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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
CVF CORP.
- - - - --------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
<TABLE>
<S> <C>
NEVADA 87-0429335
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 INTERNATIONAL DRIVE, SUITE 100
WILLIAMSVILLE, NEW YORK 14221
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(Address of principal executive offices) (Zip Code)
</TABLE>
(716) 626-3044
----------------------------------
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of each class Name of each exchange on which
to be so registered each class is to be registered
---------------------------------------- ------------------------------------
</TABLE>
Securities to be registered under Section 12(g) of the Act:
Common Shares, par value $0.001 per share
---------------------------------------------------
(Title of class)
---------------------------------------------------
(Title of class)
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TABLE OF CONTENTS
This Form 10-SB has been prepared pursuant to Alternative 2 as set forth in
Form 10-SB.
Page
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<TABLE>
<S> <C> <C>
PART I .............................................................. 1
ITEM 6. DESCRIPTION OF BUSINESS ................................. 1
Background ............................................ 1
History and Business Plan of CVFLP .................... 1
The Corporations ...................................... 2
Personnel ............................................. 2
Financial Considerations .............................. 6
ITEM 7. DESCRIPTION OF PROPERTY ................................. 6
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES . 6
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS .................. 7
Voting Securities and Principal Holders ............... 8
Options, Warrants and Rights .......................... 8
ITME 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
SECURITY HOLDERS ...................................... 9
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS 10
ITEM 12. SECURITIES BEING OFFERED ................................ 11
Common Shares ......................................... 11
Preferred Stock ....................................... 11
Warrants .............................................. 12
PART II .............................................................. 12
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS ................... 12
Market Information ..................................... 12
Dividends .............................................. 12
ITEM 2. LEGAL PROCEEDINGS ........................................ 13
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE .................... 13
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES .................. 13
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS ................ 14
PART F/S ............................................................. 14
PART III ............................................................. 15
ITEM 1. INDEX OF EXHIBITS ........................................ 15
ITEM 2. DESCRIPTION OF EXHIBITS .................................. 15
INDEX TO FINANCIAL STATEMENTS ........................................ F-1
SIGNATURES
INDEX TO EXHIBITS
</TABLE>
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SPECIAL NOTE REGARDING FORWARD - LOOKING STATEMENTS
Certain statements in this Registration Statement, under the captions "The
Corporations," "Financial Considerations" and elsewhere, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve unknown and uncertain risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. See "Financial Considerations." Given these uncertainties,
prospective investors are cautioned not to place undue reliance on such
forward-looking statements.
<PAGE> 4
PART I
ITEM 6. DESCRIPTION OF BUSINESS
Background
CVF Corp. (the "Company") was incorporated on January 10, 1986, under the laws
of the State of Utah under the name of Sierra Growth Corporation. On December
30, 1993, the Company changed its name to Western Growth Corporation and its
domicile to the State of Nevada in connection with a reincorporation merger.
The Company was organized in order to acquire or enter into a business or
business opportunity. In connection with its organization, the Company issued
an aggregate of 4,000,000 Common Shares to its original directors and officers.
In 1987, the Company completed a public offering under Regulation A of the 1933
Act of 8,280,000 Common Shares at an offering price of $0.01 per share from
which the Company received net proceeds of approximately $67,850. Immediately
following the closing of the offering, there were 12,280,000 Common Shares
issued and outstanding. During 1988 and 1989, the Company acquired a majority
ownership interest in a corporation for $62,500, which the Company planned to
transfer to its stockholders in a "spin-off" transaction. The Company
subsequently determined that the spin-off was not feasible, however, and in
1991 the subsidiary corporation was liquidated.
At a Special Stockholders' Meeting held December 3, 1993, the Company's
stockholders approved proposals to: (i) effect a 1-for-10 reverse stock split
in the issued and outstanding Common Shares thereby reducing the number of
outstanding shares from 12,280,000 to 1,228,000; (ii) change the state of
incorporation of the Company from Utah to Nevada; (iii) change the name of the
Company from Sierra Growth Corporation to Western Growth Corporation; (iv)
authorize 500,000 shares of Preferred Stock; and (v) elect L. Dee Hall as the
sole director of the Company. All of such proposals were implemented during
December 1993.
On August 20, 1995, the Company entered into an asset purchase agreement (the
"Asset Purchase Agreement") with CVFLP, under which the Company agreed to
purchase all of the assets and assume all of the liabilities of CVFLP.
Pursuant to the terms of the Asset Purchase Agreement, the Company issued to
CVFLP 4,763,918 Common Shares, 25,000 shares of its Series "A" Preferred Stock
(the "Preferred Shares") and warrants (the "Warrants") entitling CVFLP to
purchase approximately 952,784 additional Common Shares. At a Special
Stockholders' Meeting held September 12, 1995, the Company's stockholders
approved proposals to: (i) approve the Asset Purchase Agreement and the
issuance of the securities of the Company to CVFLP; (ii) change the name of the
Company from Western Growth Corporation to CVF Corp.; (iii) effect a 1-for-2
reverse split of the Common Shares; and (iv) elect Jeffrey Dreben, Malcolm
Gissing, Robert Nally and P. Anthony Bordes, Jr. as the directors of the
Company.
In October 1996, the Company instituted a stock repurchase program pursuant to
which it commenced the repurchase in the marketplace or otherwise, in
accordance with all applicable securities laws, up to 300,000 Common Shares.
To date, the Company has repurchased 10,000 Common Shares.
<PAGE> 5
History and Business Plan of CVFLP
CVFLP was formed under the laws of Ontario, Canada in 1989, to engage in the
business of developing and managing early stage and start-up companies engaged
in the information and environmental technologies areas. In August 1989, CVFLP
completed a private securities offering in which approximately $14,600,000 was
raised from a number of pension funds, insurance companies and corporate
groups. Since 1989, CVFLP has acquired ownership interests in each of the
following privately held Canadian corporations: Biorem Technologies Inc.,
Canadian Venture Founders Leasing Corporation, Certicom Corp., Dantec Systems
Corporation, Ecoval Inc., Omphalos Recovery Systems Inc., Solaria Research
Enterprises Ltd., and Turbotak Technologies, Inc. (the "Corporations"). CVFLP
worked to start, build and grow the Corporations. Certicom completed in
December 1995 a public offering of its common shares in the Provinces of
Ontario and Alberta. The Company's mandate is to acquire significant holdings
in new and emerging companies primarily in the technology area and to assist in
the management of the Corporations. Each of the Corporations generally
requires additional capital to meet its business plans beyond the Company's
initial involvement. The Company intends to actively assist in the management
of the Corporations in obtaining additional capital either from its own
resources or other participants. There can be no assurance that the
Corporations will raise sufficient amounts to remain in business and/or to meet
their respective business plans.
The Company plans to generate revenue and profit through the consolidation of
revenues and profits from the Corporations and also through the sale of its
holdings. The Company's success is solely dependent upon the success of the
Corporations. The Company plans to conduct its business operations so as not
to be deemed to be an investment company and thereby be subject to the
Investment Company Act of 1940, which would require it to register as an
investment company under such Act.
The Company believes that its holdings have the potential to develop meaningful
growth over the next three to five years. However, additional capital
contributions in the Corporations by the Company and others will be required to
facilitate such growth.
As of the date hereof, the Company has positions in the following companies.
<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP
CORPORATION OF VOTING SECURITIES
- - - - ----------- --------------------
<S> <C>
Biorem Technologies Inc. 54%
Canadian Venture 100%
Leasing Corporation 100%
Certicom Corp. 9%
Dantec Systems Corporation 34%
Ecoval Inc. 29%
Omphalos Recovery Systems, Inc. 56%
Solaria Research Enterprises Ltd. 51%
Turbotak Technologies, Inc. Convertible Debentures
</TABLE>
Personnel
As of February 7, 1997, the Company had three full-time and two part-time
employees.
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The Corporations
The following paragraphs provide a brief description of the Corporations. Each
Corporation has its own business plan, history and financial statements. Each
Corporation has completed the development of products, established markets and
distribution channels, has sold products and has put management teams in place
or is currently working to improve its management teams. Each Corporation is
working to improve its production capability to handle future growth in sales.
The additional capital required by each of the Corporations is primarily for
expansion of sales and production capability to enable the Corporations to
realize their commercial potential over the next three to five years. As is
common with early stage technology companies, each of the Corporations has
historically operated at a loss or at break-even and many will continue to
operate at a loss for at least the foreseeable future.
Biorem Technologies, Inc. Biorem, a spin-off company from the University of
Waterloo, is an industrial biotech company that is engaged in the business of
applying bioconversion and biotransformation technology to a variety of
industrial applications such as the treatment or clean-up of organic toxic
chemicals in soil or groundwater, the treatment of industrial waste streams for
liquids or air and for use in the food processing, agriculture and
pharmaceutical manufacturing industries. Biorem has certain proprietary
industrial fermentation techniques which enabled it to produce new biological
materials for use in the bioremediation, industrial waste stream treatment,
food processing, agriculture and pharmaceutical industries and markets. Biorem
provides on-site turn key remediation capability. Biorem has developed
technology for economical and effective cleaning of contaminated soils.
Biorem's customers include several major North American corporations.
Biorem plans to raise an additional $2,000,000 during the next year in order to
fulfill its current business plan. It will attempt to raise such additional
capital through private placements. The Company may participate in such
securities offerings subject to the financial requirements of its other
holdings.
Canadian Venture Founders Leasing Corporation ("CVFLC"). CVFLC was founded in
order to offer equipment leases to the Corporations as well as to offer
short-term funding to the Corporations for such items as inventory and
receivables. CVFLC is a wholly owned subsidiary of the Company and is managed
by the management team of the Company.
Certicom Corp. Certicom Corp. is a developer, manufacturer and vendor of
digital information security products, technologies and services. Digital
information security comprises a variety of technologies designed to prevent
the unauthorized disclosure, alteration or removal of information, to control
access to networks and to verify validity of electronic files and the identity
of users. These technologies include encryption, digital signatures and
authentication. Encryption is the translation of data by cryptographic
algorithms into a form that can be used by only the intended recipient.
Digital signatures are products of cryptographic techniques that can be used
to detect changes to digital information. Authentication is a procedure used
to verify user identity using digital signatures. Certicom believes that the
demand for the solutions provided by digital information security technologies
that can protect privacy and combat fraud in computer networks, wireless
communications, financial transaction systems and a host of other data
communications products will increase with the transition from paper based to
electronic commerce, the increase in the extent of computer networking, the
use of the Internet and the growth of digital communications systems.
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Certicom markets information security technologies that incorporate a
technology known as public key cryptography. While offering numerous benefits
to information security systems, public key cryptography is difficult to
implement in an efficient manner due to its complex mathematical basis.
Certicom has developed technologies that alleviate this problem resulting in
more efficient information security products. Certicom is currently focused on
three distinct market segments: Original Equipment Manufacturer ("OEM")
information security technologies, facsimile encryption and computer network
security. In the OEM information security technologies segment, Certicom
markets proprietary algorithms and licensees cryptographic technologies and
integrated circuits to manufacturers of equipment and software that provide
information security features. The most important technology in this segment
relates to implementations of a cryptosystem known as the Elliptic Curve
Cryptosystem ("ECC") around which Certicom holds one patent and has numerous
patents pending. Certicom believes that the ECC technology as modified and
improved by Certicom competes favorably in many respects including speed,
cryptographic strength and power efficiency with that of its most significant
competitor, the RSA public key cryptosystem, and has advantages in wireless
transmission, Smart Card implementations and controlled access systems for
broadcast.
Certicom completed a public offering of its common shares in December 1995.
The common shares are quoted on the Canadian dealer network, an
over-the-counter trading network, under the symbol "CERT". The closing price
of the common shares on February 7, 1997, was Cdn$35.00. The Company currently
owns 750,000 common shares of Certicom.
Dantec Systems Corporation. Dantec, an industrial automation company, using
unique process control algorithms developed at the University of Waterloo, is
in the business of developing, manufacturing and marketing a range of automated
precision moisture detection measurement and manufacturing control systems for
the food processing, wood processing, pharmaceutical, polymer and various other
material processing markets and industries. Dantec has sold its systems to
various major North American corporations in the above mentioned industries and
has a strategic marketing partnership with Honeywell to sell computerized
moisture control systems into the North American baked goods industry. During
the fiscal year ended February 28, 1995, Dantec made a strategic decision to
invest mainly in introducing its progress control systems into a series of new
markets including the pharmaceuticals, wood processing and food industries.
Sales remained flat during the 1996 fiscal year compared to the previous year.
However, several important contracts have been signed in 1997 which are
expected to substantially increase revenues.
Dantec plans to raise an additional $1,000,000 during the next year in order to
fulfill its current business plan. It will attempt to raise such additional
capital through private placements of its securities. The Company may
participate in such securities offerings subject to the financial requirement
of its other holdings.
Ecoval, Inc. Ecoval is a Montreal, Quebec-based company formed to manufacture
and market a range of 100% natural fertilizers, environmentally friendly
organic herbicides and tree recovery systems. Ecoval has received U.S. patents
for its herbicide and its 4-4-8 tree recovery fertilizer. Research results
show the herbicide to be non-toxic and bio-degradable and more effective than
chemical products. Ecoval's herbicide is currently going through the
registration and approval process with Agriculture Canada and the Environmental
Protection Agency in the U.S. and Ecoval is expecting to launch its herbicide
in 1997. The company also has proprietary binder technology to enable the
granulation of gypsum, bloodmeal, bonemeal and feathermeal and other 100%
natural ingredients. The
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company has shipped its product to customers in
Florida, California and Texas and throughout Canada. Approximately forty
municipalities in Ontario have purchased and re-ordered the product, along with
many professional lawn care and landscaping contractors. In Quebec, retail
distribution has been established along with sales to over twenty golf courses.
In the U.S., eight golf courses are currently using the product, primarily in
Florida. A new plant with 25,000 ton per year capability was recently
constructed in Montreal in order to meet the growing demand for its product.
Ecoval receives an average price of approximately $600 per ton for its
products. In October 1994, Ecoval obtained approximately $6,750,000 to fund
the new plant, as well as to provide working capital for operations and market
expansion. Approximately 50% of the funding was raised on a private placement
basis from outside investors and the remainder in the form of long-term debt
from the Canadian Federal and Quebec provincial governments. It is anticipated
that Ecoval will operate at a loss in its current fiscal year.
Ecoval plans to raise an additional $6,000,000 during the current year in order
to fulfill its current business plan. It will attempt to raise such additional
capital through private placements. The Company may participate in such
securities offerings subject to the financial requirements of its other
holdings.
Omphalos Recovery Systems, Inc. (GemprintTM). GemprintTM is in the business of
providing products and services to the insurance industry, as well as the
consumer and wholesale jewelry markets to enable diamonds and other precious
gems to be uniquely identified non-invasively (fingerprinted) using a patented
low power laser imaging system. The results are stored in a data base for
later verification and recovery of lost or stolen gems. GemprintTM currently
sells its RSi 2000 laser GemprintTM machine to jewelers for $15,000.
Currently, each consumer who gets his or her gem "Gemprinted"TM by the
jeweler's RSi 2000 machine pays the jeweler $35 of which $15 goes to GemprintTM
pursuant to licensing agreements. GemprintTM owns and operates the GemprintTM
data base. Law enforcement agencies, such as the Federal Bureau of
Investigation and many insurance companies support the GemprintTM system
(approximately 25 major insurance companies offer a 10% discount on diamond
insurance policies if a gem is GemprintedTM). Currently 110 jewelers own
GemprintTM machines throughout North America and actively use the system.
GemprintTM also recently received a letter of intent for the purchase
of 300 GemprintTM machines for $7,500 each from a group in the United Kingdom.
GemprintTM has recently developed a next generation machine with built-in
appraisal software. The additional expense of developing this machine is
expected to result in operating losses at least until the fiscal year ending
March 31, 1997.
GemprintTM plans to raise an additional $1,500,000 during the next year in
order to fulfill its current business plan. It will attempt to raise such
additional capital through private placements. The Company may participate in
such securities offerings subject to the financial requirements of its other
holdings.
Solaria Research Enterprises, Ltd. Solaria is the business of developing,
manufacturing and marketing a family of low cost, high efficiency programmable
electronic motor speed control products for battery-powered vehicles such as
material handling equipment (fork lift trucks, etc.). Solaria supplies both
original equipment manufacturers ("OEM") and the aftermarket with products.
Solaria has shipped over 500 units to date to large North American customers.
A North American distribution network of 28 distributors having 113 branches
has been set up over the past three years. Solaria is now marketing the latest
version of its product. Solaria has entered into a major strategic OEM joint
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venture with a leading North American manufacturer of fork lift trucks to
develop and manufacture a range of electronic controllers for their D.C.
engines.
Solaria plans to raise an additional $1,500,000 during the next year in order
to fulfill its current business plan. It will attempt to raise such additional
capital through private placements. The Company may participate in such
securities offerings subject to the financial requirements of its other
holdings.
Turbotak Technologies, Inc. Turbotak is a spin-off from the University of
Waterloo and is engaged in the business of researching, developing and
marketing a range of air pollution control products and systems for a variety
of industries worldwide. Recently it has developed a volatile organic compound
("VOC") removal and recovery technology for the printing, automobile, wood,
bakery and numerous other industries which produce VOC's. This technology is
cost effective in that the solvents are re-covered for resale or reuse.
Turbotak has sold its products in the pulp and paper industry and also in a
variety of other markets.
Turbotak recently executed a letter of intent pursuant to which Sonic
Environmental Systems, Inc. ("Sonic"), a publicly-traded, New Jersey based, air
pollution control products company shall acquire Turbotak in exchange for
common stock of Sonic. As a result of the transaction, Turbotak shareholders
will own approximately 75% of the outstanding common stock of Sonic. Upon
consummation of the transaction, the Company's convertible debenture in
Turbotak will be convertible into approximately 10% of the common stock of
Sonic.
Financial Considerations
Early Stage Development Companies. Each of the Corporations (other than
Canadian Venture Founders Leasing Corporation) is an early stage development
Company with a limited relevant operating history upon which an evaluation of
its prospects can be made. As such, there can be no assurance of the future
success of any of the Corporations.
Quarterly Fluctuations. The Company's operation results have historically
been, and will continue to be, subject to quarterly and annual fluctuations due
to a variety of factors. Any shortfall in revenues in a given quarter may
impact the Company's results of operations due to an inability to adjust
expenses during the quarter to match the level of revenues for the quarter.
There can be no assurance that the Company will be able to grow in future
periods or that it will be able to sustain its level of total revenues or its
revenue growth on a quarterly or annual basis.
Rapid Technological Change. The markets for the Corporations' products are
generally characterized by rapidly changing technology, evolving industry
standards, changes in customer needs and frequent new product introductions.
The Corporations' future success will depend on their ability to enhance
current products, develop new products on a timely and cost-effective basis
that meet changing customer needs and to respond to emerging industry standards
and other technological changes. There can be no assurance that the
Corporations will be successful in developing new products or enhancing their
existing products on a timely basis, or that such new products or product
enhancements will achieve market acceptance.
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ITEM 7. DESCRIPTION OF PROPERTY
The Company currently leases space for its principal executive offices which
are located at 300 International Drive, Suite 100, Williamsville, New York
14221.
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - - - ---- --- --------
<S> <C> <C>
Jeffrey Dreben 50 Director; Chief Executive Officer; and President
Robert Nally 48 Director; Secretary; and Treasurer
Malcolm Gissing 65 Director; and Consultant
</TABLE>
Mr. Jeffrey Dreben has founded three companies including CVFLP and the general
partner of CVFLP. Mr. Dreben has worked in the investment industry since 1979
beginning his investment career with Merrill Lynch and subsequently founded his
own investment advisory firm. Mr. Dreben has been working in the venture
capital industry in the United States and Canada since 1985. Mr. Dreben earned
an Honors Bachelor of Arts Degree from Loyola College of the University of
Montreal.
Mr. Robert Nally is a director, secretary and treasurer of CVF Corp. From
1985 to 1990, Mr. Nally provided commercial development consulting services to
the University of Waterloo as Technology Transfer and Commercial Development
Officer. Prior to joining the University of Waterloo, he worked for NCR
Canada, Ltd. for 10 years as Manager of Strategic Planning and New Business
Opportunities, and Manager of Advanced Development and Director of
Engineering. He earned a Bachelor of Science degree in electrical engineering
and a Master of Science degree form the University of Waterloo.
Mr. Malcolm Gissing is a director of and consultant to CVF Corp. From 1963 to
1989, he was employed by Hewlett Packard where he rose to the position of
President of Hewlett-Packard Canada. Mr Gissing earned his Electronics Degree
from Kingston College of Advanced Technology in England and is a graduate of
Stanford University's Graduate Business School Executive Program.
ITEM 9. REMUNERATION OF DIRECTORS AND OFFICERS
Prior to September 20, 1995, the Company's sole director and officer was L.Dee
Hall. Mr. Hall did not receive or accrue any compensation for his services as
a director or officer of the Company. The following is a summary of the
renumeration paid to the three highest paid persons who were officers or
directors during fiscal year 1995.
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<TABLE>
<CAPTION>
NAME OF INDIVIDUAL CAPACITIES IN WHICH AGGREGATE
OF IDENTITY OF GROUP RENUMERATION WAS RECEIVED RENUMERATIONS
-------------------- --------------------------------- -------------
<S> <C> <C>
Jeffrey Dreben Director, Chief Executive Officer
and President CDN $36,000
Robert Nally Director, Consultant CDN $36,000
Malcolm Gissing Director, Secretary, Treasurer CDN $21,000
</TABLE>
On February 5, 1997, the Company granted to each of the above individuals
options to purchase 200,644 Common Shares. The options have an exercise price
of $.05 per Common Share, are immediately exercisable, and expire in 10 years.
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ITEM 10. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
Voting Securities and Principal Holders
The following table sets forth, as of February 7, 1997, the approximate number
of Common Shares of the Company owned of record or beneficially by each person
who owned of record, or was known by the Company to own beneficially, more than
10% of the Company's Common Shares, and the name and shareholdings of each
officer and director, and all officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNTS OF AMOUNTS OF PERCENTAGE OF
NAME AND ADDRESS COMMON SHARES OWNED COMMON SHARES OWNED
--------------------------- ------------------- -------------------------
<S> <C> <C>
Jeffrey Dreben (1) 424,424 7.32%
300 International Drive
Suite 100
Williamsville, NY 14221
Malcolm Gissing (1) 424,424 7.32%
300 International Drive
Suite 100
Williamsville, NY 14221
Robert Nally (1) 424,424 7.32%
300 International Drive
Suite 100
Williamsville, NY 14221
Prudential Insurance Co. 610,750 11.33%
200 Consilium Place
Scarborough, Ontario
M1H 3E6
Bansco Group 694,081 12.88%
c/o The Bank of Nova Scotia
Securities Department
Lower Concourse
Scotia Plaza
44 King Street West
Toronto, Ontario M5H 1H1
Directors and Officers as
Group (3 persons) (1) 1,273,272 21.96%
</TABLE>
- - - - ------------
(1) Each of Messrs. Dreben, Gissing and Nally beneficially own 200,644 Common
Shares pursuant to options exercisable within 60 days, and 207,880 Common
Shares underlying a warrant (the "Warrant") exercisable by Canadian
Venture Founders Management Limited, of which Messrs. Dreben, Gissing and
Nally each own 21.8%. Mr. Dreben's wife is the registered holder of Mr.
Dreben's interest in Canadian Founders Management Limited. Accordingly,
Mr. Dreben expressly disclaims beneficial ownership of the 207,880 Common
Shares underlying the Warrant.
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OPTIONS, WARRANTS AND RIGHTS
The following table sets forth, as of February 7, 1997 the outstanding options
and warrants issued by the Company:
<TABLE>
<CAPTION>
NAME OF TITLE AND EXERCISE DATE OF
HOLDER AMOUNT OF SECURITIES PRICE EXERCISE
- - - - -------------------- -------------------- -------- --------------------
<S> <C> <C> <C>
Exercisable upon
the occurrence of
Canadian Venture Warrant to acquire $3.05 certain conditions
Founders Management 952,784 Common until September 20,
Limited(1) Shares 2000
Jeffrey Dreben options to purchase $0.05 Exercisable from
200,644 Common time of grant until
Shares February 5, 2007
Malcolm Gissing options to purchase $0.05 Exercisable from
200,644 Common time of grant until
Shares February 5, 2007
Robert Nally options to purchase $0.05 Exercisable from
200,644 Common time of grant until
Shares February 5, 2007
</TABLE>
- - - - ---------
(1) CVFLP's general partner
ITEM 11. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS
Effective June 30, 1995, the Company issued 601,932 Common Shares to CVF, Inc.,
a Delaware corporation, as payment in full for services rendered to the Company
in connection with the Company's proposal to acquire the assets of CVFLP. The
shareholders of CVF, Inc. included Jeffrey Dreben, Malcolm Gissing and Robert
Nally, all of whom are directors of the Company. The Company and CVF, Inc.
agreed that the value of the services rendered to the Company and the 601,932
Common Shares issued was $55,000. Pursuant to a stock purchase agreement,
dated February 5, 1997, the Company repurchased the 601,932 Common Shares from
CVF Inc., for an aggregate purchase price of $10.00.
The Company has also entered into a Service Agreement with D and N Consulting
Corporation ("D and N"), pursuant to which D and N provides a variety of
administrative, managerial and clerical services to the Company. Messrs.
Dreben and Nally are officers of D and N.
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ITEM 12. SECURITIES BEING OFFERED
The Company's authorized capital consists of 50,000,000 Common Shares, $0.001
par value, and 500,000 Preferred Shares, $0.001 par value. As of the date
hereof, 5,390,417 Common Shares and 25,000 Preferred Shares are currently
issued and outstanding.
Common Shares
Holders of the Common Shares are entitled to one vote per share on each matter
submitted to vote at any meeting of shareholders. Common Shares do not carry
cumulative voting rights and, therefore, holders of a majority of the
outstanding shares of Common Shares will be able to elect the entire Board of
Directors, and, if they do so, minority shareholders would not be able to elect
any members to the Board of Directors. The Company's Board of Directors has
authority, without the action by the Company's shareholders, to issue all or
any portion of the authorized but unissued Common Shares, which would reduce
the percentage ownership of the Company of its shareholders and which may
dilute the book value of the Common Shares.
