Wallace hereby covenant and agree as follow:
(a) Covenant Not To Compete. Employee hereby covenants that commencing
upon the day hereof and continuing for a period of Two (2) years after the
termination of this Agreement, Wallace or any affiliate of Wallace will not,
unless acting as an officer or employee of the Company (Fleetclean) or any of
its subsidiaries, own, manage, operate, join, control, or participate in,
directly or indirectly, or derive any benefits whatever from, or be an officer,
director, employee, partner, agent, consultant or shareholder of, any business
engaged in any activity that is in "Competition" in any manner whatsoever with
the business of the Company in the "Specified Geographical Area" and Wallace
shall not render assistance or advice to any person, firm, or enterprise which
is so engaged. For purposes of this paragraph,
(i) "Competition" means the manufacture, marketing, sale or
distribution of any chemicals or equipment or service targeted for cleaning
services in the trucking industry or other related transportation businesses
including boats, airplanes, and cars, which is the same or similar to, that of
the Company.
(ii) "Specified Geographical Area" means, any area within a
one hundred (100) mile radius of any city or county in any state or country in
which, at any time, during the the period July 1, 1999, through the date of
termination of this Employment Agreement, the Company had customers for its
products or delivered its products or services to or for customers; and
(iii) "Affiliate" means any individual, corporation,
partnership, trust, unincorporated organization, association, or other entity,
that directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, Wallace.
(b) Payments in Consideration of Covenant Not to Compete. In consideration
of the covenants set forth above, the Company has contemporaneously with the
execution hereof, agreed to pay good and valuable consideration to Wallace.
Furthermore, the Company shall pay to Wallace as continuing consideration hereof
the sums set forth in Article IV above, subject to Article III above.
(c) Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter of this
non-competition agreement and supersedes and is in full substitution for any and
all prior agreements and understandings whether written or oral between parties
relating to the subject matter of this Non-Competition Agreement.
(d) Offsets. In the event of a breach hereof by Wallace, the Company shall
have the right to immediately offset any amounts for which it is obligated to
pay Wallace against any amounts payable by the Company pursuant to Article IV
above, at the time of the breach.
3
<PAGE>
(e) Amendment. This Agreement may not be amended or modified in any
respect except by an agreement in writing executed by the parties in the same
manner as this Agreement.
(f) Assignment. This Non-Competition Agreement may be assigned by the
Company without the consent of Wallace in connection with the sale, transfer, or
other assignment of all or substantially all of the assets of, or the merger of,
the Company.
(g) Successor. This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the Company and its respective successors and
assigns.
(h) Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future law effective during
the term hereof, such provision shall be fully severable. This Agreement shall
be construed as enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof and the remaining portions hereof shall remain
in full force and effect and shall not be effected by the illegal, invalid, or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision there shall be automatically as
part of this Agreement a provision similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
(i) Specific Performance. Wallace acknowledges that his breach of the
provisions of Article V will cause irrevocable harm to the Company, for which
there may be no adequate remedy at law and for which the ascertainment of
damages would be difficult. Therefore, the Company shall be entitled, in
addition to, and without having to prove the inadequacy of, other remedies at
law (including without limitation damages for prior breaches hereof), to
specific performance of this Agreement, as well as injunctive relief (without
being required to post bond or other security).
(j) Notice. All notices, consents, requests, approvals, or other
communications in connection with this Agreement and all legal process in regard
hereto shall be in writing and shall be deemed validly delivered, if delivered
personally or sent by certified or registered mail, postage prepaid. Unless
changed by written notice pursuant hereto, the address of each party for the
purposes hereof are as follows:
If to Wallace:
Ron Wallace
4165 Rhone Dr.
Kenner, Louisiana 70065
If to the Company:
Fleetclean Systems Inc.
P.O. Box 727
Hardin, Texas 77561
Attn: Kenneth Phillips, President
Notice given by mail as set out above shall be deemed delivered when actually
deposited in the mail.
VI.
