SW VENTURES, INC.
455 EAST 400 SOUTH, SUITE 100
SALT LAKE CITY, UTAH 84111
--------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 1999
--------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of
Stockholders (the "Special Meeting") of SW Ventures, Inc., a
Nevada corporation (the "Company"), will be held at the offices
of the Company, located at 455 East 400 South, Salt Lake City,
Utah 84111 on June 8, 1999, commencing at 10:00 A.M., local time,
for the following purposes:
1. To approve a reverse stock split, reincorporation of the
Company from the State of Nevada to the State of Delaware and the
recapitalization of the Company, including the sale of the
Company's oil related assets to an affiliate and the acquisition
of other assets comprising a new business operation for the
Company in consideration of the issuance of shares of common
stock on a post reverse split basis representing 98% of the then
issued and outstanding shares of common stock.
2. To transact such other business as may properly be
brought before the Special Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
May 20, 1999, as the record date for the Special Meeting or any
adjournments thereof. Only stockholders of record on the stock
transfer books of the Company at the close of business on that
date are entitled to notice of, and to vote at, the Special
Meeting.
THE DIRECTORS AND OFFICERS OF THE COMPANY AND THEIR
AFFILIATES CONTROL MORE THAN A MAJORITY OF THE OUTSTANDING SHARES
OF THE COMPANY'S COMMON STOCK. ACCORDINGLY, THE APPROVAL OF THE
PROPOSED TRANSACTIONS IS ASSURED.
STOCKHOLDERS MAY HAVE CERTAIN DISSENTERS' RIGHTS AVAILABLE
TO THEM IN CONNECTION WITH THE COMPANY'S REORGANIZATION AS A
DELAWARE CORPORATION, THE REQUIREMENTS OF WHICH MUST BE STRICTLY
FOLLOWED AS SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.
By Order of the Board of Directors,
/s/Terri Jackson
Secretary/Treasurer and Director
Dated: May 26, 1999
Salt Lake City, Utah
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING,
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE THAT IS PROVIDED, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
<PAGE>
SW VENTURES, INC.
450 EAST 400 SOUTH, SUITE 100
SALT LAKE CITY, UTAH 84111
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PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
-------------------------------
INTRODUCTION
This Proxy Statement and accompanying Notice of Special
Meeting of Stockholders and form of proxy are first being mailed
to stockholders on or about May 26, 1999, in connection with the
solicitation of proxies by the Board of Directors of SW Ventures,
Inc., a Nevada corporation ("SW Ventures" or the "Company"), to
be used at the Special Meeting of Stockholders of the Company
(the "Special Meeting") to be held on June 8, 1999.
SOLICITATION
All proxies which are properly completed, signed, dated and
returned to the Company in time will be voted in accordance with
the instructions thereon. The persons named as proxies are
officers of the Company. Proxies may be revoked by any
stockholder upon written notice to the Secretary of the Company
prior to the exercise thereof and stockholders who are present at
the Special Meeting may revoke their proxies and vote in person
if they so desire.
The expense of preparing, assembling, printing and mailing
the form of proxy and the material used in the solicitation of
proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, the Company may
utilize the services of some of its officers and regular
employees, as well as independent proxy solicitors, to solicit
proxies personally and by telephone, facsimile and other
electronic communication. The Company has requested banks,
brokers and other custodians, nominees and fiduciaries to forward
copies of the proxy materials to their principals and to request
authority for the execution of proxies and will reimburse such
persons for their services in doing so. The cost of such
additional solicitation incurred otherwise than by use of the
mails is estimated not to exceed $5,000.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on
May 20, 1999 (the "Record Date"), as the record date for the
determination of stockholders who are entitled to notice of and
to vote at the Special Meeting and any adjournments thereof. The
Company is authorized to issue up to 50,000,000 shares of Common
Stock, $.001 par value per share (the "SW Common Stock"). At the
close of business on the Record Date, the Company had issued and
outstanding 3,416,066 shares of SW Common Stock, entitled to one
vote per share. A majority of the outstanding shares of SW
Common Stock entitled to vote on each matter to be voted upon at
the Special Meeting is required to establish a quorum.
Shares of SW Common Stock representing a majority of the
outstanding voting shares of the Company is required to approve
the Proposal. Shares of SW Common Stock represented by proxies
that are properly executed, duly returned and not revoked will be
voted in accordance with the instructions contained therein. If
no specification is indicated in the proxy, the shares of SW
Common Stock represented thereby will be voted to approve a one-
for-fifteen reverse stock split of the SW Common Stock, the
reincorporation of the Company as a Delaware corporation and a
recapitalization of the Company, and for any other matter that
may properly be brought before the Special Meeting in accordance
with the judgment of the person or persons voting the proxies.
For purposes of determining the presence of a quorum for
transacting business at the Special Meeting, abstentions and
broker "non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from
the beneficial owner or other persons entitled to vote shares on
a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated as shares that
are present but that have not been voted. Broker non-votes will
have no effect on the Proposal. Abstentions may be specified on
the Proposal, will be counted as present and will have the effect
of a vote against the Proposal to which such abstention refers.
Certain stockholders, including the current officers and
directors of the Company, who in the aggregate own or control
shares of SW Common Stock representing more than a majority of
the voting power of the SW Common Stock have indicated that they
will vote in favor of the Proposal. Accordingly, the approval of
the Proposal is assured.
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of SW
Common Stock owned beneficially as of the Record Date by (i) each
person known by the Company to be the beneficial owner of more
than 5% of the outstanding shares of SW Common Stock; (ii) each
director and executive officer; and (iii) all directors and
officers as a group. Unless otherwise noted, each individual has
sole voting and investment power over the shares indicated in the
table. Fractional shares are rounded to the nearest whole
number.
Amount and
Nature of
Name and Address Class of Beneficial Percent of
of Beneficial Owner Stock Ownership(1) Class
- ---------------------- -------- ------------ ----------
Guido Cloetens Common 1,838,000 53.81
Kampenhoutsebaan 100A
1982 Zemst, Belgium
President & Director
Terri Jackson Common 186,000 5.44
3483 South 3170 East
Salt Lake City, Utah 84109
Secretary/Treasurer & Director
Keith Biesinger Common - -
3200 South Cottonwood Canyon
Salt Lake City, Utah 84121
Trends, Inc. Common 190,000 5.56
P. O. Box 156
Pond Street, Hibiscus Square
Grand Turk
Turks and Caicos Islands
All Directors and Common 2,024,000 59.25
Executive Officers as
a Group (3 persons)
PROPOSAL I
The Board of Directors has unanimously approved, and for the
reasons described below, recommends that the stockholders
approve, a one-for-fifteen reverse stock split of the SW Common
Stock, the reincorporation of the Company as a Delaware
corporation, and a recapitalization of the Company that will
involve the disposition of all non-cash assets and liabilities of
the Company and the contribution of certain assets and technology
to the Company in exchange for shares of the voting securities of
the reorganized Delaware corporation representing 98% of the then
issued and outstanding voting securities.
BACKGROUND
The Company was organized as a Nevada corporation on May 7,
1996. Its initial business purpose was to seek out and to invest
in various oil and gas opportunities in the Western United
States. In August of 1997, the Company purchased a 21.25%
working interest in the Montana Prospect, a 320 acre oil lease in
Crook County, Wyoming (the "Montana Prospect"), which purchase
included the Company's proportional cost of drilling and
completion of the Montana Berger Well #1. The Company intended
to participate in other wells drilled on the Montana Prospect,
and also to investigate other business opportunities in the
oil and gas industry.
After conducting and completing several small private
placements of shares of the SW Common Stock, the Company
registered the class of SW Common Stock with the Securities and
Exchange Commission (the "SEC"), pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Such registration became effective on or about September 15,
1998. As a result of such registration, the class of SW Common
Stock became eligible for quotation on the OTC Electronic
Bulletin Board (the "OTCBB"), of the National Association of
Securities Dealers, Inc. (the "NASD"). On December 11, 1998, the
SW Common Stock began trading on the OTCBB under the symbol
"SWWV." The SW Common Stock has experienced very limited trading
since that time.
As a result of the drop in oil prices towards the end of
1998, the Company began to look for and to consider other
business opportunities outside of the oil and gas industry.
Bachkine & Meyer Industries, S.A.
---------------------------------
On April 14, 1999, the Company and its majority stockholder,
Mr. Guido Cloetens, entered into an agreement (the "Agreement")
with Bachkine & Meyer Industries, S.A., a British Virgin Islands
corporation ("Bachkine"), whereby the Company agreed to acquire
from Bachkine all of the assets and related liabilities (the
"Asset Contribution"), pertaining to a patented process owned by
Bachkine and its affiliates(the "New Generation Plastic Process")
in exchange for a 97.91% equity interest in the resultant
reorganized and reincorporated company. The New Generation
Plastic Process is believed to be capable of producing
commercially usable plastic polymers from a mixed virgin or
recycled stream of discrete polymers or waste plastic.
The Company also agreed, as a condition precedent to the
Asset Contribution by Bachkine, that it would (i) effect a
disposition and/or distribution of all of its oil and gas assets
and the satisfaction of all of its liabilities (the "Oil Asset
Disposition"); (b) effect (i) a one-for-fifteen reverse stock
split of the SW Common Stock (the "Reverse Stock Split"), (ii)
the reincorporation of the Company as a Delaware corporation (the
"Reincorporation"), and (iii) a name change of the Company to New
Generation Plastic, Inc. ("NGP Delaware"); and (c) solicit its
shareholders' approval of the Oil Asset Disposition, the
Reincorporation, and the issuance of shares of the common stock,
par value $0.001 per share, of NGP Delaware (the "NGP Common
Stock"), to Bachkine representing 97.91% of the then-issued and
outstanding shares of NGP Common Stock in exchange for the
Bachkine assets and liabilities related to the New Generation
Plastic Process (the "NGP Assets").
Upon consummation of the proposed transactions, scheduled to
be completed on or before June 30, 1999, the corporate existence
of the Company as a Nevada corporation will cease and it will
become part of NGP Delaware, the current officers and directors
of the Company will resign, and new officers and directors, who
will be the designees of Bachkine, will be elected. In addition,
each existing holder of SW Common Stock will thereafter own one
share of NGP Common Stock for every 15 shares of SW Common Stock
previously owned.
As discussed below, the principal reasons for the
Reincorporation are the greater flexibility of Delaware corporate
law, the substantial body of case law interpreting Delaware
corporate law and the increased ability of the Company to attract
and retain qualified directors. Although the General Corporation
Law of Nevada, contained in the Nevada Revised Statutes ("Nevada
Law") is similar to the Delaware General Corporation Law
("Delaware Law"), there is a lack of predictability under Nevada
Law resulting from the limited body of case law interpreting the
Nevada Law.
NGP Delaware
------------
Pursuant to the Reincorporation, NGP Delaware will be formed
as a wholly-owned subsidiary of SW Ventures. Upon the approval
of the stockholders of SW Ventures, SW Ventures will merge with
and into NGP Delaware, with NGP Delaware as the survivor to
effect the Reincorporation.
NGP Delaware will be formed for the specific purpose of
effectuating the Reincorporation of SW Ventures to the State of
Delaware. The change in the corporate name is prompted by the
desire to more accurately describe the nature of the Company's
new business. Like the Company, NGP Delaware will have
50,000,000 shares of NGP Common Stock authorized for issuance.
In addition, NGP Delaware will have authorized 1,000,000 shares
of "blank check" preferred stock available for issuance by the
NGP board of directors. Such preferred shares may be issued by
the NGP board without further authorization or approval of the
holders of the NGP Common Stock and may be used to impede or to
prevent a change in control of NGP Delaware.
On April 14, 1999, NGP Delaware, the successor to the
Company if the Reincorporation is approved, circulated a
Confidential Offering Memorandum in connection with a private
placement of shares of NGP Common Stock to selected institutional
and accredited investors.
THE OIL ASSET DISPOSITION
As a condition to the Reincorporation and Asset
Contribution, the Company and Mr. Cloetens agreed to dispose or
to distribute all of the non-cash assets of the Company and to
satisfy all of its existing liabilities. To accomplish the Oil
Asset Disposition, the Company determined to contribute all of
the assets and liabilities associated with the Montana Prospect
(the "SW Oil Assets") to a newly-formed subsidiary of the
Company, SW Oil & Gas Company, a Nevada corporation ("SW Oil"),
in exchange for all of the stock of SW Oil (the "SW Oil Stock").
The capital structure and bylaws of SW Oil are the same as the
Company's and the officers and directors of the Company will
assume the same roles in SW Oil.
The Company will sell all of its right, title and interest
in the SW Oil Stock to Mr. Cloetens or affiliates of Mr. Cloetens
or others for the fair market value of the SW Oil Assets as
determined by the Board of Directors of the Company. Mr.
Cloetens will not participate in the determination of such fair
market value. The disinterested directors of the Company will
approve the terms of the sale of the SW Oil Stock which will
likely include a combination of cash and a note payable to the
Company. As security for any such note, Mr. Cloetens will pledge
a sufficient number of his shares of NGP Common Stock that he
receives in the Reincorporation that fully secures the purchase
amount of the note based on an assumed per share price for the
NGP Common Stock of $6.00 and/or such other security as the
disinterested directors in the exercise of their business
judgement may determine.
As required by the Agreement, SW Oil will assume the
indemnification obligations that arise from the Company's
ownership interest in the Montana Prospect. In addition, the
Agreement provides that Mr. Cloetens will be secondarily liable
for any claim not satisfied by SW Oil with respect to the Montana
Prospect.
The sale and disposition of the SW Oil Stock will be a
taxable transaction to the Company. The Company will realize a
taxable gain measured by the difference between its basis in the
SW Oil Stock and the consideration that it receives. The Company
does not anticipate the distribution of any such consideration to
the stockholders of the Company and therefore the Oil Asset
Disposition will not be a taxable event to the stockholders of
the Company.
The SW Oil Contribution Agreement and the SW Oil Stock
Purchase Agreement with the proposed form of promissory note to
be executed by Mr. Cloetens is attached hereto as Exhibit E.
THE REVERSE STOCK SPLIT
The principal reason to effectuate the Reverse Stock
Split is to reduce the number of shares of SW Common Stock that
are outstanding, and to increase the price per share of the SW
Common Stock. In addition, after the Reincorporation, the
Reverse Stock Split will provide for a sufficient number of
shares of NGP Common Stock to effect the Asset Contribution.
The Company currently is authorized to issue 50,000,000
shares of SW Common Stock, of which 3,416,066 shares are
currently issued and outstanding and held of record by 41
stockholders. After the Reverse Stock Split, there will be
approximately 227,738 shares of SW Common Stock issued and
outstanding. No fractional shares of SW Common Stock or scrip
representing fractional shares of SW Common Stock will be issued
in connection with the Reverse Stock Split. In lieu of issuing
fractional shares, each fractional share will be rounded up to
the next highest whole share of SW Common Stock.
The shareholders of the Company are not being asked to
exchange the certificates for their existing shares of SW Common
Stock for certificates for shares of NGP Common Stock, however,
they are entitled to do so if they wish.
THE REINCORPORATION
Pursuant to an Agreement and Plan of Merger, substantially
in the form attached hereto as Exhibit A (the "Merger
Agreement"), SW Ventures will merge (the "Merger") with and into
NGP Delaware and the stockholders of SW Ventures will become
stockholders of NGP Delaware. Upon the effectiveness of the
Merger (the "Effective Date"), (i) the legal existence of SW
Ventures as a separate corporation will cease, (ii) NGP Delaware
will succeed to the then existing assets and assume the then
existing liabilities of SW Ventures, if any and (iii) each
shareholder of SW Ventures shall receive one share of NGP Common
Stock for each post-split shares of SW Common Stock that they
hold.
The Reincorporation will effect a change in the legal
domicile of SW Ventures by the creation of a Delaware company and
certain other changes of a legal nature, but will not, by itself,
result in change in the business, management, location of the
principal executive offices, or assets, liabilities or net worth
of SW Ventures. Further, except as explained herein, the
Reincorporation will not result in any substantial differences
between the Articles or Certificate of Incorporations of SW
Ventures and NGP Delaware. A copy of the proposed Articles of
Incorporation of NGP Delaware is attached as Exhibit B hereto.
As a function of the differing corporate laws of the States of
Delaware and Nevada, some differences between the Articles and
Certificate of Incorporation of SW Ventures and NGP Delaware,
respectively, will exist as discussed below.
In accordance with Nevada law, the affirmative vote of the
holders of at least a majority of the outstanding shares of SW
Common Stock is required for approval of the Reincorporation,
including approval of the Merger Agreement and the other terms of
the proposed Merger. Pursuant to the Merger Agreement, however,
the Merger (and thus the Reincorporation) may be abandoned, even
after stockholder approval has been obtained, if circumstances
arise which, in the opinion of the Company's Board of Directors,
make it inadvisable to proceed with the Merger. In addition, the
Merger Agreement may be amended prior to the Effective Date,
either before or after stockholder approval thereof, consistent
with the purposes of the Reincorporation and subject to
applicable law.
Due in part to the substantial issuance of shares of NGP
Common Stock as a part of the Asset Contribution, the Company
does not anticipate any change in the Company's status as a
reporting company for federal securities law purposes as a result
of the Merger.
The NGP Common Stock issued pursuant to the Merger will be
fully paid and non-assessable. All shares of NGP Common Stock
will have the same par value, voting rights and other rights as
shares of SW Common Stock. Stockholders of the Company do not
have preemptive or other antidilution rights to acquire
additional shares of NGP Common Stock which are to be issued in
connection with the Asset Contribution.
Dissenters' Rights
------------------
The holders of SW Common Stock will be entitled to
dissenters' rights. Nevada law establishes the procedures to be
followed and failure to do so may result in the loss of all
dissenters' rights. Please carefully review "Rights of
Dissenting Stockholders" set forth below.
Stock Certificates and Fractional Shares
----------------------------------------
The Merger will occur on the Effective Date without any
further action on the part of stockholders of the Company and
without regard to the date or dates on which certificates
representing shares of SW Common Stock are actually surrendered
by each holder thereof for certificates representing the number
of shares of the NGP Common Stock which each such stockholder is
entitled to receive as a consequence of the Merger. After the
Effective Date of the Merger, the certificates representing
shares of SW Common Stock will be deemed to represent the right
to receive one-fifteenth of a share of NGP Common Stock.
Certificates representing shares of NGP Common Stock will be
issued in due course as old certificates are tendered for
exchange or transfer to: American Stock Transfer and Trust
Company (the "Exchange Agent" or "Transfer Agent").
No fractional shares of NGP Common Stock will be issued and,
in lieu thereof, stockholders holding a number of shares of SW
Common Stock not evenly divisible by fifteen upon surrender of
their old certificates, will receive a rounded up whole number of
shares of NGP Common Stock.
As of the Record Date, there were 41 record holders of SW
Common Stock. The Company does not anticipate that, as a result
of the Merger, the number of holders of record owners of SW
Common Stock or NGP Common Stock will change significantly.
Exchange of Stock Certificates
------------------------------
On or around the Effective Date, the Company will send to
each stockholder of record as of the Effective Date a transmittal
form (the "Transmittal Form") that each such stockholder of
record should use to transmit certificates representing shares of
SW Common Stock (the "Old Certificates") to the Exchange Agent
for exchange or transfer. The Transmittal Form contains
instructions for the surrender of Old Certificates to the
Exchange Agent in exchange for certificates representing the
appropriate number of whole shares of NGP Common Stock. No new
certificates will be issued to a stockholder until such
stockholder has surrendered all Old Certificates together with a
properly completed and executed Transmittal Form to the Exchange
Agent.
Upon proper completion and execution of the Transmittal Form
and its return to the Exchange Agent together with all of a
stockholder's Old Certificates and/or an Affidavit of Loss, for
any lost or destroyed certificates, as applicable, that
stockholder will receive a new certificates or certificates
representing the number of whole shares of NGP Common Stock.
Until surrendered to the Exchange Agent, Old Certificates
retained by stockholders will be deemed for all purposes,
including voting and payment of dividends, if any, to represent
the number of whole shares of NGP Common Stock to which such
stockholders are entitled as a result of the Merger.
Stockholders should not send their Old Certificates to the
Exchange Agent until after the Effective Date. Shares of SW
Common Stock surrendered after the Effective Date will be
replaced by certificates representing shares of NGP Common Stock
as soon as practicable after such surrender.
Certificates representing shares of SW Common Stock which
contain a restrictive legend will be exchanged for NGP Common
Stock with the same restrictive legend. As applicable, the time
period during which a stockholder has held the SW Common Stock
will be included in the time period during which such stockholder
actually holds the NGP Common Stock received in exchange for the
SW Common Stock for the purposes of determining the term of the
restrictive period applicable to the NGP Common Stock.
Federal Income Tax Consequences
-------------------------------
The receipt of NGP Common Stock in the Merger should not
result in any taxable gain or loss to stockholders for federal
income tax purposes. The tax basis of NGP Common Stock received
as a result of the Merger will be equal, in the aggregate, to the
basis of the SW Common Stock exchanged for NGP Common Stock. The
per share tax basis of the NGP Common Stock is based on the tax
basis of the SW Common Stock for which the NGP Common Stock is
exchanged. For purposes of determining whether short-term or
long-term capital gains treatment will be applied to a
stockholder's disposition of NGP Common Stock subsequent to the
Merger, a stockholder's holding period for the shares of SW
Common Stock will be included in the holding period for the NGP
Common Stock received as a result of the Merger.
THE DISCUSSION SET FORTH ABOVE CONCERNING CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER IS INCLUDED HEREIN FOR
GENERAL INFORMATION ONLY. ALL STOCKHOLDERS ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISORS AS TO ANY FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES APPLICABLE TO THEM WHICH COULD RESULT
FROM THE MERGER.
Principal Reasons for Reincorporation
-------------------------------------
As the Company plans for the future, the Board and
management believe that it is essential to be able to draw upon
well established principles of corporate governance in making
legal and business decisions. The prominence and predictability
of Delaware corporate law provide a reliable foundation on which
the Company's governance decisions can be based. The Company
believes that stockholders will benefit from the responsiveness
of Delaware corporate law to their needs and to those of the
corporation they own interests in.
For many years Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy,
has been a leader in adopting, construing and implementing
comprehensive, flexible corporate laws responsive to the legal
and business needs of corporations organized under its laws.
Many corporations have chosen Delaware initially as their state
of incorporation or have subsequently changed corporate domicile
to Delaware in a manner similar to that proposed by the Company.
Because of Delaware's prominence as the state of incorporation
for many major corporations, both the legislature and the courts
in Delaware have demonstrated an ability and a willingness to act
quickly and effectively to meet changing business needs. In this
regard, the Delaware courts have developed considerable expertise
in dealing with corporate issues and a substantial body of case
law has developed construing Delaware law and establishing public
policies with respect to corporate legal affairs.
INCREASED ABILITY TO ATTRACT AND RETAIN QUALIFIED DIRECTORS.
Both Nevada and Delaware law permit a corporation to include a
provision in its certificate of incorporation which reduces or
limits the monetary liability of directors in certain
circumstances for breaches of fiduciary duty. The increasing
frequency of claims and litigation has greatly expanded the risks
facing corporate directors and officers in exercising their
respective duties. The amount of time and money required to
respond to these claims and to defend such litigation can be
substantial. It is the Company's desire to reduce these risks to
its directors and officers and to limit situations in which
monetary damages can be recovered against directors so that the
Company may continue to attract and retain qualified individuals
who otherwise might be unwilling to serve because of the risks
involved. The Company believes that, in general, Delaware law
provides greater protection to directors than Nevada law. It
also believes that Delaware case law regarding a corporation's
ability to limit director liability is more developed and
provides more guidance than Nevada law.
WELL ESTABLISHED PRINCIPLES OF CORPORATE GOVERNANCE. There
is substantial judicial precedent in the Delaware courts as to
the legal principles applicable to measures that may be taken by
a corporation and the conduct of the Board under the "business
judgment rule." The business judgment rule is a judicially
established standard for the conduct of directors and provides
directors whose actions are consistent with it with a level of
protection from liability. The Company believes that its
stockholders will benefit from the well established principles of
corporate governance that Delaware law affords.
Possible Disadvantages
----------------------
The Company believes that there are no material
disadvantages to stockholders of the Reincorporation.
Similarities and Differences Between the Corporate Laws of
Nevada and Delaware
----------------------------------------------------------
The Corporation laws of Delaware and Nevada differ in some
respects. It is impracticable to summarize all of the
differences in this Proxy Statement, but certain differences
between the corporation laws of Nevada and Delaware that could
affect the rights of stockholders of the Company are as follows:
CLASSIFICATION OF THE BOARD OF DIRECTORS. Delaware law
permits, but does not require, the adoption of a classified Board
of Directors pursuant to which the directors can be divided into
as many as three classes with staggered terms of office, with
only one class of directors coming up for election each year.
Such classification may be effected through the certificate of
incorporation, initial bylaws or a bylaw adopted by the
shareholders. Nevada law states that the bylaws or articles may
provide for the classification of directors upon the vote of
stockholders.
CUMULATIVE VOTING FOR DIRECTORS. Under cumulative voting,
each share of stock entitled to vote in the election of directors
has a number of votes equal to the number of directors to be
elected. A stockholder may then cast all of his votes for a
single candidate, or may allocate them among as many candidates
as such stockholder may choose. Under both Nevada and Delaware
law, shares may not be cumulatively voted for the election of
directors unless the certificate of incorporation specifically
provides for cumulative voting. The Articles of Incorporation of
SW Ventures do not and the Certificate of Incorporation of NGP
Delaware will not, provide for cumulative voting in the election
of directors.
LIMITATION ON CALL OF SPECIAL MEETINGS OF STOCKHOLDERS. The
NGP Delaware Bylaws will, like SW Ventures' current Bylaws do,
provide that Special Meetings of Stockholders may be called by
the Chairman of the Board of Directors, the President, or by
stockholders entitled to cast not less than 51% of the votes at
the meeting.
STOCKHOLDER VOTE FOR MERGERS. Nevada law and Delaware law
relating to mergers and other corporate reorganizations are
substantially the same.
DISSENTERS' RIGHTS. Under both Delaware and Nevada law, a
stockholder of a corporation participating in certain major
corporate transactions may, under varying circumstances, be
entitled to receive cash equal to the fair market value of the
shares held by such stockholder (as determined by a court of
competent jurisdiction or by agreement of the stockholder and the
corporation), in lieu of the consideration such stockholder would
otherwise receive in the transaction.
LOANS TO OFFICERS. Under Nevada law, there is no specific
restriction with respect to a loan or guaranty to or for the
benefit of a corporation's officers or employees and those of its
subsidiaries. However, such transactions may be void or voidable
if the transaction at issue is not fair to the corporation at the
time it is authorized or approved by the board. Under Delaware
law, a corporation may make loans to, guarantee the obligations
of, or otherwise assist, its officers or other employees and
those of its subsidiaries when such action, in the judgment of
the Company's Board of Directors, may reasonably be expected to
benefit the Company. The Bylaws of SW Ventures do not have, and
the Bylaws of NGP Delaware will have, such a provision.
INDEMNIFICATION. Delaware and Nevada have similar laws with
respect to indemnification by a corporation of its officers,
directors, employees and other agents. For example, the laws of
both states permit corporations to adopt a provision in the
Certificate or Articles of Incorporation eliminating the
liability of a director (and also an officer in the case of
Nevada) to the corporation or its stockholders for monetary
damages for breach of the director's fiduciary duty of care (and
the fiduciary duty of loyalty in the case of Nevada). There are
nonetheless certain differences between the laws of the two
states respecting indemnification and limitation of liability.
The Certificate of Incorporation of NGP Delaware will eliminate
the liability of directors to the fullest extent permissible
under Delaware law.
The Articles of Incorporation of SW Ventures likewise
eliminated the liability of directors and officers to the fullest
extent permissible under Nevada law. Under Nevada law, such
provision may not eliminate or limit director or officer
liability for: (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or (b) the
payment of unlawful dividends or distributions. Under Delaware
law, such provision may not eliminate or limit director monetary
liability for: (a) breaches of the director's duty of loyalty to
the corporation or its stockholders; (b) acts or omissions not in
good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or
unlawful stock repurchases or redemptions; or (d) transactions in
which the director received an improper personal benefit.
The limitations of liability provisions permissible under
Delaware and Nevada law also may not limit a director's liability
for violation of, or otherwise relieve a corporation or its
directors from the necessity of complying with, federal or state
securities laws, or affect the availability of non-monetary
remedies such as injunctive relief or rescission.
Nevada and Delaware law require indemnification when the
individual has successfully defended the action on the merits or
otherwise. Nevada law generally permits indemnification of
expenses incurred in the defense or settlement of a derivative or
third-party action, provided there is a determination by a
disinterested quorum of the directors, by independent legal
counsel, or by a majority vote of a quorum of the stockholders
that indemnification is proper in the circumstances. Without
court approval, however, no indemnification may be made in
respect of any derivative action in which such person is adjudged
liable for negligence or misconduct in the performance of his or
her duty to the corporation. Delaware law generally permits
indemnification of expenses incurred in the defense or settlement
of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by
independent legal counsel or by a majority vote of a quorum of
the stockholders that the person seeking indemnification acted in
good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation. Without court
approval, however, no indemnification may be made in respect of
any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to
the corporation.
INSPECTION OF STOCKHOLDERS' LIST. Nevada law permits any
person who has been a stockholder of record for at least 6
months, or any person holding at least 5% of all outstanding
shares, to inspect the stockholders' list of a corporation for a
purpose reasonably related to such person's interest as a
stockholder. Delaware law permits any stockholder to inspect a
corporation's stockholders' list for a purpose reasonably related
to such person's interest as a stockholder and, during the ten
days preceding a stockholders' meeting, for any purpose germane
to that meeting.
PAYMENTS OF DIVIDENDS. Nevada law permits the payment of
dividends if, after the dividends have been paid, the corporation
is able to pay its debts as they become due in the usual course
of business (equity test for insolvency), and the corporation's
total assets are not less than the sum of its total liabilities
plus the amount that would be needed, if the corporation were to
be dissolved at the time of the dividend payment, to satisfy the
preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the dividend
(balance sheet test for insolvency). In addition, Nevada law
generally provides that a corporation may redeem or repurchase
its shares only if the same equity and balance sheet tests for
insolvency are satisfied. In determining whether the balance
sheet test has been satisfied, the board may: (i) use financial
statements prepared on the basis of accounting practices that are
reasonable under the circumstances; (ii) make its determination
based on a fair valuation, including, but not limited to,
unrealized appreciation and depreciation; or (iii) make its
determination based upon any other method that is reasonable in
the circumstances.
Delaware law permits the payment of dividends out of surplus
or, if there is no surplus, out of net profits for the current
and preceding fiscal years (provided that the amount of capital
of the corporation is not less than the aggregate amount of the
capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets). In
addition, Delaware law generally provides that a corporation may
redeem or repurchase its shares only if such redemption or
repurchase would not impair the capital of the corporation. The
ability of a Delaware corporation to pay dividends on, or to make
repurchases or redemptions of, its shares is dependent on the
financial status of the corporation standing alone and not on a
consolidated basis. In determining the amount of surplus of a
Delaware corporation, the assets of the corporation, including
stock of subsidiaries owned by the corporation, must be valued at
their fair market value as determined by the Board of Directors,
without regard to their historical book value.
Rights of Dissenting Stockholders
---------------------------------
Any SW Ventures stockholder is entitled to be paid the fair
value of its shares in accordance with Section 92A.300 to 92A.500
of the Nevada Revised Statutes ("NRS")if the stockholder dissents
to the Reincorporation. A brief summary of the provisions of NRS
Sections 92A.300 to 92A.500 is set forth below and the complete
text of said Sections is set forth in Exhibit C.
Since it is expected that the Reincorporation shall be
approved by the required vote of SW Ventures' stockholders at the
Special Meeting, each holder of shares of SW Common Stock who
asserts dissenters' rights and who follows the procedures set
forth in Chapter 92A of NRS, will be entitled to have his or her
shares of SW Common Stock purchased by SW Ventures for cash at
their fair market value. The fair market value of shares of SW
Common Stock will be determined as of the day before the first
announcement of the terms of the Reincorporation, excluding any
appreciation or depreciation in consequence of the
Reincorporation.
A holder who wishes to exercise dissenters' rights should
mail or deliver his or her written demand to the Transfer Agent
ON OR BEFORE 10:00 A.M. EASTERN DAYLIGHT TIME ON JUNE 8, 1999.
Any stockholder who does not follow the foregoing is not entitled
to payment for his shares under NRS.
Within ten days of the Effective Date, SW Ventures must mail
a written dissenter's notice of such approval (the "Dissenter's
Notice") to all stockholders who asserted their dissenters'
rights against the Reincorporation, and must (a) state where the
demand for payment must be sent and where and when certificates,
if any, for shares must be deposited; (b) inform holders of
shares not represented by certificates to what extent the
transfer of the shares will be restricted after the demand for
payment is received; (c) supply a form for demanding payment; (d)
set a date, not less than 30 nor more than 60 days after date
notice is mailed, by which the Company must receive the demand
for payment; and (e) send a full copy of NRS Sections 92A.300
through 92A.500.
A stockholder of SW Ventures wishing to exercise dissenters'
rights must (a) demand payment; (b) certify whether he acquired
beneficial ownership of the shares before June 8, 1999; and (c)
deposit his certificates, if any, in accordance with the terms of
the Dissenter's Notice.
Within 30 days after receipt of a demand for payment, SW
Ventures shall pay each dissenter who complied with the
requirements set forth in the Dissenter's Notice the amount it
estimates to be the fair value of the stockholder's shares, plus
accrued interest (computed from the effective date of the action
until the date of payment). Payment must be accompanied by SW
Ventures' balance sheet as of the end of a fiscal year ending not
more than 16 months before the date of payment, a statement of
income for that year, a statement of changes in the stockholders'
equity for that year and the latest available interim financial
statements, if any, along with statement of SW Ventures' estimate
of the fair value of the shares, an explanation how the interest
was calculated, a statement of the dissenter's rights to demand
payment under NRS Section 92A.480 and a copy of NRS sections
92A.300 through 92A.500.
Pursuant to NRS Section 92A.470, SW Ventures may withhold
payment from a dissenter unless he was the beneficial owner of
the shares before the date sets in the dissenter's notice. If SW
Ventures withholds payment, after taking the proposed action, it
shall estimate the fair value of the shares, plus accrued
interest, and shall offer to pay this amount to each dissenter
who agrees to accept it in full satisfaction of his demand. The
offer shall contain a statement of its estimate of the fair
value, an explanation of how the interest was calculated, and a
statement of dissenters' rights pursuant to NRS Section 92A.480.
A dissenter may notify SW Ventures in writing of his
estimate of the fair value of the shares and the amount of
interest due and demand payment of his estimate, less any payment
made pursuant to NRS Section 92A.460, or reject the offer made
pursuant to NRS 92A.470 and demand payment of the fair value of
his shares and interest due. A dissenter waives his right to
demand payment unless he makes his demand in writing within 30
days after SW Ventures has made or offered payment for his
shares.
If any demand for payment remains unsettled, SW Ventures
shall commence a proceeding within 60 days of the dissenter's
demand with the district court in the County of Carson City,
State of Nevada (location of registered office), petitioning the
court to determine the fair value of the shares and accrued
interest. All dissenters whose demands remain unsettled, whether
or not residents of Nevada, shall be made parties to the court
action and shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by
publication as provided by law. If SW Ventures does not so
petition the court within this 60-day period, it shall pay all
unsettled demands. Each dissenter who is party to the proceeding
is entitled to a judgment (a) for the amount, if any, by which
the court finds the fair value of his shares, plus interest,
exceeds the amount paid by the Company; or (b) for the fair
value, plus accrued interest, of his after-acquired shares for
which SW Ventures elected to withhold payment pursuant to NRS
Section 92A.470. The court shall assess costs pursuant to NRS
Section 92A.500.