The Company's by-laws provide that a majority of the voting power of all
outstanding securities entitled to vote on a matter shall constitute a quorum
for shareholders' meetings, except with respect to matters for which a greater
quorum is required by law.
Shareholders of the Company have no pre-emptive rights to acquire additional
Common Shares. The Common Shares are not subject to redemption and carry no
subscription or conversion rights. In the event of liquidation of the Company,
the Common Shares are entitled to share equally in corporate assets after
satisfaction of all liabilities. All of the Common Shares currently issued and
outstanding are fully paid and non-assessable.
Holders of Common Shares are entitled to receive such dividends as the Board of
Directors may from time to time declare out of funds legally available for the
payment of dividends. The Company has not paid dividends on its Common Shares
and there can be no assurance that it will pay dividends in the foreseeable
future.
Preferred Stock
Preferred Shares may be issued from time to time in one or more series as may
from time to time be determined by the board of directors. Each series shall
be distinctly designated. All shares of any one series shall be alike in every
particular, except that there may be different dates from which dividends
thereon, if any, shall be cumulative, if made cumulative. The powers,
preferences, participating, optional, and other rights of each of such series
and the qualifications, limitations, or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding. Except
as provided in the Company's Certificate of Incorporation, the board of
directors of the Company is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of each particular
series of Preferred Shares the designation, powers, preferences, and relative
participating, optional, and other rights and the qualifications, limitations,
and restrictions thereof, if any, of such series.
11
<PAGE> 15
The Company currently has outstanding a series of Preferred Stock designated as
Series "A" Preferred Stock. The following discussion of the general terms of
the Series "A" Preferred Stock is set forth solely to provide a basic
understanding of the preferences and characteristics of the Series "A"
Preferred Stock as set forth in the Certificate of Designation of Voting
Powers, Preferences, Rights and Limitations of Series "A" Preferred Stock (the
"Certificate") which was filed with the Secretary of State of Nevada on
September 12, 1995. Each share of Series "A" Preferred Stock has a stated
value (the "Stated Value") of the U.S. dollar equivalent of Cdn$25.00
determined at the date of issuance by reference to the noon spot rate for
conversion of Canadian dollars into U.S. dollars as published by the National
Bank of Canada on the business day immediately preceding the date of issuance.
The holders of Series "A" Preferred Stock will be entitled to cumulative
dividends at the rate of 5% of the Stated Value plus accrued but unpaid
dividends. The dividends will have priority over any payments of dividends on
the Common Shares and on all other shares of preferred stock ranking junior to
the Series "A" Preferred Stock. Except as otherwise required by Nevada law,
the holders of Series "A" Preferred Stock shall not have any voting rights.
The Series "A" Preferred Stock is not convertible into Common Shares or into
any other security of the Company. The Company may, at its option, redeem all
or part of the Series "A" Preferred Stock from the holders thereof.
Additionally, at any time after five years from the date of issuance, a holder
of Series "A" Preferred Stock may require the Company to redeem any or all of
the Series "A" Preferred Stock held by such holder. The redemption price shall
be the Stated Value plus all accrued but unpaid dividends.
Warrants
Pursuant to the terms of the Asset Purchase Agreement, the Company issued to
CVFLP Warrants entitling it to purchase approximately 952,784 additional shares
of the Company's Common Shares. Each Warrant entitles the holder to purchase
one Common Share at a price of $3.05 per share. CVFLP has distributed the
Warrants to Canadian Venture Founders Management Limited, its general partner.
Until September 20, 2000, the Warrants may only be exercised if a former
limited partner of CVFLP sells any Common Shares which were issued to such
limited partner in connection with the Transaction. In such event, the Warrant
holders may purchase one Common Share for each five Common Shares sold by such
limited partner. Any Warrants not exercised before September 20, 2000, may be
exercised by the holder during the six month period immediately following the
end of such five year period. All shares issuable upon exercise of the
Warrants will be restricted securities as that term is defined in Rule 144
under the 1933 Act.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Market Information
12
<PAGE> 16
The Common Shares are traded in the over-the-counter market and quoted on the
NASD OTC Bulletin Board, a regulated quotation service that captures and
displays real-time quotes and indications of interest in securities not listed
on The Nasdaq Stock Market or any U.S. exchange. The following table sets
forth the high and low bid price quotations for the Common Shares in the
over-the-counter market as provided by the National Quotation Bureau, Inc.
during the periods indicated. The quotations reflect inder-dealer prices,
without retail markup mark-down on commission and may not represent actual
transactions. All prices are shown in U.S. dollars.
<TABLE>
<CAPTION>
LOW HIGH
-------- --------
<S> <C> <C> <C>
1995 - 1st Quarter unpriced unpriced
2nd Quarter unpriced unpriced
3rd Quarter unpriced unpriced
4th Quarter 1.50 3.25
1996 - 1st Quarter
(excluding January 8) 2.75 3.25
2nd Quarter 2.75 3.625
3rd Quarter 3.50 5.375
4th Quarter 5.00 6.875
1997 - 1st Quarter
(through February 7, 1997) 6.50 6.875
</TABLE>
As of February 7, 1997, there were 5,390,417 outstanding shares of Common
Stock, held by 280 holders of record.
Dividends
The Company has never paid a dividend on the Common Shares. The payment of any
future dividends will be at the sole discretion of the Company's Board of
Directors. The Company intends to retain earnings to finance the expansion of
its business and does not anticipate paying dividends on the Common Shares in
the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings,
and, to the best of its knowledge, no such action by or against the
Company has been threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
13
<PAGE> 17
The following is a summary of all securities, as of February 7, 1996, of the
Company sold within the past three years which were not registered under the
Securities Act of 1933, as amended (the "Act"). All of the sales listed below
were exempt from registration under the Act in that they did not involve a
public offering within the meaning of section 4(2) of the Act and Regulation D,
promulgated thereunder. All such sales were to "accredited investors",
officers or employees of the Company, or other persons who had a close ongoing
relationship with the Company.
<TABLE>
<CAPTION>
NAME DATE AMOUNT OF SECURITIES
- - - - ---------------------- --------------- --------------------
<S> <C> <C>
Canadian Venture
Founders I,
Limited Partnership August 20, 1995 4,763,91
CVF, Inc. June 30, 1995 601,932
Noland Schneider August 20, 1995 20,000
Alpine Securities Core August 20, 1995 5,000
</TABLE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada General Corporation Law permits a corporation to
indemnify any person who was, or is, or is threatened to be made a party in a
completed, pending or threatened proceeding, whether civil criminal,
administrative or investigative (except an action by or in the right of the
corporation), by reason of being or having been an officer, director, employee
or agent of the corporation or serving in certain capacities a the request of
the corporation. Indemnification may include attorneys' fees, judgments, fines
and amounts paid in settlement. The person to be indemnified must have acted
in good faith and in a manner he or she reasonable believed to be in or not
opposed to the bet interests of the corporation and, with respect to any
criminal action, such person must have had no reasonable cause to believe his
conduct was unlawful. With respect to actions by or in the right of the
corporation, indemnification may not be made for any claim, issue or matter as
to which such a person has been finally adjudged by a court of competent
jurisdiction to be liable to the corporation or for amounts paid in settlement
to the corporation, unless and only to the extent that the court in which the
action was brought or other court of competent jurisdiction determines upon
application that in view of all circumstances the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
Article VIII of the Company's By-Laws provides that the Company shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation, oris or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation partnership, joint venture, trust, or other
enterprise, against expenses, including attorneys' fees, judgements, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit, or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
PART F/S
14
<PAGE> 18
Please refer to the Consolidated Financial Statements and the index thereto
which appear on page F-1 to F-19 hereof.
PART III
ITEM 1. INDEX OF EXHIBITS
See the "Index to Exhibits" which appears after page F-19.
ITEM 2. DESCRIPTION OF EXHIBITS
<TABLE>
<S> <C>
2.1 Articles of Incorporation of CVF Corp.
2.2 By-Laws of CVF Corp.
3.1 Form of Common Stock Certificate
3.2 Form of Series A Preferred Stock Certificate
3.3 Form of Warrant Certificate
6.1 Asset Purchase Agreement dated as of August 20, 1995
6.2 Stock Pledge Agreement dated as of September 20, 1995
6.3 Service Agreement dated as of February 10, 1997
10 Consent of Feldman Radin & Co., P.C.
27 Financial Data Schedule
</TABLE>
15
<PAGE> 19
CVF CORP. AND SUBSIDIARIES
(FORMERLY WESTERN GROWTH CORPORATION)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
-------
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED BALANCE SHEET F-3
CONSOLIDATED STATEMENT OF OPERATIONS F-4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY F-5
CONSOLIDATED STATEMENT OF CASH FLOWS F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
</TABLE>
F-1
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
To The Stockholders and
Board of Directors of
CVF Corp.
We have audited the accompanying consolidated balance sheet of CVF Corp.
and Subsidiaries (formerly Wesstern Growth Corporation) as of December 31,
1995, and the related statements of operations, stockholders' equity and cash
flows for years ended December 31, 1995 and 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CVF Corp.
and Subsidiaries (formerly Western Growth Corporation) as of December 31, 1995,
and the results of its operations and cash flows for each of the years ended
December 31, 1995 and 1994, in conformity with generally accepted accounting
principles.
/s/ Feldman Radin & Co., P.C.
------------------------------
Certified Public Accountants
New York, New York
December 11, 1996
F-2
<PAGE> 21
CVF CORP. AND SUBSIDIARIES
---------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
CONSOLIDATED BALANCE SHEET
---------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
-------
CURRENT ASSETS:
Cash and cash equivalents $ 2,797,851 $ 445,515
Accounts receivable 303,466 337,852
Inventory 123,855 221,592
Prepaid expenses and other 99,947 87,120
------------------ ------------------
TOTAL CURRENT ASSETS 3,325,119 1,092,079
PROPERTY AND EQUIPMENT, net of accumulated depreciation 185,401 171,488
INVESTMENTS 2,415,139 3,178,540
GOODWILL, net of accumulated amortization 1,671,609 1,772,005
OTHER ASSETS 109,674 68,588
------------------ ------------------
$ 7,706,942 $ 6,282,700
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,364,226 $ 1,174,313
Due to related parties 142,592 133,561
Other current liabilities 231,294 80,922
Accrued income taxes 950,000 -
Current portion of long term debt 134,528 163,728
------------------ ------------------
TOTAL CURRENT LIABILITIES 2,822,640 1,552,524
------------------ ------------------
LONG TERM DEBT, net of current portion 392,709 151,406
MINORITY INTEREST 292,000 292,000
REDEEMABLE PREFERRED STOCK 456,250 456,250
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, authorized 50,000,000 shares,
issued and outstanding 5,992,349 shares 5,992 5,992
Additional paid in capital 12,930,787 12,930,787
Translation adjustment (277,414) (277,252)
Retained earnings (accumulated deficit) (8,916,022) (8,829,007)
------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 3,743,343 3,830,520
------------------ ------------------
$ 7,706,942 $ 6,282,700
================== ==================
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 22
CVF CORP. AND SUBSIDIARIES
---------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------------ -----------------------------------
1996 1995 1995 1994
-------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES $ 1,182,341 $ 388,513 $ 763,009 $ 259,647
COST OF SALES 810,177 246,264 530,540 107,896
-------------- -------------- -------------- --------------
GROSS PROFIT 372,164 142,249 232,469 151,751
-------------- -------------- -------------- --------------
EXPENSES:
Selling, general and administrative 1,762,400 1,737,654 2,354,488 1,555,348
Research and development 204,469 197,706 215,003 201,626
-------------- -------------- -------------- --------------
TOTAL EXPENSES 1,966,869 1,935,360 2,569,491 1,756,974
-------------- -------------- -------------- --------------
INCOME (LOSS) FROM OPERATIONS (1,594,705) (1,793,111) (2,337,022) (1,605,223)
-------------- -------------- -------------- --------------
OTHER INCOME AND (EXPENSES):
Interest income (expense), net (68,078) (23,793) (24,923) 47,339
Other income (expense), net 40,578 6,096 246,533 35,588
Income (loss) from equity affiliates (712,149) (838,555) 881,091 (1,981,812)
Gain (loss) on sale of investments 3,197,339 - - -
Minority interest - 176,907 169,515 212,692
-------------- -------------- -------------- --------------
TOTAL OTHER INCOME AND (EXPENSES) 2,457,690 (679,345) 1,272,216 (1,686,193)
-------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 862,985 (2,472,456) (1,064,806) (3,291,416)
Provision for income taxes (950,000) - - -
-------------- -------------- -------------- --------------
NET INCOME (LOSS) $ (87,015) $ (2,472,456) $ (1,064,806) $ (3,291,416)
============== ============== ============== ==============
NET INCOME (LOSS) PER SHARE $ (.02) $ (0.51) $ (0.22) $ (0.75)
============== ============== ============== ==============
WEIGHTED SHARES USED IN COMPUTATION 5,992,349 4,807,499 4,978,115 4,399,247
============== ============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
F - 4
<PAGE> 23
CVF CORP. AND SUBSIDIARIES
--------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
COMMON STOCK PAID-IN (ACCUMULATED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) ADJUSTMENT EQUITY
--------- -------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - January 1, 1994 4,220,398 $ 4,220 $ 11,674,441 $ (4,472,785) $ - $ 7,205,876
Sale of shares 357,698 358 962,514 - - 962,872
Net (loss) - - - (3,291,416) - (3,291,416)
Translation adjustment - - - - (407,719) (407,719)
--------- -------- ------------- ------------- ------------ -------------
BALANCE - December 31, 1994 4,578,096 4,578 12,636,955 (7,764,201) (407,719) 4,469,613
Sale of shares 185,821 186 486,017 - - 486,203
Shares issued in connection
with reverse acquisition 1,228,432 1,228 (192,185) - - (190,957)
Net (loss) - - - (1,064,806) - (1,064,806)
Translation adjustment - - - - 130,467 130,467
--------- -------- ------------- ------------- ------------ -------------
BALANCE - December 31, 1995 5,992,349 5,992 12,930,787 (8,829,007) (277,252) 3,830,520
Sale of shares - - - - - -
Net (loss) (Unaudited) - - - (87,015) - (87,015)
Translation adjustment - - - - (162) (162)
--------- -------- ------------- ------------- ------------ -------------
BALANCE - September 30, 1996 (Unaudited) 5,992,349 $ 5,992 $ 12,930,787 $ (8,916,022) $ (277,414) $ 3,743,343
========= ========= ============= ============= ============ =============
</TABLE>
See notes to consolidated financial statements.
F - 5
<PAGE> 24
CVF CORP. AND SUBSIDIARIES
--------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------- ------------------------------
1996 1995 1995 1994
----------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ (87,015) $ (2,472,456) $ (1,064,806) $ (3,291,416)
----------- ------------- ------------- -------------
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation and amortization 155,821 113,967 176,006 96,395
(Income) loss from equity affiliates 712,149 838,555 (881,091) 1,981,812
Gain on sale of investments (3,197,339) - - -
Minority interest in earnings (losses) of subsidiaries - (176,907) (169,515) (212,692)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 34,386 (855) (201,536) (32,490)
(Increase) decrease in inventory 97,737 48,372 (170,543) 72,490
(Increase) decrease in prepaid expenses and other (12,827) 53,603 59,346 205,700
(Increase) decrease in other assets (41,086) 3,979 (64,609) (5,632)
Increase (decrease) in accounts payable and accrued expenses 189,913 176,825 785,059 225,307
Increase (decrease) in income taxes payable 950,000 - - -
Increase (decrease) in other current liabilities 150,372 77,135 1,026 (24,479)
------------ ------------- ------------- -------------
(960,874) 1,134,674 (465,857) 2,306,411
------------ ------------- ------------- -------------
CASH PROVIDED (USED) IN OPERATING ACTIVITIES (1,047,889) (1,337,782) (1,530,663) (985,005)
------------ ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (69,338) (43,039) (50,998) (34,718)
Investments and advances to equity affiliates, net (462,316) (29,575) (317,304) 98,390
Proceeds from sale of investments 3,710,745 - - -
Acquisitions, net of cash acquired - (190,957) (190,957) -
------------ ------------- ------------- -------------
CASH PROVIDED (USED) IN INVESTING ACTIVITIES 3,179,091 (263,571) (559,259) 63,672
------------ ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) of debt 212,103 (55,317) 62,319 233,830
Borrowings (payments) of debt to related parties 9,031 105,097 1,026 60,148
Issuance of equity securities - 504,000 504,000 997,129
Minority investments in subsidiaries - 292,000 292,000 14,207
------------ ------------- ------------- -------------
CASH PROVIDED (USED) IN FINANCING ACTIVITIES 221,134 845,780 859,345 1,305,314
------------ ------------- ------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS - (51,293) (33,667) 63,132
------------ ------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,352,336 (806,866) (1,264,244) 447,113
CASH AND CASH EQUIVALENTS - beginning of period 445,515 1,709,759 1,709,759 1,262,646
------------ ------------- ------------- -------------
CASH AND CASH EQUIVALENTS - end of period $ 2,797,851 $ 902,893 $ 445,515 $ 1,709,759
============ ============= ============= =============
CASH PAID DURING THE PERIOD FOR:
Interest $ 82,001 $ 66,363 $ 33,390 $ 39,183
============ ============= ============= =============
</TABLE>
See notes to consolidated financial statements
F - 6
<PAGE> 25
CVF CORP.AND SUBSIDIARIES
-------------------------
(FORMERLY WESTERN GROWTH CORPORATION)
-------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
The consolidated balance sheet at September 30, 1996 and the consolidated
statements of operations and the consolidated statements of cash flows for the
nine-month periods ended September 30, 1996 and 1995 are unaudited but include
all adjustments, consisting only of normal, recurring adjustments, which, in
the opinion of management, are necessary to a fair presentation of the
financial position, results of operations and cash flows for the periods then
ended. The results of operations for any interim period are not necessarily
indicative of the results of operations for a full fiscal year.
1. ORGANIZATION AND BUSINESS DESCRIPTION
The Company was incorporated on January 10, 1986, under the laws of
the State of Utah under the name of Sierra Growth Corporation. On December
30, 1993, the Company changed its name to Western Growth Corporation and
its domicile to the State of Nevada.
In September 1995, the Company acquired all of the assets and assumed
all of the liabilities of Canadian Venture Founders Limited Partnership
("CVFLP") in exchange for the issuance of its equity securities to the
partners of CVFLP.
CVFLP was formed under the laws of Ontario, Canada in 1989, to engage
in the business of developing and managing early stage and start-up
companies engaged in the information and environmental technologies areas.
In August 1989, CVFLP completed a private securities offering in which
approximately $14,600,000 was committed from a number of pension funds,
insurance companies and corporate groups. Since 1989, CVFLP has acquired
ownership interests in several privately held Canadian corporations.
In connection with the acquisition of CVFLP the Company changed its
name to CVF Corp.
The Company holds majority ownership positions in the following
companies:
BIOREM TECHNOLOGIES, INC. ("BIOREM") Biorem, a spin-off company from
the University of Waterloo, is an industrial biotech company that is
engaged in the business of applying bioconversion and biotransformation
technology to a variety of industrial applications such as the treatment or
clean-up of organic toxic chemicals in soil or groundwater, the treatment
of industrial waste streams for liquids or air and for use in the food
processing, agriculture and pharmaceutical manufacturing industries. At
December
F - 7
<PAGE> 26
31, 1995, the Company had a 69% ownership interest in Biorem.
OMPHALOS RECOVERY SYSTEMS, INC. ("GEMPRINT") Gemprint is in the
business of providing products and services to the insurance industry, as
well as the consumer and wholesale jewelry markets to enable diamonds and
other precious gems to be uniquely identified non-invasively using a low
power laser imaging system unique to Gemprint. The results are stored in a
data base for later verification and recovery of lost or stolen gems. At
December 31, 1995, the Company had a 70% ownership interest in Gemprint.
SOLARIA RESEARCH ENTERPRISES, LTD. ("SOLARIA") Solaria is the
business of developing, manufacturing and marketing a family of low cost,
high efficiency programmable electronic motor speed control products for
battery-powered vehicles such as material handling equipment (fork lift
trucks, etc.). Solaria supplies both original equipment manufacturers and
the aftermarket with products. At December 31, 1995, the Company had a 51%
ownership interest in Solaria.
CANADIAN VENTURE FOUNDERS LEASING CORPORATION ("LEASING") Leasing
provides funding to various investees of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation - The financial statements include the
accounts of the Company and its majority-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
The fiscal year ends of the subsidiaries vary, in most cases from
those of the Company. The consolidated financial statements combine
periods which are within three months of the Company's reporting period for
all the companies, in accordance with Securities and Exchange Commission
rules. Material differences resulting from the combination of different
periods are reconciled and accounted for.
In September 1995, immediately prior to the Asset Purchase Agreement
with the Company, CVFLP transferred substantially all of its debt
investments in subsidiaries and investee companies to Leasing in exchange
for 100% of the common stock of Leasing. The acquisition is accounted for
as a combination of companies under common control, and Leasing is
consolidated with the Company for all periods presented.
The subsidiary companies have various debt and equity securities
outstanding which are convertible into common stock. Any such conversions
would not materially decrease the Company's interest in the net assets of
any subsidiary.
Gemprint has outstanding 4,678,953 Class B voting shares with a stated
value of Cdn $1,250,000 issued to third parties, and 1,871,581 Class C
voting shares with a stated
F - 8
<PAGE> 27
value of Cdn $2,396,913 issued to the Company. Each Class B and C share
is convertible into one share of common stock, and features cumulative
dividends of 10%. All such shares are retractable at the option of the
holders between the period October 23, 1997 and November 1, 1997. Such
shares are included in the determination of the Company's proportionate
ownership interest.
b. STATEMENT OF CASH FLOWS - The Company considers all highly liquid
temporary cash investments, with an original maturity of three months or
less when purchased to be cash equivalents. The effect of exchange rate
changes on cash balances resulting from the translation process is
presented as a separate component of the statement of cash flows.
c. ACCOUNTS RECEIVABLE - Accounts receivable are presented net of
allowance for doubtful accounts. The allowance was $3,650 at December 31,
1995. Amounts charged to expense were immaterial during the years ended
December 31, 1995 and 1994.
d. INVENTORIES - Inventories are stated at the lower of cost or
market using first-in, first-out costing.
e. PROPERTY AND EQUIPMENT - Property and equipment are stated at
cost. Depreciation is calculated using the straight-line and accelerated
methods over the estimated useful lives of the assets, which range from 5
to 10 years.
f. GOODWILL - Goodwill is recorded in connection with the acquisition
of subsidiaries. Goodwill is also imputed in connection with the
acquisition of equity basis investments. All goodwill is being amortized
over a period of 15 years. Amounts amortized in connection with
subsidiaries are charged to amortization expense. Amounts amortized in
connection with equity basis investees are expensed as a reduction in the
carrying value of the investments.
The Company assesses the recoverability of goodwill by determining
whether the amortization of goodwill balance over its remaining life can be
recovered through projected, undiscounted, future cash flows of the related
companies.
g. LOSS PER SHARE - Loss per share is based on the weighted average
number of common shares and dilutive securities outstanding during the
periods, after giving effect to cumulative preferred stock dividends.
h. SECURITIES ISSUED FOR SERVICES - The Company accounts for stock
and options issued for services by reference to the fair market value of
the Company's stock on the date of stock issuance or option grant.
Compensation expense is recorded for the fair market value of the stock
issued, or in the case of options, for the difference between the stock's
fair market value on the date of grant and the option exercise price.
F - 9
<PAGE> 28
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock Based Compensation." SFAS No. 123 permits companies to choose to
follow the accounting prescribed by SFAS No. 123 for securities issued to
employees, or to continue to follow the accounting treatment prescribed by
Accounting Principles Board Opinion No. 25 ("APB No. 25") along with the
additional disclosure required under SFAS No. 123 if the Company elects to
continue to follow APB No. 25. The Company will adopt SFAS No. 123 for
fiscal 1996, however, the Company has not yet determined the manner in
which SFAS No. 123 will be adopted. As such the Company can not at this
time determine the impact on its financial statements.
i. USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
j. FAIR VALUE OF FINANCIAL INSTRUMENTS - For its fiscal year ended
December 31, 1996, the Company will adopt Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Instruments,"
which requires disclosure of fair value information about financial
instruments whether or not recognized in the balance sheet. The Company
does not believe that the adoption of this standard will have a material
impact on its financial statements.
k. INCOME TAXES - The Company accounts for income taxes under
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires the use of the liability method.
Under the liability method, a deferred tax asset or liability is determined
based upon the tax effect of the differences between the financial
statement and tax basis of assets and liabilities as measured by the
enacted rates which will be in effect when these differences reverse.
Provision is made for all applicable U.S. and foreign income taxes pursuant
to this standard. Canadian tax credits attributable to research and
development expenditures, which are refundable regardless or whether there
is taxable income, are accounted for as a reduction in research and
development expense.
l. GAINS (LOSSES) ON SUBSIDIARY AND EQUITY METHOD INVESTEE EQUITY
TRANSACTIONS - The Company records as gains or losses the change in its
proportionate interest in the net book value of its investment resulting
from equity transactions by subsidiary companies and equity basis investees
in accordance with Securities and Exchange Commission Staff Accountants'
Bulletin #70.
m. REVERSE SPLIT - In September 1995, in connection with the
acquisition of
F - 10
<PAGE> 29
CVFLP, the Company effected a 1-for-2 reverse split of its common stock.
All share data in these financial statements is restated to reflect this
reverse split.
n. FOREIGN CURRENCY TRANSLATION - The Company's functional currency
is deemed to be the Canadian dollar. The translation adjustment resulting
from the translation of the Company's financial statement into U.S.
currency is recorded as an element of stockholders' equity.
o. MINORITY INTEREST - Minority common equity interests are charged
with their proportionate share of subsidiary losses to the extent of
positive equity-adjusted holdings. Excess losses are deferred, and will be
charged against these interests when applicable future income becomes
available. Outstanding subsidiary preferred securities are presented
together with the minority interest.
