U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange
Act of 1934
For the quarterly period ended MARCH 31, 2000
|_| Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______ to _______.
Commission File No. Pending
AUGUST PROJECT 1 CORP.
----------------------
(Name of Small Business Issuer in Its Charter)
Florida 65-0986953
- ------- --------------
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
22 South Links Avenue, Ste. 204, Sarasota, Florida 34236
- -------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(941) 330-8051
--------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has
been subject to such filing requirements for the past 90 days. Yes |_| No |X|
There were 14,734,000 shares of Common Stock outstanding as of May 22,
2000.
<PAGE>
PART I
FINANCIAL INFORMATION
- ---------------------
ITEM 1. FINANCIAL STATEMENTS.
--------------------
AUGUST PROJECT 1 CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 2000 AND DECEMBER 31, 1999
<PAGE>
C O N T E N T S
Independent Accountants' Review Report.................................... F-3
Balance Sheets............................................................ F-4
Statements of Operations.................................................. F-5
Statements of Stockholders' Equity (Deficit).............................. F-6
Statements of Cash Flows.................................................. F-7
Notes to the Financial Statements......................................... F-8
F-2
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
To the Board of Directors
August Project 1 Corporation
Miami, Florida
We have reviewed the accompanying balance sheet of August Project 1 Corporation
as of March 31, 2000 and the related statements of operations, stockholders'
equity (deficit) and cash flows for the periods ended March 31, 2000 and 1999.
These financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States.
/s/ HJ & Associates, LLC
HJ & Associates, LLC
Salt Lake City, Utah
May 15, 2000
F-3
<PAGE>
<TABLE>
AUGUST PROJECT 1 CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
------
<CAPTION>
March 31, December 31,
2000 1999
--------------------------- ---------------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ -- $ --
--------------------------- ---------------------------
Total Current Assets -- --
--------------------------- ---------------------------
TOTAL ASSETS $ -- $ --
=========================== ===========================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Note payable - related parties (Note 3) $ 25,000 $ --
--------------------------- ---------------------------
Total Current Liabilities 25,000 --
--------------------------- ---------------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock authorized: 50,000,000 common
shares at $0.001 par value; 5,000,000 shares
issued and outstanding 5,000 5,000
Capital in excess of par value (3,000) (3,000)
Deficit accumulated during the development stage (27,000) (2,000)
--------------------------- ---------------------------
Total Stockholders' Equity (Deficit) (25,000) --
--------------------------- ---------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ -- $ --
=========================== ===========================
See Accountants' Review Report and the accompanying notes to the
reviewed financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
AUGUST PROJECT 1 CORPORATION
(A Development Stage company)
Statements of Operations
<CAPTION>
From Inception on
July 10, 1997
For the Three Months Ended through March 31,
March 31, 2000
----------------------- --------------------- --------------------
2000 1999 2000
----------------------- --------------------- --------------------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
EXPENSES
General and administrative 25,000 -- 27,000
----------------------- --------------------- --------------------
Total Expenses 25,000 -- 27,000
----------------------- --------------------- --------------------
LOSS FROM OPERATIONS (25,000) -- (27,000)
----------------------- --------------------- --------------------
NET LOSS $ (25,000) $ -- $ (27,000)
======================= ===================== ====================
BASIC LOSS PER SHARE $ (0.01) $ 0.00
======================= =====================
WEIGHTED AVERAGE NUMBER OF SHARES
5,000,000 5,000,000
======================= =====================
See Accountants' Review Report and the accompanying notes to the
reviewed financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
AUGUST PROJECT 1 CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on July 10, 1997 Through March 31, 2000
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
--------------------------------------- Paid-in Development
Shares Amount Capital Stage
----------------- ------------------ ------------------ --------------------
<S> <C> <C> <C> <C>
Balance at inception on July 10, 1997 $ -- $ -- $ -- $ --
Common stock issued for services 5,000,000 5,000 (3,000) --
Net loss from inception on July 10, 1997
to December 31, 1997 -- -- -- (2,000)
----------------- ------------------ ------------------ --------------------
Balance, December 31, 1997 5,000,000 5,000 (3,000) (2,000)
Net Loss for the year ended
December 31, 1998 -- -- -- --
----------------- ------------------ ------------------ --------------------
Balance, December 31, 1998 5,000,000 5,000 (3,000) (2,000)
Net Loss for the year ended
December 31, 1999 -- -- -- --
----------------- ------------------ ------------------ --------------------
Balance, December 31, 1999 5,000,000 5,000 (3,000) (2,000)
Net Loss for the three months ended
March 31, 2000 -- -- -- (25,000)
----------------- ------------------ ------------------ --------------------
Balance, March 31, 2000` $ 5,000,000 $ 5,000 $ (3,000) $ (27,000)
================= ================== ================== ====================
See Accountants' Review Report and the accompanying notes to the
reviewed financial statements.
F-6
</TABLE>
<PAGE>
<TABLE>
AUGUST PROJECT 1 CORPORATION
(A Development Stage Company)
Statements of Cash Flows
<CAPTION>
For the Three Month Ended March 31, From Inception on
----------------------------------- July 10, 1990 -
March 31,
2000 1999 2000
------------------- ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (25,000) $ -- $ (27,000)
Adjustments to reconcile net loss to net cash
used by operating activities:
Issuance of stock for services -- -- 2,000
Increase in notes payable - related parties 25,000 -- 25,000
------------------- ------------------ ------------------
Net Cash (Used) by Operating Activities -- -- --
------------------- ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
------------------- ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES -- -- --
------------------- ------------------ ------------------
NET INCREASE (DECREASE) IN CASH -- -- --
CASH AT BEGINNING OF PERIOD -- -- --
------------------- ------------------ ------------------
CASH AT END OF PERIOD $ -- $ -- $ --
=================== ================== ==================
CASH PAYMENTS FOR:
Income taxes $ -- $ -- $ --
Interest -- -- --
SCHEDULE OF NON-CASH FINANCING
ACTIVITIES
Common stock issued for services -- $ -- $ 2,000
See Accountants' Review Report and the accompanying notes to the
reviewed financial statements.
F-7
</TABLE>
<PAGE>
AUGUST PROJECT 1 CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
August Project 1 Corporation (the "Company") was organized July
10, 1997 under the laws of the State of Florida for the purpose
of engaging in any lawful activity. The Company has had no
significant operations since inception and is considered a
development stage company in accordance with Statement of
Financial Accounting Standards No.7.
b. Provision for Taxes
At March 31, 2000, the Company had net operating loss
carryforwards of approximately $27,000 that may be offset
against future taxable income through 2019. No tax benefit has
been reported in the financial statements, because the Company
believes there is a 50% or greater chance the carryforwards will
expire unused. Accordingly, the potential tax benefits of the
net operating loss carryforwards are offset by a valuation
allowance of the same amount.
c. Accounting Method
The financial statements are prepared using the accrual method
of accounting. The Company has elected a calendar year end.
d. 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 and 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.
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
F-8
<PAGE>
AUGUST PROJECT 1 CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Basic Loss Per Share
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 2000
-----------------------------------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
------------------------ --------------------- -----------------------
<S> <C> <C> <C>
Net Loss $ (25,000) 5,000,000 $ (0.01)
======================== ===================== =======================
For the Three Months Ended
March 31, 1999
-----------------------------------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
------------------------ --------------------- -----------------------
Net Loss $ -- 5,000,000 $ 0.00
======================== ===================== =======================
</TABLE>
Basic loss per share has been calculated based on the weighted
average number of shares of common stock outstanding during the
period.
g. Revenue Recognition
The Company currently has no source of revenues. Revenue
recognition policies will be determined when principal
operations begin.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern
which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has
not established revenues sufficient to cover its operating costs
and allow it to continue as a going concern. Management intends
to seek a merger with an existing, operating company, in the
interim it has committed to meeting the Company's minimal
operating expenses.
NOTE 3 - RELATED PARTY TRANSACTION
A related party has loaned the Company $25,000 for operating
working capital. This amount has interest imputed at 10% and is
due on demand.
NOTE 4 - SUBSEQUENT EVENT
On April 10, 2000, the Company issued 9,734,000 shares of common
stock to acquire 100% of the capital stock of USWEBAUCTIONS,
INC. The total number of shares outstanding for the Company
after the acquisition is 14,734,000.
F-9
<PAGE>
ITEM 2. MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS.
----------------------------------------------------------
INTRODUCTORY STATEMENTS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS. THIS FILING CONTAINS
FORWARD-LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING, AMONG OTHER THINGS,
(A) OUR COMPANY'S PROJECTED SALES AND PROFITABILITY, (B) OUR COMPANY'S BUSINESS
PLAN AND GROWTH STRATEGIES, (C) TRENDS IN OUR COMPANY'S INDUSTRY, (D) OUR
COMPANY'S FUTURE FINANCING PLANS, (E) OUR COMPANY'S ANTICIPATED NEEDS FOR
WORKING CAPITAL AND (F) BENEFITS RELATED TO THE ACQUISITION OF USWEBAUCTIONS,
INC. IN ADDITION, WHEN USED IN THIS FILING, THE WORDS "BELIEVES," "ANTICIPATES,"
"INTENDS," "IN ANTICIPATION OF," "EXPECTS," AND SIMILAR WORDS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED
LARGELY ON OUR COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND
UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR COMPANY'S CONTROL. ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CHANGES IN TRENDS IN THE ECONOMY AND OUR COMPANY'S INDUSTRY, DEMAND FOR OUR
COMPANY'S SERVICES, COMPETITION, THE AVAILABILITY OF FINANCING AND OTHER
FACTORS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE
THAT THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FILING WILL IN FACT OCCUR.
OVERVIEW
We are a development stage company that has had no operations or income
since inception in 1997. We were incorporated in the State of Florida on July
10, 1997 as August Project 1 Corp. We were formed for the sole purpose of
acquiring or merging with an operating company. On January 27, 2000, Lido
Capital Corporation, a Florida corporation ("Lido"), purchased 97.3% of the
then-outstanding common stock of our company from its controlling shareholder,
Eric Littman. On April 10, 2000, our company acquired all of the outstanding
capital stock of USWEBAUCTIONS, Inc., a Florida corporation ("USWA"). In
consideration of all of USWA's outstanding capital stock, our company issued
9,734,000 shares of common stock to the former shareholders of USWA. USWA was
formed on February 24, 2000, and is in the business of producing, maintaining,
creating, and promulgating on-line auction services. Due to the acquisition of
USWA, our business operations are expected to focus on creating and operating
vertical auction communities in the person-to-person and business-to-business
markets.
On April 20, 2000, the board of directors of our company and USWA,
together with the shareholders holding a majority of the outstanding shares of
common stock and the sole shareholder of USWA, which is our company, approved
the merger of USWA with and into our company. We will be the surviving
corporation in the merger. Upon the effective date of the merger, the name of
our corporation will change to USWEBAUCTIONS, Inc.
BALANCE SHEET. At March 31, 2000, we had no current or total assets and
had current liabilities of $25,000.
INCOME STATEMENT. We have not had any revenue since inception. Prior to
the acquisition of USWA, our main operating expenses were expected to consist of
the costs of complying with the reporting requirements of the Securities Act of
1933, including legal and accounting fees. For the quarter ended March 31, 2000,
we recorded $25,000 in general and administrative expenses. Our net loss was
$25,000. Due to the acquisition of USWA, our main operating expenses are
expected to consist of the costs of implementing the business plan of USWA.
PLAN OF OPERATION
CASH REQUIREMENTS. As of March 31, 2000, we had no cash-on-hand. Such
funds have been fully expended. Since inception, our management has loaned money
to our company in order to fund our business operations. We will need to raise
additional capital to fund our business operations and to develop our company's
business strategy for the next twelve months and beyond. Currently, our cash
requirements consist primarily of employee salaries, rent, professional fees and
related expenses. In order to meet our cash requirements over the next twelve
months, we intend to raise capital from the sale of common stock in either a
private or public offering. Our company believes that it needs to raise
approximately $750,000 in capital in order to meet these cash requirements.
2
<PAGE>
SUMMARY OF ANTICIPATED PRODUCT DEVELOPMENT. Our company is developing a
proprietary technology called "Rapid Auction Introduction Technology Software"
(RAITStm). Using this technology, our company expects to be able to quickly and
efficiently deploy auction websites for our customers. Initially, our product
development efforts are expected to focus on the development of the RAITS
technology. The costs associated with this product development are expected to
consist primarily of the salaries for computer programmers and related expenses.
SIGNIFICANT PLANT AND EQUIPMENT PURCHASES. In 2000, we expect to
purchase computer hardware and software and telephone equipment. We estimate
that the cost of this equipment to be approximately $25,000.
CHANGES IN NUMBER OF EMPLOYEES. We currently have four employees, each
of whom is an executive officer. We are currently reviewing our personnel needs
for 2000 and beyond. As of the date hereof, we have not finalized our hiring
plans.
