U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Southwest Industrial Products, Inc.
(Name of Small Business Issuer in its charter)
Minnesota 41-1853992
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2710 Stemmons Freeway, North Tower, Suite 200
Dallas, Texas 75207
(Address of principal executive office) (Zip Code)
Issuer's telephone number (214) 638-7811
Securities to be registered under Section 12(g) of the Act:
Common Shares
Charles Clayton
527 Marquette
Minneapolis, Minnesota 55402
(612) 338-3738
(Agent for Service)
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
Southwest Industrial Products, Inc. was formed in Minnesota on June 28,
1996 as Onyx-Five, Inc. Onyx-Five, Inc. was merged with Southwest Industrial
Products, Inc. in July, 1997, and the name was changed to Southwest Industrial
Products, Inc.
The Company purchased the assets of International Golden Pacific
Plastics Manufacturing, Inc. in September, 1997 through its wholly owned
subsidiary International Container Corp. Golden Pacific Plastics was in default
of its loans, with Bay Business Credit. Golden Pacific Plastics filed a Chapter
11 bankruptcy proceeding but was unable to propose a feasible plan or
reorganization and Bay Business Credit foreclosed on all of the assets held as
collateral. The Company purchased the assets from Bay Business Credit for
$2,750,000, with a down payment of $150,000. Bay Business Credit has entered
into a financing agreement with the Company for repayment of the balance, the
loan is amortized over 10 years, with a balloon payment due at the end of 5
years. The interest rates are 10% the first year, 11% the second year, and 12%
for the remainder of the loan.
As part of the purchase agreement the Company received three year
commitments to purchase merchandise from the two largest customers of Golden
Pacific Plastics, Flamingo Industries and Central Bag Corp. Each of these
companies has in the past provided at or in excess of $1,000,000 in gross sales
to Golden Pacific annually and both are expected to provide sales at or above
the same each year of the three year purchase commitment. Flamingo provides
primarily government business and is the source of the U. S. Postal Service and
U.S.D.A. work. Central Bag provides primarily commercial work. Having the two
distinct sources ordering products provides the Company with a "cushion" because
the differing sources do not seem to be affected by the same economic factors.
International Container Corp., d.b.a Golden Pacific Bag Corp. is now a
wholly owned subsidiary of the Company, located in Houston, Texas. It operates a
60,000 square foot facility in which it manufactures woven polypropylene bags.
The Company purchases pelletized polypropylene, extrudes the pellets into sheets
and then cuts the sheets into approximately 1/8" strips of "thread." The
polypropylene thread is then woven onto bobbins, which are placed on weaving
machines. The weaving machines produce varying sizes of fabric and/or woven
tubes, which are then cut to measure per customers' orders, sewn into bags and
printed as necessary.
The bags are used by the United States Postal Service for bulk mail
purposes, vegetable growers, charcoal producers, etc., for any product that
needs to be shipped or stored in bulk.
Golden Pacific Bag Corp. has approximately 60 full and part time
employees, most of whom are involved in the manufacturing process. There are two
shifts per day, six days a week. Approximately 10 employees are involved in
maintenance of the equipment, sales and administration.
<PAGE>
The facility had been shut down for approximately 45 days when it was
reopened by the Company. Consequently sales momentum and credibility had been
lost and a restart of the facility was for all practical purposes the same as
opening a new facility. This resulted in substantial additional costs and a
period of operations with very little sales and revenue. This has caused the
operations to show a loss for the second half of 1977. However, the Company
believes it is moving into 1998 with sales momentum at least partially
reestablished and there are no known extraordinary expenses looming which will
require additional working capital. The Company believes 1998 will see the
facility return to historical sales levels and to overall profitability.
ITEM 2. PLAN OF OPERATION
The Company operates as a holding company for acquired businesses. The
Company intends to continue looking for acquisitions, primarily of operating
companies or operating subsidiaries of other companies, which it can purchase,
and to which it can add value through increased sales, reduced expenses, reduced
debt or attentive and focused management. Once the Company acquires a position
in an industry it will look for ways to increase its presence, vertically and/or
horizontally in that same industry or industry segment. The Company believes
that it can magnify the effects of its management focus and other benefits by
such concentration. The Company believes that a significant source for
acquisitions is now and will in the future be troubled companies that are
experiencing operating cash flow and profitability problems, and may even have
sought the protection of the bankruptcy courts.
The Company has no specific targeted industries or industry segments.
However, the Company has determined that it prefers, primarily for management
simplicity, to focus on industries which manufacture basic products with a broad
utility. Furthermore, the Company has determined that it prefers to purchase
companies which are fully integrated with manufacturing and sales capacities. In
furtherance of this objective, the Company plans to seek additional
opportunities in an industry or industry segment once it locates and completes
an acquisition. This may involve horizontal expansion, for example, a company
with the same manufacturing and sales capabilities but in a different geographic
location; or this may involve a vertical expansion, for example, a company which
itself manufactures and supplies a product used by the initial acquisition in
its own process.
The Company's strategic plan for growth is focused on a two pronged
attack. First the Company intends to grow through acquisitions. The Company
believes that its contacts with lenders will be fruitful source of possible
future acquisitions. Purchases of companies found through lender sources will
most likely be companies which are experiencing difficulties repaying their debt
to the same lender
<PAGE>
source. In these situations this will provide an acquisition for the Company as
well as solve a potential problem for the lender. This may in turn increase the
likelihood that the lender will direct future acquisition candidates to the
Company. The Company also intends to look for additional acquisitions within
industries in which it has already completed a purchase. The Company believes
that once it is operating in an industry, there may be opportunities available
for follow-up purchases in the same industry. The second prong of the Company's
growth strategy is through internally generated growth. The acquisitions of the
size the Company will focus on tend to be undercapitalized, especially those
acquisitions which are currently experiencing troubles of the same type with
debt service or otherwise. Providing working capital for the acquired companies
should fuel internal growth of the acquired companies.
Acquisitions of the size sought by the Company will many times be run
by a founder or a founder's family. A key component of the Company's due
diligence will be a determination of whether the founder's or selling
shareholder's continued participation is necessary or desirable for the acquired
companies ongoing operations and future success. If the selling shareholder's
continued participation is necessary, the Company will acquire the company only
if a satisfactory employment and non-compete agreements can be executed and a
significant portion of the purchase price is tied to these agreements. The more
desirable circumstance from the Company's perspective will be when the founder's
or selling shareholder's continued participation is not necessary. In this case
the Company will first look for current employees who are already performing
some management duties and who would be capable of expanding their duties and
responsibilities. If this is not possible then new outside management would be
brought into the acquired company. The management of the Company will in most
circumstances not be involved in the day to day management of the acquisitions
but instead will perform management oversight on as frequent a basis as is
deemed necessary in each particular circumstance. In most circumstances heavy
management oversight will be required immediately after the acquisition is made
and will lessen over time. Initial focus on management oversight will be
beneficial to the overall objectives of the Company as well because this will
allow the Company's management the opportunity to learn about each business and
industry and increase the chances for additional complimentary acquisitions.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's Houston manufacturing facility is located at 303 S. 66th
Street, Houston, Texas, and is leased from South 66 Warehouse Associates. The
initial term of the lease is for 3 years through July 31, 2000 with an
additional 3 year option period. First year rental is $10,250 per month, year
two is at a rate of $10,550 per month and year three is at a rate of $10,850 per
month. Rental for the renewal period is at a rate of $11,000 per month.
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the information as to the ownership of
each person who owns of record, or is known by the Company to own beneficially,
more than five per cent of the Company's common and preferred stock, and the
officers and directors of the Company.
Common Stock
Name Shares Percent
Lindsey Vinson 25,413,319 85%
Pike Hassink 1,903,681 6%
David Hayslip 625,000 2%
Directors and Officers as 27,942,000 94%
a group
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The executive officers and directors of the company, with a brief
description are as follows:
Name Age Position
Lindsey Vinson 40 President and a Director
Pike Hassink 58 Director
David Hayslip 47 Director
Lindsey Vinson, President and a Director. Mr. Vinson has a degree from
Drake University in Business Administration, and a J.D. degree from Ohio State
University. He has practised law in his own firm in Dallas, Texas since 1983.
Pike Hassink, a Director. Mr. Hassink is the founder and CEO of
Winchester Financial and the Remington Group since 1991.