3. ASSET PURCHASE AGREEMENT
On August 20, 1995, the Company entered into an asset purchase
agreement (the "Asset Purchase Agreement") with CVFLP, under which the
Company agreed to purchase all of the assets and assume all of the
liabilities of CVFLP. Pursuant to the terms of the Asset Purchase
Agreement, the Company issued to CVFLP 4,763,918 Common Shares, 25,000
shares of its Series "A" Preferred Stock (the "Preferred Shares") and
warrants (the "Warrants") entitling CVFLP to purchase approximately 952,784
additional Common Shares. At a Special Stockholders' Meeting held
September 12, 1995, the Company's stockholders approved proposals to: (i)
approve the Asset Purchase Agreement and the issuance of the securities of
the Company to CVFLP; (ii) change the name of the Company from Western
Growth Corporation to CVF Corp.; (iii) effect a 1-for-2 reverse split of
the Common Shares; and (iv) elect certain members as directors of the
Company.
The transaction has been accounted for as a reverse acquisition under
the purchase method for business combinations. Accordingly, the merger of
the two companies is recorded as a recapitalization of CVFLP, with CVFLP
being treated as the continuing entity. Prior to consummating the share
exchange, the Company did not have any significant operations.
The cost of the acquisition was recorded at the value of the Company's
(the acquired company) net tangible assets on the date of the exchange, in
accordance with Securities and Exchange Commission guidelines. On such
date, the Company had assets consisting of $43,651 in cash, offset by
$5,354 of accounts payable. Costs associated with the acquisition,
consisting of professional fees totaling $229,254, were charged against
additional paid in capital.
F - 11
<PAGE> 30
4. STOCKHOLDERS' EQUITY
The Company's authorized capital consists of 50,000,000 Common Shares,
$0.001 par value, and 500,000 Preferred Shares, $0.001 par value.
a. COMMON SHARES - Holders of the Common Shares are entitled to one
vote per share on each matter submitted to vote at any meeting of
shareholders. Common Shares do not carry cumulative voting rights and,
therefore, holders of a majority of the outstanding shares of Common Shares
will be able to elect the entire Board of Directors, and, if they do so,
minority shareholders would not be able to elect any members to the Board
of Directors. The Company's Board of Directors has authority, without the
action by the Company's shareholders, to issue all or any portion of the
authorized but unissued Common Shares, which would reduce the percentage
ownership of the Company of its shareholders and which may dilute the book
value of the Common Shares.
b. PREFERRED STOCK - Preferred Shares may be issued from time to time
in one or more series as may from time to time be determined by the board
of directors. Each series shall be distinctly designated.
The Company currently has outstanding a series of Preferred Stock
designated as Series "A" Preferred Stock. Each share of Series "A"
Preferred Stock has a stated value (the "Stated Value") of the U.S. dollar
equivalent of Cdn$25.00 determined at the date of issuance by reference to
the noon spot rate for conversion of Canadian dollars into U.S. dollars as
published by the National Bank of Canada on the business day immediately
preceding the date of issuance. The holders of Series "A" Preferred Stock
will be entitled to cumulative dividends at the rate of 5% of the Stated
Value plus accrued but unpaid dividends. The dividends will have priority
over any payments of dividends on Common Shared and on all other shares of
preferred stock ranking junior to the Series "A" Preferred Stock. Except
as otherwise required by Nevada law, the holders of Series "A" Preferred
Stock shall not have any voting rights.
The Series "A" Preferred Stock is not convertible into Common Shares
or into any other security of the Company. The Company may, at its option,
redeem all or part of the Series "A" Preferred Stock from the holders
thereof. Additionally, at any time after five years from the date of
issuance, a holder of Series "A" Preferred Stock may require the Company to
redeem any or all of the Series "A" Preferred Stock held by such holder.
The redemption price shall be the Stated Value plus all accrued but unpaid
dividends. In light of the future mandatory redemption feature, the
preferred stock is classified outside of permanent equity.
c. WARRANTS - Pursuant to the terms of the Asset Purchase Agreement,
the Company issued to CVFLP Warrants entitling it to purchase approximately
952,784 additional shares of the Company's Common Shares (approximately
15.9% of the total
F - 12
<PAGE> 31
issued and outstanding Common Shares). Each Warrant entitles the holder to
purchase one Common Share at a price of $3.05 per share. CVFLP has
distributed the Warrants to Canadian Venture Founders Management Limited,
its general partner. Until September 20, 2000, the Warrants may only be
exercised if a former limited partner of CVFLP sells any Common Shares
which were issued to such limited partner in connection with the Asset
Purchase Agreement. In such event, the Warrant holders may purchase one
Common Share for each five Common Shares sold by such limited partner. Any
Warrants not exercised before September 20, 2000, may be exercised by the
holder during the six month period immediately following the end of such
five year period. All shares issuable upon exercise of the Warrants will
be restricted securities as that term is defined in Rule 144 under the 1933
Act.
5. RELATED PARTY TRANSACTIONS
The General Partner of CVFLP had retained its affiliate, Canadian
Venture Founders Corporation ("CVF Corporation"), to provide administrative
and managerial services to CVFLP. CVF Corporation was paid an annual
management fee of 2.75% of the first $30 million of committed capital and
2.50% of original committed capital over $30 million. The management fee
was determined based on capital committed on formation of $20 million.
The amount of management fee included in the Company's statement of
operations was $490,564 for the year ended December 31, 1995 and $503,578
for the year ended December 31, 1994. This arrangement terminated with the
Asset Purchase Agreement in September 1995.
6. EXPORT SALES
F - 13
<PAGE> 32
The Company, to date, has conducted substantially all its business in
Canada and the U.S. Export sales, primarily to the U.S., amounted to
approximately $454,000 for the year ended December 31, 1995 and $191,000
for the year ended December 31, 1994.
7. INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
SFAS 109 requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the financial statement
and tax basis of assets and
F - 14
<PAGE> 33
liabilities, and for the expected future tax benefit to be derived from tax
loss and tax credit carryforwards. SFAS 109 additionally requires the
establishment of a valuation allowance to reflect the likelihood of the
realization of deferred tax assets. As of December 31, 1995, the Company
had net deferred tax assets of approximately $36,000, primarily related to
net operating loss carryforwards. The Company has recorded a valuation
allowance for the full amount of such net deferred tax assets and, as a
result, the Company has not recorded any liability or asset for deferred
taxes as of December 31, 1995.
The net operating loss carryforward amounts to approximately $90,000,
and consists exclusively of losses incurred by CVF Corp. subsequent to the
combination with CVFLP in September 1995. Prior losses of CVFLP, losses
incurred by Canadian subsidiaries (which are not consolidated with the
Company for tax purposes) and losses attributable to equity basis
investments are permanent differences and are not available to offset
income of the Company. The net operating loss carryforward expires in the
year 2010.
The benefit for income taxes differs from the amount computed by
applying the statutory income tax rate to net loss before provision for
income taxes as follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
DECEMBER 31, DECEMBER 31,
1995 1994
---------------------------------------
<S> <C> <C>
Income tax benefit computed at
statutory rate $ 373,000 $ 1,152,000
Effect of permanent differences (341,000) (1,152,000)
Tax benefit of net operating
loss not recognized (32,000) -
---------------------------------------
Provision for income taxes
reported $ - $ -
=======================================
</TABLE>
F - 15
<PAGE> 34
8. INVESTMENTS
Investments consisted of the following at December 31, 1995:
<TABLE>
<CAPTION>
NOTES
PERCENT EQUITY - AND
OWNERSHIP ADJUSTED COST ADVANCES(1) RESERVE TOTAL
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ecoval 33% $ (2,170,518) $ 2,602,773 $ (127,412) $ 304,840
Dantec 38% 310,819 136,474 - 447,293
Certicom 17% 1,236,308 967,562 (222,476) 1,981,394
Turbotak - - 730,000 (365,000) 365,000
Other - - 80,013 - 80,013
--------------------------------------------------------------------
Total $ (623,391) $ 4,516,822 $ (714,891) $ 3,178,540
====================================================================
</TABLE>
(1) Includes $682,799 of Certicom preferred stock.
Investments in which the Company holds a 20-50% ownership position are
accounted for under the equity method of accounting as required by
Accounting Principles Board Opinion No. 18. Investments of less than 20%
are accounted for at cost. The Company records losses to the extent of any
positive equity basis plus loans and advances.
The Company's holdings in investee debt are classified as
"held-to-maturity" securities (as defined in Statement of Financial
Accounting Standard No. 115), and as such are carried at amortized cost,
with provision made for what is deemed a permanent decline in value.
In December 1995, Certicom completed an initial public offering,
pursuant to which the Company's ownership percentage fell below 20%.
Accordingly, the Company discontinued the use of the equity method.
Prior to December 1994, the Company held investments in Ecoval
Technologies, Inc., and a related predecessor entity, Terra Care
Corporation (which was subsequently dissolved). In October 1994, Ecoval
Technologies was acquired by Ecoval , Inc. Upon the acquisition, the
Company received a 33% interest in Ecoval, Inc. and received a debenture
equal to all previous amounts invested in Ecoval Technologies and Terra
Care.
F - 16
<PAGE> 35
The aggregate cost of investments in associated companies accounted for
under the equity method of accounting was $4,180,658 at December 31, 1995.
The following table gives certain summarized financial information related
to the Company's equity in investees:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------
1995 1994
---------------------------------
<S> <C> <C>
Net sales $ 1,090,773 $ 1,669,381
Gross profit on sales 237,524 855,191
Net loss (1,644,736) (1,250,356)
---------------------------------
CVF Corp.'s share of net loss $ (563,113) $ (562,242)
---------------------------------
Current assets $ 1,820,937 $ 1,461,522
Noncurrent assets 8,232,657 1,897,785
---------------------------------
Total assets $ 10,053,594 $ 3,359,307
=================================
Current liabilities $ 1,904,558 $ 1,428,236
Noncurrent liabilities 9,798,172 2,812,905
Equity (deficit) (1,649,136) (881,834)
---------------------------------
Total liabilities and equity $ 10,053,594 $ 3,359,307
=================================
CVF Corp.'s share of
accumulated deficit $ (1,030,388) $ (1,107,642)
=================================
</TABLE>
The investee companies have various debt and equity securities outstanding
which are convertible into common stock. Any such conversions would not
materially decrease the Company's interest in the net assets of any investee.
F-17
<PAGE> 36
9. GOODWILL
Goodwill consisted of the following at December 31, 1995:
<TABLE>
<CAPTION>
ACCUMULATED
ORIGINAL BASIS AMORTIZATION NET
----------------------------------------------------
<S> <C> <C> <C>
Biorem $ 188,751 $ (20,639) $ 168,112
Gemprint 1,458,993 (113,477) 1,345,516
Solaria 360,183 (101,806) 258,377
----------------------------------------------------
Total $ 2,007,927 $ (235,922) $ 1,772,005
====================================================
</TABLE>
Additionally, goodwill attributable to equity basis investments which
is part of the carrying cost of such investments consisted of the
following:
<TABLE>
<CAPTION>
ACCUMULATED
ORIGINAL BASIS AMORTIZATION NET
----------------------------------------------------
<S> <C> <C> <C>
Ecoval $ 1,502,478 $ (100,166) $ 1,402,312
Dantec 639,898 (220,719) 419,179
----------------------------------------------------
Total $ 2,142,376 $ (320,885) $ 1,821,491
====================================================
</TABLE>
Amortization of goodwill in subsidiaries totaled $132,027 and $48,938
for the years ended December 31, 1995 and 1994. Amortization of goodwill
in equity basis investees totaled $151,174 and $127,502 for the years ended
December 31, 1995 and 1994.
F-18
<PAGE> 37
10. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1995:
<TABLE>
<S> <C>
Bank line of credit, collateralized by a
second position general security
agreement, bearing interest at prime plus
three percent. $ 156,962
Non-convertible debenture bearing
interest at 13.5%, repayable in February
2000. 136,875
Other 21,297
----------
315,134
Less: Current portion 163,728
----------
$ 151,406
==========
</TABLE>
11. SUBSEQUENT EVENTS
During the period April through August 1996, the Company sold a total
of 316,667 shares of Certicom on the open market, realizing net proceeds of
$3,710,745.
F-19
<PAGE> 38
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 10-SB and has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
CVF CORP.
By: /s/Jeffrey Dreben
----------------------------------
Name: Jeffrey Dreben
Title: President and Chief Executive Officer
Date: February 12, 1997
<PAGE> 1
EXHIBIT 2.1
CERTIFICATE OF INCORPORATION
OF
WESTERN GROWTH CORPORATION
ARTICLE I
NAME
The name of the corporation (the "Corporation") shall be:
Western Growth Corporation
ARTICLE II
DURATION
The Corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE III
PURPOSES
The purposes for which the Corporation is organized are:
To seek, investigate, acquire interests in, and dispose of business
opportunities, ventures, and assets; to own and operate any lawful enterprise
whatsoever; to acquire, hold, and dispose of real or personal properties of any
kind or nature whether tangible or intangible; and generally to do or perform
any act necessary or desirable in connection with the foregoing;
To acquire by purchase or otherwise, own, hold, lease, rent, mortgage, or
otherwise trade with and deal in real estate, lands, and interests in lands and
all other property of every kind and nature;
To borrow money and to execute notes and obligations and security
contracts therefore, and to lend any of the monies or funds of the Corporation
and to take evidence of indebtedness therefore; to carry on a general
mercantile business and to purchase, sell, and deal in such goods and supplies,
and merchandise as are necessary or desirable in connection therewith;
To do all and everything necessary, suitable, convenient, or proper for
the accomplishment of any of the purposes or the attainment of any one or more
of the objects herein enumerated or incidental to the powers herein named or
which shall at any time appear conducive or expedient for the protection or
benefit of the Corporation, with all the powers hereafter conferred by the laws
under which this Corporation is organized; and
<PAGE> 2
To engage in any and all other lawful purposes, activities, and pursuits,
whether similar or dissimilar to the foregoing, for which corporations may be
organized under the Nevada Revised Statutes and to exercise all powers allowed
or permitted thereunder.
ARTICLE IV
AUTHORIZED SHARES
The Corporation shall have authority to issue an aggregate of 50,500,000
shares, of which 500,000 shares shall be preferred stock, $0.001 par value (the
"Preferred Stock"), and 50,000,000 shares shall be common stock, par value
$0.001 (the "Common Stock"). The powers, preferences, and rights, and the
qualifications, limitations, or restrictions of the shares of stock of each
class and series which the Corporation shall be authorized to issue, are as
follows:
(a) Preferred Stock. Shares of Preferred Stock may be issued from time to
time in one or more series as may from time to time be determined by the board
of directors. Each series shall be distinctly designated. All shares of any
one series of the Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends thereon, if any, shall
be cumulative, if made cumulative. The powers, preferences, participating,
optional, and other rights of each such series and the qualifications,
limitations, or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. Except as hereinafter provided, the
board of directors of this Corporation is hereby expressly granted authority to
fix by resolution or resolutions adopted prior to the issuance of any shares of
each particular series of Preferred Stock, the designation, powers,
preferences, and relative participating, optional, and other rights and the
qualifications, limitations, and restrictions thereof, if any, of such series,
including, without limiting the generality of the foregoing, the following:
(i) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute each series, which number may be
increased (except as otherwise fixed by the board of directors) or
decreased (but not below the number of shares thereof outstanding) from
time to time by action of the board of directors;
(ii) The rate and times at which, and the terms and conditions on
which, dividends, if any, on the shares of the series shall be paid; the
extent of preferences or relation, if any, of such dividends to the
dividends payable on any other class or classes of stock of this
Corporation or on any series of Preferred Stock and whether such
dividends shall be cumulative or noncumulative;
(iii) The right, if any, of the holders of the shares of the same
series to convert the same into, or exchange the same for, any other
class or classes of stock of this Corporation and the terms and
conditions of such conversion or exchange;
(iv) Whether shares of the series shall be subject to redemption
and the redemption price or prices, including, without limitation, a
redemption price or prices payable in shares of any other class or
classes of stock of the Corporation, cash, or other property and the time
or times at which, and the terms and conditions on which, shares of the
series may be redeemed;
(v) The rights, if any, of the holders of shares of the series on
voluntary or involuntary
2
<PAGE> 3
liquidation, merger, consolidation, distribution, or sale of assets,
dissolution, or winding up of this Corporation;
(vi) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series; and
(vii) The voting powers, if any, of the holders of shares of the
series which may, without limiting the generality of the foregoing,
include (A) the right to more or less than one vote per share on any or
all matters voted on by the shareholders, and (B) the right to vote as a
series by itself or together with other series of Preferred Stock or
together with all series of Preferred Stock as a class, on such matters,
under such circumstances, and on such conditions as the board of
directors may fix, including, without limitation, the right, voting as a
series by itself or together with other series of Preferred Stock or
together with all series of Preferred Stock as a class, to elect one or
more directors of this Corporation in the event there shall have been a
default in the payment of dividends on any one or more series of
Preferred Stock or under such other circumstances and upon such
conditions as the board of directors may determine.
(b) Common Stock. The Common Stock shall have the following powers,
preferences, rights, qualifications, limitations, and restrictions:
(i) After the requirements with respect to preferential dividends
of Preferred Stock, if any, shall have been met and after this
Corporation shall comply with all the requirements, if any, with respect
to the setting aside of funds as sinking funds or redemption or purchase
accounts and subject further to any other conditions which may be
required by the Nevada Revised Statutes, then, but not otherwise, the
holders of Common Stock shall be entitled to receive such dividends, if
any, as may be declared from time to time by the board of directors
without distinction as to series;
(ii) After distribution in full of any preferential amount to be
distributed to the holders of Preferred Stock, if any, in the event of a
voluntary or involuntary liquidation, distribution or sale of assets,
dissolution, or winding up of this Corporation, the holders of the Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation, tangible and intangible, of whatever kind available for
distribution to stockholders, ratably in proportion to the number of
shares of Common Stock held by each without distinction as to series; and
(iii) Except as may otherwise be required by law or this
Certificate of Incorporation, in all matters as to which the vote or
consent of stockholders of the Corporation shall be required or be taken,
including any vote to amend this Certificate of Incorporation, to
increase or decrease the par value of any class of stock, effect a stock
split or combination of shares, or alter or change the powers,
preferences, or special rights of any class or series of stock, the
holders of the Common Stock shall have one vote per share of Common Stock
on all such matters and shall not have the right to cumulate their votes
for any purpose.
(c) Other Provisions.
(i) The board of directors of the Corporation shall have authority
to authorize the issuance, from time to time without any vote or other
action by the stockholders, of any or all shares of the Corporation of
any class at any time authorized, and any securities convertible into
3
<PAGE> 4
or exchangeable for such shares, in each case to such persons and for
such consideration and on such terms as the board of directors from time
to time in its discretion lawfully may determine; provided, however, that
the consideration for the issuance of shares of stock of the Corporation
having par value shall not be less than such par value. Shares so issued,
for which the full consideration determined by the board of directors has
been paid to the Corporation, shall be fully paid stock, and the holders
of such stock shall not be liable for any further call or assessments
thereon.
(ii) Unless otherwise provided in the resolution of the board of
directors providing for the issue of any series of Preferred Stock no
holder of shares of any class of the Corporation or of any security or
obligation convertible into, or of any warrant, option, or right to
purchase, subscribe for, or otherwise acquire, shares of any class of the
Corporation, whether now or hereafter authorized, shall, as such holder,
have any preemptive right whatsoever to purchase, subscribe for, or
otherwise acquire shares of any class of the Corporation, whether now or
hereafter authorized.
(iii) Anything herein contained to the contrary notwithstanding,
any and all right, title, interest, and claim in and to any dividends
declared or other distributions made by the Corporation, whether in cash,
stock, or otherwise, which are unclaimed by the stockholder entitled
thereto for a period of six years after the close of business on the
payment date, shall be and be deemed to be extinguished and abandoned;
and such unclaimed dividends or other distributions in the possession of
the Corporation, its transfer agents, or other agents or depositories,
shall at such time become the absolute property of the Corporation, free
and clear of any and all claims of any person whatsoever.
ARTICLE V
LIMITATION ON LIABILITY
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except for (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (b) the payment of
distributions in violation of section 78.300 of the Nevada Revised Statutes.
ARTICLE VI
ELECTION NOT TO BE GOVERNED BY NRS 78.378 TO 78.3793
The Corporation elects not to be governed by the provisions of sections
78.378 to 78.3793, inclusive, of the Nevada Revised Statutes regarding control
share acquisitions.
4
<PAGE> 5
ARTICLE VII
ELECTION NOT TO BE GOVERNED BY NRS 78.411 TO 78.444
The Corporation elects not to be governed by the provisions of sections
78.411 to 78.444, inclusive, of the Nevada Revised Statutes regarding
combinations with interested shareholders.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that such person is or was a director or officer of the
Corporation, or who is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with the action, suit or proceeding, to the full extent
permitted by the Nevada Revised Statutes as such statutes may be amended from
time to time.
ARTICLE IX
REGISTERED OFFICE AND REGISTERED AGENT
The name and address of the Corporation's registered agent in the state of
Nevada is Nevada Agency and Trust, Suite 880, 50 West Liberty Street, Reno,
Nevada 89501. Either the registered office or the registered agent may be
changed in the manner provided by law.
ARTICLE X
AMENDMENT
The Corporation reserves the right to amend, alter, change, or repeal all
or any portion of the provisions contained in its Certificate of Incorporation
from time to time in accordance with the laws of the state of Nevada, and all
rights conferred on stockholders herein are granted subject to this
reservation.
ARTICLE XI
ADOPTION AND AMENDMENT OF BYLAWS
The initial bylaws of the Corporation shall be adopted by the board of
directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws
shall be vested in the board of directors, but the stockholders of the
Corporation may also alter, amend, or repeal the bylaws or adopt new bylaws.
The bylaws may contain any provisions for the regulation or management of the
affairs of the Corporation
5
<PAGE> 6
not inconsistent with the laws of the state of Nevada now or hereafter
existing.
ARTICLE XII
DIRECTORS
The governing board of the Corporation shall be known as the board of
directors. The number of directors comprising the board of directors shall be
not less than one (1) nor more than nine (9) as determined from time to time in
the manner provided in the bylaws of the Corporation. The original board of
directors shall consist of one person. The name and address of the person who
is to serve as a director until the first annual meeting of stockholders and
until his or her successor is elected and shall qualify is as follows:
Name Address
---- -------
L. Dee Hall 2077 Elderberry Way
Sandy, Utah 84092
ARTICLE XIII
INCORPORATOR
The name and mailing address of the sole incorporator signing this
certificate of incorporation is as follows:
Name Address
---- -------
L. Dee Hall 2077 Elderberry Way
Sandy, Utah 84092
The undersigned, being the sole incorporator named above, for the purpose
of forming a corporation pursuant to the Nevada Revised Statutes, makes this
certificate, hereby declaring and certifying that it is his act and deed and
that the facts herein stated are true, and accordingly has hereunto set his
hand this 17 day of December, 1993.
/s/ L. Dee Hall
-------------------------------
L. Dee Hall
6
<PAGE> 7
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
I, a notary public, hereby certify that on the 17th day of December, 1993,
personally appeared before me L. Dee Hall, who being by me first duly sworn,
declared that he signed such instrument as his own act and deed and that the
facts stated therein are true.
WITNESS MY HAND AND OFFICIAL SEAL.
__________________________________
Notary Public
7
<PAGE> 8
ARTICLES OF MERGER
KNOW ALL MEN BY THESE PRESENTS:
THESE ARTICLES OF MERGER are executed and entered into as of the __ day of
December, 1993, by and between Western Growth Corporation, a Nevada corporation
(hereinafter referred to as "Western" or the "Surviving Corporation"), and
Sierra Growth Corporation, a Utah corporation (hereinafter referred to as
"Sierra").
WITNESSETH:
I
PLAN OF MERGER
Pursuant to these Articles of Merger, it is intended and agreed that
Sierra will be merged into Western, Western shall be the Surviving Corporation
and each share of Sierra common stock outstanding on the effective date of the
merger shall be converted into one share of Western common stock. The name of
the Surviving Corporation shall be Western Growth Corporation. The terms,
conditions, and understandings of the merger are set forth in the Plan of
Merger between Western ant Sierra, dated December 17, 1993, a copy of which is
attached hereto as Exhibit A and incorporated herein by this reference.
II
CERTIFICATE OF INCORPORATION AND BYLAWS
On the consummation of the merger, the certificate of incorporation and
bylaws of the Surviving Corporation shall be the certificate of incorporation
and bylaws of Western.
III
AUTHORIZED AND OUTSTANDING SHARES OF WESTERN
Western has authorized 500,000 shares of preferred stock, par value
$0.001, none of which is outstanding, and 50,000,000 shares of common voting
stock, $0.001 par value, 1,000 shares of which are issued and outstanding.
Each of the shares is entitled to one vote.
IV
AUTHORIZED AND OUTSTANDING SHARES OF SIERRA
8
<PAGE> 9
Sierra has authorized 100,000,000 shares of common stock, par value
$0.001, of which 12,280,000 shares are issued and outstanding prior to
implementation of the 1-for-10 reverse split approved by the shareholders on
December 17, 1993. Each of the shares is entitled to one vote.
V
APPROVAL BY DIRECTORS AND SHAREHOLDERS OF WESTERN
The board of directors of Western has approved the adoption of the Plan of
Merger and the performance of its terms. At 1,000 shares of common stock of
Western were voted in favor of entering into the Plan of Merger with no shares
of common stock of Western dissenting. Such shares were voted as a class. The
shares voted in favor of the Plan of Merger represented all issued and
outstanding shares of Western and the Plan of Merger was duly approved by the
Western Shareholders.
VI
APPROVAL BY DIRECTORS AND SHAREHOLDER OF SIERRA
The board of directors of Sierra approved the adoption of the Plan of
Merger and the performance of its terms. Of the 12,280,000 common shares of
Sierra issued and outstanding on the record date of December 3, 1993 (prior to
implementation of the reverse split), _________ of such shares were voted in
favor of entering into the Plan of Merger and _________ of such shares were
voted against the Plan of Merger. Such shares were voted individually and not
as a class. The shares voted in favor of the Plan of Merger represented a
majority of the total issued and outstanding shares of Sierra and the Plan of
Merger was duly approved by the Sierra shareholders.