CURRENT
DEPARTMENT EMPLOYEES
---------- ---------
Marketing and Sales 0
Administrative and Other
Support Positions 4
-------------
Total Employees 4
=============
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had no cash-on-hand. A discussion of how we
generated and used cash in the period follows:
OPERATING ACTIVITIES. Our operating activities used $25,000 in cash
during the three-month period ended March 31, 2000. This consisted primarily of
professional fees in connection with becoming a "reporting" company under the
Securities Act of 1933.
In order to meet our cash requirements over the next twelve months, we
intend to raise capital from the sale of common stock in either a private or
public offering. Our company believes that it needs to raise approximately
$750,000 in capital in order to meet these cash requirements.
GOING CONCERN OPINION
Our independent auditors have added an explanatory paragraph to their
audit opinions issued in connection with the 1999 and 1998 financial statements
which states that our company does not have significant cash or other material
assets to cover its operating costs and to allow it to continue as a going
concern. Our ability to obtain additional funding will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
CERTAIN BUSINESS RISK FACTORS
We are subject to various risks, which may have a material adverse
effect on our company's business, financial condition and results of operations.
Certain risks are discussed below:
WE HAVE NO OPERATING HISTORY OR REVENUE FROM WHICH TO EVALUATE OUR
BUSINESS
We have had no operating history or revenue from operations since
inception. In addition, we have no assets or financial resources. Due to our
lack of revenue, we expect to incur operating losses for the foreseeable future.
Due to our lack of operations, there is limited information upon which investors
can evaluate our business. Our independent auditors have noted that our company
does not have significant cash or a source of revenue to cover its operating
costs and to allow it to continue as a going concern. External capital will be
required for us to continue as a going concern. We have no commitments or other
3
<PAGE>
sources of capital available to us. Our inability to continue as a going concern
could result in a decline of our stock price, and you could lose money.
BECAUSE WE HAVE NO OPERATIONS OUR FUTURE BUSINESS OPPORTUNITIES ARE
HIGHLY SPECULATIVE
The success of our proposed plan of operation will be highly dependent
on the business operations of USWA, a company which itself has had no operations
to date. You should consider the likelihood of our future success to be highly
speculative in view of our lack of operating history.
OUR MANAGEMENT IS EXPECTED TO EXERT SIGNIFICANT INFLUENCE OVER THE
DIRECTION OF OUR COMPANY AND WILL DEVOTE A LIMITED AMOUNT OF TIME TO IDENTIFYING
BUSINESS OPPORTUNITIES
Through their stock ownership, management will be able to exert
significant influence over the direction of our company and its business
opportunities. We do not maintain any key man life insurance. The loss of the
services of these individuals will jeopardize our ability to continue
operations. This outcome would likely cause our stock price to decline.
WE MAY BE SUBJECT TO THE INVESTMENT COMPANY ACT OF 1940, WHICH WOULD
RESULT IN SIGNIFICANT REGISTRATION AND COMPLIANCE COSTS
We do not believe that our company will be subject to the Investment
Company Act of 1940 because we will not be engaged in the business of investing
or trading in securities. If we engage in business combinations in which we end
up holding passive investment interests in a number of entities, we could be
subject to regulation under the Investment Company Act of 1940. In such event,
we would be required to register as an investment company and could be expected
to incur significant registration and compliance costs.
HOLDERS OF RESTRICTED STOCK WILL NOT BE ALLOWED TO SELL SUCH STOCK FOR
90 DAYS
Much of our outstanding common stock constitutes "restricted
securities" under Rule 144 promulgated under the 1933 Act. Restricted securities
are securities acquired from an issuer or an affiliate of an issuer in a
transaction not involving a public offering (i.e., a private placement). Such
securities may be sold in accordance with Rule 144. Our company became a
"reporting" company on or about April 24, 2000, and is now required to file
periodic reports with the Securities and Exchange Commission. Pursuant to Rule
144, a reporting company must be subject to the reporting requirements for a
period of at least 90 days immediately prior to a sale of restricted securities.
As such, holders of restricted securities will not be able to rely on Rule 144
to sell restricted securities for a 90-days, or until July 24, 2000. Even after
the expiration of this 90-day period, holders of restricted securities must,
prior to selling such securities, present our company with a legal opinion in
satisfactory form stating that such securities may be sold in reliance on Rule
144.
OUR COMMON STOCK MAY BE DEEMED TO BE "PENNY STOCK"
Our common stock may be deemed to be "penny stock" as that term is
defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934.
Penny stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the Nasdaq automated quotation system
(Nasdaq listed stock must still have a price of not less than $5.00
per share); or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last three
years.
Broker/dealers dealing in penny stocks are required to provide
potential investors with a document disclosing the risks of penny stocks.
Moreover, broker/dealers must determine whether an investment in a penny stock
is a suitable investment. These requirements may reduce the potential market for
our common stock by reducing the number of potential investors. This may make it
4
<PAGE>
more difficult for investors in our common stock to resell their shares. This
could cause our stock price to decline.
PART II
OTHER INFORMATION.
- -----------------
ITEM 1. LEGAL PROCEEDINGS.
-----------------
We are not aware of any legal proceedings involving our company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
-----------------------------------------
(a), (b) and (d) None.
(c) SALES OF UNREGISTERED SECURITIES.
On July 11, 1997, in connection with the formation of our company, we
issued 5,000,000 shares of common stock to thirty-five individuals for total
consideration of $2,000 of services provided by such individuals.
On April 10, 2000, in connection with the acquisition of all of the
outstanding capital stock of USWEBAUCTIONS, Inc., we issued 9,734,000 shares of
common stock to the two former shareholders of USWEBAUCTIONS, Inc.
With respect to the sale of unregistered securities referenced above,
these transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, and Regulation D promulgated thereunder. In each
instance, the purchaser had access to sufficient information regarding our
company so as to make an informed investment decision.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
On February 23, 2000, by written consent in lieu of a special meeting,
Earl T. Ingarfield, the shareholder holding a majority of the issued and
outstanding shares of common stock of our company, elected himself to serve as
the sole director of our company until the next annual meeting of the
shareholders. The former sole director of our company resigned his office in
connection with the sale of the majority of his shares of common stock in our
company to Earl T. Ingarfield. Earl T. Ingarfield filled the vacancy created by
such resignation.
Also, on February 23, 2000, by written consent in lieu of a special
meeting, Earl T. Ingarfield, as sole director and the shareholder holding a
majority of the issued and outstanding shares of common stock of our company,
took the following action:
(a) Earl T. Ingarfield was elected to serve as the President of our
company;
(b) Jerry Busiere was elected to serve as the Secretary of our company;
(c) Articles of Amendment to the Articles of Incorporation were
adopted, which increased the authorized capital stock to 60,000,000 shares, of
which 50,000,000 shares were designated as common stock and 10,000,000 shares
were designated as preferred stock; and
(d) Bylaws of our company were adopted.
5
<PAGE>
All of the matters specified above were approved by the affirmative
vote of 4,867,000 shares of common stock. The remaining 133,000 outstanding
shares of common stock did not vote in connection with the matters specified
above.
On April 20, 2000, by written consent in lieu of a special meeting,
Earl T. Ingarfield, as sole director, and the shareholders (including Earl T.
Ingarfield) holding a majority of the issued and outstanding shares of common
stock of our company, approved the merger of USWA with and into our company. We
will be the surviving corporation in the merger. Upon the effective date of the
merger, the name of our company will be changed to USWEBAUCTIONS, Inc. This
matter was approved by the affirmative vote of 14,601,000 shares of common
stock. The remaining 133,000 shares of common stock did not vote in connection
with this matter.
ITEM 5. OTHER INFORMATION.
-----------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
<S> <C> <C>
2.01 Stock Purchase Agreement dated as of January Incorporated by reference to Exhibit 2.01 to our
27, 2000 among our company, Lido Capital company's Registration Statement on Form 10-SB
Corporation, Eric P. Littman and Dennis Sturm filed with the Securities and Exchange Commission
on February 24, 2000.
2.02 Stock Purchase Agreement dated as of April 10, Provided herewith.
2000, among our company, USWEBAUCTIONS, Inc.,
Jon Kochevar, and John Allen.
2.03 Articles of Merger dated as of April 21, 2000 Provided herewith.
of USWEBAUCTIONS, Inc. into our company,
together with the Plan of Merger
3.01 Articles of Incorporation filed on July 10, Incorporated by reference to Exhibit 3.01 to our
1997 with the Florida Secretary of State company's Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission
on February 24, 2000.
3.02 Articles of Amendment to Articles of Incorporated by reference to Exhibit 3.02 to our
Incorporation company's Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission
on February 24, 2000.
3.03 Bylaws Incorporated by reference to Exhibit 3.03 to our
company's Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission
on February 24, 2000.
10.01 Executive Employment Agreement dated as of Provided herewith.
April 10, 2000 between our company and John
Allen
10.02 Executive Employment Agreement dated as of Provided herewith.
April 10, 2000 between our company and Jon
Kochevar
6
<PAGE>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
<S> <C> <C>
11.01 Statement re: Computation of Earnings Not Applicable.
15.01 Letter on Unaudited Interim Financial Provided herewith.
Information
16.01 Letter on Change in Certifying Accountant Not Applicable.
21.01 Subsidiaries of our company Not Applicable.
23.01 Consent of Independent Accountants Not Applicable.
24.01 Power of Attorney Not Applicable.
27.01 Financial Data Schedule Provided herewith.
</TABLE>
(b) REPORTS ON FORM 8-K.
None. On April 10, 2000, our company acquired all of the outstanding
capital stock of USWEBAUCTIONS, Inc. We intend to file a Form 8-K regarding this
transaction as soon as practicable.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 22, 2000 AUGUST PROJECT 1 CORP.
By: /s/ Jerry Busiere
----------------------------
Jerry Busiere, Secretary
7
EXHIBIT 2.02
------------
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of April 10, 2000, by and among AUGUST PROJECT 1 CORP., a Florida
corporation ("August"), USWEBAUCTIONS, INC., a Florida corporation ("USWA"), and
the persons listed as "Shareholders" on the signature pages hereto (each a
"Shareholder" and collectively the "Shareholders").
RECITALS:
A. The Shareholders own all of the outstanding common stock (the "USWA
Common Stock") of USWA, which constitutes all of the issued and outstanding
capital stock of USWA.
B. The Shareholders desire to exchange all the outstanding shares (the
"USWA Shares") of USWA Common Stock for newly-issued shares of common stock of
August (the "August Common Stock"), on the terms and conditions set forth
herein. This transaction is intended to be tax-free under the Internal Revenue
Code of 1986, as amended (the "Code").
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual agreements, covenants
and premises set forth herein for certain other good and valuable consideration,
the receipt and adequacy which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. STOCK PURCHASE, PURCHASE PRICE AND RELATED TRANSACTIONS.
1.1. PURCHASE PRICE AND SALE. August shall acquire and the
Shareholders shall sell to August one hundred percent (100%) of the capital
stock of USWA in exchange for the issuance of the number of shares of August
Common Stock as set forth in Section 1.2 hereof.
1.2. PURCHASE PRICE. In consideration of the purchase by August of
the USWA Common Stock, August shall issue newly issued shares of August Common
Stock to the Shareholders in the denominations set forth opposite each
Shareholder's name on Schedule 1.2 attached hereto in exchange for all of the
USWA Shares. The total number of shares of August Common Stock issued to all the
Shareholders shall be Nine Million Seven Hundred Thirty-Four Thousand
(9,734,000) shares (the "Purchase Price"). Accordingly, after the Closing (as
defined herein), the Shareholders and Earl T. Ingarfield will each own Four
Million Eight Hundred Sixty-Seven Thousand (4,867,000) shares, and third parties
will own a total of One Hundred Thirty-Three Thousand (133,000) shares.
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1.3. CLOSING AND EFFECTIVE DATE. The closing shall occur as soon as
practicable after the satisfaction of the conditions precedent set forth in
Sections 6, 7 and 8 hereof, but in no event later than April 15, 2000 (the
"Closing"). The date of Closing is referred to herein as the "Closing Date." The
Closing shall take place at the principal offices of August's counsel, or at
such other place as may be mutually agreed upon by August and the Shareholders.
At the Closing, (i) the Shareholders shall deliver to August all original stock
certificates representing USWA Common Stock, together with stock powers duly
executed in blank; and (ii) August shall issue and deliver the Purchase Price to
the Shareholders.
1.4. FRACTIONAL SHARES; LOST CERTIFICATES. Neither certificates nor
scrip for fractional shares of August Common Stock shall be issued. Any
fractional interest in August Common Stock to be issued pursuant this Agreement
shall be rounded up or down to the nearest whole share. August shall deliver the
pro-rata portion of the Purchase Price attributable to any certificate which has
been lost or destroyed upon receipt of evidence satisfactory to August and its
counsel of ownership of the shares of USWA Common Stock represented thereby and
of appropriate indemnification to August.
2. ADDITIONAL AGREEMENTS.
2.1. ACCESS AND INSPECTION. Each party hereto has allowed the other
parties (as applicable) and their authorized representatives full access to all
of the properties, books, contracts, commitments and records of the other party
for the purpose of making such investigations as each party has reasonably
requested in connection with the transactions contemplated hereby.