<PAGE>
David Hayslip, a Director. Mr. Hayslip is a broker, he worked for
Laidlaw, Adams & Peck, Inc. and since 1994 has been the director of research for
Sunpoint Securities, Inc. a broker dealer based in Longview, Texas.
ITEM 6. EXECUTIVE COMPENSATION
The Officers and Directors of the Company have not received any
compensation, and there are no employment agreements with any of them. They are,
however, reimbursed for expenses incurred, including travel.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 8. LEGAL PROCEEDINGS
None
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock has been traded since December 23, 1997 on
the OTC Bulletin Board, before that time there was no activity. As of January
12, 1997 the following brokerage firms were making a market in the Company's
common stock: Protective Group Securities.
The following table sets forth for the periods indicated the range of
high and low closing bid quotations per share as reported by the
over-the-counter market. These quotations represent inter-dealer prices, without
retail markups, markdowns or commissions and may not necessarily represent
actual transactions.
Price per Share
High Low
Fiscal year 1997 $.30 $.10
Fourth Quarter (September 30, 1997
through December 31, 1997)
There are 46 holders of the common and preferred stock of the Company.
There have never been any dividends, cash or otherwise, paid on the common
shares of the Company.
<PAGE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Name Date Shares Cost
Common Stock
Duet Limited 8/97 200,000
Francy Gleason 8/97 3,000 $750
Wrigley Investments Holdings, Ltd. 8/97 175,000
Millport Overseas, Ltd. 8/97 175,000
Bill Lynton 8/97 500,000
Wallace Nordvik 8/97 3,000 $750
Capital Formation Trust 8/97 150,000
John Picken 8/97 150,000
Lindsey Vinson 8/97 25,413,319 $150,000
Troy Vinson 8/97 50,000
Joe Poe 8/97 12,000
Tammy Moran 8/97 12,000
George Poe 8/97 12,000
Pike Hassink 10/97 1,903,681
David Hayslip 10/97 625,000
Bob Harris 8/97 10,000
Harrel Hansen 8/97 10,000
Jarald R. Carey 8/97 9,000
Voni Chen 8/97 8,000
Frank Wong 8/97 8,000
Frank Wolfe 8/97 14,000
Trey Wolfe 8/97 12,000
John Wolfe 8/97 12,000
Charlie Waring 8/97 17,000
Dick Waring 8/97 17,000
Art Price 8/97 3,000 $750
Michael H. Lenneman 8/97 3,000 $750
Albert Peterson 8/97 3,000 $750
Gary Burmeister 8/97 3,000 $750
Timothy Harvey 8/97 3,000 $750
James Smerdon 8/97 3,000 $750
Robert Van Hoef 8/97 3,000 $750
Jon Yoder 8/97 3,000 $750
Bay Business Credit 11/97 200,000
Moon Shadow, LLC 10/97 125,000
Convertible Preferred Stock
Laura Cabot 4/97 20,000 $20,000
<PAGE>
Esther Miller 5/97 10,000 $10,000
James Brady 5/97 10,000 $10,000
Rankin D. Taylor 6/97 10,000 $10,000
James B. Newman 6/97 25,000 $25,000
Mark Brown 6/97 10,000 $10,000
Leroy Alves 6/97 10,000 $10,000
Edgar Wuthrich 7/97 10,000 $10,000
Thomas W. Taylor 7/97 15,000 $15,000
William Morgan 7/97 9,980 $9,980
Bill Ooton 7/97 20,000 $20,000
Kenneth Kuehl 7/97 10,000 $10,000
Marcella Juhl/Laura Cabot 7/97 20,000 $20,000
Tanya Morgan 8/97 11,438 $11,438
David Ballard 8/97 20,000 $20,000
Leonard Riley 8/97 10,000 $10,000
Dwain Brady 8/98 12,875 $12,875
Bob Sweat 8/97 6,620 $6,620
Margaret Desmond 8/97 25,000 $25,000
Donald McGirk 8/97 50,000 $50,000
William Atkins 8/97 10,000 $10,000
Mark Brown 9/97 10,000 $10,000
Linda Johnson 12/97 10,000 $10,000
Joseph Hildebrand 12/97 10,000 $10,000
Karen Duckworth 9/97 35,000 $35,000
Harvey Wuistinger 9/97 25,000 $25,000
Gerald Schoonover 9/97 20,000 $20,000
Othel Boiles 9/97 14,000 $14,000
Arlie McKinnon 9/97 147,939 $147,939
There was a private placement of convertible preferred stock done
through Sunpoint Securities, Inc. There were 587,851 shares sold at $1.00 per
share. There was a commission of 10%, plus a nonaccountable expense allowance of
$30,000, and certain fees for attorney's fees, printing and filing fees of
$5,000.
The registrant believes that all transactions were transactions not
involving any public offering within the meaning of Section 4(2) of the
Securities Act of 1933, since (a) each of the transactions involved the offering
of such securities to a substantially limited number of persons; (b) each person
took the securities as an investment for his own account and not with a view to
distribution; (c) each person had access to information equivalent to that which
would be included in a registration statement on the applicable form under the
Act; (d) each person had knowledge and experience in business and financial
matters to understand the merits and risk of the investment; therefore no
registration statement need be in effect prior to such issuances.
<PAGE>
ITEM 11. DESCRIPTION OF SECURITIES
The company has authorized 150,000,000 shares of stock, no par value,
149,000,000 shares have been designated as common shares, and the remaining
1,000,000 shares are preferred shares. Each holder of common stock has one vote
per share on all matters voted upon by the shareholders. Such voting rights are
noncumulative so that shareholders holding more than 50% of the outstanding
shares of common stock are able to elect all members of the Board of Directors.
There are no preemptive rights or other rights of subscription.
Each share of common stock is entitled to participate equally in
dividends as and when declared by the Board of Directors of the company out of
funds legally available, and is entitled to participate equally in the
distribution of assets in the event of liquidation. All shares, when issued and
fully paid, are nonassessable and are not subject to redemption or conversion
and have no conversion rights.
Dividend Rights. The holders of preferred stock are entitled to receive
dividends out of funds of the Company legally available at the rate of 12% per
year from the date of issuance. The dividends are payable on a calendar quarter
basis, if as and when declared by the Board of Directors starting March 31,
1998. The dividends are cumulative, so if the directors determine not to declare
a dividend, or if funds are not available for payment on a due date, any unpaid
dividends will accumulate to be paid at such time as declared by the Board of
Directors out of funds legally available.
Liquidation Rights. Before any payments in liquidation on shares of
common stock may be made the holders of preferred stock are entitled to receive,
upon any voluntary or involuntary liquidation, dissolution or winding up of the
Company, an amount equal to $1.00 per share of preferred stock held by each
holder, plus an amount equal to any accrued but unpaid dividends on the
preferred stock.
Conversion Rights. The shares of preferred stock are convertible at any
time after 12 months from issuance into common stock on a one for one basis, but
must be converted no later than December 31, 2001.
Redemption by the Company. Commencing 12 months after issuance of the
preferred stock the preferred stock may be redeemable by the Company, in whole
or in part, at a redemption price equal to $1.00 per share, plus accumulated but
unpaid dividends. In order to redeem shares of preferred stock the Company must
mail the notice of redemption not less than 30 days prior to the redemption
date. The holders of the shares to be redeemed have the right to convert the
shares into common stock until 2 business days prior to the redemption date.
Risk Factor - Penny Stock Regulation. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated by certain penny
stock rules
<PAGE>
adopted by the Securities and Exchange Commission. Penny stock generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require that prior to a
transaction in a penny stock the broker-dealer make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If the Company's securities become subject to the penny stock
rules, investors in this offering may find it more difficult to sell their
securities.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Minnesota Statutes, contain an extensive indemnification provision
which requires mandatory indemnification by a corporation of any officer,
director and affiliated person who was or is a party, or who 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 member, director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a member,
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
and against judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted, or failed to act, 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. In some instances a court must approve such
indemnification.
ITEM 13. FINANCIAL STATEMENTS
Please see the attached Financial Statements.
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Please see the attached Financial Statements
(b) Exhibits:
2. Merger Agreement and Plan of Merger
3. Articles of Incorporation and bylaws
5. Opinion of counsel
10. Letter Agreements
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: Southwest Industrial Products, Inc.