STRICT COMPLIANCE WITH DISSENT PROVISIONS REQUIRED. The
foregoing summary does not purport to provide comprehensive
statements of the procedures to be followed by a dissenting
stockholder who seeks payment of the fair value of his shares of
SW Ventures common stock. NRS establishes the procedures to be
followed and failure to do so may result in the loss of all
dissenters' rights. Accordingly, each stockholder who might
desire to exercise dissenters' rights should carefully consider
and comply with the provisions of these sections, the full text
of which is set out in Exhibit C hereto and to consult his legal
advisor.
THE COMPANY HAS RESERVED THE RIGHT TO ABANDON THE
REINCORPORATION IF IT DECIDES THAT THE NUMBER OF STOCKHOLDERS
EXERCISING DISSENTERS' RIGHTS EXCEEDS AN AMOUNT IT DEEMS
ACCEPTABLE IN ITS SOLE AND ABSOLUTE DISCRETION.
The discussion contained herein is qualified in its entirety
by and should be read in conjunction with the Forms of Merger
Agreement and the Certificate of Incorporation.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
By virtue of his majority ownership of the outstanding
shares of SW Common Stock, Mr. Cloetens may be deemed to have an
interest in the consummation of the Reorganization and related
transactions beyond that of other holders of the SW Common Stock.
In addition, Mr. Cloetens has agreed to purchase the shares of SW
Oil Stock from the Company at their fair market value as
determined by the Board of Directors of the Company. Mr.
Cloetens abstained from the Board's determination of such value.
In connection with his purchase of the SW Oil Stock, Mr. Cloetens
will execute and deliver a promissory note for the full amount of
the purchase price, which note will be secured by a portion of
the shares of NGP Common Stock that Mr. Cloetens will receive in
the Reorganization. See "PROCEDURAL ASPECTS OF THE ASSET
CONTRIBUTION."
THE ASSET CONTRIBUTION
SW Ventures and Mr. Cloetens, President, Director and
majority stockholder of SW Ventures, have entered into that
certain Asset Contribution Agreement, dated as of April 14, 1999,
attached hereto as Exhibit D, that contains the terms and
conditions for the Asset Contribution of the NGP Assets,
including the effectuation of the Reincorporation.
The information set forth in this proxy statement relating
to the NGP Assets or the New Generation Plastic Process and its
development or prospects has been furnished by Bachkine & Meyer.
Description of NGP Assets
-------------------------
The NGP Assets consist primarily of a patented proprietary
process that Bachkine believes is capable of producing
homogeneous, commercially usable polymer end products from a
mixed virgin or recycled stream of discrete polymers or waste
plastic.
The proprietary rights to the technology underlying the New
Generation Plastic Process were originally developed and patented
by certain dissolved European entities, including Process
NewPlast Holding NV and NewPlast S.A. (together, "NewPlast").
Bachkine acquired the patent and patent applications from a
secured creditor of NewPlast. Bachkine did not acquire or assume
any other assets or liabilities of NewPlast. The patents (and
applications therefor), trademarks (and applications therefor),
know-how, proprietary process control software, the NGP BT-30,
that Bachkine has assembled ("Bench Top Unit"), certain
contractual rights and agreements and all other related assets
and liabilities which form the basis of the New Generation
Plastic Process comprise the NGP Assets. A list of the NGP
Assets is attached as Schedule 1.13 to the NGP Contribution
Agreement attached hereto as Exhibit D.
Comparison to Other Existing Technology
---------------------------------------
Nearly all other current plastic recycling technology is
accomplished through expensive manual or mechanical separation
wherein each type of plastic is separated, cleaned and recycled
into discrete single type materials (PET, HDPE, etc.) for further
processing.
In contrast to existing technologies, Bachkine believes the
New Generation Plastic Process can produce a range of high
quality thermoplastic compound end products ("New Generation
Plastic Compounds") that can be used in connection with standard
plastic manufacturing techniques such as injection,
extrusion/calander, blow molding and compression as an
alternative to virgin materials. Additionally, Bachkine believes
that the use of the New Generation Plastic Process with virgin
polymer feed stock, could lead to a new generation of plastic and
polymer alloy products. The New Generation Plastic Process does
not require the addition of stabilizers or compatibilizers nor
does it require extensive sorting; making it a unique technology
among the current mixed plastic recycling options. Bachkine
believes that the New Generation Plastic Process can be
manipulated to result in pinpoint physical properties heretofore
unattainable from recycled feedstock streams and virgin
materials.
Business Plan
-------------
Bachkine, through NGP Delaware or one or more wholly owned
subsidiaries, currently intends to roll out the business in two
phases over a two-year period in accordance with its initial
business plan (the "Business Plan"). Phase One activities will
include completing and operating the Bench Top Unit with a
capacity of 30 kg/h and initiating a research and testing program
(the "PEP Program"), and its output with PEP, bringing on line a
pilot New Generation Plastic unit (the "Pilot Unit") with a 150
kg/h capacity, ordering the manufacture of the full scale 1,000
kg/h industrial capacity New Generation Plastic Units, and
developing a research/development facility in the United States.
Phase Two activities will include implementing a range of
academic and corporate joint ventures focused on the technology
and end product research; structuring joint venture projects to
implement the development of full scale processing and production
plants worldwide and marketing the technology internationally.
The New Generation Plastic Process
----------------------------------
The New Generation Plastic Process is a proprietary
technology with over 60 worldwide patents issued or pending.
Bachkine's U.S. Patent Number 5,891,955 was issued on April 6,
1999, and is entitled Process for Transforming a Starting
Material Containing At Least Two Different Thermoplastic
Materials Into A New Homogenous Thermoplastic Material. See
Schedule 1.13 to the NGP Contribution Agreement attached hereto
as Exhibit D for a complete listing of the patents and patents
pending worldwide.
Bachkine believes that the technology is unique in that it
is based on a mechanical process that may be able to combine
mixed plastic (linking different polymers which had previously
been incompatible) and in turn create a new compound or polymers
with tailor-made physical properties. The New Generation Plastic
Process can utilize both consumer and industrial plastic waste,
as well as, virgin materials.
NewPlast, the former owner of the technology, developed and
tested seven prototypes over a five-year period starting in 1991.
Extensive internal and independent testing of the technology
underlying the New Generation Plastic Process resulted in
worldwide interest and the start of commercialization. Testing
was primarily subcontracted out to Batelle, a French entity that
is one of the world's largest non-government contract applied
research organizations. Some of these tests and additional
research and presentations coordinated with PEP in 1994 resulted
in NewPlast securing the prestigious Eureka Label from the
European community in June 1995. The Eureka Label enables the
holder to seek European governmental subsidies. The Company
intends to investigate the assignment of or a reapplication for
the Eureka label for the benefit of NGP Delaware. The Company
also intends to seek other North American and world wide
technology awards and subsidy opportunities for the New
Generation Plastic Process.
Initially, the New Generation Plastic Process will be
marketed to governments and/or waste management companies that
operate urban waste recycling/disposal facilities, industrial
companies generating significant plastic wastes that are seeking
closed loop recycling, manufacturing companies utilizing plastic
components and chemical companies manufacturing resins and
polymers. Revenues will be generated from the sales of New
Generation Plastic Units and New Generation Plastic Plants, pilot
plant operations (fees for the testing/treatment of a client's
waste streams in anticipation of New Generation Plastic Unit or
New Generation Plastic Plant sales and/or co-development fees for
designing and manufacturing specific New Generation Plastic
Compounds for chemical companies), possible license fees for the
New Generation Plastic Process and/or New Generation Plastic
Compounds in selected areas of the world and potential royalties
associated with the development and sales of the different New
Generation Plastic Compounds. Additionally, the Company will
investigate joint venture development and/or the Company's
ownership and operation of its own New Generation Plastic Plant
processing waste and manufacturing specific New Generation
Plastic Compounds or plastic products (e.g. shipping pallets).
The core of the New Generation Plastic Process is the
integrated unit (the "New Generation Plastic Unit"), which
incorporates ultra-high shearing technology. The New Generation
Plastic Unit consists of a cylindrical chamber within which a
rotor turns at high speed. The speed of the motor is programmed
according to the materials being processed and the nature of the
New Generation Plastic Compounds to be created. The mixed
plastic, as a result of the friction between the plastic
particles, the rotor blades and chamber wall, are melted into a
homogeneous amalgam. Peripheral speed of the tips of the blades
can range from 40 to 65 m/sec. A sharp increase of the rotor
torque (power consumption requirement) indicates that the molten
mixture has homogenized (gelled) and is ready to be discharged
from the chamber.
All processing steps are controlled by Bachkine's
proprietary software. The parameters for programming include
temperature, rotor speed, torque variation and time. Depending
on the type of mixture processed, the cycle time should last
between 35 and 120 seconds. Temperatures of the expulsed hot
compound melt can range between 200 and 280 degrees Celsius.
The ultra high shear and the resulting temperatures produce
a stabilized compound whose properties can be manipulated by the
relative mix of the feedstock. Bachkine believes that the New
Generation Plastic Process not only provides for the processing
of mixed plastic waste, but offers the possibility of creating a
whole new generation of polymer alloys that can be made without
stabilizers and with pinpoint physical properties not yet
attainable from recycled and some virgin mono-component polymers.
Bachkine believes that the finished product is significantly
more processable than otherwise stabilized or compacted mixed
plastic products and offers volume and economic advantages over
current mixed plastic recycling processes. The New Generation
Plastic Process also offers a mechanism to economically reclaim a
significant portion of the unrecycled plastic waste stream and
create a versatile recycled plastic product that can be used in
place of the virgin materials in many applications.
MANAGEMENT AND EMPLOYEES OF NGP DELAWARE
The Company is assembling a management team to implement the
commercialization of the New Generation Plastic Process.
Currently, the Company has consultants assisting it in
engineering, finance and legal activities. The currently
anticipated members of management are set forth below. In
addition, leading executive recruiting firms have been contacted
to begin the search for qualified persons to fill out the roster
of the senior management positions that will be necessary to run
the business.
Mr. Jacques Mot (42) - Chairman of the Board and Chief
Executive Officer
Mr. Mot is a founder of Bachkine. Prior to the start up of
Bachkine, Mr. Mot was an Independent Consultant to Unilabs Group
(listed on the Nasdaq and Swiss Stock Exchanges). Mr. Mot's
activities have primarily been SEC related matters and investor
relations. He was a key member of the team that organized an
April 1997 initial public offering of Unilabs SA in Europe. Mr.
Mot was also a Director of Argenta & Magnum Management Company
Ltd. - Gilbratar, a company that created and marketed offshore
entities. From 1987 to 1992, Mr. Mot was the General Manager and
Director of Iesa Investissements S.A., a portfolio management and
investment company. While at Iesa, he handled portfolio and
investment management on a confidential basis.
Prior to Iesa, Mr. Mot held management positions at Wedge
Bank (Geneva) and Algemene Bank Nederland. While at Algemene, he
specialized in commercial credit facilities for, start-up and
established, manufacturing and marketing companies. Mr. Mot
also spent several years with American Fletcher Bank (Geneva).
Mr. Mot attended to the University of Lausanne, Switzerland
studying economics from 1976-1979.
Mr. Bernard Dubrulle d'Orhcel (55) - Chief Science and
Technical Officer
Mr. Dubrulle d'Orhcel oversees the consulting engineers
involved in the assembly and operations of the Pilot Unit, the
development of the 150 kg/h pilot plant and the commercial size
1,000 kg/h New Generation Plastic Unit, as well as, the design
and patenting of future equipment and NGP Compounds.
Prior to joining, he was President of Process NewPlast
Group, NV (1991-1996), the original company responsible for the
technical and commercial development of the technology underlying
New Generation Plastic Process. Additionally, Mr. Dubrulle
d'Orhcel was Chief Executive Officer of the Lasenco Group
(1983-1990) with offices in Geneva, Hong Kong, Beijing and
Manila. The Lasenco Group designed, built and managed four
factories in the form of joint ventures in Asia for plastic
component manufacturing and other industrial/commercial products.
From 1972-1983 he was a consulting engineer in China and the
Philippines for the setting-up of industrial facilities,
including mineral water bottling plants, windsurfing board
manufacturing, low-density urethane flexible foam production for
mattresses, car seat manufacturing and ski boot shells, amongst
other ventures.
Mr. Dubrulle d'Orhcel is a former French Navy pilot. He has
a BS in Science from College Technique St. Nicholas and has
completed additional courses in the chemistry of polymers at the
University of California, Berkley. In addition, Mr. Dubrulle
d'Orhcel received a license on urethane elastomers and urethane
reaction-injection molding from Paris Jussieu University. Mr.
Dubrulle d'Orhcel is, also, fluent in French, English, Italian
and is in fair practice in Mandarin Chinese.
Marc R. Engel (40) - Executive Vice President
Mr. Engel is involved in a range of management, finance and
marketing activities for the Company. Prior to NGP, Mr. Engel
was President of 21ST Century Capital Advisors Inc., a New York
City boutique firm specializing in business and finance strategy
development for environmental companies.
From 1991 to 1996 Mr. Engel was Senior Advisor and Vice
President at Hambro Resource Development Incorporated, the
investment banking subsidiary of Hambros Bank, which specialized
in corporate and project finance for environmental and power
companies. Prior to Hambro, Mr. Engel was an advisor, national
sales manager or held senior marketing positions with a range of
companies, including Canam Steel Corp., the Direct Marketing
Group and KPC Enterprises Inc. Mr. Engel graduated with a BA in
both English and Political Science from Boston College in 1980.
Elliot H. Levine (46) - Controller
Mr. Levine is a founding member of the accounting firm
Levine & Seltzer, LLP, Certified Public Accountants. He became a
member of the American Institute of Certified Public Accountants
in February of 1975. Mr. Levine's work experience includes five
years at Arthur Young, ten years as partner and Director of Taxes
of Leslie Sufrin & Co. P.C., CPAs and seven years as senior
member of Levine & Seltzer LLP.
Mr. Levine is a graduate of Queens College, City University
of New York. During Mr. Levine's 24 years as a CPA, he has given
numerous speeches and has chaired several conferences on the
topic of Mergers and Acquisitions.
Marcel J. Rokegem (50) -Director
Mr. Rokegem is currently a consultant to Van Moer Santerre
Group, a brokerage firm with offices in Brussels, Luxemburg and
Monaco. From 1987 to 1992 he was a co-founding Partner and
Director of Euro Suisse Limited London, a member of the London
Stock Exchange. Mr. Rokegem was a Partner of Jessup and Lamont
International Limited of London, an affiliate of Jessup and
Lamont Securities Co., Inc., a member of the New York Stock
Exchange from 1982 to 1987. Prior to that Mr. Rokegem served as
the Partner in Charge of International Equity trading for BAIRD,
Hombergen, Pringiers & Co. Mr. Rokegem began his career in 1970
with Kredietbank, NV of Brussels where he was responsible for
domestic and international equity trading, as well as, Eurobond
sales until 1980.
Mr. Rokegem has a degree in Applied Economic Sciences for
Antwerpen Jesuit University, as well as, a diploma from the
International Securities Marketing Association. Mr. Rokegem is
fluent in Dutch, French, English and German.
Thomas R. Marshall(41) - Director
Mr. Marshall currently practices at the New York office of
the law firm Schnader Harrison Segal & Lewis LLP, where he
concentrates in taxation, corporate and securities law an dserves
as counselto the Company. Previously, he was a Senior Associate
at Keck, Mahin & Cate (1993-1996) and an associate at Hall
McNicol Hamilton & Clark where he performed similar duties. From
1984 to 1988, Mr. Marshall was a Tax Supervisor at Coopers &
Lybrand (now PriceWaterhouseCoopers LLP).
Mr. Marshall holds a J.D. from St. John's University School
of Law and was awarded an L.L.M in Taxation from the New York
University School of Law. He is admitted to both the New York
and Connecticut Bars.
Advisory Council
An Advisory Council has been established to assist the NGP
Delaware's Board and management team with a range of issues,
including technical, marketing, sales, operations, finance, et
al. The members of the Advisory Council include the following:
Dr. Viktor Williams
Currently the Manager of DuPont's Global Polymer Recycling
division. Dr. Williams has spent over 24 years with DuPont in a
range of managerial positions, including managing the Ethylene
Copolymers product line and heading up the European Business
Management for Specialty Elastomers, including products such as
Tedlar, Elvacite and Dimetrol Strappings and Tapes. Since 1990,
Dr. Williams has been responsible for the Waste Management and
Recycling programs for DuPont worldwide.
He is a member, current or former board member and current
or former Chairman of the following: APME (Association of
Plastics Manufacturers Europe), EUROPEN (European Association for
Packaging and the Environment), AMCHAM (American Chamber of
Commerce), EUPC (the European Plastic Converters Association) and
CEN (the European Standardization body).
In 1996, he added to his responsibilities, the Management of
Global Polymer Recycling and joined the APC (American Plastic
Council). He is the Chairman of the Packaging Task Force in the
APME and of the Durable Business Group in the APC.
Dr. Williams received his Ph.D. in Industrial Chemistry from
the University of Rome.
Mr. J. Richard Briscoe
Mr. Briscoe has general management and
domestic/international marketing experience primarily in the
over-the-counter pharmaceuticals, cosmetics, toiletries and food
industries. Mr. Briscoe held brand management and senior
marketing executive positions with Schering-Plough. He managed
the inside-advertising agency responsible for planning and
purchasing more than $250 million in media advertising annually.
Additionally he was a senior global marketing executive for such
major brands as Dr. Scholl, Coppertone, Maybelline and Rimmel.
Mr. Briscoe was instrumental in strategic planning, new product
development and acquisitions while President of Schering-Plough's
U.S. Proprietary Drugs & Toiletries Divisions, which included
such brands as Correctol, Coppertone, Tropical Blend, Solarcaine,
Di Gel, Duration and Aftate.
Mr. Briscoe is currently a Senior Associate with the sales,
marketing and business planning consulting firm of Winston Weber
& Associates Inc., where has worked with a wide range of
companies, including: Beiersdorf, Dole Packaged Foods,
Neutrogena, Oral-B, Bristol-Meyers, Johnson & Johnson, Procter &
Gamble, Pacific Dunlop and Shell.
Mr. Briscoe received a B.A. from Rice University and an
M.B.A. from the Wharton School of the University of Pennsylvania.
He has served on the Board of the Association of National
Advertisers and the National Advertising Review Board. He is an
active director of several corporations and a Trustee of the
Memphis College of Art.
Professor Francesco P. La Mantia
Professor La Mantia is a leading author and researcher on
rheology and the processing of polymers, polymer blends, liquid
crystal polymer based blends and the recycling of polymers.
Along with approximately 190 published papers, he is the author
of seven books on polymer recycling and on LCP and LCP based
blends.
Professor La Mantia is responsible for a wide range of
plastic research programs supported by both public and private
funds. He has been the director of the Department of Chemical
Engineering and Materials and is currently both the coordinator
for the Ph.D. program on Chemical Technologies and New Materials
and a member of the Board of Directors of the University of
Palermo.
He received his Chemical Engineering degree and, since 1985,
has been a full professor of Properties and Processing of
Polymers at the University of Palermo. Professor La Mantia is an
editor and/or on the editorial board of various scientific
journals, including, Polymer Recycling, The Journal of Applied
Polymer Science, Polymer Engineering and Science, Polymer
Composites and The Journal of Rheology.
Mr. Jacques Mahler
Currently, Mr. Mahler is the Director of Industrial
Relations for Pole Europeen de Plasturgie ("PEP"). Mr. Mahler's
expertise is in recycling and composite design. He interfaces
with chief executives on a wide range of research activities.
Prior to his current position, Mr. Mahler was the
Development Director for Chomarat (1988-1991), focusing on
plastic composite design for the transportation, construction,
engineering, electronics and recreation industries. Mr. Mahler
was the inventor of Rovicor. He was the Director of Research
and Product Development (1979-1988) at Saint-Gobain-Vetrotex, a
worldwide leader in glass fiber and other industrial product
research, where he coordinated manufacturing, marketing, sales
and public relations activities. Mr. Mahler was a service
manager for synthesis studies at Saint-Gobain-Vetrotex from 1970
to 1978.
Mr. Mahler has a Masters of Physical Science and has been a
professor in Chemistry and Physics. Additionally, he is an
accomplished author, inventor and board member for a number of
schools and institutions.
Additional individuals with scientific, financial, marketing
and waste management backgrounds are being considered for
Advisory Council positions.
PROCEDURAL ASPECTS OF THE ASSET CONTRIBUTION
SW Ventures organized and incorporated NGP Delaware as a
wholly-owned subsidiary of SW Ventures. The Company has
appointed Jacques Mot, Marcel J. Rokegem and Thomas R. Marshall,
the persons designated by Bachkine, as the Directors of NGP
Delaware.
Upon the completion of the Oil Asset Disposition, the
Company shall effect the Merger through which (i) the legal
existence of SW Ventures as a separate corporation will cease,
(ii) NGP Delaware will succeed to the then existing assets and
assume the then existing liabilities of SW Ventures, and (iii)
each shareholder of SW Ventures shall receive one share of NGP
Common Stock for every fifteen shares of SW Common Stock.
The closing of the Asset Contribution shall take place on
the same day as the Merger. On or before such closing, NGP
Delaware will issue 20,000 shares of NGP Common Stock in a
private placement exempt from registration under Regulation S of
the U.S. Securities Act of 1933, as amended (the "Securities
Act") to an entity designated by SW Ventures as a finder's fee.
In addition, NGP Delaware shall enter into consulting agreements
with Mr. Cloetens and persons designated by him that provide
for the issuance of 15,000 shares of NGP Common Stock to Mr.
Cloetens and grants, under a NGP Delaware Stock Option Plan, to
purchase an aggregate of 50,000 shares of NGP Common Stock at
increasing prices (10,000 shares each at $7.50, $8.00, $8.50,
$9.00 and $9.50, respectively). Mr Cloetens has indicated that
he intends to designate the following persons as recipients of
the options: Terri Jackson (10,000 at $7.50), Keith Biesinger
(10,000 at $8.00), Leonard Burningham (10,000 at $8.50) and
himself (10,000 at $9.00 and 10,000 at $9.50).
At the closing of the Asset Contribution, NGP Delaware shall
issue shares of NGP Common Stock representing 97.91% of NGP
Delaware to Bachkine in exchange for the NGP Assets. Such shares
will be issued in a transaction exempt from registration under
Regulation S of the Securities Act. Such shares shall be
restricted and may not be offered, sold or otherwise transferred
except in compliance with the registration requirements of the
Securities Act or any other applicable securities law, pursuant
to an exemption therefrom, or in a transaction not subject
thereto.
NGP Delaware, for the benefit of Bachkine as holder of such
shares, will cause a registration statement to be filed with the
SEC under the Securities Act on such form as is necessary or
appropriate to register all or a portion of the shares for resale
by Bachkine. NGP Delaware will use its reasonable best efforts
to cause such registration statement to be declared effective as
soon as practicable following the closing of the Asset
Contribution.
ANNUAL AND QUARTERLY REPORT
INFORMATION INCORPORATED BY REFERENCE
Included as Exhibit F hereto, all stockholders of record as
of the Record Date are receiving a copy of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31,
1998, which contains certified financial statements of the
Company, and a Quarterly Report on Form 10-QSB for the three
months ended March 31, 1999.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of
no matters other than those set forth herein which will be
presented for consideration at the Special Meeting. If any other
matter or matters are properly brought before the Special Meeting
or any adjournment thereof, the persons named in the
accompanying Proxy will have discretionary authority to vote,
or otherwise act, with respect to such matters in accordance
with their judgment.
Respectfully submitted,
Terri Jackson
-----------------------
Secretary/Treasurer
and Director
Salt Lake City, Utah
May 26, 1999
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Merger Agreement") dated
as of June_, 1999, is made by and between New Generation Plastic,
Inc., a Delaware corporation ("NGP Delaware") and SW Ventures,
Inc., a Nevada corporation ("SW Ventures"). NGP Delaware and SW
Ventures are sometimes referred to herein as the "Constituent
Corporations."
RECITALS
A. NGP Delaware is a corporation duly organized and
existing under the Delaware General Corporation Law (the "DGCL").
NGP Delaware has an authorized capital of 51,000,000 shares,
consisting of 50,000,000 shares of Common Stock, par value $.001
per share ("NGP Delaware Common Stock") and 1,000,000 shares of
Preferred Stock ("NGP Preferred Stock"). As of the date hereof,
one (1) share of NGP Delaware Common Stock is issued and
outstanding, which share is held by SW Ventures.
B. SW Ventures is a corporation duly organized and
existing under the Revised Statutes of the State of Nevada (the
"NRS"). SW Ventures has an authorized capital of 50,000,000
shares par value $.001 per share ("SW Ventures Common Stock").
As of the date hereof, 3,416,066 shares of SW Ventures Common
Stock are issued and outstanding.
C. The Board of Directors of SW Ventures has determined
that, for the purpose of effecting the reincorporation of SW
Ventures in the State of Delaware it is advisable and in the best
interest of SW Ventures and its stockholders that it merge with
and into NGP Delaware upon the terms and conditions herein
provided.
D. The Board of Directors of SW Ventures has determined
that, for the purpose of increasing the price per share of SW
Ventures Common Stock and to provide a sufficient number of
shares of NGP Delaware Common Stock to effect that certain Asset
Contribution Agreement, dated April 14, 1999 between SW Ventures
and Mr. Guido Cloetens, and Bachkine & Meyer, a British Virgin
Islands corporation, to which this Merger Agreement relates, SW
Ventures shall effect a one-for-fifteen reverse stock split of
the SW Common Stock just prior effecting this Merger Agreement.
E. The Boards of Directors of NGP Delaware and SW Ventures
have authorized and approved this Merger Agreement and have
directed that this Merger Agreement be submitted to a vote of
their respective stockholders and executed by the undersigned
officers.
F. This Merger Agreement is a Plan of Reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing recitals,
the mutual agreements and covenants set forth herein, and other
good and valuable consideration, the Constituent Corporations
agree as follows:
ARTICLE I
1.1 Merger. In accordance with the provisions of this
Merger Agreement, the DGCL and the NRS, SW Ventures shall merge
with and into NGP Delaware (the "Merger"), the separate existence
of SW Ventures shall cease, and NGP Delaware shall be, and is
herein sometimes referred to as, the "Surviving Corporation."
1.2 Effectiveness. The Merger shall become effective when
the last to occur of the following actions shall have been
completed:
a. This Merger Agreement and the Merger shall have
been adopted and approved by the stockholders of each of the
Constituent Corporations in accordance with the requirements of
the DGCL and the NRS;
b. All of the conditions precedent to the
consummation of the Merger specified in this Merger Agreement
have been satisfied or duly waived;
c. A properly executed Certificate of Merger or an
executed counterpart of this Merger Agreement meeting the
requirements of the DGCL shall have been filed with and accepted
by the Secretary of State of the State of Delaware;
d. A properly executed Articles of Merger or an
executed counterpart of this Merger Agreement meeting the
requirements of the NRS shall have been filed with the State of
Nevada.
e. SW Ventures has received all necessary regulatory
approvals for the transfer of, and has in fact transferred,
substantially all of its assets and liabilities to NGP Delaware;
and
f. NGP Delaware has received all necessary regulatory
approvals for the transfer of, and has in fact transferred,
substantially all of its assets and liabilities to its wholly-
owned subsidiaries.
The date and time when the Merger shall become effective, as
aforesaid, is herein called the "Effective Date."
1.3 Effect of Merger. Upon the Effective Date, the
separate existence of SW Ventures shall cease, and NGP Delaware,
as the Surviving Corporation (i) shall continue to all of NGP
Delaware's assets, rights, powers and property as constituted
immediately prior to the Effective Date; (ii) shall be subject to
all actions previously taken by its and SW Ventures's Board of
Directors; (iii) shall succeed, without other transfer, to all of
the assets, rights, powers and property of SW Ventures including,
without limitation, all patents, trademarks, licenses,
registrations, and all other intellectual properties however
defined; (iv) shall continue to be subject to all of NGP
Delaware's debts, liabilities and obligations as constituted
immediately prior to the Effective Date, and (v) shall succeed,
without other transfer, to all of the debts, liabilities and
obligations of SW Ventures in the same manner as if NGP Delaware
had itself incurred them, all as more fully provided under the
applicable provisions of the DGCL and the NRS.
ARTICLE II
2.1 Charter. The Certificate of Incorporation of NGP
Delaware as in effect immediately prior to the Effective Date
shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in
accordance with the terms thereof and applicable law.
2.2 Bylaws. The Bylaws of NGP Delaware as in effect
immediately prior to the Effective Date shall continue in full
force and effect as the Bylaws of the Surviving Corporation until
duly amended in accordance with the provisions thereof and
applicable law.
2.3 Directors and Officers. The directors and officers of
SW Ventures immediately prior to the Effective Date shall be the
directors and officers of the Surviving Corporation until their
successors shall have been duly elected and qualified.
ARTICLE III
3.1 Stock Conversion. Upon the Effective Date, each share
of SW Ventures Common Stock issued and outstanding immediately
prior thereto shall, by virtue of the Merger, and without any
action by the Constituent Corporations, the holder of such
shares, or any other person, be deemed to represent the right to
receive one-fifteenth of one fully paid and nonasessable share of
NGP Delaware Common Stock. No fractional shares of NGP Delaware
Common Stock will be issued and, in lieu thereof, stockholders
holding a number of shares of SW Ventures Common Stock not evenly
divisible by fifteen, upon surrender of their old certificates,
shall receive a rounded up whole number of shares of NGP Delaware
Common Stock.
3.2 Cancellation of Stock. Upon the Effective Date, any
authorized but unissued shares of SW Ventures Common Stock
(including Treasury shares) shall be canceled and no shares of
NGP Delaware Common Stock shall be issued in exchange therefor.
Upon the Effective Date, the one share of NGP Delaware Common
Stock presently issued and outstanding shall be canceled and
returned to the status of authorized but unissued shares, and no
shares of common stock or other securities of Surviving
Corporation shall be issued in respect thereof.
3.3 Exchange of Certificates. (a) After the Effective
Date, each holder of an outstanding certificate representing
shares of SW Ventures Common Stock may, at such stockholder's
option, surrender the same for cancellation to American Stock
Transfer & Trust Company, as exchange agent ("Exchange Agent"),
and each such holder shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of
shares of NGP Delaware Common Stock into which the surrendered
shares were converted as herein provided. Until so surrendered,
each outstanding certificate theretofore representing shares of
SW Ventures Common Stock shall be deemed for all purposes to
represent the number of whole shares of the NGP Delaware Common
Stock into which such shares of SW Ventures Common Stock were
converted in the Merger.
(b) The registered owner on the books and records of the
Surviving Corporation or the Exchange Agent of any such
outstanding certificate shall, until such certificate shall have
been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or the Exchange Agent,
have and be entitled to exercise any voting and other rights with
respect to and to receive dividends and other distributions upon
the shares of NGP Delaware Common stock represented by such
outstanding certificate as provided above.
(c) Each certificate representing NGP Delaware Common Stock
so issued in the Merger shall bear the same legends, if any, with
respect to restrictions on transferability as the certificates of
SW Ventures Common Stock so converted and given in exchange
therefore, unless otherwise determined by the Board of Directors
of the Surviving Corporation in compliance with applicable laws.
(d) If any certificate for shares of NGP Delaware Common
Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefore is registered, it
shall be a condition of issuance thereof that the certificate so
surrendered shall be properly endorsed and otherwise in proper
form for transfer, that such transfer otherwise be proper and the
person requesting such transfer pay to the Exchange Agent any
transfer or other taxes payable by reason of the issuance of such
new certificate in a name other than that of the registered
holder of the certificate surrendered or establish to the
satisfaction of NGP Delaware that such tax has been paid or is
not payable.
ARTICLE IV
4.1 Further Assurances. From time to time, as and when
required by NGP Delaware or by its successors or assigns, there
shall be executed and delivered on behalf of SW Ventures such
deeds and other instruments, and there shall be taken or caused
to be taken by it such further and other actions, as shall be
appropriate or necessary in order to vest or perfect in or
conform of record or otherwise by NGP Delaware the title to and
possession of all the property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of SW
Ventures and otherwise to carry out the purposes of this Merger
Agreement.
4.2 Abandonment. At any time before the Effective Date,
this Agreement may be terminated and the Merger may be abandoned
for any reason whatsoever by the Board of Directors of either of
the Constituent Corporations, notwithstanding the approval of
this Agreement by the stockholders of SW Ventures or by the sole
stockholder of NGP Delaware, or by both.
4.3 Amendment. The Boards of Directors of the Constituent
Corporations may amend this Agreement at any time prior to the
filing of this Merger Agreement (or certificate in lieu thereof)
with the Secretary of State of the States of Delaware and the
State of Nevada; provided, however, that an amendment made
subsequent to the adoption of this Merger Agreement by the
stockholders of either of the Constituent Corporations shall not
(a) alter or change the amount or kind of shares, securities,
cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series
thereof of such Constituent Corporation, (b) alter or change any
term of the Certificate of Incorporation of the Surviving
Corporation, or (c) alter or change any of the terms and
conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series thereof of
such Constituent Corporation.
4.4 Registered Office. The registered and principal office
of the Surviving Corporation in the State of Delaware is located
at 1013 Centre Road, in the City of Wilmington, County of New
Castle, 19805. Corporation Services Company is the registered
agent of the Surviving Corporation at such address.
4.5 Governing Law. This Merger Agreement shall in all
respects be construed, interpreted and enforced in accordance
with the laws of the State of Delaware and, so far as applicable,
the merger provisions of the NRS.
4.6 Counterpart. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original and all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, this Agreement is hereby executed,
acknowledged, and attested as of the date written above.
ATTEST: SW VENTURES, INC.,
a Nevada corporation
Name:
By:
Title: Name:
__________________________
Title:
NEW GENERATION PLASTIC, INC.,
a Delaware corporation
Name:
By:
Title:
Name:
Title:
CERTIFICATE OF SECRETARY
OF
New Generation Plastic, Inc.
(a Delaware corporation)
I, __ , the Secretary of New Generation
Plastic, Inc. ("NGP Delaware"), hereby certify that the Agreement
and Plan of Merger to which this certificate is attached, after
having been first duly signed on behalf of NGP Delaware by the
President and Secretary under the corporate seal of NGP Delaware,
was duly approved and adopted by the stockholders of NGP Delaware
pursuant to a unanimous written consent dated ______________.
WITNESS my hand and seal of this ____ day of ______, 1999.
__________________________
By:
Secretary
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
NEW GENERATION PLASTIC, INC.
ARTICLE I
The name of the corporation is New Generation Plastic,
Inc.
ARTICLE II
The address of the registered office of the Corporation
in the State of Delaware is 1013 Centre Road, Wilmington,
Delaware 19805, County of New Castle. The name of its registered
agent at such address is Corporation Service Company.
ARTICLE III
The nature of the business of the Corporation, or the
purposes to be conducted or promoted by the Corporation, is to
engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
ARTICLE IV
The aggregate number of shares which the Corporation
shall have the authority to issue is Fifty-One Million
(51,000,000) of which Fifty Million (50,000,000) shall be Common
Stock, par value $.001 per share, and One Million (1,000,000)
shall be Preferred Stock, $.001 per share.
The Board of Directors of the Corporation (the "Board")
is authorized, subject to limitations prescribed by law and the
provisions of this Article IV, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series
shall include, but is not limited to, determination of the
following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series,
whether dividends shall be cumulative and, if so, from which date
or dates, and the relative rights of priority, if any, of payment
of dividends on shares of that series;
(c) Whether that series shall have voting rights, in
addition to the voting rights provided by law and, if so, the
terms of such voting rights;
(d) Whether that series shall have conversion privileges
and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in such
events as the Board shall determine;
(e) Whether or not the shares of that series shall be
redeemable and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the
terms and amount of such sinking fund;
(g) The rights of the shares in the event of voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of
payment of shares of that series;
(h) any other relative rights, preferences and
limitations of that series.