VII
UNDERTAKINGS OF WESTERN
Western agrees that it will comply with the provisions of the Utah Revised
Business Corporation Act with respect to foreign corporations if it is to
transact business in Utah, and hereby agrees with the Secretary of State of
Utah as follows:
(1) Western may be served
with process in Utah in any
proceeding for the enforcement
of any obligation of Sierra
and in any proceeding for the
enforcement of the rights of a
dissenting shareholder of
Sierra against the surviving
or new corporation.
9
<PAGE> 10
(2) Western hereby
irrevocably appoints the
Secretary of State of Utah as
its agent to accept service of
process in any such
proceeding, and requests that
copies of any such process be
mailed to Western at 2077
Elderberry Way, Sandy, Utah
84092.
(3) Western shall promptly
pay to the dissenting
shareholders of Sierra the
amount, if any, to which they
shall be entitled under the
provisions of the Utah Revised
Business Corporation Act with
respect to the rights of
dissenting shareholders.
10
<PAGE> 11
IN WITNESS WHEREOF, the undersigned corporations, acting by their
respective presidents, have executed these Articles of Merger as of the date
first above written.
Western Growth Corporation
A Nevada Corporation
By ____________________________
L. Dee Hall, President and Secretary
Sierra Growth Corporation
A Utah Corporation
By ____________________________
L. Dee Hall, President
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On this __ day of December, 1993, personally appeared before me L. Dee
Hall, who being by me duly sworn did say, that he is the President and
Secretary of Western Growth Corporation and the President of Sierra Growth
Corporation, that he is the person who executed the foregoing Articles of
Merger on behalf of such corporations and that the statements contained therein
are true.
My Commission Expires
_______________________________
Notary Public
Residing in ___________________
11
<PAGE> 12
EXHIBIT A
PLAN OF MERGER
THIS PLAN OF MERGER, dated as of December __, 1993, is made and entered
into by and between Sierra Growth Corporation, a Utah corporation ("Sierra"),
and Western Growth Corporation, a Nevada corporation ("Western"). Western is
sometimes hereinafter referred to as the "Surviving Corporation", and Western
and Sierra are sometimes hereinafter collectively referred to as the
"Constituent Corporations."
WITNESSETH
WHEREAS, Sierra is a corporation duly organized and existing under the
laws of the state of Utah, having an authorized capital of 100,000,000 shares
of common stock, par value $0.001 (the "Common Stock of Sierra"), of which
12,280,000 shares are issued and outstanding and of which approximately
1,228,000 will be outstanding following implementation of a 1-for-10 reverse
split approved by the Company's shareholders on December 17, 1993; and
WHEREAS, Western is a corporation duly organized and existing under the
laws of the state of Nevada, having an authorized capital of 500,000 shares of
preferred stock, par value $0.001, none of which is outstanding, and 50,000,000
shares of common stock, par value $0.001 (the "Common Stock of Western"), of
which 1,000 shares are issued and outstanding as of the date hereof; and
WHEREAS, Western was formed by Sierra for the express purpose of changing
the state of incorporation of Sierra from Utah to Nevada and, in connection
therewith, changing the name of Sierra to Western Growth Corporation; and
WHEREAS, the respective boards of directors of Sierra and Western have
each duly approved this Plan of Merger (the "Plan") providing for the merger of
Sierra with and into Western and the conversion of each share of Sierra common
stock outstanding on the effective date of the merger into one share of Western
common stock, all as authorized by the statutes of Nevada and Utah; and
WHEREAS, Sierra owns all the issued and outstanding voting securities of
Western;
NOW THEREFORE, based on the foregoing premises and in consideration of the
mutual covenants and agreements herein contained, and for the purpose of
setting forth the terms and conditions of said merger and the manner and basis
of causing the shares of Common Stock of Sierra to be converted into shares of
Common Stock of Western and such other provisions as are deemed necessary or
desirable, the parties hereto have agreed and do hereby agree, subject to the
approval and adoption of this Plan by the requisite vote of the stockholders of
each Constituent Corporation, and subject to the conditions hereinafter set
forth, as follows:
ARTICLE I
MERGER AND NAME OF SURVIVING CORPORATION
<PAGE> 13
On the effective date of the merger, Western and Sierra shall cease to
exist separate and Sierra shall be merged with and into Western, which is
hereby designated as the "Surviving Corporation", the name of which on and
after the effective date of the merger shall be "Western Growth Corporation",
or such other name as may be available and to which the parties may agree.
ARTICLE II
TERMS AND CONDITIONS OF MERGER
The terms and conditions of the merger are (in addition to those set forth
elsewhere in this Plan) as follows:
(a) On the effective date of the merger:
(i) Sierra shall be merged into Western to form a single corporation
and Western shall be and is designated herein as the Surviving
Corporation;
(ii) the separate existence of Sierra shall cease;
(iii) the Surviving Corporation shall have all the rights,
privileges, immunities, and powers and shall be subject to all duties and
liabilities of a corporation organized under the laws of Nevada; and
(iv) the Surviving Corporation shall thereupon and thereafter
possess all the rights, privileges, immunities, and franchises, of a
public as well as a private nature, of each of the Constituent
Corporations; and all property, real personal, and mixed, and all debts
due of whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest, of or belonging to or
due to each of the Constituent Corporations, shall be taken and deemed to
be transferred to and vested in the Surviving Corporation without further
act or deed; the title to any real estate, or any interest therein,
vested in either constituent Corporation shall not revert or be in any
way impaired by reason of the merger; the Surviving Corporation shall
thenceforth be responsible and liable for all the liabilities and
obligations of each of the Constituent Corporations; any claim existing
or action or proceeding pending by or against either of such Constituent
Corporations may be prosecuted as if the merger had not taken place, or
the Surviving Corporation may be substituted in place of either of the
Constituent Corporations; and neither the rights of creditors nor any
liens on the property of either of the Constituent Corporations shall be
impaired by the merger.
(b) On the effective date of the merger, the board of directors of the
Surviving Corporation and the members thereof, shall be and consist of
the members of the board of directors of Sierra elected at its special
meeting of shareholders at which the merger was approved, to serve
thereafter in accordance with the bylaws of the Surviving Corporation and
until their respective successors shall have been duly elected and
qualified in accordance with such bylaws and the laws of the state of
Nevada.
(c) On the effective date of the merger, the officers of the Surviving
Corporation shall be and
2
<PAGE> 14
consist of the officers of Sierra appointed by its directors elected at
the special meeting at which the merger was approved, such officers to
serve thereafter in accordance with the bylaws of the Surviving
Corporation and until their respective successors shall have been duly
elected and qualified in accordance with such bylaws and the laws of the
state of Nevada.
If on the effective date of the merger, a vacancy shall exist in the board
of directors or in any of the offices of the Surviving Corporation, such
vacancy may be filled in the manner provided in the bylaws of the Surviving
Corporation and the laws of the state of Nevada.
3
<PAGE> 15
ARTICLE III
MANNER AND BASIS OF CONVERTING SHARES
The manner and basis of converting the shares of Common Stock of Sierra
into shares of the Common Stock of Western, and the mode of carrying the merger
into effect are as follows:
(a) Each share of Common stock of Sierra outstanding on the effective
date of the merger shall, without any action on the part of the holder
thereof, be converted into one fully paid and nonassessable share of
Common Stock of Western, so that the approximately 1,228,000 share of
Common Stock of Sierra outstanding following implementation of the
reverse split are converted into an aggregate of approximately 1,280,000
share of Common Stock of Western, which shares of Common Stock of Western
shall thereupon be duly and validly issued and outstanding, fully paid,
and nonassessable, and shall not be liable to any further call, nor shall
the holders thereof be liable for any further payments with respect
thereto. After the effective date of the merger, each holder of an
outstanding certificate which prior thereto represented shares of the
Common Stock of Sierra shall be entitled on surrender thereof to the
transfer and exchange agent of Western, to receive in exchange therefor a
certificate or certificates representing the number of whole share of
Common Stock of Western into which the shares of Common Stock of Sierra
so surrendered shall have been converted as set forth above, such
denominations and registered in such names as such holder may request.
Until so surrendered, each such outstanding certificate which, prior to
the effective date of the merger, represented share of the Common Stock
of Sierra shall for all purposes evidence the ownership of the share of
Common Stock of Western into which such shares have been converted;
provided, that dividends or other distributions which are payable in
respect to shares of Common Stock of Western into which shares of Common
Stock of Sierra shall have been converted shall be set aside by Western
and shall not be paid to holders of certificates, representing such
shares of Common Stock of Sierra until such certificates shall have been
surrendered in exchange for certificates representing shares of Common
Stock of Western, and on such surrender, of such share shall be entitled
to receive such dividends or other distributions without interest.
(b) All shares of Common Stock of Western into which shares of the
Common Stock of Sierra shall have been converted pursuant to this Article
III shall be issued in full satisfaction of all rights pertaining to the
shares of Common Stock of Sierra.
(c) If any certificate for shares of Common Stock of Western is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting
such exchange pay to Western or any agent designated by it any transfer
or other taxes required by reason of the issuance of a certificate for
shares of Common Stock of Western in any name other than that of the
registered holder of the certificate surrendered, or established to the
satisfaction of Western or any agent designated by it that such tax has
been paid or is not payable.
(d) The 1,000 shares of Common Stock of Western held by Sierra shall be
canceled and returned to the status of authorized and unissued shares.
4
<PAGE> 16
ARTICLE IV
CERTIFICATE OF INCORPORATION AND BYLAWS
1. The certificate of incorporation of Western shall, on the merger
becoming effective, be and constitute the certificate of incorporation of the
Surviving Corporation unless and until amended in the manner provided by law.
2. The bylaws of Western shall, on the merger becoming effective, be and
constitute the bylaws of the Surviving Corporation unless and until amended in
the manner provided by law.
ARTICLE V
OTHER PROVISIONS WITH RESPECT TO MERGER
This Plan shall be submitted to a vote at a meeting of shareholders of
each of the Constituent Corporations as provided by the laws of the states of
Nevada and Utah. After the approval or adoption thereof by the shareholders of
each Constituent Corporation in accordance with the requirements of the laws of
the states of Nevada and Utah, all required documents shall be executed, filed,
and recorded in accordance with all requirements of the states of Nevada and
Utah.
ARTICLE VI
APPROVAL AND EFFECTIVE DATE OF THE MERGER; MISCELLANEOUS MATTERS
1. The merger shall become effective when all of the following actions
have been taken:
(a) This Plan shall have been authorized, adopted, and approved on behalf
of the Constituent Corporations in accordance with the laws of the states
of Nevada and Utah; and
(b) Articles of Merger (with this Plan attached as part thereof), or a
Certificate of Merger setting forth the information required by, and
executed and certified in accordance with, the laws of the states of
Nevada and Utah, shall be filed in the appropriate offices of the states
of Nevada and Utah, and such states shall have issued certificates of
merger reflecting such filing.
2. If at any time the Surviving Corporation shall deem or be advised that
any further grants, assignments, confirmations, or assurances are necessary or
desirable to vest, perfect, or confirmable title in the Surviving Corporation,
of record or otherwise, to any property of Sierra or Western acquired or to be
acquired by or as a result of the merger, the officers and directors of Sierra
or Western or any of them shall be severally and fully authorized to execute
and deliver any and Ad such deeds, assignments, confirmations, and assurances
and to do all things necessary or proper so as to best prove, confirm, and
ratify title to such property in the Surviving Corporation and otherwise carry
out the purpose of the merger and the terms of this Plan.
3. For the convenience of the parties and to facilitate the filing and
recording of this Plan, any number of counterparts hereof may be executed, and
each such counterpart shall be deemed to be an
5
<PAGE> 17
original instrument and all such counterparts together shall be considered one
instrument.
4. This Plan shall be governed by and construed in accordance with the
applicable laws of the states of Nevada and Utah.
5. This Plan cannot be altered or amended except pursuant to an instrument
in writing signed on behalf of the parties hereto.
IN WITNESS WHEREOF, each Constituent Corporation has caused this Plan of
Merger to be executed, all as of the date first above written.
Sierra Growth Corporation
By /s/ L. Dee Hall
________________________
L. Dee Hall, President
Western Growth Corporation
By /s/ L. Dee Hall
________________________
L. Dee Hall, President
6
<PAGE> 18
AMENDMENT TO
ARTICLES OF INCORPORATION OF
SIERRA GROWTH CORPORATION
Pursuant to section of the Utah Revised Business Corporation Act, Sierra
Growth Corporation, a Utah corporation, hereinafter referred to as the
"Corporation", hereby adopts the following Amendment to its Articles of
Incorporation.
1. The Articles of Incorporation of the Corporation are hereby amended by
inserting the following new provision as Article IV-A:
ARTICLE IV-A-REVERSE STOCK SPLIT
At the effective time of this Amendment, the Corporation shall
effect a reverse split in its issued and outstanding shares of Common
Stock so that the 12,280,000 shares currently issued and outstanding
shall be reverse split, or consolidated, on a 1-for-10 basis, and
stockholders shall receive one share of the Corporation's post-split
Common Stock (hereinafter the "Consolidated Common Stock"), for each 10
shares of Common Stock $0.001 par value, held by them on the effective
date of the reverse split. No scrip or fractional shares will be issued
in connection with the reverse split and any fractional interests will be
rounded to the nearest whole share. The reverse split will not result in
any modification of the rights of shareholders, and will have no effect
on the shareholders' equity in the Corporation. All shares returned to
the Corporation as a result of the reverse split will be canceled and
returned to the status of authorized and unissued shares.
2. Except as specifically provided herein, the Corporation's Articles of
Incorporation shall remain unamended and shall continue in full force and
effect.
3. By execution of this Amendment to Articles of Incorporation, the
president of the Corporation certifies that the foregoing Amendment to Articles
of Incorporation of Sierra Growth Corporation, was duly authorized and adopted
by the shareholders of the Corporation at special meeting held December 17,
1993, at which a total of shares of the Corporation's 12,280,000 issued and
outstanding shares of common stock were represented in person or by proxy and
of which were voted in favor of this Amendment, shares, or were voted against
this Amendment, and shares, or abstained from voting.
<PAGE> 19
DATED the 17th day of December, 1993.
Sierra Growth Corporation
By /s/ L. Dee Hall
________________________
L. Dee Hall, President
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
On this ___ day of December, 1993, personally appeared before me L. Dee
Hall, who, being by me duly sworn, did say that he is the president of Sierra
Growth Corporation, a Utah corporation, that he is the person who executed the
foregoing Amendment to Articles of Incorporation on behalf of said corporation
by authority of its board of directors and shareholders, and he acknowledged to
me that said corporation executed the same.
____________________________
Notary Public
2
<PAGE> 20
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
WESTERN GROWTH CORPORATION
Pursuant to the provision of Article 78.390 of the Nevada Revised Status
Act, the undersigned corporation hereby adopts the following Articles of
Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Western Growth Corporation.
SECOND: The following amendment to the Articles of Incorporation of
Western Growth Corporation, was duly adopted by the shareholders of the
corporation at a meeting held September 12, 1995, in the manner prescribed by
the Laws of the State of Nevada Act, to Wit:
ARTICLE I-NAME
The name of the Corporation is CVF Corp.
THIRD: The number of shares of the corporation outstanding at the time of
the adoption of such amendments was 2,431,863 and the number entitled to vote
thereon was 2,431,863.
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows, to-wit:
Class Number of Shares
----- ----------------
Common 2,431,000
FIFTH: The number of shares voted for such amendments was 2,019,463, with
- - - - -0- opposing and -0- abstaining.
SIXTH: This amendment does not provide for any exchange, reclassification
or cancellation of issued shares.
SEVENTH: This amendment does not effect a change in the stated capital of
the corporation as set forth above.
IN WITNESS WHEREOF, the undersigned president and secretary, having been
thereunto duly authorized, has executed the foregoing Articles of Amendment for
the corporation this 12th day of September 1995.
WESTERN GROWTH CORPORATION
3
<PAGE> 21
By: /s/ L. Dee Hall
--------------------------------
L. Dee Hall, President/Secretary
4
<PAGE> 22
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
Subscribed and sworn to before me this 12th day of September 1995.
Notary Public
My Commission Expires:
Residing at: Salt Lake County
5
<PAGE> 23
CERTIFICATE OF DESIGNATION OF
VOTING POWERS, PREFERENCES, RIGHTS AND LIMITATIONS
OF
SERIES "A" PREFERRED STOCK
OF
CVF CORP.
Authority is expressly granted to the Board of Directors of CVF Corp. (the
"Company"), at any time and from time to time, to issue the preferred shares of
the Company in one or more series with such designations and characteristics as
determined by the Board of Directors. The President/Secretary of the Company
does hereby certify that, pursuant to authority conferred upon the Board of
Directors by the Company's Articles of Incorporation and pursuant to the
provisions of Section 78.195 of the Nevada Revised Statutes, the Company's
Board of Directors, pursuant to unanimous written consent in lieu of a meeting
dated August 10, 1995, duly adopted a resolution providing for the designation
of a series of preferred stock consisting of 25,000 shares of the Company's
preferred stock to be known as Series "A" Preferred Stock. Such resolution is
as follows:
RESOLVED, that pursuant to the authority expressly granted and invested in
the Board of Directors of this Company in accordance with the provisions of its
Articles of Incorporation, a series of preferred stock of the Company is hereby
given the distinctive designation of "Series "A" Preferred Stock." Said series
shall consist of 25,000 shares of the Company's par value $.001 per share
preferred stock. Each share of Series "A" Preferred Stock shall have a Stated
Value of the U.S. dollar equivalent of Cdn. $25.00 determined at the date of
issuance by reference to the noon spot rate for conversion of Canadian dollars
into U.S. dollars as published by the Bank of Canada on the business day
immediately preceding the date of issuance (the "Stated Value"). The Board of
Directors hereby designates the preferences and characteristics of the Series
"A" Preferred Stock as follows:
1. DIVIDENDS
1.1 The holders of the Series "A" Preferred Stock, in priority to the
holders of shares of Common Stock of any class of the Company and all other
shares ranking junior to the Series "A" Preferred Stock, shall be entitled to
receive and the Company shall pay thereon, as and when declared by the Board of
Directors of the Company out the assets of the Company properly applicable to
the payment of dividends, fixed preferential cumulative cash dividends at the
rate of 5% per annum on the Redemption Amount (as hereinafter defined) per
share. Such dividends shall be payable in semi-annual installments on the last
days of June and December in each year and shall accrue and be cumulative from
the date of issue. If on any dividend payment date the dividend payable on
such date is not paid in full on all the shares of Series "A" Preferred Stock
then issued and outstanding, such dividend, or the unpaid part thereof, shall
be paid at a subsequent date or dates in priority to dividends on any class of
Common Stock of the Company and any other shares ranking junior to the Series
"A" Preferred
<PAGE> 24
Stock. The holders of shares of Series "A" Preferred Stock shall not be
entitled to any dividends other than or in excess of the preferential
cumulative cash dividends hereinbefore provided.
1.2 Except with the consent in writing of the holders of all the shares
of Series "A" Preferred stock outstanding, no dividend shall at any time be
declared and paid on or set apart for payment on the Common Stock of any class
of the Company or on any other shares ranking junior to the Series "A"
Preferred Stock and the Company shall not call for redemption, purchase or
otherwise acquire for value less than all of the then outstanding Series "A"
Preferred Stock nor redeem, purchase or otherwise acquire for value any class
of Common Stock or any shares of any other class of the Company ranking junior
to the Series "A": Preferred Stock unless and until the accrued preferential
cumulative cash dividends on all the shares of Series "A" Preferred Stock
outstanding have been declared and paid or set apart for payment.
2. LIQUIDATION
2.1 In the event of the liquidation, dissolution or winding-up of the
Company or other distribution of assets of the Company among its shareholders
for the purpose of winding up its affairs, the holders of the shares of Series
"A" Preferred Stock shall be entitled to receive from the assets of the Company
a sum equivalent to the aggregate Redemption Amount (as hereinafter defined) of
all shares of Series "A" Preferred Stock held by them respectively before any
amount shall be paid or any assets of the Company distributed to the holders of
any shares of Common Stock of any class of the Company or shares of any other
class ranking junior to the Series "A" Preferred Stock. After payment to the
holders of the Series "A" Preferred Stock of the amount so payable to them as
above provided, they shall not be entitled to share in any further distribution
of the assets of the Company.
3. PURCHASE BY THE CORPORATION
3.1 Subject to applicable law, the Company may at any time or from time
to time, purchase (if obtainable) all or part of the outstanding shares of
Series "A" Preferred Stock at the lowest price at which, in the opinion of the
Board of Directors of the Company, such shares are obtainable, but not
exceeding the Redemption Amount calculated in the manner set out in the clause
4.1.
4. REDEMPTION BY THE CORPORATION
4.1 The Company may, upon giving notice as hereinafter provided, redeem
at any time the whole or from time to time any part of the then outstanding
shares of Series "A" Preferred Stock on payment of an amount for each share to
be redeemed equal to the U.S. dollar equivalent of Cdn. $25.00 determined at
the date of issuance by reference to the noon spot rate for conversion of
Canadian dollars into U.S. dollars as published by the Bank of Canada on the
business day immediately preceding the date of issuance, such amount being
herein referred to as the "Redemption Price", plus all unpaid dividends which
shall have accrued thereon and
2
<PAGE> 25
which shall be treated as accruing to, but not including, the date of such
redemption, the whole constitution and being herein referred to as the
"Redemption Amount".
4.2 In the case of redemption of shares of Series "A" Preferred Stock
under the provisions of clause 4.1 hereof, the Company shall at least 21 days
(or, if all of the holders of the shares of Series "A" Preferred Stock consent,
such shorter period to which they may consent) before the date specified for
redemption mail (or, with the consent of any particular holder, otherwise
deliver) to each person who at the date of mailing (or delivery, as the case
may be) is a holder of shares of Series "A" Preferred Stock to be redeemed, a
notice in writing of the intention of the Company to redeem such shares. Such
notice shall (subject to the consent of any particular holder referred to
above) be mailed by letter, postage prepaid, addressed to each such holder at
his address as it appears on the records of the Company or in the event of the
address of any such holder not so appearing, then to the last known address of
such holder; provided, however, that accidental failure to give any such notice
to one or more of such holders shall not affect the validity of such
redemption. Such notice shall set out the Redemption Amount and the date on
which redemption is to take place and if only part of the shares held by the
person to whom it is addressed is to be redeemed, the number thereof so to be
redeemed. On or after the date so specified for redemption, the Company shall
pay or cause to be paid to or to the order of the holders of the shares of
Series "A" Preferred Stock to be redeemed, the Redemption Amount thereof on
presentation and surrender at the registered office of the Company or any other
place designated in such notice of the certificates representing the shares of
Series "A" Preferred Stock called for redemption. Such payment shall be made
by check payable at par at any branch of the Company's banks in the United
States (or, with the consent of any particular holder, by any other means of
immediately available funds). If only part of the shares represented by any
certificate are redeemed, a new certificate for the balance shall be issued at
the expense of the Company. From and after the date specified for redemption
in any such notice, the holders of the shares of Series "A" Preferred Stock
called for redemption shall cease to be entitled to dividends and shall not be
entitled to exercise any of the rights of holders of shares of Series "A"
Preferred Stock in respect thereof unless payment of the Redemption Amount is
not made upon presentation of certificates in accordance with the foregoing
provisions, in which case the rights of the holders of the said shares of
Series "A" Preferred Stock shall remain unaffected.
The Company shall have the right, at any time after the mailing (or
delivery, as the case may be) of notice of its intention to redeem any shares
of Series "A" Preferred Stock, to deposit the Redemption Amount of the shares
so called for redemption, or of such of the said shares represented by
certificates as have not at the date of such deposit been surrendered by the
holders thereof in connection with such redemption, to a special account in any
chartered bank or in any trust company in Canada, named in such notice, to be
paid without interest to, or to the order of, the respective holders of such
shares of Series "A" Preferred Stock called for redemption upon presentation
and surrender to such bank or trust company of the certificates representing
the same, and upon such deposit being made or upon the date specified for
redemption in such notice, whichever is the later, the shares of Series "A"
Preferred Stock in respect whereof such deposit shall have been made, shall be
redeemed and the rights of the
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holders thereof after such deposit or such redemption date, as the case may be,
shall be limited to receiving without interest their proportionate part of the
total Redemption Amount so deposited against presentation and surrender of the
said certificates held by them respectively and any interest allowed on such
deposit shall belong to the Company.
5. REDEMPTION AT THE OPTION OF THE HOLDERS
5.1 At any time after five (5) years from the date of issuance of the
Series "A" Preferred Stock, a holder of such shares shall be entitled to
require the Company to redeem, subject to the requirements of applicable law,
all or any of the shares of Series "A" Preferred Stock held by such holder by
tendering to the Company at its registered office a share certificate or
certificates representing the shares of Series "A" Preferred Stock which the
holder desires to have the Company redeem together with a request in writing
specifying (i) that the holder desires to have the shares of Series "A"
Preferred Stock represented by such certificate or certificates redeemed by the
Company and, if only part of the shares represented by such certificate or
certificates is to be redeemed, the number thereof so to be redeemed and (ii)
the business day (herein referred to as the "Redemption Date") on which the
holder desires to have the Company redeem such shares of Series "A" Preferred
Stock. The Redemption Date shall be not less then 30 days (or such shorter
period to which the Company may consent after the day on which the request in
writing is given to the Company. Upon receipt of a share certificate or
certificates representing the shares of Series "A" Preferred Stock which the
holder desires to have the Company redeem together with such a request, the
Company shall, on the Redemption Date, redeem such shares by paying to such
holder the Redemption Amount (as defined above) for each such share of Series
"A" Preferred Stock being redeemed. Such payment shall be made by check
payable at par at any branch of the Company's banks (or, with the consent of
the holder, by any other means of immediately available funds). If only part
of the shares represented by any certificate are redeemed, a new certificate
for the balance shall be issued at the expense of the Company. The said shares
of Series "A" Preferred Stock shall be redeemed on the Redemption Date and from
and after the Redemption Date, the holder of such shares shall cease to be
entitled to dividends and shall not be entitled to exercise any of the rights
of a holder of shares of Series "A" Preferred Stock in respect thereof unless
payment of the Redemption Amount is not made on the Redemption Date, in which
event the right of the holder of said shares of Series "A" Preferred Stock
shall remain unaffected.