____/s/___________________________
Lindsey Vinson, President
____/s/________________________
Pike Hassink, Director
____/s/________________________
David Hayslip, Director
<PAGE>
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
COMPILED FINANCIAL STATEMENTS
FIVE MONTHS ENDED NOVEMBER 30, 1997
GARY A. LaPALME, C.P.A.
CERTIFIED PUBLIC ACCOUNTANTS
Minneapolis, Minnesota
<PAGE>
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
CONTENTS
FIVE MONTHS ENDED NOVEMBER 30, 1997
Page
Accountants Compilation Report 2
Financial Statements
Balance Sheets 3
Statements of Operations and Retained Deficit 4
Statements of Cash Flows 5
Notes to Financial Statements 6-7
<PAGE>
[GARY A. LaPALME, C.P.A. LETTERHEAD]
To the Board of Directors
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
Dallas, Texas
I have compiled the accompanying balance sheet of SOUTHWEST INDUSTRIAL PRODUCTS,
INC. as of NOVEMBER 30, 1997 and the related statements of income and retained
deficit and cash flows for the five months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. I have not audited or
reviewed the accompanying November 30, 1997 financial statements and,
accordingly, do not express an opinion or any other form of assurance on them.
The financial statements for the year ended June 30, 1997 were audited by me,
and I expressed an unqualified opinion on them in my report dated August 11,
1997, but I have not performed any auditing procedures since that date.
/s/ Gary A. LaPalme, CPA
GARY A. LaPALME, C.P.A.
Certified Public Accountants
January 14, 1998
Minneapolis, Minnesota
<PAGE>
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
BALANCE SHEETS
ASSETS
November 30, June 30
1997 1997
----------- --------
(unaudited)
Current Assets
Cash $ 7,250 $ --
Accounts receivable 94,931 --
Inventory 150,000 --
Deposits 31,000 --
----------- --------
Total Current Assets 283,181 --
----------- --------
Property and Equipment-net
of depreciation of $100,320 1,103,530 --
----------- --------
Other Assets
Incorporation costs, net of amortization
of $83 and $-0- respectively 917 1,000
Organization costs, net of amortization
of $750 and $-0- respectively 8,250 9,000
Goodwill, net of amortization of
$42,949 and $-0- respectively 1,503,201 --
----------- --------
Total Other Assets 1,512,368 10,000
----------- --------
TOTAL ASSETS $ 2,899,079 $ 10,000
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt
due within one year $ 241,000 $ --
Accounts payable 107,803 --
----------- --------
Total Current Liabilities 348,803 --
----------- --------
Long-Term debt- net of portion
due within one year 2,319,000 --
----------- --------
Commitments and Contingencies -- --
Stockholders' Equity
Common stock, no par value, 29,850,000
issued and outstanding 57,500 10,000
Preferred stock, no par value, 569,259
shares issued and outstanding at
November 30, 1997 and 2,000 at
June 30, 1997 499,177 10
Additional paid in capital (10) (10)
Retained earnings (325,391) --
----------- --------
Total Stockholders' Equity 231,276 10,000
----------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,899,079 $ 10,000
=========== ========
See Accountant's Compilation Report and The Notes To Financial Statements
<PAGE>
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
STATEMENTS OF OPERATIONS AND RETAINED DEFICIT
Five
Months Ended Year Ended
November 30, June 30
1997 1997
------------ -----------
(Unaudited)
Revenue
Sales $ 968,709 $ --
Miscellaneous income 9,299 --
------------ -----------
Total Revenue 978,008 --
------------ -----------
Cost of Sales
Materials 374,444 --
Payroll expenses 494,596 --
Supplies 11,653 --
Freight 37,229 --
------------ -----------
Total Cost of Sales 917,922 --
------------ -----------
Gross Profit 60,086 --
------------ -----------
General and Administrative Expenses
Rent 53,231 --
Utilities 47,857 --
Depreciation and amortization 144,102 --
Insurance 37,444 --
Repairs 25,644 --
Equipment rental 19,776 --
Miscellaneous expenses 14,184 --
Legal and accounting 12,500 --
Printing 9,381 --
Postage and delivery 4,947 --
Telephone 4,296 --
Vehicle expense 3,192 --
Miscellaneous taxes 3,521 --
Office supplies 1,876 --
Licenses and permits 1,576 --
Travel and entertainment 1,450 --
Security 500 --
------------ -----------
Total General and Administration
expenses 385,477 --
------------ -----------
Net Loss Before Taxes on Income (325,391) --
------------ -----------
Taxes on Income -- --
------------ -----------
Net Loss (325,391) --
Retained Earnings, beginning of period -- --
------------ -----------
Retained Deficit, end of period $ (325,391) $ --
============ ===========
Net Earnings Per Share $ (.01) $ --
============ ===========
Weighted Average Shares Outstanding 25,774,676 20,000,000
============ ===========
See Accountant's Compilation Report and The Notes To Financial Statements
<PAGE>
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
Three
Months Ended Year Ended
September 30, June 30,
1997 1997
----------- --------
(Unaudited)
Cash Flows From Operating Activities
Net loss $ (325,391) $ --
Adjustments to reconcile net
income to net cash used for
operating activities:
Depreciation and
amortization 144,102 --
(Increase) in accounts receivable (94,931) --
(Increase) in inventory (150,000) --
(Increase) in deposits (31,000) --
Increase in accounts payable 107,803 --
(Increase) in incorporation costs -- (1,000)
(Increase) in organization costs -- (9,000)
----------- --------
Net Cash From Operating Activities (349,417) (10,000)
----------- --------
Cash From Financing Activities
Proceeds from issue of stock 546,667 --
Proceeds from debt 2,750,000 --
Payments on debt (190,000) --
----------- --------
Net Cash Flows From Financing
Activities 3,106,667 --
----------- --------
Cash Flows From Investing Activities
Purchase of property and equipment (1,203,850) --
Investment in goodwill (1,546,150) --
----------- --------
Net Cash Flows From Investing
Activities (2,750,000) --
----------- --------
Net (Decrease) in Cash 7,250 (10,000)
Cash at Beginning of Period -- 10,000
----------- --------
Cash at End of Period $ 7,250 $ --
=========== ========
See Accountant's Compilation Report and The Notes To Financial Statements
<PAGE>
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
FIVE MONTHS ENDED NOVEMBER 30, 1997
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The Company was incorporated on June 28, 1996
in the State of Minnesota. The Company is operating as a holding
company for acquired business. Effective September 19, 1997 the
Company purchased the pledged assets of Golden Pacific Plastics, Inc.
and is now operating as a manufacturer of large polypropolene bags.
Estimates and Assumptions - 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 at the date of the financial
statements and revenues and expenses during the reporting period.
Significant estimates include the valuation of stock issued to
acquire companies. Actual results could differ in these estimates.
NOTE B PROPERTY AND EQUIPMENT
Property and equipment are being depreciated over five years on a
straight line basis. The assets were purchased from Golden Pacific
Plastics, Inc. and consist primarily of equipment used in the
manufacture of large polypropolene bags.
NOTE C PURCHASE OF PLEDGED ASSETS
On and effective September 19, 1997 the Company purchased the
pledged assets of Golden Pacific Plastics Mfg., Inc. that were
pledged as collateral to a creditor. These assets were purchased by
Southwest Industrial Products, Inc. from the creditor for
$2,750,000. The purchase called for a down payment of $150,000 and a
promissory note in the amount of $2,600,000. The principal of the
note is due in monthly installments of $18,750 commencing November
1, 1997. The note requires four additional principal payments of
$100,000 on November 15, 1997 and January 15, 1998 and $150,000 on
March 15, 1998. Interest is to be paid monthly at the following
rates:
10% per annum from September 19, 1997 until August 31, 1998
11% per annum from September 01, 1998 until August 31, 1999
12% per annum from September 01, 1999 until paid in full.
NOTE D COMMON STOCK
The authorized number of shares for both common and preferred shares
is an aggregate total of 150,000,000. The number of common shares
issued and outstanding is 20,000,000.
NOTE E PREFERRED STOCK
The authorized number of shares for both common and preferred shares
is an aggregate total of 150,000,000. The preferred shares were
issued in two distinct instances with separate characteristics to
each. 2,000 shares were issued on June 30, 1996. These shares are
convertible to ten common shares for every one preferred share.
These 2,000 preferred shares were issued as follows: 1,000 shares to
the stock transfer agent for stock transfer services, and 1,000
shares for consulting services. These 2,000 shares do not have a
priority on liquidation of the Company. The second group of
preferred stock was issued after June 30, 1997.