ARTICLE V
In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board is
expressly authorized to make, alter or repeal the Bylaws of the
Corporation, subject to the power of the stockholders of the
Corporation to alter or repeal any Bylaws made by the Board.
ARTICLE VI
Unless, and except to the extent that, the Bylaws of the
Corporation shall so require, the election of Directors of the
Corporation need not be by written ballot.
ARTICLE VII
The name and mailing address of the sole incorporator is:
Steven James Herman
Schnader Harrison Segal & Lewis
1300 Eye Street, N.W.
11th Floor East
Wsahington, D.C. 20005
ARTICLE VIII
A Director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director except to the
extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended.
Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of a Director
of the Corporation existing hereunder with respect to any act or
omission occurring prior to such repeal or modification.
ARTICLE IX
The Corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General
Corporation Law of Delaware.
ARTICLE X
The Corporation reserves the right at any time, and from
time to time, to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, and other
provisions authorized by the laws of the State of Delaware at the
time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders,
directors or any other persons whomever by and pursuant to this
Certificate of Incorporation in its present form or as hereafter
amended are granted subject to the rights reserved in this
article.
ARTICLE XI
No action required to be taken or which may be taken at
any annual or special meeting of stockholders of the Corporation
may be taken without a meeting, and the power of stockholders to
consent in writing, without a meeting, to the taking of any
action is specifically denied, unless such action has been
approved by the Board prior to such action being taken.
I, Steven James Herman, being the sole incorporator of
the Corporation, for the purpose of forming a Corporation
pursuant to the General Corporation Law of the State of Delaware,
do make this certificate, hereby declaring and certifying that
this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 25th day of May, 1999.
----------------------------------
Steven James Herman, Sole Incorporator
<PAGE>
EXHIBIT C
CHAPTER 92A
MERGERS AND EXCHANGES OF INTEREST
RIGHTS OF DISSENTING OWNERS
NRS 92A.300 DEFINITIONS. As used in NRS 92A.300 to 92A.500,
inclusive, unless the context otherwise requires, the words and
terms defined in NRS 92A.305 to 92A.335, inclusive, have the
meanings ascribed to them in those sections.
NRS 92A.305 "BENEFICIAL STOCKHOLDER" defined. "Beneficial
stockholder" means a person who is a beneficial owner of shares
held in a voting trust or by a nominee as the stockholder of
record.
NRS 92A.310 "CORPORATE ACTION" defined. "Corporate action"
means the action of a domestic corporation.
NRS 92A.315 "DISSENTER" defined. "Dissenter" means a
stockholder who is entitled to dissent from a domestic
corporation's action under NRS 92A.380 and who exercises that
right when and in the manner required by NRS 92A.410 to 92A.480,
inclusive.
NRS 92A.320 "FAIR VALUE" defined. "Fair value," with
respect to a dissenter's shares, means the value of the shares
immediately before the effectuation of the corporate action to
which he objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be
inequitable.
NRS 92A.325 "STOCKHOLDER" defined. "Stockholder" means a
stockholder of record or a beneficial stockholder of a domestic
corporation.
NRS 92A.330 "STOCKHOLDER OF RECORD" defined. "Stockholder of
record" means the person in whose name shares are registered in
the records of a domestic corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee's
certificate on file with the domestic corporation.
NRS 92A.335 "SUBJECT CORPORATION" defined. "Subject
corporation" means the domestic corporation which is the issuer
of the shares held by a dissenter before the corporate action
creating the dissenter's rights becomes effective or the
surviving or acquiring entity of that issuer after the corporate
action becomes effective.
NRS 92A.340 COMPUTATION OF INTEREST. Interest payable
pursuant to NRS 92A.300 to 92A.500, inclusive, must be computed
from the effective date of the action until the date of payment,
at the average rate currently paid by the entity on its principal
bank loans or, if it has no bank loans, at a rate that is fair
and equitable under all of the circumstances.
NRS 92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED
PARTNERSHIP. A partnership agreement of a domestic limited
partnership or, unless otherwise provided in the partnership
agreement, an agreement of merger or exchange, may provide that
contractual rights with respect to the partnership interest of a
dissenting general or limited partner of a domestic limited
partnership are available for any class or group of partnership
interests in connection with any merger or exchange in which the
domestic limited partnership is a constituent entity.
NRS 92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC
LIMITED-LIABILITY COMPANY. The articles of organization or
operating agreement of a domestic limited-liability company or,
unless otherwise provided in the articles of organization or
operating agreement, an agreement of merger or exchange, may
provide that contractual rights with respect to the interest of
a dissenting member are available in connection with any merger
or exchange in which the domestic limited-liability company is a
constituent entity.
NRS 92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT
CORPORATION.
1. Except as otherwise provided in subsection 2 and
unless otherwise provided in the articles or bylaws, any member
of any constituent domestic nonprofit corporation who voted
against the merger may, without prior notice, but within 30 days
after the effective date of the merger, resign from membership
and is thereby excused from all contractual obligations to the
constituent or surviving corporations which did not occur before
his resignation and is thereby entitled to those rights, if any,
which would have existed if there had been no merger and the
membership had been terminated or the member had been expelled.
2. Unless otherwise provided in its articles of
incorporation or bylaws, no member of a domestic nonprofit
corporation, including, but not limited to, a cooperative
corporation, which supplies services described in chapter 704 of
NRS to its members only, and no person who is a member of a
domestic nonprofit corporation as a condition of or by reason of
the ownership of an interest in real property, may resign and
dissent pursuant to subsection 1.
NRS 92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN
CORPORATE ACTIONS AND TO OBTAIN PAYMENT FOR SHARES.
1. Except as otherwise provided in NRS 92A.370 to 92A.390, a
stockholder is entitled to dissent from, and obtain payment of
the fair value of his shares in the event of any of the following
corporate actions:
(a) Consummation of a plan of merger to which the domestic
corporation is a party:
(1) If approval by the stockholders is required for the
merger by NRS 92A.120 to 92A.160, inclusive, or the articles of
incorporation and he is entitled to vote on the merger; or
(2) If the domestic corporation is a subsidiary and is
merged with its parent under NRS 92A.180.
(b) Consummation of a plan of exchange to which the
domestic corporation is a party as the corporation whose subject
owner's interests will be acquired, if he is entitled to vote on
the plan.
(c) Any corporate action taken pursuant to a vote of the
stockholders to the event that the articles of incorporation,
bylaws or a resolution of the board of directors provides that
voting or nonvoting stockholders are entitled to dissent and
obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain
payment under NRS 92A.300 to 92A.500, inclusive, may not
challenge the corporate action creating his entitlement unless
the action is unlawful or fraudulent with respect to him or the
domestic corporation.
NRS 92A.390 LIMITATIONS ON RIGHT OF DISSENT:
STOCKHOLDERS OF CERTAIN CLASSES OR SERIES; ACTION OF
STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER.
1. There is no right of dissent with respect to a plan of
merger or exchange in favor of stockholders of any class or
series which, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the
meeting at which the plan of merger or exchange is to be acted
on, were either listed on a national securities exchange,
included in the national market system by the National
Association of Securities Dealers, Inc., or held by at least
2,000 stockholders of record, unless:
(a) The articles of incorporation of the corporation
issuing the shares provide otherwise; or
(b) The holders of the class or series are required under
the plan of merger or exchange to accept for the shares anything
except:
(1) Cash, owner's interests or owner's interests and
cash in lieu of fractional owner's interests of: (I) The
surviving or acquiring entity; or (II) Any other entity which, at
the effective date of the plan of merger or exchange, were
either listed on a national securities exchange, included in the
national market system by the National Association of Securities
Dealers, Inc., or held of record by a least 2,000 holders of
owner's interests of record; or
(2) A combination of cash and owner's interests of the
kind described in sub-subparagraphs (I) and (II) of subparagraph
(1) of paragraph (b).
2. There is no right of dissent for any holders of stock of
the surviving domestic corporation if the plan of merger does
not require action of the stockholders of the surviving domestic
corporation under NRS 92A.130.
NRS 92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO
PORTIONS ONLY TO SHARES REGISTERED TO STOCKHOLDER; ASSERTION
BY BENEFICIAL STOCKHOLDER.
1. A stockholder of record may assert dissenter's rights as
to fewer than all of the shares registered in his name only if
he dissents with respect to all shares beneficially owned by any
one person and notifies the subject corporation in writing of the
name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this
subsection are determined as if the shares as to which he
dissents and his other shares were registered in the names of
different stockholders.
2. A beneficial stockholder may assert dissenter's rights as
to shares held on his behalf only if:
(a) He submits to the subject corporation the written
consent of the stockholder of record to the dissent not later
than the time the beneficial stockholder asserts dissenter's
rights; and
(b) He does so with respect to all shares of which he is the
beneficial stockholder or over which he has power to direct the
vote.
NRS 92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF
DISSENT.
1. If a proposed corporate action creating dissenters'
rights is submitted to a vote at a stockholders' meeting, the
notice of the meeting must state that stockholders are or may be
entitled to assert dissenters' rights under NRS 92A.300 to
92A.500, inclusive, and be accompanied by a copy of those
sections.
2. If the corporate action creating dissenters' rights is
taken by written consent of the stockholders or without a vote of
the stockholders, the domestic corporation shall notify in
writing all stockholders entitled to assert dissenters' rights
that the action was taken and send them the dissenter's notice
described in NRS 92A.430.
NRS 92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR
SHARES.
1. If a proposed corporate action creating dissenters'
rights is submitted to a vote at a stockholders' meeting, a
stockholder who wishes to assert dissenter's rights:
(a) Must deliver to the subject corporation, before the vote
is taken, written notice of his intent to demand payment for his
shares if the proposed action is effectuated; and
(b) Must not vote his shares in favor of the proposed
action.
2. A stockholder who does not satisfy the requirements of
subsection 1 is not entitled to payment for his shares under this
chapter.
NRS 92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS
ENTITLED TO ASSERT RIGHTS; CONTENTS.
1. If a proposed corporate action creating dissenters'
rights is authorized at a stockholders' meeting, the subject
corporation shall deliver a written dissenter's notice to all
stockholders who satisfied the requirements to assert those
rights.
2. The dissenter's notice must be sent no later than 10 days
after the effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and
where and when certificates, if any, for shares must be
deposited;
(b) Inform the holders of shares not represented by
certificates to what extent the transfer of the shares will be
restricted after the demand for payment is received;
(c) Supply a form for demanding payment that includes the
date of the first announcement to the news media or to the
stockholders of the terms of the proposed action and requires
that the person asserting dissenter's rights certify whether or
not he acquired beneficial ownership of the shares before that
date;
(d) Set a date by which the subject corporation must receive
the demand for payment, which may not be less than 30 nor more
than 60 days after the date the notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500,
inclusive.
NRS 92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF
CERTIFICATES; RETENTION OF RIGHTS OF STOCKHOLDER.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the
dissenter's notice for this certification; and
(c) Deposit his certificates, if any, in accordance with
the terms of the notice.
2. The stockholder who demands payment and deposits his
certificates, if any, before the proposed corporate action is
taken retains all other rights of a stockholder until those
rights are canceled or modified by the taking of the proposed
corporate action.
3. The stockholder who does not demand payment or deposit
his certificates where required, each by the date set forth in
the dissenter's notice, is not entitled to payment for his shares
under this chapter.
NRS 92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT
TRANSFER AFTER DEMAND FOR PAYMENT; RETENTION OF RIGHTS OF
STOCKHOLDER.
1. The subject corporation may restrict the transfer of
shares not represented by a certificate from the date the demand
for their payment is received.
2. The person for whom dissenter's rights are asserted as
to shares not represented by a certificate retains all other
rights of a stockholder until those rights are canceled or
modified by the taking of the proposed corporate action.
NRS 92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS.
1. Except as otherwise provided in NRS 92A.470, within 30
days after receipt of a demand for payment, the subject
corporation shall pay each dissenter who complied with NRS
92A.440 the amount the subject corporation estimates to be the
fair value of his shares, plus accrued interest. The obligation
of the subject corporation under this subsection may be enforced
by the district court:
(a) Of the county where the corporation's registered office
is located; or
(b) At the election of any dissenter residing or having its
registered office in this state, of the county where the
dissenter resides or has its registered office. The court shall
dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of
a fiscal year ending not more than 16 months before the date of
payment, a statement of income for that year, a statement of
changes in the stockholders' equity for that year and the latest
available interim financial statements, if any;
(b) A statement of the subject corporation's estimate of the
fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment
under NRS 92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive.
NRS 92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR
AFTER DATE OF DISSENTER'S NOTICE.
1. A subject corporation may elect to withhold payment from
a dissenter unless he was the beneficial owner of the shares
before the date set forth in the dissenter's notice as the date
of the first announcement to the news media or to the
stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold
payment, after taking the proposed action, it shall estimate the
fair value of the shares, plus accrued interest, and shall offer
to pay this amount to each dissenter who agrees to accept it in
full satisfaction of his demand. The subject corporation shall
send with its offer a statement of its estimate of the fair value
of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand
payment pursuant to NRS 92A.480.
NRS 92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE:
NOTIFICATION OF SUBJECT CORPORATION; DEMAND FOR PAYMENT OF
ESTIMATE.
1. A dissenter may notify the subject corporation in writing
of his own estimate of the fair value of his shares and the
amount of interest due, and demand payment of his estimate, less
any payment pursuant to NRS 92A.460, or reject the offer pursuant
to NRS 92A.470 and demand payment of the fair value of his shares
and interest due, if he believes that the amount paid pursuant
to NRS 92A.460 or offered pursuant to NRS 92A.470 is less than
the fair value of his shares or that the interest due is
incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant
to this section unless he notifies the subject corporation of his
demand in writing within 30 days after the subject corporation
made or offered payment for his shares.
NRS 92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE:
DUTIES OF SUBJECT CORPORATION; POWERS OF COURT; RIGHTS OF
DISSENTER.
1. If a demand for payment remains unsettled, the subject
corporation shall commence a proceeding within 60 days after
receiving the demand and petition the court to determine the fair
value of the shares and accrued interest. If the subject
corporation does not commence the proceeding within the 60-day
period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in
the district court of the county where its registered office is
located. If the subject corporation is a foreign entity without
a resident agent in the state, it shall commence the proceeding
in the county where the registered office of the domestic
corporation merged with or whose shares were acquired by the
foreign entity was located.
3. The subject corporation shall make all dissenters,
whether or not residents of Nevada, whose demands remain
unsettled, parties to the proceeding as in an action against
their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified
mail or by publication as provided by law.
4. The jurisdiction of the court in which the proceeding is
commenced under subsection 2 is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The
appraisers have the powers described in the order appointing
them, or any amendment thereto. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is
entitled to a judgment:
(a) For the amount, if any, by which the court finds the
fair value of his shares, plus interest, exceeds the amount paid
by the subject corporation; or
(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the subject corporation elected
to withhold payment pursuant to NRS 92A.470.
NRS 92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE:
ASSESSMENT OF COSTS AND FEES.
1. The court in a proceeding to determine fair value shall
determine all of the costs of the proceeding, including the
reasonable compensation and expenses of any appraisers appointed
by the court. The court shall assess the costs against the
subject corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding
payment.
2. The court may also assess the fees and expenses of the
counsel and experts for the respective parties, in amounts the
court finds equitable:
(a) Against the subject corporation and in favor of all
dissenters if the court finds the subject corporation did not
substantially comply with the requirements of NRS 92A.300 to
92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith with respect to the
rights provided by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the subject corporation, the court may
award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.
4. In a proceeding commenced pursuant to NRS 92A.460, the
court may assess the costs against the subject corporation,
except that the court may assess costs against all or some of the
dissenters who are parties to the proceeding, in amounts the
court finds equitable, to the extent the court finds that such
parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding
commenced pursuant to NRS 92A.460 or 92A.490 from applying the
provisions of N.R.C.P. 68 or NRS 17.115.
<PAGE>
EXHIBIT D
ASSET CONTRIBUTION AGREEMENT
BETWEEN
BACHKINE & MEYER INDUSTRIES, S.A.
and
SW VENTURES, INC.
AND
GUIDO CLOETENS
As of April 14, 1999
<PAGE>
TABLE OF CONTENTS
Page
RECITALS i
ARTICLE I CONTRIBUTION AND CLOSING 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF CLOETENS 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SWV 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BMI 11
ARTICLE V ADDITIONAL AGREEMENTS OF THE PARTIES 12
ARTICLE VI CONDITIONS OF BMI 14
ARTICLE VII CONDITIONS OF SWV AND CLOETENS 15
ARTICLE VIII INDEMNIFICATION 16
ARTICLE IX OTHER PROVISIONS 19
<PAGE>
ASSET CONTRIBUTION AGREEMENT
THIS ASSET CONTRIBUTION AGREEMENT ("Agreement"), is made and
entered into as of this 14th day of April, 1999, by and between
Bachkine & Meyer Industries, S.A., a British Virgin Islands
corporation ("BMI,"), on one part, and SW Ventures, Inc., a
Nevada corporation ("SWV") and Guido Cloetens, an individual
resident of Belgium ("Cloetens") on the other part.
RECITALS
BMI and its wholly owned subsidiary, BAMI Intelligence, S.A.
("BAMI") (References herein to BMI include both BMI and BAMI) are
the owners of a processing and recycling technology that is
capable of producing discrete plastic polymers from a stream of
either mixed virgin resins or mixed plastic waste without the
necessity of expensive compatibilizers (the "New Generation
PlasticTM Process") The assets, including, the patents,
trademarks, know-how, proprietary process control software, the
NGP BT-30 (the "Bench Top Unit")(that BMI is currently
assembling), certain contractual rights and agreements and all
other related assets and liabilities that form the basis of the
New Generation Plastic(tm) Process are referred to herein as the
"NGP Assets."
SWV is currently a reporting company under Section 12(g) of
the Securities Exchange Act of 1934 (the "Exchange Act").
However, none of the outstanding common stock of SWV is currently
registered under the Securities Act of 1933 (the "Securities
Act").
Cloetens, as the record owner of more than 50% of the
currently outstanding common stock of SWV, has agreed to vote his
shares in favor of the transactions contemplated by this
Agreement.
In accordance with the provisions of this Agreement, after
the completion of the Reorganization (as defined herein) required
by Article V of this Agreement, BMI desires to contribute the NGP
Assets owned by BMI or BAMI to New Generation Plastic, Inc. ("NGP
Delaware"), a Delaware corporation, in exchange for 11,580,000
shares of the common stock of NGP Delaware (the "NGP
Contribution"). The parties intend that the NGP Contribution
qualifies for tax free treatment under Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code").
Throughout this Agreement various Schedules are referenced
as being attached to this Agreement. Notwithstanding anything
herein to the contrary, this Agreement may be executed without
any Schedules attached hereto and if so executed shall be valid
and binding without regard to the contemplated Schedules until
same are attached in final form and delivered to the other party
for review at Closing.
ARTICLE I
Contribution and Closing
Section 1.1 Incorporation of Recitals and Preamble. The
recitals and preamble set forth above are incorporated herein by
reference and are a part of this Agreement.
Section 1.2 Time and Place for Closing. Closing under this
Agreement shall take place within fifteen (15) days after the
conditions set forth in Article VI and Article VII being
satisfied or waived, time being of the essence, at the offices of
BMI, Rue de la Rotisserie 29, Geneva, Switzerland, or such other
place as the parties hereto may agree upon. The date that
Closing occurs is referred to hereinafter as the "Closing Date"
and the act of closing as "Closing." The exact Closing Date
shall be established by mutual consent of BMI and SWV.
Section 1.3 Agreement to Contribute the NGP Assets;
Issuance of Common Stock. At the Closing, BMI agrees to assign,
transfer and deliver to NGP Delaware all of its right title and
interest in the NGP Assets (a list of the NGP Assets is attached
hereto as Schedule 1.3) currently owned by BMI and /or BAMI to
NGP Delaware, and NGP Delaware shall deliver to BMI 11,580,000
shares (the "NGP Delaware Stock") of the common stock of NGP
Delaware (the "NGP Contribution").
Section 1.4 Closing. Following execution of this
Agreement, BMI and SWV shall be obligated to conclude the
transaction strictly in accordance with its terms within five (5)
days after the conditions of Closing set forth in Article VI and
Article VII have been satisfied or waived, time being of the
essence. If the failure to conclude this transaction is due to
the refusal and failure of SWV and/or Cloetens to perform their
obligations under this Agreement, BMI may seek to enforce this
Agreement with an action of specific performance, in addition to,
and not in limitation of, any other rights and remedies available
to BMI under this Agreement, or at law or in equity, including,
without limitation an action to recover its actual damages
resulting from the default of SWV and/or Cloetens. If the
failure to conclude this transaction is due to the refusal and
failure of BMI to perform its obligations under this Agreement,
SWV may seek to enforce this Agreement with an action of specific
performance, in addition to and not in limitation of any other
rights and remedies available to SWV under this Agreement, or at
law or in equity, including without limitation an action to
recover his actual damages resulting from the default of BMI.
Section 1.5 Termination. This Agreement and the
transactions contemplated hereby may be terminated at any time
prior to the Closing Date:
(a) by mutual written agreement of BMI and SWV and
Cloetens;
(b) by BMI within the later of thirty (30) days after the
date of this Agreement or five (5) days after all Schedules to be
prepared by SWV are delivered to BMI, if BMI is not satisfied, in
its sole discretion, with the due diligence it has conducted on
SWV;
(c) by BMI or SWV, in the event the other makes a material
misrepresentation under this Agreement or breaches a material
covenant or agreement under this Agreement which is not cured
within fifteen (15) days after notice is received; or
(d) by BMI or SWV, if the Closing shall not have occurred
by June 30, 1999, or such other date as may be agreed to by all
of the parties hereto in writing, due to the non-fulfillment of a
condition precedent to such party's obligation to close as set
forth at Article VI or VII hereof, as applicable (through no
fault or breach by the terminating party).
In the event this Agreement is terminated as provided
herein, this Agreement shall become void and be of no further
force and effect and no party hereto shall have any further
liability to any other party hereto, except that Section 1.5,
Section 9.1 and Section 9.15 shall survive and continue in full
force and effect, notwithstanding termination. The termination
of this Agreement shall not limit, waive or prejudice the
remedies available to the parties, at law or in equity, for a
breach of this Agreement. If this Agreement is terminated, all
due diligence and other documentation delivered to BMI by SWV
shall be returned promptly to SWV.
Section 1.6 Deliveries by SWV. At the Closing, SWV shall
deliver or cause to be delivered, all duly and properly executed,
authorized and issued (where applicable):
(a) Certificates representing the NGP Delaware Stock, as
provided in Section 1.3 above;
(b) Resignations of Officers in the form attached a
Schedule 1.6(b); and
(c) A favorable opinion from counsel for SWV, dated the
Closing Date, in the form attached as Schedule 1.6(c).
Section 1.7 Deliveries by BMI. At the Closing, BMI shall
deliver to SWV or cause to be delivered, all duly and properly
executed, authorized and issued (where applicable) the following:
(a) Duly executed Assignments of the NPG Assets in the forms
attached as Schedule 1.7(a); and
(b) An opinion from counsel for BMI, dated the Closing Date, in
form attached as Schedule 1.7(b).
ARTICLE II
Representations and Warranties of Cloetens
With knowledge that BMI is relying upon the representations,
warranties and covenants herein contained, Cloetens represents
and warrants to BMI and makes the following covenants for BMI's
benefit.
Section 2.1 Authority Relative to this Agreement. Cloetens has
full authority to enter into and perform his obligations under
this Agreement and the Collateral Documents, and neither the
execution, delivery nor performance by Cloetens of this Agreement
or the Collateral Documents will (i) result in a violation or
breach of any term or provision nor constitute a default under
any contract or agreement to which Cloetens is a party or by
which he is bound, or violate any order, writ, injunction or
decree of any court, administrative agency or governmental body,
or (ii) result in a violation or breach of any term or provision,
or constitute a default or accelerate the performance required,
under any indenture, mortgage, deed of trust or other contract or
agreement to which Cloetens is a party or by which he or his
properties is bound.
Section 2.2 Majority Ownership of SWV. Cloetens is the sole
owner of and possesses sole voting power over 1,838,000 shares of
the common stock of SWV. As such, Cloetens possesses a majority
of the voting power of the outstanding shares of SWV.
ARTICLE III
Representations and Warranties of SWV
With knowledge that BMI is relying upon the representations,
warranties and covenants herein contained, SWV represents and
warrants to BMI and makes the following covenants for BMI's
benefit. When the phrase "to SWV's knowledge" or any equivalent
phrase is used in this Agreement, the phrase shall mean the
actual knowledge of SWV or the information and/or knowledge of an
officer or director of SWV acting with reasonable diligence in
the conduct of his or her duties as an officer or director.
Section 3.1 Organization and Standing. SWV is duly organized,
validly existing and in good standing under the laws of the State
of Nevada, with full power and authority to own its properties
and conduct its business as now being conducted. Except as
listed in Schedule 3.1, SWV does not own any stock or interest in
any other corporation, partnership, or other business
organization.
Section 3.2 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and the Collateral
Documents by SWV have been duly authorized and approved by the
Board of Directors of SWV and as of the Closing Date by the
shareholders of SWV. No further corporate action is necessary on
the part of SWV to consummate this Agreement and the Collateral
Documents in accordance with their terms. SWV has full authority
to enter into and perform its obligations under this Agreement
and the Collateral Documents, and neither the execution, delivery
nor performance by SWV of this Agreement or the Collateral
Documents will (i) result in a violation or breach of any term or
provision nor constitute a default under the certificate of
incorporation or bylaws of SWV or under any contract or agreement
to which SWV is a party or by which it is bound, or violate any
order, writ, injunction or decree of any court, administrative
agency or governmental body, or (ii) result in a violation or
breach of any term or provision, or constitute a default or
accelerate the performance required, under any indenture,
mortgage, deed of trust or other contract or agreement to which
SWV is a party or by which it or its properties is bound.
Section 3.3 Securities. SWV has the authorized and
outstanding securities set forth on Schedule 3.3. All
outstanding shares of stock are legally and validly authorized
and issued, fully-paid and nonassessable. There are no
outstanding rights of any kind to acquire additional shares of
any class of stock of SWV, except as set forth on Schedule 3.3.
Section 3.4 Contracts, Permits and Material Documents.
The items listed in Schedule 3.4 attached hereto are all of the
following ("Material Documents") with respect to SWV which
provide a benefit or impose a detriment of a value of $5,000 or
more: (i) leases for real and personal property, (ii) licenses,
(iii) franchises, (iv) promissory notes, guarantees, bonds,
mortgages, liens, pledges, and security agreements under which
SWV is bound or under which SWV is the beneficiary, (v)
collective bargaining agreements, (vi) patents, trademarks, trade
names, copyrights, trade secrets, proprietary rights, symbols,
service marks, and logos, (vii) all permits, licenses, consents
and other approvals from governments, governmental agencies
(federal, state and local) and/or third parties relating to, used
in or required for the operation of any of the business of SWV,
(viii) all surety bonds, closure bonds or any other obligation
which SWV has liability for with respect to its operations and
(ix) other contracts, agreements and instruments not listed on
another Schedule attached to this Agreement which are binding on
SWV or any of its property and pursuant to which SWV derives a
benefit or incurs a detriment having a value of $15,000 or more.
Except as set forth on Schedule 3.4, neither SWV nor any person
or party to any of the Material Documents or bound thereby is in
material default under any of the Material Documents, and, to the
knowledge of SWV, no act or event has occurred which with notice
or lapse of time, or both, would constitute such a default. SWV
is not a party to, and none of SWV's properties are bound by, any
agreement or instrument which is material to the continued
conduct of business operations of SWV, as now being conducted,
except as listed in Schedule 3.4.
Section 3.5 Personal Property. All items of personal property
used in the business of SWV (the "Business") are listed on
Schedule 3.5. All such items are owned by SWV by good and
marketable title free of all liens and are now and at closing
will be in good condition, normal wear and tear excepted, and
except as noted on Schedule 3.5.
Section 3.6 Real Property. SWV has never owned, leased or
otherwise occupied, had an interest in or operated any real
property other than the real property (the "Real Property")
listed on Schedule 3.6 attached hereto and incorporated herein by
reference. SWV has good, marketable and insurable title to the
Real Property.
(a) In all material respects, except as set forth in Schedule
3.6(a) attached hereto and incorporated herein, the Real Property
is, and at all times during operation of the Business thereon has
been, licensed, permitted and authorized for the operation of
such Business under all applicable federal, state and local
statutes, laws, rules, regulations, orders, permits (including,
without limitation, zoning restrictions and land use
requirements) and licenses and all administrative and judicial
judgments, rulings, decisions and orders affecting or otherwise
applicable to the protection of the environment and the Real
Property (collectively, the "Applicable Laws").
(b) Except as set forth in Schedule 3.6(b) attached hereto and
incorporated herein by reference, all activities and operations
conducted on the Real Property, whether by SWV or by third
parties, are now being conducted and, to SWV's knowledge, have
always been conducted in compliance with all Applicable Laws.
(c) SWV shall make available on BMI's reasonable request all
engineering, geologic, environmental and other similar reports,
documentation and maps relating to the Real Property in the
possession or control of the SWV or its consultants or employed
professional firms.
(d) Except as set forth in Schedule 3.6(d) attached hereto
and incorporated herein by reference, neither SWV nor the Real
Property now is or ever has been involved in any litigation or
administrative proceeding seeking to impose fines, penalties or
other liabilities or seeking injunctive relief for violation of
any Applicable Laws relating to the environment.
(e) To SWV's knowledge, there have been no spills, leaks,
deposits or other releases into the environment or onto or under
the Real Property of any Hazardous Materials as defined in any
Applicable Law or other material environmental conditions other
than as disclosed on Schedule 3.6(e).
(f) No party, other than SWV, has a present or future right to
possession of all or any part of the Real Property, except for
any right defined in, under or by any of the Permitted
Exceptions.
(g) No portion of the Real Property contains any areas that
could be characterized as disturbed, undisturbed or man-made
wetlands or as "waters of the United States" pursuant to any
Applicable Laws or the procedural manuals of the Environmental
Protection Agency, U.S. Army Corps of Engineers or the [Nevada
Department of Environmental Protection] whether such
characterization reflects current conditions or historic
conditions which have been altered without the necessary permits
or approvals, except as listed on Schedule 3.6(g) attached hereto
and incorporated herein by reference.
(h) There are no mechanic's liens affecting the Real Property
and no work has been performed on the Real Property within twelve
(12) months of the date hereof for which a mechanic's lien could
be filed, except as set forth in Schedule 3.6(h) attached hereto
and incorporated herein by reference.
(i) There are no levied or pending special assessments affecting
all or any part of the Real Property owed to any governmental
entity and none is threatened.
Section 3.7 Liabilities. SWV does not have any liabilities,
fixed or contingent, other than:
(a) liabilities fully reflected in the Most Recent Balance Sheet,
except for liabilities not required to be disclosed therein in
accordance with GAAP; and
(b) accounts payable arising since the date of the Most Recent
Balance Sheet arising during the normal course of business
consistent with past custom and practice.
Section 3.8 Fiscal Condition of SWV. Since the date of the Most
Recent Balance Sheet, except as set forth in Schedule 3.8, there
has not (except as otherwise specifically permitted by this
Agreement or as set forth in the Schedules to this Agreement)
been:
(a) Any material adverse change in the financial condition,
business organization or personnel of SWV or in the relationships
of SWV with third parties;
(b) Any disposition by SWV of any of its capital stock or any
grant of any option or right to acquire any of its capital stock,
or any acquisition or retirement by SWV of any of its capital
stock or any declaration or payment of any dividend or other
distribution of its capital stock;
(c) Any sale or other disposition of any asset owned by any of
SWV at the close of business on the date of the Most Recent
Balance Sheet, or acquired by it since that date, other than in
the ordinary course of business consistent with past practice or
in accordance with the terms of this Agreement;
(d) Except as set forth in Section 3.8(d), any expenditure or
commitment by SWV for the acquisition of any single asset or any
single business;
(e) Except as set forth in Section 3.8(e), any material bonuses
or increases in the compensation payable or to become payable by
SWV to any officer or key employee, except in the ordinary course
of business or as required by law or pursuant to a contract which
is listed on a Schedule to this Agreement;
(f) Except as set forth in Section 3.8(f), any loans or advances
to or by SWV other than renewals or extensions of existing
indebtedness and other than in the ordinary course of business
consistent with past practice; or
(h) Any change in accounting method or practice.
Section 3.9 Tax Returns. SWV has filed all Federal and other tax
returns for all periods on or before the due date of such return
(as may have been extended by any valid extension of time) and
has paid all taxes due for the periods covered by the said
returns. SWV has no liability for taxes incurred by their
operations prior to Closing, except for taxes for the current
fiscal year in an amount not exceeding the reserve therefor on
the Most Recent Balance Sheet. SWV is a Subchapter C corporation
under the Internal Revenue Service Code. Cloetens warrants that
it will pay with his own funds any and all federal, state and
local taxes due and payable by SWV with respect to all periods
prior to the Closing, to the extent such taxes exceed the
reserves for taxes established on SWV's Most Recent Balance
Sheet, including, without limiting the generality of the
foregoing, all federal, state and local income, sales, use,
payroll, franchise, excise and property taxes. The reserves for
all taxes reflected in the Most Recent Balance Sheet, if any, are
adequate to cover all taxes, interest and penalties in connection
therewith that may be assessed with respect to the property and
business operations for the period(s) ending on the Closing Date
and for all prior periods. SWV has filed or timely extended the
time for filing and will file, in a timely manner, all requisite
federal, state, local and other tax returns due for all fiscal
periods ended on or before the date hereof and as of the Closing
shall have filed in a timely manner all such returns due for all
periods ended on or before the Closing Date. No federal, state,
local or other tax returns or reports filed by SWV (whether filed
prior to, on, or after the date hereof), will result in any
taxes, assessments, fees or other governmental charges in excess
of the amounts reserved for on the Most Recent Balance Sheet.
SWV has duly withheld and collected all taxes which SWV is
required to withhold or collect by law, has paid over to the
proper authorities all such amounts required to be paid, and has
in reserve all amounts so withheld or collected which have not
yet been required to be paid. No taxing authority has asserted
any deficiency for any prior tax period of SWV, and to SWV's
knowledge, there are no facts which would constitute the basis
for the assertion of such a deficiency.
Section 3.10 Policies of Insurance. All insurance policies,
performance bonds, and letters of credit insuring SWV or which
SWV has had issued and which have not expired are listed on
Schedule 3.10 attached hereto. Schedule 3.10 includes the names
and addresses of the insurers and sureties, policy and bond
numbers, types of coverage or bond, time periods or projects
covered and the names and addresses of all known banks,
beneficiaries, agents or agencies with respect to each listed
insurance policy, performance bond and letter of credit. All
current insurance policies, performance bonds and letters of
credits of SWV are in force and effect and the premiums thereon
are not delinquent. Except as set forth in Schedule 3.10, SWV
has not received any notification from any insurance carrier
denying or disputing any claim made by SWV or denying or
disputing any coverage for any such claim or denying or disputing
the amount of any claim. SWV has no claim against any of its
insurance carriers under any of policies insuring it pending or
anticipated and there has been no occurrence of any kind which
would give rise to any such claim.
Section 3.11 Employees, Pensions, and ERISA.
(a) SWV does not have, nor has it ever had, any employees.
(b) SWV does not have, nor has it ever had, any employee benefit
plans, funds or programs (within the meaning of the Code or the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")) which are currently maintained and/or were established
or sponsored by SWV (whether or not they are now terminated) or
to which SWV currently contributes, or has an obligation to
contribute in the future, including, without limitation,
employment agreements and any other agreements containing "golden
parachute" provisions ("Plans"), whether or not the Plans are or
are intended to be (i) covered or qualified under the Code, ERISA
or any other applicable law, (ii) written or oral, (iii) funded
or unfunded, or (iv) generally available to all employees of SWV.