2.2. CONFIDENTIAL TREATMENT OF INFORMATION. From and after the date
hereof, the parties hereto shall and shall cause their representatives to hold
in confidence this Agreement (including the Schedules hereto), all matters
relating hereto and all data and information obtained with respect to the other
parties or their business, except such data or information as is published or is
a matter of public record, or as compelled by legal process. In the event this
Agreement is terminated pursuant to Section 10 hereof, each party shall promptly
return to the other(s) any statements, documents, schedules, exhibits or other
written information obtained from them in connection with this Agreement, and
shall not retain any copies thereof.
2.3. PUBLIC ANNOUNCEMENTS. The parties will consult with each other
before issuing any press releases or otherwise making any public statement with
respect to this Agreement or any of the transactions contemplated hereby and no
party will issue any such press release or make any such public statement
without the prior written consent of the other parties, except as may be
required by law or by the rules and regulations of any governmental authority or
securities exchange.
2.4. SECURITIES LAW MATTERS.
2.4.1. PRIVATE PLACEMENT. The issuance of the August Shares to
the Shareholders hereunder shall not be registered under the Securities Act of
1933, as amended, (the "Securities Act") by reason of the exemption provided by
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Section 4(2) thereof, and such shares may not be further transferred unless such
transfer is registered under applicable securities laws or, in the opinion of
August's counsel, such transfer complies with an exemption from such
registration. All certificates evidencing the August Shares to be issued to
Shareholders shall be legended to reflect the foregoing restriction.
2.5. FURTHER ASSURANCES. The parties shall deliver any and all other
instruments or documents required to be delivered pursuant to, or necessary or
proper in order to give effect to, the provisions of this Agreement, including
without limitation, all necessary stock powers and such other instruments of
transfer as may be necessary or desirable to transfer ownership of the USWA
Common Stock to August and to consummate the transactions contemplated by this
Agreement.
2.6. EMPLOYMENT AGREEMENTS. At Closing, each of Jon Kochevar and
John Allen shall execute and deliver an employment agreement (each, an
"Employment Agreement") with August in the form attached hereto as Exhibits "A"
and "B."
2.7. Consistent Tax Filing Position. Each of the parties hereto
shall file all Federal income tax returns in a manner consistent with the
intended tax-free nature of this transaction.
3. REPRESENTATIONS, COVENANTS AND WARRANTIES OF THE SHAREHOLDERS AND
USWA.
- --------------------------------------------------------------------------------
To further induce August to enter into this Agreement and to consummate
the transactions contemplated hereby, USWA and the Shareholders each hereby
jointly and severally represent and warrant to and covenant with August as
follows:
3.1. ORGANIZATION AND QUALIFICATION: ABSENCE OF SUBSIDIARIES. USWA
is a corporation duly organized and validly existing and in good standing under
the laws of the State of Florida and has the requisite power and authority to
own, lease and operate its properties and to carry on its business as it is
currently being conducted. USWA is in good standing in the State of Florida.
USWA is duly qualified or licensed and is in good standing, in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary, except
for such failures to be so qualified or licensed and in good standing that would
not, individually or in the aggregate, have a material adverse effect on the
business, properties, assets, financial condition, prospects or future business
of USWA (collectively, "USWA Material Adverse Effect"). USWA does not have any
subsidiaries nor an equity interest in any partnerships or joint venture
arrangements or other business entity.
3.2. CAPITALIZATION AND RELATED MATTERS.
3.2.1. Shares; Capitalization. The authorized capital stock of
USWA consists solely of _______ shares of common stock, of which ________ shares
are issued and outstanding and none are held in its treasury. All of the USWA
Shares are owned of record, legally and beneficially by the Shareholders. The
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USWA Shares are free and clear of any and all security interests, encumbrances,
and rights of any kind or nature whatsoever (collectively, "Encumbrances"), and
upon delivery of the USWA Shares hereunder, August will acquire title thereto,
free and clear of any and all Encumbrances. Other than voting rights, redemption
rights and such other rights conferred by USWA's charter documents and by
applicable Florida statutes, there exist no Securities Rights (as defined
herein) with respect to the USWA Shares. All rights and powers to vote the USWA
Shares are held exclusively by the Shareholders. All of the USWA Shares are
validly issued, fully paid and nonassessable, were not issued in violation of
the terms of any agreement or other understanding, and were issued in compliance
with all applicable federal and state securities or "blue sky" laws and
regulations. The certificates representing the USWA Shares to be delivered to
August at the Closing are, and the signatures and endorsements thereof or stock
powers relating thereto will be, valid and genuine. For the purposes of this
section, "Securities Rights" means, with respect to the USWA Shares (whether
issued or unissued) or any other securities convertible into or exchangeable for
USWA Shares, and includes all written or unwritten contractual rights relating
to the issuance, sale, assignment, transfer, purchase, redemption, conversion,
exchange, registration or voting of the USWA Shares and all rights conferred by
USWA's governing documents and by any applicable agreement.
3.2.2. LIABILITIES AND OBLIGATIONS. USWA has no debt,
obligation or liability, absolute, fixed, contingent or otherwise, of any nature
whatsoever, whether due or to become due, including any unasserted claim,
whether incurred directly or by any predecessor thereto, and whether arising out
of any act, omission, transaction, circumstance, sale of goods or services,
state of facts or other condition, which individually or in the aggregate would
have a USWA Material Adverse Effect except: (i) those reflected or reserved
against on the USWA Financial Statements (as defined herein) in the amounts
shown therein; and (ii) those that have arisen in the ordinary course of
business of USWA after the Balance Sheet Date (as defined herein) through the
Closing Date, none of which, individually or in the aggregate, has had or will
have a USWA Material Adverse Effect on the business or financial condition of
USWA.
3.3. CERTIFICATE OF INCORPORATION AND BY-LAWS. USWA has heretofore
made available to August a complete and correct copy of the Certificate of
Incorporation and the By-Laws of USWA. Such Certificate of Incorporation and
By-Laws are in full force and effect.
3.4. AUTHORITY RELATIVE TO THIS AGREEMENT. USWA and each Shareholder
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. Each Shareholder has full right and
capacity to enter into this Agreement and to carry out his obligations
hereunder. The execution and delivery of this Agreement by USWA and each
Shareholder, the performance by each such Shareholder of his obligations
hereunder and the consummation by USWA of the transactions contemplated by this
Agreement have been duly authorized by all necessary action on the part of USWA
or such Shareholders as are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This Agreement has
been duly and validly executed and delivered by USWA and each Shareholder and
constitutes the legal, valid and binding obligations of USWA and each
Shareholder, enforceable against USWA and each Shareholder in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws of general application
affecting the enforcement of creditors' rights generally.
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3.5. PERMITS AND LICENSES; COMPLIANCE. USWA is in possession of all
permits and licenses necessary for the conduct of its business and, as of the
date hereof, no suspension or cancellation of any such permits or licenses is
pending or, to the knowledge of each Shareholder and USWA after reasonable
investigation, threatened, except where the failure to possess, or the
suspension or cancellation of, any such permits or licenses would not,
individually or in the aggregate, have a USWA Material Adverse Effect. To the
best knowledge of each Shareholder and USWA, USWA is not in conflict with, or in
default or violation of, (a) any law applicable to USWA or by which any property
or asset of USWA is bound or (b) any permit or license, other than conflicts or
violations which, individually or in the aggregate, would not have a USWA
Material Adverse Effect.
3.6. FINANCIAL STATEMENTS. True and complete copies of (a) the
unaudited balance sheet of USWA for the fiscal period ended as of __________
(the "Balance Sheet Date") and the related unaudited statements of income and
retained earnings for the period from _______ through _______ with all related
notes and schedules thereto, and (b) the unaudited balance sheet of USWA for the
____ month period ending _______________ and the related monthly statements of
income of USWA (collectively referred to herein as the "USWA Financial
Statements") have been delivered by USWA prior to Closing. The USWA Financial
Statements (i) were prepared in accordance with the books of account and other
financial records of USWA, (ii) present fairly the financial condition and
results of operations of USWA as of the dates thereof or for the periods covered
thereby, (iii) have been prepared in accordance with U.S. GAAP (except as may be
indicated in the notes thereto) applied on a basis consistent with the past
practices of USWA, and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the financial
condition of USWA and the results of the operations of USWA as of the dates
thereof or for the periods covered thereby (subject, in the case of USWA Interim
Financial Statement, to normal recurring year-end adjustments).
3.7. Absence of Litigation. There is no legal, equitable, or
administrative action or proceeding pending or, to the knowledge of USWA or the
individual Shareholders after reasonable investigation, threatened against USWA
or any property or asset of USWA.
3.8. BENEFIT PLANS. There are no employee benefit plans (as defined
in Section 3(3) of ERISA), bonus, stock option, stock purchase, restricted
stock, incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements to which USWA is a party, with respect to which USWA has any
obligation, or which are maintained, contributed to, or sponsored by USWA for
the benefit of any current or former employee, officer, or director of USWA.
3.9. INTELLECTUAL PROPERTY.
3.9.1. Schedule 3.9.1 sets forth a true and complete list of
all intellectual property owned by USWA (the "USWA Intellectual Property"). The
USWA Intellectual Property constitutes all the intellectual property used or
contemplated to be used by USWA in the conduct of its business, and there are no
other items of intellectual property that are material to USWA or the business
of USWA.
3.9.2. No claim has been asserted to the best knowledge of
each Shareholder and USWA that the use of USWA Intellectual Property or the
conduct of the business of USWA does or may infringe upon such rights of any
third party.
3.9.3. USWA is the owner of the entire, title and interest in
and to the Intellectual Property, free and clear of all Encumbrances, and has
the right to use, all USWA Intellectual Property in the continued operations of
USWA.
3.9.4. The USWA Intellectual Property has not been adjudged
invalid or unenforceable in whole or part by any governmental authority.
3.9.5. To the knowledge of USWA and the individual
Shareholders after reasonable investigation, no person or entity is engaging in
any activity that infringes upon USWA Intellectual Property or upon the rights
of USWA therein. The consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any of USWA
Intellectual Property.
3.9.6. USWA has not granted to, nor received from, any third
party any license or sublicense of intellectual property.
3.10. TAXES. USWA has (a) filed all federal, state, local and
foreign tax (as defined herein) returns required to be filed by it prior to the
date of this Agreement, (b) paid or accrued all Taxes which are due. For
purposes of this Agreement, "Tax" or "Taxes" means any and all taxes, fees,
levies, duties, tariffs, imposts and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature or
excise, withholding, ad valorem, stamp, transfer, value added or gains taxes,
license, registration and documentation fees, and custom duties, tariffs and
similar charges.
3.11. ASSETS. USWA owns, leases or has the right to use all the
properties and assets used or contemplated to be used in the conduct of its
business. USWA has good and marketable title to, or, in the case of leased or
subleased assets, valid and subsisting leasehold interests in, all the assets,
free and clear of all Encumbrances.
3.12. EXECUTION; NO INCONSISTENT AGREEMENTS; ETC. The execution and
delivery of this Agreement by the Shareholders and USWA does not, and the
consummation of the transactions contemplated hereby will not, constitute a
breach or violation of the charter or by-laws of USWA, or a default under any of
the terms, conditions or provisions of (or an act or omission that would give
rise to any right of termination, cancellation or acceleration under) any
material note, bond, mortgage, lease, indenture, agreement or obligation to
which USWA or any Shareholder is a party, pursuant to which USWA or any
Shareholder otherwise receives benefits, or to which any of the properties of
USWA or any Shareholder is subject.
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3.13. CORPORATE RECORDS. The statutory records, including the stock
register and minute books of USWA, fully reflect all issuances, transfers and
redemptions of USWA's capital stock, correctly show and will correctly show the
total number of shares of its capital stock issued and outstanding on the date
hereof and on the Closing Date, the charter or other organizational documents
and all amendments thereto, and their by-laws as amended and currently in force.
3.14. ABSENCE OF CHANGES. From the Balance Sheet Date to the date of
this Agreement, there has been no adverse change in the business, assets,
liabilities, results of operations or financial condition of USWA or its
relationships with suppliers, customers, employees, lessors or others, other
than changes in the ordinary course of business, none of which, singularly or in
the aggregate, have had or will have a USWA Material Adverse Effect.
3.15. COMPLIANCE WITH LAW. The business and activities of USWA have
at all times been conducted in accordance with its articles of incorporation and
by-laws and, to the best knowledge of each Shareholder and USWA, any applicable
law, regulation, ordinance, order, license, permit, rule, injunction or other
restriction or ruling of any court or administrative or governmental agency,
ministry, or body, except where the failure to do so would not result in a USWA
Material Adverse Effect.
3.16. CONTINGENCIES. There are no actions, suits, claims or
proceedings pending, or, to the knowledge of USWA and each Shareholder after
reasonable investigation, threatened against, by or affecting USWA in any court
or before any arbitrator or governmental agency that may have a USWA Material
Adverse Effect or which could adversely affect the right or ability of USWA to
consummate the transactions contemplated hereby. To the knowledge of each
Shareholder after reasonable investigation, there is no valid basis upon which
any such action, suit, claim, or proceeding may be commenced or asserted against
USWA. There are no unsatisfied judgments against USWA and no consent decrees or
similar agreements to which USWA is subject and which could have a USWA Material
Adverse Effect.