The second group of preferred shares totals 567,259 shares. These
shares are to be paid quarterly dividends at 12% starting March 31,
1998. Each of these preferred shares is convertible to one common
share and have a liquidation right at $1 per preferred share before
any common share rights. This group of preferred shares are
redeemable by the Company after twelve months from the date of
issue.
<PAGE>
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
FIVE MONTHS ENDED NOVEMBER 30, 1997
NOTE F NAME CHANGE
On July 23, 1997 the Company changed its name from Onyx-Five, Inc.
to SOUTHWEST INDUSTRIAL PRODUCTS, INC.
NOTE G RECLASSIFICATION
Some numbers from the financial statements for the year ended June
30, 1997 have been reclassified to conform to the presentation of
the financial statements for the five months ended November 30,
1997. The results of operations have not been changed.
NOTE H LEASE OBLIGATION
The Company leases its warehouse space under a three year lease from
August, 1997 through July, 2000. The terms of the lease call for
lease payments of $10,250 per month for the first year, $10,550 per
month for the second year, and $10,850 per month for the third year.
The lease has a three year renewal option at $11,000 per month.
Minimum lease payments are as follows:
Year ended June 30, 1998 $ 123,000
Year ended July 31, 1999 126,600
Year ended July 31, 2000 130,200
---------
$ 379,800
=========
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement")
dated this ______ day of July, 1997, between Southwest Industrial Products, Inc.
(the "Company"), a Texas corporation, and Onyx-Five, Inc. (the "Purchaser") a
Minnesota corporation,
WHEREAS, the Company desires to merge with the Purchaser and the
Purchaser with the Company, all upon the terms and subject to the conditions of
this Agreement and the Plan of Merger attached as Exhibit A (the "Plan of
Merger"); and
WHEREAS, the Company and the Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
merger of the Company;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein
contained, the parties agree as follows:
ARTICLE 1
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in section 1.4) the Company shall be merged
with and into the Purchaser and the separate corporate existence of the Company
shall cease (the "Merger"). The Purchaser shall be the surviving corporation in
the Merger (sometimes referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Minnesota, and the separate
corporate existence of the Purchaser with all its rights, privileges, immunities
and franchises shall continue unaffected by the Merger.
1.2 TERMS OF MERGER. The Company shall transfer all of its shares of
its stock to the Purchaser. The Purchaser agrees to issue 10,000,000 shares of
its common stock to the shareholders of the Company. The Board of Directors
shall be Lindsey Vinson, David Hayslip and Pike Hassink, the Board of Directors
shall then elect the officers of the Company.
1.3 CLOSING. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Charles Clayton, Minneapolis, Minnesota on the first
business day on which the last to be fulfilled or waived of the conditions set
forth in Article VII shall be fulfilled or waived in accordance with this
Agreement, at such time as the Company and Purchaser may agree, or (ii) on such
other date and/or at such other place and time as the Company and Purchaser may
agree.
<PAGE>
1.4 EFFECTIVE TIME. As soon as practicable following fulfillment or
waiver of the conditions specified in Article VII, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VIII, the
Company and the Purchaser will cause the Articles of Merger (the "Articles of
Merger") to be executed and filed with the Secretary of State of Minnesota (the
"State Commission"). The merger shall become effective on the date on which the
Secretary of State issues a Certificate of Merger, and such time is referred to
as the "Effective Time".
ARTICLE II
ARTICLES OF INCORPORATION AND BY-LAWS OF THE
SURVIVING COMPANY
2.1 THE ARTICLES OF INCORPORATION. The Articles of Incorporation of the
Purchaser (the "Articles") in effect at the Effective Time shall be Articles of
Incorporation of the Surviving Corporation, in accordance with the Minnesota
Statutes.
2.2 THE BY-LAWS. The By-Laws of the Purchaser in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation, unless duly
amended in accordance with its terms and the Minnesota Statutes.
ARTICLE III
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.1 OFFICERS AND DIRECTORS. The directors and officers of the Purchaser
at the Effective Time shall, from and after the Effective Time, be directors and
officers, of the Surviving Corporation, until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Articles and By-Laws.
ARTICLE IV
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
4.1 At the Effective Time, all shares of common stock of the Company
issued and outstanding immediately prior to the Effective Time shall be
exchanged for validly issued, fully paid and nonassessable shares of the
Purchaser.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 CORPORATE ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. The Company has the corporate power and authority to
carry on its respective businesses as they are now being conducted. The Company
has made available to Purchaser a complete and correct copy of the Company's
Articles, and the Company's By-Laws. The Company's Articles and By-Laws so
delivered are in full force and effect.
5.2 CORPORATE AUTHORITY. Subject only to approval of this Agreement and
the Plan of Merger by the holders of a majority of the outstanding shares, the
Company has the requisite corporate power and authority and has taken all
corporate action necessary in order to execute and deliver this Agreement and to
consummate the transactions contemplated. This Agreement is a valid and binding
agreement of the Company.
5.3 COMPLIANCE. The execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated by the
Company will not, constitute or result in (i) a breach or violation of, or a
default under, the Articles or By-Laws of the Company or (ii) a breach or
violation of, a default under, the acceleration of, or the creation of a lien,
pledge, security interest or other encumbrance on assets pursuant to (with or
without the giving of notice or the lapse of time), any provision of any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation ("Contracts") of the Company, or any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or non-governmental
permit or license to which the Company is subject, except, in the case of clause
(ii) above, for such breaches, violations, defaults, or accelerations which,
alone or in the aggregate, will not have a material adverse effect on the
financial condition, properties, business or results of operations of the
Company.
5.4 BROKERS AND FINDERS. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated.
5.5 FINANCIAL STATEMENTS. The financial statements as of May 31, 1997,
which have been delivered to Purchaser ("Company Financial Statements") are
complete, accurate, and fairly present the financial condition of the Company as
of the date and the results of its operation for the periods covered. To the
best
<PAGE>
knowledge of the Company, there are no liabilities, either fixed or contingent,
not reflected in the financial statements other than contracts or obligations in
the ordinary and usual course of business, constituting liens or other
liabilities which, if disclosed, would alter substantially the financial
condition of the Company as reflected in the financial statements. These
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied.
5.6 LITIGATION AND PROCEEDINGS. To the best knowledge of the Company,
it is not involved in any pending litigation or governmental investigation or
proceeding not reflected in the financial statements, or otherwise disclosed in
the Schedules and, to the best knowledge of the Company, no litigation, claims,
assessments, or governmental investigation or proceeding is threatened against
the Company.
5.7 TAX RETURNS. The Company has filed all tax returns, forms, or
reports, which are due or required to be filed by it prior to this date and has
paid or made adequate provisions for the payment of all taxes, penalty fees, or
assessments which have or may become due pursuant to such returns or pursuant to
any assessments received.
5.8 TITLE AND RELATED MATTERS. The Company has good and marketable
title to all of its licenses, copyrights, trademark, patents, patents pending,
properties, inventory, interests in properties, and other assets, real and
personal, free and clear of all mortgages, liens, pledges, charges, or
encumbrances except (i) statutory liens or claims not yet delinquent; (ii) such
imperfections of title and easements as do not and will not materially detract
from or interfere with the present or proposed use of the assets or properties
subject thereto or affected thereby or otherwise materially impair present
business operations on such properties or in connection with such assets; and
(iii) as described in the financial statements or in Company Schedules. The
Company owns, free and clear of any liens, claims, encumbrances, royalty
interests, or other restrictions or limitations of any nature whatsoever, any
and all procedures, techniques, business plans, methods of management, or other
information utilized in the conduct of the Company's business or operations,
whether or not the value thereof is reflected in the most recent balance sheet
included in the Company Schedules. The plants, structures, and equipment of the
Company that are necessary or used in the operations of the business of the
Company are in good operating condition and repair, normal wear and tear
excepted.