Section 3.12 Legality of Operation. In regard to SWV:
(a) Except as disclosed in Schedule 3.12(a) to this Agreement,
and except as to Environmental Laws, as hereinafter defined in
Section 3.12(b) below, SWV is in substantial compliance with all
federal, state and local laws, rules and regulations including,
without limitation, the following laws: land use or zoning laws;
payroll, employment, labor, interstate commerce, transportation
or safety laws; or federal, state or local "anti-trust" or
"unfair competition" or "racketeering" laws such as but not
limited to the Sherman Act, Clayton Act, Robinson Patman Act,
Federal Trade Commission Act, or Racketeer Influenced and Corrupt
Organization Act (collectively, "Law"). Except as disclosed in
Schedule 3.12(a), SWV is in substantial compliance with all
permits, franchises, licenses, and orders that have been issued
with respect to the Laws and are or may be applicable to any of
their property and operations, including, without limitation, any
order, decree or directive of any court or federal, state,
municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal,
state and local permits, orders, franchises and consents. Except
as set forth on Schedule 3.12(a), with respect to any Law there
are no claims, actions, suits, investigations or proceedings
pending, or to SWV's knowledge, threatened against or affecting
SWV, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, wherever located, which would
result in any adverse change in the financial condition or
business of SWV or which would invalidate this Agreement or any
action taken in connection with this Agreement. Except as
disclosed in Schedule 3.12(a), SWV has received no notification
of any past or present failure by SWV to comply with any Law
applicable to it or its assets.
(b) Except as disclosed in Schedule 3.12(b) to this Agreement,
SWV is in compliance with all federal, state and local laws,
rules and regulations relating to environmental issues of any
kind ("Environmental Law"). Except as disclosed in Schedule
3.12(b), with respect to any Environmental Law, SWV is in
compliance with all permits, licenses, and orders related thereto
or issued thereunder, as are or may be applicable to the property
and operations of SWV, including, without limitation, any order,
decree or directive of any court or federal, state, municipal, or
other governmental department, commission, board, bureau, agency
or instrumentality wherever located. Except as set forth on
Schedule 3.12(b), there are no Environmental Law related claims,
actions, suits or proceedings pending or to SWV's knowledge
threatened against or affecting SWV, at law or in equity, or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
wherever located, which would result in an adverse change in the
financial condition or business of SWV or which would invalidate
this Agreement or any action taken in connection with this
Agreement.
(c) Except as set forth in Schedule 3.12(c), to SWV's knowledge,
no employee, officer, director, or shareholder of SWV is under
investigation by the Attorney General of any state, by the
District Attorney of any county of any state, or by any United
States Attorney or any other governmental investigative agency
for the violation of any Laws, including, without limitation, the
violation of any anti-trust, racketeering, securities or unfair
competition Laws.
(d) All pending or to SWV's knowledge threatened litigation and
administrative or judicial proceedings involving SWV, or its
assets or liabilities, are set forth on Schedule 3.12(d)
attached, together with a description of each such proceeding.
Section 3.13 Working Interest in the Montana Prospect. Except as
disclosed in Schedule 3.13 to this Agreement, the Montana
Prospect, a 320 acre oil lease in Crook County, Wyoming (the
"Montana Prospect"), in which SWV has a working interest, is in
compliance with all federal, state and local laws, rules and
regulations relating to environmental issues of any kind
("Environmental Law"). Except as disclosed in Schedule 3.13,
with respect to any Environmental Law, the Montana Prospect is in
compliance with all permits, licenses, and orders related thereto
or issued thereunder, as are or may be applicable to the property
and operations of the Montana Prospect, including, without
limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality wherever
located. Except as set forth on Schedule 3.12(b), there are no
Environmental Law related claims, actions, suits or proceedings
pending or to SWV's knowledge threatened against or affecting the
Montana Prospect, at law or in equity, or before or by any
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, wherever
located, which would result in an adverse change in the financial
condition or business of the Montana Prospect.
Section 3.14 Corrupt Practices. SWV has not made, offered or
agreed to offer anything of value to any employees of any
customers of SWV (except in conformity with Law) for the purpose
of attracting business to SWV or any foreign or domestic
governmental official, political party or candidate for
government office or any of their respective employees or
representatives, nor has SWV otherwise taken any action which
would cause it to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended.
Section 3.15 Legal Compliance. SWV has the right, power, legal
capacity and authority to enter into, and perform each of its
obligations under this Agreement, and, except as set forth in
Schedule 3.15, no approvals or consents of any other persons,
business or governmental units are necessary to be obtained by
SWV in connection with the transactions, filings with or notices
to, contemplated by this Agreement. Except as disclosed in
Schedule 3.15 to this Agreement, the execution and performance of
this Agreement will not result in a material breach of or
constitute a material default or result in the loss of any
material right or benefit under:
(a) Any charter, by-law, agreement or other document to which
SWV is a party or by which the SWV or any of its properties are
bound, including, without limitation, any agreement by or between
any shareholder of SWV; or
(b) Any decree, order or rule of any court or governmental
authority which is binding on SWV or on any property of SWV; or
(c) Any permit, certificate or license issued by any
governmental authority under which SWV operates or pursuant to
which any of the property of SWV is bound; or
(d) Any agreement to which SWV is bound, including, without
limitation, bank loan documents, agreements with customers or
suppliers and leases for equipment.
Section 3.16 Transaction Intermediaries. Except as disclosed in
Schedule 3.16, SWV has no agreement or understanding with any
agent, broker, financial advisor or other person acting pursuant
to the express authority of SWV with respect to any commission or
finder's fee in connection with the transactions contemplated by
this Agreement.
Section 3.17 Intellectual Property. To SWV's knowledge, SWV has
not infringed, and is not now infringing, on any trade name,
trademark, service mark or copyright belonging to any person,
firm or corporation ("Intellectual Property") and no one has or
is infringing any Intellectual Property right of SWV. SWV owns
or has legally licensed all computer software used in connection
with its business and has not infringed, and is not now
infringing, on the rights of any third parties by its use of
computer software.
Section 3.18 SEC Filings. SWV has delivered to BMI all
historical filings made by SWV on Forms 8-K, 10-KSB, 10-QSB and
Proxy Statements timely filed with the Securities and Exchange
Commission ("SEC") for fiscal years ending December 31, 1998 (the
"Public Reports"). The Public Reports accurately and completely
describe, in all material respects, SWV's financial status,
business operations and prospects as of the date of such filings
and as of the date hereof, and do not omit any material fact(s)
necessary to make the information contained in the filings not
misleading.
Section 3.19 Issued Common Stock. The NGP Delaware Stock to be
issued pursuant to this Agreement has been duly authorized and,
when issued, will be validly issued, fully paid and
nonassessable.
Section 3.20 Disclosure. The representations and warranties of
SWV contained in this Agreement, or in any Schedule or other
document delivered by SWV pursuant hereto, do not contain any
untrue statement of a material fact, or omit any statement of a
material fact necessary to make the statements contained not
misleading. If, prior to Closing, SWV becomes aware of any
inaccuracy or misrepresentation or omission in any of the
Schedules, SWV shall immediately advise BMI in writing of the
inaccuracy, misrepresentation or omission.
ARTICLE IV
Representations and Warranties of BMI
With knowledge that SWV is relying upon the representations,
warranties and covenants contained herein, BMI represents and
warrants to SWV and makes the following covenants for SWV's
benefit.
Section 4.1 Organization and Existence. BMI is a corporation
duly organized, validly existing and in good standing under the
laws of the British Virgin Islands and has all requisite
corporate power and authority to carry on its business as now
conducted. BMI has all requisite corporate power and authority
to consummate the transactions contemplated by this Agreement.
Section 4.2 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and the Collateral
Documents by BMI has been duly authorized and approved by the
Board of Directors of BMI. No further corporate action is
necessary on the part of BMI to consummate this Agreement and the
Collateral Documents in accordance with their terms. BMI has
full authority to enter into and perform its obligations under
this Agreement and the Collateral Documents, and neither the
execution, delivery nor performance by BMI of this Agreement or
the Collateral Documents will (i) result in a violation or breach
of any term or provision nor constitute a default under the
certificate of incorporation or bylaws of BMI or under any
contract or agreement to which BMI is a party or by which it is
bound, or violate any order, writ, injunction or decree of any
court, administrative agency or governmental body, or (ii) result
in a violation or breach of any term or provision, or constitute
a default or accelerate the performance required, under any
indenture, mortgage, deed of trust or other contract or agreement
to which BMI is a party or by which it or its properties is
bound.
Section 4.3 NGP Assets. BMI and/or BAMI have all right title and
interest to the NGP Assets (attached hereto as Schedule 1.3) free
of any liens.
Section 4.4 Transaction Intermediaries. Except for Section 5.1,
BMI has no agreement or understanding with any agent, broker,
financial advisor or other person acting pursuant to the express
authority of BMI with respect to any commission or finder's fee
in connection with the transactions contemplated by this
Agreement.
ARTICLE V
Additional Agreements of the Parties
The parties hereto covenant and agree with the other, as
applicable, as follows:
Section 5.1 The Reorganization. Subject to SWV Shareholder
approval, SWV has agreed, prior to Closing, to: (X) effect the
disposition and/or distribution of all of its non-cash assets,
including, without limitation, any limited partnership interest
in a working interest in the Montana Prospect (the "Working
Interest") and to satisfy or otherwise extinguish all liabilities
(the "SWV Purge") and (Y) form NGP Delaware and to merge (the
"Delaware Merger") SWV into NGP Delaware, with NGP Delaware as
the survivor (The SWV Purge and the Delaware Merger are referred
to herein collectively as, the "Reorganization").
(a) Terms of the SWV Purge. SWV may determine, in its
discretion, the nature of the transaction by which the SWV Purge
shall be accomplished, provided, that, the SWV Purge must be
completed prior to the Delaware Merger. It is presently
contemplated that SWV will effect the SWV Purge by means of a
"spin off" on a pro rata basis of the stock of a newly formed
subsidiary to which SWV shall have previously contributed all of
its assets and liabilities. To the extent that the transactions
contemplated by the SWV Purge give rise to any federal and/or
state income tax liability, SWV agrees that it shall ensure that
prior to the closing of the NGP Contribution such liabilities are
paid in full or that the cash necessary to satisfy such tax
liabilities is on hand in NGP Delaware.
(b) Terms of the Delaware Merger. The terms of the Delaware
Domicile Merger shall provide that, upon the effectiveness, each
shareholder of SWV shall receive one (1) share of the common
stock of NGP Delaware for every fifteen (15) shares of the common
stock of SWV. The number of authorized shares of NGP Delaware
shall be 50,000,000. Except for the conversion ratio above, the
terms of the NGP Delaware common stock shall be identical to the
terms of the common stock of SWV. As a result of the Delaware
Merger, prior to the NGP Contribution, the former shareholders of
SWV will hold 227,733 shares of stock of NGP Delaware. On the
formation of NGP Delaware, SWV shall appoint the persons
designated by BMI as the Directors of NGP Delaware.
(c) Finder's Shares and Options. SWV and BMI agree that after
the Delaware Merger and prior to the Closing of the NGP
Contribution, NGP Delaware will issue 20,000 shares of its common
stock to E. T. International Limited (P.O. Box 235, 14 New
Street, St. Peter Port Guernsey, UK GY14LE) as a finder's fee.
In addition, NGP Delaware will enter into Consulting Agreements
with Cloetens or a company designated by Cloetens that provide
for grants, under a NGP Delaware Stock Option Plan of an
aggregate of 50,000 five (5) year options (the "Options") (10,000
at $7.50, $8.00, $8.50, $9.00 and $9.50, respectively), to
purchase publicly registered shares of common stock of NGP
Delaware.
Section 5.2 Proxy Statement. SWV has agreed to prepare and file
a Proxy Statement (the "Proxy Statement") pursuant to Regulation
14A, giving notice of a special meeting of shareholders to the
record owners of SWV. The Proxy Statement shall be filed with
the Securities and Exchange Commission (the "SEC") no later than
thirty (30) days after the date of this Agreement. In accordance
with SEC rules, the Proxy Statement will be sent to the record
shareholders of SWV giving them notice of the time and place of a
special meeting of the shareholders on a date no more than twenty
(20) after the date of mailing of the Proxy Statement. The Proxy
Statement shall seek proxies for the approval of the following
actions:
(i) The Reorganization.
(ii) The SWV Purge.
(iii) The ratification and approval of the NGP Contribution,
including without limitation, the issuance of common stock to
BMI.
(iv) Any other matter that may properly come before the meeting
of the shareholders.
Section 5.3 Access to Records. SWV will give to BMI and its
representatives, from the date hereof until the Closing Date,
full access during normal business hours, upon reasonable notice,
to all of the properties, books, contracts, documents and records
of SWV, and will make available to BMI and its representatives
all additional financial statements of and all information with
respect to the business and affairs of SWV that BMI may
reasonably request.
Section 5.4 Continuation of Insurance. SWV will keep in
existence all policies of insurance insuring SWV against
liability and property damage, fire and other casualty through
the Closing Date, consistent with the policies currently in
effect.
Section 5.5 Standstill Agreement. Until the Closing Date,
unless this Agreement is earlier terminated pursuant to the
provisions hereof, SWV will not, directly or indirectly, solicit
offers for the shares or the assets of SWV or for a merger or
consolidation involving SWV, or respond to inquiries from, share
information with, negotiate with or in any way facilitate
inquiries or offers from, third parties who express or who have
heretofore expressed an interest in acquiring SWV by merger,
consolidation or other combination or acquiring any of SWV's
assets.
Section 5.6 Payment of Expenses. Each party will pay its own
expenses incurred in conjunction with this Agreement, the
Collateral Documents and the transactions contemplated thereby,
including all fees and expenses of counsel and accountants and
any broker or finder commission, whether or not such transaction
is completed. It is acknowledged by the parties, that BMI will
bear the cost of the preparation of the Proxy Statement by its
attorneys and that SWV shall bear the cost of its attorney's
review of the Proxy Statement.
Section 5.7 Vote by Cloetens; Board Recommendation. Cloetens
hereby agrees that he will vote all of his shares of SWV common
stock in favor of all the actions to be taken hereunder that
require SWV shareholder approval and that he will execute any
agreement, proxy or other document as may be reasonably required
by BMI to ensure his vote. Further, Cloetens agrees that a
statement to the effect that he will vote in favor of the actions
will be included in the Proxy Statement. The Board of Directors
of SWV agree that it will recommend the approval of the
Reorganization and the NGP Contribution to the shareholders of
SWV.
Section 5.9 Consents. SWV and BMI shall cooperate with each
other and use their reasonable best efforts to obtain all
approvals, authorizations and consents required to be obtained to
consummate the transaction set forth in this Agreement,
including, the approval of every regulatory agency of federal,
state, or local government that may be required in the opinion of
either BMI or SWV.
ARTICLE VI
Conditions of BMI
The obligations of BMI to effect the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to
the Closing Date of each of the following items that are
conditions to the Closing:
Section 6.1 Compliance by SWV and Cloetens. SWV and Cloetens
shall have performed and complied with all material obligations
and conditions required by this Agreement to be performed or
complied with by SWV and Cloetens at or prior to the Closing
Date, including, without limitation, Sections 5.1 and 5.2. All
representations and warranties of SWV and Cloetens contained in
this Agreement shall be true and correct in all material respects
at and as of the Closing Date, with the same force and effect as
though made at and as of the Closing Date, except for changes
expressly permitted by this Agreement, and BMI shall have
received a Certificate duly executed by the President of SWV
representing and warranting the foregoing.
Section 6.2 Litigation Affecting This Transaction. There
shall be no actual or threatened action by or before any court
which seeks to restrain, prohibit or invalidate the transactions
contemplated by this Agreement or which might affect the right of
BMI to own the NGP Delaware Stock or control SWV or the business
SWV operates, which, as a result of the transactions contemplated
by this Agreement, might affect such right as to BMI or any
affiliate thereof subsequent to the Closing Date and which, in
the judgment of the Board of Directors of BMI, made in good faith
and based upon advice of its counsel, makes it inadvisable to
proceed with the transactions contemplated by this Agreement.
Section 6.3 Fiscal Condition of Business. There shall have been
no material adverse change in the results of operations,
financial condition or business of SWV.
Section 6.4 Opinions of Counsel. SWV shall have delivered to
BMI the opinion of counsel, dated the Closing Date, in the form
annexed hereto as Schedule 1.6(c).
Section 6.5 Consents. All approvals, authorizations and
consents required to be obtained shall have been obtained. BMI
shall have been furnished with appropriate evidence, reasonably
satisfactory to BMI and its counsel, of the granting of such
approvals, authorizations and consents.
Section 6.6 Phase 1 Environmental Survey. BMI shall have
ordered, at its sole cost and expense, and received a Phase 1
Environmental survey of the Montana Prospect that is satisfactory
to BMI in its sole discretion.
ARTICLE VII
Conditions of SWV
The obligations of SWV to effect the transaction contemplated by
this Agreement shall be subject to the fulfillment at or prior to
the Closing Date of each of the following conditions:
Section 7.1 Compliance by BMI. BMI shall have performed and
complied with all material obligations and conditions required by
this Agreement to be performed or complied with by it at or prior
to the Closing Date. All representations and warranties of BMI
contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date, with the same
force and effect as though made at and as of the Closing Date,
except for changes expressly permitted by this Agreement.
Section 7.3 Material Adverse Change. There shall not have been,
and on the Closing Date shall not be in existence, any event,
condition or state of facts which could reasonably be expected to
result in, any material adverse change in the condition
(financial or otherwise), assets, real property, personal
property, results of operations, business or prospects of BMI and
its subsidiaries taken as a whole.
Section 7.4 Opinion of Counsel. BMI shall have delivered to SWV
the opinion of counsel to BMI, dated the Closing Date, in the
form annexed hereto as Schedule 1.7(b).
Section 7.5 Consents. All approvals, authorizations and consents
required to be obtained shall have been obtained. SWV shall have
been furnished with appropriate evidence, reasonably satisfactory
to SWV and its counsel, of the granting of such approvals,
authorizations and consents.
ARTICLE VIII
Indemnification
Section 8.1 Indemnification by Cloetens. Subject to Section 8.8
below, Cloetens agrees that he will indemnify, defend, protect
and hold harmless BMI or NGP Delaware and their officers,
shareholders, directors, divisions, subdivisions, affiliates,
subsidiaries, parents, agents, employees, legal representatives,
successors and assigns from and against all claims, damages,
actions, suits, proceedings, demands, assessments, adjustments,
penalties, costs and expenses whatsoever (including specifically,
but without limitation, reasonable attorneys' fees and expenses
of investigation) whether equitable or legal, matured or
contingent, known or unknown to SWV and/or Cloetens, foreseen or
unforeseen, ordinary or extraordinary, patent or latent, arising
out of occurrences prior to the Closing of this Agreement, from:
(a) any breach of, misrepresentation in, untruth in or inaccuracy
in the representations and warranties by the SWV and/or Cloetens,
set forth in this Agreement or in the Schedules attached to this
Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the
part of SWV or Cloetens made in this Agreement and to be
performed by SWV or Cloetens before the Closing Date, provided,
however, that such nonfulfillment or nonperformance is within the
control of SWV and/or Cloetens; (c) violation of the requirements
of any governmental authority relating to the reporting and
payment of federal, state, local or other income, sales, use,
franchise, excise or property tax liabilities of SWV arising or
accrued prior to the Closing Date; (d) any violation of any
federal, state or local "anti-trust" or "racketeering" or "unfair
competition law", including, without limitation, the Sherman Act,
Clayton Act, Robinson Patman Act, Federal Trade Commission Act,
or Racketeer Influenced and Corrupt Organization Act; and (e) any
claim by a third party that, if true, would mean that a condition
for indemnification set forth in subsections (a), (b), (c) or (d)
of this Section 8.1 of this Agreement has occurred.
Section 8.2 Indemnification by BMI. BMI agrees that it will
indemnify, defend, protect and hold harmless SWV and/or Cloetens
and their agents, employees, heirs, legal representatives,
successors and assigns, as applicable, from and against all
claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses
whatsoever (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation)
incurred by them, as a result of or incident to: (a) any breach
of, misrepresentation in, untruth in or inaccuracy in the
representations and warranties of BMI set forth in this Agreement
or in the Schedule attached to this Agreement or in the
Collateral Documents; (b) nonfulfillment or nonperformance of any
agreement, covenant or condition on the part of BMI made in this
Agreement and to be performed by BMI before or after the Closing
Date; (c) any claim by a third party that, if true, would mean
that a condition for indemnification set forth in subsections
(a), (b), or (c) of this Section 8.2 has occurred.
Section 8.3 Procedure for Indemnification with Respect to Third
Party Claims.
(a) If any third party shall notify a party to this Agreement
(the "Indemnified Party") with respect to any matter (a "Third
Party Claim") that may give rise to a claim for indemnification
against any other party to this Agreement (the "Indemnifying
Party") under this Article VIII, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party is thereby
prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party so
long as (i) the Indemnifying Party notifies the Indemnified Party
in writing within ten days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party pursuant to the provisions of
this Article VIII, as applicable, from and against the entirety
of any adverse consequences (which will include, without
limitation, all losses, claims, liens, and reasonable attorneys'
fees and related expenses) the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party
will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only monetary
damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse judgment with respect to the Third
Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice
adverse to the continuing business interests of the Indemnified
Party, and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 8.3(b) above,
(i) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in (but not control) the
defense of the Third Party Claim, (ii) the Indemnified Party will
not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (which will not
be unreasonably withheld), and (iii) the Indemnifying Party will
not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be
unreasonably withheld). In the case of (c)(ii) or (c)(iii)
above, any such consent to judgment or settlement shall include,
as an unconditional term thereof, the release of the Indemnifying
Party from all liability in connection therewith.
(d) If any condition set forth in Section 8.3(b) above is or
becomes unsatisfied, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim and any
matter it may deem appropriate and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party
in connection therewith, (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the
cost of defending against the Third Party Claim (including
attorneys' fees and expenses), and (iii) the Indemnifying Party
will remain responsible for any adverse consequences the
Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim
to the fullest extent provided in this Article IX.
Section 8.4 Procedure for Non-Third Party Claims. If BMI, NGP
Delaware, SWV or Cloetens wishes to make a claim for indemnity
under Section 8.1 or Section 8.2, as applicable, and the claim
does not arise out of a third party notification which makes the
provisions of Section 8.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the party
from which indemnification is sought ("Indemnifying Party") a
written demand for indemnification ("Indemnification Demand").
The Indemnification Demand shall state: (a) the amount of losses,
damages or expenses to which the Indemnified Party has incurred
or has suffered or is expected to incur or suffer to which the
Indemnified Party is entitled to indemnification pursuant to
Section 8.1 or Section 8.2, as applicable; (b) the nature of the
event or occurrence which entitles the Indemnified Party to
receive payment under Section 8.1 or Section 8.2, as applicable.
If the Indemnifying Party wishes to object to an Indemnification
Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the
objections ("Indemnification Objection"). If no Indemnification
Objection is sent within thirty (30) days after the
Indemnification Demand is sent, the Indemnifying Party shall be
deemed to have acknowledged the correctness of the claim or
claims specified in the Indemnification Demand and shall pay the
full amount claimed in the Indemnification Demand within
forty-five (45) days of the day the Indemnification Demand is
dated. If for any reason the Indemnifying Party does not pay the
amounts claimed in the Indemnification Demand, within thirty days
of the Indemnification Demand's date, the Indemnified Party may
institute legal proceedings to enforce payment of the
indemnification claim contained in the Indemnification Demand and
any other claim for indemnification that the Indemnified Party
may have.
Section 8.5 Survival of Claim. All of the respective
representations, warranties and obligations of the parties to
this Agreement shall survive consummation of the transactions
contemplated by this Agreement as follows: (i) all
representations and warranties pertaining to federal, state and
local taxes, including, without limitation, the representations
and warranties set forth in Section 3.9 shall survive until the
expiration of the applicable statute of limitations on any claim
which can be brought against the Companies by tax authorities or
governmental agencies or governmental units and (ii) all
representations and warranties other than set forth in (i) above
shall survive twelve (12) months from the Closing Date.
Notwithstanding the prior sentence which provides that the
representations and warranties expire after certain stated
periods of time, if within the stated period of time, a notice of
a claim for indemnification or Indemnification Demand is given,
or a suit or action based upon representation or warranty is
commenced, the Indemnified Party shall not be precluded from
pursuing such claim or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on
the claim or action, by reason of the expiration of the
representation or warranty.
Section 8.6 Limitation of Liability. The Parties agree that
they shall not bring a claim for indemnification under this
Article VIII unless and until all claims a party has exceed
$50,000, and that the first $50,000 of damages are not
recoverable.
Section 8.7 Prompt Payment. In the event that any party is
required to make any payment under this Article VIII, such party
shall promptly pay the Indemnifying Party the amount so
determined. If there should be a dispute as to the amount or
manner of determination of any indemnity obligation owed under
this Article VIII, the Indemnifying Party shall, nevertheless,
pay when due such portion, if any, of the obligation as shall not
be subject to dispute. The portion in dispute shall be paid upon
a final and non-appealable resolution of such dispute. Upon the
payment in full of any claim, the Indemnifying Party shall be
subrogated to the rights of the Indemnified Party against any
person with respect to the subject matter of such claim.
Section 8.8 Condition to Cloetens' Indemnification Obligation.
Notwithstanding any other provision of this Article VIII to the
contrary, BMI agrees that it will not assert, for itself or on
behalf of NGP Delaware, any right to indemnification under
Section 8.1 that arises from SWV's ownership and participation in
the Working Interest for the period ending on the Closing Date (a
"Working Interest Claim") against Cloetens, unless and to the
extent BMI and/or NGP Delaware is not indemnified for such
Working Interest Claim by the new owner of the Working Interest
(the "New Owner"). Cloetens acknowledges that in structuring the
SWV Purge, the New Owner must be obligated to assume Cloetens'
indemnification obligation for any Working Interest Claim on
terms substantially the same as provided in this Article VIII.
ARTICLE IX
Other Provisions
Section 9.1 Nondisclosure by SWV and Cloetens. SWV and Cloetens
recognize and acknowledge that they have in the past, currently
has, and in the future will have certain confidential information
of BMI. SWV and Cloetens agree that for a period of ten (10)
years from the Closing Date they will not disclose such
confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever,
except to authorized representatives of BMI, unless (i) such
information becomes known to the public generally through no
fault of SWV or Cloetens or (ii) SWV is compelled to disclose
such information by a governmental entity or pursuant to a court
proceeding. In the event of a breach or threatened breach by SWV
or Cloetens of the provisions of this Section, BMI shall be
entitled to an injunction restraining SWV or Cloetens from
disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting BMI from
pursuing any other available remedy for such breach or threatened
breach, including, without limitation, the recovery of damages.
Section 9.2 Assignment; Binding Effect; Amendment. This
Agreement and the rights of the parties hereunder may be assigned
with the prior consent of the other parties and shall be binding
upon and shall inure to the benefit of the parties hereto, and
the successors and/or assigns of BMI , SWV and Cloetens. This
Agreement, upon execution and delivery, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance
with its terms and may be modified or amended only by a written
instrument executed by all parties hereto.
Section 9.3 Entire Agreement. This Agreement, is the final,
complete and exclusive statement and expression of the agreement
among the parties hereto with relation to the subject matter of
this Agreement, it being understood that there are no oral
representations, understandings or agreements covering the same
subject matter as the Agreement. The Agreement supersedes, and
cannot be varied, contradicted or supplemented by evidence of any
prior to contemporaneous discussions, correspondence, or oral or
written agreements of any kind. The parties to this Agreement
have relied on their own advisors for all legal, accounting, tax
or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 9.4 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original and all of which together shall constitute
but one and the same instrument. This Agreement may be executed
by facsimile signatures.
Section 9.5 Notices. All notices or other communications
required or permitted hereunder shall be in writing and may be
given by depositing the same in United States mail, addressed to
the party to be notified, postage prepaid, registered or
certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
(a) If to BMI, addressed to it at:
Rue de la Rotisserie 29
1204 Geneva
Switzerland
Attention: Jacques Mot
with a copy to:
Thomas R Marshall, Esq.
Schnader Harrison Segal & Lewis LLP
330 Madison Avenue
New York, New York 10017
(b) If to SWV or Cloetens, addressed to it or him at:
455 East 400 South, Suite 100
Salt Lake City, UT 84111
Attention: President
with a copy to:
Leonard W. Burningham, Esq.
455 East 500 South, Suite 205
Salt Lake City, UT 84111
Notice shall be deemed given and effective the day personally
delivered, the day after being sent by overnight courier and
three business days after the deposit in the U.S. mail of a
writing addressed as above and sent first class mail, certified,
return receipt requested, or when actually received, if earlier.
Any party may change the address for notice by notifying the
other parties of such change in accordance with this Section 9.5.
Section 9.6 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State
of Nevada, without giving effect to any choice or conflict of law
provision or rule (whether of the State of Nevada or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Nevada.
Section 9.7 No Waiver. No delay of or omission in the exercise
of any right, power or remedy accruing to any party as a result
of any breach or default by any other party under this Agreement
shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or
default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach of default occurring before
or after that waiver.
Section 9.8 Time of the Essence. Time is of the essence of this
Agreement.
Section 9.9 Captions. The headings of this Agreement are
inserted for convenience only, shall not constitute a part of
this Agreement or be used to construe or interpret any provision
hereof.
Section 9.10 Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall,
to the extent possible, be modified in such manner as to be
valid, legal and enforceable but so as most nearly to retain the
intent of the parties. If such modification is not possible,
such provision shall be severed from this Agreement. In either
case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or
impaired thereby.
Section 9.11 Construction. The parties have participated
jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute shall be deemed to refer
to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" means included,
without limitation.
Section 9.12 Extension or Waiver of Performance. Either BMI or
SWV may extend the time for or waive the performance of any of
the obligations of the other, waive any inaccuracies in the
representations or warranties by the other, or waive compliance
by the other with any of the covenants or conditions contained in
this Agreement, provided that any such extension or waiver shall
be in writing and signed by SWV and BMI.
Section 9.13 Liabilities of Third Parties. Nothing in this
Agreement, whether expressed or implied, is intended to confer
any rights or remedies under or by reason of this Agreement on
any persons other than the parties to it and their respective
officers, shareholders, directors, affiliates, subsidiaries,
parents, agents, employees, legal representatives, successors and
assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provisions give any third
person any rights of subrogation or action over or against any
party to this Agreement.
Section 9.14 Publicity. Prior to Closing, except as may be
required by law, no party to this Agreement shall issue any press
release or otherwise make any statement with respect to the
transactions contemplated by this Agreement without the prior
consent of the other party, which shall not be unreasonably
withheld.
Section 9.15 Arbitration.
(a) Each and every controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in the
State of Nevada, in accordance with the commercial rules (the
"Rules") of the American Arbitration Association then obtaining,
and judgment upon the award rendered in such arbitration shall be
final and binding upon the parties and may be confirmed in any
court having jurisdiction thereof. Notwithstanding the
foregoing, this Agreement to arbitrate shall not bar any party
from seeking temporary or provisional remedies in any Court
having jurisdiction. Notice of the demand for arbitration shall
be filed in writing with the other party to this Agreement, which
such demand shall set forth in the same degree of particularity
as required for complaints under the Federal Rules of Civil
Procedure the claims to be submitted to arbitration.
Additionally, the demand for arbitration shall be stated with
reasonable particularity with respect to such demand with
documents attached as appropriate. In no event shall the demand
for arbitration be made after the date when institution of legal
or equitable proceedings based on such claim, dispute or other
matter in question would be barred by the applicable statutes of
limitations.
(b) The arbitrators shall have the authority and jurisdiction to
determine their own jurisdiction and enter any preliminary awards
that would aid and assist the conduct of the arbitration or
preserve the parties' rights with respect to the arbitration as
the arbitrators shall deem appropriate in their discretion. The
award of the arbitrators shall be in writing and it shall specify
in detail the issues submitted to arbitration and the award of
the arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any
arbitration proceeding under this Agreement, each party shall
file with the arbitrators its contemplated discovery plan
outlining the desired documents to be produced, the depositions
to be take, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration
proceeding. After a preliminary hearing, the arbitrators shall
fix the scope and content of each party's discovery plan as the
arbitrators deem appropriate. The arbitrators shall have the
authority to modify, amend or change the discovery plans of the
parties upon application by either party, if good cause appears
for doing so.
(d) The award pursuant to such arbitration will be final,
binding and conclusive.
(e) Counsel to SWV and BMI in connection with the negotiation of
and consummation of the transactions under this Agreement shall
be entitled to represent their respective
party in any and all proceedings under this Section or in any
other proceeding (collectively, "Proceedings"). SWV and BMI,
respectively, waive the right and agree they shall not seek to
disqualify any such counsel in any such Proceedings for any
reason, including but not limited to the fact that such counsel
or any member thereof may be a witness in any such Proceedings or
possess or have learned of information of a confidential or
financial nature of the party whose interests are adverse to the
party represented by such counsel in any such Proceedings.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first above written.
Bachkine & Meyer Industries, S.A.
By:___________________________
Jacques Mot
President
SW Ventures, Inc.
By:___________________________
Guido Cloetens
President
____________________________
Guido Cloetens
Schedule 1.3
NGP ASSETS
The following is a description of the assets and liabilities
that will be contributed to NGP in the NGP contribution.