DISABILITY AND DEATH
A. Disability. Notwithstanding any failure or inability of Wallace
during the Term, because of illness, or similar incapacity, whether physical
or mental ("Disability"), to perform the obligations as
4
<PAGE>
contemplated by this Agreement, Fleetclean nevertheless shall continue to pay
Wallace the compensation and benefits provided for in Section IV hereof and all
other benefits provided by this agreement, except as provided otherwise in this
section VI.
1. Obligations of Fleetclean. In the event a Disability of Wallace
continues for a period of more than one (1) consecutive months out of the term
of twelve (12) months, Fleetclean may, at its option, at any time on or after
the last day of the aforesaid one month Disability period, by written notice to
Wallace (the "Disability Notice"), declare Wallace "disabled" and this Agreement
shall terminate with no further liability on the part of Fleetclean; however
such notice shall be of no force and effect if Wallace has resumed the duties
and responsibilities provided hereunder prior to the delivery of the Disability
Notice.
2. Obligations of Wallace. Wallace, by entering into this agreement
certifies that he is physically and mentally able to perform the managerial
functions as may be required under the terms of this agreement, and expressly
agrees to undergo a physical examination at the Company's expense, by a doctor
of the company's choosing, prior to the effective date of this agreement. In the
event that the examination reveals any pre-existing condition, which in the sole
judgment of the company, on advice of the company's selected doctor, would
render Wallace unable to perform the duties and responsibilities required under
this agreement, this agreement is canceled and Fleetclean will have no further
obligation to Wallace.
B. Death. In all respects, this agreement shall be deemed to terminate
upon the death of Wallace.
VII.
DISCLOSURE INFORMATION
Wallace acknowledges that Fleetclean's trade secrets, private or secret
processes as they may exist from time to time, and confidential information
concerning their products, development, all technical information, procurement
and sales activities and procedures, promotion and pricing techniques and credit
and financial data concerning customers are valuable, special and unique assets
of Fleetclean and its affiliates or subsidiaries, access to and knowledge of
which are essential to the performance of Wallace's duties hereunder. In light
of the highly competitive nature of the industry in which Fleetclean's and its
affiliates' or subsidiaries' business is conducted, Wallace further agrees that
all knowledge and information described in the preceding sentence not in the
public domain and heretofore or in the future obtained by him as a result of
this employment by Fleetclean or its affiliates or subsidiaries shall be
considered confidential information. In recognition of this fact, Wallace agrees
that he will not, during or after the Employment Period, disclose any of such
secrets, processes or information to any person or their entity for any reason
or purpose whatsoever, except as is necessary in the performance of his duties
as an employee of Fleetclean or its subsidiaries and then only upon a written
confidentiality agreement in such form and content as requested by Fleetclean
from time to time; nor shall Wallace make use of any such secrets, processes or
information (other than information in the public domain) under any
circumstances during the Employment Period, or for a period not to exceed
twenty-four (24) months after termination of Wallace's employment with
Fleetclean.
VIII.
COMPANY RIGHT TO PATENTS, TITLES, SCRIPTS AND DATA
A. Wallace shall promptly disclose, grant and assign to Fleetclean for
its sole use and benefit any and all technical information relating in any way
to the products of Fleetclean, developed or acquired, during the Employment
Period, together with all patent applications, letters patent, or copyrights, if
any, in the name of Wallace that may at any time be granted for or upon any such
technical information. In connection therewith, Wallace shall promptly at all
times during and after the Employment Period:
5
<PAGE>
1. Execute and deliver such applications, assignments, descriptions and
other instruments as may be necessary or proper in the opinion of Wallace to
vest in Fleetclean title to such technical information or patent applications,
if any, in the name of Wallace to enable it to obtain and maintain the entire
right and title thereto throughout the world; and
2. During the term of the Agreement render to Fleetclean at its expense
all such assistance as it may require in the prosecution of applications for
said patents or reissues thereof, in the prosecution or defense of interferences
which may be declared involving any said application or patents, and in any
litigation in which Fleetclean or its subsidiaries may be involved relating to
any such patents.