5.10 COMPANY SCHEDULES. The Company has delivered to Purchaser the
following schedules which are collectively referred to as the "Schedules" and
which consist of separate schedules dated as of the date of execution of this
Agreement and instruments and data as of the same date, all certified by the
chief executive officer of the Company, as complete, true, and correct:
(A) A schedule containing complete and correct copies of the articles
of
<PAGE>
Incorporation and Bylaws of Company in effect as of the date of this
Agreement;
(B) A schedule containing a description of all real property owned or
leased by the Company, together with a description of every mortgage,
deed of trust, pledge, lien, agreement, encumbrance, claim, or equity
interest of any nature whatsoever in real property with copies of the
underlying documentation;
(C) A schedule describing all material contracts, employee agreements,
licenses, agreements, or other instruments to which the Company is a
party or by which it or its properties or assets are bound;
(D) A schedule describing all loans and mortgages for which Company is
obligated and the terms;
(E) A schedule setting forth a description of any material adverse
change in business, operations, property, inventory, assets, or
condition of the Company since May 31, 1997;
(F) A schedule of all litigation or governmental investigation or
proceeding which is pending or which, to the best knowledge of
management, is threatened or contemplated;
(G) A schedule of all outstanding options and warrants to acquire
shares of common stock;
(H) A schedule describing all joint ventures, partnerships or
corporations in which the Company owns an interest or a right to
acquire an interest;
(I) A schedule of all documents, disclosures, or representations
required to be disclosed by this Agreement or required to be disclosed
in order to set forth all material facts regarding Acquiree.
5.11 CORPORATE ORGANIZATION AND QUALIFICATION. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Minnesota. The Purchaser has the corporate power and authority
to carry on its respective businesses as they are now being conducted. The
Purchaser has made available to the Company a complete and correct copy of the
Purchaser's Articles, and the Purchaser's By-Laws. The Purchaser's Articles and
By-Laws so delivered are in full force and effect.
5.12 CORPORATE AUTHORITY. Subject only to approval of this Agreement
and the Plan of Merger by the holders of a majority of the outstanding shares,
the Purchaser has the requisite corporate power and authority and has taken all
corporate action necessary in order to execute and deliver this Agreement and to
<PAGE>
consummate the transactions contemplated. This Agreement is a valid and binding
agreement of the Purchaser.
5.13 COMPLIANCE. The execution and delivery of this Agreement by the
Purchaser do not, and the consummation of the transactions contemplated by the
Purchaser will not, constitute or result in (i) a breach or violation of, or a
default under, the Articles or By-Laws of the Purchaser or (ii) a breach or
violation of, a default under, the acceleration of or the creation of a lien,
pledge, security interest or other encumbrance on assets pursuant to (with or
without the giving of notice or the lapse of time), any provision of any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation ("Contracts") of the Purchaser or any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or non-governmental
permit or license to which the Purchaser is subject, except, in the case of
clause (ii) above, for such breaches, violations, defaults, or accelerations
which, alone or in the aggregate, will not have a material adverse effect on the
financial condition, properties, business or results of operations of the
Purchaser.
5.14 BROKERS AND FINDERS. Neither the Purchaser nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated.
ARTICLE VI
COVENANTS
6.1 ACQUISITION PROPOSALS. The Company will, and shall direct (and
shall use its best efforts to cause) all of its officers and directors and
employees and any investment banker, attorney, accountant or other agent
retained by the Company not to, initiate or solicit any inquiries or the making
of any proposal with respect to, or, except to the extent required by fiduciary
obligations under applicable laws, as advised in writing by counsel, engage in
negotiations concerning, or provide any confidential information or data or to
have any discussions with, any person relating to, any acquisition, business
combination or purchase of all or any significant portion of the assets of, or
any equity interest in, the Company. The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted with respect to any of the foregoing. The Company will
notify Purchaser immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with the Company.
6.2 INTERIM OPERATIONS OF THE COMPANY. The Company covenants and agrees
that after this date and prior to the Effective Time (unless
<PAGE>
Purchaser shall otherwise agree in writing and except as otherwise contemplated
by this Agreement):
(a) the business of the Company shall be conducted only in the
ordinary and usual course and, to the extent consistent
therewith, the Company shall use its reasonable best efforts
to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees and
business associates;
(b) the Company shall not materially modify or amend or terminate
any of its material contracts or waive, release or assign any
material rights or claims, except in the ordinary and usual
course of business;
6.3 MEETINGS OF THE SHAREHOLDERS. As soon as practicable after this
date, Purchaser and the Company shall prepare a joint proxy/registration
statement (the "Registration Statement"), which shall comply as to form with all
applicable law and its governing instruments to convene a meeting of its
shareholders as promptly as practicable to consider and vote upon the approval
of this Agreement and the Plan of Merger and the Merger. Subject to fiduciary
requirements of applicable law, the respective boards of directors of each of
Purchaser and the Company shall recommend such approval and take all lawful
action to solicit such approval; provided, however, and notwithstanding any
other provision in this Agreement to the contrary, if either Purchaser or the
Company should experience any development or combination of developments having
a material adverse effect on the financial condition, properties, business or
results of operations of Purchaser, taken as a whole, or the Company, taken as a
whole, as the case may be, other than as a result of factors affecting the
industry or the economy generally, then the board of directors of the other
Company may withdraw its recommendation of the merger and may postpone the
meeting of its shareholders to allow adequate time to disseminate relevant
disclosure material. The Company agrees, as to information with respect to the
Company, its officers, directors, and shareholders contained when the
Registration Statement becomes effective and at the date of the meeting of the
respective shareholders of Purchaser and the Company, will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated or necessary to make the statement not misleading.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF PURCHASER AND COMPANY. The respective
obligations of Purchaser and the Company to consummate the
<PAGE>
merger are subject to the fulfillment of each of the following conditions, any
or all of which may be waived in whole or in part by Purchaser or the Company as
the case may be, to the extent permitted by applicable law:
(a) Shareholder Approval. This Agreement shall have been duly
approved by the holders of (i) at least a majority of the
voting power of the outstanding shares of the Purchaser common
stock, voting together as a single class, in accordance with
applicable law and the Certificate of Incorporation and
By-Laws of Purchaser and (ii) a majority of the outstanding
shares, in accordance with applicable law and the Articles and
By-Laws of the Company.
(b) Continuing Warranties, Certificate. The representations and
warranties of the Company contained in this Agreement shall be
correct on and as of the Effective Time in all material
respects with the same effect as though made and as of such
date, except for the changes contemplated by this Agreement,
and the Company shall have performed in all material respects
all of its obligations to be performed, and Purchaser shall
have received at the Effective Time a certificate to that
effect, dated the Effective Time, and executed on behalf of
the Company by an executive officer of the Company.
Notwithstanding anything in the foregoing to the contrary,
this Section 7.1(b) shall be deemed to have been fulfilled
regardless of whether the representations contained in Section
5.1 shall not be so correct or the covenants in Sections 6.1
and 6.2 to the extent it is applied to these sections.
7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the merger are subject to the fulfillment of each of the
following conditions, any or all of which may be waived in whole or in part by
the Company to the extent permitted by applicable law:
(a) Shareholder Approval. This Agreement shall have been duly
approved by the holders of (i) at least a majority of the
voting power of the outstanding shares of the Purchaser common
stock, voting together as a single class, in accordance with
applicable law and the Certificate of Incorporation and
By-Laws of Purchaser and (ii) a majority of the outstanding
shares, in accordance with applicable law and the Articles and
By-Laws of the Purchaser.
(b) Continuing Warranties, Certificate. The representations and
warranties of the Purchaser contained in this Agreement shall
be correct on and as of the Effective Time in all material
respects with the same effect as though made and as of such
date, except for the changes contemplated by this Agreement,
and the Purchaser shall have performed in all
<PAGE>
material respects all of its obligations to be performed, and
Company shall have received at the Effective Time a
certificate to that effect, dated the Effective Time, and
executed on behalf of the Purchaser by an executive officer of
the Purchaser.
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the merger may be abandoned at any time prior to the Effective Time, before or
after the approval by shareholders of the parties by the mutual consent of
Purchaser and the Company by action of their respective boards of directors.
8.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement and abandonment of the merger pursuant to this Article VIII,
no party (or any of its directors or officers) shall have any liability or
further obligation to any other party to this Agreement, except as provided in
Section 9.2 and except that nothing will relieve any party from liability for
any breach of this Agreement.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES. Whether or not the merger shall be
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
merger.
9.2 SURVIVAL. The agreements shall survive the consummation of the
merger.
9.3 MODIFICATION OR AMENDMENT. Subject to the Minnesota Statutes, at
any time prior to the Effective Time, the parties may, by written agreement,
make any modification or amendment of this Agreement approved by their
respective boards of directors. This Agreement shall not be modified or amended
except pursuant to an instrument in writing executed and delivered on behalf of
each of the parties. After the Effective Time, none of the agreements may be
amended.