3.17. MATERIAL CONTRACTS. There are no contracts of USWA which
involve consideration in excess of the equivalent of $2,500.00 or have a term of
one year or more (collectively, the "Material Contracts").
3.18. INSURANCE. All policies of insurance presently maintained by
USWA are in full force and effect, and all premiums due thereon have been paid.
USWA has received no notices of cancellation with respect thereto.
3.19. EMPLOYMENT AND LABOR MATTERS. Schedule 3.19 sets forth the
name, position, employment date, and current compensation (base and bonus) of
each employee or intended employee of USWA.
3.20. ENVIRONMENTAL MATTERS. USWA is not in violation, in any
material respect, of any Environmental Law (as defined herein); USWA has
received all permits and approvals with respect to emissions into the
environment and the proper collection, storage, transport, distribution or
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disposal of Wastes (as defined herein) and other materials required for the
operation of its business at present operating levels; and USWA is not liable or
responsible for any clean up, fines, liability or expense arising under any
Environmental Law, as a result of the disposal of Wastes or other materials in
or on the property of USWA (whether owned or leased), or in or on any other
property, including property no longer owned, leased or used by USWA. As used
herein, (a) "Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation
and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, any other "Superfund" or
"Superlien" law or any other federal, or applicable state or local statute, law,
ordinance, code, rule, regulation, order or decree (foreign or domestic)
regulating, relating to, or imposing liability or standards of conduct
concerning, Wastes, or the environment; and (b) "Wastes" means and includes any
hazardous, toxic or dangerous waste, liquid, substance or material (including
petroleum products and derivatives), the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.
3.21. INVENTORIES. The amounts stated as inventories of USWA on the
USWA Financial Statements reflect fairly the products, materials and supplies
and spare parts held by USWA. The inventory shown on the USWA Financial
Statements (i) represents items of a quality and quantity usable and saleable in
the ordinary course of business, and (ii) conforms in all material respects to
customary trade standards for such inventory in USWA's current markets. USWA has
not given any express written warranty with respect to any goods or products
sold.
3.22. RECEIVABLES. All notes receivable and accounts receivable
shown on the USWA Financial Statements and all such receivables now held by USWA
were and are valid and collectible obligations of the respective makers thereof
and were not and are not subject to any offset or counterclaim; except for a
portion of such receivables, not to exceed the amount, if any, shown as the
allowance for bad debt on the USWA Financial Statements, which may prove not to
be collectible.
3.23. AGREEMENTS AND TRANSACTIONS WITH RELATED PARTIES. USWA is not
a party to any contract, agreement, lease or transaction with, or any other
commitment to, (i) a Shareholder, (ii) any person related by blood, adoption or
marriage to Shareholder, (iii) any director or officer of USWA, (iv) any
corporation or other entity in which any of the foregoing parties has, directly
or indirectly, at least five percent (5.0%) beneficial interest in the capital
stock or other type of equity interest in such corporation or other entity, or
(v) any partnership in which any such party is a general partner or a limited
partner having a five percent (5%) or more interest therein (any or all of the
foregoing being herein referred to as a "Related Party" and collectively as the
"Related Parties").
3.24. FULL DISCLOSURE. No representation or warranty of USWA or the
Shareholders contained in this Agreement, and none of the statements or
information concerning USWA contained in this Agreement and the Exhibits and
Schedules hereto, contains or will contain any untrue statement of a material
fact nor will such representations, warranties, covenants or statements taken as
a whole omit a material fact required to be stated therein or necessary in order
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to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF AUGUST.
To induce USWA and the Shareholders to enter into this Agreement and to
consummate the transactions contemplated hereby, August represents and warrants
to and covenants with USWA and the Shareholders as follows:
4.1. ORGANIZATION. August is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. August is
entitled to own or lease its properties and to carry on its business as and in
the places where such business is now conducted, and August is duly licensed and
qualified in all jurisdictions where the character of the property owned by it
or the nature of the business transacted by it makes such license or
qualification necessary, except where such failure would not result in a
material adverse effect on August.
4.2. CAPITALIZATION AND RELATED MATTERS.
4.2.1. August has authorized capital stock consisting of Fifty
Million (50,000,000) shares of common stock, $0.001 par value per share, of
which Five Million (5,000,000) shares were issued and outstanding as of the date
hereof. The August Shares will be, as of the Closing Date, duly and validly
authorized and issued, and fully paid and non-assessable, and will be issued to
the Shareholders free of all Encumbrances, claims and liens whatsoever.
4.2.2. August does not have outstanding any securities
convertible into capital stock, nor any rights to subscribe for or to purchase,
or any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock or securities convertible into its
capital stock.
4.3. EXECUTION; NO INCONSISTENT AGREEMENTS; ETC.
4.3.1. The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby have been duly and validly
authorized and approved by August and this Agreement is a valid and binding
agreement of August, enforceable against August in accordance with its terms,
except as such enforcement may be limited by bankruptcy or similar laws
affecting the enforcement of creditors' rights generally, and the availability
of equitable remedies.
4.3.2. The execution and delivery of this Agreement by August
does not, and the consummation of the transactions contemplated hereby will not,
constitute a breach or violation of the charter or by-laws of August, or a
default under any of the terms, conditions or provisions of (or an act or
omission that would give rise to any right of termination, cancellation or
acceleration under) any material note, bond, mortgage, lease, indenture,
agreement or obligation to which August is a party, pursuant to which it
otherwise receives benefits, or by which any of its properties may be bound.
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4.4. FINANCIAL STATEMENTS. Prior to Closing, August shall deliver to
USWA the audited balance sheets of August as of December 31, 1999 (the "August
Financial Statement"). The August Financial Statement has been prepared in
accordance with GAAP, applied on a consistent basis (except that the unaudited
statements do not contain all the disclosures required by GAAP). Since December
31, 1999, there has been no material adverse change in the assets or
liabilities, in the business or condition, financial or otherwise, of August, or
in its results of operations.
4.5. LIABILITIES. August has no material debt, liability or
obligation of any kind, whether accrued, absolute, contingent or otherwise,
except those reflected on the August Financial Statements, including the notes
thereto and the liabilities incurred in the ordinary course of business since
December 31, 1999.
4.6. CONTINGENCIES. There are no actions, suits, claims or
proceedings pending or, to August's knowledge, threatened, against, by or
affecting August in any court or before any arbitrator or governmental agency
which could have a material adverse effect on August or which could materially
and adversely affect the right or ability of August to consummate the
transactions contemplated hereby. To the knowledge of August, there is no valid
basis upon which any such action, suit, claim or proceeding may be commenced or
asserted against August. There are no unsatisfied judgments against August and
no consent decrees or similar agreements to which August is subject and which
could have a material adverse effect on August or which could materially and
adversely affect the right or ability of August to consummate the transactions
contemplated hereby. August's operations are contingent upon its ability to
obtain additional financing.
4.7. FULL DISCLOSURE. No representation or warranty of August
contained in this Agreement, and none of the statements or information
concerning August contained in this Agreement and the Schedules, contains or
will contain any untrue statement of a material fact nor will such
representations, warranties, covenants or statements taken as a whole omit a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5. CONDUCT OF BUSINESS OF USWA PENDING CLOSING.
5.1. Conduct of Business. USWA and the Shareholders covenant and
agree that, between the date hereof and the Closing Date, the business of USWA
shall be conducted only in the ordinary course and consistent with past
practice.
5.2. No Material Changes. USWA shall not materially alter its
organization, capitalization, or financial structure, practices or operations.
Without limiting the generality of the foregoing:
(a) no change shall be made in the articles of incorporation or
by-laws of USWA;
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(b) no change shall be made in the authorized or issued capital
stock of USWA;
(c) USWA shall not issue or grant any right or option to
purchase or otherwise acquire any of its capital stock or other securities; and
(d) no dividend or other distribution or payment shall be
declared or made with respect to any of the capital stock of USWA.
5.3. COMPENSATION. No increase shall be made in the compensation or
employee benefits payable or to become payable to any director, officer,
employee or agent of USWA, and no bonus or profit-share payment or other
arrangement (whether current or deferred) shall be made to or with any such
director, officer, employee or agent, except in the ordinary course of business
and consistent with prior practices.
5.4. NOTIFICATION. Each party to this Agreement shall promptly
notify the other parties in writing of the occurrence, or threatened occurrence,
of any event that would constitute a breach or violation of this Agreement by
any party or that would cause any representation or warranty made by the
notifying party in this Agreement to be false or misleading in any respect. The
Shareholders shall promptly notify August of any event of which any Shareholder
obtains knowledge which could have a Material Adverse Effect.
6. CONDITIONS TO OBLIGATIONS OF ALL PARTIES.
The obligation of the parties hereto to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, on or before the
Closing, of each of the following conditions; any or all of which may be waived
in whole or in part by the joint agreement of the parties hereto:
6.1. ABSENCE OF ACTIONS. No action or proceeding shall have been
brought or threatened before any court or administrative agency to prevent the
consummation or to seek damages in a material amount by reason of the
transactions contemplated hereby, and no governmental authority shall have
asserted that the within transactions (or any other pending transaction
involving August, the Shareholders or USWA when considered in light of the
effect of the within transactions) shall constitute a violation of law or give
rise to material liability on the part of the Shareholders, USWA or August.
6.2. CONSENTS. The parties shall have received from any suppliers,
lessors, lenders, lien holders or governmental authorities, bodies or agencies
having jurisdiction over the transactions contemplated by this Agreement, or any
part hereof, such consents, authorizations and approvals as are necessary for
the consummation hereof.
7. CONDITIONS TO OBLIGATIONS OF AUGUST.
All obligations of August to consummate the transactions contemplated
by this Agreement are subject to the fulfillment and satisfaction of each and
11
<PAGE>
every of the following conditions on or prior to the Closing Date, any or all of
which may be waived in whole or in part by August:
7.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Section 3 of this Agreement and in any certificate,
instrument, schedule, agreement or other writing delivered by or on behalf of
USWA or the Shareholders in connection with the transactions contemplated by
this Agreement shall be true, correct and complete in all material respects
(except for representations and warranties which are by their terms qualified by
materiality, which shall be true, correct and complete in all respects) as of
the date when made and shall be deemed to be made again at and as of the Closing
Date and shall be true, correct and complete at and as of such time in all
material respects (except for representations and warranties which are by their
terms qualified by materiality, which shall be true, correct and complete in all
respects).
7.2. COMPLIANCE WITH AGREEMENTS AND CONDITIONS. USWA and the
Shareholders shall have performed and complied with all material agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or on the Closing Date.
7.3. ABSENCE OF MATERIAL ADVERSE CHANGES. No material adverse change
in the business, assets, financial condition, or prospects of USWA shall have
occurred.
7.4. CERTIFICATE OF USWA AND SHAREHOLDERS. USWA and the Shareholders
shall have executed and delivered, or caused to be executed and delivered, to
August one or more certificates, dated the Closing Date, certifying in such
detail as August may reasonably request to the fulfillment and satisfaction of
the conditions specified in Sections 7.1 through 7.3 above.
8. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS.
All of the obligations of the Shareholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment and
satisfaction of each and every of the following conditions on or prior to the
Closing, any or all of which may be waived in whole or in part, by the
Shareholders:
8.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Section 4 of this Agreement and in any certificate,
instrument, schedule, agreement or other writing delivered by or on behalf of
August in connection with the transactions contemplated by this Agreement shall
be true, correct and complete in all material respects (except for
representations and warranties which are by their terms qualified by
materiality, which shall be true, correct and complete in all respects) when
made and shall be deemed to be made again at and as of the Closing Date and
shall be true, correct and complete at and as of such time in all material
respects (except for representations and warranties which are by their terms
qualified by materiality, which shall be true, correct and complete in all
respects).
12
<PAGE>
8.2. COMPLIANCE WITH AGREEMENTS AND CONDITIONS. August shall have
performed and complied with all material agreements and conditions required by
this Agreement to be performed or complied with by August prior to or on the
Closing Date.
8.3. ABSENCE OF MATERIAL ADVERSE CHANGES. No material adverse change
in the business, assets, financial condition, or prospects of August, taken as a
whole, shall have occurred, and no event shall have occurred which has had, or
will have a material adverse effect on the business, assets, financial condition
or prospects of August and its subsidiaries, taken as a whole.
8.4. CERTIFICATE OF AUGUST. August shall have delivered to the
Shareholders a certificate, executed by an executive officer and dated the
Closing Date, certifying in such detail as counsel for the Shareholder may
reasonably request to the fulfillment and satisfaction of the conditions
specified in Sections 8.1 through 8.3 above.