6. VOTING RIGHTS
6.1 Except as provided by law, the holders of Series "A" Preferred Stock
shall have no voting rights.
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IN WITNESS WHEREOF, this Certificate has been executed by its President
and Secretary as of the 12th day of September, 1995.
CVF Corp.
By: /s/ L. Dee Hall
----------------------
L. Dee Hall
President/Secretary
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STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
The foregoing instrument was acknowledged before me this 12th day of
September, 1995, by L. Dee Hall, President/Secretary of CVF Corp., a Nevada
corporation, on behalf of the Company.
__________________________
Notary Public
State of Utah
My Commission Expires:
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<PAGE> 1
EXHIBIT 2.2
BYLAWS
OF
WESTERN GROWTH CORPORATION
ARTICLE I
OFFICES
Section 1.01 Registered Office. The registered office shall be fixed and
located at the offices of The Nevada Agency and Trust Company, Suite 880,
Valley Bank Plaza, 50 West Liberty Street, Reno, Nevada 89501. The board of
directors may change the location of such principal office from one location to
another location in the State of Nevada.
Section 1.02 Locations of Offices. The corporation may also have offices
at such other places both within and without the state of Nevada as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
SHAREHOLDERS
Section 2.01 Annual Meeting. The annual meeting of the stockholders shall
be held at such time and at such date between 90 and 180 days after the end of
the corporation's fiscal year as the board of directors may designate and
provide for in the notice of the meeting. If the election of directors shall
not be held on the day designated herein for the annual meeting of the
stockholders, or at any adjournment thereof, the board of directors shall cause
the election to be held at a special meeting of the stockholders as soon
thereafter as may be convenient.
Section 2.02 Special Meetings. Special meetings of the stockholders may
be called at any time by the board of directors or by one or more shareholders
holding not less than 10% of the voting power of the corporation.
Section 2.03 Place of Meeting. The board of directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual meeting or for any special meeting called by the board
of directors. A waiver of notice signed by all stockholders entitled to vote
at a meeting may designate any place, either within or without the state of
incorporation, as the place for the holding of such meeting. If no designation
is made, the place of meeting shall be at the principal office of the
corporation.
Section 2.04 Notice of Meetings. The secretary or assistant secretary,
if any, shall cause notice of the time, place, and purpose or purposes of all
meetings of the stockholders (whether annual or special), to be mailed at least
ten days, but not more than 50 days, prior to the meeting, to each stockholder
of record entitled to vote.
Section 2.05 Waiver of Notice. Any stockholder may waive notice of any
meeting of stockholders (however called or noticed, whether or not called or
noticed and whether before, during, or after the meeting), signing a written
waiver of notice or a consent to the holding of such meeting, or an approval of
the minutes thereof. Attendance at a meeting, in person or by proxy, shall
constitute waiver of all defects of notice regardless of whether waiver,
consent, or approval is signed or any objections are made, unless attendance is
solely for the purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. All such waivers, consents, or approvals shall be made a part of the
minutes of the meeting.
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Section 2.06 Fixing Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or stockholder entitled to receive payment of any dividend
or other distribution or allotment of any rights or entitled to exercise any
rights in respect to any change, conversion, or exchange of stock, or for the
purpose of any other lawful action, the board of directors may fix in advance a
date as the record date for any such determination of stockholders, such date
in any case to be not more than 50 days and, in case of a meeting of
stockholders, not less than 10 days prior to the date on which the particular
action requiring such determination of stockholders is to be taken. If no
record date is fixed for the determination of stockholders entitled to notice
of or to vote at a meeting, the day preceding the date on which notice of the
meeting is mailed shall be the record date. For any other purpose, the record
date shall be the close of business on the date on which the resolution of the
board of directors pertaining thereto is adopted. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof. Failure to comply with this section shall not affect the validity of
any action taken at a meeting of stockholders.
Section 2.07 Voting Lists. The officers of the corporation shall cause
to be prepared from the stock ledger, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The original stock ledger shall
be prima facie evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by this section, or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 2.08 Quorum. Stock representing a majority of the voting power
of all outstanding stock of the corporation entitled to vote, present in person
or represented by proxy, shall constitute a quorum at a meeting of the
stockholders for the transaction of business, except as otherwise provided by
statute or by the articles of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.
Section 2.09 Vote Required. When a quorum is present at a meeting, the
vote of the holders of stock having a majority of the voting power present in
person or represented by proxy shall decide all questions brought before such
meeting, unless a question is one on which, by express provision of the
statutes of the state of Nevada or of the articles of incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 2.10 Voting of Stock. Unless otherwise provided in the articles
of incorporation, each stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of the voting
capital stock held by such stockholder, subject to the modification of such
voting rights of any class or classes of the corporation's capital stock by the
articles of incorporation.
Section 2.11 Proxies. At each meeting of the stockholders, each
stockholder entitled to vote shall be entitled to vote in person or by proxy;
provided, however, that the right to vote by proxy shall exist only in case the
instrument authorizing such proxy to act shall have been executed in writing by
the registered holder or holders
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of such stock, as the case may be, as shown on the stock ledger of the
corporation or by his attorney thereunto duly authorized in writing. Such
instrument authorizing a proxy to act shall be delivered at the beginning of
such meeting to the secretary of the corporation or to such other officer or
person who may, in the absence of the secretary, be acting as secretary of the
meeting. In the event that any such instrument shall designate two or more
persons to act as proxy, a majority of such persons present at the meeting, or
if only one be present, that one shall (unless the instrument shall otherwise
provide) have all of the powers conferred by the instrument on all persons so
designated. Persons holding stock in a fiduciary capacity shall be entitled to
vote the stock so held and the persons whose shares are pledged shall be
entitled to vote, unless the transfer by the pledgor in the books and records
of the corporation shall have expressly empowered the pledgee to vote thereon,
in which case the pledgee, or his proxy, may represent such stock and vote
thereon. No proxy shall be voted or acted on after 6 months from its date,
unless it is coupled with an interest or the proxy provides for a longer
period, which may not exceed 7 years from the date of the proxy.
Section 2.12 Written Consent to Action by Stockholders. Unless otherwise
provided in the articles of incorporation, any action required to be taken at
any annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may
be taken without a meeting, without prior notice, and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of a majority of the outstanding stock entitled to vote with respect to
the subject matter thereof.
ARTICLE III
DIRECTORS
Section 3.01 Number, Term, and Qualifications. The number of directors
which shall constitute the whole board shall be not less than one nor more than
nine. Within the limits above specified, the number of directors shall be
determined by resolution of the board of directors or by the stockholders at
the annual meeting of the stockholders or a special meeting called for such
purpose, except as provided in section 3.02 of this article, and each director
elected shall hold office until his successor is elected and qualified.
Directors need not be residents of the state of incorporation or stockholders
of the corporation.
Section 3.02 Vacancies and Newly Created Directorships. Vacancies and
newly created directorships resulting from any increase in the number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
Section 3.03 General Powers. The business of the corporation shall be
managed under the direction of its board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are
not by statute, by the articles of incorporation, or by these bylaws, directed
or required to be exercised or done by the stockholders.
Section 3.04 Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately
following, and at the same place as, the annual meeting of stockholders. The
board of directors may provide by resolution the time and place, either within
or without the state of incorporation, for the holding of additional regular
meetings without other notice than such resolution.
Section 3.05 Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman of the board,
president, vice president, or any two directors. The person or persons
authorized to call special meetings of the board of directors may fix any
place, either within or without the state of incorporation, as the place for
holding any special meeting of the board of directors called by them.
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Section 3.06 Meetings by Telephone Conference Call. Members of the board
of directors may participate in a meeting of the board of directors or a
committee of the board of directors by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
Section 3.07 Notice. Notice of any special meeting shall be given at
least five days prior thereto by written notice delivered personally or mailed
to each director at his regular business address or residence, or by telegram.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may waive notice
of any meeting. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
solely for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 3.08 Quorum. The presence of a majority of the directors shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, but if less than a majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
Section 3.09 Manner of Acting. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, and individual directors shall have no power as such.
Section 3.10 Compensation. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors, and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 3.11 Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting, unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof, or shall forward such dissent by
registered or certified mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
Section 3.12 Resignations. A director may resign at any time by
delivering a written resignation to either the president, a vice president, the
secretary, or assistant secretary, if any. The resignation shall become
effective on its acceptance by the board of directors; provided, that if the
board has not acted thereon within ten days from the date presented, the
resignation shall be deemed accepted.
Section 3.13 Written Consent to Action by Directors. Any action required
to be taken at a meeting of the directors of the corporation or any other
action which may be taken at a meeting of the directors or of a committee, may
be taken without a meeting, if a consent in writing, setting forth the action
so taken, shall be signed by all of the directors, or all of the members of the
committee, as the case may be. Such consent shall have the same legal effect
as a unanimous vote of all the directors or members of the committee.
Section 3.14 Removal. Any director may be removed from office by the
vote of stockholders representing not less than two-thirds of the voting power
of issued and outstanding stock entitled to voting power.
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ARTICLE IV
OFFICERS
Section 4.01 Number. The officers of the corporation shall be a
president, a secretary, a treasurer, and such other officers as may be
appointed by the board of directors, including, a chairman of the board, one or
more vice presidents, an assistant secretary, or an assistant treasurer.
Section 4.02 Election, Term of Office, and Qualifications. The officers
shall be chosen by the board of directors annually at its annual meeting. In
the event of failure to choose officers at an annual meeting of the board of
directors, officers may be chosen at any regular or special meeting of the
board of directors. Each such officer (whether chosen at an annual meeting of
the board of directors to fill a vacancy or otherwise) shall hold his office
until the next ensuing annual meeting of the board of directors and until his
successor shall have been chosen and qualified, or until his death, or until
his resignation or removal in the manner provided in these bylaws. Any one
person may hold any two or more of such offices, except the president shall not
also be the secretary. No person holding two or more offices shall act in or
execute any instrument in the capacity of more than one office. The chairman
of the board, if any, shall be and remain director of the corporation during
the term of his office. No other officer need be a director.
Section 4.03 Subordinate Officers, Etc. The board of directors from time
to time may appoint such other officers or agents as it may deem advisable,
each of whom shall have such title, hold office for such period, have such
authority, and perform such duties as the board of directors from time to time
may determine. The board of directors from time to time may delegate to any
officer or agent the power to appoint any such subordinate officer or agents
and to prescribe their respective titles, terms of office, authorities, and
duties. Subordinate officers need not be stockholders or directors.
Section 4.04 Resignations. Any officer may resign at any time by
delivering a written resignation to the board of directors, the president, or
the secretary. Unless otherwise specified therein, such resignation shall
taken effect on delivery.
Section 4.05 Removal. Any officer may be removed from office at any
special meeting of the board of directors called for that purpose or at a
regular meeting, by the vote of a majority of the directors, with or without
cause. Any officer or agent appointed in accordance with the provisions of
section 4.03 hereof may also be removed, either with or without cause, by any
officer on whom such power of removal shall have been conferred by the board of
directors.
Section 4.06 Vacancies and Newly Created Offices. If any vacancy shall
occur in any office by reason of death, resignation removal, disqualification,
or any other cause, or if a new office shall be created, then such vacancies or
newly created offices may be filled by the board of directors at any regular or
special meeting.
Section 4.07 The Chairman of the Board. The chairman of the board, if
there be such an officer, shall have the following powers and duties:
(a) He or she shall preside at all stockholders' meetings;
(b) He or she shall preside at all meetings of the board of
directors; and
(c) He or she shall be a member of the executive committee, if any.
Section 4.08 The President. The president shall have the following
powers and duties:
(a) He shall be the chief executive officer of the corporation, and,
subject to the direction
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of the board of directors, shall have general charge of the business,
affairs, and property of the corporation and general supervision over its
officers, employees, and agents;
(b) If no chairman of the board has been chosen, or if such officer
is absent or disabled, he shall preside at meetings of the stockholders
and board of directors;
(c) He or she shall be a member of the executive committee, if any;
(d) He or she shall be empowered to sign certificates representing
stock of the corporation, the issuance of which shall have been
authorized by the board of directors; and
(e) He or she shall have all power and shall perform all duties
normally incident to the office of a president of a corporation, and
shall exercise such other powers and perform such other duties as from
time to time may be assigned to him by the board of directors.
Section 4.09 The Vice Presidents. The board of directors may, from time
to time, designate and elect one or more vice presidents, one of whom may be
designated to serve as executive vice president. Each vice president shall have
such powers and perform such duties as from time to time may be assigned to him
by the board of directors or the president. At the request of or in the
absence or disability of the president, the executive vice president or, in the
absence or disability of the executive vice president, the vice president
designated by the board of directors or (in the absence of such designation by
the board of directors) by the president, the senior vice president, shall
perform all the duties of the president, and when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the president.
Section 4.10 The Secretary. The secretary shall have the following
powers and duties:
(a) He or she shall keep or cause to be kept a record of all of the
proceedings of the meetings of the stockholders and of the board of
directors in books provided for that purpose;
(b) He or she shall cause all notices to be duly given in accordance
with the provisions of these bylaws and as required by statute;
(c) He or she shall be the custodian of the records and of the seal
of the corporation, and shall cause such seal (or a facsimile thereof) to
be affixed to all certificates representing stock of the corporation
prior to the issuance thereof and to all instruments, the execution of
which on behalf of the corporation under its seal shall have been duly
authorized in accordance with these bylaws, and when so affixed, he may
attest the same;
(d) He or she shall assume that the books, reports, statements,
certificates, and other documents and records required by statute are
properly kept and filed;
(e) He or she shall have charge of the stock ledger and books of the
corporation and cause such books to be kept in such manner as to show at
any time the amount of the stock of the corporation of each class issued
and outstanding, the manner in which and the time when such stock was
paid for, the names alphabetically arranged and the addresses of the
holders of record thereof, the amount of stock held by each holder and
time when each became such holder of record; and he shall exhibit at all
reasonable times to any director, on application, the original or
duplicate stock ledger. He or she shall cause the stock ledger referred
to in section 6.04 hereof to be kept and exhibited at the principal
office of the corporation, or at such other place as the board of
directors shall determine, in the manner and for the purpose provided in
such section;
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(f) He or she shall be empowered to sign certificates representing
stock of the corporation, the issuance of which shall have been
authorized by the board of directors; and
(g) He or she shall perform in general all duties incident to the
office of secretary and such other duties as are given to him by these
bylaws or as from time to time may be assigned to him by the board of
directors or the president.
Section 4.11 The Treasurer. The treasurer shall have the following
powers and duties:
(a) He or she shall have charge and supervision over and be
responsible for the monies, securities, receipts, and disbursements of
the corporation;
(b) He or she shall cause the monies and other valuable effects of
the corporation to be deposited in the name and to the credit of the
corporation in such banks or trust companies or with such banks or other
depositories as shall be selected in accordance with section 5.03 hereof;
(c) He or she shall cause the monies of the corporation to be
disbursed by checks or drafts (signed as provided in section 5.04 hereof)
drawn on the authorized depositories of the corporation, and cause to be
taken and preserved property vouchers for all monies disbursed;
(d) He or she shall render to the board of directors or the
president, whenever requested, a statement of the financial condition of
the corporation and of all of his transactions as treasurer, and render a
full financial report at the annual meeting of the stockholders, if
called upon to do so;
(e) He or she shall cause to be kept correct books of account of all
the business and transactions of the corporation and exhibit such books
to any directors on request during business hours;
(f) He or she shall be empowered from time to time to require from
all officers or agents of the corporation reports or statements giving
such information as he may desire with respect to any and all financial
transactions of the corporation; and
(g) He or she shall perform in general all duties incident to the
office of treasurer and such other duties as are given to him by these
bylaws or as from time to time may be assigned to him by the board of
directors or the president.
Section 4.12 Salaries. The salaries and other compensation of the
officers of the corporation shall be fixed from time to time by the board of
directors, except that the board of directors may delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
section 4.03 hereof. No officer shall be prevented from receiving any such
salary or compensation by reason of the fact that he is also a director of the
corporation.
Section 4.13 Surety Bonds. In case the board of directors shall so
require, any officer or agent of the corporation shall execute to the
corporation a bond in such sums and with such surety or sureties as the board
of directors may direct, conditioned on the faithful performance of his duties
to the corporation, including responsibility for negligence and for the
accounting of all property, monies, or securities of the corporation which may
come into his hands.
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ARTICLE V
EXECUTION OF INSTRUMENTS, BORROWING OF MONEY,
AND DEPOSIT OF CORPORATE FUNDS
Section 5.01 Execution of Instruments. Subject to any limitation
contained in the articles of incorporation or these bylaws, the president or
any vice president, if any, may, in the name and on behalf of the corporation,
execute and deliver any contract or other instrument authorized in writing by
the board of directors. The board of directors may, subject to any limitation
contained in the articles of incorporation or in these bylaws, authorize in
writing any officer to execute and deliver any contract or other instrument in
the name and on behalf of the corporation. Any such authorization may be
general or confined to specific instances.
Section 5.02 Loans. No loan or advance shall be contracted on behalf of
the corporation, no negotiable paper or other evidence of its obligation under
any loan or advance shall be issued in its name, and no property of the
corporation shall be mortgaged, pledged, hypothecated, transferred, or conveyed
as security for the payment of any loan, advance, indebtedness, or liability of
the corporation, unless and except as authorized by the board of directors.
Any such authorization may be general or confined to specific instances.
Section 5.03 Deposits. All monies of the corporation not otherwise
employed shall be deposited from time to time to its credit in such banks or
trust companies or with such bankers or other depositories as the board of
directors may select, or as from time to time may be selected by any officer or
agent authorized to do so by the board of directors.
Section 5.04 Checks, Drafts, Etc. All notes, drafts, acceptances,
checks, endorsements, and, subject to the provisions of these bylaws, evidences
of indebtedness of the corporation, shall be signed by such officer or officers
or such agent or agents of the corporation and in such manner as the board of
directors from time to time may determine. Endorsements for deposit to the
credit of the corporation in any of its duly authorized depositories shall be
in such manner as the board of directors from time to time may determine.
Section 5.05 Bonds and Debentures. Every bond or debenture issued by the
corporation shall be evidenced by an appropriate instrument which shall be
signed by the president or a vice president and by the secretary and sealed
with the seal of the corporation. The seal may be a facsimile, engraved or
printed. Where such bond or debenture is authenticated with the manual
signature of an authorized officer of the corporation or other trustee
designated by the indenture of trust or other agreement under which such
security is issued, the signature of any of the corporation's officers named
thereon may be a facsimile. In case any officer who signed, or whose facsimile
signature has been used on any such bond or debenture, should cease to be an
officer of the corporation for any reason before the same has been delivered by
the corporation, such bond or debenture may nevertheless be adopted by the
corporation and issued and delivered as through the person who signed it or
whose facsimile signature has been used thereon had not ceased to be such
officer.
Section 5.06 Sale, Transfer, Etc. of Securities. Sales, transfers,
endorsements, and assignments of stocks, bonds, and other securities owned by
or standing in the name of the corporation, and the execution and delivery on
behalf of the corporation of any and all instruments in writing incident to any
such sale, transfer, endorsement, or assignment, shall be assignment, shall be
effected by the president, or by any vice president, together with the
secretary, or by any officer or agent thereunto authorized by the board of
directors.
Section 5.07 Proxies. Proxies to vote with respect to stock of other
corporations owned by or standing in the name of the corporation shall be
executed and delivered on behalf of the corporation by the president or any
vice president and the secretary or assistant secretary of the corporation, or
by any officer or agent thereunder authorized by the board of directors.
8
<PAGE> 9
ARTICLE VI
CAPITAL SHARES
Section 6.01 Stock Certificates. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by the president or
any vice president and the secretary or assistant secretary, and sealed with
the seal (which may be a facsimile, engraved or printed) of the corporation,
certifying the number and kind, class or series of stock owned by him in the
corporation; provided, however, that where such a certificate is countersigned
by (a) a transfer agent or an assistant transfer agent, or (b) registered by a
registrar, the signature of any such president, vice president, secretary, or
assistant secretary may be a facsimile. In case any officer who shall have
signed, or whose facsimile signature or signature shall have been used on any
such certificate, shall cease to be such officer of the corporation, for any
reason, before the delivery of such certificate by the corporation, such
certificate may nevertheless be adopted by the corporation and be issued and
delivered as though the person who signed it, or whose facsimile signature or
signatures shall have been used thereon, has not ceased to be such officer.
Certificates representing stock of the corporation shall be in such form as
provided by the statutes of the state of incorporation. There shall be entered
on the stock books of the corporation at the time of issuance of each share,
the number of the certificate issued, the name and address of the person owing
the stock represented thereby, the number and kind, class or series of such
stock, and the date of issuance thereof. Every certificate exchanged or
returned to the corporation shall be marked "Canceled" with the date of
cancellation.
Section 6.02 Transfer of Stock. Transfers of stock of the corporation
shall be made on the books of the corporation by the holder of record thereof,
or by his attorney thereunto duly authorized by a power of attorney duly
executed in writing and filed with the secretary of the corporation or any of
its transfer agents, and on surrender of the certificate or certificates,
properly endorsed or accompanied by proper instruments of transfer,
representing such stock. Except as provided by law, the corporation and
transfer agents and registrars, if any, shall be entitled to treat the holder
of record of any stock as the absolute owner thereof for all purposes, and
accordingly shall not be bound to recognize any legal, equitable, or other
claim to or interest in such stock on the part of any other person whether or
not it or they shall have express or other notice thereof.
Section 6.03 Regulations. Subject to the provisions of the articles of
incorporation, the board of directors may make such rules and regulations as
they may deem expedient concerning the issuance, transfer, redemption, and
registration of certificates for stock of the corporation.
Section 6.04 Maintenance of Stock Ledger at Principal Place of Business.
A stock ledger (or ledgers where more than one kind, class, or series of stock
is outstanding) shall be kept at the principal place of business of the
corporation, or at such other place as the board of directors shall determine,
containing the names, alphabetically arranged, of original stockholders of the
corporation, their addresses, their interest, the amount paid on their shares,
and all transfers thereof and the number and class of stock held by each. Such
stock ledgers shall at all reasonable hours be subject to inspection by persons
entitled by law to inspect the same.
Section 6.05 Transfer Agents and Registrars. The board of directors may
appoint one or more transfer agents and one or more registrars with respect to
the certificates representing stock of the corporation, and may require all
such certificates to bear the signature of either or both. The board of
directors may from time to time define the respective duties of such transfer
agents and registrars. No certificate for stock shall be valid until
countersigned by a transfer agent, if at the date appearing thereon the
corporation had a transfer agent for such stock, and until registered by a
registrar, if at such date the corporation had a registrar for such stock.
Section 6.06 Closing of Transfer Books and Fixing of Record Date.
(a) The board of directors shall have power to close the stock
ledgers of the corporation for a period of not to exceed 50 days
preceding the date of any meeting of stockholders, of the date for
payment of any dividend, or the date for the allotment of rights, or
capital stock shall go into effect, or
9
<PAGE> 10
a date in connection with obtaining the consent of stockholders for any
purpose.
(b) In lieu of closing the stock ledgers as aforesaid, the board of
directors may fix in advance a date, not exceeding 50 days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining any such consent, as a record date
for the determination of the stockholders entitled to a notice of, and to
vote at, any such meeting and any adjournment thereof, or entitled to
receive payment of such dividend or to any such allotment of rights, or
to exercise the rights in respect of any such change, conversion or
exchange of capital stock, or to give such consent.
(c) If the stock ledgers shall be closed or a record date set for
the purpose of determining stockholders entitled to notice of or to vote
at a meeting of stockholders, such books shall be closed for, or such
record date shall be, at least ten days immediately preceding such
meeting.
Section 6.07 Lost or Destroyed Certificates. The corporation may issue a
new certificate for stock of the corporation in place of any certificate
theretofore issued by it, alleged to have been lost or destroyed, and the board
of directors may, in its discretion, require the owner of the lost or destroyed
certificate or his legal representatives, to give the corporation a bond in
such form and amount as the board of directors may direct, and with such surety
or sureties as may be satisfactory to the board, to indemnify the corporation
and its transfer agents and registrars, if any, against any claims that may be
made against it or any such transfer agent or registrar on account of the
issuance of such new certificate. A new certificate may be issued without
requiring any bond when, in the judgment of the board of directors, it is
proper to do so.
ARTICLE VII
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 7.01 How Constituted. The board of directors may designate an
executive committee and such other committees as the board of directors may
deem appropriate, each of which committees shall consist of one or more
directors. Members of the executive committee and of any other committee shall
be designated annually at the annual meeting of the board of directors;
provided, however, that at any time the board of directors may abolish or
reconstitute the executive committee or any other committee. Each member of
the executive committee and of any other committee shall hold office until his
successor shall have been designated or until his resignation or removal in the
manner provided in these bylaws.
Section 7.02 Powers. During the intervals between meetings of the board
of directors, the executive committee shall have and may exercise all powers of
the board of directors in the management of the business and affairs of the
corporation, except for the power to fill vacancies in the board of directors
or to amend these bylaws, and except for such powers as by law may not be
delegated by the board of directors to an executive committee.
Section 7.03 Proceedings. The executive committee, and such other
committees as may be designated hereunder by the board of directors, may fix
its own presiding and recording officer or officers, and may meet at such place
or places, at such time or times and on such notice (or without notice) as it
shall determine from time to time. It will keep a record of its proceedings
and shall report such proceedings to the board of directors at the meeting of
the board of directors next following.
Section 7.04 Quorum and Manner of Acting. At all meetings of the
executive committee, and of such other committees as may be designated
hereunder by the board of directors, the presence of members constituting a
majority of the total authorized membership of the committee shall be necessary
and sufficient to constitute a quorum for the transaction of business, and the
act of a majority of the members present at any meeting at which
10
<PAGE> 11
a quorum is present shall be the act of such committee. The members of the
executive committee, and of such other committees as may be designated
hereunder by the board of directors, shall act only as a committee and the
individual members thereof shall have no powers as such.
Section 7.05 Resignations. Any member of the executive committee, and of
such other committees as may be designated hereunder by the board of directors,
may resign at any time by delivering a written resignation to either the
president, the secretary, or assistant secretary, or to the presiding officer
for the committee of which he is a member, if any shall have been appointed and
shall be in office. Unless otherwise specified therein, such resignation shall
take effect on delivery.