9.4 WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
<PAGE>
9.5 COUNTERPARTS. For the convenience of the parties this Agreement may
be executed in any number of counterparts, each such counterpart being deemed to
be an original instrument, and all counterparts shall together constitute the
same agreement.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota regardless of the laws that
might otherwise govern under applicable principles of conflicts of law except
that the provisions of this Agreement relating to the merger shall also be
governed by the laws of the State of Minnesota.
9.7 NOTICES. Any notice, request, instruction, or other document to be
given by any party to the other, shall be in writing and delivered personally or
sent by a registered or certified mail, postage prepaid to the Company to
Lindsey Vinson, Dallas, Texas and to the Purchaser to Lindsey Vinson, Dallas,
Texas, or to such other persons or addresses as may be designated in writing by
the party to receive such notice.
9.8 ENTIRE AGREEMENT, ETC. This Agreement (a) constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties, with respect to the subject matter and (b)
shall not be assignable by operation of law or obligation to, or rights in
respect of, any persons other than the parties, it being expressly agreed that
all of the persons (and their successors and assigns) who are beneficiaries of
such sections or schedule (whether as individuals or as members of a class or
group) shall be entitled to enforce such sections and schedule against Purchaser
or the surviving corporation or of the Purchaser.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
By:____________________________
Name:_________________________
Title:__________________________
<PAGE>
ONYX-FIVE, INC.
By:____________________________
Name:_________________________
Title:__________________________
<PAGE>
PLAN OF MERGER
SECTION 1. CORPORATIONS PLANNING TO MERGE.
Southwest Industrial Products, Inc. (Southwest), a Texas corporation
shall be merged with Onyx-Five, Inc. (Onyx), a Minnesota, corporation. At the
Effective Time the corporate existence of Southwest shall cease. Onyx shall be
the surviving corporation, and shall continue to be governed by the laws of the
State of Minnesota.
SECTION 2. TERMS AND CONDITIONS.
2.1 The merger shall be effective upon the issuance of a Certificate of
Merger by the Secretary of State of the State of Minnesota.
2.2 The Articles of Incorporation shall be the Articles of
Incorporation of Onyx.
2.3 The By-Laws shall be the By-Laws of Onyx.
2.4 The Directors and Officers shall be the Directors and Officers of
Onyx.
SECTION 3. MANNER AND BASIS OF CONVERTING THE SHARES.
3.1 At the Effective Time, all of the shares of the common stock of
Southwest issued and outstanding immediately before the Effective Time shall be
retired.
3.2 Promptly after the Effective Time Onyx shall cause to be mailed to
each person who was at the Effective Time a holder of record of shares of
Southwest common stock his pro rata share of 10,000,000 shares of common stock.
IN WITNESS WHEREOF, the parties have executed this Plan of Merger this
____ day of July, 1997.
Southwest Industrial Products, Inc.
by____________________________
President
<PAGE>
Onyx-Five, Inc.
by____________________________
President
ARTICLES OF INCORPORATION
OF
ONYX-FIVE, INC.
The undersigned incorporator, being a natural person, 18 years of age
or older, in order to form a corporate entity under Minnesota Statutes, Chapter
302A, hereby adopts the following Articles of Incorporation:
ARTICLE I
The name of the corporation is Onyx-Five, Inc.
ARTICLE II
The registered office of the corporation is located at 320 E. Main St.,
Anoka, Minnesota 55303, and the registered agent at that address is Carla Wirth.
ARTICLE III
The name and address of the incorporator is Gary A. Larvinson, 11409
91st Street, Clear Lake, Minnesota.
ARTICLE IV
The corporation is authorized to issue an aggregate total of
150,000,000 shares.
ARTICLE V
In addition to the powers granted to the Board of Directors by
Minnesota Statutes, Chapter 302A, the Board of Directors of this corporation
shall have the
<PAGE>
power and authority to fix by resolution any designation, class, series, voting
power, preference, right, qualification, limitation, restriction, dividend, time
and place of redemption, and conversion right with respect to any stock of the
corporation.
ARTICLE VI
Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting by written action signed by a
majority of the Board of Directors then in office, except as to those matters
which require shareholder approval, in which case the written action shall be
signed by all members of the Board of Directors then in office.
ARTICLE VII
No holder of stock of this corporation shall be entitled to any
cumulative voting rights.
ARTICLE VIII
No holder of stock of this corporation shall have any preferential,
pre-emptive, or other rights of subscription to any shares of any class or
series of stock of this corporation allotted or sold or to be allotted or sold
and now or hereafter authorized, or to any obligations or securities convertible
into any class or series of stock of this corporation, nor any right of
subscription to any part thereof.
ARTICLE IX
IN WITNESS WHEREOF, the Incorporator has executed these Articles of
Incorporation, this 13 day of June, 1996.
/s/ Gary A. Larvinson
-----------------------------
Gary A. Larvinson
STATE OF MINNESOTA )
)
COUNTY OF HENNEPIN )
Subscribed and sworn to before me
this 13 day of June, 1996.
/s/ Connie I. Krinke
- ---------------------------------
Notary Public
CONNIE I. KRINKE
NOTARY PUBLIC--MINNESOTA
SHERBURNE COUNTY
MY COMMISSION EXPIRES 1-27-99
[SEAL]
<PAGE>
ARTICLES OF AMENDMENT
0F
ONYX-FIVE CORPORATION
The undersigned corporation hereby adopt the following Articles of
Amendment, which replace and supersede prior Articles filed:
ARTICLES OF INCORPORATION
OF
SOUTHWEST INDUSTRIAL PRODUCTS, INC.
The undersigned incorporator, being a natural person, 18 years of age
or older, in order to form a corporate entity under Minnesota Statutes, Chapter
302A, hereby adopts the following Articles of Incorporation:
ARTICLE I
The name of the corporation is Southwest Industrial Products, Inc.
ARTICLE II
The registered office of the corporation is located at 527 Marquette,
Minneapolis, Minnesota 55402 and the registered agent at that address is Charles
Clayton.
ARTICLE III
The name and address of the incorporator is Charles Clayton, 527
Marquette, Minneapolis, Minnesota.
ARTICLE IV
The corporation is authorized to issue an aggregate total of
150,000,000 shares.
ARTICLE V
In addition to the powers granted to the Board of Directors by
Minnesota
<PAGE>
Statutes, Chapter 302A, the Board of Directors of this corporation shall have
the power and authority to fix by resolution any designation, class, series,
voting power, preference, right, qualification, limitation, restriction,
dividend, time and place of redemption, and conversion right with respect to any
stock of the corporation.
ARTICLE VI
Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting by written action signed by a
majority of the Board of Directors then in office, except as to those matters
which require shareholder approval, in which case the written action shall be
signed by all members of the Board of Directors then in office.
ARTICLE VII
No holder of stock of this corporation shall be entitled to any
cumulative voting rights.
ARTICLE VIII
No holder of stock of this corporation shall have any preferential,
pre-emptive, or other rights of subscription to any shares of any class or
series of stock of this corporation allotted or sold or to be allotted or sold
and now or hereafter authorized, or to any obligations or securities convertible
into any class or series of stock of this corporation, nor any right of
subscription to any part thereof.
ARTICLE IX
Minnesota Statutes sections 302A.671 (Control share acquisitions),
302A.673 (Business combinations) and 302A.675 (Takeover offer; fair price) shall
not apply to this corporation.
IN WITNESS WHEREOF, the Incorporator has executed these Articles of
Incorporation, this 17th day of July, 1997.
/s/ Lindsey Vinson
-----------------------------
Lindsey Vinson
<PAGE>
The amendment was adopted by the shareholders, on the 17th day of July,
1997.
/s/ Lindsey Vinson
------------------------------------
Lidnsey Vinson
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
JUL 23 1997
[ILLEGIBLE SIGNATURE]
SECRETARY OF STATE
<PAGE>
BY-LAWS
OF
ONYX-FIVE, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
1.1 Regular Meetings. Regular meetings of shareholders may be called by the
Chief Executive Officer, the Secretary, the Board of Directors, or by
shareholder demanded in accordance with Minnesota Statutes Section
302A.431, subdivision 2. No meeting shall be designated a regular
meeting unless specifically described as such in the notice of meeting
or unless all the shareholders are present in person or by proxy, and
none of them objects to this designation.