B. Upon termination of this Agreement, Wallace or his personal
representative shall promptly deliver to the Company all books, memoranda,
plans, records and written data of every kind relating to the business and
affairs of the Company which are then in his possession.
IX.
NOTICES
Any notice required or permitted to be given under this Agreement shall be
deemed properly given if in writing and if mailed by certified or registered
mail, postage prepaid with return receipt requested, to his residence in the
case of notices to Wallace, or to the principal office of Fleetclean, to the
attention of its President.
X.
WAIVER
It is Expressly agreed and understood that the waiver by a party of its
rights, or any portion of its rights, under this Agreement in any particular
instance or instances, whether intentional or otherwise, shall not be considered
as a continuing waiver which would prevent the subsequent enforcement of such
rights.
XI.
ASSIGNMENTS
This Agreement shall not be assignable by Wallace without the written
consent of Fleetclean; and, only after full disclosure of all terms and
ramifications of said assignment has been made by Wallace. This Agreement is
assignable by Fleetclean and/or any of its subsidiaries to any successor in
interest of Fleetclean's or its subsidiaries' business.
XII.
SUCCESSORS
This Agreement shall be binding on the assignees, heirs, administrators,
executors, spouses, successors and legal representatives of both parties hereto.
XIII.
ENTIRE AGREEMENT
This instrument contains the entire agreement of the parties or of
Fleetclean and Wallace relating to the subject matter hereof, and supersedes and
replaces in its entirety any existing Agreement between Fleetclean and Wallace.
XIV.
6
<PAGE>
SURVIVAL
Any termination of this Agreement shall not affect the provisions of
Sections V, VII, or VIII, which shall survive such termination in accordance
with its terms.
XV.
CHOICE OF LAW AND VENUE
This Agreement shall be subject to and governed by the law of the State of
Texas. Venue for any dispute arising out of or relating to this Agreement shall
be in Liberty County, Texas.
XVI.
HEADINGS
The headings of the Sections hereof are for convenience only and shall not
control or affect the meaning, or construction, or limit the scope or intent of
any of the provisions of this Agreement.
XVII.
COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
XVIII.
MISCELLANEOUS
It is anticipated that variances and deviations from certain provisions of
this Agreement may be necessary and may be allowed or tolerated, but it is
agreed that such variances or deviations, regardless of number, shall not be
reason for altering or modifying the interpretation of any portion of this
Agreement.
WITNESS our hand this the 22nd day of June, A.D., 1999, in the execution
of three (3) original counterparts of this Agreement, each of said counterpart
copies which are originally executed having the force and effect of an original
for any and all purposes.
FLEETCLEAN SYSTEMS INC.
/s/ KENNETH A. PHILLIPS /s/ RON WALLACE
BY: KENNETH A. PHILLIPS RON WALLACE
Title: President
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FLEETCLEAN SYSTEMS INC. FORM 10SB FOR FISCAL 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 54,383 37,008
<SECURITIES> 0 0
<RECEIVABLES> 131,888 139,032
<ALLOWANCES> 0 0
<INVENTORY> 125,573 87,129
<CURRENT-ASSETS> 354,187 419,854
<PP&E> 1,052,693 590,184
<DEPRECIATION> (414,442) (480,815)
<TOTAL-ASSETS> 1,008,540 327,209
<CURRENT-LIABILITIES> 260,185 260,283
<BONDS> 0 0
0 0
0 0
<COMMON> 47,367 58,883
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 1,008,540 1,827,209
<SALES> 1,028,952 542,075
<TOTAL-REVENUES> 1,028,952 542,075
<CGS> 224,627 98,955
<TOTAL-COSTS> 753,205 427,057
<OTHER-EXPENSES> 2,362 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 46,318 23,543
<INCOME-PRETAX> 2,440 (3,591)
<INCOME-TAX> 366 (500)
<INCOME-CONTINUING> 2,074 (3,091)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,074 3,091
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