I. PATENTS AND APPLICATIONS THEREFOR
Patent Title: METHOD AND DEVICE FOR TRANSFORMING A RAW
MATERIAL CONTAINING AT LEAST TWO DIFFERENT THERMOPLASTIC
MATERIALS INTO A NOVEL HOMOGENEOUS THERMOPLASTIC MATERIAL
Inventors: Giordano Mariani and Cinzia L. Mariani
Country: Algeria
Serial No.: 037-92/1992
Filed: April 16, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Argentina
Serial No.: 322.153
Filed: April 15, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Austria
Serial No.: 9001/92
Filed: April 8, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Australia
Serial No.: 14348/92
Filed: April 8, 1992
Recordation:
Patent No.: 653011
Issued: January 10, 1995
Status: Patented
Country: Brazil
Serial No.: PI 9205235
Filed: December 14, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Belarus
Serial No.: 2260/IZ
Filed: November 7, 1994
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Belgium
Serial No.: 9200334
Filed: April 14, 1992
Recordation:
Patent No.: 9200334
Issued: January 25, 1994
Status: Patented
Country: Bulgaria
Serial No.: 97167
Filed: April 8, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Canada
Serial No.: 2,085,236
Filed: April 8, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Chile
Serial No.: 361-92
Filed: April 14, 1992
Recordation:
Patent No.: 38994
Issued: October 13, 1995
Status: Patented
Country: China
Serial No.: 92102678.1
Filed: April 16, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Columbia
Serial No.: 359.664
Filed: April 15, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Croatia
Serial No.: 381-03/92-04/182
Filed: September 29, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Denmark
Serial No.: 1504/92
Filed: December 16, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Egypt
Serial No.: 200/92
Filed: April 15, 1992
Recordation:
Patent No.: 19667
Issued: August 31, 1995
Status: Patented
Country: Europe
Serial No.: 92907183.5-2307
Filed: December 16, 1992
Recordation:
Patent No.: 0539534
Issued: September 16, 1998
Status: Patented; opposition period ends 6/16/99
Country: Finland
Serial No.: 925446
Filed: November 30, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: France
Serial No.: 9204244
Filed: April 7, 1992
Recordation:
Patent No.: 2675422
Issued: November 4, 1994
Status: Patented
Country: Great Britain
Serial No.: 9224822.8
Filed: April 8, 1992
Recordation:
Patent No.: 2260329
Issued: September 13, 1995
Status: Patented
Country: Germany
Serial No.: P4291173.7
Filed: April 8, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Greece
Serial No.: 920100136
Filed: April 7, 1992
Recordation:
Patent No.: 1001132
Issued: January 26, 1993
Status: Patented
Country: Hungary
Serial No.: P9203620
Filed: December 3, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: India
Serial No.: 263CAL92
Filed: April 16, 1992
Recordation:
Patent No.: 177527
Issued: December 26, 1997
Status: Patented
Country: Iran
Serial No.: 29293
Filed: April 8, 1992
Recordation:
Patent No.: 24691
Issued: December 8, 1992
Status: Patented
Country: Indonesia
Serial No.: P002719
Filed: April 16, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Ireland
Serial No.: 921207
Filed: April 15, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Israel
Serial No.: 101563
Filed: April 10, 1992
Recordation:
Patent No.: 101563
Issued: November 5, 1996
Status: Patented
Country: Italy
Serial No.: TO91A000288
Filed: April 8, 1992
Recordation:
Patent No.: 1245070
Issued: September 13, 1994
Status: Patented
Country: Japan
Serial No.: 506802/92
Filed: April 8, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Kuwait
Serial No.: 21/92
Filed: April 15, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Kazakhstan
Serial No.: 932778.1
Filed: April 8, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Luxembourg
Serial No.: 88199
Filed: December 9, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Malaysia
Serial No.: PI 9200637
Filed: April 14, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Mexico
Serial No.: 9201686
Filed: August 3, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Morocco
Serial No.: 22.790
Filed: April 15, 1992
Recordation:
Patent No.: 22.665
Issued: April 1, 1993
Status: Patented
Country: Netherlands
Serial No.: 9220001
Filed: April 8, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Norway
Serial No.: P924633
Filed: December 1, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: New Zealand
Serial No.: 242352
Filed: April 14, 1992
Recordation:
Patent No.: 242352
Issued: February 18, 1995
Status: Patented
Country: OAPI
Serial No.: 60317
Filed: April 8, 1992
Recordation:
Patent No.: 9799
Issued: December 16, 1992
Status: Patented
Country: Paraguay
Serial No.: 23/92
Filed: April 15, 1992
Recordation:
Patent No.: 3.554
Issued: September 6, 1994
Status: Patented
Country: Pakistan
Serial No.: 148/92
Filed: April 8, 1992
Recordation:
Patent No.: 133,146
Issued: June 2, 1994
Status: Patented
Country: Philippines
Serial No.: 44202
Filed: April 13, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Poland
Serial No.: P-297188
Filed: April 8, 1992
Recordation:
Patent No.: 169931
Issued: March 29, 1996
Status: Patented
Country: Portugal
Serial No.: 100385
Filed: April 14, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Russian Federation
Serial No.: 92016612
Filed: April 8, 1992
Recordation:
Patent No.: 2118931
Issued:
Status: Patented
Country: Republic of Korea
Serial No.: 702946/92
Filed: November 23, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Romania
Serial No.: 92-01553
Filed: April 8, 1992
Recordation:
Patent No.: 110133
Issued: September 29, 1995
Status: Patented
Country: South Africa
Serial No.: 92/2833
Filed: April 16, 1992
Recordation:
Patent No.: 92/2833
Issued: September 29, 1993
Status: Patented
Country: Switzerland and Liechtenstein
Serial No.: 3880/92-4
Filed: April 8, 1992
Recordation:
Patent No.: 688276
Issued: July 15, 1997
Status: Patented
Country: Spain
Serial No.: P92550050
Filed: December 15, 1992
Recordation:
Patent No.: 2085201
Issued: February 18, 1997
Status: Patented
Country: Sri Lanka
Serial No.: 10455
Filed: November 27, 1992
Recordation:
Patent No.: 10455
Issued: December 31, 1992
Status: Patented
Country: Sudan
Serial No.: PCT/127/92/SD
Filed: December 12, 1992
Recordation:
Patent No.: PCT/SD/113
Issued: August 18, 1993
Status: Patented
Country: Sweden
Serial No.: 9203578-1
Filed: November 27, 1992
Recordation:
Patent No.: 508021
Issued: August 10, 1998
Status: Patented
Country: Thailand
Serial No.: 015884
Filed: April 14, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Tunisia
Serial No.: 92.031
Filed: April 14, 1992
Recordation:
Patent No.: 16.558
Issued: April 7, 1993
Status: Patented
Country: Ukraine
Serial No.: 93004667
Filed: June 18, 1993
Recordation:
Patent No.:
Issued:
Status: Pending
Country: Uruguay
Serial No.: 23.401
Filed: April 10, 1992
Recordation:
Patent No.: 13.414
Issued: May 30, 1994
Status: Patented
Country: Venezuela
Serial No.: 0517-92
Filed: April 10, 1992
Recordation:
Patent No.:
Issued:
Status: Pending
Country: United States of America
Serial No.: 08/897,370
Filed: July 21, 1997
Recordation: February 16, 1993
Patent No.: 5,891,955
Issued: April 6, 1999
Status: Patented
Country: United States of America
Serial No.: 09/149,680
Filed: September 9, 1998
Recordation: February 16, 1993
Patent No.:
Issued:
Status: Pending
Country: United States of America
Serial No.: 09/149,669
Filed: September 9, 1998
Recordation: February 16, 1993
Patent No.:
Issued:
Status: Pending
Country: Yugoslavia
Serial No.: P-397/92
Filed: April 16, 1992
Recordation:
Patent No.: 48287
Issued:
Status: Pending; awaiting issuance of patent
II. TRADEMARKS
BMI has filed for the registration of three (3) trademarks with
the United States Patent and Trademark Office. Each application
covers the following goods and services: (a) Machinery for the
Production of Plastic Material, (b) Computer Software Used for
the Production of Plastic Material, (c) Plastic Material Used for
Manufacturing and (d) Manufacture of Plastic Products for Others,
Recycling of Mixed Waste Plastic Products for Others.
A) Mark: New Generation Plastic
App. No.: 75/628132
App. Date: January 27, 1999
Status: Filed
B) Mark: NewGen Plastic
App. No.: 75/628971
App. Date: January 27, 1999
Status: Filed
C) Mark: NGP
App. No.: Not yet assigned
App. Date: January 27, 1999
Status: Filed
III. OTHER ITEMS
A. NGP BT - 30 Bench Top Unit
B. All Process control Software relating to the New Generation
Plastic(tm) Process.
C. All know how, trade secrets and other intangible assets
relating to the New Generation Plastic(tm) Process.
D. All contracts and agreements relating to the New Generation
Plastic(tm) Process and the related business.
E. Certain liabilities relating to the New Generation Plastic(tm)
Process and the related business.
<PAGE>
EXHIBIT E
SW OIL CONTRIBUTION AGREEMENT AND SW OIL
STOCK PURCHASE AGREEMENT AND FORM OF
PROMISSORY NOTE
<PAGE>
EXHIBIT E
form of
ASSET CONTRIBUTION AGREEMENT
THIS ASSET CONTRIBUTION AGREEMENT ("Agreement"), is made and
entered into as of this day of June, 1999, by and between
SW Oil & Gas Company, a Nevada corporation ("SW Oil"), on one
part, and SW Ventures, Inc., a Nevada corporation ("SWV") on the
other part.
RECITALS
SWV's stated business purpose has been that of seeking out
and investing in various oil and gas opportunities in the Western
United States. Currently, SWV is the owner of a 21.25% working
interest (the "Working Interest") in the Montana Prospect (the
"Montana Prospect"), a 320 acre oil lease in Crook County,
Wyoming
SWV and Guido Cloetens ("Cloetens"), its majority
shareholder, have entered into an Asset Contribution Agreement
(the "NGP Contribution Agreement") dated as of April 14, 1999
with Bachkine & Meyer Industries, S.A. ("BMI") whereby BMI will
contribute its assets and liabilities (the "NGP Assets") relating
to a patented proprietary process that BMI believes is capable of
producing homogeneous, commercially usable plastic polymer end
products from a mixed virgin or recycled stream of discrete
polymers or waste plastic. Article V of the NGP Contribution
Agreement requires, among other things, that SWV divest itself of
all its existing non-cash assets and existing liabilities (the
"SWV Assets"), except its rights under the NGP Contribution
Agreement, prior to the contribution of the NGP Assets by BMI.
SWV formed SW Oil for the purpose of effecting the
divestiture of the SWV Assets. In accordance with the provisions
of this Agreement, SWV desires to contribute the SWV Assets in
exchange for 100 shares of the common stock of SW Oil (the "SW
Oil Contribution"). The parties intend that the SW Oil
Contribution qualifies for tax free treatment under Section 351
of the Internal Revenue Code of 1986, as amended (the "Code").
Throughout this Agreement various Schedules are referenced
as being attached to this Agreement. Notwithstanding anything
herein to the contrary, this Agreement may be executed without
any Schedules attached hereto and if so executed shall be valid
and binding without regard to the contemplated Schedules until
same are attached in final form and delivered to the other party
for review at Closing.
ARTICLE I
Contribution and Closing
Section 1.1 Incorporation of Recitals and Preamble. The
recitals and preamble set forth above are incorporated herein by
reference and are a part of this Agreement.
Section 1.2 Time and Place for Closing. Closing under this
Agreement shall take place as soon as practicable after the SW
Oil Contribution is approved by an affirmative vote of a majority
of the stockholders of SWV, time being of the essence, at the
offices of SWV, 455 East 400 South, Salt Lake City, UT 84111, or
such other place as the parties hereto may agree upon. The date
that Closing occurs is referred to hereinafter as the "Closing
Date" and the act of closing as "Closing." The exact Closing
Date shall be established by mutual consent of the SWV and SW
Oil.
Section 1.4 Agreement to Contribute the SWV Assets;
Issuance of Common Stock. At the Closing, the SWV agrees to
assign, transfer and deliver to SW Oil all of its right title and
interest in the SWV Assets (a list of the SWV Assets is attached
hereto as Schedule 1.3) owned by SWV, and SW Oil shall deliver to
SWV [100] shares (the "SW Oil Stock") of the common stock of SW
Oil (the "SW Oil Contribution").
Section 1.5 Deliveries by SW Oil. At the Closing, SW Oil
shall deliver or cause to be delivered, a duly and properly
executed, authorized and issued certificate representing the SW
Oil Stock, as provided in Section 1.3 above;
Section 1.6 Deliveries by BMI. At the Closing, SWV shall
deliver to SWV Oil or cause to be delivered, all duly and
properly executed, authorized and issued assignments of the SWV
Assets in the forms attached as Schedule 1.7(a).
ARTICLE II
Assumption of Indemnification Obligation
Under the NGP Contribution Agreement
Section 2.1 Assumption by SW Oil. SW Oil hereby
specifically acknowledges and assumes any and all of the rights,
responsibilities, obligations and liabilities of Cloetens
relating to SWV's ownership of the oil assets under Article VIII
of the NGP Contribution Agreement.
Section 2.2 Notice to SW Oil. Cloetens shall notify the SW
Oil in writing within three (3) business days after the receipt
of any claim for indemnification under Article VIII of the NGP
Contribution Agreement.
ARTICLE III
Other Provisions
Section 3.1 Entire Agreement. This Agreement, is the
final, complete and exclusive statement and expression of the
agreement among the parties hereto with relation to the subject
matter of this Agreement, it being understood that there are no
oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes,
and cannot be varied, contradicted or supplemented by evidence of
any prior to contemporaneous discussions, correspondence, or oral
or written agreements of any kind. The parties to this Agreement
have relied on their own advisors for all legal, accounting, tax
or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 3.2 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original and all of which together shall constitute
but one and the same instrument. This Agreement may be executed
by facsimile signatures.
Section 3.3 Governing Law. This Agreement shall be
governed by and construed in accordance with the internal laws of
the State of Nevada, without giving effect to any choice or
conflict of law provision or rule (whether of the State of Nevada
or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Nevada.
Section 3.4 Time of the Essence. Time is of the essence of
this Agreement.
Section 3.5 Captions. The headings of this Agreement are
inserted for convenience only, shall not constitute a part of
this Agreement or be used to construe or interpret any provision
hereof.
Section 3.6 Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall,
to the extent possible, be modified in such manner as to be
valid, legal and enforceable but so as most nearly to retain the
intent of the parties. If such modification is not possible,
such provision shall be severed from this Agreement. In either
case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or
impaired thereby.
Section 3.7 Publicity. Prior to Closing, except as may be
required by law, no party to this Agreement shall issue any press
release or otherwise make any statement with respect to the
transactions contemplated by this Agreement without the prior
consent of the other party, which shall not be unreasonably
withheld.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
SW Ventures, Inc.
By:___________________________
Name:
Title:
SW Oil & Gas Company
By:___________________________
Name:
Title:
<PAGE>
form of
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT made as of this day of June,
1999, by and among Guido Cloetens ("Buyer"), an individual with a
business address at Kampenhoutsebaan 100A, 1982 Zemst, Belgium,
SW Ventures, Inc. ("Seller"), a Nevada corporation, with its
principal offices located at 450 East 400 South, Suite 100, Salt
Lake City, UT 84111 and SW Oil & Gas Company (the "Company"), a
Nevada corporation, with its principal offices located at 450
East 400 South, Suite 100, Salt Lake City, UT 84111 .
W I T N E S E T H:
WHEREAS, the Seller owns one hundred (100) shares of the
voting common shares of the Company, comprising one hundred
percent (100%) of the issued and outstanding shares of common
stock, $0.001 par value (herein called the "Common Stock");
WHEREAS, Buyer desires to purchase and the Seller desires to
sell to Buyer the Common Stock of the Company owned by the Seller
on the terms and subject to the conditions of this Agreement; and
WHEREAS, Buyer has agreed to pledge [15,000] shares of the
common stock of New Generation Plastic, Inc. ("NGP"), a Delaware
corporation, received in connection with the contemplated merger
(the "Merger") of the Seller into NGP, as security for the
deferred payment of purchase price evidenced by the Promissory
Note (as defined herein) of even date herewith; and
WHEREAS, this Agreement is being entered into by the parties
to comply with the requirements of Article V of the Asset
Contribution Agreement dated as of April 14, 1999 (the "NGP
Contribution Agreement") by and between Bachkine & Meyer
Industries, S.A., on one part, and the Seller and Buyer on the
other.
NOW, THEREFORE, in consideration of the premises and the
respective covenants and agreements hereinafter set forth, the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale of Stock. The Seller agrees that at
the closing provided for in Section 1.4 hereof (herein called the
"Closing") it will sell, assign, transfer and deliver to Buyer,
and Buyer agrees he will purchase, the Common Stock free and
clear of any claim, lien and encumbrance, except as may be
created under this Agreement.
1.2 Consideration. Subject to the terms and conditions of
this Agreement, in reliance on the representations, warranties
and agreements of the Seller contained herein, and in
consideration of the sale, assignment, transfer and delivery of
the Common Stock, the purchase price (the "Price") for the Common
Stock shall be an amount equal to [Ninety Thousand] U.S. Dollars
($90,000). The Price shall be paid by Buyer to Seller by
delivery on the date hereof the Promissory Note of the Buyer
payable to the order of the Seller, dated of even date with this
Agreement, in the form attached hereto as Exhibit 1.2 (the
"Promissory Note"). The Promissory Note shall by its terms be
subject to the terms and conditions of Section 1.3 below.
1.3 Loan and Security Agreement. This Section 1.3 shall
serve as the Loan Agreement and Security Agreement for the
Promissory Note delivered by the Buyer under Section 1.2 of this
Agreement and the terms of this Section 1.3 shall be and hereby
are incorporated by reference in such Promissory Note.
a) Payments of Principal.. Buyer promises to pay to
the order of Seller, the principal amount of the Promissory Note
in one lump sum payment on December , 1999, together with all
accrued but unpaid interest thereon. Buyer may elect to pay all
or a portion of the principal amount (and interest thereon) by
surrendering shares of Pledged Stock having a Value (as defined
below) equal to the amount of principal to repaid to the Seller.
If the entire amount of principal due under the Promissory Note
is satisfied in full by the surrender of shares, any shares of
Pledged Stock not surrendered shall be immediately returned to
Cloetens. The Buyer shall make an election to surrender shares of
Pledged Stock by delivering a written notice to the Escrow Agent
designating the effective date of the surrender which must be at
least three trading days after the date the notice is received by
the Escrow Agent. For purposes of this Agreement and the
Promissory Note the term "Value" shall mean the average of the
high bid and low ask prices of the NGP common stock on the date
of effectiveness of the surrender and the [two] immediately
preceding trading days.
b) Term. The term of the Promissory Note shall be
six (6) months. The only payment of principal shall be due
December , 1999 (the "Maturity Date").
c) Defaults. The following events (hereinafter
called "Events of Default") shall constitute defaults under this
Agreement and the Promissory Note.
(i) Nonpayment. Failure of the Buyer to make any
payment of any type under the terms of this Agreement and/or the
Promissory Note, or of any of the agreements contemplated
hereunder, within ten (10) days after the same becomes due and
payable.
(ii) Performance. Failure of the Buyer to observe or
covenant or term of this Agreement and perform any condition, all
related agreements and documents; provided, however, that if such
failure is susceptible to cure an Event of Default shall not
occur unless such failure is not cured within fifteen (15) days
after the Seller gives the Buyer written notice of same.
(iii) Other Obligations. Failure of the Borrower to
observe or perform any other condition, covenant, or term of any
other written agreement with the Seller after any applicable cure
or grace period related thereto.
(iv) Representations. Failure of any representation or
warranty made by the Borrower in connection with the execution
and performance of this Agreement.
(v) Financial Difficulties. Financial difficulties of
the Buyer and/or the Company as evidenced by:
(A) any admission in writing of inability to pay
debts as they become due; or
(B) the filing of a voluntary or involuntary
petition in bankruptcy, or under any chapters of the Bankruptcy
Code, or under any federal or state statute providing for the
relief of debtors; or
(C) making an assignment for the benefit of
creditors; or
(D) consenting to the appointment of a trustee or
receiver for all or a major part of any of its property; or
(E) the entry of a court order appointing a
receiver or a trustee for all or a major part of its property; or
e) Remedies. If any one or more Events of Default occur
and is continuing, the Seller may upon 30 days prior written
notice to Buyer accelerate all amounts due under the Promissory
Note, the Buyer and the Company to the Seller such that the same
become forthwith due and payable without presentment, demand,
protest, or other notice of any kind, all of which are hereby
expressly waived. In case any such Events of Default shall
occur, the Seller shall be entitled to recover judgment against
the Buyer and the Company for all liabilities Buyer and the
Company to the Seller either before, or after, or during the
pendency of any proceedings for the enforcement, of any security
interests, mortgages, pledges, or guarantees and, in the event of
realization of any funds from any security or guarantee and
application thereof to the payment of the amounts due under the
Promissory Note, the Seller shall be entitled to enforce payment
of and recover judgment for all amounts remaining due and unpaid
on the Promissory Note. The Seller may proceed to protect and
enforce its rights by any other appropriate proceedings,
including action for the specific performance of any covenant or
agreement contained in this Agreement and other written
agreements held by the Seller.
e) Security. As security for the Promissory Note, the
Cloetens shall deliver [15,000] shares of common stock of New
Generation Plastic, Inc. (the "Pledged Stock"), endorsed in
blank, to Schnader Harrison Segal & Lewis LLP, as Escrow Agent.
The Escrow Agent shall hold the Pledged Shares until the all
amounts of principal due under the Promissory Note are paid in
full. No partial release of shares of Pledged Stock will be
permitted.
1.4 Closing.
(a) The "Closing" of the sale of the Common Stock
contemplated by this Agreement will take place at the offices of
Schnader Harrison Segal & Lewis LLP at 330 Madison Avenue, New
York, New York 10017 on June ,1999, or at such other time and
place as may be determined by the parties. It is the intent of
the parties that the Closing shall occur simultaneously with the
closing of the NGP Contribution Agreement and the effectiveness
of the Merger. The transactions shall be deemed to occur in the
following order: the Closing, the effectiveness of the Merger and
then the closing of the NGP Contribution Agreement and none will
be deemed to occur unless all occur.
(b) At the Closing, the Seller will deliver to Buyer:
(i) the Common Stock duly endorsed in blank or with
stock powers; and
(ii) a copy of any books, records, documents and other
things pertaining to the Company, including the Company's
balance sheet dated as of the date of the Closing (reflecting the
contribution of assets and liabilities pursuant to the Asset
Contribution Agreement dated of even dated herewith by and
between SWV and the Company).
(c) At the Closing, Buyer will deliver the Price as defined
by Section 1.2 to Seller.
(c) At the Closing, Cloetens will deliver the Pledged Stock
to the Escrow Agent as security for the Promissory Note.
1.5 Further Assurances. After the Closing, the Seller
shall from time to time, at the request of Buyer and without
further cost or expense to Seller, execute and deliver such other
instruments of conveyance and transfer and take such other
actions as Buyer may reasonably request, to more effectively
consummate the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY
The Seller and the Company hereby jointly and severally
represent, covenant and warrant to Buyer that except as
contemplated by this Agreement or any agreement related or
disclosed to Buyer in writing or in any schedule or exhibit
hereto:
2.1 Corporate Organization. The Company is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Nevada, and has full corporate power and
authority to carry on its business as it is now being conducted
and to own the properties and assets it now owns. The copies of
the Certificate of Incorporation and By-Laws of the Company
delivered herewith to Buyer are complete and correct copies of
such instruments as in effect.
2.2 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement by the Seller has been
duly authorized and approved by the Board of Directors of Seller.
No further corporate action is necessary on the part of Seller to
consummate this Agreement in accordance with its terms. Seller
has full authority to enter into and perform its obligations
under this Agreement, and neither the execution, delivery nor
performance by Seller of this Agreement will (i) result in a
violation or breach of any term or provision nor constitute a
default under the Articles of Incorporation or bylaws of Seller
or under any contract or agreement to which Seller is a party or
by which it is bound, or violate any order, writ, injunction or
decree of any court, administrative agency or governmental body,
or (ii) result in a violation or breach of any term or provision,
or constitute a default or accelerate the performance required,
under any indenture, mortgage, deed of trust or other contract or
agreement to which Seller is a party or by which it or its
properties is bound.
2.3 Authorized and Outstanding Common Stock. The
authorized capital stock of the Company consists of [number] (XX)
shares of voting common stock, $0.001 par value, of which one
hundred (100) shares are issued and outstanding (the "Common
Stock"). The Common Stock is duly authorized, validly issued,
fully paid and nonassessable. Except for the Common Stock, no
other equity securities, or securities convertible into or
exchangeable for equity securities, of the Company, are
authorized, issued or outstanding, and there are no outstanding
options, warrants, agreements, restrictions, contracts, calls,
demands, understandings, obligations (contingent or otherwise) or
commitments of any character relating to any equity interest in
the Company other than this Agreement.
2.4 Title to Common Stock. The Seller represents that:
(a) it owns, beneficially and of record, the Common
Stock, free and clear of all liens, charges, claims, pledges and
encumbrances of any kind or nature whatsoever;
(b) the transfer of the Common Stock being sold by
Seller to Buyer pursuant to this Agreement will pass good and
marketable title thereto to Buyer, free and clear of any and all
liens, charges, claims, pledges and encumbrances of any kind or
nature whatsoever; and
(c) it will pay any transfer or other similar taxes
arising from the sale and transfer of such Common Stock to Buyer.
2.5 Authorization, etc. The execution, delivery and
performance of this Agreement and all other agreements
contemplated hereby have been duly and validly authorized by all
necessary action on the part of the Seller and the Company. This
Agreement is a valid and binding agreement of the Seller and the
Company, enforceable in accordance with its terms, except that:
(a) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights; and
(b) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefore may be brought. The execution, delivery and
performance of this Agreement does not violate or conflict with
any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Seller and the Company.
2.6 Compliance with Law. The operations of the Company
have been conducted in accordance with all applicable laws,
regulations and other requirements of all national governmental
authorities, and of all states, municipalities and other
political subdivisions and agencies thereof, having jurisdiction
over the Company, including, without limitation, all such laws,
regulations and requirements relating to antitrust, consumer
protection, currency exchange, equal opportunity, health,
occupational safety and pension matters, except for violations
which could not reasonably be expected to have a material adverse
effect on the business, assets or properties of the Company. The
Company has not received any notification of any asserted present
or past failure by the Company to comply with such laws, rules or
regulations.
2.7 Title to Properties; Encumbrances. The Company has
good, valid and marketable title to all the properties and assets
which it purports to own (personal and mixed, tangible and
intangible), including, without limitation, all the properties
and assets reflected in the Asset List attached hereto as
Schedule 2.6. All properties and assets reflected in the Asset
List are free and clear of all title defects or objections,
liens, claims, charges, security interests or other encumbrances
of any nature whatsoever including, without limitation, leases,
chattel mortgages, conditional sales contracts, collateral
security arrangements and other title or interest retention
arrangements, except encumbrances in the nature of leases
affecting the specific equipment which are the subject of such
leases. The rights, properties and other assets presently owned,
leased or licensed by the Company and described in this Agreement
include all rights, properties and other assets necessary to
permit the Company to conduct its business in all material
respects in the same manner as its business has been conducted
prior to the date hereof.
2.8 Liabilities. The Company does not have any
liabilities, fixed or contingent, other than:
(a) liabilities fully reflected in the Closing Balance
Sheet, except for liabilities not required to be disclosed
therein in accordance with GAAP; and
(b) accounts payable arising since the date of the Closing
Balance Sheet arising during the normal course of business
consistent with past custom and practice.
2.9 Agreements in Full Force and Effect. All contracts,
agreements, plans, leases, insurance policies and licenses of the
Company are valid and in full force and effect, and true copies
thereof have been heretofore made available to Buyer.
2.10 Employee Benefit Plans. The Company has no bonus,
deferred compensation, pension, profit-sharing, retirement, stock
purchase, stock option, group insurance or any other fringe
benefit plan, arrangement or practice, whether formal or
informal. The Company has no commitment, whether formal or
informal and whether legally binding or not, to create any
additional such plan or arrangement.
2.11 Consents and Approvals. Except as disclosed in writing
to Buyer or as otherwise contemplated by this Agreement (which
assumes the requirement of Buyer filing true, correct and
complete applications and amendments of appropriate filings with
all government agencies having jurisdiction hereof), no consent
of any person, governmental authority or agency (federal, state
or local) or any regulatory or membership organization is
necessary to the consummation of the transactions contemplated
hereby, including, without limitation, consents from parties to
loans, contracts, leases or other agreements.
2.12 Litigation. Except as disclosed in writing, there is
no action, suit, inquiry, customer complaint, proceedings or
investigation by or before any court or governmental or other
regulatory or administrative agency, or which questions or
challenges the validity of this Agreement or any action taken or
to be taken by the Company or the Seller pursuant to this
Agreement or in connection with the transactions contemplated
hereby; and the Seller and the Company do not know or have any
reason to know of any valid basis for any such action, proceeding
or investigation. The Company is not in default under or in
violation of, nor is there any valid basis for any claim of a
default under or violation of, any provisions of any contract,
commitment or restriction to which it is a party or by which it
is bound, as to which the time to cure the same has elapsed,
which default could reasonably be expected to have a material
adverse effect on the business, assets or properties of the
Company. The Company is not subject to any judgment, order or
decree entered in any lawsuit or proceeding which may have a
material adverse effect on its business practices or on its
ability to acquire any property or conduct its business in any
area.
2.13 Insurance. All fire, liability, workmen's compensation
and other forms of insurance owned or held by the Company are in
full force and effect, all premiums with respect thereto covering
all periods up to and including the date of the Closing have been
paid when due or before the grace period thereunder has elapsed,
and no notice of cancellation or termination has been received
with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to
which the Company is a party; are valid, outstanding and
enforceable policies; and provide adequate insurance coverage for
the assets and operations of the Company. The Company has not
been refused any insurance with respect to its assets or
operations, nor has its coverage been limited, by any insurance
carrier to which it has applied for any such insurance or with
which it has carried insurance during the last two (2) years.
2.14 Disclosure. No representations or warranties by the
Company in this Agreement and no statement contained in any
document (including, without limitation, financial statements),
certificate, or other writing furnished or to be furnished by the
Seller to Buyer or any of its representatives pursuant to the
provisions hereof or in connection with the transactions
contemplated hereby, contains or will contain any untrue
statement of material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or
therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby jointly and severally represents, covenants
and warrants to Seller that except as contemplated by this
Agreement or any agreement related or disclosed to Seller in
writing or in any schedule or exhibit hereto:
3.1 Authority Relative to this Agreement. Buyer has full
authority to enter into and perform its obligations under this
Agreement, and neither the execution, delivery nor performance by
Buyer of this Agreement and the Promissory Note will (i) result
in a violation or breach of any term or provision nor constitute
a default under any contract or agreement to which Buyer is a
party or by which heis bound, or violate any order, writ,
injunction or decree of any court, administrative agency or
governmental body, or (ii) result in a violation or breach of any
term or provision, or constitute a default or accelerate the
performance required, under any indenture, mortgage, deed of
trust or other contract or agreement to which Buyer is a party or
by which heor its properties is bound.
3.3 Title to Pledged Stock. Buyer represents that:
(a) he owns, beneficially and of record, the Pledged
Stock, free and clear of all liens, charges, claims, pledges and
encumbrances of any kind or nature whatsoever, and
(b) the pledge of the Pledged Stock pursuant to this
Agreement will not result in a violation or breach of any term or
provision nor constitute a default under any contract or
agreement to which Cloetens is a party or by which he is bound,
or violate any order, writ, injunction or decree of any court,
administrative agency or governmental body.
ARTICLE IV
ASSUMPTION OF INDEMNIFICATION OBLIGATION
UNDER THE NGP CONTRIBUTION AGREEMENT
4.1 Assumption by Buyer. Buyer hereby acknowledges and
assumes any and all of the rights, responsibilities, obligations
and liabilities of Cloetens under Article VIII of the NGP
Contribution Agreement.
4.2 Notice to Buyer. The Seller shall notify the Buyer in
writing within three (3) business days after the receipt of any
claim for indemnification under Article VIII of the NGP
Contribution Agreement.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification by Seller. Seller agrees that it will
indemnify, defend, protect and hold harmless Buyer and his
agents, legal representatives, successors and assigns from and
against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, penalties, costs and expenses
whatsoever (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) whether
equitable or legal, matured or contingent, known or unknown to
Seller, foreseen or unforeseen, ordinary or extraordinary, patent
or latent, arising out of occurrences prior to the Closing of
this Agreement, from: (a) any breach of, misrepresentation in,
untruth in or inaccuracy in the representations and warranties by
the Seller, set forth in this Agreement or in the Schedules
attached to this Agreement; (b) nonfulfillment or nonperformance
of any agreement, covenant or condition on the part of Seller
made in this Agreement and to be performed by Seller before or
after the Closing Date, provided, however, that such
nonfulfillment or nonperformance is within the control of Seller;
(c) violation of the requirements of any governmental authority
relating to the reporting and payment of federal, state, local or
other income, sales, use, franchise, excise or property tax
liabilities of SW Oil arising or accrued prior to the Closing
Date; (d) any violation of any federal, state or local
Aanti-trust" or Aracketeering" or "unfair competition law",
including, without limitation, the Sherman Act, Clayton Act,
Robinson Patman Act, Federal Trade Commission Act, or Racketeer
Influenced and Corrupt Organization Act; and (e) any claim by a
third party that, if true, would mean that a condition for
indemnification set forth in subsections (a), (b), (c) or (d) of
this Section 5.1 of this Agreement has occurred.
5.2 Indemnification by Buyer. Buyer agrees that he will
indemnify, defend, protect and hold harmless Seller and its
agents, employees, heirs, legal representatives, successors and
assigns, as applicable, from and against all claims, damages,
actions, suits, proceedings, demands, assessments, adjustments,
penalties, costs and expenses whatsoever (including specifically,
but without limitation, reasonable attorneys' fees and expenses
of investigation) incurred by them, as a result of or incident
to: (a) any breach of, misrepresentation in, untruth in or
inaccuracy in the representations and warranties of Buyer and/or
Cloetens set forth in this Agreement or in the schedules attached
to this Agreement; (b) nonfulfillment or nonperformance of any
agreement, covenant or condition on the part of Buyer or Cloetens
made in this Agreement and to be performed by Buyer or Cloetens
before or after the Closing Date; (c) any claim by a third party
that, if true, would mean that a condition for indemnification
set forth in subsections (a), (b), or (c) of this Section 5.2 has
occurred.
5.3 Procedure for Indemnification with Respect to Third
Party Claims.
(a) If any third party shall notify a party to this
Agreement (the "Indemnified Party") with respect to any matter (a
"Third Party Claim") that may give rise to a claim for
indemnification against any other party to this Agreement (the
"Indemnifying Party") under this Article V, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnifying Party is
thereby prejudiced. Such notice shall state the amount of the
claim and the relevant details thereof.
(b) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified
Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within ten days after the
Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party
pursuant to the provisions of this Article V, as applicable, from
and against the entirety of any adverse consequences (which will
include, without limitation, all losses, claims, liens, and
reasonable attorneys' fees and related expenses) the Indemnified
Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable
relief, (iv) settlement of, or adverse judgment with respect to
the Third Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with Section
5.3(b) above, (i) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in (but
not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party
(which will not be unreasonably withheld), and (iii) the
Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party
(which will not be unreasonably withheld). In the case of
(c)(ii) or (c)(iii) above, any such consent to judgment or
settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in
connection therewith.
(d) If any condition set forth in Section 5.3(b) above
is or becomes unsatisfied, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim and any
matter it may deem appropriate and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party
in connection therewith, (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the
cost of defending against the Third Party Claim (including
attorneys' fees and expenses), and (iii) the Indemnifying Party
will remain responsible for any adverse consequences the
Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim
to the fullest extent provided in this Article V.
5.4 Procedure for Non-Third Party Claims. If Buyer or
Seller wishes to make a claim for indemnity under Section 5.1 or
Section 5.2, as applicable, and the claim does not arise out of a
third party notification which makes the provisions of Section
5.3 applicable, the party desiring indemnification ("Indemnified
Party") shall deliver to the party from which indemnification is
sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification
Demand shall state: (a) the amount of losses, damages or expenses
to which the Indemnified Party has incurred or has suffered or is
expected to incur or suffer to which the Indemnified Party is
entitled to indemnification pursuant to Section 5.1 or Section
5.2, as applicable; (b) the nature of the event or occurrence
which entitles the Indemnified Party to receive payment under
Section 5.1 or Section 5.2, as applicable. If the Indemnifying
Party wishes to object to an Indemnification Demand, the
Indemnifying Party must send written notice to the Indemnified
Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection
is sent within thirty (30) days after the Indemnification Demand
is sent, the Indemnifying Party shall be deemed to have
acknowledged the correctness of the claim or claims specified in
the Indemnification Demand and shall pay the full amount claimed
in the Indemnification Demand within forty-five (45) days of the
day the Indemnification Demand is dated. If for any reason the
Indemnifying Party does not pay the amounts claimed in the
Indemnification Demand, within thirty days of the Indemnification
Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim
contained in the Indemnification Demand and any other claim for
indemnification that the Indemnified Party may have.
5.5 Survival of Claims. All of the respective
representations, warranties and obligations of the parties to
this Agreement shall survive consummation of the transactions
contemplated by this Agreement twelve (12) months from the
Closing Date. Notwithstanding the prior sentence which provides
that the representations and warranties expire after certain
stated periods of time, if within the stated period of time, a
notice of a claim for indemnification or Indemnification Demand
is given, or a suit or action based upon representation or
warranty is commenced, the Indemnified Party shall not be
precluded from pursuing such claim or action, or from recovering
from the Indemnifying Party (whether through the courts or
otherwise) on the claim or action, by reason of the expiration of
the representation or warranty.
5.6 Limitation of Liability. The Parties agree that they
shall not bring a claim for indemnification under this Article V
unless and until all claims a party has exceed $50,000, and that
the first $50,000 of damages are not recoverable.