9. INDEMNIFICATION.
9.1. INDEMNIFICATION BY SHAREHOLDERS AND USWA. Subject to Section
9.5, the Shareholders and USWA (hereinafter collectively called the
"Indemnitor") shall jointly and severally defend, indemnify and hold harmless
August, its direct and indirect parent corporations, subsidiaries (including
USWA after Closing) and affiliates, their officers, directors, employees and
agents (hereinafter collectively called "Indemnitees") against and in respect of
any and all loss, damage, liability, fine, penalty, cost and expense, including
reasonable attorneys' fees and amounts paid in settlement (collectively,
"Indemnified Losses"), suffered or incurred by any Indemnitee by reason of, or
arising out of:
(a) any misrepresentation, breach of warranty or breach or
non-fulfillment of any agreement of any Shareholder or USWA contained in this
13
<PAGE>
Agreement or in any certificate, schedule, instrument or document delivered to
August by or on behalf of the Shareholders or USWA pursuant to the provisions of
this Agreement (without regard to materiality thresholds contained therein); and
(b) any liabilities of USWA of any nature whatsoever
(including tax liability, penalties and interest), whether accrued, absolute,
contingent or otherwise arising from or relating to the Shareholders' ownership
or operation of USWA prior to the Closing Date.
9.2. INDEMNIFICATION BY AUGUST. Subject to Section 9.5, August
(hereinafter called the "Indemnitor") shall defend, indemnify and hold harmless
each Shareholder and USWA (hereinafter called "Indemnitee") against and in
respect of any and all loss, damage, liability, cost and expense, including
reasonable attorneys' fees and amounts paid in settlement (collectively,
"Indemnified Losses"), suffered or incurred by Indemnitee by reason of or
arising out of:
(a) any misrepresentation, breach of warranty or breach or
non-fulfillment of any material agreement of August contained in this Agreement
or in any other certificate, schedule, instrument or document delivered to the
Shareholders by or on behalf of August pursuant to the provisions of this
Agreement; and
(b) any liabilities of any nature whatsoever (including tax
liability, penalties and interest), whether accrued, absolute, contingent or
otherwise, arising from August's ownership or operation of USWA after Closing,
but only so long as such liability is not the result of an act or omission, of
USWA, or any Shareholder occurring prior to Closing.
9.3. DEFENSE OF CLAIMS.
9.3.1. Should any claim or action by a third party arise after
the Closing Date for which an Indemnitor is liable under the terms of this
Agreement, the Indemnitee shall notify Indemnitor within ten (10) days after
such claim or action arises and is known to Indemnitee, and shall give the
Indemnitor a reasonable opportunity to participate in any proceedings and to
settle or defend any such claim or action. The expenses of all proceedings,
contests or lawsuits with respect to such claims or actions shall be borne by
the Indemnitor. If the Indemnitor wishes to assume the defense of such claim or
action, the Indemnitor shall give written notice to the Indemnitees within ten
(10) days after notice from the Indemnitees of such claim or action, and the
Indemnitor shall thereafter assume the defense of any such claim or liability,
through counsel reasonably satisfactory to the Indemnitees, provided that
Indemnitees may participate in such defense at their own expense, and the
Indemnitor shall, in any event, have the right to control the defense of the
claim or action.
9.3.2. If the Indemnitor shall not assume the defense of, or
if after so assuming it shall fail to defend, any such claim or action, the
Indemnitees may defend against any such claim or action in such manner as they
may deem appropriate and the Indemnitees may settle such claim or litigation on
such terms as they may deem appropriate but subject to the Indemnitor's
approval, such approval not to be unreasonably withheld; provided, however, that
any such settlement shall be deemed approved by the Indemnitor if the Indemnitor
fails to object thereto, by written notice to the Indemnitees, within fifteen
(15) days after the Indemnitor's receipt of a written summary of such
settlement. The Indemnitor shall promptly reimburse the Indemnitees for the
amount of all expenses, legal and otherwise, incurred by the Indemnitees in
connection with the defense and settlement of such claim or action.
9.3.3. If a non-appealable judgment is rendered against any of
the Indemnitees in any action covered by the indemnification hereunder, or any
lien attaches to any of the assets of any of the Indemnitees, the Indemnitor
shall immediately upon such entry or attachment pay such judgment in full or
discharge such lien unless, at the expense and direction of the Indemnitor, an
appeal is taken under which the execution of the judgment or satisfaction of the
lien is stayed. If and when a final judgment is rendered in any such action, the
Indemnitor shall forthwith pay such judgment or discharge such lien before any
of the Indemnitees is compelled to do so.
9.4. WAIVER. The failure of any Indemnitee to give any notice or to
take any action hereunder shall not be deemed a waiver of any of the rights of
such Indemnitee hereunder, except to the extent that Indemnitor is actually
prejudiced by such failure.
14
<PAGE>
9.5. LIMITATIONS ON INDEMNIFICATION. Notwithstanding anything to the
contrary contained in this Agreement:
9.5.1. TIME LIMITATION. No party shall be responsible hereunder
for any Indemnified Loss unless the Indemnitee shall have provided such party
with written notice containing a reasonable description of the claim, action or
circumstances giving rise to such Indemnified Loss within one (1) year after the
Closing Date (the "Indemnity Notice Period"); provided, however, that there
shall be no limit on the Indemnity Notice Period for indemnity claims: (i)
against Shareholders for Indemnified Losses arising or resulting from a breach
of a representation or warranty of Shareholders relating to Environmental Laws,
Taxes or any liability of USWA relating to the handling or disposal of Wastes or
the failure to comply with any Environmental Law; and (ii) against any party
based on fraud, intentional breach or misrepresentation.
9.5.2. CAPS ON LOSSES. The aggregate liability of the
Shareholders after Closing for Indemnified Losses shall not exceed the aggregate
August Common Stock issued to the Shareholders, with each Shareholder's share of
the aggregate liability limited to August Common Stock issued to such
Shareholder. In the event of a claim of liability, the value of such shares
shall be determined by the Board of Directors of August whose determination
shall be final and binding on all parties hereto. The aggregate liability of
August after Closing for Indemnified Losses shall not exceed an amount equal to
the Purchase Price.
10. TERMINATION.
10.1. Termination. This Agreement may be terminated at any time on
or prior to the Closing:
(a) By mutual consent of the parties hereto; or
(b) At the election of August if: (i) a Shareholder or USWA
has breached or failed to perform or comply with any of their representations,
warranties, covenants or obligations under this Agreement; or (ii) any of the
conditions precedent set forth in Section 6 or 7 is not satisfied as and when
required by this Agreement; or (iii) the Closing has not been consummated by
April 15, 2000; or
(c) At the election of the Shareholders if: (i) August has
breached or failed to perform or comply with any of its representations,
warranties, covenants or obligations under this Agreement; or (ii) any of the
conditions precedent set forth in Section 6 or 8 is not satisfied as and when
required by this Agreement; or (iii) if the Closing has not been consummated by
April 15, 2000.
10.2. MANNER AND EFFECT OF TERMINATION. Written notice of any
termination ("Termination Notice") pursuant to this Section 10 shall be given by
the party electing termination of this Agreement ("Terminating Party") to the
other party or parties (collectively, the "Terminated Party"), and such notice
shall state the reason for termination. The party or parties receiving
Termination Notice shall have a period of ten (10) days after receipt of
<PAGE>
Termination Notice to cure the matters giving rise to such termination to the
reasonable satisfaction of the Terminating Party. If the matters giving rise to
termination are not cured as required hereby, this Agreement shall be terminated
effective as of the close of business on the tenth (10th) day following the
Terminated Party's receipt of Termination Notice. Upon termination of this
Agreement prior to the consummation of the Closing and in accordance with the
terms hereof, this Agreement shall become void and of no effect, and none of the
parties shall have any liability to the others, except that nothing contained
herein shall relieve any party from: (i) its obligations under Section 2.2; or
(ii) liability for its intentional breach of any representation, warranty or
covenant contained herein, or its intentional failure to comply with the terms
and conditions of this Agreement or to perform its obligations hereunder.
11. MISCELLANEOUS.
11.1. Notices.
11.1.1. All notices, requests, demands, or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given upon delivery if delivered in person or if sent by Federal Express (or
similar recognized overnight courier service) to the parties at the following
addresses:
If to Shareholders: To the addresses contained on the signatures
page of this Agreement
If to August: August Project 1 Corp.
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
Attention: Earl Ingarfield
With a copy to: Clayton E. Parker, Esq.
Kirkpatrick & Lockhart LLP
201 S. Biscayne Blvd.
Suite 2000, Miami Center
Miami, Florida 33131
If to USWA: USWebauctions, Inc.
7131 Curtiss Avenue, Suite 1
Sarasota, Florida 34231
11.1.2. Notices may also be given in any other manner permitted
by law, effective upon actual receipt. Any party may change the address to which
notices, requests, demands or other communications to such party shall be
delivered or mailed by giving notice thereof to the other parties hereto in the
manner provided herein.
11.2. SURVIVAL. The representations, warranties, agreements and
indemnifications of the parties contained in this Agreement or in any writing
16
<PAGE>
delivered pursuant to the provisions of this Agreement shall survive any
investigation heretofore or hereafter made by the parties and the consummation
of the transactions contemplated herein and shall continue in full force and
effect and survive after the Closing, subject to the limitations of Section 9.5.
11.3. COUNTERPARTS; INTERPRETATION. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, and
all of which shall constitute one instrument. This Agreement supersedes all
prior discussions and agreements between the parties with respect to the subject
matter hereof, and this Agreement contains the sole and entire agreement among
the parties with respect to the matters covered hereby. All Schedules and
Exhibits hereto shall be deemed a part of this Agreement. This Agreement shall
not be altered or amended except by a written instrument signed by or on behalf
of all of the parties hereto. No ambiguity in any provision hereof shall be
construed against a party by reason of the fact it was drafted by such party or
its counsel. For purposes of this Agreement "herein," "hereby," "hereof,"
"hereunder," "herewith," "hereafter" and "hereinafter" and similar words refer
to this Agreement in its entirety, and not to any particular subsection or
paragraph. References to "including" means including without limiting the
generality of any description preceding such term. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person other than the parties hereto any rights or remedies under or by reason
of this Agreement.
11.4. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida. The parties
hereto agree that any claim, suit, action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
submitted for adjudication exclusively in any state or federal court sitting in
Miami-Dade County, Florida and each party hereto expressly agrees to be bound by
such selection of jurisdiction and venue for purposes of such adjudication. Each
party (a) waives any objection which it may have that such court is not a
convenient forum for any such adjudication, (b) agrees and consents to the
personal jurisdiction of such court with respect to any claim or dispute arising
out of or relating to this Agreement or the transactions contemplated hereby and
(c) agrees that process issued out of such court or in accordance with the rules
of practice of such court shall be properly served if served personally or
served by certified mail or other form of substituted service, as provided under
the rules of practice of such court.
11.5. PARTIAL INVALIDITY AND SEVERABILITY. All rights and
restrictions contained herein may be exercised and shall be applicable and
binding only to the extent that they do not violate any applicable laws and are
intended to be limited to the extent necessary to render this Agreement legal,
valid and enforceable. If any terms of this Agreement not essential to the
commercial purpose of this Agreement shall be held to be illegal, invalid or
unenforceable by a court of competent jurisdiction, it is the intention of the
parties that the remaining terms hereof shall constitute their agreement with
respect to the subject matter hereof and all such remaining terms shall remain
in full force and effect. To the extent legally permissible, any illegal,
invalid or unenforceable provision of this Agreement shall be replaced by a
valid provision which will implement the commercial purpose of the illegal,
invalid or unenforceable provision.
11.6. Waiver. Any term or condition of this Agreement may be waived
at any time by the party which is entitled to the benefit thereof, but only if
17
<PAGE>
such waiver is evidenced by a writing signed by such party. No failure on the
part of a party hereto to exercise, and no delay in exercising, any right, power
or remedy created hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or remedy by any such party
preclude any other future exercise thereof or the exercise of any other right,
power or remedy. No waiver by any party hereto to any breach of or default in
any term or condition of this Agreement shall constitute a waiver of or assent
to any succeeding breach of or default in the same or any other term or
condition hereof.
11.7. HEADINGS. The headings as to contents of particular paragraphs
of this Agreement are inserted for convenience only and shall not be construed
as a part of this Agreement or as a limitation on the scope of any terms or
provisions of this Agreement.
11.8. EXPENSES. Except as otherwise expressly provided herein, all
legal and other costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by August or the
Shareholders as each party incurs such expenses, and none of such expenses shall
be charged to or paid by USWA.
11.9. FINDER'S FEES. August represents to the Shareholders that no
broker, agent, finder or other party has been retained by it in connection with
the transactions contemplated hereby and that no other fee or commission has
been agreed by August to be paid for or on account of the transactions
contemplated hereby. The Shareholders represent to August that no broker, agent,
finder or other party has been retained by Shareholders or USWA in connection
with the transactions contemplated hereby and that no other fee or commission
has been agreed by the Shareholders or USWA to be paid for or on account of the
transactions contemplated hereby.
11.10. GENDER. Where the context requires, the use of the singular
form herein shall include the plural, the use of the plural shall include the
singular, and the use of any gender shall include any and all genders.