1.2 Special Meetings. Special meetings of the shareholders may be called
for any purpose or purposes at any time by the Chief Executive Officer,
Chief Financial Officer, two or more directors, or by shareholder
demand in accordance with Minnesota Statutes, Section 203A.433,
subdivision 2.
1.3 Time and Place of Shareholder Meeting. Except as otherwise provided by
statute, any meeting of shareholders shall be held on the date and at
the time and place fixed by the Chief Executive Officer or the Board of
Directors of the corporation.
1.4 Notice of Shareholder Meeting. Except as otherwise provided by statute,
written notice of the date, time, and place of any meeting of
shareholders shall be given to every holder of voting shares at such
address as appears on the stock book of the corporation at least five
days prior to the meeting if by mail, or two days prior to the meeting
if by telex, telegram, or in person.
1.5 Voting. Except where a greater percentage is required by statute, the
shareholders shall take action by the affirmative vote of the holders
of a majority of the votes of the shares present.
<PAGE>
ARTICLE II
DIRECTORS
2.1 Number, Term of Office. The number of directors of the corporation
shall be as determined from time to time by the shareholders. Directors
need not be shareholders. Each director shall hold office for an
indefinite term, not to exceed five years, that expires at the regular
meeting of shareholders next held after the director's election and
until a successor is elected and has qualified, or until the earlier
death, resignation, removal, or disqualification of the director.
2.2 Removal. The Board of Directors or the shareholders may remove any
director of the corporation at any time, for cause or without cause.
New directors may be elected at a meeting at which directors are
removed.
2.3 Board Meetings, Notice. The Chief Executive Officer (if a director),
the Chairman of the Board of Directors (if one is elected) or Directors
comprising at least one third of the number of directors then in office
may call a Board meeting by giving five days notice if by mail, or two
days notice if by telephone, telex, telegram, or in person, to all
directors of the day or date and time of the meeting. Meetings of the
Board of Directors may be held at the day or date, time, and place, as
shall be determined by the Board. If the day or date, time, and place
have been announced at a previous meeting of the Board, or if a meeting
schedule is adopted by the Board, no notice is required. In absence of
a designation by the Board of Directors, Board meetings shall be held
at the principal executive offices of the corporation.
2.4 (a) Advance Written Consent or Opposition. Any member of the Board or a
committee thereof, as the case may be, may give advance written consent
or opposition to a proposal to be acted on at a Board or committee
meeting. If a director or committee member is not present at the
meeting, advance written consent or opposition to a proposal does not
constitute presence for the purpose of determining whether a quorum
exists, but such advance written consent or opposition shall be a vote
in favor of or against the proposal or resolution acted upon at the
meeting is substantially the same or has substantially the same effect
as the proposal or resolution to which the member of the Board or
committee has consented or objected.
(b) Action Without Meeting. Any action, other than an action requiring
shareholder approval, may be taken by written action signed by the
number of directors that would be required to take the same action at a
meeting of the Board at which all directors were present. An action
<PAGE>
requiring shareholder approval required or permitted to be taken at a
board meeting may be taken by written action signed by all the
directors. Any such written action is effective when signed by the
required number of directors, unless a different effective time is
provided in the written action. When written action is taken by less
than all directors, all directors shall be notified immediately of its
text and effective date. Failure to provide the notice does not
invalidate the written action. A director who does not sign or consent
to the written action has no liability for the action or actions taken.
ARTICLE III
OFFICERS
3.1 Election; Term of Office; Removal. The Board of Directors shall elect a
Chief Executive Officer and Chief Financial Officer, and may elect such
other officers as it may deem necessary for the operation and
management of the corporation, each of whom shall have the duties and
responsibilities incident to the offices which they hold or as
determined by the Board. Officers need not be directors or
shareholders. Without limiting the foregoing, the Board may elect a
Chairman of the Board, President, one or more Vice Presidents, a
Treasurer, a Secretary and such assistant officers as it may designate
with titles to describe their duties, functions or special
responsibilities. Officers shall hold office at the will of the Board
for an indefinite term until their successors are elected and
qualified. Any officer elected or appointed by the Board of Directors
may be removed by the Board at any time with or without cause.
ARTICLE IV
AMENDMENTS
4.1 Subject to the power of shareholders to adopt, amend, or repeal these
Bylaws as provided in Minnesota Statutes, Section 302A.181, Subdivision
3, any Bylaw may be amended or repealed by the Board of Directors at
any meeting, provided that, after adoption of the initial Bylaws, the
Board shall not adopt, amend, or repeal a Bylaw fixing a quorum for
meetings of shareholders, prescribing procedures for removing directors
or filling vacancies in the Board, or fixing the number of directors or
their classifications, qualifications, or terms of office. The Board
may adopt or amend a Bylaw to increase the number of directors.
<PAGE>
ARTICLE V
INDEMNIFICATION
5.1 The corporation shall indemnify persons for such expenses and
liabilities in such manner, under such circumstances, and to the extent
required by Minnesota Statutes, Section 302A.521.
[CHARLES CLAYTON LETTERHEAD]
Exhibit 5
January 22, 1998
Southwest Industrial Products, Inc.
2710 Stemmons Freeway
Dallas, Texas 75207
Gentlemen:
I have acted as counsel for the company in connection with the
preparation of the Registration Statement, and, based on this, I am of the
opinion that:
1. The company is a corporation, duly organized, validly existing, and
in good standing under the laws of the State of Minnesota, with corporate
authority to conduct the business in which it is now engaged, and as described
in the Registration Statement.
2. There is not pending, or to the knowledge of counsel, threatened,
any action, suit, or proceeding before or by any court or governmental agency or
body to which the company is a party, or to which any property of the company is
subject, and which, in the opinion of counsel, could result in a material
adverse change in the business, business prospects, financial position or
results of operations, present or prospective, of the company or of its
properties or assets.
3. There is a liquidation preference for any preferred shareholder to
receive $1.00 for each share held before any liquidation payments may to made to
any holder of common shares.
Cordially,
CHARLES CLAYTON
[LINDSEY VINSON LETTERHEAD]
June 12, 1997
VIA TELECOPY 510-256-9021
Mr. Dimitri Koroslev
Bay Business Credit
1460 Maria Lane
Suite 300
Walnut Creek, California 94596
Re: Golden Pacific Plastics Mfg., Inc.
Dear Di:
Per our discussion of Wednesday afternoon, below are the terms under
which Southwest Industrial Products, Inc. is agreeing to purchase the pledged
assets of Golden Pacific Plastics Mfg., Inc. after Bay Business Credit's
foreclosure upon those assets and as well, in the interim, Southwest Industrial
Products, Inc.'s rental and operation of that equipment in place. Those terms
are as follows:
Purchase:
* Purchase price of $2,750,000
* Initial principal payment of $500,000 and an additional
principal payment in six months of $125,000. Balance to be
amortized over ten years due in seven with the amortization to
begin 30 days after the initial payment.
* First year interest rate ten percent (10%), second year eleven
percent (11%), years three through seven twelve percent (12%)
These rates will, however, float with prime.
* Southwest Industrial Products, Inc. signs as guarantor of the
debt. "Newco" would be the borrower. The borrower and
guarantor would be required to maintain a minimum tangible net
worth of $1,000,000 and working capital of $200,000. The
balance of the purchase price will be secured with a first
lien security interest in the assets of the borrower including
the purchase commitment contracts from Central Bag and
Flamingo.
* You have indicated that Bay Business Credit has reached an
agreement with Central Bag and Flamingo to settle the
California litigation on the following terms and will settle
that litigation on these terms:
<PAGE>
Central Bag -- cash payment of $125,000, $25,000 down
and the balance over 12 months plus purchase
commitments from "Newco" as generally outlined in Mr.
Logan's May 21st and May 30th letters subject to
negotiation. The final agreement as to the purchase
commitments will be mine to negotiate, with the
assistance of you and Peter, and the final agreement
will be within my sole discretion to determine. If I
am not able to reach an agreement with Central Bag on
the purchase commitments they will remain a defendant
in the litigation.
Flamingo -- Cash payment of $225,000, $120,000 down
and the balance over an agreed period, which you will
reasonably negotiate, plus purchase commitments from
"Newco." The final agreement as to the purchase
commitments will be mine to negotiate, with the
assistance of you and Peter, and the final agreement
will be within my sole discretion to determine. If I
am not able to reach an agreement with Flamingo on
the purchase commitments they will remain a defendant
in the litigation.