5.7 Prompt Payment. In the event that any party is
required to make any payment under this Article V, such party
shall promptly pay the Indemnifying Party the amount so
determined. If there should be a dispute as to the amount or
manner of determination of any indemnity obligation owed under
this Article V, the Indemnifying Party shall, nevertheless, pay
when due such portion, if any, of the obligation as shall not be
subject to dispute. The portion in dispute shall be paid upon a
final and non-appealable resolution of such dispute. Upon the
payment in full of any claim, the Indemnifying Party shall be
subrogated to the rights of the Indemnified Party against any
person with respect to the subject matter of such claim.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Expenses: Transfer Taxes: etc. The Seller agrees that
all fees and expenses incurred by him or the Company in
connection with this Agreement shall be borne by him and Buyer
agrees that all fees and expenses incurred by him in connection
with this Agreement shall be borne by him.
6.2 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given and received
if delivered by hand or four (4) days after having been mailed,
certified or registered mail with postage prepaid:
(a) If to the Seller, to:
SW Ventures, Inc.
c/o Schnader Harrison Segal & Lewis LLP
330 Madison Avenue
New York, New York 10017
(b) If to Buyer, to:
Guido Cloetens
Kampenhoutsebaan 100A
1982 Zemst
Belgium
6.3 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns, notwithstanding the foregoing, and subject to Section
1.3 above, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by the Buyer
without the prior written consent of Seller.
6.4 Governing Law. This Agreement and the legal relations
among the parties hereto shall be governed by and construed in
accordance with the laws of the State of Nevada, without regard
to its conflicts of law doctrine.
6.5 Counterparts. This Agreement may be executed
simultaneously 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.
6.6 Headings. The headings of the Sections and Articles of
this Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any way the meaning or
interpretation of this Agreement.
6.7 Entire Agreement. This Agreement, including the
Schedules and Exhibits hereto, the other documents and
certificates delivered pursuant to the terms hereof, set forth
the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and supersede all
prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party
hereto.
6.8 Third Parties. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any
person or corporation other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason
of this Agreement.
6.9 Severability. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in
any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal or unenforceable in any other
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first
above written.
BUYER:
Guido Cloetens
SELLER:
SW Ventures, Inc.
By:
Name: Guido Cloetens
Title: President
COMPANY:
SW Oil & Gas Company
By:
Name: [Name]
Title: President
<PAGE>
form of
PROMISSORY NOTE
U.S. $90,000
Salt Lake City, Utah
June , 1999
FOR VALUE RECEIVED, Guido Cloetens ("Debtor") promises to
pay to the order of SW Ventures, Inc. ("Lender"), in lawful money
of the United States of America, in immediately available funds,
at such location as the Lender shall designate, the principal sum
of Ninety Thousand U.S. Dollars (U.S. $90,000), or so much
thereof as shall from time to time be outstanding (the "Principal
Amount"), without interest, from the date hereof until this Note
is paid in full.
2. Principal. Debtor promises to pay to the order of
Lender, the Principal Amount in one lump sum payment on December
, 1999.
3. Payments. Debtor may pay this Note in whole or in part
at any time.
4. Security. The Debtor, the Lender and Guido Cloetens
("Cloetens") have executed that certain Stock Purchase Agreement
of even date herewith, pursuant to which 15,000 shares of common
stock of New Generation Plastic, Inc. (the "Pledged Stock") have
been pledged by Cloetens as security for the payment of this
Note. Certificates representing the Pledged Stock have been
delivered to Schnader Harrison Segal & Lewis LLP, as Escrow
Agent, endorsed in blank. The Escrow Agent shall hold the
Pledged Shares until the all amounts of principal due under the
Promissory Note are paid in full. No partial release of shares
of Pledged Stock will be permitted.
5. Method of Payment. All payments of principal hereunder
shall be made by certified check, wire transfer or other mutually
agreeable form of payment to Lender at its address specified
herein or at any other address of Lender which is specified in
writing by Lender to Debtor at least two (2) business days prior
to the date when such payment is due. If the payment of
principal on the Note shall become due on a day which is not a
business day, such payment shall be made on the next succeeding
business day. Notwithstanding the foregoing, the Debtor may
elect to pay all or a portion of the principal amount by
surrendering shares of Pledged Stock having a Value (as defined
below) equal to the amount of principal Debtor is paying to the
Lender. If the entire amount of principal due under the
Promissory Note is satisfied in full by the surrender of shares,
any shares of Pledged Stock not surrendered shall be immediately
returned to Cloetens. The Debtor shall make an election to
surrender shares of Pledged Stock by delivering a written notice
to the Escrow Agent designating the effective date of the
surrender which must be at least three trading days after the
date the notice is received by the Escrow Agent. For purposes
of this Note the term "Value" shall mean the average of the high
bid and low ask prices of the NGP common stock on the date of
effectiveness of the surrender and the two immediately preceding
trading days.
6. No Waiver. Each and every one of the rights, remedies,
options and benefits provided herein to Lender or the holder
hereof, shall be cumulative and shall not be exclusive of any
other rights, remedies or benefits provided in any other
agreements between Lender and Debtor, or as provided by law.
Neither the failure nor delay by Lender or the holder hereof to
exercise any right, remedy, option, power or privilege hereunder
shall operate as a waiver of the right to exercise the same at a
later time; nor shall any single or partial exercise of any such
right, remedy, option, power or privilege by Lender or the holder
hereof operate as a waiver of any such right, remedy, option,
power or privilege.
7. Waiver of Presentment. Debtor and all endorsers,
guarantors and all persons who are liable or who may hereafter
become liable under this Note, jointly and severally, hereby
expressly waive presentment for payment, demand, notice of
nonpayment, notice of dishonor, protest of any dishonor, notice
of protest, diligence in collection and notice of any other kind
in connection with this Note.
8. Collection Costs. Debtor agrees to pay all collection
costs (including, but not limited to, reasonable attorneys' fees
and disbursements) incurred by Lender hereunder.
9. Governing Law. This Note shall be construed in
accordance with and governed by the internal laws and decisions
of the State of Nevada (without giving effect to choice of law
principles).
10. Application of Law. The parties hereto intend and
believe that each provision of this Note comports with all
applicable local, state and federal laws and judicial decisions.
However, if any provision or provisions or if any portion of any
provision or provisions in this Note is found by a court of law
to be in violation of any applicable local, state or federal
ordinance, statute, law, administrative or judicial decision, or
public policy and if such court should declare such portion,
provision or provisions of this Note to be illegal, invalid,
unlawful, void or unenforceable as written, then it is the intent
of all parties hereto that such portion, provision or provisions
shall be given force to the fullest possible extent that it or
they are legal, valid and enforceable, that the remainder of this
Note shall be construed as if such illegal, invalid, unlawful,
void or unenforceable portion, provision or provisions were not
contained therein, and that the rights, obligations and interests
of Debtor and the holder hereof under the remainder of this Note
shall continue in full force and effect.
11. Captions. The captions and headings of various
Sections of this Note are for convenience only and are not to be
considered as defining or limiting in any way, the scope or
intent of the provisions hereof.
12. Notices. Any notice, demand, request or other
communication which any party hereto may be required or may
desire to give hereunder shall be sufficiently given (i) on the
date of transmittal, if personally delivered, (ii) on the
business day after transmittal, if sent by facsimile (with a
confirming copy mailed by international air mail), and (iii) on
the third day following posting if mailed postage prepaid, by
registered air mail, addressed as follows:
If to Lender:
SW Ventures, Inc.
c/o New Generation Plastic, Inc.
245 Park Avenue, 39th Floor
New York, NY 10167
Facsimile: (212)
If to Debtor:
Guido Cloetens
Kampenhoutsebaan 100A
1982 Zemst, Belgium
Facsimile: 011 32 1665 11 50
13. Modification, Waiver. No modification, waiver,
amendment, discharge or change of this Note shall be valid unless
the same is in writing and signed by the party against which the
enforcement of such modification, waiver, amendment, discharge or
change is sought.
14. Time is of the Essence. Time is hereby declared to be
of the essence of this Note and of every part hereof.
15. Successors and Assigns. This Note shall inure to the
benefit of and shall be binding on the parties hereto and their
respective successors and assigns.
The undersigned has executed this Note as of the day and
year first set forth above.
- -------------------------------
Guido Cloetens
<PAGE>
EXHIBIT F
ANNUAL REPORT ON FORM 10-KSB FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1998
AND
QUARTERLY REPORT ON FORM 10-QSB FOR
THE THREE MONTHS ENDED MARCH 31, 1999
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______ to _______
Commission file number 0-24623
________
SW Ventures, Inc.
_________________________________________________
(Exact name of registrant as specified in its charter)
Nevada 87-0559453
_______________________________
________________________________
(State or other jurisdiction of (IRS employer
identification no.)
incorporation)
455 East 400 South, Suite 100 Salt Lake City, Utah 84111
__________________________________________________
____________
(Address of principal executive offices) (Zip
Code)
Issuer's telephone number: (801) 355-6524
Securities registered pursuant to Section 12(b) of the Exchange
Act:
Title of each class Name of each exchange on which
registered
None None
_________________________
___________________________________
Securities registered pursuant to Section 12(g) of the Act:
Common
____________________________________________
Check whether the issuer (1) filed all reports required to
be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the
registrant was
required to file such reports), and (2) has been subject to such
filing
requirements for the past 90 days. [x] Yes [ ] No
Check if there is no disclosure of delinquent filers
pursuant to Item 405
of Regulation S-B is not contained herein, and will not be
contained, to the
best of registrant's knowledge, in definitive proxy or
information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to
this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $
76,903.
The Company has no "established" market for its common
shares. Therefore,
management has arbitrarily valued the 1,392,066 shares held by
non-affiliates
as of March 1, 1999, at $1,392.07, based on the par value of one
mill ($0.001)
per share.
The number of shares outstanding of the issuer's common
stock as of March
1, 1999, was 3,416,066 shares of common stock, $.001 par value
per share.
Transitional Small Business Disclosure Format YES [ ] NO [x]
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
SW Ventures, Inc. (the "Company") was organized as a Nevada
corporation
on May 7, 1996. The Company's business purpose is that of
seeking out and
investing in various oil and gas opportunities in the Western
United States.
At inception, the Company issued "unregistered", "restricted"
shares to its
founders in connection with the initial funding of the Company.
In June of
1997, the Company commenced an offering of its common stock
pursuant to an
exemption from the registration requirements of Section 5 of the
Securities
Act of 1933, as amended (the "Act"), under Section 3(b),
Regulation D, Rule
504, whereby it offered for sale up to 1,000,000 of its
unregistered common
shares at an offering price of $.10 per share. The purpose of the
offering was
to raise funds for the purchase of a 21.25% working interest in
the Montana
Prospect, a 320 acre oil lease in Crook County, Wyoming (the
"Prospect"). The
Offering commenced on June 19, 1997 and closed on September 30,
1997 with all
shares offered sold for gross proceeds of $100,000.
In August of 1997, the Company purchased a 21.25% working
interest in
the Prospect, which purchase included the cost of drilling and
completion to
the Company, based on its 21.25% working interest, of the Montana
Berger Well
#1. The total acreage acquisition costs were $11,330 and drilling
and
completion of the first well totaled $62,995. The Company's share
of revenues
from the well is 17.85% after a landowner's royalty is paid. The
Company
elected to participate in a second well on the Prospect, the
Montana Berger
Well #2, in late March 1998, which well has been drilled and
completed. The
Company's share of the cost of drilling and completing the second
well, based
on its 21.25% working interest, was $69,874. The Company's
interest in oil
revenues on the second well after landowner royalties are paid is
equal to
17.35%. The Company funded the drilling and completion of the
second well
partially through funds raised in a second offering conducted
pursuant to the
exemption provided for under Section 3(b), Regulation D, Rule
504, of the Act
which commenced on March 16, 1998, and closed on September 13,
1998 with
326,066 shares sold at $0.15 per share for gross proceeds of
$48,910. The
funds raised were insufficient to pay the Company's share of the
drilling and
completion of the second well. Additional funding was provided
by an officer
and director who loaned the Company $11,200 of the required
completion and
drilling costs, and approximately $9,764 came from revenues from
operations.
The funds advanced by the officer and director were interest free
and payable
at such time as the director and the Company mutually determine.
At December
31, 1998, approximately $2,300 had been repaid. Subsequent to
such date,
the balance was repaid in full to the Director.
The Company had intended to participate in other wells
drilled on the
Prospect, and may do so, when and if the price of oil in the
market place
increases and stabilizes. It also has investigated other business
opportunities in the oil and gas industry such as purchasing
overriding and/or
working interests in other wells, the purchase of interests in
producing
wells, and/or an investment in other oil and gas related
businesses, although
the Company will make no decisions to pursue any of the foregoing
until and
unless the price of oil in the market goes up and stabilizes.
As of the
date hereof, the Company has invested in only one drilling
program, the
3
<PAGE>
Montana Prospect Drilling Program (the "Program"), and has
participated in the
drilling of two wells on that Prospect.
Oil prices have taken a sharp decline and the Company has
begun seeking
other types of investment opportunities. It is currently
negotiating with a
non-U.S. entity regarding the acquisition of certain assets.
These
negotiations are at a preliminary stage and no definitive
agreements have been
reached. If these negotiations prove successful and a
transaction is
consummated, of which no assurance can be given, this transaction
could result
in a change of control of the Company and the abandonment of its
oil and gas
investment plans. The Company will file a report on Form 8-K if
any material
acquisition of assets or change of control takes place.
BUSINESS OF THE COMPANY
Principal Products of the Company: the Montana Prospect Drilling
Program
- -----------------------------------------------------------------
- --------
* The Montana Prospect Drilling Program *
The Company's principal product is oil and gas. As of the
date hereof,
the Company has invested in only project, the Program, which has
drilled and
completed two wells: the Montana Berger Well #1 and the Montana
Berger Well
#2. The Prospect is in the northeastern Powder River Basin in
T. 53 N, R. 67
W, Section 17-18 and is part of an oil field known as the Sidner
Draw Field.
The Program was formed for the purpose of engaging in the
acquisition of 320
acres of oil and gas lease located in Crook County, Wyoming, and
the drilling
of a well or wells thereon; completing such well(s); and, if
warranted,
operating the same and distributing the revenues to the
participants in the
Program, as defined below.
* Working Interest *
In August/September 1997, the Company purchased its 21.25%
working
interest in the Program. The Company's initial investment in
the Program
included the purchase of the leases and its estimated costs and
expenses for
completion of the first well in the Program known as the Montana
Berger Well
#1. Additional participants purchased 53.75% of the Program to
equal 75% of
the Program. The working interest participants, including the
Company, who
own an aggregate of 75% of the Program were responsible for 100%
of the total
land acquisition and drilling costs of the project up through the
drilling of
the first well, the Montana Berger Well #1; the Carried Working
Interest
Owners, which include the Sponsor (Triple B Energy - 9.375%), the
geologist
(Twiford International, Inc. - 6.250%), the operator of the
well(s) (L& J
Operating, Inc.- 3.125%), and Mr. Robert Haigh (who negotiated
the lease
acquisition - 6.25%), have an aggregate 25% Carried Working
Interest (the
Working Interest Participants and the Carried Working Interest
Participants
are hereinafter sometimes collectively referred to as the
"Participants"). The
Carried Working Interest Participants did not bear lease
acquisition costs,
which include 25 separate leases on the Prospect, or drilling
costs of the
first well, the Montana Berger Well #1. All of the Participants,
however,
paid their proportionate share of completion costs once casing
point was set
on the first well; each Participant will pay its percentage share
of all
drilling and completion on any subsequent well they elect to
participate in.
Each Participant has first right of refusal on participation in
each well the
Program elects to drill, with a 300% penalty on revenues to be
received by a
non-participating party on any well such party chooses not to
participate in.
(Participating parties would receive three times the return of
their
4
<PAGE>
investment before a non-participating party is entitled to
revenues on a well
such party has not participated in.)
* Landowner Royalties *
The leases on the Prospect are three year leases from
private landowners
(a total of 25 separate leases) at an aggregate cost to the
Program of
$40,000. Each lease becomes perpetual when and if a well is
completed on
the lease and during the life of the well. The Prospect is
presently burdened
by landowners' royalties which vary from landowner to landowner.
The acreage
on which the Montana Berger Well #1 was drilled is burdened by a
landowners'
royalty of 16%, giving the Program a net interest of 84%. The
Montana Berger
Well #2 involves 15 separate landowners with varying royalties
which equal
18.36%, leaving the Program a net interest of 81.64%. (The
foregoing
landowners' royalties are hereinafter generally referred to as
the
"Landowners' Royalty".)The Participants are entitled to 100% of
the revenues
after paying the landowners. Net revenues means the percentage
of oil and gas
left to the Working Interest Participants after Landowners'
Royalty and any
additional overriding royalties have been deducted from the total
oil or gas
produced (approximately 17.85% to the Company on the Montana
Berger Well #1
and 17.35% to the Company on the Montana Berger Well #2).
* Operating Agreement *
The Company is a party to an operating agreement (the
"Operating
Agreement"), as is each Working Interest Participant. The Company
appointed
the L & J Operating, Inc. (the "Operator") as the operator of the
Prospect in
all matters related to the drilling and completion of any
well(s)drilled
thereon, and in the subsequent sale and delivery of oil and gas
therefrom, if
any, into the marketplace. Each time the Company elects to
participate in the
drilling and completion of a well, it is given an itemized
"Approval for
Expenditures", which outlines the itemized costs of drilling and
completion as
well as other costs anticipated to be expended on the proposed
well.
* Assignment of Lease *
Subsequent to the execution of the Operating Agreement, all
of the
subject leases comprising the Prospect, consisting of 25 separate
leases,
were held in the record name of Robert S. and Marjorie Fern
Haigh. The
subject oil and gas leases were then assigned to the Company (in
its
proportionate interest equal to 21.25%) on November 6, 1997 by
the Haighs.
Mr. Haigh was the negotiator on behalf of the Program with the
landowners and
each of the 25 leases was originally assigned to him prior to and
during the
sale of the working interest in the Program. The leases were
then assigned to
the Participants in the Program subsequent to the execution of
the Operating
Agreement between L & J Operating and the various Participants in
the Program,
and recorded with the Crook County Recorder, Connie D. Tschetter,
on Nov. 6,
1997, Book 356, page 116. The twenty-five leases which are the
subject of
the Operating Agreement are three year leases with varying lease
dates
beginning as early as August 20, 1996. Nine of these leases are
dated August
20, 1996, and will therefore expire, unless renewed, on August
20, 1999.
However, if a well is successfully drilled and completed on any
lease, the
lease becomes perpetual for the life of the well. The Program
must complete
its proposed drilling by as early as August 20, 1999 and as late
as June 20,
2000, or renew those leases on undrilled acreage. The Company
receives 21.25%
of the net revenues after payment of the landowner's royalty .
5
<PAGE>
* The Producing Wells on the Prospect: Montana Berger Wells
#1 and #2 *
The Montana Berger Well #1 is located in Township 53 North,
Range 67
West, 6th P.M. Section 17: SW/4SW/4 on 40 acres. Total
acquisition, drilling
and completion costs up through the completion of the Montana
Berger Well #1,
were $285,725. The Working Interest Participants who own an
aggregate of 75%
of the Program were responsible for all costs of land acquisition
and drilling
at approximately $190,825; all of the Participants, however, paid
their
proportionate share of completion costs once casing point was set
equal to
$94,000 and will participate in any additional wells in
accordance with their
working interest. The Company's initial payment of $74,233.66 to
the Program
included the Company's purchase of the leases and drilling costs
(on a basis
of 1/3 for 1/4), estimated at $54,067, and the Company's share of
completion
costs estimated at $20,166. L & J Operating Company, the Operator
of the
Program, began drilling of the Montana Berger Well #1 on
September 9, 1997 and
oil began flowing in early October. The well, during its first
few months,
flowed at a rate of approximately 130 barrels per day or 4,000
barrels per
month; during the Company's year ended December 31, 1998 the
Montana Berger
Well #1 produced an average of approximately 100 barrels of oil
per day. The
gravity of the oil produced from this well is approximately 21.1
and it is
considered sour asphalt base crude.
The Montana Berger Well #2 is located in Township 53 North
67 West,
Crook County Wyoming, Section 17, SW NE SW. In late March, 1998,
the Company
paid an additional $62,000 to the Program, its estimated share of
the drilling
and completion costs on the Montana Berger Well #2, the second
well to be
drilled by the Program. Total drilling and completion costs for
the Montana
Berger Well #2 were estimated at $163,000 for drilling and
$129,000 for
completion, of which the Company paid 21.25% or $62,000. L & J
Operating
Company began the drilling of the Montana Berger Well #2 on March
28, 1998 and
a completion rig was moved onto the property on April 6, 1998.
Some
additional completion costs were incurred on the second well
which required
the payment of an additional $7,800 to the Program by the
Company. The average
production on the Montana Berger Well #2 is approximately 90
barrels per day
at December 31, 1998. The average gravity of the production
from the Montana
Berger Well #2 is 21.78 and is considered sour asphalt base
crude.
The Company has received approximately $99,000 in gross
revenues from
production from the Montana Berger wells (net of landowner
royalties) since
production began on the wells (October 1997 for the Montana
Berger #1 and
April 1998 on the Montana Berger #2). Well operating expenses
(taxes,
administration and well expenses) equaled approximately $ 34,875
not including
cost depletion during that same period.
*Well Completion *
Both of the currently producing wells on the Prospect, the
Montana
Berger Well #1 and #2 and the next proposed well to be drilled on
the
Prospect, were or will be completed by the Operator in the same
fashion,
without the necessity of using a heavy mud system by setting
casing prior to
reaching the Minnelusa formation. A cased whole log is run
before the hole is
drilled into the Upper "B" sand and this sand is not penetrated
more than a
few feet. Installation of a secondary water flood is not
necessary because
the Upper "B" sand in the producing wells is being pressurized
due to the
adjacent water flood at the Deadman Creek Field. (For a more
detailed
description of the Minnelusa formation, see "ITEM 2. PROPERTIES,
LOCATION AND
DESCRIPTION OF PROPERTIES/OIL PRODUCING ACTIVITIES, Description
of Fields,
Location and Geology of Sidner Draw Field."
6
<PAGE>
Distribution Method of the Company's Product
- --------------------------------------------
The Company is dependent on the Operator to market any oil
production
from the Montana Berger Wells #1 and #2 and any subsequent
production which
may be received from other wells which may be successfully
drilled on the
Prospect. The Company must rely on the Operator's ability and
expertise in
the industry to successfully market the same. Prices at which the
Operator
sells gas/oil both in intrastate and interstate commerce, will be
subject to
the availability of pipe lines, demand and other factors beyond
the control of
the Operator. The Operator believes any oil produced can be
readily sold to a
number of local buyers. To date, all of the Company's oil
production has been
sold to Eighty Eight Oil Company of Casper, Wyoming. There are
other local
companies, however, which are also willing to purchase the
Program's crude
oil. No assurance can be given, however, that the current price
of oil, which
has decreased dramatically since the Company started realizing
revenues from
operations from $16.49 per barrel @ 40 gravity to approximately
$6.28 per
barrel @ 40 gravity as of December 31, 1998, will increase and
stabilize. The
Operator, however, is in the position to negotiate contracts with
buyers to
purchase production for a definitive period of time; such
purchase contracts
often include bonuses. The last contract was a 12 month contract;
the current
one with Eighty-Eight Oil Company is for six months. (See
"Competitive
Position in the Industry", below.)
Competitive Position in the Industry
- ------------------------------------
There are a large number of companies and individuals
engaged in the
exploration for and development of oil and gas properties.
Competition is
intense for the acquisition of oil and gas leases suitable for
exploration,
the purchase or sale of producing properties and the raising of
capital.
Capital available for the investment in the oil and gas industry
has declined
significantly as a result of decreases in oil prices and changes
in federal
tax laws and adverse economic conditions generally affecting the
oil and gas
industry. The Company is a small, inexperienced company and must
compete with
much larger companies which are better capitalized, have
considerably more
experience in the oil and gas industry, are better able to fund
drilling
enterprises than the Company is, and are better able to withstand
the negative
impact of the low price of oil in the market. The Company's only
competitive
factor is its low production costs (because it is a "flow" well
which does not
require pumping.) This lower production cost may be off-set by
the fact that
the same water pressure which pressurizes the well, may also be
the cause of
the slow but gradual increase of water in the Company's
production, from
almost zero when each of the wells began flowing, to
approximately 12% as of
the date hereof. At present date, however, production costs are
such that it
is still cost effective to flow the wells. This gives the
Program a slight
advantage because many marginal wells in Wyoming have been
shut-in in recent
months (an estimated 1,200 wells) due to plummeting oil prices,
and the demand
for the sour asphalt base crude such as produced by the Montana
Berger Wells
#1 and #2 has risen. As a result of this increased demand the
Operator has
been able to negotiate a better contract with Eighty Eight Oil
Company with a
higher bonus per barrel. Currently the Operator has a six month
contract in
effect with Eighty Eight Oil Company, which has agreed to
purchase all
production from the Program for the term of the contract. Eighty
Eight Oil
Company has agreed to pay an approximate $3.50 per barrel bonus
over and above
the posted price of oil per barrel in the market at the time of
sale. The
beginning date of the contract was January 1, 1999. Although, the
Operator's
former contract with Eighty Eight Oil Company also included a
bonus per
7
<PAGE>
barrel, the new contract is paying a bonus which is approximately
$1.00 -
$2.50 bonus per barrel more than the former contract.
Sources and Availability of Equipment/Raw Materials
- ---------------------------------------------------
In the past, increased drilling activities from time to time
have created
certain shortages of equipment necessary in the drilling and or
completion of
wells. Due to shortage of such equipment and to generally
inflationary
trends, and the age and condition of much of the existing
equipment, prices at
which equipment is available have escalated. Although the
Company has
suffered no problems to date as to equipment shortages, it has
incurred
certain expenses due to its investment in older equipment, as
part of its
working interest obligations. There is always the possibility
that current
equipment in use due to age and/or lack of proper maintenance
could fail to
perform properly. This would force expensive repairs and/or
costly delays to
the working interest participants, one of which will be the
Company, or the
purchase of additional new or used equipment which could be
delayed if
shortages of equipment exist. In addition, there is no guarantee
that the
necessary equipment will be available when and if the Program
begins
developing other leases on the Prospect.
Dependence on a Few Major Customers
- -----------------------------------
The Company is not dependent on a few major customers but
rather is
dependent upon the Operator's ability to market crude oil to
prospective
purchasers. There are a number of prospective purchasers in the
State of
Wyoming for the Company's crude oil. All of the production to
date from the
Program's two wells has been purchased by Eighty Eight Oil
Company under
various contracts. Currently the Operator has a six month
contract in effect
with Eighty Eight Oil Company, which has agreed to purchase all
production
from the Prospect paying an approximate $3.50 per barrel bonus
over and above
the posted price of oil per barrel in the market at the time of
sale. The
beginning date of the contract was January 1, 1999. However, if
at the end of
six months the Operator is unable to negotiate a new contract
with Eighty
Eight Oil Company, there are numerous other available purchasers.
Effect of Existing/Probable Government Regulations on the
Company's Business
- -----------------------------------------------------------------
- ----------
The areas of oil and gas exploration have become highly
regulated by
state and federal governmental agencies. Although the Operator
is experienced
in the area of oil and gas operations and has not encountered any
unknown,
unanticipated or additional expenses or problems due to
government
regulations, there is no guarantee that new rules and regulations
may not be
adopted either at a state or federal level which would adversely
affect the
Company's oil and gas operations. Recent changes in Wyoming
statutes
affecting taxes on oil and gas have had certain effects on
taxation of the
Company's oil revenues. During late 1997, the State of Wyoming
eliminated its
2% severance tax rate on wells which were designated as "wild
cat" wells
(first productive well in an area). Although newly discovered
crude continues
to receive a tax break of 2%, such rate is applicable to the
first 60 barrels
of production per day only, which increases to 6% on any
production over 60
barrels on a daily basis. Such tax break is only for the first
two years of
production. This change has resulted in increased taxation for
the Company on
production from oil and less profitability from operations.
Unless
regulations change, in October of 1999, the Company will no
longer be eligible
8
<PAGE>
to utilize the 2% tax break on its first 60 barrels per day
produced from the
Montana Berger #1 and will be subject to a full 6% tax on that
well.
The State of Wyoming House of Representatives gave
preliminary approval
to oil tax breaks in early February of 1999, which would reduce
the State's
severance tax rate to 4% if the price of oil is between $11 and
$16 per barrel
and 2% if it is less than $11 per barrel. The severance tax
would also rise
to 8% if the price per barrel of oil in the market exceeded $16.
On February
25, 1999, the Wyoming State Senate adopted an amended version of
the proposed
tax breaks. The bill reduces the severance tax from 6% to 4% for
1999 and 2000
for as long as oil stays below $20 per barrel. The bill must go
back to the
State of Wyoming House of Representatives for final approval of
changes.
Although such legislation will certainly help offset the negative
impact of
the low oil prices on the Company, the bill is not yet law.
Costs and Effects of Compliance with Environmental Laws
- -------------------------------------------------------
In the conduct of its drilling operations, the Operator may
encounter
natural hazards, such as unusual or unexpected rock formations or
pressures,
or other conditions not anticipated which could result in
substantial cost
overruns or the inability of the Operator to drill and complete
the well which
otherwise might be productive. The insurance against these
hazards that the
Operator may carry may be insufficient to offset all such
contingencies. The
Prospect may also be subject to liabilities for pollution or
other damages,
both environmental or otherwise, against which it cannot insure
or the
Operator chooses not to insure, due to premium costs or other
reasons.
Accordingly, it is possible that the Company could incur
substantial
liabilities to third parties including liabilities for
environmental clean-up
which could reduce funds available for exploration and
development or reduce
revenues to the Company. Because the land leases involve private
property, the
Operator is subject to rules and regulations of the Wyoming Oil
and Gas
Conservation Commission.
The Company's current involvement with a drilling program
which is being
drilled in the Minnelusa area, has specific difficulties
associated with water
driven wells which involve potential water removal from the
wells. Although
the Operator of the wells has experience in Minnelusa wells and
operates the
same in a manner which minimizes the risks inherent in such a
well, it likely
that the significant increase of water in production which the
wells have
experienced over the past few months will continue. There are
strict laws
regarding disposal of water from oil wells if the water has
salinity above a
certain percentage. These laws, which are enforced by the State
of Wyoming
Department of Water Quality, can be expensive to comply with.
All of the
water from the Company's Montana Berger Wells #1 and #2 has
excess salinity
and must be disposed of in a certain location and manner. It is,
and will
continue to be, costly to dispose of the water and one or both
wells could be
shut-in if the water production increases to the point where it
is no longer
cost-effective to flow the wells and dispose of the water. As of
December 31,
1998, both wells were showing increased percentages of water
equaling
approximately 12.5%. The Company's costs have risen along with
the increase
because it is now faced with its portion of water removal and
disposal costs.
The Company is dependent on the Operator for the proper removal
and disposal
of water, compliance with applicable laws and regulations, and
for the proper
shutting in of one or both of the wells should production become
uneconomical.
9
<PAGE>
Status of Publicly Announced New Products
- -----------------------------------------
The Company has made no public announcements on any new
products or
services nor does it have any new products or services.
Patents/Trademarks/Licenses/Concessions/Franchises/Labor
Contracts/Royalties.
- -----------------------------------------------------------------
- ------------
The Company has no patents, trademarks or trade names nor
does it
anticipate applying for the same. The Company does not have any
licenses,
concessions, franchises, or labor contracts. The Company does
not have any
royalty contracts other than those discussed under "BUSINESS OF
THE COMPANY,
Principal Products of the Company, the Program, *Landowner
Royalties*."
Research and Development
- ------------------------
Other than the development of the various wells on the
Prospect, the
Company is conducting no research and development nor has it
since its
inception. The Company's participation in the development of oil
wells in the
Sidner Draw Field is further discussed elsewhere in this
"Business" section
and under "ITEM 2, PROPERTIES."
Number of Employees
- -------------------
The Company has no employees as of the date hereof other
than one of its
officers. The Company compensates its Secretary/Treasurer for
services
rendered in those capacities and for various services performed
for the
Company as a consultant, at a rate of $1,000 per month. (See
"Executive
Compensation".)
ITEM 2. DESCRIPTION OF PROPERTIES.
LOCATION AND DESCRIPTION OF PROPERTIES/OIL PRODUCING ACTIVITIES
The Company owns a 21.25% working interest in a drilling
program on the
320 acre Prospect, located on an oil field known as the Sidner
Draw Field.
Description of Fields the Sidner Draw Field
- ---------------------------------------------
* Location and Geology of the Sidner Draw Field *
In contemplating its initial investment in the Program, the
Company
reviewed information contained in a geology report by Twiford
International
Inc. The Prospect, located in the Sidner Draw Field in Township
53 North,
Range 67 West, 6th P.M. of Section 17: W/2W/2, SE/4NW/4,
NE/4SW/4 and Section
18: E/2NE/4 (2-40 acre parcels are in the NE part of Section 18
and 6-40 acre
parcels are in Section 17), Crook County, Wyoming, is comprised
of 320 acres
located on two adjacent southwest plunging anticlinal
paleogeomorphic
features. The productive formation is the Minnelusa Upper "B"
sand and is the
primary target of this Prospect area. The sand on the Montana
Berger Well #1
was anticipated and subsequently encountered at depth of 6100
feet at the well
location. The same Minnelusa Upper "B" sand which is common to
the Prospect
will be encountered on any wells drilled. This particular sand
was charged
with a bottom hole pressure approximately 800 lbs. above normal,
or about 3200
10
<PAGE>
pounds. The excessive pressure is believed to be caused from
water loss in
the adjacent Deadman Creek Field which is undergoing a water
flood in the
lower "B" Minnelusa sand. The field is currently named the Sidner
Draw Field.
The Minnelusa Upper "B" Sand is an eolian dunal complex
which pinches out
in an easterly or up-dig direction. This pinch-out is due in
part to erosion
or non-deposition of the Upper "B" sand. The impermeable Opeche
shale is the
up-dig trapping mechanism for oil in the Upper "B" sand while the
underlying
Middle "B" dolomite provides the bottom seal for the Upper "B"
sand. The
lateral trapping mechanism may be a pinch out of the sand itself
which will
become dolomitic approaching the barrier. This could be a
subsystem boundary
trap for the Upper "B" sand thus allowing a large accumulation of
oil.
* Analogy to Sidner Draw Field - the Edsel Field *
The Prospect area which is located on the Sidner Draw Field
is adjacent
to sections of similar geology such as the Edsel Field which is
located in
sections 25,26, 27, 24, 36 of T.54N, R.68W, Crook County,
Wyoming, and
contains wells which produce oil from Minnesula Upper "B" sand.
According
to the Wyoming Oil and Gas Commission, as of May, 1996, the
field had
produced 4,849,196 barrels of oil. Average porosity in the Edsel
Field is
19.6% with net pay averaging 21.5 feet. The average water
saturation is 47%.
The original oil in place was estimated at 6.25 million barrels
and was
expected to produce 12.4% of this figure on a primary production
increasing to
or 2.49 million barrels under a polymer augmented water flood.
Since the
report to the Wyoming Oil and Gas Commission (1996- 4,849,196
barrels), there
have been six additional producing wells drilled in the field.
Stratigraphically, the Edsel Field is similar to the Prospect.
This
comparison is based, in part, on values taken from the Wyoming
Geological
Association Guidebook 1984.
Drilling Activity
- -----------------
* Exploration, Site Testing and Conclusions *
Five test holes were previously drilled by other programs on
the
Prospect. Of the five test holes, four were dry holes and one is
currently a
shut-in well. The shut-in well is on the southern feature and
was drilled by
EMC Energies, Inc. in the SW SW of Section 17 and had an initial
production of
700 barrels of oil per day, flowing. Such well was shut-in due
to too much
water. Subsequent to the Company's involvement in the Program,
the Montana
Berger Well #1 was drilled and completed about 800 feet northeast
of the
initial shut-in well, in NE SW SW of Section 17 and the Montana
Berger Well #2
was drilled approximately 650 feet from the Montana Berger Well
#1 in SW NE SW
of Section 17 (See "The Producing Wells on the Prospect: Montana
Berger Well
#1 and #2" under "BUSINESS").