Section 7.06 Removal. The board of directors may at any time remove any
member of the executive committee or of any other committee designated by it
hereunder either with or without cause.
Section 7.07 Vacancies. If any vacancy should occur in the executive
committee or of any other committee designated by the board of directors
hereunder, by reason of disqualification, death, resignation, removal, or
otherwise, the remaining members shall, until the filling of such vacancy,
constitute the then total authorized membership of the committee and continue
to act, unless such committee consisted of more than one member prior to the
vacancy or vacancies and is left with only one member as a result thereof.
Such vacancy may be filled at any meeting of the board of directors.
Section 7.08 Compensation. The board of directors may allow a fixed sum
and expenses of attendance to any member of the executive committee, or of any
other committee designated by it hereunder, who is not an active salaried
employee of the corporation for attendance at each meeting of the said
committee.
ARTICLE VIII
INDEMNIFICATION, INSURANCE, AND
OFFICER AND DIRECTOR CONTRACTS
Section 8.01 Indemnification: Third Party Actions. The corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or preceding, whether
civil, criminal, administrative, or investigative, except an action by or in
the right of the corporation, by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses, including attorneys' fees, judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action, suit, or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or on a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
Section 8.02 Indemnification: Corporate Actions. The corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee, or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust,
or other enterprise, against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement and attorneys' fees actually and reasonably incurred by
him in connection with the defense or settlement of the action or suit, if he
acted in good faith and in a manner he reasonably believed
11
<PAGE> 12
to be in or not opposed to the best interest of the corporation.
Indemnification may not be made for any claim, issue, or matter as to which
such a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such expenses as the court deems proper.
Section 8.03 Determination. To the extent that a director, officer,
employee, or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in sections
8.01 and 8.02 hereof, or in defence of any claim, issue, or matter therein, he
must be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense. Any indemnification
under sections 8.01 or 8.02, unless ordered by a court, shall be made by the
corporation only as authorized in the specific case on a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in sections 8.01 or 8.02. The determination shall be made: (a) by the
stockholders; (b) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to the act, suit, or proceeding;
(c) if a majority vote of a quorum consisting of directors who were not parties
to the act, suit or proceeding so orders, by independent legal counsel in a
written opinion; or (d) if a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 8.04 Advances. Expenses incurred by officers and directors in
defending a civil or criminal action, suit, or proceeding shall be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit, or proceeding upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by
the corporation. The provisions of this section do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
Section 8.05 Scope of Indemnification. The indemnification and
advancement of expenses authorized in or ordered by the corporation pursuant to
sections 8.01, 8.02, 8.04:
(a) does not, exclude any other rights to which a person seeking
indemnification or advancement of expenses, including corporate personnel
other than directors or officers, may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise for either an action in his
official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant
to section 8.02 or for the advancement of expenses made pursuant to
section 8.04, may not be made to or on behalf of any director or officer
if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was
material to the cause of action; and
(b) continues for a person who has ceased to be a director, officer,
employee, or agent and inures to the benefit of the heirs, executors, and
administrators of such a person.
Section 8.06 Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, officer, employee, or agent, or arising out
of his status as such, whether or not the corporation has the authority to
indemnify him against such liability and expenses.
Section 8.07 Officer and Director Contracts. No contract or other
transaction between the corporation and any other firm or corporation shall be
affected by the fact that a director or officer of the corporation has an
interest in, or is a director or officer of the corporation or any such other
corporation. Any officer or director, individually or with other, may be a
party to, or may have an interest in, any transaction of the corporation or any
12
<PAGE> 13
transaction in which the corporation is a party or has an interest. Each
person who is now or may become an officer or director of the corporation is
hereby relieved from liability that he might otherwise obtain in the event such
officer or director contracts with the corporation for the benefit of himself
or any firm or other corporation in which he may have an interest; provided,
such officer or director acts in good faith.
ARTICLE IX
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
ARTICLE X
DIVIDENDS
The board of directors may from time to time declare, and the corporation
may pay, dividends on its outstanding stock in the manner and on the terms and
conditions provided by the certificate of incorporation and by the laws.
ARTICLE XI
AMENDMENTS
All bylaws of the corporation, whether adopted by the board of directors
or the stockholders, shall be subject to amendment, alteration, or repeal, and
new bylaws may be made, except that no bylaw adopted or amended by the
stockholders shall be altered or repealed by the board of directors.
[THE SPACE LEFT BLANK INTENTIONALLY]
13
<PAGE> 14
CERTIFICATE OF SECRETARY
The undersigned does hereby certify that he/she is the secretary of
Western Growth Corporation, a corporation duly organized and existing under and
by virtue of the laws of the state of Nevada; that the above and foregoing
bylaws of said corporation were duly and regularly adopted as such by the board
of directors of said corporation by unanimous consent dated December 22, 1993,
and that the above and foregoing bylaws are now in full force and effect and
supersede and replace any prior bylaws of the corporation.
DATED this 22nd day of December, 1993.
Western Growth Corporation
By: /s/ L. Dee Hall
---------------------------
L. Dee Hall, Secretary
14
<PAGE> 1
EXHIBIT 3.1
INCORPORATED UNDER THE LAWS OF
NUMBER NEVADA SHARES
CVF CORP.
COMMON STOCK
This certifies that is the owner of
shares of $.001 Par Value each of the Capital Stock of
CVF Corp.
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal
of the Corporation
this day of AD 19
/s/ L. Dee Hall
--------------------------
L. Dee Hall, President
SHARES EACH
$.001
Par Value
CERTIFICATE
NUMBER
For Shares
Issued to
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
Dated 19
FROM WHOM TRANSFERRED
- - - - --------------------------------------------------------------------------------
Dated 19
<TABLE>
<S> <C> <C>
NO. ORIGINAL NO. ORIGINAL NO. OF SHARES
CERTIFICATE SHARES TRANSFERRED
Received CERTIFICATE NO.
For Shares
this day of 19
</TABLE>
<PAGE> 2
CERTIFICATE
FOR
SHARES
OF THE
CAPITAL STOCK
ISSUED TO
DATED
For Value Received, hereby sell, assign and transfer
unto
Shares
of the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
to transfer the said Stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated 19
In presence of
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 3.2
INCORPORATED UNDER THE LAWS OF
NUMBER NEVADA SHARES
CVF CORP.
Series A Preferred Stock
This certifies that is the owner of
shares of $.001 Par Value each of the Capital Stock of
CVF Corp.
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal
of the Corporation
this day of AD 19
/s/ L. Dee Hall
--------------------------
L. Dee Hall, President
SHARES EACH
$.001
Par Value
CERTIFICATE
NUMBER
For Shares
Issued to
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
Dated 19
FROM WHOM TRANSFERRED
- - - - --------------------------------------------------------------------------------
Dated 19
<TABLE>
<S> <C> <C>
NO. ORIGINAL NO. ORIGINAL NO. OF SHARES
CERTIFICATE SHARES TRANSFERRED
Received CERTIFICATE NO.
For Shares
this day of 19
</TABLE>
<PAGE> 2
CERTIFICATE
FOR
SHARES
OF THE
CAPITAL STOCK
ISSUED TO
DATED
For Value Received, hereby sell, assign and transfer
unto
Shares
of the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
to transfer the said Stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated 19
In presence of
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 3.3
CVF Corp.
Common Share Purchase Warrant
No. W-1 September 20, 1995
CVF Corp., a Nevada corporation (the "Company"), for value received,
hereby certifies that Canadian Venture Founders I, Limited Partnership
("CVFLP"), is entitled to purchase from the Company 952,784 duly authorized,
validly issued, fully paid and nonassessable common shares, par value $.001 per
share (the "Common Shares") of the Company at the purchase price per share set
forth in section 2.2 hereof, at any time or from time to time prior to 5:00
P.M., New York City time, on September 20, 2000, all subject to the terms and
conditions set forth below in this Warrant.
This Warrant was originally issued as part of the consideration paid by
the Company to Canadian Venture Founders I Limited Partnership ("CVFLP") under
the Asset Purchase Agreement (the "Asset Purchase Agreement"), dated August 20,
1995, between the Company, CVFLP and L. Dee Hall. The Warrants originally so
issued evidence rights to purchase a maximum of 15.9% of the number of Common
Shares outstanding immediately after the closing of the transactions
contemplated by the Asset Purchase Agreement.
1. Exercise of Warrant.
1.1. Manner of Exercise. For a period of five years from the date of
issuance (the "Initial Exercise Period") the Warrant may be exercised by the
holder hereof, in the amount set forth in section 1.4(a) hereof, and for a
period of six months after the end of the Initial Exercise Period, in the
amount set forth in section 1.4(b) hereof. Such exercises may be during normal
business hours on any business day, by surrender of this Warrant to the Company
at its principal office, accompanied by a subscription in substantially the
form attached to this Warrant duly executed by such holder and accompanied by
payment, in cash, by certified or official bank check payable to the order of
the Company in the amount calculated as set forth in section 2.2 hereof.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to the Company
as provided in section 1.1, and at such time the person or persons in whose
name or names any certificate or certificates for Common Shares shall be
issuable upon such exercise as provided in section 1.3 shall be deemed to have
become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
each exercise of this Warrant, in whole or in part, and in any event within
five business days thereafter, the Company at its expense will cause to be
issued in the name of and delivered to the holder hereof or,
<PAGE> 2
subject to section 4, as such holder (upon payment by such holder of any
applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable Common Shares
to which such holder shall be entitled upon such exercise, and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces
thereof for the number of Common Shares equal (without giving effect to
any adjustment thereof) to the number of such shares called for on the
face of this Warrant minus the number of such shares designated by the
holder upon such exercise as provided in section 1.1.
1.4. Common Shares Issuable Upon Exercise of Warrants. The number of
Common Shares which the holder of this Warrant shall be entitled to receive
upon each exercise hereof shall be determined as follows:
(a) if, within the Initial Exercise Period, a former Limited
Partner of CVFLP (as listed on Schedule A hereto) sells any number of
Common Shares, Warrants entitling the holder to acquire one-fifth of
such number of Common Shares may be exercised any time during the
Exercise Period; and
(b) at the end of the Initial Exercise Period the balance of the
Warrants may be exercised within the following six months.
1.5. Exercise Price. The exercise price of the Warrants shall be $3.05.
In the event that the Company shall at any time subdivide or change the
outstanding number of Common Shares, the Exercise Price and the number of
Common Shares issuable upon exercise of the Warrant shall be proportionately
adjusted.
2. No Impairment. The Company will not, by amendment of its articles of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant
against impairment. Without limiting the generality of the foregoing, the
Company will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of stock on the exercise of the Warrants from time to time outstanding.
3. Registration of Common Stock. If any Common Shares required to be
reserved for purposes of exercise of this Warrant require registration with or
approval of any governmental authority under any federal or state law (other
than the Securities Act) before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. At any such time as Common Shares are listed on any national securities
exchange, the Company will, at its expense, obtain promptly and maintain the
approval for listing on each such exchange, upon official notice of
2
<PAGE> 3
issuance, the Common Shares issuable upon exercise of the then outstanding
Warrants and maintain the listing of such shares after their issuance.
4. Restrictions on Transfer.
4.1. Restrictive Legends. Except as otherwise permitted by this section
4, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and may not be
transferred, sold or otherwise disposed of except while a
registration under the Securities Act is in effect or pursuant
to an exemption therefrom under the Securities Act. This
Warrant and such shares may be transferred only in compliance
with the conditions specified in this Warrant."
Except as otherwise permitted by this section 4, each certificate for Common
Shares issued upon the exercise of any Warrant, and each certificate issued
upon the transfer of any such Common Shares, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be transferred in the absence of
such registration or an exemption therefrom. Such shares may be
transferred only in compliance with the conditions specified in
certain Common Share Purchase Warrants issued by Western Growth
Corporation, dated September 20, 1995. A complete and correct
copy of the form of such Warrant is available for inspection at
the principal office of the Company and will be furnished to the
holder of such shares upon written request and without charge."
4.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
transfer of any securities bearing either of the legends set forth in Section
4.1 (the "Restricted Securities"), the holder thereof will give written notice
to the Company of such holder's intention to effect such transfer and to comply
in all other respects with this section 4.2. Each such notice (a) shall
describe the manner and circumstances of the proposed transfer in sufficient
detail to enable counsel to render the opinions referred to below, and (b)
shall designate counsel for the holder giving such notice (who may be in-house
counsel for such holder). The holder giving such notice will submit a copy
thereof to the counsel designated in such notice and the Company will promptly
submit a copy thereof to its counsel. The following provisions shall then
apply:
(i) If (A) in the opinion of such counsel for the holder
the proposed transfer may be effected without registration of
such Restricted Securities under the Securities Act, and (B)
counsel for the Company shall not have rendered an opinion within
15 days after the receipt by the Company of such written notice
that such registration is required, such holder shall thereupon
be entitled to transfer such securities in accordance with the
terms of the notice delivered by such holder to the Company.
Each warrant or certificate, if any, representing such securities
issued upon or in connection with such transfer shall bear the
appropriate restrictive legend required by section 4.1, unless in
the opinion of each such counsel such legend is no longer
required to insure compliance with the Securities Act. If for
any reason
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<PAGE> 4
counsel for the Company (after having been furnished with the
information required to be furnished by clause (a) of this
section 4.2) shall fail to deliver an opinion to the Company as
aforesaid, then for all purposes of this Warrant the opinion of
counsel for the Company shall be deemed to be the same as the
opinion of counsel for such holders.
(ii) If in the opinion of either of or both such counsel
the proposed transfer may not legally be effected without
registration of such Restricted Securities under the Securities
Act (such opinion or opinions to state the basis of the legal
conclusions reached therein), the Company will promptly so notify
the holder thereof and thereafter such holder shall not be
entitled to transfer such Restricted Securities until either (x)
receipt by the Company of a further notice from such holder
pursuant to the foregoing provisions of this section 4.2 and
fulfillment of the provisions of clause (i) above or (y) such
shares have been effectively registered under the Securities Act.
Notwithstanding the foregoing provisions of this section 4.2(ii), CVFLP shall
be permitted to transfer any Restricted Securities to a limited number of
institutional investors, provided that (A) each such investor represents in
writing that it is acquiring such Restricted Securities for investment and not
with a view to the distribution thereof (subject, however, to any requirement
of law that the disposition thereof shall at all times be within the control of
such transferee), (B) each such investor agrees in writing to be bound by all
the restrictions on transfer of such Restricted Securities contained in this
section 4.2 and (C) CVFLP delivers to the Company an opinion of counsel
satisfactory to the Company, stating that such transfer may be effected without
registration under the Securities Act. Each party shall pay its own reasonable
fees and disbursements of counsel in connection with all opinions rendered by
them pursuant to this section 4.2 and pursuant to section 4.3.
4.3. Termination of Restrictions. The restrictions imposed by this
section 4 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act, or (b) when,
in the opinions of both counsel for the holder thereof and counsel for the
Company, such restrictions are no longer required in order to insure compliance
with the Securities Act. Whenever such restrictions shall cease and terminate
as to any Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense (other than applicable transfer
taxes, if any), new securities of like tenor not bearing the applicable legends
required by section 4.1.
5. Reservation of Shares, etc. The Company will at all times reserve and
keep available, solely for issuance and delivery upon exercise of the Warrants,
the number of Common Shares from time to time issuable upon exercise of all
Warrants at the time outstanding. All Common Shares issuable upon exercise of
any Warrants shall be duly authorized and, when issued upon such exercise,
shall be validly issued and, in the case of shares, fully paid and
nonassessable with no liability on the part of the holders thereof.
6. Registration and Transfer of Warrants, etc.
6.1. Warrant Register; Ownership of Warrants. The Company will keep at
its principal office a register in which the Company will provide for the
registration of Warrants and the registration of transfers of Warrants. The
Company may treat the person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
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<PAGE> 5
be affected by any notice to the contrary, except that, if and when any Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer thereof as the owner of such Warrant for all purposes.
Subject to section 4, a Warrant, if properly assigned, may be exercised by a
new holder without a new Warrant first having been issued.
6.2. Transfer and Exchange of Warrants. Upon surrender of any Warrant
for registration of transfer or for exchange to the Company at its principal
office, the Company at its expense will (subject to compliance with section 4,
if applicable) execute and deliver in exchange therefor a new Warrant or
Warrants of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of Common Shares
called for on the face or faces of the Warrant or Warrants so surrendered.
6.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Warrant and, in the case of any such loss, theft or destruction of any
Warrant, upon delivery of an indemnity bond in such reasonable amount as the
Company may determine or, in the case of any such mutilation, upon the
surrender of such Warrant for cancellation to the Company at its principal
office, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
7. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
8. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
9. Notices. All notices and other communications under this Warrant
shall be in writing and shall be delivered, or mailed by registered or
certified mail, return receipt requested, by a nationally recognized overnight
courier, postage prepaid, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its principal office, provided that the exercise of any
Warrant shall be effective in the manner provided in section 1.
10. Amendments. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
11. Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
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<PAGE> 6
12. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
CVF Corp.
/s/ L. Dee Hall
---------------------
By: L. Dee Hall
Title: President
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<PAGE> 7
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To [NAME OF ISSUER]
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ______ Common Shares of
[NAME OF ISSUER] and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: __________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
Warrant)
__________________________________________
(Street Address)
__________________________________________
(City)(State)(Zip Code)
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<PAGE> 8
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right represented
by such Warrant to purchase Common Shares of [NAME OF ISSUER] to which
such Warrant relates, and appoints Attorney to make such
transfer on the books of [NAME OF ISSUER] maintained for such purpose, with
full power of substitution in the premises.
Dated: __________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
Warrant)
__________________________________________
(Street Address)
__________________________________________
(City)(State)(Zip Code)
Signed in the presence of:
_______________________________________
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<PAGE> 9
____________________________________________________________________
CVF Corp.
Common Share Purchase Warrant
Dated as of September 20, 1995
____________________________________________________________________
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A
REGISTRATION UNDER THE SECURITIES ACT IS IN EFFECT OR PURSUANT TO AN EXEMPTION
THEREFROM UNDER THE SECURITIES ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT.
<PAGE> 1
EXHIBIT 6.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 20th day of August, 1995, by and between Canadian Venture Founders I
Limited Partnership, a partnership governed under the laws of Ontario
("CVFLP"), Western Growth Corporation, a Nevada corporation ("Western"), and L.
Dee Hall (the "Principal").
WHEREAS, Western is a corporation whose shares are quoted on the National
Association of Securities Dealers' (the "NASD") OTC Bulletin Board (the
"Bulletin Board");
WHEREAS, CVFLP is a partnership whose assets consist primarily of the
securities of other corporations; and
WHEREAS, CVFLP desires to transfer, and Western desires to acquire, all of
the assets of CVFLP, upon the terms and subject to conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Transfer and Acquisition of Assets.
1.1. Transferred Assets. Upon the terms and subject to the conditions
contained in this Agreement, and for the consideration set forth in Section
1.3, CVFLP will, at the Closing (as defined in Section 1.4), transfer to
Western all of CVFLP's right, title and interest in and to the following assets
and rights (the "Transferred Assets"):
(a) Securities. Each of the securities of Biorem Biological Remediation
and Waste Treatment Corporation, Dantec Systems Corporation, Ecoval
Technologies Inc., Solaria Research Enterprises Ltd., Terra Care International
Corporation, Omphalos Recovery Systems Inc., Canadian Venture Founders Leasing
Corporation and Cryptech Systems Inc. (the "CVFLP-Owned Entities") bene-
<PAGE> 2
ficially owned by CVFLP including, without limitation, all of the common shares
and convertible debentures set forth on Schedule 3.3 hereto (the "CVFLP-Owned
Securities").
(b) Cash and Cash Equivalents. All of CVFLP's accounts receivable, notes
receivable, cash-on-hand, prepaid expenses and deposits, deposits in bank
accounts and marketable securities other than the CVFLP-Owned Securities.
1.2. Assumption of Liabilities. Upon the transfer of the Transferred
Assets on the Closing Date in accordance with this Agreement, Western shall
assume all liabilities and obligations of CVFLP.
1.3. Consideration. Upon the terms and subject to the conditions
contained herein and in consideration of, and in full payment for, the
aforesaid acquisition of the Transferred Assets, at the Closing, Western shall
issue, transfer and deliver or cause to be delivered to CVFLP, 9,527,835 shares
of Western's common stock, par value $0.001 (the "Western Common Stock"),
25,000 shares of Western's preferred stock, par value $.001 (the "Western
Preferred Stock and 1,905,567 restricted warrants (the "Warrants") to purchase
Western Common Stock (collectively, the "Western Securities"). Immediately
after the Closing, CVFLP will own 79.5% of the issued and outstanding shares of
Western Common Stock, 100% of the issued and outstanding shares of Western
Preferred Stock, and 100% of the issued and outstanding Warrants. The Western
Securities will not be registered under the Securities Act of 1933, as amended
(the "Securities Act") and may not be offered or sold in the United States or
to U.S. Persons (as that term is defined in Regulation S under the Securities
Act), unless an exemption from the registration requirements of the Securities
Act is available.
1.4. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall occur at such time and place as may be agreed
upon by the parties. The time and date of the Closing is sometimes referred to
herein as the "Closing Date."
2. Representations, Warranties and Agreements of Western and the
Principal. Western and the Principal jointly and severally represent and
warrant to and agree with CVFLP as follows:
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<PAGE> 3
2.1. Corporate Organization. Western is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has the corporate power and authority to own or lease its properties and to
carry on its business as it is presently being conducted. Western is duly
qualified or licensed to do business as a foreign corporation in good standing
in all the jurisdictions in which the conduct of its business requires such
qualification, except where the failure to be so duly qualified or licensed
would not have material adverse effect on the business, operations or financial
condition of Western. Western does not own, directly or indirectly, any
capital stock of any corporation or have any direct or indirect equity or
ownership interest of any kind in any business, joint venture, partnership or
other entity. The copies of the Certificate of Incorporation and Bylaws of
Western heretofore delivered to CVFLP are complete and correct copies of such
instruments as presently in effect.
2.2. Authorization. Western has the full corporate power and authority
to execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by Western pursuant hereto (the
"Additional Western Documents") and to consummate the transactions contemplated
hereby and thereby (other than the approval of the transactions contemplated by
this Agreement by a majority of the outstanding shares of Western Common Stock
pursuant to Nevada law). The execution and delivery of this Agreement and the
Additional Western Documents and the consummation of the transactions
contemplated hereby and thereby have been validly authorized by Western's Board
of Directors and no other corporate proceedings on the part of Western are
necessary to authorize this Agreement or the Additional Western Documents or to
consummate the transactions contemplated hereby or thereby (other than
shareholder approval as described in the first sentence of this Section 2.2).
The Principal has the requisite power, capacity and authority to enter into
this Agreement and the Additional Western Documents and to consummate the
transactions contemplated hereby and thereby. This Agreement and the
Additional Western Documents have been duly and validly executed and delivered
by Western and the Principal and assuming that this Agreement and the
Additional CVFLP Documents have been duly and validly executed and delivered by
CVFLP, constitute legal, valid and binding obligations of Western and the
Principal enforceable against each of them in accordance with their respective
terms.
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<PAGE> 4
2.3. Capitalization. The authorized capital stock of Western consists of
50,500,000 shares, of which 500,000 are shares of Western Preferred Stock and
50,000,000 are shares of Western Common Stock, of which 2,456,863 shares of
Western Common Stock are issued and outstanding and no shares of Western
Preferred Stock are issued and outstanding. All issued and outstanding shares
of Western Common Stock are validly issued, fully paid and nonassessable and
have been issued in compliance with all applicable state and federal securities
laws and free of any preemptive rights or other similar restrictions with
respect thereto. Other than the Warrants to be issued to CVFLP, there are no
securities outstanding which are convertible into or exercisable or
exchangeable for shares of capital stock of Western and there are no
outstanding options, rights, contracts, warrants, subscriptions, conversion
rights or other agreements or commitments pursuant to which Western may be
required to purchase, redeem, issue or sell any shares of capital stock or
other securities of Western or in any way relating to the issuance or voting of
any capital stock or other securities of Western.
2.4. Authorization and Issuance of Western Securities. The issuance of
the Western Securities contemplated by this Agreement has been duly authorized
by Western and, upon delivery by CVFLP to Western of the Transferred Assets,
the Western Securities will be validly issued, fully paid and nonassessable,
free and clear of all Liens (as defined in Section 2.5) and restrictions.
2.5. Consents and Approvals; Non-Contravention. Neither the execution,
delivery or performance of this Agreement or of any of the Additional Western
Documents, nor the consummation by Western of the transactions contemplated
hereby or thereby, nor compliance by Western with any of the provisions hereof
or thereof will (a) violate any provision of Western's Certificate of
Incorporation or Bylaws, (b) require any filing with, or permit, authorization,
consent or approval of, any court, arbitral tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"), (c) require any consent, approval or authorization
under any contract, agreement, lease or other instrument or obligation, (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Western or any of its respective properties or assets or (e)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or
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<PAGE> 5
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or any loss of a material benefit) under, or
result in the creation or imposition of (or the obligation to create or impose)
any mortgage, pledge, security interest, encumbrance, lien, claim or charge of
any kind or right of others of whatever nature (a "Lien") upon any of the
respective properties or assets of Western under, any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which Western is a party or by which Western or any of its
respective properties or assets may be bound.
2.6. Western Financial Statements. The audited balance sheets of Western
at June 30, 1995, December 31, 1994, 1993 and 1992, the statements of
operations for four months ended April 30, 1995, and the years ended December
31, 1994, 1993 and 1992, the statement of stockholders' equity from January 2,
1986 through April 30, 1995 and the statement of cash flows for the four months
ended April 30, 1995, and the years ended December 31, 1994, 1993 and 1992,
heretofore delivered to CVFLP (collectively, the "Western Financial
Statements"), fairly present the financial condition of Western as of the dates
and for the periods indicated and, except as disclosed in Section 2.6 of the
Disclosure Schedule, have been prepared in accordance with generally accepted
accounting principles as historically and consistently applied.