11.11. ACCEPTANCE BY FAX. This Agreement shall be accepted,
effective and binding, for all purposes, when the parties shall have signed and
transmitted to each other, by telecopier or otherwise, copies of the signature
pages hereto.
11.12. ATTORNEYS' FEES. In the event of any litigation or other
proceeding arising out of or in connection with this Agreement, the prevailing
party or parties shall be entitled to recover its or their reasonable attorneys'
fees and court costs from the other party or parties.
11.13. INDEPENDENT REPRESENTATION. Each party hereto acknowledges
and agrees that it has received independent legal counsel of its own choice and
that it has been sufficiently apprised of its rights and responsibilities with
regard to the substance of this Agreement. In addition, Shareholders and USWA
acknowledge that Kirkpatrick & Lockhart LLP ("K&L") is solely representing
August in connection with this Agreement and all of the other documents
associated with this transaction.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement or caused this Stock Purchase Agreement to be duly executed by their
duly authorized officers as of the date first above written.
AUGUST PROJECT 1 CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
USWEBAUCTIONS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SHAREHOLDERS:
JOHN ALLEN JON KOCHEVAR
- ------------------------------------ -----------------------------------
Address: Address:
---------------------------- ---------------------------
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
<PAGE>
19
<TABLE>
<CAPTION>
SCHEDULE 1.2
<S> <C> <C>
- ------------------- ---------------------------------------------------- ---------------------------------- ----------------
SHAREHOLDER NUMBER OF SHARES
- ------------------- ---------------------------------------------------- ---------------------------------- ----------------
John Kochevar 4,867,000
John Allen 4,867,000
</TABLE>
20
EXHIBIT 2.03
------------
ARTICLES OF MERGER
OF
USWEBAUCTIONS, INC., A FLORIDA CORPORATION,
INTO
AUGUST PROJECT 1 CORP., A FLORIDA CORPORATION
- --------------------------------------------------------------------------------
Pursuant to the provisions of Section 607.1104 of the Florida Business
Corporation Act (the "ACT"), the parties hereto hereby adopt the following
Articles of Merger for the purpose of merging them into one corporation:
1. USWEBAUCTIONS, INC., a Florida corporation (the "MERGING CORPORATION"),
shall be merged with and into AUGUST PROJECT 1 CORP., a Florida corporation (the
"SURVIVING CORPORATION"), which shall be the surviving corporation in
the merger.
2. The merger shall become effective on the date on which these Articles
of Merger are filed with the Florida Department of State (the "EFFECTIVE Date").
3. The Articles of Incorporation of the Surviving Corporation as in effect
immediately prior to the Effective Date shall remain and be the Articles of
Incorporation of the Surviving Corporation, except that the name of the
Surviving Corporation after the merger shall be USWEBAUCTIONS, INC.
4. The Plan of Merger, a copy of which is attached hereto and made a part
hereof, was adopted and approved by the directors and sole shareholder of the
Merging Corporation effective as of April 20, 2000 and by the entire board of
directors and a majority of the shareholders of the Surviving Corporation
effective as of April 20, 2000.
IN WITNESS WHEREOF, the Surviving Corporation and the Merging Corporation
have caused these Articles of Merger to be executed by their respective officers
effective as of April 21, 2000.
AUGUST PROJECT 1 CORP. USWEBAUCTIONS, INC.
By: By:
--------------------------- -------------------------
Name: Earl T. Ingarfield Name: Jon Kochevar
Its: President Its: President
<PAGE>
PLAN OF MERGER
--------------
THIS PLAN OF MERGER (the "PLAN") is made and entered into as of April 21,
2000 by and between USWEBAUCTIONS, INC., a Florida corporation (the "MERGING
CORPORATION"), and AUGUST PROJECT 1 CORP., a Florida corporation (the "SURVIVING
CORPORATION"). The Merging Corporation and the Surviving Corporation are
hereinafter sometimes referred to collectively as the "CONSTITUENT
CORPORATIONS."
W I T N E S S E T H:
WHEREAS, the directors of the Constituent Corporations have determined
that it would be in the best interest of such corporations and their respective
shareholders for the Merging Corporation to merge with and into the Surviving
Corporation in accordance with Florida Business Corporation Act; and
WHEREAS, the Merging Corporation is a wholly-owned subsidiary of the
Surviving Corporation.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants, agreements, provisions and grants herein contained, the Constituent
Corporations hereby agree and prescribe the terms and conditions of this Plan of
Merger and the mode of carrying the same into effect, as follows:
1. MERGER. Subject to and on the terms and conditions set forth herein, on
the Effective Date (as defined in Section 2 below), the Merging Corporation
shall be merged (the "MERGER") with and into the Surviving Corporation, with the
Surviving Corporation remaining the surviving corporation.
2. EFFECTIVE DATE. The Merger shall become effective upon the filing of
the Articles of Merger with the Florida Department of State (the
"EFFECTIVE --------- DATE"). ----
3. EFFECT OF MERGER. Upon the Effective Date: (a) the Merging Corporation
and the Surviving Corporation shall become a single corporation and the separate
corporate existence of the Merging Corporation shall cease; (b) the Surviving
Corporation shall succeed to and posses all the rights, privileges, powers, and
immunities of the Merging Corporation which, together with all of the assets,
properties, business, patents, trademarks, and goodwill of the Merging
Corporation, of every type and description wherever located, shall vest in the
Surviving Corporation without further act or deed; (c) all rights of creditors
and all liens upon any property of the Constituent Corporations shall remain
unimpaired; and (d) the name of the Surviving Corporation shall become
USWEBAUCTIONS, INC., without further act or deed.
4. ARTICLES OF INCORPORATION, BYLAWS, OFFICERS AND DIRECTORS OF SURVIVING
CORPORATION. Upon the Effective Date: (a) the Articles of Incorporation of the
Surviving Corporation shall remain and continue as the Articles of Incorporation
of the Surviving Corporation, except that the name of the Surviving Corporation
<PAGE>
after the Merger shall be USWEBAUCTIONS, INC.; (b) the Bylaws of the Surviving
Corporation shall remain and continue as the Bylaws of the Surviving Corporation
until amended in the manner provided by law; and (c) the officers and directors
of the Surviving Corporation shall remain and continue as the officers and
directors of the Surviving Corporation until their successors are duly elected
and qualified.
5. CANCELLATION OF SHARES. Upon the Effective Date, all of the then-issued
and outstanding shares of capital stock of the Merging Corporation shall be
automatically canceled, without any action on the part of the holder thereof.
6. ARTICLES OF MERGER. Promptly upon adopting this Plan, the parties shall
promptly execute the Articles of Merger attached hereto and file the same with
the Florida Department of State.
7. GOVERNING LAW. This Plan of Merger shall be governed and construed in
accordance with the laws of the State of Florida.
8. COUNTERPARTS. This Plan of Merger may be executed in counterparts, each
of which when so executed shall constitute an original copy hereof, but both of
which together shall be considered but one and the same document.
IN WITNESS WHEREOF, the parties have executed this Plan of Merger on the
date first above written.
AUGUST PROJECT 1 CORP.
By:____________________________
Name: Earl T. Ingarfield
Title: President
USWEBAUCTIONS, INC.
By:____________________________
Name: John Kochevar
Title: President
2
EXHIBIT 10.01
-------------
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("the AGREEMENT") is made and entered
into on April 10, 2000 by and between AUGUST PROJECT 1 CORP., a Florida
corporation (the "COMPANY"), and JOHN ALLEN (the "EXECUTIVE"), who hereby agree
as hereinafter provided:
Section 1. DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below.
"BASE COMPENSATION" shall have the meaning set forth in Section 5.
"BOARD OF DIRECTORS" means the directors of the Company.
"CAUSE" shall have the meaning set forth in Section 10(b).
"DISABILITY" of the Executive means that, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties on a full time basis for three (3) consecutive months, or
for an aggregate of six (6) months in any consecutive twelve (12) month period.
"EMPLOYMENT COMMENCEMENT DATE" means the date hereof.
"EMPLOYMENT PERIOD" means that period commencing on the Employment
Commencement Date and ending two (2) years from the date hereof unless
terminated earlier pursuant to Section 10 hereof.
"EMPLOYMENT TERMINATION DATE" means the date the Employment Period
terminates as provided in Section 10.
"FISCAL YEAR" means the fiscal year of the Company ending December 31 or
as such fiscal year as may be amended by the Board of Directors.
"SCHEDULED EMPLOYMENT TERMINATION DATE" means the later of (a) the day
immediately preceding the second (2nd) anniversary of the Employment
Commencement Date or (b) such date as is specified by either the Company or the
Executive in a Notice of Termination.
"SUBSIDIARIES" means any wholly owned subsidiaries of the Company, if any.
Section 2. EMPLOYMENT AND TERM. The Company hereby employs the
Executive, and the Executive hereby accepts such employment by the Company, for
the purposes and upon the terms and conditions contained in this Agreement. The
term of such employment shall be for the Employment Period.
<PAGE>
Section 3. EMPLOYMENT CAPACITY AND DUTIES. The Executive shall be employed
throughout the Employment Period as the Vice-President of the Company. The
Executive shall have the duties and responsibilities incumbent with this
position, but at all times shall act in accordance with the directions given by
the Board of Directors.
Section 4. EXECUTIVE PERFORMANCE COVENANTS. The Executive accepts the
employment described in Section 3 and agrees to devote all of his working time
and efforts (except for absences due to illness and appropriate vacations) to
the business and affairs of the Company and the performance of the aforesaid
duties and responsibilities.
Section 5. COMPENSATION. The Executive shall be paid "BASE COMPENSATION"
for each Fiscal Year at an annual rate of $50,000 in 26 bi-weekly equal
installments or such other basis as may be determined by the Board of Directors.
The Base Compensation shall be pro-rated for any Fiscal Year hereunder which is
less than a full Fiscal Year.
Section 6. PAYMENT OF EXPENSES. The Company shall pay the Executive's
reasonable expenses, including expenses for travel, entertainment and similar
items, in accordance with the Company's expense policies as determined from time
to time by the Board of Directors. The Employee shall provide all documentation
in connection with such expenses as the Board of Directors shall request. If
there is a dispute as to the eligibility of an expense for payment in accordance
with the Company's expense policies, then such expense shall be determined to be
payable by the Company if approved by the Board of Directors. Any such
determination shall be final and binding on the parties hereto. Notwithstanding
any other provision hereof, any expenses which cumulatively exceed one thousand
dollars ($1,000) in any one month shall require the prior written approval of
the Board of Directors to be eligible for reimbursement hereunder.
Section 7. EMPLOYEE BENEFITS, VACATIONS. During the Employment Period, the
Executive shall receive the benefits and enjoy the perquisites described below:
(a) BENEFIT PLANS. The Executive shall be entitled to participate
in any perquisite, benefit or compensation plan, including any medical insurance
plan or other plans which is generally applicable to all salaried employees of
the Company (collectively referred to as the "BENEFIT PLANS"). The Company does
not guarantee, represent or warrant that any Benefit Plan will be available or
will continue to be available hereunder during the term of this Agreement.
(b) VACATIONS. The Executive shall be entitled in each Fiscal Year
to a vacation of two (2) weeks (ten [10] working days).
Section 8. COMPANY LIFE INSURANCE; MEDICAL EXAMINATIONS. At any time
during the Employment Period, the Company may, in its discretion, apply for and
procure as owner and for its own benefit, insurance on the life of the
Executive, in such amounts and in such form or forms as the Company may
determine. The Executive shall have no right to any interest in any such policy
or policies, but he shall, at the request of the Company, submit to such medical
examinations, supply such information and execute such applications, instruments
2
<PAGE>
and other documents as reasonably may be required by the insurance company or
companies to whom the Company has applied for such insurance.
If requested by the Company, the Executive shall submit to at least one
medical examination during each Fiscal Year at such reasonable time and place
and by a physician or physicians determined and selected by the Company.
Section 9. CERTAIN COMPANY PROTECTION PROVISIONS. The following provisions
apply for the protection of the Company:
(a) CONFIDENTIALITY. The Executive agrees and acknowledges that,
by reason of the nature of his duties as an officer and employee of the Company,
he will have access to and become informed of confidential and secret
information which is a competitive asset of the Company ("CONFIDENTIAL
INFORMATION"), including, without limitation, any lists of customers or
suppliers, financial statistics, research data or any other statistics and plans
contained in profit plans, capital plans, critical issue plans, strategic plans,
marketing or operational plans, technical data and information, technology,
software, product information or other information of the Company (whether or
not such information qualifies as a "trade secret" under applicable law) and any
of the foregoing which belong to any person or company but to which the
Executive has had access by reason of his employment relationship with the
Company. Any technology, software, or patents created, obtained, designed, or
produced by Executive during the Employment Period shall be deemed to be
Confidential Information; however, any technology, software, or patents created,
obtained, designed, or produced by Executive during any period other than the
Employment Period shall be deemed not to be Confidential Information. The
Executive agrees to faithfully keep in strict confidence, and not, either
directly or indirectly, to make known, divulge, reveal, furnish, make available
or use (except for use in the regular course of his employment duties) any such
Confidential Information. The Executive acknowledges that all manuals,
instruction books, price lists, technology, software, information and records
and other information and aids relating to the Company's business, and any and
all other documents (and all copies thereof) containing Confidential Information
furnished to the Executive by the Company or otherwise acquired or developed by
the Executive, shall at all times be the property of the Company. Upon
termination of the Employment Period, the Executive shall return to the Company
all such property or documents (and all copies thereof) which are in his
possession, custody or control, but his obligation of confidentiality shall
survive such termination of the Employment Period until and unless any such
Confidential Information shall have become, through no fault of the Executive,
generally known to the public. The obligations of the Executive under this
subsection are in addition to, and not in limitation or preemption of, all other
obligations of confidentiality which the Executive may have to the Company under
general legal or equitable principles or otherwise.