The four dry holes drilled on the Prospect had varying
results. Common
to each of the test sites however was the presence of water in
sufficient
quantities to prevent the recovery of any material amount of oil
in an
economic fashion. The hole drilled in SE NE of section 18,
appears to be on
the down dip edge of an oil accumulation, while the well drilled
in the SW SW
of section 17 penetrated oil in a pool as evidenced from the
production from
the well (shut-in because of too much water.) The hole drilled
in the NE NE
of section 18 penetrated a tight Upper "B" and is therefore a
barrier hole.
The hole drilled in the SE NW of section 17 penetrated a thin
tight section of
11
<PAGE>
Upper "B" interval which is on the up-dip edge of the dunal
complex. The hole
drilled in the SE SW of section 17 penetrated a Minnelusa section
that is
dolomitic with the Upper "B" zone completely absent. This hole
penetrated the
southern lateral barrier of the Prospect area.
A dunal complex is present in this area with the necessary
parameters
present to form an accumulation of oil, i.e. sand with good oil
shows as well
as production down dip, sand gone and/or tight up-dig and
laterally. The
first producing well on the Prospect, the Montana Berger Well #1,
was drilled
in the NE SW SW of Section 17 and was high structurally to the
original well
on the SW SW of section 17 (the shut in well).
Exploration and test drilling have resulted in an estimated
productive
area of 130 acres with an estimated average thickness of
productive pay in
feet of 25 and an estimated porosity of 23.9%. The conclusion of
an initial
report on the Prospect performed by Twiford International, Inc.,
indicated
that on the estimated 130 productive acreage, there were
potentially 5,739,072
barrels of oil in place with estimated primary recovery under
normal
conditions of 12.4%. A waterflood could increase that recovery.
The high
pressure of the Upper "B" sand may be a waterflood in itself
precluding the
necessity of the installation. Gravity of the oil is
approximately 20
degrees.
* Drilling Activity *
The following table sets forth the results of drilling
activity by the
Company, net to its interest, since its inception in 1996.
Year Ended December 31,
1998 1997
______________________
Development Wells Gross:
Productive 2 1
Dry Holes 0 0
Total 2 1
Development Wells Net:
Productive 0.425 0.2125
Dry Holes 0 0
Exploratory Wells 0 0
Production
- ----------
The following table summarizes net volumes of oil produced
and sold,
and the average prices received for such sales from all
properties in which
the Company held an interest since its inception in 1996.
Year Ended December 31,
1996(5) 1997
1998
___________________________________________
Average Sales Price ($/Bbl)(1) 0 $ 13.15 $
6.85
Production Data No. of Barrels(2) 0 1,531.19
11,390.71
Lifting Costs per barrel(3) 0 $ 2.31 $
1.37
Taxes per barrel (4) 0 $ 1.46 $
1.31
_________________________________________________________________
____________
12
<PAGE>
(1) Based on the average price throughout the year;
(2) Company's share of production of 8,578 bbls. total in 1997;
and 41,145
bbls (Montana Berger #1) and 23,324 bbls. (Montana Berger #2)in
1998;
(3) Lifting costs includes monthly recurring costs of producing
and marketing
oil and gas, including costs incurred for labor, fuel, repairs,
hauling,
materials, supplies, utilities, and other costs incident thereto,
insurance
and casualty loss expense, and compensation to well operators for
other
services rendered in conducting such operations.
(4) Average taxes per barrel paid by the Company which include
production
taxes, severance taxes and ad valorem taxes.
(5) The Company had no interest in any oil properties during its
calendar year
ended December 31, 1996.
Productive Wells and Acreage
- ----------------------------
As of the date hereof, the Company owns a 21.25% working
interest net of
landowners' royalty in two net productive wells each on 40 acres.
Both wells
were producing as of the last year end, December 31, 1998.
The following table sets forth information regarding the
number of
productive wells in which the Company has a working interest as
of the current
date. Productive wells are either producing wells or wells
capable of
production although currently shut-in. One or more completions
in the same
bore hole are counted as one well.
Gross Productive Wells Net Productive Wells
Total No. of Wells in which Sum of Total Amount of
Type Working Interest is Owned Working Interest in
Gross Wells
- ---------- ----------------------------
- --------------------------------
Oil 2 .425
The following table sets forth the approximate developed and
undeveloped
acreage in which the Company held a leasehold, mineral or other
interest as of
the current date. Undeveloped acreage includes leased acres on
which wells
have not been drilled or completed to a point that would permit
the production
of commercial quantities of gas of oil, regardless of whether or
not such
acreage contains proved reserves. A gross acre is an acre in
which interest is
owned. A net acre is deemed to exist when the sum of fractional
ownership
interests in gross acres equals one. The number of net acres is
the sum of
fractional interests owned in gross acres expressed in whole
numbers and
fractions thereof.
Developed Developed Undeveloped Undeveloped
Location Gross Net Gross Net
- -------- --------- --------- ----------- -----------
Wyoming 80 17 240 51
13
<PAGE>
Reserves
- ---------
*Reserve Estimates *
Although the Company has had reports prepared for it on
estimated oil
reserves, no estimate of total proved net oil reserves of the
Company has been
filed with or included in reports to any federal authority or
agency.
There are numerous uncertainties inherent in estimating
quantities of
proved reserves and in projecting rates of production and future
net cash
flows. The quantities of oil that are ultimately recovered,
production and
operating costs, the amount and timing of future development
expenditures, and
future oil sales prices may all differ from those assumed in
these estimates.
Reserve assessment is a subjective process of estimating recovery
from
underground accumulations of oil that cannot be measured
precisely, and
estimates of other persons might differ from those of the
Company.
Accordingly, reserve estimates are often different from the
quantities of oil
that are ultimately recovered. A market value determination
would take into
account, among other things, the recovery of reserves not
presently classified
as proved, anticipated future changes in prices and costs and a
discount
factor more representative of the time value of money and the
risks inherent
in reserve estimates. The information included in this section
should be read
in conjunction with the Company's Financial Statements, including
the Notes
thereto.
The Company's estimated proved oil reserves as of the date
hereof are as
follows:
Proved Developed 67,695 barrels
Proved Undeveloped 0 barrels
*Reserve Report on the Prospect*
The Working Interest Participants in the Program engaged
a petroleum
engineer, Tony C. Stone, dba Jadasat Enterprises, to complete a
report on
the probable oil reserves on the Prospect. The report was
completed as a
supplement to the Twiford International, Inc. Prospect Study (see
DESCRIPTION
OF FIELDS THE SIDNER DRAW FIELD, Geology), and was based on the
information
obtained from the shut-in well on the Prospect and from the
producing well,
the Montana Berger Well #1 (the Montana Berger Well #2 was not
completed at
the date of the report). Th report concluded that recoverable
reserves on the
Prospect less production at the date of the report is estimated
at 1,508,400
barrels. Mr. Stone's conclusions were partially based on the
Twiford
International Report isopatch and structure maps and the
completion and
restricted production procedure used by the Operator on the
Montana Berger
Well #1. Mr. Stone indicated in his report that the Upper "B"
productive
interval in the Sidner Draw Field, which was discovered with the
currently
shut in well, is confirmed by the Montana Berger Well #1. The
confirmation
well has produced approximately 14,000+ barrels as of January 31,
1998, water
free, and is currently flowing at 130 BOPD with 900 psi surface
pressure on
6/64" choke. It is produced on a restricted flow to limit
wellborn draw down
to 100 psi maximum to avoid water "coming" or the fracturing of
the semi-
unconsolidated sands coming through naturally fractured dolomite
separating
sands. Because of oil price volatility at the time of the
report, no
economic analysis was performed by Mr. Stone. Mr. Stone also
indicated that
one or more delineation wells were required to totally validate
the prospect
14
<PAGE>
structure. Since Mr. Stone's report, the Company has not engaged
for its own
account, nor has it engaged in conjunction with the other
Participants, a
petroleum engineer to complete any additional reports on the
Prospect. All
information contained Mr. Stone's report was as of January 1998.
Delivery Commitments
- ---------------------
Subsequent to the Company's year ended December 31, 1998,
the Operator
entered into a six month contract with Eighty Eight Oil Company
of Casper,
Wyoming. Eighty Eight Oil Company has agreed to purchase all
production from
the Montana Berger Wells #1 and #2 during that period. (See
"BUSINESS,
Distribution Methods of the Company's Products" and "Competitive
Position in
the Industry".) Under the purchase agreement, the Operator is not
obligated to
provide a fixed and determinable quantity of oil.
Present Activities
- ------------------
The Company currently has no activities except sale of
production on
its two producing wells. The Company had intended to participate
in the
drilling of a third development well on the Prospect in October
of 1998;
however, due to the extremely low price of oil in the market, the
Program
elected not to spud a new well. The Company may be faced with
making a
decision as to whether or not to participate in a third well in
mid to late
spring of 1999 although such decision will likely be postponed by
the Program
because of the record low oil prices. The Company is currently
seeking other
types of investment opportunities not related to the oil and gas
industry.
(See "DESCRIPTION OF BUSINESS, BUSINESS DEVELOPMENT".)
INVESTMENT POLICIES
The Company has no investment in any real estate interests
or real
estate other than its working interest in the Prospect. It has
no investment
in any real estate mortgages, or securities or interests in
persons primarily
engaged in real estate activities, nor, as of the date, hereof
does the
Company intend to invest in any of the foregoing. The Company
will, however,
consider investing in other oil and gas leases, when and if
management deems
it in the Company's best interests to do so. It may also invest
in production
interest or other leases. In addition, the Company may elect to
invest in
other oil and gas related enterprises, which could consist of
acquiring
companies which have business purposes or interests related to
oil and gas,
and purchasing additional interest if available in the Program or
other
drilling programs. As of the date hereof, however, management has
postponed
making any decisions as to future investment in the oil and gas
industry due
to the extremely low price of oil in the market, which does not
appear to be
recovering significantly, and is investigating other types of
business
opportunities.
OFFICES
The Company rents office space in Salt Lake City, Utah, on a
month to
month basis at a monthly rate of $260 per month including
telephone. The
office is sufficient to conduct the day to day operations of its
business.
There is no written lease in effect.
15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceedings
and, to the
best of its knowledge, no such action by or against the Company
has been
threatened. None of the Company's officers, directors, or
beneficial owners
of 5% or more of the Company's outstanding securities is a party
to
proceedings adverse to the Company nor do any of the foregoing
individuals
have a material interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the year ended December 31, 1998, no matter was
submitted to a
vote of security holders.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER
MATTERS.
MARKET INFORMATION
Although the Company received its symbol for listing on the
OTC Bulletin
Board of the National Association of Securities Dealers, Inc.
(the "NASD")on
December 11, 1998, namely "SWWV", no trading activity had
commenced as of
December 31, 1998, the date of the financial statements included
in this
Report. Since December 31, 1998, an extremely limited market has
commenced.
The high and low bids for the two months ended January and
February, 1999 were
$0.13 and $0.10, respectively. Such over-the-market quotations
reflect inter-
dealer prices, without retail markup, mark-down or commission,
and may not
necessarily represent actual transactions. However, because of
the extremely
limited trading activity, the Company believes that there is not,
as of this
date, an "established" trading market.
DIVIDEND POLICY
No dividends have been paid by the Company since its
inception. The
payment by the Company of dividends, if any, in the future, rests
within the
discretion of its Board of Directors and will depend, among other
things, upon
the Company's earnings, its capital requirements and its
financial condition,
as well as other relevant factors. The Company has not paid or
declared any
dividends to date due to its present financial status. The
Company does not
anticipate paying dividends on its common stock in the
foreseeable future but
plans to retain earnings, if any, for the operation and expansion
of its
business. There are no restrictions that limit the ability to pay
dividends on
common equity or that are likely to limit the same in the near
future.
HOLDERS
There are 44 shareholders of record of the Company's common
stock as of
December 31, 1998.
RECENT SALES OF UNREGISTERED SECURITIES
There have been no recent sales of unregistered securities
other than
those previously reported on in the Company's Registration
Statement on Form
10-SB filed on July 14, 1998 and amended on September 28, 1998,
and in the
Company's Quarterly Report on Form 10QSB for its quarter ended
September 30,
1998. (See "Item 13. EXHIBITS AND REPORTS ON FORM 8-K".)
16
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
The following discussion provides information which
management believes
is relevant to an assessment and understanding of the Company's
plan of
operation. The discussion should be read in conjunction with the
consolidated
financial statements and notes thereto.
RESULTS OF OPERATIONS
The Company has received revenues from operations since
October of 1997
when it received its first revenues from oil production from the
Montana
Berger Well #1. A second well, the Montana Berger Well #2 began
production in
April of 1998.
YEARS ENDED DECEMBER 31, 1998 AND 1997: The Company had net
income of
$3,381 for the year ended December 31, 1998, as compared to a net
loss of
$31,153 for 1997. The Company had revenues from oil production in
1998 of
$76,903 compared to revenues of $22,007 in 1997. The change from
net loss to
net income from 1997 to 1998 is attributable to an increase in
oil production
revenues. Although the Company saw a total overall increase in
expenses from
1997 to 1998 of $20,057, the increase in oil production revenues
was over
$54,000. The increase in production is due to the fact that the
Company
realized revenues from production for only a little over two
months in 1997 as
opposed to a full year in 1998.
General administrative expenses increased from $13,478 in
1997 to
$21,367 in 1998. This increase was due to the commencement of the
payment of
compensation to an officer of the Company of $1,000 per month
beginning in
February of 1998, for various services rendered on behalf of the
Company in
connection with her duties as Secretary/Treasurer, in-house
accounting,
initial drafting of various documentation including the Company's
offering
memorandum, dated March 16, 1998, its Registration Statement on
Form 10-SB,
and amendments thereto, and other required disclosure
documentation. (See
"Item 10. EXECUTIVE COMPENSATION".)
The Company changed legal counsel during 1998 and
significantly reduced
its legal fees from $30,340 in 1997 to $6,389 in 1998.
Depreciation expenses
rose from $228 in 1997 to $742 in 1998 and cost depletion on the
Company's
wells rose from $1,705 in 1997 to $17,558 in 1998. The Company
recognizes cost
depletion based upon the production from its wells as compared to
total
estimated reserve quantities of the wells and therefore cost
depletion levels
are a function of production quantities.
The Company funded mineral property investments in 1998 by
selling
shares of its common stock to public investors for cash in the
amount $48,910.
In addition, the Company received cash advances from an officer
and director
in the amount of $11,200, which was repaid out of production
revenues; $2,311
was repaid in 1998 and the balance was repaid in January of 1999.
An
additional $9,764 of the costs of mineral property investment
came from
production revenues. In 1997, the Company funded its initial
mineral
property investment of $74,325 from proceeds of an offering in
which 1,000,000
shares were purchased by investors for gross proceeds to the
Company of
$100,000. It also received a cash advance from an officer and
director of
$9,000 which was converted into 90,000 shares of common stock in
January of
1998. The foregoing 90,000 shares are "restricted".
17
<PAGE>
When comparing the Company's fourth quarter in the years
ended 1997 and
1998, the Company attributes the increased income in the fourth
quarter of
1998 to the fact that the Company received production revenues
from two wells
in the fourth quarter of 1998 compared to production revenues
from only one
well in the comparable quarter of 1997. However, although
production almost
doubled in the fourth quarter of 1998 compared to the fourth
quarter of 1997,
the Company's revenues from production did not. This is due to
the fact that
oil prices in the market in the fourth quarter of 1998 were
significantly
lower. The Company received an average of $13.50 per barrel of
oil in the
fourth quarter of 1997 compared with an average of $5.18 per
barrel during
that same quarter in 1998. Expenses associated with production
activities
increased for the Company in the fourth quarter of 1998 due to
increases in
well operation expenses as a result increased production and
increased
relative percentage of equipment maintenance and repair expenses.
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996.
The Company
had a net loss of $14,728 as of December 31, 1996, which
increased to $31,153
in 1997. The increase in net loss was due to an increase in the
Company's
legal expenses. The Company did not receive any revenues from
operations in
1996, as opposed to its year ended 1997 when it received revenues
from oil
production of $22,700. In connection with its initial revenues
from
operations in 1997, which began in mid-October, the Company also
incurred
related production expenses and taxes totaling $7,409. The
Company had no
production expenses or production taxes in 1996. General and
administrative
costs in 1997 were $13,478 as opposed to $14,728 in 1996, which
makes 1996
expenses proportionately higher because the Company's year ended
1996 was not
a full year (the Company's inception being May 7, 1996), and is
mainly
attributable to costs related to start-up. Legal expenses in
1997 were
$30,340 as opposed to -0- in 1996 and were incurred in connection
with the
drafting of the Company's first offering memorandum.
The Company funded its losses in 1996 through the issuance
of shares of
common stock for cash contributions which equaled $14,728. In
1997, the
Company conducted an offering of 1,000,000 shares of its common
stock to the
public and received gross proceeds of $100,000, and net proceeds
of $82,400,
$74,345 of which went to the Company's initial investment in
mineral property
(the Prospect).
LIQUIDITY AND CAPITAL RESOURCES.
The Company has had revenues from operations in each of the
last two
years. The Company's cash requirements consist of its office
expenditures,
legal and accounting fees to comply with securities registration
filing
requirements, oil production taxes and expenses, and certain
consulting fees.
The Company relies on revenues from operations to cover its cash
requirements.
During the last year revenues were sufficient to meet the
Company's cash
requirements to fund day to day operations as well as a portion
of mineral
property investments. The Company also relied on sales of its
common stock and
advances from an officer and director to fund the balance of its
mineral
property investments. The Company anticipates that it will have
sufficient
revenues in 1999 to fund its operations, provided it continues to
receive
revenues from oil production. Revenues from oil production to
the Company,
however, have decreased due to the significant decrease in the
price per
barrel of oil in the marketplace, and an increase in associated
production
expenses which began in the fourth quarter ended December 31,
1998. The
Company expects lower oil prices to persist throughout 1999.
However, the
Program has been receiving a larger than normal bonus per barrel
for its low
gravity, high asphalt crude oil due to a reduced supply of the
same in the
18
<PAGE>
market. The higher than normal bonus will continue at least
through the end
of the Company's second quarter, if not longer.
As a working interest owner in the Prospect, the Company
could incur
production expenses in the next year which exceed revenues if
well
administration expenses continue to increase and oil prices drop
even further.
In addition, the Company could incur its proportionate share of
additional
expenses associated with equipment repair, maintenance and/or
replacement as
well as water disposal and road repairs in connection with the
operation of
the two wells. If the Company's share of these expenses is too
high, the
Company may not have sufficient revenues to pay such additional
expense(s).
Also, the Company's oil wells are water driven and as the water
continues to
encroach as expected, the operating costs will continue to
increase as a
percent of revenues. (See "BUSINESS, Costs and Effects of
Compliance with
Environmental Laws".) The Company must rely on the Operator of
the wells to
make decisions as to whether or not the continued operation of
the wells is
economical. The well operator's decision to shut-in one or both
of the wells
may not occur at the same point in time as the Company would like
it to occur.
As part of its plans for growth, the Company had intended to
participate
in an additional well(s) on the Prospect, as well as investigate
opportunities
for purchasing additional interest in the Prospect, purchasing
other oil and
gas leases, and/or making other oil and gas investments. Such
expansion would
have been funded partially from revenues from operations, and
from cash
contributions or loans from affiliates of the Company. In
addition, the
Company also considered offering for sale additional shares of
the Company's
common stock or some other debt or equity financings. Due to the
condition of
the oil market, however, the Company has placed any such plans on
hold.
Management does not believe that further investment in the oil
and gas
industry is in the best interest of the Company until and unless
the price of
oil in the market increases dramatically and stabilizes.
Depressed oil prices
on a continued basis will adversely affect the Company's
financial outlook.
YEAR 2000
Management believes that the Company's accounting and
operational systems
are year 2000 compliant. Prior to the Company's filing of its
last Quarterly
Report on Form 10-QSB, the Company contacted the Operator of the
wells; the
Operator indicated to The Company that it expects no material
year 2000 issues
because none of the systems used at the wells sites in which the
Company has
an interest are run by computer systems. The Company is not
dependent on
computers other than for its internal bookkeeping which is done
on a system
that is Year 2000 compliant. The Company has no relationship
with any third
parties which are dependent on computers other than its bank.
The Company's
bank has reported that it is Year 2000 compliant.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-KSB, in filings by the Company
with the
Securities and Exchange Commission (the "SEC"), in the Company's
press
releases or other public or stockholder communications, or in
oral statements
made with the approval of an authorized executive officer of the
Company, the
words or phrases "would be," "will allow," "intends to," "will
likely result,"
"are expected to," "will continue," "is anticipated," "estimate,"
"project,"
or similar expressions are intended to identify "forward-looking
statements"
within the meaning of the Private Securities Litigation Reform
Act of 1995.
19
<PAGE>
The Company cautions readers not to place undue reliance on
any forward
looking statements, which speak only as of the date made, are
based on certain
assumptions and expectations which may or may not be valid or
actually occur,
and which involve various risks and uncertainties. The Company's
actual
results for future periods could differ materially from those
anticipated or
projected.
Unless otherwise required by applicable law, the Company
does not
undertake, and specifically disclaims any obligation, to update
any forward-
looking statements to reflect occurrences, developments,
unanticipated events
or circumstances after the date of such statement.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included herewith.
The Company's
audited Financial Statements for its years ended December 31,
1998 and 1997
and from inception on May 7, 1996 through its year ended December
31, 1996.
SW Ventures, Inc.
Audited Financial Statements
December 31, 1998 and December 31, 1997
Independent Auditor's
Report..........................................F-1
Balance Sheet at December 31, 1998 and December 31,
1997..............F-2
Statement of Operations and Accumulated Deficit for the
years ended December 31, 1997 and 1998, and the period
from inception on May 7, 1996 though December 31,
1996................F-3
Statement of Cash Flows for the years ended December 31,
1997 and 1998 and the period from inception on May 7,
1996 though December 31,
1996.........................................F-4
Statement of Changes in Stockholder's Equity from May 7,
1996 to December 31,
1998.............................................F-5
Notes to Financial
Statements.........................................F-6
20
<PAGE>
Randy Simpson C.P.A. P.C.
11775 South Nicklaus Road
Sandy Utah 84092
Fax & Phone (801)572-3009
Independent Auditor's Report
- ----------------------------
The Board of Directors and Stockholders of SW Ventures, Inc.:
We have audited the accompanying balance sheets of SW Ventures,
Inc. (the
Company) as of December 31, 1998 and December 31, 1997 and the
related
statements of operations, stockholders' equity, and cash flows
for the years
ended December 31, 1998 and 1997 and the period from May 7, 1996
(inception)
through December 31, 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 audits.
We conducted our audits in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audit to
obtain reasonable assurance about wether the financial statements
are free of
material misstatements. An audit includes examining, on a test
basis,
evidence supporting the amounts and disclosures in the financial
statements.
An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating
the overall
financial statement presentation. We believe that our audits
provide a
reasonable basis for our opinion.
In our opinion, the above mentioned financial statements fairly
present, in
all material respects, the financial position of SW Ventures,
Inc. as of
December 31, 1998 and December 31, 1997 and the results of its
operations and
its cash flows for the year ended December 31, 1998 and 1997, and
the period
from inception (May 7, 1996) through December 31, 1996, in
conformity with
generally accepted accounting principles.
/s/ Randy Simpson CPA
RANDY SIMPSON, CPA
A Professional Corporation
March 8, 1999
Salt Lake City, Utah
F-1
<PAGE> 21
SW Ventures, Inc.
Balance Sheets
December 31, 1998 and December 31, 1997
December 31
December 31
1998
1997
-------------
- --------------
ASSETS
Current Assets:
Cash $ 8,900 $
8,424
Accounts receivable 3,748
5,878
Inventory 292
1,870
-------------
- --------------
Total Current Assets 12,940
16,172
-------------
- --------------
Mineral Property & Equipment:
Mineral property 144,200
74,325
Less cost depletion (19,263)
(1,705)
Office equipment 4,291
1,953
Less accumulated depreciation (970)
(228)
-------------
- --------------
Net Mineral Property &
Equipment 128,258
74,345
-------------
- ---------------
Total Assets $ 141,198 $
90,517
=============
===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,125
12,648
Advances from officer 8,889
9,000
-------------
- --------------
Total Current Liabilities 13,014
21,648
Stockholders' Equity:
Common Stock, $.001 par value; authorized
50,000,000 shares, issued and outstanding
3,416,066 shares on December 31, 1998
and 3,000,000 on December 31, 1997 3,416
3,000
Paid-in capital 167,268
111,750
Accumulated deficit (42,500)
(45,881)
-------------
- --------------
Total Stockholders' Equity 128,184
68,869
-------------
- --------------
Total Liabilities &
Stockholders' Equity $ 141,198 $
90,517
=============
=============
See accompanying notes to financial statements
F-2
<PAGE> 22
SW Ventures, Inc.
Statement of Operations and Accumulated Deficit
Years Ended December 31, 1998 and 1997, and
the period from inception (May 7, 1996) though December 31, 1996
From
Inception
For the For the
(May 7, 1996)
Year Ended Year Ended
to
December 31 December 31
December 31
1998 1997
1996
----------- -----------
- -----------
Oil revenue $ 76,903 $ 22,007
$ -
Oil production costs & taxes 27,466 7,409
-
General & administrative expenses 21,367 13,478
14,728
Legal & professional fees 6,389 30,340
-
Depreciation expense 742 228
-
Cost depletion 17,558 1,705
-
----------- -----------
- -----------
Total expenses 73,522 53,160
14,728
----------- -----------
- -----------
Net income (loss) 3,381 (31,153)
(14,728)
Accumulated deficit -beginning of year (45,881) (14,728)
-
----------- -----------
- -----------
Accumulated deficit - end of year $ (42,500) $ (45,881)
$ (14,728)
=========== ===========
===========
Net income (loss)per common share $ .001 $ (0.021)
$ (0.009)
=========== ===========
===========
Weighted average shares outstanding 3,295,363 2,202,083
1,615,232
=========== ===========
===========
See accompanying notes to financial statements
F-3
<PAGE> 23
SW Ventures, Inc.
Statement of Cash Flows
For the Years Ended December 31, 1998 and 1997
and from Inception (May 7, 1996) to December 31, 1996
<TABLE>
<CAPTION>
For the
For the From Inception
Year
Year (May 7, 1996)
Ended
Ended to
December 31,
December 31, December 31,
1998
1997 1996
--------------
- --------------
- ----------------
<S> <C>
<C> <C>
Cash flows used in operating activities:
Net income (loss) $ 3,381
$ (31,153) $ (14,728)
Adjustments to reconcile net loss
to net cash used in operating activities:
Common stock issued for services -
4,500 850
Depreciation expense & cost depletion 18,300
1,933 -
Changes to operating assets & liabilities:
Decrease(Increase) in accounts receivable 2,130
(5,878) -
Decrease(Increase) in inventory 1,578
(1,870) -
(Decrease)increase in accounts payable (8,523)
1,745 10,903
--------------
- -------------- ---------------
Net cash provided (used) by operating activities 16,866
(30,723) (2,975)
Cash flows used in investing activities:
Purchase of equipment & properties (72,213)
(76,278) -
--------------
- -------------- ---------------
Net cash used in investing activities (72,213)
(76,278) -
Cash flows from financing activities:
Offering costs for common stock issuance -
(5,750) (11,850)
Common stock issued for cash 46,934
103,000 24,000
Advances from officers 8,889
9,000 -
--------------
- -------------- ---------------
Cash provided by financing activities 55,823
106,250 12,150
Net increase (decrease) 476
(751) 9,175
Cash, beginning period 8,424
9,175 -
--------------
- -------------- ---------------
Cash, end of period $ 8,900
$ 8,424 $ 9,175
==============
============== ===============
Supplemental non-cash financing activities
issuance of common stock for loan from
affiliate $ 9,000
$ - $ -
==============
============= ===============
No cash paid for income taxes or interest.
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 24
SW Ventures, Inc.
Statement of Changes in Stockholders' Equity
From May 7, 1996 (Inception) to December 31, 1998
<TABLE>
<CAPTION>
$.001
Par value
Common Common
Accumu-
Stock Stock Paid-in
lated Total
Shares Amount Capital
Deficit Equity
----------- ---------- ----------
- ---------- ----------
<S> <C> <C> <C>
<C> <C>
Shares issued to founders
on May 7, 1996 1,475,000 $ 1,475 $ 9,525 $
- $ 11,000
Shares issued for legal fees
(securities registration)
on May 7, 1996 115,000 115 735
- 850
Shares issued for cash on
December 6, 1996 260,000 260 12,740
- 13,000
Net loss for the period from
May 7, 1996 (inception)
through December 31, 1996
(14,728) (14,728)
----------- ---------- ----------
- --------- ----------
Balances, December 31, 1996 1,850,000 1,850 23,000
(14,728) 10,122
Shares issued for cash
May 16, 1997 60,000 60 2,940
- 3,000
Shares issued for compensation
May 16, 1997 55,000 55 2,695
- 2,750
Shares issued for legal fees
(securities registration)
on May 16, 1997 35,000 35 1,715
- 1,750
Shares issued for cash (private
placement offering) on
September 26, 1997 net of
offering costs of $17,600 1,000,000 1,000 81,400
- 82,400
Net loss for the year ended
December 31, 1997
(31,153) (31,153)
----------- --------- ----------
- --------- ---------
Balances, December 31, 1997 3,000,000 3,000 111,750
(45,881) 68,869
Shares issued to officer upon
conversion of loan in
January, 1998 90,000 90 8,910
9,000
Shares issued for cash (in
private placement offering)
net of offering costs of
$1,976: (275,000 in April;
27,646 in June; 23,420
in Sept.) 326,066 326 46,608
46,934
Net gain for year ended
December 31, 1998
3,381 3,381
---------- --------- ---------
- --------- -----------
Balance at December 31,1998 3,416,066 $ 3,416 $167,268
$( 42,500)$ 128,184
========== ========== =========
========= ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 25
SW Ventures, Inc.
Notes to Financial Statements
A. Origination and Accounting Policies
-----------------------------------
SW Ventures, Inc. (the "Company") was incorporated May 7,
1996 as a
Nevada corporation. The Company reviewed certain business
opportunities
during 1996 and on June 19, 1997 conducted a stock offering under
Rule 504 of
Regulation D, Section 3(b) under the Securities Act of 1933, as
amended. The
offering closed on September 26, 1997 with proceeds of $100,000
being received
by the Company.
The Company invested as a working interest partner in an
oil drilling
program in Crook County, Wyoming. The Company invested $74,325
in the
drilling and completion of an oil well located in Crook County,
Wyoming. The
Company owns a 21.25% working interest in the well. The well,
the Montana
Berger #1, has produced approximately 50,730 barrels of crude oil
from its
successful completion in October, 1997 through December 1998.
The well
averaged during 1998 approximately 100 barrels of oil per day.
The prospect
includes a 320 acre lease on which additional wells may be
drilled.
The Company conducted a second offering under Rule 504,
in March of
1998 which closed in September of 1998 with 326,066 shares sold
for gross
proceeds of $48,909. In March of 1998, the Company invested an
additional
$69,875 for the drilling and completion of a second well in the
same program,
the Montana Berger #2 which began production in mid-April 1998.
The Company
funded the its share of the second well from offering proceeds,
revenues from
production and a loan from an officer and director. Since
then, the Montana
Berger #2 has produced approximately 23,324 barrels of crude oil
with average
production during 1998 equaling approximately 90 barrels of oil
per day.
B. Mineral Properties, Equipment, Accounts Receivable and
Inventory
- ----------------------------------------------------------------
Mineral property and equipment are stated at cost. The
Company
accounts for its oil and gas exploration activities utilizing the
full cost
method of accounting. Exploration costs, including geological
and
geophysical costs, costs for drilling and completing wells (both
geophysical
costs, costs for drilling and completing wells (both successful
and dry holes)
are capitalized and depleted to expense over the total
recoverable oil and gas
reserves of the Company's properties.
Mineral properties include the acquisition costs of a 320
acre mineral
lease and an oil well which was drilled and completed on October
7, 1997. The
Company invested $74,325 for the drilling and completion of this
well. The
total acreage acquisition costs were $11,330 and $62,995 was
invested in the
drilling and completion of the oil well. The second well,
drilled in April of
1998, cost the Company $69,875. The Company is depleting its
investment in oil
an gas properties based on the yearly oil production (in barrels)
divided by
the estimated recoverable reserves (in barrels) of the well or
more commonly
referred to as the units of production method. The Company
recorded cost
depletion of $17,558 based upon total production of barrels for
1998. The
total estimated reserves of the wells are approximately 380,000
barrels at
December 31, 1998. The Company was receiving a price of $3.52 to
$3.66 per
barrel at December 31, 1998, and these reserve estimates were
based upon that
price.
F-6
<PAGE> 26
SW Ventures, Inc.
Notes to Financial Statements
Accounts receivable represent the net oil production
received in January
1999 for December 1998 oil production and inventory represents
the value of
the oil on site which was unsold on December 31, 1998.
C. Related Party Transactions.
---------------------------
The Company issued 1,475,000 shares to its founders in
consideration of
$11,000 in cash at the inception of the Company. An additional
60,000 and
260,000 shares were issued for cash advances totaling $16,000
from the
president of the Company during 1996 and early 1997. Legal
counsel was issued
150,000 shares for services in 1996 and 1997, at $0.007 and $0.05
per share,
respectively. Also in 1997, 55,000 shares were issued to the
Company's
Secretary/Treasurer for services at $0.05 per share. In January
of 1998,
90,000 shares were issued to an officer and director in
satisfaction of a loan
for $9,000.
D. Operating Leases and Contingent Liabilities
-------------------------------------------
The Company rents its office space on a month to month basis
at $260 per
month. This agreement is cancelable at any time without notice.
E. Supplemental Information on Oil Producing Activities
---------------------------------------------------
The Company drilled and completed the Montana Berger Well #1
in October
of 1997. The following financial and reserve data reflect only
the activities
of the Montana Berger Well #1 in 1997. The Company drilled and
completed the
Montana Berger Well #2 in April of 1998, which activities are
reflected in the
1998 reserve data. The Company has future drill sites for
approximately 4 more
wells on the Prospect. However, it does not consider these drill
sites to be
proved reserves at this point in time.
The following disclosures provide unaudited information
required by SFAS
No. 69, "Disclosures About Oil and Gas Producing Activities."
RESULTS OF OPERATIONS FOR OIL PRODUCING ACTIVITIES
Year Ended December 31, 1997
- ----------------------------
Revenues............................................$ 22,007
Production Costs ................................... (5,583)
Depreciation, depletion & amortization.............. (1,705)
Taxes other than income............................. (1,823)
Income tax expense.................................. 0
---------
Results of operations for producing activities......$ 12,896
=========
Year Ended December 31, 1998
- ----------------------------
Revenues............................................$ 76,903
Production Costs.................................... (18,728)
Depreciation, depletion & amortization.............. (17,558)
Taxes other than income............................. ( 8,738
Income tax expense.................................. 0
---------
Results of operations for producing activities......$ 31,879
=========
F-7
<PAGE> 27
SW Ventures, Inc.
Notes to Financial Statements
CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
Well Costs (Drilling and Completion)............... $132,870
Mineral Property Acquisition Costs (Proved)........ 11,330
---------
Total Capitalized Costs............................ $144,200
=========
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED
TO PROVED OIL
RESERVES.
The standardized measure of discounted future net cash flows
relating to
the Company's ownership interest in oil reserves at year end,
December 31,
1998 is as follows:
1998
1997
---------
- ----------
Future cash inflows................................$ 240,314 $
484,930
Future oil operating and tax expenses.............. ( 93,328)
(103,800)
Future income tax expenses - benefit ............. 4,769
(25,854)
----------
- ----------
Future net cash flows.............................. 151,755
355,276
10% annual discount for estimating timing of
cash flows...................................... (43,279)
(54,293)
----------
- ----------
Standardized measure of discounted future
net cash flows................................. $ 108,476 $
300,983
==========
==========
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH
FLOWS
Changes in standardized measure of future net cash flows
relating to
proved oil reserves are summarized below:
Balance at Dec. 31, 1996................................$
0
Sales and transfers of oil produced,
net of production costs................................