2.7. Interim Change. Since December 31, 1994, Western has been operating
only in, and has not engaged in any material transaction other than in the
ordinary course of business and consistent with past practice and has not,
since December 31, 1994, incurred any expense, accrued or otherwise, in excess
of $500.00, other than expenses incurred in connection with the negotiation of
this Agreement and the transactions contemplated hereby (the "Western
Transaction Expenses") which may not, without the prior written consent of
CVFLP, exceed $15,000.
2.8. No Undisclosed Liabilities. Except as and to the extent of the
amounts specifically reflected or reserved against in the Western Financial
Statements, and other than current liabilities which were incurred, and
obligations under agreements, commitments or contracts entered into, in the
ordinary course of business and consistent with past practice and not in excess
of $500.00, Western has no liabilities or obligations of any
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<PAGE> 6
nature (whether absolute or accrued, known or unknown, contingent or otherwise
and whether due or to become due) other than the Western Transaction Expenses.
2.9. Litigation. There is no claim, action, suit, inquiry, proceeding or
investigation pending or, to the best knowledge of Western and the Principal,
threatened against or involving Western or affecting any of the respective
properties or assets of Western, or which in any manner seeks injunctive or
other non-monetary relief or seeks to prevent, enjoin, alter or delay any
transaction contemplated hereby, nor is there any basis for any such claim,
action, suit, inquiry, proceeding or investigation. Western is not subject to
any order, writ, injunction or decree.
2.10. No Violation. Western is not in breach or violation of, or in
default under (and no event has occurred which with notice or lapse of time or
both would constitute such a breach, violation or default), any term, condition
or provision of (a) its Articles of Incorporation or By-Laws, (b) any order,
writ, decree, statute, rule or regulation applicable to Western or any of its
respective properties or assets or (c) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
Western is a party or by which Western or any of its respective properties or
assets may be bound. Western has, and is in compliance with, all such
licenses, permits, variances, exemptions, orders, approvals and other
authorizations of all Governmental Entities as are necessary in order to enable
it to own and conduct its business as currently conducted and as proposed to be
conducted and to enter into the transactions contemplated hereby, the lack of
which, under applicable law, rule or regulation, (x) would render legally
impermissible the transactions contemplated by this Agreement or which might
result in a material limitation of the benefits expected to be derived by CVFLP
as a result of the transactions contemplated hereby or (y) might have a
material adverse effect on the business, operations, prospects, properties,
assets (including intangible assets), liabilities (including contingent
liabilities), financial condition or results of operations of Western or CVFLP
or any of its subsidiaries or affiliates (a "Material Adverse Effect").
2.11. Title to Assets. Western has good and marketable title, free and
clear of all Liens (other than Liens for current taxes not yet due), to all of
the
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<PAGE> 7
assets, real property, interest in real property, rights, franchises,
copyrights, trademarks, trade names, licenses and properties tangible or
intangible, real or personal, wherever located which are used in the conduct of
the business conducted by Western (the "Assets"), other than property that is
leased or licensed. Western has valid and enforceable leases or licenses, as
the case may be, with respect to the Assets consisting of property that is
leased or licensed, under which there exists no default, event of default or
event which, with notice or lapse of time or both, would constitute a default.
2.12. Contracts and Commitments.
(a) Schedule 2.13(a) sets forth a complete and accurate list of all of the
following contracts and agreements (whether written or oral) of Western (such
contracts and agreements set forth in Schedule 2.13(b) being "Material
Contracts"):
(i) credit agreements, notes, indentures, security agreements,
pledges, guarantees of or agreements to acquire any such debt obligation
of others or similar documents relating to indebtedness for borrowed
money to which Western is a party or by which any of its assets are
bound, restricted or encumbered;
(ii) all employment, consulting, severance or termination
agreements;
(iii) all agreements, or group of related agreements with the same
party or any group of affiliated parties, under which Western has or has
agreed to lease any property as lessee or lessor; and
(iv) all deeds, title documents, title reports or similar
documents related to any real property owned by Western.
(b) Except as set forth in Schedule 2.13(b):
(i) Western has no outstanding contract with respect to the
employment of any officer, individual, employee, director, agent,
consultant, advisor, salesperson, representative or other person (whether
of a legally binding nature or in the nature of informal understandings)
on a full-time, part-time, contract or consulting basis which is not
terminable
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<PAGE> 8
by Western on notice without cost or other liability to Western;
(ii) Western has no pension, profit-sharing, bonus, severance pay,
retirement, hospitalization, insurance, stock purchase, stock option or
other benefit plan, arrangement, understanding or agreement with or for
the benefit of any Person (a "Benefit Plan") or any other employment or
consulting agreement that contains any severance or termination pay,
liability or obligation;
(iii) Western has no Benefit Plan applicable to employees
generally;
(iv) Western has no employee to whom it is paying a salary;
(v) Western is not restricted by any agreement from carrying on
its business in any material respect anywhere in the world;
(vi) Western does not have any outstanding loan to any individual,
corporation, partnership, trust, or other entity or group (a "Person");
(vii) Western does not have any power of attorney outstanding or
any obligation or liability (whether absolute, accrued, contingent or
otherwise), as surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any Person;
(viii) there exists no voting trust, stockholders' agreement,
pledge agreement or buy-sell agreement relating to any securities of
Western which is or will be in effect as of the Closing;
(ix) Western does not have any agreement or obligation
(contingent or otherwise) to issue or sell or to repurchase or otherwise
acquire or retire any shares of its capital stock or any of its other
equity securities; and
(x) Western does not have any other contract which is material
to its business, operations or prospects or any other contract,
instrument, commitment, plan or arrangement, a copy of which would be
required to be filed with the SEC as an exhibit to a
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<PAGE> 9
registration statement on Form S-1, if Western were registering
securities under the Securities Act on such form.
(c) Each Material Contract: (i) is, to the best knowledge of Western and
the Principal, valid and binding on the other party or parties thereto and is
in full force and effect and (ii) upon consummation of the transactions
contemplated by this Agreement, shall continue in full force and effect without
penalty or other adverse consequence. Neither Western nor, to the best
knowledge of Western and the Principal, any other party to any Material
Contract or any contract or agreement referenced in this Section 2.13 is in
breach of, or default under, such Material Contract or such other contract or
agreement, respectively.
2.14. Access to CVFLP Information. Western hereby represents that (a) it
has been furnished by CVFLP during the course of this transaction with all
information regarding CVFLP and the CVFLP-Owned Entities which it has
requested, (b) all documents that have been reasonably requested by Western
have been made available for Western's or its counsel's inspection and review,
(c) it has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of CVFLP
concerning the terms and conditions of the transfer of the Transferred Assets
to it by CVFLP, as consideration for its transfer of the Western Securities to
CVFLP, and (d) any other additional information which it has requested has been
provided. Western hereby agrees and acknowledges that the terms of this
Agreement represent the definitive terms of its acquisition of the Transferred
Assets and shall supersede any terms set forth in any memorandum, document or
term sheet and any discussion, agreement or understanding of any and every
nature among the parties hereto.
2.15. Environmental Matters. Since its inception, Western has not (a)
engaged in any activities regulated by federal, state or local environmental
laws, (b) disposed of any materials other than ordinary office trash and
sanitary garbage or (c) used, generated, manufactured or stored any Hazardous
Materials. For the purposes of this Agreement, "Hazardous Materials" shall
mean any hazardous or toxic substance, material or waste which is or becomes
prior to the Closing regulated under, or defined as a "hazardous substance,"
"pollutant," "contaminant," "toxic chemical," "hazardous material," "toxic
substance" or "hazardous chemical" under (i) the
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<PAGE> 10
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended; (ii) any similar federal, state or local law; or (iii) regulations
promulgated under any of the above laws or statutes.
2.16. Taxes.
(a) All returns, declarations, reports, estimates, information returns,
and statements (collectively, "Tax Returns") required to be filed by Western
for all periods ending on or before the Closing Date have been (or will be)
timely filed, and all such Tax Returns are true, correct and complete. Western
is not required to file any state Tax Returns other than in the State of
Nevada.
(b) Western has timely paid all Taxes due or claimed to be due by it to
any federal, state, local or foreign taxing authority in respect to periods (or
any portion thereof) ending on or before the Closing Date.
(c) There are no liens for Taxes upon the assets of Western except liens
for Taxes not yet due and payable.
(d) No deficiency for any Taxes has been proposed, asserted or assessed
against Western which has not been resolved and paid in full. There are no
outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax Returns that have been
given by Western.
(e) No audit or other proceeding by any federal, state, local or foreign
court, governmental, regulatory, administrative or similar authority are
presently pending with respect to any Taxes or Tax Return of Western.
(f) Western is not a party to, is not bound by nor has any obligation
under, any Tax sharing agreement or similar contract or arrangement. No power
of attorney has been granted by Western with respect to any matter relating to
taxes which is currently in force.
(g) For purposes of this Agreement, "Taxes" (including, with correlative
meaning, the term "Tax") shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem,
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<PAGE> 11
transfer, franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupation, property or other taxes, customs
duties, fees, assessments or charges of any kind whatsoever, together with any
interest, penalties, additions to tax or other additional amounts imposed with
respect thereto, imposed by any taxing authority (domestic or foreign).
2.17. Brokers, Dealers and Market Makers. The complete list of Western's
market makers is set forth on Schedule 2.17 to this Agreement. To the best
knowledge of Western and the Principal, none of the brokers, dealers or market
makers for the Western Common Stock have been or are currently subject to any
NASD disciplinary proceedings. The corporate information statement, dated
March 8, 1994, which was delivered to each of Western's brokers, dealers and
market makers pursuant to Section 15c2-11 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), was when filed and continues to be true
and correct in all material respects.
2.18. No Trading Suspension Orders. No trading suspension order has been
issued by the Securities and Exchange Commission (the "SEC") pursuant to
Section 12(k) of the Securities Act with respect to the Western Common Stock,
nor has any public release been issued by the SEC announcing any such trading
suspension order, and to the best knowledge of Western and the Principal, no
such order is contemplated by the SEC.
2.19. Not an Investment Company. Western is not an open-end investment
company or unit investment trust registered or required to be registered or a
closed-end investment company required to be registered, but not registered,
under the Investment Company Act of 1940, as amended.
2.20. Number of Western Shareholders. As of July 18, 1995, the number of
shareholders "of record" as defined in Rule 12g5-1 under the Exchange Act was
425.
2.21. Material Information. No representation or warranty set forth in
this Section 2, to the best knowledge of Western and the Principal, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained therein not misleading.
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3. Representations and Warranties of CVFLP. CVFLP hereby represents and
warrants to Western as follows:
3.1. Organization. CVFLP is a limited partnership formed under the
Limited Partnerships Act (Ontario) and has the power and authority to own or
lease its properties and to carry on its business as it is presently being
conducted.
3.2. Authorization. The general partner of CVFLP has been duly
authorized for and on behalf of CVFLP to execute and deliver this Agreement and
the other agreements, documents and instruments to be executed and delivered by
CVFLP pursuant hereto (the "Additional CVFLP Documents") and no other
proceedings on the part of CVFLP are necessary to authorize this Agreement or
the Additional CVFLP Documents or the consummation of the transactions
contemplated hereby. This Agreement and the Additional CVFLP Documents have
been executed and delivered by the general partner of CVFLP for and on behalf
of CVFLP and, assuming that this Agreement and the Additional Western Documents
have been duly and validly executed and delivered by Western and the Principal,
constitute legal, valid and binding obligations of CVFLP, enforceable against
CVFLP in accordance with their respective terms.
3.3. Capitalization. The authorized and issued capital stock of each of
the CVFLP-Owned Entities is as set forth on Schedule 3.3 to this Agreement.
3.4. Ownership of Shares. CVFLP has good and valid title to each of the
CVFLP-Owned Securities. No person or entity other than CVFLP has any power or
right, whether or not shared with any other person or entity, to dispose of or
direct the disposition of any CVFLP-Owned Securities or vote or direct the
voting of any CVFLP-Owned Securities. CVFLP owns the CVFLP-Owned Securities
free and clear from all Liens.
3.5. Corporate Organization of CVFLP-Owned Entities. Each of the
CVFLP-Owned Entities is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction and has the
corporate power and authority to own or lease its properties and to carry on
its business as it is presently being conducted.
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3.6 Personal Property. CVFLP does not own or lease any personal
property.
3.7. Consents and Approvals; Non-Contravention. Neither the execution,
delivery or performance of this Agreement or any of the Additional CVFLP
Documents by CVFLP, nor the consummation by CVFLP of the transactions
contemplated hereby or thereby nor compliance by CVFLP with any of the
provisions hereof or thereof will (a) violate any provision of the Amended and
Restated Limited Partnership Agreement of CVFLP, (b) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to CVFLP or any of
its properties or assets or (c) violate the Limited Partnerships Act (Ontario).
3.8 CVFLP Financial Statements. The audited balance sheets of CVFLP at
December 31, 1994, 1993 and 1992, the audited statements of operations for the
years ended December 31, 1994, 1993 and 1992, heretofore delivered to Western
(collectively, the "CVFLP Financial Statements"), fairly present the financial
condition of CVFLP as of the dates and for the periods indicated and have been
prepared in accordance with generally accepted accounting principles as
historically and consistently applied.
3.9 Interim Change. Since December 31, 1994, CVFLP has been operating only
in, and has not engaged in any material transaction other than in the ordinary
course of business and consistent with past practice.
3.10. Litigation. There is no claim, action, suit, inquiry, proceeding
or investigation pending or, to best knowledge of CVFLP, threatened against or
involving CVFLP which, if adversely determined, would either individually or in
the aggregate, have a Material Adverse Effect, or which in any manner seeks
injunctive or other non-monetary relief or seeks to prevent, enjoin, alter or
delay any transaction contemplated hereby, nor is there any basis for any such
claim, action, suit, inquiry, proceeding or investigation. CVFLP is not
subject to any order, writ, injunction or decree which, individually or in the
aggregate, has or in the future would have a Material Adverse Effect on the
ability of CVFLP to consummate the transactions contemplated hereby.
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<PAGE> 14
3.11. No Violation. To the best knowledge of CVFLP, CVFLP is not in
breach or violation of, or in default under (and no event has occurred which
with notice or lapse of time or both would constitute such a breach, violation
or default), any term, condition or provision of (a) its Amended and Restated
Limited Partnership Agreement, (b) any order, writ, decree, statute, rule or
regulation applicable to CVFLP or any of its respective properties or assets or
(c) any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which CVFLP is a party of by which CVFLP or
any of its respective properties or assets may be bound, which breaches,
violations or defaults, individually or in the aggregate, could have a Material
Adverse Effect. CVFLP has, and is in compliance with, all such licenses,
permits, variances, exemptions, orders, approvals and other authorizations of
all Governmental Entities as are necessary in order to enable it to own and
conduct its business as currently conducted and as proposed to be conducted and
to enter into the transactions contemplated hereby, the lack of which, under
applicable law, rule or regulation, (x) would render legally impermissible the
transactions contemplated by this Agreement or which might result in a material
limitation of the benefits expected to be derived by Western as a result of the
transactions contemplated hereby or (y) might have a Material Adverse Effect.
3.12. CVFLP Not a U.S. Person. Neither CVFLP nor any of its general or
limited partners is a U.S. Person (as that term is defined in Regulation S
under the Securities Act) and none of them is acquiring the Western Securities
for the account or benefit of any U.S. Person.
3.13. Access to Western Information. CVFLP hereby represents that (a) it
has been furnished by Western during the course of this transaction with all
information regarding Western which it has requested, (b) all documents that
have been reasonably requested by CVFLP have been made available for CVFLP's or
its counsel's inspection and review, (c) it has been afforded the opportunity to
ask questions of and receive answers from duly authorized officers or other
representatives of Western concerning the terms and conditions of the transfer
of the Transferred Assets to Western by it, as consideration for Western's
transfer of the Western Securities to CVFLP, and (d) any other additional
information which it has requested has been provided. CVFLP hereby agrees and
acknowledges that the terms of this Agreement
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<PAGE> 15
represent the definitive terms of Western's acquisition of the Transferred
Assets and shall supersede any terms set forth in any memorandum, document or
term sheet and any discussion, agreement or understanding of any and every
nature among the parties hereto.
3.14. Taxes.
(a) All returns, declarations, reports, estimates, information returns,
and statements (collectively, the "CVFLP Tax Returns") required to be filed by
CVFLP for all periods ending on or before the Closing Date have been (or will
be) timely filed, and all such CVFLP Tax Returns are true, correct and
complete.
(b) CVFLP has timely paid all Taxes due or claimed to be due by it to any
federal, provincial, local or foreign taxing authority in respect to periods
(or any portion thereof) ending on or before the Closing Date.
(c) There are no liens for Taxes upon the assets of CVFLP except liens
for Taxes not yet due and payable.
(d) No deficiency for any Taxes has been proposed, asserted or assessed
against CVFLP which has not been resolved and paid in full. There are no
outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax Returns that have been
given by CVFLP.
(e) No audit or other proceeding by any federal, provincial, local or
foreign court, governmental, regulatory, administrative or similar authority
are presently pending with respect to any Taxes or Tax Return of CVFLP.
(f) CVFLP is not a party to, is not bound by nor has any obligation
under, any Tax sharing agreement or similar contract or arrangement. No power
of attorney has been granted by CVFLP with respect to any matter relating to
taxes which is currently in force.
3.15. Material Information. No representation or warranty set forth in
this Section 3, to the best knowledge of CVFLP, contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained therein not misleading.
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4. Covenants of Western and CVFLP. Western and CVFLP agree to comply
with their respective covenants below:
4.1. Conduct of the Business of Western Prior to the Closing Date.
(a) Western covenants and agrees with CVFLP that between the date hereof
and the Closing Date, unless CVFLP shall otherwise agree in writing (which
agreement shall not be unreasonably withheld or delayed), Western shall not:
(i) incur any debts, obligations or liabilities, absolute,
accrued, contingent or otherwise, whether due or to become due, that
include obligations (monetary or otherwise) to be performed by CVFLP,
with respect to the operation of the business of Western, after the
Closing Date, other than in the ordinary course of business in an amount
not to exceed $500.00, except that the Western Transaction Expenses may
not exceed $15,000.
(ii) sell, transfer, lease, mortgage, pledge, or subject to a Lien
any of its assets;
(iii) enter into, amend, or renew any contract that would be a
Material Contract;
(iv) make or grant any wage or salary increase to any employee or
director;
(v) make any change in the accounting principles, methods, or
practices followed by it or depreciation or amortization policies or
rates theretofore adopted;
(vi) declare, pay or set aside for payment any dividend or other
distribution (whether in cash, stock or property or any combination
thereof);
(vii) amend its Certificate of Incorporation or Bylaws; or
(viii) enter into any agreement, or otherwise obligate itself, to
do any of the foregoing.
(b) Western covenants and agrees with CVFLP that between the date hereof
and the Closing Date, unless
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CVFLP otherwise agrees in writing (which agreement shall not be unreasonably
delayed) Western shall:
(i) operate the business of Western in the usual and ordinary
course of business, in accordance with past practice and to conduct its
business in all material respects in compliance with all applicable
laws, rules and regulations;
(ii) preserve intact its present business organization;
(iii) maintain its books and records in the usual and ordinary
manner and in accordance with generally accepted accounting principles;
and
(iv) upon prior written notice, provide CVFLP and its authorized
representatives with reasonable access during normal business hours to
inspect the documents, records and other information relating to the
business of Western.
(c) Western covenants and agrees that it will not, and it will cause its
affiliates, partners, employees, attorneys, accountants, investment bankers and
other agents and representatives not to, (i) initiate, solicit or encourage any
inquiries or proposals with respect to the sale of Western to any person or
entity other than CVFLP, (ii) enter into negotiations in connection with any
such sale or (iii) enter into any commitment for any such sale.
4.2. Conduct of the Business of CVFLP Prior to the Closing Date. CVFLP
covenants and agrees with Western that between the date hereof and the Closing
Date, unless Western shall otherwise agree in writing (which agreement shall not
be unreasonably withheld or delayed), CVFLP shall not conduct its business other
than in the ordinary course.
4.3. Consents and Approvals. Each of CVFLP and Western shall take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on itself with respect to the transactions contemplated
hereby (which actions shall include, without limitation, furnishing all
information required in connection with approvals of or filings with any
Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such
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requirements imposed on any of them in connection with the transactions
contemplated hereby. CVFLP and Western shall take all reasonable actions
necessary to obtain (and shall cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained or made by CVFLP or Western in connection with the transactions
contemplated hereby.
4.4. Regulation S. Western agrees that it will not register any transfer
of the Western Securities other than transfers made pursuant to Regulation S
under the Securities Act, and agrees that each of the Western Securities will
be legended to the effect that such transfers of the Western Securities are
prohibited except in accordance with Regulation S. CVFLP and each of its
limited and general partners agree to resell the Western Securities only in
accordance with the provisions of Regulation S, pursuant to registration under
the Securities Act or pursuant to an available exemption from registration.
4.5. Approval of Transaction. Western shall call a meeting of its
shareholders as required by Nevada law to be held as promptly as practicable
for the purpose of approving the transactions contemplated by this Agreement,
and will use its best efforts to obtain the approval of its shareholders.
Western shall prepare a proxy statement (the "Proxy Statement") to be delivered
to Western's shareholders in connection with the meeting.
4.6. Public Announcements. Except as required by law, securities
regulatory authorities or rules and regulations of applicable securities
exchanges, neither Western nor CVFLP will issue or cause the publication of any
press release or other public announcement with respect to the transaction
contemplated by this Agreement without the prior consent of the other party,
which consent shall not be unreasonably withheld. Each party will consult with
the other prior to making any public disclosure required by law with respect to
the transaction contemplated by this Agreement.
4.7. Conditions to Obligations. Between the date of this Agreement and
the Closing Date, Western shall use commercially reasonable efforts to cause
the conditions to the obligations of CVFLP set forth in Section 6 to be
satisfied on or before the Closing Date,
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and CVFLP shall use commercially reasonable efforts to cause the conditions to
the obligations of Western set forth in Section 5 to be satisfied on or before
the Closing Date.
5. Conditions to Obligations of Western.
5.1. Representations and Warranties; Agreements and Covenants.
(a) The representations and warranties of CVFLP contained herein shall be
accurate in all material respects at the Closing Date with the same effect as
though such representations and warranties had been made on and as of the
Closing Date, and CVFLP shall have complied in all material respects with the
agreements and covenants contained herein to be performed by CVFLP at or prior
to the Closing.
(b) Western shall have received a certificate of CVFLP, dated as of the
Closing Date, certifying that the conditions set forth Section 5.1(a) have been
satisfied.
5.2. No Injunction.
(a) No order shall have been issued, enacted, entered, promulgated or
enforced, and have not been withdrawn or terminated, by any Governmental Entity
which prohibits or restricts the consummation of the transactions contemplated
by this Agreement or makes such consummation illegal.
(b) No action, suit, claim or proceeding by any Governmental Entity shall
have been commenced (and not terminated) or be pending which seeks to prohibit
or restrict the consummation of the transactions contemplated by this
Agreement.
5.3. Opinion of CVFLP's Counsel. CVFLP shall have delivered to Western
an opinion dated as of the Closing Date in a form reasonably satisfactory to
Western.
5.4. Approval of Limited Partners. The limited partners of CVFLP shall
have approved the consummation of the transactions contemplated by this
Agreement in accordance with the Amended and Restated Limited Partnership
Agreement and applicable law.
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5.5. Other Deliveries. CVFLP shall have delivered such other documents
as previously agreed to among the parties in the form, if any, previously
agreed to among the parties.
6. Conditions to Obligations of CVFLP.
6.1. Representations and Warranties; Agreements and Covenants.
(a) The representations and warranties of Western and the Principal
contained herein shall be accurate in all material respects at the Closing Date
with the same effect as though such representations and warranties had been
made on and as of the Closing Date, and Western shall have complied in all
material respects with the agreements and covenants contained herein to be
performed by Western at or prior to the Closing.
(b) CVFLP shall have received a certificate of Western and the Principal,
dated as of the Closing Date, certifying that the conditions set forth Section
6.1(a) have been satisfied.
6.2. No Injunction.
(a) No order shall have been issued, enacted, entered, promulgated or
enforced, and have not been withdrawn or terminated, by any Governmental Entity
which prohibits or restricts the consummation of the transactions contemplated
by this Agreement or makes such consummation illegal.
(b) No action, suit, claim or proceeding by any Governmental Entity shall
have been commenced (and not terminated) or be pending which seeks to prohibit
or restrict the consummation of the transactions contemplated by this
Agreement.
6.3. Opinion of Western's Counsel. Western shall have delivered to CVFLP
an opinion, dated as of the Closing Date, in a form satisfactory to CVFLP's
counsel.
6.4. Good Standing Certificate. Western shall have delivered to CVFLP a
good standing certificate, dated as of a date within five days of the Closing
Date, from the State of Nevada.
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6.5. Proxy Statement; Approval of Shareholders. Western's shareholders
shall have approved the transactions contemplated by this Agreement in
accordance with Nevada and other applicable law.
6.6. Shareholders of Record. Western shall have no more than 450
shareholders of record as of the Closing Date.
6.7. Change of Western's Name; Resignations of Officers and Directors.
Western shall have changed its name to CVF Corp. Each of the directors and
officers of Western shall have resigned from office and been replaced by
nominees of CVFLP.
6.8. Certificate of Noland Schneider. CVFLP shall have received a
representation letter from Noland Schneider, dated as of the Closing Date,
certifying that (i) there is no litigation pending or threatened against
Western and (ii) there is no material fact or circumstance known to him that
would prevent the consummation of the transactions contemplated by this
Agreement.
6.9. Certificate of Rob Littel and Peter Bordes. CVFLP shall have
received a certificate of Rob Littel and Peter Bordes, dated as of the Closing
Date, in a form reasonably satisfactory to CVFLP.
6.10. Other Deliveries. Western shall have delivered such other
documents as previously agreed to among the parties in the form, if any,
previously agreed to among the parties.
7. Survival and Indemnification.
7.1. Survival. All representations and warranties contained in this
Agreement shall survive the Closing for a period of eighteen months; provided
that the representations and warranties set forth in Sections 2.3, 2.4 and 2.16
shall survive the Closing indefinitely. This Section 7.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates
performance after the Closing.
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7.2. Indemnification.