(b) REMEDIES. It is expressly agreed by the Executive and the
Company that these provisions are reasonable for purposes of preserving for the
Company its business, goodwill and proprietary information. It is also agreed
that if any provision is found by a court having jurisdiction to be
unreasonable, for any reason, then that provision shall be amended to correspond
to that considered reasonable by a court and as amended shall be enforced and
3
<PAGE>
the remaining provisions shall remain effective. In the event of any breach of
these provisions by the Executive, the parties recognize and acknowledge that a
remedy at law will be inadequate and the Company may suffer irreparable injury.
The Executive acknowledges that the services to be rendered by him are of a
character giving them peculiar value, the loss of which cannot be adequately
compensated for in damages; accordingly the Executive consents to injunctive and
other appropriate equitable relief (without the posting of a bond) upon the
institution of proceedings therefor by the Company in order to protect the
Company's rights. Such relief shall be in addition to any other relief to which
the Company may be entitled at law or in equity.
Section 10. TERMINATION OF EMPLOYMENT.
(a) NOTICE OF TERMINATION; EMPLOYMENT TERMINATION DATE.
-----------------------------------------------------------
(1) Any termination of the Executive's employment by the
Company or the Executive shall be communicated by written "NOTICE OF
TERMINATION" to the other party thereto.
(2) "EMPLOYMENT TERMINATION DATE" shall mean the date on
which the Employment Period and the Executive's right and obligation to perform
employment services for the Company shall terminate effective upon the first to
occur of the following:
(A) If the Executive's employment is terminated for
Disability, the date that the Notice of Termination is
given;
(B) If the Executive's employment is terminated by the
Executive by voluntary action of the Executive (see
Section 10(e)), the date specified in the Notice of
Termination, which date (except with the written consent
of the Company to the contrary) shall not be more than
sixty (60) days after the date that the Notice of
Termination is given;
(C) The death of the Executive;
(D) If the Executive's employment is terminated by the
Company for Cause (see Section 10(b)(1)), the date on
which a Notice of Termination is given; and
(E) If the Executive's employment is terminated by the
Company other than for Cause, Disability or death of the
Executive (see Section 10(f)), the date specified in the
Notice of Termination which date (except with the
written consent of the Executive to the contrary) shall
not be more than sixty (60) days after the date that the
Notice of Termination is given.
(b) TERMINATION FOR CAUSE:
---------------------
(1) The Company may terminate the Executive's employment and
the Employment Period for Cause. For the purposes of this Agreement, the Company
4
<PAGE>
shall have "CAUSE" to terminate employment hereunder (A) if termination shall
have been the result of an act or acts of willful misconduct injurious to the
Company, monetarily or otherwise; (B) upon the willful and continued failure by
the Executive substantially to perform his duties with the Company; (C) if the
Executive is convicted of a felony crime; or (D) if the Executive willfully
fails to follow the directives of the Board of Directors in connection with his
employment hereunder.
(2) If the Executive's employment shall be terminated for
Cause, the Company shall pay the Executive within ten (10) days of such
termination, his unpaid Base Compensation through the Employment Termination
Date at the rate in effect at the time Notice of Termination is given, plus any
expenses incurred in accordance with Section 6 hereof.
(c) TERMINATION FOR DISABILITY. The Company may terminate the
Executive's employment because of the Disability of the Executive and thereafter
shall pay to the Executive (or his successors) (1) his unpaid Base Compensation
through the third full month following the Employment Termination Date at his
then effective Base Compensation rate plus (2) any expenses incurred in
accordance with Section 6 hereof.
(d) TERMINATION UPON EXECUTIVE'S DEATH. In the event of the
Executive's death, the Company shall pay to the Executive's estate (1) any
unpaid amount of Base Compensation through the date of death at the then
effective Base Compensation rate, plus (2) any expenses incurred in accordance
with Section 6 hereof.
(e) TERMINATION OF EMPLOYMENT BY THE EXECUTIVE. The Executive
shall have the right voluntarily to terminate his employment prior to the
Scheduled Employment Termination Date, and if the Executive shall so terminate
his employment, he shall be entitled only to payment of the amounts which would
be payable under Section 10(b)(2) had he been terminated for Cause.
(f) COMPENSATION UPON TERMINATION OTHER THAN FOR CAUSE. If the
Company shall terminate the Executive's employment other than for Cause or,
pursuant to Section 10(c) or (d), then the Company shall pay to the Executive
his unpaid Base Compensation through the Scheduled Employment Termination Date
at his then effective Base Compensation Rate, plus (2) any expenses incurred in
accordance with Section 6 hereof.
(g) COMPENSATION UPON DISABILITY. During any period that the
Executive fails to perform his duties hereunder as a result of Disability due to
physical or mental illness, he shall continue to receive his full Base
Compensation at the rate then in effect until this Agreement is terminated
pursuant to Section 10(c) hereof. Thereafter, his benefits shall be determined
in accordance with the Company's Benefit Plans.
Section 11. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Miami-Dade County, Florida in accordance with the rules of the American
Arbitration Association then in effect.
5
<PAGE>
Section 12. SUCCESSORS AND ASSIGNS. Except as hereinafter expressly
provided, the agreements, covenants, terms and provisions of this Agreement
shall bind the respective heirs, executors, administrators, successors and
assigns of the parties. Specifically, and not by way of limitation of the
foregoing, the Executive shall be bound by the terms and conditions of this
Agreement to any successor assignee of the Company's rights and obligations
hereunder as a result of any merger, consolidation or sale or lease of all or
substantially all of the Company's business and assets.
If the Executive should die while any amounts are payable to him
hereunder, or if by reason of his death payments are to be made to him
hereunder, then this Agreement shall inure to the benefit of and be enforceable
by the Executive's executors, administrators, heirs, distributees, devisees and
legatees and all amounts payable hereunder shall then be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there is no such designee, to this estate.
This Agreement is personal in nature and the Executive shall not, without
the consent of the Company, assign or transfer this Agreement or any rights or
obligations hereunder. Without limiting the foregoing, the Executive's right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
his will or by the laws of descent or distribution, and in the event of any
attempted assignment or transfer contrary to this paragraph the Company shall
have no liability to pay to the purported assignee or transferee any amount so
attempted to be assigned or transferred.
As used in this Agreement, the "COMPANY" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in the first
paragraph of this Section or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
Section 13. NOTICES. Any notice or other communication required or desired
to be given hereunder shall be in writing and shall be deemed sufficiently given
when personally delivered or delivered by nationally recognized overnight
delivery service, addressed to the parties at their respective addressed set
forth under their respective signatures below or such other person or addresses
as shall be given by notice of any party. Such notice shall be deemed to be
given on the date of delivery.
Section 14. WAIVER; REMEDIES CUMULATIVE. No waiver of any right or option
hereunder by any party shall operate as a waiver of any other right or option,
or the same right or option as respects any subsequent occasion for its
exercise, or of any legal remedy. No waiver by any party of any breach of this
Agreement or of any agreement or covenant contained herein shall be held to
constitute a waiver of any other breach or a continuation of the same breach.
All remedies provided by this Agreement are in addition to all other remedies by
it or the law provided.
Section 15. GOVERNING LAW; SEVERABILITY. This Agreement is made and is
expected to be performed in Florida, and the various terms, provisions,
6
<PAGE>
covenants and agreements, and the performance thereof, shall be construed,
interpreted and enforced under and with reference to the laws of the State of
Florida, unless otherwise indicated herein. It is the intention of the Company
and the Executive to comply fully with all laws and matters of public policy
relating to employment agreements and restrictive covenants, and this Agreement
shall be construed consistently with such laws and public policy to the extent
possible. If and to the extent any one or more covenants, agreements, terms and
provisions of this Agreement or any portion or portions thereof shall be held
invalid or unenforceable by a court of competent jurisdiction, then such
covenants, agreements, terms and provisions (or portions thereof) shall be
deemed separable from the remaining covenants, agreements, terms and provisions
of this Agreement and such holding shall in no way affect the validity or
enforceability of any of the other covenants, agreements, terms and provisions
hereof.
Section 16. INDEPENDENT REPRESENTATION. Each party hereto acknowledges and
agrees that it has received independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement. In addition, Executive acknowledges that
Kirkpatrick & Lockhart LLP ("K&L") is solely representing the Company in
connection with this Agreement and all of the other documents associated with
this transaction.
Section 17. MISCELLANEOUS. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
This Agreement may not be modified, changed or amended except in a writing
signed by each of the parties hereto. This Agreement may be signed in multiple
counterparts, each of which shall be deemed an original hereof. The captions of
the several sections and subsections of this Agreement are not a part of the
context hereof, are inserted only for convenience in locating such sections and
subsections and shall be ignored in construing this Agreement.
Section 18. SURVIVAL. The provisions of Sections 9, 11, 12, 15 and 16
shall survive termination of this Agreement for any reason.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Executive Employment Agreement as of the date first above written.
AUGUST PROJECT 1 CORP. JOHN ALLEN
By:_________________________________ _______________________________
Name:_______________________________ Address:
Title:______________________________ _______________________________
Address:____________________________ _______________________________
22 South Links Drive, Suite 204 _______________________________
Sarasota, Florida 34236 _______________________________
7
EXHIBIT 10.02
-------------
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("the AGREEMENT") is made and entered
into on April 10, 2000 by and between AUGUST PROJECT 1 CORP., a Florida
corporation (the "COMPANY"), and JON KOCHEVAR (the "EXECUTIVE"), who hereby
agree as hereinafter provided:
Section 1. DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below.
"BASE COMPENSATION" shall have the meaning set forth in Section 5.
"BOARD OF DIRECTORS" means the directors of the Company.
"CAUSE" shall have the meaning set forth in Section 10(b).
"DISABILITY" of the Executive means that, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties on a full time basis for three (3) consecutive months, or
for an aggregate of six (6) months in any consecutive twelve (12) month period.
"EMPLOYMENT COMMENCEMENT DATE" means the date hereof.
"EMPLOYMENT PERIOD" means that period commencing on the Employment
Commencement Date and ending two (2) years from the date hereof unless
terminated earlier pursuant to Section 10 hereof.
"EMPLOYMENT TERMINATION DATE" means the date the Employment Period
terminates as provided in Section 10.
"FISCAL YEAR" means the fiscal year of the Company ending December 31 or
as such fiscal year as may be amended by the Board of Directors.
"SCHEDULED EMPLOYMENT TERMINATION DATE" means the later of (a) the day
immediately preceding the second (2nd) anniversary of the Employment
Commencement Date or (b) such date as is specified by either the Company or the
Executive in a Notice of Termination.
"SUBSIDIARIES" means any wholly owned subsidiaries of the Company, if any.
Section 2. EMPLOYMENT AND TERM. The Company hereby employs the Executive,
and the Executive hereby accepts such employment by the Company, for the
purposes and upon the terms and conditions contained in this Agreement. The term
of such employment shall be for the Employment Period.
<PAGE>
Section 3. EMPLOYMENT CAPACITY AND DUTIES. The Executive shall be employed
throughout the Employment Period as the President of the Company. The Executive
shall have the duties and responsibilities incumbent with this position, but at
all times shall act in accordance with the directions given by the Board of
Directors.
Section 4. EXECUTIVE PERFORMANCE COVENANTS. The Executive accepts the
employment described in Section 3 and agrees to devote all of his working time
and efforts (except for absences due to illness and appropriate vacations) to
the business and affairs of the Company and the performance of the aforesaid
duties and responsibilities.
Section 5. COMPENSATION. The Executive shall be paid "BASE COMPENSATION"
for each Fiscal Year at an annual rate of $80,000 in 26 bi-weekly equal
installments or such other basis as may be determined by the Board of Directors.
The Base Compensation shall be pro-rated for any Fiscal Year hereunder which is
less than a full Fiscal Year.
Section 6. PAYMENT OF EXPENSES. The Company shall pay the Executive's
reasonable expenses, including expenses for travel, entertainment and similar
items, in accordance with the Company's expense policies as determined from time
to time by the Board of Directors. The Employee shall provide all documentation
in connection with such expenses as the Board of Directors shall request. If
there is a dispute as to the eligibility of an expense for payment in accordance
with the Company's expense policies, then such expense shall be determined to be
payable by the Company if approved by the Board of Directors. Any such
determination shall be final and binding on the parties hereto. Notwithstanding
any other provision hereof, any expenses which cumulatively exceed one thousand
dollars ($1,000) in any one month shall require the prior written approval of
the Board of Directors to be eligible for reimbursement hereunder.