(14,601)
Extensions, discoveries and improved recoveries
net of future production and development
costs..................................................
315,584
- -----------
Balance, December 31, 1997..............................
300,983
Sales and transfers of oil produced,
net of production costs................................
(49,437)
Extensions, discoveries and improved recoveries
net of future production and development costs.........
66,347
Reduction in reserves due to decline in oil prices......
(198,010)
Reduction in reserves - volume/decline curve
adjustments............................................
(11,407)
- -----------
Balance at December 31, 1998............................$
108,476
===========
F-8
<PAGE> 28
SW Ventures, Inc.
Notes to Financial Statements
RESERVE QUANTITY INFORMATION
The following summarized the policies used by the Company in
preparing the
accompanying oil reserve disclosures.
The Company has only proved developed reserves. Proved
developed reserves
are proved reserves that can reasonably be expected to be
recovered through
existing wells with existing equipment and operating methods.
Oil
(BBLS)
Proved Reserves 1998
1997
- --------------- -----------
- ----------
Balance at beginning of period 48,940
0
Extensions discoveries and other additions........... 33,684
50,471
Production........................................... (11,391)
(1,531)
Changes in estimates - price decline................. (3,538)
0
-----------
- -----------
Balance, at end of period............................ 67,695
48,940
===========
===========
The Company has no natural gas reserves.
F-9
<PAGE> 29
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Set forth below is certain information concerning each of
the directors
and executive officers of the Company as of December 31, 1998.
Name Age Position Held
& Since
- -------------------------------- ------
- --------------------------
Guido Cloetens 33 President,
Chairman of the
Kampenhoutsebaan 100A Board of
Directors, Chief
1982 Elewijt Zemst, Belgium Executive
Officer
Since May 1996
Terri Jackson 45
Secretary/Treasurer and a
3483 S. 3170 E. Director
Salt Lake City, UT 84109 Since May 1996
Keith Biesinger, Esq. 54 Director
3200 Big Cottonwood Rd. Since March
13, 1998
Salt Lake City, Utah 94121
BIOGRAPHICAL INFORMATION ON OFFICERS AND DIRECTORS
Guido Cloetens, age 33, is the President, Chief Executive
Officer and
Chairman of the Board of Directors of the Company. From 1988 to
1989 Mr.
Cloetens was a representative of DAIWA Securities, Inc., in
Brussels, Belgium,
engaged in selling Japanese equities. In 1990, Mr. Cloetens
worked as an
investment advisor for PBI Securities, Inc. in Amsterdam,
Holland. From 1991
to 1994, Mr. Cloetens was a manager of client accounts for
institutional
investors with Kredietbank in Brussels. From May 1994 to November
1995, Mr.
Cloetens was the owner/manager of Pyros Consulting, a Belgium
corporation
engaged in the financial consulting business. Pyros Consulting
was sold in
1995. Since then, Mr. Cloetens has been self-employed as a
businessman with an
interest in several private companies. The Company intends to
employ Mr.
Cloetens, or an entity to be formed by Mr. Cloetens, as a
consultant and/or
management/consulting firm in the future. (See "Transactions
Between the
Company and Management.") Mr. Cloetens successfully completed a
post
university program as investment advisor at the EHSAL Management
School in
Brussels in 1992. He also attended courses in economics and
accounting at the
Catholic University of Leuven in Belgium followed with a post
university
program "Corporate Finance and Investment and Financial
Statements Analysis at
the University of Brussels in 1984 - 1986.
Terri Jackson, age 45, is the Secretary/Treasurer and a director
of the
Company. Ms. Jackson is the author of "Glide's Garden", published
in 1977 in
England by Oreal Press, London, England as well as a
contributing writer to
the Hudson-Mohawk SIDS Alliance Newsletter. From 1977 to 1987,
Ms. Jackson
worked as an employee of Intermountain Plant Works, and was
promoted to
operations manager from 1984-1987. Ms. Jackson was a founding
member and on
the Board of Trustees of the Broadway Stage, a live theater in
Salt Lake City,
Utah, from 1989-1991. From 1989 to the 1996, Ms. Jackson worked
as a legal
30
<PAGE>
assistant to an attorney in Salt Lake City, Utah specializing in
corporate and
securities law. In late 1996, Ms. Jackson co-founded Data
Electronic Filing
*Service, L.C., a company established to assist lawyers,
accountants and
public companies with SEC. mandatory electronic filing
requirements. Data
Electronic Filing Service, L.C. is a registered SEC EDGAR filing
agent.
Currently, Ms. Jackson also works as an independent paralegal
providing
services to various attorneys in the area of securities and
corporate law.
Keith Biesinger, Esq., age 54, was appointed an interim Director
by the
Company's Board of Directors on March 13, 1998, to serve the
unexpired portion
of a term held by Ms. Lise-Lotte Ruzicka Newell who resigned on
March 13,
1998. Mr. Biesinger is a member of the Utah State Bar
Association and has
practiced law in Salt Lake City, Utah for numerous years. He is
also a member
of Safari Club International, Sierra Club, Ducks Unlimited, and
the World
Wildlife Fund. Currently, in addition to his position with the
Company, he
serves as a trustee of The Gun Club, a Utah non-profit
corporation. His
interests are shooting sporting clays, fly fishing, hiking and
traveling.
Executive officers of the Company are elected by the Board on an
annual basis
and serve at the discretion of the Board.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)of the Securities Exchange Act of 1934 requires
the
Company's executive officers, directors and persons who
beneficially own more
than 10% of the Company's common stock to file initial reports of
ownership
and reports of changes in ownership with the Securities and
Exchange
Commission. Such persons are required by SEC regulations to
furnish the
Company with copies of all Section 16(a) forms filed by such
persons.
Based solely on the Company's review of such forms furnished
to the
Company and representations from certain reporting persons,
management
believes that all filing requirements applicable to the Company's
executive
officers, directors and more than 10% stockholders were complied
with during
the year ended December 31, 1998, except those of Mr. Keith
Biesinger. Mr.
Biesinger, a director of the Company, failed to file his Form 3
"Initial
Statement of Beneficial Ownership" in a timely manner. Mr.
Biesinger does
not, and has never, owned any securities of the Company and filed
his initial
report on Form 3 so stating, on or about February 22, 1999.
[This space intentionally left blank]
31
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth certain information as to the
Company's
Chief Executive Officer and each of the Company's officers and
directors who
have received compensation for the years ended December 31, 1996,
December 31,
1997, and December 31, 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long
Term Compensation
- -----------------------------------------------------------------
- -----
Annual Compensation
Awards Payouts
- -----------------------------------------------------------------
- ----------------------------
- ---
(a) (b) (c) (d) (e) (f)
(g) (h) (i)
Other
All
Name Annual
Restricted Other
and Compensa- Stock
Underlying LTIP
Compensa-
Principal sation Award
Options/ Payouts tion
Position Year Salary($) Bonus($) ($) ($)
SAR's(#) ($) ($)
- -----------------------------------------------------------------
- ----------------------------
- ---
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
Guido Cloetens(1) 1996 -0- -0- -0- -0-
-0- -0- -0-
Kampenhoutsebaan 100A 1997 -0- -0- -0- -0-
-0- -0- -0-
1982 Elewijt-Zemst 1998 -0- -0- -0- -0-
-0- -0- -0-
Belgium
President, Chairman
of the Board, CEO
Terri Jackson(2) 1996 -0- -0- -0- -0-
-0- -0- -0-
3483 South 3170 East 1997 -0- -0- -0-
$2,750(3) -0- -0- -0-
Salt Lake City, UT 1998 -0- -0- $10,100 $
900(3) -0- -0- -0-
84109
Secretary/Treasurer
Director
Keith Biesinger 1996 -0- -0- -0- -0-
-0- -0- -0-
3200 Big Cottonwood 1997 -0- -0- -0- -0-
-0- -0- -0-
Salt Lake City, UT 1998 -0- -0- -0- -0-
-0- -0- -0-
84121
Director
Lise-Lotte (Ruzicka) 1996 -0- -0- -0- -0-
-0- -0- $
1000(5)
Newell(4) 1997 -0- -0- -0- -0-
-0- -0- -0-
Director
(1) The Company has agreed to pay Mr. Cloetens or an entity
yet to formed by Mr.
Cloetens,
$2000 per month for consulting services. As of the date
hereof, the agreement between
the
Company and Mr. Cloetens has not been finalized. (See
"CERTAIN RELATIONSHIPS AND
RELATED
TRANSACTIONS."
(2) Terri Jackson has been receiving $1,000 per month
starting in February 1998 for
various
services rendered on behalf of the Company in connection
with her duties as
Secretary/Treasurer, in-house accounting, initial
drafting of various documentation
including the Company's offering memorandum, dated March
16, 1998, its Registration
Statement on Form 10-SB, and amendments thereto, and
other required disclosure
documentation. There is no employment agreement in effect
with Ms. Jackson.
(3) Ms. Jackson received 55,000 shares of the Company's
unregistered common stock for
services rendered to the Company in her capacity of
Secretary Treasurer for the
period
from inception in May of 1996 through May of 1997. The
shares were given a deemed
value
of $0.05 per share based on the following: that the par
value of the stock was
$0.001,
that there was no trading market for the Company's common
shares, and that the
Company
was preparing to commence an offering of its common stock
at $.10 per share. The
price
of $.05 was the price utilized by Mr. Cloetens to convert
various loans made to the
Company into stock as of that same date. In addition, Ms.
Jackson took stock in lieu
of
approximately $ 900 in fees due her for services
performed in April of 1998. Ms.
Jackson
converted her outstanding fees due into 6,000 shares of
stock at $.15 per share, the
same
price per share as paid in the Company's offering which
commenced on March 16, 1998.
Ms.
Jackson currently owns 186,000 shares of the Company's
stock.
32
<PAGE>
(4) Lise-Lotte Ruzicka Newell resigned in early 1997.
(5) Lise-Lotte Ruzicka Newell received $1,000 for her
assistance in organizing the
Company.
The $1,000 was not paid until September of 1997.
</TABLE>
COMPENSATION OF DIRECTORS
No cash fees or other consideration was paid to directors of
the Company
for service on the Board during the year ended December 31,
1998.
Employment Agreements
The Company has no employment contracts in effect with any
of the members
of its Board of Directors or its executive officers nor are there
any
agreements or understandings with such persons regarding
termination of
employment or change-in control arrangements. The Company has
agreed to
compensate Ms. Jackson $1,000 per month for services rendered in
her capacity
as Secretary/Treasurer of the Company, which includes in-house
accounting, as
well as other services in connection with the initial drafting of
the
Company's offering memorandum and its Registration Statement on
Form 10-SB and
amendments thereto, prior to review by counsel. The Company has
also agreed
to enter into a Consulting Agreement with Mr. Guido Cloetens,
President, Chief
Executive Officer and a director of the Company, or an entity to
be formed by
Mr. Cloetens for such purposes. The Company will compensate Mr.
Cloetens or
such entity $2,000 per month when the agreement is consummated.
(See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS".)
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Nevada law authorizes, and the Company's Bylaws and
Certificate of
Incorporation provide for, indemnification of the Company's
directors and
officers against claims, liabilities, amounts paid in settlement
and expenses
in a variety of circumstances. Indemnification for liabilities
arising under
the Act may be permitted for directors, officers and controlling
persons of
the Company pursuant to the foregoing or otherwise. However, the
Company has
been advised that, in the opinion of the Securities and Exchange
Commission,
such indemnification is against public policy as expressed in the
Act and is,
therefore, unenforceable.
STOCK OPTIONS AND WARRANTS
There are no outstanding stock options or warrants.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following tables sets forth certain information with
respect to the
beneficial ownership of the common stock of the Company as of
December 31,
1998 for: (i) each person who is known by the Company to
beneficially own more
than 5 percent of the Company's common stock, (ii) each of the
Company's
directors, (iii) each of the Company's Named Executive Officers
(defined
below), and (iv) all directors and executive officers as a group.
As of
December 31, 1998, the Company had 3,416,066 shares of common
stock
outstanding.
33
<PAGE>
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS
- --------------------------------------------
Amount and
Title Nature of Percent(1)
of Principal Shareholders Beneficial of Class as
Class Name, Address & Position Ownership Current
Date
- ----------- ------------------------- ------------
- -------------
<S> <C> <C> <C>
Common Guido Cloetens 1,838,000
Kampenhoutsebaan 100A Sole Voting
1982 Zemst, Belgium Power 53.81%
-----------------------
President & Director
Chief Executive Officer
- -----------------------------------------------------------------
- ----------
Common Terri Jackson 186,000
3483 South 3170 East Sole Voting
Salt Lake City, UT 84109 Power 5.44%
------------------------
Secretary/Treasurer &
Director
- -----------------------------------------------------------------
- -----------
Common Keith Biesinger -0- 0%
32000 So. Big Cottonwood Rd.
Salt Lake City, Utah
---------------------------
Director
- -----------------------------------------------------------------
- ------------
Officers and Directors as a Group 2,024,000 59.25%
- -----------------------------------------------------------------
- ------------
</TABLE>
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF OWNERS OF 5% OR MORE OF THE COMPANY'S
OUTSTANDING SHARES
- -----------------------------------------------------------------
- ------------
Amount and
Title Nature of Percent(1)
of Principal Shareholders Beneficial of Class as
Class Name, Address & Position Ownership Current
Date
- ----------- ------------------------- ------------
- -------------
<S> <C> <C> <C>
Common Guido Cloetens* 1,838,000
Kampenhoutsebaan 100A Sole Voting
1982 Zemst, Belgium Power 53.81%
- -----------------------------------------------------------------
- ----------
Common Terri Jackson * 186,000
3483 South 3170 East Sole Voting
Salt Lake City, UT 84109 Power 5.44%
- -----------------------------------------------------------------
- -----------
Common Trends, Inc. 190,000 5.56%
P.O. Box 156
Pond Street, Hibiscus Square
Grand Turk
Turks and Caicos Islands
British West Indies
- -----------------------------------------------------------------
- ------------------
* Also an officer and director
34
<PAGE>
The Company is currently negotiating with a foreign entity
regarding the
purchase of certain assets. No definitive agreements have been
entered into
as of the date hereof, and there can be no assurance that a
transaction will
be consummated. However, it is possible that if a definitive
agreement is
entered into, it will result in a change of control of the
Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There have been no material transactions in the past two
years or
proposed transactions to which the Company has been or proposed
to be a party
in which any officer, director, nominee for officer or director,
or security
holder of more than 5% of the Company's outstanding securities is
involved.
Although the Company intends to enter into an consulting
agreement with Mr.
Cloetens or an entity to-be-formed by him in which he retains a
controlling
interest, the amount involved in the transaction will not be more
than $24,000
per year. Mr. Cloetens is currently serving as President of the
Company,
Chief Executive Officer and Chairman of the Board. Mr. Cloetens,
or an entity
to be formed by Mr. Cloetens, will provide management and
consulting services
to the Company, including, but not limited to, shareholder
relations for non-
US shareholders, financial advice, investigating and analyzing
various
business opportunities, etc. The Company has agreed to pay Mr.
Cloetens, or
the to be formed entity, $2,000 a month for its services.
Although an
agreement has not been consummated, the Company expects to begin
utilizing the
services of Mr. Cloetens in such capacity at such time as it
believes revenues
from operations are sufficient to do so.
The Company issued 1,475,000 shares to its founders
(including Mr.
Cloetens and Ms. Jackson) in consideration of $11,000 in cash at
the inception
of the Company. An additional 60,000 and 260,000 shares were
issued for cash
advances totaling $16,000 from the President of the Company,
Guido Cloetens,
during 1996 and early 1997. The shares were given a deemed value
of $0.05 per
share based on the following: (i)that the par value of the stock
was $0.001,
(ii) that there was no trading market for the Company's common
shares, and
(iii) that the Company was preparing to commence an offering of
its common
stock at $.10 per share. Ms. Jackson received 55,000 shares of
the Company's
unregistered common stock for services rendered to the Company in
her capacity
of Secretary/Treasurer for the period from inception in May of
1996 through
May of 1997. The price of $.05 per share was the same price
utilized by Mr.
Cloetens to convert various loans made to the Company into stock
as of that
same date. In addition, Guido Cloetens converted a $9,000 loan to
the Company,
made during 1997 and which was interest free, into 90,000 common
shares of
restricted stock in January of 1998. Such loan was converted at
the same
price paid by investors in the offering, $0.10 per share, which
closed in
September of 1998. In addition, Ms. Jackson took stock in lieu
of
approximately $ 900 in fees due her for services performed in
April of 1998.
Ms Jackson converted her outstanding fees due into 6,000 shares
of stock at
$.15 per share, the same price per share as paid by investors in
the Company's
second offering which commenced on March 16, 1998. During the
calendar year
ended December 31, 1998, Mr. Cloetens made loans to the Company
approximating
$11,200, which loans were interest free. As of December 31, 1998,
$2,311 was
repaid and the balance was repaid subsequent to the Company's
year end.
The Company has no promoters other than its President and a
director,
Mr. Guido Cloetens. Other than the consulting agreement
discussed above,
which the Company intends to enter into with Mr. Cloetens (or his
yet to be
formed entity), there have been no transactions which have
benefitted or will
benefit Mr. Cloetens, either directly or indirectly.
35
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The following exhibits are filed as part of this Form
10-KSB for the
Company's year ended December 31, 1998.
(i)
Exhibit Exhibit Where
Incorporated
No. Description(1) In this
Report
- ---- -----------
- -------------------
Registration Statement on Form 10-SB filed Part II
July 14, 1998 and amended on September 29,
1998(2)
Quarterly Report on Form 10-QSB for the Part II
quarterly period ended September 30,
1998(2)
(ii)
Exhibit
No. Description
- ------- -------------------------
3.1.1 Articles of Incorporation(3)
3.2.1 Bylaws and Amendments thereto(3)
10.1 Operating Agreement with L & J Operating Inc.(3)
27 Financial Data Schedule
(1) Summaries of all exhibits contained within this Report are
modified in
their entirety by reference to these Exhibits
(2) These documents and related exhibits have been previously
filed with the
Securities and Exchange Commission.
(3) Previously filed as part of the Company's initial
Registration Statements
on 10-SB Registration, filed on July 14, 1998.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
fourth quarter
ended December 31, 1998.
36
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the
registrant caused this report to be signed on its behalf by the
undersigned,
thereunto duly authorized.
SW Ventures, Inc.
(Registrant)
By: /s/ Guido Cloetens
---------------------
Date: March 22, 1999 Guido Cloetens
President, Chief
Executive
Officer and
Director
In accordance with the Exchange Act, this report has been
signed below by
the following persons on behalf of the registrant and in the
capacities and on
the dates indicated.
Signature Title
Date
--------- --------
- -------
/s/ Guido Cloetens President, Chief Executive
March 22, 1999
- ------------------------ Officer and Director (Principal
Guido Cloetens Executive Officer)
/s/ Keith Biesinger Director
March 22, 1999
- ------------------------
Keith Biesinger
/s/ Terri Jackson Director
March 22, 1999
- ------------------------ Secretary/Treasurer
Terri Jackson
37
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999
Commission file number 000-24623
SW Ventures, Inc.
________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Nevada 87-0559453
(State or other jurisdiction of (IRS Employer
Identification Number)
incorporation or organization
455 East 400 South, Suite 100
Salt Lake City, Utah 84111
________________________________________
(Address of principal executive offices)
(801) 355-6524
________________________________________________
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to
be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12
months (or for such shorter period that the registrant was
required to file
such reports) Yes [ x ] No [ ], and (2) has been subject to
such filing
requirements for the past 90 days. Yes [X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the
issuer's classes of
common equity, as of the latest practicable date:
As of March 31, 1999 the issuer had outstanding 3,416,066
shares of its
Common Stock, $0.001 par value.
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited financial statements of SW Ventures, Inc., a
Nevada
corporation (the "Company"), as of March 31, 1999 were prepared
by Management
and commence on the following page. In the opinion of Management
the
financial statements fairly present the financial condition of
the Company.
SW Ventures Inc.
Unaudited Balance Sheets
For the Three Months Ended March 31, 1999
Balance Sheet at March 31, 1999 and December 31, 1998
Statement of Operations for the three months ended March 31, 1999
and March
31, 1998
Statement of Cash Flows for the three months ended March 31, 1999
and March
31, 1998
Statement of Changes in Stockholder's Equity from May 7, 1996 to
March 31,
1999
2
<PAGE>
SW Ventures Inc.
Balance Sheet
For the Three Months Ended March 31, 1999
and the Year Ended December 31, 1998
March 31
December 31
1999
1998
-----------
- ----------------
(Unaudited)
Assets
Current Assets:
Cash $ 301 $
8,900
Accounts Receivable 9,726
3,748
Inventory 894
292
-----------
- ----------------
Total Current Assets 10,921
12,940
-----------
- ----------------
Mineral Property & Equipment:
Mineral property 144,200
144,200
Less cost depletion (24,880)
(19,263)
Office equipment 4,291
4,291
Less accumulated depreciation (1,185)
(970)
-------------
- --------------
Net Mineral Property &
Equipment 122,426
128,258
-------------
- ---------------
Total Assets $ 133,347 $
141,198
=============
===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,773 $
4,125
Advances from officer 500
8,889
-------------
- --------------
Total Current Liabilities 8,273
13,014
Stockholders' Equity:
Common Stock, $.001 par value; authorized
50,000,000 shares, issued and outstanding
3,416,066 shares on March 31, 1999
and 3,416,066 on December 31, 1998 3,416
3,416
Paid-in capital 167,268
167,268
Accumulated deficit (45,610)
(42,500)
-------------
- --------------
Total Stockholders' Equity 125,074
128,184
-------------
- --------------
Total Liabilities & Stockholders' Equity $ 133,347
$141,198
=============
===============
3
<PAGE>
SW Ventures, Inc.
Statement of Operations
For the three month period Ended March 31, 1999 and 1998
Three Months
Ended
March 31, 1999
March 31, 1998
(Unaudited)
(Unaudited)
-----------------
- ---------------
Oil revenue $ 21,415 $
19,980
Oil production costs & taxes 9,121
6,467
Cost depletion 5,617
2,685
General & administrative expenses 9,572
5,824
Depreciation expense 215
99
-----------------
- ---------------
Total expenses 24,525
15,075
-----------------
- ---------------
Income (Loss) Before Income taxes (3,110)
4,905
Income tax provision -
-
-----------------
- ----------------
Net Income (Loss) $ (3,110) $
4,905
=================
===============
Basic and diluted net
income (loss) per common share $ (0.001) $
0.002
=================
===============
Weighted average shares outstanding 3,416,066
3,092,500
=================
===============
4
<PAGE>
SW Ventures, Inc.
Statement of Cash Flows
For the three month period ended March 31, 1999 and 1998
For the For
the
Three Month
Three Month
Period Ended
Period Ended
March 31, 1999
March 31, 1998
(Unaudited)
(Unaudited)
--------------
- ----------------
Cash flows used in operating activities:
Net income (loss) $ (3,110) $
4,905
Adjustments to reconcile income(loss)
to net cash used in operating activities:
Depreciation expense & cost depletion 5,832
2,783
Changes to operating assets & liabilities:
Decrease (Increase)in accounts receivable (5,978)
(921)
(Decrease) Increase in accounts payable 3,648
(4,300)
Decrease (Increase) in inventory (602)
-
-------------
- --------------
Net cash provided (used) by operating
activities ( 210)
2,467
Cash flows used in investing activities:
Purchase of equipment & mineral properties -
(45,338)
--------------
- ---------------
Net cash used in investing activities -
45,338
Cash flows provided by (used in) financing activities:
Common stock issued for cash -
33,750
Advance from officer 500
6,500
Repayment of advance from officer (8,889)
Offering costs for common stock issuance -
(20)
--------------
- ---------------
Cash provided (used) by financing activities (8,389)
40,230
Net increase (decrease) in cash (8,599)
(2,641)
Cash, beginning period 8,900
8,424
--------------
- ---------------
Cash, end of period $ 301 $
5,783
==============
===============
No cash paid for income taxes or interest.
Supplemental non cash activities:
Issuance of common stock for loan
From affiliate $ 0 $
9,000
==============
===============
5
<PAGE>
SW Ventures, Inc.
Statements of Changes in Stockholders' Equity
From May 7, 1996 (Inception) to the year ended December 31, 1998
and the three month period ended March 31, 1999
</TABLE>
<TABLE>
<CAPTION>
$.001
Par value
Common Common
Accumu-
Stock Stock Paid-in
lated Total
Shares Amount Capital
Deficit Equity
----------- ---------- ----------
- ---------- ----------
<S> <C> <C> <C>
<C> <C>
Shares issued to founders
on May 7, 1996 1,475,000 $ 1,475 $ 9,525 $
- $ 11,000
Shares issued for legal fees
(securities registration)
on May 7, 1996 115,000 115 735
- 850
Shares issued for cash on
December 6, 1996 260,000 260 12,740
- 13,000
Net loss for the period from
May 7, 1996 (inception)
through December 31, 1996
(14,728) (14,728)
----------- ---------- ----------
- --------- ----------
Balances, December 31, 1996 1,850,000 1,850 23,000
(14,728) 10,122
Shares issued for cash
May 16, 1997 60,000 60 2,940
- 3,000
Shares issued for compensation
May 16, 1997 55,000 55 2,695
- 2,750
Shares issued for legal fees
(securities registration)
on May 16, 1997 35,000 35 1,715
- 1,750
Shares issued for cash (private
placement offering) on
September 26, 1997 net of
offering costs of $17,600 1,000,000 1,000 81,400
- 82,400
Net loss for the year ended
December 31, 1997
(31,153) (31,153)
----------- --------- ----------
- --------- ---------
Balances, December 31, 1997 3,000,000 3,000 111,750
(45,881) 68,869
Shares issued to officer upon
conversion of loan on
January, 1998 90,000 90 8,910
- 9,000
Shares issued for cash (in
private placement offering)
net of offering costs of
$1,976: (275,000 in April;
27,646 in June; 23,420
in Sept.) 326,066 326 46,608
- 46,934
Net income for year ended
December 31, 1998 - - -
3,381 3,381
---------- --------- ----------
- --------- ---------
Balance at December 31,1998 3,416,066 3,416 167,268
(42,500) 128,184
Net loss for the three
months ended March 31, 1999 - - -
(3,110) (3,110)
---------- --------- ----------
- --------- ---------
Balance at March 31, 1999 3,416,066 $ 3,416 $ 167,268
$(45,610) $125,074
========== ========== ==========
========= =========
</TABLE>
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and
Results of Operations.
The following discussion provides information which
management believes
is relevant to an assessment and understanding of the Company's
plan of
operation. The discussion should be read in conjunction with the
consolidated
financial statements and notes thereto.
RESULTS OF OPERATIONS
The Company has received revenues from operations since
October of 1997
when it received its first revenues from oil production from the
Montana
Berger Well #1. A second well, the Montana Berger Well #2 began
production in
April of 1998.
QUARTERS ENDED MARCH 31, 1998 AND 1999: The Company had net
loss of
$3,110 its first quarter of 1999, as compared to net income of
$4,904 in the
first quarter of 1998. The Company had revenues from oil
production for the
first three months of 1999 of $21,415 compared to revenues of
$19,979 in the
first three months of 1998. The Company's revenues from oil
production,
therefore, were almost equal with only a 7% increase over the
first quarter
of 1999, although oil production costs and taxes increased 33% in
1999 over
the first quarter of 1998, and depletion expenses more than
doubled. This is
due to the fact that the Company had two producing wells in its
first quarter
of 1999 as opposed to one producing well in the first quarter of
1998 with oil
prices lower in 1999 (averaging $7.90 bbl. during the first
quarter) compared
to the first quarter of 1998 (averaging $8.90 bbl). In
addition, production
is down on the Company's initial well, the Montana Berger Well
#1, which
averaged 3,996 bbls. per month in the first quarter of 1998 as
opposed to
2,965 bbls. per month in the first quarter of 1999. The Company
recognizes
cost depletion based upon the production from its wells as
compared to total
estimated reserve quantities of the wells and therefore cost
depletion levels
are a function of production quantities.
During the first three months of 1999, general and
administrative
expenses rose from $5,825 in 1998 to $9,573, despite a reduction
in both
legal/accounting fees and consulting fees between the same two
first quarter
periods. This increase was due to mostly to a more than $3,000
increase in
the first three months of 1999 in travel expenses over the same
period last
year which were incurred by the Company in connection with
investigating other
business opportunities.
YEARS ENDED DECEMBER 31, 1998 AND 1997: The Company had net
income of
$3,381 for the year ended December 31, 1998, as compared to a net
loss of
$31,153 for 1997. The Company had revenues from oil production in
1998 of
$76,903 compared to revenues of $22,007 in 1997. The change from
net loss to
net income from 1997 to 1998 is attributable to an increase in
oil production
revenues. Although the Company saw a total overall increase in
expenses from
1997 to 1998 of $20,057, the increase in oil production revenues
was over
$54,000. The increase in production is due to the fact that the
Company
realized revenues from production for only a little over two
months in 1997 as
opposed to a full year in 1998.
General administrative expenses increased from $13,478
in 1997 to
$21,367 in 1998. This increase was due to the commencement of the
payment of
compensation to an officer of the Company of $1,000 per month
beginning in
February of 1998, for various services rendered on behalf of the
Company in
connection with her duties as Secretary/Treasurer, in-house
accounting,
7
<PAGE>
initial drafting of various documentation including the Company's
offering
memorandum, dated March 16, 1998, its Registration Statement on
Form 10-SB,
and amendments thereto, and other required disclosure
documentation.
The Company changed legal counsel during 1998 and
significantly
reduced its legal fees from $30,340 in 1997 to $6,389 in 1998.
Depreciation
expenses rose from $228 in 1997 to $742 in 1998 and cost
depletion on the
Company's wells rose from $1,705 in 1997 to $17,558 in 1998.
The Company funded mineral property investments in 1998
by selling
shares of its common stock to public investors for cash in the
amount $48,910.
In addition, the Company received cash advances from an officer
and director
in the amount of $11,200, which was repaid out of production
revenues; $2,311
was repaid in 1998 and the balance was repaid in January of 1999.
An
additional $9,764 of the costs of mineral property investment
came from
production revenues. In 1997, the Company funded its initial
mineral
property investment of $74,325 from proceeds of an offering in
which 1,000,000
shares were purchased by investors for gross proceeds to the
Company of
$100,000. It also received a cash advance from an officer and
director of
$9,000 which was converted into 90,000 shares of common stock in
January of
1998. The foregoing 90,000 shares are "restricted".
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996.
The Company
had a net loss of $14,728 as of December 31, 1996, which
increased to $31,153
in 1997. The increase in net loss was due to an increase in the
Company's
legal expenses. The Company did not receive any revenues from
operations in
1996, as opposed to its year ended 1997 when it received revenues
from oil
production of $22,700. In connection with its initial revenues
from
operations in 1997, which began in mid-October, the Company also
incurred
related production expenses and taxes totaling $7,409. The
Company had no
production expenses or production taxes in 1996. General and
administrative
costs in 1997 were $13,478 as opposed to $14,728 in 1996, which
makes 1996
expenses proportionately higher because the Company's year ended
1996 was not
a full year (the Company's inception being May 7, 1996), and is
mainly
attributable to costs related to start-up. Legal expenses in
1997 were
$30,340 as opposed to -0- in 1996 and were incurred in connection
with the
drafting of the Company's first offering memorandum.
The Company funded its losses in 1996 through the issuance
of shares of
common stock for cash contributions which equaled $14,728. In
1997, the
Company conducted an offering of 1,000,000 shares of its common
stock to the
public and received gross proceeds of $100,000, and net proceeds
of $82,400,
$74,345 of which went to the Company's initial investment in
mineral property
(the Prospect).
LIQUIDITY AND CAPITAL RESOURCES.
The Company has had revenues from operations in each of the
last two
years. The Company's cash requirements consist of its office
expenditures,
legal and accounting fees to comply with securities registration
filing
requirements, oil production taxes and expenses, and certain
consulting fees.
The Company relies on revenues from operations to cover its cash
requirements.
During the last year and the first quarter of 1999, revenues were
sufficient
to meet the Company's cash requirements to fund day to day
operations as well
as a portion of mineral property investments. The Company also
relied on sales
of its common stock and advances from an officer and director to
fund the
balance of its mineral property investments during its last
fiscal year
although it has not made any material purchases of property or
equipment
8
<PAGE>
during the first quarter of 1999. The Company anticipates that it
will have
sufficient revenues in 1999 to fund its operations, provided it
continues to
receive revenues from oil production. Revenues from oil
production to the
Company, however, have decreased due to the significant decrease
in the price
per barrel of oil in the marketplace, and an increase in
associated production
expenses which began in the fourth quarter ended December 31,
1998. The
Company expects lower oil prices to persist throughout 1999.
However, the
Montana Prospect Drilling Program (in which Company has a 21.25%
working
interest)(the "Program")has been receiving a larger than normal
bonus per
barrel for its low gravity, high asphalt crude oil due to a
reduced supply of
the same in the market. The higher than normal bonus will
continue at least
through the end of the Company's second quarter, if not longer.
YEAR 2000
Management believes that the Company's accounting and
operational systems
are year 2000 compliant. Prior to the Company's filing of its
last Quarterly
Report on Form 10-QSB, the Company contacted the Operator of the
wells; the
Operator indicated to The Company that it expects no material
year 2000 issues
because none of the systems used at the wells sites in which the
Company has
an interest are run by computer systems. The Company is not
dependent on
computers other than for its internal bookkeeping which is done
on a system
that is Year 2000 compliant. The Company has no relationship
with any third
parties which are dependent on computers other than its bank.
The Company's
bank has reported that it is Year 2000 compliant.
FORWARD-LOOKING STATEMENTS
When used in this Form 10-QSB, in filings by the Company
with the
Securities and Exchange Commission (the "SEC"), in the Company's
press
releases or other public or stockholder communications, or in
oral statements
made with the approval of an authorized executive officer of the
Company, the
words or phrases "would be," "will allow," "intends to," "will
likely result,"
"are expected to," "will continue," "is anticipated," "estimate,"
"project,"
or similar expressions are intended to identify "forward-looking
statements"
within the meaning of the Private Securities Litigation Reform
Act of 1995.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB
REFLECT
MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND
INVOLVE RISKS
AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None
9
<PAGE>
Item 5. Other Information.
Subsequent to the Company's first quarter ended, on April
14, 1999, the
Company executed and Asset Contribution Agreement with Bachkine &
Meyer
Industries S.A. ("Bachkine"), a British Virgin Islands
corporation, whereby
the Company will acquire certain proprietary technology from
Bachkine. For
additional information, see the Company's Current Report on Form
8-K and
attached Exhibit, filed with the Securities and Exchange
Commission on April
29, 1999, and incorporated herein be reference.)
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
No. Description
- ----- ---------------
10 Asset Contribution Agreement, incorporated by
reference to Exhibit
10 of the Company's Current Report on 8-K dated April
14, 1999 and
filed on April 29, 1999
(b) Reports on Form 8-K.
On April 29, 1999, the Company filed a Current Report
on Form 8-K with the
Securities and Exchange Commission. The following items were
reported on: Item 1.
Changes in Control of the Registrant; Item 2, Acquisition and
Disposition of Assets;
Item 5. Other Events; Item 6. Resignation of Officers and
Directors; Item 7.
Financial Statements and Exhibits; and Item 9. Sales of Equity
Securities Pursuant
to Regulation S.
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of
1934, the Registrant caused this report to be signed on its
behalf by the
undersigned, thereunto duly authorized.
SW VENTURES, INC.
(Registrant)
Date: May 13, 1999 By: /s/ Guido
Cloetens
- ------------------------
Guido Cloetens
Director,
President and
Chief Executive
Officer