(a) Western and the Principal jointly and severally agree to indemnify and
hold harmless CVFLP and its subsidiaries and affiliates and their respective
general partners, limited partners, officers, directors, employees and agents
against and in respect of any loss, liability (including without limitation any
liability for Taxes), damage, deficiency, cost and expense (including without
limitation reasonable expenses of investigation and reasonable attorneys' fees
incurred in connection with any claim, suit or proceeding brought against an
indemnified party (collectively, "Losses") incurred or sustained by any of them
as a result of any breach by Western or the Principal of this Agreement,
including the representations, warranties and covenants contained herein or in
any agreement, document or other instrument delivered pursuant hereto or in
connection herewith.
(b) CVFLP agrees to indemnify and hold harmless Western against and in
respect of any Losses incurred or sustained by it as a result of any breach by
CVFLP of the Agreement, including the representations, warranties and covenants
contained herein or in any document delivered pursuant hereto or in connection
herewith.
(c) Losses as defined in Section 7.2(a) hereof shall be limited to the
amount of actual Losses sustained by the Indemnitee (as hereinafter defined),
net of (i) any insurance proceeds recovered by the Indemnitee under its
insurance policies and (ii) any tax benefits actually realized by such
Indemnitee.
7.3. Procedure for Indemnification.
(a) Any Person or entity entitled to assert a claim for indemnification
under this Agreement (the "Indemnitee") shall give prompt written notice to the
indemnifying party (the "Indemnitor") of any claim or event known to it which
does or may give rise to a claim for indemnification hereunder by the Indemnitee
against the Indemnitor; provided that the failure of any Indemnitee to give
notice as provided in this Section 7.3 shall not relieve the Indemnitor of its
obligations under this Section 7, except to the extent that such failure has
materially and adversely affected the rights of the Indemnitor. In the case of
any claim for indemnification hereunder arising out of a claim, action, suit
or pro-
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ceeding brought by any Person who is not a party to this Agreement (a "Third
Party Claim"), the Indemnitee shall also give the Indemnitor copies of any
written claims, process or legal pleadings with respect to such Third Party
Claim promptly after such documents are received by the Indemnitee.
(b) An Indemnitor may elect to compromise or defend, at such Indemnitor's
own expense and by such Indemnitor's own counsel, any Third Party Claim. If an
Indemnitor elects to compromise or defend a Third Party Claim, it shall, within
30 days of the date of its receipt of the notice provided pursuant to Section
7.3(a) hereof (or sooner, if the nature of such Third Party Claim so requires),
notify the related Indemnitee of its intent to do so, and such Indemnitee shall
reasonably cooperate in the compromise of, or defense against, such Third Party
Claim. Such Indemnitor shall pay such Indemnitee's actual out-of-pocket
expenses incurred in connection with such cooperation. After notice from an
Indemnitor to an Indemnitee of its election to assume the defense of a Third
Party Claim, such Indemnitor shall not be liable to such Indemnitee under this
Section 7 for any legal expenses subsequently incurred by such Indemnitee in
connection with the defense thereof; provided that such Indemnitee shall have
the right to employ one counsel of its choice in each applicable jurisdiction
(if more than one jurisdiction is involved) to represent such Indemnitee if, in
such Indemnitee's reasonable judgment, a conflict of interest between such
Indemnitee and such Indemnitor exists in respect of such claim, and in that
event the fees and expenses of such separate counsel shall be paid by such
Indemnitor. If an Indemnitor elects not to compromise or defend against a
Third Party Claim, or fails to notify an Indemnitee of its election as provided
in this Section 7.3, such Indemnitee may pay, compromise or defend such Third
Party Claim on behalf of and for the account and risk of the Indemnitor. No
Indemnitor shall consent to entry of any judgment or enter into any settlement
without the written consent of each related Indemnitee (which consent shall not
be unreasonably withheld), unless such judgment or settlement provides solely
for money damages or other money payments for which such Indemnitee is entitled
to indemnification hereunder and includes as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a release from all
liability in respect of such Third Party Claim.
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(c) If there is a reasonable likelihood that a Third Party Claim may
adversely affect an Indemnitee, other than as a result of money damages or
other money payments for which such Indemnitee is entitled to indemnification
hereunder, such Indemnitee will have the right, after consultation with the
Indemnitor and at the cost and expense of the Indemnitor, to defend such Third
Party Claim.
(d) If the amount of any Losses shall, at any time subsequent to payment
pursuant to this Agreement, be reduced by recovery, settlement or otherwise,
the amount of such reduction, less any expenses incurred in connection
therewith, shall promptly be repaid by the Indemnitee to the related
Indemnitor.
8. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
9. General Provisions.
9.1. Amendment and Waiver. No amendment of any provision of this
Agreement shall in any event be effective, unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party, but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provision
hereof or to take any such action.
9.2. Expenses. Each of the parties hereto agrees to pay all costs and
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby.
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9.3. Broker's and Finder's Fees. Except as previously disclosed in
writing, Western hereby represents and warrants to CVFLP with respect to
Western, and CVFLP hereby represents and warrants to Western with respect to
CVFLP, that no Person or entity is entitled to receive from Western, on the one
hand, or from CVFLP, on the other hand, any investment banking, brokerage or
finder's fee or fees for financial consulting or advisory services in
connection with this Agreement or the transactions contemplated hereby.
9.4. Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (receipt confirmed electronically or otherwise) or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to CVFLP:
Canadian Venture Founders I Limited Partnership
75 Navy Street
Suite 300
Oakville, Ontario L6J 2Z1
Attention: Jeffrey Dreben
Facsimile No.: (905) 842-9774
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
P.O Box 189, Suite 1820
Royal Bank Plaza, North Tower
Toronto, Ontario M4Y 1M2
Attention: Christopher W. Morgan
Facsimile No.: (416) 777-4747
(b) If to Western:
Western Growth Corporation
2077 Elderberry Way
Sandy, Utah 84092
Attention: L. Dee Hall
Facsimile No.: (801) 553-8840
With a copy to:
Cohne, Rappaport & Segal
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525 East First South
Fifth Floor
Salt Lake City, Utah 84102
Attention: A.O. Headman, Jr.
Facsimile No.: (801) 355-1813
9.5. Entire Agreement; Assignment. This Agreement and the documents
referred to herein (a) constitute the entire agreement and supersede all other
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof (provided that any confidentiality
agreement shall survive the execution of this Agreement) and (b) shall not be
assigned by either party (by operation of law or otherwise) without the prior
written consent of the other party, except that CVFLP may assign its rights and
obligations under this Agreement to Canadian Venture Founders Management
Limited, its general partner.
9.6. Applicable Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of Nevada. The parties
hereby consent to the jurisdiction of Nevada state and federal courts over all
matters relating to this Agreement.
9.7. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and, subject to Section 9.5(b)
hereof, their respective successors and assigns, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
9.8. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.9. Headings; Pronouns and Conjunctions. The section and other headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Unless
otherwise indicated herein or the context otherwise requires, the masculine
pronoun shall include the feminine and neuter and the singular shall include
the plural. The word "or" shall not be deemed exclusive.
26
<PAGE> 27
9.10. Announcements. Except as required by law or the rules of any
national securities exchange, for so long as this Agreement is in effect, no
announcement of this Agreement or the transactions contemplated hereby shall be
made by either party without the written consent of the other party which
consent shall not be unreasonably withheld.
9.11. Severability. In case any term, provision, covenant or restriction
of this Agreement is held to be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining terms,
provisions, covenants or restrictions, or of such term, provision, covenant or
restriction in any other jurisdiction, shall not in any way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement under
seal as of the date first written above.
CANADIAN VENTURE FOUNDERS I
LIMITED PARTNERSHIP
By:/s/ Jeffrey Dreben
----------------------------
Name: Jeffrey Dreben
Title: Managing Director
WESTERN GROWTH CORPORATION
By:/s/ L. Dee Hall
----------------------------
Name: L. Dee Hall
Title: President
/s/ L. Dee Hall
----------------------------
L. Dee Hall
27
<PAGE> 1
EXHIBIT 6.2
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of September 20, 1995, between CVF, Inc.
("Pledgor") and CVF Corp. ("Pledgee").
W I T N E S S E T H :
WHEREAS, Pledgor and Pledgee have entered into a Service Agreement dated
as of September 20, 1995 (the "Service Agreement"), pursuant to which Pledgor
has agreed to provide certain management services to Pledgee and pay certain
expenses of Pledgee (the "Financial Obligations");
WHEREAS, Pledgor has agreed to provide security for the performance of the
Financial Obligations;
NOW, THEREFORE, in consideration of the premises and the covenants set
forth herein and in the Service Agreement, the parties hereto agree as follows.
1. Definitions. Capitalized terms used but not defined herein and defined
in the Service Agreement are used herein as therein defined. References to
this "Agreement" shall mean this Stock Pledge Agreement as the same may be in
effect at the time such reference becomes operative, including all amendments,
modifications and supplements hereto and any exhibits or schedules to any of
the foregoing.
2. Pledge. In order to secure the payment in full of all of the Financial
Obligations, Pledgor hereby pledges, assigns, grants a security interest in,
transfers and delivers unto Pledgee each of the following (the "Collateral"):
(a) all of Pledgor's right, title and interest in and to all shares
(the "Pledged Shares") of capital stock described in Schedule I hereto
and the certificates, if any, representing the Pledged Shares, and all
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(b) all other rights appurtenant to the property described in clause
(a) above (including, without limitation, voting rights); and
(c) all cash and noncash proceeds of the foregoing.
Certificates representing the Pledged Shares set forth on Schedule I hereto,
accompanied by proper instruments of assignment duly executed in blank by
Pledgor, are herewith delivered to Pledgee.
3. Representations and Warranties. Pledgor hereby represents and warrants
to Pledgee that as of the date hereof:
<PAGE> 2
(a) Pledgor is the sole holder of record and beneficial owner of the
Pledged Shares set forth on Schedule I hereto, free and clear of any
pledge, hypothecation, assignment, lien, charge, claim, security
interest, option, preference, priority or other preferential arrangement
of any kind or nature whatsoever ("Lien") thereon or affecting the title
thereto.
(b) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable, and Pledgor has the right and all
requisite corporate authority to pledge, assign, grant a security
interest in, transfer and deliver the Collateral to Pledgee as provided
herein.
(c) This Agreement has been duly authorized, executed and delivered
by Pledgor and constitutes the legal, valid and binding obligation of
Pledgor, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of
equity.
(d) No consent, approval, authorization or other order of any Person
is required for (i) the execution and delivery of this Agreement by
Pledgor or the delivery by Pledgor of the Collateral to Pledgee as
provided herein, or (ii) for the exercise by Pledgee of the voting or
other rights provided for in this Agreement or the remedies in respect of
the Collateral pursuant to this Agreement, except as may be required in
connection with the disposition of the Collateral by laws affecting the
offering and sale of securities generally.
(e) Upon the delivery to Pledgee of the certificates representing
the Pledged Shares, Pledgee will have a valid and perfected security
interest therein subject to no prior Lien.
The representations and warranties set forth in this Section 3 shall
survive the execution and delivery of this Agreement.
4. Rights of Pledgor. Unless Pledgor shall have failed to satisfy its
Financial Obligations:
(a) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms of this
Agreement.
(b) Pledgor shall be entitled, from time to time, to collect and
receive for its own use all cash dividends (except cash dividends paid or
payable in respect of the total or partial liquidation) paid on the
Pledged Shares; provided, however, that until actually paid, all rights
to such dividends shall remain subject to the Lien of this Agreement.
All dividends (other than cash dividends governed by the immediately
preceding sentence) and all other distributions in respect of any of the
Collateral, whenever paid or made, shall be delivered to Pledgee and held
by it subject to the Lien created by this Agreement.
5. Covenants. Pledgor covenants and agrees that until the termination of
this Agreement:
(a) Pledgor will not, without the prior written consent of Pledgee,
sell, assign, transfer, mortgage, pledge or otherwise encumber any of its
rights in or to the Collateral or any dividends or other distributions or
payments with respect thereto or grant a Lien on any thereof.
2
<PAGE> 3
(b) Pledgor will, at its own expense, execute, acknowledge and
deliver all such instruments and take all such action as Pledgee from
time to time may reasonably request in order to ensure to Pledgee the
benefits of the first priority Lien on and to the Collateral intended to
be created by this Agreement.
(c) Pledgor will defend the title to the Collateral and the Lien of
Pledgee thereon against the claim of any Person claiming against or
through Pledgor and will maintain and preserve such Lien so long as this
Agreement shall remain in effect.
(d) Unless Pledgor shall have given Pledgee not less than 30 days'
prior notice thereof, Pledgor will not change (i) its name, identity or
corporate structure in any manner or (ii) the location of its chief
executive office.
6. Remedy. Upon the failure of the Pledgor to perform its Financial
Obligations under the Service Agreement during any fiscal quarter, the Pledgee
may repurchase for $0.01 per share the number of Pledged Shares equal to the
unpaid dollar amount of the Financial Obligations, divided by the Market Price
of the Pledged Shares. For purposes hereof, "Market Price" shall equal the 90
day weighted average trading price of the Pledged Shares over the prior
quarter.
7. Exoneration of Pledgee. Other than the exercise of reasonable care in
the custody and preservation of the Collateral, Pledgee shall have no duty with
respect thereto. Pledgee shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which it accords
its own property, and shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any agent or bailee selected by Pledgee in good
faith.
8. Waiver. No delay on Pledgee's part in exercising any right hereunder,
and no notice or demand which may be given to or made upon Pledgor by Pledgee
with respect to any right hereunder, shall constitute a waiver thereof, or
limit or impair Pledgee's right to take any action or to exercise any right
hereunder, without notice or demand, or prejudice Pledgee's rights as against
Pledgor in any respect.
9. Assignment. Neither party may assign its rights under this agreement,
except that in the event of assignment by Pledgee of its rights under the
Service Agreement in accordance therewith, the party to whom such assignment is
made shall be entitled to Pledgee's rights hereunder.
10. Termination. At such time as (a) all Financial Obligations have been
fully satisfied and (b) the Service Agreement shall have been terminated,
Pledgee shall deliver to Pledgor the Collateral at the time subject to this
Agreement and all instruments of assignment executed in connection therewith,
free and clear of the Lien hereof and all of Pledgor's obligations hereunder
shall thereupon terminate. When so released, such Collateral shall be free and
clear of any lien or encumbrance hereunder.
11. Expenses. Pledgor will reimburse Pledgee for all expenses (including
reasonable expenses for legal services of every kind) of, or incidental to the
preparation or enforcement of any of the provisions of, this Agreement or any
enforcement, collection, compromise or settlement of any of the Collateral and
for the care of the Collateral and defending or asserting the rights and claims
of Pledgee in respect of the Collateral, by litigation or otherwise, including
but not limited to expenses of insurance and the fees and expenses of counsel
for Pledgee. All such expenses shall be deemed additional Financial
Obligations.
3
<PAGE> 4
12. Miscellaneous.
(a) Pledgee may execute any of its duties hereunder by or through
agents or employees. Pledgee may consult with legal counsel and any
action taken or suffered in good faith in accordance with the advice of
such counsel shall be full justification and protection to it.
(b) Neither Pledgee nor any of its officers, directors, employees,
agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith,
except for their own gross negligence or willful misconduct and Pledgee
shall not be liable for any error of judgment made by it in good faith.
(c) This Agreement shall be binding upon Pledgor and its successors
and assigns, and shall inure to the benefit of, and be enforceable by,
Pledgee and its successors, transferees and assigns. None of the terms
or provisions of this Agreement may be waived, altered, modified or
amended except in writing duly signed for and on behalf of Pledgee and
Pledgor.
(d) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE.
13. Further Assurances; Pledgee May Perform.
(a) At Pledgor's expense, Pledgor will do all such acts, and will
furnish to Pledgee all such financing statements, certificates, legal
opinions and other documents and will do or cause to be done all such
other things as Pledgee may reasonably request from time to time in order
to give full effect to this Agreement and to secure the rights intended
to be granted to Pledgee hereunder. To the extent permitted by
applicable law, Pledgor hereby authorizes Pledgee to execute and file, in
the name of Pledgor or otherwise, Uniform Commercial Code financing
statements (which may be photocopies of this Agreement) which Pledgee in
its sole discretion may deem necessary or appropriate.
(b) If Pledgor fails to perform any act required by this Agreement,
Pledgee may perform, or cause performance of, such act, and the expenses
of Pledgee incurred in connection therewith shall be governed by Section
11 hereof.
14. Notices. Except as otherwise provided herein, any notice required
hereunder shall be in writing, and shall be deemed to have been validly served,
given or delivered upon receipt after transmittal by hand or by Federal Express
or similar service, or five business days after deposit in the United States
mails, registered first class mail, with proper postage prepaid. Failure to
comply with the provisions set forth above with respect to the delivery of
copies shall not impair the validity of any notice otherwise complying with the
terms hereof.
4
<PAGE> 5
15. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge
Agreement to be duly executed as of the date first above written.
CVF Corp.
/s/ Jeffrey Dreben
--------------------------------
By: Jeffrey Dreben
Title: President
CVF, Inc.
/s/ Jeffrey Dreben
--------------------------------
By: Jeffrey Dreben
Title: President
5
<PAGE> 1
EXHIBIT 6.3
SERVICE AGREEMENT
AGREEMENT dated as of February 10, 1997, by and between D and N Consulting
Corporation, a Delaware corporation (the "Service Company"), and CVF Corp., a
Nevada Corporation ("Newco").
1. Payment of Operating Expenses. The Service Company agrees to be
responsible for all administrative requirements of Newco, including, but
not limited to, costs of maintaining the books of Newco, preparing
periodic reports to the Board of Directors of Newco and providing office
facilities and travel expenses, and except those expenses to be borne by
Newco which are described in Section 3 below. The Service Company will
also be responsible for compensating its employees and directors and any
other person or entity employed for the purpose of providing services to
Newco pursuant to this Service Agreement.
2. Service Fee
(a) Subject as set forth below, Newco will pay the Service
Company an annual service fee (the "Service Fee") based on an
annual budget prepared by the Service Company which will be
reasonable and commensurate with administering the business of
Newco and approved by the Board of Directors of Newco. Any fees or
other amounts received by the Service Company, or its respective
directors or officers from investee companies of Newco as financing
commitment fees, consulting fees, directors' fees or otherwise for
services rendered to the investee companies shall be credited
against the Service Fee.
(b) The Service Fee for each fiscal year shall be determined in
the last 30 days of Newco's prior fiscal year, based upon the
budget prepared by the Service Company and approved by the Board of
Directors of Newco.
(c) The Service Fee will be calculated and paid quarterly in
advance on the first day of January, April, July and October of
each year.
<PAGE> 2
(d) If the Service Fee shall be payable for any period which is
less than one year, such payments shall be adjusted on a pro rata
basis based upon the number of days that this Service Agreement is
in effect during such period. If this Service Agreement is
terminated as of a date that is not the last day of March, June,
September or December in any calendar year, then the Service
Company shall refund to Newco the unearned portion of the Service
Fee, calculated on a pro rata basis.
(e) The Service Company may, with the consent of Jeffrey Dreben and
Robert Nally, direct Newco to pay all expenses directly.
3. Exceptions to Payment of Service Fee.
(a) After fifteen months have elapsed from the date of this
Service Agreement, the Service Company's right to the Service Fee
in any quarter will depend on the trading price of the shares of
Newco Common Stock (the "Newco Common Shares"). If the 90 day
weighted average trading price (the "Trading Price") over the
course of the prior quarter does not, at any time in the prior
fiscal quarter of Newco, exceed the target price (the "Target
Price") set out below, the Service Company will not be entitled to
the Service Fee during the next quarter.
For purposes of this Service Agreement, the Target Price equals
$3.05. In the event that Newco shall at any time after the Closing
subdivide or change the outstanding number of Newco Common Shares,
the Target Price shall be proportionately adjusted.
If at any time in any fiscal quarter the Trading Price of Newco
Common Shares is greater than the Target Price but less than double
the Target Price, then the Service Company will be entitled to a
percentage of the Service Fee for all future quarters (based on the
proportion that the excess of the Trading Price over the Target
Price is of the Target Price).
If, at any time after fifteen months have elapsed from the date of
this Service Agreement, the Trading Price exceeds double the Target
Price, the Service Company will no longer be responsible for any
costs in relation to Newco and the Common Shares pledged by the
Service Company to Newco will be released and the Stock Pledge
Agreement cancelled.
(b) In lieu of satisfying its financial obligations under this Service
Agreement, the Service Company may put its 10.2% Common Share
interest (the "Share Interest") in Newco, or any portion thereof, to
2
Exhibit 6.3
<PAGE> 3
Newco for the pro rata cancellation of the Service Company's financial
obligations. The Service Company's financial obligations will
decrease proportionately to the percentage of the Share Interest that
is put to Newco. For instance, if fifty percent of the Share Interest
is put to Newco, then fifty percent of the financial obligations of
Newco will be paid by the Service Company and fifty percent by Newco.
If and when the entire Share Interest is put to Newco, the Service
Company's financial obligations under the Service Agreement will
terminate. Thereafter, Newco will reimburse the Service company for
100 percent of its financial obligations.
4. Exceptions to Payment of Expenses by the Service Company.
(a) Notwithstanding Section 1, the following specific ongoing
expenses of Newco will not be paid by the Service Company but will
be paid by Newco:
(i) legal fees;
(ii) audit fees;
(iii) interest, taxes, brokerage and other fees
and expenses directly related to the implementation of
purchase, sale or other transactions for Newco's investments
or for Newco Common Shares, including documentation and
expenses related to investor relations; and
(iv) fees (legal or other) associated with
compliance with the rules and regulations of the Securities
Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.
(v) insurance premiums, if any, incurred to
protect Newco.
5. Service Company Duties. The Service Company covenants that it will
maintain a staff trained and experienced in the business of identifying
and providing assistance to new and emerging growth-oriented businesses
and adequate for the performance of the Service Company's duties under
this Service Agreement. Services to be rendered by the Service Company
shall include assistance within the areas of expertise of its staff and,
when considered appropriate by the Service Company, the services of its
officers and employees as directors, consultants and advisors to investee
companies. Services to be provided to a investee company by officers and
employees of the Service Company will be performed in good faith,
consistent with the
3
<PAGE> 4
obligations of the Service Company to Newco. Subject to the control and
direction of Newco's Board of Directors, the Service Company shall be
authorized to manage the operations of and act in the name of and bind
Newco. Selection of the Newco investments, shall be made by the Service
Company after consultation with and approval by Newco's Board of Directors.
6. Term. Commencing on the date hereof, services will be performed for
Newco for an initial term of five years (the "Initial Term"). This
service agreement will automatically renew for successive one year terms
upon six (6) months prior written notice by either party to the other
party.
7. Termination.
(a) During the Initial Term, Newco shall be entitled to
terminate the Service Agreement at any time for cause. For
purposes of this Service Agreement, "cause" shall mean (i) the
Service Company's material breach or material failure to perform
the services set forth in this Service Agreement and (ii) the
Service Company's or any of its directors' or officers' conviction
for fraud, embezzlement, misappropriation or other felony related
to the services to be performed under this Service Agreement.
(b) After the Initial Term, this Service Agreement may be
terminated with or without cause and without penalty upon six (6)
months prior written notice by either party to the other party.
8. Governing Law and Jurisdiction. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Delaware. The parties hereto irrevocably attorn to the jurisdiction of
the courts of Delaware.
9. Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall enure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, that the Service Company may not assign
its obligations hereunder to any party (other than a successor by merger
to the Service Company) without the written consent of the Board of
Directors of Newco.
10. Severability. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
4
<PAGE> 5
11. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed and delivered shall constitute a complete and
original instrument but all of which together shall constitute one and the
same agreement, and it shall be necessary when making proof of this
Agreement or any counterpart thereof to account for any other counterpart.
12. Entire Agreement; Amendment. This Agreement can be modified or amended
only by a writing signed by the parties hereto and only with the written
consent of the Board of Directors of Newco. This Agreement constitutes
the full and entire understanding and agreement between the parties with
regard to the subject matter hereof.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the
date first above written.
D and N Consulting Corporation
By: /s/ Jeffrey Dreben
---------------------------
CVF CORP.
By: /s/ Jeffrey Dreben
---------------------------
5
<PAGE> 1
EXHIBIT 10
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on From 10-SB
of our report dated December 11, 1996 related to the consolidated financial
statements of CVF Corp. and Subsidiaries (formerly Western Growth Corporation)
for the years ended December 31, 1995 and 1994.
/s/ Feldman Radin & Co., P.C.
-----------------------------
Feldman Radin & Co., P.C.
Certified Public Accountants
New York, New York
February 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,797,851
<SECURITIES> 0
<RECEIVABLES> 341,502
<ALLOWANCES> (3,650)
<INVENTORY> 221,592
<CURRENT-ASSETS> 1,092,079
<PP&E> 345,883
<DEPRECIATION> (174,395)
<TOTAL-ASSETS> 6,282,700
<CURRENT-LIABILITIES> 1,552,524
<BONDS> 151,406
<COMMON> 5,992
456,250
0
<OTHER-SE> 3,824,528
<TOTAL-LIABILITY-AND-EQUITY> 6,282,700
<SALES> 763,009
<TOTAL-REVENUES> 763,009
<CGS> 530,540
<TOTAL-COSTS> 530,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,923
<INCOME-PRETAX> (1,064,806)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,064,806)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,064,806)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,797,851
<SECURITIES> 0
<RECEIVABLES> 306,738
<ALLOWANCES> (3,272)
<INVENTORY> 123,855
<CURRENT-ASSETS> 3,325,119
<PP&E> 415,221
<DEPRECIATION> (229,820)
<TOTAL-ASSETS> 7,706,942
<CURRENT-LIABILITIES> 3,542,640
<BONDS> 392,709
<COMMON> 5,992
456,250
0
<OTHER-SE> 3,737,351
<TOTAL-LIABILITY-AND-EQUITY> 7,706,942
<SALES> 1,182,341
<TOTAL-REVENUES> 1,182,341
<CGS> 810,177
<TOTAL-COSTS> 810,177
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,078
<INCOME-PRETAX> 862,985
<INCOME-TAX> 950,000
<INCOME-CONTINUING> (87,015)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87,015)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