Section 7. EMPLOYEE BENEFITS, VACATIONS. During the Employment Period, the
Executive shall receive the benefits and enjoy the perquisites described below:
(a) BENEFIT PLANS. The Executive shall be entitled to participate
in any perquisite, benefit or compensation plan, including any medical insurance
plan or other plans which is generally applicable to all salaried employees of
the Company (collectively referred to as the "BENEFIT PLANS"). The Company does
not guarantee, represent or warrant that any Benefit Plan will be available or
will continue to be available hereunder during the term of this Agreement.
(b) VACATIONS. The Executive shall be entitled in each Fiscal Year
to a vacation of two (2) weeks (ten [10] working days).
Section 8. COMPANY LIFE INSURANCE; MEDICAL EXAMINATIONS. At any time
during the Employment Period, the Company may, in its discretion, apply for and
procure as owner and for its own benefit, insurance on the life of the
Executive, in such amounts and in such form or forms as the Company may
determine. The Executive shall have no right to any interest in any such policy
or policies, but he shall, at the request of the Company, submit to such medical
2
<PAGE>
examinations, supply such information and execute such applications, instruments
and other documents as reasonably may be required by the insurance company or
companies to whom the Company has applied for such insurance.
If requested by the Company, the Executive shall submit to at least one
medical examination during each Fiscal Year at such reasonable time and place
and by a physician or physicians determined and selected by the Company.
Section 9. CERTAIN COMPANY PROTECTION PROVISIONS. The following
provisions apply for the protection of the Company:
(a) CONFIDENTIALITY. The Executive agrees and acknowledges
that, by reason of the nature of his duties as an officer and employee of the
Company, he will have access to and become informed of confidential and secret
information which is a competitive asset of the Company ("CONFIDENTIAL
INFORMATION"), including, without limitation, any lists of customers or
suppliers, financial statistics, research data or any other statistics and plans
contained in profit plans, capital plans, critical issue plans, strategic plans,
marketing or operational plans, technical data and information, technology,
software, product information or other information of the Company (whether or
not such information qualifies as a "trade secret" under applicable law) and any
of the foregoing which belong to any person or company but to which the
Executive has had access by reason of his employment relationship with the
Company. Any technology, software, or patents created, obtained, designed, or
produced by Executive during the Employment Period shall be deemed to be
Confidential Information; however, any technology, software, or patents created,
obtained, designed, or produced by Executive during any period other than the
Employment Period shall be deemed not to be Confidential Information. The
Executive agrees to faithfully keep in strict confidence, and not, either
directly or indirectly, to make known, divulge, reveal, furnish, make available
or use (except for use in the regular course of his employment duties) any such
Confidential Information. The Executive acknowledges that all manuals,
instruction books, price lists, technology, software, information and records
and other information and aids relating to the Company's business, and any and
all other documents (and all copies thereof) containing Confidential Information
furnished to the Executive by the Company or otherwise acquired or developed by
the Executive, shall at all times be the property of the Company. Upon
termination of the Employment Period, the Executive shall return to the Company
all such property or documents (and all copies thereof) which are in his
possession, custody or control, but his obligation of confidentiality shall
survive such termination of the Employment Period until and unless any such
Confidential Information shall have become, through no fault of the Executive,
generally known to the public. The obligations of the Executive under this
subsection are in addition to, and not in limitation or preemption of, all other
obligations of confidentiality which the Executive may have to the Company under
general legal or equitable principles or otherwise.
(b) REMEDIES. It is expressly agreed by the Executive and the
Company that these provisions are reasonable for purposes of preserving for the
Company its business, goodwill and proprietary information. It is also agreed
that if any provision is found by a court having jurisdiction to be
unreasonable, for any reason, then that provision shall be amended to correspond
to that considered reasonable by a court and as amended shall be enforced and
3
<PAGE>
the remaining provisions shall remain effective. In the event of any breach of
these provisions by the Executive, the parties recognize and acknowledge that a
remedy at law will be inadequate and the Company may suffer irreparable injury.
The Executive acknowledges that the services to be rendered by him are of a
character giving them peculiar value, the loss of which cannot be adequately
compensated for in damages; accordingly the Executive consents to injunctive and
other appropriate equitable relief (without the posting of a bond) upon the
institution of proceedings therefor by the Company in order to protect the
Company's rights. Such relief shall be in addition to any other relief to which
the Company may be entitled at law or in equity.
Section 10. TERMINATION OF EMPLOYMENT.
-------------------------
(a) NOTICE OF TERMINATION; EMPLOYMENT TERMINATION DATE.
-----------------------------------------------------------
(1) Any terminatio7n of the Executive's employment by the
Company or the Executive shall be communicated by written "NOTICE OF
TERMINATION" to the other party thereto.
(2) "EMPLOYMENT TERMINATION DATE" shall mean the date on
which the Employment Period and the Executive's right and obligation to perform
employment services for the Company shall terminate effective upon the first to
occur of the following:
(A) If the Executive's employment is terminated for
Disability, the date that the Notice of Termination is
given;
(B) If the Executive's employment is terminated by the
Executive by voluntary action of the Executive (see
Section 10(e)), the date specified in the Notice of
Termination, which date (except with the written consent
of the Company to the contrary) shall not be more than
sixty (60) days after the date that the Notice of
Termination is given;
(C) The death of the Executive;
(D) If the Executive's employment is terminated by the
Company for Cause (see Section 10(b)(1)), the date on
which a Notice of Termination is given; and
(E) If the Executive's employment is terminated by the
Company other than for Cause, Disability or death of the
Executive (see Section 10(f)), the date specified in the
Notice of Termination which date (except with the
written consent of the Executive to the contrary) shall
not be more than sixty (60) days after the date that the
Notice of Termination is given.
(b) TERMINATION FOR CAUSE:
---------------------
(1) The Company may terminate the Executive's employment and
the Employment Period for Cause. For the purposes of this Agreement, the Company
4
<PAGE>
shall have "CAUSE" to terminate employment hereunder (A) if termination shall
have been the result of an act or acts of willful misconduct injurious to the
Company, monetarily or otherwise; (B) upon the willful and continued failure by
the Executive substantially to perform his duties with the Company; (C) if the
Executive is convicted of a felony crime; or (D) if the Executive willfully
fails to follow the directives of the Board of Directors in connection with his
employment hereunder.
(2) If the Executive's employment shall be terminated for
Cause, the Company shall pay the Executive within ten (10) days of such
termination, his unpaid Base Compensation through the Employment Termination
Date at the rate in effect at the time Notice of Termination is given, plus any
expenses incurred in accordance with Section 6 hereof.
(c) TERMINATION FOR DISABILITY. The Company may terminate the
Executive's employment because of the Disability of the Executive and thereafter
shall pay to the Executive (or his successors) (1) his unpaid Base Compensation
through the third full month following the Employment Termination Date at his
then effective Base Compensation rate plus (2) any expenses incurred in
accordance with Section 6 hereof.
(d) TERMINATION UPON EXECUTIVE'S DEATH. In the event of the
Executive's death, the Company shall pay to the Executive's estate (1) any
unpaid amount of Base Compensation through the date of death at the then
effective Base Compensation rate, plus (2) any expenses incurred in accordance
with Section 6 hereof.
(e) TERMINATION OF EMPLOYMENT BY THE EXECUTIVE. The Executive
shall have the right voluntarily to terminate his employment prior to the
Scheduled Employment Termination Date, and if the Executive shall so terminate
his employment, he shall be entitled only to payment of the amounts which would
be payable under Section 10(b)(2) had he been terminated for Cause.
(f) COMPENSATION UPON TERMINATION OTHER THAN FOR CAUSE. If the
Company shall terminate the Executive's employment other than for Cause or,
pursuant to Section 10(c) or (d), then the Company shall pay to the Executive
his unpaid Base Compensation through the Scheduled Employment Termination Date
at his then effective Base Compensation Rate, plus (2) any expenses incurred in
accordance with Section 6 hereof.
(g) COMPENSATION UPON DISABILITY. During any period that the
Executive fails to perform his duties hereunder as a result of Disability due to
physical or mental illness, he shall continue to receive his full Base
Compensation at the rate then in effect until this Agreement is terminated
pursuant to Section 10(c) hereof. Thereafter, his benefits shall be determined
in accordance with the Company's Benefit Plans.
Section 11. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Miami-Dade County, Florida in accordance with the rules of the American
Arbitration Association then in effect.
5
<PAGE>
Section 12. SUCCESSORS AND ASSIGNS. Except as hereinafter expressly
provided, the agreements, covenants, terms and provisions of this Agreement
shall bind the respective heirs, executors, administrators, successors and
assigns of the parties. Specifically, and not by way of limitation of the
foregoing, the Executive shall be bound by the terms and conditions of this
Agreement to any successor assignee of the Company's rights and obligations
hereunder as a result of any merger, consolidation or sale or lease of all or
substantially all of the Company's business and assets.
If the Executive should die while any amounts are payable to him
hereunder, or if by reason of his death payments are to be made to him
hereunder, then this Agreement shall inure to the benefit of and be enforceable
by the Executive's executors, administrators, heirs, distributees, devisees and
legatees and all amounts payable hereunder shall then be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there is no such designee, to this estate.
This Agreement is personal in nature and the Executive shall not, without
the consent of the Company, assign or transfer this Agreement or any rights or
obligations hereunder. Without limiting the foregoing, the Executive's right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
his will or by the laws of descent or distribution, and in the event of any
attempted assignment or transfer contrary to this paragraph the Company shall
have no liability to pay to the purported assignee or transferee any amount so
attempted to be assigned or transferred.
As used in this Agreement, the "COMPANY" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in the first
paragraph of this Section or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
Section 13. NOTICES. Any notice or other communication required or desired
to be given hereunder shall be in writing and shall be deemed sufficiently given
when personally delivered or delivered by nationally recognized overnight
delivery service, addressed to the parties at their respective addressed set
forth under their respective signatures below or such other person or addresses
as shall be given by notice of any party. Such notice shall be deemed to be
given on the date of delivery.
Section 14. WAIVER; REMEDIES CUMULATIVE. No waiver of any right or option
hereunder by any party shall operate as a waiver of any other right or option,
or the same right or option as respects any subsequent occasion for its
exercise, or of any legal remedy. No waiver by any party of any breach of this
Agreement or of any agreement or covenant contained herein shall be held to
constitute a waiver of any other breach or a continuation of the same breach.
All remedies provided by this Agreement are in addition to all other remedies by
it or the law provided.
Section 15. GOVERNING LAW; SEVERABILITY. This Agreement is made and is
expected to be performed in Florida, and the various terms, provisions,
6
<PAGE>
covenants and agreements, and the performance thereof, shall be construed,
interpreted and enforced under and with reference to the laws of the State of
Florida, unless otherwise indicated herein. It is the intention of the Company
and the Executive to comply fully with all laws and matters of public policy
relating to employment agreements and restrictive covenants, and this Agreement
shall be construed consistently with such laws and public policy to the extent
possible. If and to the extent any one or more covenants, agreements, terms and
provisions of this Agreement or any portion or portions thereof shall be held
invalid or unenforceable by a court of competent jurisdiction, then such
covenants, agreements, terms and provisions (or portions thereof) shall be
deemed separable from the remaining covenants, agreements, terms and provisions
of this Agreement and such holding shall in no way affect the validity or
enforceability of any of the other covenants, agreements, terms and provisions
hereof.
Section 16. INDEPENDENT REPRESENTATION. Each party hereto acknowledges and
agrees that it has received independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement. In addition, Executive acknowledges that
Kirkpatrick & Lockhart LLP ("K&L") is solely representing the Company in
connection with this Agreement and all of the other documents associated with
this transaction.
Section 17. MISCELLANEOUS. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
This Agreement may not be modified, changed or amended except in a writing
signed by each of the parties hereto. This Agreement may be signed in multiple
counterparts, each of which shall be deemed an original hereof. The captions of
the several sections and subsections of this Agreement are not a part of the
context hereof, are inserted only for convenience in locating such sections and
subsections and shall be ignored in construing this Agreement.
Section 18. SURVIVAL. The provisions of Sections 9, 11, 12, 15 and 16
shall survive termination of this Agreement for any reason.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Executive Employment Agreement as of the date first above written.
AUGUST PROJECT 1 CORP. JON KOCHEVAR
By:_________________________________ ________________________________
Name:_______________________________ Address:
Title:______________________________ ________________________________
Address:____________________________ ________________________________
22 South Links Drive, Suite 204 ________________________________
Sarasota, Florida 34236 ________________________________
7
EXHIBIT 15.01
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
To the Board of Directors
August Project I Corporation
Miami, Florida
We have reviewed the accompanying balance sheet of August Project I Corporation
as of March 31, 2000 and the related statements of operations, stockholders'
equity (deficit) and cash flows for the periods ended March 31, 2000 and 1999.
These financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States.
/s/ HJ & Associates, LLC
HJ & Associates, LLC
Salt Lake City, Utah
May 15, 2000
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