Any monies received from these or any other account Debtors,
net of any legal expenses incurred subsequent to May 1, 1997,
will be applied to the debt of Newco and the amortization of
the loan to Newco will be adjusted to reflect the reduced
principal as such payments are received by Bay Business
Credit. You will have Peter Bertram move as fast as possible
to finalize these agreements. I will contact Peter directly,
with your permission, regarding the purchase commitment
aspects.
* This agreement is expressly contingent upon obtaining purchase
commitments from Central Bag & Flamingo which are acceptable
to me and upon my confirming a deal with Voni Chen which is
acceptable to me.
* The sale is to be consummated at the earliest possible date
but not later than sixty (60) days from the date hereof.
However, this date may need to be adjusted depending upon when
the purchase commitments referenced above are finalized and
effective.
Rental and License
* Southwest Industrial Products, Inc. will indemnify Bay
Business Credit for any claims arising from the operation of
the business or occupancy of the premises by Southwest
Industrial Products, Inc., its agent, or assignee.
<PAGE>
* Southwest Industrial Products, Inc. will comply with all laws
and regulations pertaining to the operation of the business.
* Southwest Industrial Products, Inc. will pay all the rent and
utilities on the premises during the period of occupancy.
* Southwest Industrial Products, Inc. or Golden Pacific
Plastics, Mfg. will maintain insurance on the equipment and
inventory for a minimum of $1,500,000. Bay Business Credit
will be provided with a lenders loss payable endorsement on
the insurance which provides for 30 days notice prior to
cancellation. As I understand it from you, this insurance is
already in place through June.
* Southwest Industrial Products, Inc. will maintain the
equipment in proper operating condition and will not allow
waste or damage to the equipment.
* Southwest Industrial Products, Inc. shall pay to Bay Business
Credit the current value of any existing inventory sold during
the time of rental.
* All rental payments and payments for inventory shall apply to
the purchase of the assets by Southwest Industrial Products,
Inc. from Bay Business Credit and shall be applied to the
initial principal payment referenced above. Should the
intended sale of the assets to Southwest Industrial Products,
Inc. not be concluded during the term of this rental any and
inventory payments shall be retained by Bay Business Credit
without further obligation to Southwest.
* The landlord, South 66 Warehouse Associates must consent to an
extension of the period during which Bay Business Credit may
occupy the premises and liquidate collateral as provided for
in the "Waiver and Consent by Property Owner" between Bay
Business Credit and landlord dated February 15, 1995.
* Golden Pacific, its affiliates, and the guarantors of the Bay
Business Credit loans to Golden Pacific will rent the assets
in place to Newco or Southwest Industrial Products for $2,500
per week which payments shall be made directly to Bay Business
Credit.
* Any payments made by Golden Pacific shall not be a cure of the
default of Golden Pacific in its obligations to Bay Business
Credit and Bay Business Credit shall continue with its
foreclosure on the assets of Golden Pacific pursuant to its
rights under the Loan and Security Agreement between Golden
Pacific and Bay Business Credit and under the Uniform
Commercial Code.
<PAGE>
* During the period of this rental Southwest Industrial
Products, Inc. and Golden Pacific shall cooperate with Bay
Business Credit in allowing Bay Business Credit to show the
operation to other potential buyers.
* The rental shall be for a period of sixty (60) days. After the
initial sixty (60) days this consent to rental may be canceled
by Bay Business Credit upon ten days notice to Southwest.
Should Bay Business Credit cancel this consent Southwest
Industrial Products, Inc. shall return possession of the
premises to Bay Business Credit. Southwest Industrial
Products, Inc. may cancel the rental after the initial sixty
(60) days upon ten days notice to Bay Business Credit and
return of the premises to Bay Business Credit.
Please sign below where indicated on behalf of Bay Business Credit and
on behalf of your participants in this loan so I can move forward with the other
aspects of this deal.
Assuming these terms are satisfactory, I would like to pick up the keys
either Friday or Monday. Also, have you had any conversations recently with the
landlord?
Sincerely,
/s/ Lindsey Vinson
Lindsey Vinson
AGREED:
Bay Business Credit
/s/ Dimitri Koroslev
- -----------------------
Dimitri Koroslev, President
LV/tjm
cc: Pike Hassink (via telecopy)
Barry Grossman (via telecopy)
<PAGE>
[SOUTHWEST INDUSTRIAL PRODUCTS, INC. LETTERHEAD]
August 26, 1997
VIA TELECOPY 510-256-9021
Mr. Jim Cosmot
Bay Business Credit
1460 Maria Lane
#300
Walnut Creek, California 94596
Re: Golden Pacific Plastics Mfg., Inc.
Dear Jim:
I hope you got my message last week regarding the lease payment on the
premises in Houston. The check was hand delivered to the landlord on that day.
Due to several factors, including the delay in conclusion of the
settlements (which are still not, in fact, concluded) and the increased working
capital needs of Golden Pacific from this slow start, I need to discuss with you
a slight variation in the terms of the transaction. As you know, the letter
agreement currently provides for an initial principal payment of $500,000 with
an additional principal payment in six months of $125,000. The letter agreement
also provides that the note was to balloon in seven (7) years with interest
rates (floating with prime) of 10% in year one (1); 11% in year two (2); and 12%
in year three (3). I propose altering the above terms in the following respects:
* A closing on or before September 15, 1997 with a principal
payment at closing of $100,000 with additional principal
reductions (in addition to the normal amortization) of
$100,000 on November 15 and January 15, 1998 with another
principal reduction on March 15, 1998 of $150,000.
In consideration of "spreading" the down payment as indicated above:
* I will agree to increase the annual interest rates 2 percent
each year so that the first year interest rate (all floating
with prime) will be 10 1/2%, the second year will be 11 1/2%
and years 3 forward will be 12 1/2%.
* I will agree that the balloon will be moved up to five (5)
years rather than seven (7) years.
<PAGE>
* Southwest Industrial Products Inc. will convey to Bay Business
Credit, or as directed by BBC, 200,000 shares of Southwest
Industrial Products, Inc. free trading common stock at
closing. (Within the next week to ten days, Southwest
Industrial Products, Inc. will be trading on the OTC
electronic bulletin board.)
The other terms of our letter agreement shall remain essentially the
same. This closing shall remain contingent upon concluding at least one of the
purchase commitments, from either Flamingo or Central Bag. I am meeting with
Arthur Wah and George Eshoo next Tuesday here in Dallas to finalize their
purchase commitment. As I understand it, an agreement has been reached with
Flamingo on the money terms. I will need to confirm that such an agreement has
been reached so that I can proceed to finalize the purchase commitment from
Flamingo. I will continue to work towards finalizing a commitment with Central
Bag.
Please give these matters some thought so that we may discuss them in
the next several days.
Sincerely,
/s/ Lindsey Vinson
Lindsey Vinson
LV/tjm
<PAGE>
[SOUTHWEST INDUSTRIAL PRODUCTS, INC. LETTERHEAD]
September 3, 1997
VIA TELECOPY 510-256-9021
Mr. Jim Cosmot
Bay Business Credit
1460 Maria Lane
#300
Walnut Creek, California 94596
Re: Golden Pacific Plastics Mfg., Inc.
Dear Jim:
I am sorry that I did not get back to you yesterday. As we discussed, I
moved on Friday and was still out of the office taking care of related matters.
I wanted to get back to you regarding my letter of last week and our
discussion regarding same. As I understand it, all of the basic terms and
conditions in my August 26, 1997 letter to you are acceptable to you except that
you wanted an initial principal payment at closing of $150,000 rather than the
$100,000 proposed in my letter. Based upon where I am right now with Golden
Pacific and my offering, I can agree to increase that initial principal payment
to $150,000. Based upon our agreement to these basic terms, I would like to move
forward and get this closed. I have previously received copy of a note and
security documents from Dimitri. Could you please have those modified to reflect
the new payment terms and forward them to me for my review.
I met with Arthur Wah and George Eshoo yesterday and believe we have an
agreement with regards to the purchase commitment. We will be working over the
next several days to formalize that. As well, George Eshoo has indicated that he
will trying to firm up with Peter Bertrand the settlement agreement and release
for Flamingo in the litigation.
Please call me if you have any questions. I very much appreciate your
continued assistance with these matters.
Sincerely,
/s/ Lindsey Vinson
Lindsey Vinson
LV/tjm
